<PAGE>
As filed with the Securities and Exchange Commission on May 12, 2000
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
TELECORP-TRITEL HOLDING COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware 4812 54-1988007
(Primary Standard (I.R.S. Employer
(State or Other Industrial Identification Number)
Jurisdiction of Classification Code
Incorporation or Number)
Organization)
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
(703) 236-1100
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
----------------
Thomas H. Sullivan
Executive Vice President and Chief Financial Officer
TeleCorp-Tritel Holding Company
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
(703) 236-1100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
----------------
Copies to:
<TABLE>
<S> <C> <C> <C>
Brian Hoffmann, Esq. John R. Pomerance, Esq. James H. Neeld, IV, Esq. Michael A. King, Esq.
Cadwalader, Wickersham & Taft Lewis J. Geffen, Esq. Tritel, Inc. Brown & Wood LLP
100 Maiden Lane Mintz, Levin, Cohn, Ferris, 111 E. Capitol Street One World Trade Center
New York, New York 10038 Glovsky and Popeo, P.C. Suite 500 New York, New York 10048
(212) 504-6000 One Financial Center Jackson, Mississippi 39201 (212) 839-5300
Boston, Massachusetts 02111 (601) 914-8000
(617) 542-6000
</TABLE>
----------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective and all other conditions to the proposed merger described herein have
been satisfied or waived.
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 of 1933, 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 of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<CAPTION>
Proposed
Title of each Class of Maximum Proposed Maximum Amount of
Securities to be Amount to be Offering Price Aggregate Registration
Registered Registered(1) Per Share Offering Price(2) Fee(2)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A voting common
stock, $0.01 par value
per share............. 178,497,292(3) $ 39.00 $6,962,200,975 1,838,022
- --------------------------------------------------------------------------------------
Class C common stock,
$0.01 par value per
share................. 283,813 0.01 2,838 1
- --------------------------------------------------------------------------------------
Class D common stock,
$0.01 par value per
share................. 851,429 0.01 8,514 3
- --------------------------------------------------------------------------------------
Class E common stock,
$0.01 par value per
share................. 10,491 0.01 138 1
- --------------------------------------------------------------------------------------
Class F common stock,
$0.01 par value per
share................. 37,717 0.01 497 1
- --------------------------------------------------------------------------------------
Voting preference common
stock, $0.01 par value
per share............. 3,093 0.01 31 1
- --------------------------------------------------------------------------------------
Series A preferred
stock, $0.01 par
value per share....... 97,473 1,150.11 112,104,918 29,596
- --------------------------------------------------------------------------------------
Series B preferred
stock, $0.01 par
value per share....... 90,668 1,123.36 101,852,828 26,890
- --------------------------------------------------------------------------------------
Series C preferred
stock, $0.01 par
value per share....... 210,608 965.90 203,425,750 53,705
- --------------------------------------------------------------------------------------
Series D preferred
stock, $0.01 par
value per share....... 49,417 1,004.91 49,659,588 13,111
- --------------------------------------------------------------------------------------
Series E preferred
stock, $0.01 par
value per share....... 25,841 105.45 2,724,937 720
- --------------------------------------------------------------------------------------
Series F preferred
stock, $0.01 par
value per share....... 14,912,778 0.01 149,128 40
- --------------------------------------------------------------------------------------
Series G preferred
stock, $0.01 par
value per share....... 46,374 1,062.68 49,280,820 13,011
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the maximum number of shares of each class or series of capital
stock expected to be issued in connection with the transactions described
herein.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f). The registration fee was calculated in
accordance:
(i) with respect to the class A voting common stock, in accordance with
Rule 457(f)(1), based on the average of the high and low sales prices
for shares of class A voting common stock of each of TeleCorp and
Tritel on the Nasdaq National Market on May 11, 2000:
(a) TeleCorp class A voting common stock, 87,900,661 shares, multiplied
by $43.875; plus
(b) Tritel class A voting common stock, 97,809,997 shares, multiplied by
$31.75; and
(ii) with respect to each other class of TeleCorp common stock and each of
the series of TeleCorp preferred stock in accordance with Rule
457(f)(2), based on the book value per share:
(a) TeleCorp class C common stock, 283,813 shares, multiplied by book
value per share, $2,838; plus
(b) TeleCorp class D common stock, 851,429 shares, multiplied by book
value per share, $8,514; plus
(c) TeleCorp voting preference common stock, 3,090 shares, multiplied by
book value per share, $31; plus
(d) TeleCorp series A preferred stock, 97,473 shares, multiplied by book
value per share, $112,104,918; plus
(e) TeleCorp series C preferred stock, 210,608 shares, multiplied by
book value per share, $203,425,750; plus
(f) TeleCorp series D preferred stock, 49,417 shares, multiplied by book
value per share, $49,659,588; plus
(g) TeleCorp series E preferred stock, 25,841 shares, multiplied by book
value per share, $2,724,937; plus
(h) TeleCorp series F preferred stock, 14,912,778 shares, multiplied by
book value per share, $149,128; and
(iii) with respect to each other class of Tritel common stock and each of
the series of Tritel preferred stock in accordance with Rule
457(f)(2), based on the book value per share:
(a) Tritel class B non-voting common stock, 2,927,120 shares, multiplied
by book value per share, $29,271; plus
(b) Tritel class C common stock, 1,380,448 shares, multiplied by book
value per share, $13,804; plus
(c) Tritel class D common stock, 4,962,804 shares, multiplied by book
value per share, $49,628; plus
(d) Tritel voting preference common stock, 6 shares, multiplied by book
value per share, $0.06; plus
(e) Tritel series A preferred stock, 90,668 shares, multiplied by book
value per share, $101,852,828; plus
(f) Tritel series D preferred stock, 46,374 shares, multiplied by book
value per share, $49,280,820; and
(iv) with respect to Tritel voting preference stock, in accordance with
Rule 457(f)(3), (i), (ii) and (iii) above reduced by $0.*
(3) Plus an indeterminate number of shares of Holding Company class A voting
common stock as may be issued to holders of Holding Company class B non-
voting common, class C common, class D common, class E common and class F
common stock and Holding Company series A preferred, series B preferred,
series F preferred and series G preferred stock upon conversion or exchange
of their shares.
- --------
* Under Rule 457(f)(3), any cash to be paid by the registrant in connection
with this transaction will be deducted from the value of the securities to be
received by the registrant as described in (i), (ii), and (iii) above. In
connection with this transaction, the registrant paid $10 million to E.B.
Martin, Jr.; however, deducting $10 million from the value of the securities
in accordance with Rule 457(f)(3) would result in a negative fee.
<PAGE>
[LOGO OF SUNCOM
Member of the AT&T Wireless Network]
To the stockholders of TeleCorp PCS, Inc. and Tritel, Inc.
TeleCorp and Tritel have agreed to combine in a merger of each company with
a newly formed subsidiary of a new holding company. After the transaction,
TeleCorp-Tritel Holding Company will be renamed TeleCorp PCS, Inc. and each of
TeleCorp, which will change its name to TeleCorp Wireless, Inc., and Tritel
will be subsidiaries of the newly renamed TeleCorp PCS, Inc. Throughout this
document to avoid confusion, we will refer to the new holding company as
"Holding Company." We are proposing the merger because we believe the combined
strengths of our two companies will enable us to better position ourselves to
compete in the wireless personal communications services, commonly referred to
as PCS, marketplace. We believe that the merger will benefit the stockholders
of both companies and we ask for your support in voting for the merger
proposals at our special meetings.
When the merger is completed:
. TeleCorp common stockholders will receive one share of a corresponding
class of substantially similar Holding Company common stock for each
share of each class of TeleCorp class A voting common through class D
common and voting preference common stock they own, except that TeleCorp
class B non-voting common stockholders, if any, will receive one share
of Holding Company class A voting common stock for each share they own;
. TeleCorp preferred stockholders will receive one share of a
corresponding series of substantially similar Holding Company preferred
stock for each share of each series of TeleCorp preferred stock they
own;
. Tritel class A voting common and class B non-voting common stockholders
will receive 0.76 shares of Holding Company class A voting common stock
for each share they own and cash in lieu of any fractional shares;
. Tritel class C common and class D common stockholders will receive
0.0076 shares of Holding Company class E common and class F common
stock, respectively, and 0.7524 shares of Holding Company class A voting
common stock for each share they own and cash in lieu of any fractional
shares;
. E.B. Martin, Jr., as a Tritel voting preference common stockholder, will
receive an aggregate amount of $10 million for all the shares of voting
preference common stock he owns;
. William M. Mounger, II, as a Tritel voting preference common
stockholder, will receive three shares of Holding Company voting
preference common stock for all the shares of Tritel voting preference
common stock he owns. In connection with the merger, Mr. Mounger will
receive a put right to sell his shares of Holding Company voting
preference common stock for $10 million; and
. Tritel series A preferred and series D preferred stockholders will
receive one share of Holding Company series B preferred and series G
preferred stock, respectively, for each share they own.
Holding Company intends to apply to list its class A voting common stock on
the Nasdaq National Market under the symbol "TLCP."
The board of directors of both TeleCorp and Tritel have unanimously approved
the merger and recommend that their stockholders vote FOR the merger proposals
as described in the attached materials. Information about the merger is
contained in this joint proxy statement-prospectus. We urge you to read this
material, including the section describing risk factors relating to the merger
that begins on page 19.
<PAGE>
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the voting power of shares of TeleCorp class A voting
common stock and TeleCorp voting preference common stock, voting as a single
class, outstanding as of the record date voting at the TeleCorp special
meeting.
Pursuant to a voting agreement with TeleCorp and Tritel, Gerald T. Vento and
Thomas H. Sullivan have agreed to vote all of their shares of TeleCorp capital
stock, which represent a majority of the voting power of TeleCorp capital stock
entitled to vote at the special meeting, in favor of the adoption of the merger
agreement. Accordingly, approval of the merger agreement by TeleCorp
stockholders is assured without the affirmative vote of any other stockholder.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the voting power of shares of Tritel class A voting
common stock and Tritel voting preference common stock, voting as a single
class, outstanding as of the record date voting at the Tritel special meeting.
Pursuant to a voting agreement with Tritel and TeleCorp, Mr. Mounger and Mr.
Martin have agreed to vote all of their shares of Tritel capital stock, which
represent a majority of the total voting power of Tritel capital stock entitled
to vote at the Tritel special meeting, in favor of the adoption of the merger
agreement. Accordingly, approval of the merger agreement by Tritel stockholders
is assured without the affirmative vote of any other stockholder.
The dates, times and places of the meetings are as follows:
For TeleCorp stockholders: For Tritel stockholders:
To vote your shares, you may complete and return the enclosed proxy card or
voting instructions. If you are a holder of record, you may also cast your vote
in person at the special meeting. If your shares are held in an account at a
brokerage firm or bank, you must instruct them on how to vote your shares. If
you do not vote or do not instruct your broker or bank how to vote, it will
have the same effect as voting against the merger.
We strongly support this combination of our companies and join with our
board of directors in enthusiastically recommending that you vote in favor of
the merger.
/s/ Mr. Gerald T. Vento /s/ Mr. William M. Mounger, II
____________________________ ______________________________
Chairman and Chief Chairman and Chief Executive
Executive Officer TeleCorp Officer Tritel, Inc.
PCS, Inc.
This joint proxy statement-prospectus gives you detailed information about
the proposed merger and the other matters to be voted upon at your stockholders
meeting. Please also refer to the section entitled "Where You Can Find More
Information" on page 236 for additional information about TeleCorp and Tritel
on file with the Securities and Exchange Commission. We encourage you to read
this additional information.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued in
connection with the merger or determined if this joint proxy statement-
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
This joint proxy statement-prospectus is dated , 2000, and is first
being mailed to stockholders of TeleCorp and Tritel on or about , 2000.
<PAGE>
[LOGO OF TELECORP PCS, INC.]
TELECORP PCS, INC.
1010 N. Glebe Road, Suite 800
Arlington, Virginia 22201
Notice of Special Meeting of TeleCorp Stockholders
, 2000
at :00 A.M.
To the stockholders of TeleCorp PCS, Inc.:
Notice is hereby given that a special meeting of stockholders of TeleCorp
PCS, Inc. will be held on , 2000 at :00 a.m., local time, at ,
for the following purposes:
1. To consider and vote upon a proposal to adopt a merger agreement between
TeleCorp and Tritel pursuant to which TeleCorp and Tritel will each become a
wholly owned subsidiary of a new holding company, TeleCorp-Tritel Holding
Company, that will be renamed TeleCorp PCS, Inc. and:
. each share of each class of TeleCorp common stock will be automatically
converted into one share of a corresponding class of substantially
identical Holding Company class A voting common through class D common
and voting preference common stock, except that each share of TeleCorp
class B non-voting common stock will be automatically converted into one
share of Holding Company class A voting common stock; and
. each share of each series of TeleCorp preferred stock will be
automatically converted into one share of a corresponding series of
Holding Company preferred stock having terms substantially identical to
those of the TeleCorp preferred stock.
2. To transact any other business as may properly come before the special
meeting or any adjournment or postponement of the special meeting.
These items of business are described in the attached joint proxy statement-
prospectus. Holders of record of TeleCorp class A voting common and voting
preference common stock at the close of business on , 2000, the record
date, are entitled to notice of, and to vote at, the special meeting and any
adjournments or postponements of the special meeting.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the voting power of shares of TeleCorp class A voting
common stock and TeleCorp voting preference common stock, voting as a single
class, outstanding as of the record date voting at the TeleCorp special
meeting.
Pursuant to a voting agreement with TeleCorp and Tritel, Mr. Vento and Mr.
Sullivan have agreed to vote all of their shares of TeleCorp capital stock,
which represent a majority of the voting power of TeleCorp capital stock
entitled to vote at the special meeting, in favor of the adoption of the merger
agreement. Accordingly, approval of the merger agreement by TeleCorp
stockholders is assured without the affirmative vote of any other stockholder.
To vote your shares, you may complete and return the enclosed proxy card. If
you are a holder of record, you may also cast your vote in person at the
special meeting. If your shares are held in an account at a brokerage firm or
bank, you must instruct them on how to vote your shares. If you do not vote or
do not instruct your broker or bank how to vote, it will have the same effect
as voting against the merger.
By order of the Board of Directors of
TeleCorp PCS, Inc.
/s/ Thomas H. Sullivan
_________________________________________
Executive Vice President and Chief
Financial Officer
Arlington, Virginia
, 2000
<PAGE>
[LOGO OF TRITEL, INC.]
TRITEL, INC.
111 E. Capitol Street, Suite 500
Jackson, Mississippi 39201
Notice of Special Meeting of Tritel Stockholders
, 2000
at A.M.
To the stockholders of Tritel, Inc.:
Notice is hereby given that a special meeting of the stockholders of Tritel,
Inc. will be held on , 2000, at a.m., local time, at , for the
following purposes:
1. To consider and vote upon a proposal to adopt a merger agreement between
TeleCorp and Tritel pursuant to which TeleCorp and Tritel will each become a
wholly owned subsidiary of a new holding company, TeleCorp-Tritel Holding
Company, that will be renamed TeleCorp PCS, Inc. and:
. each share of Tritel class A voting common and class B non-voting common
stock will be automatically converted into 0.76 shares of Holding
Company class A voting common stock and cash in lieu of any fractional
shares;
. each share of Tritel class C common and class D common stock will be
automatically converted into 0.0076 shares of Holding Company class E
common and class F common stock, respectively, and 0.7524 shares of
Holding Company class A voting common stock and cash in lieu of any
fractional shares;
. all shares of Tritel voting preference common stock owned by E.B.
Martin, Jr. will be automatically converted into an aggregate amount of
$10 million;
. all shares of Tritel voting preference common stock owned by William M.
Mounger, II will be automatically converted into three shares of Holding
Company voting preference common stock. In connection with the merger,
Mr. Mounger will receive a put right to sell his shares of Holding
Company voting preference common stock for $10 million; and
. each share of Tritel series A preferred and series D preferred stock
will be automatically converted into one share of Holding Company series
B preferred and series G preferred stock, respectively.
2. To transact any other business that may properly come before the special
meeting or any adjournment or postponement of the special meeting.
These items of business are described in the attached joint proxy statement-
prospectus. Holders of record of Tritel class A voting common and voting
preference common stock at the close of business on , 2000, the record
date, are entitled to notice of, and to vote at, the special meeting and any
adjournments or postponements of the special meeting.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the voting power of shares of Tritel class A voting
common stock and Tritel voting preference common stock, voting as a single
class, outstanding as of the record date voting at the Tritel special meeting.
Pursuant to a voting agreement with Tritel and TeleCorp, Mr. Mounger and Mr.
Martin have agreed to vote all of their shares of Tritel capital stock, which
represent a majority of the total voting power of Tritel capital stock entitled
to vote at the Tritel special meeting, in favor of the adoption of the merger
agreement. Accordingly, approval of the merger agreement by Tritel stockholders
is assured without the affirmative vote of any other stockholder.
To vote your shares, you may complete and return the enclosed proxy card. If
you are a holder of record, you may also cast your vote in person at the
special meeting. If your shares are held in an account at a brokerage firm or
bank, you must instruct them on how to vote your shares. If you do not vote or
do not instruct your broker or bank on how to vote, it will have the same
effect as voting against the merger.
By order of the Board of Directors of
Tritel, Inc.
/s/ James H. Neeld, IV
________________________________________
Senior Vice President--General Counsel
and Secretary
Jackson, Mississippi
, 2000
<PAGE>
ADDITIONAL INFORMATION
This joint proxy statement-prospectus incorporates important business and
financial information about TeleCorp and Tritel from other documents that are
not included in or delivered with the joint proxy statement-prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference in this joint
proxy statement-prospectus by requesting them in writing or by telephone at one
of the following addresses or telephone numbers:
TeleCorp PCS, Inc. Tritel, Inc.
Investor Relations Investor Relations
1010 North Glebe Road 111 East Capitol Street
Suite 800 Suite 500
Arlington, Virginia 22201 Jackson, Mississippi 39201
(703) 236-1100 (601) 914-8000
email: [email protected] email: [email protected]
If you would like to request any documents, please do so by , 2000 in
order to receive them before the special meetings.
See "Where You Can Find More Information" that begins on page 236.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I
QUESTIONS AND ANSWERS ABOUT THE MERGER...................................... 1
SUMMARY OF THE JOINT PROXY STATEMENT-PROSPECTUS............................. 4
The Companies............................................................. 4
The Structure of the Merger............................................... 8
Recommendation of the Boards of Directors................................. 10
Opinions of Financial Advisors............................................ 10
Stockholder Approvals..................................................... 10
The Special Meetings...................................................... 11
Board of Directors and Management Following the Merger.................... 12
Interests of Directors and Executive Officers in the Merger............... 12
Treatment of Stock Options and Restricted Stock........................... 12
Tax Consequences.......................................................... 13
Overview of the Merger Agreement.......................................... 13
AT&T Wireless Services Contribution....................................... 14
Other AT&T Transactions................................................... 14
Stockholders' Agreements.................................................. 15
Voting Agreements......................................................... 15
Holding Company Selected Unaudited Pro Forma Financial Data............... 16
Unaudited Comparative Per Share Information............................... 18
RISK FACTORS................................................................ 19
Risks Relating to the Merger and Related Agreements....................... 19
Risks Relating to Our Business, Industry, Strategy and Operations......... 20
Risks Relating to Our Relationship with AT&T.............................. 27
Risks Relating to Financing............................................... 29
Risks Relating to Regulatory Matters...................................... 31
MARKET PRICE AND DIVIDEND INFORMATION....................................... 34
THE SPECIAL MEETINGS........................................................ 35
Joint Proxy Statement-Prospectus.......................................... 35
Date, Time and Place of the Special Meetings.............................. 35
Purpose of the Special Meetings........................................... 35
Stockholder Record Date for the Special Meetings.......................... 36
Vote Required for Adoption of the Merger Agreement........................ 36
Proxies................................................................... 37
Solicitation of Proxies................................................... 38
THE MERGER.................................................................. 39
Background of the Merger.................................................. 39
TeleCorp's Reasons for the Merger......................................... 42
Tritel's Reasons for the Merger........................................... 44
Recommendation of TeleCorp's Board of Directors........................... 45
Opinion of TeleCorp's Financial Advisor................................... 45
Fee Arrangement with Lehman Brothers...................................... 52
Recommendation of Tritel's Board of Directors............................. 53
Opinion of Tritel's Financial Advisor..................................... 53
Fee Arrangements with Merrill Lynch....................................... 58
Interests of TeleCorp Directors and Executive Officers in the Merger...... 59
The Julie Dobson Employment Agreement..................................... 61
Interests of Tritel Directors and Executive Officers in the Merger........ 61
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Completion and Effectiveness of the Merger............................... 64
Structure of the Merger and Conversion of TeleCorp and Tritel Stock...... 64
Exchange of Stock Certificates for Holding Company Stock Certificates.... 65
Treatment of TeleCorp and Tritel Stock Options and Restricted Stock...... 66
Effect of the Merger on Outstanding TeleCorp and Tritel Credit
Facilities.............................................................. 66
Material United States Federal Income Tax Consequences of the Merger..... 67
Accounting Treatment of the Merger....................................... 69
Regulatory Matters....................................................... 70
Restrictions on Sales of Shares by Affiliates of TeleCorp and Tritel..... 70
Nasdaq National Market Listing of Holding Company Common Stock to be
Issued in the Merger.................................................... 71
Appraisal Rights......................................................... 71
Delisting and Deregistration of TeleCorp and Tritel Common Stock after
the Merger.............................................................. 71
The Merger Agreement..................................................... 71
Transition Committee..................................................... 80
Holding Company Charter and By-Laws...................................... 80
Description of AT&T Wireless Services Contribution....................... 80
Description of Other AT&T Transactions................................... 81
Stockholders' Agreements................................................. 86
Voting Agreement......................................................... 100
Business Relationships Between TeleCorp and Tritel....................... 101
HOLDING COMPANY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS................................................................ 102
INDUSTRY OVERVIEW.......................................................... 126
THE SUBSIDIARIES OF HOLDING COMPANY........................................ 128
TELECORP................................................................... 128
Company Overview......................................................... 128
Service.................................................................. 129
Sales and Distribution................................................... 129
Customer Care............................................................ 130
Network Development...................................................... 130
Acquisition History...................................................... 133
Intellectual Property.................................................... 134
Employees................................................................ 134
Properties............................................................... 134
Legal Proceedings........................................................ 135
Stock Ownership of Certain Beneficial Owners and Management.............. 135
Executive Compensation................................................... 141
AT&T Agreements.......................................................... 145
Other Related Party Transactions......................................... 154
Selected Historical Financial Data....................................... 158
TeleCorp Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 159
Quantitative and Qualitative Disclosures About Market Risk............... 169
TRITEL..................................................................... 170
Company Overview......................................................... 170
Employees................................................................ 179
Properties............................................................... 179
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Legal Proceedings...................................................... 179
Stock Ownership of Management.......................................... 179
Executive Compensation................................................. 184
Joint Venture Agreements With AT&T Wireless............................ 189
Certain Relationships and Related Transactions......................... 194
Selected Historical Financial Information.............................. 197
Tritel Management's Discussion and Analysis of Financial Conditions and
Results of Operations................................................. 198
Quantitative and Qualitative Disclosure About Market Risk.............. 207
GOVERNMENT REGULATION.................................................... 208
STOCK PERFORMANCE GRAPH.................................................. 213
DESCRIPTION OF HOLDING COMPANY CAPITAL STOCK............................. 215
Authorized Capital Stock............................................... 215
Holding Company Common Stock........................................... 216
Holding Company Preferred Stock........................................ 219
Transfer Restrictions.................................................. 225
Transfer Agents and Registrars......................................... 225
Anti-Takeover Considerations........................................... 225
COMPARISON OF RIGHTS OF HOLDING COMPANY STOCKHOLDERS, TELECORP
STOCKHOLDERS AND TRITEL STOCKHOLDERS.................................... 226
MANAGEMENT OF HOLDING COMPANY AFTER THE MERGER........................... 232
Board of Directors of Holding Company.................................. 232
Committees of Holding Company Board of Directors....................... 235
Compensation of Directors.............................................. 235
Executive Officers of Holding Company.................................. 235
Compensation of Executive Officers..................................... 235
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION......................... 236
WHERE YOU CAN FIND MORE INFORMATION...................................... 236
LEGAL MATTERS............................................................ 237
OTHER MATTERS............................................................ 237
EXPERTS.................................................................. 238
FINANCIAL STATEMENTS..................................................... F-1
TeleCorp PCS, Inc. and Subsidiaries and Predecessor Company............ F-2
Tritel, Inc. and Subsidiaries and Predecessor Company.................. F-44
TeleCorp-Tritel Holding Company and Subsidiaries....................... F-76
</TABLE>
ANNEX A--Agreement and Plan of Reorganization and Contribution
ANNEX B--Amendment No. 1 to the Agreement and Plan of Reorganization and
Contribution
ANNEX C--Opinion of Lehman Brothers
ANNEX D--Opinion of Merrill Lynch
ANNEX E--Form of Restated Certificate of Incorporation of Holding Company
ANNEX F--Form of Restated By-laws of Holding Company
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are TeleCorp and Tritel proposing the merger?
A: The merger will combine two contiguous wireless service territories in the
south-central United States. In connection with the merger agreement AT&T
Wireless Services, Inc. agreed to contribute rights to purchase additional
wireless properties and a two-year extension of the AT&T network membership
license agreement. In a separate transaction, TeleCorp agreed to exchange
wireless properties with AT&T Wireless PCS, LLC. The combined transactions
will provide Holding Company with a licensed service area covering
approximately 35 million people, including 16 of the top 100 U.S. markets.
Upon closing the merger and separate exchange transaction, the increased
operating scale and geographic scope of Holding Company will enable it to
reduce operating expenses and enable Holding Company to provide a more
compelling service offering for its customers. We will refer to AT&T
Wireless PCS, LLC as "AT&T Wireless" and AT&T Wireless Services, Inc. as
"AT&T Wireless Services."
Q: What will I receive in the merger?
A: Stockholders of TeleCorp and Tritel will receive the following in the
merger:
. TeleCorp common stockholders will receive one share of a corresponding
class of substantially similar Holding Company class A voting common
through class D common and voting preference common stock for each share
of each class of TeleCorp class A voting common through class D common
and voting preference common stock they own, except that TeleCorp class
B non-voting common stockholders, if any, will receive one share of
Holding Company class A voting common stock for each share they own;
. TeleCorp preferred stockholders will receive one share of a
corresponding series of substantially similar Holding Company preferred
stock for each share of each series of TeleCorp preferred stock they
own;
. Tritel class A voting common and class B non-voting common stockholders
will receive 0.76 shares of Holding Company class A voting common stock
for each share they own and cash in lieu of any fractional shares;
. Tritel class C common and class D common stockholders will receive
0.0076 shares of Holding Company class E common and class F common
stock, respectively, and 0.7524 shares of Holding Company class A voting
common stock for each share they own and cash in lieu of any fractional
shares;
. E.B. Martin, Jr., as a Tritel voting preference common stockholder, will
receive an aggregate amount of $10 million for all of the shares of
Tritel voting preference common stock he owns;
. William M. Mounger, II, as a Tritel voting preference common
stockholder, will also receive three shares of Holding Company voting
preference common stock for all of the shares of Tritel voting
preference common stock he owns. In connection with the merger, Mr.
Mounger will receive a put right to sell his shares of Holding Company
voting preference common stock for $10 million; and
. Tritel series A preferred and series D preferred stockholders will
receive one share of Holding Company series B preferred and series G
preferred stock, respectively, for each share they own.
Q: What stockholder approvals are needed?
A: For TeleCorp, the affirmative vote at the special meeting by the holders of
a majority of the voting power of the outstanding shares of TeleCorp class A
voting common stock and TeleCorp voting preference common stock, voting as a
single class, as of the record date is required to adopt the merger
agreement.
1
<PAGE>
Pursuant to a voting agreement with Tritel and TeleCorp, Mr. Mounger and
Mr. Martin have agreed to vote all of their shares of Tritel capital stock,
which represent a majority of the total voting power of Tritel capital
stock entitled to vote at the Tritel special meeting, in favor of the
adoption of the merger agreement. Accordingly, approval of the merger
agreement by Tritel stockholders is assured without the affirmative vote of
any other stockholder.
For Tritel, the affirmative vote at the special meeting by the holders of a
majority of the voting power of the outstanding shares of Tritel class A
voting common stock and Tritel voting preference common stock, voting as a
single class, as of the record date is required to adopt the merger
agreement.
Pursuant to a voting agreement with TeleCorp and Tritel, Mr. Vento and Mr.
Sullivan have agreed to vote all of their shares of TeleCorp capital stock,
which represent a majority of the voting power of TeleCorp capital stock
entitled to vote at the special meeting, in favor of the adoption of the
merger agreement. Accordingly, approval of the merger agreement by TeleCorp
stockholders is assured without the affirmative vote of any other
stockholder.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
joint proxy statement-prospectus, please respond by completing, signing and
dating your proxy card or voting instructions and returning it in the
enclosed postage paid envelope as soon as possible so that your shares may
be represented at your special meeting.
Q: What if I do not vote?
A:. You should understand that approval of the merger by both Tritel and
TeleCorp stockholders is assured even if you do not vote.
. If you fail to respond, it will have the same effect as a vote against
the merger.
. If you respond and do not indicate how you want to vote, your proxy will
be counted as a vote in favor of the merger.
. If you respond and abstain from voting, your proxy will have the same
effect as a vote against the merger.
Q: If my shares are held in street name by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. Without instructions, your
shares will not be voted, which will have the same effect as a vote against
the merger.
Q: Can I change my vote after I have delivered my proxy?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can revoke
your proxy. Second, you can submit a new proxy. If you choose either of
these two methods, you must submit your notice of revocation or your new
proxy to the secretary of TeleCorp or Tritel, as appropriate, before the
special meeting. If your shares are held in an account at a brokerage firm
or bank, you should contact your brokerage firm or bank to change your vote.
Third, if you are a holder of record, you can attend the special meeting and
vote in person.
Q: Am I entitled to appraisal rights?
A: Under Delaware law, TeleCorp class A voting common stockholders and Tritel
class A voting common stockholders are not entitled to appraisal rights in
connection with the merger. Holders of TeleCorp voting preference common
stock and Tritel voting preference common stock are entitled to appraisal
rights under
2
<PAGE>
Delaware law. TeleCorp voting preference common stockholders and Tritel
voting preference common stockholders have entered into a voting agreement
with TeleCorp and Tritel under which all the stockholders have agreed to
vote their voting preference common shares in favor of the merger. Any
TeleCorp voting preference common stockholder or Tritel voting preference
common stockholder who votes in favor of the merger will not be able to
exercise his appraisal rights.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, you will receive written instructions
from the exchange agent on how to exchange your stock certificates for
shares of Holding Company. Please do not send in your stock certificates
with your proxy.
Q: Where will my shares of Holding Company class A voting common stock be
listed?
A: We intend to apply to list Holding Company class A voting common stock on
the Nasdaq National Market under the symbol "TLCP."
Q: Will I receive dividends on my Holding Company shares?
A: Like TeleCorp and Tritel, Holding Company does not currently intend to pay
dividends on its common stock. Holding Company will pay dividends on each
series of its preferred stock in accordance with their terms.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as quickly as possible. We expect to
complete the merger during the fourth quarter of this year.
Q: Who can help answer my questions?
A: If you have any questions about the merger or how to submit your proxy, or
if you need additional copies of this joint proxy statement-prospectus or
the enclosed proxy card or voting instructions, you should contact:
. if you are a TeleCorp stockholder:
TeleCorp PCS, Inc.
Investor Relations
1010 North Glebe Road
Suite 800
Arlington, Virginia 22201
(703) 236-1100
email: [email protected]
. if you are a Tritel stockholder:
Tritel, Inc.
Investor Relations
111 E. Capitol Street
Suite 500
Jackson, Mississippi 39201
(601) 914-8000
email: [email protected]
3
<PAGE>
[LOGO OF SUNCOM
Member of the AT&T Wireless Network]
SUMMARY OF THE JOINT PROXY STATEMENT-PROSPECTUS
This summary highlights selected information in the joint proxy statement-
prospectus and may not contain all of the information that is important to you.
You should carefully read this entire joint proxy statement-prospectus and the
other documents we refer to for a more complete understanding of the merger. In
particular, you should read the merger agreement attached to this joint proxy
statement-prospectus as Annex A. In addition, please also refer to the section
which we have entitled "Where You Can Find More Information" that begins on
page 236 for additional information about TeleCorp and Tritel on file with the
Securities and Exchange Commission. We encourage you to read this additional
information. Unless the context otherwise requires, references to Holding
Company after consummation of the merger mean Holding Company and its
subsidiaries.
The Companies
TeleCorp PCS, Inc.
1010 N. Glebe Road
Suite 800
Arlington, Virginia 22201
(703) 236-1100
Founded in July 1996, TeleCorp currently provides wireless personal
communications services, or PCS, in selected markets in the United States and
is the largest AT&T Wireless affiliate in the United States in terms of
licensed population, with licenses covering 16.7 million people. As of March
31, 2000, TeleCorp had more than 228,000 customers and its networks covered
approximately 74% of the population where it held licenses. TeleCorp has also
joined with Tritel and another AT&T Wireless Services affiliate to operate
under a common regional brand name, SunCom.
TeleCorp's business operations are focused on the following fundamental
areas:
. personal communications services;
. strategic alliances; and
. PCS network development.
The personal communications services area provides several services, such
as:
. wireless calling with a wide range of features, including access to both
digital and analog systems;
. customer care with strict quality standards and proactive and responsive
customer service;
. sales and distribution through company sales, retail outlets, online
sales and direct sales and marketing efforts; and
. sales of wireless personal communications handsets and accessories used
in connection with the wireless services.
TeleCorp's strategic alliance with AT&T provides TeleCorp with many
business, operational and marketing advantages, including:
. Exclusivity. TeleCorp is AT&T's exclusive provider of wireless mobility
services using equal emphasis co-branding with AT&T in TeleCorp's
covered markets, subject to AT&T's right to resell services on
TeleCorp's network.
4
<PAGE>
. Brand. TeleCorp has the right to use the AT&T brand name and logo
together with the SunCom brand name and logo in TeleCorp's markets,
giving equal emphasis to each.
. Roaming. TeleCorp is AT&T's preferred roaming partner for digital
customers in TeleCorp's markets.
. Coast-to-Coast Coverage. Outside TeleCorp's markets, its customers can
place and receive calls in AT&T Wireless's markets and the markets of
AT&T Wireless's other roaming partners.
. Products and Services. TeleCorp receives preferred terms on selected
products and services, including handsets, infrastructure equipment and
back office support, from companies that provide these products and
services to AT&T.
. Marketing. TeleCorp benefits from AT&T's nationwide marketing and
advertising campaigns, including the success of the AT&T Digital One
RateSM plans, in the marketing of its own national SunRate plans. In
addition, TeleCorp is working with AT&T's national sales representatives
to jointly market TeleCorp's wireless services to AT&T corporate
customers located in TeleCorp's markets.
Since TeleCorp launched its operations in February 1999, TeleCorp has
focused on developing its networks and markets and expanding its coverage
areas. As a result of these efforts, TeleCorp is able to:
. provide coast-to-coast coverage in connection with its roaming
arrangements with AT&T Wireless;
. operate in 28 markets, including selected markets in the south-central
and northeast United States and Puerto Rico, which have an average
population density of approximately 30% above the national average and
have a high volume of wireless communications usage;
. obtain PCS licenses in major population centers as well as popular
vacation destinations that attract an estimated 39 million visitors per
year;
. provide PCS in markets which encompass eight of the 100 largest
metropolitan areas;
. rely on an experienced senior management team with an average of 11
years of experience in the wireless industry;
. build out its network using advanced digital technology allowing
TeleCorp to offer enhanced services and features relative to standard
cellular service;
. build out its network in the near future to expand its coverage to over
40 markets and acquire contiguous licensed territories to maximize its
coverage area;
. use licenses with a minimum of 30 to 35 Megahertz (or MHz), a measure of
airwave capacity, in most of the major markets serviced by TeleCorp to
competitively deploy new and enhanced voice and data services; and
. maintain a strong capital base which includes approximately $1.6 billion
of committed capital, of which $1.1 billion has been funded as of March
31, 2000.
Tritel, Inc.
111 E. Capitol Street
Suite 500
Jackson, Mississippi 39201
(601) 914-8010
Tritel, Inc. is an AT&T Wireless Services affiliate with licenses to provide
PCS to approximately 14.0 million people in contiguous markets in the south-
central United States. As of March 31, 2000, Tritel had more than 63,800
customers and its networks covered over 50% of the population where it held
licenses. Tritel has
5
<PAGE>
also joined with TeleCorp and another AT&T Wireless Services affiliate to
operate under a common regional brand name, SunCom.
Tritel began to provide wireless services in September 1999 and was
operational in eight of its major markets by the end of 1999. Tritel provides
PCS services as a member of the AT&T Wireless network, serving as the preferred
roaming provider to AT&T Wireless's digital wireless customers in virtually all
of its markets and co-branding its services with the AT&T and SunCom brands and
logos, giving equal emphasis to each.
Tritel's affiliation with AT&T Wireless is an integral part of its strategy.
AT&T Wireless contributed PCS licenses covering 9.1 million people to Tritel in
exchange for its ownership stake in Tritel. As an AT&T Wireless affiliate,
Tritel enjoys numerous important benefits, including the following:
. Exclusivity. Tritel is AT&T's exclusive provider of wireless mobility
services using equal emphasis co-branding with AT&T in Tritel's covered
markets, subject to AT&T's right to resell services on Tritel's network,
except for licenses covering 790,000 people in mostly rural areas.
. Brand. Tritel has the right to use the AT&T brand name and logo together
with the SunCom brand name and logo in Tritel's markets, giving equal
emphasis to each.
. Roaming. Tritel is AT&T's preferred roaming partner for digital
customers in Tritel's markets except for licenses covering 790,000
people in mostly rural areas.
. Coast-to-Coast Coverage. Outside Tritel's markets, its customers can
place and receive calls in AT&T Wireless's markets and the markets of
AT&T Wireless's other roaming partners.
. Products and Services. Tritel receives preferred terms on selected
products and services, including handsets, infrastructure equipment and
back office support, from companies that provide these products and
services to AT&T.
. Marketing. Tritel benefits from AT&T's nationwide marketing and
advertising campaigns, including the success of the AT&T Digital One
RateSM plans, in the marketing of its own national rate plans. In
addition, Tritel is working with AT&T's national sales representatives
to jointly market Tritel's wireless services to AT&T corporate customers
located in Tritel's markets.
Holding Company
1010 North Glebe Road
Suite 800
Arlington, VA 22201
(703) 236-1100
Holding Company is a newly formed corporation that has not, to date,
conducted any activities other than those incident to its formation. Upon
completion of the merger, TeleCorp and Tritel will each become a wholly owned
subsidiary of Holding Company. The business of Holding Company will be the
combined businesses currently conducted by TeleCorp and Tritel.
After the merger and separate exchange transaction described below, it is
expected that Holding Company will have a licensed service area covering
approximately 35 million people, including 16 of the top 100 U.S. markets.
Holding Company's business operations will be focused on the following
fundamental areas:
. personal communications services;
. strategic alliances; and
6
<PAGE>
. PCS network development.
The personal communications services area will provide several services,
such as:
. wireless calling with a wide range of features including access to both
digital and analog systems;
. customer care with strict quality standards and proactive and responsive
customer service;
. sales and distribution through company sales, company stores, retail
outlets, online sales and direct sales and marketing efforts; and
. sales of wireless personal communications handsets and accessories used
in connection with the wireless services.
Holding Company's strategic alliance with AT&T will provide Holding Company
with many business, operational and marketing advantages, including:
. Exclusivity. Holding Company, through its subsidiaries, will be AT&T's
exclusive provider of wireless mobility services using equal emphasis
co-branding with AT&T in Holding Company's covered markets, except for
790,000 people in Kentucky, subject to AT&T's right to resell services
on Holding Company's network.
. Brand. Holding Company will have the right to use the AT&T brand name
and logo together with the SunCom brand name and logo in Holding
Company's markets under a network membership license agreement, giving
equal emphasis to each.
. Roaming. Holding Company will be AT&T's preferred roaming partner for
digital customers in Holding Company's markets, except for licenses
covering 790,000 people in mostly rural areas.
. Coast-to-Coast Coverage. Outside Holding Company's markets, its
customers will be able to place and receive calls in AT&T Wireless's
markets and the markets of AT&T Wireless's other roaming partners.
. Products and Services. Holding Company will receive preferred terms on
selected products and services, including handsets, infrastructure
equipment and back office support from companies who provide these
products and services to AT&T.
. Marketing. Holding Company will benefit from AT&T's nationwide marketing
and advertising campaigns, including the success of the AT&T Digital One
RateSM plans, in the marketing of its own national rate plans which will
be similar to TeleCorp's and Tritel's existing rate plans and will be
marketed under the SunCom name. In addition, Holding Company will work
with AT&T's national sales representatives to jointly market Holding
Company's wireless services to AT&T corporate customers located in
Holding Company's markets.
Holding Company will focus on developing its networks and markets and
expanding its coverage areas. After the merger and separate exchange
transaction, Holding Company expects to be able to:
. provide coast-to-coast coverage in connection with its roaming
arrangements with AT&T Wireless;
. operate in more than 61 markets, including selected markets in the
south-central United States and Puerto Rico, which have an average
population density of approximately 30% above the national average and
which have a high volume of wireless communications usage;
. obtain PCS licenses in major population centers as well as popular
vacation destinations that attract an estimated 39 million visitors per
year;
. provide PCS in markets which encompass 16 of the 100 largest
metropolitan areas;
. build out its network using advanced digital technology allowing Holding
Company to offer enhanced services and features relative to standard
cellular service;
7
<PAGE>
. use licenses with an average of 31 MHz in the major markets serviced by
Holding Company to competitively deploy new and enhanced voice and data
services; and
. maintain a strong capital base which includes approximately $3.0 billion
of funded and committed capital.
The Structure of the Merger (see page 64)
To accomplish the combination of TeleCorp's and Tritel's businesses,
TeleCorp formed Holding Company, with two subsidiaries, TTHC First Merger Sub,
Inc. and TTHC Second Merger Sub, Inc. At the time the merger is completed:
. First Merger Sub will be merged into TeleCorp, and TeleCorp will be the
surviving corporation;
. Second Merger Sub will be merged into Tritel, and Tritel will be the
surviving corporation;
. TeleCorp and Tritel stockholders will become stockholders of Holding
Company through the conversion of their respective capital stock for
Holding Company capital stock; and
. Holding Company will change its name to "TeleCorp PCS, Inc."
As a result, TeleCorp and Tritel will each become a wholly owned subsidiary
of Holding Company.
8
<PAGE>
The organization of the companies before and after the merger is illustrated
below:
BEFORE THE MERGER
<TABLE>
<S> <C> <C> <C>
Holders of TeleCorp Holders of Tritel
class A voting, class B non-voting, class A voting, class B non-voting,
class C, D and voting preference class C, D and voting preference
common and series A, C, D, E common and series A and
and F preferred stock. D preferred stock.
TeleCorp Tritel
Holding Company
First Merger Sub Second Merger Sub
</TABLE>
AFTER THE MERGER
<TABLE>
<S> <C> <C> <C>
TeleCorp common stock TeleCorp preferred Tritel series A Tritel common stock
classes A voting, B stock series A, C, D, preferred stock. classes A voting and
non-voting, C and D. E and F. 1 to 1 conversion B non-voting.
1 to 1 conversion 1 to 1 conversion ratio. 1 to .76 conversion
ratio. ratio. Holding Company ratio.
Holding Company Holding Company series B preferred Holding Company class
common stock classes preferred stock stock. A voting common
A voting, A voting, C series A, C, D, E and stock.
and D, respectively. F, respectively. Tritel class D
preferred stock. Tritel class C common
TeleCorp voting 1 to 1 conversion stock.
preference common ratio 1 to .0076 and 1 to
stock. Holding Company .7524 conversion
1 to 1 conversion series G preferred ratios, respectively.
ratio. stock. Holding Company
Holding Company common stock classes
voting preference E and A voting,
common stock. respectively.
Tritel class D common
stock.
1 to .0076 and 1 to
.7524 conversion
ratios, respectively.
Holding Company
common stock classes
F and A voting,
respectively.
An aggregate amount
of $10 million for
all shares of Tritel
voting preference
common stock owned by
E.B. Martin, Jr.
William M. Mounger,
II, holder of Tritel
voting preference
common stock. Right
to receive 3 shares
of Holding Company
voting preference
common stock for all
his shares. Put right
to sell his shares of
Holding Company
voting preference
common stock for $10
million.
- ------------------------------------------------------------------------------------------
Holding Company Holding Company Holding Company Holding Company
Common Stock Preferred Stock Preferred Stock Common Stock or Cash
</TABLE>
HOLDING COMPANY
TeleCorp Tritel
9
<PAGE>
Recommendation of the Boards of Directors (see pages 45 and 53)
To TeleCorp Stockholders: The TeleCorp board of directors believes that the
merger is fair to you and in your best interest and unanimously voted, with
three directors abstaining, to approve the merger agreement and unanimously
recommends that you vote FOR the adoption of the merger agreement.
To Tritel Stockholders: The Tritel board of directors believes that the
merger is fair to you and in your best interest and unanimously voted to
approve the merger agreement and unanimously recommends that you vote FOR the
adoption of the merger agreement.
Opinions of Financial Advisors (see pages 45 and 53)
Opinion of TeleCorp's Financial Advisor. In deciding to approve the merger,
the TeleCorp board of directors considered the opinion of its financial
advisor, Lehman Brothers, that, as of the date of its opinion, and subject to
and based on the considerations referred to in its opinion, the ratio to
exchange TeleCorp classes of common stock for Holding Company classes of common
stock is fair, from a financial point of view, to TeleCorp stockholders. The
full text of this opinion is attached as Annex C to this joint proxy statement-
prospectus. TeleCorp urges its stockholders to read the opinion of Lehman
Brothers in its entirety.
Opinion of Tritel's Financial Advisor. In deciding to approve the merger,
the Tritel board of directors considered the opinion of its financial advisor,
Merrill Lynch, that, as of the date of its opinion, and subject to the
assumptions, qualifications and limitations referred to in its opinion, the
exchange ratio was fair, from a financial point of view, to the holders of
shares of Tritel class A voting common stock other than AT&T Wireless and its
affiliates. The full text of this opinion is attached as Annex D to this joint
proxy statement-prospectus. Tritel urges its stockholders to read the opinion
of Merrill Lynch in its entirety.
Stockholder Approvals (see page 36)
Approval of TeleCorp Stockholders. The affirmative vote at the special
meeting by the holders of a majority of the shares of TeleCorp class A voting
common stock and TeleCorp voting preference common stock, voting as a single
class, outstanding as of the record date is required to adopt the merger
agreement. Regardless of the number of shares outstanding, TeleCorp class A
voting common stockholders are entitled to, as a class, an aggregate of
4,990,000 votes and TeleCorp voting preference common stockholders are entitled
to, as a class, 5,010,000 votes of all outstanding TeleCorp common stock. Each
holder of TeleCorp class A voting common stock will have the number of votes
equal to 4,990,000 divided by the number of outstanding shares of TeleCorp
class A voting common stock multiplied by the number of shares of class A
voting common stock held by such stockholder. The holders of the TeleCorp class
B non-voting common stock, TeleCorp class C common stock, TeleCorp class D
common stock, TeleCorp series A preferred stock, TeleCorp series B preferred
stock, TeleCorp series C preferred stock, TeleCorp series D preferred stock,
TeleCorp series E preferred stock and TeleCorp series F preferred stock are not
entitled to vote on the merger proposal. As of the record date, TeleCorp
directors and executive officers and their affiliates (including Mr. Vento and
Mr. Sullivan) owned a majority of the voting power of TeleCorp capital stock
entitled to vote at the TeleCorp special stockholders meeting. Pursuant to a
voting agreement with TeleCorp and Tritel, Mr. Vento and Mr. Sullivan have
agreed to vote all of their shares of TeleCorp capital stock, which represent a
majority of the voting power of TeleCorp capital stock entitled to vote at the
TeleCorp special meeting, in favor of the adoption of the merger agreement.
Accordingly, approval of the merger agreement by TeleCorp stockholders is
assured.
Approval of Tritel Stockholders. The affirmative vote at the special meeting
by the holders of a majority of the voting power of shares of Tritel class A
voting common stock and Tritel voting preference common stock, voting as a
single class, outstanding as of the record date is required to adopt the merger
agreement. Regardless of the number of shares outstanding, Tritel class A
voting common stockholders are entitled to, as a
10
<PAGE>
class, an aggregate of 4,990,000 votes and Tritel voting preference common
stockholders are entitled to, as a class, 5,010,000 votes of all outstanding
Tritel common stock. Each holder of Tritel class A voting common stock will
have the number of votes equal to 4,990,000 divided by the number of
outstanding shares of Tritel class A voting common stock multiplied by the
number of shares of class A voting common stock held by such stockholder. The
holders of the Tritel class B non-voting common stock, Tritel class C common
stock, Tritel class D common stock, Tritel series A preferred stock and Tritel
series D preferred stock are not entitled to vote on the merger proposal. As of
the record date, Tritel directors and executive officers and their affiliates
(including Mr. Mounger and Mr. Martin) owned a majority of the voting power of
Tritel capital stock entitled to vote at the Tritel special stockholders
meeting. Pursuant to a voting agreement with Tritel and TeleCorp, Mr. Mounger
and Mr. Martin have agreed to vote all of their shares of Tritel capital stock,
which represent a majority of the voting power of Tritel capital stock entitled
to vote at the Tritel special meeting, in favor of the adoption of the merger
agreement. Accordingly, approval of the merger agreement by Tritel stockholders
is assured.
Procedures for Voting Your Shares. You may vote your shares by signing your
proxy card and mailing it in the enclosed return envelope. If you are a holder
of record, you may vote in person at the special meeting. If you do not include
instructions on how to vote your properly executed proxy card, your shares will
be voted FOR adoption of the merger agreement. If your shares are held in an
account at a brokerage firm or bank, your broker will vote your shares only if
you provide instructions on how to vote by following the information provided
to you by your broker. If you do not vote, it will have the same effect as
voting against the merger.
Procedure for Changing Your Vote. You can change your vote at any time
before your proxy is voted at the special meeting of your company's
stockholders. You can do this in one of three ways. First, you can send a
written notice stating that you are revoking your proxy. Second, you can
complete and submit a new proxy card. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy at any
time before the special meeting of the Company's stockholders, for TeleCorp
shares to the Corporate Secretary of TeleCorp at the address on page 3 and for
Tritel shares to the Corporate Secretary of Tritel at the address on page 3. If
your shares are held in an account at a brokerage firm or bank, you should
contact your broker to change your vote. Third, if you are a holder of record,
you can attend the special meeting of your company's stockholders and vote in
person.
Appraisal Rights. Under Delaware law, TeleCorp class A voting common
stockholders and Tritel class A voting common stockholders are not entitled to
appraisal rights in connection with the merger. Holders of TeleCorp voting
preference common stock and Tritel voting preference common stock are entitled
to appraisal rights under Delaware law. TeleCorp voting preference common
stockholders and Tritel voting preference common stockholders have each entered
into a voting agreement with TeleCorp and Tritel under which all the
stockholders have agreed to vote all of their shares of voting preference
common stock in favor of the merger. As a result of the voting agreements, any
TeleCorp voting preference common stockholder or Tritel voting preference
common stockholder who votes in favor of the merger will not be able to
exercise his appraisal rights.
The Special Meetings (see page 35)
Special Meeting of TeleCorp's Stockholders. The TeleCorp special meeting
will be held at on , 2000, starting at a.m., local time.
Special Meeting of Tritel's Stockholders. The Tritel special meeting will be
held at on , 2000, starting at a.m., local time.
11
<PAGE>
Board of Directors and Management Following the Merger (see page 232)
TeleCorp and Tritel have agreed that the initial fourteen directors of
Holding Company will be selected by TeleCorp, Tritel, AT&T Wireless and certain
other stockholders pursuant to the stockholders' agreement. For a more detailed
description of the stockholders' agreement, see "The Merger--Stockholders'
Agreements" on page 86.
TeleCorp and Tritel have designated the following persons to serve on the
Holding Company board of directors after the merger:
Gerald T. Vento Timothy L. McLaughlin
Thomas H. Sullivan Scott I. Anderson
William M. Mounger, II James M. Hoak
E.B. Martin, Jr. David A. Jones, Jr.
Alexander P. Coleman Kevin J. Shepherd
Michael R. Hannon Rohit M. Desai
Michael Schwartz William W. Hague
After the merger, the following persons will hold the offices of Holding
Company as indicated:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Gerald T. Vento......... Chief Executive Officer
Thomas H. Sullivan...... Executive Vice President and Chief Financial Officer
William M. Mounger, II.. Chairman of the Board of Directors
E.B. Martin, Jr. ....... Vice-Chairman of the Board of Directors
After the merger, the following persons will hold the following offices of
the subsidiaries of Holding Company that survive the mergers:
<CAPTION>
Name Position
---- --------
<S> <C>
Julie A. Dobson......... Chief Operating Officer of TeleCorp
William S. Arnett....... Chief Operating Officer of Tritel
James H. Neeld, IV...... Senior Vice President-General Counsel and Secretary of Tritel
</TABLE>
Interests of Directors and Executive Officers in the Merger (see pages 59 and
61)
Some of the directors and executive officers of TeleCorp and Tritel have
interests in the merger that are different from, or are in addition to, the
interests of their company's other stockholders.
Treatment of Stock Options and Restricted Stock (see page 66)
TeleCorp. When the merger is completed, each outstanding TeleCorp employee
stock option will be converted into an option to purchase shares of Holding
Company class A voting common stock at an exercise price per share equal to the
exercise price per share of TeleCorp class A voting common stock subject to the
option before the conversion. In addition, each outstanding restricted share of
TeleCorp class A voting common stock will be converted into one restricted
share of Holding Company class A voting common stock. The vesting of the
options granted by TeleCorp will not be accelerated by the merger.
Tritel. When the merger is completed, each outstanding Tritel employee stock
option will be converted into an option to purchase the number of shares of
Holding Company class A voting common stock that is equal to the product of
0.76 multiplied by the number of shares of Tritel class A voting common stock
that would have been obtained before the merger upon the exercise of the
option, rounded to the nearest whole
12
<PAGE>
share. The exercise price per share will be adjusted to reflect the exchange
ratio of Tritel class A voting common stock in the merger. The vesting of the
Tritel options issued prior to February 28, 2000 will, under the Tritel stock
option plans, be accelerated upon the consummation of the merger. In addition,
each outstanding restricted share of Tritel class A voting common stock will be
converted upon the consummation of the merger into the number of restricted
shares of Holding Company class A voting common stock that is equal to the
product of 0.76 multiplied by the number of shares of Tritel class A voting
common stock subject to the award.
Tax Consequences (see page 67)
We have structured the merger so that TeleCorp, Tritel and their respective
stockholders who exchange their shares for shares of Holding Company capital
stock will not recognize gain or loss for United States federal income tax
purposes in connection with the merger, except for taxes payable because of
cash received by TeleCorp and Tritel stockholders instead of fractional shares.
Tax matters are very complicated, and the tax consequences to you resulting
from the merger will depend on the facts of your own situation. You should
consult with your own tax advisor for a full understanding of the tax
consequences to you resulting from the merger.
Overview of the Merger Agreement (see page 13)
The merger agreement is attached as Annex A to this joint proxy statement-
prospectus. You are encouraged to read the merger agreement as it is the legal
document that governs the merger
Conditions to the Completion of the Merger. Each of TeleCorp's and Tritel's
obligation to complete the merger is subject to the satisfaction or waiver of
specified conditions, including those listed below:
. the merger agreement must be adopted by both the TeleCorp and Tritel
stockholders;
. no law, injunction or order preventing the completion of the merger may
be in effect;
. the applicable waiting period under U.S. antitrust laws must expire or
be terminated;
. TeleCorp and Tritel must obtain other regulatory approvals from domestic
governmental entities;
. the shares of Holding Company class A voting common stock to be issued
in the merger must have been approved for listing on the Nasdaq National
Market;
. TeleCorp and Tritel must have complied with their respective covenants
in the merger agreement;
. TeleCorp's and Tritel's respective representations and warranties in the
merger agreement must be true and correct; and
. TeleCorp and Tritel must each receive an opinion of tax counsel to the
effect that the merger will qualify as a tax-free exchange or
reorganization.
Termination of the Merger Agreement. TeleCorp and Tritel can jointly agree
to terminate the merger agreement at any time. Either company may also
terminate the merger agreement if:
. the merger is not completed on or before December 31, 2000 or, if
certain regulatory approvals are pending, March 31, 2001, so long as the
failure to complete the merger is not the result of the willful failure
by that company to fulfill any of its material obligations under the
merger agreement;
. government actions do not permit the completion of the merger;
13
<PAGE>
. either company's stockholders do not vote to adopt the merger agreement
at a duly held meeting of that company's stockholders; or
. the other company breaches its representations, warranties or covenants
in the merger agreement in a material way.
"No Solicitation" Provisions. The merger agreement contains detailed
provisions prohibiting TeleCorp and Tritel from seeking an alternative
transaction. These "no solicitation" provisions prohibit TeleCorp and Tritel,
as well as their officers, directors, subsidiaries and representatives, from
taking any action to solicit an acquisition proposal. The merger agreement does
not, however, prohibit either party or its respective board of directors from
considering an unsolicited bona fide written superior proposal from a third
party and withdrawing its recommendation of the merger, as described on page
75.
Regulatory Matters. Under U.S. antitrust laws, Holding Company may not
complete the merger until it has notified the Antitrust Division of the
Department of Justice and the Federal Trade Commission of the merger and filed
the necessary report forms, and until a required waiting period has ended.
Holding Company has filed the required information and materials with the
Department of Justice and the Federal Trade Commission.
To complete the merger, Holding Company must also obtain the approval of the
Federal Communications Commission. The Federal Communications Commission has
not completed its review of the merger.
Holding Company cannot assure you that it will obtain all regulatory
approvals necessary to complete the merger or that the granting of these
approvals will not involve the imposition of conditions to the completion of
the merger or require changes to the terms of the merger. These conditions or
changes could result in the conditions to the merger not being satisfied.
Accounting Treatment. The merger will be accounted for under the purchase
method of accounting for business combinations.
Completion and Effectiveness of the Merger. Holding Company will complete
the merger when all of the conditions to completion of the merger are satisfied
or waived in accordance with the merger agreement. The merger will become
effective when TeleCorp and Tritel file certificates of merger with the State
of Delaware. Holding Company expects to complete the merger during the fourth
quarter of this year.
AT&T Wireless Services Contribution
In connection with the merger, AT&T Wireless Services agreed to contribute
the right to purchase certain wireless rights and commitments in the midwestern
United States, cash of approximately $20 million and a two-year extension of
the AT&T network membership license agreement to all people covered by Holding
Company's licenses in exchange for 9,272,740 shares of Holding Company class A
voting common stock.
Other AT&T Transactions (see page 81)
AT&T Wireless Exchange. In a separate transaction, TeleCorp agreed to
exchange its Boston operating segment, which includes PCS licenses in several
New England markets, for certain wireless properties or rights to designate a
qualified assignee for additional wireless properties of AT&T Wireless in the
Milwaukee, Wisconsin and Des Moines, Iowa markets, and a cash payment of
approximately $80 million.
Further AT&T Agreements. AT&T has agreed to extend the term of the roaming
agreements and to expand the geographic coverage of the AT&T operating
agreements with TeleCorp to include the new markets,
14
<PAGE>
either through amending TeleCorp's existing agreements or by entering into new
agreements with Holding Company on substantially the same terms as TeleCorp's
existing agreements. AT&T has also agreed to extend its affiliation agreements
to include licenses covering an additional 1.4 million people in the midwest if
TeleCorp acquires them.
Stockholders' Agreements (see page 86)
TeleCorp and Tritel each have a stockholders' agreement with their
respective management stockholders, their respective initial investors other
than AT&T Wireless, and AT&T Wireless. Upon the completion of the merger, the
TeleCorp stockholders' agreement and the Tritel stockholders' agreement will be
amended and restated to give effect to the Holding Company stockholders'
agreement, as described below.
TeleCorp. The TeleCorp stockholders' agreement, as amended, between
TeleCorp, TeleCorp's initial investors, and Messrs. Vento and Sullivan provides
for the following: (1) guidelines for TeleCorp's management and operations and
(2) restrictions on the sale, transfer or other disposition of TeleCorp capital
stock.
Tritel. The Tritel stockholders' agreement, as amended, between Tritel, AT&T
Wireless, the Tritel management stockholders and the Tritel initial investors
other than AT&T Wireless provides for the following: (1) guidelines for
Tritel's management and operations and (2) restrictions on the sale, transfer
or other disposition of Tritel capital stock.
Holding Company. The Holding Company stockholders' agreement between Holding
Company, TeleCorp's and Tritel's initial investors and Messrs. Mounger, Martin,
Vento and Sullivan provides for the following: (1) guidelines for the
management and operations of Holding Company and (2) restrictions on the sale,
transfer or other disposition of Holding Company capital stock.
Voting Agreements (see page 100)
TeleCorp. TeleCorp and Tritel have entered into a voting agreement with
Gerald T. Vento, Chairman and Chief Executive Officer of TeleCorp, and Thomas
H. Sullivan, Executive Vice President and Chief Financial Officer of TeleCorp,
pursuant to which these TeleCorp stockholders have agreed to vote all of their
shares of TeleCorp class A voting common and voting preference common stock in
favor of the adoption of the merger agreement. As of the record date, these
stockholders owned shares representing a majority of the voting power of
TeleCorp capital stock entitled to vote at the TeleCorp special meeting.
Accordingly, approval of the merger agreement by TeleCorp stockholders is
assured.
Tritel. Tritel and TeleCorp have entered into a voting agreement with
William M. Mounger, II, Chairman and Chief Executive Officer of Tritel, and
E.B. Martin, Jr., Executive Vice President and Chief Financial Officer of
Tritel, pursuant to which these Tritel stockholders have agreed to vote all of
their shares of Tritel class A voting common and voting preference common stock
in favor of the adoption of the merger agreement. As of the record date, these
stockholders owned shares representing a majority of the voting power of Tritel
capital stock entitled to vote at the Tritel special meeting. Accordingly,
approval of the merger agreement by Tritel stockholders is assured.
15
<PAGE>
Holding Company Selected Unaudited Pro Forma Financial Data
The following unaudited pro forma financial data combines the historical
consolidated balance sheets and statements of operations of TeleCorp, Tritel,
Indus, Inc. (Indus) and Airadigm Communications, Inc. (Airadigm). These
unaudited pro forma financial statements give effect to the merger with Tritel
using the purchase method of accounting, the contribution from AT&T, the
acquisition of all of the common and preferred stock of Indus, the acquisition
of additional wireless properties and assets from Airadigm, the exchange with
AT&T which includes the acquisition of PCS licenses from ABC Wireless, L.L.C.
(ABC) and Polycell Communications, Inc. (Polycell), other transactions and
other adjustments.
To aid you in your analysis of the financial aspects of each of these
transactions, we present a summary of unaudited pro forma financial statements
to demonstrate the financial aspects of the combined transactions.
We derived this information from the audited consolidated financial
statements of TeleCorp and Tritel and from the unaudited financial statements
of Indus and Airadigm as of and for the year ended December 31, 1999. This
information is only a summary and should be read in conjunction with the
historical financial statements and related notes of TeleCorp and Tritel for
that period, contained elsewhere herein. For presentation of the pro forma
financial aspects of each of these transactions, both individually and
combined, see "Financial Information--Unaudited Pro Forma Condensed Combined
Financial Statements."
The unaudited pro forma condensed combined statement of operations data for
the year ended December 31, 1999, assumes each of the transactions was effected
on January 1, 1999. The unaudited pro forma condensed combined balance sheet
data as of December 31, 1999 gives effect to each transaction as if it had
occurred on December 31, 1999. The accounting policies of TeleCorp, Tritel,
Indus and Airadigm are substantially comparable. Certain reclassifications have
been made to Tritel's, Indus's and Airadigm's historical presentation to
conform to TeleCorp's presentation. These reclassifications do not materially
impact Tritel's, Indus's or Airadigm's statements of operations or financial
position for the period presented.
We are providing the unaudited pro forma condensed combined financial
information for illustrative purposes only. The companies may have performed
differently had they always been combined. You should not rely on the unaudited
pro forma condensed combined financial information as being indicative of the
historical results that would have been achieved had the companies always been
combined or the future results that the combined company will experience.
16
<PAGE>
<TABLE>
<CAPTION>
For the year ended
December 31, 1999
($'s in thousands, Pro Forma
except per share data) ------------------
(unaudited)
<S> <C>
Statement of Operations Data:
Revenue:
Service.................................................. $ 45,866
Roaming.................................................. 24,544
Equipment................................................ 19,565
------------
Total Revenue.......................................... 89,975
------------
Operating expenses:
Cost of revenue.......................................... 46,348
Operations and development............................... 57,519
Sales and marketing...................................... 107,514
General and administrative............................... 315,628
Depreciation and amortization............................ 250,701
Restructuring charges.................................... 32,000
------------
Total operating expenses............................... 809,710
------------
Operating loss......................................... (719,735)
------------
Other (expense) income:
Interest expense......................................... (99,251)
Interest income and other................................ 24,314
------------
Loss before income taxes................................... (794,672)
------------
Income tax benefit......................................... 28,976
------------
Net loss................................................... (765,696)
Accretion of mandatorily redeemable preferred stock........ (33,042)
------------
Net loss attributable to common equity..................... $ (798,738)
============
Pro forma net loss attributable to common equity per
share--basic and diluted.................................. $ (4.73)
============
Pro forma weighted average common equity shares
outstanding--basic and diluted............................ 168,742,005
============
<CAPTION>
As of
December 31, 1999
Pro Forma
------------------
(unaudited)
<S> <C>
Balance Sheet Data:
Cash and cash equivalents.................................. $ 740,323
Working capital............................................ 534,303
Property and equipment, net................................ 605,132
PCS licenses and microwave relocation costs, net........... 4,036,094
Intangible assets and goodwill, net........................ 3,075,292
Total assets............................................... 8,584,885
Total debt................................................. 1,358,631
Mandatorily redeemable preferred stock, net................ 364,654
Total stockholders' equity (deficit)....................... 5,336,569
</TABLE>
17
<PAGE>
Unaudited Comparative Per Share Information
The following reflects (a) the historical net loss attributable to common
equity per share and book value per share of TeleCorp common equity shares in
comparison with the pro forma net loss and book value per common equity share
after giving effect to the proposed merger with Tritel under the purchase
method of accounting, the contribution and exchange with AT&T and the
acquisitions related to Indus, Airadigm, ABC and Polycell; and (b) the
historical net loss and book value per share of Tritel common equity shares in
comparison with the equivalent pro forma net loss and book value per share
attributable to 0.76 of a share of Holding Company common equity shares which
will be received for each share of Tritel. This information should be read in
conjunction with the pro forma condensed combined financial statements of
Holding Company and the separate financial statements of the respective
companies and the notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
As of and
for the year ended
December 31, 1999
(unaudited)
------------------
<S> <C>
TeleCorp
Net loss attributable to common equity per share
Historical................................................. $ (3.58)
Pro forma Holding Company.................................. $ (4.73)
Book value per share(1)
Historical................................................. $ (0.90)
Pro forma Holding Company.................................. $ 27.74
Cash dividends per share(3)
Historical................................................. $ --
Pro forma Holding Company.................................. $ --
Tritel
Net loss per share
Historical................................................. $(33.25)
Equivalent pro forma(2).................................... $ (3.59)
Book value per share(1)
Historical................................................. $ 3.06
Equivalent pro forma(2).................................... $ 21.08
Cash dividends per share(3)
Historical................................................. $ --
Equivalent pro forma....................................... $ --
</TABLE>
- --------
(1) Computed by dividing net worth (assets less liabilities less mandatorily
redeemable preferred stock) by the number of shares outstanding as of
December 31, 1999.
(2) Computed by multiplying pro forma loss per share and pro forma book value
per share of Holding Company by the exchange ratio of 0.76.
(3) No cash dividends have been paid since the inception of TeleCorp or
Tritel.
Stock Split
On August 27, 1999, TeleCorp amended its certificate of incorporation to
effect a 100 for 1 stock split for its series F preferred stock and all classes
of its common stock to be effective as of August 27, 1999. On November 8, 1999,
TeleCorp amended its certificate of incorporation to effect a 3.09 for 1 stock
split for its series F preferred stock and all classes of its common stock to
be effective as of November 8, 1999. All TeleCorp common stock and preferred
stock share data has been retroactively adjusted to reflect this change.
On November 19, 1999, Tritel's board of directors approved a 400 for 1 stock
split for class A voting, class B non-voting, class C and class D common stock
which became effective December 13, 1999. All Tritel common stock share data,
except voting preference common shares, has been retroactively adjusted to
reflect this change.
18
<PAGE>
RISK FACTORS
You should carefully consider the risks described below as well as all the
other information in this joint proxy statement-prospectus--including the
financial statements and related notes--before deciding to vote for the merger.
Holding Company's business, operating results and financial condition could be
seriously harmed due to any of the following risks.
Risks Relating to the Merger and Related Agreements
Holding Company's stock price may be volatile and you may lose all or part of
your investment
There has not previously been a market for Holding Company stock. Holding
Company cannot predict the extent to which there will be a trading market for
its stock or how liquid the market might become. In addition, the exchange
ratio was determined in negotiations between TeleCorp and Tritel and may not
reflect the actual market value of the stock of TeleCorp and Tritel. Any
decrease in the market value of TeleCorp or Tritel stock before the completion
of the merger would likely reduce the market value of the Holding Company stock
to be received by stockholders.
In addition, the market price of Holding Company stock is likely to be
highly volatile and could be subject to wide fluctuations in response to
factors such as the following, some of which are beyond Holding Company's
control:
. quarterly variations in Holding Company's operating results;
. operating results that vary from the expectations of securities analysts
and investors;
. changes in expectations as to Holding Company's future financial
performance, including financial estimates by securities analysts and
investors;
. changes in the status of Holding Company's intellectual property and
other proprietary rights;
. changes in law and regulation;
. announcements by third parties of significant claims or proceedings
against Holding Company;
. changes in market valuations of other PCS companies;
. announcements of technological innovations or new services by Holding
Company or its competitors;
. announcements by Holding Company or its competitors of significant
contracts, acquisitions, strategic partnerships, joint ventures or
capital commitments;
. additions or departures of key personnel; and
. stock market price and volume fluctuations.
Holding Company may fail to realize the anticipated benefits of the merger
The success of the merger will depend, in part, on Holding Company's ability
to realize the anticipated growth opportunities and synergies from combining
the business of TeleCorp with the business of Tritel. If Holding Company does
not recognize economies of scale and synergies as a result of the merger, the
value of its stock may decline. To realize the anticipated benefits of this
combination, Holding Company's management team must develop strategies and
implement a business plan that will:
. effectively manage markets and networks of TeleCorp and Tritel;
. effectively manage the marketing and sales of the services of TeleCorp
and Tritel;
19
<PAGE>
. successfully retain and attract key employees of the combined company,
including management, during a period of transition and in light of the
competitive employment market; and
. maintain adequate focus on existing business and operations while
working to integrate the two companies.
Directors, management and significant stockholders of TeleCorp and Tritel
have potential conflicts of interest in recommending that you vote in favor
of the merger
Most directors of TeleCorp and Tritel who recommend that you vote in favor
of the adoption of the merger agreement have investments, employment or
severance agreements or benefit arrangements that provide them with interests
in the merger that differ from yours. The receipt of compensation or other
benefits in the merger (including the vesting of stock options and restricted
stock) or the continuation of indemnification arrangements following
completion of the merger may influence these directors in making their
recommendation that you vote in favor of the merger. For more details on
potential conflicts of interest see the sections entitled "Interests of
TeleCorp Directors and Executive Officers in the Merger" and "Interests of
Tritel Directors and Executive Officers in the Merger."
Holding Company may not be able to exercise the right to acquire licenses
which AT&T Wireless Services has the right to acquire
Holding Company will receive an assignment of AT&T Wireless Services'
rights under several agreements to purchase licenses covering certain markets
in Wisconsin and Iowa. The ability of Holding Company to exercise these rights
is subject to numerous conditions and contingencies. There can be no assurance
Holding Company will obtain any or all of these licenses. If Holding Company
cannot exercise its rights to acquire some or all of these licenses, it will
not acquire additional spectrum in Wisconsin and Iowa, which may slow its
growth and its ability to compete in the wireless communications industry.
Holding Company may be subject to adverse regulatory conditions
Holding Company and its subsidiaries must obtain various approvals from
competition authorities in the United States and the Federal Communications
Commission before the merger may be completed and the rights contributed and
exchanged by AT&T Wireless and AT&T Wireless Services exercised. Any of these
governmental entities from whom approvals are required may attempt to
condition their approval of the merger, or of the transfer of control of
licenses and other entitlements to the combined company, on the imposition of
certain regulatory conditions that may have the effect of imposing additional
costs on Holding Company or limiting its revenues.
Risks Relating to Our Business, Industry, Strategy and Operations
Both TeleCorp and Tritel have limited operating histories with histories of
losses. Holding Company may never achieve operating profitability or generate
sufficient cash flow to meet its obligations
Both TeleCorp and Tritel have limited operating histories and histories of
operating losses. TeleCorp and Tritel expect to continue to incur operating
losses and to generate negative cash flow from operating activities during the
next several years while they develop their business and expand their
networks. Additionally, TeleCorp's and Tritel's businesses have required and
will continue to require substantial capital expenditures. Holding Company
will have to dedicate a substantial portion of any cash flow from operations
to make interest and principal payments on its subsidiaries' debt, which will
reduce funds available for other purposes. If Holding Company does not achieve
and maintain positive cash flow from operations on a timely basis, Holding
Company may be unable to develop its network or conduct its business in an
effective or competitive manner.
Holding Company's future operating results over both the short and long
term are uncertain because of several factors, some of which are outside of
its control. These factors include:
. the significant cost of building its PCS network;
. the cost and availability of PCS infrastructure and subscriber
equipment, including tri-mode handsets;
20
<PAGE>
. possible delays in introducing its services;
. fluctuating market demand and prices for its services;
. pricing strategies for competitive services;
. new offerings of competitive services;
. changes in federal, state and local legislation and regulations;
. the potential allocation by the Federal Communications Commission of
additional PCS licenses or other wireless licenses in its markets;
. technological changes; and
. general economic conditions.
Holding Company and its subsidiaries may not be able to develop the markets
acquired from AT&T Wireless
Holding Company and its subsidiaries agreed to acquire undeveloped and
partially developed licenses from AT&T Wireless in exchange for certain of
TeleCorp's markets which already have established operations. Holding
Company's customer base and revenue will decrease after it exchanges the
developed markets. In addition, Holding Company may not be able to obtain
lease sites, network equipment or government or other approvals necessary in
order to successfully develop the new markets. If Holding Company cannot
successfully construct the new network, it may not be able to compensate for
the decrease in customer base or revenue from the exchange of its developed
market, which may slow its growth and its ability to compete in the wireless
communications industry.
Holding Company faces intense competition from other PCS and cellular
providers and from other technologies
The viability of Holding Company's PCS business will depend upon, among
other things, its ability to compete, especially on price, reliability,
quality of service and availability of voice and data features. In addition,
Holding Company's ability to maintain the pricing of its services may be
limited by competition, including the entry of new service providers into its
markets.
Holding Company competes in each of its markets with at least two major
U.S. wireless communications services companies such as:
. Verizon Wireless;
. BellSouth;
. Powertel;
. SBC Communications; and
. Sprint PCS.
These providers have significant infrastructure in place, often at low
historical cost, have been operational for many years, have substantial
existing subscriber bases and have substantially greater capital resources
than Holding Company does. Holding Company also faces competition from paging,
dispatch and conventional mobile radio operations, specialized mobile radio,
called SMR, and enhanced specialized mobile radio, called ESMR, including
those ESMR networks operated by Nextel Communications and its affiliates in
Holding
21
<PAGE>
Company's markets, and domestic and global mobile satellite service. Holding
Company will also be competing with resellers of wireless services. Holding
Company expects competition in the wireless telecommunications industry to be
dynamic and intense as a result of the entrance of new competition and the
development and deployment of new technologies, products and services.
In the future, cellular and PCS providers will also compete more directly
with traditional landline telephone service operators, and may compete with
services offered by energy companies, utility companies and cable and wireless
cable operators seeking to offer communications services by leveraging their
existing infrastructure. They may attract customers away from Holding Company
or prevent Holding Company from attracting customers. Additionally, continuing
technological advances in telecommunications, the availability of more
spectrum and Federal Communications Commission policies that encourage the
development of new spectrum-based technologies make it impossible to
accurately predict the extent of future competition.
Holding Company may experience a high rate of customer turnover that could
negatively impact its business
Many providers in the personal communications services industry have
experienced a high rate of customer turnover as compared to cellular industry
averages. Holding Company's strategy to address customer turnover may not be
successful, or the rate of customer turnover may be unacceptable. The rate of
customer turnover may be the result of several factors, including network
coverage, reliability issues such as blocked and dropped calls, handset
problems, non-usage of phones, change of employment, affordability, customer
care concerns and other competitive factors. Price competition and other
competitive factors could also cause increased customer turnover.
If Holding Company fails to build out the remainder of its PCS network
according to its current plan and schedule, Holding Company's growth may be
limited, its market entry may be delayed and its buildout costs may increase
Holding Company's future financial condition depends on its ability to
build out rapidly and then operate a commercial PCS network in its markets. If
Holding Company is unable to implement its construction plan in both new and
existing markets, it may also be unable to provide, or may be delayed in
providing, PCS service in certain of those markets. To complete construction
of its PCS network, Holding Company must first complete the design of the
network, acquire, purchase and install equipment, test the network and
relocate or otherwise accommodate microwave users currently using the
spectrum. There is considerable demand for PCS infrastructure equipment that
may result in substantial backlog of orders and long lead times for delivery
of certain types of equipment. If any vendors fail to perform on schedule,
Holding Company may not be able to build out the remainder of its markets or
provide PCS service to these markets in a timely and cost-effective manner.
In areas where Holding Company is unable to co-locate its transmission
equipment on existing facilities, Holding Company will need to negotiate lease
or acquisition agreements, which may involve competitors as counterparties. In
many cases, Holding Company will be required to obtain zoning variances and
other governmental approvals or permits. In addition, because of concern over
radio frequency emissions and tower appearance, some local governments have
instituted moratoria on further construction of antenna sites until the
respective health, safety and historic preservation aspects of this matter are
studied further. Accordingly, Holding Company may be unable to construct its
PCS network in any particular market in accordance with its current
construction plan and schedule. As a result, Holding Company's growth may be
limited, its market entry may be delayed and the costs of building out new
markets may increase.
Holding Company depends on its service vendors for radio frequency
engineering services, site acquisition services and build-to-suit site
construction services. If any of these service vendors fail to perform on
schedule, Holding Company may not be able to begin its PCS operations on
schedule in certain markets.
Holding Company anticipates that its subscribers will access wireless
services in its markets and throughout the AT&T Wireless network by using tri-
mode handsets. A limited number of companies
22
<PAGE>
worldwide, including Ericsson, Motorola and Nokia Corporation, currently
manufacture and supply TDMA trimode handsets in commercial quantities. If
Holding Company's vendors fail to supply these handsets when expected, Holding
Company will be required to delay its launch of service in one or more markets
or offer its customers handsets without tri-mode capabilities. Without tri-
mode handsets, Holding Company's customers will not be able to roam on both
analog cellular and digital cellular systems. If Holding Company is unable to
obtain these handsets from its vendors in the quantities or at the prices it
expects, Holding Company's service, business and operating results could be
adversely affected.
Any one of these factors would be likely to adversely affect Holding
Company's future operating performance in those markets.
Potential acquisitions may require Holding Company to incur substantial
additional debt and integrate new technologies, operations and services,
which may be costly and time consuming
Holding Company intends to continually evaluate opportunities for the
acquisition of licenses and properties that are intended to complement or
extend its existing operations. If Holding Company acquires new licenses or
facilities, it may encounter difficulties that may be costly and time-
consuming, may slow its growth or may lower the market value of Holding
Company common stock. Examples of such difficulties are that Holding Company
may have to:
. incur substantial additional debt to finance the acquisitions;
. assume United States government debt related to any licenses it
acquires;
. integrate new technologies with its technology;
. integrate new operations with its operations;
. integrate new services with its offering of services; or
. divert the attention of its management from other business concerns.
Holding Company may not be able to manage the construction of its network or
the growth of its business successfully
Holding Company expects to experience rapid growth and development in a
relatively short period of time. Holding Company's financial performance will
depend on its ability to manage such growth and the successful construction of
its network. Holding Company's management may not be able to direct its
development effectively, including implementing adequate systems and controls
in a timely manner or retaining qualified employees. This inability could slow
Holding Company's growth and its ability to compete in the wireless
communications service industry.
Holding Company may not be able to acquire the sites necessary to complete
its network
Holding Company must lease or otherwise acquire rights to use sites for the
location of network equipment and obtain zoning variances and other
governmental approvals for construction of its network and to provide wireless
communications services to customers in its licensed areas. If Holding Company
encounters significant difficulties in leasing or otherwise acquiring rights
to sites for the location of network equipment, Holding Company may need to
alter the design of its network. Changes in Holding Company's development plan
could slow the construction of its network, which would make it harder to
compete in the wireless communications industry or cause Holding Company not
to meet development requirements.
The technology chosen by Holding Company may become obsolete or may not gain
customer acceptance, which would adversely affect its ability to be
competitive and may result in increased costs to adopt a new technology
If Holding Company's technologies become obsolete, Holding Company may need
to purchase and install equipment necessary to allow it to convert to new
technologies to compete in the marketplace. Holding
23
<PAGE>
Company uses the TDMA, or time division multiple access, technology standard in
its network. Other digital technologies, such as CDMA, or code division
multiple access, and GSM, or global system for mobile communications, may have
significant advantages over TDMA. It is anticipated that CDMA-based PCS
providers will own licenses covering virtually all of the United States
population. Other PCS providers have deployed GSM technology in many of Holding
Company's markets. GSM is the prevalent standard in Europe. In addition, it is
possible that a digital transmission technology other than TDMA may gain
sufficient acceptance in the United States to adversely affect the resources
currently devoted by vendors to improving TDMA digital cellular technology. If
consumers perceive that another technology has marketplace advantages over
TDMA, Holding Company could experience a competitive disadvantage or be forced
to implement that technology at substantially increased cost.
Although all three standards are digital transmission technologies and share
certain basic characteristics that differentiate them from analog transmission
technology, they are not compatible or interchangeable with each other. In
order to roam in other markets where no PCS licensee utilizes the TDMA
standard, Holding Company's subscribers must utilize tri-mode handsets to use
an analog or digital cellular system in such markets. Generally, trimode
handsets are more expensive than single- or dual-mode handsets. The higher cost
of these handsets may impede Holding Company's ability to attract subscribers
or achieve positive cash flow as planned.
Holding Company's agreements with AT&T include conditions requiring Holding
Company to upgrade its technology to match the technology of AT&T. Holding
Company may not be able to successfully purchase and install the equipment
necessary to allow Holding Company to convert to a new or different technology
or to adopt a new or different technology at an acceptable cost, if at all. In
addition, the technologies that Holding Company chooses to invest in may not
lead to successful implementation of its business plan.
Third-Party fraud will likely cause Holding Company to incur increased
operating costs
As do most companies in the wireless industry, Holding Company will likely
incur costs associated with the unauthorized use of its network, including
administrative and capital costs associated with detecting, monitoring and
reducing the incidence of fraud. Fraud impacts interconnection costs, capacity
costs, administrative costs, fraud prevention costs and payments to other
carriers for unbillable fraudulent roaming.
Concerns that the use of wireless handsets may pose health and safety risks
may discourage the use of Holding Company's PCS handsets
Media reports have suggested that, and studies are currently being
undertaken to determine whether, radio frequency emissions from cellular and
PCS wireless handsets may be linked with health risks, including cancer, and
interference with various electronic medical devices, including hearing aids
and pacemakers.
Concerns over radio frequency emissions may discourage the use of wireless
communications devices, such as PCS handsets, which could adversely affect
Holding Company's business. In addition, the Federal Communications Commission
requires that certain transmitters, facilities, operations, and mobile and
portable transmitting devices used in PCS handsets meet specific radio
frequency emission standards. Compliance with any new restrictions could
materially increase Holding Company's costs. Concerns about radio frequency
emissions may affect Holding Company's ability to obtain licenses from
government entities necessary to construct microwave sites in certain
locations.
Separately, governmental authorities may create new regulations concerning
hand-held phones, and Holding Company's handsets may not comply with rules
adopted in the future. Noncompliance would decrease demand for Holding
Company's services. In addition, some state and local legislatures have passed
or are considering restrictions on wireless phone use for drivers. The passage
or proliferation of this or future legislation could decrease demand for
Holding Company's services.
24
<PAGE>
Holding Company cannot predict the effect of any governmental action
concerning the usage of mobile phones. In addition, measures aimed at wireless
services companies as opposed to users may be proposed or passed on the state
or federal level in the future. Governmental actions could materially
adversely affect Holding Company by requiring Holding Company to modify its
operations or business plans in response to such restrictions.
Because a significant portion of Holding Company's assets are intangible,
they may have little value upon a liquidation
Holding Company's assets consist primarily of intangible assets,
principally Federal Communications Commission licenses, the value of which
will depend significantly upon the success of Holding Company's PCS network
business and the growth of the PCS and wireless communications industries in
general. If Holding Company defaults on its indebtedness or upon its
liquidation, the value of these assets may not be sufficient to satisfy its
obligations.
Holding Company's use of the SunCom brand name for marketing may link its
reputation with another SunCom company
Holding Company uses the SunCom brand name to market its products and
services in conjunction with another affiliate of AT&T Wireless Services,
Triton, in order to broaden Holding Company's marketing exposure and share the
costs of advertising. If Triton has problems in developing and operating its
network, it could harm consumer perception of the SunCom brand and, in turn,
harm Holding Company's own reputation.
Holding Company's use of the SunCom trademark may expose Holding Company to
litigation
The State of Florida has contacted AT&T Wireless Services concerning
Florida's alleged rights in the trademark SunCom. Florida uses the trademark
SunCom for a communications network used solely by state agencies in Florida
and certain not-for-profit entities that conduct a threshold level of business
with the state. If Holding Company is not successful in reaching an amicable
resolution with Florida regarding the SunCom trademark, Holding Company may
need to litigate to determine the scope of the rights of the state with
respect to the SunCom trademark. The outcome of any litigation is uncertain,
and Holding Company may not have a continuing right to use the SunCom brand
name in the areas in which Florida has done business under the SunCom
trademark.
A limited number of stockholders control Holding Company, and their interests
may be different from yours
Following the merger, Messrs. Vento and Sullivan will control a majority of
the total voting power of Holding Company. In addition, AT&T Wireless, CB
Capital Investors, L.P., Equity-Linked Investors-II, Private Equity Investors
III, L.P., Hoak Communications Partners, L.P., HCP Capital Fund, L.P., CIHC,
Incorporated and Dresdner Kleinwort Benson Private Equity Partners L.P. will
control approximately 28.4% of Holding Company's total voting power, in the
aggregate, after the merger. These stockholders, and certain of their
affiliates, together have the power to elect all of Holding Company's
directors. They have agreed in a stockholders' agreement to arrangements for
the nomination of directors and to vote their shares together to elect all of
the nominees selected by them under the stockholders' agreement. As a result
of their stock ownership, these stockholders and Holding Company's management
will have the ability to control the future operations and strategy of Holding
Company. They will also be able to effect or prevent a sale or merger or other
change of control of Holding Company. In addition, Mr. Sullivan and Mr. Vento
will own a majority of the Holding Company voting preference common stock,
which will represent 50.1% of the voting power of all of the outstanding
voting stock of Holding Company and will control the vote of all of the
Holding Company voting preference common stock under the stockholders'
agreement. Therefore, by virtue of their ownership of voting preference common
stock, Messrs. Vento and Sullivan can control the outcome of any matter that
requires a vote of a majority of the common stock and can prevent the approval
of any matter that requires a supermajority vote of the common stock.
25
<PAGE>
Conflicts of interest between these stockholders and management stockholders
and Holding Company's public stockholders may arise with respect to sales of
shares of Holding Company class A voting common or class B non-voting common
stock owned by Holding Company's initial investors and management stockholders
or other matters. For example, sales of shares by Holding Company's initial
investors and management stockholders could result in a change of control under
TeleCorp's and Tritel's bank facilities, which would constitute an event of
default under the bank facility, and under TeleCorp's and Tritel's senior
subordinated discount note indentures, which would require Holding Company to
offer to repurchase those notes. In addition, the interests of Holding
Company's initial investors and other existing stockholders regarding any
proposed merger or sale may differ from the interests of new public
stockholders of Holding Company, especially if the consideration to be paid for
the Holding Company class A voting common and class B non-voting common stock
in a merger or sale is less than the price paid by public stockholders.
Holding Company's tracking stockholders may receive a greater value upon the
payment of dividends or upon liquidation than other stockholders
Holding Company's class C, D, E and F common stock are tracking stock and
the ability to pay dividends and the amount receivable on liquidation is based
on the value of specific subsidiaries of Tritel and TeleCorp. The management of
Holding Company and the initial investors of TeleCorp and Tritel own all of the
Holding Company tracking stock. Management can cause payment of any future
dividends on the Holding Company tracking stock. The value received by the
Holding Company tracking stockholders is not available to other Holding Company
stockholders. In addition, the value received upon the liquidation of the
Holding Company tracking stock is not available to other stockholders of
Holding Company.
Holding Company does not intend to pay dividends in the foreseeable future
Neither TeleCorp nor Tritel has declared or paid any cash dividends on their
common stock. For the foreseeable future, Holding Company intends to retain any
earnings to finance the development and expansion of its business, and Holding
Company does not anticipate paying any cash dividends on its common stock.
Payment of any future dividends on Holding Company's common stock will depend
on its earnings and capital requirements, the terms of its debt instruments and
preferred stock and other factors Holding Company's board of directors
considers appropriate.
Anti-takeover provisions affecting Holding Company could prevent or delay a
change of control that you may favor
Provisions of Holding Company's restated certificate of incorporation and
its by-laws that will become effective upon the completion of this merger,
provisions of its debt instruments and other agreements, and provisions of
applicable Delaware law and applicable federal and state regulations may
discourage, delay or prevent a merger or other change of control that
stockholders may consider favorable. The provisions of Holding Company's
restated certificate of incorporation or by-laws, among other things, will:
. divide Holding Company's board of directors into three classes, with
members of each class to be elected in staggered three-year terms;
. limit the right of stockholders to remove directors;
. regulate how stockholders may present proposals or nominate directors
for election at annual meetings of stockholders; and
. authorize Holding Company's board of directors to issue preferred stock
in one or more series, without stockholder approval.
These provisions could:
. have the effect of delaying, deferring or preventing a change in control
of Holding Company;
. discourage bids for Holding Company class A voting common stock at a
premium over the market price;
26
<PAGE>
. lower the market price of, and the voting and other rights of the
holders of, Holding Company class A voting common stock; or
. impede the ability of the holders of Holding Company class A voting
common stock to change its management.
In addition, AT&T Wireless, pursuant to Holding Company's stockholders'
agreement, and TeleCorp's and Tritel's lenders, under their bank facilities and
senior subordinated note indentures, have the ability to restrict Holding
Company's ability to enter into change of control transactions.
Holding Company's business is subject to regulation by the Federal
Communications Commission and state regulatory commissions or similar state
regulatory agencies in the states in which it operates. This regulation may
prevent some investors from owning Holding Company securities, even if that
ownership may be favorable to Holding Company. The Federal Communications
Commission and some states have statutes or regulations that would require an
investor who acquires a specified percentage of Holding Company's securities,
or the securities of one of its subsidiaries, to obtain approval to own those
securities from the Federal Communications Commission or the applicable state
commission.
In addition, following the merger, Messrs. Vento and Sullivan will control a
majority of the total voting power of Holding Company. As a result, Messrs.
Vento and Sullivan will have the ability to effect or prevent a sale or merger
or other change of control of Holding Company.
Risks Relating to Our Relationship with AT&T
Holding Company depends on agreements with AT&T for its success, and would
have difficulty operating without them
TeleCorp and Tritel have entered into a number of agreements with AT&T,
including:
. a license agreement;
. a stockholders' agreement;
. an intercarrier roamer services agreement;
. a roaming administration service agreement; and
. a long distance agreement.
Holding Company's business strategy depends on its relationship with AT&T
Wireless. Holding Company and its operating subsidiaries are dependent on co-
branding, roaming and service relationships with AT&T Wireless under their
joint venture agreements. These relationships are central to Holding Company's
business plan. If any of these relationships were terminated, Holding Company's
business strategy could be significantly affected and, as a result, its
operations and future prospects could be adversely affected.
The AT&T Wireless Services agreements create an organizational and
operational structure that defines the relationships between AT&T Wireless
Services and, through TeleCorp and Tritel, Holding Company. Because of Holding
Company's dependence on these relationships, it is important for you to
understand that there are circumstances in which AT&T can terminate TeleCorp's
and Tritel's right to use its brand name, as well as other important rights
under the joint venture agreements, if TeleCorp or Tritel violates the terms of
the joint venture agreements or if certain other events occur.
TeleCorp and Tritel have agreements with AT&T Wireless for equipment
discounts. Any disruption in Holding Company's relationship with AT&T Wireless
could hinder its ability to obtain the infrastructure equipment that Holding
Company uses in its network or harm its relationship with its vendors.
27
<PAGE>
If Holding Company fails to maintain certain quality standards or violates
terms of its licenses, AT&T could terminate its exclusive relationship with
Holding Company and its rights to the AT&T brand
If Holding Company fails to meet specified customer care, reception quality
and network reliability standards set forth under the stockholders' agreement,
AT&T Wireless may terminate AT&T Wireless's exclusivity obligations with
Holding Company and its rights to use the AT&T brand. If AT&T Wireless
terminates its exclusivity obligations, other providers could then enter into
agreements with AT&T Wireless, exposing Holding Company to increased
competition, and Holding Company could lose access to customers. If Holding
Company loses its rights to use the AT&T brand, Holding Company would lose the
advantages associated with AT&T's marketing efforts. If Holding Company loses
the rights to use this brand, customers may not recognize its brand readily.
Holding Company may have to spend significantly more money on advertising to
create brand recognition.
AT&T can terminate Holding Company's license to use the AT&T brand name,
designation as a member of the AT&T Wireless network, or use of other AT&T
service marks if Holding Company violates the terms of the license or
otherwise breaches one of the AT&T agreements. The exercise by AT&T of any of
these rights, or other rights described in the AT&T agreements, could
significantly and materially affect Holding Company's operations, future
prospects and results of operations.
In addition, if AT&T Wireless combines with specified entities with over $5
billion in annual revenues from telecommunications activities, that derives
less than one-third of its aggregate revenues from the provision of wireless
telecommunications and that have PCS or cellular licenses that cover at least
25% of the people covered by Holding Company's licenses, then AT&T Wireless
may terminate its exclusivity obligations with Holding Company in markets that
overlap with markets of those entities. Other providers could then enter into
agreements with AT&T Wireless in those markets, exposing Holding Company to
increased competition, and Holding Company could lose access to customers.
Holding Company relies on AT&T Wireless Services for a significant portion of
its roaming revenue and a decrease in this roaming revenue may have a
negative impact on Holding Company's business
Under the roaming agreement, the roaming rate that AT&T Wireless Services
pays to TeleCorp when AT&T Wireless Services' customers roam onto its network
will decline over each of the next several years in certain of TeleCorp's
markets. This may affect Holding Company's roaming revenue, most of which has
historically been derived from AT&T Wireless Services' customers traveling
through TeleCorp's markets.
Holding Company relies on the use of the AT&T brand name and logo to market
its services, and a loss of use of this brand and logo or a decrease in the
market value of this brand and logo would hinder Holding Company's ability to
market its products and may have an adverse effect on its business and
results of operations
The AT&T brand and logo is highly recognizable and AT&T supports its brand
and logo by its marketing. If Holding Company loses its rights to use the AT&T
brand and logo under the license agreements with its subsidiaries, Holding
Company would lose the advantages associated with AT&T's marketing efforts. If
Holding Company loses the rights to use this brand and logo, customers may not
recognize its brand readily and Holding Company may have to spend
significantly more money on advertising to create brand recognition.
In addition, Holding Company's results of operations are highly dependent
on TeleCorp's and Tritel's relationship with AT&T and AT&T Wireless, their
success as a wireless communications provider and the value of the AT&T brand
and logo. If AT&T Wireless encounters problems in developing and operating its
wireless network and its reputation as a wireless communications provider
declines, it could adversely affect the value to Holding Company of the AT&T
brand, TeleCorp's and Tritel's agreements with various AT&T entities and
Holding Company's results of operations. In that event, Holding Company may
need to invest heavily in obtaining other operating agreements and in
marketing Holding Company's brand to develop its business, and Holding Company
may not have funds to do so.
28
<PAGE>
AT&T Wireless can at any time require Holding Company to enter into a resale
agreement that would allow AT&T Wireless to sell access to, and usage of,
Holding Company services in its licensed area on a nonexclusive basis using
the AT&T brand
Under the terms of a stockholders' agreement, Holding Company is required
to enter into a resale agreement at AT&T Wireless's request. The resale
agreement will allow AT&T Wireless to sell access to, and usage of, Holding
Company's services in its licensed area on a nonexclusive basis and using the
AT&T brand. AT&T Wireless may be able to develop its own customer base in
Holding Company's licensed area during the term of the resale agreement.
AT&T Wireless may terminate its rights under the stockholders' agreement,
which could result in increased competition with Holding Company for
subscribers who otherwise might use Holding Company's services that are co-
branded with AT&T
If AT&T Wireless engages in specified business combinations, the exercise
of its termination rights under the stockholders' agreement could result in
increased competition detrimental to Holding Company's business. Holding
Company cannot assure you that AT&T Wireless will not enter into such a
business combination, and the termination of the non-compete and exclusivity
provisions of the stockholders' agreement could have a material adverse effect
on Holding Company's operations.
Holding Company may not be able to engage in certain activities and make
acquisitions outside of its license footprint and this may limit Holding
Company's future growth
Generally, Holding Company cannot engage in any business other than
providing mobile wireless telecommunications services using TDMA technology or
ancillary businesses, or make acquisitions of licenses outside of Holding
Company's license footprint without the approval of AT&T Wireless. This
limitation on Holding Company's ability to engage in other business or acquire
additional licenses outside of its footprint may inhibit Holding Company's
future growth.
Risks Relating to Financing
Holding Company's highly leveraged capital structure limits its ability to
obtain additional financing and could adversely affect its business in
several other ways
Holding Company has a substantial amount of debt, may incur substantial
additional debt in the future and may not have sufficient funds to make
interest and principal payments on its debt. Holding Company expects to incur
substantial additional debt under existing commitments in connection with the
construction of its network and the operation of its existing markets. In
addition, if Holding Company completes the AT&T Wireless acquisitions and/or
acquires licenses in additional markets, it would expect to incur substantial
additional debt as part of the financing of the acquisition and the
construction and operation of PCS systems in those markets. Holding Company
may not have sufficient cash flow in the future to service any additional debt
it incurs.
Holding Company's large amount of indebtedness could significantly impact
its business for the following reasons:
. Holding Company is limited in its ability to obtain additional
financing, if needed, to expand its network, to cover its cash flow
deficit or for working capital, other capital expenditures, debt service
requirements or other purposes.
. Holding Company will need to dedicate a substantial portion of its
operating cash flow to fund interest expense on TeleCorp's and Tritel's
bank facilities and other indebtedness, thereby reducing funds available
for its network expansion, operations or other purposes.
. Holding Company is vulnerable to interest rate fluctuations because a
significant portion of Tritel's bank debt is at variable interest rates.
. Holding Company is limited in its ability to compete with competitors
who are not as highly leveraged.
29
<PAGE>
. Holding Company is limited in its ability to react to changing market
conditions, changes in Holding Company's industry and economic
downturns.
. Holding Company is especially susceptible to competition and market
fluctuations because Holding Company requires significant amounts of
cash flow to service its debt, so Holding Company may not be able to
discount its prices to maintain competitive pricing packages.
TeleCorp's and Tritel's debt instruments contain restrictive covenants that
may limit TeleCorp's and Tritel's operating flexibility
The documents governing TeleCorp's and Tritel's indebtedness, including the
credit facilities and senior subordinated note indentures, contain significant
covenants that limit their ability to engage in various transactions and, in
the case of the credit facility, require satisfaction of specified financial
performance criteria. In addition, under each of these documents, the
occurrence of specific events, in some cases after notice and grace periods,
would constitute an event of default permitting acceleration of the respective
indebtedness. The limitations imposed by the documents governing the
outstanding indebtedness are substantial, and if TeleCorp and Tritel fail to
comply with them, TeleCorp's or Tritel's debts could become immediately payable
at a time when TeleCorp and Tritel are unable to pay them.
If TeleCorp and Tritel do not pay the interest and principal on any debt
that TeleCorp and Tritel owe to the U.S. government when it is due, the Federal
Communications Commission may:
. impose substantial financial penalties;
. reclaim and reauction the licenses for which TeleCorp and Tritel
incurred the debt;
. not renew any of TeleCorp's and Tritel's other licenses; and
. pursue other enforcement measures.
Any of these Federal Communications Commission actions would slow TeleCorp's
and Tritel's growth and ability to compete in the wireless communications
industry.
Holding Company, TeleCorp or Tritel may not be able to obtain the additional
financing it may need to complete TeleCorp's and Tritel's network, to complete
the network it acquired from AT&T Wireless and fund TeleCorp's and Tritel's
operating losses
Holding Company will make significant capital expenditures to finish the
construction, testing and deployment of TeleCorp's and Tritel's network,
particularly in connection with the licenses or assigned rights acquired from
AT&T Wireless and AT&T Wireless Services. The actual expenditures necessary to
achieve these goals may differ significantly from Holding Company's estimates.
Holding Company cannot predict whether any additional financing it may need
will be available, or what the terms of any such additional financing would be
or whether Tritel's and TeleCorp's existing debt agreements will allow
additional financing. Holding Company may incur variable rate debt, which would
make Holding Company more vulnerable to interest rate increases. If Holding
Company cannot obtain additional financing when needed, Holding Company will
have to delay, modify or abandon some of its plans to construct the remainder
of TeleCorp's and Tritel's network, as well as the buildout of the network
relating to the licenses or assigned rights it acquired or may receive from
AT&T Wireless and AT&T Wireless Services, which could slow Holding Company's
growth and ability to compete in the wireless communications industry.
Holding Company would have to obtain additional financing if, among other
things:
. any of its sources of capital are unavailable or insufficient;
. Holding Company significantly departs from its business plan;
30
<PAGE>
. Holding Company experiences unexpected delays or cost overruns in the
construction of its network;
. Holding Company experiences increases in operating costs;
. changes in technology or governmental regulations create unanticipated
costs;
. Holding Company acquires additional licenses; or
. revenue from subscribers is lower than anticipated.
Some of Holding Company's stockholders are obligated to make equity
contributions to TeleCorp in the future and Holding Company cannot guarantee
that they will make those contributions
TeleCorp received unconditional and irrevocable equity commitments from
some of its stockholders in connection with the completion of various business
ventures. In return for these commitments, these stockholders received shares
of TeleCorp common and preferred stock (which will be converted into Holding
Company preferred and common stock upon consummation of the merger), which
they pledged to TeleCorp and its senior bank lenders to collateralize their
commitments. These stockholders are required to fund $37.6 million of these
commitments in 2000, $48.4 million in 2001 and the remaining $11.0 million in
2002. In the event any of these stockholders do not fund the remaining
portions of their commitments, TeleCorp could foreclose on their pledged
shares, but TeleCorp or Holding Company would likely have to obtain
alternative financing to complete its network. Such financing may not be
available on terms satisfactory to TeleCorp or Holding Company. If TeleCorp or
Holding Company are unable to secure alternate financing, they may have to
delay, modify or abandon some of its plans to construct the remainder of
TeleCorp's network.
Risks Relating to Regulatory Matters
Holding Company's Federal Communications Commission licenses may be cancelled
or revoked under certain circumstances, and the loss of any Federal
Communications Commission licenses would adversely affect Holding Company's
business and its ability to provide PCS service in certain markets
Holding Company's principal assets are PCS licenses issued by the Federal
Communications Commission. The Federal Communications Commission has imposed
certain requirements on its licensees, including PCS operators. For example,
PCS licenses may be revoked by the Federal Communications Commission at any
time for cause. The licenses may also be cancelled for a violation of Federal
Communications Commission regulations, failure to continue to qualify for the
licenses, malfeasance, other misconduct or failure to comply with the terms of
the licenses. The loss of any license, or an action that threatens the loss of
any license, would have a material adverse effect on Holding Company's
business and Holding Company's operating results.
Because Holding Company faces broad and evolving government regulation,
Holding Company may have to modify its business plans or operations in the
future and may incur increased costs to comply with new regulations
The licensing, construction, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the Federal Communications Commission, Congress and state and local
regulatory agencies. This regulation is continually evolving. There are a
number of issues as to which regulation has been or in the future may be
introduced, including those regarding interference between different types of
wireless telecommunications systems and the effect of wireless
telecommunications equipment on medical equipment and devices. As new
regulations are promulgated on these or other subjects, Holding Company may be
required to modify its business plans or operations to comply with them. It is
possible that the Federal Communications Commission, Congress or any state or
local regulatory agency having jurisdiction over Holding Company's business
will adopt or change regulations or take other actions that could adversely
affect Holding Company's business and operating results.
31
<PAGE>
The Telecommunications Act of 1996 mandated significant changes in existing
regulation of the telecommunications industry to promote competitive
development of new service offerings, to expand public availability of
telecommunications services and to streamline regulation of the industry.
Nevertheless, the implementation of these mandates by the Federal
Communications Commission and state authorities will involve numerous changes
in established rules and policies that could adversely affect Holding Company's
business.
All of Holding Company's PCS licenses are subject to the Federal
Communications Commission's buildout requirements. Holding Company has
developed a buildout plan that Holding Company believes meets all Federal
Communications Commission requirements. In addition, the acquisition of new
licenses in connection with the merger and separate exchange transaction will
require new buildout plans. However, Holding Company may be unable to meet its
buildout schedules. If there are delays in implementing Holding Company's and
its subsidiaries' network buildout, the Federal Communications Commission could
reassess Holding Company's authorized service area or, in extreme cases, it may
revoke Holding Company's licenses or impose fines.
The current restrictions on foreign ownership could adversely affect Holding
Company's ability to attract additional equity financing from entities that
are, or are owned by, foreign interests. If Holding Company's foreign ownership
were to exceed the then-applicable limits in the future, the Federal
Communications Commission could revoke or cancel Holding Company's PCS licenses
or order an ownership restructuring that could cause Holding Company to incur
significant costs.
If Holding Company fails to satisfy Federal Communications Commission control
group requirements, Holding Company may lose its C- and F-Block licenses,
which could adversely affect its business and its ability to provide PCS
service in certain markets
To retain the C-and F-Block licenses and the favorable government financing
granted to Holding Company, Holding Company must maintain its designated entity
status as an entrepreneur and small business or very small business. To
maintain all of the benefits of Holding Company's designated entity status,
Holding Company's control group, including its qualifying investors, must
retain certain minimum stock ownership and control of its voting stock, as well
as legal and actual control of Holding Company for five years from the date of
grant of Holding Company's C-and F-Block PCS licenses, subject to possible
unjust enrichment obligations for ten years. The Federal Communications
Commission has indicated that it will not rely solely on legal control in
determining whether the control group and its qualifying investors are truly in
control of an entity. Even if the control group and the qualifying investors
hold the requisite percentages of equity control, the Federal Communications
Commission may still inquire to determine whether actual and voting control
exists.
Government regulation, changes in Holding Company's licenses or other
governmental action could affect how Holding Company does business
Congress, the Federal Communications Commission, the Federal Aviation
Administration, state and local regulatory authorities or the courts may adopt
new regulations, amend existing regulations, alter the administration of
existing regulations or take other actions that might cause Holding Company to
incur significant costs in making changes to its network, and such costs might
affect Holding Company's cash flows.
As the Federal Communications Commission continues to implement changes to
promote competition under the Communications Act of 1934, as amended by the
Telecommunications Act of 1996, it may change how it regulates the way Holding
Company's network connects with other carriers' networks. The Federal
Communications Commission may require Holding Company to provide lower cost
services to other carriers, which may lessen Holding Company's revenues.
Holding Company's licenses to provide wireless communications services,
which are its principal assets, have terms of ten years. The Federal
Communications Commission may not renew Holding Company's licenses upon the
expiration of their terms. Further, the Federal Communications Commission could
modify
32
<PAGE>
Holding Company's licenses in a way that decreases their value or use to
Holding Company or allocate unused airwaves for similar services. The
nonrenewal or modification of any of Holding Company's licenses or the
allocation of additional spectrum would slow its growth and ability to compete
in the wireless communications industry. See "Government Regulation" on page
209.
Holding Company could lose its PCS licenses or incur financial penalties if
the Federal Communications Commission determines certain of Holding Company
and its subsidiaries are not small businesses, very small businesses or
entrepreneurial enterprises or if Holding Company does not meet the Federal
Communications Commission's minimum construction requirements
The Federal Communications Commission could impose penalties on Holding
Company related to its subsidiaries' very small business, small business and
entrepreneurial status and its requirements regarding minimum construction of
Holding Company's network that could slow Holding Company's growth and its
ability to compete in the wireless communications industry.
Certain subsidiaries of TeleCorp and Tritel acquired PCS licenses as very
small businesses, small businesses and entrepreneurial companies. These
subsidiaries must remain very small businesses, small businesses or
entrepreneurs, as the case may be, for at least five years to comply with
applicable rules of the Federal Communications Commission, including rules
governing Holding Company's capital and ownership structure and corporate
governance. If the Federal Communications Commission determines that Holding
Company or its subsidiaries violated these rules or failed to meet its minimum
construction requirements, it could impose substantial penalties upon Holding
Company. Among other things, the Federal Communications Commission could:
. fine Holding Company;
. cancel Holding Company's licenses;
. revoke Holding Company's licenses;
. accelerate Holding Company's installment payment obligations;
. require a restructuring of Holding Company's equity; or
. cause Holding Company to lose bidding credits retroactively.
33
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
Share Price. TeleCorp class A voting common stock began trading on the
Nasdaq National Market on November 23, 1999, under the symbol "TLCP." Tritel
class A voting common stock began trading on the Nasdaq National Market on
December 14, 1999, under the symbol "TTEL."
On February 28, 2000, the last trading day prior to announcement of the
execution of the merger agreement, the last reported prices per share of
TeleCorp's class A voting stock and Tritel's class A voting common stock were
$54.00 and $24.00, respectively, and the pro forma equivalent market value of
Tritel's class A voting common stock was $41.04. The pro forma equivalent
market value per share of the Tritel class A voting common stock is calculated
by multiplying the last reported sales price of TeleCorp class A voting common
stock by the exchange ratio of 0.76.
Beginning on the closing date of the merger, Holding Company class A voting
common stock will be traded on the Nasdaq National Market under the symbol
"TLCP."
Market Price. The following table lists the high and low last reported sales
price for TeleCorp's class A voting common stock for the periods indicated, as
reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
Quarter High Low
------- ------- -------
<S> <C> <C>
Fourth Quarter ended December 31, 1999 (from November 22,
1999)........................................................ $40.25 $33.00
First Quarter ended March 31, 2000............................ $54.00 $31.00
Second Quarter beginning April 1, 2000 (through May 11,
2000)........................................................ $53.625 $38.00
The following table lists the high and low last reported sales price for
Tritel's class A voting common stock for the periods indicated, as reported by
the Nasdaq National Market.
<CAPTION>
Quarter High Low
------- ------- -------
<S> <C> <C>
Fourth Quarter ended December 31, 1999 (from December 14,
1999)........................................................ $31.688 $26.125
First Quarter ended March 31, 2000............................ $39.50 $21.875
Second Quarter beginning April 1, 2000 (through May 11,
2000)........................................................ $39.00 $26.875
</TABLE>
Dividends. Neither TeleCorp nor Tritel has ever paid cash dividends to its
stockholders since its inception. Following the merger, Holding Company does
not plan to pay cash dividends in the foreseeable future. Holding Company
currently intends to retain earnings, if any, to finance the expansion of its
business. Any future determination to pay dividends will be at the discretion
of Holding Company's board of directors and will be dependent upon then
existing conditions, including financial conditions and results of operations,
contractual restrictions, business prospects and other relevant factors.
Holding Company may only pay dividends if permitted under the terms of its
preferred stock, and the senior subordinated notes indenture and the senior
credit facilities of TeleCorp and Tritel.
34
<PAGE>
THE SPECIAL MEETINGS
Joint Proxy Statement-Prospectus
This joint proxy statement-prospectus is being furnished to you in
connection with the solicitation of proxies by each of TeleCorp's and Tritel's
board of directors in connection with the proposed merger.
This joint proxy statement-prospectus is first being furnished to
stockholders of TeleCorp and Tritel on or about , 2000.
Date, Time and Place of the Special Meetings
The special meetings are scheduled to be held as follows:
For TeleCorp stockholders: For Tritel stockholders:
, 2000 , 2000
a.m., local time a.m., local time
Purpose of the Special Meetings
The special meetings are being held so that stockholders of each of
TeleCorp and Tritel may consider and vote upon a proposal to adopt a merger
agreement between TeleCorp and Tritel pursuant to which TeleCorp and Tritel
will each become a wholly owned subsidiary of Holding Company, and to transact
any other business that properly comes before the special meetings or any
adjournment or postponement of the special meetings. Adoption of the merger
agreement will also constitute approval of the merger and the other
transactions contemplated by the merger agreement.
If the stockholders of TeleCorp and Tritel adopt the merger agreement, upon
completion of the merger:
. each share of each class of TeleCorp common stock will be automatically
converted into one share of a corresponding class of substantially
similar Holding Company class A voting common through class D common and
voting preference common stock except that each share of TeleCorp class
B non-voting common stock will be automatically converted into one share
of Holding Company class A voting common stock;
. each share of each series of TeleCorp preferred stock will be
automatically converted into one share of a corresponding series of
Holding Company preferred stock having terms substantially similar to
those of the TeleCorp preferred stock;
. each share of Tritel class A voting common and class B non-voting common
stock will be automatically converted into 0.76 shares of Holding
Company class A voting common stock for each share they own and cash in
lieu of any fractional shares;
. each share of Tritel class C common and class D common stock will be
automatically converted into 0.0076 shares of Holding Company class E
common and class F common stock, respectively, and 0.7524 shares of
Holding Company class A voting common stock and cash in lieu of any
fractional shares;
. all shares of Tritel voting preference common stock owned by E.B.
Martin, Jr. will be automatically converted into an aggregate amount of
$10 million;
. all shares of Tritel voting preference common stock owned by William M.
Mounger, II will be automatically converted into three shares of Holding
Company voting preference common stock. In connection with the merger,
Mr. Mounger will receive a put right to sell his shares of Holding
Company voting preference common stock for an aggregate amount of $10
million; and
. each share of Tritel series A preferred and series D preferred stock
will be automatically converted into one share of Holding Company series
B preferred and series G preferred stock, respectively.
35
<PAGE>
Stockholder Record Date for the Special Meetings
TeleCorp. TeleCorp's board of directors has fixed the close of business on
, 2000 as the record date for determination of TeleCorp stockholders
entitled to notice of, and to vote at, the special meeting. On the record date,
there were:
. shares of TeleCorp class A voting common stock outstanding, held by
approximately holders of record; and
. 3,090 shares of TeleCorp voting preference common stock outstanding,
held by 2 holders of record.
Tritel. Tritel's board of directors has fixed the close of business on
, 2000 as the record date for determination of Tritel stockholders entitled to
notice of, and to vote at, the Tritel special meeting. On the record date,
there were:
. shares of Tritel class A voting common stock outstanding, held by
approximately holders of record; and
. 6 shares of Tritel voting preference common stock outstanding, held by 2
holders of record.
Vote Required for Adoption of the Merger Agreement
TeleCorp. When a majority of TeleCorp voting preference common stock are
represented and when shares of TeleCorp class A voting and TeleCorp voting
preference common stock with at least 5,010,000 votes are represented, either
in person or by proxy, a quorum will be present at the TeleCorp special
meeting. The affirmative vote of the holders of a majority of the voting power
of shares of TeleCorp class A voting common stock and TeleCorp voting
preference common stock, voting as a single class, outstanding as of the record
date voting at the special meeting is required to adopt the merger agreement.
Except as otherwise required by law, if a quorum is present at the special
meeting, the majority vote of the TeleCorp voting preference common stock will
be sufficient to approve the merger. At the TeleCorp special meeting:
. the TeleCorp class A voting common stockholders are entitled to, as a
class, an aggregate of 4,990,000 votes of all outstanding TeleCorp
common stock, regardless of the number of shares outstanding;
. each holder of TeleCorp class A voting common stock will have the number
of votes equal to 4,990,000 divided by the number of outstanding shares
of TeleCorp class A voting common stock multiplied by the number of
shares of TeleCorp class A voting common stock held by such stockholder;
and
. the TeleCorp voting preference common stockholders are entitled to, as a
class, 5,010,000 votes of all outstanding TeleCorp common stock,
regardless of the number of shares outstanding.
The holders of the TeleCorp class B non-voting common stock, TeleCorp class
C common stock, TeleCorp class D common stock, TeleCorp series A preferred
stock, TeleCorp series B preferred stock, TeleCorp series C preferred stock,
TeleCorp series D preferred stock, TeleCorp series E preferred stock and
TeleCorp series F preferred stock are not entitled to vote on the merger
proposal.
As of the record date, TeleCorp directors and executive officers and their
affiliates, including Mr. Vento and Mr. Sullivan, owned a majority of the
voting power of TeleCorp capital stock entitled to vote at the TeleCorp special
meeting. Pursuant to a voting agreement with TeleCorp and Tritel, Mr. Vento and
Mr. Sullivan have agreed to vote all of their shares of TeleCorp capital stock,
which represent a majority of the voting power of TeleCorp capital stock
entitled to vote at the TeleCorp special meeting, in favor of the adoption of
the merger agreement. Accordingly, approval of the merger agreement by TeleCorp
stockholders is assured.
36
<PAGE>
Tritel. When a majority of Tritel voting preference common stock and a
majority of Tritel class A voting common stock are represented and when shares
of Tritel class A voting and Tritel voting preference common stock with at
least 5,010,000 votes are represented, either in person or by proxy, a quorum
will be present at the Tritel special meeting. The affirmative vote of the
holders of a majority of the voting power of shares of Tritel class A voting
common stock and Tritel voting preference common stock, voting as a single
class, outstanding as of the record date voting at the special meeting is
required to adopt the merger agreement. Except as otherwise required by law, if
a quorum of the Tritel voting preference common stock is present at the special
meeting, the vote of the Tritel voting preference common stock having 5,010,000
votes will be sufficient to approve the merger. At the Tritel special meeting:
. the Tritel class A voting common stockholders are entitled to, as a
class, an aggregate of 4,990,000 votes of all outstanding Tritel common
stock, regardless of the number of shares outstanding;
. each holder of Tritel class A voting common stock will have the number
of votes equal to 4,990,000 divided by the number of outstanding shares
of Tritel class A voting common stock multiplied by the number of shares
of Tritel class A voting common stock held by such stockholder; and
. the Tritel voting preference common stockholders are entitled to, as a
class, 5,010,000 votes of all outstanding Tritel common stock,
regardless of the number of shares outstanding.
The holders of the Tritel class B non-voting common stock, Tritel class C
common stock, Tritel class D common stock, Tritel series A preferred stock and
Tritel series D preferred stock are not entitled to vote on the merger
proposal.
As of the record date, Tritel directors and executive officers and their
affiliates, including Mr. Mounger and Mr. Martin, owned a majority of the
voting power of Tritel capital stock entitled to vote at the Tritel special
meeting. Pursuant to a voting agreement with Tritel and TeleCorp, Mr. Mounger
and Mr. Martin have agreed to vote all of their shares of Tritel capital stock,
which represent a majority of the voting power of Tritel capital stock entitled
to vote at the Tritel special meeting, in favor of the adoption of the merger
agreement. Accordingly, approval of the merger agreement by Tritel stockholders
is assured.
Proxies
All shares of TeleCorp class A voting common stock and TeleCorp voting
preference common stock represented by properly executed proxies or voting
instructions received before or at the TeleCorp special meeting and all shares
of Tritel class A voting common stock and Tritel voting preference common stock
represented by properly executed proxies or voting instructions received before
or at the Tritel special meeting will, unless the proxies or voting
instructions are revoked, be voted in accordance with the instructions
indicated on those proxies or voting instructions. If no instructions are
indicated on a properly executed proxy card or voting instructions, the shares
will be voted FOR adoption of the merger agreement. You are urged to mark the
box on the proxy card to indicate how to vote your shares.
If a properly executed proxy card or voting instruction is returned and the
stockholder has abstained from voting on adoption of the merger agreement, the
TeleCorp class A voting common stock, TeleCorp voting preference common stock,
Tritel class A voting common stock or Tritel voting preference common stock
represented by the proxy or voting instructions will be considered present at
the special meeting for purposes of determining a quorum, but will not be
considered to have been voted in favor of adoption of the merger agreement. If
your shares are held in an account at a brokerage firm or bank, you must
instruct them on how to vote your shares. If an executed proxy card is returned
by a broker or bank holding shares which indicates that the broker or bank does
not have discretionary authority to vote on adoption of the merger agreement,
the shares will be considered present at the meeting for purposes of
determining the presence of a quorum, but will not be considered to have been
voted in favor of adoption of the merger agreement. Your broker or bank will
vote your shares only if you provide instructions on how to vote by following
the information provided to you by your broker.
37
<PAGE>
Neither TeleCorp nor Tritel expects that any matter other than adoption of
the merger agreement will be brought before its special meeting. If, however,
other matters are properly presented, the persons named as proxies will vote in
accordance with their judgment with respect to those matters, unless authority
to do so is withheld on the proxy card.
A stockholder may revoke his or her proxy at any time before it is voted by:
. notifying in writing the Secretary of TeleCorp at 1010 North Glebe Road,
Suite 800, Arlington, VA 22201, if you are a TeleCorp stockholder, or
the Secretary of Tritel at 111 E. Capitol Street, Suite 500, Jackson, MS
39201, if you are a Tritel stockholder;
. granting a subsequently dated proxy; or
. appearing in person and voting at the special meeting if you are a
holder of record.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
Solicitation of Proxies
TeleCorp and Tritel will equally share the expenses incurred in connection
with the printing and mailing of this joint proxy statement-prospectus.
TeleCorp and Tritel will also request banks, brokers and other intermediaries
holding shares of TeleCorp or Tritel common stock beneficially owned by others
to send this joint proxy statement-prospectus to, and obtain proxies from, the
beneficial owners and will reimburse the holders for their reasonable expenses
in so doing.
You should not send in any stock certificates with your proxy card. A
transmittal letter with instructions for the surrender of stock certificates
will be mailed to you as soon as practicable after completion of the merger.
38
<PAGE>
THE MERGER
This section of the joint proxy statement-prospectus describes material
aspects of the proposed merger, including the merger agreement, the stockholder
agreement, the voting agreement and other agreements. While we believe that the
description covers the material terms of the merger, this summary may not
contain all of the information that is important to you. You should read this
entire joint proxy statement-prospectus and the other documents we refer to
carefully for a more complete understanding of the merger.
Background of the Merger
On January 12, 2000, Messrs. Vento and Sullivan met with Michael Schwartz
and William W. Hague, both officers of AT&T Wireless at the time, in Redmond,
Washington regarding a potential exchange of certain markets held by AT&T
Wireless and affiliated entities for TeleCorp's New England markets. Officers
of TeleCorp and AT&T Wireless had discussions regarding a potential asset
exchange on a number of occasions prior to the January 12th meeting. During
this meeting, in addition to discussions surrounding the potential exchange,
Messrs. Vento and Sullivan raised the possibility of TeleCorp entering into a
business combination with Tritel or another company. The AT&T Wireless
representatives indicated a willingness to consider waiving provisions under
the stockholders' agreement between AT&T Wireless, TeleCorp and certain of its
other initial investors that would prevent TeleCorp from combining with Tritel
or another company until it completed certain buildout requirements.
Commencing in mid-January, Mr. Vento and Mr. Sullivan began consulting with
legal and accounting advisors regarding Federal Communications Commission,
regulatory, tax and corporate structuring issues relevant to the proposed
transaction.
On January 21, 2000, Mr. Vento called Mr. Mounger to set up a meeting the
following week to discuss a potential business combination of TeleCorp and
Tritel.
On January 27, 2000, Messrs. Vento, Sullivan, Arnett, Martin and Mounger met
in Jackson, Mississippi where they initiated discussions about a potential
business combination of TeleCorp and Tritel and the strategic benefits of
combining the two businesses. They discussed the possibility of structuring the
transaction as a stock-for-stock merger of equals and governance issues.
On February 3, 2000, Messrs. Vento, Sullivan, Arnett, Martin and Mounger met
for lunch in Dallas and continued discussions regarding a potential merger and
the governance and management structure for the merged entity. The meeting
concluded without an agreement. During the week that followed, Messrs. Vento,
Sullivan, Martin and Mounger had periodic conversations discussing the proposed
merger but no agreement was reached.
From February 4, 2000 through February 11, 2000, several telephone calls
occurred among two or more of Messrs. Vento, Sullivan, Arnett, Martin, Mounger,
Hague and Schwartz concerning general terms of the proposed merger. During one
of these calls on February 7, 2000, Tritel and TeleCorp discussed a price per
person covered by its licenses related to TeleCorp's price per person covered
by its licenses, as determined by dividing TeleCorp's enterprise value by the
total number of people covered by its licenses. During a subsequent call Mr.
Sullivan proposed an acquisition of Tritel incorporating an exchange ratio that
would value Tritel at a fixed price per person covered in licensed areas based
on TeleCorp's then current share market price. The discussions concluded
without an agreement.
The Tritel board of directors met by telephone conference call on February
12, 2000. The board of directors was informed of the discussions relating to
the feasibility of a proposed transaction with TeleCorp. The Tritel board of
directors then established a special committee of directors having no
affiliation with
39
<PAGE>
Telecorp or AT&T to evaluate and oversee negotiations of the proposed
transaction. Following the adjournment of the board meeting, the committee met
and engaged Merrill Lynch as its financial advisors, and there ensued a wide
ranging discussion of a potential transaction with TeleCorp. Members of the
committee included Andrew Hubregsen, Kevin J. Shepherd, Alexander P. Coleman,
David A. Jones, Jr. and Messrs. Mounger and Martin. The Tritel committee held a
telephonic meeting on February 14, 2000 to discuss the process and status of
negotiations and the benefits of the merger.
On February 14, 2000, Messrs. Martin and Sullivan met in New York and
discussed pricing and management structure issues. The discussions concluded
without an agreement.
During mid-February, Tritel, TeleCorp and their respective advisors began
due diligence activities, communication coordination and preparation of
definitive documentation, which continued for the next two weeks.
On February 15, 2000, Messrs. Sullivan, Mounger, Martin, Hague and Schwartz
met at the offices of Cadwalader, Wickersham & Taft in New York and continued
negotiations. Mr. Sullivan repeated his earlier proposal for an exchange ratio
based on a fixed price per person covered by Tritel's licenses. They also
discussed governance and management structure for the merged entity and the
status of the proposed market swap and other transactions being negotiated by
TeleCorp with AT&T Wireless. Mr. Martin suggested in light of the proposed
governance and management structure that the exchange ratio needed to be
higher. The discussions concluded without an agreement. That evening, the
Tritel committee, together with its legal and financial advisors, met by
telephone conference call. The committee reviewed the status of ongoing
negotiations with TeleCorp's representatives and discussed various structures,
alternatives and valuation issues with the assistance of its legal and
financial advisors.
On February 17, 2000, the Tritel committee and its legal and financial
advisors met by telephone conference call. The committee's financial advisors
provided an analysis primarily relating to valuation. There was also a report
of ongoing negotiations between Tritel's and TeleCorp's representatives.
On February 17, 2000 and February 18, 2000, Mr. Vento and Mr. Sullivan
apprised the members of TeleCorp's board of directors on an individual basis of
the potential business combination of TeleCorp and Tritel.
On February 19, 2000, Messrs. Vento, Sullivan, Martin and Mounger had a
telephone conference in which Messrs. Hague and Schwartz and Ms. Mary Hawkins-
Key, formerly of AT&T Wireless and a past TeleCorp director, also participated.
During this conference, Messrs. Vento and Sullivan proposed that they maintain
voting control of the combined company and suggested an exchange ratio of 0.76
to 1. Messrs. Martin and Mounger proposed that any exchange ratio incorporate
an adjustment to the ratio if TeleCorp was not successful in closing the market
swap and related transactions with AT&T Wireless. The discussions concluded
without an agreement.
On February 21, 2000, Messrs. Vento and Sullivan, together with its legal
advisors, met with TeleCorp's board of directors by telephone conference call
to discuss the potential merger, proposed market swap and other potential
transactions with AT&T. At this meeting, Messrs. Vento and Sullivan discussed
each of the transactions with the board, including the strategic reasons for
the proposed transactions, the valuation of the proposed transactions, the
principal terms of the proposed transactions and various structural and
operational issues related to the proposed merger transaction, including the
structure of the management and the board of directors of the combined
companies.
On February 21, 2000, the Tritel committee, together with its legal and
financial advisors, met by telephone conference call to discuss the exchange
ratio for the proposed transaction and other issues. The committee further
discussed the valuation of the proposed transaction and the structure of the
management and the board of directors of the combined companies. The committee
also reviewed Federal Communications Commission regulatory issues relevant to
the proposed transaction with representatives of Lukas, Nace, Gutierrez &
Sachs, Federal Communications Commission counsel to Tritel.
40
<PAGE>
Throughout the week of February 21, 2000, Messrs. Vento and Sullivan and
their advisors communicated informally with the members of the TeleCorp board
of directors, certain of TeleCorp's major stockholders and their respective
representatives.
On February 21, 2000, TeleCorp delivered a draft of the agreement and plan
of merger and reorganization to Tritel and AT&T Wireless Services. During the
week of February 22, 2000, senior management of TeleCorp, Tritel and AT&T
Wireless Services and their respective financial and legal advisors negotiated
the terms of the merger agreement.
On February 22, 2000, Tritel's representatives forwarded Mr. Vento a draft
term sheet proposing a 0.76 to 1 exchange ratio, certain matters related to
employee compensation and the issuance of rights to Tritel shareholders for
additional shares to cover any shortfall triggered by TeleCorp's failure to
acquire licenses covering at least 5.5 million people in conjunction with the
proposed market swap and other transactions being negotiated by TeleCorp with
AT&T. They also proposed that voting control of the combined entity be shared
equally by the current holders of Tritel's and TeleCorp's voting preference
stock. Messrs. Vento and Sullivan met with Tritel's committee at the offices of
Conseco, a significant shareholder in Tritel, in New York. The discussions
related primarily to potential benefits of the merger, management philosophy
and the status of negotiations between TeleCorp and AT&T relating to their
proposed exchange of markets and other matters. The discussions concluded
without an agreement. Following this meeting the Tritel committee, together
with its legal and financial advisors, met by telephone conference call. The
committee reviewed the status of ongoing negotiations with TeleCorp's
representatives and discussed various structures, alternatives and valuation
issues with the assistance of its legal and financial advisors. In a telephone
conference following the committee meeting Messrs. Vento, Hubregsen and Mounger
discussed Tritel's position with regard to various terms of the merger. The
discussions concluded without an agreement.
On the morning of February 23, 2000, Messrs. Vento and Sullivan met with Mr.
Martin, Mr. Hubregsen, Mr. Shepherd and James H. Neeld, IV, Tritel's Senior
Vice President--General Counsel, at Conseco's offices. Messrs. Vento and
Sullivan indicated an exchange ratio of 0.76 to 1 would be acceptable but that
an adjustment to the ratio based on whether or not the additional properties
were acquired was not acceptable. They also indicated that the acceptance of
the exchange ratio was conditioned upon TeleCorp's management having a majority
of the voting preference stock of the merged entity and suggested the
redemption of certain shares of Tritel voting preference stock held by Tritel
management. The meeting concluded without an agreement. That afternoon, the
same representatives met at the offices of Cadwalader, Wickersham & Taft,
counsel to TeleCorp, to further negotiate the terms of the merger with
discussions centering on employee compensation and retention matters. Tritel's
representatives indicated that, subject to approval of Tritel's committee and
full board of directors, TeleCorp's proposals concerning the exchange ratio,
voting preference stock and management structure were acceptable.
The Tritel committee and its legal and financial advisors held meetings by
telephone conference call on February 23, 24, 25 and 26, 2000. Tritel's
representatives presented reports of ongoing negotiations between Tritel's and
TeleCorp's representatives and ongoing due diligence reviews.
On February 27, 2000, the board of directors of TeleCorp met at the offices
of Cadwalader, Wickersham & Taft to consider the proposed transaction. At this
meeting, Messrs. Vento and Sullivan reviewed the transaction with the board,
including the strategic reasons for the proposed transaction, the principal
terms of the proposed transaction, a financial review of the proposed
transaction, a review of TeleCorp's financial condition and business operations
and the results of TeleCorp's due diligence review.
Representatives from TeleCorp's counsel, Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C. and Cadwalader, Wickersham & Taft, discussed the terms of the
merger agreement and related documents. Representatives of Lehman Brothers
presented to TeleCorp's board of directors a summary of its analyses on the
strategic rationale for and financial analyses related to the proposed
transaction. In addition, Lehman delivered its opinion that the ratio for
exchanging shares of TeleCorp's classes and series of common and
41
<PAGE>
preferred stock for shares of common and preferred stock of Holding Company
pursuant to the merger agreement was fair, from a financial point of view, to
holders of TeleCorp's common and preferred stock. After an extensive review and
discussion of the merger and separate exchange transaction in which Messrs.
Anderson and Schwartz and Ms. Hawkins-Key did not participate, the board of
directors of TeleCorp, with Messrs. Anderson, Schwartz and Ms. Hawkins-Key
abstaining, unanimously approved the merger and exchange agreements and the
related transactions contemplated by those agreements, declared them advisable
and resolved to recommend that TeleCorp's stockholders adopt the merger and
exchange agreements.
Also on February 27, 2000, the Tritel committee met at the offices of Brown
& Wood llp, counsel to Tritel and the Tritel committee, to consider the
proposed transaction. At this meeting members of management reviewed the
transaction with the Tritel committee, including the strategic reasons for the
proposed transaction, the principal terms of the proposed transaction, a
financial review of the proposed transaction, a review of Tritel's financial
condition and business operations and the results of Tritel's due diligence
review.
Tritel's legal advisors discussed the terms of the merger agreement and
related documents. Representatives of Merrill Lynch presented to Tritel's board
of directors a summary of its analyses on the strategic rationale for and
financial analyses related to the proposed transaction. In addition, Merrill
Lynch delivered its oral opinion, which was subsequently confirmed in writing,
to the effect that, as of the date thereof, and subject to the assumptions,
qualifications and limitations referred to in its opinion, the exchange ratio
was fair, from a financial point of view, to the holders of shares of Tritel
class A voting common stock other than AT&T Wireless and its affiliates. The
Tritel committee then resolved to recommend that the board of directors of
Tritel approve the merger agreement and the related agreements. The board of
directors of Tritel held a meeting later that day (with the members of the
Tritel committee convened at the offices of Brown & Wood llp) and, after an
extensive review and discussion of the merger transaction, the board of
directors of Tritel unanimously approved the merger agreement and the related
agreements and the transactions contemplated by those agreements, declared them
advisable and resolved to recommend that Tritel's stockholders adopt the merger
agreement.
Negotiation and resolution of the final terms of the merger agreement, the
exchange agreement and related agreements continued among representatives of
TeleCorp, Tritel and AT&T Wireless on February 27 and 28, 2000. In addition,
Messrs. Vento, Sullivan, Martin and Mounger each agreed to enter into voting
agreements pursuant to which they agreed to vote all of their shares carrying
the right to vote in favor of the adoption of the merger agreement.
On February 28, 2000, TeleCorp, Tritel and AT&T Wireless Services executed
the merger agreement and issued a press release to that effect. Messrs. Vento,
Sullivan, Martin and Mounger each entered into their respective voting
agreements.
TeleCorp's Reasons for the Merger
The TeleCorp board of directors has determined that the merger is fair to
and in the best interests of TeleCorp's stockholders, has approved the merger
agreement, and unanimously recommends a vote "FOR" approval of, and adoption
of, the merger agreement.
In light of the developing trends in the telecommunications industry and
consolidation in the wireless PCS market, the TeleCorp board of directors
believes that the merger represents a strategic opportunity to significantly
expand the size and scope of TeleCorp's operations. The TeleCorp board of
directors believes that, following the merger, TeleCorp will have greater
financial strength, operational efficiencies and growth potential than either
TeleCorp or Tritel would have on its own. TeleCorp's board of directors also
identified a number of potential benefits of the proposed merger, including the
following:
. synergies relating to expanded in-network coverage and the contiguous
network footprints of TeleCorp and Tritel post-merger;
. savings realized through the sharing of outlays in future infrastructure
investments;
. economies of scale that should yield enhanced purchasing power and
improved marketing;
42
<PAGE>
. a significantly stronger capital structure and financial resources
providing greater operating flexibility; and
. a larger market capitalization and size that may result in broader
research coverage and increased interest by institutional investors.
In reaching its decision to approve the merger agreement, the merger and the
other transactions contemplated by the merger agreement, TeleCorp's board of
directors also considered, in addition to the factors described above:
. information concerning the financial performance and condition, business
operations, capital and prospects of each of TeleCorp and Tritel on a
stand-alone basis as well as a combined basis;
. current industry, economic and market trends, including the likelihood
of increasing and broadening competition in the wireless PCS industry;
. the importance of market position, significant scale and scope and
financial resources to TeleCorp's ability to compete effectively in the
future;
. the valuation ascribed TeleCorp's common stock in the merger agreement
and the valuation implied for the combined entity based on currently
prevailing market multiples;
. the relative contributions of TeleCorp and Tritel to the net revenues
and EBITDA of the combined company;
. the opinion delivered by Lehman Brothers to the TeleCorp board of
directors on February 27, 2000 to the effect that, as of the date
thereof and based on and subject to the assumptions, limitations and
qualifications set forth in the opinion, the fairness, from a financial
point of view, of the ratio for exchanging shares of TeleCorp's classes
and series of common and preferred stock for shares of Holding Company
common and preferred stock, to TeleCorp common and preferred
stockholders;
. the expectation that the merger would be accounted for as a purchase for
accounting purposes and would be accomplished on a tax-free basis for
federal income tax purposes; and
. the structure of the merger and the terms of the merger agreement,
including the arrangements proposed for the Holding Company board of
directors and the designation by TeleCorp of members to serve on the
Holding Company board of directors.
TeleCorp's board of directors also considered potential risks relating to
the merger, including:
. the risk that the benefits and synergies sought from the merger would
not be fully achieved;
. the management distraction inherent in integrating two companies;
. the risk that the merger would not be consummated;
. the limitations imposed by the merger agreement on the conduct of
TeleCorp's business prior to the merger, as well as the length of time
projected for satisfying all closing conditions; and
. the number of shares of Holding Company class A voting common stock
issuable in connection with the merger and related transactions and the
consequent reduction in the voting power of TeleCorp's current
stockholders.
The TeleCorp board of directors believes that these risks were outweighed by
the potential benefits to be realized by the merger. The foregoing discussion
of the information and factors considered by the TeleCorp board of directors is
not intended to be exhaustive but includes all material factors considered by
the TeleCorp board of directors. In view of the wide variety of information and
factors considered, the board of directors did not find it practical to, and
did not, assign any relative or special weights to the foregoing factors, and
individual directors may have given differing weights to different factors. The
TeleCorp board of directors
43
<PAGE>
adopted the merger agreement and approved the transactions contemplated thereby
in consideration of all of the facts, matters and information brought to its
attention. Taking into account all of the material facts, matters and
information, including those described above, the TeleCorp board of directors
believes that the terms of the merger agreement and the transactions provided
for therein are fair to and in the best interests of TeleCorp's stockholders.
THE TELECORP BOARD UNANIMOUSLY RECOMMENDS THAT TELECORP'S STOCKHOLDERS VOTE
"FOR" ADOPTION OF, AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY, THE MERGER
AGREEMENT.
Tritel's Reasons for the Merger
The Tritel board of directors formed a special committee of directors to
review and evaluate the terms of the merger. The Tritel committee consisted
solely of directors having no affiliation with TeleCorp or AT&T, a substantial
shareholder of both Tritel and TeleCorp. Based in part on the unanimous
recommendation of the Tritel committee, Tritel's board of directors has
determined that the terms of the merger are fair to, and in the best interests
of, Tritel's stockholders. On the recommendation of the Tritel committee,
Tritel's board of directors has approved the merger agreement and recommends a
vote "FOR" approval of, and adoption of, the merger agreement. In reaching its
recommendation, Tritel's board of directors identified several potential
benefits of the merger, including the following:
. the growth opportunity for the combined company and the opportunity to
improve market positions;
. the greater capital resources and the financial diversification and
flexibility of the combined company, including the opportunity for
stockholders to participate in a larger and more diversified company;
and
. the increased ability to compete by providing better service to
customers through an expanded digital network and greater technical
resources under the same regional brand name, including greater
flexibility to adjust to future trends and competition from other
technologies.
The Tritel committee consulted with senior management, as well as its legal
counsel and financial advisors, in reaching its decision to recommend the
approval of the merger. In its evaluation of the merger, in addition to the
factors listed above, Tritel's committee also reviewed the following factors:
. the historical information concerning Tritel's and TeleCorp's respective
businesses, financial performance and condition, operations, technology,
management and prospects;
. the reports filed by TeleCorp with the Securities and Exchange
Commission;
. the current financial market conditions and historical market prices,
volatility and trading information;
. the opinion of Merrill Lynch that, as of the date of its opinion and
subject to the considerations described in the opinion, the exchange
ratio in the merger is fair to holders of the Tritel class A voting
common stock, other than AT&T Wireless and its affiliates, from a
financial point of view;
. the structure of the merger, including the composition of the board of
directors and management of the Holding Company;
. the expectation that the merger will be accomplished on a tax-free basis
for federal income tax purposes and accounted for as a purchase;
. the belief that the terms of the merger agreement are reasonable;
. the potential strategic alternatives available to Tritel and the
viability and risks associated with each alternative including the
prospects for Tritel on a stand-alone basis;
. the increasing competition in Tritel's markets from both existing and
potential competitors, some of which have greater assets and resources;
. the likelihood of the merger being approved by the appropriate
regulatory authorities;
44
<PAGE>
. the complementary nature of the companies' product and service
offerings;
. the impact of the merger on Tritel's employees and customers;
. the reports from management, legal and financial advisors as to the
results of the due diligence investigation of TeleCorp; and
. the debt-to-capital ratio of both companies.
The Tritel committee and the Tritel board of directors also identified and
considered a number of risks relating to the merger, including the following:
. the risk that the potential benefits of the merger may not be realized;
. the possibility that the merger may not be consummated, even though
approval by Tritel's and TeleCorp's stockholders is contractually
assured;
. the risk of management and employee disruption associated with the
merger, including the risk that key technical, sales and management
personnel might not remain employed by the combined company;
. the difficulty of managing operations in the different geographic
locations in which Tritel and TeleCorp operate; and
. the loss of Tritel management control over the future operations of the
combined company.
The Tritel committee and the Tritel board of directors concluded that, on
balance, the potential benefits to Tritel's stockholders of the merger
outweighed the risks associated with the merger. The foregoing discussion of
the information and factors considered by the Tritel committee and the Tritel
board of directors is not intended to be exhaustive, but includes all material
factors considered by the Tritel committee and the Tritel board of directors.
In view of the variety of factors considered in connection with its evaluation
of the merger, the Tritel committee and the Tritel board of directors did not
find it practicable to, and did not quantify or otherwise assign relative
weight to, the specific factors considered in reaching their determination, and
individual directors may have given differing weights to different factors.
After careful consideration of all the information brought before it, the
Tritel board of directors has determined the merger agreement and the merger to
be fair to, and in the best interests of, Tritel's stockholders. THE TRITEL
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT TRITEL'S STOCKHOLDERS VOTE "FOR"
ADOPTION OF, AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY, THE MERGER
AGREEMENT.
Recommendation of TeleCorp's Board of Directors
The TeleCorp board of directors believes that the merger is fair to
TeleCorp's stockholders and in their best interest, and recommends the adoption
of the merger agreement.
In considering the recommendation of the TeleCorp board of directors with
respect to the merger agreement, you should be aware that certain directors and
executive officers of TeleCorp have interests in the merger that are different
from, or are in addition to, the interests of TeleCorp stockholders. Please see
the section entitled "Interests of TeleCorp Directors and Executive Officers in
the Merger" in this joint proxy statement-prospectus.
Opinion of TeleCorp's Financial Advisor
Lehman Brothers acted as financial advisor to the TeleCorp board of
directors in connection with the proposed merger and delivered its written
opinion to the TeleCorp board of directors at its February 27, 2000 meeting to
the effect that, as of the date thereof, and based on and subject to the
assumptions, limitations and
45
<PAGE>
qualifications set forth in the opinion, the fairness, from a financial point
of view, (1) to the holders of class A voting common stock of TeleCorp of the
class A voting exchange ratio to be offered to such holders in the proposed
merger, (2) to the holders of class C common stock of TeleCorp of the class C
voting exchange ratio to be offered to such holders in the proposed merger, (3)
to the holders of class D common stock of TeleCorp of the class D exchange
ratio to be offered to such holders in the proposed merger and (4) to the
holders of the senior subordinated discount notes of the exchange ratios to be
offered to the holders of TeleCorp's class A voting common stock, class C
common stock and class D common stock in the proposed merger.
The full text of Lehman Brothers' written opinion, dated February 27, 2000,
is attached as Annex C to this joint proxy statement-prospectus. Stockholders
may read the opinion for a discussion of assumptions made, matters considered
and limitations of the review undertaken by Lehman Brothers in rendering its
opinion. The summary of the Lehman Brothers opinion set forth in this joint
proxy statement-prospectus is qualified in its entirety by reference to the
full text of the opinion attached as Annex C.
No limitations were imposed by TeleCorp on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. Lehman Brothers was not requested to and did not make any
recommendation to the TeleCorp board of directors as to the form or amount of
the consideration to be received by TeleCorp stockholders, which was determined
through arms-length negotiations between the parties. In arriving at its
opinion, Lehman Brothers did not ascribe a specific range of values to TeleCorp
or Tritel, but rather made its determination as to fairness, from a financial
point of view, on the basis of the financial and comparative analyses described
below. The Lehman Brothers opinion was provided to the TeleCorp board of
directors for its use and benefit in connection with its consideration of the
proposed merger. This opinion was not intended to be and does not constitute a
recommendation to any stockholder of TeleCorp with respect to how any
stockholder should vote with respect to the proposed merger. Lehman Brothers
was not requested to opine as to, and the opinion does not in any manner
address, the Company's underlying business decision to proceed with or effect
the proposed merger. In its opinion relating to the proposed merger, Lehman
Brothers did not address the fairness of the series of agreements with AT&T
Wireless entered into simultaneously with the merger agreement. Lehman
Brothers, however, did render a separate opinion regarding the fairness, from a
financial point of view, to TeleCorp and to the holders of the senior
subordinated discount notes of the consideration to be received in the series
of agreements with AT&T Wireless.
In connection with the preparation and delivery of its opinion to the
TeleCorp board of directors, Lehman Brothers performed a variety of financial
and comparative analyses, as described below. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial and comparative analysis and the application of those
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at its
opinion, Lehman Brothers did not attribute any particular weight to any
analysis or factor considered by it, but, rather, made qualitative judgments as
to the significance and relevance of each analysis and factor. Accordingly,
Lehman Brothers believes that its analyses must be considered as a whole and
that considering any portion of such analyses and factors, without considering
all analyses and factors, could create a misleading or incomplete view of the
process underlying its opinion. In its analyses, Lehman Brothers made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of TeleCorp
and Tritel. Any estimates or projections contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of a business do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
In arriving at its opinion, Lehman Brothers reviewed and analyzed:
. the merger agreement and the specific terms of the proposed merger;
. publicly available information concerning TeleCorp that Lehman Brothers
believed to be relevant to its analyses, including the TeleCorp
registration statement on Form S-1 declared effective on November 22,
1999 and the TeleCorp quarterly report on Form 10-Q for the quarter
ended September 30, 1999;
46
<PAGE>
. publicly available information concerning Tritel that Lehman Brothers
believed to be relevant to its analysis, including the Tritel
registration statement on Form S-1 declared effective on December 13,
1999;
. financial and operating information with respect to the business,
operations and prospects of TeleCorp furnished to it by TeleCorp;
. financial and operating information with respect to the business,
operations and prospects of Tritel furnished to it by Tritel;
. a trading history of TeleCorp's common stock from November 22, 1999 to
the present and a comparison of that trading history with those of other
companies that it deemed relevant;
. a trading history of Tritel's common stock from December 13, 1999 to the
present and a comparison of that trading history with those of other
companies that it deemed relevant;
. a comparison of the historical financial results and present financial
condition of TeleCorp with those of other companies that it deemed
relevant;
. a comparison of the historical financial results and present financial
condition of the Tritel with those of other companies that it deemed
relevant;
. a comparison of the financial terms of the proposed merger with the
financial terms of certain other transactions that it deemed relevant;
. published estimates of third party research analysts with respect to the
future financial performance of TeleCorp and Tritel; and
. the relative contributions of TeleCorp and Tritel, on a pro forma basis,
to the future financial performance of Holding Company following
consummation of the proposed merger.
In addition, Lehman Brothers had discussions with the managements of
TeleCorp and Tritel concerning their respective businesses, operations, assets,
financial conditions and prospects and has undertaken such other studies,
analyses and investigations that it deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and has further relied upon the assurances of the managements of
TeleCorp and Tritel that they are not aware of any facts or circumstances that
would make such information inaccurate or misleading. With respect to the
financial projections of TeleCorp, upon advice of TeleCorp, Lehman Brothers
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of TeleCorp as to the future financial performance of TeleCorp and
that TeleCorp will perform substantially in accordance with such projections.
Lehman Brothers was not provided with, and did not have access to, financial
projections of Tritel prepared by the management of Tritel. Accordingly, upon
advice of Tritel, Lehman Brothers assumed that the published estimates of third
party research analysts are a reasonable basis upon which to evaluate the
future financial performance of Tritel and that Tritel will perform
substantially in accordance with such estimates. In arriving at its opinion,
Lehman Brothers has not conducted a physical inspection of the properties and
facilities of TeleCorp or Tritel and has not made or obtained any evaluations
or appraisals of the assets or liabilities of TeleCorp or Tritel. Upon advice
of TeleCorp and its legal and accounting advisors, Lehman Brothers assumed that
the merger will qualify as a tax-free transaction within the meaning of Section
351 of the Internal Revenue Code of 1986, as amended, and a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and therefore as a tax-free transaction to the stockholders of
TeleCorp. Lehman Brothers' opinion necessarily is based upon market, economic
and other conditions as they exist on, and can be evaluated as of, the date of
its letter.
In addition, Lehman Brothers expressed no opinion as to the prices at which
shares of common stock of Holding Company or the senior subordinated discount
notes actually will trade following consummation of the
47
<PAGE>
proposed merger and this opinion should not be viewed as providing any
assurance that the market value of the shares of Holding Company to be held by
the stockholders of TeleCorp after the proposed merger will be in excess of the
market value of the shares of TeleCorp's class A voting common stock owned by
such stockholders at any time prior to announcement or consummation of the
proposed merger or that the market value of the senior subordinated discount
notes prior to the announcement or consummation of the proposed merger.
The following is a summary of the material financial and comparative
analyses performed by Lehman Brothers and presented to the TeleCorp board of
directors. Certain of the analyses include information presented in tabular or
graphic format. In order to fully understand the financial analyses used by
Lehman Brothers, the tables and graphs must be read together with the text of
each summary. The tables or graphs alone do not constitute a complete
description of the financial analyses.
Purchase Price Analysis
As of February 27, 2000, Lehman Brothers estimated that the price per Tritel
class A voting common share Tritel would receive in the proposed merger would
be $33.45, based on the TeleCorp class A voting common stock 5-day average
closing price as of February 25, 2000 of $44.02 and the class A voting common
exchange ratio of 0.76. This price per share represented a 36.5% premium over
the Tritel class A voting common stock February 25, 2000 closing price of
$24.50. As of February 25, 2000, Lehman Brothers estimated that the price per
Tritel class A voting common share Tritel would receive in the proposed merger
would be $37.62, based on the TeleCorp class A voting common stock closing
price as of February 25, 2000 of $49.50. This price per share represented a
53.6% premium over the Tritel class A voting common stock February 25, 2000
closing price.
Historical Exchange Ratio Analysis
Lehman Brothers reviewed the ratio of the recent daily closing price of
Tritel class A voting common stock from December 14, 1999 to February 25, 2000
relative to TeleCorp class A voting common stock in order to compare it to the
class A exchange ratio. The following table lists the low, average and high
daily ratio of Tritel's class A voting common stock closing price relative to
TeleCorp's class A voting common stock closing price for the periods indicated.
HISTORICAL EXCHANGE RATIOS
<TABLE>
<S> <C>
5-day average (as of 2/25/00)......................................... 0.54
Close (as of 2/25/00)................................................. 0.49
Low (since 12/14/99).................................................. 0.49
High (since 12/14/99)................................................. 0.88
</TABLE>
Lehman Brothers noted that these historical exchange ratios are based on
public market trading values for the respective stocks, and do not include any
adjustments by Lehman Brothers for acquisition premiums.
48
<PAGE>
Historical Public Market Trading Analysis
Lehman Brothers reviewed the recent stock price performance of Tritel class
A voting common stock based on an analysis of the historical closing prices
from December 14, 1999 to February 25, 2000 in order to compare it to the
estimated price per share each Tritel class A voting common stockholder would
receive in the proposed merger. The following table lists the low, average and
high daily closing prices of shares of Tritel class A voting common stock for
the periods indicated.
[GRAPH]
HISTORICAL TRITEL CLASS A VOTING COMMON STOCK PRICES
<TABLE>
<S> <C>
Close (2/25/00).................................................... $24.50
Low (since 12/14/99-2/25/00)....................................... $21.88
High (since 12/14/99-2/25/00)...................................... $32.00
5 Day Trading Average (2/18/00-2/25/00)............................ $23.80
10 Day Trading Average (2/11/00-2/25/00)........................... $23.28
20 Day Trading Average (1/28/00-2/25/00)........................... $24.59
Trading Average Since IPO (51 Days, 12/14/99-2/25/00).............. $26.58
</TABLE>
Lehman Brothers also reviewed the recent stock price performance of TeleCorp
class A voting common stock based on an analysis of the historical closing
prices from November 22, 1999 to February 25, 2000 in order to compare it to
TeleCorp's stock price at the time of announcement of the proposed merger. The
following table lists the low, average and high daily closing prices of shares
of TeleCorp class A voting common stock for the periods indicated.
49
<PAGE>
[GRAPH]
HISTORICAL TELECORP CLASS A VOTING COMMON STOCK PRICES
<TABLE>
<S> <C>
Close (2/25/00).................................................... $49.50
Low (11/23/99-2/25/00)............................................. $31.00
High (11/23/99-2/25/00)............................................ $49.50
5 Day Trading Average (2/18/00-2/25/00)............................ $44.02
10 Day Trading Average (2/11/00-2/25/00)........................... $43.22
20 Day Trading Average (1/28/00-2/25/00)........................... $43.39
Trading Average Since IPO (65 Days, 11/23/99-2/25/00).............. $38.99
</TABLE>
Research Analyst Price Targets
Lehman Brothers reviewed and analyzed future price targets for the Tritel
class A voting common stock and the TeleCorp class A voting common stock
prepared by securities research analysts. These targets reflected each
analyst's estimate of the future price of the Tritel class A voting common
stock or the TeleCorp class A voting common stock at the end of the particular
time period considered for each estimate. Using an annual discount rate of 15%,
Lehman Brothers discounted these estimates to arrive at a range of present
values of the price targets. Based on the one published research report on
Tritel, Lehman Brothers derived a current value of $32.00 per Tritel class A
voting common share. Based on the target prices published in the research
available for TeleCorp, Lehman Brothers derived a $45.30 to $52.17 range of
current values per TeleCorp's class A voting common share.
Peer Group Comparison
Lehman Brothers performed a peer group comparison analysis to consider and
compare different prices per person within the companies' license coverage
areas that have been attributed to Tritel, TeleCorp and the peer group in order
to determine how the market valuations of Tritel and TeleCorp compared to their
peer companies. Lehman Brothers compared certain financial statistics of Tritel
and TeleCorp with corresponding financial statistics for the following six PCS
companies: Airgate, Alamosa, Powertel, Sprint PCS, Triton and Voicestream.
Lehman Brothers analyzed, among other things, firm value (the market valuation
of a company's stock plus the amount of its outstanding debt less the amount of
cash it has on hand) as a multiple of total POPs (the number of persons within
the companies' license coverage areas). Lehman Brothers also analyzed the
license value (the firm value less the company's gross property, plant and
equipment and less the value of the company's subscribers) as a multiple of
total POPs. As of February 27, 2000, the statistics derived from this analysis
are set forth below:
50
<PAGE>
PEER GROUP COMPARISON
<TABLE>
<CAPTION>
MEAN TRITEL TELECORP
---- ------ --------
<S> <C> <C> <C>
Firm Value/Total POPs................................. $218 $229 $365
License Value/Total POPs.............................. $191 $218 $336
</TABLE>
Lehman Brothers noted that the current public market valuation of Tritel
(based upon the per POP trading multiples implied by Tritel's class A voting
common stock price) was generally in line with its peer companies. Lehman
Brothers also noted that the current public market valuation of TeleCorp (based
upon the per POP trading multiples implied by TeleCorp's class A voting common
stock price) was generally higher than its peer companies.
Because of the inherent differences in the businesses, operations, financial
conditions and prospects of Tritel and TeleCorp and their respective comparable
companies, Lehman Brothers believed that it was inappropriate to, and therefore
did not, rely solely on the quantitative results of the comparable companies
analysis, and, accordingly, also made qualitative judgments concerning
differences between the characteristics of the comparable companies and Tritel
and TeleCorp, respectively, that would affect the trading values of Tritel,
TeleCorp and the comparable companies. In particular, Lehman Brothers
considered the size and desirability of the markets of operation and current
levels and historical rates of growth of Tritel, TeleCorp and their respective
comparable companies.
Selected Comparable Precedent Transaction Analysis
As part of its analysis, Lehman Brothers reviewed the following nine
transactions involving domestic PCS and wireless companies since 1998 in order
to compare the multiples paid in these transactions with the implied multiple
being paid to Tritel in the proposed merger:
. October 1999--MCI Worldcom / Sprint PCS
. September 1999--Voicestream / Aerial
. June 1999--Voicestream / Omnipoint
. May 1999--TeleCorp PCS / AT&T Wireless
. April 1999--Sprint PCS / Cox Communications
. December 1998--Triton / AT&T Wireless
. September 1998--Sonera / Aerial
. April 1998--AirTouch / U.S. WEST (PrimeCo)
. January 1998--Sprint PCS / APC
For each of these, Lehman Brothers reviewed the prices paid and calculated
the enterprise value as a multiple of total POPs. This analysis indicated
multiples ranging from $25 to $208 per POP for these transactions, with an
overall mean per POP multiple of $96. For those transactions in which a portion
of the consideration paid was stock of the acquirer, Lehman Brothers also
evaluated the per POP multiples using the current share price of the acquirer
rather than the share price of the acquirer at the close of the day prior to
the announcement of the transaction. Using this methodology, the analysis
indicated multiples ranging from $101 to $284 per POP for these transactions,
with an overall mean per POP multiple of $229. The multiple per Tritel POP
being paid by TeleCorp in the proposed merger based on TeleCorp's five-day
average closing price per class A voting common share is approximately $330.
Because the reasons for and the circumstances surrounding each of the
transactions analyzed were specific to each transaction and because of the
inherent differences between the businesses, operations and prospects of Tritel
and the businesses, operations and prospects of the acquired companies included
in the selected
51
<PAGE>
transactions, Lehman Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the precedent
transactions analysis, and accordingly also made qualitative judgments
concerning differences between the characteristics of these transactions and
the proposed merger that would affect the acquisition values of Tritel and such
acquired companies. In particular, Lehman Brothers considered the size and
desirability of the markets of operation, the strategic fit of the acquired
company, the form of consideration offered and the tax characteristics of the
transaction.
Discounted Cash Flow Analysis
Lehman Brothers performed a discounted cash flow analysis of the Tritel
business and then compared the range of valuations implied by such analysis to
the estimated price per share that Tritel shareholders would receive in the
proposed merger. A discounted cash flow analysis is one method used to value
businesses and involves an analysis of the present value of projected cash
flows of a business for a specified number of years into the future and the
present value of the projected value of the business at the end of that period
of years. Lehman Brothers performed a discounted cash flow analysis for Tritel
based on TeleCorp management projections of cash flows for Tritel.
Lehman Brothers analyzed Tritel using a forecast for the period beginning
January 1, 2000 and ending December 31, 2008. Lehman Brothers used discount
rates ranging from 11% to 12% and terminal value multiples of estimated 2008
EBITDA ranging from 12.0x to 13.0x. This analysis yielded a range of values for
Tritel of approximately $3.8 billion to $4.5 billion, implying a range of
values for Tritel class A voting common stock of $29 to $35 per share.
Lehman Brothers noted that, based on its purchase price analysis, the
estimated price per share of Tritel class A voting common shareholders would
receive in the proposed merger based on the TeleCorp class A voting common
stock five-day average closing price as of February 25, 2000, $33.45, fell
within the implied range of values determined by this analysis.
Contribution Analysis
Lehman Brothers conducted a contribution analysis which compared the current
total POPs and the projected revenue for the year 2003 Tritel is contributing
to the combined company relative to the TeleCorp contribution to these items.
The projections for Tritel's 2003 revenues were obtained from a securities
research analyst report and projections for TeleCorp's 2003 revenues were
obtained from TeleCorp's management. Using this methodology, Lehman Brothers
derived implied exchange ratios ranging from 0.82 to 0.93.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and other securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The TeleCorp board of directors
selected Lehman Brothers because of its expertise, reputation and familiarity
with TeleCorp in particular and the telecommunications industry in general, and
because its investment banking professionals have substantial experience in
transactions similar to the proposed merger.
Fee Arrangement with Lehman Brothers
Pursuant to a letter agreement dated February 21, 2000, TeleCorp engaged
Lehman Brothers to act as its financial advisor in connection with the proposed
merger and the transactions with AT&T Wireless. TeleCorp has agreed to pay
Lehman Brothers approximately $13 million, approximately $2.25 million of which
has been paid and the remainder of which will be paid upon consummation of the
proposed merger. TeleCorp also has agreed to reimburse Lehman Brothers for its
reasonable out-of-pocket expenses, including attorney's fees, and to indemnify
them against certain liabilities.
52
<PAGE>
In the ordinary course of its business, Lehman Brothers actively trades in
the debt and equity securities of TeleCorp for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
Recommendation of Tritel's Board of Directors
The Tritel board of directors believes, based in part on the recommendation
of the Tritel committee, that the merger is fair to Tritel's stockholders and
in their best interest, and recommends the adoption of the merger agreement.
In considering the recommendation of the Tritel board of directors with
respect to the merger agreement, you should be aware that certain directors and
executive officers of Tritel have interests in the merger that are different
from, or are in addition to, the interests of Tritel stockholders. Please see
the section entitled "Interests of Tritel Directors and Executive Officers in
the Merger" in this joint proxy statement-prospectus.
Opinion of Tritel's Financial Advisor
Tritel engaged Merrill Lynch as its financial advisor in connection with the
merger based on its experience and expertise. Merrill Lynch is an
internationally recognized investment banking firm that has substantial
experience in transactions similar to the merger. Merrill Lynch, as part of its
investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
At the February 27, 2000 meeting of the Tritel Board, Merrill Lynch
delivered its oral opinion (subsequently confirmed in writing) to the effect
that, as of the date thereof, and subject to the assumptions, qualifications
and limitations set forth therein, the exchange ratio was fair, from a
financial point of view, to the holders of shares of Tritel class A voting
common stock other than AT&T Wireless and its affiliates.
The full text of Merrill Lynch's written opinion, dated February 27, 2000,
which sets forth the assumptions made, matters considered and qualifications
and limitations on the review undertaken by Merrill Lynch, is set forth in
Annex D and is incorporated herein by reference. The summary of Merrill Lynch's
opinion set forth below is qualified in its entirety by reference to the full
text of such opinion. Tritel stockholders are urged to read carefully the
Merrill Lynch opinion in its entirety.
The opinion speaks only as of February 27, 2000, and Merrill Lynch is under
no obligation to confirm its opinion as of any later date. In reading the
following discussion of the Merrill Lynch opinion, Tritel stockholders should
be aware that the opinion:
. was provided to the Tritel Board for its information and is directed
only to the fairness, from a financial point of view, of the exchange
ratio to the holders of shares of Tritel class A voting common stock
other than AT&T Wireless and its affiliates;
. did not constitute a recommendation to the Tritel Board in connection
with their consideration of the merger agreement and the merger;
. does not address the merits of the underlying decision by Tritel to
engage in the merger or the price or range of prices at which Tritel,
TeleCorp or Holding Company securities may trade subsequent to the
announcement or consummation of the merger; and
. does not constitute a recommendation to any Tritel stockholder as to how
such stockholder should vote on the merger or any matter related
thereto.
Although Merrill Lynch evaluated the fairness, from a financial point of
view, of the exchange ratio to the holders of Tritel class A voting common
stock other than AT&T Wireless and its affiliates, the merger
53
<PAGE>
consideration itself was determined by Tritel through arm's-length
negotiations. Merrill Lynch provided advice to Tritel during the course of such
negotiations. Tritel did not provide specific instructions to, or place any
limitations on, Merrill Lynch with respect to the procedures to be followed or
factors to be considered by them in performing their analyses or providing
their opinion.
Merrill Lynch Opinion
In arriving at its opinion, Merrill Lynch, among other things:
. reviewed certain publicly available business and financial information
relating to Tritel and TeleCorp that Merrill Lynch deemed to be
relevant;
. reviewed certain information, including financial forecasts provided by
the management of Tritel, relating to the business, earnings, cash flow,
assets, liabilities and prospects of Tritel;
. reviewed certain information relating to the business, earnings, cash
flow, assets, liabilities and prospects of TeleCorp, and other
information, including financial forecasts, with respect to the
expansion markets described below;
. conducted discussions with members of senior management and
representatives of Tritel and TeleCorp concerning the matters described
in the above two bullet points, as well as their respective businesses
and prospects before and after giving effect to the merger;
. reviewed the market prices and valuation multiples for shares of Tritel
class A voting common stock and compared them with those of certain
publicly traded companies that Merrill Lynch deemed to be relevant;
. reviewed the results of operations of Tritel and TeleCorp and compared
them with those of certain publicly traded companies that Merrill Lynch
deemed to be relevant;
. compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed to be
relevant;
. participated in certain discussions and negotiations among
representatives of Tritel and TeleCorp and their financial and legal
advisors;
. reviewed the potential pro forma impact of the merger;
. reviewed a draft of the merger agreement; and
. reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including its
assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for
independently verifying such information or undertake an independent evaluation
or appraisal of any of the assets or liabilities of Tritel or TeleCorp nor was
Merrill Lynch furnished with any such evaluation or appraisal. In addition,
Merrill Lynch did not assume any obligation to conduct any physical inspection
of the properties or facilities of Tritel or TeleCorp. With respect to the
financial forecast information furnished to or discussed with Merrill Lynch by
Tritel or TeleCorp (with respect to the expansion markets), Merrill Lynch
assumed that they had been reasonably prepared and reflected the best currently
available estimates and judgment of Tritel's or TeleCorp's management as to the
expected future financial performance of Tritel or the expansion markets, as
the case may be. Merrill Lynch further assumed that the merger will qualify as
a tax-free reorganization for U.S. federal income tax purposes. Merrill Lynch
also assumed that the final form of the merger agreement would be substantially
similar to the last draft reviewed by Merrill Lynch.
54
<PAGE>
Merrill Lynch's opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of the date of its opinion.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, to the merger agreement, will be imposed that will have a
material adverse effect on the contemplated benefits of the merger.
Merrill Lynch's opinion did not address the relative merits, financial or
otherwise, of the merger as compared to any alternative transaction or business
strategy that may be available to Tritel.
Financial Analysis of Merrill Lynch
The following is a brief summary of the material valuation, financial and
comparative analyses presented by Merrill Lynch to the Tritel Board in
connection with the rendering of Merrill Lynch's opinion. This summary does not
purport to be a complete description of the analyses underlying the Merrill
Lynch opinion and is qualified in its entirety by reference to the full text of
the opinion which is incorporated herein by reference.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, Tritel and TeleCorp. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses. In addition, estimates of the value of businesses
or securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty. In
addition, as described above, Merrill Lynch's opinion was among several factors
taken into consideration by the Tritel board of directors in making its
determination to approve the merger agreement and the merger.
Historical Stock Price Performance and Premium Analysis
Merrill Lynch reviewed the daily closing per share prices of Tritel class A
voting common stock since the initial public offering of Tritel on December 13,
1999 and calculated the thirty-day average and all trading days average closing
share prices for the period ended February 25, 2000. The average closing per
share prices of Tritel class A voting common stock for such periods were $24.83
and $26.46, respectively. In addition, Merrill Lynch calculated the premiums
implied by the exchange ratio based on the closing price of $49.50 per share of
TeleCorp class A voting common stock compared to the one-day, thirty-day and
all trading days average closing share prices of Tritel class A voting common
stock for the period ended February 25, 2000. The calculated premiums for such
periods were 53.6%, 51.5% and 42.2%, respectively. The premiums implied by the
exchange ratio based on the 10-day average closing price of $42.98 per share of
TeleCorp class A voting common stock for such periods were 33.3%, 31.6% and
23.4%.
Historical Exchange Ratio Analysis
Merrill Lynch analyzed the ratio of the daily closing share prices of Tritel
class A voting common stock to the corresponding share prices of TeleCorp class
A voting common stock for all trading days since the initial public offering of
Tritel on December 13, 1999 through February 25, 2000. This analysis indicated
minimum and maximum implied exchange ratios of 0.495x and 0.884x, and a mean of
0.682x, for such period.
Analysis of Selected Publicly Traded Companies
Merrill Lynch compared certain financial, operating and stock market data of
Tritel and TeleCorp without and with the additional markets covered by the
TeleCorp licenses acquired from AT&T Wireless and the additional wireless
licenses in the Midwest covered by the AT&T brand license, which may be
acquired by
55
<PAGE>
TeleCorp in the future, net of the markets transferred to AT&T, referred to as
"expansion markets," to corresponding data of the following selected publicly
traded wireless PCS comparable carriers: VoiceStream Wireless Corp. (pro forma
for its acquisitions of Omnipoint Corp. and Aerial Communications, Inc.),
PowerTel, Inc., Sprint PCS Group, Nextel Communications and Triton. Merrill
Lynch calculated firm values as a multiple of estimated POPs, 1999, 2000 and
2001 subscribers and revenues for each of the PCS comparable carriers.
Estimated financial and operating data for the PCS comparable carriers was
based on equity research estimates of selected Wall Street firms and Merrill
Lynch. Estimated financial and operating data for Tritel was provided by Tritel
management and estimated financial and operating data for TeleCorp was provided
by equity research of a major Wall Street firm and TeleCorp management. All
multiples were based on closing stock prices as of February 25, 2000. Applying
a range of POP multiples of PCS comparable carriers to corresponding financial
and operating data of Tritel and TeleCorp without and with expansion markets,
Merrill Lynch derived the minimum and maximum exchange ratio ranges of 0.545x-
1.301x and 0.458x-1.068x, respectively.
Discounted Cash Flow Analysis
Merrill Lynch estimated the present value of the future streams of annual
after-tax free cash flows that Tritel and TeleCorp, without and with expansion
markets, could produce on a stand-alone basis for the period from 2000 through
2007. The analysis was based on estimates for Tritel, provided by the
management of Tritel, and estimates for TeleCorp, provided by equity research
generated by a major Wall Street firm and TeleCorp management. Ranges of
terminal values were estimated using multiples of 2007 projected earnings
before interest, taxes, depreciation and amortization of 12.0x to 14.0x. The
free cash flow streams and estimated terminal values were then discounted to
present value using discount rates ranging from 10.0% to 12.0%. Based on the
Discounted Cash Flow Analysis on Tritel and TeleCorp without and with expansion
markets, Merrill Lynch derived the minimum and maximum exchange ratio ranges of
0.423x-0.806x and 0.331x-0.620x, respectively.
Relative Contribution Analysis
Using estimated financial data for Tritel and TeleCorp, Merrill Lynch
analyzed the relative contributions, or "asset mix," of Tritel and TeleCorp to
the combined company based on estimated licensed POPs, covered POPs,
subscribers, revenues and gross property, plant and equipment. The analysis was
based on estimates for Tritel, provided by the management of Tritel, and
estimates for TeleCorp, provided by equity research generated by a major Wall
Street firm and TeleCorp management. The Relative Contribution Analysis was
further adjusted for leverage ratios using relative net debt of each company to
generate an "Equity Mix" and to calculate an implied exchange ratio based on
the estimated licensed POPs, covered POPs, subscribers, revenues and gross
property, plant and equipment. The results of the analysis without and with
TeleCorp expansion markets are shown in Table 1 and Table 2, respectively.
Table 1
<TABLE>
<CAPTION>
Asset Mix Equity Mix
--------------- --------------- Exchange
Tritel TeleCorp Tritel TeleCorp Ratio
------ -------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
POPs
Licensed.............................. 45.8% 54.2% 48.9% 51.1% 0.786x
Covered............................... 38.8% 61.2% 41.7% 58.3% 0.588x
Subscribers
2000E................................. 36.1% 63.9% 38.9% 61.1% 0.524x
2001E................................. 41.2% 58.8% 44.2% 55.8% 0.651x
Revenues
2000E................................. 30.3% 69.7% 32.9% 67.1% 0.404x
2001E................................. 39.9% 60.1% 42.8% 57.2% 0.617x
Gross PP&E
1999.................................. 41.3% 58.7% 44.3% 55.7% 0.655x
2000E................................. 46.7% 53.3% 49.7% 50.3% 0.813x
</TABLE>
56
<PAGE>
Table 2
<TABLE>
<CAPTION>
Asset Mix Equity Mix
--------------- --------------- Exchange
Tritel TeleCorp Tritel TeleCorp Ratio
------ -------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
POPs
Licensed............................. 40.5% 59.5% 43.0% 57.0% 0.677x
Covered.............................. 34.3% 65.7% 36.7% 63.3% 0.521x
Subscribers
2000E................................ 37.6% 62.4% 40.0% 60.0% 0.600x
2001E................................ 39.2% 60.8% 41.7% 58.3% 0.641x
Revenues
2000E................................ 31.9% 68.1% 34.2% 65.8% 0.467x
2001E................................ 38.1% 61.9% 40.6% 59.4% 0.613x
Gross PP&E
2000E................................ 43.4% 56.6% 46.0% 54.0% 0.764x
</TABLE>
Merrill Lynch noted that this analysis demonstrated that the exchange ratio
of 0.76x was within the range of implied exchange ratios based on the Relative
Contribution Analysis assuming TeleCorp without and with expansion markets of
0.404x to 0.813x and 0.467x to 0.764x, respectively.
Historical Mergers and Acquisitions Premium Analysis
Merrill Lynch analyzed historical premiums paid in selected
telecommunications mergers and acquisitions based on offer price compared to
closing common stock prices for one-month prior, one-week prior and one-day
prior periods. An implied exchange ratio range for Tritel of 0.625x and 0.834x
was derived from the median premium paid of 46.2% and 28.6% during a one-month
prior and one-day prior period, respectively.
Relative Exchange Ratio Analysis
For purposes of deriving an implied exchange ratio reference range, Merrill
Lynch performed several financial analyses, as described above, on Tritel and
TeleCorp without and with expansion markets, against which the exchange ratio
of 0.76x could be compared. The results of the Relative Exchange Ratio Analysis
are presented in Table 3.
Table 3
<TABLE>
<CAPTION>
Implied Exchange Implied Exchange
Ratio (without Ratio (with
TeleCorp TeleCorp
expansion markets) expansion markets)
------------------ ------------------
<S> <C> <C>
Historical Trading Range................ 0.495x - 0.884x 0.495x - 0.884x
Public Comparables Analysis............. 0.545x - 1.301x 0.458x - 1.068x
Discounted Cash Flow Analysis........... 0.423x - 0.806x 0.331x - 0.620x
Contribution Analysis--POPs............. 0.588x - 0.786x 0.521x - 0.677x
Contribution Analysis--Subs and Gross
Plant.................................. 0.524x - 0.813x 0.600x - 0.764x
Premium Paid Analysis................... 0.625x - 0.834x 0.625x - 0.834x
</TABLE>
Merrill Lynch noted that the exchange ratio of 0.760x falls within or above
the implied exchange ratio ranges set forth above.
Pro Forma Merger Consequences Analysis
Merrill Lynch also analyzed the potential pro forma effect of the merger on
the combined company's free cash flow. The analysis was based on Tritel
estimates, provided by the management of Tritel, and TeleCorp estimates based
on equity research generated by a major Wall Street firm and TeleCorp
management. This
57
<PAGE>
analysis indicated that the merger would be accretive to Tritel's free cash
flow. No synergies were assumed in the analysis. The actual operating or
financial results achieved by the pro forma combined company may vary from
projected results. Variations may be material as a result of business and
operational risks, the timing and amount of synergies, and the costs associated
with achieving such synergies and other factors.
Merrill Lynch analyzed the impact of per POP trading values for the combined
company on the combined company stock price and the corresponding impact on
Tritel stock price. This analysis is presented in Table 4 and Table 5 for
TeleCorp without and with the expansion markets, respectively.
Table 4
<TABLE>
<S> <C> <C> <C> <C> <C>
POP Multiple....................... $ 350 $ 300 $ 250 $ 200 $ 150
Pro Forma Holding Company Equity
Value............................. $ 9,883 $8,356 $6,828 $5,301 $3,773
Implied Pro Forma Holding Company
Equity Value/Share................ $ 49.04 $41.46 $33.88 $26.30 $18.72
Implied Tritel Per Share Value..... $ 37.27 $31.51 $25.75 $19.99 $14.23
Premium/(Discount) to Current
Price............................. 52.1% 28.6% 5.1% (18.4%) (41.9%)
Table 5
POP Multiple....................... $ 350 $ 300 $ 250 $ 200 $ 150
Pro Forma Holding Company Equity
Value............................. $11,341 $9,612 $7,883 $6,154 $4,424
Implied Pro Forma Holding Company
Equity Value / Share.............. $ 53.73 $45.54 $37.34 $29.15 $20.96
Implied Tritel Per Share Value..... $ 40.83 $34.61 $28.38 $22.16 $15.93
Premium/(Discount) to Current
Tritel Price...................... 66.7% 41.3% 15.8% (9.6%) (35.0%)
</TABLE>
The weighted average per POP multiple for Tritel and TeleCorp was $298 as of
February 25, 2000 and $271 based on the ten-day average of TeleCorp share price
for the period ended February 25, 2000. Merrill Lynch noted that if the pro
forma company traded at these per POP multiples, the transaction would be
accretive to Tritel stockholders.
Relevance of Various Analyses
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. Such an opinion is therefore not readily
susceptible to partial analysis or summary description, and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the view of Merrill Lynch, create an incomplete and misleading picture of
the processes underlying the analyses considered in rendering Merrill Lynch's
opinion. Merrill Lynch did not form an opinion as to whether any individual
analysis or factor (positive or negative), considered in isolation, supported
or failed to support its opinion. In arriving at its opinion, Merrill Lynch
considered the results of its analysis and did not attribute particular weight
to any one analysis or factor considered by such firm. The analyses performed
by Merrill Lynch, particularly those based on estimates and projections, are
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Merrill Lynch's analysis of the
fairness, from a financial point of view, of the exchange ratio to holders of
Tritel class A voting common stock other than AT&T Wireless and its affiliates.
Fee Arrangements with Merrill Lynch
Pursuant to the terms of a letter dated February 25, 2000, Tritel has
engaged Merrill Lynch to act as its financial advisor in connection with the
proposed merger transaction. Tritel has agreed to pay Merrill Lynch
approximately $5 million in connection with the delivery of Merrill Lynch's
opinion, $1 million of which has
58
<PAGE>
been paid, $2 million of which is payable upon the mailing of this proxy
statement to the stockholders of Tritel and $2 million of which is payable upon
the consummation of the proposed merger. In addition, Tritel has agreed to
reimburse Merrill Lynch for all reasonable out-of-pocket expenses incurred by
them in connection with the merger, including reasonable fees and disbursements
of their legal counsel. Tritel has also agreed to indemnify Merrill Lynch
against certain liabilities in connection with its engagement, including
certain liabilities under the federal securities laws.
Merrill Lynch participated in the underwriting syndicate of the initial
public offering of Tritel in December 1999 and the initial public offering of
TeleCorp in November 1999. In addition, Merrill Lynch has rendered financing
and financial advisory services to AT&T in the past and is currently providing
financial advisory services in connection with the tracking stock issue for its
wireless unit.
Interests of TeleCorp Directors and Executive Officers in the Merger
In considering the recommendation of the board of directors of TeleCorp to
vote for the proposal to adopt the merger agreement, stockholders of TeleCorp
should be aware that members of the TeleCorp board of directors and members of
TeleCorp's management team have agreements or arrangements that provide them
with interests in the merger that differ from those of other TeleCorp
stockholders. The TeleCorp board of directors was aware of these agreements and
arrangements during its deliberations of the merits of the merger and in
determining to recommend to the stockholders of TeleCorp that they vote for the
proposal to adopt the merger agreement.
TeleCorp Governance and Corporate Structure and Management
Positions. Pursuant to the terms of the merger agreement, upon completion of
the merger:
. the board of directors of Holding Company will be initially comprised of
14 individuals;
. current TeleCorp Executive Officers, including Gerald T. Vento and
Thomas H. Sullivan, will become members of the Holding Company board of
directors; and
. current members of the TeleCorp board of directors, including Scott
Anderson, Rohit M. Desai, Michael R. Hannon, James M. Hoak, William W.
Hague, Michael Schwartz, Thomas H. Sullivan and Gerald T. Vento, will
become members of the Holding Company board of directors.
The merger agreement also provides that, upon completion of the merger:
. Gerald T. Vento, Chief Executive Officer and Chairman of the Board of
TeleCorp, will serve as Chief Executive Officer of Holding Company; and
. Thomas H. Sullivan, Executive Vice President, Chief Financial Officer
and Director of TeleCorp, will serve as Executive Vice-President and
Chief Financial Officer of Holding Company.
In addition, Thomas H. Sullivan and Gerald T. Vento together own all of the
TeleCorp voting preference common stock, which represents 50.10% of the voting
power of all the outstanding voting stock of TeleCorp. Mr. Sullivan and Mr.
Vento have agreed, pursuant to a voting agreement, to vote all of their voting
shares of TeleCorp together to approve the merger. After the mergers, Mr.
Sullivan and Mr. Vento will own virtually all of the Holding Company voting
preference common stock, which will represent 50.10% of the voting power of all
of the outstanding voting stock of Holding Company. By reason of their
ownership of Holding Company voting preference common stock, Messrs. Sullivan
and Vento will control the vote of a majority of the Holding Company voting
power.
In connection with the merger and separate exchange transaction, AT&T
Wireless Services and AT&T Wireless will be participating in an exchange of
assets with TeleCorp. Certain assets being exchanged by AT&T Wireless Services
are being acquired from a company owned by Mr. Sullivan, Mr. Vento and Mr.
Anderson, who will become directors of Holding Company.
59
<PAGE>
In connection with the exchange, AT&T Wireless Services will be receiving
Holding Company class A voting common stock. Two of the directors of TeleCorp
are employees of AT&T Wireless Services.
Additionally, certain of the assets to be received by TeleCorp from AT&T
Wireless Services in the exchange will be owned by a subsidiary of TeleCorp,
the value of which impacts the liquidation preference and dividends of the
class C common and class D common stock of Holding Company. These classes of
Holding Company Stock are owned by the directors of TeleCorp or certain of
their affiliates.
TeleCorp Employee Stock Options and Restricted Shares. Pursuant to the terms
of the merger agreement, each TeleCorp employee stock option outstanding
immediately prior to the completion of the merger will be converted, upon
completion of the merger, into an option to acquire, on the same terms and
conditions, the same number of shares of Holding Company class A voting common
stock at the same exercise price. Similarly, each restricted share of TeleCorp
class A voting common stock outstanding immediately prior to the merger will be
converted, upon completion of the merger, into the same number of restricted
shares of Holding Company class A voting common stock. The vesting of the
employee options will not be accelerated by the merger.
TeleCorp Indemnification and Insurance. The merger agreement provides that,
upon the effective time of the merger, Holding Company will indemnify and hold
harmless all past and present directors, officers and employees of TeleCorp and
its subsidiaries, in their capacities as directors or officers of TeleCorp, for
a period of six years after the effective time of the merger:
. to the same extent they were indemnified prior to the effective time,
pursuant to TeleCorp's fifth amended and restated certificate of
incorporation, second amended and restated by-laws and indemnification
agreements with any directors and officers of TeleCorp and its
subsidiaries; and
. to the fullest extent permitted by law,
in each case for acts or omissions occurring at or prior to the completion of
the merger. For a period of six years after the effective time of the merger,
TeleCorp's certificate of incorporation and by-laws may not be amended in any
manner which would adversely affect the rights of the directors, officers,
employees or agents, unless required by applicable law.
The merger agreement also provides that, upon the effective time of the
merger, Holding Company will cause to be maintained, for a period of six years
after the effective time of the merger, the current policies of directors' and
officers' liability insurance maintained by TeleCorp, or policies on terms at
least comparable to those in effect on February 28, 2000, although Holding
Company will not be required to expend in any one year an amount in excess of
125% of the annual premiums currently paid by TeleCorp for directors' and
officers' liability insurance.
The TeleCorp Management Agreement
Messrs. Vento and Sullivan are the sole stockholders of TeleCorp Management
Corp., Inc. Pursuant to the merger, Messrs. Vento and Sullivan will enter into
a new management agreement with Holding Company which is substantially similar
to their original management agreement with TeleCorp. For a more detailed
description of the original management agreement, see "TeleCorp Executive
Compensation--The Management Agreement."
Under the original management agreement, TeleCorp Management Corp., Inc.,
under TeleCorp's oversight, review and ultimate control and approval, assisted
TeleCorp with operating and managing TeleCorp's business operations using the
services of Mr. Vento and Mr. Sullivan. Upon the consummation of the merger,
the original management agreement will terminate and the new management
agreement with Holding Company will become effective. After the completion of
the merger, Mr. Vento and Mr. Sullivan will continue to perform their
obligations under the new management agreement, and Mr. Vento will become
Holding Company's Chief Executive Officer and Mr. Sullivan will become Holding
Company's Chief Financial Officer.
60
<PAGE>
Under the original management agreement, TeleCorp is obligated to repurchase
from Mr. Vento and Mr. Sullivan, and they are required to sell to TeleCorp,
following the termination of the management agreement for any reason, the
amount of TeleCorp class A voting common stock, up to 5,764,596 shares, and
TeleCorp series E preferred stock, up to 18,220 shares, that have not yet
vested. Under the new management agreement, which becomes effective on the
closing of the merger, if either Mr. Sullivan or Mr. Vento are removed without
cause or leave with good reason, then TeleCorp's repurchase rights with respect
to Mr. Sullivan's and Mr. Vento's unvested stock will terminate and Mr.
Sullivan's and Mr. Vento's unvested stock will become immediately vested.
In addition, for Federal Communications Commission regulatory reasons, Mr.
Sullivan and Mr. Vento have options to purchase Mr. Martin's and Mr. Mounger's
Tritel class E common stock at the average price of Holding Company's class A
voting common stock, as quoted on the Nasdaq National Market for the 20 days
immediately prior to the termination of Messrs. Martin's and Mounger's
employment agreements.
The Julie Dobson Employment Agreement
The TeleCorp board of directors has agreed to amend Julie Dobson's
employment agreement to be effective upon the closing of the merger to provide
that if Ms. Dobson is removed without cause or leaves with good reason, then
Ms. Dobson's unvested stock will become immediately vested and will not be
subject to repurchase by TeleCorp. For a more detailed description of Ms.
Dobson's employment agreement, see "TeleCorp Executive Compensation--Employment
Agreement."
Interests of Tritel Directors and Executive Officers in the Merger
In considering the recommendation of the board of directors of Tritel to
vote for the proposal to adopt the merger agreement, stockholders of Tritel
should be aware that members of the Tritel board of directors and members of
Tritel's management team have agreements or arrangements that provide them with
interests in the merger that differ from those of other Tritel stockholders.
The Tritel board of directors was aware of these agreements and arrangements
during its deliberations of the merits of the merger and in determining to
recommend to the stockholders of Tritel that they vote for the proposal to
adopt the merger agreement.
Tritel Governance Structure and Management Positions. Pursuant to the terms
of the stockholders' agreement, upon completion of the merger:
. the board of directors of Holding Company will be initially comprised of
fourteen individuals;
. current Tritel executive officers and members of the Tritel board of
directors, including Scott Anderson, Alex P. Coleman, Kevin J. Shepherd,
David A. Jones, Jr., William M. Mounger, II and E.B. Martin, Jr., will
become members of the Holding Company board of directors.
The merger agreement also provides that, upon completion of the merger:
. William M. Mounger, II, Chief Executive Officer and Chairman of the
Board of Tritel, will serve as Chairman of the Board of Directors of
Holding Company; and
. E.B. Martin, Jr., Executive Vice President, Treasurer, Chief Financial
Officer and Director of Tritel, will serve as Vice-Chairman of the Board
of Directors of Holding Company.
In connection with the merger, Mr. Martin will receive $10 million for all
of the shares of Tritel voting preference common stock he owns upon
consummation of the merger. Mr. Mounger will receive a put right to sell his
shares of Holding Company voting preference common stock for $10 million.
Both Mr. Martin and Mr. Mounger could potentially receive contingent
payments for the shares of Tritel voting preference common stock they own
immediately prior to the merger under certain circumstances. In the event that
either Thomas Sullivan or Gerald Vento or both engage in a transaction in which
voting preference
61
<PAGE>
stock representing in excess of 50% of the voting power of Holding Company
capital stock entitled to vote generally in the election of directors is
directly or indirectly sold, transferred, assigned, exchanged or converted, Mr.
Mounger will be entitled to receive from Tritel either (1) if prior to the
exercise of Mr. Mounger's put right, an amount equal to the sum of (A) $10
million and (B) 50% of the sum of (i) the amount by which the consideration
received by Thomas Sullivan in the control transfer transaction exceeds $10
million (consideration received for shares of Holding Company capital stock
other than voting preference stock is not attributed to the control transfer
transaction) and (ii) the amount by which the consideration received by Gerald
Vento in the control transfer transaction exceeds $10 million (consideration
received for shares of Holding Company capital stock other than voting
preference stock is not attributed to the control transfer transaction) or (2)
if after the exercise of Mr. Mounger's put right, an amount equal to 50% of the
sum of the amounts in (i) and (ii) above, as reduced to reflect interest
calculated from the date of the exercise of the put right on $10 million
received by Mr. Mounger. In addition, upon such a control transfer transaction,
Mr. Martin will be entitled to receive an amount equal to 50% of the sum of the
amounts in (i) and (ii) above, as reduced to reflect interest calculated from
the closing date of the merger on $10 million received by Mr. Martin.
In connection with the exchange transaction, AT&T Wireless will be
participating in a swap of assets of AT&T Wireless with TeleCorp. In connection
with the merger, AT&T Wireless Services will be receiving Holding Company class
A voting common stock. Two of the directors of Tritel are employees of AT&T
Wireless Services.
Tritel Employee Stock Options. Pursuant to the terms of the merger
agreement, each Tritel employee stock option outstanding immediately prior to
the completion of the merger will be converted, upon completion of the merger,
into an option to acquire, on the same terms and conditions, the same number of
shares of Holding Company class A voting common stock that is equal to the
product of the number of shares of Tritel class A voting common stock that
could have been acquired upon exercise of the option immediately before the
completion of the merger multiplied by 0.76, rounded to the nearest whole
share. The exercise price of these Holding Company class A voting common stock
options will be the exercise price for the Tritel class A voting common stock
option immediately before completion of the merger divided by 0.76. The vesting
of the options granted by Tritel prior to February 28, 2000 will be accelerated
as a result of the merger.
Tritel Indemnification and Insurance. The merger agreement provides that,
upon the effective time of the merger, Holding Company will indemnify and hold
harmless all past and present directors, officers and employees of Tritel and
its subsidiaries in their capacities as directors and officers of Tritel for a
period of six years after the effective time of the merger:
. to the same extent they were indemnified prior to the effective time,
pursuant to Tritel's restated certificate of incorporation, as amended,
by-laws and indemnification agreements with any directors and officers
of Tritel and its subsidiaries; and
. to the fullest extent permitted by law,
in each case for acts or omissions occurring at prior to the completion of the
merger. For a period of six years after the effective time of the merger,
Tritel's certificate of incorporation and by-laws may not be amended in any
manner which would adversely affect the rights of the directors, officers,
employees or agents, unless required by applicable law.
The merger agreement also provides that, upon the effective time of the
merger, Holding Company will cause to be maintained, for a period of six years
after the effective time of the merger, the current policies of directors' and
officers' liability insurance maintained by Tritel, or policies on terms at
least comparable to those in effect on February 28, 2000 although Holding
Company will not be required to expend in any one year an amount in excess of
125% of the annual premiums currently paid by Tritel for directors' and
officers' liability insurance.
The Tritel Employment Agreements
Subject to completion of the merger, Holding Company will enter into one-
year employment agreements with William M. Mounger, II and E.B. Martin, Jr. By
the terms of the merger agreement, Mr. Mounger and
62
<PAGE>
Mr. Martin will each be record owners of 3,986 shares of Holding Company's
class E common stock. The employment agreements provide that Holding Company
will indemnify Mr. Mounger and Mr. Martin against any claims, losses or causes
of action arising from their performance as members of the board of directors,
and that they will be covered by directors and officers liability insurance
maintained by Holding Company.
Mr. Mounger's Employment Agreement
Mr. Mounger's employment agreement provides that, upon completion of the
merger, Mr. Mounger will serve as Chairman of the Board of Directors of Holding
Company. The agreement terminates and replaces the employment agreement entered
into by Mr. Mounger and Tritel on January 7, 1999.
Upon termination of the employment agreement, the shares of Holding Company
class E common stock then held by Mr. Mounger will be purchased by:
. Mr. Vento and Mr. Sullivan or
. any other person Holding Company designates to purchase the shares.
The price of the shares will be the average price of Holding Company's class
A voting common stock, as quoted on the Nasdaq National Market or other
securities exchange for the 20 trading days immediately preceding the
termination of the employment agreement.
Any restricted shares of Holding Company class A voting common stock or
class E common stock that were subject to vesting and repurchase provisions set
forth in the original employment agreement between Mr. Mounger and Tritel will
become fully vested on the date that the merger becomes effective, provided
that Mr. Mounger remains in continuous employ of Holding Company or any of its
subsidiaries until that date.
Mr. Martin's Employment Agreement
Under Mr. Martin's employment agreement, Mr. Martin will serve as Vice
Chairman of the Board of Directors of Holding Company. The agreement terminates
and replaces the employment agreement entered into by Mr. Martin and Tritel on
January 7, 1999.
Upon termination of the employment agreement, the shares of Holding Company
class E common stock then held by Mr. Martin will be purchased by:
. Mr. Vento and Mr. Sullivan or
. any other person Holding Company designates to purchase the shares.
The price of the shares will be the average price of Holding Company's class
A voting common stock, as quoted on the Nasdaq National Market or other
securities exchange for the 20 trading days immediately preceding the
termination of the employment agreement.
Any restricted shares of Holding Company class A voting common stock or
class E common stock that were subject to vesting and repurchase provisions set
forth in the original employment agreement between Mr. Martin and Tritel will
become fully vested on the date that the merger becomes effective, provided
that Mr. Martin remains in continuous employ of Holding Company or any of its
subsidiaries until that date.
Mr. Arnett's Employment Agreement
In addition to Mr. Mounger's and Mr. Martin's employment agreements, the
merger agreement permits amendments to the employment agreement between Tritel
and William Arnett, President and Chief Operating Officer of Tritel. Under the
merger agreement, Tritel is permitted to modify Mr. Arnett's employment
agreement to fully vest all restricted stock awards at the effective time of
the merger and to make other related changes, including amendment of the
provisions relating to the payment of the exercise price. Although the Tritel
board of directors has authorized, and Tritel intends to effect, these
amendments to Mr. Arnett's employment agreement, no amendments have been
finalized or executed as of the date of this joint proxy statement-prospectus.
63
<PAGE>
Completion and Effectiveness of the Merger
The merger will be completed when all of the conditions to completion of the
merger are satisfied or waived, including the adoption of the merger agreement
by the stockholders of TeleCorp and Tritel. The merger will become effective
upon the filing of certificates of merger with the Secretary of State of the
State of Delaware.
We are working toward completing the merger and expect to complete the
merger during the fourth quarter of 2000.
Structure of the Merger and Conversion of TeleCorp and Tritel Stock
Structure. To accomplish the combination of TeleCorp's and Tritel's
businesses, TeleCorp formed a new company, Holding Company, with two
subsidiaries, TTHC First Merger Sub, Inc. and TTHC Second Merger Sub, Inc. At
the time the merger is completed:
. First Merger Sub will be merged into TeleCorp, TeleCorp will be the
surviving corporation and TeleCorp will change its name to TeleCorp
Wireless, Inc.;
. Second Merger Sub will be merged into Tritel, and Tritel will be the
surviving corporation;
. TeleCorp and Tritel stockholders will become stockholders of Holding
Company through the conversion of their respective capital stock for
Holding Company capital stock; and
. Holding Company will change its name to TeleCorp PCS, Inc.
As a result, TeleCorp and Tritel will each become a wholly owned subsidiary
of Holding Company.
Conversion of TeleCorp and Tritel Stock. When the merger is completed:
. TeleCorp class A voting common stockholders will receive one share of
Holding Company class A voting common stock for each share they own;
. TeleCorp class B non-voting common stockholders will receive one share
of Holding Company class A voting common stock for each share they own;
. TeleCorp class C common stockholders will receive one share of Holding
Company class C common stock for each share they own;
. TeleCorp class D common stockholders will receive one share of Holding
Company class D common stock for each share they own;
. TeleCorp voting preference common stockholders will receive one share of
Holding Company voting preference common stock for each share they own;
. TeleCorp series A preferred stockholders will receive one share of
Holding Company series A preferred stock for each share they own;
. TeleCorp series C preferred stockholders will receive one share of
Holding Company series C preferred stock for each share they own;
. TeleCorp series D preferred stockholders will receive one share of
Holding Company series D preferred stock for each share they own;
. TeleCorp series E preferred stockholders will receive one share of
Holding Company series E preferred stock for each share they own;
. TeleCorp series F Preferred stockholders will receive one share of
Holding Company series F preferred stock for each share they own;
64
<PAGE>
. Tritel class A voting common stockholders will receive 0.76 shares of
Holding Company class A voting common stock for each share they own and
cash in lieu of any fractional share;
. Tritel class B non-voting common stockholders will receive 0.76 shares
of Holding Company class A voting common stock for each share they own
and cash in lieu of any fractional share;
. Tritel class C common stockholders will receive 0.0076 shares of Holding
Company class E common stock and 0.7524 shares of Holding Company class
A voting common stock for each share they own and cash in lieu of any
fractional share;
. Tritel class D common stockholders will receive 0.0076 shares of Holding
Company class F common stock and 0.7524 shares of Holding Company class
A voting common stock for each share they own and cash in lieu of any
fractional share;
. E.B. Martin, Jr. will receive an aggregate amount of $10 million for all
of the Tritel voting preference shares he owns;
. William M. Mounger, II, as a Tritel voting preference common
stockholder, will receive three shares of Holding Company voting
preference common stock for all of the shares he owns. In connection
with the merger, Mr. Mounger will receive a put right to sell his shares
of Holding Company voting preference common stock for $10 million;
. Tritel series A preferred stockholders will receive one share of Holding
Company series B preferred stock for each share they own; and
. Tritel series D preferred stockholders will receive one share of Holding
Company series G preferred stock for each share they own.
Holding Company will proportionately adjust the number of shares of Holding
Company stock issuable in the merger for any stock split, stock dividend or
similar event with respect to the TeleCorp capital stock or Tritel capital
stock effected between the date of the merger agreement and the date of
completion of the merger.
Exchange of Stock Certificates for Holding Company Stock Certificates
When the merger is completed, the exchange agent will mail to you a letter
of transmittal and instructions for use in surrendering your TeleCorp or Tritel
stock certificates in exchange for Holding Company stock certificates. When you
deliver your stock certificates to the exchange agent along with a properly
executed letter of transmittal and any other required documents, your stock
certificates will be canceled and you will receive Holding Company stock
certificates representing the number of full shares of Holding Company class A
voting common stock to which you are entitled under the merger agreement.
TeleCorp and Tritel stockholders will receive payment in cash, without
interest, in lieu of any fractional shares of Holding Company class A voting
common stock which would have been otherwise issuable to them as a result of
the merger. In addition, TeleCorp and Tritel stockholders may receive fractions
of a share for all classes and series of Holding Company capital stock, other
than class A voting common stock, issued to them as a result of the merger
You should not submit your TeleCorp or Tritel stock certificates for
exchange until you receive the transmittal instructions and a form of letter of
transmittal from the exchange agent.
You are not entitled to receive any dividends or other distributions on
Holding Company common stock until the merger is completed and you have
surrendered your TeleCorp or Tritel stock certificates in exchange for Holding
Company stock certificates.
If there is any dividend or other distribution on Holding Company stock with
a record date after the date on which the merger is completed, you will receive
the dividend or distribution with respect to the shares of Holding Company
capital stock issued to you promptly after you surrender your TeleCorp or
Tritel stock certificates in exchange for Holding Company stock certificates.
65
<PAGE>
Holding Company will only issue a Holding Company stock certificate or a
check in lieu of a fractional share in a name other than the name in which a
surrendered TeleCorp or Tritel stock certificate is registered if you present
the exchange agent with all documents required to show and effect the
unrecorded transfer of ownership and show that you paid any applicable stock
transfer taxes.
Treatment of TeleCorp and Tritel Stock Options and Restricted Stock
TeleCorp and Tritel made available to their employees and officers a total
of four stock plans. The four plans are: the TeleCorp 1998 Restricted Stock
Plan, the TeleCorp 1999 Stock Option Plan, the Tritel Non-Employee Directors
Stock Option Plan and the Tritel 1999 Stock Option Plan. Upon completion of the
merger, Holding Company will assume all liabilities and obligations under the
TeleCorp 1998 Restricted Stock Plan, Tritel Non-Employee Directors Stock Option
Plan and Tritel 1999 Stock Option Plan and the options issued under the
TeleCorp 1999 Stock Option Plan will be automatically converted into options to
purchase Holding Company class A voting common stock.
TeleCorp. When the merger is completed, each outstanding TeleCorp employee
stock option will be converted into an option to purchase shares of Holding
Company class A voting common stock at an exercise price per share equal to the
exercise price per share of TeleCorp subject to the option before the
conversion. In addition, each outstanding restricted share of TeleCorp class A
voting common stock will be converted into one restricted share of Holding
Company class A voting common stock. Also, under the TeleCorp 1998 Restricted
Stock Plan, on July 17, 2003, Mr. Vento and Mr. Sullivan will be entitled to
receive all unallocated shares issued under the plan that have not vested as of
that date, pro rata in accordance with the stock they have received pursuant to
the management agreement.
Tritel. When the merger is completed, each outstanding Tritel stock option
will be converted into an option to purchase the number of shares of Tritel
class A voting common stock that is equal to the product of 0.76 multiplied by
the number of shares of Tritel class A voting common stock that would have been
obtained before the merger upon the exercise of the option, rounded to the
nearest whole share. The exercise price per share will be divided by 0.76 to
reflect the exchange ratio of Tritel class A voting common stock in the merger.
The vesting of the Tritel options issued prior to February 28, 2000 will be
accelerated upon the consummation of the merger. In addition, each outstanding
restricted share of Tritel class A voting common stock will be converted upon
the consummation of the merger into the number of restricted shares of Holding
Company class A voting common stock that is equal to the product of 0.76
multiplied by the number of shares of Tritel class A voting common stock
subject to the award. Pursuant to the merger agreement, Tritel is permitted to
amend its restricted stock agreements to fully vest all recipients on or before
December 31, 2002. Although Tritel intends to effect amendments to compress the
vesting schedule of its restricted stock as permitted under the merger
agreement, no amendments have been finalized or executed as of the date of this
joint proxy statement- prospectus.
The other terms of each TeleCorp and Tritel option and restricted shares
referred to above will continue to apply.
Holding Company will file a registration statement covering the issuance of
the shares of Holding Company class A voting common stock subject to each
TeleCorp and Tritel option and restricted shares and will maintain the
effectiveness of that registration statement for as long as any of the options
or restricted shares remain outstanding.
Effect of the Merger on Outstanding TeleCorp and Tritel Credit Facilities
The TeleCorp Debt
As of March 31, 2000, TeleCorp has available a $560 million senior credit
facility of which $225 million has been drawn. TeleCorp entered into the senior
credit facility with Chase Manhattan Bank, TD Securities (USA) Inc. and other
lenders on July 17, 1998 and the credit facility will mature between January
2007 and January 2009.
66
<PAGE>
The senior credit facility permits TeleCorp to enter into a stock-for-stock
merger but prohibits any change of control without the prior consent of the
lenders. A change in control occurs when there is an acquisition of more than
20% of the aggregate voting power of the outstanding TeleCorp capital stock,
which would be an event of default under the credit facility. After the merger,
Tritel stockholders will own 47% of the stock and approximately 23.4% of the
voting power in Holding Company, which will hold 100% of the stock in TeleCorp
resulting in Tritel stockholders indirectly holding 47% of the stock and
approximately 23.4% of the voting power in TeleCorp. Therefore, the merger will
not violate the merger provision but it will violate the change of control
provision and require a waiver of the change of control provision. TeleCorp has
been actively seeking a waiver of the change of control provision from its
lenders.
The Tritel Debt
As of March 31, 2000, Tritel has available a $550 million senior secured
credit facility of which $300 million has been drawn. Tritel entered into the
senior credit facility with Toronto Dominion (Texas) Inc., Toronto Dominion
Bank and other lenders on March 31, 1999 and amended the senior credit facility
on April 21, 1999. The Tritel credit facility consists of a $250 million
revolving credit facility which has an 8.5-year maturity term, a $100 million
term loan A, which has an 8.5-year maturity term, and a $200 million term loan
B, which has a 9-year maturity term.
The Tritel credit agreement prohibits the merger of Tritel with any other
parties, except with or among its subsidiaries. The merger will also constitute
a change of control under the Tritel credit agreement which will result in an
event of default under the credit facility. A change in control occurs (1) upon
any disposition of Tritel capital stock that would result in AT&T Wireless
Services not owning at least 15% of the equity of Tritel, (2) upon the
acquisition of more than 20% of the aggregate voting power of the outstanding
Tritel capital stock or (3) if the majority of the members of the board of
directors of Tritel were not appointed by current Tritel board of directors or
stockholders. Therefore, the merger will violate the merger provision and the
change of control provision and an amendment or bank consent to the Tritel
credit agreement will be required for the proposed transaction. Tritel has been
actively seeking an amendment to the Tritel credit agreement or consent from
its lenders concerning the change of control and merger provisions.
Material United States Federal Income Tax Consequences of the Merger
The following summary discusses the material U.S. federal income tax
consequences of the merger to U.S. Holders of TeleCorp and Tritel stock.
For purposes of this discussion, a U.S. Holder means:
. a citizen or resident of the United States;
. a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any of its political
subdivisions;
. a trust, if a U.S. court is able to exercise primary supervision over
the administration of the trust and one or more U.S. fiduciaries have
the authority to control all substantial decisions of the trust; or
. an estate that is subject to U.S. federal income tax on its income
regardless of its source.
This discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations, administrative rulings and judicial decisions currently
in effect, all of which are subject to change, possibly with retroactive
effect. The discussion assumes that TeleCorp stockholders hold their TeleCorp
capital stock and will hold their Holding Company capital stock, and that
Tritel stockholders hold their Tritel capital stock and will hold their Holding
Company capital stock, as a capital asset within the meaning of Section 1221 of
the Internal Revenue Code. Further, the discussion does not address all aspects
of U.S. federal income taxation that may be relevant to a particular
stockholder in light of his, her or its personal investment circumstances or to
stockholders subject to special treatment under the U.S. federal income tax
laws, including:
. insurance companies;
67
<PAGE>
. tax-exempt organizations;
. dealers in securities or foreign currency;
. banks or trusts;
. persons that hold their TeleCorp or Tritel capital stock as part of a
straddle, a hedge against currency risk or a constructive sale or
conversion transaction;
. persons that have a functional currency other than the U.S. dollar;
. investors in pass-through entities;
. stockholders who acquired their TeleCorp or Tritel capital stock through
the exercise of options or otherwise as compensation or through a tax-
qualified retirement plan; or
. holders of options granted under any TeleCorp or Tritel benefit plan.
Furthermore, this discussion does not consider the potential effects of any
state, local or foreign tax laws.
None of TeleCorp, Tritel or Holding Company has requested a ruling from the
United States Internal Revenue Service with respect to any of the U.S. federal
income tax consequences of the merger and, as a result, there can be no
assurance that the Internal Revenue Service will not disagree with or
challenge any of the conclusions described below.
Cadwalader, Wickersham & Taft, counsel to TeleCorp, has delivered its
opinion to TeleCorp and Brown & Wood LLP, counsel to Tritel, has delivered its
opinion to Tritel to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion, the exchange of
TeleCorp and Tritel capital stock for Holding Company capital stock in the
merger will, taken together, constitute a tax-free transaction within the
meaning of Section 351 of the Internal Revenue Code and each company's stock
exchange will separately qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code. Any change in
currently applicable law, which may or may not be retroactive, or the failure
of any factual representations or assumptions to be true, correct and complete
in all material respects, could affect the continuing validity of the
Cadwalader, Wickersham & Taft tax opinion and/or the Brown & Wood tax opinion.
Based on such tax opinions, the following tax consequences would arise:
. no gain or loss will be recognized by Holding Company, TeleCorp, Tritel,
First Merger Sub or Second Merger Sub in connection with the merger;
. no gain or loss will be recognized by (1) U.S. Holders of TeleCorp stock
on the exchange of their TeleCorp stock for Holding Company stock or (2)
U.S. Holders of Tritel stock on the exchange of their Tritel stock for
Holding Company stock (except with respect to cash received by U.S.
Holders of TeleCorp or Tritel stock in lieu of fractional shares of
Holding Company stock);
. (1) the aggregate adjusted basis of the Holding Company capital stock
received in the merger by a U.S. Holder of TeleCorp capital stock will
be equal to the aggregate adjusted basis of the U.S. Holder's TeleCorp
capital stock exchanged for that Holding Company capital stock (reduced
by any amount allocable to the fractional share interests in Holding
Company capital stock for which cash is received) and (2) the aggregate
adjusted basis of the Holding Company capital stock received in the
merger by a U.S. Holder of Tritel capital stock will be equal to the
aggregate adjusted basis of the U.S. Holder's Tritel capital stock
exchanged for that Holding Company capital stock (reduced by any amount
allocable to the fractional share interests in Holding Company capital
stock for which cash is received); and
. (1) the holding period of the Holding Company capital stock received in
the merger by a U.S. Holder of TeleCorp capital stock will include the
holding period of the U.S. Holder's TeleCorp capital stock exchanged for
that Holding Company capital stock and (2) the holding period of the
Holding
68
<PAGE>
Company capital stock received in the merger by a U.S. Holder of Tritel
capital stock will include the holding period of the U.S. Holder's
Tritel capital stock exchanged for that Holding Company capital stock.
Cash Instead of Fractional Shares. The receipt of cash instead of a
fractional share of Holding Company capital stock by a U.S. Holder of TeleCorp
or Tritel capital stock will result in taxable gain or loss to such U.S.
Holder for U.S. federal income tax purposes based upon the difference between
the amount of cash received by such U.S. Holder and the U.S. Holder's adjusted
tax basis in the fractional share as set forth above. The gain or loss will
constitute capital gain or loss and will constitute long-term capital gain or
loss if the U.S. Holder's holding period is greater than 12 months as of the
date of the merger. For non-corporate U.S. Holders, this long-term capital
gain generally will be taxed at a maximum U.S. federal income tax rate of 20%.
The deductibility of capital losses is subject to limitations.
Constructive Distributions on Preferred Stock Issued in the Merger. Section
305 of the Internal Revenue Code and the Treasury Regulations thereunder
provide that, under certain circumstances, the excess of the redemption price
of preferred stock over the issue price of such preferred stock will be
taxable as a constructive distribution to the holder (which will be treated as
a dividend to the extent of the issuer's current and accumulated earnings and
profits). Certain classes of the Holding Company preferred stock may be deemed
"preferred stock" for purposes of Section 305 of the Internal Revenue Code.
If the redemption price of a series of preferred stock exceeds, by more
than a de minimis amount, the issue price of the series of preferred stock
(i.e., the fair market value of such stock) at its date of issue, holders will
be required to accrue such excess (the "redemption premium") as a constructive
dividend distribution (to the extent of the issuer's current and accumulated
earnings and profits) over the term of such stock. In addition, a distribution
by the Holding Company of any additional shares of a series of preferred
stock, in lieu of a cash dividend payment, may give rise to additional
redemption premium. Holders should consult their tax advisors regarding the
application of the above rules to their particular situation.
Backup Withholding. Certain non-corporate TeleCorp or Tritel stockholders
may be subject to backup withholding at a 31% rate on cash payments received
instead of fractional shares of Holding Company capital stock. Backup
withholding will not apply, however, to a TeleCorp or Tritel stockholder who:
. furnishes a correct taxpayer identification number and certifies that
he, she or it is not subject to backup withholding on the substitute
Form W-9 or successor form included in the letter of transmittal to be
delivered to Tritel stockholders following the date of completion of the
merger;
. provides a certification of foreign status on Form W-8 or successor
form; or
. is otherwise exempt from backup withholding.
Reporting Requirements. A U.S. Holder of TeleCorp or Tritel capital stock
receiving Holding Company capital stock as a result of the merger may be
required to retain records related to such U.S. Holder's TeleCorp and Tritel
capital stock, as the case may be, and file with its federal income tax
return, a statement setting forth facts relating to the merger.
The summary of material U.S. federal income tax consequences is intended to
provide only a general summary and is not intended to be a complete analysis
or description of all potential federal income tax consequences of the merger.
In addition, the summary does not address tax consequences that may vary with,
or are contingent on, individual circumstances. Moreover, the summary does not
address any non-income tax or any foreign, state or local tax consequences of
the merger. The summary does not address the tax consequences of any
transaction other than the merger. Accordingly, each TeleCorp and Tritel
stockholder is strongly urged to consult with a tax advisor to determine the
particular federal, state, local or foreign income or other tax consequences
of the merger to the holder.
Accounting Treatment of the Merger
The merger will be accounted for under the purchase method of accounting
for business combinations. See "Unaudited Pro Forma Condensed Combined
Financial Statements."
69
<PAGE>
Regulatory Matters
We have summarized below the material regulatory requirements affecting the
merger. Although we have not yet received the required approvals we discuss, we
anticipate that we will receive regulatory approvals sufficient to complete the
merger in the fourth quarter of 2000.
Antitrust Considerations. The merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, which prevents specified
transactions from being completed until required information and materials are
furnished to the Antitrust Division of the Department of Justice and the
Federal Trade Commission and specified waiting periods are terminated or
expire. We have filed the required information and materials with the
Department of Justice and the Federal Trade Commission.
The Antitrust Division of the Department of Justice or the Federal Trade
Commission may challenge the merger on antitrust grounds, either before or
after expiration of the waiting period. Accordingly, at any time before or
after the completion of the merger, either the Antitrust Division of the
Department of Justice or the Federal Trade Commission could take action under
the antitrust laws as it deems necessary or desirable in the public interest,
or other persons could take action under the antitrust laws, including seeking
to enjoin the merger. Additionally, at any time before or after the completion
of the merger, notwithstanding that the applicable waiting period expired or
was terminated, any state could take action under the antitrust laws as it
deems necessary or desirable in the public interest. There can be no assurance
that a challenge to the merger will not be made or that, if a challenge is
made, we will prevail.
Federal Communications Commission. Pursuant to the Communications Act of
1934 and Federal Communications Commission rules, the transfer of control of
companies holding, or assignment of, licenses issued by the Federal
Communications Commission typically requires prior Federal Communications
Commission approval. TeleCorp and Tritel each directly or indirectly hold
Federal Communications Commission licenses and intend to obtain any necessary
approvals from the Federal Communications Commission in connection with the
mergers. On or about May 4, 2000, TeleCorp and Tritel filed appropriate
applications with the Federal Communications Commission seeking approval for
the transfer of control to Holding Company of the applicable Federal
Communications Commission licenses and authorizations. Additionally, on April
27, 2000 TeleCorp filed an application to implement the transfer of the license
involved in the AT&T Wireless transaction, as well as applications to implement
the license swaps. The applications will be listed on public notice which will
commence a 30-day period in which interested parties may file comments or
petitions to deny.
Completion of the merger is conditioned, among other factors, upon grants of
the requisite Federal Communications Commission consents becoming final. A
"final" Federal Communications Commission order is one that has not been stayed
and is no longer subject to review by the Federal Communications Commission or
the courts because the statutory period for seeking such review has expired
without any request for review or stay pending. Following the Federal
Communications Commission's grants of consents to the transfers, there may be
post-grant challenges by private parties or actions by the Federal
Communications Commission or the courts that would delay or prevent finality.
Closing of the merger will result in Holding Company's attribution with
spectrum in excess of the Federal Communications Commission's spectrum
aggregation limits by 5 MHz in one county in Kentucky. Accordingly, Holding
Company has filed for consent to assign the offending partitional and
disaggregated spectrum to an unaffiliated third party.
We currently anticipate Federal Communications Commission action on all
applications necessary for completion of the merger by the end of the fourth
quarter of 2000.
Restrictions on Sales of Shares by Affiliates of TeleCorp and Tritel
The shares of Holding Company class A voting common stock to be issued in
connection with the merger or upon conversion of shares of Holding Company
common stock or Holding Company preferred stock issued
70
<PAGE>
in connection with the merger will be registered under the Securities Act of
1933 and will be freely transferable under the Securities Act of 1933, except
for shares of Holding Company class A voting common stock issued to any person
who is deemed to be an "affiliate" of either TeleCorp or Tritel. Persons who
may be deemed to be affiliates include individuals or entities that control,
are controlled by, or are under the common control of either TeleCorp or Tritel
and may include Holding Company's executive officers and directors, as well as
its significant stockholders. Affiliates may not sell their shares of Holding
Company common stock acquired in connection with the merger except pursuant to:
. an effective registration statement under the Securities Act of 1933
covering the resale of those shares;
. an exemption under paragraph (d) of Rule 145 under the Securities Act of
1933; or
. any other applicable exemption under the Securities Act of 1933.
Holding Company's registration statement on Form S-4, of which this joint
proxy statement-prospectus forms a part, does not cover the resale of shares of
Holding Company common stock to be received by an affiliate of TeleCorp and
Tritel in the merger.
Nasdaq National Market Listing of Holding Company Common Stock to be Issued in
the Merger
TeleCorp and Tritel have agreed to cooperate to cause the shares of Holding
Company class A voting common stock to be issued in connection with the merger
to be approved for listing on the Nasdaq National Market, subject to official
notice of issuance, before the completion of the merger.
Appraisal Rights
TeleCorp. Under Delaware law, TeleCorp class A voting common stockholders
are not entitled to appraisal rights in connection with the merger. Holders of
TeleCorp voting preference common stock are entitled to appraisal rights under
Delaware law. TeleCorp voting preference common stockholders have entered into
a voting agreement with TeleCorp and Tritel through which all the voting
preference common stockholders have agreed to vote all of their shares of
voting preference common stock in favor of the merger. As a result of the
voting agreement, any TeleCorp voting preference common stockholder who votes
in favor of the merger will not be able to exercise his appraisal rights.
Tritel. Under Delaware law, Tritel class A voting common stockholders are
not entitled to appraisal rights in connection with the merger. Holders of
Tritel voting preference common stock are entitled to appraisal rights under
Delaware law. Tritel voting preference common stockholders have entered into a
voting agreement with Tritel and TeleCorp, through which all the voting
preference common stockholders have agreed to vote all of their shares of
voting preference common stock in favor of the merger. As a result of the
voting agreement, any Tritel voting preference common stockholder who votes in
favor of the merger will not be able to exercise his appraisal rights.
Delisting and Deregistration of TeleCorp and Tritel Common Stock after the
Merger
When the merger is completed, TeleCorp class A voting common stock and
Tritel class A voting common stock will each be delisted from the Nasdaq
National Market and will be deregistered under the Securities Exchange Act of
1934.
The Merger Agreement
The following summary of the merger agreement is qualified in its entirety
by reference to the complete text of the merger agreement as amended, which is
incorporated by reference and attached as Annex A to this joint proxy
statement-prospectus. We urge you to read the full text of the merger
agreement.
71
<PAGE>
The merger agreement provides that simultaneously with the closing of the
mergers, AT&T Wireless Services will contribute to Holding Company rights to
acquire additional wireless licenses in exchange for Holding Company class A
voting common stock. For a more detailed description of the AT&T Wireless
Services contribution, see the section entitled "The Merger--Description of
AT&T Wireless Services Contribution" in this joint proxy statement-prospectus.
Conditions to the Merger. Each of TeleCorp's and Tritel's obligations to
complete the merger of First Merger Sub into TeleCorp and the merger of Second
Merger Sub into Tritel are subject to the satisfaction or waiver of specified
conditions before completion of the mergers, including the following:
. the adoption of the merger agreement by the affirmative vote of:
. the holders of a majority of the voting power of the outstanding
shares of TeleCorp class A voting common stock and TeleCorp voting
preference common stock, voting as a single class, outstanding as of
the record date, voting at the special meeting; and
. the holders of a majority of the voting power of the outstanding
shares of Tritel class A voting common stock and Tritel voting
preference common stock, voting as a single class, outstanding as of
the record date, voting at the special meeting;
. the receipt of all permits, approvals and consents of, and the
completion of filings with, or notices to, any state or local government
authorities, including state securities commissions, necessary for
completion of the merger transactions (other than the AT&T Wireless
Services contribution), the failure of which to obtain, individually or
in the aggregate, would not reasonably be expected to have a material
adverse effect, as described below, on TeleCorp, Tritel or Holding
Company after the mergers;
. the receipt of all consents or approvals of any person, other than a
government authority, required under any agreement or instrument
necessary for completion of the merger transactions (other than the AT&T
Wireless Services contribution), the failure of which to obtain,
individually or in the aggregate, would not have a material adverse
effect, as described below, on TeleCorp or Tritel;
. the declaration of effectiveness of the registration statement on Form
S-4, of which this joint proxy statement-prospectus forms a part, by the
Securities and Exchange Commission, and the absence of any stop order or
threatened or pending proceedings seeking a stop order;
. the absence of any law, order or injunction prohibiting completion of
the mergers or creating a material adverse effect, as described below,
with respect to TeleCorp or Tritel;
. the receipt of written opinions from Cadwalader, Wickersham & Taft and
Brown & Wood LLP to the effect that for federal income tax purposes,
each merger will constitute an exchange to which Section 351 of the
Internal Revenue Code applies and a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
. the expiration or termination of the applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976;
. the receipt of executed affiliate agreements from TeleCorp and Tritel
affiliates;
. the final approval of the Federal Communications Commission free of
conditions materially adverse to TeleCorp or Tritel, other than those
conditions applicable to the PCS or wireless communications services
industry generally; and
. the approval for listing, by the Nasdaq National Market, of the shares
of Holding Company class A voting common stock to be issued, or to be
reserved for issuance, in connection with the mergers, subject to
official notice of issuance.
"Material Adverse Effect," when used in reference to any entity, means any
event, change, or effect that is materially adverse to the business, assets,
financial condition or results of operations of the entity and its
subsidiaries, taken as a whole.
72
<PAGE>
However, there will be no material adverse effect to the extent that any
adverse change in, or effect on, the financial condition or revenues relates:
. to the general economic conditions in the United States; or
. to the wireless communications industry generally.
TeleCorp's obligations to complete the merger of First Merger Sub into
TeleCorp are subject to the satisfaction or waiver of the following additional
conditions before completion of the merger:
. Tritel's representations and warranties, disregarding all qualifications
and exceptions contained in the merger agreement relating to materiality
or material adverse effect, must be true and correct as of the date of
the merger agreement and as of the date of completion of the mergers,
except for:
. any failure of such representations and warranties to be true and
correct that would not, individually or in the aggregate, have a
material adverse effect on Tritel;
. changes contemplated by the merger agreement; and
. representations and warranties that expressly address matters only
as of a particular date, which must be true and correct as of such
date;
. Tritel must have performed or complied in all material respects with all
agreements and covenants required to be performed by it under the merger
agreement; and
. the simultaneous completion of the merger of Second Merger Sub into
Tritel.
Tritel's obligations to complete the merger of Second Merger Sub into Tritel
are subject to the satisfaction or waiver of the following additional
conditions before completion of the merger:
. TeleCorp's representations and warranties, disregarding all
qualifications and exceptions contained in the merger agreement relating
to the materiality or material adverse effect, must be true and correct
as of the date of the merger agreement and as of the date of completion
of the mergers, except for:
. any failure of such representations and warranties to be true and
correct that would not, individually or in the aggregate, have a
material adverse effect on TeleCorp;
. for changes contemplated by the merger agreement; and
. representations and warranties that expressly address matters only
as of a particular date, which must be true and correct as of such
date;
. TeleCorp must have performed or complied in all material respects with
all agreements and covenants required to be performed by it under the
merger agreement; and
. the simultaneous completion of the merger of First Merger Sub into
TeleCorp.
Holding Company's obligations to issue shares of class A voting common stock
to AT&T Wireless Services in connection with the AT&T Wireless Services
contribution are subject to the satisfaction or waiver of the following
additional conditions before completion of the mergers:
. AT&T Wireless Services representations and warranties must be true and
correct in all material respects as of the date of the merger agreement
and as of the date of completion of the mergers, except for:
. changes contemplated by the merger agreement; and
. representations and warranties that expressly address matters only
as of a particular date, which must be true and correct in all
material respects as of such date.
. AT&T Wireless Services must have performed or complied in all material
respects with all agreements and covenants required to be performed by
it under the merger agreement;
73
<PAGE>
. the absence of any law, order or injunction making the contribution
illegal, prohibiting completion of the contribution or creating a
material adverse effect on AT&T Wireless Services;
. the receipt by AT&T Wireless Services of all approvals and consents of,
and the completion of filings by AT&T Wireless Services with, or notices
to, any federal, state or local government authorities necessary for
completion of the AT&T Wireless Services contribution, the failure of
which to obtain, individually or in the aggregate, would not reasonably
be expected to have a material adverse effect on AT&T Wireless Services;
. the expiration or termination of the applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976;
. the execution of the Airadigm assignment agreement by AT&T Wireless
Services in connection with the contribution by AT&T Wireless Services;
. the execution of the Indus merger agreement and the Indus assignment and
assumption agreement (as described below under the heading "The Merger
Agreement--Description of AT&T Wireless Services Contribution") and the
satisfaction of the conditions required to consummate the contribution
by AT&T Wireless Services;
. the execution of the license extension agreement by AT&T Wireless
Services in connection with the contribution by AT&T Wireless Services;
. the contribution by AT&T Wireless Services of approximately $20 million
in cash to Holding Company; and
. the transactions in connection with the exchange agreement between AT&T
Wireless, TeleCorp and certain AT&T Wireless affiliates must have been
completed. For a more detailed description of the separate exchange
transaction, see "The Merger--Description of Other AT&T Transactions."
AT&T Wireless Services obligations to complete the contribution and execute
the license extension agreement relating to AT&T Wireless Services are subject
to the satisfaction or waiver of the following additional conditions before
completion of the mergers:
. TeleCorp's and Tritel's representations and warranties, disregarding all
qualifications and exceptions contained in the merger agreement relating
to materiality or material adverse effect, must be true and correct as
of the date of the merger agreement and as of the date of completion of
the mergers, except for:
. any failure of such representations and warranties to be true and
correct that would not, individually or in the aggregate, have a
material adverse effect on TeleCorp or Tritel;
. any changes contemplated by the merger agreement; and
. representations and warranties that expressly address matters only
as of a particular date, which must be true and correct as of such
date.
. TeleCorp and Tritel must have performed or complied in all material
respects with all agreements and covenants required to be performed by
it under the merger agreement;
. the absence of any law, order or injunction making the contribution
illegal, prohibiting completion of the contribution or creating a
material adverse effect on TeleCorp, Tritel or which would reasonably be
expected to have a material adverse effect on AT&T Wireless Services;
. the receipt by TeleCorp, Tritel and Holding Company of all approvals and
consents of, and the completion of filings by TeleCorp, Tritel and
Holding Company with, or notices to, any federal, state or local
government authorities necessary for completion of the contribution, the
failure of which to obtain, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on TeleCorp,
Tritel or a material adverse effect on Holding Company or AT&T Wireless
Services;
74
<PAGE>
. the expiration or termination of the applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 relating to the
completion of the AT&T Wireless Services contribution;
. the completion of the merger of First Merger Sub into TeleCorp and the
merger of Second Merger Sub into Tritel;
. 9,272,740 shares of Holding Company class A voting common stock must
have been simultaneously issued to AT&T Wireless Services; and
. the transactions in connection with the separate exchange agreement
between AT&T Wireless Services, TeleCorp and certain AT&T Wireless
Services affiliates must have been completed.
No Other Transactions Involving TeleCorp or Tritel. The merger agreement
contains detailed provisions prohibiting TeleCorp and Tritel from seeking an
alternative transaction. Under these "no solicitation" provisions, each of
TeleCorp and Tritel has agreed that neither it nor any of its subsidiaries,
officers and directors, will, and that each will use reasonable best efforts to
ensure that it and its subsidiaries' employees, agents and representatives, do
not, directly or indirectly:
. initiate, solicit or encourage any proposals, including by furnishing
information, that constitute, or could reasonably be expected to result
in, an acquisition proposal, as described below;
. have any discussion or engage in any negotiations with, or provide any
non-public information to, any person relating to an acquisition
proposal; or
. agree to, approve or recommend any acquisition proposal.
"Acquisition Proposal" means, with respect to any entity, any proposal or
intended proposal regarding:
. any transaction or tender or exchange offer for the equity securities of
that entity that, if completed, would result in any person other than a
party to the merger agreement beneficially owning securities
representing 20% or more of the outstanding shares of that entity, or of
the surviving parent entity in the transaction, or any of its
significant subsidiaries;
. any acquisition or proposed acquisition of that entity by merger or
business combination; or
. any acquisition, directly or indirectly, of control of the assets of
that entity, including stock of its subsidiaries taken as a whole, by a
person not a party to the merger agreement for an amount equal to 20% or
more of the fair market value of all the outstanding shares of that
entity on the date of the merger agreement.
The merger agreement does not prevent each of TeleCorp and Tritel, or its
board of directors, from engaging in any discussions with, or providing any
non-public information to, any person or entity in response to an unsolicited
bona fide written acquisition proposal by that person or entity, if and only to
the extent that its board of directors concludes in good faith, after
consulting with its financial advisors, that the acquisition proposal would, if
consummated, result in a transaction more favorable to the TeleCorp or Tritel
stockholders, as applicable.
However, TeleCorp or Tritel may only take such action if and only to the
extent that:
. its board of directors, after consultation with outside counsel,
determines in good faith that the failure to engage in discussions with,
or provide non-public information to, the person or entity would be
inconsistent with its fiduciary duties under applicable law; and
. before providing any non-public information to, or engaging in any
discussions or negotiations with, any person or entity in connection
with an acquisition proposal by that person or entity, its board of
directors receives from that person or entity an executed
confidentiality agreement with terms no less favorable than the
comparable terms in the confidentiality agreement between TeleCorp and
Tritel.
75
<PAGE>
In addition, the merger agreement does not prevent each of TeleCorp and
Tritel, or its board of directors, from making any disclosure to its
stockholders, if its board of directors, after consultation with outside
counsel, determines in good faith that the failure to disclose would result in
the reasonable likelihood that its board of directors would breach its
fiduciary duties under applicable law.
In any event, each of TeleCorp and Tritel will immediately terminate any
existing solicitation, initiation, encouragement activity, discussion or
negotiation with any person that was conducted before the merger agreement was
signed.
In addition, the merger agreement does not prevent TeleCorp or Tritel from
complying with Rule 14d-9 and Rule 14e-2 promulgated under the Securities
Exchange Act of 1934 with regard to an acquisition proposal.
Each of TeleCorp and Tritel has agreed under the provisions of the merger
agreement that:
. it will promptly notify the other party and AT&T Wireless Services
orally and in writing, of any proposals or requests for information
covered by the "no solicitation" provisions of the merger agreement;
. it will provide the name of the person and the material terms and
conditions of any inquiries or proposals;
. it will keep the other party and AT&T Wireless Services reasonably
informed of the status of any proposals or requests for information;
. it will immediately cease and terminate any existing solicitation,
initiation, encouragement activity, discussion or negotiation with any
person covered by the "no solicitation" provisions of the merger
agreement; and
. it will not release any person not a party to the merger agreement from,
fail to enforce or waive any provision of any standstill agreement to
which it is a party which could effect an acquisition proposal.
Termination. The merger agreement may be terminated at any time, whether
before or after the stockholder approvals have been obtained:
. by mutual written consent authorized by the board of directors of
TeleCorp and Tritel;
. by either TeleCorp or Tritel if the mergers are not completed on or
before December 31, 2000, or if the mergers are not completed solely
because of outstanding Hart-Scott-Rodino or Federal Communications
Commission approvals or consents before March 31, 2001, except that this
right to terminate the merger agreement will not be available to any
party whose willful failure to fulfill any material obligation under the
merger agreement has been the cause of, or has resulted in, the failure
of the mergers to be completed by December 31, 2000 or March 31, 2001,
as the case may be;
. by either TeleCorp or Tritel if the other party breaches or fails to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the merger agreement in such
a way as to render the conditions to the completion of the mergers
contained in the merger agreement incapable of being satisfied on or
before December 31, 2000;
. by either TeleCorp or Tritel if any governmental entity issues an
injunction, order or decree enjoining or otherwise prohibiting the
mergers and the contribution, and the injunction, order or decree
becomes final and nonappealable, except that this right to terminate the
merger agreement will not be available to any party who fails to use
reasonable best efforts to remove the injunction, order or decree; or
. by either TeleCorp, Tritel or AT&T Wireless Services with respect to the
contribution only, if the approval and adoption of the merger agreement
by either party's stockholders is not obtained at a duly held meeting of
TeleCorp's or Tritel's stockholders.
76
<PAGE>
The provisions of the merger agreement relating to the contribution by AT&T
Wireless Services may be terminated at any time whether before or after the
stockholder approvals have been obtained:
. by mutual written consent authorized by the board of directors of
Holding Company (or TeleCorp before the mergers are completed) and AT&T
Wireless Services;
. by either Holding Company (or TeleCorp before the mergers are completed)
or AT&T Wireless Services if the mergers are completed but the
contribution by AT&T Wireless Services is not completed on or before
December 31, 2000, except that this right to terminate the merger
agreement will not be available to any party whose willful failure to
fulfill any material obligation under the merger agreement has been the
cause of, or has resulted in, the failure of the mergers to be completed
by December 31, 2000; or
. by either Holding Company (or TeleCorp before the mergers are completed)
or AT&T Wireless Services if any governmental entity issues an
injunction, order or decree enjoining or otherwise prohibiting the AT&T
Wireless Services contribution, and the injunction, order or decree
becomes final and nonappealable, except that this right to terminate the
provisions of the merger agreement relating to the AT&T Wireless
Services contribution will not be available to any party who fails to
use reasonable best efforts to remove the injunction, order or decree.
Conduct of Business Pending the Merger. Under the merger agreement, each of
TeleCorp and Tritel has agreed that, during the period before completion of the
mergers, except as expressly contemplated, required or permitted by the merger
agreement, or to the extent that the other party consents in writing, it will
carry on its respective business in the ordinary course in the same manner as
previously conducted, and will use its commercially reasonable efforts to
preserve substantially intact its present business organization, its
relationships with third parties and the services of its employees.
In addition to these agreements regarding the conduct of business generally,
each of TeleCorp and Tritel has agreed to specific restrictions relating to the
following:
. the amendment of its certificate of incorporation or by-laws;
. the merger or consolidation with other entities;
. the issuance or sale of capital stock, any voting debt or other equity
interests;
. the disposition of assets;
. the alteration of share capital, including, among other things, stock
splits, combinations or reclassifications;
. the declaration or payment of dividends;
. the repurchase or redemption of capital stock;
. compensation of directors, executive officers and key employees;
. employment or severance agreements;
. the acquisition of assets or other entities;
. the incurrence, assumption or guarantee of loans or advances;
. the incurrence of capital expenditures;
. the incurrence of purchase commitments;
. accounting policies and procedures;
. the incurrence of debt;
. the disposition of intellectual property;
77
<PAGE>
. actions that would result in a material violation, default or waiver of
rights under any material agreements;
. actions or failure to take actions that would result in any of the
representations and warranties becoming untrue in any material respect,
or any of the conditions to the mergers not being satisfied;
. the taking of actions that would prevent or impede the mergers from
qualifying as an exchange under Section 351 of the Internal Revenue Code
or the qualification of either merger as a reorganization under Section
368 of the Internal Revenue Code; or
. the entering into or amending of any agreements, commitments or
arrangements with respect to any conduct of business prohibited during
the period before completion of the mergers.
Stockholders' Meetings. Each of TeleCorp and Tritel has agreed to hold its
stockholders' meeting as soon as practicable after the signing of the merger
agreement to obtain the approval of its stockholders. The board of directors of
each of TeleCorp and Tritel has agreed to recommend to its stockholders that
the merger agreement be approved and authorized by its stockholders. In
addition, the board of directors of each of TeleCorp and Tritel has agreed to
submit the merger agreement to its stockholders, whether or not the board of
directors of TeleCorp or Tritel, as applicable, at any time changes, withdraws
or modifies its recommendation.
Additional Agreements. Each of TeleCorp and Tritel has agreed to cooperate
with each other and to use its reasonable best efforts to take all actions and
do all things necessary, proper and advisable under the merger agreement and
applicable laws to complete the mergers as soon as practicable after February
28, 2000, which is the date of the merger agreement. Accordingly, each has
agreed to use its reasonable best efforts to:
. as promptly as practicable, prepare and file all registrations and
filings and other documents, and to obtain all consents, licenses,
orders, approvals, permits, authorizations and qualifications from any
third party or any domestic governmental entity necessary to complete
the mergers; and
. take all reasonable steps to obtain all necessary consents and required
approvals, including those required under applicable antitrust and
communications laws.
TeleCorp's and Tritel's cooperation may also include using their reasonable
best efforts to contest and resist actions challenging the mergers as illegal
and laws or orders making the mergers illegal or prohibiting or materially
impairing or delaying the mergers. Neither TeleCorp nor Tritel will be required
to divest or hold separate any business or take any other action that could be
reasonably expected to impair the ability of Holding Company to own and operate
its businesses or the contributed property, AT&T Wireless Services to own
common stock, or TeleCorp, Tritel or AT&T Wireless Services, as the case may
be, to own and operate its business if the mergers are not completed in
substantially the same manner as previously conducted.
Each of TeleCorp and Tritel have also agreed to use commercially reasonable
efforts to obtain all opinions, affiliate agreements, necessary state
securities permits and approvals and provide all documentation, information and
materials to qualify as a tax-free transaction for federal income tax purposes.
Each of TeleCorp and Holding Company have also agreed to indemnify and hold
harmless AT&T Wireless Services and its affiliates against any liabilities in
connection with the Airadigm assignment and purchase agreements and the Indus
assignment and merger agreements in connection with the contribution by AT&T
Wireless Services.
AT&T Wireless Services has also agreed:
. to use commercially reasonable efforts to obtain the necessary approvals
to complete the contribution;
. to waive its rights to object to the mergers; and
. to cooperate in exercising its rights under the agreements in connection
with the contribution and completing the mergers.
78
<PAGE>
The merger agreement also contains covenants relating to the cooperation
between TeleCorp and Tritel in the preparation of this joint proxy statement-
prospectus and additional agreements between them relating to, among other
things, access to information, mutual notice of specified matters, employee
benefits and public announcements.
Amendment, Extension and Waiver. The merger agreement may be amended by the
parties and provisions of the merger agreement may be waived. All amendments
and waivers to the merger agreement must be in writing signed by each party.
Expenses. Whether or not the mergers are completed, all expenses and fees
incurred in connection with the merger agreement and the mergers will be paid
by the party incurring the expenses or fees, except:
. all expenses and fees incurred in connection with the filing, printing
and mailing of this joint proxy statement-prospectus and the
registration statement of which it is a part will be shared equally by
Tritel and TeleCorp; and
. if the mergers are completed, the surviving corporation of each merger
will pay any property or transfer taxes imposed in connection with the
mergers.
Representations and Warranties. The merger agreement contains customary
representations and warranties of TeleCorp and Tritel relating to, among other
things:
. corporate organization and similar corporate matters;
. subsidiaries;
. capital structure;
. authorization and enforceability;
. board of directors approval and applicable state takeover laws;
. the stockholder vote required to adopt the merger agreement;
. absence of conflicts;
. Hart-Scott-Rodino and Federal Communications Commission filings and
consents;
. documents filed with the Securities and Exchange Commission and
financial statements included in those documents;
. specified contracts;
. compliance with applicable laws;
. licenses and authorizations;
. absence of specified changes or events;
. absence of litigation;
. employee benefits;
. employment and labor matters;
. information supplied in connection with this joint proxy statement-
prospectus and the registration statement of which it is a part;
. business activities;
. title and leases;
. taxes;
79
<PAGE>
. environment;
. intellectual property;
. anti-takeover statutes;
. brokers; and
. opinions of financial advisors.
Transition Committee
A transition committee, comprised of Gerald T. Vento, Thomas H. Sullivan,
E.B. Martin, Jr., William M. Mounger, II, Andrew Hubregsen, Michael R. Hannon
and Scott Anderson has been formed to provide recommendations as to the
advisability of all consents sought with regard to confidentiality issues and
the conduct of business of TeleCorp and Tritel pending the closing of the
merger. Such recommendations shall be presented, together with the request for
a consent, to TeleCorp or Tritel, as appropriate.
Holding Company Charter and By-Laws
Upon completion of the merger, the restated certificate of incorporation
for Holding Company will become effective in substantially the form set forth
in Annex E to this joint proxy statement-prospectus and the restated by-laws
of Holding Company will become effective in substantially the form set forth
in Annex F to this joint proxy statement-prospectus. For a summary of the
material provisions of the restated certificate of incorporation and restated
by-laws of Holding Company, and the rights of stockholders of Holding Company
under the restated certificate of incorporation and restated by-laws, see the
section entitled "Description of Holding Company Capital Stock."
Description of AT&T Wireless Services Contribution
General. In connection with the merger, and as part of an overall plan with
the merger, simultaneously with the closing of the merger, AT&T Wireless
Services will contribute to Holding Company rights, pursuant to separate asset
purchase and merger agreements, to designate a qualified assignee for wireless
licenses in Milwaukee and Madison, Wisconsin and Des Moines and Davenport,
Iowa.
In connection with the contribution, the merger agreement provides for the
following transactions to occur:
. AT&T Wireless Services has agreed to assign to Holding Company its right
to enter into, and all its rights, title and interest in, an asset
purchase agreement with Airadigm including the assumption of
approximately $74.6 million in debt and other liabilities and a $74.0
million cash payment. The asset purchase agreement is part of, and
subject to the approval of, a plan of reorganization filed on January
24, 2000 in connection with the bankruptcy proceedings of Airadigm.
Holding Company intends to acquire from Airadigm licenses representing a
population of approximately 3.1 million people in Wisconsin and Iowa
under the asset purchase agreement;
. AT&T Wireless Services has agreed to assign to Holding Company all of
its rights, title and interest in a merger agreement with Indus
including the assumption of approximately $54 million of Federal
Communications Commission debt, $48.3 million of other liabilities and a
$34.7 million cash payment (of which, up to $4 million can be satisfied
in Holding Company class A voting common stock at Indus' option).
Holding Company intends to acquire from Indus licenses representing a
population of approximately 1.9 million people in Milwaukee, Wisconsin
under the merger agreement;
. the network membership license agreement between AT&T and Holding
Company (or TeleCorp before the merger) will be amended to extend the
initial five-year brand sharing for an additional two years from the
closing of the merger and extend the rights of TeleCorp to all people
covered by Holding Company licenses;
80
<PAGE>
. AT&T Wireless Services will contribute approximately $20 million in cash
to Holding Company; and
. in consideration for AT&T Wireless Services contribution of licenses,
assignment of rights and cash, AT&T Wireless Services will receive
9,272,740 million shares of Holding Company class A voting common stock.
Indus Merger
. if the Indus merger is completed prior to the closing of the TeleCorp
and Tritel mergers, TeleCorp or one of its affiliates will assume all of
the obligations of AT&T Wireless Services or its affiliates under the
organizational agreement among Indus, AT&T Wireless Services and other
parties not otherwise related to this transaction;
. if the merger agreement is terminated after the Indus merger is
completed, AT&T Wireless Services has the option to select either of the
following:
. TeleCorp will re-assign and transfer to AT&T Wireless Services all
of the assets and rights which were acquired by TeleCorp from AT&T
Wireless Services in connection with the Indus merger closing and
AT&T Wireless Services will reimburse TeleCorp for certain costs
incurred by TeleCorp in connection with the Indus merger; or
. TeleCorp will pay AT&T Wireless Services in TeleCorp class A voting
common stock valued at the average of the closing bid prices for the
TeleCorp class A voting common stock for the ten trading days
immediately preceding the date of the closing of the Indus merger
equal to (1) $175 times the number of people within the licensed
area of Indus, less (2) the purchase price that was paid plus the
amount of the Indus debt assumed pursuant to the Indus merger
agreement or the organization agreement.
If AT&T Wireless Services is unable to provide the assets of Indus to
Holding Company, then it may provide replacement assets consisting of 20 MHz
PCS licenses, chosen at the option of AT&T Wireless Services, for at least an
equivalent number of people in the Kansas City or Indianapolis BTAs and their
surrounding BTAs or other equivalent BTAs agreed to by the parties in good
faith provided that:
. if the number of people in licensed areas included in the replacement
assets exceeds the number of people covered in Indus's licensed areas,
Holding Company will issue to AT&T Wireless Services an additional
amount of Holding Company class A voting common stock, valued as
described above, equal to $175 times the number of the excess people;
and
. if AT&T Wireless Services chooses not to provide replacement assets,
TeleCorp (or Holding Company) may elect to terminate the assignment of
assets and rights and contribution of cash by AT&T Wireless Services in
exchange for Holding Company class A voting common stock, referred to as
the "AT&T Wireless Contribution".
The completion of the contribution requires the completion of the mergers,
however the failure of the contributions to occur will not prevent the
completion of the mergers.
Description of Other AT&T Transactions
AT&T Wireless Exchange
TeleCorp and AT&T Wireless entered into a separate exchange agreement to
exchange certain wireless assets to extend their respective service areas.
In connection with the exchange, the exchange agreement provides for the
following transactions:
TeleCorp will sell the 20 MHz PCS licenses in the New England territory,
including some suburbs of Boston, Hyannis, and Worcester, Massachusetts, and
Manchester, Nashua and Concord, New Hampshire,
81
<PAGE>
representing a population of 1.9 million people and certain property and
equipment to AT&T Wireless in exchange for the following assets and rights of
AT&T Wireless:
. ABC has obtained the right to purchase the licenses of Polycell and
Clinton Communications, Inc., which is a wholly owned subsidiary of
Polycell, pursuant to the amended acquisition agreement between
Polycell, Clinton Communications and ABC and has assigned its rights to
transfer the right to hold the licenses and all of its other rights
under the acquisition agreement to AT&T Wireless. AT&T Wireless has
agreed to assign to TeleCorp the right to hold the licenses and all of
its other rights under the acquisition agreement. TeleCorp will acquire
from Polycell and Clinton Communications licenses covering approximately
0.3 million people in Iowa;
. AT&T Wireless has obtained the right to assign the right to hold certain
licenses of ABC and to assign all of its other rights and obligations
under its acquisition agreement with ABC. TeleCorp will acquire from
AT&T Wireless licenses representing a population of approximately 1.5
million people in Iowa, including Des Moines, Davenport, Dubuque and
Iowa City;
. AT&T Wireless has agreed to transfer to TeleCorp its 10 MHz licenses in
Wisconsin held by AT&T Wireless or its affiliates. TeleCorp will acquire
from AT&T Wireless licenses representing a population of approximately
1.95 million people in Wisconsin, including Madison, Appleton-Oshkosh
and Greenbay;
. AT&T Wireless has agreed to transfer to TeleCorp its 10 MHz licenses in
Iowa held by AT&T Wireless or its affiliates. TeleCorp will acquire from
AT&T Wireless licenses representing approximately 385,400 people in
Iowa; and
. AT&T Wireless will pay TeleCorp $80 million in cash less the cash
consideration paid in connection with the Polycell and ABC licenses for
certain of the assets associated with TeleCorp's New England territory.
As of February 29, 2000, AT&T Wireless has paid $3,384,350 in cash to
Polycell. Upon the closing of the merger, Polycell will receive
$1,715,650 from AT&T Wireless in either Holding Company class A voting
common stock or cash or a combination of cash and stock. Upon the
closing of the merger, AT&T Wireless will pay $6,867,750 in cash to ABC.
Intermediary
Each of TeleCorp Holding Corp., Inc., TeleCorp PCS, LLC and AT&T Wireless
has agreed to use all commercially reasonable efforts to structure the exchange
transactions so that the exchange transactions will qualify as a tax-free
exchange of like-kind assets to the maximum extent permitted by Section 1031 of
the Internal Revenue Code, including, as applicable, a deferred like-kind
exchange under Section 1031 of the Internal Revenue Code.
To facilitate the exchange, an intermediary corporation will hold all of the
assets of TeleCorp, the assets of AT&T Wireless and the cash and stock
consideration, if any, pending the completion of the exchange transactions.
However, title to the assets will pass directly to TeleCorp or its affiliates
and AT&T Wireless at the closing of the exchange transactions pursuant to the
intermediary agreement. The intermediary will complete the exchange
transactions and distribute the assets to the parties as follows:
. to TeleCorp Holding Corp., Inc., a subsidiary of TeleCorp, the assets
acquired from Polycell and ABC;
. to TeleCorp PCS LLC, a subsidiary of TeleCorp, the assets acquired from
AT&T Wireless;
. to certain affiliates of TeleCorp, the cash consideration; and
. to AT&T Wireless, the TeleCorp licenses and assets in the New England
territory.
The exchange agreement provides that AT&T Wireless may decline to use any of
the TeleCorp licenses in the New England territory on the earlier of (i) 120
days from the date of the exchange agreement or (ii) the closing of the
exchange transactions. If AT&T Wireless declines any TeleCorp assets then
TeleCorp will keep title of the declined assets upon the closing of the
exchange transactions.
82
<PAGE>
Replacement Assets
In the event that AT&T Wireless is unable to deliver any of the licenses of
Polycell, Clinton Communications or ABC within 35 days after any of TeleCorp
and its affiliates are treated as transferring any asset of TeleCorp under
certain tax regulations, then, within 45 days after the date of transfer, AT&T
Wireless will deliver to the intermediary one of the following (chosen at AT&T
Wireless's option):
. cash in an amount equal to (1) $133 times the number of people covered
by the licenses of Polycell, Clinton Communications or ABC, as the case
may be, less (2) the amount of the cash consideration that was required
to be paid under the acquisition agreements;
. class A voting common stock of TeleCorp having a value equal to the cash
payable as described above, valued based on the average of the closing
prices of TeleCorp's class A voting common stock for the ten trading
days immediately preceding the closing date of the exchange
transactions; or
. executed assignments satisfactory to TeleCorp for replacement assets
consisting of PCS licenses held by AT&T Wireless or its affiliates in
markets of equivalent size and density to markets covered by the
licenses of Polycell, Clinton Communications and ABC and reasonably
acceptable to TeleCorp for at least an equivalent number of people in
licensed areas, which shall be exchanged as a like-kind exchange. If
AT&T Wireless chooses to deliver the replacement assets described above,
then:
. TeleCorp will deliver to the intermediary, who will deliver to AT&T
Wireless, TeleCorp class A voting common stock, valued based on the
average of the closing prices of TeleCorp's class A voting common
stock for the ten trading days immediately preceding the closing
date of the exchange transactions, equal to the amount of the cash
consideration that was required to be paid under the acquisition
agreement(s) governing the undistributed licenses;
. if the number of people in licensed areas included in the
replacement assets exceeds the number of people covered by the
licenses of Polycell, Clinton Communications or ABC, TeleCorp will
deliver to the intermediary who will deliver to AT&T Wireless an
additional amount of TeleCorp class A voting common stock, valued as
described above, equal to $133 times the number of the excess
people; and
. the replacement assets will be considered as "replacement assets"
within the meaning of Section 1031 of the Internal Revenue Code.
The intermediary will transfer the replacement assets and any cash
consideration to the TeleCorp affiliate and any cash consideration to AT&T
Wireless at the closing of the exchange transactions.
Termination
In the event that TeleCorp PCS, LLC is unable to deliver any of the TeleCorp
licenses or if the exchange agreement terminates prior to delivery of the
TeleCorp licenses, and prior to termination any affiliate of TeleCorp has
acquired any of the Polycell and ABC assets pursuant to the exchange agreement,
then promptly upon termination of the exchange agreement, TeleCorp will, as
directed by AT&T Wireless, either:
. sell the licenses of Polycell, Clinton Communications or ABC to an
entity designated by AT&T Wireless, for a purchase price and otherwise
on the same terms and conditions as TeleCorp's acquisition of the
Polycell assets or the ABC assets; or
. issue to AT&T Wireless TeleCorp class A voting common stock having a
value equal to (1) $133 times the number of people covered by the
licenses of Polycell, Clinton Communications or ABC, as the case may be,
less (2) the amount of the cash consideration that was required to be
paid pursuant to the Polycell Acquisition Agreement or the ABC
Acquisition Agreement, as the case may be, the TeleCorp class A voting
common stock to be valued based on the average of the closing prices of
the stock for the ten trading days immediately preceding the date of
closing of the exchange transactions.
TeleCorp and AT&T Wireless have agreed to enter into a transition agreement
requiring TeleCorp to provide operational and administrative services for AT&T
Wireless with respect to the TeleCorp licenses for a certain period of time.
83
<PAGE>
The exchange transaction is subject to regulatory approvals, lender consents
and other conditions and is expected to close in the second half of 2000.
Side Letters With AT&T Wireless Services
At the same time TeleCorp entered into the merger agreement and the exchange
agreement, TeleCorp entered into the following two side letters with AT&T
Wireless or AT&T Wireless Services as described below:
Replacement Assets Side Letter. In connection with the contribution,
TeleCorp and AT&T Wireless Services have agreed that if AT&T Wireless Services
does not have the ability to deliver the assets of Indus or the replacement
assets to Holding Company, then TeleCorp, instead of terminating the
contribution, will have the option to elect to have AT&T Wireless Services' 10
MHz license for the Milwaukee BTA constitute the replacement assets.
Side Letter to Merger and Exchange Agreements. Pursuant to a side letter,
TeleCorp, AT&T Wireless Services and AT&T Wireless have agreed to the
following:
Additional Markets. Upon the effective time of the exchange
transactions, TeleCorp, AT&T Wireless Services and AT&T Wireless have
agreed to the following:
Des Moines-Quad Cities MTA. If TeleCorp or an affiliate tries to
acquire any PCS license in the Des Moines, Iowa territory within two
years of the closing of the exchange transactions, the area encompassed
by the additional license, which covers 0.6 million people, will be
included in the licensed territory under the network membership license
agreement and will be subject to the roaming agreement, except that
AT&T Wireless, AT&T Wireless Services and their affiliates will not be
obligated under the stockholders' agreement to program subscriber
equipment so that PCS systems operated by TeleCorp in the additional
Iowa territory is the preferred provider for the subscribers of AT&T
Wireless, AT&T Wireless Services and their affiliates.
Airadigm. If any PCS license originally granted to Airadigm or an
affiliate is auctioned by the Federal Communications Commission, AT&T
Wireless, AT&T Wireless Services or an affiliate have agreed to enter
into an agreement with a qualified entity chosen by AT&T Wireless and
AT&T Wireless Services pursuant to which (i) AT&T Wireless and AT&T
Wireless Services will fund one-third of the purchase price, up to a
specified limit, of any auctioned license for which the qualified
entity is the successful bidder, and TeleCorp has agreed to fund the
remaining two-thirds, (ii) the qualified entity will, subject to
applicable Federal Communications Commission requirements, promptly
disaggregate each auctioned license, so that 10 MHz of each auctioned
license will be retained by the qualified entity and 20 MHz of each
auctioned license will be assigned or otherwise transferred to
TeleCorp. AT&T Wireless and AT&T Wireless Services and TeleCorp have
agreed to cooperate in obtaining any regulatory approvals required.
Right of First Refusal. TeleCorp, AT&T Wireless Services and AT&T Wireless
have agreed that AT&T Wireless and AT&T Wireless Services will have a right of
first refusal to purchase the ROFR assets, which refers collectively to: (i)
the assets of AT&T under the exchange agreement; (ii) all of the assets to be
transferred under the terms of the Airadigm purchase agreement; and (iii) all
of the assets currently held by Indus, under the following circumstances:
Asset Sale. If TeleCorp agrees to sell, assign, transfer or otherwise
dispose of any or all of the ROFR assets to any person other than a
subsidiary of TeleCorp, AT&T Wireless or AT&T Wireless Services have the
right to purchase the ROFR assets at a price per person in a licensed
coverage area equal to the price per person in a licensed coverage area
agreed to be paid by the purchaser, subject to approval by the Federal
Communications Commissions or other governmental entities; or
Transfer of Control. If TeleCorp agrees to a consolidation, merger or
reorganization of TeleCorp with or into any person in which the
stockholders of TeleCorp will own less than 60% of the voting
84
<PAGE>
securities of the surviving entity, or any transaction in which in excess
of 40% of TeleCorp's voting power is transferred, or the sale, transfer or
lease of all or substantially all of the assets of TeleCorp, then AT&T
Wireless and AT&T Wireless Services have the right to purchase the ROFR
assets at a price per person in a licensed coverage area equal to the price
per person in a licensed coverage area being paid for TeleCorp as a whole
in connection with the transfer of control.
If a transfer of control occurs within 18 months after the closing of the
merger agreement and either (i) the markets covered by the ROFR assets do not
have at least negative 95 dB signal strength coverage over 50% of the people in
these markets or (ii) the number of active customers TeleCorp has in these
markets is less than one percent of the people within the territory of the ROFR
assets, then the price per person in a licensed coverage area will be reduced,
however, the aggregate purchase price to be paid by AT&T Wireless and AT&T
Wireless Services will be equal to at least $175 per person in a licensed
coverage area plus the amount of any capital contributed and operating expenses
paid by TeleCorp with respect to the ROFR Assets.
Transfers to Third Parties. If AT&T Wireless and AT&T Wireless Services do
not elect to purchase all of the assets being offered, then TeleCorp may sell
all or any part of the assets being offered to one or more third party
transferees at an aggregate purchase price in an amount that equals or exceeds
the purchase price being offered by the purchaser. If there is a transfer of
control, AT&T Wireless and AT&T Wireless Services do not elect to purchase all
of the ROFR assets owned by TeleCorp, or if AT&T Wireless and AT&T Wireless
Services fail to respond in writing to the control notice in a timely manner,
then TeleCorp will be free to complete the transfer of control in connection
with the required notice without regard to the right of first refusal unless
the price per person in a licensed coverage area being paid for TeleCorp is
reduced by more than 5% from the price per person in a licensed coverage area
contained in the necessary control notice.
Termination. If any agreement giving rise to a transfer of control is
terminated without a transfer of control taking place, AT&T Wireless and AT&T
Wireless Services shall have no rights to acquire the assets being offered or
the ROFR assets unless a new sale of assets or transfer of control is proposed.
Amendment of Certain Agreements
Under the exchange agreement, the network membership license agreement, the
stockholders agreement, the intercarrier roamer services agreement and the
roaming administration agreement will be amended to require:
. the expansion of the territories under these agreements to include the
territories covered by licenses transferred to Holding Company, TeleCorp
or an affiliate pursuant to the exchange agreement; and
. the contraction of the territories under these agreements to exclude the
territories covered by licenses transferred by Holding Company, TeleCorp
or an affiliate pursuant to the exchange agreement.
Upon the completion of the contribution pursuant to the merger agreement,
the network membership license agreement, the stockholders agreement, the
intercarrier roamer services agreement and the roaming administration agreement
will be amended as necessary to expand the territories to which the agreements
apply to include the territories covered by the licenses transferred to Holding
Company, TeleCorp or an affiliate pursuant to the contribution transactions.
New Areas Minimum Buildout Plan. TeleCorp has agreed that Holding Company
should be obligated to build out new areas covered by leases transferred to
TeleCorp in the exchange or contribution transactions in accordance with a
minimum buildout plan to be agreed upon by Holding Company (or TeleCorp before
the merger), AT&T Wireless and AT&T Wireless Services. The minimum buildout
plan will provide that within five years, specifying the year by year targets,
the new areas will be built out to a level of 80% of the people in the
Milwaukee BTA and 75% elsewhere, plus appropriate coverage of highways and
interstates. Licensed areas are deemed built out if they have coverage of
negative 95 dB signal strength.
85
<PAGE>
Stockholders' Agreements
TeleCorp and Tritel each have a stockholders' agreement among AT&T Wireless,
their respective management stockholders and their respective initial investors
other than AT&T Wireless. Upon the consummation of the merger, the TeleCorp
stockholders' agreement and the Tritel stockholders' agreement will be
terminated, and the Holding Company stockholders' agreement described below
will go into effect.
Tritel Stockholders' Agreement
General. AT&T Wireless, the Tritel management stockholders and the Tritel
initial investors other than AT&T Wireless have entered into a stockholders'
agreement with Tritel
. to provide for Tritel's management;
. to impose restrictions on the sale, transfer or other disposition of
Tritel securities; and
. to create rights related to Tritel securities, including representation
on Tritel's board of directors, a right of first offer on Tritel
securities, a right of inclusion in sales of Tritel securities and
registration rights.
Management. The Tritel stockholders' agreement provides that Tritel's board
of directors will consist of thirteen members. For so long as required by the
Federal Communications Commission, the Tritel management stockholders will
nominate four members, each of whom must be one of Tritel's officers and each
of whom will have 1/2 of a vote, AT&T Wireless will nominate two members and
the Tritel initial investors other than AT&T Wireless will nominate three
members. The remaining four directors will be nominated by the Tritel
management stockholders, with one such nomination subject to the consent of the
Tritel initial investors other than AT&T Wireless alone, with the remaining
three subject to the consent of the Tritel initial investors other than AT&T
Wireless and AT&T Wireless. Once permitted by Federal Communications Commission
regulation, the remaining four directors will be nominated by the Tritel
initial investors other than AT&T Wireless, with three of these nominations
subject to the consent of AT&T Wireless and Messrs. Mounger and Martin.
All actions of the Tritel board of directors will require a majority vote of
the entire Tritel board of directors, except that certain significant
transactions will require the vote of at least three of the five directors
nominated by the Tritel initial investors other than AT&T Wireless and AT&T
Wireless and four of the six votes cast by the directors nominated by the
Tritel management stockholders and the four remaining directors nominated by
the Tritel management stockholders or the Tritel initial investors other than
AT&T Wireless as described above. Such significant transactions include, but
are not limited to,
. a sale or transfer of a material portion of Tritel's assets or any
Tritel subsidiary;
. a merger or consolidation of Tritel or any Tritel subsidiary;
. the offering of any Tritel securities or securities of any Tritel
subsidiary other than as contemplated by the Tritel securities purchase
agreement;
. the hiring or termination of Tritel executive officers;
. the incurrence by Tritel of certain indebtedness;
. the making by Tritel of certain capital expenditures; and
. the initiation of any bankruptcy proceeding, dissolution or liquidation
of Tritel or any of its subsidiaries.
Restrictions on Transfer. The Tritel stockholders, including AT&T Wireless,
have agreed not to transfer any share of Tritel series C preferred, Tritel
series D preferred or Tritel common stock until January 7, 2002, except to
affiliates and except that Tritel initial investors other than AT&T Wireless
may transfer up to 400,000 shares of common stock to Tritel management
stockholders. The Tritel management stockholders have agreed not to transfer
any shares of Tritel class A voting common stock until January 7, 2004 except
to Tritel and except that 25% of their class A voting common stock may be
Transferred on or after January 7, 2002.
86
<PAGE>
Right of First Offer. If a Tritel stockholder, other than AT&T Wireless,
desires to sell shares of Tritel preferred or common stock, other than voting
preference stock and class C common stock, to a third party, such stockholder
must first offer such shares to AT&T Wireless. AT&T Wireless will then have ten
business days to offer to purchase all, but not less than all, of such shares
at the offered price. If AT&T Wireless does not accept such offer, such
investor may offer the shares to other potential purchasers at or above the
offer price, for up to 90 days. If AT&T Wireless desires to sell shares of
Tritel preferred or common stock, the Tritel initial investors other than AT&T
Wireless will have the same right of first offer. In the event that neither any
Tritel initial investors other than AT&T Wireless nor AT&T Wireless purchases
such Tritel shares pursuant to the above rights, the Tritel shares may be sold
to any person other than a prohibited transferee as defined in the Tritel
stockholders' agreement.
Right of Inclusion. No Tritel stockholder may transfer shares of any series
or class of Tritel preferred stock, other than Tritel series B preferred, or
Tritel common stock, referred to as "inclusion stock," to persons who are not
affiliates of that stockholder if the transfer would result in that Tritel
stockholder, or Tritel stockholders acting in concert, transferring 25% or more
of the outstanding shares of any class of inclusion stock, referred to as an
"inclusion event," unless the terms and conditions of such transfer include an
offer to AT&T Wireless, the Tritel initial investors other than AT&T Wireless
and the Tritel management stockholders, each referred to as an "inclusion event
offeree," for each of them to sell to the purchaser of the inclusion stock the
same proportion of each inclusion event offeree's inclusion stock as proposed
to be sold by the selling stockholder. In the event that such person does not
agree to purchase all of the shares of inclusion stock proposed to be sold,
then the selling stockholder and each inclusion event offeree will have the
right to sell a proportionate amount of inclusion stock to such person. For
purposes of determining an inclusion event, if the inclusion stock is series C
preferred stock, then series D preferred stock shall also be deemed to be
inclusion stock, and series C preferred and series D preferred stock shall be
deemed to be one class of preferred stock.
Right of First Negotiation. Any Tritel stockholder desiring to transfer any
shares of Tritel common stock or Tritel series C preferred stock (1) pursuant
to an underwritten registration, (2) pursuant to Rule 144 under the Securities
Act of 1933 or (3) in a transaction or series of related transactions resulting
in the transfer of not more than ten percent of all Tritel common stock on a
fully diluted basis, excluding for such purposes the Tritel series A preferred
stock, must first give AT&T Wireless written notice thereof containing the
proposed terms of such sale. For the applicable first negotiation period, AT&T
Wireless will have the exclusive right to negotiate with such Tritel
stockholder regarding the purchase of such shares. The Tritel stockholder has
the right to reject any offer made by AT&T Wireless during such first
negotiation period. Upon the expiration of the first negotiation period, the
Tritel stockholder has the right to sell the Tritel shares included in the
notice on such terms and conditions as are acceptable to the Tritel stockholder
in its sole discretion during the applicable offer period.
If shares of Tritel common stock are proposed to be transferred pursuant to
an underwritten registration, the applicable first negotiation period is ten
days and the applicable offer period is 120 days. If shares of Tritel common
stock are proposed to be transferred pursuant to Rule 144, the applicable first
negotiation period is three hours and the applicable offer period is five
business days. If shares of Tritel common stock are proposed to be transferred
in a transaction or series of related transactions resulting in the sale of not
more than ten percent of all Tritel common stock on a fully diluted basis,
excluding for such purposes the Tritel series A preferred stock, the applicable
first negotiation period is one business day, provided the notice is given
prior to 9:00 a.m. on the day prior to the proposed transfer, and the
applicable offer period is ten business days.
Demand Registration Rights. From and after June 13, 2000, any Tritel
"Qualified Holder" and Tritel management stockholders that in the aggregate
beneficially own at least 50.1% of the Tritel class A voting common stock then
beneficially owned by the Tritel management stockholders will have the right to
require Tritel to file a registration statement under the Securities Act of
1933 covering Tritel class A voting common stock subject to certain limited
exceptions.
87
<PAGE>
A Tritel "Qualified Holder" is defined as:
(a) any Tritel stockholder or group of Tritel stockholders that
beneficially owns shares of Tritel class A voting common stock reasonably
expected, upon sale, to result in aggregate gross proceeds of at least $25
million; or
(b) AT&T Wireless for so long as it beneficially owns in the aggregate
greater than two-thirds of the initial issuance to it of shares of Tritel
series A preferred stock.
Tritel will not be obligated to effect more than two separate demand
registrations in any twelve-month period, provided that only one request for
demand registration may be exercised by AT&T Wireless and/or Tritel management
stockholders that in the aggregate beneficially own at least 50.1% of the
shares of the Tritel class A voting common stock then beneficially owned by the
Tritel management stockholders during any twelve-month period. If Tritel
determines that a demand registration would interfere with any pending or
contemplated material transaction, Tritel may defer such demand registration
subject to certain limitations.
Piggyback Registration Rights. If Tritel proposes to register any shares of
Tritel class A voting common stock, or Tritel securities convertible into or
exchangeable for shares of Tritel class A voting common stock, with the
Securities and Exchange Commission under the Securities Act of 1933, Tritel
will, subject to certain limitations, give notice of the proposed registration
to all Tritel stockholders and include all Tritel class A voting common stock
as to which Tritel has received a request for inclusion, subject to customary
underwriter cutbacks.
Consequences of a Disqualifying Transaction. Upon consummation of a Tritel
disqualifying transaction, as defined below, the exclusivity provisions of the
Tritel stockholders' agreement applicable to AT&T Wireless will terminate as to
all of its markets. However, if Tritel has not exercised its right to convert
all of AT&T's Tritel series A and Tritel series D preferred stock into Tritel
series B preferred stock, the termination applies only to the Tritel overlap
markets, as defined below.
Upon AT&T Wireless's terminating its obligations in connection with a Tritel
disqualifying transaction, Tritel will have the right to cause AT&T Wireless,
or its transferees other than any Tritel cash equity investor, to exchange all
or a proportionate number of shares of Tritel series A preferred stock then
owned by AT&T Wireless equal to a fraction, the numerator of which is the
number of people in the Tritel overlap markets and the denominator of which is
the total number of people in all of Tritel's markets, for an equivalent number
of shares of Tritel series B preferred stock. Tritel has similar conversion
rights with respect to any Tritel series D preferred stock, or Tritel series B
preferred or Tritel common stock into which such shares have been converted,
owned by AT&T Wireless.
Additional Covenants. To induce the Tritel stockholders to enter into the
Tritel stockholders' agreement, Tritel has agreed to, among other things:
. construct a network system to cover the territory of its PCS licenses
according to an agreed upon buildout plan;
. arrange for all necessary microwave relocation and reimburse AT&T
Wireless for any such relocation costs it incurs in connection with the
AT&T Wireless contributed licensed areas;
. offer certain service features and adhere to certain quality standards;
. refrain from entering into certain merger, sale or liquidation
transactions or effect a change in its business without the prior
consent of AT&T Wireless;
. refrain from marketing, offering, providing or reselling interexchange
services other than its own or AT&T's;
. enter into resale agreements with AT&T Wireless from time to time at the
request of AT&T Wireless;
88
<PAGE>
. refrain from soliciting for employment AT&T's personnel for a limited
period; and
. permit AT&T Wireless to co-locate certain cell sites in locations
holding Tritel cell sites.
Concurrently, AT&T Wireless has agreed to, among other things:
. assist Tritel in obtaining discounts from AT&T Wireless equipment
vendors;
. refrain from soliciting for employment Tritel personnel for a limited
period; and
. permit Tritel to co-locate certain cell sites in locations holding AT&T
Wireless cell sites.
In addition, Tritel stockholders other than AT&T Wireless that are subject
to the Tritel stockholders' agreement have agreed to refrain from providing,
reselling or acting as agent for any person offering wireless services in
territories designated to Tritel.
Term. The Tritel stockholders' agreement will terminate on January 7, 2010
and may be terminated earlier upon the consent of all parties, or if one Tritel
stockholder should beneficially own all of the Tritel class A voting common
stock. If not otherwise terminated, the provisions regarding management and the
transfer of shares of Tritel will terminate on January 7, 2009, and the
provisions regarding registration rights will terminate on January 7, 2019.
TeleCorp Stockholders' Agreement
As of July 17, 1998 TeleCorp entered into a stockholders' agreement among
TeleCorp, its initial investors, and Messrs. Vento and Sullivan, which sets
guidelines for TeleCorp's management and operations and restricts the sale,
transfer or other disposition of its capital stock.
Board of Directors. The TeleCorp stockholders' agreement provides that any
action of TeleCorp's board of directors be approved by the affirmative vote of
a majority of TeleCorp's entire board of directors, except in circumstances
where voting by particular classes of TeleCorp directors is required. The
TeleCorp stockholders' agreement also provides that the TeleCorp board of
directors consists of nine directors. The parties to the stockholders'
agreement have agreed to vote all of their shares of TeleCorp class A voting
common stock and voting preference stock to cause the election of the following
nine individuals to TeleCorp's board of directors:
. Mr. Vento and Mr. Sullivan so long as each remains an officer of
TeleCorp and the management agreement with TeleCorp Management Corp.
remains in effect;
. two individuals selected by holders of a majority in interest of the
TeleCorp common stock beneficially owned by TeleCorp's initial investors
other than AT&T Wireless;
. two additional individuals selected by Mr. Vento and Mr. Sullivan, so
long as they remain TeleCorp officers, who must be acceptable to the
holders of a majority in interest of the TeleCorp common stock
beneficially owned by TeleCorp's initial investors other than AT&T
Wireless on the one hand, and AT&T Wireless on the other hand;
. one individual nominated by AT&T Wireless in its capacity as the holder
of TeleCorp series A preferred stock so long as AT&T has the right to
nominate one TeleCorp director in accordance with TeleCorp's restated
certificate of incorporation;
. one individual selected by Mr. Vento and Mr. Sullivan, so long as they
remain TeleCorp officers, who must be acceptable to AT&T Wireless; and
. one individual selected by Mr. Vento and Mr. Sullivan, so long as they
remain TeleCorp officers, who must be acceptable to the holders of a
majority in interest of the TeleCorp class A voting common stock
beneficially owned by TeleCorp's initial investors other than AT&T.
89
<PAGE>
The TeleCorp stockholders' agreement provides that when Federal
Communications Commission ownership restrictions no longer apply to TeleCorp,
TeleCorp's board of directors will have seven members and the right of Mr.
Vento and Mr. Sullivan to appoint the individuals set forth in the last two
items above will expire.
Exclusivity. The parties to the TeleCorp stockholders' agreement have agreed
that, during the term of the TeleCorp stockholders' agreement, neither they nor
any of their respective affiliates will provide or resell, or act as the agent
for any person offering, within the areas covered by TeleCorp's licenses,
wireless communications services initiated or terminated using TDMA and
portions of the airwaves licensed by the Federal Communications Commission,
except that AT&T and its affiliates may:
. resell or act as agent for TeleCorp in connection with mobile wireless
communications services;
. provide or resell wireless communications services only to or from
specific locations, provided that any equipment sold in connection with
the service must be capable of providing TeleCorp's wireless
communications services; and
. resell mobile wireless communications services from another person in
any area where TeleCorp has not placed a system into commercial service.
Additionally, with respect to some markets identified in the intercarrier
roamer services agreement with AT&T Wireless Services, each of TeleCorp and
AT&T Wireless Services has agreed to cause TeleCorp's respective affiliates in
their home carrier capacities to:
. program and direct the programming of customer equipment so that the
other party, in its capacity as the serving carrier, is the preferred
provider in these markets; and
. refrain from inducing any of its customers to change such programming.
AT&T Wireless has retained some PCS licenses within the areas covered by
TeleCorp's licenses for which TeleCorp has a right of negotiation in the event
of a proposed transfer.
If TeleCorp materially breaches any of its obligations, AT&T Wireless may
terminate its exclusivity obligations under the TeleCorp stockholders'
agreement and may terminate TeleCorp's rights to the AT&T brand and logo under
the license agreement if a default continues after the applicable cure periods
lapse. These material breaches include, if:
. AT&T Wireless and its affiliates decide to adopt a new technology
standard other than TDMA in a majority of its markets, and TeleCorp
declines to adopt the new technology;
. each portion of TeleCorp's network does not, within one year after being
placed into service, meet or exceed technical standards that AT&T has
developed regarding voice quality and performance of network and call
completion equipment. Each portion of TeleCorp's network must, within
one year after being placed into service, perform on a level, as
measured by these standards manuals, that meets or exceeds the levels
achieved by the average of all comparable wireless communications
networks owned and operated by AT&T;
. TeleCorp fails to satisfy specific percentages that TeleCorp's entire
network, measured as a single system, must meet, including as to
percentage of calls completed, percentage of established calls that are
dropped, percentages of calls that are not successfully transferred from
one network equipment site to another as a handset moves, as well as
technical standards regarding the functioning of network and call
connection equipment; or
. TeleCorp fails to meet specified customer care, reception quality and
network reliability standards.
In all of TeleCorp's launched markets, TeleCorp believes it currently meets
all of the standards that it is required to satisfy by the first anniversary of
each launch date.
90
<PAGE>
The exclusivity provisions in the stockholders' agreement do not apply to
approximately 100,000 people that overlapped with the coverage area of licenses
AT&T purchased from Vanguard Cellular in Strafford, New Hampshire. TeleCorp has
agreed with AT&T to exchange TeleCorp's licenses covering the Strafford, New
Hampshire market for an alternative license or licenses covering other people.
These exchanged populations will be covered under the scope of TeleCorp's
agreements with AT&T.
Construction. The stockholders' agreement requires TeleCorp to construct a
PCS system in the areas covered by its licenses according to a minimum
construction plan, which requires TeleCorp to construct a system in areas
covering:
. 20% of the total 1995 population of the area covered by TeleCorp's
licenses in the mainland United States by July 17, 1999, focusing on
designated areas of Memphis and New Orleans;
. 30% of the total 1995 population of the area covered by TeleCorp's
licenses in Puerto Rico and the U.S. Virgin Islands by May 25, 2000,
focusing on the core urban and suburban cities of the San Juan
metropolitan area;
. 40% of the total 1995 population of the area covered by TeleCorp's
licenses in Puerto Rico and U.S. Virgin Islands by May 25, 2001, and
also focusing on secondary cities throughout Puerto Rico;
. 40% of the total 1995 population of the area covered by TeleCorp's
licenses by July 17, 2000, and also focusing on designated areas of New
England, Little Rock and Missouri and enhancing coverage in all markets;
. 55% of the total 1995 population of the area covered by TeleCorp's
licenses in the mainland United States by July 17, 2001 and also
focusing on secondary cities and the important associated connecting
highways;
. 55% of the total 1995 population of the area covered by TeleCorp's
licenses in Puerto Rico and the U.S. Virgin Islands by May 25, 2002, and
continuing to expand the secondary cities of Puerto Rico and key cities
to the U.S. Virgin Islands and the important associated connected
highways;
. 70% of the total 1995 population of the area covered by TeleCorp's
licenses in the mainland United States by July 17, 2002, and continuing
to expand the secondary cities and enhancing coverage of the core areas;
. 70% of the total 1995 population of the area covered by TeleCorp's
licenses in Puerto Rico and the U.S. Virgin Islands by May 25, 2003, and
continuing to expand secondary cities and enhancing coverage and
capacity of core areas;
. 75% of the total 1995 population of the area covered by TeleCorp's
licenses in the mainland United States by July 17, 2003, and also
focusing on adding capacity sites and filling in the remaining suburban
areas; and
. 75% of the total 1995 population of the area covered by TeleCorp's
licenses in Puerto Rico and the U.S. Virgin Islands by May 25, 2004, and
also focusing on adding capacity sites and filling in the remaining
suburban areas.
In addition to the minimum construction plan, TeleCorp is bound to do the
following:
. arrange for all necessary microwave relocation for TeleCorp's licenses
and AT&T's retained licenses;
. ensure compatibility of TeleCorp's systems with the majority of systems
in Louisiana, Oklahoma, Minnesota, Illinois and Texas, excluding
Houston;
. satisfy the Federal Communications Commission construction requirements
in the areas covered by TeleCorp's licenses and AT&T's retained
licenses;
91
<PAGE>
. offer service features such as call forwarding, call waiting and
voicemail with respect to TeleCorp's systems, causing TeleCorp's systems
to comply with AT&T's network, audio and system performance quality
standards; and
. refrain from providing or reselling services other than mobile wireless
services and long distance services that constitute mobile wireless
communications services initiated or terminated using TDMA and portions
of the airwaves licensed by the Federal Communications Commission or
that are procured from AT&T.
Disqualifying Transaction. If AT&T and an entity that:
. derives annual revenues from communications businesses in excess of $5
billion;
. derives less than one-third of its aggregate revenues from wireless
communications; and
. owns Federal Communications Commission licenses to offer, and does
offer, mobile wireless communications services serving more than 25% of
the residents, as determined by Equifax Marketing Decision Systems Inc.,
within the areas covered by TeleCorp's licenses
merge, consolidate, acquire or dispose of assets to each other, or otherwise
combine, then AT&T, upon written notice to TeleCorp, may terminate its
exclusivity obligations where the territory covered by TeleCorp's licenses
overlaps with commercial mobile radio service licenses of the business
combination partner. Upon such termination, TeleCorp has the right to cause
AT&T, or any transferee that acquired any shares of TeleCorp series A preferred
stock, TeleCorp series D preferred stock or TeleCorp series F preferred stock
owned by AT&T Wireless on July 17, 1998, and any shares of TeleCorp common
stock into which any of these shares are converted, to exchange their shares
into shares of TeleCorp series B preferred stock. If TeleCorp decides to
convert AT&T Wireless's shares into shares of TeleCorp series B preferred stock
AT&T may terminate its exclusivity obligations in all of TeleCorp's markets.
Once so converted, TeleCorp may redeem the shares of TeleCorp series B
preferred stock at any time in accordance with its restated certificate of
incorporation.
Under some circumstances, if AT&T proposes to sell, transfer or assign to
any person that is not an affiliate of AT&T Wireless, any PCS system owned and
operated by AT&T Wireless and its affiliates in any of the St. Louis, Missouri,
Louisville, Kentucky, or Boston, Massachusetts basic trading areas, then AT&T
must provide TeleCorp with the opportunity to offer TeleCorp's network for sale
jointly with AT&T for a 90-day period.
Acquisition of Licenses. The stockholders' agreement provides that TeleCorp
may acquire any cellular license that its board of directors has determined is
a demonstrably superior alternative to constructing a PCS system within the
corresponding areas covered by TeleCorp's licenses, if:
. a majority of the population covered by the license is within the areas
covered by TeleCorp's licenses;
. AT&T Wireless and its affiliates do not own commercial mobile radio
service licenses in the area covered by the license; and
. TeleCorp's ownership of the license will not cause AT&T Wireless or any
affiliate to be in breach of any law or contract.
Vendor Discounts; Roaming Agreements. AT&T Wireless has agreed in the
TeleCorp stockholders' agreement that, if TeleCorp so requests, and if such
request shall not result in any adverse impact to AT&T Wireless PCS, it will
use all commercially reasonable efforts:
. to assist TeleCorp in obtaining discounts from any AT&T Wireless vendor
with whom TeleCorp is negotiating for the purchase of any infrastructure
equipment or billing services; and
92
<PAGE>
. to enable TeleCorp to become a party to the roaming agreements between
AT&T Wireless and its affiliates and operators of other cellular and PCS
systems.
Resale Agreements. TeleCorp, upon the request of AT&T Wireless, will enter
into resale agreements relating to the areas covered by TeleCorp's licenses
under which AT&T may resell TeleCorp's services. The rates, terms and
conditions of service that TeleCorp provides are to be at least as favorable,
and to the extent permitted by applicable law, more favorable, to AT&T
Wireless, taken as a whole, as the rates, terms and conditions that TeleCorp
provides to other customers.
Subsidiaries. The TeleCorp stockholders' agreement provides that all of
TeleCorp's subsidiaries must be direct or indirect wholly owned subsidiaries.
The TeleCorp stockholders' agreement also provides that, without the prior
written consent of, or right of first offer to, AT&T Wireless, TeleCorp and its
subsidiaries may not:
. sell or dispose of a substantial portion of TeleCorp's assets or the
assets of any of its subsidiaries; or
. liquidate, merge or consolidate until TeleCorp meets minimum
construction requirements.
Restrictions on Transfer. The TeleCorp stockholders' agreement restricts the
sale, transfer or other disposition of TeleCorp's capital stock, such as by
giving rights of first offer and tag along rights and providing demand and
piggyback registration rights.
If one of TeleCorp's stockholders who is a party to the TeleCorp
stockholders' agreement desires to transfer any or all of its shares of
TeleCorp preferred or common stock, other than voting preference stock and
class C common stock, the selling stockholder must first give written notice to
TeleCorp and:
. if the selling stockholder is one of TeleCorp's initial investors other
than AT&T or any other TeleCorp stockholder who is a party to the
TeleCorp stockholders' agreement, to AT&T Wireless; and
. if the selling stockholder is AT&T Wireless, to every other TeleCorp
initial investor.
The TeleCorp stockholders who receive notice from the selling stockholders
may acquire all, but not less than all, of the shares offered to be sold at the
price offered by the selling stockholder. If none of the TeleCorp stockholders
opt to purchase the shares of the selling stockholder, the selling stockholder
can sell its shares to any other person on the same terms and conditions as
originally offered to the TeleCorp stockholders. The right of first offer does
not apply to TeleCorp's repurchase of any shares of TeleCorp's class A voting
common stock or class E preferred stock from one of TeleCorp's employees in
connection with the termination of the employee's employment with TeleCorp.
A TeleCorp stockholder subject to the stockholders' agreement may not
transfer 25% or more of any of the following shares of TeleCorp's capital
stock, whether alone or with other stockholders or whether in one transaction
or a series of transactions:
. series A preferred stock;
. series C preferred stock;
. series D preferred stock;
. series E preferred stock;
. series F preferred stock;
. voting preference stock;
. class A voting common stock;
. class B non-voting common stock;
. class C common stock; or
. class D common stock,
93
<PAGE>
unless the proposed transfer includes an offer to TeleCorp's initial investors
and Mr. Vento and Mr. Sullivan to join in the transfer. Class C common stock
and class D common stock will count as one class of stock for purposes of the
25% test. If a selling stockholder receives an offer from a bona fide purchaser
to transfer a selling stockholder's shares, the selling TeleCorp stockholder
must follow procedures included in the TeleCorp stockholders' agreement to
include the other stockholders in the proposed transfer.
In addition to the foregoing restrictions, the TeleCorp initial investors
have agreed not to transfer any shares of their common stock until July 17,
2001 except to affiliates, and Mr. Vento and Mr. Sullivan have agreed not to
transfer any shares of common stock prior to July 17, 2003, subject to limited
exceptions, including that 25% of their common stock may be transferred after
July 17, 2001.
TeleCorp's stockholders who are subject to the TeleCorp stockholders'
agreement also have demand and piggyback registration rights. In some
circumstances, stockholders may demand that TeleCorp register some or all of
its securities with the Securities and Exchange Commission under the Securities
Act. Also, if TeleCorp proposes to register any shares of its class A voting
common stock or securities convertible into or exchangeable for class A voting
common stock with the Securities and Exchange Commission under the Securities
Act, TeleCorp must notify all stockholders of its intention to do so, and
TeleCorp's stockholders may include in TeleCorp's registration their shares of
class A voting stock or securities convertible into or exchangeable for class A
voting common stock.
Amendments. In addition to the approval of TeleCorp's senior lenders, the
terms of the TeleCorp stockholders' agreement may be amended only if agreed to
in writing by TeleCorp and the beneficial holders of a majority of the class A
voting common stock party to the stockholders' agreement, including AT&T
Wireless, 66 2/3% of the class A voting common stock beneficially owned by
TeleCorp's initial investors other than AT&T, and 66 2/3% of the class A voting
common stock beneficially owned by Mr. Vento and Mr. Sullivan.
Termination. The stockholders' agreement will terminate upon the earliest to
occur of:
. the receipt of the written consent of each party;
. July 17, 2009; and
. under specified circumstances, the date on which a single stockholder
beneficially owns all of the outstanding shares of TeleCorp class A
voting common stock.
Holding Company Stockholders' Agreement
General. The Holding Company stockholders' agreement among the TeleCorp and
Tritel initial investors, Messrs. Mounger, Martin, Vento and Sullivan and the
Holding Company, to be executed on or before the consummation of the merger,
sets guidelines for the management and operations of the Holding Company and
restricts the sale, transfer or other disposition of Holding Company capital
stock.
Board of Directors. The Holding Company stockholders' agreement provides
that any action of Holding Company's board of directors be approved by the
affirmative vote of a majority of the entire Holding Company board of
directors, except in circumstances where voting by particular classes of
directors is required. The Holding Company stockholders' agreement also
provides that, upon closing of the merger, Holding Company's board of directors
will consist of fourteen directors (two of whom will have only one-half vote,
as described below).
The parties to the Holding Company stockholders' agreement have agreed to
vote all of the shares of Holding Company stock to cause the election of the
following fourteen individuals to Holding Company's board of directors:
. Mr. Vento and Mr. Sullivan so long as each remains an officer and the
management agreement with TeleCorp management remains in effect;
94
<PAGE>
. subject to the provisions described below which limit such selection
rights, two individuals selected by holders of a majority in interest of
the class A voting common stock beneficially owned by TeleCorp's initial
investors other than AT&T Wireless;
. subject to the provisions described below which limit such selection
rights, two individuals selected by holders of a majority in interest of
the class A voting common stock beneficially owned by Tritel's initial
investors other than AT&T Wireless;
. two individuals selected by AT&T Wireless in its capacity as the holder
of Holding Company series A preferred stock and series B preferred stock
so long as AT&T has the right to elect each such director in accordance
with Holding Company's certificate of incorporation;
. six individuals designated by the holders of Holding Company voting
preference stock, which include:
. one individual who must be reasonably acceptable to AT&T Wireless;
. two individuals who will be Messrs. Martin and Mounger so long as
each remains an officer and employee of Holding Company, or two
individuals who must be reasonably acceptable to Messrs. Martin and
Mounger, each individual in either case having one-half vote on all
matters requiring a vote of the board of directors; and
. three individuals who must be reasonably acceptable to holders of a
majority in interest of Holding Company class A voting common stock
beneficially owned by AT&T Wireless on the one hand, and the initial
investors other than AT&T Wireless, on the other hand, so long as
the initial investors other than AT&T Wireless remain entitled to
designate at least two directors, or, if they are not entitled, then
by the remaining directors on the board of directors.
In the event that Mr. Martin ceases to be an officer or employee of Holding
Company, Mr. Martin will resign or be removed from the board of directors, and
in the event that Mr. Mounger ceases to be an officer or employee of Holding
Company and either the number of shares of Holding Company common stock
beneficially owned by Mr. Mounger and Mr. Martin falls below seventy percent of
the number of shares of Holding Company common stock beneficially owned by them
on the date of closing of the merger, or two years elapse from the date of the
closing of the merger, Mr. Mounger will resign or be removed from the board of
directors. Following the first resignation or removal of either Mr. Martin or
Mr. Mounger, the Holding Company board of directors will be reduced by one, the
remaining individual board of directors seat will have one vote on all matters
requiring vote of the board of directors, and any nominated director requiring
the approval of Messrs. Martin and Mounger will only require the approval of
whoever remains as director. In the event that neither Mr. Martin nor Mr.
Mounger remains on the Holding Company board of directors, the number of
directors designated by the holders of the voting preferencecommon stock who
require approval by Messrs. Martin and Mounger will be reduced to zero, and the
number of directors designated by the holders of the voting preference stock
and acceptable to holders of a majority in interest of Holding Company class A
voting common stock beneficially owned by AT&T on one hand and initial TeleCorp
and Tritel investors other than AT&T Wireless on the other hand will be
increased to four.
In the event that Mr. Vento or Mr. Sullivan shall cease to be an officer of
Holding Company, or the management agreement between Holding Company and
TeleCorp Management Corp. ceases to be in full force and effect, Mr. Vento or
Mr. Sullivan, as applicable, will resign or be removed from Holding Company's
board of directors and the holders of the Holding Company voting preference
stock will select a replacement or replacements who must be acceptable to a
majority in interest of the initial TeleCorp and Tritel investors other than
AT&T Wireless, in its sole discretion. In the event that AT&T Wireless ceases
to be entitled to designate Holding Company directors, the director or
directors elected by AT&T Wireless will resign or be removed from Holding
Company's board of directors and the remaining Holding Company directors will
take action so that the number of Holding Company directors constituting the
entire Holding Company board of directors will be reduced accordingly.
95
<PAGE>
The number of Holding Company directors the initial TeleCorp and Tritel
investors other than AT&T Wireless will be permitted to designate will be
reduced when the number of shares of Holding Company common stock beneficially
owned by the initial TeleCorp and Tritel investors other than AT&T Wireless on
a fully diluted basis falls below:
. 85% of the number of shares of common stock beneficially owned by them
on the date of closing of the merger;
. 70% of the number of shares of common stock beneficially owned by them
on the date of the closing of the merger;
. 60% of the number of shares of common stock beneficially owned by them
on the date of the closing of the merger; and
. 50% of the number of shares of common stock beneficially owned by them
on the date of the closing of the merger,
so that the initial TeleCorp and Tritel investors other than AT&T Wireless in
both TeleCorp and Tritel will be permitted to designate three, two, one and
zero directors respectively; provided, however, that the reductions in the
board of directors may not take place or may be delayed if certain initial
TeleCorp and Tritel investors other than AT&T Wireless hold or maintain a
specified percentage of common stock as set forth in the Holding Company
stockholders' agreement.
In each instance in which the number of directors the initial TeleCorp and
Tritel investors other than AT&T Wireless are entitled to designate is reduced,
the director designated by the initial TeleCorp and Tritel investors other than
AT&T Wireless beneficially owning the smallest percentage of shares of common
stock then owned by any of the initial TeleCorp and Tritel investors other than
AT&T Wireless whose designees then remain as directors designated will resign
or be removed from Holding Company's board of directors and the size of Holding
Company's board of directors will be reduced accordingly. In the event that
either:
. the number of Holding Company directors the initial TeleCorp and Tritel
investors other than AT&T Wireless are entitled to designate falls below
two; or
. both of the initial TeleCorp and Tritel investors other than AT&T
Wireless entitled to designate the last two directors that initial
TeleCorp and Tritel investors other than AT&T Wireless may designate
cease to beneficially own at least 75% of the number of shares of common
stock beneficially owned by them on the date of the closing of the
merger,
the initial TeleCorp and Tritel investors other than AT&T Wireless will no
longer be entitled to approve any designation of Holding Company directors nor
approve any director that replaces Messrs. Vento or Sullivan on the Holding
Company board of directors.
Exclusivity. The parties to the Holding Company stockholders' agreement have
agreed that, during the term of the stockholders' agreement, neither they nor
any of their respective affiliates will provide or resell, or act as the agent
for any person offering, within the areas covered by Holding Company licenses,
wireless communications services initiated or terminated using TDMA and
portions of the airwaves licensed by the Federal Communications Commission,
except that AT&T Wireless and its affiliates may:
. resell or act as agent for Holding Company in connection with mobile
wireless communications services;
. provide or resell wireless communications services only to or from
specific locations, provided that any equipment sold in connection with
the service must be capable of providing Holding Company wireless
communications services; and
. resell mobile wireless communications services from another person in
any area where Holding Company has not placed a system into commercial
service.
96
<PAGE>
Additionally, with respect to some markets identified in the intercarrier
roamer services agreement with AT&T Wireless, each of Holding Company and AT&T
Wireless has agreed to cause their respective affiliates in their home carrier
capacities to:
. program and direct the programming of customer equipment so that the
other party, in its capacity as the serving carrier, is the preferred
provider in these markets; and
. refrain from inducing any of its customers to change such programming.
AT&T Wireless has retained some PCS licenses within the areas covered by
Holding Company licenses for which Holding Company has a right of negotiation
in the event of a proposed transfer.
If Holding Company materially breaches any of its obligations, AT&T Wireless
may terminate its exclusivity obligations under the Holding Company
stockholders' agreement and may terminate Holding Company's rights to the AT&T
brand and logo under the license agreement if a default continues after the
applicable cure periods lapse. These material breaches include, if:
. Holding Company fails to meet its minimum build-out requirements for its
systems as set forth in the Holding Company stockholders' agreement;
. AT&T Wireless and its affiliates decide to adopt a new technology
standard other than TDMA in a majority of its markets, and Holding
Company declines to adopt the new technology;
. each portion of Holding Company's network does not, within one year
after being placed into service, meet or exceed technical standards that
AT&T has developed regarding voice quality and performance of network
and call completion equipment. Each portion of Holding Company's network
must, within one year after being placed into service, perform on a
level, as measured by these standards manuals, that meets or exceeds the
levels achieved by the average of all comparable wireless communications
networks owned and operated by AT&T;
. Holding Company fails to satisfy specific performance requirement
percentages that its entire network, measured as a single system, must
meet, including percentage of calls completed, percentage of established
calls dropped, percentages of calls not successfully transferred from
one network equipment site to another as a handset moves, or fails to
satisfy technical standards regarding the functioning of network and
call connection equipment; or
. Holding Company fails to meet specified customer care, reception quality
and network reliability standards.
The exclusivity provisions in the Holding Company stockholders' agreement
also do not apply to AT&T with respect to certain rural portions of Kentucky.
Construction. The stockholders' agreement requires Holding Company to
construct a PCS system in the areas covered by its licenses according to a
minimum construction plan. The minimum construction plan will consist of the
minimum construction plan set forth in the TeleCorp Stockholders' Agreement and
Tritel Stockholders' Agreement. See "The Merger--Stockholders' Agreements." In
addition, prior to the consummation of the merger, the parties will agree on
additional provisions which will be included in the buildout plan with respect
to the construction of systems in the Wisconsin and Iowa markets acquired by
TeleCorp in its exchange of markets with AT&T Wireless.
Disqualifying Transaction. If AT&T (or any of its affiliates) and an entity
that:
. derives annual revenues from communications businesses in excess of $5
billion;
. derives less than one-third of its aggregate revenues from wireless
communications; and
. owns Federal Communications Commission licenses to offer, and does
offer, mobile wireless communications services serving more than 25% of
the residents, as determined by Paul Kagan Associates, Inc., within the
areas covered by Holding Company licenses.
97
<PAGE>
merge, consolidate, acquire or dispose of assets to each other, or otherwise
combine, then AT&T, upon written notice to Holding Company, may terminate its
exclusivity obligations where the territory covered by Holding Company licenses
overlaps with commercial mobile radio service licenses of the business
combination partner. Upon such termination, Holding Company has the right to
cause AT&T or any transferee that acquired any shares of Holding Company series
A preferred stock, series B preferred stock, series D preferred stock, series F
preferred stock or series G preferred stock then owned by AT&T Wireless, and
any shares of Holding Company common stock into which any of these shares are
converted, to exchange all, or a proportionate share based on overlapping
service areas after such disqualifying transaction, of their shares into shares
of series H and series I preferred stock. If Holding Company decides to convert
such shares into shares of series H and I preferred stock, AT&T may terminate
its exclusivity obligations in all of Holding Company's markets.
Once so converted, Holding Company may redeem the shares of series H and I
preferred stock at any time in accordance with its restated certificate of
incorporation.
Under some circumstances, if AT&T proposes to sell, transfer or assign to
any person that is not an affiliate of AT&T Wireless, any PCS system owned and
operated by AT&T Wireless and its affiliates in any of the St. Louis, Missouri,
Louisville, Kentucky, or Atlanta, Georgia basic trading areas, then AT&T must
provide Holding Company with the opportunity to offer its network for sale
jointly with AT&T for a 90-day period.
Acquisition of Licenses. The stockholders' agreement provides that Holding
Company may acquire any cellular license that Holding Company's board of
directors has determined is a demonstrably superior alternative to constructing
a PCS system within the corresponding areas covered by Holding Company
licenses, if:
. a majority of the population covered by the license is within the areas
covered by Holding Company licenses;
. AT&T Wireless and its affiliates do not own commercial mobile radio
service licenses in the area covered by the license; and
. Holding Company's ownership of the license will not cause AT&T Wireless
or any affiliate to be in breach of any law or contract.
Vendor Discounts; Roaming Agreements. AT&T Wireless has agreed in the
Holding Company stockholders' agreement that, if Holding Company so requests,
and if such request shall not result in any adverse impact to AT&T Wireless, it
will use all commercially reasonable efforts:
. to assist Holding Company in obtaining discounts from any AT&T Wireless
vendor with whom Holding Company is negotiating for the purchase of any
infrastructure equipment or billing services; and
. to enable Holding Company to become a party to the roaming agreements
between AT&T Wireless and its affiliates and operators of other cellular
and PCS systems.
Resale Agreements. Holding Company, upon the request of AT&T Wireless, will
enter into resale agreements relating to the areas covered by Holding Company
licenses under which AT&T Wireless may resell Holding Company services. The
rates, terms and conditions of service that Holding Company provides are to be
at least as favorable, and to the extent permitted by applicable law, more
favorable, to AT&T Wireless, taken as a whole, as the rates, terms and
conditions that Holding Company provides to other customers.
Subsidiaries. The Holding Company stockholders' agreement provides that all
of Holding Company's subsidiaries must be direct or indirect wholly owned
subsidiaries. The stockholders' agreement also provides that with respect to
such subsidiaries, Holding Company may not sell or dispose of a substantial
portion of the assets or any of the capital stock of any of such subsidiaries
except in connection with a pledge to secure indebtedness.
98
<PAGE>
Restrictions on Transfer. The Holding Company stockholders' agreement
restricts the sale, transfer or other disposition of Holding Company capital
stock, such as by giving rights of first offer and tag along rights and
providing demand and piggyback registration rights.
If one of Holding Company's stockholders who is a party to the Holding
Company stockholders' agreement desires to transfer any or all of its shares of
Holding Company preferred or common stock, other than Holding Company voting
preference stock and class C common stock, the selling stockholder must first
give written notice to Holding Company and:
. if the selling stockholder is one of the initial TeleCorp and Tritel
investors other than AT&T Wireless or any other stockholder who is a
party to the Holding Company stockholders' agreement, to AT&T Wireless;
and
. if the selling stockholder is AT&T Wireless, to every other cash equity
investor.
The stockholders who receive notice from the selling stockholders may
acquire all, but not less than all, of the shares offered to be sold at the
price offered by the selling stockholder. If none of the stockholders opt to
purchase the shares of the selling stockholder, the selling stockholder can
sell its shares to any other person on the same terms and conditions as
originally offered to the stockholders. The right of first offer does not apply
to Holding Company's repurchase of any shares of its class A voting common
stock or class E preferred stock from one of its employees in connection with
the termination of the employee's employment with Holding Company.
A stockholder subject to the stockholders' agreement may not transfer 25%
(on a fully diluted basis as calculated under the Holding Company stockholders'
agreement) or more of any of the shares of Holding Company capital stock,
whether alone or with other stockholders or whether in one transaction or a
series of transactions, unless the proposed transfer includes an offer to AT&T
Wireless, the initial TeleCorp and Tritel investors other than AT&T Wireless
and Mr. Vento and Mr. Sullivan to join in the transfer in accordance with the
procedures included in the Holding Company stockholders' agreement regarding
the inclusion of other stockholders in the proposed transfer.
Registration Rights. Holding Company stockholders who are subject to the
stockholders' agreement also have certain demand and piggyback registration
rights. In some circumstances, Holding Company stockholders may demand that
Holding Company register some or all of their securities with the Securities
and Exchange Commission under the Securities Act of 1933. Also, if Holding
Company proposes to register any shares of its class A voting common stock or
securities convertible into or exchangeable for class A voting common stock
with the Securities and Exchange Commission under the Securities Act of 1933,
Holding Company must notify stockholders party to the Holding Company
stockholders' agreement of Holding Company's intention to do so, and such
Holding Company stockholders may include in the registration their shares of
class A voting common stock or securities convertible into or exchangeable for
class A voting common stock, subject to certain cutback provisions based on
limitations on the number of shares which may be offered as determined by the
underwriters in the offering.
Lockup and Subsequent Offering. In the Holding Company stockholders'
agreement, each party agrees not to effect any public sale or distribution of
Holding Company class A voting common stock or a similar security, or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144, Rule 145 or Rule 144A under the
Securities Act of 1933 during the 90 day period beginning on the effective date
of the merger, and additionally during such period commencing upon the filing
of the registration statement for the offering described in the next paragraph
(provided that the registration statement for such offering is filed within 60
days of the effective date of the merger) and continuing so long as the Company
is using commercially reasonable efforts to pursue such registration until such
registration becomes effective, and for such additional period of time as is
reasonably requested by the managing underwriter(s) of the offering described
in the next paragraph, unless such sale or distribution is effected through the
offering described in the next paragraph.
99
<PAGE>
In the Holding Company stockholders' agreement, Holding Company agrees to
use commercially reasonable efforts to file a registration statement giving
rise to a piggyback registration relating to the Holding Company class A voting
common stock within 60 days of the effective date of the merger and have such
registration statement declared effective within 150 days of the effective date
of the merger, provided, however, that the Holding Company has agreed to
include no more than 50% of newly issued Holding Company shares in such
offering, or $150 million, up to the first $300 million registered in such
offering; and thereafter no more than the 30% of the incremental shares
registered by the Holding Company as primary for offerings over and above $300
million.
Amendments. In addition to the approval of Holding Company's senior lenders,
the terms of the stockholders' agreement may be amended only if agreed to in
writing by Holding Company and the beneficial holders of a majority of the
class A voting common stock party to the stockholders' agreement, including
AT&T Wireless, 66 2/3% of the class A voting common stock beneficially owned by
the initial TeleCorp and Tritel investors other than AT&T, and 66 2/3% of the
class A voting common stock beneficially owned by Mr. Vento and Mr. Sullivan.
Termination. The stockholders' agreement will terminate upon the earliest to
occur of:
. the receipt of the written consent of each party;
. July 17, 2009; and
. the date on which a single stockholder beneficially owns all of the
outstanding shares of class A voting common stock.
Voting Agreement
In connection with the execution and delivery of the merger agreement, both
TeleCorp and Tritel entered into separate voting agreements with William M.
Mounger, II, Chairman and Chief Executive Officer of Tritel and E.B. Martin,
Jr., Executive Vice President and Chief Financial Officer of Tritel and Gerald
T. Vento, Chief Executive Officer of TeleCorp and Thomas H. Sullivan, Executive
Vice President and Chief Financial Officer of TeleCorp under which these
principal stockholders agreed to vote all of their shares in favor of the
adoption of the merger agreement and to vote against, other than pursuant to
the merger agreement:
. the approval of any proposal opposing or competing with the merger;
. any other merger, consolidation, sale of assets, business combination,
share exchange, reorganization or recapitalization of TeleCorp or
Tritel;
. any liquidation or winding up of TeleCorp or Tritel;
. any extraordinary dividend by TeleCorp or Tritel;
. any change in the capital structure of TeleCorp or Tritel; and
. any other action that may reasonably be expected to interfere with or
delay the completion of merger or result in a breach of any of the
covenants, representations, warranties or other obligations or
agreements of TeleCorp or Tritel which would materially and adversely
affect TeleCorp's or Tritel's abilities to complete the merger.
As of the record date for the special meeting of TeleCorp, Messrs. Vento and
Sullivan together owned of TeleCorp class A voting common stock and all
of the shares of TeleCorp voting preference common stock, representing a
majority of the total voting power of the outstanding shares of TeleCorp
capital stock. Accordingly approval of the merger agreement by TeleCorp
stockholders is assured.
As of the record date for the special meeting of Tritel, Mr. Mounger and Mr.
Martin together owned shares of Tritel class A voting common stock and
all of the outstanding shares of Tritel voting preference common stock,
representing a majority of the total voting power of the outstanding shares of
Tritel
100
<PAGE>
capital stock. Mr. Mounger also owned 2,379,072 shares of Tritel class A voting
common stock indirectly held by Trillium, PCS and M3, LLC and his children's
trust. Mr. Mounger has a controlling interest in Trillium PCS and M3, LLC.
Accordingly, approval of the merger agreement by Tritel stockholders is
assured.
The voting agreements prohibit, subject to limited exceptions, any
stockholder from selling, transferring, pledging, encumbering, assigning or
otherwise disposing of any shares of TeleCorp or Tritel capital stock, except
to a person who agrees in writing to be bound by the terms of the voting
agreement.
The voting agreement terminates upon the earlier to occur of (i) the
completion of the mergers, (ii) two years from the date the voting agreements
were signed, and (iii) the termination of the merger agreement in accordance
with its terms.
Business Relationships Between TeleCorp and Tritel
SunCom Marks. TeleCorp, Tritel and Triton each have a one-third membership
interest in Affiliate License Co., L.L.C., which was formed on April 16, 1999
for the purpose of owning and licensing the marks SUNCOM, SUNCOM WIRELESS and
other SUNCOM and SUN-formative marks. On April 16, 1999, pursuant to an amended
and restated agreement, TeleCorp, Tritel and Triton agreed to transfer the
SUNCOM marks to Affiliate License Co. In return, Affiliate License Co. agreed
to grant each of TeleCorp, Tritel and Triton a royalty-bearing, transferable
license to use the SUNCOM marks. The terms of this agreement were negotiated at
arms' length.
ABC Wireless Loan. ABC Wireless was formed to participate in the Federal
Communications Commission's auction of PCS licenses in several of TeleCorp's
markets. ABC Wireless is owned by Mr. Vento, Mr. Sullivan and Mr. Anderson.
Pursuant to a promissory note dated March 1, 1999, Tritel PCS, Inc., a wholly
owned subsidiary of Tritel, made a $7.5 million loan to ABC Wireless to finance
ABC Wireless's efforts to obtain PCS licenses. This loan is collateralized by a
security agreement between ABC Wireless and AT&T Wireless Services, Inc.,
acting as agent for, among others, Tritel PCS, Inc.
Common Board Members. Scott I. Anderson is a member of the board of
directors of both TeleCorp and Tritel.
101
<PAGE>
HOLDING COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
combine the historical consolidated balance sheets and statements of operations
of TeleCorp, Tritel, Indus and Airadigm. These unaudited pro forma financial
statements give effect to the merger with Tritel, referred to as the Merger,
the contribution from AT&T, the acquisition of the common and preferred stock
of Indus, the acquisition of additional wireless properties and assets from
Airadigm, referred to as the Contribution, and the exchange with AT&T which
includes the acquisition of PCS licenses from ABC Wireless and Polycell,
referred to as the Exchange, other transactions and pro forma inter-company
eliminations.
To aid you in your analysis of the financial aspects of each of these
transactions, both individually and combined, we have presented this set of
unaudited pro forma condensed combined financial statements to demonstrate the
financial aspects of the combined transaction.
We derived this information from the audited consolidated financial
statements of TeleCorp and Tritel and from the unaudited financial statements
of Indus and Airadigm as of and for the year ended December 31, 1999. This
information is only a summary and should be read in conjunction with the
historical financial statements and related notes contained elsewhere herein
for that period.
The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 1999, assumes each of the transactions was effected on
January 1, 1999. The unaudited pro forma condensed combined balance sheet as of
December 31, 1999, gives effect to each transaction as if it had occurred on
December 31, 1999. The accounting policies of TeleCorp, Tritel, Indus and
Airadigm are substantially comparable. Certain reclassifications have been made
to Tritel's, Indus' and Airadigm's historical presentation to conform to
TeleCorp's presentation. These reclassifications do not materially impact
Tritel's, Indus', or Airadigm's operations or financial position for the period
presented.
We are providing the unaudited pro forma condensed combined financial
information for illustrative purposes only. The companies may have performed
differently had they always been combined. You should not rely on the unaudited
pro forma condensed combined financial information as being indicative of the
historical results that would have been achieved had the companies always been
combined or the future results that the combined company will experience.
102
<PAGE>
HOLDING COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
December 31, 1999
($'s in thousands)
<TABLE>
<CAPTION>
Merger Contribution and Exchange
-------------------------------- -------------------------------------------
Pro forma Pro forma Other
Telecorp Tritel Adjustments Indus Airadigm Adjustments Transactions
---------- ---------- ----------- ---------- ---------- ----------- ------------
(Note 1a.) (Note 1b.) (Note 2.) (Note 1c.) (Note 1d.) (Note 3.) (Note 5.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents...... $ 182,330 $ 609,269 2q.(i) $ (38,000) $ 466 $ 7,314 3c.(i) $(20,656) 5c. $ (400)
Accounts
receivable, net.. 23,581 5,040 -- -- 916 -- --
Other current
assets........... 19,630 16,255 -- 500 1,056 3c.(ii) (1,556) --
--------- ---------- ---------- -------- -------- -------- --------
Total current
assets.......... 225,541 630,564 (38,000) 966 9,286 (22,212) (400)
Property and
equipment, net... 400,450 262,343 -- 914 54,909 3c.(iii) (113,484) --
PCS licenses and
microwave
relocation costs,
net.............. 267,682 201,946 2q.(ii) 2,740,254 70,902 76,265 3c.(iv) 673,638 5d.(i) 5,407
Intangible
assets, net...... 37,908 59,508 2q.(iii) 423,292 -- -- 3c.(v) 309,248 --
Other assets..... 20,621 42,001 -- 1,321 1,725 3c.(vi) (3,046) --
Goodwill......... -- -- 2o. 2,245,336 -- -- -- --
--------- ---------- ---------- -------- -------- -------- --------
Total assets.... $ 952,202 $1,196,362 $5,370,882 $ 74,103 $142,185 $844,144 $ 5,007
========= ========== ========== ======== ======== ======== ========
Liabilities,
mandatorily
redeemable
preferred stock
and stockholders'
equity (deficit)
Current
liabilities:
Accounts payable
and accrued
liabilities...... $ 90,880 $ 113,324 $ -- $ 5,891 $ 2,898 3c.(vii) $ (2,898) $ --
Other current
liabilities...... 39,218 -- -- 9,560 5,223 3c.(viii) (5,223) --
Current portion
of long-term
debt............. 1,361 923 -- -- 49,907 3c.(ix) (39,622) --
--------- ---------- ---------- -------- -------- -------- --------
Total current
liabilities..... 131,459 114,247 -- 15,451 58,028 (47,743) --
Long-term debt... 639,210 557,716 2i. 15,968 84,883 101,039 3c.(x) (55,054) 5c. 2,300
Microwave
relocation
obligation....... 2,365 -- -- -- -- -- --
Other long term
liabilities...... 6,541 37,367 2q.(iv) 1,117,189 2,006 4,819 3c.(xi) 95,871 --
--------- ---------- ---------- -------- -------- -------- --------
Total
liabilities..... 779,575 709,330 1,133,157 102,340 163,886 (6,926) 2,300
--------- ---------- ---------- -------- -------- -------- --------
Mandatorily
redeemable
preferred stock,
net.............. 263,181 99,586 2q.(v) 1,829 -- -- -- 5a. 58
--------- ---------- ---------- -------- -------- -------- --------
Stockholders'
equity (deficit)
Preferred stock.. 149 46,374 2q.(vi) 654,438 450 -- 3c.(xii) (450) --
Common stock, net
of subscriptions
receivable....... 268,107 612,348 2q.(vii) 3,355,182 25,434 10,011 3c.(xiii) 408,163 5d.(ii) 17,946
Deferred
compensation..... (42,811) -- 2n. (45,000) -- -- -- --
Accumulated
deficit.......... (315,999) (271,276) 1b. 271,276 (54,121) (31,712) 3c.(xiv) 443,357 5a. (15,297)
--------- ---------- ---------- -------- -------- -------- --------
Total
stockholders'
equity
(deficit)....... (90,554) 387,446 4,235,896 (28,237) (21,701) 851,070 2,649
--------- ---------- ---------- -------- -------- -------- --------
Total
liabilities,
mandatorily
redeemable
preferred stock
and
stockholders'
equity
(deficit)....... $ 952,202 $1,196,362 $5,370,882 $ 74,103 $142,185 $844,144 $ 5,007
========= ========== ========== ======== ======== ======== ========
<CAPTION>
Total
-----------
<S> <C>
Assets
Current assets:
Cash and cash
equivalents...... $ 740,323
Accounts
receivable, net.. 29,537
Other current
assets........... 35,885
-----------
Total current
assets.......... 805,745
Property and
equipment, net... 605,132
PCS licenses and
microwave
relocation costs,
net.............. 4,036,094
Intangible
assets, net...... 829,956
Other assets..... 62,622
Goodwill......... 2,245,336
-----------
Total assets.... $8,584,885
===========
Liabilities,
mandatorily
redeemable
preferred stock
and stockholders'
equity (deficit)
Current
liabilities:
Accounts payable
and accrued
liabilities...... $ 210,095
Other current
liabilities...... 48,778
Current portion
of long-term
debt............. 12,569
-----------
Total current
liabilities..... 271,442
Long-term debt... 1,346,062
Microwave
relocation
obligation....... 2,365
Other long term
liabilities...... 1,263,793
-----------
Total
liabilities..... 2,883,662
-----------
Mandatorily
redeemable
preferred stock,
net.............. 364,654
-----------
Stockholders'
equity (deficit)
Preferred stock.. 700,961
Common stock, net
of subscriptions
receivable....... 4,697,191
Deferred
compensation..... (87,811)
Accumulated
deficit.......... 26,228
-----------
Total
stockholders'
equity
(deficit)....... 5,336,569
-----------
Total
liabilities,
mandatorily
redeemable
preferred stock
and
stockholders'
equity
(deficit)....... $8,584,885
===========
</TABLE>
103
<PAGE>
HOLDING COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1999
($'s in thousands, except per share data)
<TABLE>
<CAPTION>
Merger Contribution and Exchange
--------------------------- ------------------------------------------ Inter-
Proforma Proforma Company
TeleCorp Tritel Adjustments Indus Airadigm Adjustments Eliminations
----------- ---------- ----------- ---------- ---------- ----------- ------------
(Note 1a.) (Note 1b.) (Note 2) (Note 1c.) (Note 1d.) (Note 3) (Note 4)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Service......... $ 41,319 $ 1,186 $ -- $ 339 $ 6,000 3a.(vii) $ (2,978) $ --
Roaming......... 29,010 3,421 -- -- -- 3a.(vii) (5,887) (2,000)
Equipment....... 17,353 2,152 -- 108 1,701 3a.(vii) (1,749) --
----------- ---------- --------- -------- -------- -------- -------
Total revenue... 87,682 6,759 -- 447 7,701 (10,614) (2,000)
----------- ---------- --------- -------- -------- -------- -------
Operating
expenses:
Cost of
revenue......... 39,259 6,966 -- 905 5,073 3a.(vii) (3,855) (2,000)
Operations and
development..... 35,979 29,113 -- -- -- 3a.(vii) (7,573) --
Sales and
marketing....... 71,180 32,790 -- 7,569 1,556 3a.(vii) (5,581) --
General and
administrative.. 92,585 190,539 2n. 22,500 -- 11,909 3a.(vii) (1,905) --
Depreciation and
amortization.... 55,110 12,839 2p. 164,075 4,061 10,253 3b.(i) 4,301 -- 5c.
Restructuring
charges......... -- -- -- 32,000 -- -- --
----------- ---------- --------- -------- -------- -------- -------
Total operating
expenses........ 294,113 272,247 186,575 44,535 28,791 (14,613) (2,000)
----------- ---------- --------- -------- -------- -------- -------
Operating loss... (206,431) (265,488) (186,575) (44,088) (21,090) 3,999 --
Other income
(expense):
Interest
expense......... (51,313) (27,200) 2i. 712 (5,944) (12,583) 3b.(ii) (2,668) -- 5c.
Interest income
and other....... 6,748 16,791 -- 109 666 -- --
----------- ---------- --------- -------- -------- -------- -------
Loss before
income taxes..... (250,996) (275,897) (185,863) (49,923) (33,007) 1,331 --
Income tax
benefit.......... -- 28,443 -- 533 -- -- --
----------- ---------- --------- -------- -------- -------- -------
Net loss......... (250,996) (247,454) (185,863) (49,390) (33,007) 1,331 --
Accretion of
mandatorily
redeemable
preferred stock.. (24,124) (8,918) -- -- -- -- --
----------- ---------- --------- -------- -------- -------- -------
Net loss
attributable to
common
stockholders..... $ (275,120) $ (256,372) $(185,863) $(49,390) $(33,007) 1,331 $ --
=========== ========== ========= ======== ======== ======== =======
Net loss
attributable to
common equity per
share
outstanding--
basic and
diluted.......... $ (3.58) $ (33.25)
=========== ==========
Weighted average
common equity
shares
outstanding--
basic and
diluted.......... 76,895,391 7,710,649
=========== ==========
Pro forma net
loss attributable
to common equity
per share
(unaudited)--
basic and
diluted..........
Pro forma
weighted average
common equity
shares
outstanding
(unaudited)--
basic and
diluted..........
<CAPTION>
Other
Transactions Total
------------ -------------
(Note 5)
<S> <C> <C>
Revenue:
Service......... $ -- $ 45,866
Roaming......... -- 24,544
Equipment....... -- 19,565
------------ -------------
Total revenue... -- 89,975
------------ -------------
Operating
expenses:
Cost of
revenue......... -- 46,348
Operations and
development..... -- 57,519
Sales and
marketing....... -- 107,514
General and
administrative.. -- 315,628
Depreciation and
amortization.... 62 250,701
Restructuring
charges......... -- 32,000
------------ -------------
Total operating
expenses........ 62 809,710
------------ -------------
Operating loss... (62) (719,735)
Other income
(expense):
Interest
expense......... (255) (99,251)
Interest income
and other....... -- 24,314
------------ -------------
Loss before
income taxes..... (317) (794,672)
Income tax
benefit.......... -- 28,976
------------ -------------
Net loss......... (317) (765,696)
Accretion of
mandatorily
redeemable
preferred stock.. -- (33,042)
------------ -------------
Net loss
attributable to
common
stockholders..... $ (317) $ (798,738)
============ =============
Net loss
attributable to
common equity per
share
outstanding--
basic and
diluted..........
Weighted average
common equity
shares
outstanding--
basic and
diluted..........
Pro forma net
loss attributable
to common equity
per share
(unaudited)--
basic and
diluted.......... Note 6 $ (4.73)
=============
Pro forma
weighted average
common equity
shares
outstanding
(unaudited)--
basic and
diluted.......... Note 6 168,742,005
=============
</TABLE>
104
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
($'s in 000's, except per share data)
1. HISTORICAL FINANCIAL INFORMATION
1a. Represents the historical balance sheet and statement of operations of
TeleCorp.
1b. Represents the historical balance sheet and statement of operations of
Tritel adjusted for certain reclassifications that have been made to conform to
TeleCorp's financial statement presentation. These reclassifications do not
materially impact Tritel's results of operations or financial position.
1c. Represents the historical balance sheet and statement of operations of
Indus adjusted for certain reclassifications that have been made to conform to
TeleCorp's financial statement presentation. These reclassifications do not
materially impact Indus' results of operations or financial position.
1d. Represents the historical balance sheet and statement of operations of
Airadigm adjusted for certain reclassifications that have been made to conform
to TeleCorp's financial statement presentation. These reclassifications do not
materially impact Airadigm's results of operations or financial position.
2. MERGER
On February 28, 2000, TeleCorp agreed to merge with Tritel, through a merger
of each of TeleCorp and Tritel into a newly formed subsidiary of Holding
Company. The merger will result in the exchange of 100% of the outstanding
common and preferred stock of TeleCorp and Tritel for common and preferred
stock of Holding Company. The new entity will be controlled by TeleCorp's
voting preference common stockholders, and TeleCorp and Tritel will become
subsidiaries of Holding Company.
The Merger will be accounted for using the purchase method of accounting.
The purchase price for Tritel will be determined based on the fair value of the
shares issued to the former shareholders of Tritel plus cash, the fair value
associated with the conversion of outstanding Tritel stock options, liabilities
assumed, and merger related costs. The fair value of the shares issued will be
determined based on the market price of TeleCorp's Class A common stock, which
is publicly traded, and, for those shares that do not have a readily available
market price, through valuation by an investment banking firm. The purchase
price for this transaction will be allocated to the assets acquired based on
their estimated fair values as determined by a valuation services company. The
excess of the purchase price over the assets acquired will be recorded as
goodwill and amortized over 20 years.
The proposed merger has been unanimously approved by TeleCorp's and Tritel's
board of directors, with three of TeleCorp's directors abstaining. In addition,
shareholders with greater than 50% of the voting power of each company have
agreed to vote in favor of the merger. The Merger is subject to regulatory
approval and other conditions and is expected to close in the last quarter of
2000.
The unaudited pro forma condensed combined balance sheet and unaudited pro
forma condensed combined statement of operations have been adjusted for the
Merger which includes Holding Company's acquisition of Tritel in exchange for
stock in Holding Company. The Merger will result in an allocation of the
purchase price to the tangible and intangible assets and liabilities of Tritel.
Such allocation reflects the estimated fair value of the assets and liabilities
acquired by Holding Company based upon information available at the date of the
preparation of the accompanying unaudited pro forma condensed combined
financial statements. Such allocations will be adjusted upon the final
determination of such fair values. Management is not aware of any circumstance
that would cause the final purchase price allocation to be significantly
different from that which is reflected in the accompanying pro forma condensed
combined balance sheet. However, actual valuations and allocation may differ
from those reflected herein. The aggregate purchase price was calculated as
follows ($'s in thousands, except per share data):
105
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
<TABLE>
<S> <C>
Tritel common shares outstanding -- Note 2a...................... 107,005,121
Tritel common stock exchange ratio per share -- Note 2b.......... 0.76
Equivalent Holding Company trading common shares................. 81,323,891
Tritel conversion price -- Note 2c............................... $ 47.84
------------
Subtotal (1)..................................................... $ 3,890,535
------------
Tritel non-trading common shares outstanding -- Note 2d.......... 63,432
Tritel common stock exchange ratio per share -- Note 2b.......... 0.76
Equivalent Holding Company non-trading common shares............. 48,208
Tritel conversion price -- Note 2f............................... $ 31.10
------------
Subtotal (2)..................................................... $ 1,499
------------
Tritel Series A preferred stock outstanding...................... 90,668
Tritel Series A preferred stock exchange ratio per share -- Note
2e.............................................................. 1.00
Equivalent TeleCorp Holdings preferred shares.................... 90,668
Tritel conversion price -- Note 2f............................... $ 1,118.53
------------
Subtotal (3)..................................................... $ 101,415
------------
Tritel Series D preferred stock -- Note 2g. (4).................. $ 700,812
------------
Fair value of Tritel shares exchanged for Holding Company shares
(items (1) through (4))......................................... $ 4,694,261
------------
Cash consideration -- Note 2h.(i)................................ $ 10,000
Fair value of liabilities of Tritel assumed at December 31,
1999--Note 2i................................................... 725,298
Option conversion costs -- Note 2j............................... 75,496
Put right -- Note 2h.(ii)........................................ 10,000
Merger related costs -- Note 2k.................................. 28,000
Assumed deferred tax liability -- Note 2l ....................... 1,107,189
------------
Total consideration.............................................. $ 6,650,244
Less: Fair value of assets acquired:
Fair value of assets of Tritel acquired (excluding PCS licenses
and AT&T operating agreements) -- Note 2m..................... $ 934,908
Fair value of PCS licenses acquired -- Note 2m................. 2,942,200
Fair value of AT&T operating agreements -- Note 2m............. 409,200
Fair value of other intangibles -- Note 2m..................... 73,600
Deferred compensation -- Note 2n .............................. 45,000
------------
Goodwill -- Note 2o............................................ $ 2,245,336
============
2a. Tritel common shares outstanding used for purposes of this pro forma
presentation are as of February 28, 2000, the date of the announcement. The
common shares outstanding of Tritel for purposes of this pro forma include all
shares that will be converted into Holding Company trading Class A common
shares as follows:
Tritel Class A voting common stock............................. 97,798,181
Tritel Class B non voting common stock......................... 2,927,120
Tritel Class C voting/non voting common stock (i).............. 1,366,644
Tritel Class D voting/non voting common stock (ii)............. 4,913,176
------------
Total Tritel common shares outstanding......................... 107,005,121
============
</TABLE>
106
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
(i) The terms of the Merger agreement provide that all of the outstanding
shares of Tritel Class C common stock will be converted into Holding
Company Class A common stock and Holding Company Class E common stock
at a ratio of 1.00 to 0.7524 and 1.00 to 0.0076, respectively. Note
that only the Tritel Class C common shares converted to Holding
Company Class A common stock are included in this chart as they are
considered Holding Company trading common shares. The Tritel Class C
common stock converted into Holding Company Class E common stock are
included in the chart below as Holding Company non-trading common
stock.
(ii) The terms of the Merger agreement provide that all of the outstanding
shares of Tritel Class D common stock will be converted into Holding
Company Class A common stock and Holding Company Class F common stock
at a ratio of 1.00 to 0.7524 and 1.00 to 0.0076, respectively. Note
that only the Tritel Class D common shares converted to Holding
Company Class A common stock are included in this chart as they are
considered Holding Company non-trading common shares. The Tritel
Class D common stock converted into Holding Company Class F common
stock are included in the chart below as Holding Company non-trading
common stock.
2b. The terms of the Merger agreement provide that the Tritel exchange ratio
for shares of Holding Company stock shall be 1.00 to 0.76.
2c. The conversion price is based on TeleCorp's Class A public trading
securities two days before, the day of and two days after the date of the
announcement.
2d. Tritel non-trading common shares outstanding used for purposes of this pro
forma presentation are as of February 28, 2000, the date of the announcement.
The non-trading common shares outstanding of Tritel for purposes of this pro
forma presentation include all shares that will be converted into Holding
Company non-trading common shares and consist of the following:
<TABLE>
<S> <C>
Tritel Class C voting/nonvoting common stock (i)....................... 13,804
Tritel Class D voting/nonvoting common stock (ii)...................... 49,628
------
Total Tritel non-trading common stock outstanding...................... 63,432
======
</TABLE>
(i) The terms of the Merger agreement provide that all of the outstanding
shares of Tritel Class C common stock will be converted into Holding
Company Class A common stock and Holding Company Class E common stock
at a ratio of 1.00 to 0.7524 and 1.00 to 0.0076, respectively. Note
that only the Tritel Class C common shares converted to Holding
Company Class E common stock are included in this chart as they are
considered Holding Company non-trading common shares.
(ii) The terms of the Merger agreement provide that all of the outstanding
shares of Tritel Class D common stock will be converted into Holding
Company Class A common stock and Holding Company Class F common stock
at a ratio of 1.00 to 0.7524 and 1.00 to 0.0076, respectively. Tritel
Class D common shares converted to Holding Company Class F common
stock are included in this chart as they are considered Holding
Company non-trading common shares.
2e. The terms of the Merger provide that all of the outstanding Series A
preferred shares of Tritel will be converted into Series B preferred shares of
Holding Company at the exchange rate of 1.00 to 1.00.
2f. The conversion price is based on an independent valuation performed by an
investment banker.
2g. The terms of the agreement provide that all of the outstanding Series D
preferred shares of Tritel will be converted into Series G preferred shares of
Holding Company at the exchange ratio of 1.00 to 0.76. Based on
107
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
the Holding Company stockholders agreement, each share of Series G preferred
stock can be immediately converted into 398.1 shares of Holding Company Class A
common stock and 26.9 shares of Holding Company Class F common stock. For
purposes of this pro forma presentation the Tritel Series A preferred stock has
been valued based on the number of Holding Company Class A common shares and
Holding Company Class F common shares into which the shares will be ultimately
converted.
<TABLE>
<CAPTION>
Holding Company Holding Company Total value of
Tritel Series D preferred Class A trading Class F non-trading Tritel Series D
stock common stock common stock preferred stock
------------------------- --------------- ------------------- ---------------
<S> <C> <C> <C>
46,374 shares:
Pro Forma shares convert-
ed....................... 14,031,972 949,398
Tritel conversion price
(note 2c and note 2f).... $ 47.84 $ 31.10
---------- -------
$ 671,290 $29,522 $700,812
========== ======= ========
</TABLE>
2h. Tritel voting preference common stock
(i) The terms of the Merger provide that all of the outstanding shares of
Tritel voting preference common stock owned by E. B. Martin, Jr. shall
be converted into and become exchangeable for an aggregate amount of
$10,000 in cash.
(ii) The terms of the Merger provide that all of the outstanding shares of
Tritel voting preference common stock owned by William M. Mounger, II
shall be converted to 3 shares of Holding Company voting preference
common stock. Furthermore, Mr. Mounger received a put right (the "Put
Right") to sell his 3 shares of Holding Company voting preference
common stock for $10,000 at any time after the first anniversary of
the closing of the Merger.
2i. Represents the fair value of Tritel debt, increasing Tritel's historic
balance by $15,968 using TeleCorp's incremental borrowing rate of 11.1% at
February 28, 2000, the date of the announcement. A reduction of interest
expense of $712 was recorded as an adjustment to the unaudited pro forma
condensed combined statement of operations to reflect the interest expense
related to the incremental debt as if the Merger had occurred on January 1,
1999.
2j. Represents the fair value, based on a Black-Scholes valuation, associated
with the conversion of outstanding Tritel stock options to equivalent stock
options of Holding Company at the time of the agreement based on the number of
Tritel stock options outstanding and the closing market price of TeleCorp as of
February 28, 2000, the date of the announcement. At the closing of the Merger,
each outstanding and unexercised option to purchase shares of Tritel's common
stock will be converted into an option to purchase shares of Holding Company
common stock. The estimated fair value of these options has been recorded as
additional purchase price.
2k. Anticipated costs of the transactions to Holding Company have been included
as additional purchase price and are:
<TABLE>
<S> <C>
Investment banking fees............................................. $18,000
Legal, accounting and printing fees................................. $ 8,000
Other costs......................................................... $ 2,000
-------
Total transaction cost.............................................. $28,000
=======
</TABLE>
108
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
2l. Deferred tax liability
A deferred tax liability has been recorded for the differences between the
estimated fair value and tax bases of the Tritel assets acquired and
liabilities assumed. The Merger is being accounted for using the purchase
method while for tax purposes, the merger is a tax free business combination.
The effective tax rate reflects TeleCorp's composite federal and state income
tax rate (net of federal benefit). The deferred tax liability has been
calculated as follows:
<TABLE>
<CAPTION>
Temporary
Fair value Tax Basis Difference
---------- ---------- ----------
<S> <C> <C> <C>
Property and equipment............... $ 262,343 $ 262,537 $ (194)
PCS licenses......................... 2,942,200 86,773 2,855,427
Identifiable intangible assets....... 482,800 30,457 452,343
Long-term debt....................... (573,684) (546,792) (26,892)
Deferred compensation................ 45,000 -- 45,000
Net operating losses................. -- 65,965 (65,965)
---------- ---------- ----------
Total................................ $3,158,659 $ (101,060) $3,259,719
========== ==========
Effective tax rate................... 38%
----------
Net deferred tax liability........... $1,238,693
Tritel historical net deferred tax
liability........................... (25,705)
Reversal of TeleCorp historical valu-
ation allowance .................... (104,779)
Reversal of Tritel historical valua-
tion allowance...................... (1,020)
----------
Net deferred tax liability related to
merger.............................. $1,107,189
==========
</TABLE>
2m. The fair value (based on an independent valuation performed by a valuation
services company) of Tritel's PCS licenses, AT&T operating agreements and other
intangible and tangible assets received by Holding Company as part of the
Merger are as follows:
<TABLE>
<S> <C>
PCS licenses..................................................... $2,942,200
AT&T operating agreements........................................ 409,200
Other assets..................................................... 934,908
Subscriber list.................................................. 73,600
----------
Total fair value of assets acquired by Holding Company........... $4,359,908
==========
</TABLE>
PCS licenses being acquired have an estimated fair value of $2,942,200. As
Tritel did not commence service in its BTAs until September 1999, a pro forma
adjustment has been made to the unaudited pro forma condensed combined
statement of operations to record four months of amortization expense totaling
$22,835 on these licenses.
AT&T operating agreements (Network Membership License, Exclusivity, and
Roaming) being acquired have an estimated fair value of $409,200. The summary
of the characteristics of the AT&T operating agreements historically held by
Tritel and obtained by Holding Company is included in Note 4a. The amortization
of the Network Membership License Agreement will occur over its term of five
years. A pro forma adjustment of $15,400 is included as amortization expense in
the unaudited pro forma condensed combined statement of operations to reflect
the effect of the Merger as if it had occurred on January 1, 1999. The
amortization of the Exclusivity and Roaming Agreements will commence once PCS
service is provided in
109
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
the related BTAs. As Tritel did not commence service in these BTAs until
September 1999, amortization expense has been recorded on the Exclusivity and
Roaming agreements in the unaudited pro forma condensed combined statement of
operations for four months totaling $7,440.
Subscriber list held by Tritel has an estimated fair value of $73,600. The
subscriber list has a life of four years. As Tritel did not commence service in
its BTAs until September 1999, amortization expense has been recorded on the
subscriber list in the unaudited pro forma condensed combined statement of
operations for four months totaling $6,133.
2n. Represents unvested restricted stock awards granted by Holding Company in
exchange for restricted stock awards held by certain employees of Tritel which
has been included in the purchase price. However, since service is required
subsequent to the consummation date of the merger in order to vest the
replacement restricted stock awards, $45,000 of the intrinsic value of the
unvested awards has been allocated to deferred compensation to be recognized as
$22,500 of compensation over each of the remaining future two years of the
vesting period.
2o. Goodwill
The goodwill associated with the Merger of $2,245,336 is recorded as a pro
forma adjustment to the unaudited pro forma combined condensed balance sheet.
Amortization of goodwill over a twenty year period results in a pro forma
adjustment of $112,267 amortization expense recognized as if the Merger
occurred on January 1, 1999.
2p. Summary of Merger adjustments to the unaudited pro forma condensed combined
statement of operations.
The following table sets forth the depreciation and amortization pro forma
adjustment as presented on the unaudited pro forma condensed combined statement
of operations related to the Merger:
<TABLE>
<CAPTION>
Pro forma merger adjustment to amortization expense
<S> <C> <C>
Amortization of:
PCS licenses............................................. Note 2m. $ 22,835
Network Membership License agreement..................... Note 2m. 15,400
Exclusivity and Roaming agreements....................... Note 2m. 7,440
Subscriber list.......................................... Note 2m. 6,133
Goodwill................................................. Note 2o. 112,267
--------
$164,075
========
</TABLE>
2q. Summary of Merger adjustments to the unaudited pro forma condensed combined
balance sheet.
The following tables set forth the summary of pro forma adjustments as
presented on the unaudited pro forma condensed combined balance sheet related
to the Merger:
(i) Cash
<TABLE>
<CAPTION>
Pro forma Merger adjustment to cash
<S> <C> <C>
Cash consideration.................................... Note 2h.(i) $(10,000)
Transaction related costs............................. Note 2k. (28,000)
--------
$(38,000)
========
</TABLE>
110
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
(ii) PCS licenses
<TABLE>
<S> <C> <C>
Pro forma Merger adjustment to PCS licenses
Fair value.................................. Note 2m. $2,942,200
Historic cost of Tritel..................... Note 1b. (201,946)
----------
$2,740,254
==========
(iii) Intangible assets
Pro forma Merger adjustment to intangible
assets
Fair value -- AT&T operating agreements..... Note 2m. $ 409,200
Subscriber list............................. Note 2m. 73,600
Historic cost of Tritel..................... Note 1b. (59,508)
----------
$ 423,292
==========
(iv) Other long term payables
Pro forma Merger adjustment to other long term
payables
Deferred tax liability...................... Note 2l. $1,107,189
William M. Mounger II put right............. Note 2h.(ii) 10,000
----------
$1,117,189
==========
(v) Redeemable preferred stock
Pro forma Merger adjustment to redeemable
preferred stock
Fair value -- redeemable preferred stock.... Note 2 subtotal(3) $ 101,415
Historic cost of Tritel..................... Note 1b. (99,586)
----------
$ 1,829
==========
(vi) Preferred stock
Pro forma Merger adjustment to preferred stock
Fair value -- preferred stock............... Note 2g. $ 700,812
Historic cost of Tritel..................... Note 1b. (46,374)
----------
$ 654,438
==========
(vii) Common stock
Pro forma Merger adjustment to common stock
Fair value -- common stock.................. Note 2 subtotal (1) $3,890,535
Fair value -- common stock.................. Note 2 subtotal (2) 1,499
Fair value -- option conversion cost........ Note 2j. 75,496
Historic cost of Tritel..................... Note 1b. (612,348)
----------
$3,355,182
==========
</TABLE>
111
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
3. CONTRIBUTION AND EXCHANGE
In connection with the Merger, AT&T has agreed to contribute certain assets
and rights to Holding Company (the Contribution). The Contribution will result
in Holding Company acquiring various assets in exchange for the consideration
issued as follows:
Holding Company acquires:
. $20,000 cash from AT&T Wireless Services
. The right to acquire all of the common and preferred stock of Indus.
. The right to acquire additional wireless properties and assets from
Airadigm.
. The two year extension and expansion of the AT&T network membership
license agreement to cover all people in Holding Company's markets.
Consideration issued:
. 9,272,740 shares of Class A common stock of the new holding company
formed from the Tritel merger to AT&T Wireless Services.
Separately, AT&T Wireless and TeleCorp entered into an Asset Exchange
Agreement (the Exchange) pursuant to which TeleCorp has agreed to exchange
certain assets with AT&T Wireless, among other consideration. TeleCorp is
receiving certain consideration in exchange for assets as follows:
TeleCorp acquires:
. $80,000 in cash from AT&T Wireless less $5,100 and $6,868 paid to
Polycell and ABC Wireless, respectively, on behalf of TeleCorp by AT&T
Wireless.
. AT&T Wireless' 10 MHZ PCS licenses in the areas covering part of the
Wisconsin market, in addition to adjacent licenses and AT&T Wireless
10MHZ licenses in Fort Dodge and Waterloo, Iowa.
. PCS licenses from Polycell.
. PCS licenses from ABC Wireless.
Consideration issued:
. The Holding Company's New England market segment to AT&T Wireless.
Further, AT&T has agreed to extend the term of the roaming agreement and to
expand the geographic coverage of the AT&T operating agreements with Telecorp
to include the new markets, either through amending Telecorp's existing
agreements or by entering into new agreements with Holding Company on
substantially the same terms as Telecorp's existing agreements. In addition,
TeleCorp has granted AT&T Wireless a "right of first refusal" with respect to
certain markets transferred by AT&T Wireless Services or AT&T Wireless
triggered in the event of a sale of Holding Company to a third party.
These unaudited pro forma combined condensed financial statements are
presented as if TeleCorp exercised its rights to purchase Indus and Airadigm.
As such, the following incremental consideration will be given by TeleCorp in
exercising the right to purchase Indus and Airadigm:
. $34,688 in cash to the shareholders of Indus.
. An assumption of Indus' debt and other liabilities of $93,865.
. $74,000 in cash to Airadigm.
. An assumption of Airadigm's debt and other liabilities of $64,745.
112
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
The Contribution and Exchange from AT&T will be accounted for as an asset
purchase and disposition and recorded at fair value. The purchase price will be
determined based on cash paid, the fair value of the Class A common stock
issued, and the fair value of the assets relinquished. The purchase price will
be proportionately allocated to the noncurrent assets acquired based on their
estimated fair values. A gain is recognized as the difference between the fair
value of the New England assets disposed and their net book value.
For purposes of these unaudited pro forma combined condensed financial
statements, Holding Company exercised its rights to purchase Indus and Airadigm
based on incremental cash paid and liabilities assumed based on their estimated
fair values. These transactions will be accounted for as asset purchases. The
purchase price will be allocated to the assets acquired based on their
estimated fair values.
3a. Cost Basis of Assets Received and Gain on Disposal of New England
Operations
The cost basis of assets received is based on the fair value of the assets
relinquished:
Fair value of Holding Company consideration issued
<TABLE>
<S> <C>
Holding Company Class A common stock given to AT&T (i)............ $ 443,608
Fair value of the TeleCorp New England assets transferred to AT&T
(ii)............................................................. 434,900
Cash paid to Indus (iii).......................................... 34,688
Assumption of Indus' debt and other liabilities (iv).............. 93,865
Cash paid to Airadigm (v)......................................... 74,000
Assumption of Airadigm's debt and other liabilities (vi).......... 64,745
Cash paid to ABC Wireless......................................... 6,868
Cash paid to Polycell............................................. 5,100
Assumption of deferred tax liability.............................. 100,690
----------
Total fair value................................................ $1,258,464
==========
</TABLE>
A gain is recognized as the difference between the fair value of the assets
relinquished related to TeleCorp New England assets transferred to AT&T and
those assets' net book value.
<TABLE>
<S> <C>
Fair value of the New England assets transferred to AT&T (ii)...... $434,900
Net book value of the New England assets transferred to AT&T (vii). (77,376)
--------
Gain on disposal of New England assets (viii)...................... $357,524
========
</TABLE>
113
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
The contribution and the exchange represent the purchase of assets and the
disposition of a business. This transaction is accounted for at fair value for
book purposes. For tax purposes, these transactions are primarily tax-free and
recorded at historical cost. Therefore, this represents an asset purchase
whereby the fair value of acquired assets differs from the tax basis of the
assets resulting in an adjustment to the carrying amount of the acquired assets
and a deferred tax liability of $100,690.
The purchase price will be allocated to the assets acquired based on their
estimated fair values. The following table sets forth the fair values of the
assets received:
Fair value of assets Holding Company received
<TABLE>
<S> <C>
Cash from AT&T.................................................... $ 100,000
Cash from historic financial statements of Indus (Note 1c.)....... 466
Cash from historic financial statements of Airadigm (Note 1d.).... 7,314
Accounts receivable from historic financial statements of Airadigm
(Note 1d.)....................................................... 916
PCS licenses from AT&T (ix)....................................... 191,554
AT&T network membership license agreement extension (x)........... 165,000
AT&T operating agreements (xi).................................... 118,400
PCS license from ABC Wireless, at cost (xii)...................... 6,868
PCS licenses from Polycell, at cost (xii)......................... 5,100
PCS licenses from Airadigm (xiii)................................. 330,000
PCS licenses from Indus (xiv)..................................... 225,200
----------
Total fair value of assets received............................. $1,150,818
==========
</TABLE>
114
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
The difference of the fair value of the assets acquired as compared to the
consideration is allocated to increase proportionately the values assigned to
non-current assets in determining their cost basis. The following table sets
forth the difference of fair value of assets received as compared to the cost
and related increase to non-current assets.
<TABLE>
<S> <C>
Total fair value of consideration issued.......................... $1,258,464
Total fair value of assets Holding Company received............... 1,150,818
----------
Difference........................................................ $ 107,646
==========
Proportionate allocation increasing the fair value of noncurrent assets
received
PCS licenses from AT&T (ix)....................................... $ 20,017
AT&T network membership license agreement extension (x)........... 17,242
AT&T operating agreements (xi).................................... 12,372
PCS license from ABC Wireless, at cost (xii)...................... --
PCS licenses from Polycell, at cost (xii)......................... --
PCS licenses from Airadigm (xiii)................................. 34,483
PCS licenses from Indus (xiv)..................................... 23,532
----------
Increase in fair value of non-current assets.................... $ 107,646
==========
Basis of assets Holding Company received
Cash (from AT&T and historic basis of Indus and Airadigm)......... $ 107,780
Accounts receivable (historical basis of Airadigm)................ 916
PCS licenses from AT&T (ix)....................................... 211,571
AT&T branding agreement extension (x)............................. 182,242
AT&T operating agreements (xi).................................... 130,772
PCS license from ABC Wireless, at cost (xii)...................... 6,868
PCS licenses from Polycell, at cost (xii)......................... 5,100
PCS license from Airadigm (xiii).................................. 364,483
PCS licenses from Indus (xiv)..................................... 248,732
----------
Total basis of assets Holding Company received.................. $1,258,464
==========
</TABLE>
The unaudited pro forma condensed combined balance sheet and the unaudited
pro forma condensed combined statement of operations have been adjusted for the
Contribution and Exchange.
(i) Holding Company class A common stock given to AT&T
Holding Company will issue 9,272,740 shares of class A common stock with
a fair value of $443,608 as determined by TeleCorp's class A public trading
securities two days before, the day of and two days after the date of the
announcement of the Merger. As this is an asset purchase, the fair value of
the stock issued will be measured upon close.
(ii) Fair value of the TeleCorp New England assets transferred to AT&T
Holding Company will issue to AT&T the New England market segment with a
fair value of $434,900 as determined by an independent appraiser. The table
below sets forth the components of the value as appraised:
<TABLE>
<S> <C>
PCS licenses....................................................... $333,800
Property and equipment............................................. 79,000
Subscriber list.................................................... 22,100
--------
$434,900
========
</TABLE>
115
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
(iii) Cash paid to Indus
For the purposes of the unaudited pro forma condensed combined financial
statements, we assume the right to purchase Indus was exercised. Of the
cash consideration to Indus, $4,000 may be paid as common stock at the
option of Indus. For the purpose of the pro forma combined financial
statements it was assumed this consideration was paid in cash.
(iv) Assumption of Indus' debt and other liabilities
For the purposes of the unaudited pro forma condensed combined financial
statements, we assume the right to purchase Indus was exercised. The fair
value of Indus long term debt is $76,408, net of a discount of $8,475 using
TeleCorp's incremental borrowing rate of 11.1% at February 28, 2000. The
fair value of other liabilities assumed by Holding Company from Indus
totaled $17,457. Interest expense of $1,237 was recorded as an adjustment
to the unaudited pro forma condensed combined statement of operations to
reflect the amortization of the debt discount as if the Contribution and
Exchange had occurred on January 1, 1999.
(v) Cash paid to Airadigm
For the purposes of the unaudited pro forma condensed combined financial
statements, we assume the right to purchase Airadigm was exercised.
(vi) Assumption of Airadigm's debt and other liabilities
For the purposes of the unaudited pro forma condensed combined financial
statements, we assume the right to purchase Airadigm was exercised. In
consideration to Airadigm for assets received as part of the Contribution,
Holding Company will pay Airadigm cash and assume long term debt of
$54,460, net a discount of $9,814 and current liabilities with a fair value
of approximately $10,285. Interest expense of $1,431 was recorded as an
adjustment to the unaudited pro forma condensed combined statement of
operations to reflect the amortization of the debt discount as if the
Contribution and Exchange had occurred on January 1, 1999.
(vii) Net book value of the New England assets transferred to AT&T
The following table sets forth the historical carrying cost of New
England's assets
<TABLE>
<S> <C>
PCS licenses........................................................ $15,949
Property and equipment.............................................. 57,661
AT&T operating agreements........................................... 3,766
-------
$77,376
=======
</TABLE>
Property and equipment
Property and equipment consist of the wireless network, computer equipment,
internal use software, furniture, fixtures, office equipment and leasehold
improvements related to the Holding Company's New England market. The net book
value of the assets recorded in TeleCorp's historical financial statements as
of December 31, 1999 was reduced as a pro forma adjustment to reflect the
disposition as if it had occurred on December 31, 1999. The related
depreciation expense incurred by Telecorp and recorded in TeleCorp's historical
financial statements for the year ended December 31, 1999 was reduced as a pro
forma adjustment to reflect the disposition as if it had occurred on January 1,
1999.
116
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
PCS licenses
The four PCS licenses conveyed to AT&T are 20 megahertz (MHz) PCS licenses
in Manchester, NH, Worcester, Rockingham and, Stafford County and Hyannis, MA.
These licenses are currently being amortized over a 40 year life. The net book
value of the licenses recorded in TeleCorp's historical balance sheet as of
December 31, 1999 was reduced as a pro forma adjustment to reflect the
disposition as if it had occurred on December 31, 1999. The related
amortization incurred by TeleCorp was reduced to reflect the disposition as if
it had occurred on January 1, 1999.
AT&T operating agreements
In January 1998, TeleCorp entered into a Securities Purchase Agreement with
AT&T Wireless and TWR Cellular, Inc. whereby TeleCorp, in exchange for
securities and cash, received licenses and operating agreements from AT&T. The
total value of the operating agreements was allocated to each of TeleCorp's
regions based on POP's.
In connection with this Exchange, as a pro forma adjustment, we removed the
net book value of each of the agreements from Holding Company's balance sheet
and removed $6,766 for the related 1999 amortization expense.
Historical results of operations of New England BTAs
Services, roaming, and equipment revenues of $2,978, $5,887 and $1,749,
respectively, for the year ended December 31, 1999 recorded in TeleCorp's
historical financial statements have been eliminated as pro forma adjustments
to reflect the disposition of the BTAs underlying assets as if it had occurred
on January 1, 1999.
Cost of revenue, operations and development expense, selling and marketing,
general and administration expenses, and depreciation and amortization of
$3,855, $7,573, $5,581, $1,905 and $6,766 respectively, for the year ended
December 31, 1999 recorded in TeleCorp's historical financial statements have
been eliminated as pro forma adjustments to reflect the disposition of the BTAs
underlying assets as if it had occurred on January 1, 1999.
(viii) Gain on disposal of New England operations
The gain on the disposal of New England assets of $357,524 is presented
in the unaudited pro forma condensed combined balance sheet as if the
transaction had occurred on December 31, 1999. The gain is not included in
the unaudited pro forma condensed combined statement of operations as if
the transaction had occurred on January 1, 1999 due to the non-recurring
nature.
(ix) PCS licenses from AT&T
Holding Company acquired PCS licenses from AT&T; 14 D-Block 10 MHz and
one E-Block 10 MHZ located in Wisconsin, Michigan and Iowa that have a
total fair value of $191,554. As part of the proportionate increase in the
fair value due to the difference of consideration given, PCS licenses from
AT&T were increased $20,017. The cost basis of the PCS licenses from AT&T
are recorded in the unaudited pro forma condensed combined balance sheet at
$211,571.
As Holding Company is not planning to commence service in theses BTAs
within the twelve months following the February 28, 2000 announcement,
amortization expenses has not been recorded on these licenses in the
unaudited pro forma condensed combined statement of operations.
117
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
(x) AT&T network membership license agreement extension
Holding Company acquired a two year extension of its network membership
license agreement with AT&T (discussed elsewhere in this prospectus) with a
fair value of $165,000. As part of the proportionate increase in the fair
value due to the difference of consideration given the AT&T network
membership license extension was increased $17,242. The cost basis of the
AT&T network membership license extension agreement are recorded in the
unaudited pro forma condensed combined balance sheet at $182,242.
Holding Company will begin amortization of the extension of the network
membership license Agreement upon expiration of its existing branding
agreement over its extension term of two years. As the current network
membership license agreement will not expire within one year of the
Febraury 28, 2000 anouncement, no pro forma amortization expense was
included in the unaudited pro forma condensed combined statement of
operations to reflect the effect of the Contribution and Exchange as if it
had occurred on January 1, 1999.
(xi) AT&T operating agreements
Holding Company acquired operating agreements with AT&T (discussed
elsewhere in this prospectus) with a fair value $118,400. These operating
agreements are the same agreements held by Holding Company for TeleCorp and
Tritel extended to include the BTAs associated with the PCS licenses of
Airadigm, Indus, Polycell, ABC Wireless and the licenses obtained from
AT&T. As part of the proportionate increase in the fair value due to the
difference of consideration given the AT&T operating agreements were
increased $12,372. The cost basis of the AT&T operating agreements are
recorded in the unaudited pro forma condensed combined balance sheet at
$130,772.
The cost basis of these agreements are as follows:
<TABLE>
<S> <C>
Network membership license......................................... $ 55,335
Exclusivity........................................................ 38,878
Roaming............................................................ 36,559
--------
$130,772
========
</TABLE>
Holding Company's accounting policy will be to begin amortization of the
network membership license Agreement upon close of the transaction over the
remainder of its term of five years. A pro forma adjustment of $11,067 is
included as amortization expense in the unaudited pro forma condensed combined
statement of operations to reflect the effect of the transactions as if they
had occurred on January 1, 1999.
Holding Company will commence amortization of the Exclusivity and
Roaming Agreements once PCS service is provided in the related BTAs. As
Holding Company is not projecting to commence service in theses BTAs within
the twelve months after the February 28, 2000 announcement, no amortization
expense has been recorded on these agreements in the unaudited pro forma
condensed combined statement of operations.
(xii) PCS licenses from ABC Wireless and Polycell
Holding Company obtained PCS licenses from ABC Wireless, a related party
controlled by shareholders who also control TeleCorp. Holding Company paid
ABC Wireless cash of $6,868 for these
118
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
licenses (paid by AT&T on behalf of Holding Company). Holding Company
obtained PCS licenses from Polycell through rights obtained by ABC
Wireless, a related party controlled by shareholders who also control
TeleCorp. Holding Company paid Polycell cash of $5,100 for these licenses
(paid by AT&T on behalf of Holding Company). The amounts paid on behalf of
Holding Company by AT&T reduce the cash consideration received by Holding
Company from AT&T.
The licenses obtained from ABC Wireless were recorded on the unaudited
pro forma condensed combined balance sheet at the historic cost of ABC
Wireless which also equaled the cash consideration of $6,868. Furthermore,
the licenses obtained from Polycell were recorded on the unaudited pro
forma condensed combined balance sheet at a value equal to the cash
consideration paid of $5,100. As these licenses are recorded at cost, they
were not increased by the difference of fair value of consideration given
nor by the recognition of the deferred tax liability.
As Holding Company is not projecting to commence service in theses BTAs
within the twelve months following the February 28, 2000 announcement, no
amortization expense has been recorded on these licenses in the unaudited
pro forma condensed combined statement of operations.
(xiii) PCS licenses from Airadigm
For the purposes of the unaudited pro forma condensed combined financial
statements, we assume the right to purchase Airadigm was exercised.
Holding Company acquired PCS licenses from Airadigm that have a total
fair value of $330,000. As part of the proportionate increase in the fair
value due to the difference of consideration given, PCS licenses from
Airadigm were increased $34,483. The cost basis of the PCS licenses from
Airadigm are recorded in the unaudited pro forma condensed combined balance
sheet at $364,483.
As Holding Company is not planning to commence service in theses BTAs
within the twelve months following the February 28, 2000 announcement,
amortization expense has not been recorded on these licenses in the
unaudited pro forma condensed combined statement of operations.
(xiv) PCS licenses from Indus
For the purposes of the unaudited pro forma condensed combined financial
statements, we assume the right to purchase Indus was exercised.
Holding Company acquired PCS licenses from Indus that have a total fair
value of $225,200. As part of the proportionate increase in the fair value
due to the difference of consideration given, PCS licenses from Indus were
increased $23,532. The cost basis of the PCS licenses from Indus are
recorded in the unaudited pro forma condensed combined balance sheet at
$248,732.
As Holding Company is not planning to commence service in theses BTAs
within the twelve months following the February 28, 2000 announcement,
amortization expense has not been recorded on these licenses in the
unaudited pro forma condensed combined statement of operations.
119
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
3b.Summary of Contribution and Exchange adjustments to the unaudited pro forma
condensed combined statement of operations.
The following table sets forth the summary of the (i) depreciation and
amortization and (ii) interest expense pro forma adjustments as presented
on the unaudited pro forma condensed combined statement of operations
related to the Contribution and Exchange.
(i) Depreciation and amortization
<TABLE>
<S> <C> <C>
Pro forma adjustment to amortization of:
New England historical results................... Note 3a.(vii) $ (6,766)
Operating agreements............................. Note 3a.(xi) 11,067
--------
$ 4,301
========
(ii) Interest expense
Pro forma adjustment to interest expense
Incremental interest related to Indus debt....... Note 3a.(iv) $ 1,237
Incremental interest related to Airadigm debt.... Note 3a.(vi) 1,431
--------
$ 2,668
========
3c.Summary of Contribution and Exchange adjustments to the unaudited pro forma
condensed combined balance sheet.
The following tables set forth the summary of pro forma adjustments as
presented on the unaudited pro forma condensed combined balance sheet
related to the Contribution and Exchange
(i) Cash
Pro forma adjustment to cash
Cash from AT&T................................... Note 3a. $100,000
Cash to ABC Wireless............................. Note 3a.(xii) (6,868)
Cash to Polycell................................. Note 3a.(xii) (5,100)
Cash to Indus.................................... Note 3a.(iii) (34,688)
Cash to Airadigm................................. Note 3a.(v) (74,000)
--------
$(20,656)
========
(ii) Other current assets
Pro forma adjustment to other current assets
Fair value of other assets received as considera-
tion............................................ $ --
Historic cost of Indus' current assets........... Note 1c. (500)
Historic cost of Airadigm's current assets....... Note 1d. (1,056)
--------
$ (1,556)
========
</TABLE>
120
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
(iii) Property and equipment
<TABLE>
<S> <C> <C>
Pro forma adjustment to property and equipment
Fair value received as consideration........... $ --
Historic cost of New England property and
equipment..................................... Note 3a.(vii) (57,661)
Historic cost of Indus' property and equip-
ment.......................................... Note 1c. (914)
Historic cost of Airadigm's property and equip-
ment.......................................... Note 1d. (54,909)
---------
$(113,484)
=========
(iv) PCS licenses
Pro forma adjustment to PCS licenses
Cost basis of New England PCS licenses......... Note 3a.(vii) $ (15,949)
Fair value as adjusted of PCS licenses from
AT&T.......................................... Note 3a.(ix) 211,571
Fair value as adjusted of PCS licenses from ABC
Wireless...................................... Note 3a.(xii) 6,868
Fair value as adjusted of PCS licenses from
Polycell...................................... Note 3a.(xii) 5,100
Fair value as adjusted of PCS licenses received
from Indus.................................... Note 3a.(xiv) 248,732
Historic cost of Indus' PCS licenses........... Note 1c. (70,902)
Cost basis PCS license received from Airadigm.. Note 3a.(xiii) 364,483
Historic cost of Airadigm's PCS licenses....... Note 1d. (76,265)
---------
$ 673,638
=========
(v) Intangible assets
Pro forma adjustment to intangible assets
AT&T network membership license agreement ex-
tension....................................... Note 3a.(x) $ 182,242
AT&T operating agreements...................... Note 3a.(xi) 130,772
Historic cost of AT&T operating agreements in
New England................................... Note 3a.(vii) (3,766)
---------
$ 309,248
=========
</TABLE>
(vi) Other assets
<TABLE>
<S> <C> <C>
Pro forma adjustment to other assets
Fair value of other assets received as consideration... $ --
Historic cost of Indus' other assets................... Note 1c. (1,321)
Historic cost of Airadigm's other assets............... Note 1d. (1,725)
-------
$(3,046)
=======
(vii) Accounts payable and accrued expenses
Pro forma adjustment to accounts payable and accrued
liabilities
Fair value of Airadigm accounts payable and accrued
liabilities........................................... $ --
Historic cost of Airadigm's accounts payable and
accrued expenses...................................... Note 1d. (2,898)
-------
$(2,898)
=======
</TABLE>
121
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
(viii) Other current liabilities
<TABLE>
<S> <C> <C>
Pro forma adjustment to other current liabilities
Fair value of Airadigm's other current
liabilities.................................... $ --
Historic cost of Airadigm's other current
liabilities.................................... Note 1d. (5,223)
---------
$ (5,223)
=========
(ix) Long term debt, current portion
Pro forma adjustment to long term debt, current
portion
Fair value of long term debt, current portion,
assumed from Airadigm.......................... Note 3a. (vi) $ 10,285
Historic cost of Airadigm's long term debt,
current portion................................ Note 1d. (49,907)
---------
$ (39,622)
=========
(x) Long term debt
Pro forma adjustment to long term debt
Fair value of Indus' long term debt assumed..... Note 3a. (iv) $ 76,408
Historic cost of Indus' long term debt.......... Note 1c. (84,883)
Fair value of Airadigm's long term debt
assumed........................................ Note 3a. (vi) 54,460
Historic cost of Airadigm's long term debt...... Note 1d. (101,039)
---------
$ (55,054)
=========
(xi) Other long term payables
Pro forma adjustment to other long term payables
Fair value of other long term payables assumed.. $ --
Deferred tax liability.......................... Note 3a. 100,690
Historic cost of Airadigm's other long term
payables....................................... Note 1d. (4,819)
---------
$ 95,871
=========
(xii) Preferred stock
Pro forma adjustment to preferred stock
Elimination of historic cost of Indus' preferred
stock.......................................... Note 1c. $ (450)
---------
$ (450)
=========
(xiii) Common stock
Pro forma contribution adjustment to common stock
Fair value of common stock given to AT&T....... Note 3a. (i) $ 443,608
Elimination of historic cost of Indus' common
stock.......................................... Note 1c. (25,434)
Elimination of historic cost of Airadigm's
common stock................................... Note 1d. (10,011)
---------
$ 408,163
=========
</TABLE>
122
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
(xiv) Accumulated deficit
<TABLE>
<S> <C> <C>
Gain on disposal of New England operations...... Note 3a. (viii) $357,524
Elimination of historic cost of Indus'
accumulated deficit............................ Note 1c. 54,121
Elimination of historic cost of Airadigm's
accumulated deficit............................ Note 1d. 31,712
--------
$443,357
========
</TABLE>
4. INTER-COMPANY ELIMINATIONS
Roaming revenue and cost of revenue of $1,000 and $1,000, respectively
included on the historical consolidated statement of operations of TeleCorp
relate to amounts earned and expensed by Tritel during 1999. As such, roaming
revenue and cost of revenue of $1,000 and $1,000 included on the historical
consolidated statement of operations of Tritel relates to amounts earned and
expensed directly with Telecorp. The pro forma inter-company eliminations
adjustment of revenue and cost of revenue of $2,000 are the reduction of such
balances as if the transaction occurred on January 1, 1999.
No payables, receivables or inter-company investments existed between any of
the companies at December 31, 1999. No inter-company eliminations were
necessary for the unaudited pro forma condensed combined balance sheet.
5. OTHER TRANSACTIONS
Included in the unaudited pro forma condensed combined financial statements
are the following transactions of TeleCorp that closed during April 2000: (a)
acquisition of the remaining 15% of Viper Wireless that TeleCorp did not
currently own; (b) acquisition of licenses of TeleCorp LMDS, and (c)
acquisition of licenses from Gulf Telecom.
5a. Viper Wireless
On April 11, 2000, the Company completed its acquisition of the 15% of
Viper Wireless that it did not already own from Mr. Vento and Mr. Sullivan
in exchange for an aggregate of 323,372 shares of TeleCorp's class A common
stock and 800 shares of its series E preferred stock. The Company acquired
85% of Viper Wireless on March 1, 1999 in exchange for $32,286 contributed
by AT&T and certain of the Company's other initial investors for additional
shares of its preferred and common stock. Viper Wireless used the proceeds
to participate in the Federal Communications Commission's reauction of PCS
licenses. Viper Wireless was subsequently granted six PCS licenses in the
reauction.
An unaudited pro forma condensed combined balance sheet adjustment has
been made to include the issuance of 323,372 Holding Company shares of
class A common stock at the $47.125 share price on April 11, 2000 for
$15,239 and $58 of Holding Company Series E preferred stock. This
transaction results in a $15,297 increase in Accumulated Deficit for the
recognition of compensation expense as if this transaction occurred on
December 31, 1999. As the event will be a non-recurring charge to
compensation expense, this information is not included in the unaudited pro
forma condensed combined statement of operations as if the transaction
occurred on January 1, 1999.
123
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
5b. TeleCorp LMDS
On October 18, 1999, TeleCorp agreed to acquire TeleCorp LMDS, Inc.
through an exchange of all of the outstanding stock of TeleCorp LMDS for
878,400 shares of our class A common stock. TeleCorp LMDS's stockholders
are Mr. Vento, Mr. Sullivan and three of our initial investors. By
acquiring TeleCorp LMDS, we will gain local multipoint distribution service
licenses covering 1100 MHz of airwaves in the Little Rock, Arkansas basic
trading area and 150 MHz of airwaves in each of the Beaumont, Texas, New
Orleans, Louisiana, San Juan and Mayaguez, Puerto Rico, and U.S. Virgin
Islands basic trading areas. This transaction closed on April 7, 2000.
An unaudited pro forma condensed combined balance sheet adjustment has
been made to include the issuance of 878,400 Holding Company Class A common
shares at the $52.25 share price on April 7, 2000 for $45,896. As TeleCorp
LMDS is a company under common control with TeleCorp, the licenses are
recorded on the unaudited pro forma combined condensed balance sheet at the
historic cost to TeleCorp LMDS of $2,707. The remaining balance of $43,189
has been accounted for as a distribution to shareholders. The licenses
owned by TeleCorp LMDS are intended to be developed to offer fixed wireless
broadband services. The Company has not yet begun development of a
broadband wireless network. As the service related to the TeleCorp LMDS
licenses is not planned to commence within the twelve months following
April 7, 2000, no pro forma amortization expense was included in the
unaudited pro forma condensed combined statement of operations to reflect
the transaction as if it had occurred on January 1, 1999.
5c. Gulf Telecom, L.L.C.
On October 14, 1999, TeleCorp agreed to purchase 15 MHz of additional
airwaves in the Lake Charles, Louisiana basic trading area from Gulf
Telecom, L.L.C. Total consideration approximates $2,700 and consists of
approximately $400 in cash plus the assumption by Holding Company of
approximately $2,300 in Federal Communications Commission debt related to
the license. Additionally, TeleCorp will reimburse Gulf Telecom for all
interest it paid to the Federal Communications Commission on debt related
to the license from June 1998 until the date the transaction is completed.
The entire purchase price will be allocated to licenses and recorded on the
unaudited pro forma condensed combined balance sheet as if the transaction
occurred on December 31, 1999. A pro forma adjustment is included on the
unaudited pro forma condensed combined statement of operations for 11
months of amortization related to the licenses as if the transaction
occurred on January 1, 1999. The Holding Company's accounting policy will
be to amortize licenses over its term commencing at a time when PCS service
is provided in the related BTAs. As TeleCorp began offering PCS services in
the related BTA's in February, 1999, the amortization period does not
include the entire year of 1999. The amortization expense included as a pro
forma adjustment for licenses is $62. A pro forma adjustment to interest
expense on the unaudited pro forma condensed combined statement of
operations was recorded as $255 using TeleCorp's incremental borrowing rate
at February 28, 2000, the date of the announcement, as if this transaction
occurred on January 1, 1999. This transaction closed on April 27, 2000.
124
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(continued)
($'s in 000's, except per share data)
5d. Summary of other transaction adjustments to the unaudited pro forma
condensed combined balance sheet
The following tables set forth the summary of pro forma adjustments as
presented on the unaudited pro forma condensed combined balance sheet
related to these other transactions:
(i) PCS licenses
<TABLE>
<S> <C> <C>
Pro forma other transactions adjustment to PCS licenses
Fair value acquired from TeleCorp LMDS................ Note 5b. $ 2,707
Fair value acquired from Gulf Telecom................. Note 5c. 2,700
--------
$ 5,407
========
(ii) Common stock
Pro forma merger adjustment to common stock
Fair value of stock consideration to Viper Wireless... Note 5a. $ 15,239
Distribution to shareholders for TeleCorp LMDS........ Note 5b. (43,189)
Fair value of stock consideration to TeleCorp LMDS.... Note 5b. 45,896
--------
$ 17,946
========
</TABLE>
6. CALCULATION OF PRO FORMA NET LOSS PER SHARE
For purposes of calculating pro forma net loss per share, all share
issuances and conversions, other than TeleCorp historical weighted average
common shares, have been calculated as if the Transaction and other pending
transactions occurred on January 1, 1999. Additionally, for pro forma purposes,
an assumption was made that all payments to Indus were satisfied in cash (Note
3a.(iv)).
<TABLE>
<S> <C> <C>
TeleCorp weighted average common shares......... Note 1a. 76,895,391
Conversion of Tritel common stock to Holding
Company trading common stock................... Note 2 81,323,891
William M. Mounger, II voting preference stock.. Note 2h.(ii) 3
Conversion of Tritel outstanding common stock... Note 2 48,208
Issuance of common stock to AT&T................ Note 3a.(i) 9,272,740
Issuance of common stock for Viper Wireless..... Note 5a. 323,372
Issuance of common stock for TeleCorp LMDS...... Note 5b. 878,400
------------
Total weighted average common shares.......... 168,742,005
============
Holding Company pro forma net loss.............. $ (798,738)
============
Basic and diluted net loss per common share..... $ (4.73)
============
</TABLE>
125
<PAGE>
INDUSTRY OVERVIEW
The Wireless Communications Industry
Wireless communications systems use a variety of radio airwaves to transmit
voice and data signals. In the wireless communications industry, applications
that transmit these signals include one-way radio applications, such as paging
or beeper services, and two-way radio applications, such as PCS, cellular
telephone and other technologies. Each application is licensed and operates in
a distinct radio airwave block. The two principal services licensed by the
Federal Communications Commission for transmitting voice and data signals are
PCS and cellular. PCS is a term commonly used to refer to service carried over
the 1850 MHz to 1990 MHz portion of the radio airwaves. Megahertz is a method
of measuring radio airwaves. Cellular is a term commonly used to refer to
service carried over the 824 MHz to 893 MHz portion of the radio airwaves.
Cellular service systems were originally analog-based systems, although digital
technology has been introduced in some markets. PCS systems use digital
technology. Analog technology has several limitations, including lack of
privacy and limited transmission capacity. Digital systems convert voice or
data signals into a stream of digits that is compressed before transmission,
enabling a single radio channel to carry multiple simultaneous signal
transmissions. This enhanced capacity, along with improvements in digital
signaling, allows digital-based wireless technologies to offer new and enhanced
services, such as greater call privacy and robust data transmission features,
including mobile office applications like facsimile, e-mail and wireless
connections to computer/data networks, including the Internet.
In order to increase competition, promote improved quality and service, and
make available the widest possible range of wireless telecommunications
services to U.S. consumers, federal legislation was enacted in 1993 directing
the Federal Communications Commission to allocate radio frequency spectrum for
PCS by competitive bidding. In 1993, the Federal Communications Commission
allocated 120 MHz of spectrum in the 2GHz band for the provision of PCS.
Since 1995, the Federal Communications Commission has been conducting
auctions in which industry participants were awarded PCS licenses for
designated areas throughout the United States, and the Federal Communications
Commission is likely to continue to conduct periodic auctions for additional
spectrum, which could be used for competing PCS services.
Operation of Wireless Communications Systems
Wireless communications system service areas, whether PCS, cellular or other
technologies, are divided into multiple units, each containing a transmitter, a
receiver and signaling equipment to transmit wireless signals to individual
phones. This equipment is connected by telephone lines or microwave signals to
call connection equipment that uses computers to control the operation of the
communications system for the entire service area. The call connection
equipment controls the connection of calls and the connection of the wireless
network to local telephone systems and long distance carriers. As a customer's
handset travels, the system controls the transfer of calls from one equipment
site to another, coordinates calls to and from handsets, allocates calls among
the network equipment sites within the system and connects calls to the local
telephone system or to a long distance telephone carrier. Wireless
communications providers must establish agreements with local and long distance
carriers that allow them to pass calls, or interconnect, thereby integrating
their system with the existing communications system.
Because the signal strength of a transmission between a handset and a
network equipment site declines as the handset moves away from the originating
network equipment site, the wireless network monitors the signal strength of
calls in progress. When the signal strength of a call declines, the call
connection equipment may transfer the call to another network equipment site
where the signal is stronger. If a handset leaves the service area of a PCS or
cellular system, the call is disconnected unless there is a technical
connection with the adjacent system. If there is a technical connection with
the adjacent system, the customer may roam onto the adjacent system.
126
<PAGE>
Although PCS and cellular systems use similar technologies and hardware,
they operate on different portions of the airwaves and use different technical
and network standards. The use of advanced handsets makes it possible for
customers using one type of system to roam on a different type of system
outside of their service area, and to transfer calls from one type of system to
another if the appropriate agreements are in place and the networks are
properly configured to transfer calls from one system to the next.
Currently, PCS systems operate under one of three principal digital signal
transmission technology standards that various operators and vendors have
proposed for use in PCS systems: time division multiple access (or TDMA), code
division multiple access (or CDMA) or global system for mobile communications
(or GSM). TDMA and GSM are both time division-based technologies, but are
incompatible with each other and with CDMA. Accordingly, a customer of a system
that uses TDMA technology is unable to use a TDMA handset when travelling in an
area not served by TDMA-based PCS operators, unless the customer carries a
special handset that permits the customer to use the analog or digital system
on the cellular portion of the airwaves in that area and the appropriate
agreements are in place.
TDMA technology allows for:
. the use of advanced handsets which allow for roaming across the PCS and
cellular portion of the airwaves, including both analog and digital
technologies;
. enhanced services and features, such as short-messaging, extended
battery life, added call security and improved voice quality; and
. network equipment sites that are small and that improve network coverage
with low incremental investment.
TDMA technology is the digital technology choice of two of the largest
wireless communications companies in the United States, AT&T and SBC
Communications. This technology served an estimated 35 million customers
worldwide and 19 million customers in North America as of December 31, 1999,
according to the Universal Wireless Communications Consortium, an association
of TDMA providers and manufacturers.
If a PCS system operated by the service provider or covered by a roaming
agreement is operating in the area, the call will be placed via this system. If
there is no PCS system providing coverage, the call will be placed through a
digital system on the cellular portion of the airwaves operating in the area
and providing coverage to the user, and if no digital system on the cellular
portion of the airwaves is providing coverage, the call will be connected over
an analog system that uses the cellular portion of the airwaves providing
coverage. Advanced handsets allow for a call in progress to be handed off to an
adjacent system, without interruption, if appropriate agreements are in place,
whereas earlier generations of handsets would cut off the call when the handset
left the coverage of one system, requiring the customer to redial the call
using the adjacent system.
127
<PAGE>
THE SUBSIDIARIES OF HOLDING COMPANY
TELECORP
Company Overview
TeleCorp is the largest AT&T Wireless affiliate in the United States in
terms of licensed population, with licenses covering approximately 16.7 million
people. It provides wireless personal communication services, or PCS, in
selected markets in the south-central and northeast United States and in Puerto
Rico, encompassing eight of the 100 largest metropolitan areas in the United
States. Commencing with the launch of operations in the New Orleans market in
February 1999, TeleCorp successfully launched its services in 26 markets by
December 31, 1999. As of March 31, 2000, it had more than 228,000 customers and
its networks covered approximately 74% of the population where it held
licenses.
TeleCorp entered into a venture with AT&T in July 1998 under which AT&T
contributed PCS licenses to TeleCorp in exchange for ownership in the company.
TeleCorp is AT&T's exclusive provider of wireless mobility services using equal
emphasis co-branding with AT&T in TeleCorp's covered markets, subject to AT&T's
right to resell services on TeleCorp's network. TeleCorp has the right to use
the AT&T brand name and logo together with TeleCorp's SunCom brand name and
logo, giving equal emphasis to each in TeleCorp's covered markets. TeleCorp is
AT&T's preferred roaming partner for digital customers in TeleCorp's markets.
Additionally, its relationship with AT&T allows TeleCorp to provide coast-to-
coast coverage to its customers.
TeleCorp's PCS licenses include both major population centers as well as
popular vacation destinations, such as:
. San Juan, Puerto Rico and the U.S. Virgin Islands;
. New Orleans and Baton Rouge, Louisiana;
. Memphis, Tennessee;
. Little Rock, Arkansas;
. Manchester, Concord and Nashua, New Hampshire; and
. Worcester, Cape Cod, Martha's Vineyard and Nantucket, Massachusetts.
TeleCorp markets its services through its own stores, retail outlets,
through its direct corporate and telemarketing sales forces and on the Internet
through its website. TeleCorp has a strong distribution presence in its markets
through its company-owned stores and retail outlets where consumers can
purchase its services, including Best Buy, Circuit City, Office Depot, Office
Max, Staples and Radio Shack. TeleCorp's affiliation with AT&T enables it to
leverage its marketing and sales efforts in its markets.
TeleCorp's Revenue Sources
TeleCorp derives its revenue from:
. Services. The various types of revenue associated with PCS for
TeleCorp's customers include monthly recurring access charges and
monthly non-recurring airtime charges for local, long distance and
roaming airtime used in excess of pre-subscribed usage. TeleCorp's
customers' charges are rate plan-dependent, based on the number of
pooled minutes included in their plans. Service revenue also includes
monthly non-recurring airtime usage associated with TeleCorp's prepaid
customers and non-recurring activation and de-activation service
charges.
. Roaming Charges. TeleCorp charges monthly, non-recurring, per minute
fees to other wireless companies whose customers use its network
facilities to place and receive wireless services.
. Equipment Sales. TeleCorp sells wireless personal communications
handsets and accessories that are used by its customers in connection
with its wireless services.
128
<PAGE>
Strategic Alliance with AT&T
TeleCorp has a strategic alliance with AT&T which provides it with many
business, operational and marketing advantages, including:
Exclusivity. TeleCorp is AT&T's exclusive provider of wireless mobility
services using equal emphasis co-branding with AT&T in TeleCorp's covered
markets, subject to AT&T's right to resell services on TeleCorp's network.
Brand. TeleCorp has the right to use the AT&T brand name and logo together
with the SunCom brand name and logo in TeleCorp's markets, giving equal
emphasis to each.
Roaming. TeleCorp is AT&T's preferred roaming partner for digital customers
in TeleCorp's markets. TeleCorp's roaming revenues increased from approximately
$1.9 million in the first quarter of 1999 to approximately $11.5 million in the
first quarter of 2000.
Coast-to-Coast Coverage. Outside TeleCorp's markets, its customers can place
and receive calls in AT&T Wireless's markets and the markets of AT&T Wireless's
other roaming partners.
Products and Services. TeleCorp receives preferred terms on selected
products and services, including handsets, infrastructure equipment and back
office support from companies who provide these products and services to AT&T.
Marketing. TeleCorp benefits from AT&T's nationwide marketing and
advertising campaigns, including the success of the AT&T Digital One RateSM
plans, in the marketing of its own national SunRate plans. In addition,
TeleCorp works with AT&T's national sales representatives to jointly market
TeleCorp's wireless services to AT&T corporate customers located in TeleCorp's
markets.
Service
TeleCorp's primary service is wireless calling and TeleCorp has chosen
digital TDMA technology for its network. TeleCorp's service features advanced
handsets, enhanced voice clarity, improved protection from eavesdropping and a
broad feature set. TeleCorp's basic wireless service offering includes caller
identification, three-way conference calling, call waiting, voicemail, paging
and short-messaging. As part of TeleCorp's basic service offering, it sells
easy-to-use, interactive menu-driven handsets that can be activated over the
air.
Sales and Distribution
TeleCorp's sales and distribution strategy is to use a balanced mix of
distribution channels to maximize penetration within its licensed service area
while minimizing customer acquisition costs. Its channels include a network of
company stores, nationally recognized retailers, a direct sales force for
corporate and business customers, regional and local mass merchandisers,
telesales, direct mail and online sales. TeleCorp also works with AT&T's sales
channels to cooperatively exchange leads and develop new business.
Company Stores. TeleCorp's stores range in size from small kiosks to 3,600
square foot stores in the principal retail district in each market. As of March
31, 2000, TeleCorp had opened 56 stores for the distribution and sale of its
handsets and expects to have a total of 89 SunCom stores open by the end of
2000.
Retail Outlets. TeleCorp has negotiated distribution agreements with
national and regional mass merchandisers and consumer electronics retailers,
including Circuit City, Cellular Warehouse, Metrocall, Office Depot, Staples,
Best Buy and Office Max in the U.S. and Farmacia El Amal, Let's Talk Wireless,
Beeper
129
<PAGE>
Connections and Radio Shack in Puerto Rico. TeleCorp currently has over 1,367
retail outlet locations where customers can purchase TeleCorp's services. In
some of these retail store locations, TeleCorp is implementing a store-within-
a-store concept, which uses visual merchandising to leverage the brand
awareness created by both SunCom and AT&T advertising.
Direct Sales and Marketing. TeleCorp's direct corporate sales force focuses
on high-revenue, high-margin corporate users. As of March 31, 2000, TeleCorp's
direct corporate sales force consisted of approximately 103 dedicated
professionals targeting the wireless decision maker within large corporations.
TeleCorp also benefits from AT&T's national corporate accounts sales force.
AT&T, in conjunction with TeleCorp, supports TeleCorp's marketing of its
services to AT&T's large national accounts located in TeleCorp's service areas.
TeleCorp also employs 21 telesales representatives in its Memphis call center
and contracts for 11 Spanish speaking telesales representatives in Convergys'
Fort Lauderdale, Florida operations. TeleCorp uses direct marketing to generate
leads and stimulate prospects, allowing it to maintain low selling costs and to
offer its customers additional features or customized services.
Online Sales. TeleCorp's web page provides current information about
TeleCorp, its markets, its products and services. All information that is
required to make a purchasing decision is available through TeleCorp's website
and online store. Customers are able to choose any of TeleCorp's rate plans,
features, handsets and accessories. The online store provides a secure
environment for transactions, and customers purchasing through the online store
experience a similar business process to that of customers purchasing service
through other channels.
Customer Care
TeleCorp is committed to building strong customer relationships by providing
customers with prompt and helpful service. TeleCorp serves its customers from
its state-of-the-art facility in Memphis, Tennessee. Convergys, a leading
provider of outsourced call center services, provides back up call center
support and bilingual customer service, for TeleCorp's Spanish speaking
customers, from two facilities in Florida. As of March 31, 2000, the three
centers employed 368 customer care representatives including 149 of TeleCorp's
employees. The multiple center structure allows TeleCorp to distribute customer
service calls between the centers to promote cost effective 24 hour/seven days
a week customer service. All of its centers have sophisticated infrastructure
and information systems, including automated call distributors and advanced
diagnostic tools for one-call trouble resolution. TeleCorp emphasizes proactive
and responsive customer service, including welcome packages along with first
bill, three months and one year anniversary calls. TeleCorp is also expanding
web-based services to include online account information to allow customers to
check billing, modify service or otherwise manage their accounts.
Network Development
TeleCorp launched commercial operations in February 1999 and has commenced
its services in each of its major markets. It launched in markets which have
attractive characteristics for a high volume of wireless communications usage,
including metropolitan areas, the surrounding suburbs, commuting and travel
corridors, and popular leisure and vacation destinations. Immediately upon
launch, customers had access to coast-to-coast coverage through roaming
arrangements with AT&T and its roaming partners, both inside and outside its
licensed areas. Within each market, geographic coverage will be based upon
changes in wireless communications usage patterns, demographic changes within
TeleCorp's licensed areas and its experiences in those markets. As of March 31,
2000, TeleCorp provided coverage to approximately 74% of the population of its
licensed area. TeleCorp defines coverage to include an entire basic trading
area if it has a significantly developed system in that basic trading area.
130
<PAGE>
Construction of TeleCorp's network is scheduled for multiple phases. In
1999, TeleCorp completed the first phase of its network build out and expects
to complete the second phase by the end of 2000. TeleCorp has successfully
launched commercial service in the following 26 markets in 1999:
Fayetteville, AR Nantucket, MA
Hot Springs, AR Worcester, MA
Little Rock, AR Concord, NH
Jonesboro, AR Manchester, NH
Baton Rouge, LA Nashua, NH
Hammond, LA Portsmouth, NH
Houma, LA Arecibo, PR
Lafayette, LA Humacao, PR
New Iberia, LA Mayaguez, PR
New Orleans, LA Ponce, PR
Thibodaux, LA San Juan, PR
Cape Cod, MA Jackson, TN
Martha's Vineyard, MA Memphis, TN
As of March 31, 2000, TeleCorp's entire network covered a total of 28
markets and a population of 12.4 million, and included approximately 815
network equipment sites and six connection sites.
The third and fourth phases of TeleCorp's network buildout plan will focus
on expanding its coverage to a total of 46 markets including a population of
3.3 million, and entail launching service in Beaumont, Texas; Alexandria,
Louisiana; Evansville, Indiana; Paducah, Kentucky; Columbia and Jefferson City,
Missouri; Pine Bluff and Fort Smith, Arkansas and the U.S. Virgin Islands. Upon
completion of the fourth phase, which TeleCorp expects by the end of 2001,
TeleCorp expects its network will be available to a population of 15.7 million
and will include eight call connection sites and 1,215 network equipment sites.
Network Operations
TeleCorp maintains a network operations center to ensure continuous
monitoring and maintenance of its network. The effective operation of its
network requires:
. connection agreements and agreements to transmit signals from network
equipment sites to call connection equipment with other communications
providers;
. long distance connection;
. the implementation of roaming arrangements;
. the development of network monitoring systems; and
. the implementation of information technology systems.
Connection Agreements
TeleCorp's network is connected to the public telephone network to
facilitate the origination and termination of traffic between its network and
both the local and long distance carriers. TeleCorp has signed agreements with
multiple carriers, including BellSouth, SBC Communications, Bell Atlantic and
Puerto Rico Telephone. In most cases these agreements are standard agreements
entered into with all qualifying carriers on generally the same terms, with
each party agreeing to pay the other for the carrying or completion of calls on
the other's network.
Long Distance Connection
TeleCorp has executed a wholesale long distance agreement with AT&T
providing for preferred rates for long distance services.
131
<PAGE>
Roaming Arrangements
Through TeleCorp's arrangements with AT&T and via the use of advanced
handsets, its customers have roaming capabilities on AT&T's wireless network
and AT&T's customers have roaming capability on TeleCorp's wireless network.
Further, TeleCorp has the benefit of AT&T's roaming agreements with third party
carriers at AT&T's preferred pricing. These agreements, together with AT&T's
wireless network, cover approximately 98% of the U.S. population, including in-
region roaming agreements covering all of TeleCorp's launched service areas.
Network Monitoring Systems
TeleCorp's network operations center provides around-the-clock monitoring
and maintenance of its entire network. The network operations center is
equipped to constantly monitor the status of all network equipment sites and
call connection equipment and to record network traffic. The network operations
center provides continuous monitoring of system quality for blocked or dropped
calls, call clarity and evidence of tampering, cloning or fraud. TeleCorp
designed its network operations center to oversee the interface between
customer usage, data collected by call connection equipment and its billing
systems. TeleCorp's network operations center is located in the Memphis site
containing call connection equipment, and TeleCorp also has back-up network
operations center capabilities in its Arlington, Virginia data center.
Information Technology Systems
TeleCorp operates management information systems to handle customer care,
billing, network management and financial and administrative services. The
systems focus on three primary areas:
. network management, including service activation, pre-pay systems,
traffic and usage monitoring, trouble management and operational support
systems;
. customer care, including billing systems and customer service and
support systems; and
. business systems, including financial, purchasing, human resources and
other administrative systems.
TeleCorp has incorporated sophisticated network management and operations
support systems to facilitate network fault detection, correction and
management, performance and usage monitoring and security. System capabilities
have been developed to allow over-the-air activation of handsets and implement
fraud protection measures. TeleCorp maintains stringent controls for both
voluntary and involuntary deactivations. TeleCorp attempts to minimize customer
disconnects initiated by it through credit review and preactivation screening,
to identify prior fraudulent or bad debt activity and call pattern profiling,
to identify where activation and termination policy adjustments are needed.
Competition
TeleCorp believes that customers choose a wireless communications service
provider principally based upon network coverage, pricing, quality of service
and customer care. TeleCorp competes directly with at least two cellular
providers and other PCS providers in each of its markets and against enhanced
special mobile radio operations in some of its markets. TeleCorp competes with
at least one analog, one CDMA and one GSM operator in each of its markets other
than Puerto Rico and New Orleans. Most of the existing cellular providers in
TeleCorp's markets have an infrastructure in place and have been operational
for a number of years, with some of these competitors having greater financial
and technical resources than TeleCorp does. These cellular operators may
upgrade their networks to provide services comparable to those offered by
TeleCorp. TeleCorp also competes with other PCS license holders in each of its
markets.
TeleCorp also competes with resellers of wireless communications services in
each of its markets. Resellers purchase large volumes of services on a wireless
operator's network, usually at a discount, and resell the services to end users
under the reseller's own brand name. While the network operator receives some
132
<PAGE>
revenue from the sale of services to the reseller, the operator is competing
with its own customer for sales to the end users. The principal resellers in
TeleCorp's markets include MCI in New England and Motorola in Puerto Rico.
TeleCorp has agreed to resell services to AT&T in each of its markets should
AT&T desire to do so. TeleCorp has not yet entered into any such arrangements
with AT&T or any other party.
As a recent entrant into the market for wireless communications services,
TeleCorp does not believe that it has obtained a significant share of the
market in any of its areas of operation. As a recent entrant, TeleCorp faces
significant competition from operators who have already established strong
market positions and have signed up many customers. Most of the existing
cellular operators have developed systems that have larger local and regional
coverage than TeleCorp currently has. TeleCorp seeks to compete by offering a
competitive product with attractive pricing plans and through its extensive
access to roaming, including in-region roaming, which gives TeleCorp an
effective coverage area competitive with that of its principal competitors.
TeleCorp has developed its pricing plans to be competitive and to emphasize the
advantages of its offerings. TeleCorp has discounted and may continue to
discount its pricing in order to obtain customers or in response to downward
pricing in the market for wireless communications services.
TeleCorp anticipates that market prices for wireless communications services
generally will decline in the future based upon increased competition.
TeleCorp's ability to compete successfully will depend, in part, on its ability
to anticipate and respond to various competitive factors affecting the
industry, including new services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions and competitors' discount
pricing strategies, all of which could adversely affect its operating margins.
TeleCorp plans to use its digital feature offerings, national network through
its AT&T affiliations, contiguous footprint providing an extended home calling
area, and local presence in secondary markets, to combat potential competition.
TeleCorp believes that its extensive digital network, once deployed, will
provide a cost effective means to react appropriately to any price competition.
Acquisition History
On April 20, 1999, TeleCorp acquired PCS licenses covering the Baton Rouge,
Houma, Hammond and Lafayette, Louisiana basic trading areas from Digital PCS.
As consideration for these licenses, TeleCorp issued to Digital PCS $2.3
million of its common and preferred stock, paid Digital PCS approximately $0.3
million in reimbursement of interest paid on U.S. government debt related to
the licenses and assumed debt owed to the U.S. government of $4.1 million less
a discount of $609, related to these licenses. These licenses cover a
population of approximately 1.6 million, including a population of 1.2 million
in Baton Rouge and Lafayette covered by licenses already owned.
On May 25, 1999, TeleCorp completed the acquisition of a PCS license and
related assets covering the San Juan major trading area from AT&T Wireless. On
May 24, 1999, TeleCorp sold to AT&T Wireless $40.0 million of its series A, D
and F preferred stock. On May 25, 1999, it purchased the license and related
assets from AT&T Wireless for $96.5 million in cash. In addition, TeleCorp
reimbursed AT&T Wireless $3.2 million for microwave relocation and $0.3 million
for other expenses AT&T Wireless incurred in connection with the acquisition.
This license covers a population of approximately 3.9 million in Puerto Rico
and the U.S. Virgin Islands.
On June 2, 1999, TeleCorp acquired PCS licenses covering the Alexandria,
Lake Charles and Monroe, Louisiana basic trading areas from Wireless 2000. As
consideration for these licenses, TeleCorp issued approximately $0.4 million of
common and preferred stock, paid approximately $0.2 million to Wireless 2000
for microwave relocation expenses related to the Monroe license and reimbursed
Wireless 2000 $0.4 million for interest paid on government debt related to
their licenses. Additionally, TeleCorp assumed $7.4 million, less a discount of
$1.0 million of debt owed to the U.S. government related to these licenses.
These licenses cover a population of approximately 0.8 million. TeleCorp
cannot, without AT&T Wireless's consent, develop the markets covered by the
Monroe license.
133
<PAGE>
TeleCorp's agreements with AT&T Wireless were extended to cover the Baton
Rouge, Houma, Hammond and Lafayette, Louisiana basic trading areas; the San
Juan, Puerto Rico major trading area; and the Alexandria, Lake Charles and
Monroe, Louisiana basic trading areas, except for a portion of the Monroe basic
trading area, upon the closing of the Louisiana and Puerto Rico acquisitions.
On April 7, 2000, TeleCorp completed its acquisition of TeleCorp LMDS, Inc.
through an exchange of all of the outstanding stock of TeleCorp LMDS for
878,400 shares of TeleCorp's class A voting common stock. TeleCorp LMDS's
stockholders are Mr. Vento, Mr. Sullivan and three of TeleCorp's initial
investors. By acquiring TeleCorp LMDS, TeleCorp will gain local multipoint
distribution service licenses covering 1100 MHz of airwaves in the Little Rock,
Arkansas basic trading area and 150 MHz of airwaves in each of the Beaumont,
Texas; New Orleans, Louisiana; San Juan and Mayaguez, Puerto Rico; and U.S.
Virgin Islands basic trading areas.
On April 11, 2000, TeleCorp completed its acquisition of the 15% of Viper
Wireless, Inc. that it did not yet own from Messrs. Vento and Sullivan in
exchange for an aggregate of 323,372 shares of TeleCorp's class A voting common
stock and 800 shares of its series E preferred stock through a merger of
TeleCorp Holding Corp. and Viper Wireless. TeleCorp Holding Corp. acquired 85%
of Viper Wireless on March 1, 1999 in exchange for $32.3 million contributed by
AT&T and some of TeleCorp's other initial investors for additional shares of
its preferred and common stock. Viper Wireless used the proceeds to participate
in the Federal Communications Commission's reauction of PCS licenses. Viper
Wireless was subsequently granted six PCS licenses in the reauction.
On April 27, 2000, TeleCorp acquired 15 MHz of additional airwaves in the
Lake Charles, Louisiana basic trading area from Gulf Telecom, LLC. As
consideration for the additional airwaves TeleCorp paid Gulf Telecom $0.3
million in cash, assumed approximately $2.4 million in Federal Communications
Commission debt related to the license and reimbursed Gulf Telecom for all
interest it paid to the Federal Communications Commission on debt related to
the license from June 1998 through March 2000.
Intellectual Property
The AT&T globe design logo is a service mark registered with the U.S. Patent
and Trademark Office. AT&T owns the service mark. TeleCorp uses the AT&T globe
design logo, on a royalty free basis, with equal emphasis on its SunCom brand
and logo, solely within its licensed area in connection with marketing,
offering and providing licensed services to end-users and resellers of its
services. TeleCorp's license agreement with AT&T grants it the right and
license to use licensed marks on permitted mobile phones. This license
agreement contains numerous restrictions with respect to the use and
modification of licensed marks.
TeleCorp, Tritel and Triton have adopted a common brand, SunCom. Each of the
SunCom companies owns one-third of Affiliate License Co., which owns the SunCom
name and has no other operations. TeleCorp and the other SunCom companies
license the SunCom name from Affiliate License Co. TeleCorp uses the brand to
market, offer and provide services to end-users and resellers of its PCS.
Employees
As of March 31, 2000, TeleCorp employed approximately 1,120 people. None of
TeleCorp's employees currently are represented by a union and TeleCorp believes
that its relations with its employees are good.
Properties
TeleCorp leases space for its call connection equipment in New Orleans,
Boston and Puerto Rico and for its network operations center, its call
connection equipment, its customer care and its data center in Memphis.
Further, TeleCorp has operating leases primarily related to its headquarters,
regional offices, retail store locations, distribution outlets, office space
and network equipment sites.
134
<PAGE>
Legal Proceedings
TeleCorp was not a party to any lawsuit or proceeding which is likely, in
the opinion of management, to have a material adverse effect on its financial
position, results of operations and cash flows. TeleCorp is a party to routine
filings and customary regulatory proceedings with the Federal Communications
Commission relating to its operations.
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth information concerning the beneficial
ownership of TeleCorp's class A voting common stock as of April 11, 2000, for:
. each person known to TeleCorp to beneficially own more than 5% of the
outstanding shares of TeleCorp class A voting common stock;
. TeleCorp's directors;
. the Chief Executive Officer and the three other most highly compensated
executive officers who were serving as executive officers during 1999;
and
. all of TeleCorp's executive officers and directors, as a group.
Except as otherwise noted, the named individual has sole voting and
investment power with respect to such securities.
<TABLE>
<CAPTION>
Percentage of Percentage
Outstanding of Outstanding
Class A Voting Voting Preference
Common Stock Common Stock
Beneficially Beneficially
Number of Owned Owned
Shares of ---------------- ----------------- Percent
Class A In In of Voting
Voting In Holding In Holding Power in
Common Stock TeleCorp Company TeleCorp Company Holding
Beneficially before after before after Company
Owned in the the the the After the
Stockholders TeleCorp(1) Merger Merger Merger(2) Merger Merger(3)
- ------------ ------------ -------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Chase Capital Partners.. 15,618,648(4) 17.8 8.8 -- -- 3.8
Equity-Linked Investors
II..................... 14,835,023(5) 16.9 8.3 -- -- 3.6
Hoak Communications
Partners, L.P.......... 10,974,781(6) 12.5 6.1 -- -- 2.7
Whitney Equity Partners,
L.P.................... 9,100,865(7) 10.4 5.1 -- -- 2.2
Media/Communications
Partners............... 5,923,519(8) 6.7 3.3 -- -- 1.5
AT&T Wireless PCS, LLC.. 17,867,453(9) 17.4 22.7 -- -- 12.4
Michael R. Hannon....... 15,618,648(4) 17.8 8.8 -- -- 3.8
Michael Schwartz........ 17,867,453(9) 17.4 22.7 -- -- 12.4
William Hague........... 17,867,453(9) 17.4 22.7 -- -- 12.4
Rohit M. Desai.......... 14,835,023(5) 16.9 8.3 -- -- 3.6
James M. Hoak........... 10,974,781(6) 12.5 6.1 -- -- 2.7
Scott I. Anderson....... 499,789(10) * * -- -- *
William Kussell......... 499,789(11) * * -- -- *
Gerald T. Vento......... 5,249,654(12) 6.0 2.9 50.0 49.95 26.3
Thomas H. Sullivan...... 3,394,228(13) 3.9 1.9 50.0 49.95 25.8
Julie A. Dobson......... 1,602,879(14) 1.8 * -- -- *
Robert Dowski........... 37,090 * * -- -- *
Directors and Executive
Officers as a Group (11
persons)............... 69,103,142 67.3 47.4 100.0 99.9 75.0(16)
</TABLE>
- --------
* Less than one percent.
(1) Pursuant to the rules of the Securities and Exchange Commission,
percentages of beneficial ownership of the class A voting common stock are
calculated assuming that shares of class A voting common stock issuable
upon conversion of securities convertible into class A voting common stock
are outstanding for purposes of each respective stockholder or group, but
not outstanding for purposes of computing the percentage of any
135
<PAGE>
other person. Included in the calculation of beneficial ownership are
shares of class A voting common stock issuable upon conversion or exercise
of securities within 60 days of April 11, 2000. The number of shares of
class A voting common stock held in Holding Company after the merger
remains the same for each person or entity listed in the table except that:
(i) AT&T will hold an aggregate of 47,038,522 shares of class A voting
common stock, which includes 18,288,835 shares of class A voting common
stock; 14,912,778 shares of Series F Preferred Stock convertible into
14,717,715 shares of class A voting common stock and 195,063 shares of
class D common stock of Holding Company; and 46,374 shares of series G
Preferred stock convertible into 14,031,972 shares of class A voting common
stock and 949,398 shares of class F common stock, (ii) Scott Anderson will
hold an aggregate of 502,388 shares of class A voting common stock, which
includes options to purchase an aggregate of 10,005 shares of Holding
Company class A voting common stock, consisting of the conversion of
options to purchase 2,280 shares of Tritel class A voting common stock and
7,725 shares of TeleCorp class A voting common stock and 492,064 shares of
class A common stock held by TeleCorp Investment Corp II, L.L.C. and (iii)
TeleCorp's directors and executive officers as a group hold 98,276,810
shares of Holding Company class A voting common stock.
(2) Mr. Vento and Mr. Sullivan each own 1,545 shares of voting preference
stock. Together, the voting preference stock possesses 50.1% of the voting
power of all shares of TeleCorp's capital stock. Mr. Vento and Mr.
Sullivan are required to vote their shares of voting preference stock
together on all matters.
(3) The percentage of voting power held in Holding Company assumes the
conversion of 14,912,778 shares of series F preferred stock held by AT&T
into 14,717,715 shares of class A voting common stock and 195,063 shares
of class D common stock of Holding Company and 46,374 shares of series G
preferred stock held by AT&T into 14,031,972 shares of class A voting
common stock and 949,398 shares of class F common stock of Holding
Company.
(4) Consists of 15,265,692 shares of class A voting common stock held by CB
Capital Investors, L.P., an affiliate of Chase Capital Partners, and
352,956 shares of class A voting common stock held by TeleCorp Investment
Corp., L.L.C., of which CB Capital Investors, L.P. owns a majority of the
membership interest. These shares may also be deemed to be beneficially
owned by Mr. Hannon, Vice President of CB Capital Investors, L.P., who
disclaims beneficial ownership of all of these shares. The address of
these stockholders and of Mr. Hannon is 380 Madison Avenue, 12th Floor,
New York, New York 10017.
(5) Consists of 8,848,318 shares of class A voting common stock held by
Private Equity Investors III, L.P. and 5,986,705 shares of class A voting
common stock held by Equity-Linked Investors-II. Each of these
stockholders is an affiliate of Desai Capital Management. These shares may
also be deemed to be beneficially owned by Mr. Desai, the managing general
partner of each of these stockholders, who disclaims beneficial ownership
of all of these shares. The address of these stockholders and Mr. Desai is
540 Madison Avenue, 36th Floor, New York, New York 10022.
(6) Consists of 919,881 shares of class A voting common stock held by HCP
Capital Fund, L.P. and 10,054,900 shares of class A voting common stock
held by Hoak Communications Partners, L.P. These shares may also be deemed
to be beneficially owned by Mr. Hoak, Principal and Chairman of the
manager of these stockholders, stockholder of the manager and General
Partner of Hoak Communications Partners, L.P. and limited partner and
stockholder of the General Partner of HCP Capital Fund, L.P. The address
of these stockholders and Mr. Hoak is One Galleria Tower, 13355 Noel Road,
Suite 1050, Dallas, Texas 75240.
(7) Consists of 6,255,859 shares of class A voting common stock held by J. H.
Whitney III, L.P., 150,746 shares of class A voting common stock held by
Whitney Strategic Partners III, L.P.; and 2,694,260 shares of class A
voting common stock held by Whitney Equity Partners, L.P. The address of
these stockholders is 177 Broad Street, 15th Floor, Stamford, Connecticut
06901.
(8) Consists of 5,657,726 shares of class A voting common stock held by
Media/Communications Partners III Limited Partnership and 265,793 shares
of class A voting common stock held by Media/Communications Investors
Limited Partnership. These shares may also be deemed to be beneficially
owned by Mr. Wade, President of M/C Investor General Partner-J, Inc.,
which is a General Partner in Media Communications Investors Limited
Partnerships and Manager of M/C III, L.L.C., which is a General Partner in
Media
136
<PAGE>
Communications Partners III Limited Partnership. The address of these
stockholders and Mr. Wade is 75 State Street, Suite 2500, Boston,
Massachusetts 02109.
(9) Consists of (1) 3,149,737 shares of class A voting common stock and
14,912,718 shares of series F preferred stock, which is convertible into
14,717,715 shares of class A voting common stock and 195,063 shares of
class D common stock, held by AT&T Wireless PCS, LLC. These shares may
also be deemed to be held by Mr. Schwartz, Mr. Hague and various AT&T
affiliates. Mr. Schwartz and Mr. Hague disclaim beneficial ownership of
all of these shares. The address of Mr. Schwartz and Mr. Hague is c/o
AT&T Wireless PCS, LLC 7277 164th Avenue, N.E., Redmond, Washington
98052.
(10) Consists of 492,064 shares of class A voting common stock held by
TeleCorp Investment Corp. II, L.L.C., of which Cedar Grove Partners, LLC
owns 4.49%, and vested options to purchase 7,725 shares of class A voting
common stock held by Mr. Anderson. Mr. Anderson is a principal of Cedar
Grove Partners, LLC. The address of Mr. Anderson is c/o Cedar Grove
Investments, 2415 Carillon Point, Kirkland, WA 98033.
(11) Consists of 492,064 shares of class A voting common stock held by
TeleCorp Investment Corp. II, L.L.C., of which Mr. Kussell owns 2.99% and
vested options to purchase 7,725 shares of class A voting common stock
held by Mr. Kussell. The address of Mr. Kussell is c/o Allied Domecq
Retailing USR, 15 Pacella Park Drive, Randolph, MA 02368.
(12) Consists of 492,064 shares of class A voting common stock held by
TeleCorp Investment Corp. II, L.L.C. and 4,757,590 shares of class A
voting common stock held by Mr. Vento. Mr. Vento serves as a manager and
is a member of TeleCorp Investment Corp. II, L.L.C. The address of the
stockholder is c/o TeleCorp PCS, Inc. 1010 N. Glebe Road, Suite 800,
Arlington, VA 22201.
(13) Consists of 492,064 shares of class A voting common stock held by
TeleCorp Investment Corp. II, L.L.C.; 2,899,964 shares of class A voting
common stock held by Mr. Sullivan; and 2,200 shares of class A voting
common stock held by Mr. Sullivan's spouse. Mr. Sullivan serves as a
manager and is the manager of a member of TeleCorp Investment Corp. II,
L.L.C. The address of Mr. Sullivan is c/o TeleCorp PCS, Inc. 1010 N.
Glebe Road, Suite 800, Arlington, VA 22201.
(14) Consists of 1,601,279 shares of class A voting common stock held by Ms.
Dobson and 1,600 shares of class A voting common stock held by Ms.
Dobson's spouse.
(15) Robert Dowski's employment with TeleCorp terminated on March 8, 1999.
(16) This reflects the percentage of voting power the 11 directors and
officers of TeleCorp will hold in Holding Company.
Compensation Committee Report On Executive Compensation
Role of the Compensation Committee
The compensation committee is comprised of four members of TeleCorp's board
of directors, Mr. Michael Schwartz, Mr. Rohit Desai, Mr. Michael Hannon and
Mr. Scott Anderson, each of whom is neither a current nor former employee of
TeleCorp. The compensation committee sets the overall compensation principles
of TeleCorp and reviews the entire compensation program at least once a year.
The base salaries of the TeleCorp's executive officers are determined by the
compensation committee. In establishing base salaries for executive officers
the compensation committee considers numerous factors such as: a review of
salaries in comparable telecommunications companies, the executive's
responsibilities, the executive's importance to the company, the executive's
performance in the prior year, historical salary levels of the executive and
relative salary levels within the company. To date, the compensation committee
has not considered the advice of independent outside consultants in
determining whether the amounts and types of compensation TeleCorp pays to its
officers are appropriate, but the compensation committee may choose to do so
from time to time in the future.
Executive Compensation Guiding Principles
The goal of TeleCorp's compensation program is to attract, motivate and
retain the highly talented individuals TeleCorp needs to be a market leader in
a highly competitive industry. TeleCorp developed the program with the
company's leadership team to support the company's aggressive business
strategy. The following principles guided the development of the program:
137
<PAGE>
Compensation Should Be Related To Performance
TeleCorp believes that the better an individual performs, the higher the
individual's compensation should be. TeleCorp also believes that individual
compensation should be tied to how well the company performs financially. That
is, when the company's performance exceeds its pre-established objectives, the
bonus pool will be higher and to the extent the company's performance does not
meet these objectives, the bonus pool is reduced, and to the extent the
company's performance is less than pre-determined levels, any award payment
will be subject to the compensation committee's discretion.
TeleCorp Employees Should Own TeleCorp Stock
TeleCorp provides its employees at virtually all levels with a way to
become stockholders. In August 1999 TeleCorp made stock option grants to all
of its employees employed prior to July 1, 1999 and in December 1999 TeleCorp
approved the grant of stock options to all employees employed on or before
December 31, 1999 who were not included in the previous grant of options. To
date the executive officers have not received stock options under TeleCorp's
1999 Stock Option Plan. TeleCorp's goal is to encourage each employee to act
like an owner of the business.
Incentive Compensation Should Be A Greater Part Of Total Compensation For
More Senior Management
The proportion of an individual's total compensation that depends on
individual and company performance objectives should increase as the
individual becomes more senior in the company.
Other Goals
TeleCorp's compensation program is designed to balance short and long-term
financial objectives, build stockholder value and reward individual, team and
corporate performance.
TeleCorp reviews compensation survey data from several independent sources
to ensure that its total compensation program is competitive. Companies
selected include those with whom TeleCorp competes for executive and other
employee talent. TeleCorp's competitors for executive and other employee
talent are not necessarily the same companies that are included in the index
used to compare stockholder returns (see Stock Performance Graph, page 213)
because TeleCorp may require specialized skills from a more varied set of
backgrounds.
Components of the Compensation Program
The principal components of TeleCorp's compensation program, other than the
employee benefits, including a 401(k) retirement plan and medical insurance
plans that are available to all employees of TeleCorp, include the following:
. Base Salary;
. Short Term Incentives: Annual Bonus;
. Long Term Incentives: Stock Options; and
. Special Equity Grants: Stock Options and Restricted Stock Grants.
1. Base Salary. TeleCorp sets base salaries for all employees, officers and
executives at levels that are comparable to similar positions at companies
with whom it compares for compensation purposes. While TeleCorp compares
salaries on a regular basis, it usually adjusts salaries only when its review
shows a significant deviation. This is in line with TeleCorp's philosophy that
compensation above competitive levels should come primarily from the variable
portion of the compensation package.
138
<PAGE>
2. Short Term Incentives: Bonus. The annual bonus component of incentive
compensation is intended to align the compensation of TeleCorp's employees,
officers and executives with the short term, or annual, performance of the
company. In 1999, the annual bonus opportunity was based on the company
achieving a number of financial, operating and other objectives, including,
without limitation, meeting revenue and expense targets, meeting build-out
requirements for its licenses and the completion of TeleCorp's initial public
offering of securities. When TeleCorp evaluates performance, it considers
factors such as leadership, customer focus, business knowledge and execution of
TeleCorp's business strategy.
3. Long Term Incentives: Stock Options. TeleCorp makes grants of stock
options to independent members of the company's board of directors, as well as
most other employees of the company. On July 22, 1999, TeleCorp's board
approved the grant of options to virtually all its employees and three of its
directors to purchase an aggregate of 581,967 shares of class A voting common
stock under its plan at an exercise price of $0.0065 per share, the estimated
fair value of the class A voting common stock on the date of grant. TeleCorp
effected these grants on August 31, 1999. On December 17, 1999 TeleCorp's board
also approved the grant of options to employees employed on or prior to
December 31, 1999 who had not previously been granted options to purchase an
aggregate of approximately 260,000 shares of TeleCorp's class A voting common
stock at a below fair market exercise price of $20.00 per share. These grants
will be effective as of January 1, 2000. TeleCorp currently plans to issue
future options at an exercise price equal to the fair market value of the
company's class A voting common stock on the day it grants the options. These
options generally vest over a four year period of continuous service to the
company and expire ten years from the date of the grant. TeleCorp bases target
grants on a comparison to its selected sample group; however, grants to
individuals can be adjusted based on individual performance, retention and
other special circumstances.
4. Special Equity Grants: Stock Options and Restricted Stock
Grants. TeleCorp believes that ownership of TeleCorp stock is a key element of
its compensation program and that retention of its senior management team is
essential to TeleCorp's future success, both in the short and long term. From
time to time, TeleCorp may make special equity grants to accomplish one or both
of these objectives. Depending on the circumstances, a special equity grant may
take the form of a stock option, restricted stock or a combination of the two.
Compensation of the Chief Executive Officer.
In fiscal 1999, TeleCorp's most highly compensated officer was Gerald T.
Vento, the chairman of the board and chief executive officer. Each year, the
board of directors agrees on a set of objectives with Mr. Vento. At the end of
the year, the compensation committee reviews Mr. Vento's performance against
those objectives. This review includes analysis of TeleCorp's short and long
term financial results, as well as its progress towards its strategic
objectives. In addition, TeleCorp considers individual factors such as Mr.
Vento's leadership ability and ability to execute TeleCorp's business strategy
and the company's relationship with customers and the investment community.
Base Salary:
In the year ended December 31, 1999, TeleCorp did not change Mr. Vento's
annual base salary from 1998 of $300,000. The compensation committee believes
that Mr. Vento's current annual base salary is competitive with those paid by
other companies in this industry to their chief executive officers.
Short Term Incentives:
For fiscal 1999, Mr. Vento's annual bonus was based on corporate objectives,
as determined by TeleCorp's board of directors, including meeting revenue and
expense targets, meeting build-out requirements for its licenses, the company's
performance compared to its competitors and the completion of the company's
initial public offering.
139
<PAGE>
When the compensation committee assessed Mr. Vento's performance and
determined his short-term incentive award at the end of the year, it considered
the following accomplishments:
. TeleCorp ended 1999 with over 142,000 customers;
. TeleCorp successfully completed its debt offering in April 1999;
. expenses continued to be in line with expectations;
. TeleCorp successfully completed its initial public offering of
securities in November 1999; and
. at March 31, 2000 TeleCorp had successfully launched service in 28
markets with networks covering approximately 74% of the population where
the company held licenses.
Section 162 (m)
Under Section 162 (m) of the Internal Revenue Code of 1986, as amended,
certain executive compensation (in the form of cash, options or stock) received
by any of the three executive officers of TeleCorp, when aggregated with all
other compensation received by such executive, in excess of $1.0 million will
not be deductible by the company for federal income tax purposes unless such
compensation is awarded under a performance-based plan approved by the
stockholders of the company. To date, all awards of stock to the executive
officers have been made pursuant to agreements or plans approved by TeleCorp's
stockholders. The compensation committee intends to review the potential effect
of Section 162 (m) when making future recommendations to TeleCorp regarding the
compensation of the executive officers.
Committee Conclusion
The compensation committee believes that the caliber and motivation of
TeleCorp's employees and the quality of the company's leadership determine the
company's long term performance. The compensation committee further believes
that it is in the stockholders' interests to compensate executives well when
performance meets or exceeds the high standards set by the board of directors,
so long as there is an appropriate downside risk to compensation when
performance falls short of such high standards. The compensation committee was
satisfied with TeleCorp's progress for 1999 and believes that the compensation
paid was consistent with the company's philosophy of linking executive
compensation with the creation of stockholder value.
This report submitted by the compensation committee, composed of:
Michael Schwartz, Chairman Scott Anderson
Rohit Desai Michael Hannon
Compensation Committee Interlocks and Insider Participation
The TeleCorp compensation committee consists of Messrs. Anderson, Desai,
Hannon and Schwartz (chairman), none of whom is a TeleCorp employee or
consultant. In addition, none of TeleCorp's executive officers has served as a
director or member of the compensation committee of any other entity whose
executive officer served as a director or member of TeleCorp's Compensation
Committee.
140
<PAGE>
Executive Compensation
Compensation of Executive Officers
Summary Compensation Table
The following table contains information about the cash and other
compensation that TeleCorp paid in 1998 and 1999 to Mr. Vento, TeleCorp's Chief
Executive Officer, and the three other most highly paid executive officers. The
bonuses in the table are shown in the year in which they were earned. In
general, bonuses were paid in the year after they were earned.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------- ------------
Other Annual Restricted All Other
Name and Principal Salary Bonus Compensation Stock Awards Compensation
Position* Year ($) ($) ($) ($) ($)
------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gerald T. Vento......... 1999 300,000(1) 300,000 -- -- --
Chief Executive Officer 1998 213,461(2) 157,500 -- -- --
and Chairman
Thomas H. Sullivan...... 1999 250,000(3) 250,000 -- -- --
Executive Vice Presi- 1998 206,931(4) 125,000 106,637(5) -- --
dent and Chief Finan-
cial Officer
Julie A. Dobson......... 1999 250,000 250,000 67,871(6) 47,574(7) --
Vice President and 1998 124,289 155,000 66,134(8) 5,494(9) --
Chief Operating Officer
Robert Dowski(10)....... 1999 35,000 -- -- -- 275,497(11)
Chief Financial Officer 1998 181,196 105,000 -- 2,064(12) --
</TABLE>
- --------
* TeleCorp historically has had only four officers that constitute executive
officers, and as of April 11, 2000, has only three officers that constitute
executive officers as a result of the departure of Mr. Dowski in March
1999.
(1) This amount consists of $300,000 that TeleCorp Management Corp. paid to
Mr. Vento out of amounts TeleCorp paid to TeleCorp Management Corp. under
the Management Agreement.
(2) This amount consists of $111,538 that TeleCorp Management Corp. paid to
Mr. Vento out of amounts TeleCorp paid to TeleCorp Management Corp. under
the Management Agreement and $101,923 that TeleCorp Holding Corp. paid to
Mr. Vento.
(3) This amount consists of $250,000 that TeleCorp Management Corp. paid to
Mr. Sullivan out of amounts TeleCorp paid to TeleCorp Management Corp.
under the Management Agreement.
(4) This amount consists of $92,947 that TeleCorp Management Corp. paid to Mr.
Sullivan out of amounts TeleCorp paid to TeleCorp Management Corp. under
the Management Agreement and $113,984 that TeleCorp Holding Corp. paid to
Mr. Sullivan.
(5) This amount consists of $103,637 in relocation expenses that TeleCorp
Management Corp. paid to Mr. Sullivan out of amounts that TeleCorp paid to
TeleCorp Management Corp. under the Management Agreement and $3,000 that
TeleCorp paid on behalf of Mr. Sullivan in TeleCorp's 401(k) plan.
(6) This amount consists of $67,871 in relocation expenses that TeleCorp
Communications paid to Ms. Dobson.
(7) Consists of 833 shares of series E preferred stock, valued at $52.00 per
share, and 532,308 shares of class A voting common stock, valued at $0.008
per share, issued under TeleCorp's restricted stock plan on July 1, 1999.
(8) This amount consists of $66,134 in relocation expenses that TeleCorp
Communications paid to Ms. Dobson.
(9) Consists of 2,287 shares of series E preferred stock, valued at $1.00 per
share, and 1,068,971 shares of class A voting common stock, valued at
$0.003 per share, issued under TeleCorp's restricted stock grant plan on
July 17, 1998.
(10) Mr. Dowski ceased to be employed with TeleCorp as of March 8, 1999, except
for transition support.
(11) This amount consists of amounts TeleCorp paid or is required to pay to Mr.
Dowski pursuant to his Separation Agreement as follows: $210,000 payable
in 12 monthly installments of $17,500 each, ending March 2000, $17,769 for
his vacation balance and $47,728 in relocation expenses.
(12) Consists of 714 shares of series E preferred stock, valued at $1.00 per
share, and 449,877 shares of class A voting common stock, valued at $0.003
per share, issued under TeleCorp's restricted stock grant plan on July 17,
1998. In March 1999, TeleCorp repurchased 577 of Mr. Dowski's shares of
series E preferred stock and 406,786 of Mr. Dowski's shares of class A
voting common stock, for a total of approximately $19, which is not
reflected in the table.
141
<PAGE>
Option Grants in Fiscal Year Ending December 31, 1999
There were no stock options awarded to the named executive officers in the
last fiscal year.
Management Agreement
Pursuant to the merger, Messrs. Vento and Sullivan will enter into a new
management agreement with Holding Company which is substantially similar to the
original management agreement with TeleCorp.
Under the original management agreement dated July 17, 1998, as amended,
TeleCorp Management Corp., under TeleCorp's oversight, review and ultimate
control and approval, assists TeleCorp with:
. administrative services, such as accounting, payment of all bills and
collection;
. operational services, such as engineering, maintenance and construction;
. marketing services, such as sales, advertising and promotion;
. regulatory services, such as tax compliance, Federal Communications
Commission applications and regulatory filings; and
. general business services, such as supervising employees, budgeting and
negotiating contracts.
Mr. Vento and Mr. Sullivan own TeleCorp Management Corp.
TeleCorp Management Corp. has agreed to provide the services of Mr. Vento
and Mr. Sullivan in connection with the performance of TeleCorp Management
Corp.'s obligations under the management agreement. Mr. Vento and Mr. Sullivan
have agreed to devote their entire business time and attention to providing
these services, provided that they may devote reasonable periods of time to
other enumerated activities.
TeleCorp reimburses TeleCorp Management Corp. for all out of pocket expenses
it incurs for the retention of third parties on TeleCorp's behalf. TeleCorp
pays TeleCorp Management Corp. fees of $550,000 per year, payable in monthly
installments. TeleCorp Management Corp. is also entitled to a potential annual
bonus based upon the achievement of objectives established by the compensation
committee of TeleCorp's board of directors for a particular calendar year. In
1998 and 1999, TeleCorp Management Corp. earned bonuses totaling approximately
$282,500 and $550,000, respectively.
The management agreement has a five-year term. TeleCorp may terminate the
management agreement immediately in certain circumstances including:
. indictment of Mr. Vento or Mr. Sullivan for a felony;
. a material breach which remains uncured after 30 days written notice;
. the failure of TeleCorp Management Corp. to provide to TeleCorp the
services of Mr. Vento and Mr. Sullivan;
. an event of default on any of TeleCorp's credit agreements for
borrowings of $25.0 million or more; or
. acceleration of any of TeleCorp's indebtedness over $25.0 million.
TeleCorp Management Corp. may terminate the agreement voluntarily upon 30
days written notice to TeleCorp. TeleCorp Management Corp. may also terminate
the agreement immediately if:
. Mr. Vento and Mr. Sullivan are removed as directors or are demoted or
removed from their respective offices or there is a material
diminishment of Mr. Vento's and Mr. Sullivan's responsibilities, duties
or status, which diminishment is not rescinded within 30 days after the
date of receipt by TeleCorp's board of directors from Mr. Vento and Mr.
Sullivan of their respective written notice referring to the management
agreement and describing the diminishment; or
. TeleCorp relocates its principal offices without TeleCorp Management
Corp.'s consent to a location more than 50 miles from TeleCorp's
principal offices in Arlington, Virginia.
142
<PAGE>
If TeleCorp Management Corp. terminates the agreement for the two preceding
reasons or if TeleCorp terminates the agreement because of a breach by TeleCorp
Management Corp. or TeleCorp fails to comply with any of its credit agreements
for borrowed money in the amount of $25.0 million or more, TeleCorp Management
Corp. will be entitled to their management fee and annual bonus. Their annual
bonus will be determined as follows:
. if the date of termination is on or prior to June 30 or any applicable
calendar year, the annual bonus will be equal to a pro rata portion of
the annual bonus in respect of that year, as determined based upon
TeleCorp's achievement of the objectives for that year;
. if the date of termination is after June 30 of any applicable calendar
year, the annual bonus will be equal to the annual bonus payable in
respect of that year, as determined based upon TeleCorp's achievement of
the objectives for that year,
in either instance payable upon the later to occur of 30 days after
certification of TeleCorp's financial statements for that year and the last day
of the month after which a new management service provider is retained by
TeleCorp, and conditioned upon TeleCorp Management Corp. having nominated a
successor person or persons, who are acceptable to TeleCorp's board of
directors, and:
. who would not cause a significant and detrimental effect on TeleCorp's
eligibility to hold its PCS licenses and to realize the benefits, if
any, that TeleCorp derives from TeleCorp Management Corp.'s status as a
very small business; and
. to whom TeleCorp voting preference common stock and class C common stock
will be transferred by Mr. Vento and Mr. Sullivan.
Under the new management agreement, which becomes effective on the closing
of the merger, if either Mr. Sullivan or Mr. Vento are removed without cause or
leave with good reason, then TeleCorp's repurchase rights with respect to Mr.
Sullivan's and Mr. Vento's unvested stock will terminate and Mr. Sullivan's and
Mr. Vento's unvested stock will become immediately vested.
The management agreement protects TeleCorp if TeleCorp Management Corp. does
not nominate an acceptable person or persons to provide management services to
TeleCorp.
The shares of class A voting common stock and series E preferred stock that
Mr. Vento and Mr. Sullivan received under the securities purchase agreement
vest in accordance with the following schedule, which is contained in the
management agreement:
<TABLE>
<CAPTION>
Vesting Date Percent of Shares
------------ -----------------
<S> <C>
July 17, 1998.............................................. 20%
July 17, 2000.............................................. 15%
July 17, 2001.............................................. 15%
July 17, 2002.............................................. 15%
July 17, 2003.............................................. 15%
</TABLE>
The remaining shares vest according to the completion of different steps in
TeleCorp's minimum construction plan.
TeleCorp is obligated to repurchase from Mr. Vento and Mr. Sullivan, and
they are required to sell to TeleCorp, following the termination of the
management agreement for any reason, the amount of TeleCorp's class A voting
common stock, up to 5,764,595 shares, and TeleCorp's series E preferred stock,
up to 18,219 shares, that have not yet vested.
During the term of the management agreement, and under limited circumstances
for a period following termination, TeleCorp Management Corp., Mr. Vento and
Mr. Sullivan are prohibited from assisting or becoming associated with any
person or entity, other than as a holder of up to 5% of the outstanding voting
shares of any publicly traded company, that is actively engaged in the business
of providing mobile wireless communications services in TeleCorp's territory,
and from employing any person who was employed by TeleCorp unless that person
was not employed by TeleCorp for a period of at least six months.
143
<PAGE>
Employment Agreement
On July 17, 1998, TeleCorp entered into an employment agreement with Julie
Dobson. On February 27, 2000, TeleCorp agreed to amend Ms. Dobson's employment
agreement to be effective upon the closing of the merger.
The Original Agreement. Under the original agreement Ms. Dobson serves as
TeleCorp's Chief Operating Officer at a base annual salary of $250,000. Ms.
Dobson is eligible under the employment agreement, at TeleCorp's board of
directors's discretion, to receive a potential annual bonus based upon the
achievement of objectives established by the compensation committee of the
board of directors.
Ms. Dobson's employee agreement provides that she is an employee-at-will.
TeleCorp will reimburse the reasonable expenses that she incurs while
performing her services under her employment agreement and she may participate
in TeleCorp's employee benefit plans available to employees of comparable
status and position.
If Ms. Dobson should die, TeleCorp will pay any amounts that it owed her
under her employment agreement accrued prior to her death to her estate, heirs
and beneficiaries. All family medical benefits under the employment agreement
for the benefit of Ms. Dobson will continue for six months after death.
If TeleCorp terminates Ms. Dobson for cause, or she voluntarily quits,
TeleCorp will pay her any amounts that TeleCorp owes her that accrued prior to
the cessation of employment. If TeleCorp terminates her other than for cause,
TeleCorp will pay Ms. Dobson an amount equal to her then annual base salary, at
normal payroll intervals, as well as continue to cover her under its employee
benefit plans for 12 months. Cause is:
. engaging in misconduct which has caused demonstrable and serious injury,
financial or otherwise, to TeleCorp or its reputation;
. being convicted of a felony or misdemeanor as evidenced by a judgment,
order or decree of a court of competent jurisdiction;
. failing to comply with the TeleCorp board of directors's directions, or
neglecting or refusing to perform the executive's duties or
responsibilities, unless changed significantly without the executive's
consent; or
. violating the employee agreement or restricted stock grant plan.
Under her employment agreement, Ms. Dobson is subject to confidentiality
provisions, and has agreed, for one year after cessation of employment with
TeleCorp, to non-competition and non-solicitation provisions and to limit
public statements concerning TeleCorp.
The Amended Agreement. The amendment to the original employment agreement
provides that if:
. Ms. Dobson's employment with TeleCorp is terminated by TeleCorp without
cause; or
. Ms. Dobson's employment with TeleCorp is terminated by Ms. Dobson
because:
(i) TeleCorp failed to: (a) make payment of Ms. Dobson's annual base
salary or bonus, (b) reimburse Ms. Dobson for expenses she incurred
while performing her duties, and (c) include Ms. Dobson in all
benefit plans for which she qualified;
(ii) TeleCorp causes a material breach of the amended agreement;
(iii) Ms. Dobson is demoted or removed from her offices or there is a
material diminishment of her responsibilities, duties or status;
144
<PAGE>
in each case within 30 days of Ms. Dobson's written notice of the failure,
or
(iv) TeleCorp relocates its offices to a location more than 50 miles
from its principal offices in Arlington, Virginia without Ms.
Dobson's approval,
. then any shares of TeleCorp stock which were granted to Ms. Dobson
pursuant to a stock or award plan that had not vested will immediately
vest. Neither the merger nor the contribution will cause the demotion or
diminishment of Ms. Dobson's duties or responsibilities.
1998 Restricted Stock Plan
In July 1998 TeleCorp established the TeleCorp PCS, Inc. 1998 Restricted
Stock Plan to award key employees shares of its series E preferred stock and
class A voting common stock. Each award is subject to a five- or six-year
vesting schedule that depends on the employee's date of hire, with unvested
shares being redeemed by TeleCorp for $0.003 per share upon termination of
employment. The shares granted are subject to the same transfer restrictions
and repurchase rights as shares held by AT&T and TeleCorp's other initial
investors. As of April 11, 2000, 6,821 shares of series E preferred stock and
3,884,821 shares of class A voting common stock were outstanding under this
plan. TeleCorp repurchased an additional 1,361 shares of series E preferred
stock and 959,261 shares of class A voting common stock from TeleCorp's
stockholders, which it had granted under this plan, and TeleCorp has regranted
some of these repurchased shares under this plan. Any shares not granted on or
prior to July 17, 2003 will be granted to Messrs. Vento and Sullivan.
1999 Stock Option Plan
On July 22, 1999, TeleCorp implemented the 1999 Stock Option Plan to award
employees and members of its board of directors options to acquire shares of
its class A voting common stock. TeleCorp's board of directors has the
discretion to determine the terms of any options granted under this plan.
TeleCorp has reserved 1,814,321 shares of its class A voting common stock for
issuance under this plan. On July 22, 1999, TeleCorp's board of directors
approved the grant of options to virtually all of its employees and three of
its directors to purchase an aggregate of 581,967 shares of class A voting
common stock under TeleCorp's plan at an exercise price of $0.0065 per share,
the estimated fair value of the class A voting common stock on the date of
grant. TeleCorp effected these grants on August 31, 1999. On December 17, 1999,
TeleCorp's board of directors also approved the grant of options to employees
employed on or prior to December 31, 1999 who had not previously been granted
options to purchase an aggregate of approximately 260,000 shares of its class A
voting common stock at a below fair market value exercise price of $20.00 per
share. These grants were effective as of January 1, 2000. On March 20, 2000,
TeleCorp's board of directors approved the grant of options to newly hired
employees to be granted on the last day of the month the employee was hired at
a per share exercise price equal to the lesser of the estimated fair market
value on that day or $44.02. As of March 31, 2000 TeleCorp had not granted any
options to purchase shares of class A voting common stock to employees hired in
January, February and March of 2000. All of the options granted vest ratably
over a three to four year period.
Separation Agreement
On March 8, 1999, TeleCorp entered into a separation agreement with Mr.
Dowski under which TeleCorp paid Mr. Dowski a lump sum payment of $105,000 plus
additional amounts representing unused vacation time and travel and relocation
reimbursements and an aggregate of $210,000 payable in 12 installments of
$17,500 per month. TeleCorp also repurchased 577 shares of Mr. Dowski's series
E preferred stock and 406,786 of Mr. Dowski's class A voting common stock for
an aggregate amount of approximately $19.
AT&T Agreements
On January 23, 1998, TeleCorp and AT&T announced the formation of a venture
under which TeleCorp is financing, constructing and operating a wireless
communications network using the AT&T and SunCom brand
145
<PAGE>
names and logos together, giving equal emphasis to both. AT&T contributed
licenses to TeleCorp in exchange for an equity interest in it. The venture
provides the basis for an alliance between TeleCorp and AT&T to provide
wireless communications services in particular markets. These agreements are
unique and were heavily negotiated by the parties. The parties entered into
these agreements as a whole, and, taken as a whole, TeleCorp believes that the
terms of these agreements were no more favorable to any of the parties than
could have been obtained from third parties negotiated at arms' length. AT&T,
as a result of these agreements, owns shares of TeleCorp's capital stock. In
addition, Mary Hawkins-Key, formerly one of TeleCorp's directors, was a senior
vice president of AT&T Wireless until April 2000 and Michael Schwartz, a
current TeleCorp director, was a vice president of AT&T's Acquisitions and
Development group until his departure in March 2000 and he continues to provide
services to AT&T on a part-time basis. The terms of the venture and the
alliance are described in a number of agreements, summaries of which are set
forth below.
Securities Purchase Agreement
Under a securities purchase agreement, dated as of January 23, 1998, as
amended, among TeleCorp, its initial investors, the former stockholders of
TeleCorp Holding Corp., and Mr. Vento and Mr. Sullivan, TeleCorp received PCS
licenses from AT&T Wireless and TWR Cellular, Inc. in exchange for shares of
TeleCorp's series A preferred stock, series D preferred stock and series F
preferred stock and $21.0 million in cash. TeleCorp's initial investors include
AT&T Wireless, Chase Capital Partners, Desai Associates, Hoak Capital
Corporation, J. H. Whitney & Co., M/C Partners, One Liberty Fund III, L.P.,
Toronto Dominion Investments, Inc. and Northwood Capital Partners. Under the
securities purchase agreement, the initial investors other than AT&T Wireless
agreed to contribute $128.0 million to TeleCorp in exchange for shares of
TeleCorp's series C preferred stock, class A voting common stock, class C
common stock, and class D common stock. In addition, the securities purchase
agreement provides that, upon the closing by TeleCorp of an acquisition of PCS
licenses covering populations of one million or more people, TeleCorp's initial
investors other than AT&T Wireless will contribute an additional $5.0 million
to it in exchange for additional shares of TeleCorp's series C preferred stock
and class A voting common stock. This obligation was satisfied in connection
with TeleCorp's purchase of licenses of Digital PCS LLC. Approximately $39.0
million of the contributions to be made by TeleCorp's initial investors other
than AT&T Wireless were made upon the closing of the transactions contemplated
by the securities purchase agreement, which occurred on July 17, 1998, and the
remainder of the contributions will be made over a three-year period. The
obligations of such initial investors to make their remaining contributions
are:
. irrevocable and unconditional, and not subject to counterclaim, set-off,
deduction or defense, or to abatement, suspension, deferment, diminution
or reduction for any reason whatsoever; and
. secured by a pledge of the shares of TeleCorp's capital stock issued to
each such initial investor under the securities purchase agreement.
Under the securities purchase agreement, Mr. Vento and Mr. Sullivan
exchanged their shares of stock in TeleCorp Holding Corp. for shares of
TeleCorp's series E preferred stock, class A voting common stock, class C
common stock and class D common stock. Mr. Vento and Mr. Sullivan also each
received 1,545 shares of TeleCorp's voting preference stock in exchange for
shares of stock TeleCorp previously issued to them. The other former
stockholders of TeleCorp Holding Corp. exchanged their shares of stock in
TeleCorp Holding Corp. for shares of TeleCorp's series C preferred stock, class
A voting common stock, class C common stock and class D common stock. The table
below indicates each of the parties to the securities purchase agreement, their
contribution and the consideration received:
146
<PAGE>
<TABLE>
<CAPTION>
Stockholder Contribution Consideration Received
----------- ------------------------ ----------------------------
<S> <C> <C>
. AT&T Wireless . PCS licenses covering . 30,650 shares of
some of the basic TeleCorp's
trading series A preferred stock
areas or other areas . 15,741 shares of
within the St. Louis TeleCorp's
major trading series D preferred stock
area, the Louisville- . 4,735,410 shares of
Lexington-Evansville TeleCorp's
major trading area, and series F preferred stock
the Boston-Providence
major trading area
. TWR Cellular, Inc. . PCS licenses covering . 36,073 shares of
the Little Rock, TeleCorp's
Arkansas major series A preferred stock
trading area and . 18,526 shares of
covering some of the TeleCorp's
basic trading series D preferred stock
areas or other areas . 5,573,267 shares of
within the Memphis- TeleCorp's
Jackson major trading series F preferred stock
area
. Chase Capital Partners . $27,782,016 . 28,942 shares of
TeleCorp's
. 363 class A shares of series C preferred stock
TeleCorp Holding Corp. . 8,500,982 shares of
TeleCorp's
. 2,296 class C shares class A voting common stock
of
TeleCorp Holding Corp. . 27,489 shares of
TeleCorp's
. 58 series A preferred class C common stock
shares of TeleCorp . 180,459 shares of
Holding Corp. TeleCorp's class D common
stock
. Desai Associates . $27,782,016 . 27,782 shares of
TeleCorp's
series C preferred stock
. 8,148,027 shares of
TeleCorp's
class A voting common stock
. 26,914 shares of
TeleCorp's
class C common stock
. 176,680 shares of
TeleCorp's
class D common stock
. Hoak Capital . $20,836,512 . 20,837 shares of
Corporation TeleCorp's
series C preferred stock
. 6,111,022 shares of
TeleCorp's
class A voting common stock
. 20,184 shares of
TeleCorp's
class C common stock
. 132,512 shares of
TeleCorp's
class D common stock
. J.H. Whitney & Co. . $17,363,760 . 17,364 shares of
TeleCorp's series C
preferred stock
. 5,092,518 shares of
TeleCorp's class A voting
common stock
</TABLE>
147
<PAGE>
<TABLE>
<CAPTION>
Stockholder Contribution Consideration Received
----------- ------------------------ ----------------------------
<S> <C> <C>
. 16,822 shares of
TeleCorp's
class C common stock
. 110,427 shares of
TeleCorp's
class D common stock
. Entergy Technology . $13,891,008 . 15,051 shares of
Holding TeleCorp's
Company, who has since . 1,974 class B shares series C preferred stock
transferred all of of
TeleCorp's capital stock TeleCorp Holding Corp. . 4,426,969 shares of
it owned to other TeleCorp's
of TeleCorp's initial . 685 class C shares of class A voting common stock
investors
TeleCorp Holding Corp. . 106,151 shares of
TeleCorp's
. 58 series A preferred class D common stock
shares of TeleCorp
Holding Corp.
. M/C Partners and M/C . $10,418,256 . 11,578 shares of
Investors TeleCorp's
. 363 class A shares of series C preferred stock
TeleCorp Holding Corp. . 3,408,462 shares of
TeleCorp's
. 2,296 class C shares class A voting common stock
of TeleCorp Holding . 10,667 shares of
Corp. TeleCorp's
. 58 series A preferred class C common stock
shares of TeleCorp . 70,035 shares of
Holding Corp. TeleCorp's class D common
stock
. One Liberty Fund III, . $3,472,752 . 5,004 shares of TeleCorp's
LP
. 837 class A shares of series C preferred stock
TeleCorp Holding Corp. . 1,431,461 shares of
TeleCorp's
. 2,273 class C shares class A voting common stock
of
TeleCorp Holding Corp. . 4,039 shares of TeleCorp's
. 77 series A preferred class C common stock
shares of TeleCorp . 26,506 shares of
Holding Corp. TeleCorp's class D common
stock
. Toronto Dominion . $3,472,752 . 3,473 shares of TeleCorp's
Investments
series C preferred stock
. 1,018,504 shares of
TeleCorp's
class A voting common stock
. 3,365 shares of TeleCorp's
class C common stock
. 22,084 shares of
TeleCorp's
class D common stock
. Northwood Capital . $2,430,928 . 3,591 shares of TeleCorp's
Partners
and Northwood Ventures . 363 class A shares of series C preferred stock
TeleCorp Holding Corp. . 1,065,908 shares of
TeleCorp's
. 2,296 class C shares class A voting common stock
of
TeleCorp Holding Corp. . 2,929 shares of TeleCorp's
class
. 58 series A preferred C common stock
shares of TeleCorp . 19,241 shares of
Holding Corp. TeleCorp's class D common
stock
. Gilde Investment Fund . 8 class A shares of . 15 shares of TeleCorp's
B.V. TeleCorp Holding Corp. series C preferred stock
. 23 class C shares of . 4,168 shares of TeleCorp's
TeleCorp Holding Corp. class A voting common stock
. 1 series A preferred . 6 shares of TeleCorp's
share of TeleCorp class C common stock
Holding Corp.
</TABLE>
148
<PAGE>
<TABLE>
<CAPTION>
Stockholder Contribution Consideration Received
----------- ------------------------ ----------------------------
<S> <C> <C>
. 43 shares of TeleCorp's
class D common stock
. TeleCorp Investment . 2,659 class C shares . 352,956 shares of
Corp., L.L.C. of TeleCorp Holding TeleCorp's class A voting
Corp. common stock
. 58 series A preferred . 575 shares of TeleCorp's
shares of TeleCorp class C common stock
Holding
Corp. . 3,780 shares of TeleCorp's
class D common stock
. 1,160 shares of TeleCorp's
series C preferred stock
. Gerald T. Vento .$450,000 .1,545 shares of TeleCorp's
.1,788 class A shares of voting preferred common
stock
TeleCorp Holding Corp. .450 shares of TeleCorp's
series C preferred stock
.8,729 shares of TeleCorp's
series E preferred stock
.3,462,725 shares of
TeleCorp's class A voting
common stock
.105,443 shares of
TeleCorp's class C common
stock
.2,861 shares of TeleCorp's
class D common stock
. Thomas H. Sullivan .$100,000 .1,545 shares of TeleCorp's
.1,112 class A shares of voting preferred common
stock
TeleCorp Holding Corp. .100 shares of TeleCorp's
series C preferred stock
.5,426 shares of TeleCorp's
series E preferred stock
.2,099,927 shares of
TeleCorp's class A voting
common stock
.65,372 shares of TeleCorp's
class C common stock
.637 shares of TeleCorp's
class D common stock
</TABLE>
TeleCorp's initial investors other than AT&T also committed in the
securities purchase agreement to make additional irrevocable equity
contributions in the aggregate amount of $5.0 million in return for the
issuance of preferred and common stock in connection with TeleCorp's
acquisition of licenses from Digital PCS LLC. In addition, upon the closing of
the transactions contemplated by the securities purchase agreement, TeleCorp
also issued to other members of management shares of TeleCorp's series E
preferred stock and class A voting common stock. Up to 35.7% of the class A
voting common stock issued to members of management are under TeleCorp's
restricted stock plan. Shares issued under the restricted stock plan are
subject to forfeiture according to a schedule if employment of such stockholder
with TeleCorp is terminated within six years after the closing of the
securities purchase agreement.
Network Membership License Agreement
Under a network license agreement dated as of July 17, 1998 between AT&T and
TeleCorp, AT&T granted to TeleCorp a royalty-free, non-transferable, non-
sublicensable, non-exclusive, limited license to use some of their licensed
marks in TeleCorp's markets, including:
. the logo containing the AT&T name and globe design;
149
<PAGE>
. the expression "Member, AT&T Wireless Services Network"; and
. AT&T colors, graphics and overall configurations.
The licensed marks may only be used in connection with licensed activities.
These licensed activities include:
. providing to TeleCorp's customers and resellers of TeleCorp's wireless
services, solely within the areas covered by TeleCorp's licenses, mobile
wireless communications services; and
. marketing and offering the licensed services within the areas covered by
TeleCorp's licenses with limited advertising outside TeleCorp's licensed
area.
The license agreement also grants to TeleCorp the right to use licensed
marks on specified mobile phones distributed to TeleCorp's customers.
Except in specified instances, AT&T has agreed not to grant to any other
person a right to provide or resell, or act as agent for any person offering,
mobile wireless communications services under the licensed marks in TeleCorp's
licensed markets. AT&T retains all rights of ownership in the licensed marks,
subject to its exclusivity obligations to TeleCorp, in both the areas covered
by TeleCorp's licenses and all other areas.
The license agreement restricts TeleCorp's use and modification of any of
the licensed marks. Although TeleCorp may develop its own marks, TeleCorp may
not use them together with the licensed marks without the prior approval of
AT&T. Any services TeleCorp markets or provides using the licensed marks must
be of comparable quality to similar services that AT&T markets and provides in
areas that are comparable to the areas covered by TeleCorp's licenses. TeleCorp
may take into account commercial reasonableness and the relative stage of
development of the licensed areas, to determine what is comparable service.
TeleCorp must also provide sufficiently high quality services to provide
maximum enhancement to and protect licensed marks, such as attaining specified
levels of network quality, audio quality, system performance and meeting
customer care standards. The license agreement also defines specific testing
procedures to determine compliance with these standards and affords TeleCorp
with a grace period to cure any instances of noncompliance. Following the cure
period, TeleCorp must stop using the licensed marks until it complies with the
standards, or TeleCorp may be deemed to be in breach of the license agreement
and may lose its rights to the licensed marks.
TeleCorp may not assign, sublicense or transfer, by change of control or
otherwise, any of its rights under the license agreement, except that the
license agreement may be, and has been, assigned to TeleCorp's lenders under
TeleCorp's senior credit facilities. After the expiration of any applicable
grace and cure periods under TeleCorp's senior credit facilities, the lenders
may then enforce TeleCorp's rights under the license agreement and assign the
license agreement to any person with AT&T's consent.
The initial term of the license agreement is for a period of five years,
which will be automatically renewed for an additional five-year period if each
party gives written notice to the other party of the election to renew the
license agreement and neither party gives notice of non-renewal.
The license agreement may be terminated by AT&T at any time in the event of
TeleCorp's significant breach and the exhaustion of any applicable cure
periods, which include:
. TeleCorp's misuse of any licensed marks;
. TeleCorp's bankruptcy;
. TeleCorp licensing or assignment of any of its rights under the license
agreement, except as permitted by the terms of the license agreement;
. TeleCorp's loss of the licenses acquired from AT&T;
. TeleCorp's failure to maintain AT&T's quality standards in any material
respect; or
150
<PAGE>
. TeleCorp's change of control, which is defined as a transaction, other
than a transfer by AT&T, that results in any person other than
TeleCorp's initial stockholders or TeleCorp's senior lenders acquiring
beneficial ownership of more than 50% of TeleCorp's voting stock, or
33.3% of TeleCorp's voting stock if the person acquiring TeleCorp stock
acquires more than TeleCorp's initial stockholders hold at that time.
Also included is a transaction that results in any of the three largest
telecommunications carriers, excluding AT&T and any wireless carrier
using TDMA technology, or any regional bell operating company, or
Microsoft acquiring more than 15% of TeleCorp's voting stock, excluding
acquisitions through open market transactions or a majority of
TeleCorp's directors are removed in a proxy contest.
TeleCorp's rights under the license agreement are also subject to the
minimum construction plan set forth in the stockholders' agreement. For more
information concerning the minimum construction plan, see the discussion under
"Stockholders' Agreement" under the heading "AT&T Agreements." After the
initial term, AT&T may also terminate the license agreement in connection with
a disqualifying transaction.
Upon closing of the Digital PCS acquisition, the license agreement was
automatically amended to include the Baton Rouge, Houma, Hammond and Lafayette,
Louisiana basic trading areas under its scope. Upon closing of the Puerto Rico
acquisition, the license agreement was automatically amended to include the San
Juan major trading area under its scope. Upon the closing of the Wireless 2000
acquisition, the license agreement was automatically amended to include the
Alexandria and Lake Charles, Louisiana basic trading areas and certain other
counties under the Monroe, Louisiana basic trading area under its scope.
Intercarrier Roamer Service Agreement/Roaming Administration Service Agreement
Intercarrier Roamer Service Agreement. TeleCorp entered into the
intercarrier roamer services agreement dated as of July 17, 1998 with AT&T
Wireless Services and several of its affiliates. TeleCorp has agreed with AT&T
Wireless that each party, in its capacity as a serving provider, will provide
services to each others customers where it has a license or permit to operate a
wireless communications system. Each home carrier whose customers receive
service from a serving provider will pay to the serving provider all of the
serving provider's charges for wireless service and all of the applicable
charges. Each serving provider's service charges per minute or partial minute
for use for the first three years will be fixed at a declining rate.
The intercarrier roamer service agreement has a term of 20 years, which is
automatically renewed on a year-to-year basis unless terminated by either party
upon 90-days prior written notice after 10 years. The intercarrier roamer
service agreement may be terminated immediately by either party upon written
notice to the other of a default of the other party. A party will be in default
under the intercarrier roamer service agreement upon any of the following:
. material breach of any material term of the intercarrier roamer service
agreement by a party that continues for 30 days after receipt of written
notice of the breach from the nonbreaching party;
. voluntary liquidation or dissolution or the approval by the management
or owners of a party of any plan or arrangement for the voluntary
liquidation or dissolution of the party; or
. bankruptcy or insolvency of a party.
The intercarrier roamer service agreement may also be suspended by either
party immediately upon written notice to the other party of the existence of a
breach of the agreement, whether or not the breach constitutes a default, if
the breach materially affects the service being provided to the customers of
the non-breaching party. While the suspension is in effect, either in whole or
in part, the parties will work together to resolve as quickly as possible the
difficulty that caused the suspension. When the party who originally gave
notice of suspension concludes that the problem causing the suspension has been
resolved, that party will give to the other written notice to this effect, and
the agreement will resume in full effect within five business days after the
parties have mutually agreed that the problem has been resolved. Neither party
may assign or transfer
151
<PAGE>
its rights and obligations under the intercarrier roamer service agreement
without the written consent of the other party, except to an affiliate or an
assignee of its license.
Roaming Administrative Service Agreement. Under the roaming administrative
service agreement dated as of July 17, 1998 between AT&T Wireless and TeleCorp,
AT&T Wireless has agreed to make available to TeleCorp the benefits of the
intercarrier roaming services agreements it has entered into with other
wireless carriers, subject to the consent of the other wireless carriers and to
TeleCorp remaining a member in good standing of the North American Cellular
Network.
The roaming administrative service agreement has an initial term of two
years, which is automatically renewed on a year-to-year basis unless terminated
by either party upon 90-days prior written notice. Either party may terminate
the roaming administrative service agreement for any reason at any time upon
180-days prior written notice. Either party may also terminate the roaming
administrative service agreement:
. upon a material breach of the other party that is not cured or for which
cure is not reasonably begun within 30 days after written notice of the
claimed breach; or
. immediately by either party, after reasonable prior notice, if the other
party's operations materially and unreasonably interfere with its
operations and the interference is not eliminated within 10 days.
AT&T Wireless can terminate the roaming administrative service agreement if:
. TeleCorp is no longer a member in good standing of the North American
Cellular Network; or
. the agreement under which AT&T Wireless receives roaming administration
services is terminated or expires; provided, however, that AT&T Wireless
will offer to resume its services in the event that it extends or
continues that agreement.
Neither party may assign or transfer its rights and obligations under the
roaming administrative service agreement without the written consent of the
other party, except to an affiliate or an assignee of its license, except that
AT&T Wireless may subcontract its duties.
Resale Agreement
The stockholders' agreement provides that, from time to time, at AT&T
Wireless's request, TeleCorp is required to enter into a resale agreement with
AT&T Wireless PCS or other of its affiliates. The resale agreement would grant
to AT&T Wireless the right to purchase from TeleCorp its wireless services on a
non- exclusive basis within a designated area and resell access to, and use of,
TeleCorp's services. AT&T Wireless must pay charges for any services that are
resold, including usage, roaming, directory assistance and long distance
charges, and taxes and tariffs. Any resale agreement would have an initial term
of ten years that would be automatically renewed on a year-to-year basis unless
terminated by either party upon 90-days prior written notice. In addition, AT&T
Wireless would be able to terminate any resale agreement for any reason at any
time upon 180-days prior written notice.
Long Distance Agreement
Under the long distance agreement dated as of December 21, 1998 between AT&T
Wireless and TeleCorp, TeleCorp purchases interstate and intrastate long
distance services from AT&T Wireless at preferred rates. TeleCorp then resells
these long distance services to its customers. TeleCorp can only obtain these
preferred rates if it continues its affiliation with AT&T Wireless. The long
distance agreement has a term of up to three years.
The long distance agreement requires that TeleCorp meets a minimum traffic
volume during the term of the agreement, which is adjusted at least once each
calendar year at the time specified by AT&T Wireless. The minimum traffic
volume commitments may be adjusted more frequently upon mutual agreement by
AT&T
152
<PAGE>
Wireless and TeleCorp. During the first year, TeleCorp sets the minimum
traffic volume commitment in its sole discretion. After the first calendar
year, the commitment may be increased by any amount or decreased by any amount
up to ten percent at TeleCorp's discretion. TeleCorp may reduce the minimum
traffic volume commitments by more than ten percent with AT&T Wireless's
permission. If TeleCorp fails to meet the volume commitments, it must pay to
AT&T Wireless the difference between the expected fee based on the volume
commitment and the fees based on actual volume.
The long distance services TeleCorp purchases from AT&T Wireless may only
be used in connection with:
. TeleCorp's commercial mobile radio services;
. calls that originate on TeleCorp's network; and
. those commercial mobile radio services that share TeleCorp's call
connection equipment.
Puerto Rico License
In a series of transactions, TeleCorp acquired a license and related assets
covering the San Juan major trading area from AT&T Wireless on May 25, 1999.
The following transactions took place ultimately to effect the acquisition of
the license and related assets from AT&T Wireless:
. on May 24, 1999, TeleCorp sold to AT&T for $40.0 million 30,750 shares
of its series A preferred stock, 10,250 shares of its series D preferred
stock, and 3,090,000 shares of its series F preferred stock under a
preferred stock purchase agreement;
. on May 25, 1999, TeleCorp sold to its initial investors other than AT&T
39,997 shares of its series C preferred stock and 12,358,950 shares of
its class A voting common stock in exchange for an aggregate amount of
$40.0 million in cash under a stock purchase agreement, which will be
funded over a three-year period;
. on May 25, 1999, TeleCorp purchased the license for the San Juan major
trading area and related assets, which included 27 constructed network
equipment sites, call connection equipment and leases for additional
network equipment sites, from AT&T for $96.5 million in cash under an
asset purchase agreement; and
. TeleCorp incurred $3.2 million for microwave relocation and $0.3 million
for legal expenses in connection with this acquisition.
In addition, Mr. Vento and Mr. Sullivan were issued fixed and variable
awards of 4,063 and 1,633,899 restricted shares of TeleCorp's series E
preferred stock and class A voting common stock, respectively, in exchange for
their interest in Puerto Rico Acquisition Corporation. Puerto Rico Acquisition
Corporation was an entity wholly-owned by Mr. Vento and Mr. Sullivan that was
created for the special purpose of acquiring the license and related assets of
the San Juan major trading area. The fixed awards typically vest over a five-
year period.
The variable awards vest based upon certain events taking place, including
TeleCorp's reaching milestones in TeleCorp's minimum construction plan, both
of which were probable at December 31, 1999. The stockholders' agreement sets
forth network development requirements for the Puerto Rico license. See "The
Merger--Stockholders Agreement--Construction."
The San Juan major trading area covers a population of approximately 3.9
million people in Puerto Rico, as well as the U.S. Virgin Islands. TeleCorp's
agreements with AT&T were automatically amended to include the San Juan major
trading area under the scope of those agreements.
153
<PAGE>
Other Related Party Transactions
Relationship with Entel Technologies and other Site Acquisition Service
Providers
TeleCorp receives site acquisition, construction management, program
management, microwave relocation and engineering services under a master
services agreement with Wireless Facilities, Inc. Payments under the agreement
were approximately $30.7 million in the 1998 fiscal year. At the time of
entering into the master services agreement, Mr. Vento was a senior officer,
and he and Mr. Sullivan were the controlling stockholders of Entel
Technologies. In February 1998, they sold their interests in Entel Technologies
to Wireless Facilities, Inc. The terms of this agreement were no more favorable
to the parties than they could have obtained from third parties negotiated at
arms' length.
American Towers, Inc. provides TeleCorp with network site leases for PCS
deployment under a master site lease agreement. Chase Capital Partners, one of
TeleCorp's beneficial owners, has a noncontrolling interest in American Towers.
The terms of these lease agreements were no more favorable to the parties than
they could have obtained from third parties negotiated at arms' length.
Relationship with the Initial Purchasers of the Senior Subordinated Discount
Notes
Chase Securities Inc. was one of the initial purchasers of TeleCorp's
outstanding senior subordinated discount notes. Chase Securities Inc. and its
affiliates perform various investment banking and commercial banking services
from time to time for TeleCorp and its affiliates. Chase Securities Inc. acted
as TeleCorp's lead manager for the offering of TeleCorp's senior subordinated
discount notes. The Chase Manhattan Bank, an affiliate of Chase Securities
Inc., is the agent bank and a lender under TeleCorp's senior credit facilities.
Michael R. Hannon, a member of TeleCorp's board of directors, is a General
Partner of Chase Capital Partners, an affiliate of Chase Securities Inc. In
addition, CB Capital Investors, L.P., an affiliate of Chase Capital Partners,
is one of TeleCorp's initial investors and owns shares of TeleCorp's common and
preferred stock. For further information concerning these relationships, see
"TeleCorp Management" and "TeleCorp Principal Stockholders and Beneficial
Ownership of Management." The terms of TeleCorp's senior credit facilities were
no more favorable to the parties than they could have obtained from third
parties negotiated at arms' length.
Relationships with Tritel Communications and Triton
TeleCorp has formed Affiliate License Co. with Triton and Tritel
Communications to adopt a common brand, SunCom, that is co-branded with AT&T on
an equal emphasis basis. Under the agreement, TeleCorp, Triton and Tritel
Communications each own one third of Affiliate License Co., the owner of the
SunCom name. TeleCorp and the other SunCom companies license the SunCom name
from Affiliate License Co. Mr. Sullivan is a director of Affiliate License Co.
The terms of this agreement were no more favorable to the parties than they
could have obtained from third parties negotiated at arms' length.
AT&T owns stock in TeleCorp and in Tritel Communications, and TeleCorp and
Tritel may be deemed affiliates by virtue of common ownership. Mr. Anderson,
one of TeleCorp's directors, also serves as a director of Tritel
Communications. AT&T, CB Capital Investors and Equity-Linked Investors own
stock in TeleCorp and in Triton, and TeleCorp and Triton may be deemed
affiliates by virtue of common ownership. Mr. Anderson also serves as a
director of Triton.
Tritel Communications owned a controlling interest in Digital PCS at the
time TeleCorp acquired licenses from Digital PCS. Tritel Communications may be
deemed an affiliate of Digital PCS. In addition, at the time TeleCorp acquired
licenses from Digital PCS, Mr. Anderson, one of TeleCorp's current directors,
and Mr. Fuqua, one of TeleCorp's directors at the time of the acquisition, were
directors of Tritel Communications. The terms of this agreement were no more
favorable to the parties than they could have obtained from third parties
negotiated at arms' length.
154
<PAGE>
Relationship with Other Entities
TeleCorp Holding Corp. TeleCorp's predecessor company, TeleCorp Holding
Corp., was incorporated to participate in the Federal Communications
Commission's auction of licenses in April 1997. TeleCorp Holding Corp. raised
money from investors to develop any licenses it obtained in the auction.
TeleCorp Holding Corp. successfully obtained licenses in the New Orleans,
Memphis, Beaumont, Little Rock, Houston, Tampa, Melbourne and Orlando basic
trading areas. In August 1997, TeleCorp Holding Corp. transferred the Houston,
Tampa, Melbourne and Orlando basic trading area licenses to four newly-formed
entities created by TeleCorp Holding Corp.'s stockholders:
. THC of Houston;
. THC of Tampa;
. THC of Melbourne; and
. THC of Orlando;
and issued notes in the aggregate amount of approximately $2.7 million to these
entities to develop these licenses. These licenses were transferred along with
the related operating assets and liabilities in exchange for investment units
consisting of class A voting, B non-voting and C common stock and series A
preferred stock in August 1997. Concurrently, TeleCorp Holding Corp.
distributed the investment units, on a pro rata basis, in a partial stock
redemption to TeleCorp Holding Corp.'s existing stockholder group. As a result
of this distribution, TeleCorp Holding Corp. no longer retains any ownership
equity interest in the newly formed entities. TeleCorp Holding Corp. performed
administrative and management services and paid costs on behalf of these
entities for the year ended December 31, 1997 worth the aggregate amount of
$0.7 million. In 1998, upon the closing of the agreements with AT&T, TeleCorp
Holding Corp. paid approximately $2.0 million to the four THC entities as
payment of the notes, offset by the approximately $0.7 million in services and
costs. The terms of these transactions were no more favorable to the parties
than they could have obtained from third parties negotiated at arms' length.
TeleCorp WCS. On May 5, 1997, TeleCorp Holding Corp. lent approximately $3.0
million to TeleCorp WCS, Inc. in exchange for interest-free notes from TeleCorp
WCS. On May 5, 1997, TeleCorp Holding Corp. received equity investments in
exchange for the right to receive:
. the notes from TeleCorp WCS;
. any cash, notes or other assets received by TeleCorp Holding Corp. on
behalf of the notes; or
. any capital stock into which the notes were converted.
TeleCorp WCS repaid approximately $2.7 million of the notes with cash to
TeleCorp Holding Corp., and TeleCorp Holding Corp. forwarded this cash to the
equity investors. TeleCorp WCS issued a note in the amount of approximately
$0.3 million directly to the investors on behalf of the remaining $0.3 million
outstanding under the notes. TeleCorp WCS converted these notes into capital
stock issued to the investors in 1998.
Mr. Sullivan and Mr. Vento own 2,875 and 4,625 shares of class C common
stock of TeleCorp WCS, respectively, which represents 60% of its outstanding
class A voting common stock. At the time of entering into the transactions with
TeleCorp WCS, Mr. Sullivan and Mr. Vento were stockholders in TeleCorp Holding
Corp.
The terms of these transactions were no more favorable to the parties than
they could have obtained from third parties negotiated at arms' length.
TeleCorp Investment Corp.; TeleCorp Investment Corp. II. TeleCorp Investment
Corp. owns 352,956 shares of TeleCorp's class A voting common stock, 575 shares
of TeleCorp's class C common stock, 3,780
155
<PAGE>
shares of TeleCorp's class D common stock and 1,160.17 shares of TeleCorp's
series C preferred stock. Some of TeleCorp's stockholders own stock in TeleCorp
Investment Corp., as follows:
. Chase Capital Partners, one of TeleCorp's initial investors, owns an 80%
equity interest;
. Mr. Sullivan and Mr. Vento each own a 2.4% equity interest; and
. Mr. Dowski owns a 1.6% equity interest.
In addition, TeleCorp Investment Corp. II was formed to purchase from
Entergy Technology Holding Corporation 492,064 shares of TeleCorp's class A
voting common stock and 11,366 shares of TeleCorp's class D common stock. The
purchase of shares was concluded on July 15, 1999. Mr. Vento, Mr. Sullivan and
Ms. Dobson each own 5.99% of TeleCorp Investment Corp. II. Mr. Vento and Mr.
Sullivan serve as managers of TeleCorp Investment Corp. II.
The terms of these transactions were no more favorable to the parties than
they could have obtained from third parties negotiated at arms' length.
Viper Wireless. On April 11, 2000, pursuant to Federal Communications
Commission consent, TeleCorp acquired the 15% of Viper Wireless, Inc. that it
did not yet own from Messrs. Vento and Sullivan in exchange for an aggregate of
323,372 shares of TeleCorp's class A voting common stock and 800 shares of
TeleCorp's series E preferred stock through a merger of TeleCorp Holding Corp.
and Viper Wireless. TeleCorp Holding Corp. acquired 85% of Viper Wireless on
March 1, 1999 in exchange for $32.3 million contributed by AT&T Wireless and
some of TeleCorp's other initial investors for additional shares of TeleCorp's
preferred and common stock. As part of this financing, TeleCorp paid
approximately $0.5 million to Chase Securities, Inc., an initial purchaser and
an affiliate of one of TeleCorp's initial investors, for placement advice.
Viper Wireless used the proceeds to participate in the Federal Communications
Commission's reauction of PCS licenses. Viper Wireless was subsequently granted
six PCS licenses in the reauction.
TeleCorp LMDS
On April 7, 2000, pursuant to Federal Communications Commission consent,
TeleCorp acquired TeleCorp LMDS, Inc. through an exchange of all of the
outstanding stock of TeleCorp LMDS for 878,400 shares of TeleCorp's class A
voting common stock. TeleCorp LMDS's stockholders are Mr. Vento, Mr. Sullivan
and three of TeleCorp's initial investors. By acquiring TeleCorp LMDS, TeleCorp
will gain LMDS licenses covering airwaves in Little Rock, Arkansas, Beaumont,
Texas, New Orleans, Louisiana, San Juan and Mayaguez, Puerto Rico, and the U.S.
Virgin Islands. See "Stock Ownership of Certain Beneficial Owners and
Management."
Relationship with Toronto Dominion
Toronto Dominion Investments, one of TeleCorp's initial investors, and TD
Securities (USA), an affiliate of Toronto Dominion Investments, which is a
lender under TeleCorp's senior credit facilities, may be deemed to be under
common control by virtue of their relationship to each other and to TeleCorp.
The terms of TeleCorp's senior credit facilities were no more favorable to the
parties than they could have obtained from third parties negotiated at arms'
length.
Relationships with Stockholders
From inception through June 1998, TeleCorp's primary source of financing was
notes issued to some of its initial investors. In July 1996, TeleCorp issued
$0.5 million of subordinated promissory notes to such investors. These notes
were converted into 50 shares of TeleCorp's series A preferred stock in April
1997. In December 1997, TeleCorp issued various promissory notes to some of its
initial investors. These notes were converted
156
<PAGE>
into mandatorily redeemable preferred stock in July 1998. From January 1, 1998
to June 30, 1998, TeleCorp borrowed approximately $22.5 million in the form of
promissory notes to existing and prospective investors to satisfy working
capital needs. These notes were converted into equity in July 1998 in
connection with the completion of the venture with AT&T.
The terms of these transactions were no more favorable to the parties than
they could have obtained from third parties negotiated at arms' length.
Relationship with McDermott, Will & Emery
TeleCorp uses the services of a law firm, McDermott, Will & Emery, to which
Mr. Sullivan, TeleCorp's Executive Vice President and Chief Financial Officer,
was counsel until October 1999 and a partner prior to July 1998. The terms of
these arrangements were no more favorable to McDermott, Will & Emery than could
have been obtained from third parties negotiated at arms' length.
Relationship with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
TeleCorp uses the services of a law firm, Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., whose affiliate, ML Strategies, LLC, pursuant to an
agreement and for matters unrelated to TeleCorp, utilizes the services of Mr.
Sullivan, TeleCorp's Executive Vice President, as a consultant, for a
consulting fee. The terms of these arrangements are no more favorable to Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., ML Strategies or Mr. Sullivan,
than could have been obtained from third parties negotiated at arms' length.
157
<PAGE>
Selected Historical Financial Data
The selected historical balance sheet data of TeleCorp presented below as of
December 31, 1998 and 1999 and the selected statements of operations data for
each of three years in the period ended December 31, 1999, has been derived
from audited consolidated financial statements included elsewhere in this
prospectus. The selected historical balance sheet data presented below as of
December 31, 1996 and 1997 and the selected statement of operations data for
the period from inception on July 29, 1996 to December 31, 1996 has been
derived from audited consolidated financial statements not included elsewhere
in this prospectus. "Other Operating Data" is not directly derived from
historical consolidated financial statements, and has been presented to provide
additional information.
You should read this information together with the financial statements and
related notes included elsewhere in this joint proxy statement-prospectus ($ in
thousands, except per share amounts).
<TABLE>
<CAPTION>
July 29, 1996
(inception to For the years ended December 31,
December 31, ----------------------------------
1996) 1997 1998 1999
------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Statements of Operations
Data:
Revenue:
Service.................... $ -- $ -- $ -- $ 41,319
Roaming.................... -- -- 29 29,010
Equipment.................. -- -- -- 17,353
------- -------- ---------- ------------
Total revenue.............. -- -- 29 87,682
------- -------- ---------- ------------
Operating expense:
Cost of revenue............ -- -- -- 39,259
Operations and
development(c)............ -- -- 9,772 35,979
Selling and marketing(c)... 10 304 6,325 71,180
General and
administrative(c)......... 515 2,637 26,239 92,585
Depreciation and
amortization.............. -- 11 1,584 55,110
------- -------- ---------- ------------
Total operating expense.... 525 2,952 43,920 294,113
------- -------- ---------- ------------
Operating loss............. (525) (2,952) (43,891) (206,431)
Other expense (income):
Interest expense........... -- 396 11,934 51,313
Interest income............ -- (13) (4,697) (6,464)
Other expense.............. -- -- 27 (284)
------- -------- ---------- ------------
Net loss................... (525) (3,335) (51,155) (250,996)
Accretion of mandatorily
redeemable preferred
stock..................... (289) (726) (8,567) (24,124)
------- -------- ---------- ------------
Net loss attributable to
common equity............. $ (814) $ (4,061) $ (59,722) $ (275,120)
======= ======== ========== ============
Net loss attributable to
common equity per share--
basic and diluted.......... $(44.45) $(111.74) $ (2.19) $ (3.58)
======= ======== ========== ============
Weighted average common
equity shares outstanding--
basic and diluted.......... 18,313 36,340 27,233,786 76,895,391
======= ======== ========== ============
Other Operating Data:
Subscribers (end of peri-
od)....................... -- -- -- 142,231
Covered population (end of
period)................... -- -- -- 11.0 million
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-----------------------------------
1996 1997 1998 1999
------ ------- -------- --------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................ $ 52 $ 2,567 $111,733 $182,330
Working (deficit) capital................ (524) (6,656) (4,676) 94,082
Property and equipment, net.............. 1 3,609 197,469 400,450
PCS licenses and microwave relocation
costs, net.............................. -- 10,018 118,107 267,682
Intangible assets--AT&T agreements, net.. -- -- 26,285 37,908
Total assets............................. 7,574 16,295 466,644 952,202
Total debt............................... 499 7,727 243,385 640,571
Mandatorily redeemable preferred stock,
net(a)(b)............................... 7,789 4,144 164,491 263,181
Total stockholders' equity (deficit)..... $ (812) $(4,875) $(64,500) $(90,554)
</TABLE>
- --------
(a) Net of deferred compensation and preferred stock subscription receivable of
$4 and $75,914, respectively, as of December 31, 1998.
(b) Net of preferred stock subscription receivable of $97,001 as of December
31, 1999.
(c) Includes non-cash stock compensation as described in the TeleCorp financial
statements contained herein.
158
<PAGE>
TeleCorp Management's Discussion and Analysis of Financial Condition and
Results of Operations
For periods prior to 1999, TeleCorp was a development stage company. In the
first quarter of 1999, TeleCorp exited the development stage and commenced
commercial operations in each of its major mainland U.S. markets, after having
launched its New Orleans market for roaming services in late December 1998.
TeleCorp launched its service in its Puerto Rico markets on June 30, 1999. At
December 31, 1999, TeleCorp had launched its service in 26 markets covering
approximately 66% of the population of its licensed area.
Revenue
TeleCorp derives its revenue from:
. Services. TeleCorp sells wireless personal communications services. The
various types of service revenue associated with personal communications
services for its customers include monthly recurring access charges and
monthly non-recurring airtime charges for local, long distance and
roaming airtime used in excess of pre-subscribed usage. TeleCorp's
customers' charges are rate plan dependent, based on the number of
pooled minutes included in their plans. Service revenue also includes
monthly non-recurring airtime usage associated with TeleCorp's prepaid
customers and non-recurring activation and de-activation service
charges.
. Roaming Charges. TeleCorp charges monthly, non-recurring, per minute
fees to other wireless companies whose customers use TeleCorp's network
facilities to place and receive wireless services.
. Equipment Sales. TeleCorp sells wireless personal communications
handsets and accessories that are used by its customers in connection
with TeleCorp's wireless services.
Service revenue constituted TeleCorp's largest component of revenue during
the year ended December 31, 1999 at 47%. Roaming revenue and equipment revenue
represented 33% and 20%, respectively. TeleCorp expects that as its customer
base grows, service revenue will become an even larger percentage of revenue,
while roaming revenue and equipment revenue are expected to decrease as a
percent of revenue. Roaming minutes on TeleCorp's network are expected to
increase as AT&T and other carriers increase the number of customers on their
networks. Under TeleCorp's reciprocal roaming agreement with AT&T Wireless,
TeleCorp's largest roaming partner, the amount TeleCorp will receive and pay
for roaming minutes declines for each of the next several years.
It appears that the wireless industry is experiencing a general trend
towards offering rate plans containing larger buckets of minutes. This is
expected to result in decreases in gross revenue per minute.
TeleCorp has autonomy in determining its pricing plans. TeleCorp has
developed its pricing plans to be competitive and to emphasize the advantages
of its service. TeleCorp may discount its pricing from time to time in order to
obtain additional customers or in response to downward pricing in the market
for wireless communications services.
Cost of Revenue
. Equipment. TeleCorp purchases personal communications handsets and
accessories from third party vendors to resell to its customers for use
in connection with its services. The cost of handsets is, and is
expected to remain, higher than the resale price to the customer.
TeleCorp records as cost of revenue an amount approximately equal to its
revenue on equipment sales. TeleCorp records the excess cost of handsets
as a sales and marketing operating expense. TeleCorp does not
manufacture any of this equipment.
. Roaming Fees. TeleCorp pays fees to other wireless communications
companies based on airtime usage of its customers on other
communications networks. It is expected that reciprocal roaming rates
159
<PAGE>
charged between TeleCorp and other carriers will decrease. TeleCorp does
not have any significant minimum purchase requirements other than its
obligation to purchase at least 15 million roaming minutes from July
1999 to January 2002 from another wireless provider in Puerto Rico
relating to customers roaming outside its coverage area. TeleCorp
believes it will be able to meet these minimum requirements.
. Clearinghouse Fees. TeleCorp pays fees to an independent clearinghouse
for processing its call data records and performing monthly inter-
carrier financial settlements for all charges that it pays to other
wireless companies when its customers use their network, and that other
wireless companies pay to TeleCorp when their customers use TeleCorp's
network. TeleCorp does not have any significant minimum purchase
requirements. These fees are based on the number of transactions
processed in a month.
. Variable Interconnect. TeleCorp pays monthly charges associated with the
connection of its network with other carriers' networks. These fees are
based on minutes of use by TeleCorp's customers. This is known as
interconnection. TeleCorp does not have any significant minimum purchase
requirements.
. Variable Long Distance. TeleCorp pays monthly usage charges to other
communications companies for long distance service provided to
TeleCorp's customers. These variable charges are based on TeleCorp's
customers' usage, applied at pre-negotiated rates with the other
carriers. TeleCorp does not have any significant minimum purchase
requirements other than an obligation to AT&T Wireless to purchase a
minimum number of minutes of traffic annually over a specified time
period and a specified number of dedicated voice and data leased lines
in order for TeleCorp to retain preferred pricing rates. TeleCorp
believes it will be able to meet these minimum requirements.
Operating Expense
Operations and development. TeleCorp's operations and development expense
includes engineering operations and support, field technicians, network
implementation support, product development, engineering management and non
cash stock compensation related to employees whose salaries are recorded
within operations and development. This expense also includes monthly
recurring charges directly associated with the maintenance and operations of
network facilities and equipment. Operations and development expense is
expected to increase as TeleCorp expands its coverage and add customers. In
future periods, TeleCorp expects that this expense will decrease as a
percentage of gross revenues.
Selling and marketing. TeleCorp's selling and marketing expense includes
brand management, external communications, sales training and all costs
associated with retail distribution, direct, indirect, third party and
telemarketing sales (primarily salaries, commissions, and retail store rent),
and non cash stock compensation related to employees whose salaries are
included within selling and marketing. TeleCorp also records the excess cost
of handsets over the resale price as a cost of selling and marketing. Selling
and marketing expense is expected to increase as TeleCorp expands its coverage
and add customers. TeleCorp expects that this expense will decrease as a
percentage of gross revenues.
General and administrative. TeleCorp's general and administrative expense
includes customer support, billing, information technology, finance,
accounting and legal services and non cash stock compensation related to
employees whose salaries are included within general and administrative.
Although TeleCorp expects general and administrative expense to increase in
future periods, it expects this expense will decrease as a percentage of gross
revenues.
Depreciation and amortization. Depreciation of property and equipment is
computed using the straight-line method, generally over three to ten years,
based upon estimated useful lives. Leasehold improvements are amortized over
the lesser of the useful lives of the assets or the term of the lease. Network
development costs incurred to ready TeleCorp's network for use are
capitalized. Amortization of network development costs begins when the network
equipment is ready for its intended use and will be amortized over its
estimated
160
<PAGE>
useful life ranging from five to ten years. TeleCorp began amortizing the cost
of the PCS licenses, microwave relocation costs, and capitalized interest in
the first quarter of 1999, when PCS services commenced in some of its basic
trading areas. Microwave relocation entails transferring business and public
safety companies from radio airwaves that overlap with the portion of the
airwaves covered by TeleCorp's business to other portions of the airwaves.
Amortization of PCS licenses and microwave relocation is calculated using the
straight-line method over 40 years. The AT&T agreements are amortized on a
straight-line basis over the related contractual terms, which range from three
to ten years. Amortization of the AT&T exclusivity agreement, long distance
agreement and the intercarrier roamer services agreement began once wireless
services were available to its customers. Amortization of the network
membership license agreement began on July 17, 1998, the date of the
finalization of the AT&T transaction.
Other Income (Expenses)
Interest income (expense). Interest income is earned primarily on TeleCorp's
cash and cash equivalents. Interest expense through December 31, 1999 consists
of interest due on TeleCorp's senior credit facilities, senior subordinated
discount notes, vendor financing, and debt owed to the U.S. government related
to TeleCorp's licenses, less interest capitalized.
Results of Operations
Year ended December 31, 1999 Compared to Year ended December 31, 1998
Customer Analysis
TeleCorp began launching commercial service in the first quarter of 1999 and
by December 31, 1999 grew its customer base to over 142,000 customers and
launched commercial service in 26 of its markets with its networks covering
approximately 66% of the population where it held licenses.
Revenue
Service revenue was approximately $41.3 million for the year ended December
31, 1999 and resulted from TeleCorp's launch of commercial service in 26 of its
markets in 1999. TeleCorp generated no service revenue for the year ended
December 31, 1998. Equipment revenue was approximately $17.4 million for the
year ended December 31, 1999 and resulted from its customers' purchase of
handsets and other equipment in connection with the use of TeleCorp's service.
TeleCorp generated no equipment revenue for the year ended December 31, 1998.
Roaming revenue was $29.0 million for the year ended December 31, 1999, as
compared to $29,000 for the year ended December 31, 1998. The increase was due
to TeleCorp's significant increase in cell sites which provided service to
roaming customers of other carriers, primarily AT&T Wireless, in TeleCorp's
markets.
Cost of Revenue
Cost of Revenue for the year ended December 31, 1999 was approximately $39.3
million, consisting of equipment costs, roaming and clearinghouse fees and
variable interconnect and long distance charges. TeleCorp did not generate any
cost of revenue for the year ended December 31, 1998.
Operations and Development
Operations and development expense was $36.0 million for the year ended
December 31, 1999, as compared to $9.8 million for the year ended December 31,
1998. The increase in operations and development was primarily due to the
engineering and implementation support and maintenance expense related to the
significant increase of TeleCorp's PCS network.
161
<PAGE>
Selling and Marketing
Selling and marketing expense for the year ended December 31, 1999, was
approximately $71.2 million, as compared to $6.3 million for the year ended
December 31, 1998. This increase was primarily due to the increase in salary
and benefit expenses for the new corporate and regional sales staff,
advertising and promotion expenses associated with TeleCorp's launch of 26
markets in 1999, and the expense associated with the excess cost of handsets
over the retail price.
General and Administrative
General and administrative expense was approximately $92.6 million,
including $29.4 million in non cash stock compensation, for the year ended
December 31, 1999, as compared to approximately $26.2 million and no non-cash
stock compensation for the year ended December 31, 1998. The increase was
primarily due to the development and growth of infrastructure and staffing
related to information technology, customer care and other administrative
functions incurred in conjunction with the commencement of TeleCorp's service
offering, as well as the stock based compensation charge related to vested
stock options and vested stock awards measured in 1999.
Depreciation and Amortization
Depreciation and amortization expense was approximately $55.1 million for
the year ended December 31, 1999, as compared to approximately $1.6 million for
the year ended December 31, 1998. The increase was primarily due to
depreciation of TeleCorp's fixed assets, as well as the amortization on
personal communications services licenses and AT&T agreements.
Interest Expense
Interest expense was $51.3 million, net of capitalized interest of $5.4
million, for the year ended December 31, 1999, as compared to $11.9 million,
net of capitalized interest of $1.5 million, for the year ended December 31,
1998. The increase in interest expense was primarily due to the increase in
debt of approximately $397,000 including the issuance of the senior
subordinated discount notes of $327.6 million. The increase in capitalized
interest of $3.8 million was attributable to the increased capital expenditure
in 1999.
Year ended December 31, 1998 Compared to Year ended December 31, 1997
Revenue
Revenue for the year ended December 31, 1998 was approximately $29,000. This
revenue resulted from servicing roaming customers of other carriers, primarily
AT&T Wireless, in TeleCorp's Louisiana markets. TeleCorp began offering
wireless services in most of its major markets in the first quarter of 1999.
TeleCorp generated no revenue for the year ended 1997.
Operations and Development
Operations and development expense for the year ended December 31, 1998, was
approximately $9.8 million. This expense was primarily related to an increase
in engineering and operating staff devoted to the implementation of future
operations of TeleCorp's network. There was no operations and development
expense for the year ended December 31, 1997.
Selling and Marketing
Selling and marketing expenses for the year ended December 31, 1998, was
approximately $6.3 million, as compared to approximately $0.3 million for the
year ended December 31, 1997. The year-over-year increase
162
<PAGE>
was due to the increase in corporate and regional sales and marketing staff in
order to prepare for domestic market launches in the first quarter of 1999.
General and Administrative
General and administrative expense for the year ended December 31, 1998, was
approximately $26.2 million, as compared to approximately $2.6 million for the
year ended December 31, 1997. The year-over-year increase was due to the
development and growth of infrastructure and staffing related to information
technology, customer care and other administrative functions incurred in the
preparation for commercial launch of TeleCorp's markets in the first quarter of
1999.
Depreciation and Amortization
Depreciation and amortization expense for the year ended December 31, 1998,
was approximately $1.6 million, as compared to approximately $11,000 for the
year ended December 31, 1997. This expense was related to depreciation of
furniture, fixtures and office equipment, as well as the initiation of
amortization on AT&T Wireless agreements.
Interest Expense
Interest expense, net of capitalized interest, for the year ended December
31, 1998, was approximately $11.9 million, as compared to approximately $0.4
million of interest expense for the year ended December 31, 1997. This interest
expense was related to notes payable to stockholders and affiliates. This
increase in interest expense was related to borrowings under the senior credit
facilities of $225.0 million since July 1998 and the issuance of $10.0 million
aggregate principal amount of notes under the vendor financing provided by
Lucent.
Liquidity and Capital Resources
TeleCorp has been relying on the proceeds from borrowings and issuances of
capital stock, rather than revenues, for its primary sources of cash flow. It
began commercial operations in December 1998 and began earning recurring
revenues by the end of the first quarter of 1999.
Cash and cash equivalents totaled $182.3 million at December 31, 1999, as
compared to $111.7 million at December 31, 1998. This increase was the result
of incoming cash provided by financing activities of $638.6 million, offset by
$126.9 million of cash used in operating activities and $441.0 million of cash
used in network development and investing activities.
During the year ended December 31, 1999, TeleCorp received proceeds from
long-term debt, net of repayments of $357.2 million. Additionally, TeleCorp
received net proceeds from its initial public offering of $195.5 million, and
received $79.7 million of preferred stock proceeds and receipt of preferred
stock subscriptions receivable net of direct issuance costs. Cash outlays for
capital expenditures required to develop and construct its network totaled
$298.5 million. TeleCorp spent $114.2 million to purchase PCS licenses and
$17.3 million for the purchase of additional AT&T agreements. Cash used in
operating activities of $126.9 million for the year ended December 31, 1999
resulted from a net loss of $251.0 million that was partially offset by non-
cash charges of $122.6 million.
During the year ended December 31, 1998, TeleCorp received proceeds from
long-term debt, net of repayments of $255.4 million. Additionally, TeleCorp
received $26.7 million of preferred stock proceeds net of direct issuance
costs. Cash outlays for capital expenditures required to develop and construct
its network totaled $107.5 million and TeleCorp spent $21.0 million to purchase
PCS licenses. Cash used in operating activities of $29.8 million for the year
ended December 31, 1998 resulted from a net loss of $51.2 million that was
partially offset by non-cash charges of $3.0 million.
163
<PAGE>
During the year ended December 31, 1997, TeleCorp received proceeds from
long-term debt, net of repayments of $2.8 million. Additionally, TeleCorp
received $1.5 million of preferred stock proceeds net of direct issuance costs.
Cash outlays for capital expenditures required to develop and construct its
network totaled $1.1 million. Cash used in operating activities of $2.4 million
for the year ended December 31, 1997 resulted from a net loss of $3.3 million
that was partially offset by non-cash charges of $0.1 million.
TeleCorp's preferred stock is convertible at the holder's option into shares
of its common stock at various times and following various events as follows:
. TeleCorp's series A preferred stock is convertible into shares of its
class A voting common stock after July 17, 2006 at a conversion rate
equal to the liquidation preference, which was approximately $109.6
million as of December 31, 1999, divided by the market price of the
class A voting common stock at the time of conversion; and
. TeleCorp's series F preferred stock is convertible at any time into
shares of its class A voting, class B non-voting, and, if certain
Federal Communications Commission restrictions have not lifted, class D
common stock on a share for share basis.
. TeleCorp may redeem:
. shares of TeleCorp's series A preferred stock after the tenth
anniversary of its issuance; and
. shares of TeleCorp's series B, series C and series D preferred stock at
any time at the liquidation preference for the shares being redeemed.
The holders of TeleCorp's series A, series B, series C, series D and series
E preferred stock have the right to require TeleCorp to redeem their shares
after the twentieth anniversary of their issuance time at the liquidation
preference for the shares being redeemed.
Holders of TeleCorp series A preferred stock are entitled to a quarterly
dividend equal to 10% per annum of that stock's accumulated liquidation
preference. The accumulated liquidation preference of TeleCorp's series A
preferred stock was approximately $109.6 million in aggregate as of December
31, 1999. TeleCorp may defer payment of this dividend until December 31, 2008,
and TeleCorp is currently doing so.
Holders of TeleCorp's series C, D and E preferred stock are not entitled to
a dividend except to the extent declared by TeleCorp's board of directors.
Those series of stock, however, are entitled to an accumulated liquidation
preference, which was approximately $280.3 million in aggregate as of December
31, 1999. The liquidation preference accretes at a rate of 6% per annum,
compounded quarterly.
Equity Commitments
In connection with completion of the venture with AT&T Wireless, TeleCorp
received unconditional and irrevocable equity commitments from its stockholders
in the aggregate amount of $128.0 million in return for the issuance of
preferred and common stock. As of December 31, 1999, approximately $55.5
million of the equity commitments had been funded. The remaining equity
commitments will be funded in an installment of $36.3 million in July 2000 and
$36.2 million in July 2001.
TeleCorp received additional irrevocable equity commitments from its
stockholders in the aggregate amount of $5.0 million in return for the issuance
of preferred and common stock in connection with the Digital PCS acquisition.
TeleCorp's stockholders funded $2.2 million of these equity commitments on
April 30, 1999, and will fund $1.4 million in each of July 2000 and July 2001.
TeleCorp has received additional irrevocable equity commitments from its
stockholders in the aggregate amount of approximately $40.0 million in return
for the issuance of preferred and common stock in connection with the Puerto
Rico acquisition. TeleCorp received $12.0 million of these commitments on May
24, 1999 and
164
<PAGE>
an additional $6.0 million on December 15, 1999. TeleCorp's stockholders will
fund the remaining commitments in two installments of $11.0 million on March
30, 2001 and March 30, 2002.
TeleCorp also received irrevocable equity commitments from its stockholders
in the amount of approximately $32.3 million in connection with Viper
Wireless's participation in the Federal Communications Commission's reauction
of PCS licenses. TeleCorp received approximately $6.5 million of these equity
commitments on May 14, 1999, approximately $11.0 million on July 15, 1999 and
approximately $14.8 million on September 29, 1999.
In the aggregate, TeleCorp has obtained $205 million of equity commitments,
of which $108 million had been funded as of December 31, 1999.
These equity commitments cannot be amended without TeleCorp's consent and
the consent of AT&T and all of the other initial investors. In addition, the
terms of TeleCorp's senior subordinated discount notes and its bank and vendor
credit facilities restrict it from waiving or amending these commitments. The
foregoing equity commitments are also collateralized by pledges of the shares
of TeleCorp's capital stock issued to each initial investor, other than certain
shares of preferred stock. Those pledges have been assigned to TeleCorp's
senior lenders as collateral for its senior credit facilities. Transfers of
shares of TeleCorp's capital stock pledged to collateralize an equity
commitment remain subject to such pledge until the equity commitment is funded
in full.
In addition, pursuant to the stockholders' agreement between TeleCorp's
initial investors, Mr. Vento and Mr. Sullivan and TeleCorp, the initial
investors are restricted from transferring their shares of common stock prior
to July 2001, except to affiliates. Any transfers by them of preferred or
common stock are subject to rights of first offer and tag along rights in favor
of AT&T Wireless and the other initial investors. In addition to the approval
of TeleCorp's senior lenders, the terms of the stockholders' agreement may be
amended only if agreed to in writing by TeleCorp and the beneficial holders of
a majority of the class A voting common stock party to the stockholders'
agreement, including AT&T Wireless, 66 2/3% of the class A voting common stock
beneficially owned by TeleCorp's initial investors other than AT&T Wireless,
and 66 2/3% of the class A voting common stock beneficially owned by Mr. Vento
and Mr. Sullivan. Following the expiration or waiver of the 180 day
restrictions on transfer imposed in connection with TeleCorp initial public
offering of 9,200,000 shares of its class A voting common stock, shares of its
preferred stock may be transferred, subject, however, to the pledge described
above and the continuing obligations of the investors to fund its commitments.
Senior Subordinated Discount Notes
On April 20, 1999, TeleCorp sold $575.0 million aggregate principal amount
at maturity of 11 5/8% senior subordinated discount notes due April 15, 2009.
Cash interest on these notes will not accrue or be payable prior to April 15,
2004. From April 15, 2004, cash interest will accrue at a rate of 11 5/8% per
annum on the principal amount at maturity of the notes through and including
the maturity date and will be payable semi-annually on April 15 and October 15
of each year. In connection with the sale of these notes, TeleCorp received net
proceeds of approximately $317 million after deducting initial purchasers'
discount and issuance expenses of approximately $11 million.
The indenture under which the notes were issued restricts, among other
things, TeleCorp's ability to:
. incur debt;
. create levels of debt that are senior to the notes but junior to
TeleCorp's senior debt;
. pay dividends on or redeem capital stock;
. make some investments or redeem other subordinated debt;
. make particular dispositions of assets;
165
<PAGE>
. engage in transactions with affiliates;
. engage in particular business activities; and
. engage in mergers, consolidations and particular sales of assets.
Senior Credit Facilities
In July 1998, TeleCorp entered into senior credit facilities with a group of
lenders for an aggregate amount of $525.0 million. Subsequent to December 31,
1999, TeleCorp entered into amendments to the senior credit facilities under
which the amount of credit available to TeleCorp was increased to $560.0
million. TeleCorp's senior credit facilities currently provide for:
. a $150.0 million senior secured term loan that matures in January 2007;
. a $225.0 million senior secured term loan that matures in January 2008;
. a $150.0 million senior secured revolving credit facility that matures
in January 2007; and
. a $35.0 million senior secured term loan that matures in May 2009.
TeleCorp must repay the term loans in quarterly installments, beginning in
September 2002, and the commitments to make loans under the revolving credit
facility automatically and permanently reduce beginning in April 2005. As of
December 31, 1999, $225.0 million had been drawn under the senior credit
facilities and was then accruing interest at an annual rate of 9.12%. The
senior credit agreement contains financial and other covenants customary for
senior credit agreements.
Vendor Financing
TeleCorp entered into a note purchase agreement with Lucent under which
Lucent agreed to provide TeleCorp with $80.0 million of junior subordinated
vendor financing. This $80.0 million consisted of $40.0 million aggregate
principal amount of increasing rate Lucent series A notes and $40.0 million
aggregate principal amount of increasing rate Lucent series B notes. TeleCorp
borrowed $40.0 million under the series B note facility and repaid this amount
and accrued interest thereon in April 1999 from proceeds of its sale of senior
subordinated discount notes. This amount cannot be reborrowed. As of December
31, 1999, TeleCorp had outstanding approximately $43.5 million of TeleCorp's
Lucent series A notes, including $3.6 million of accrued interest and accruing
interest at a rate per annum of 8.5% as of December 31, 1999. The amount
outstanding under these series A notes and any future series A note borrowings
is subject to mandatory prepayment in an amount equal to 50% of the excess of
$198.0 million in net proceeds TeleCorp receives from any future equity
offering other than the issuance of capital stock used to acquire related
business assets.
In October 1999 TeleCorp entered into an amended and restated note purchase
agreement with Lucent under which Lucent has agreed to purchase up to $12.5
million of new series A notes and up to $12.5 million of new series B notes
under a vendor expansion facility in connection with TeleCorp's prior
acquisition of licenses in the San Juan, Puerto Rico, Evansville, Indiana,
Paducah, Kentucky and Alexandria and Lake Charles, Louisiana markets. The
obligation of Lucent to purchase notes under this vendor expansion facility is
subject to a number of conditions, including that TeleCorp commits to purchase
one wireless call connection equipment site and 50 network equipment sites for
each additional market from Lucent.
In addition, pursuant to the amended and restated note purchase agreement
Lucent has agreed to make available up to an additional $50.0 million of new
vendor financing not to exceed an amount equal to 30% of the value of
equipment, software and services provided by Lucent in connection with any
additional markets TeleCorp acquires. This $50.0 million of availability is
subject to a reduction up to $20 million on a dollar for dollar basis of any
additional amounts Lucent otherwise lends to TeleCorp for such purposes under
its senior
166
<PAGE>
credit facilities, exclusive of amounts Lucent lends to TeleCorp under its
existing commitments under its senior credit facilities. Any notes purchased
under this facility would be divided equally between Lucent series A and series
B notes.
The terms of Lucent series A and series B notes issued under these expansion
facilities would be identical to the terms of the original Lucent series A and
series B notes as amended, including a maturity date of October 23, 2009.
Any Lucent series B notes issued under these expansion facilities will
mature and will be subject to mandatory prepayment on a dollar for dollar basis
out of the net proceeds of any future public or private offering or sale of
debt securities, exclusive of any private placement notes issued to finance any
additional market and borrowings under the senior credit facilities or any
replacement facility.
Interest payable on the Lucent series A notes and the Lucent series B notes
on or prior to May 11, 2004 will be payable in additional series A and series B
notes. Thereafter, interest will be paid in arrears in cash on each six month
and yearly anniversary of the series A and series B closing date or, if cash
interest payments are prohibited under the senior credit facilities or a
qualifying high yield debt offering, in additional series A and series B notes.
The U.S. government financing requires quarterly interest payments, which
commenced in July 1998 and continued for one year thereafter, then quarterly
principal and interest payments for the remaining nine years.
Vendor Commitment
In May 1998, TeleCorp entered into a vendor procurement contract with Lucent
pursuant to which it may purchase up to $285.0 million of radio, call
connecting and related equipment and services for the development of its
wireless communications network. At December 31, 1999, TeleCorp has purchased
approximately $294.5 million of equipment and services from Lucent.
Federal Communications Commission Debt
In completing acquisitions of PCS licenses during the year ended December
31, 1999, TeleCorp assumed U.S. government financing with the Federal
Communications Commission. At December 31, 1999 TeleCorp's Federal
Communications Commission debt was $20.2 million less a discount of $2.5
million. The terms of the notes include interest rates ranging from 6.125% to
7.00% and have quarterly and principal interest payments over the remaining
nine years of the debt.
Commitments
TeleCorp has operating leases primarily related to retail store locations,
distribution outlets, office space and rent for its network development. The
terms of some of the leases include a reduction of rental payments and
scheduled rent increases at specified intervals during the term of the leases.
TeleCorp recognizes rent expense on a straight-line basis over the life of the
lease, which establishes deferred rent on the balance sheet. As of December 31,
1999, the aggregate minimum rental commitments under non-cancelable operating
leases are as follows ($ in thousands):
<TABLE>
<CAPTION>
For the year ended December 31:
--------------------------------------------
<S> <C>
2000............................... $ 21,605
2001............................... 21,375
2002............................... 21,057
2003............................... 18,374
2004............................... 10,330
Thereafter......................... 27,999
--------
Total.............................. $120,740
========
</TABLE>
167
<PAGE>
Rental expense, which is recorded ratably over the lease terms, was
approximately $0.2, $3.2 million and $13.8 million for the years ended December
31, 1997, 1998, and 1999, respectively.
TeleCorp has communications towers situated on leased sites in all of its
markets and is considering entering into sale/leaseback transactions and may do
so if it can obtain terms acceptable to it.
TeleCorp has entered into letters of credit to facilitate local business
activities. TeleCorp is liable under the letters of credit for nonperformance
of certain criteria under the individual contracts. The total amount of
outstanding letters of credit was approximately $1.6 million at December 31,
1999. The outstanding letters of credit reduce the amount available to be drawn
under TeleCorp's senior credit facility.
TeleCorp has minimum purchase commitments of 15 million roaming minutes from
July 1999 to January 2002 from another wireless provider in Puerto Rico
relating to customers roaming outside TeleCorp's coverage area. TeleCorp
believes it will be able to meet these minimum requirements.
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly operating
information for each of the eight quarters ended December 31, 1999. This data
has been prepared on the same basis as the audited financial statements, and in
management's opinion, includes all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the information
for the periods presented. Results for any previous fiscal quarter are not
necessarily indicative of results for the full year or for any future quarter.
Quarterly Financial Data (Unaudited)
($ in thousands except per share amounts)
<TABLE>
<CAPTION>
Quarter ended,
---------------------------------------
March Sept.
31, June 30, 30, Dec. 31,
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
1999
----
Revenue.............................. $ 4,220 $ 17,128 $ 26,833 $ 39,481
Operating loss....................... (26,944) (37,150) (50,179) (92,158)
Net loss............................. (32,293) (45,990) (65,792) (106,921)
Accretion of mandatorily redeemable
preferred stock..................... (4,267) (5,629) (7,064) (7,164)
Net loss attributable to common
equity.............................. $(36,560) $(51,619) $(72,856) $(114,085)
Net loss attributable to common
equity per share--basic and
diluted............................. $ (0.62) $ (0.75) $ (0.89) $ (1.29)
1998
----
Revenue.............................. $ 0 $ 0 $ 0 $ 29
Operating loss....................... (2,655) (6,624) (12,239) (21,373)
Net loss............................. (2,745) (6,843) (15,823) (25,744)
Accretion of mandatorily redeemable
preferred stock..................... (17) (190) (3,819) (4,541)
Net loss attributable to common
equity.............................. $ (2,762) $ (7,033) $(19,643) $ (30,285)
Net loss attributable to common
equity per share--basic and
diluted(a).......................... $(142.85) $(363.75) $ (1.23) $ (0.51)
</TABLE>
- --------
(a) Net loss attributable to common equity per share--basic and diluted for the
first and second quarter of 1998 was computed based on the common equity
structure of the predecessor company.
168
<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
TeleCorp is not exposed to fluctuations in currency exchange rates because
all of its services are invoiced in U.S. dollars. TeleCorp is exposed to the
impact of interest rate changes on its short-term cash investments, consisting
of U.S. Treasury obligations and other investments in respect of institutions
with the highest credit ratings, all of which have maturities of three months
or less. These short-term investments carry a degree of interest rate risk.
TeleCorp believes that the impact of a 10% increase or decline in interest
rates would not be material to its investment income.
TeleCorp uses interest rate swaps to hedge the effects of fluctuations in
interest rates on its senior credit facilities. These transactions meet the
requirements for hedge accounting, including designation and correlation. These
interest rate swaps are managed in accordance with TeleCorp's policies and
procedures. TeleCorp does not enter into these transactions for trading
purposes. The resulting gains or losses, measured by quoted market prices, are
accounted for as part of the transactions being hedged, except that losses not
expected to be recovered upon the completion of hedged transactions are
expensed. Gains or losses associated with interest rate swaps are computed as
the difference between the interest expense per the amount hedged using the
fixed rate compared to a floating rate over the term of the swap agreement. As
of December 31, 1999, TeleCorp had entered into six interest rate swap
agreements totaling $225 million to convert its variable rate debt to fixed
rate debt. The interest rate swaps had no material impact on its consolidated
financial statements as of and for the year ended December 31, 1999. The swap
agreement matures in September of 2003.
169
<PAGE>
TRITEL
Company Overview
Tritel is an AT&T Wireless affiliate with licenses to provide personal
communications services, called PCS, to approximately 14.0 million people in
contiguous markets in the south-central United States. Tritel began to provide
wireless services in eight of its major markets during 1999. In January 1999,
Tritel entered into an affiliation agreement with AT&T Wireless Services,
Tritel's largest stockholder with 21.6% ownership of the company. Tritel has
also joined with two other AT&T Wireless affiliates to operate under a common
regional brand name, SunCom. Tritel provides its PCS services as a member of
the AT&T Wireless network, serving as the preferred roaming provider to AT&T
Wireless's digital wireless customers in virtually all of Tritel's markets and
co-branding its services with the AT&T and SunCom brands and logos, giving
equal emphasis to each.
Tritel's senior management team has substantial experience in the wireless
communications industry, with a significant operating history in the south-
central United States. Tritel has commenced commercial PCS services in nine of
its ten largest markets. Tritel expects to be able to provide service to over
98% of the people in its license areas by the end of 2000. Tritel defines
coverage to include an entire basic trading area if Tritel has a significantly
developed system in that basic trading area.
The following table sets forth Tritel's ten largest markets and the date on
which it has commenced or expects to commence commercial PCS service.
<TABLE>
<CAPTION>
1998 People in
Market Commercial Launch Date Licensed Areas
------ ------------------------- --------------
<S> <C> <C>
Jackson and Vicksburg, MS............ September 1999 719,500
Nashville and Clarksville,
TN/Hopkinsville, KY................. November 1999 1,936,500
Knoxville, TN........................ November 1999 1,074,000
Chattanooga and Cleveland, TN/Dalton,
GA.................................. November 1999 760,800
Huntsville, AL....................... November 1999 496,400
Montgomery, AL....................... November 1999 475,300
Louisville, KY....................... December 1999 1,448,400
Lexington, KY........................ December 1999 893,400
Birmingham, AL....................... April 2000 1,297,800
Mobile, AL........................... Expected 2nd Quarter 2000 653,900
</TABLE>
Tritel's Markets
Tritel believes that a substantial majority of the population covered by its
licenses are located in areas that have demographic characteristics well-suited
to the provision of wireless telecommunications services, with favorable
commuting patterns and growing business environments. Four state capitals are
included within Tritel's markets. There are almost 3,000 total miles of
interstate highway and over 9,000 total highway miles within Tritel's markets.
Tritel's markets are estimated to have grown 16% faster between 1995 and 2000
than the national average and the population density in Tritel's markets is
estimated to be 39% higher than the national average, based on the 1999 Kagan
Cellular/PCS Pop Book.
Tritel's markets are situated principally in Alabama, Georgia, Kentucky,
Mississippi and Tennessee. The major population centers in Tritel's markets
include the cities of Nashville, Louisville, Birmingham, Knoxville, Lexington,
Jackson and Mobile. Tritel's licenses will complement the PCS and cellular
coverage areas of AT&T Wireless. Tritel anticipates that the contiguous nature
of Tritel's footprint of licensed areas will contribute to reduced operating
expenses.
Louisville. Greater Louisville, which is Tritel's largest market with
approximately 2.3 million people, including Lexington, encompasses several
counties in Kentucky and southern Indiana. Greater Louisville is also
170
<PAGE>
at the crossroads of three major highways, I-64, I-65 and I-71, as well as four
major railways. The Greater Louisville area is a leading manufacturing center,
particularly for automobiles and durable goods with an increasing emphasis on
services, particularly transportation and health care. Major employers include
United Parcel Service, General Electric, Ford Motor, Columbia/HCA Healthcare
and Humana Inc.
Nashville. Nashville, Tennessee's capital, has a population of approximately
1.7 million people and is a vital transportation, business, educational and
tourist center for the U.S. Additionally, Nashville International Airport is
served by a number of the major U.S. carriers. Nashville is also a major rail
transportation hub connecting 19 states and is a convergence point for three
major interstate highways, I-40, I-65 and I-24. Major employers include
Vanderbilt University and Medical Center, Columbia/HCA Healthcare, Saturn
Corporation, Nissan Motor Corp., Ford Motor Company, BellSouth, Bankers Trust,
SunTrust, Kroger and Ingram Industries.
Birmingham. Birmingham has a population of approximately 1.3 million people.
The four-county Birmingham area, which includes six colleges and universities,
anchors Alabama's business and cultural life with 21% of the state's
population, 23% of the total business establishments, 24% of the retail sales
and 31% of the payroll dollars. Three major highways pass through Birmingham,
I-20, I-59 and I-65. Major employers include University of Alabama at
Birmingham, Baptist Health System, Bruno's, SouthTrust Bank, BellSouth, Wal-
Mart, Alabama Power Company, Blue Cross-Blue Shield of Alabama and American
Cast Iron Pipe.
Knoxville. Knoxville is a growing city with a population of approximately
1.1 million people and a solid economic foundation. Job growth since 1997 has
been 3.3%, significantly higher than the national average of 1.9%. Knoxville is
centrally located in the eastern United States and is served by three major
interstate highways, I-40, I-75 and I-81. Major manufacturing companies in the
area include Clayton Homes, DeRoyal Industries, Robertshaw Controls and
Matsushita Electronic Corp.
Jackson. Jackson has a population of approximately 658,000 people, is the
capital of Mississippi and is home to six colleges and universities. Two major
interstate highways, I-20 and I-55, pass through Jackson. Key industries
include automobile parts manufacturing, aircraft parts manufacturing,
telecommunications, healthcare delivery, government, transportation and poultry
processing. Major employers include MCI WorldCom, Ergon and University Medical
Center.
Mobile. Mobile has a population of approximately 654,000 people and is a
regional center for medical care, research and education. Its port is one of
the nation's leading facilities for coal and forest product exports. Two major
highways, I-10 and I-65, pass through Mobile. Major employers include
BellSouth, Coca-Cola Bottling Company, International Paper Company, DuPont
Mobile Manufacturing and the University of South Alabama.
The Tritel Network
Tritel's network offers advanced PCS services on a local and regional basis
and through roaming agreements with AT&T Wireless Services and other carriers
in many other markets throughout the United States. Tritel intends to offer
contiguous market coverage using its own network facilities, the regional
markets covered by the SunCom brand alliance and the AT&T Wireless Services,
Inc. network, all of which use a common technology platform, IS-136 Time
Division Multiple Access, or TDMA. Tritel believes that IS-136 TDMA provides
its subscribers with excellent voice quality, fewer dropped calls than existing
analog systems and coast-to-coast roaming over the AT&T Wireless Services
network. To maximize the commercial utility of IS-136 TDMA, Tritel offers its
customers tri-mode handsets, which can automatically pass or "hand-off" calls
between IS-136 TDMA systems and analog or TDMA-based digital cellular systems
that are connected through SS7 data signaling links. Several major wireless
telecommunications service providers in North America have selected IS-136 TDMA
for their digital PCS networks, including AT&T Wireless Services, SBC
Communications, BellSouth, United States Cellular Corporation and Canada's
Rogers Cantel Mobile Communications Inc. BellSouth currently provides IS-136
TDMA service within many of Tritel's markets.
171
<PAGE>
Tritel's Network Facilities. Tritel expects to be able to provide service to
over 98% of the people in its license areas by the end of 2000. Tritel has
commenced PCS service in nine major markets: Jackson, Mississippi; Nashville,
Knoxville and Chattanooga, Tennessee; Birmingham, Huntsville and Montgomery,
Alabama; and Louisville and Lexington, Kentucky. Tritel expects to commence PCS
service in Mobile, Alabama during the second quarter of 2000.
Tritel has designed its PCS network to offer efficient and extensive
coverage within its markets. Tritel's cell site acquisition strategy is to co-
locate as many of its cell sites as possible on existing towers and other
transmitting or receiving facilities. Tritel believes this strategy has reduced
and will continue to reduce its site acquisition costs and minimize delays due
to zoning and other local regulations. Tritel launches service only after
comprehensive and reliable coverage can be maintained within a particular
market.
Tritel expects that there will be areas within its markets that Tritel will
ultimately build out, but where it will not, at least initially, have coverage.
In these areas of its markets, Tritel benefits from AT&T Wireless Services'
existing roaming arrangements with other carriers to provide service. Tritel
may seek direct roaming agreements with some local carriers providing
compatible service. These agreements will also allow Tritel to launch its
service at a lower level of capital expenditures than would otherwise be
required, without adversely impacting the service Tritel will be able to offer
its customers.
The SunCom Brand Alliance. Tritel has entered into an agreement with two
other AT&T Wireless affiliates, Triton and TeleCorp, to create a common
regional market brand, SunCom, and to provide for sharing certain development,
research, advertising and support costs. The members of this regional brand
alliance hold PCS licenses that cover approximately 43 million people primarily
in the south-central and southeastern United States from New Orleans, Louisiana
to Richmond, Virginia. Each of the SunCom companies owns one-third of Affiliate
License Co., which owns the SunCom brand. Tritel and the other SunCom companies
license the SunCom name from Affiliate License Co.
To ensure that all SunCom customers will receive the same high quality
service throughout the SunCom region, all three SunCom affiliates:
. have agreed to build out their respective networks, adhering to the same
AT&T Wireless Services quality standards, and
. have agreed to use tri-mode handsets with IS-136 TDMA technology.
Tritel has also entered into reciprocal roaming agreements with one of the
SunCom affiliates.
The AT&T Wireless Network. AT&T Wireless is one of the largest providers of
wireless telecommunications services in the United States. The AT&T Wireless
Services network provides coast-to-coast coverage for wireless services.
Tritel is the preferred provider of mobile PCS services for the AT&T
Wireless network using equal emphasis co-branding with AT&T within Tritel's
markets, except for an area covering 790,000 people in Kentucky. AT&T Wireless
has granted Tritel a license to co-brand with the AT&T logo and other service
marks in Tritel's covered markets. Tritel also has established roaming,
purchasing, engineering and other arrangements with AT&T Wireless. These
arrangements will provide Tritel's customers immediate, coast-to-coast roaming
on the AT&T Wireless network.
Joint Venture and Strategic Alliance with AT&T
Tritel's strategic alliance with AT&T Wireless is part of AT&T's strategy to
expand its IS-136 TDMA digital wireless coverage in the United States. AT&T's
four affiliates, including Tritel, will provide AT&T
172
<PAGE>
Wireless subscribers roaming in Tritel's markets with features and
functionality typically offered by the AT&T Wireless network. The relationship
with AT&T Wireless is valuable to Tritel because, among other reasons, the
relationship enables Tritel to market its service using what it believes to be
one of the world's most respected and recognizable brands, AT&T, in equal
emphasis with the SunCom regional brand name. Tritel also expects to take
advantage of the coast-to-coast coverage of the AT&T Wireless network and the
extensive national advertising of AT&T Wireless and AT&T.
As part of Tritel's alliance with AT&T Wireless, AT&T Wireless contributed
licenses for approximately 9.1 million of Tritel's 14.0 million total people in
its licensed areas. In exchange for the AT&T contributed licenses and the other
benefits provided for in the agreements governing the joint venture, AT&T
Wireless received a 17.09% fully diluted common equity interest in Tritel,
consisting of preferred stock with a stated value of $137.1 million. AT&T
Wireless increased its ownership to approximately 21.6% through the purchase of
shares of Tritel's series C preferred stock from another investor and
maintained that percentage through the purchase of class B common stock in the
December 1999 private stock offering concurrent with Tritel's initial public
offering.
The AT&T Wireless licenses contributed to Tritel provide for the right to
use 20 MHz of authorized frequencies in the geographic areas covered by those
licenses. In order to create these licenses, AT&T Wireless partitioned and
disaggregated the original 30-MHz A- and B-Block PCS licenses it received in
these markets. AT&T Wireless has retained 10 MHz of spectrum licenses in those
markets it contributed and has the right to offer any non-competing services on
that spectrum. Tritel will maximize the following benefits of its AT&T
affiliation to distinguish itself from other PCS providers in its markets:
Exclusivity. Tritel is AT&T's exclusive provider of wireless mobility
services using equal emphasis co-branding with AT&T in Tritel's covered
markets, subject to AT&T's right to resell services on Tritel's network and
except for licenses covering 790,000 people in mostly rural areas.
Brand. Tritel has the right to use the AT&T brand name and logo together
with the SunCom brand name and logo in Tritel's markets, giving equal emphasis
to each.
Roaming. Tritel is AT&T's preferred roaming partner for digital customers in
Tritel's markets, except for licenses covering 790,000 people in mostly rural
areas. Tritel's roaming revenues increased from approximately $3.3 million in
the fourth quarter of 1999 to approximately $5.9 million in the first quarter
of 2000.
Coast-to-Coast Coverage. Outside Tritel's markets, its customers can place
and receive calls in AT&T Wireless's markets and the markets of AT&T Wireless's
other roaming partners.
Products and Services. Tritel receives preferred terms on selected products
and services, including handsets, infrastructure equipment and back office
support from companies who provide these products and services to AT&T.
Marketing. Tritel benefits from AT&T's nationwide marketing and advertising
campaigns, including the success of the AT&T Digital One RateSM plans, in the
marketing of its own national rate plans. In addition, Tritel works with AT&T's
national sales representatives to jointly market Tritel's wireless services to
AT&T corporate customers located in Tritel's markets.
Services and Features
Tritel provides reliable, high quality service at what Tritel believes are
affordable prices. The following features and services are currently available
to Tritel's IS-136 TDMA users, and Tritel offers them to its customers:
Superior Voice Quality and Technology. Tritel uses enhanced IS-136 TDMA
equipment, which is capable of providing superior voice quality.
173
<PAGE>
Extended Battery Life. When operating in digital mode, Tritel's handsets
have a battery life that is significantly longer than the battery life of
existing analog cellular handsets. The IS-136 TDMA technology standard allows a
handset to draw significantly less battery power while accessing a digital
control channel by entering into sleep mode, which alerts the handset of an
incoming call and thereby extends the length of time a battery can be used
without having to be recharged. Analog cellular handsets, on the other hand,
must stay in constant contact with a cell site in order to receive an incoming
call.
Wireless E-mail and Sophisticated Call Management. These services include a
set of advanced features for receiving wireless e-mail, voice mail, message
waiting indicator, caller ID, call rejection, call routing and forwarding,
three-way calling and call waiting.
Tri-mode Handsets. The tri-mode phone handsets that Tritel sells can operate
in analog and digital modes on the 850 MHz bandwidth, in digital mode on the
1900 MHz bandwidth and also with a digital control channel and analog voice
channel on the 850 MHz bandwidth. These handsets, which are designed for use on
an IS-136 TDMA system such as Tritel's, enable a user to initiate a call on a
digital cellular or PCS network and then be handed off, without interruption,
to an analog network if the user roams to a location where digital coverage is
unavailable and the systems are supported by SS7 data signaling links. A user
may also initiate a call on an analog network and have that call handed off to
a TDMA-based digital cellular network.
Tritel currently offers tri-mode handsets manufactured by Nokia, Ericsson
and Motorola, and expects to offer additional handsets of at least one more
manufacturer as they become available. The Nokia, Ericsson and Motorola models
are capable of providing advanced digital PCS services and features that meet
the operability and feature set requirements with which Tritel is required to
comply under the AT&T Wireless joint venture. All handsets and their packaging
prominently display the AT&T and SunCom logos with equal emphasis.
Advanced Data Features. Tritel has launched its PCS service offering voice
and wireless e-mail delivery services only. However, the IS-136 TDMA technology
and tri-mode handsets are capable of handling more complex data exchange
features, which include internet access and access to stock quotes, sports
scores and weather reports. Tritel will continue to explore providing these
services based on consumer demand.
Customized Billing. Tritel offers special billing services that cater to the
needs of consumers, including simplified monthly billing statements and
flexible billing cycles. Tritel believes that simple, accurate bills are
necessary to support the customer's perception of quality service. In addition,
Tritel plans to offer customized billing options, including debit billing,
enabling customers to charge calls against pre-paid accounts and
neighborhood/zonal billing, which provides service at reduced charges within
certain home areas. Tritel also plans to offer "Wireless Office Services" to
corporate customers, which can include zonal billing for all usage and four-
digit dialing within the wireless office.
The wireless communications industry continues to undergo substantial
technological innovation. As a result, Tritel expects new services and features
to become commercially available for IS-136 TDMA systems in the future. Tritel
plans to make those services and features available to its customers.
Network Buildout
By the end of 2001, Tritel expects to have 1,445 cell sites, cover over
9,000 highway miles and provide service in over 40 cities.
Bechtel Corporation is providing the overall project and construction
management of the design, site acquisition, installation and testing of
Tritel's PCS transmission system. Bechtel is a respected world leader in
providing engineering project and construction management services. The
contract with Bechtel is based on specified hourly fees.
Initial Radio Frequency Design. Two radio frequency engineering firms,
Galaxy Personal Communications Services, Inc., a wholly owned subsidiary of
World Access, Inc., for the Mississippi,
174
<PAGE>
Alabama, Georgia and eastern Tennessee sites, and Wireless Facilities, Inc.,
for the Nashville, Tennessee and the Louisville and Lexington, Kentucky sites,
performed the initial radio frequency design for the network. Based upon their
engineering designs, Galaxy and Wireless Facilities determined the required
number of cell sites to operate the network and identified the general
geographic areas in which they propose to locate each of the required cell
sites. Tritel's network is designed to provide 90% in-building service
reliability in urban areas, 88% in-building service reliability in suburban
areas and 90% in-car service reliability in rural areas.
Site Identification, Acquisition and Construction. Tritel has arrangements
with several firms to identify and acquire the sites on which it will locate
the towers, antennae and other equipment necessary for the operation of its PCS
system. After the site acquisition companies identify the general geographic
area in which to locate cell sites, the site acquisition companies survey
potential sites to identify two potential tower sites within each geographic
location. The site acquisition companies evaluate the alternative sites within
each of the identified geographic areas, giving consideration to various
engineering criteria as well as the desirability of the site from an economic
point of view. The contracts with these site acquisition companies are based
upon specified hourly fees or fixed fee arrangements.
Tritel can obtain a cell site in three ways:
(1) co-location;
(2) construction of a tower by an independent build-to-suit company; or
(3) construction of a tower by Tritel.
First preference in site acquisition is being given to sites on which Tritel
can co-locate with another wireless company or companies by leasing space on an
existing tower or building. The advantages of co-location are that there are
lower construction costs to Tritel associated with the building of a tower and
any zoning difficulties have likely been resolved. Second preference is being
given to sites where Tritel would be able to arrange for the construction of a
tower on a build-to-suit basis by an independent tower construction company who
would acquire the site, build the tower and lease it back to Tritel. The
principal advantage of this method is that it reduces Tritel's capital
expenditures, although operating expenses will reflect the required lease
payments. Third preference is being given to those greenfield sites that Tritel
would acquire and then arrange for the construction of a tower that Tritel
would own.
Microwave Relocation. Prior to the Federal Communications Commission's
auction of PCS licenses in the 1850-1970 MHz frequency bandwidths, these
frequencies were used by various fixed microwave operators. The Federal
Communications Commission has established procedures for PCS licensees to
relocate these existing microwave paths, generally at the PCS licensee's
expense. Tritel has engaged Wireless Facilities to relocate the microwave paths
that currently use Tritel's bandwidth.
Mobile Switching Centers. In order to cover Tritel's approximately 14.0
million people in licensed areas, Tritel will utilize five switching centers
located in Louisville, Nashville, Birmingham, Knoxville and Jackson. All
locations for the switching centers have been leased and are currently being
constructed or renovated. Each switching center serves several purposes,
including routing calls, managing call handoff, managing access to landlines
and providing access to voice mail.
Network Operations Center. Tritel is utilizing Wireless Facilities' Network
Operations Center located in Richardson, Texas during the initial buildout and
deployment of its network in order to launch service earlier and reduce its
initial capital expenditures. The Network Operations Center's function is to
monitor the network on a real-time basis for, among other things, alarm
monitoring, power outages, tower lighting problems and traffic patterns. Tritel
is considering building and operating its own Network Operations Center at its
switch facilities in Jackson, Mississippi by 2001.
175
<PAGE>
Interconnection. Tritel's digital PCS network connects to the landline
telephone system through local exchange carriers. Tritel has entered into
interconnection agreements with BellSouth, GTE and smaller local exchange
carriers within Tritel's markets. Additionally, Tritel has entered into a long
distance agreement with AT&T providing for preferred rates for long distance
services.
Network Communications Equipment. Tritel has entered into an exclusive
equipment supply agreement with Ericsson under which Tritel purchases radio
base stations, switches and other related PCS transmission equipment, software
and services necessary to establish its PCS network. Ericsson has assigned a
dedicated project management team to assist Tritel in the installation and
testing of the equipment that will comprise Tritel's PCS transmission system.
Tritel has agreed that, during the five year term of the agreement, Ericsson
will be the exclusive provider to Tritel for certain PCS transmission
equipment, materials and services within Tritel's markets. Tritel has agreed to
purchase at least $300 million of equipment over the term of the agreement.
PCS Auctions. Many C-Block PCS licensees have returned all or a portion of
their spectrum to the government under a Federal Communications Commission
order permitting these licensees to restructure. Tritel chose to return 15 MHz
of spectrum for certain licenses covering certain populations in northern
Alabama. On April 15, 1999, the Federal Communications Commission completed an
auction of all C-Block spectrum, along with several D-, E- and F-Block
licenses, which was either returned under the restructuring order or otherwise
forfeited for noncompliance with the rules or default under the government
financing. Tritel participated in this re-auction through ABC, to which Tritel
made a loan of $7.5 million for bidding on licenses.
Competition
There are two established cellular providers in each of Tritel's markets.
These providers have significant infrastructure in place, often at low
historical cost, have been operational for many years, have substantial
existing subscriber bases and have substantially greater capital resources than
Tritel does. In addition, in most of Tritel's markets, there are at least two
or three other PCS providers currently offering commercial service or likely to
begin offering service before Tritel will. Tritel also faces competition from
paging, dispatch and conventional mobile radio operations as well as
specialized mobile radio, or SMR, and enhanced specialized mobile radio, or
ESMR, including those ESMR networks operated by Nextel and its affiliates in
Tritel's markets. Tritel is also competing with resellers of wireless services.
Over the past several years, the Federal Communications Commission has
auctioned, and will continue to auction, large amounts of spectrum that could
be used to compete with PCS services. Tritel expects competition in the
wireless telecommunications industry to be dynamic and intense as a result of
the entrance of new competition and the development of new technologies,
products and services.
Competition from Other PCS and Cellular Providers. Tritel expects to compete
directly with up to five or more PCS and cellular providers in each of its
markets. Principal PCS and cellular competitors in Tritel's markets are
BellSouth, Powertel, GTE, Sprint PCS, Century Telephone, PrimeCo and ALLTEL.
Tritel considers its primary competitors to be BellSouth, GTE and Powertel.
BellSouth, through its BellSouth Mobility subsidiary, provides analog and TDMA-
based digital cellular services in markets that substantially overlap Tritel's
markets. BellSouth has deployed IS-136 TDMA technology in all of its digital
markets in which it competes with Tritel, except Knoxville, where it has
deployed the GSM standard. GTE, Tritel's other principal cellular competitor,
has begun to upgrade its network to provide digital cellular service.
Powertel's PCS markets overlap nearly all of Tritel's markets. Powertel has
deployed the GSM digital technology standard in all of its PCS markets. The GSM
technology currently does not permit roaming onto an analog cellular system
without reconnecting the call. As a result, Powertel customers currently have
to drop and reinitiate calls as they roam from a Powertel PCS service area to
the service area of an analog cellular provider.
176
<PAGE>
Federal Communications Commission rules permit the partitioning of broadband
PCS licenses into licenses to serve smaller service areas, which could allow
other new wireless telecommunications providers to enter Tritel's markets. It
is also possible for an A-, B- or C-Block license holder to disaggregate its
30-MHz license into several smaller components, such as 20-MHz and 10-MHz
portions. If such disaggregation did occur, Tritel could face additional PCS
competition in certain of its markets.
Competition from Other Technologies. In addition to PCS and cellular
operators and resellers, Tritel may also face competition from other existing
communications technologies, including enhanced specialized mobile radio. The
ESMR system incorporates characteristics of cellular technology, including low
power transmission and interconnection with the landline telephone network. A
limited number of ESMR operators have recently begun offering short messaging,
data services and voice messaging service on a limited basis. The integrated
enhanced digital technology network that Nextel and its affiliates have
deployed integrates the capabilities of three currently different devices: a
dispatch radio, a cellular telephone and an alphanumeric pager. Nextel is
offering service in Birmingham, Louisville, Knoxville and Nashville, and Tritel
believes it is likely that Nextel will expand its service to other cities in
Tritel's markets. Within the area in which Tritel competes, Southern
Communications Services, Inc. also has begun to deploy ESMR cell sites over
much of Georgia, Alabama and southeastern Mississippi.
In the future, cellular and PCS offerings will also compete more directly
with traditional landline telephone service operators, and may compete with
services offered by energy utilities, and cable and wireless cable operators
seeking to offer communications services through their existing infrastructure.
Additionally, continuing technological advances in telecommunications, the
availability of more spectrum and Federal Communications Commission policies
that encourage the development of new spectrum-based technologies make it
impossible to predict the extent of future competition.
Marketing and Sales
Tritel's overall marketing strategy emphasizes the AT&T brand name in equal
emphasis with the SunCom brand name, the benefits of digital technology, the
breadth of Tritel's coverage and its focus on customer service, all of which is
provided at competitive prices. Tritel employs a sales and marketing approach
with highly definable and measurable goals, which focuses primarily on the use
of company stores to build the Tritel customer base.
Company Stores. Tritel's company-owned and operated retail stores are
modeled after AT&T Wireless retail stores, with the exception that Tritel may
not use the AT&T logo on the outside of its store fronts. Sales representatives
in company stores receive in-depth training on the advantages of PCS and the
AT&T and SunCom alliances. Tritel management also believes that in-store
customer education on PCS services and features will increase customer
satisfaction and usage. The company stores are intended to be customer
destinations in response to advertising and promotions, rather than impulse
stops.
Tritel stores are being designed to facilitate demonstration of the benefits
of Tritel's PCS services and features. The decentralized nature of the stores
enables sales representatives to emphasize flexible rate plans and the
different advantages to customers on a market-by-market basis. In addition,
emphasis is placed on the coast-to-coast roaming and service features
attributable to the IS-136 TDMA technology and the tri-mode handsets.
Tritel seeks to locate company stores on heavy traffic arteries, in high
visibility areas, and near high profile anchor retailers. Nearly all of the
company stores are expected to be located in retail shopping centers and to
range in size from 1,200 to 2,000 square feet. Tritel opened 34 company stores
as of March 31, 2000 and plans to open an additional 49 stores by the end of
2000.
Direct Sales Force. Tritel also uses a dedicated sales force. Tritel's sales
agents are assigned to specific regions within Tritel's markets and use the
company stores as their bases of operations. Sales agents receive
177
<PAGE>
training on the advantages of PCS and are provided with product and service
research, proposal writing and competitor analysis information. Tritel's sales
force will seek to coordinate with AT&T Wireless to offer bundled telephony and
related services. Tritel currently has a direct sales force of 61 sales people
and plans to have approximately 134 sales people by the end of 2000.
Indirect Distribution Channels. To augment the company's direct distribution
efforts, Tritel uses mass retailers in its markets, including Circuit City,
Office Depot and Best Buy. Tritel's management believes that the AT&T brand
recognition along with over-the-air activation capability will facilitate
distribution through mass retailers. In the future, Tritel may use other
distribution techniques as well, including simplified retail sales processes
and new, lower cost channels such as inbound telesales through a toll-free
number, affinity marketing programs and Internet sales.
Focus on Local Advertising and Promotion. Tritel advertises and promotes its
PCS services and products through various local media and consumer education
programs, including local television, radio, print, billboard and direct mail.
To reach a broad base of potential subscribers, Tritel combines mass marketing
efforts and direct marketing approaches to build and promote the AT&T and
SunCom brands locally, giving equal emphasis to each. Further, as markets are
launched, Tritel offers various promotional programs designed to entice new
subscribers, including special limited term and introductory rate and feature
programs, product demonstrations and special events. In addition to its local
marketing strategies, Tritel expects that the national promotional efforts by
AT&T and AT&T Wireless will increase interest and sales through its
distribution channels. Tritel believes AT&T Wireless's national "customer pull"
strategies for promotion will encourage potential customers to visit Tritel's
stores and local retailers to seek out the branded service.
Promotions to Target Specific Subscriber Types. Tritel has created distinct
marketing programs for different customer segments, including high volume
wireless users, home business operators, corporate accounts and casual wireless
users. For each segment, Tritel has created a specific marketing program
including a service package, pricing plan and promotional strategy. Tritel's
management believes that by tailoring its service packages and marketing
efforts to specific market segments, customers will perceive a higher value in
relation to the cost of service, will be more inclined to use Tritel's service,
and will have increased customer loyalty and higher levels of customer
satisfaction. Tritel will employ sophisticated marketing and database systems
to enable personalization of services for individual customers and
implementation of a proactive customer retention program. The deployment of
these systems should enable Tritel to better identify attractive niche
opportunities and provide feedback on the effectiveness of its marketing
campaigns.
Pricing. Tritel's management believes that a service- and feature-based
strategy, as opposed to a rate-based strategy, will be more successful in
acquiring and retaining subscribers. As part of a decentralized marketing
strategy, Tritel offers its retail subscribers and national and corporate
account subscribers volume and service-based rate plans that are responsive to
market trends. Tritel's billing system has the technology and capacity to
enable it to offer numerous pricing plans to its customers. Tritel will also
offer its customers prepaid debit pricing and plans to offer neighborhood/zonal
pricing options.
Tritel is not required to use any published AT&T Wireless pricing plan in
its markets, although Tritel may choose to do so. However, Tritel does offer a
series of national calling plans similar to the AT&T Digital OneRateSM plan.
Customer Service Operations. Tritel's customer service strategy is
predicated upon building strong relationships with customers, beginning with
the subscriber's handset purchase. Subscribers who purchase handsets from
company stores are able to activate service immediately. Subscribers purchasing
their handsets from independent retailers are able to activate service by using
the handset to call one of Tritel's customer service representatives. Either
way, the subscriber is able to obtain immediate credit approval or establish a
debit billing plan, select service features and a rate plan and set up a
billing program. Tritel also offers special billing services that cater to the
needs of consumers, including simplified monthly billing statements and
flexible billing cycles. Tritel expects future enhancements to include on-line
billing and account information.
178
<PAGE>
AT&T Wireless and the SunCom affiliates, including Tritel, will exchange
information and share best practices in order to provide customers with better
customer care.
Employees
At March 31, 2000, Tritel had 777 employees, including 126 in technical
operations, 420 in marketing and sales operations, 92 in customer operations,
28 in management information systems, 26 in human resources and 85 in corporate
and financial. Most of Tritel's employees are located at the corporate and
customer service operations locations in Jackson, Mississippi. Technical
operations and market and sales operations personnel are located in each of the
regional markets of Birmingham, Chattanooga, Huntsville, Knoxville, Louisville,
Lexington, Mobile, Montgomery and Nashville. Tritel considers its relations
with its employees to be good. None of Tritel's employees is represented by a
union.
Properties
Tritel currently owns no real property. Tritel has entered into leases for
an aggregate of 57,000 square feet of office space in Jackson, Mississippi for
use as its principal executive offices. The leases have initial terms ranging
from five years to ten years, with an option to renew for an additional five
years. Tritel has also entered into a lease for 48,900 square feet of office
space in Jackson, Mississippi for use as a customer operations center. This
lease has an initial term of five and one-half years, with an option to renew
for an additional five years. Tritel's management expects that the company's
current executive office and customer operations office facilities will be
sufficient through at least 2001.
Tritel has entered into leases in Jackson, Birmingham, Mobile, Nashville,
Knoxville, Louisville, Lexington and elsewhere for regional offices.
Tritel has leased mobile switching centers in Knoxville, Nashville,
Birmingham, Louisville and Jackson. Each switching center has a common design
with up to 13,000 square feet of space. The lease term for the switch centers
is generally in the range of ten to fifteen years, with Tritel having an option
to extend the term for five or ten years. These five switch centers have
sufficient square footage to house switches covering all of Tritel's markets
and, accordingly, Tritel does not expect to add switch centers in the future.
Company retail stores will be located throughout Tritel's markets. These
stores will generally cover 1,200 to 2,000 square feet of space and the leases
will generally be for an initial five-year term, with one or more five-year
renewal options. Tritel opened 34 company stores as of March 31, 2000 and plans
to open an additional 49 stores in 2000 to service all markets being launched
in 1999 and 2000.
Tritel expects to lease approximately 90% of its cell sites, either through
existing sites or built-to-suit sites. The cell site lease term is generally
for five years with one or more five-year renewal options. Maintenance of the
site is typically included in the lease arrangement and performed by the
lessor. Additionally, Tritel has negotiated master lease agreements with other
wireless providers and tower companies to lease space on their existing cell
sites throughout Tritel's markets.
Legal Proceedings
Tritel is a party to various legal proceedings, none of which, in the
opinion of Tritel's management, are material.
Stock Ownership of Management
The table below sets forth certain information as of March 31, 2000 with
respect to beneficial ownership of Tritel's voting securities by
. each stockholder who is known by Tritel to own beneficially more than 5%
of any class of Tritel's voting securities,
179
<PAGE>
. each of Tritel's directors,
. each of Tritel's named executive officers, and
. all of Tritel's directors and executive officers as a group.
Tritel's class A voting common stock casts 4,990,000 votes on all matters
not requiring a class vote, while the six shares of voting preference common
stock cast 5,010,000 votes on all matters not requiring a class vote. The votes
to which the class A voting common stock are entitled are allocated to each
share on a pro rata basis. Similarly, the votes to which the six shares of
voting preference common stock are entitled are allocated to each share on a
pro rata basis. The voting preference common stock loses its voting preference
when the rules of the Federal Communications Commission so permit, which is
currently five years after the respective issuances of its C- and F-Block
licenses, subject to possible unjust enrichment obligations for ten years.
Tritel's class B common stock generally does not have voting rights. Tritel's
class B common stock votes as a separate class only on any proposed changes to
the company's Restated Certificate of Incorporation that adversely affect the
rights of holders of class B common stock. Each share of class B common stock
is convertible into one share of class A voting common stock at any time at the
option of the holder.
Certain parties to Tritel's stockholders' agreement may be members of a
beneficial ownership "group" as a result of being a party to that agreement.
Such parties disclaim any beneficial ownership of shares owned by other parties
to the agreement.
180
<PAGE>
Unless otherwise indicated, each person named below has sole voting and
investment power with respect to the shares beneficially owned. Unless
otherwise indicated, the address of each person named below is c/o Tritel,
Inc., 111 E. Capitol Street, Suite 500, Jackson, Mississippi 39201.
<TABLE>
<CAPTION>
Percentage of
Number of Shares of Class A Outstanding Class A Percentage of Outstanding
Voting Common Stock Voting Common Stock Voting Preference Common Percent of
Beneficially Owned Beneficially Owned Stock Beneficially Owned Voting
--------------------------- --------------------- ----------------------------- Power in
In Holding In Holding In Holding Holding
Company In Tritel Company In Tritel Company Company
In Tritel before after the before the after the before the after the After the
Stockholder the Merger Merger(1) Merger Merger Merger Merger Merger
- ----------- ---------------- ---------- ---------- ---------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
AT&T Wireless PCS,
LLC(2)................. 25,881,196(3) 47,038,521(4) 21.7% 22.7 -- -- 12.4
CIHC, Incorporated(5)... 21,188,709 17,182,072 17.8 9.6 -- -- 3.9
Dresdner Kleinwort
Benson Private Equity
Partners L.P.(6)....... 11,147,761 9,039,797 9.4 5.1 -- -- 2.0
Triune PCS, LLC(7)...... 9,700,186 7,861,387 8.1 4.4 -- -- 1.8
Kevin J. Shepherd(8).... 9,701,386 7,862,299 8.1 4.4 -- -- 1.8
Southern Farm Bureau
Life Insurance Co.(9).. 7,814,486 6,324,657 6.6 3.5 -- -- 1.4
William M. Mounger,
II(10)................. 4,763,616 4,251,477 4.0 2.4 50.0 * 1.0
E.B. Martin, Jr......... 2,384,544 2,331,577 2.0 1.3 50.0 -- *
William S. Arnett(11)... 1,664,053 1,264,680 1.4 * -- -- *
Karlen Turbeville(12)... 1,086,412 825,673 * * -- -- *
David A. Jones,
Jr.(13)................ 729,993 591,803 * * -- -- *
Kirk Hughes(14)......... 206,500 156,940 * * -- -- *
Elizabeth L.
Nichols(15)............ 4,440 3,374 * * -- -- *
Scott I. Anderson(16)... 3,420 502,338 * * -- -- *
Andrew Hubregsen........ 1,200 912 * * -- -- *
Gary S. Fuqua........... 600 456 * * -- -- *
All of Tritel's
executive officers and
directors as a group
(16 persons)........... 80,352,550 92,286,706 67.3 43.3 100.0 * 22.6
</TABLE>
- --------
* Less than one-percent
(1) The shares of class A voting common stock held in Holding Company includes
the conversion of Tritel class A voting common stock, Tritel class B non-
voting common stock and Tritel class D common stock into Holding Company
class A voting common stock.
(2) Address is: c/o AT&T Wireless Services, Inc., 7277 164th Avenue, NE,
Redmond, Washington 98052.
(3) AT&T Wireless owns 46,374 shares of non-voting series D preferred stock.
These shares, including their unpaid dividends, are immediately convertible
at the holder's option into 18,463,121 shares of class A voting common
stock, which are included in the table, and 1,249,207 shares of non-voting
class D common stock. AT&T Wireless also owns 90,668 shares of non-voting
series A preferred stock. AT&T Wireless also owns 2,927,120 shares of class
B non-voting common stock which is convertible into 2,927,120 shares of
class A voting common stock at any time at the option of the AT&T Wireless.
These shares may be deemed to be beneficially owned by various affiliates
of AT&T Wireless.
(4) Consists of 18,288,834 shares of class A voting common stock, which
includes 3,149,137 shares of class A voting common stock converted from
shares of TeleCorp stock held by AT&T Wireless PCS, LLC, 14,912,778 shares
of series F preferred stock convertible into 14,717,715 shares of class A
voting common stock and 195,063 shares of class D common stock; and 46,374
shares of series G preferred stock convertible into 14,031,972 shares of
class A voting common stock and 949,398 shares of class F common stock.
(5) Address is: 11825 North Pennsylvania Street, Carmel, IN 46032.
(6) Address is: 75 Wall Street, 24th Floor, New York, NY 10005.
(7) Address is: 4770 Baseline Road, Suite 380, Boulder, CO 80303.
(8) Address is: 4770 Baseline Road, Suite 380, Boulder, CO 80303. Tritel shares
include 9,700,186 shares held by Triune PCS, LLC. Holding Company shares
include 7,861,387 shares held by Triune PCS, LLC. An affiliate of Mr.
Shepherd is the sole manager of Triune PCS LLC. Mr. Shepherd, together with
his spouse and his children's trust, indirectly holds a 43% economic
interest in Triune PCS and disclaims any beneficial ownership in the
remaining Triune PCS shares.
(9) Address is: 1401 Livingston Lane, Jackson, MS 39213.
(10) Tritel shares include 885,875 shares owned by Trillium PCS, LLC, 1,489,598
shares owned by M3, LLC and 3,600 shares held by Mr. Mounger's children's
trust. Holding Company shares include 713,799 shares owned by Trillium
PCS, LLC, 1,203,363 shares held by M3, LLC and 2,736 shares held by Mr.
Mounger's children's trust. Mr. Mounger controls both Trillium and M3.
(11) Tritel shares include 1,200 shares owned by Mr. Arnett's spouse and
children and options to purchase 34,437 shares of class A voting common
stock exercisable within 60 days of March 31, 2000. Holding Company shares
include 912 shares owned by Mr. Arnett's spouse and children and options
to purchase 26,172 shares of class A voting common stock exercisable
within 60 days of March 31, 2000.
(12) Tritel shares include 1,200 shares owned by Ms. Turbeville's children.
Holding Company shares include 912 shares owned by Ms. Turbeville's
children.
181
<PAGE>
(13) Tritel shares include options to purchase 3,000 shares of class A voting
common stock exercisable within 60 days of March 31, 2000 as well as
726,993 shares owned by J.G. Funding, LLC, an investment fund managed by
Chrysalis Ventures, LLC. Holding Company shares include options to
purchase 2,280 shares of class A voting common stock exercisable within 60
days of March 31, 2000 as well as 589,523 shares owned by J.G. Funding,
LLC. Mr. Jones is the Chairman and Managing Director of Chrysalis
Ventures, LLC.
(14) Tritel shares include options to purchase 42,100 shares of class A voting
common stock exercisable within 60 days of March 31, 2000 and 1,620 shares
owned jointly with his spouse. Holding Company shares include options to
purchase 31,996 shares of class A voting common stock exercisable within
60 days of March 31, 2000 and 1,231 shares owned jointly with his spouse.
(15) Tritel shares include 840 shares owned by Ms. Nichols' spouse and children
and options to purchase 3,000 shares of class A voting common stock
exercisable within 60 days of March 31, 2000. Holding Company shares
include 638 shares owned by Ms. Nichols spouse and children and options to
purchase 2,280 shares of class A voting common stock exercisable within 60
days of March 31, 2000.
(16) Tritel shares include options to purchase 3,000 shares of class A voting
common stock exercisable within 60 days of March 31, 2000. Holding Company
shares include options to purchase an aggregate of 10,005 shares of class
A voting common stock exercisable within 60 days of March 31, 2000, which
include the conversion of options to purchase 2,280 shares of Tritel class
A voting common stock and 7,725 shares of TeleCorp class A voting common
stock, and 492,064 shares of class A voting common stock held by TeleCorp
Investment Corp. II, L.L.C.
(17) Tritel shares include shares of class A voting common stock beneficially
owned by Tritel's executive officers, directors and Tritel's investors
with representation on Tritel's Board. Ann K. Hall and H. Lee Maschmann,
who are both employed by AT&T Wireless, Alexander P. Coleman, who is
employed by Dresdner Kleinwort Benson Private Equity, and Andrew
Hubregsen, who is employed by Conseco Private Capital Group and affiliate
of CIHC, Incorporated, each disclaims any beneficial ownership of shares
owned by his or her employer.
Compensation Committee Report
Historical Approach. Prior to Tritel's public offering of class A voting
common stock, the salaries for its executives were generally determined by
market standards. The current compensation committee, which was established on
March 25, 1999, will utilize various sources of compensation information upon
which to base its decisions. The compensation information reviewed will include
compensation surveys and peer group analyses. In addition, the compensation
committee will focus on the salary, pay adjustments and benefit packages of
other senior executives in the telecommunications industry, with particular
attention to other wireless communications companies.
In reviewing the compensation package for the executive officers, the
compensation committee will consider a number of factors including asset size,
earnings, type of operations, corporate structure, geographic locations and
budget considerations. The compensation committee will be provided with
relevant, timely and reliable data regarding compensation.
Compensation Policies. The compensation committee expects to consider the
following objectives in setting compensation and benefits and some of the
following incentives in determining bonuses:
. establishing base salaries at a competitive average;
. rewarding the achievement of Tritel's annual and long term strategic
goals;
. retaining executive officers by offering compensation and benefits at a
competitive level with other executives in the wireless communications
industry; and
. providing additional motivation for the executive officers to enhance
stockholder value by linking a portion of the compensation package to
the performance of Tritel's common stock.
Components of Salary. An executive's total compensation consists of three
elements: base salary, an annual incentive bonus, and long-term stock-based
compensation (including stock options and restricted stock awards).
Base Salary and Bonus Awards. The compensation committee considers a number
of factors in fixing the base salary and bonus awards of the executive
officers. Those factors typically include: the level of responsibility
associated with the individual's position, the individual's performance,
Tritel's overall performance, certain non-financial indicators and the business
and inflationary climate. In the case of executive officers with responsibility
for a particular business department, the compensation committee also considers
the
182
<PAGE>
department's financial performance. Non-financial indicators may include, among
other things, the completion of Tritel's network buildout, strategic
developments for which an executive officer has responsibility, or managerial
performance.
The compensation committee also considers the compensation awarded by other
wireless communications companies such as TeleCorp, Triton, Nextel and Sprint
PCS. The compensation committee considered all of these various factors in
setting compensation for 1999, and as to the bonus awards, assigned a
particular weighting to certain of these factors.
Stock-Based Compensation. Under the 1999 Stock Option Plan, the compensation
committee is authorized to grant certain stock-based awards, including
"incentive stock options" and nonqualified stock options, restricted shares,
deferred shares and stock appreciation rights. The compensation committee
believes that Tritel's long-term stock-based compensation aligns the interests
of the executive officers with those of the stockholders, because appreciation
in the price of the stock will benefit all stockholders commensurately.
Stock options grants are based on level of position and individual
contribution. The compensation committee also considers stock option grants
previously made and the aggregate of such grants. As with the determination of
salary and bonus awards, the compensation committee exercises subjective
judgment and discretion evaluating the above criteria. Tritel's long-term
performance will ultimately determine compensation from stock options, since
gains from stock option exercises are entirely dependent on the long-term
growth of Tritel's stock price.
Chief Executive Officer. The Chief Executive Officer's compensation for 1999
was determined with reference to the same measures used for all executive
officers of Tritel. For 1999, Mr. Mounger received $225,000 as his base salary
and $172,575 as his bonus award. The compensation committee exercised its
subjective judgment and discretion in determining Mr. Mounger's salary and
bonus award. With respect to Mr. Mounger's bonus award for 1999, the
compensation committee assigned particular weightings to various factors,
including the completion of Tritel's network buildout, its capital expenditures
budget, its operating budget, its subscriber base and its revenues.
Section 162(m). Under Section 162(m) of the Internal Revenue Code of 1986,
as amended, certain executive compensation (in the form of cash, options or
stock) received by Tritel's executive officers, when aggregated with all other
compensation received by such executive, in excess of $1.0 million will not be
deductible by Tritel for federal income tax purposes unless such compensation
is awarded under a performance-based plan approved by Tritel's stockholders.
The compensation committee intends to review the potential effect of Section
162(m) when making awards and recommendations regarding the compensation of
Tritel's executive officers.
The goal of Tritel's compensation structure is to be certain that all
executives are compensated consistent with the above guidelines and to assure
that all reasonable and possible efforts are being exerted to maximize
stockholder value. Compensation levels will be reviewed as frequently as
necessary to ensure this result.
The Compensation Committee
Andrew Hubregsen, Chairman H. Lee Maschmann Kevin J. Shepherd
Compensation Committee Interlocks and Insider Participation
The compensation committee during the year ended December 31, 1999,
consisted of Andrew Hubregsen, H. Lee Maschmann and Kevin J. Shepherd. None of
the executive officers served as a director or member of the compensation
committee or other board committee performing equivalent functions of another
corporation.
183
<PAGE>
Executive Compensation
Compensation of Executive Officers
Summary Compensation Table
The following table sets forth certain information with respect to the
compensation paid by Tritel for services rendered during the fiscal year 1999
by Tritel's chief executive officer, its four most highly compensated executive
officers and Jerry M. Sullivan Jr., a former executive officer of Tritel. Mr.
Arnett became president in January 1999 and was not a Tritel employee prior to
such appointment.
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------
Annual Compensation Awards
------------------------------------ ------------------------
Securities All Other
Name and Principal Other Annual Restricted Underlying Compensation
Position Year Salary Bonus(1) Compensation Stock Awards Options (2)
------------------ ---- -------- -------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William M. Mounger, II.. 1999 $225,000 $172,575 -- 30,748(3) -- --
Chairman of the Board 1998 225,000 112,500 -- -- -- --
and Chief Executive
Officer
William S. Arnett....... 1999 220,320 172,575 -- 16,278(4) 172,184 84,300
President, Chief 1998 -- -- -- -- -- --
Operating Officer and
Director
E.B. Martin, Jr. ....... 1999 225,000 172,575 -- 30,748(5) -- --
Executive Vice 1998 225,000 112,500 -- -- -- --
President, Treasurer
and Chief Financial
Officer
Karlen Turbeville....... 1999 175,000 109,970 -- 10,852(6) -- --
Senior Vice President-- 1998 175,000 87,500 -- -- -- --
Finance
Kirk Hughes............. 1999 175,000 92,181 -- 1,628(7) 168,400 --
Senior Vice President-- 1998 55,019(8) 74,743(9) -- -- -- --
Information
Technologies
Jerry M. Sullivan,
Jr. ................... 1999 225,000 112,500 -- 30,748(10) -- 1,012,500
Former Executive Vice 1998 225,000 112,500 -- -- -- --
President
</TABLE>
- --------
(1) In March 2000, the Compensation Committee awarded discretionary bonuses to
the employees, including the executive officers listed in the Summary
Compensation Table, for services rendered during the year ended December
31, 1999.
(2) "All Other Compensation" for Mr. Arnett for the year ended December 31,
1999, includes approximately $66,655 paid in connection with the relocation
of his residence to Jackson, Mississippi; approximately $2,482 of inputed
interest with respect to an unsecured, interest-free loan made by Tritel in
connection with the relocation of his residence, and approximately $15,163
in legal fees incurred in connection with the negotiation of his employment
agreement with Tritel. "All Other Compensation" for Mr. Sullivan for the
year ended December 31, 1999, includes the amounts payable to him in
connection with Tritel's agreement with him to redefine his employment
agreement.
(3) This amount reflects 2,384,544 shares of Tritel class A voting common stock
and 690,224 shares of Tritel class C common stock, valued at 1/400th of
$.01 on January 7, 1999, the date of grant, awarded to Mr. Mounger upon the
closing of the joint venture. The value of the restricted stock held by Mr.
Mounger at December 31, 1999 was $97,189,186.
(4) This amount reflects the value of 1,627,816 shares of Tritel class A voting
common stock, valued at 1/400th of $.01 on January 7, 1999, the date of
grant, awarded to Mr. Arnett in connection with his employment as
President. The value of the restricted stock held by Mr. Arnett at December
31, 1999 was $51,452,992.
(5) This amount reflects the value of 2,384,544 shares of Tritel's class A
voting common stock and 690,224 shares of Tritel's class C common stock,
valued at 1/400th of $.01 on January 7, 1999, the date of grant, awarded to
Mr. Martin upon the closing of the joint venture. The value of the
restricted stock held by Mr. Martin at December 31, 1999 was $97,189,186.
(6) This amount reflects the value of 1,085,212 shares of Tritel class A voting
common stock, valued at 1/400th of $.01 on January 7, 1999, the date of
grant, awarded to Ms. Turbeville upon the closing of the joint venture.
These shares vest at the rate of 20% at the date of grant, 15% on each of
the second, third, fourth and fifth anniversaries of the date of grant, and
10% each upon the completion of two defined network build-out plan
milestones. The value of the restricted stock held by Ms. Turbeville at
December 31, 1999 was $34,302,037.
(7) This amount reflects the value of 162,780 shares of Tritel class A voting
common stock, valued at 1/400th of $.01 on January 7, 1999, the date of
grant, awarded to Mr. Hughes upon the closing of the joint venture. These
shares vest at the rate of 20% at the first anniversary of the date of
grant, 15% on each of the second, third, fourth and fifth anniversaries of
the date of grant, and 10% each
184
<PAGE>
upon the completion of two defined network build-out plan milestones. The
value of the restricted stock held by Mr. Hughes at December 31, 1999 was
$5,145,249.
(8) This amount reflects the base salary paid to Mr. Hughes from the time of
his employment with Tritel in September 1998 to December 31, 1998.
(9) This amount includes a $50,000 signing bonus paid to Mr. Hughes in 1998 in
addition to the discretionary bonus awarded to Mr. Hughes with respect to
services rendered during the year ended December 31, 1998.
(10) This amount reflects the value of 2,384,544 shares of Tritel class A
voting common stock and 690,224 shares of Tritel class C common stock,
valued at 1/400th of $.01 on January 7, 1999, the date of grant, awarded
to Mr. Sullivan upon the closing of the joint venture. Effective
September 30, 1999, Tritel repurchased 584,544 shares of Tritel class A
voting common stock and 690,224 shares of Tritel class C common stock
from Mr. Sullivan for a total of approximately $12,748, which is not
reflected in the table. The remaining shares owned by Mr. Sullivan are no
longer subject to vesting requirements.
Stock Options
1999 Option Grants Table
The following table sets forth stock options granted in 1999 to each of
Tritel's named executive officers and stock options granted to all employees
as a group. The table also sets forth the grant date present value of the
options. The actual future value of the options will depend on the market
value of Tritel's common stock. All option exercise prices are based either on
fair market value on the date of grant or an average of the closing price on
the most recent five trading days including the date of grant.
Option Grants in 1999
<TABLE>
<CAPTION>
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base Grant Date
Options Employees Price Expiration Present
Name Granted in 1999 ($/Sh) Date Value ($)(1)
- ---- ---------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
William M. Mounger, II.. -- -- -- -- --
William S. Arnett....... 172,184(2) 8.3% $18.00 12/13/09 $1,463,564
E.B. Martin, Jr......... -- -- -- -- --
Karlen Turbeville....... -- -- -- -- --
Kirk Hughes............. 168,400(3) 8.1% $18.00 12/13/09 1,431,400
Jerry M. Sullivan, Jr... -- -- -- -- --
All employees as a
group.................. 481,422 100.0% $18.05 -- 17,736,407
</TABLE>
- --------
(1) The actual value, if any, that an executive officer may ultimately realize
upon the exercise of stock options will depend on the excess of the stock
price over the exercise price on the date the stock option is exercised.
Therefore, there can be no assurance that the value realized by Mr. Arnett
or Mr. Hughes upon actual exercise of the stock options granted in 1999
will be at or near the Grant Date Present Value indicated in the table.
(2) The stock options reflected in this table for Mr. Arnett vest at the rate
of 20% at the date of grant, 15% on each of the second, third, fourth and
fifth anniversaries of the date of grant, and 10% each upon the completion
of two defined network build-out plan milestones.
(3) The stock options reflected in this table for Mr. Hughes vest at the rate
of 25% at the date of grant and 25% on each of the first, second, and
third anniversaries of the date of grant.
185
<PAGE>
The following table sets forth information concerning the value as of
December 31, 1999 of options held by Tritel's named executive officers.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money
Exercise Realized Options at FY-End Options at FY-End
----------- -------- ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William M. Mounger, II.. -- -- -- -- -- --
William S. Arnett....... -- -- 34,437 137,747 $471,354 $1,885,415
E.B. Martin, Jr......... -- -- -- -- -- --
Karlen Turbeville....... -- -- -- -- -- --
Kirk Hughes............. -- -- 42,100 126,300 $576,244 $1,728,731
Jerry M. Sullivan, Jr... -- -- -- -- -- --
</TABLE>
- --------
(1) The amounts shown under this caption represent the difference between the
closing price for the common stock on The Nasdaq National Market on
December 31, 1999 ($31.6875 per share) and the exercise price of in-the-
money stock options.
Director Compensation. The directors designated by the initial investors
other than AT&T Wireless or AT&T do not receive cash compensation for their
service on the board of directors. Other non-employee directors receive a
quarterly stipend of $2,500, $1,000 for attending each Board or committee
meeting and $500 for participating in each Board or committee meeting held by
teleconference. In addition, Tritel has adopted the 1999 Stock Option Plan for
Non-Employee Directors and has granted 45,000 stock options to qualifying non-
employee directors in fiscal year 1999. All directors, including directors who
are Tritel employees, will be reimbursed for out-of-pocket expenses in
connection with attendance at meetings.
Employment Agreements
William M. Mounger, II
Upon consummation of the merger, Holding Company and Mr. Mounger will enter
into a one-year employment agreement which provides that Mr. Mounger will serve
as Chairman of the Board of Directors of Holding Company. The agreement
terminates and replaces the employment agreement entered into by Mr. Mounger
and Tritel on January 7, 1999. By the terms of the new employment agreement,
Mr. Mounger will receive a base annual salary of not less than $250,000, with a
minimum annual increase of $25,000. Mr. Mounger will be entitled to an annual
bonus equal to the greater of:
. 50% of his base annual salary; or
. the amount of annual bonus paid to Gerald Vento for that year.
Mr. Mounger's employment under his employment agreement may be terminated:
. voluntarily by Mr. Mounger at his sole discretion, upon two weeks notice
to Holding Company;
. on Mr. Mounger's death;
. by Holding Company on Mr. Mounger's "disability," as defined in the
agreement; or
. by Holding Company, with or without cause, upon two weeks notice to Mr.
Mounger.
If Holding Company terminates Mr. Mounger for any reason, or if he
voluntarily quits, Holding Company will pay him:
. any earned but unpaid base salary;
. any amounts vested or which Mr. Mounger would otherwise be entitled to
under any plan or contract with Holding Company;
186
<PAGE>
. a base salary, at normal payroll intervals, in an amount equal to the
salary Mr. Mounger would have been entitled to receive had his
employment not been terminated, for the period beginning on the date of
termination and ending on January 7, 2004; and
. an annual bonus through January 7, 2004, excluding 2004.
Upon termination of the employment agreement, the shares of Holding Company
class E common stock then held by Mr. Mounger will be purchased by:
. Mr. Vento and Mr. Sullivan; or
. any other person Holding Company designates to purchase the shares.
The price of the shares will be the average price of Holding Company's class
A voting common stock, as quoted on the Nasdaq National Market or other
securities exchange for the 20 trading days immediately preceding the
termination of the employment agreement.
Any restricted shares of Holding Company class A voting common stock or
class E common stock that were subject to vesting and repurchase provisions set
forth in the employment agreement between Mr. Mounger and Tritel will become
fully vested on the date that the merger becomes effective, provided that Mr.
Mounger remains in continuous employ of Holding Company or any of its
subsidiaries until that date.
The employment agreement contains a 6 month non-competition clause, and
requires that Mr. Mounger not disclose trade secrets learned during his
employment.
E.B. Martin, Jr.
Subject to completion of the merger, Holding Company and Mr. Martin will
enter into a one-year employment agreement which provides that Mr. Martin will
serve as Vice Chairman of the Board of Directors of Holding Company. The
agreement terminates and replaces the employment agreement entered into by Mr.
Martin and Tritel on January 7, 1999. By the terms of the employment agreement,
Mr. Martin will receive a base annual salary of not less than $250,000, with a
minimum annual increase of $25,000. Mr. Martin will be entitled to an annual
bonus equal to the greater of:
. 50% of his base annual salary; or
. the amount of annual bonus paid to Thomas Sullivan for that year.
Mr. Martin's employment under his employment agreement may be terminated:
. voluntarily by Mr. Martin at his sole discretion, upon two weeks notice
to Holding Company;
. on Mr. Martin's death;
. by Holding Company on Mr. Martin's "disability," as defined in the
agreement; or
. by Holding Company, with or without cause, upon two weeks notice to Mr.
Martin.
If Holding Company terminates Mr. Martin for any reason, or if he
voluntarily quits, Holding Company will pay him:
. any earned but unpaid base salary;
. any amounts vested or which Mr. Martin is entitled to under any plan or
contract with Holding Company;
. a base salary, at normal payroll intervals, in an amount equal to the
base salary Mr. Martin would have been entitled to receive had his
employment not been terminated, for the period beginning on the date of
termination and ending January 7, 2004; and
. an annual bonus through January 7, 2004, excluding 2004.
187
<PAGE>
Upon termination of the employment agreement, the shares of Holding Company
class E common stock then held by Mr. Martin will be purchased by:
. Mr. Vento and Mr. Sullivan; or
. any other person the Holding Company designates to purchase the shares.
The price of the shares will be the average price of Holding Company's class
A voting common stock, as quoted on the Nasdaq National Market or other
securities exchange for the 20 trading days immediately preceding the
termination of the employment agreement.
Any restricted shares of Holding Company class A voting common stock or
class E common stock that were subject to vesting and repurchase provisions set
forth in the employment agreement between Mr. Martin and Tritel will become
fully vested on the date that the merger becomes effective, provided that Mr.
Martin remains in continuous employ of Holding Company or any of its
subsidiaries until that date.
The employment agreement contains a six month non-competition clause, and
requires that Mr. Martin not disclose trade secrets learned during his
employment.
William S. Arnett. In addition to Mr. Mounger's and Mr. Martin's employment
agreements, the merger agreement permits amendments to the employment agreement
between Tritel and William Arnett, President and Chief Operating Officer of
Tritel, Inc. Under the merger agreement, Tritel is permitted to modify Mr.
Arnett's employment agreement to fully vest all restricted stock awards at the
effective time of the merger and to make other related changes, including
amendment of the provisions relating to the payment of the exercise price.
Although the Tritel board of directors has authorized, and Tritel intends to
effect these, amendments to Mr. Arnett's employment agreement, no amendments
have been finalized or executed as of the date of this joint proxy statement-
prospectus.
1999 Stock Option Plan. Tritel's 1999 stock option plan authorizes the grant
of certain tax-advantaged stock options that are intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended, nonqualified stock options, restricted shares, deferred
shares and stock appreciation rights for the purchase of an aggregate of up to
10,462,400 shares of Tritel's common stock, referred to as "Awards." The stock
option plan provides for the grant of awards to Tritel's qualified officers,
employee directors and other key employees of, and consultants to, Tritel and
its subsidiaries, provided, however that incentive stock options may only be
granted to employees. As of March 31, 2000, 6,734,759 shares had been issued or
were subject to currently outstanding option rights. The share totals and
limitations described in this section are subject to adjustment in the event of
changes in Tritel's capitalization. The maximum term of any stock option to be
granted under the stock option plan is ten years, except that with respect to
incentive stock options granted to an individual who owns stock possessing more
than 10% of the total combined voting power of all classes of Tritel's stock,
the term of those stock options will be for no more than five years. Generally,
after the effectiveness of the registration statement covering Tritel's class A
voting common stock, no participant may be granted stock options or stock
appreciation rights covering more than 500,000 shares of common stock under the
stock option plan during any two calendar year period. A similar limitation
applies for deferred shares. The restricted stock generally is subject to the
repurchase agreements as discussed under "Employment Agreements." The number
and terms of each award and all questions of interpretation with respect to the
stock option plan, including the administration of, and amendments to, the
stock option plan, are currently determined by the board of directors. The
stock option plan generally will be administered by the compensation committee
of the board.
The exercise price of incentive stock options granted under the stock option
plan generally must not be less than the fair market value of the common stock
on the grant date, except that the exercise price of incentive stock options
granted to a 10% stockholder must not be less than 110% of such fair market
value on the grant date. The minimum exercise price of non-qualified stock
options granted under the plan is the lesser of 75% of the then fair market
value of Tritel's common stock on the date of grant or $23.61 per share. The
188
<PAGE>
aggregate fair market value on the date of grant of the common stock for which
incentive stock options are exercisable for the first time by an employee
during any calendar year may not exceed $100,000. The stock option plan will
terminate in 2009 unless extended by amendment.
In the event a participant in the stock option plan terminates employment
with Tritel, the board or the compensation committee may accelerate the vesting
and exercisability of any stock option or stock appreciation right or lapse the
restrictions on any restricted share or deferred share if it determines such
action to be equitable under the circumstances or in Tritel's best interest.
To the extent that a participant recognizes ordinary income in the
circumstances described above, Tritel will be entitled to a corresponding
deduction provided that, among other things, (1) the income meets the test of
reasonableness, is an ordinary and necessary business expense and is not an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code and is not disallowed by the $1.0 million limitation on certain
executive compensation, and (2) any applicable reporting obligations are
satisfied.
1999 stock option plan for Non-employee Directors. Tritel's 1999 stock
option plan for non-employee directors authorized the grant of certain
nonqualified stock options for the purchase of an aggregate of up to 20,000,000
shares of Tritel's common stock to non-employee directors of Tritel. On
December 3, 1999, the Tritel board of directors approved an amendment to the
non-employee directors plan to decrease the number of shares of common stock
reserved under the plan to 100,000 shares. As of the date of this offering,
options for 45,000 shares had been issued under the non-employee directors
plan. The maximum term of any stock option to be granted under the non-employee
directors plan is ten years. Grants of options under the non-employee directors
plan and all questions of interpretations with respect to the non-employee
directors plan, including the administration of, and amendments to, the non-
employee directors plan, are determined by the Tritel board of directors.
The exercise price of nonqualified stock options granted under the non-
employee directors plan must not be less than the fair market value of the
common stock on the grant date. The non-employee directors plan will terminate
in 2009 unless extended by amendment.
Joint Venture Agreements With AT&T Wireless
On May 20, 1998, Airwave Communications, Digital PCS, AT&T Wireless, TWR
Cellular, Inc., certain initial investors other than AT&T Wireless, certain
members of management and Tritel entered into a securities purchase agreement
which provided for the formation of the Tritel-AT&T Wireless joint venture and
related equity investments.
On January 7, 1999, the transactions contemplated by the securities purchase
agreement were closed and the parties entered into a network membership license
agreement, roaming agreement, roaming administration agreement, stockholders'
agreement, long distance agreement, closing agreement and agreed on a form of
resale agreement.
The following description is a summary of the material provisions of the
securities purchase agreement, network membership license agreement, roaming
agreement, roaming administration agreement, stockholders' agreement, long
distance agreement, closing agreement and form of resale agreement.
The summary does not restate those agreements in their entirety and is
qualified in its entirety by reference to each agreement.
Securities Purchase Agreement
Under the securities purchase agreement: (1) AT&T Wireless and TWR assigned
the AT&T licensed areas to Tritel in exchange for shares of Tritel's series A
preferred stock and series D preferred stock; (2) Airwave
189
<PAGE>
Communications and Digital PCS assigned to Tritel their contributed licensed
areas and certain other assets in exchange for shares of series C preferred and
the assumption of certain liabilities of Airwave Communications and Digital
PCS, including the indebtedness owed to the United States Department of the
Treasury for the Airwave Communications and Digital PCS contributed licensed
areas; and (3) the initial investors other than AT&T Wireless purchased shares
of the series C preferred stock.
The AT&T contributed licensed areas are comprised of licenses providing for
the right to use 20 MHz of authorized frequencies in geographic areas that
cover approximately 9.1 million people in licensed areas, which AT&T Wireless
has partitioned and disaggregated from certain of its 30-MHz A- and B-Block PCS
licenses.
AT&T Wireless has reserved the right to use, and market and sell to others,
any services on the 10 MHz of spectrum that it retains in the creation of the
AT&T contributed licensed areas, subject to the exclusivity provisions of the
stockholders' agreement and the network membership license agreement.
Except as specified in the securities purchase agreement and the related
agreements, none of AT&T Wireless, TWR nor any of their respective affiliates
has any further obligation or commitment to acquire Tritel's debt or equity
securities, provide or arrange for debt or equity financing for Tritel or
provide services to or otherwise assist Tritel in connection with the conduct
of Tritel's business. The securities purchase agreement does not contain any
restrictions on AT&T Wireless, TWR, or any of their respective affiliates, from
competing, directly or indirectly, with Tritel.
AT&T Wireless Network Membership License Agreement
As part of Tritel's strategic alliance with AT&T Wireless, Tritel has
entered into the AT&T network membership license agreement with AT&T and its
affiliates, including AT&T Wireless. Under the network membership license
agreement, Tritel has been granted a royalty-free, non-exclusive license to use
the AT&T logo with the globe design, the related trade dress and the expression
"Member of the AT&T Wireless Network" and variations of the foregoing, in equal
emphasis with Tritel's brands or marks, in Tritel's markets in the marketing of
Tritel's mobile wireless telecommunications products and services. The license
does not permit, however, the use of the AT&T licensed marks in connection with
providing or reselling long distance or local service or any other product or
service other than those covered by Tritel's PCS licenses. AT&T has retained
the unimpaired right to use the AT&T licensed marks in Tritel's markets for
marketing, offering or providing any products or services. AT&T will not grant
to any other person providing mobile wireless telecommunications products or
services in Tritel's markets a right or license to use the AT&T licensed marks,
except to a person that is a reseller of Tritel's services, a person acting as
Tritel's agent or a person that provides fixed wireless telecommunications
services to or from specific locations, such as buildings or office complexes,
so long as such services do not constitute mobile wireless telecommunications
services in Tritel's markets. Tritel is not permitted to assign, sub-license or
transfer any of Tritel's rights, obligations or benefits under the network
membership license agreement.
In an effort to ensure that Tritel's service meets AT&T's high quality
standards, Tritel has agreed to abide by certain quality standards set forth in
the network membership license agreement and to permit AT&T to conduct
inspections of Tritel's facilities from time to time.
The network membership license agreement is for an initial term of five
years. The network membership license agreement will be renewed for an
additional five-year term if:
. each party gives the other notice of intent to renew at least 90 days
prior to the expiration of the initial term, or
. during the period which begins 120 days prior to expiration and ends 110
days prior to expiration, either party requests that the other party
provide notice of intent to renew, and the other party either gives
notice of intent to renew or fails to respond to such request.
190
<PAGE>
AT&T is permitted to terminate the network membership license agreement if
Tritel:
. uses the AT&T licensed marks other than as provided in the network
membership license agreement;
. uses the AT&T licensed marks in connection with any marketing or
provision of telecommunications services that fails to meet AT&T's
quality standards in any material respect;
. refuses or neglects a request by AT&T Wireless for access to Tritel's
facilities or marketing materials for a period of more than five
business days after the receipt of notice thereof;
. experiences a change of control;
. becomes bankrupt;
. fails to maintain Tritel's rights to hold Federal Communications
Commission licenses with respect to Tritel's markets representing 5% or
more of the people in Tritel's licensed areas, unless the failure is the
result of AT&T's actions or inactions;
. licenses, assigns, transfers, disposes of or relinquishes any of the
rights granted to Tritel in, and other than as permitted by, the network
membership license agreement;
. fails to obtain permission from AT&T to use the AT&T licensed marks in
sponsoring, endorsing or affiliating with any event, meeting, charitable
endeavor or other undertaking that has a material adverse effect on AT&T
or the AT&T licensed marks;
. fails to maintain any and all confidential information furnished to
Tritel in the strictest confidence; or
. commits a substantial company breach as defined in the stockholders'
agreement.
Upon the later occurrence of: (a) consummation of a Disqualifying
Transaction, as defined below, or (b) the second anniversary of the date AT&T
gives notice to Tritel that it has entered into a letter of intent or binding
agreement to engage in a Disqualifying Transaction, AT&T may terminate the
network membership license agreement with Tritel by providing notice to Tritel.
However, no such termination may occur during the initial term. If Tritel has
not exercised its right to convert all of AT&T's series A and series D
preferred into series B preferred, the termination only applies to that portion
of its markets that overlap the markets in which a party to such Disqualifying
Transaction owns a Federal Communications Commission license to provide
commercial mobile radio service (the "Overlap Markets"). Upon a termination of
the network membership license agreement, Tritel must cease using the AT&T
licensed marks within 90 days.
The network membership license agreement will also terminate in the event
that AT&T Wireless converts any of its shares of series A preferred into common
stock on the later of (a) the initial term plus any renewal periods, or (b) two
years from the date of such conversion.
The term "Disqualifying Transaction" means a merger, consolidation, asset
acquisition or disposition, or other business combination involving AT&T or its
affiliates and another person, which other person
(a) derives from telecommunications businesses annual revenues in excess of
$5 billion,
(b) derives less than one-third of its aggregate revenues from wireless
telecommunications services,
(c) owns Federal Communications Commission Licenses to offer, and does
offer, mobile wireless telecommunications services, except certain
specified services, serving more than 25% of the people within Tritel's
licensed territory, and
(d) with respect to which AT&T Wireless has given notice to Tritel
specifying that such merger, consolidation, asset acquisition or
disposition or other business combination shall be a Disqualifying
Transaction for purposes of this agreement and the transactions
contemplated thereby.
191
<PAGE>
Roaming Agreement
Tritel and AT&T Wireless, along with Tritel's respective affiliates, have
also entered into an intercarrier roamer service agreement, called the Roaming
Agreement, to allow subscribers of each party to roam onto each others wireless
network when a subscriber travels into a geographic area that the other party
services.
The Roaming Agreement states that Tritel and AT&T Wireless will provide
automatic call delivery to the other party's customers who roam into Tritel's
geographic area. To facilitate this service, each party has agreed to provide
continuously the necessary hardware, software and transmission facilities to
support such call delivery, either directly or through a separate network of
wireless communications carriers.
The Roaming Agreement has an initial term of 20 years, subject to earlier
termination, and thereafter will continue on a month-to-month basis until
terminated with 90 day's written notice. The agreement may be terminated or
suspended upon default by either party for
. material breach of any term of the Roaming Agreement that continues
unremedied for 30 days;
. a voluntary liquidation or dissolution of either party;
. a final order by the Federal Communications Commission revoking or
denying renewal of a material PCS license or permit granted to either
party; or
. a bankruptcy of either party.
Either party may suspend certain aspects of its services if it determines
that fraudulent or unauthorized use of the system has reached an unacceptable
level of financial loss.
Roaming Administration Service Agreement
AT&T Wireless and Tritel's company have also entered into a roaming
administration service agreement to allow Tritel to receive certain benefits
under intercarrier roaming services agreements between AT&T Wireless and other
specified wireless carriers, to permit subscribers of those other wireless
carriers to use Tritel's facilities in accordance with the applicable
intercarrier roaming services agreements and to make available to Tritel the
roaming administration services of AT&T Wireless. The roaming administration
agreement provides that AT&T Wireless will perform, for a fee, roaming
administration and settlement services to manage Tritel's roaming program.
The roaming administration agreement has an initial term of two years,
subject to earlier termination, and thereafter will renew automatically for
successive terms of one year each until either party chooses not to renew upon
90 day's prior written notice. The roaming administration agreement may be
terminated for any of the following reasons:
. material breach by either party;
. material and unreasonable interference with one party's operations by
the operations of the other party for a period exceeding ten days;
. by AT&T Wireless with respect to any intercarrier roaming services
agreement or its interoperability agreement with EDS Personal
Communications Corporation, in the event the applicable agreement
expires or is terminated. The current interoperability agreement with
EDS Personal Communications Corporation expires on March 31, 2000, with
respect to settlement services and on June 30, 1999, with respect to
call validation services;
. by AT&T Wireless in the event that Tritel is no longer a member in good
standing with the North American Cellular Network, Inc.;
192
<PAGE>
. by AT&T Wireless with respect to the roaming administration services
received under AT&T Wireless's interoperability agreement with EDS
Personal Communications Corporation should that agreement expire or
terminate; or
. by either party for any reason upon 180 day's prior written notice.
Upon termination of the roaming administration agreement for any of the
reasons set forth above, each party shall immediately, or upon final
accounting, pay all amounts owing to the other parties thereunder, whether due
or to become due.
Long Distance Agreement
AT&T Wireless and Tritel have entered into a long distance agreement which
provides that Tritel will purchase interstate and intrastate long distance
services from AT&T Wireless for a term of up to three years. These long
distance services will be purchased at preferred rates, which are contingent
upon Tritel's continuing affiliation with AT&T Wireless, and will be resold to
Tritel's customers. Under the long distance agreement, Tritel must meet a
yearly minimum traffic volume commitment which is to be negotiated with AT&T
Wireless. If Tritel does not meet the minimum traffic volume commitment then
Tritel must pay to AT&T Wireless an amount equal to the difference between
AT&T's expected fee based on the minimum traffic volume commitment and its fee
based on the actual traffic volume.
Closing Agreement
AT&T Wireless, Tritel and the other parties to the securities purchase
agreement have entered into a closing agreement to provide for certain matters
set forth in the securities purchase agreement, including, among other things,
consent for certain of Tritel's subsidiaries to enter into agreements and to
conduct its operations, and direction that certain PCS licenses be transferred
to Tritel's subsidiaries by AT&T Wireless, Airwave Communications, Digital PCS
and Central Alabama Partnership.
Resale Agreement
AT&T Wireless and Tritel have also agreed on the form of a resale agreement
to be entered into from time to time, which permits AT&T Wireless, its
affiliates and one person designated by AT&T Wireless, who is licensed to
provide telecommunications services in such area under AT&T's service marks,
for any geographic area within the territory covered by Tritel's licenses,
each, referred to as a reseller, to purchase access to and usage of Tritel's
wireless telecommunications services for resale to its subscribers. Tritel has
agreed to provide service to the reseller on a nonexclusive basis, and
therefore will retain the right to market and sell its services to other
customers in competition with AT&T Wireless.
The resale agreement will have an initial term of ten years and will be
automatically renewed for additional one-year terms, unless it is previously
terminated. The reseller has the right to terminate the resale agreement for
any reason upon 180 day's written notice. Following the eleventh anniversary of
the commencement date of the resale agreement, either party may terminate the
agreement on 90 days' written notice for any reason.
In addition, either the reseller or Tritel may terminate the resale
agreement after any of the following events occur and continue unremedied for
some time period:
. certain bankruptcy events of Tritel or the reseller;
. the failure by either the reseller or Tritel to pay any sum owed to the
other at the time such amount comes due;
. the failure by the reseller or Tritel to perform or observe any other
material term, condition, or covenant to be performed by it under the
resale agreement;
193
<PAGE>
. the commission of any illegal act by or the filing of any criminal
indictment or information against the reseller, its proprietors,
partners, officers, or directors or stockholders controlling in the
aggregate or individual 10% or more of the voting rights or equity
interests of the reseller;
. the furnishing, within a twelve-month period, by the reseller to Tritel
of two or more checks that are not paid when presented due to
insufficient funds;
. an unauthorized assignment of the resale agreement;
. failure by the reseller to meet the eligibility requirements as
described in the resale agreement; and
. either party attempts to incorporate into its marks, or challenge the
other party's service marks, trademarks or trade names, including,
without limitation, all terms and conditions of each service plan
selected by the reseller.
Upon termination, Tritel will have no further obligation to provide the
reseller access to and usage of its PCS services.
Certain Relationships and Related Transactions
Transfer of Licenses to Tritel. As part of the joint venture transactions,
Tritel acquired C-Block PCS licenses from Airwave Communications and E-and F-
Block PCS licenses from Digital PCS. The members of Digital PCS are Messrs.
Mounger, Sullivan and Martin. Airwave Communications transferred its C-Block
PCS licenses, comprising approximately 2.5 million people in Alabama, and $31.9
million of government financing, to Tritel in exchange for $14.4 million of
series C preferred stock. Digital PCS transferred certain of its E- and F-Block
licenses, comprising areas containing 4.1 million people in Alabama and
Mississippi, and $9.5 million of government financing, to Tritel, in exchange
for $3.8 million of series C preferred stock. Of the 4.1 million people in the
area transferred by Digital PCS, 1.7 million overlap with those contributed by
AT&T Wireless Services.
Option to Purchase Licenses in Georgia and Florida; Ownership of the
Remaining Affiliate Licenses. Digital PCS, one of Tritel's predecessors, holds
licenses covering 2.0 million people in Florida and southern Georgia. These
markets include the cities of Pensacola, Tallahassee and Panama City, Florida.
As part of Tritel's formation, the company received from Digital PCS an option
to purchase these licenses for approximately 1.2 million shares of Tritel's
class A voting common stock (reflecting the conversion of Tritel's series C
preferred stock and the stock split of Tritel's class A voting common stock in
December 1999) and Tritel's assumption of $12.0 million of Federal
Communications Commission debt. In May 1999, Tritel exercised this option, and
on March 29, 2000, the Federal Communications Commission approved the transfer
of these licenses to Tritel.
Tritel has committed to sell to Panther Wireless, LLC these licenses for the
assumption of all outstanding Federal Communications Commission debt on these
licenses and cash in the amount equal to 110% of the sum of (a) the amount
payable to the Federal Communications Commission in respect of these licenses
minus the amount of Federal Communications Commission debt assumed, plus (b)
the aggregate amount of interest paid on the Federal Communications Commission
debt by Tritel and Digital PCS. Panther Wireless is owned by Messrs. Vento,
Sullivan and Anderson. Mr. Vento and Mr. Sullivan are both officers and
directors of TeleCorp and Mr. Anderson is a director of both TeleCorp and
Tritel.
Loans to Predecessors. On January 7, 1999, Tritel entered into a secured
promissory note agreement under which it agreed to lend up to $2.5 million to
Airwave Communications and Digital PCS. Interest on advances under the loan
agreement is 10% per year. The interest will compound annually and interest and
principal are due at maturity of the note. The note is secured by Airwave
Communications and Digital PCS's ownership interest in Tritel and certain
equity securities of TeleCorp. Any proceeds from the sale of licenses by
Airwave Communications and Digital PCS, net of the Federal Communications
Commission debt repayment, are required to be applied to the note balance. If
the note has not been repaid within five years, it will be repaid
194
<PAGE>
through a reduction of Airwave Communications' and Digital PCS's interest in
Tritel based on a valuation of Tritel's stock at that time.
Management Agreement. Tritel has entered into a management agreement with
Tritel Management, LLC, a Mississippi limited liability company, which is
wholly owned by the Messrs. Martin and Mounger. Pursuant to the management
agreement, Tritel Management is to be responsible for the design, construction
and operation of Tritel's network, all subject to Tritel's oversight, review
and ultimate control and approval. Tritel will pay Tritel Management a fee of
$10,000 per year for such services and will reimburse Tritel Management for
out-of-pocket expenses incurred on Tritel's behalf. The term of the management
agreement is five years, subject to termination upon the occurrence of certain
events described in the management agreement.
Relationship with Mercury Communications. Mercury Communications is wholly
owned by Messrs. Martin and Mounger. During April 1997, Tritel advanced
$249,000 on behalf of Mercury Communications to repay a loan Mercury
Communications had incurred from a third party. The balance due from Mercury
Communications on this advance was $247,000 at December 31, 1997, 1998 and
1999.
Relationship with Mercury Wireless Management, Inc. Mercury Wireless
Management, Inc., a company wholly owned by Messrs. Martin, Mounger and
Sullivan, provides management and marketing services to communications tower
owners, including municipalities. Mercury Wireless Management has contracted to
provide such services to the City of Jackson, Mississippi. Under the City of
Jackson contract, Mercury Wireless Management receives a percentage of rentals
generated from the leasing of the facilities managed by Mercury Wireless
Management. Tritel has entered into various leases to co-locate its equipment
on certain towers owned by the City of Jackson and managed by Mercury Wireless
Management. These leases were negotiated on an arms length basis and
incorporate terms substantially identical to those offered by the City of
Jackson to unrelated third-party carriers.
Relationship with Wireless Facilities, Inc. Tritel received site acquisition
and microwave relocation services and is receiving network monitoring services
from Wireless Facilities, Inc. Scott I. Anderson, who is a director of Tritel,
is also a director of Wireless Facilities.
Relationship with AT&T Wireless Services. Tritel has entered into joint
venture agreements with AT&T Wireless Services and its affiliates, including
the securities purchase agreement, the closing agreement related thereto,
stockholders' agreement, network membership license agreement, roaming
agreement, resale agreement, roaming administration agreement and long distance
agreement. AT&T Wireless Services holds class A voting common stock, class B
common stock, class D common stock, series A preferred stock and series D
preferred stock and has nominated two directors to Tritel's board of directors,
Ann K. Hall and H. Lee Maschmann.
Relationship with TeleCorp and Triton. Tritel has common stockholders with
TeleCorp and Triton and may be deemed an affiliate by virtue of this common
ownership. Scott I. Anderson, one of Tritel's directors, serves as a director
of TeleCorp. Mr. Anderson also serves as a director of Triton. Tritel has
entered into an agreement with TeleCorp and Triton to adopt a common brand
name, SunCom, that is co-branded with the AT&T brand name, giving equal
emphasis to each.
Relationship with ABC. Tritel has made a loan of $7.5 million to ABC for the
purpose of bidding on licenses in the Federal Communications Commission's
auction of C-Block PCS licenses. The members of ABC Wireless are Mr. Anderson,
a director of Tritel, and Gerald T. Vento and Thomas H. Sullivan, directors and
executive officers of TeleCorp.
Relationship with Flying A Towers. Tritel has leased several communication
towers from Flying A Towers. Mr. Arnett is President of Flying A Towers.
Relationship with Initial Investors other than AT&T Wireless. Tritel and
certain initial investors other than AT&T Wireless have entered into an
investors stockholders' agreement to provide for certain rights with
195
<PAGE>
respect to the management of Tritel, and to provide for certain restrictions
with respect to the sale, transfer or other disposition of Tritel's stock
beyond those rights and restrictions set forth in the stockholders' agreement.
The investors stockholders' agreement provides, subject to limited
exceptions with respect to removal of directors and filling of vacancies, that
the initial investors other than AT&T Wireless will vote all of their shares to
cause the election of three individuals to be designated as a director by
Conseco and Dresdner. The directors designated by Conseco and Dresdner are
Andrew Hubregsen, Alexander P. Coleman and Gary S. Fuqua, respectively. In the
event that the right of the initial investors other than AT&T Wireless to
nominate directors is reduced to one director, then that right will be
exercisable by initial investors other than AT&T Wireless owning two-thirds of
the outstanding shares of common stock held by all initial investors other than
AT&T Wireless.
Each cash equity investor has agreed, subject to certain limited exceptions,
that it will not directly or indirectly transfer or otherwise grant or create
certain liens in, give, place in trust or otherwise voluntarily or
involuntarily dispose of, referred to as a Transfer, any share of its capital
stock held by it as of January 7, 1999 or thereafter acquired by it to any
Prohibited Transferee, as defined in the stockholders' agreement, or any
regional bell operating companies, Microsoft Corporation, GTE, SNET or any of
their respective affiliates, successors or assigns. In addition, if a cash
equity investor desires to Transfer any or all of its shares of Tritel's
capital stock other than to an affiliate or affiliated successor, then the cash
equity investor must first offer all of those shares to the other initial
investors other than AT&T Wireless, subject to certain terms and conditions.
Each cash equity investor also has tag along rights and drag along rights. The
tag along rights enable non-selling initial investors other than AT&T Wireless
to participate in a sale of certain Tritel capital stock by other selling
initial investors other than AT&T Wireless, subject to certain terms and
conditions. The drag-along rights provide, under certain circumstances, that a
cash equity investor that proposes to sell its shares of Tritel capital stock
may compel other non-selling initial investors other than AT&T Wireless to
participate in the proposed sale.
196
<PAGE>
Selected Historical Financial Information
The selected historical balance sheet data of Tritel presented below as of
December 31, 1998 and 1999 and the selected statements of operations data for
each of the three years in the period ended December 31, 1999, has been derived
from audited consolidated financial statements included elsewhere in this joint
proxy statement-prospectus. The selected historical balance sheet data
presented below as of December 31, 1995, 1996 and 1997 and the selected
statements of operations data for the years ended December 31, 1995 and 1996
has been derived from audited consolidated financial statements not included
elsewhere in this prospectus.
You should read this information together with the financial statements and
related notes included elsewhere in this joint proxy statement-prospectus ($ in
thousands, except per share amounts).
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------
1995 1996 1997 1998 1999
----- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenues........................ $ -- $ -- $ -- $ -- $ 6,759
----- ------- ------- -------- ---------
Operating expenses:
Costs of services and
equipment.................... -- -- -- -- 6,966
Technical operations.......... -- 4 104 1,939 18,459
Sales, general and
administrative............... 121 1,486 3,151 5,399 43,319
Stock-based compensation...... -- -- -- -- 190,664
Depreciation and
amortization................. -- 2 20 348 12,839
----- ------- ------- -------- ---------
Total operating expense....... 121 1,492 3,275 7,686 272,247
----- ------- ------- -------- ---------
Operating loss................ (121) (1,492) (3,275) (7,686) (265,488)
Interest income................. 1 31 121 77 16,791
Interest expense and financing
cost........................... -- -- -- (722) (27,200)
----- ------- ------- -------- ---------
Loss before extraordinary item
and income taxes............... (120) (1,461) (3,154) (8,331) (275,897)
Income tax benefit.............. -- -- -- -- 28,443
----- ------- ------- -------- ---------
Loss before extraordinary item.. (120) (1,461) (3,154) (8,331) (247,454)
Extraordinary item--loss on
return of spectrum............. -- -- -- (2,414) --
----- ------- ------- -------- ---------
Net loss........................ (120) (1,461) (3,154) (10,745) (247,454)
Accrual of dividends on series A
redeemable preferred stock..... -- -- -- -- (8,918)
----- ------- ------- -------- ---------
Net loss available to common
shareholders................... $(120) $(1,461) $(3,154) $(10,745) $(256,372)
===== ======= ======= ======== =========
Basic and diluted net loss per
common share................... $ (33.25)
---------
Weighted average common shares
outstanding(1)................. 7,710,649
---------
</TABLE>
- --------
(1) Per share information is not included for periods prior to 1999 because
Tritel's predecessor companies were limited liability companies with
different capital structures.
197
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------
1995 1996 1997 1998 1999
------ ------- -------- ------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......... $ 400 $ 32 $ 1,763 $ 846 $ 609,269
Other current assets.............. 4,501 5,000 285 960 21,295
Property and equipment, net....... -- 10 13 13,816 262,343
Federal Communications Commission
licensing costs.................. 40 62,503 99,425 71,466 201,946
Intangible assets, net............ 3 186 1,027 -- 59,508
Other assets...................... -- -- -- 1,933 42,001
------ ------- -------- ------- ----------
Total assets...................... $4,944 $67,731 $102,513 $89,021 $1,196,362
====== ======= ======== ======= ==========
Total current liabilities......... $3,425 $ 8,553 $ 8,425 $32,911 $ 114,247
Long-term debt.................... -- 53,504 77,200 51,599 557,716
Other non-current liabilities..... -- -- 8,126 6,494 37,367
Total series A redeemable
preferred stock.................. -- -- -- -- 99,586
Total stockholders' equity
(deficit)........................ 1,519 5,674 8,762 (1,983) 387,446
------ ------- -------- ------- ----------
Total liabilities and
stockholders' equity............. $4,944 $67,731 $102,513 $89,021 $1,196,362
====== ======= ======== ======= ==========
</TABLE>
For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
consist of interest expense and other financing costs on all indebtedness,
including amortization of discount and deferred debt issuance costs. Earnings
were insufficient to cover fixed charges by $140,000 for the period from
inception, July 27, 1995 through December 31, 1995, $4.8 million, $10.4
million, $18.9 million and $271.1 million for the years ended December 31,
1996, 1997, 1998 and 1999, respectively.
Tritel Management's Discussion and Analysis of Financial Conditions and Results
of Operations
The following discussion and analysis of Tritel's financial condition and
results of operations should be read in conjunction with its consolidated
financial statements and notes thereto, which are included in this joint proxy
statement-prospectus. See also "Statements Regarding Forward Looking
Statements."
General
Tritel is an AT&T Wireless affiliate with licenses to provide PCS services
to approximately 14.0 million people in contiguous markets in the south-central
United States. Tritel began providing wireless services in its Jackson,
Mississippi market in September 1999 and in seven other major markets by year
end. In January 1999, Tritel entered into its affiliation agreement with AT&T
Wireless, Tritel's largest equity shareholder, with 21.6% ownership of the
company. Tritel has also joined with two other AT&T Wireless affiliates to
operate under a common regional brand name, SunCom. Tritel provides its PCS
services as a member of the AT&T Wireless network, serving as the preferred
roaming provider to AT&T Wireless's digital customers in virtually all of
Tritel's markets and co-branding its services with the AT&T and SunCom brands
and logos, giving equal emphasis to each.
AT&T Wireless operates the largest digital wireless network in North
America. Its network consists of AT&T Wireless's existing digital and analog
systems, PCS systems being constructed by four joint venture partners,
including Tritel, and systems currently operated by third parties with which
AT&T Wireless has roaming agreements. In the aggregate, these systems covered
over 95% of the total people throughout the United States as of December 31,
1999.
Tritel has incurred significant expenditures in conjunction with its
organization and financing, PCS license acquisitions, hiring key personnel and
the design and construction of its PCS network facilities. Tritel has
198
<PAGE>
commenced commercial PCS services in eight of its ten largest markets. Tritel
expects to have commenced commercial PCS service in all of its major population
and business centers by the end of 2000. The timing of launch in individual
markets will be determined by various factors, principally the success of
Tritel's site acquisition program, zoning and microwave relocation activities,
equipment delivery schedules and local market and competitive considerations.
Tritel provided service to over 50% of the people in its license area at the
end of 1999 and expects to be providing service to over 98% by the end of 2000.
Thereafter, Tritel will evaluate further coverage expansion on a market-by-
market basis.
The extent to which Tritel is able to generate operating revenues and
earnings will be dependent on a number of business factors, including
successfully deploying the PCS network and attaining profitable levels of
market demand for Tritel's products and services.
Revenues
Tritel generates substantially all of its revenues from the following
sources:
Service. Tritel sells wireless personal communications services. The various
types of service revenue associated with personal communications services for
Tritel's subscribers include monthly recurring charges and monthly non-
recurring airtime charges for local, long distance and roaming airtime used in
excess of pre-subscribed usage. Tritel's customers' charges are dependent on
their rate plans, based on the number of minutes included in their plans.
Service revenue also includes monthly non-recurring airtime usage associated
with Tritel's prepaid subscribers and non-recurring activation and deactivation
service charges.
Equipment. Tritel sells wireless PCS handsets and accessories that are used
by its customers in connection with its wireless services.
Roaming. Tritel charges monthly, non-recurring, per minute fees to other
wireless companies whose customers use its network facilities to place and
receive wireless services.
Industry statistics indicate that average revenue per unit, called ARPU, for
the wireless communications business has declined substantially over the period
1993-1998. Although this decline has stabilized recently, Tritel's management
believes that some deterioration in ARPU will continue. Tritel's management
believes that certain direct operating costs, including billing, interconnect,
roaming and long distance charges will decline. However, Tritel's ability to
improve its margins will depend primarily on its ability to manage its variable
costs, including selling, general and administrative expense and costs per new
subscriber.
A particular focus of Tritel's strategy is to reduce subscriber churn.
Industry data suggest that providers (including PCS providers) that have
offered poor or spotty coverage, poor voice quality, unresponsive customer care
or confusing billing suffer higher-than-average churn rates. Accordingly,
Tritel launches service in a new market only after it believes that
comprehensive and reliable coverage and service can be maintained in that
market. In addition, Tritel has designed its billing system to provide simple
and understandable options to its subscribers and to permit subscribers to
select a flexible billing cycle.
Tritel also focuses resources on a proactive subscriber retention program,
strict credit policies and alternative methods of payment for credit-challenged
customers. However, future PCS churn rates may be higher than historical rates
due to the increase in number of competitors and expanded marketbase.
Cost of Services and Equipment
Tritel's cost of services and equipment has consisted of, and it expects it
will continue to consist of, the following:
Equipment. Tritel purchases personal communications handsets and accessories
from third party vendors to resell to its customers for use in connection with
Tritel's services. The cost of handsets has been, and is
199
<PAGE>
expected to remain, higher than the resale price to the customer. This cost is
recorded as a cost of services and equipment. Tritel does not manufacture any
of this equipment.
Roaming Fees. Tritel pays fees to other wireless communications companies
based on airtime usage of its customers on other communications networks. It is
expected that reciprocal roaming rates charged between Tritel and other
carriers will decrease.
Variable Interconnect. Tritel pays monthly charges associated with the
connection of its network with other carriers' networks. These fees are based
on minutes of use by its customers. This is known as interconnection.
Variable Long Distance. Tritel pays monthly usage charges to other
communications companies for long distance service provided to its customers.
These variable charges are based on Tritel's subscribers' usage, applied at
pre-negotiated rates with the other carriers.
Clearinghouse Fees. Tritel pays fees to an independent clearinghouse for
processing its call data records and performing monthly intercarrier financial
settlements for all charges that Tritel pays to other wireless companies when
its customers use their network, and that other wireless companies pay to
Tritel when their customers use Tritel's network. These fees are based on the
number of transactions processed in a month.
Operating Expenses
Tritel's operating expenses have consisted of, and Tritel expects it will
continue to consist of, the following costs:
Technical Operations. Tritel's technical operations expense includes
engineering operations and support, cell site lease expenses, field
technicians, network implementation support, and engineering management. This
expense also includes monthly recurring charges directly associated with the
maintenance of network facilities and equipment.
General and Administrative. Tritel's general and administrative expense
includes customer service, billing, information technology, finance,
accounting, human resources and legal services.
Sales and Marketing. Tritel's sales and marketing expense includes salaries
and benefits, commissions, advertising and promotions, retail distribution,
sales training, and direct and indirect support.
Stock Based Compensation. Tritel has issued a total of 12,362,380 shares of
its class A and class C common stock to members of its management, primarily in
connection with the formation of the joint venture with AT&T Wireless. These
shares are subject to vesting and are currently held in escrow. These shares
are also subject to repurchase agreements, which are considered a "variable
stock plan" under generally accepted accounting principles. Under the
repurchase agreements, the management holders will pay $2.50 per share for
these shares, payable by surrendering shares to Tritel valued at their fair
value. Based on the average closing price of Tritel's common stock for the last
ten trading days of 1999, Tritel recorded non-cash compensation expense of
approximately $190.7 million in the fourth quarter of 1999 relating to the
earned portion of the stock issued to management. Subsequent to year end, the
Tritel board of directors approved a plan to modify these awards to remove the
provision that requires management to surrender a portion of their shares
consistent with the conditions of the merger agreement. The effective date of
this modification if and when completed will become the measurement date upon
which the value of the award will be fixed. Assuming Tritel's class A voting
common stock continues to have a fair value of approximately $28.50 per share
on the measurement date, Tritel would record additional non-cash compensation
expense related to these shares for the period from 2000 to 2004 of
approximately $131.0 million. Future stock price movement will result in
charges that differ from this amount. Each dollar increase or decrease in the
average closing price of Tritel's common stock for the last ten trading days of
any quarter will result in an increase or decrease in the non-cash compensation
expense related to these shares of approximately $12.4 million.
200
<PAGE>
Depreciation and Amortization. Property and equipment are depreciated using
the straight-line method, generally over three to seven years, based upon the
estimated useful lives of the respective assets. Leasehold improvements are
depreciated over the term of the lease. Network development costs are
capitalized and are depreciated generally over seven years beginning as PCS
service is commenced in each of Tritel's markets.
PCS license costs are amortized over 40 years beginning as PCS service is
commenced in each of Tritel's markets. The AT&T agreements, including the
Network Membership License Agreement and the Intercarrier Roamer Service
Agreement, are amortized over the lives of the agreements, 10 years and 20
years, respectively, beginning in January 1999.
Interest Income (Expense). Interest income is earned primarily on Tritel's
cash and cash equivalents and restricted cash. Interest expense through
December 1999 consists of interest due on Tritel's senior credit facilities and
debt owed to the U.S. government related to Tritel's licenses as well as
discount accretion on the senior subordinated discount notes.
Results of Operations
Revenues. Revenues for the year ended December 31, 1999 were $6.8 million.
Tritel launched commercial service in Jackson, Mississippi in September 1999
and launched commercial service in seven other major markets during the fourth
quarter of 1999. Tritel had not previously recognized any revenues. Revenues
consist primarily of revenues derived from service to Tritel's customers,
roaming services provided to customers of other carriers, and the sale of
handsets and accessories.
Tritel ended 1999 with approximately 24,600 subscribers in eight major
markets. Tritel's ARPU including service and feature revenue as well as airtime
and incollect roaming charges was $45 for the fourth quarter of 1999. Tritel
expects an increase in ARPU as it begins to target business customers,
implements a national accounts program, focuses on value added features and
provides incentives to its sales force for selling higher priced rate plans.
Tritel anticipates strong growth in 2000 in revenue and subscribers as it
continues to expand its operations in its licensed areas. Tritel expects to
launch substantially all of its remaining markets during 2000. Tritel expects
to begin offering SunCom service in two of its largest markets, Birmingham and
Mobile, Alabama, in the second quarter of 2000.
Tritel expects roaming revenues to increase during 2000 as it expands its
coverage areas and completes its first full year of operations in the markets
that became operational during 1999.
Operating Expenses
Cost of services and equipment was $7.0 million for the year ended December
31, 1999. Cost of equipment includes primarily the cost of equipment sold to
customers, costs paid to other carriers for roaming services and wireline
access and long-distance costs from customer use on Tritel's system. These
costs are expected to increase in future periods as subscribers are added to
the system and usage of Tritel's system increases.
Technical operations expenses were $104,000, $1.9 million and $18.5 million
for the years ended December 31, 1997, 1998, and 1999, respectively. These
expenses include primarily the cost of engineering and operating staff devoted
to the oversight of the design, implementation and monitoring of Tritel's
network, cell site lease expense, charges incurred to connect Tritel's network
to other carriers and construction site office expenses.
Tritel expects that the majority of its future technical operations expenses
will consist of costs relating to operating the network, including the cost of
interconnection to wireline and other wireless networks, cell site
201
<PAGE>
lease costs, network personnel and repair and maintenance. Tritel expects these
costs to increase in future periods as it expands its coverage areas, adds
additional subscribers and incurs a full year of operational expenses.
Tritel's general and administrative expense includes customer service,
billing, information technology, finance, accounting, human resources and legal
services. General and administrative expenses increased from $3.1 million in
1997, to $4.9 million in 1998 and $22.9 million in 1999. The increase was due
primarily to increased staffing in various departments, including information
technology, billing, customer care, accounting, human resources and other
administrative functions, incurred in preparation for commercial launch of
Tritel's network in 1999, as well as costs related to Tritel's redefined
employment agreement with Jerry M. Sullivan, Jr. totaling $5.8 million recorded
in 1999.
Effective September 1, 1999, Tritel and Mr. Sullivan entered into an
agreement to redefine Mr. Sullivan's relationship with Tritel. Mr. Sullivan
resigned as one of Tritel's officers and directors. Mr. Sullivan will retain
the title Executive Vice President through December 15, 2001; however, under
the agreement, he is not permitted to represent Tritel nor will he perform any
functions for Tritel. As part of the agreement, Mr. Sullivan will also receive
an annual salary of $225,000 and an annual bonus of $112,500 through December
31, 2002. Mr. Sullivan is fully vested in 1,800,000 shares of class A voting
common stock and has returned all other shares held by him, including his
voting preference common stock, to Tritel. Accordingly, Tritel recorded $5.8
million in additional compensation expense for the year ended December 31,
1999. The $5.8 million was determined pursuant to the settlement of Mr.
Sullivan's employment relationship with the company and includes $4.5 million
for the grant of additional stock rights, $225,000 annual salary and $112,500
annual bonus through December 31, 2002, and other related amounts.
Tritel expects general and administrative expenses to increase during 2000
as it continues to launch additional markets and provide customer support
functions to a larger customer base.
Tritel's sales and marketing expense includes salaries and benefits,
commissions, advertising and promotions, retail distribution, sales training,
and direct and indirect support. Sales and marketing expenses increased from
$28,000 in 1997 to $452,000 in 1998 and $20.4 million in 1999. The increase was
associated with the salary and benefits for sales and marketing personnel,
market deployment, including planning and leasing of sales offices and retail
store locations and advertising costs related to 1999 market launches. Tritel
expects to incur significant selling and marketing costs during 2000 primarily
related to sales commissions, ongoing advertising and promotions in its
existing markets and promotional events and advertising incurred in connection
with market launches.
Depreciation and amortization expenses were $20,000 in 1997 compared to
$348,000 in 1998 and $12.8 million in 1999. The 1999 expenses related primarily
to the depreciation of network system equipment placed into service in 1999 and
the amortization of Tritel's roaming and license agreements with AT&T Wireless,
as well as depreciation of computer hardware, software, furniture, fixtures,
and office equipment. Depreciation and amortization expenses are expected to
increase during 2000 as Tritel completes the construction of its network and
recognizes a full year of depreciation expense on its network assets placed in
service during 1999.
Non-Operating Income and Expense
Interest income was $121,000 in 1997, $77,000 in 1998 and $16.8 million in
1999. This significant increase in 1999, as compared to 1998, was a result of
Tritel's investment of the cash received from equity investors of $163.4
million, advances under its bank facility of $300.0 million, proceeds from the
sale of senior subordinated discount notes of approximately $200.2 million and
proceeds from the sale of common stock in Tritel's initial public offering of
approximately $242.5 million. Tritel's short-term cash investments consist
primarily of U.S. Government securities and highly rated commercial paper with
a dollar-weighted average maturity of 90 days or less.
202
<PAGE>
Financing costs were $2.2 million for the year ended December 31, 1999.
These costs were associated with the January 1999 conversion by Digital PCS of
debt due to an investor to equity in Airwave Communications.
Interest expense was $722,000 in 1998 and $25.0 million in 1999 and
consisted of interest incurred related to borrowing under Tritel's bank credit
facility and the Federal Communications Commission debt and discount accretion
on the senior subordinated discount notes issued in May 1999. Interest expense
is net of the amount capitalized for the purpose of completing the network
buildout.
For the year ended December 31, 1999, Tritel recorded a deferred income tax
benefit of $28.4 million. The valuation allowance for the gross deferred tax
asset at December 31, 1999 was $1.0 million. No valuation allowance was
considered necessary for the remaining gross deferred tax asset, principally
due to the existence of a deferred tax liability that was recorded upon the
closing of the AT&T transaction on January 7, 1999. Prior to this date, the
Predecessor Company was a limited liability corporation and was not subject to
income taxes.
During June 1998, Tritel took advantage of a reconsideration order by the
Federal Communications Commission allowing companies holding C-Block PCS
licenses several options to restructure their license holdings and associated
obligations. Tritel elected the disaggregation option and returned one-half of
the broadcast spectrum originally acquired for each of the C-Block license
areas. As a result, Tritel reduced the carrying amount of the related licenses
by one-half, or $35.4 million, and reduced the discounted debt and accrued
interest due to the Federal Communications Commission by $33.0 million. Because
of the disaggregation election, Tritel recognized an extraordinary loss in 1998
of approximately $2.4 million.
Liquidity and Capital Resources
The buildout of Tritel's network and the marketing and distribution of its
products and services will require substantial capital. Tritel currently
estimates that its capital requirements for the period from inception through
the end of 2001, assuming substantial completion of its network buildout, will
total approximately $1.4 billion. Tritel estimates those capital requirements
will be met as follows:
<TABLE>
<S> <C>
Bank facility................................................... $ 550.0
Senior subordinated discount notes.............................. 200.2
Government financing............................................ 47.5
Net proceeds from public offering of stock...................... 242.5
Cash equity..................................................... 163.4
Non-cash equity................................................. 157.9
--------
Total estimated capital requirements.......................... $1,361.5
========
</TABLE>
On January 7, 1999, Tritel entered into a loan agreement that provides for a
senior bank facility with a group of lenders for an aggregate amount of $550
million of senior secured credit. The bank facility provides for:
. a $250 million reducing revolving credit facility maturing on June 30,
2007,
. a $100 million term credit facility maturing on June 30, 2007, and
. a $200 million term credit facility maturing on December 31, 2007.
Up to $10 million of the facility may be used for letters of credit. Tritel
estimates that the $550 million bank facility will be drawn through the end of
2001 for capital requirements. The terms of the bank facility will permit
Tritel, subject to certain terms and conditions, including compliance with
certain leverage ratios and satisfaction of buildout and subscriber milestones,
to draw up to $550 million to finance working capital requirements, capital
expenditures or other corporate purposes. As of December 31, 1999, Tritel could
have
203
<PAGE>
borrowed up to a total of approximately $550 million pursuant to the terms of
the bank facility. See "The Merger--Effect of the Merger on Outstanding
TeleCorp and Tritel Credit Facilities".
On May 11, 1999, Tritel issued senior subordinated discount notes with a
principal amount at maturity of $372.0 million. These notes were issued at a
substantial discount from their principal amount at maturity for proceeds of
$200.2 million. No interest will be paid on the notes prior to May 15, 2004.
Tritel will recognize interest expense for discount accretion during this
period. Thereafter, the notes will bear interest at the stated rate. The notes
mature on May 15, 2009.
Tritel's predecessor companies received preferential financing from the U.S.
Government for the C and F-Block licenses, which they contributed to Tritel in
exchange for series C preferred stock. As a result, Tritel is obligated to pay
$47.5 million to the U.S. Government under the terms of preferential financing
terms. The debt relating to the C-Block licenses requires interest only
payments for the first six years of the term and then principal and interest
payments in years seven through ten. The debt relating to the F-Block licenses
requires interest only payments for the first two years of the term and then
principal and interest payments in years three through ten.
In connection with the consummation of its affiliation with AT&T Wireless,
Tritel received equity from institutional investors in the aggregate amount of
$149.2 million in return for the issuance of series C preferred stock.
Additionally, on January 7, 1999, in exchange for the issuance of series C
preferred stock, Tritel received $14.2 million of cash from Airwave
Communications and Digital PCS.
Non-cash equity consists of:
. series A preferred stock and series D preferred stock valued at $137.1
million issued to AT&T Wireless on January 7, 1999 in exchange for the
licenses it contributed and for entering into exclusivity, license and
roaming agreements;
. series C preferred stock valued at $18.3 million issued to Airwave
Communications and Digital PCS on January 7, 1999 in exchange for the
net assets it contributed; and
. series C preferred stock valued at $2.6 million issued to Central
Alabama Partnership on January 7, 1999 in exchange for the net assets it
contributed.
In connection with the December 1999 initial public offering of Tritel, the
series C preferred stock converted to class A voting and class D common stock.
As stated previously, Tritel currently estimates that its capital
requirements, including capital expenditures, the cost of acquiring licenses,
working capital, debt service requirements and anticipated operating losses,
for the period from inception through the end of 2001, assuming substantial
completion of its network buildout will total approximately $1.4 billion.
Tritel estimates those capital requirements will be applied as follows:
<TABLE>
<S> <C>
Acquisition of PCS licenses and exclusivity, license and
roaming agreements........................................... $ 192.9
Capital expenditures.......................................... 706.6
Cash interest and fees........................................ 147.6
Working capital............................................... 314.4
--------
Total estimated use of capital.............................. $1,361.5
========
</TABLE>
Tritel has funded $192.9 million in capital for the acquisition of the PCS
licenses and the agreements with AT&T Wireless relating to exclusivity, license
and roaming. This amount includes the acquisition of PCS licenses from AT&T
Wireless, Central Alabama Partnership, Airwave Communications and Digital PCS.
The cash portion of this capital requirement of $14.7 million was paid by
Airwave Communications and Digital PCS primarily as a downpayment on the
purchase of the C- and F-Block licenses.
204
<PAGE>
Management estimates that capital expenditures associated with the buildout
will total approximately $706.6 million from inception through the end of 2001,
including a commitment to purchase a minimum of $300 million in equipment and
services from Ericsson. Costs associated with the network buildout include
switches, base stations, towers and antennae, radio frequency engineering, cell
site acquisition and construction, and microwave relocation. The actual funds
required to build out Tritel's network may vary materially from these
estimates, and additional funds could be required in the event of significant
departures from the current business plan, unforeseen delays, cost overruns,
unanticipated expenses, regulatory expenses, engineering design changes and
other technological risks. Tritel has incurred approximately $260.3 million in
capital expenditures through December 31, 1999.
Tritel estimates that cash interest and fees through 2001 will total
approximately $147.6 million, including debt issuance costs related to the bank
credit facility and the senior subordinated discount notes. This amount
represents interest and fees on the senior bank facility and interest on the
preferential financing from the U.S. Government for the C and F-Block licenses.
Cash interest will not be paid on the senior subordinated discount notes until
2004. Tritel incurred approximately $28.0 million in cash interest and fees
during the year ended December 31, 1999.
Tritel estimates that working capital requirements during the period from
inception through 2001 will total $314.4 million. This amount represents the
costs related to initiating, marketing, operating and managing its PCS network.
Tritel believes that the proceeds from the initial public offering completed
in December 1999, together with the proceeds from its sale of senior
subordinated discount notes, the financing made available to Tritel by the
Federal Communications Commission, borrowings under its bank credit facility
and the equity investments it has received, will provide Tritel with sufficient
funds to build out its existing network as planned and fund operating losses
until it completes its planned network buildout and generates positive cash
flow.
Tritel's ability to meet its capital requirements without additional
financing is subject to its ability to construct its network and obtain
customers in accordance with its plans and assumptions and a number of other
risks and uncertainties. The development of its network may not be completed as
projected and Tritel may not be able to generate positive cash flow. If any of
Tritel's projections are incorrect, Tritel may not be able to meet its
projected capital requirements. Tritel does not expect the merger to have any
material effect on its current plans related to network buildout.
Digital PCS holds licenses covering 2.0 million people in Florida and
southern Georgia. These markets include the cities of Pensacola, Tallahassee
and Panama City, Florida. As part of Tritel's formation, the company received
from Digital PCS an option to purchase these licenses for approximately 1.2
million shares of Tritel's class A voting common stock (reflecting the
conversion of series C preferred stock and the stock split of Tritel's class A
voting common stock in December 1999) and Tritel's assumption of approximately
$12.0 million of Federal Communications Commission debt. In May 1999, Tritel
exercised this option, and on March 29, 2000, the Federal Communications
Commission approved the transfer of these licenses to Tritel. Tritel has
committed to sell these licenses to Panther Wireless LLC for the assumption of
all outstanding Federal Communications Commission debt on the licenses and cash
in the amount equal to 110% of the sum of (a) the amount payable to the Federal
Communications Commission in respect of the licenses minus the amount of
Federal Communications Commission debt assumed plus (b) the aggregate amount of
interest paid on the Federal Communications Commission debt by Tritel and
Digital PCS. Panther Wireless LLC is owned by Messrs. Vento, Sullivan and
Anderson. Mr. Vento and Mr. Sullivan are both officers and directors of
TeleCorp and Mr. Anderson is a director of both TeleCorp and Tritel.
Pending License Acquisition
On March 23, 1999, the Federal Communications Commission commenced a re-
auction of the C-, D-, E- and F-Block licenses that had been returned to the
Federal Communications Commission under a Federal
205
<PAGE>
Communications Commission restructuring order or that had been forfeited for
noncompliance with Federal Communications Commission rules or for default under
the related Federal Communications Commission financing. Before the re-auction,
Tritel loaned $7.5 million to ABC Wireless, an entity formed to participate in
the C-Block re-auction as a "very small business" under applicable Federal
Communications Commission rules, to partially fund its participation in the re-
auction.
In the re-auction, ABC Wireless was successful in bidding for an additional
15 to 30 MHz of spectrum covering a total of 5.7 million people, all of which
are already covered by Tritel's existing licenses. Nashville and Chattanooga
are the largest cities covered by the additional licenses. The total bid price
for these additional licenses was $7.8 million. Tritel has increased its loan
to ABC Wireless to $7.8 million. Tritel's purchase of licenses from ABC
Wireless would be subject to, among other things, the consent of AT&T Wireless
and the Federal Communications Commission.
Year 2000
Many currently installed computer systems and software applications are
encoded to accept only two digit entries in the year entry of the date code
field. Beginning in the year 2000, these codes will need to accept four digit
year entries to distinguish 21st century dates from 20th century dates. Tritel
implemented a Year 2000 program to ensure that its computer systems and
applications would function properly after 1999. Tritel believes that it
allocated adequate resources for this purpose and successfully completed its
Year 2000 compliance program on a timely basis. Tritel did not incur material
expenses or meaningful delays as a result of the Year 2000 date change. To
date, Tritel has experienced no material adverse effects related to the Year
2000 computer issue.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, referred to as FAS 133. FAS 133 establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. FAS 133 will significantly change the accounting
treatment of derivative instruments and, depending upon the underlying risk
management strategy, these accounting changes could affect future earnings,
assets, liabilities, and shareholders' equity. Tritel is closely monitoring the
deliberations of the FASB's derivative implementation task force. With the
issuance of Statement of Financial Accounting Standards No. 137, Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB Statement No. 133, which delayed the effective date of FAS 133, Tritel
will be required to adopt FAS 133 on January 1, 2001. Presently, Tritel has not
yet quantified the impact that the adoption will have on its consolidated
financial statements.
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly operating
information for each of the eight quarters ended December 31, 1999. This data
has been prepared on the same basis as the audited financial statements, and in
management's opinion, includes all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the information
for the periods presented. Results for any previous fiscal quarter are not
necessarily indicative of results for the full year or for any future quarter.
206
<PAGE>
Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
(dollars in thousands except per share data)
For the Quarters Ended
----------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------------- --------------- ----------------- ------------------
1998 1999 1998 1999 1998 1999 1998 1999
----- ------- ----- -------- ------- -------- ------- ---------
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ $ $ $ $ $ 179 $ $ 6,580
Operating loss.......... (763) (7,471) (997) (8,801) (1,390) (22,305) (4,536) (226,911)
Loss before
extraordinary item..... (743) (8,247) (990) (10,027) (1,398) (10,482) (5,200) (218,698)
Net loss................ (743) (8,247) (990) (10,027) (3,812) (10,482) (5,200) (218,698)
Net loss per common
share.................. $ (2.76) $ (3.30) $ (3.45) $ (9.20)
</TABLE>
Quantitative and Qualitative Disclosure About Market Risk
Tritel is exposed to market risk from changes in interest rates which could
impact results of operations. Tritel manages interest rate risk through a
combination of fixed and variable rate debt. Tritel has entered into interest
rate swap agreements as a risk management tool, not for speculative purposes.
See Note 9 of Notes to Consolidated Financial Statements.
At December 31, 1999 Tritel had $300 million of term A and term B notes
under its bank facility, which carried a rate of 10.62%; $372 million of the
original 12.75% senior subordinated discount notes, due 2009; $38.0 million of
7%, discounted to yield 10%, debt to the Federal Communications Commission, due
in quarterly installments from 2003 to 2006; and $9.5 million of 6 1/8%,
discounted to yield 10%, debt to the Federal Communications Commission, due in
quarterly installments from 2000 to 2008.
Tritel's senior subordinated discount notes and Federal Communications
Commission debt are fixed interest rate and as a result Tritel is less
sensitive to market rate fluctuations. However, Tritel's term A and term B
notes outstanding and other amounts available to Tritel under its bank facility
agreement are variable interest rate. Beginning in May 1999, Tritel entered
into interest rate swap agreements with notional amounts totaling $200 million
to manage its interest rate risk under the bank facility. The swap agreements
establish a fixed effective rate of 9.05% on $200 million of the current
balance outstanding under the bank facility through the earlier of March 31,
2002 or the date on which Tritel achieves operating cash flow breakeven. Market
risk, due to potential fluctuations in interest rates, is inherent in swap
agreements.
The following table provides information about Tritel's market risk exposure
associated with changing interest rates on the company's fixed rate debt at
maturity value of the debt (dollars in millions):
<TABLE>
<CAPTION>
Expected Maturity
---------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
---- ---- ---- ---- ---- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Face value of long-term fixed
rate debt..................... -- $0.9 $1.0 $1.1 $9.7 $406.8 $419.5
Average interest rate.......... -- 6.1% 6.1% 6.1% 6.9% 12.2% --
</TABLE>
Collectively, Tritel's fixed rate debt has a carrying value of $258.6
million at December 30, 1999. The carrying amount of fixed rate debt is
believed to approximate fair value because a portion of such debt was
discounted to reflect a market interest rate at inception and the remaining
portion of fixed rate debt was issued in May 1999 and therefore approximates
fair value due to its recent issuance.
Tritel is also exposed to the impact of interest rate changes on its short-
term cash investments, consisting primarily of U.S. government securities and
highly rated commercial paper with a dollar weighted average maturity of 90
days or less. As with all investments, these short-term investments carry a
degree of interest rate risk.
Tritel is not exposed to fluctuations in currency exchange rates since its
operations are entirely within the United States.
207
<PAGE>
GOVERNMENT REGULATION
TeleCorp and Tritel are subject to substantial regulation by the Federal
Communications Commission, state public utility commissions and, in some cases,
local authorities. TeleCorp's and Tritel's principal operations are classified
as commercial mobile radio service by the Federal Communications Commission,
subject to regulation under Title II of the Communications Act of 1934, as
amended by the Telecommunications Act of 1996, as a common carrier and subject
to regulation under Title III of the Communications Act as a radio licensee.
The states are preempted from regulating TeleCorp's and Tritel's entry into and
rates for commercial mobile radio service offerings, but remain free to
regulate other terms and conditions of its commercial mobile radio services and
to regulate other intrastate offerings by us. Congress and the states regularly
enact legislation, and the Federal Communications Commission, state commissions
and local authorities regularly conduct rulemaking and adjudicatory proceedings
that could have a material adverse effect on us. In addition, government
regulation may adversely affect TeleCorp's and Tritel's ability to engage in,
or rapidly complete, transactions and may require TeleCorp and Tritel to expend
additional resources in due diligence and filings related to the Federal
Communications Commission and other requirements, as compared to unregulated
entities.
Federal Communications Commission Common Carrier Regulation Under Title II
Under Title II of the Communications Act, among other things, TeleCorp and
Tritel are:
. required to offer service upon reasonable request;
. prohibited from imposing unjust or unreasonable rates, terms or
conditions of service;
. proscribed from unjustly or unreasonably discriminating among customers;
. required to reserve communications capacity for law enforcement
surveillance operations and to make technical network changes to
facilitate this surveillance;
. required to make its services and products accessible to, and usable by,
Americans with disabilities, if readily achievable; and
. required to comply with limitations on its use of customer proprietary
network information.
Under the Telecommunications Act, TeleCorp and Tritel are entitled to
benefits when negotiating interconnection arrangements with other
communications carriers, such as resale rights, their customers being able to
keep their old numbers when switching to TeleCorp and Tritel and compensation
equal to that of other carriers, but TeleCorp and Tritel are subject to many of
those same requirements when other carriers seek to interconnect with their
networks. The Federal Communications Commission is still in the process of
implementing some of these benefits. While the rates of common carriers are
subject to the Federal Communications Commission's jurisdiction, the Federal
Communications Commission forbears from requiring commercial mobile radio
service carriers to file tariffs for their services. Common carriers, including
commercial mobile radio service providers, are also prohibited under the
Communications Act from unreasonably restricting the resale of their services
and are required to offer unrestricted resale.
Federal Communications Commission Radio License Regulation Under Title III
Among other things, Title III of the Communications Act:
. does not permit licenses to be granted or held by entities that have
been subject to the denial of federal benefits;
. requires TeleCorp and Tritel to seek prior approval from the Federal
Communications Commission to transfer control of TeleCorp or Tritel or
to assign TeleCorp's or Tritel's radio authorizations, including
subdividing its radio airwaves or partitioning geographic license areas,
except in very limited circumstances; and
. limits foreign ownership in radio licensees, including PCS providers.
208
<PAGE>
Federal Communications Commission Commercial Mobile Radio Service Regulation
The Federal Communications Commission rules and policies impose substantial
regulations on commercial mobile radio service providers. Among other
regulations, commercial mobile radio service providers such as TeleCorp and
Tritel:
. incur costs as a result of required contributions to federal programs;
. are prohibited from acquiring or holding an attributable interest in
PCS, cellular or special mobile radio licenses with more than 45MHz of
airwaves in the same metropolitan area, and more than 55 MHz in rural
markets, although these rules are currently subject to requests for
modification;
. are required to provide at least manual roaming service to enable a
customer of one provider to obtain service while roaming in another
carrier's service area;
. are required to route emergency calls to public safety centers and
provide the public safety centers under certain circumstances with
information regarding the originating number and the general location of
the caller;
. are required to comply with federal rules governing radio frequency
transmissions in order to limit exposure, by both the general public and
maintenance personnel, to potentially harmful radiation;
. will eventually be required to allow customers to retain their telephone
numbers when changing service providers in some circumstances.
Federal Communications Commission Personal Communications Services Regulation
TeleCorp and Tritel are subject to service-specific regulations under the
Federal Communications Commission's rules. Among other things, these
regulations provide that PCS licensees, such as TeleCorp and Tritel, be granted
licenses for a 10-year term, subject to renewal. Under these policies, TeleCorp
and Tritel will be granted a renewal expectancy that would preclude the Federal
Communications Commission from considering competing applications if TeleCorp
and Tritel have:
. provided "substantial" performance, that is, "sound, favorable and
substantially above a level of mediocre service just minimally
justifying renewal"; and
. substantially complied with the Federal Communications Commission rules
and policies and the Communications Act.
These regulations also govern the transmission characteristics of PCS
handsets and network equipment sites and other technical requirements. PCS
licensees are required to comply with limits intended to ensure that these
operations do not interfere with radio services in other markets or in other
portions of the airwaves and to ensure emissions from mobile transmitters do
not cause adverse health effects. TeleCorp and Tritel are also subject to
minimum construction requirements that will require TeleCorp and Tritel to
deploy facilities with service coverage of a particular amount of the
population of their licensed areas within specified time periods.
Relocation of Fixed Microwave Licensees
Because PCS carriers use airwaves occupied by existing microwave licensees,
the Federal Communications Commission has adopted special regulations governing
the relocation of incumbent systems and cost-sharing among licensees that pay
to relocate microwave incumbents. Relocation usually requires a PCS operator to
compensate an incumbent for the costs of system modifications and new equipment
required to move the incumbent to new portions of the airwaves, including
possible premium costs for early relocation to alternate portions of the
airwaves. The transition plan allows most microwave users to operate in the PCS
portion of the airwaves for a one-year voluntary negotiation period and an
additional one-year mandatory negotiation period following the issuance of the
PCS license. These periods are longer for public safety entities. TeleCorp and
Tritel have entered into all necessary agreements for microwave relocation.
Under certain
209
<PAGE>
circumstances relocated licensees may exercise their rights to move back to
their original sites in the event the new sites are inadequate.
Local Multipoint Distribution Service Regulation
TeleCorp LMDS holds certain Local Multipoint Distribution Service, referred
to as "LMDS," licenses that are subject to service specific Federal
Communications Commission regulations. Like the PCS service specific
regulations, these regulations provide that LMDS licensees such as TeleCorp are
granted licenses for a 10-year term subject to renewal. Under these policies,
TeleCorp will be granted a renewal expectancy that would preclude the Federal
Communications Commission from considering competing applications if TeleCorp
has:
. provided "substantial" performance, that is, "sound, favorable and
substantially above a level of mediocre service just minimally
justifying renewal"; and
. substantially complied with Federal Communications Commission rules and
policies and the Communication Act.
These regulations also govern the transmission characteristics of LMDS
systems and other technical requirements. LMDS licenses are required to comply
with limits intended to ensure that these operations do not interfere with
radio services in other markets or in other portions of the airwaves and to
ensure emissions from transmitter do not cause adverse health effects. In
addition, depending upon how the Company uses such licenses, the Company may
become subject to additional federal or state regulations.
Federal Communications Commission and Federal Aviation Administration
Facilities Regulation
Because TeleCorp and Tritel acquire and operate antenna sites for use in
their networks, they are subject to Federal Communications Commission and
Federal Aviation Administration regulations governing registration of towers,
the marking and lighting of structures and regulations governing compliance
with the National Environmental Policy Act of 1969, which requires carriers to
assess the impact of their operations on the environment, including the health
effects of radio airwave radiation on humans.
Federal Communications Commission Designated Entity Regulation
Federal Communications Commission licenses are held by certain TeleCorp and
Tritel subsidiaries under the Federal Communications Commission's designated
entity policies. Under such policies, for a period of five years from initial
license grant, these licenses can only be held by a company that meets the
Federal Communications Commission's criteria for "entrepreneurial" status. In
addition, some of TeleCorp's and Tritel's licenses were awarded subject to
bidding credits because the original bidder met the criteria for "small
business" or "very small business" status. With respect to TeleCorp's and
Tritel's designated entity licenses, each of TeleCorp and Tritel:
. believes its subsidiaries met the relevant eligibility and benefits
criteria at the time such licenses were granted;
. believes its subsidiaries continue to hold such licenses in compliance
with the Federal Communications Commission's eligibility and benefits
criteria; and
. intends to diligently maintain its subsidiaries' eligibility and
benefits in compliance with applicable Federal Communications Commission
rules.
TeleCorp and Tritel rely on representations of their investors to determine
their subsidiaries' compliance with the Federal Communications Commission's
rules applicable to PCS licenses.
Entrepreneurial Eligibility. Under the Federal Communications Commission's
designated entity rules for PCS, the C and F Blocks of PCS spectrum were set
aside by the Federal Communications Commission for
210
<PAGE>
entrepreneurs. Only entrepreneurs were eligible to bid for these licenses and,
for a period of five years from the original grant, only entrepreneurs may hold
these licenses. Certain subsidiaries of TeleCorp and Tritel hold PCS licenses
as entrepreneurs, having won some licenses at auction and having acquired some
licenses from other entrepreneurs. To qualify as an entrepreneur, TeleCorp's
and Tritel's designated entity subsidiaries, their attributable investors, the
affiliates of TeleCorp's and Tritel's designated entity subsidiaries and the
affiliates of the attributable investors in TeleCorp's and Tritel's designated
entity subsidiaries must have had less than $500 million in net assets at the
time they acquired their initial licenses and average aggregate gross revenues
of less than $125 million for the two years prior to filing their applications
for these licenses. To the extent an entrepreneur grows beyond these limits as
a result of normal business growth, it will retain its eligibility to holds its
licenses and even may continue to acquire additional entrepreneurial licenses
from other entrepreneurs.
Small Business and Very Small Business Status. Under the Federal
Communications Commission's designated entity policies, certain subsidiaries of
TeleCorp and Tritel received their licenses subject to bidding credits, and in
some cases, government financing, awarded because of their status as very small
businesses or small businesses. In order to qualify for bidding credits or
government financing, or to acquire licenses originally awarded with bidding
credits or government financing without being subject to penalty payments, the
Federal Communications Commission considers the aggregate average gross
revenues of the applicant, its attributable investors, the applicant's
affiliates, and the affiliates of the applicant's attributable investors for
the prior three years. If these average annual revenues are less than $40
million, the entity will be considered a small business. If these average
annual revenues are less than $15 million, the entity will be considered a very
small business. To the extent a small business or very small business grows
beyond these limits as a result of normal business growth, it will not lose its
bidding credits or governmental financing, but its status is not grandfathered
for other licenses it subsequently acquires. Each of TeleCorp Holding, TeleCorp
LMDS, Viper and a number of subsidiaries of Tritel C/F Holding Corp. qualified
as a very small business. AirCom PCS, Inc. also holds licenses as a small
business. TeleCorp Holding has also acquired licenses in the aftermarket as a
very small business. After 1999, however, TeleCorps's and Tritel's designated
entity subsidiaries will only qualify as small businesses for future
acquisitions.
Control Group Requirements. For TeleCorp's and Tritel's designated entity
subsidiaries to avoid attribution of the revenues and assets of some of their
investors, TeleCorp's and Tritel's designated entity subsidiaries are required
to maintain a conforming control group and to limit the amount of equity held
by other entities on a fully-diluted basis. These requirements mandate that the
control group, among other things, have and maintain both actual and legal
control of the licensee. Under these control group requirements:
. an established group of investors meeting the financial qualifications
must own at least three-fifths of the control group's equity, or 15% of
the licensee's overall equity, on a fully-diluted basis and at least
50.1% of the voting power, in the licensee entity; and
. additional members of the control group may hold up to two-fifths of the
control group's equity, or up to 10% equity interest on a fully-diluted
basis, in the licensee entity.
Additional members may be non-controlling institutional investors, including
most venture capital firms. A licensee must have met the requirements at the
time it filed its application to acquire these licenses and must continue to
meet the requirements for five years following the date that a license is
granted, although normal business growth is permitted. Beginning the fourth
year of the license term, the Federal Communications Commission rules:
. eliminate the requirement that the 10% equity interest be held by
certain limited classes of investors; and
. allow the qualifying investors to reduce the minimum required equity
interest from 15% to 10%.
211
<PAGE>
Federal Communications Commission Transfer Restrictions
During the first five years of their license terms, designated entity PCS
licensees may only transfer or assign their license, in whole or in part, to
other qualified entrepreneurs. The acquiring entities would take over the
license, or any portion of the license, subject to separately established
installment payment obligations. After five years, licenses are transferable to
entrepreneurs and non-entrepreneurs alike, subject to unjust enrichment
penalties. If transfer occurs during years six through ten of the initial
license term to a company that does not qualify for the same level of auction
preferences as the transferor, the sale would be subject to immediate payment
of the outstanding balance of the government installment payment debt and
payment of any unjust enrichment assessments as a condition of transfer. The
Federal Communications Commission has also initiated transfer disclosure
regulations that require licensees who transfer control of or assign a PCS
license within the first three years to file associated contracts for sale,
option agreements, management agreements or other documents disclosing the
total consideration that the applicant would receive in return for the transfer
or assignment of its license.
State and Local Regulation
The Federal Communications Commission permits the states to:
. regulate terms and conditions of TeleCorp's and Tritel's commercial
mobile radio service services other than rates and entry and may
regulate all aspects of their intrastate toll services;
. regulate the intrastate portion of services offered by local telephone
carriers, and therefore the rates TeleCorp must pay to acquire critical
facilities from other common carriers;
. administer numbering resources, subject to federal oversight; and
. have other responsibilities that impact the nature and profitability of
TeleCorp's and Tritel's operations, including the ability to specify
cost-recovery mechanisms for network modifications to support emergency
public safety services.
States and localities also regulate construction of new antenna site
facilities and are responsible for zoning and developmental regulations that
can materially impact TeleCorp's and Tritel's timely acquisition of sites
critical to their radio network.
Emission and Hands-Free Regulation
Media reports have suggested that some radio airwave emissions from wireless
handsets may be linked to health concerns, including the incidence of cancer.
Data gathered in studies performed by manufacturers of wireless communications
equipment dispute these media reports. The Federal Communications Commission
has adopted rules specifying the methods to be used in evaluating radio airwave
emissions from radio equipment, including wireless handsets. The hand-held
digital telephones that TeleCorp and Tritel offer to their customers comply
with the standards adopted under the new rules, although these handsets may not
comply with any rules adopted by the Federal Communications Commission in the
future. Recent studies have shown that hand-held digital telephones interfere
with medical devices, including hearing aids and pacemakers and additional
studies are underway.
Various state legislatures have proposed or considered measures that would
require hands free use of cellular phones while operating motor vehicles, ban
cellular phone use or limit the length of calls while driving and require
drivers to pull to the side of the road to use cellular phones. In addition,
some gas stations have banned the use of mobile phones on their premises.
212
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph depicts TeleCorp's and Tritel's class A common stock
price performance from the date on which quotations for the class A voting
common stock for each of the companies first appeared on the Nasdaq National
Market (November 23, 1999, for TeleCorp, December 14, 1999, for Tritel) through
December 31, 1999. The graph shows this performance relative to the performance
of the Nasdaq Composite Index (listed as "COMP" in the graph) and the Nasdaq
Telecommunications Index (listed as "IXTC" in the graph). All indices shown in
the graph have been reset to a base of 100 as of November 23, 1999 (with the
exception of Tritel, which was not publicly traded until December 14, 1999),
and assume an investment of $100 on that date and the reinvestment of
dividends, if any, paid since that date. Neither TeleCorp nor Tritel has ever
paid cash dividends on its common stock. The graph was prepared by Holding
Company. Management cautions that the stock price performance shown in the
graph below should not be considered indicative of potential future stock
performance.
[Stock Performance Graph]
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG TELECORP, TRITEL, NASDAQ COMPOSITE
INDEX AND NASDAQ TELECOMMUNICATIONS INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
213
<PAGE>
<TABLE>
<CAPTION>
Nasdaq Nasdaq
Composite Telecom
TeleCorp Value of Tritel Value of Index Value of Index Value of
(TLCP) $100 TLCP (TTEL) $100 TTEL (COMP) $100 COMP (IXTC) $100 IXTC
Date Closing Investment Closing Investment Closing Investment Closing Investment
- ---- -------- ---------- ------- ---------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/23/99................ $ 20* $100.00 -- -- 3342.87 $100.00 845.19 $100.00
11/24/99................ 35.5 $177.50 -- -- 3420.5 $102.33 870.1 $102.95
11/26/99................ 38 $ 190.0 -- -- 3447.81 $103.15 876.73 $103.73
11/29/99................ 36.125 $180.63 -- -- 3421.37 $102.35 857.38 $101.44
11/30/99................ 36.063 $180.32 -- -- 3336.16 $ 99.80 820.9 $ 97.13
12/1/99................. 34.75 $173.75 -- -- 3353.71 $100.32 813.99 $ 96.31
12/2/99................. 36 $180.00 -- -- 3452.78 $103.30 837.85 $ 99.13
12/3/99................. 35.875 $179.38 -- -- 3520.63 $105.33 856.54 $101.34
12/6/99................. 37.688 $188.44 -- -- 3546.01 $106.09 856.86 $101.38
12/7/99................. 40.25 $201.25 -- -- 3586.92 $107.32 869.48 $102.87
12/8/99................. 39.5 $197.50 -- -- 3586.08 $107.29 870.86 $103.04
12/9/99................. 39.25 $196.25 -- -- 3594.17 $107.53 872.72 $103.26
12/10/99................ 39.688 $198.44 -- -- 3620.24 $108.32 882.11 $104.37
12/13/99................ 37.969 $189.85 -- -- 3658.17 $109.45 898.14 $106.26
12/14/99................ 37.125 $185.63 18.00** $100.00 3571.66 $106.86 884.27 $104.62
12/15/99................ 37.188 $185.94 30.563 $169.81 3621.95 $108.37 880.16 $104.14
12/16/99................ 36 $180.00 29.563 $164.25 3715.06 $111.16 900.67 $106.56
12/17/99................ 36.313 $181.57 28.125 $156.26 3753.06 $112.30 908.4 $107.48
12/20/99................ 38.813 $194.07 28.25 $156.96 3783.87 $113.22 912.15 $107.92
12/21/99................ 37.313 $186.57 26.875 $149.32 3911.15 $117.04 942.81 $111.55
12/22/99................ 36.875 $184.38 26.688 $148.17 3937.3 $117.82 944.5 $111.75
12/23/99................ 36.969 $184.85 26.125 $145.15 3969.44 $118.78 963.09 $113.95
12/27/99................ 39.25 $196.25 28.5 $158.35 3975.38 $118.96 961.43 $113.75
12/28/99................ 38 $190.00 29.313 $162.86 3972.11 $118.86 966.78 $114.38
12/29/99................ 37.281 $180.41 29.75 $165.29 4041.46 $120.94 999.98 $118.31
12/30/99................ 38.469 $192.35 29.875 $165.99 4036.87 $120.81 990.59 $117.20
12/31/99................ 38 $190.00 31.688 $176.06 4069.31 $121.78 1015.4 $120.14
</TABLE>
* This number represents the initial public offering price. The closing price
for the first day of trading was $33.00.
** This number represents the initial public offering price. The closing price
for the first day of trading was $30.188.
214
<PAGE>
DESCRIPTION OF HOLDING COMPANY CAPITAL STOCK
This section of the joint proxy statement-prospectus describes the material
terms of Holding Company's capital stock under Holding Company's amended and
restated certificate of incorporation and by-laws that will be in effect
immediately after the merger is completed. This section also summarizes
relevant provisions of the Delaware General Corporation Law, which is referred
to as "Delaware law." The terms of Holding Company's amended and restated
certificate of incorporation and by-laws, as well as the terms of Delaware law,
are more detailed than the general information provided below. Therefore, you
should carefully consider the actual provisions of these documents. Holding
Company's amended and restated certificate of incorporation is attached as
Annex E to this prospectus, and Holding Company's by-laws are attached as Annex
F to this prospectus.
Authorized Capital Stock
Total Shares. Holding Company initially will have authority to issue a total
of 1,954,339,093 shares of capital stock consisting of:
. 1,934,339,093 shares of common stock, par value $0.01 per share; and
. 20,000,000 shares of preferred stock, par value $0.01 per share.
Common Stock. The Holding Company common stock will consist of seven
classes. The designation and authorized number of shares of each class will be:
. 1,108,550,000 shares of class A voting common stock;
. 808,550,000 shares of class B non-voting common stock;
. 309,000 shares of class C common stock;
. 927,000 shares of class D common stock;
. 4,000,000 shares of class E common stock;
. 12,000,000 shares of class F common stock; and
. 3,093 shares of voting preference common stock.
Following completion of the merger, the approximate number of outstanding
common shares of Holding Company in each class will be:
. 178,497,292 shares of class A voting common stock;
. no shares of class B non-voting common stock;
. 283,813 shares of class C common stock;
. 851,429 shares of class D common stock;
. 10,491 shares of class E common stock;
. 37,717 shares of class F common stock; and
. 3,093 shares of voting preference common stock.
Preferred Stock. The Holding Company preferred stock will consist of eight
series. The designation and authorized number of shares of each series will be:
. 100,000 shares of series A convertible preferred stock;
. 200,000 shares of series B preferred stock;
215
<PAGE>
. 215,000 shares of series C preferred stock;
. 50,000 shares of series D preferred stock;
. 30,000 shares of series E preferred stock;
. 15,450,000 shares of series F preferred stock;
. 100,000 shares of series G preferred stock;
. 200,000 shares of series H preferred stock; and
. 300,000 shares of series I preferred stock.
In addition, subject to any required approval of holders of any shares of
any series of preferred stock, Holding Company will have the right, through its
board of directors, to designate and issue, with preferences and rights as the
board of directors determines, up to 3,355,000 undesignated shares of preferred
stock. Following completion of the merger, the approximate number of each
series of Holding Company's outstanding preferred shares will be:
. 97,473 shares of series A convertible preferred stock;
. 90,668 shares of series B preferred stock;
. 210,608 shares of series C preferred stock;
. 49,417 shares of series D preferred stock;
. 25,841 shares of series E preferred stock;
. 14,912,778 shares of series F preferred stock;
. 46,374 shares of series G preferred stock;
. no shares of series H preferred stock; and
. no shares of series I preferred stock.
Listing. Holding Company intends to apply to list its class A voting common
stock on the NASDAQ National Market under the symbol "TLCP". No other class or
series of its capital stock will be listed.
Preemptive Rights. The holders of Holding Company common stock and Holding
Company preferred stock will not have preemptive rights to purchase or
subscribe for any stock or other securities of Holding Company.
Holding Company Common Stock
Voting Rights. The holders of shares of common stock (other than holders of
the class B non-voting common stock and the voting preference common stock)
shall have, together with the holders of series F preferred stock and series G
preferred stock, an aggregate total of 4,690,000 votes. The number of votes or
fractional votes to which each share of a particular class of common stock
(other than the class B non-voting common stock and the voting preference
common stock), series F preferred stock and series G preferred stock shall be
entitled shall be the quotient determined by dividing the aggregate number of
votes to which the common stock (other than the class B non-voting common stock
and voting preference common stock), the series F preferred stock and the
series G preferred stock is entitled by the number of shares of all common
stock (other than the class B non-voting common stock and voting preference
common stock), series F preferred stock and series G preferred stock then
outstanding. The holders of voting preference common stock shall have an
aggregate total of 5,010,000 votes. The holders of class B non-voting common
stock shall have no votes except for a vote as a separate class regarding any
amendment, repeal or modification of any provision
216
<PAGE>
of the amended and restated certificate of incorporation that adversely affects
the powers, preferences or special rights of the holders of the class B non-
voting common stock.
The amended and restated certificate of incorporation provides that, except
where a class of capital stock has the right to vote as a class, a quorum for
the transaction of business will be present so long as a majority of the shares
of voting preference common stock outstanding are present and when shares of
all classes of common stock and preferred stock with at least 5,010,000 votes
are present. When a class vote is required, a majority of that class must also
be present, with holders of the stock of such class entitled to one vote per
share. Any further action not requiring a class vote may be approved by the
affirmative vote of a majority of the voting preference common stock present at
any meeting where a quorum is present.
If:
. Holding Company receives an opinion of regulatory counsel of nationally
recognized standing that rules, regulations or policies of the Federal
Communications Commission permit the class A voting common stock and
voting preference common stock to vote and be treated as a single class
of stock for quorum purposes and have one vote per share;
. not less than two-thirds of the outstanding class A voting common stock
affirmatively vote for the single class status; and
. Holding Company's board determines that it is not likely to be
significantly detrimental to Holding Company,
Holding Company will seek the approval of the Federal Communications Commission
to have class A voting common stock and voting preference common stock vote and
be treated together as a single class with one vote per share.
The holders of shares of voting preference common stock shall have the
right, voting separately as a single class, to elect two directors to the board
of directors of Holding Company who shall be entitled to 1/2 of a vote on all
matters voted upon by the directors of Holding Company. In the event any
director so nominated by the holders of the voting preference common stock
ceases to be a director of Holding Company during the director's term, the
remaining director shall be entitled to one vote and the voting rights of the
holders of the shares of voting preference common stock to elect two directors
to the board of directors of Holding Company shall be reduced to the right to
elect one director. In addition, in the event Holding Company receives the
opinion of regulatory counsel described above, the voting rights of the holders
of the shares of voting preference common stock to elect directors to the board
of directors shall terminate and be of no further force and effect.
Dividends. Subject to the rights of the holders of the preferred stock, the
board of directors of Holding Company may declare dividends on the common
stock; provided, that:
. dividends on class A voting common stock and class B non-voting common
stock may only be paid up to the amount by which funds legally available
for the dividends exceed the excess of:
(1) fair market value of the assets of TeleCorp Holding Corp., Inc.
less TeleCorp Holding Corp.'s liabilities; over the aggregate par
value of class C common stock and class D common stock, at Holding
Company's board's discretion, plus
(2) fair market value of the assets of Tritel Holding less Tritel
Holding's liabilities; over the aggregate par value of class E
common stock and class F common stock, at Holding Company's board's
discretion.
217
<PAGE>
. to the extent funds are legally available for the dividends, dividends
on class C common stock and class D common stock may only be paid up to
an amount equal to the lesser of:
(1) the legally available funds; and
(2) fair market value of the assets of TeleCorp Holding Corp. less
TeleCorp Holding Corp.'s liabilities; over the aggregate par value
of class C common stock and class D common stock, at Holding
Company's board's discretion.
. to the extent funds are legally available for the dividends, dividends
on class E common stock and class F common stock may only be paid up to
the amount equal to the lesser of:
(1) the legally available funds; and
(2) fair market value of the assets of Tritel Holding less Tritel
Holding's liabilities; over the aggregate par value of class E
common stock and class F common stock, at Holding Company's board's
discretion.
Holding Company may not declare or pay any cash dividends on any share of
class A voting common stock or class B non-voting common stock unless it
declares and pays cash dividends on the same terms to all shares of class A
voting common stock and class B non-voting common stock ratably in accordance
with the number of shares of class A voting common stock and class B non-voting
common stock then outstanding. Holding Company may not declare or pay any cash
dividends on any share of class C common stock or class D common stock unless
it declares and pays cash dividends on the same terms to all shares of class C
common stock and class D common stock ratably in accordance with the number of
shares of class C common stock and class D common stock then outstanding.
Holding Company may not declare or pay any cash dividends on any share of class
E common stock or class F common stock, unless it declares and pays cash
dividends on the same terms to all shares of class E common stock and class F
common stock ratably in accordance with the number of shares of class E common
stock and class F common stock then outstanding.
In addition, Holding Company may not pay dividends on any shares of any
class of its capital stock if, at the time:
. Holding Company is insolvent or the payments will render it insolvent;
or
. any law or any of Holding Company's agreements prohibits the dividend
payments.
Further, Holding Company's amended and restated certificate of incorporation
restricts its ability to pay any dividends on any class of capital stock to the
extent shares of capital stock ranking senior to or on a parity with the class
remain outstanding or dividends on the senior or parity shares have not been
paid in full.
Liquidation Rights. Upon Holding Company's liquidation, dissolution or
winding up and following payment of all amounts payable to the holders of
preferred stock and any other class or series of stock having a preference over
the common stock then outstanding, the holders of:
. class C common stock and class D common stock shall be entitled to
receive pro rata an amount equal to the fair market value of the assets
of TeleCorp Holding Corp. less TeleCorp Holding Corp.'s liabilities;
. class E common stock and the class F common stock shall be entitled to
receive pro rata an amount equal to the fair market value of the assets
of Tritel Holding less Tritel Holding's liabilities;
. class A voting common stock and class B non-voting common stock shall be
entitled to receive pro rata the excess of:
(1) all of Holding Company's remaining assets available for
distribution to its stockholders; over
(2) the amounts payable to the class C common stock, the class D common
stock, the class E common stock and the class F common stock; and
218
<PAGE>
. the holders of the other classes of common stock will be entitled to
receive the remaining amounts available for distribution.
Regulatory Restrictions. Outstanding shares of Holding Company common stock
may be redeemed by action of the board of directors to the extent necessary to
prevent the loss of, or to permit the reinstatement of, any governmental
license or franchise, the holding of which is conditioned upon stockholders
possessing prescribed qualifications.
Conversion. Each share of class B non-voting common stock may, at the option
of the holder thereof, at any time, be converted into one fully paid and non-
assessable share of class A voting common stock. Each share of class A voting
common stock may, at the option of the holder thereof, at any time, be
converted into one fully paid and non-assessable share of class B non-voting
common stock.
If Holding Company receives an opinion of regulatory counsel that class C
common stock, class D common stock, class E common stock or class F common
stock may under Federal Communications Commission rules, regulations and
policies be converted into class A voting common stock or class B common stock,
then, unless the board of directors of Holding Company determines that it is
likely to be detrimental to Holding Company, holders of any of the class C
through F common stock may convert each share into one share of class A voting
common stock or class B common stock upon the affirmative vote of the holders
of 66 2/3% or more of the class A voting common stock.
All conversions are subject to obtaining any required Federal Communications
Commission approvals. Holders of common stock that may be converted as
described above may elect to convert any or all of their shares by giving
written notice to us prior to the requisite Federal Communications Commission
approvals. This conversion will not become effective until the final receipt of
all necessary Federal Communications Commission approvals.
Redemption. The management agreement provides for the redemption by Holding
Company of specific shares of class A voting common stock held by Mr. Vento and
Mr. Sullivan in particular circumstances. See "TeleCorp--Executive
Compensation--Management Agreement."
Holding Company Preferred Stock
Voting Rights. Regardless of the number of shares of any series of preferred
stock then outstanding, the holders of each series of preferred stock shall
have the following aggregate votes on any matter brought before them:
. the series A convertible preferred stock shall have 67,804 votes;
. the series B preferred stock shall have 61,608 votes;
. the series C preferred stock shall have 124,096 votes;
. the series D preferred stock shall have 30,308 votes;
. the series E preferred stock shall have 16,184 votes;
. the series F preferred stock and the series G preferred stock shall have
the voting rights described above in "Holding Company Common Stock--
Voting Rights";
. the series H preferred stock shall have the number of votes which shares
of series A preferred stock exchanged for such series H preferred stock
had prior to such exchange; and
. the series I preferred stock shall have the number of votes which shares
of series B preferred stock exchanged for such series I preferred stock
had prior to such exchange.
219
<PAGE>
The number of votes or fractional votes to which each share of a particular
series of preferred stock shall be entitled shall be the quotient determined by
dividing the aggregate number of votes to which such series of preferred stock
is entitled by the number of shares of such series of preferred stock then
outstanding.
In any matter requiring a separate class vote of holders of any series of
preferred stock or a separate vote of two or more series of preferred stock
voting together as a single class, for the purposes of such a class vote, each
share of preferred stock of such series shall be entitled to one vote per
share.
Special Voting Rights of Preferred Stock. The affirmative vote of the
holders of a majority of the outstanding shares of a series of preferred stock
shall be necessary to:
. authorize or issue any shares senior or on a parity with the class;
. amend Holding Company's amended and restated certificate of
incorporation to change any of the characteristics of the class; or
. authorize or issue any security convertible into, exchangeable for or
granting the right to purchase or otherwise receive any shares of stock
senior to or on a parity with the class.
In addition, so long as AT&T Wireless and/or any of its affiliates that is a
subsidiary of AT&T owns in the aggregate at least 44,481 shares of series A
convertible preferred stock, holders of shares of series A convertible
preferred stock shall have the exclusive right, voting separately as a single
class, to designate one of Holding Company's directors.
Also, so long as AT&T Wireless and/or any of its affiliates that is a
subsidiary of AT&T owns in the aggregate at least 60,446 shares of series B
preferred stock, holders of shares of series B preferred stock shall have the
exclusive right, voting separately as a single class, to designate one of
Holding Company's directors.
Ranking. With respect to the payment of dividends and distributions upon
Holding Company's liquidation, dissolution or winding up, series of preferred
stock rank as follows:
<TABLE>
<CAPTION>
Class of Stock Parity with Junior to Senior to
-------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
series A preferred series B preferred none series C preferred
series H preferred series D preferred
series I preferred series E preferred
series F preferred
series G preferred
common stock
series B preferred series A preferred none series C preferred
series H preferred series D preferred
series I preferred series E preferred
series F preferred
series G preferred
common stock
series C preferred series D preferred-- series A preferred series E preferred
except when a series B preferred series F preferred
statutory liquidation series D preferred-- series G preferred
common stock--only only upon a statutory common stock--only
with respect to liquidation with respect to
dividends series H preferred dissolution,
series I preferred liquidation and
winding up
</TABLE>
220
<PAGE>
<TABLE>
<CAPTION>
Class of Stock Parity with Junior to Senior to
-------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
series D preferred series C preferred-- series A preferred series C preferred--
except when a series B preferred only upon a statutory
statutory liquidation series H preferred liquidation
common stock--only series I preferred series E preferred
with respect to series F preferred
dividends series G preferred
common stock--only
with respect to
dissolution,
liquidation and
winding up
series E preferred none series A preferred series F preferred
series B preferred series G preferred
series C preferred common stock
series D preferred
series H preferred
series I preferred
series F preferred series G preferred series A preferred common stock--only
common stock--except series B preferred upon a statutory
when a statutory series C preferred liquidation
liquidation series D preferred
series E preferred
series H preferred
series I preferred
series G preferred series F preferred series A preferred common stock--only
common stock--except series B preferred upon a statutory
when a statutory series C preferred liquidation
liquidation series D preferred
series E preferred
series H preferred
series I preferred
series H preferred series A preferred none series C preferred
series B preferred series D preferred
series I preferred series E preferred
series F preferred
series G preferred
common stock
series I preferred series A preferred none series C preferred
series B preferred series D preferred
series H preferred series E preferred
series F preferred
series G preferred
common stock
</TABLE>
Dividends. The holders of series A convertible preferred stock and series B
preferred stock are entitled to receive annual dividends equal to 10% of the
liquidation preference related to their shares; and so long as any shares of
series A convertible preferred stock or series B preferred stock are
outstanding, no dividends may be paid on any shares of any class of capital
stock ranking junior to series A convertible preferred stock or series B
preferred stock. Dividends accrue from the date of original issuance of the
shares, or, with respect to any series A convertible preferred stock or series
B preferred stock received in exchange for stock in TeleCorp or Tritel, the
date of issuance of such TeleCorp or Tritel stock, dividends are payable
quarterly, provided that
221
<PAGE>
Holding Company has the option to defer payment of dividends until December
2008, in the case of series A convertible preferred stock, and June 2009, in
the case of series B preferred stock.
The holders of series C preferred stock, series D preferred stock, series E
preferred stock and series F preferred stock are entitled to dividends as
declared by Holding Company's board.
The dividend rights of Holding Company's outstanding preferred stock are
summarized below:
<TABLE>
<CAPTION>
Aggregate Liquidation
Series of Preference as of March
Preferred Stock Amount of Dividend Payment Dates 31, 2000
- --------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
series A 10% of liquidation Quarterly commencing the $112,435,609
preference annually, last day of the quarter
accruing daily from July in which the shares are
17, 1998 issued; may be deferred
until December 31, 2008
on which date all past
unpaid dividends become
due
series B 10% of liquidation Quarterly commencing the $101,852,828
preference annually, last day of the quarter
accruing daily from in which the shares are
January 17,1999 issued; may be deferred
until June 30, 2009 on
which date all past
unpaid dividends become
due
series C As declared by Holding When and if declared by $228,719,976
Company's board, up to Holding Company's board
the liquidation
preference compounded
quarterly
series D As declared by Holding When and if declared by $53,813,723
Company's board, up to Holding Company's board
the liquidation
preference compounded
quarterly
series E As declared by Holding When and if declared by $2,339,226
Company's board, up to Holding Company's board
the liquidation
preference compounded
quarterly
series F As declared by Holding When and if declared by $443
Company's board Holding Company's board
series G As declared by Holding When and if declared by $49,280,820
Company's board Holding Company's board
series H 10% of liquidation Quarterly commencing the $0
preference annually, last day of the quarter
accruing daily from July in which the shares are
17, 1998 issued; may be deferred
until December 31, 2008
on which date all past
unpaid dividends become
due
</TABLE>
222
<PAGE>
<TABLE>
<CAPTION>
Aggregate Liquidation
Series of Preference as of March
Preferred Stock Amount of Dividend Payment Dates 31, 2000
--------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
series I 10% of liquidation Quarterly commencing the $0
preference annually, last day of the quarter
accruing daily from in which the shares are
January 17, 1999 issued; may be deferred
until June 30, 2009 on
which date all past
unpaid dividends become
due
</TABLE>
Holding Company may not pay dividends on any shares of any class of its
capital stock if, at the time:
. it is insolvent or the payments will render it insolvent; or
. any law or any of its agreements prohibits the dividend payments.
Further, Holding Company's amended and restated certificate of incorporation
restricts its ability to pay any dividends on any class of capital stock to the
extent shares of capital stock ranking senior to or on a parity with the class
remain outstanding or dividends on the senior or parity shares have not been
paid in full.
Liquidation Rights. The holders of preferred stock are entitled to
preferences with respect to distributions upon Holding Company's liquidation,
dissolution or winding up as follows:
. holders of series A convertible preferred stock, series B preferred
stock, series H preferred stock and series I preferred stock are
entitled to a preference per share equal to $1,000 plus accrued and
unpaid dividends on the shares;
. holders of series C preferred stock are entitled to a preference per
share equal to the paid-in capital per share of series C preferred
stock, or the paid-in capital per share of capital stock exchanged for
series C preferred stock, together with interest on $1,000 from the date
of issuance at a rate of 6% per annum, compounded quarterly, less the
amount of any dividends paid on the shares, plus accrued and unpaid
dividends;
. holders of series D preferred stock are entitled to a preference per
share equal to $1,000 together with interest from the date of issuance,
or the date of issuance of capital stock exchanged for series D
preferred stock, at a rate of 6% per annum, compounded quarterly, less
the amount of any dividends paid on the shares, plus accrued and unpaid
dividends;
. holders of series E preferred stock are entitled to a preference per
share equal to the amount of accrued and unpaid dividends on the shares,
together with interest on $1,000 from the date of issuance, or the date
of issuance of capital stock exchanged for series E preferred stock, at
a rate of 6% per annum, compounded quarterly, less the amount of any
dividends declared and paid on the shares;
. holders of series F preferred stock are entitled to a preference equal
to $0.000032 plus accrued and unpaid dividends on the shares; and
. holders of series G preferred stock are entitled to a preference per
share equal to $1,000 plus declared but unpaid dividends thereon (if
any), plus interest on $1,000 from the date of issuance, or the date of
issuance of capital stock exchanged for series G preferred stock, at a
rate of 6.5% per annum, compounded quarterly.
Regulatory Restrictions. Outstanding shares of Holding Company preferred
stock may be redeemed by action of the board of directors to the extent
necessary to prevent the loss of, or to permit the reinstatement of, any
governmental license or franchise, the holding of which is conditioned upon
stockholders possessing prescribed qualifications.
223
<PAGE>
Conversion. After July 17, 2006, holders of series A convertible preferred
stock may convert their shares into shares of class A voting common stock at a
conversion rate equal to the liquidation preference of series A convertible
preferred stock divided by the market price of class A voting common stock.
After January 15, 2007, holders of series B preferred stock may convert
their shares into shares of class A voting common stock at a conversion rate
equal to the liquidation preference of series B preferred stock divided by the
market price of class A voting common stock.
At any time, holders of series F preferred stock may convert each share into
one share of class A voting common stock; provided, that, until the class C
common stock, class D common stock, class E common stock and class F common
stock is convertible into class A voting common stock, the first 195,063 of
class F Preferred Stock shares to be converted are convertible into shares of
class D common stock.
At any time, holders of series G preferred stock may convert their shares
into their pro rata share (based on the number of shares of series G preferred
stock outstanding) of 14,031,972 shares of class A voting common stock and
949,398 shares of class F common stock or, if the class C common stock, class D
common stock, class E common stock and class F common stock is convertible into
class A voting common stock, 949,398 shares of class A voting common stock
instead of shares of class F common stock.
Redemption. Holding Company has the right to redeem its capital stock as
follows:
. all shares of series A convertible preferred stock: following 30 days
after the 20th anniversary of issuance at the liquidation preference of
the series A convertible preferred stock;
. all shares of series B preferred stock: following 30 days after the 20th
anniversary of issuance at the liquidation preference of the series B
preferred stock;
. all shares of series C preferred stock and series D preferred stock: at
any time at the liquidation preferences of series C preferred stock or
series D preferred stock, respectively; provided, that if Holding
Company redeems any shares of either series C preferred stock or series
D preferred stock, it must redeem all shares of the other, unless funds
are not legally available for such redemption, in which case, it must
allocate the funds legally available for redemption ratably in
accordance with the number of shares of each series outstanding on the
date of redemption;
. all shares of series E preferred stock: at any time at the liquidation
preference of series E preferred stock; and
. any shares of series H preferred stock or series I preferred stock: at
any time at the liquidation preferences of series H preferred stock or
series I preferred stock, respectively.
In addition, the holders of some classes of capital stock have the right to
require Holding Company to redeem their shares as follows:
. holders of series A convertible preferred stock or series B preferred
stock: all shares held by such holder following the 30th day after the
20th anniversary of issuance at the liquidation preference of the series
A convertible preferred stock or series B preferred stock, respectively;
and
. holders of series C preferred stock, series D preferred stock or series
E preferred stock: following the 30th day after the 20th anniversary of
issuance at the liquidation preference of the series C preferred stock,
series D preferred stock or series E preferred stock, respectively.
Neither Holding Company nor any holder of shares of any class of Holding
Company capital stock may cause Holding Company to redeem its capital stock if,
at that time:
. Holding Company is insolvent or the redemption will render it insolvent;
or
. any law or any of Holding Company's agreements prohibits the redemption.
224
<PAGE>
Further, Holding Company's amended and restated certificate of incorporation
restricts its ability to redeem any shares of capital stock to the extent
shares of capital stock ranking senior to or on a parity with the shares remain
outstanding or dividends on the senior or parity shares have not been paid in
full.
Holding Company's amended and restated certificate of incorporation also
provides for redemption of any of its shares of capital stock that are held by
stockholders whose holding of the shares, in the opinion of Holding Company's
board of directors, may result in the loss of, or failure to obtain the
reinstatement of, any of its licenses or franchises.
The management agreement provides for the repurchase by Holding Company of
specific shares of class A voting common stock and series E preferred stock
held by Mr. Vento and Mr. Sullivan in specific circumstances. See "TeleCorp--
Executive Compensation--Management Agreement."
Transfer Restrictions
Some of Holding Company's stockholders have entered into agreements that
restrict transfer of their shares and provide for the happening of specified
events, such as share conversions. See "TeleCorp--AT&T Agreements", "Tritel--
Joint Venture Agreements With AT&T Wireless", and "TeleCorp--Executive
Compensation--Management Agreement."
Transfer Agents and Registrars
The transfer agent and registrar for the capital stock of TeleCorp is
EquiServe. The transfer agent and registrar for the capital stock of Tritel is
American Stock Transfer & Trust Company. Holding Company's transfer agent and
registrar for Holding Company capital stock is EquiServe.
Anti-Takeover Considerations
Delaware law and Holding Company's amended and restated certificate of
incorporation and restated by-laws will contain a number of provisions which
may have the effect of discouraging transactions that involve an actual or
threatened change of control of us. For a description of the provisions, see
"Comparison of Rights of Holding Company Stockholders, TeleCorp Stockholders
and Tritel Stockholders--Number and Election of Directors," "--Amendments to
the Amended and Restated Certificate of Incorporation," and "--State Anti-
Takeover Statutes."
225
<PAGE>
COMPARISON OF RIGHTS OF HOLDING COMPANY STOCKHOLDERS,
TELECORP STOCKHOLDERS AND TRITEL STOCKHOLDERS
Holding Company, TeleCorp and Tritel are all organized under the laws of the
State of Delaware. Any differences, therefore, in the rights of holders of
Holding Company capital stock, TeleCorp capital stock and Tritel capital stock
arise primarily from differences in their respective amended and restated
certificates of incorporation and by-laws or restated by-laws. Upon completion
of the merger, holders of TeleCorp capital stock and holders of Tritel capital
stock will become holders of Holding Company capital stock and their rights
will be governed by Delaware law, the Holding Company amended and restated
certificate of incorporation and the Holding Company by-laws. The following
table describes the material differences between the rights of TeleCorp
stockholders and Tritel stockholders. This table also includes a brief
description of the material rights that Holding Company stockholders are
expected to have following completion of the merger although in some cases the
board of directors of Holding Company retains the discretion to alter those
rights without stockholder consent. This table does not include a complete
description of all differences among the rights of these stockholders, nor does
it include a complete description of the specific rights of these stockholders.
In addition, the identification of some of the differences in the rights of
these stockholders as material is not intended to indicate that other
differences that are equally important do not exist. All TeleCorp stockholders
and Tritel stockholders are urged to read carefully the relevant provisions of
Delaware law, as well as the amended and restated certificates of incorporation
and restated by-laws of each of TeleCorp, Tritel and Holding Company. Copies of
the forms of the amended and restated certificate of incorporation and by-laws
for Holding Company are attached to this prospectus as Annexes E and F,
respectively. Copies of the amended and restated certificates of incorporation
and restated by-laws of TeleCorp and Tritel will be sent to TeleCorp
stockholders and Tritel stockholders, as applicable, upon request. See "Where
You Can Find More Information."
<TABLE>
<CAPTION>
Rights TeleCorp Tritel Holding Company
------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Capitalization 918,339,090 shares of 1,016,000,009 shares of 1,934,339,093 shares of
common stock, par value common stock, par value common stock, par value
$0.01 per share, $0.01 per share, $0.01 per share,
consisting of: consisting of: consisting of:
. 608,550,000 shares of . 500,000,000 shares of . 1,108,550,000 shares
class A voting common class A voting common of class A voting
stock stock common stock
. 308,550,000 shares of . 500,000,000 shares of . 808,550,000 shares of
class B non-voting class B non-voting class B non-voting
common stock common stock common stock
. 309,000 shares of . 4,000,000 shares of . 309,000 shares of
class C common stock class C common stock class C common stock
. 927,000 shares of . 12,000,000 shares of . 927,000 shares of
class D common stock class D common stock class D common stock
. 4,000,000 shares of
class E common stock
. 12,000,000 shares of
class F common stock
. 3,090 shares of voting . nine shares of voting . 3,093 shares of voting
preference common preference common preference common
stock stock stock.
17,045,000 shares of 3,100,000 shares of 20,000,000 shares of
preferred stock, par preferred stock, par preferred stock, par
value $0.01 per share, value $0.01 per share, value $0.01 per share,
consisting of: consisting of: consisting of:
. 100,000 shares of . 200,000 shares of . 100,000 shares of
series A preferred series A convertible series A convertible
stock preferred stock preferred stock
. 200,000 shares of . 300,000 shares of . 200,000 shares of
series B preferred series B preferred series B preferred
stock stock stock
. 215,000 shares of . 500,000 shares of . 215,000 shares of
series C preferred series C convertible series C preferred
stock preferred stock stock
. 50,000 shares of . 100,000 shares of . 50,000 shares of
series D preferred series D convertible series D preferred
stock preferred stock stock
</TABLE>
226
<PAGE>
<TABLE>
<CAPTION>
Rights TeleCorp Tritel Holding Company
------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
. 30,000 shares of . 30,000 shares of
series E preferred series E preferred
stock stock
. 15,450,000 shares of . 15,450,000 shares of
series F preferred series F preferred
stock stock
. 100,000 shares of
series G preferred
stock
. 200,000 shares of
series H preferred
stock
. 300,000 shares of
series I preferred
stock
. 1,000,000 undesignated . 2,000,000 undesignated . 3,355,000 undesignated
shares shares shares
- -----------------------------------------------------------------------------------------
Voting Rights Holders of class A Tritel stockholders have Holders of all classes
voting common stock-- the same voting rights of common stock (except
4,990,000 aggregate as TeleCorp's the class B non-voting
votes allocated to each stockholders. common stock and voting
share on a pro rata preference common
basis. stock), series F
preferred stock and
Holders of class B non- series G preferred
voting common stock have stock--4,690,000
no voting rights. aggregate votes with a
per share vote equal to
4,690,000 divided by the
number of outstanding
shares all classes of
common stock (except the
class B non-voting
common stock and voting
preference common
stock), plus the common
stock equivalents of
series F preferred stock
and series G preferred
stock
Holders of voting Holders of voting
preference common preference common stock
stock--5,010,000 have the same voting
aggregate votes, rights as the TeleCorp
allocated to each share voting preference
on a pro rata basis. stockholders. Holders of
class B non-voting
common stock have no
voting rights.
Holders of all series of Holders of series A,B,C
TeleCorp's preferred and D preferred stock
stock do not have the have a vote per share
right to vote on matters equal to the aggregate
generally. They do have number of votes for that
class voting rights in class divided by the
certain circumstances. outstanding shares of
See Class Voting Rights the class. Aggregate
of Preferred votes for each series
Stockholders below. are as follows:
series A preferred
stock--67,804
series B preferred
stock--61,608
series C preferred
stock--124,096
series D preferred
stock--30,308
series E preferred
stock--16,184
Holders of series H and
I preferred stock shall
have the number of votes
which any shares of
series A and B preferred
stock exchanged for
series H and I preferred
stock, respectively,
previously had.
</TABLE>
227
<PAGE>
<TABLE>
<CAPTION>
Rights TeleCorp Tritel Holding Company
------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Class Voting Rights of Holders of class A Tritel class A voting Same class voting rights
Common and Preferred voting common stock and common and voting as the holders of
Stockholders voting preference common preference stockholders TeleCorp common and
stock have the right to have the same class preferred stock.
vote as a single class voting rights as the
under certain TeleCorp class A voting
circumstances. common and voting
preference stockholders.
Holders of class B non- The holders of the
voting common stock are series A convertible
entitled to vote as a preferred stock and
separate class on any series B preferred stock
amendment, repeal or have the same class
modification of restated voting rights as the
certificate of TeleCorp preferred
incorporation that stockholders.
adversely affects the
powers, preferences or
special rights of
holders of class B
common stock.
The holders of each The holders of the
class of preferred stock series C and D preferred
have the right to vote stock have the same
as a class, with a class voting rights as
majority vote of the the TeleCorp preferred
class required to stockholders except that
approve, any measure to: the Tritel series C and
D preferred stockholders
also have the right to
vote as a class on the
authorization or
issuance of any security
by Tritel and Tritel
series C preferred
stockholders have the
right to vote together
as a single class with
the class A voting
common stock.
. authorize or issue any
shares senior to or on
a parity with the
class;
.amend the restated
certificate of
incorporation to
change any of the
characteristics of the
class; or
.authorize or issue
any security
convertible into,
exchangeable for or
granting the right to
purchase or otherwise
receive any shares of
stock senior to or on
a parity with the
class.
Holders of series A and
B preferred stock have
the exclusive right,
voting separately as a
single class, to
nominate one director
under specified
circumstances.
- --------------------------------------------------------------------------------------------------
Quorum Except where a class of Same provisions as Same provisions as
capital stock has the TeleCorp except that to TeleCorp.
right to vote as a constitute a quorum to
class, a quorum is approve actions not
present if a majority of requiring a class vote,
the outstanding voting Tritel also requires the
preference common stock presence of a majority
and shares representing of the shares of all
at least 5,010,000 votes other classes of common
of all shares of capital stock other than the
stock are present. voting preference stock.
When a class vote is
required, a majority of
that class must also be
present.
- --------------------------------------------------------------------------------------------------
Amendments to the Subject to the separate Same provisions as Same provisions as
Amended and Restated class vote requirements TeleCorp except that TeleCorp.
Certificate of relating to any class or written consent is not
Incorporation series of Preferred permitted.
Stock, holders of shares
of capital stock
representing at least
two-thirds ( 2/3) of the
votes entitled to be
cast for the election of
directors of the
Corporation, voting
together as a single
class, or by written
consent, may amend,
alter or repeal the
restated certificate of
incorporation.
</TABLE>
228
<PAGE>
<TABLE>
<CAPTION>
Rights TeleCorp Tritel Holding Company
------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Number and Election of Nine member board of Thirteen member board of Fourteen member board of
Directors directors divided into directors divided into directors divided into
three classes. Each three classes. Each three classes. Each
class serves a staggered class serves a staggered class serves a staggered
three-year term where three-year term where three-year term where
one class of the board one class of directors one-third of the board
of directors is elected is elected each year. of directors is elected
each year. each year.
Holders of series A and
B preferred stock may
each nominate one
director under specified
circumstances.
Holders of voting
preference common stock
have the exclusive
right, voting together
as a single class, to
elect two directors,
with each of these
directors entitled to
1/2 of a vote.
- --------------------------------------------------------------------------------------------------
Actions by Written Action of stockholders Not permitted. Same provisions as
Consent may be taken without a TeleCorp.
meeting, without prior
notice and without a
vote of stockholders, if
holders, of outstanding
stock having not less
than the minimum number
of votes necessary to
take such action at a
meeting at which all
shares entitled to vote
thereon were present and
voted, shall consent in
writing to such action.
- --------------------------------------------------------------------------------------------------
Notice of Stockholder Stockholders wishing to Stockholders wishing to Same provisions as
Action bring any business bring any business TeleCorp.
before an annual meeting before an annual meeting
of stockholders most of stockholders must
deliver written notice deliver written notice
to TeleCorp not less to Tritel not less than
than 90 days prior to 90 days nor more than
the date of the annual 120 days prior to the
meeting of stockholders. first anniversary of the
If, however, the date of preceding year's annual
the meeting is scheduled meeting. If, however,
to occur more than 30 the date of the meeting
days before or more than is scheduled to occur
90 days after the more than 30 days before
anniversary of the prior or more than 90 days
year's annual meeting, after the anniversary of
notice must be delivered the prior year's annual
not later than the close meeting, notice must be
of business on the tenth delivered not later than
day following the day on the close of business on
which public the tenth day following
announcement of the date the day on which public
of the annual meeting is announcement of the date
made. of the annual meeting is
made.
- --------------------------------------------------------------------------------------------------
Limitation of Personal Personal liability of Same provisions as Same provisions as
Liability of Directors directors and executive TeleCorp except that in TeleCorp.
officers for monetary addition, certain
damages for breach of outside directors may be
fiduciary duty as a covered by liability
director or executive insurance policies
officer, is eliminated provided by their
by provisions of the employers.
amended and restated
certificate of
incorporation except:
. for any breach of the
director's or
executive officer's
duty of loyalty to
TeleCorp or its
stockholders;
. for acts or omissions
not in good faith or
that involve
intentional misconduct
or a knowing violation
of law;
</TABLE>
229
<PAGE>
<TABLE>
<CAPTION>
Rights TeleCorp Tritel Holding Company
------ ------------------- ------------------- -------------------
<S> <C> <C> <C>
</TABLE>
. for unlawful
dividends and
stock purchases
under the Delaware
General
Corporation Law;
or
. for any
transaction from
which the director
derived an
improper personal
benefit.
- --------------------------------------------------------------------------------
Indemnification
of
Directors
and
Officers
Bylaws provide that: Same provisions as Same provisions as
TeleCorp except that TeleCorp.
. TeleCorp must Tritel has not
indemnify its entered into
directors and additional indemnity
officers to the agreements with each
fullest extent of its directors. In
permitted by addition, officers
Delaware law, and certain outside
subject to very directors may be
limited covered by liability
exceptions; insurance policies
provided by their
. TeleCorp may employers and
indemnify its indemnification
other employees arrangements under
and agents to the the organizational
same extent that documents of their
it indemnifies its employers.
officers and
directors, unless
otherwise required
by law, its
amended and
restated
certificate of
incorporation,
TeleCorp's bylaws
or agreements; and
. TeleCorp must
advance expenses,
as incurred, to
its directors and
executive officers
in connection with
any legal
proceeding to the
fullest extent
permitted by
Delaware law,
subject to limited
exceptions.
TeleCorp entered
into indemnity
agreements with each
of its directors and
executive officers
to give them
additional
contractual
assurances regarding
the scope of the
indemnification
described above and
to provide
additional
procedural
protections. In
addition, TeleCorp
obtained directors'
and officers'
insurance providing
indemnification for
its directors,
officers and key
employees for
various liabilities.
- --------------------------------------------------------------------------------
State TeleCorp is subject Same provisions as Same provisions as
Anti- to the provisions of TeleCorp. TeleCorp except that
Takeover Section 203 of the Holding Company will
Statutes Delaware General elect not to have
Corporation Law, Section 203 of the
which generally GCL govern the
prohibits a issuance of capital
publicly-held stock to AT&T
Delaware corporation Wireless or its
from engaging in a Affiliates, Gerald
"business T. Vento or Thomas
combination" with an H. Sullivan.
"interested
stockholder" for a
period of three
years after the date
of the transaction
in which the person
became an interested
stockholder, unless
the interested
stockholder attained
that status with the
approval of the
board of directors
or unless the
business combination
is approved in a
prescribed manner.
230
<PAGE>
<TABLE>
<CAPTION>
Rights TeleCorp Tritel Holding Company
- ------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
A "business combination"
includes mergers, asset
sales and other
transactions resulting
in a financial benefit
to the interested
stockholder.
Generally, an
"interested stockholder"
is a person who,
together with affiliates
and associates, owns, or
within three years did
own, 15% or more of a
corporation's voting
stock.
This statute could
prohibit or delay the
accomplishment of
mergers or other
takeovers or changes in
control with respect to
TeleCorp and,
accordingly, may
discourage attempts to
acquire TeleCorp.
</TABLE>
231
<PAGE>
MANAGEMENT OF HOLDING COMPANY AFTER THE MERGER
Board of Directors of Holding Company
Members of Holding Company Board of Directors. Upon completion of the
merger, pursuant to the terms of the stockholders agreement the board of
directors of Holding Company will be comprised of fourteen individuals,
initially designated as follows:
. Gerald T. Vento, as long as he is an officer of Holding Company and the
management agreement is in full force and effect;
. Thomas H. Sullivan, as long as he is an officer of Holding Company and
the management agreement is in full force and effect;
. two (2) individuals selected by holders of a majority of Holding Company
class A voting common stock owned by TeleCorp initial investors other
than AT&T Wireless;
. two (2) individuals selected by holders a majority of Holding Company
class A voting common stock owned by Tritel initial investors other than
AT&T Wireless;
. two (2) individuals selected by AT&T Wireless in its capacity as a
Holding Company series A preferred stockholder and Holding Company
series B preferred stockholder; and
. six (6) individuals designated by the Holding Company voting preference
stockholders, of which:
. one (1) individual is reasonably acceptable to AT&T Wireless;
. two (2) individuals, having one-half vote each, are reasonably
acceptable to William M. Mounger, II and E.B. Martin, Jr. Mr.
Mounger and Mr. Martin, as long as each of them is an officer of
Holding Company or is employed by Holding Company under their
respective employment agreements, will be the designated directors;
and
. three (3) individuals are reasonably acceptable to holders of a
majority of Holding Company class A voting common stock owned by
AT&T Wireless and the initial investors other than AT&T Wireless.
The stockholders agreement provides certain restrictions on the designations
by the holders of Holding Company class A voting common stock owned by AT&T
Wireless and the initial investors other than AT&T Wireless and the terms of
the individual directors. For a more detailed description of these
restrictions, see the section entitled "The Merger--Stockholders' Agreements"
in this joint proxy statement-prospectus.
The board of directors of Holding Company, except for those directors
designated by the holders of Holding Company voting preference common stock,
will be divided into three classes, as nearly equal in number as possible, by
the affirmative vote (which vote may be taken prior to the closing of the
merger) of a majority of the directors then holding office. The board of
directors will be staggered with the first class of directors having a term
expiring at the first annual meeting of stockholders, the second class of
directors having a term expiring at the second annual meeting of stockholders,
and the third class of directors having a term expiring at the third annual
meeting of stockholders. Following the third annual meeting, the successors
directors of each class whose term is expiring will be elected by a plurality
vote and will serve three year terms. The voting preference directors shall be
elected to the board of directors for a one year term expiring at each annual
meeting.
The affirmative vote of a majority of the members of the board of directors
of Holding Company will be required to change the size of the Holding Company
board of directors.
To date, TeleCorp and Tritel have designated the following individuals to be
directors of Holding Company upon completion of the merger:
232
<PAGE>
<TABLE>
<CAPTION>
Name Age Term Expires
---- --- ------------
<S> <C> <C>
Gerald T. Vento............................................ 53 2001
Thomas H. Sullivan......................................... 37 2001
William M. Mounger, II*.................................... 43 2001
E.B. Martin, Jr.*.......................................... 43 2001
Alex P. Coleman............................................ 32 2002
Michael R. Hannon.......................................... 39 2002
Michael Schwartz........................................... 35 2002
Timothy L. McLaughlin...................................... 43 2002
Scott I. Anderson.......................................... 41 2002
James M. Hoak.............................................. 55 2003
David A. Jones, Jr......................................... 41 2003
Kevin J. Shepherd.......................................... 43 2003
William W. Hague........................................... 44 2003
Rohit M. Desai............................................. 61 2003
</TABLE>
- --------
* Mr. Mounger and Mr. Martin hold two seats, but are entitled to one vote.
Gerald T. Vento. Mr. Vento is the co-founder of TeleCorp and its predecessor
company, TeleCorp Holding Corp., Inc., and has been TeleCorp's Chief Executive
Officer and a director since its inception in July 1997. He has been Chairman
of TeleCorp's board of directors since June 1999. From December 1993 to March
1995, Mr. Vento was Vice Chairman and Chief Executive Officer of Sprint
Spectrum/American PCS, L.P. From April 1995 to March 1998, Mr. Vento was
Chairman of Entel Technologies, Inc., a wireless site acquisition and
construction management company. From April 1996 to October 1996, Mr. Vento
also served as the Chief Executive Officer of National Fiber Networks, Inc. Mr.
Vento also served as managing partner in a joint venture with the Washington
Post Company to build and operate that company's systems in the United Kingdom
prior to its sale in 1993 to TCI/US West Communications. Mr. Vento has spent
over twenty years in cable, telephone and wireless businesses. Mr. Vento was
the founder and Managing General Partner of several cable television companies,
which he developed from inception throughout the United States and Puerto Rico.
Thomas H. Sullivan. Mr. Sullivan is the co-founder of TeleCorp and its
predecessor company, TeleCorp Holding Corp., Inc., and has been TeleCorp's
Executive Vice President and one of TeleCorp's directors since its inception in
July 1997, and Chief Financial Officer since March 1999. Mr. Sullivan served as
President of TeleCorp Holding Corp., Inc. from 1996 to 1998 and has served as a
senior executive and founder of several wireless and wireline companies for the
past six years. From 1992 to 1999, Mr. Sullivan was a partner of, and counsel
to, McDermott, Will & Emery, where he served as co-head of its
telecommunications practice and co-chairman of its Boston corporate department.
William M. Mounger, II. Mr. Mounger has served as Chief Executive Officer of
Tritel and Mercury Communications since 1998 and 1990, respectively. In
addition, Mr. Mounger served as Tritel's President until January 1999. Mr.
Mounger was a member of the Cellular One Advisory Council from 1992-1994 and
served as its Chairman from 1993-94. In recent years, Mr. Mounger has served as
President of Delta Cellular Communications, as President of Alaska-3 Cellular,
as Vice President of Mobile Talk, Inc., as an SMR operator, as President of
Southeastern Cellular Communications, and as President or executive officer in
several other cellular companies. In 1996, Mr. Mounger was one of three
original founders of Unity Communications, a reseller of long distance and
wireless services. From 1983 to 1988, he was a partner in Sunbelt Cellular
Partners, which merged with other entities to form Vanguard Cellular in 1987.
E.B. Martin, Jr. Mr. Martin has served as Tritel's Executive Vice President,
Treasurer and Chief Financial Officer since 1998. Mr. Martin has also served as
the Vice President and Chief Financial Officer of Mercury Communications from
1990 to 1993 and since 1997. Mr. Martin was a member of the law firm of Young,
Williams, Henderson & Fuselier, P.A. from 1993 to 1996. Mr. Martin also serves
as Secretary/Treasurer for Mercury Communications and Mercury Wireless
Management.
233
<PAGE>
Alexander P. Coleman. Since 1996, Mr. Coleman has served as a Vice President
and Investment Partner of Dresdner Kleinwort Benson Private Equity LLC's
leveraged buyout group. Prior to joining Dresdner Kleinwort Benson, Mr. Coleman
served in several corporate finance positions for Citicorp/Citibank N.A. from
1989 through 1995, most recently as Vice President of Citicorp Venture Capital.
Mr. Coleman has served as a Director of Tritel since January 1999.
Michael R. Hannon. Mr. Hannon has been a General Partner of Chase Capital
Partners, a general partnership with over $15 billion under management, since
January 1988. Chase Capital Partners invests in a wide variety of international
equity opportunities, including management buyouts, growth equity and venture
capital situations. Chase Capital Partners' chief limited partner is The Chase
Manhattan Corporation, one of the largest bank holding companies in the United
States. Mr. Hannon also serves as the global practice head of the media and
telecommunications industry at Chase Capital Partners. From 1998 until November
1999, Mr. Hannon served as TeleCorp's Chairman and he is currently on the board
of directors of Entercom Communications and several privately held media and
telecommunications firms. He has served as one of TeleCorp's directors since
July 1998.
Michael Schwartz. Mr. Schwartz is a co-founder and Executive Vice President
of habit.com, an e-commerce entertainment community. Prior to joining habit.com
in March 2000, he was a Vice President in AT&T Wireless's Acquisitions and
Development group. Mr. Schwartz continues to provide services to AT&T on a
part-time basis. From September 1996 through September 1998, Mr. Schwartz was
Vice President and Chief Counsel of AT&T's Messaging Division. Prior to joining
AT&T, Mr. Schwartz was in private law practice in the Seattle firm of Riddell
Williams P.S. He has served as one of TeleCorp's directors since November 1998.
Timothy L. McLaughlin. Mr. McLaughlin is the AT&T Wireless Services Vice
President--Controller. Mr. McLaughlin joined AT&T Wireless Services as the Vice
President--Controller in May 1996. Prior to joining AT&T Wireless Services, Mr.
McLaughlin was Director of Corporate Planning for Symbios Logic from 1995 to
1996 and CFO of NCR's Microelectronics Division from 1991 to 1995. His previous
experience also includes various assignments within NCR Corporation and Union
Carbide Corporation.
Scott Anderson. Since 1997, Mr. Anderson has served as Principal in Cedar
Grove Partners, LLC, an investment and consulting/advisory partnership, and
since 1998 as Principal in Cedar Grove Investments, LLC, a private seed capital
investment fund. He was a board member of Tegic, a wireless technology
licensing company until its merger with America Online, Inc. in 1999 and is a
board member of Triton, Wireless Facilities, Inc., Telephia, Inc., ABC
Wireless, LLC and Xypoint, Inc. He was employed by McCaw Cellular
Communications and AT&T Wireless Services from 1986 until 1997, where he last
served as Senior Vice President of the Acquisitions and Development group. Mr.
Anderson has served as one of TeleCorp's directors since July 1998 and as one
of Tritel's directors since January 1999.
James M. Hoak, Jr. Mr. Hoak has served as Chairman and a Principal of Hoak
Capital Corporation, a private equity investment firm, since September 1991. He
has also served as Chairman of HBW Holdings, an investment bank, from July 1996
to November 1999, and continues to serve as a director of this firm. He served
as Chairman of Heritage Media Corporation, a broadcasting and marketing
services firm, from its inception in August 1987 to its sale in August 1997.
From February 1991 to January 1995, he served as Chairman and Chief Executive
Officer of Crown Media, Inc., a cable television company. From 1971 to 1987, he
served as President and Chief Executive Officer of Heritage Communications,
Inc., a diversified communications company, and as its Chairman and Chief
Executive Officer from August 1987 to December 1990. He is also a director of
PanAmSat Corporation, Pier 1 Imports and Texas Industries. He has served as one
of TeleCorp's directors since July 1998.
234
<PAGE>
Kevin J. Shepherd. Mr. Shepherd has served as President of Triune, Inc., a
financial advisory firm servicing high net worth individuals since its
inception in 1989. Mr. Shepherd has served as a Director of Tritel since
January 1999.
David A. Jones, Jr. Mr. Jones is a founder and the Chairman and Managing
Director of Chrysalis Ventures, LLC, a venture capital firm. Prior to founding
Chrysalis Ventures, LLC in 1994, Mr. Jones was an attorney in private
practice. Mr. Jones is Vice-Chairman of the Board of Directors of Humana Inc.,
a director of Mid-America Bancorp and Chairman of the Board of Directors of
High Speed Access Corp. Mr. Jones has served as a Director of Tritel since
July 1999.
William W. Hague. Mr. Hague was appointed as a Director of TeleCorp on
April 28, 2000 by AT&T Wireless and previously served as a member of the Board
of Directors of TeleCorp's predecessor company from April 1998 through July
1998 and of TeleCorp from July 1998 through March 1999. Mr. Hague serves as
the Senior Vice President, Corporate Development, Mergers and Acquisitions at
AT&T Wireless Services where he has been employed since 1995. Prior to this
position, and beginning in 1992, he acted as Director of Acquisitions and
Legal Affairs at Pacific Northwest Cellular/Western Wireless Corporation. From
1986 through 1992, Mr. Hague practiced law at the Kirkland, Washington office
of Stokes Lawrence, LLC where he was a partner. Mr. Hague is also a member of
the Board of Directors of Triton PCS, Inc., Dobson Cellular Communications,
Inc., and is a member of the management committee of Far Eastone.
Rohit M. Desai. Mr. Desai has been the Chairman, President and Chief
Investment Officer of Desai Capital Management Incorporated, an equity
investment firm with approximately $2 billion under management, since 1984.
Desai Capital Management is the investment advisor to Equity-Linked Investors
II, Private Equity Investors III, L.P., and Private Equity Investors IV, L.P.,
of which Mr. Desai is the managing general partner. Mr. Desai currently sits
on the board of The Rouse Company, Sunglass Hut International, Finlay Fine
Jewelry Holdings and Independence Community Bankcorp. He has served as one of
TeleCorp's directors since July 1998.
Committees of Holding Company Board of Directors
The Holding Company bylaws provide that the Holding Company board of
directors may establish committees to exercise powers delegated by the Holding
Company board of directors. Under that authority the Holding Company board of
directors has established an audit committee and a compensation committee.
Compensation of Directors
The amount, if any, which each director shall be entitled to receive as
compensation for his services as such shall be fixed from time to time by
resolution of Holding Company board of directors.
Executive Officers of Holding Company
The principal executive officers of Holding Company upon completion of the
merger will be as follows:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Gerald T. Vento.................... 53 Chief Executive Officer, Director
Thomas H. Sullivan................. 37 Chief Financial Officer, Director
William M. Mounger, II............. 43 Chairman of the Board of Directors
E.B. Martin, Jr.................... 43 Vice-Chairman of the Board of Directors
</TABLE>
Compensation of Executive Officers
Holding Company has not yet paid any compensation to its chief executive
officer, chief financial officer, chairman of the board, vice-chairman of the
board, or any other person expected to become an executive officer of Holding
Company. The form and amount of the compensation to be paid to each of Holding
Company's executive officers in any future period will be determined by the
Holding Company board of directors.
235
<PAGE>
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
The Securities and Exchange Commission encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. This joint proxy
statement-prospectus contains such "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are included in this joint proxy statement-prospectus referring to
TeleCorp, Tritel and Holding Company, including under the following captions:
. "Risk Factors"; and
. "The Merger."
These statements may include statements regarding the period following
completion of the merger.
Words such as "anticipate," "estimate," "expects," "projects," "intends,"
"plans," "believes" and words and terms of similar substance used in connection
with any discussion of future operating or financial performance, or the merger
of TeleCorp and Tritel, identify forward-looking statements. All forward-
looking statements are management's present expectations of future events and
are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. In addition to the risks related to the businesses of TeleCorp and
Tritel, the factors relating to the merger discussed under Risk Factors, among
others, could cause actual results to differ materially from those described in
the forward-looking statements. These factors include: relative value of
Holding Company stock and TeleCorp's and Tritel's stocks, the market's
difficulty in valuing its new business model, the failure to realize the
anticipated benefits of the merger and adverse regulatory conditions.
Stockholders are cautioned not to place undue reliance on the forward-looking
statements, which speak only of the date of this joint proxy statement-
prospectus. None of TeleCorp's, Tritel or Holding Company is under any
obligation, and each expressly disclaims any obligation, to update or alter any
forward-looking statements, whether as a result of new information, future
events or otherwise.
All subsequent forward-looking statements attributable to TeleCorp, Tritel
or Holding Company or any person acting on their behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this
section.
WHERE YOU CAN FIND MORE INFORMATION
You should rely only on the information contained in this document or that
which TeleCorp and Tritel have referred you to. TeleCorp and Tritel have not
authorized anyone to provide you with any additional information.
The documents referred to in this joint proxy statement-prospectus are
available from TeleCorp and Tritel upon request. TeleCorp and Tritel will
provide a copy of any and all of the information that is referred to in this
joint proxy statement-prospectus to any person, without charge, upon written or
oral request. If exhibits to the documents referred to in this joint proxy
statement-prospectus are not themselves specifically referred to in this joint
proxy statement-prospectus, then the exhibits will not be provided. Any request
for documents should be made by , 2000 to ensure timely delivery of the
documents.
Requests for documents relating to TeleCorp should be directed to:
TeleCorp PCS, Inc., 1010 N. Glebe Road, Suite 800, Arlington, Virginia
22201. Attention Investor Relations, telephone (703) 236-1100. Requests for
documents relating to Tritel should be directed to:
Tritel, Inc., 111 E. Capitol Street, Suite 500, Jackson, Mississippi 39201.
Attention: Investor Relations, telephone (601) 914-8010.
236
<PAGE>
TeleCorp and Tritel file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of those reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Securities and Exchange Commission at:
. Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
. Seven World Trade Center, 13th Floor, New York, New York 10048; or
. Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms.
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Room of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 or by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains a website that contains reports, proxy statements and other
information regarding each of us. The address of the Securities and Exchange
Commission website is http://www.sec.gov.
Holding Company has filed a registration statement on Form S-4 under the
Securities Act of 1933 with the Securities and Exchange Commission with respect
to Holding Company's stock to be issued in the merger. This joint proxy
statement-prospectus constitutes the prospectus of Holding Company filed as
part of the registration statement. This joint proxy statement-prospectus does
not contain all of the information set forth in the registration statement
because certain parts of the registration statement are omitted in accordance
with the rules and regulations of the Securities and Exchange Commission. The
registration statement and its exhibits are available for inspection and
copying as set forth above.
If you have any questions about the merger, please call either TeleCorp
Investor Relations at (703) 236-1100 or Tritel Investor Relations at (601) 914-
8010.
This joint proxy statement-prospectus does not constitute an offer to sell,
or a solicitation of an offer to purchase, the securities offered by this joint
proxy statement-prospectus, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such jurisdiction. Neither
the delivery of this joint proxy statement-prospectus nor any distribution of
securities pursuant to this joint proxy statement-prospectus shall, under any
circumstances, create any implication that there has been no change in the
information set forth or incorporated into this joint proxy statement-
prospectus by reference or in TeleCorp's or Tritel's affairs since the date of
the joint proxy statement-prospectus. The information contained in this joint
proxy statement-prospectus with respect to TeleCorp was provided by TeleCorp
and the information contained in this joint proxy statement-prospectus with
respect to Tritel was provided by Tritel.
LEGAL MATTERS
Certain legal matters in connection with this merger, including federal
income tax consequences, have been passed upon for TeleCorp by Cadwalader,
Wickersham & Taft, New York, New York and Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., Boston, Massachusetts. Certain legal matters in connection
with this merger have been passed upon for Tritel by Brown & Wood LLP, New
York, New York.
OTHER MATTERS
Neither TeleCorp nor Tritel presently intends to bring any matters other
than those described in this document before its special meeting. Further,
neither TeleCorp nor Tritel has any knowledge of any other matters that may be
introduced by other persons. If any other matters do properly come before
either company's special meeting, the person named in the enclosed proxy forms
of TeleCorp or Tritel, as applicable, will vote the proxies in keeping with
their judgment on such matters.
237
<PAGE>
EXPERTS
The consolidated financial statements of TeleCorp PCS, Inc. and Subsidiaries
and Predecessor Company as of December 31, 1998 and 1999, and for each of the
three years in the period ended December 31, 1999 and the consolidated balance
sheet of TeleCorp-Tritel Holding Company as of April 28, 2000 included in this
prospectus, have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
the firm as experts in accounting and auditing.
The consolidated balance sheets of Tritel, Inc. and subsidiaries as of
December 31, 1998 and 1999, and the consolidated statements of operations,
members' and stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1999, included in this prospectus have
been audited by KPMG LLP, independent certified public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
238
<PAGE>
FINANCIAL STATEMENTS
INDEX
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit)...... F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-8
</TABLE>
TRITEL, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report............................................... F-44
Consolidated Balance Sheets................................................ F-45
Consolidated Statements of Operations...................................... F-46
Consolidated Statements of Members' and Stockholders' Equity............... F-47
Consolidated Statements of Cash Flows...................................... F-48
Notes to Consolidated Financial Statements................................. F-49
</TABLE>
TELECORP-TRITEL HOLDING COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-76
Consolidated Balance Sheet................................................. F-77
Notes to Consolidated Balance Sheet........................................ F-78
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
TeleCorp PCS, Inc. and Subsidiaries and Predecessor Company:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in stockholders' equity
(deficit) and cash flows present fairly, in all material respects, the
financial position of TeleCorp PCS, Inc. and Subsidiaries and Predecessor
Company (the Company) at December 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, 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 the opinion expressed above.
PricewaterhouseCoopers LLP
McLean, Virginia
March 10, 2000, except for certain information
in Note 20 for which the date is April 27, 2000.
F-2
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $111,733 $ 182,330
Accounts receivable, net............................... -- 23,581
Inventory.............................................. 778 15,802
Prepaid expenses....................................... 2,186 3,031
Other current assets................................... 1,218 797
-------- ---------
Total current assets................................. 115,915 225,541
Property and equipment, net............................ 197,469 400,450
PCS licenses and microwave relocation costs, net....... 118,107 267,682
Intangible assets -- AT&T agreements, net.............. 26,285 37,908
Deferred financing costs, net.......................... 8,585 19,577
Other assets........................................... 283 1,044
-------- ---------
Total assets......................................... $466,644 $ 952,202
======== =========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 14,592 $ 38,903
Accrued expenses....................................... 94,872 51,977
Microwave relocation obligation, current portion....... 6,636 36,122
Long-term debt, current portion........................ -- 1,361
Accrued interest....................................... 4,491 1,387
Deferred revenue....................................... -- 1,709
-------- ---------
Total current liabilities............................ 120,591 131,459
Long-term debt........................................... 243,385 639,210
Microwave relocation obligation.......................... 2,481 2,365
Accrued expenses and other............................... 196 6,541
-------- ---------
Total liabilities.................................... 366,653 779,575
-------- ---------
Mandatorily redeemable preferred stock, issued 255,999
and 382,539 shares, respectively; and outstanding,
255,215 and 382,539 shares, respectively, (liquidation
preference $389,966 as of December 31, 1999)............ 240,409 360,182
Deferred compensation.................................... (4) --
Treasury stock, 784 shares and none, respectively, at
cost.................................................... -- --
Preferred stock subscriptions receivable................. (75,914) (97,001)
-------- ---------
Total mandatorily redeemable preferred stock, net.... 164,491 263,181
-------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Series F preferred stock, par value $.01 per share,
10,308,676 and 14,912,778 shares issued and
outstanding, respectively (liquidation preference $1
as of December 31, 1999).............................. 103 149
Common stock, par value $.01 per share issued
49,357,658 and 85,592,221 shares, respectively; and
outstanding 48,805,184 and 85,592,221 shares,
respectively.......................................... 493 856
Additional paid-in capital............................. -- 267,442
Deferred compensation.................................. (7) (42,811)
Common stock subscriptions receivable.................. (86) (191)
Treasury stock, 552,474 shares and none, respectively,
at cost............................................... -- --
Accumulated deficit.................................... (65,003) (315,999)
-------- ---------
Total stockholders' equity (deficit)................. (64,500) (90,554)
-------- ---------
Total liabilities, mandatorily redeemable preferred
stock and stockholders' equity (deficit)............ $466,644 $ 952,202
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
<TABLE>
<CAPTION>
For the year ended December
31,
--------------------------------
1997 1998 1999
-------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Service.................................... $ -- $ -- $ 41,319
Roaming.................................... -- 29 29,010
Equipment.................................. -- -- 17,353
-------- ---------- ----------
Total revenue............................ -- 29 87,682
-------- ---------- ----------
Operating expenses:
Cost of revenue............................ -- -- 39,259
Operations and development (including non
cash stock compensation of $1,472 in
1999)..................................... -- 9,772 35,979
Selling and marketing (including non cash
stock compensation of $937 in 1999)....... 304 6,325 71,180
General and administrative (including non
cash stock compensation of $29,408 in
1999)..................................... 2,637 26,239 92,585
Depreciation and amortization.............. 11 1,584 55,110
-------- ---------- ----------
Total operating expenses................. 2,952 43,920 294,113
-------- ---------- ----------
Operating loss........................... (2,952) (43,891) (206,431)
Other (income) expense:
Interest expense........................... 396 11,934 51,313
Interest income............................ (13) (4,697) (6,464)
Other expense (income)..................... -- 27 (284)
-------- ---------- ----------
Net loss................................. (3,335) (51,155) (250,996)
Accretion of mandatorily redeemable preferred
stock....................................... (726) (8,567) (24,124)
-------- ---------- ----------
Net loss attributable to common equity... $ (4,061) $ (59,722) $ (275,120)
======== ========== ==========
Net loss attributable to common equity per
share--basic and diluted.................... $(111.74) $ (2.19) $ (3.58)
======== ========== ==========
Weighted average common equity shares
outstanding--basic and diluted.............. 36,340 27,233,786 76,895,391
======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
($ in thousands)
<TABLE>
<CAPTION>
Series F Common
Preferred Stock Common Stock Additional stock Treasury stock
----------------- ------------------ Paid-in Deferred Subscriptions ---------------- Accumulated
Shares Amount Shares Amount capital Compensation Receivable Shares Amount Deficit
---------- ------ ---------- ------ ---------- ------------ ------------- -------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1996........... -- $-- 43,124 $ 2 $ -- $ -- $ -- -- $-- $ (814)
Issuance of
common stock
for cash....... -- -- 6,875 -- -- -- -- -- -- --
Accretion of
mandatorily
redeemable
preferred
stock.......... -- -- -- -- -- -- -- -- -- (726)
Noncash
redemption of
equity
interests...... -- -- (30,664) (1) -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- (3,335)
---------- ---- ---------- ---- -------- -------- ----- -------- ---- ---------
Balance,
December 31,
1997........... -- -- 19,335 1 -- -- -- -- -- (4,875)
Noncash
redemption of
equity
interests...... -- -- (19,335) (1) -- -- -- -- -- --
Issuance of
preferred and
common stock
for cash,
licenses and
AT&T
agreements..... 10,308,676 103 46,262,185 462 -- -- (86) -- -- (383)
Accretion of
mandatorily
redeemable
preferred
stock.......... -- -- -- -- -- -- -- -- -- (8,567)
Noncash issuance
of restricted
stock to
employees...... -- -- 3,095,473 31 -- (10) -- -- -- (21)
Repurchase of
common stock
for cash....... -- -- -- -- -- 2 -- (552,474) -- (2)
Compensation
expense related
to restricted
stock awards... -- -- -- -- -- 1 -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- (51,155)
---------- ---- ---------- ---- -------- -------- ----- -------- ---- ---------
Balance,
December 31,
1998........... 10,308,676 103 49,357,658 493 -- (7) (86) (552,474) -- (65,003)
Issuance of
preferred stock
and common
stock for cash
and licenses... 4,604,102 46 23,231,331 233 21,550 -- (105) -- -- --
Issuance of
common stock in
initial public
offering....... -- -- 10,580,000 106 197,211 -- -- -- -- --
Costs associated
with initial
public
offering....... -- -- -- -- (1,801) -- -- -- -- --
Deferred
compensation
expense related
to stock option
grants and
restricted
stock awards... -- -- -- -- 73,049 (73,049) -- -- -- --
Compensation
expense related
to stock option
grants and
restricted
stock awards... -- -- -- -- -- 31,817 -- -- -- --
Non-cash
issuance of
restricted
stock.......... -- -- 2,423,232 24 1,558 (1,573) -- 959,259 -- --
Repurchase of
common stock
for cash....... (1) 1 (406,785) --
Accretion of
mandatorily
redeemable
preferred
stock.......... -- -- -- -- (24,124) -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- (250,996)
---------- ---- ---------- ---- -------- -------- ----- -------- ---- ---------
Balance,
December 31,
1999........... 14,912,778 $149 85,592,221 $856 $267,442 $(42,811) $(191) -- $-- $(315,999)
========== ==== ========== ==== ======== ======== ===== ======== ==== =========
<CAPTION>
Total
----------
<S> <C>
Balance,
December 31,
1996........... $ (812)
Issuance of
common stock
for cash....... --
Accretion of
mandatorily
redeemable
preferred
stock.......... (726)
Noncash
redemption of
equity
interests...... (1)
Net loss........ (3,335)
----------
Balance,
December 31,
1997........... (4,874)
Noncash
redemption of
equity
interests...... (1)
Issuance of
preferred and
common stock
for cash,
licenses and
AT&T
agreements..... 96
Accretion of
mandatorily
redeemable
preferred
stock.......... (8,567)
Noncash issuance
of restricted
stock to
employees...... --
Repurchase of
common stock
for cash....... --
Compensation
expense related
to restricted
stock awards... 1
Net loss........ (51,155)
----------
Balance,
December 31,
1998........... (64,500)
Issuance of
preferred stock
and common
stock for cash
and licenses... 21,724
Issuance of
common stock in
initial public
offering....... 197,317
Costs associated
with initial
public
offering....... (1,801)
Deferred
compensation
expense related
to stock option
grants and
restricted
stock awards... --
Compensation
expense related
to stock option
grants and
restricted
stock awards... 31,817
Non-cash
issuance of
restricted
stock.......... 9
Repurchase of
common stock
for cash....... --
Accretion of
mandatorily
redeemable
preferred
stock.......... (24,124)
Net loss........ (250,996)
----------
Balance,
December 31,
1999........... $ (90,554)
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
For the year ended December
31,
-----------------------------
1997 1998 1999
------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................... $(3,335) $ (51,155) $(250,996)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................ 11 1,584 55,110
Noncash compensation expense related to stock
option grants and restricted stock awards... -- 2 31,817
Noncash interest expense..................... 134 1,182 32,718
Bad debt expense............................. -- -- 2,962
Noncash general and administrative expense
charge by affiliates........................ -- 197 --
Changes in cash flow from operations resulting
from changes in assets and liabilities:
Accounts receivable.......................... -- -- (23,581)
Inventory.................................... -- (778) (15,024)
Prepaid expenses............................. -- (2,186) (845)
Other current assets......................... (52) (1,145) 421
Other assets................................. (27) (256) (761)
Accounts payable............................. 619 11,586 24,808
Accrued expenses............................. -- 9,145 17,831
Accrued interest............................. 258 2,046 (3,104)
Deferred revenue............................. -- -- 1,709
------- --------- ---------
Net cash used in operating activities....... (2,392) (29,778) (126,935)
------- --------- ---------
Cash flows from investing activities:
Expenditures for network under development,
wireless network and property and equipment.. (1,134) (107,542) (298,506)
Capitalized interest on network under
development and wireless network............. -- (227) (5,317)
Expenditures for microwave relocation......... -- (3,340) (5,654)
Purchase of PCS licenses...................... -- (21,000) (114,238)
Partial refund of deposit on PCS licenses..... 1,561 -- --
Purchase of intangibles--AT&T agreements...... -- -- (17,310)
------- --------- ---------
Net cash provided by (used in) investing ac-
tivities................................... 427 (132,109) (441,025)
------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of mandatorily redeemable
preferred stock.............................. 1,500 26,661 70,323
Receipt of preferred stock subscription
receivable................................... -- -- 9,414
Direct issuance costs from sale of mandatorily
redeemable preferred stock................... -- (1,027) (2,500)
Proceeds from sale of common stock and series
F preferred stock............................ -- 38 21,724
Proceeds from long-term debt.................. 2,809 257,492 407,635
Proceeds associated with initial public
offering..................................... -- -- 197,317
Direct issuance cost from the initial public
offering..................................... -- -- (1,801)
Payments on long term debt.................... -- (2,073) (50,451)
Payments of deferred financing costs.......... -- (9,110) (12,742)
Net increase in amounts due to affiliates..... 171 (928) (362)
------- --------- ---------
Net cash provided by financing activities..... 4,480 271,053 638,557
------- --------- ---------
Net increase in cash and cash equivalents..... 2,515 109,166 70,597
Cash and cash equivalents at the beginning of
period......................................... 52 2,567 111,733
------- --------- ---------
Cash and cash equivalents at the end of period.. $ 2,567 $ 111,733 $ 182,330
======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
($ in thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
--------------------------------
1997 1998 1999
--------------------- ----------
<S> <C> <C> <C>
Supplemental disclosure of cash flow
Information:
Cash paid for income taxes.................. $ -- $ -- $ --
Cash paid for interest...................... -- 9,786 24,342
Supplemental disclosure of non-cash investing
and financing activities:
Network under development and microwave
relocation costs included in accounts
payable and accrued expenses............... 2,485 98,092 32,424
Issuance of mandatorily redeemable preferred
stock and preferred stock in exchange for
PCS licenses and AT&T agreements........... -- 100,900 2,674
Issuance of mandatorily redeemable preferred
stock and common stock in exchange for
stock subscriptions receivable............. -- 76,000 27,191
U.S. Government financing of PCS licenses... 9,193 -- 11,551
Discount on U.S. Government financing....... 1,600 -- 1,631
Conversion of notes payable to stockholders
into preferred stock....................... 499 25,300 --
Accretion of preferred stock dividends...... 726 8,567 24,124
Redemption of equity interests.............. 6,370 -- --
Distribution of net assets to Affiliates.... 3,645 -- --
Notes payable to affiliates................. 2,725 -- --
Capitalized interest........................ $ 131 $ 2,055 $ 5,409
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)
1. Organization and Business
TeleCorp Holding Corp., Inc. (Holding) was incorporated in the State of
Delaware on July 29, 1996 (date of inception). Holding was formed to
participate in the Federal Communications Commission's (FCC) Auction of F-Block
Personal Communications Services (PCS) licenses (the Auction) in April 1997.
Holding successfully obtained licenses in the New Orleans, Memphis, Beaumont,
Little Rock, Houston, Tampa, Melbourne and Orlando Basic Trading Areas (BTAs).
Holding qualifies as a Designated Entity and Very Small Business under Part 24
of the rules of the Federal Communications Commission applicable to broadband
PCS.
In April 1997, Holding entered into an agreement to transfer the PCS
licenses for the Houston, Tampa, Melbourne and Orlando BTAs to four newly-
formed entities created by Holding's existing stockholder group: THC of
Houston, Inc.; THC of Tampa, Inc.; THC of Melbourne, Inc.; and THC of Orlando,
Inc. These licenses were transferred along with the related operating assets
and liabilities in exchange for investment units consisting of Class A, B and C
common stock and Series A preferred stock in August 1997.
TeleCorp PCS, Inc. (TeleCorp) was incorporated in the State of Delaware on
November 14, 1997 by the controlling stockholders of Holding. TeleCorp is the
exclusive provider of wireless mobility services using equal emphasis co-
branding with AT&T in its licensed regions in connection with a strategic
alliance with AT&T Wireless and its affiliates (collectively AT&T). Upon
finalization of the AT&T Transaction, Holding became a wholly-owned subsidiary
of TeleCorp (see Note 9). TeleCorp and Holding are hereafter referred to as the
Company.
TeleCorp PCS, Inc. is the largest AT&T Wireless affiliate in the United
States in terms of licensed population, with licenses covering markets where
approximately 16.7 million people reside. The Company provides wireless
personal communication services, or PCS, in selected markets in the south-
central and northeast United States and in Puerto Rico, encompassing eight of
the 100 largest metropolitan areas in the United States.
Under the terms of the AT&T strategic alliance, the Company is AT&T's
exclusive provider of wireless mobility services in the eight covered markets,
using equal emphasis co-branding with AT&T subject to AT&T's right to resell
services on the Company's network. The Company has the right to use the AT&T
brand name and logo together with the SunCom brand name and logo, giving equal
emphasis to each in its covered markets. The Company is AT&T's preferred
roaming partner for digital customers in the Company's markets. Additionally,
the Company's relationship with AT&T provides coast-to-coast coverage to
TeleCorp customers.
2. Summary of Significant Accounting Policies
Basis of presentation
Holding was formed to explore various business opportunities in the wireless
telecommunications industry. TeleCorp was formed to continue the activity of
Holding through its strategic alliance with AT&T. For purposes of the
accompanying financial statements, Holding has been treated as a "predecessor"
entity. Therefore, the financial statements for the year ended December 31,
1997 include the historical financial information of Holding, the predecessor
entity. The financial statements as of and for the year ended December 31, 1998
and for all periods thereafter, include the historical financial information of
Holding and TeleCorp. The Chief Executive Officer and President of Holding
maintain the positions of Chief Executive Officer and Executive Vice President
and Chief Financial Officer, respectively, of TeleCorp. In addition, these
officers own a majority of the voting stock of TeleCorp and, prior to the
finalization of the AT&T Transaction, owned a majority of the voting stock of
Holding. As a result of this relationship, certain financing relationships and
the similar nature of business activities, Holding and TeleCorp were considered
companies under common control.
F-8
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Risks and uncertainties
The Company expects to continue to incur significant operating losses and to
generate negative cash flow from operating activities for at least the next
several years while it constructs its network and develops its customer base.
The Company's ability to eliminate operating losses and to generate positive
cash flow from operations in the future will depend upon a variety of factors,
many of which it is unable to control. These factors include: (1) the cost of
constructing its network, (2) changes in technology, (3) changes in
governmental regulations, (4) the level of demand for wireless communications
services, (5) the product offerings, pricing strategies and other competitive
factors of the Company's competitors and (6) general economic conditions. If
the Company is unable to implement its business plan successfully, it may not
be able to eliminate operating losses, generate positive cash flow or achieve
or sustain profitability which would materially adversely affect its business,
operations and financial results as well as its ability to make payments on its
debt obligations.
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, which includes TeleCorp Communications,
Inc., TeleCorp LLC and Holding. All intercompany accounts and transactions have
been eliminated in consolidation.
Development Stage Company
Prior to January 1, 1999, the Company's activities principally were planning
and participation in the Auction, initiating research and development,
conducting market research, securing capital and developing its proposed
service and network. Since the Auction, the Company has been relying on the
borrowing of funds and the issuance of common and preferred stock rather than
recurring revenues, for its primary sources of cash flow. Accordingly, the
Company's financial statements for all periods prior to January 1, 1999 were
presented as a development stage enterprise, as prescribed by Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises." In the first quarter of 1999, the Company commenced
operations and began providing wireless mobility services for its customers. As
a result, the Company exited the development stage in the quarter ended March
31, 1999.
Fair Value of Financial Instruments
The Company believes that the carrying amount of its financial instruments
approximate fair value.
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 on the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash, cash equivalents and accounts
receivable. The Company sells products and services to various customers
throughout many regions in the United States and Puerto Rico. The Company
routinely assesses the strength of its customers and maintains allowances for
anticipated losses.
For the years ended December 31, 1997, 1998 and 1999, no one customer
accounted for 10% or more of total revenues or accounts receivable.
F-9
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Cash Equivalents
The Company considers all highly liquid instruments with a maturity from
purchase date of three months or less to be cash equivalents. Cash equivalents
consist of overnight sweep accounts and U.S. Treasury obligations.
Inventory
Inventory, consisting of handsets and accessories, is valued at the lower of
average cost or market and is recorded net of an allowance for obsolescence, if
required.
Property and Equipment and Network Under Development
Property and equipment are recorded at cost and depreciation is computed
using the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Computer equipment................ 3 to 5 years
Network under development and
wireless network................. 5 to 10 years upon commencement of service
Internal use software............. 3 years
Furniture, fixtures and office
equipment........................ 5 years
Leasehold improvements............ Lesser of useful life or lease term
</TABLE>
Expenditures for repairs and maintenance are charged to operations when
incurred. Gains and losses from disposals, if any, are included in the
statements of operations. Network under development includes all costs related
to engineering, cell site acquisition, site development, interest expense and
other development costs being incurred to ready the Company's wireless network
for use.
Internal and external costs incurred to develop the Company's billing,
financial systems and other internal applications during the application
development stage are capitalized as internal use software. All costs incurred
prior to the application development stage are expensed as incurred. Training
costs and all post implementation internal and external costs are expensed as
incurred.
PCS Licenses and Microwave Relocation Costs
PCS licenses include costs incurred, including capitalized interest related
to the U.S. Government financing, to acquire Federal Communications Commission
licenses in the 1850-1990 MHz radio frequency band. Interest capitalization on
the U.S. Government financing began when the activities necessary to get the
Company's network ready for its intended use were initiated and concluded when
the wireless networks were ready for intended use. The PCS licenses are issued
conditionally for ten years. Historically, the Federal Communications
Commission has granted license renewals providing the licensees have complied
with applicable rules, policies and the Communications Act of 1934, as amended.
The Company believes it has complied with and intends to continue to comply
with these rules and policies.
As a condition of each PCS license, the Federal Communications Commission
requires each license-holder to relocate existing microwave users (Incumbents)
within the awarded spectrum to microwave frequencies of equal capacity.
Microwave relocation costs include the actual and estimated costs incurred to
relocate the Incumbent's microwave links affecting the Company's licensed
frequencies.
The Company began amortizing the cost of the PCS licenses, microwave
relocation costs, and capitalized interest in March 1999, when PCS services
commenced in certain BTAs. Amortization is calculated using the straight-line
method over 40 years.
F-10
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Intangible assets--AT&T Agreements
The AT&T Agreements consist of the fair value of various agreements with
AT&T exchanged for mandatorily redeemable preferred stock and series F
preferred stock (see Notes 9 and 10). The AT&T Agreements are amortized on a
straight-line basis over the related contractual terms, which range from three
to ten years.
Long-Lived Assets
The Company periodically evaluates the recoverability of the carrying value
of property and equipment, network under development, intangible assets, PCS
licenses and microwave relocation costs. The Company considers historical
performance and anticipated future results in its evaluation of potential
impairment. Accordingly, when indicators of impairment are present, the Company
evaluates the carrying value of these assets in relation to the operating
performance of the business and future and undiscounted cash flows expected to
result from the use of these assets. Impairment losses are recognized when the
sum of the present value of expected future cash flows are less than the
assets' carrying value. No such impairment losses have been recognized to date.
Deferred Financing Costs
Deferred finance costs are capitalized and amortized as a component of
interest expense over the term of the related debt.
Revenue Recognition
The Company earns revenue by providing wireless mobility services to both
its subscribers and subscribers of other wireless carriers traveling in the
Company's service area, as well as sale of equipment and accessories.
Wireless mobility services revenue consists of monthly recurring and non-
recurring charges for local, long distance, roaming and airtime used in excess
of pre-subscribed usage. Generally, access fees, airtime roaming and long
distance charges are billed monthly and are recognized when service is
provided. Prepaid service revenue is collected in advance, recorded as deferred
revenue, and recognized as service is provided.
Roaming revenue consists of the airtime and long distance charged to the
subscribers of other wireless carriers for use of the Company's network while
traveling in the Company's service area and is recognized when the service is
provided.
Equipment revenue is recognized upon delivery of the equipment to the
customer and when future obligations are no longer significant.
Advertising Costs
The Company expenses production costs of print, radio and television
advertisements and other advertising costs as such costs are incurred.
Income Taxes
The Company accounts for income taxes in accordance with the liability
method. Deferred income taxes are recognized for tax consequences in future
years for differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end, based on enacted laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce net deferred tax assets to the amount expected to be
realized. The provision for income taxes consists of the current tax provision
and the change during the period in deferred tax assets and liabilities.
F-11
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Accounting for Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation", requires disclosure
of the fair value method of accounting for stock options and other equity
instruments. Under the fair value method, compensation cost is measured at
grant date based on the fair value of the award and is recognized over the
service period which is usually the vesting period. The Company has chosen,
under provisions of SFAS No. 123, to continue to account for employee stock-
based compensation under Accounting Principles Board (APB) No. 25, "Accounting
for Stock Issued to Employees". The Company discloses in Note 11 to the
financial statements the pro forma net loss and the pro forma basic and diluted
net loss per share as if the Company had applied the method of accounting
prescribed by SFAS No. 123.
The Company periodically issues restricted stock awards and stock option
grants to its employees. Upon reaching a measurement date, the Company records
deferred compensation equal to the difference between the strike price and the
estimated fair value of the stock award. Deferred compensation is amortized to
compensation expense over the related vesting period.
Interest Rate Swaps
The Company uses interest rate swaps to hedge the effects of fluctuations in
interest rates from their Senior Credit Facility (see Note 8). These
transactions meet the requirements for hedge accounting, including designation
and correlation. The interest rate swaps are managed in accordance with the
Company's policies and procedures. The Company does not enter into these
transactions for trading purposes. The resulting gains or losses, measured by
quoted market prices, are accounted for as part of the transactions being
hedged, except that losses not expected to be recovered upon the completion of
hedged transactions are expensed. Gains or losses associated with interest rate
swaps are computed as the difference between the interest expense per the
amount hedged using the fixed rate compared to a floating rate over the term of
the swap agreement.
Net Loss Attributable to Common Equity Per Share
The Company computes net loss attributable to common equity per share in
accordance with SFAS No. 128, "Earnings Per Share," and SEC Staff Accounting
Bulletin No. 98 (SAB 98). Under the provisions of SFAS No. 128 and SAB 98,
basic net loss attributable to common equity per share is computed by dividing
the net loss attributable to common equity for the period by the weighted
average number of common equity shares outstanding during the period. The
weighted average number of common shares outstanding includes the Series F
Preferred Stock, which is a participating stock and has no preferential rights
over Common Stock, and all classes of Common Stock. Diluted net loss
attributable to common equity per share is computed by dividing the net loss
attributable to common equity for the period by the weighted average number of
common and dilutive common equivalent shares outstanding during the period. As
the Company had a net loss attributable to common equity in each of the periods
presented, basic and diluted net loss attributable to common equity per share
are the same.
Segment Reporting
The Company presently operates in a single business segment as a provider of
wireless mobility services in its licensed regions primarily in the south-
central and northeastern United States and Puerto Rico. The Company operates in
various MTAs including New Orleans, LA, Memphis, TN, Little Rock, AR, Boston,
MA and San Juan, Puerto Rico.
Reclassifications
Certain amounts in the 1997 and 1998 consolidated financial statements have
been reclassified to conform with the presentations of the 1999 consolidated
financial statements.
F-12
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Recently Issued Accounting Standards
In July 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 137, "Deferral of the Effective
Date of FAS 133" which defers the effective date of SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. The Company
is in the process of determining the effect of adopting this standard.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) Number 101, "Revenue Recognition in Financial
Statements." This bulletin will become effective for the Company for the
quarter ended June 30, 2000. This bulletin establishes more clearly defined
revenue recognition criteria than previously existing accounting
pronouncements, and specifically addresses revenue recognition requirements for
nonrefundable fees, such as activation fees, collected by a company upon
entering into an arrangement with a customer, such as an arrangement to provide
telecommunications services. The Company is currently evaluating the full
impact of this SAB to determine the impact on its financial position and
results of operations.
3. Accounts Receivable
Accounts receivables consists of the following:
<TABLE>
<CAPTION>
December 31,
------------
1998 1999
---- -------
<S> <C> <C>
Accounts receivable............................................ $-- $26,203
Allowance for doubtful accounts................................ -- (2,622)
---- -------
$-- $23,581
==== =======
</TABLE>
Bad debt expense for the year ended December 31, 1999 was $2,962.
4. Inventory
Inventory consists of the following:
<TABLE>
<CAPTION>
December 31,
------------
1998 1999
---- -------
<S> <C> <C>
Handsets........................................................ $778 $15,090
Accessories..................................................... -- 712
---- -------
Total inventory................................................. $778 $15,802
==== =======
</TABLE>
5. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
-------- --------
<S> <C> <C>
Wireless network......................................... $ -- $364,491
Network under development................................ 170,886 21,758
Computer equipment....................................... 10,115 16,888
Internal use software.................................... 11,161 21,648
Leasehold improvements................................... 3,205 12,011
Furniture, fixtures and office equipment................. 2,924 10,855
Land..................................................... -- 49
-------- --------
198,291 447,700
Accumulated depreciation................................. (822) (47,250)
-------- --------
$197,469 $400,450
======== ========
</TABLE>
F-13
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Depreciation expense for the years ended December 31, 1997, 1998 and 1999
was $11, $811, and $46,428, respectively.
6. PCS Licenses and Microwave Relocation Costs
PCS licenses, microwave relocation costs, and capitalized interest consist
of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
PCS licenses.............................................. $104,737 $221,650
Microwave relocation costs................................ 12,457 47,835
Capitalized interest...................................... 913 1,005
-------- --------
118,107 270,490
Accumulated amortization.................................. -- (2,808)
-------- --------
$118,107 $267,682
======== ========
</TABLE>
Amortization expense related to PCS licenses, its related capitalized
interest, and microwave relocation costs for the years ended December 31, 1997,
1998 and 1999 was $0, $0, and $2,808, respectively.
7. Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------- -------
<S> <C> <C>
Property and equipment...................................... $85,635 $32,725
Sales taxes................................................. -- 8,263
Bonuses and vacation........................................ 2,386 6,079
Selling and marketing....................................... 347 3,496
Other....................................................... 6,700 7,955
------- -------
95,068 58,518
Less: non-current portion................................... 196 6,541
------- -------
$94,872 $51,977
======= =======
</TABLE>
8. Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
Senior subordinated discount notes........................ $ -- $354,291
Senior credit facilities.................................. 225,000 225,000
Lucent notes payable...................................... 10,460 43,504
U.S. Government financing................................. 7,925 17,776
-------- --------
243,385 640,571
Less: current portion..................................... -- 1,361
-------- --------
$243,385 $639,210
======== ========
</TABLE>
F-14
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Senior Subordinated Discount Notes
On April 23, 1999, the Company completed the issuance and sale of 11 5/8%
Senior Subordinated Discount Notes (the Notes) with an aggregate principal
amount at maturity of $575,000. The total gross proceeds from the sale of the
Notes were $327,635. Offering expenses consisting of underwriting, printing,
legal and accounting fees totaled $10,999. The Notes mature April 15, 2009,
unless previously redeemed by the Company. As interest accrues, it will be
added to the principal as an increase to interest expense and the carrying
value of the Notes until April 15, 2004. The Company will begin paying interest
semi-annually beginning October 15, 2004. The Notes are not collateralized. The
Notes are subordinate to all of the Company's existing and future senior debt
and ranks equally with all other senior subordinated debt, and ranks senior to
all of the Company's existing and future subordinated debt. The Notes are
guaranteed by the Company's wholly owned subsidiary, TeleCorp Communications,
Inc. (see Note 19). As of December 31, 1999 accrued interest added to the
principal was $26,656. In October 1999, the Company registered the Notes with
the Securities and Exchange Commission to become publicly traded securities.
Offering expenses totaled $917 and are accounted for as debt issuance costs.
Senior Credit Facilities
In July 1998, the Company entered into a credit facility (the Senior Credit
Facility) with a group of commercial lenders, under which the Company may
borrow up to $525,000, in the aggregate, consisting of (i) up to $150,000 in
revolving loans (the Senior Revolving Credit Facility) with a maturity date of
January 2007, (ii) a $150,000 term loan (the Tranche A Term Loan) with a
maturity date of January 2007, and (iii) a $225,000 term loan (the Tranche B
Term Loan) with a maturity date of January 2008. Subsequent to year-end, the
Company entered into amendments to increase the amount of credit available to
$560,000. A total of $225,000 of indebtedness from the Tranche B Term Loan was
outstanding as of December 31, 1998 and 1999. The Senior Credit Facility also
provides for an uncommitted $40,000 senior term loan (the Expansion Facility)
with a maturity date of January 2008.
Beginning in September 2002, principal repayments will be made in 18
quarterly installments for the Tranche A Term Loan and 22 quarterly
installments for the Tranche B Term Loan. Quarterly principal repayments for
the Tranche A Term Loan are as follows: first six, $3,750; next four, $9,375;
last eight, $11,250. Quarterly principal repayments for the Tranche B Term Loan
are as follows: first 18, $562, last four, $53,721. Interest payments on the
senior credit facility are made quarterly. The Senior Credit Facility contains
a prepayment provision whereby certain amounts borrowed must be repaid upon the
occurrence of certain specified events.
The commitment to make loans under the Tranche A Term loan will terminate in
July 2001, or earlier if elected by the Company. Beginning in April 2005, the
commitment to make loans under the Senior Revolving Credit Facility will be
permanently reduced on a quarterly basis through April 2007 as follows: first
four reductions, $12,500; last four reductions $25,000. The unpaid principal on
the Senior Revolving Credit Facility is due January 2007. In July 2000, if the
undrawn portion of the Tranche A Term Loan exceeds $50,000 the amount of the
Tranche A Term Loan will be automatically reduced by such excess.
The interest rate applicable to the Senior Credit Facility is based on, at
the Company's option, (i) LIBOR (Eurodollar Loans) plus the Applicable Margin,
as defined, or (ii) the higher of the administrative agent's prime rate or the
Federal Funds Effective Rate (ABR Loans), plus the Applicable Margin, as
defined. The Applicable Margin for Eurodollar Loans will range from 125 to 325
basis points based upon certain events by the Company, as specified. The
Applicable Margin for ABR Loans will range from 25 to 225 basis points based
upon certain events by the Company, as specified. At December 31, 1998, the
interest rate applicable to the
F-15
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Tranche B Term Loan was 8.75% and interest incurred for the year ended December
31, 1998 was $9,210 of which $7,710 was expensed and $1,500 was capitalized. At
December 31, 1999, the interest rate applicable to the Tranche B Term Loan was
9.12%, and for the year ended December 31, 1999 interest incurred on the
Tranche B Term Loan was $19,110 of which $13,793 was expensed and $5,317 was
capitalized.
The loans from the Senior Credit Facility are subject to an annual
commitment fee which ranges from 0.50% to 1.25% of the available portion of the
Tranche A Term Loan and the Senior Revolving Credit Facility. The Company has
expensed $3,306 and $3,817, for the year ended December 31, 1998 and 1999,
respectively, related to these bank commitment fees. The Senior Credit Facility
requires the Company to purchase interest rate hedging contracts covering
amounts equal to at least 50% of the total amount of the outstanding
indebtedness of the Company. As of December 31, 1998 and 1999, the Company
hedged 100% of its outstanding indebtedness of $225,000 to take advantage of
favorable interest rate swaps. The six outstanding interest rate swap contracts
fix LIBOR at annual interest rates from 5.20% to 5.26%. The contracts mature in
September of 2003.
Initially, borrowings under the Senior Credit Facility are subject to a
maximum Senior Debt to Total Capital ratio, as defined, of 50%. This ratio has
been increased to 55% because certain specified operating benchmarks have been
achieved. In addition, the Company must comply with certain financial and
operating covenants. The financial covenants include various debt to equity,
debt to EBITDA, interest coverage, and fixed charge coverage ratios, as defined
in the Senior Credit Facility. The operating covenants include minimum
subscribers, minimum aggregate service revenue, minimum coverage of population
and maximum capital expenditure thresholds. As of December 31, 1998 and 1999,
the Company was in compliance with these covenants.
The Company may utilize the Expansion Facility as long as the Company is not
in default of the Senior Credit Facility and is in compliance with each of the
financial covenants. However, none of the lenders are required to participate
in the Expansion Facility.
The Senior Credit Facility is collateralized by substantially all of the
assets of the Company. In addition, the Senior Credit Facility has been
guaranteed by the Company's subsidiaries and shall be guaranteed by
subsequently acquired or organized domestic subsidiaries of the Company.
Lucent Notes Payable
In May 1998, the Company entered into a Note Purchase Agreement (the Lucent
Note Agreement) with Lucent Technologies, Inc. (Lucent) which provides for the
issuance of increasing rate 8.5% Series A (the Series A Notes) and 10.0% Series
B (the Series B Notes) junior subordinated notes (the Subordinated Notes) with
an aggregate face value of $80,000. The aggregate face value of the
Subordinated Notes shall decrease dollar for dollar, upon the occurrence of
certain events as defined in the Lucent Note Agreement. The proceeds of the
Subordinated Notes are to be used to develop the Company's network in certain
designated areas. As of December 31, 1998 and 1999, the Company had $10,460 and
$43,504, respectively outstanding under the Series A Notes. During the year
ended December 31, 1999, the Company borrowed and repaid $40,000 on the Lucent
Series B Notes plus $228 of accrued interest. Interest expense for the years
ended December 31, 1998 and 1999 was $460 and $3,044, respectively.
The Series A and Series B Notes will not amortize and will have a maturity
date six months after the final maturity of the Company's high yield debt
offering, but in no event later than May 1, 2012. The Series A Notes will have
a mandatory redemption at par plus accrued interest from the proceeds of a
subsequent equity offering to the extent the net proceeds exceed an amount
identified in the Lucent Note Agreement. If the Series A Notes
F-16
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
and Series B Notes are not redeemed in full by January 2001 and January 2000,
respectively, the interest rate on each note will increase by 1.5% per annum on
January 1. However, the interest rate applicable to the Subordinated Notes
shall not exceed 12.125%. Interest payable on the Series A Notes and the Series
B Notes on or prior to May 11, 2004 shall be payable in additional Series A and
Series B Notes. Thereafter, interest shall be paid in arrears in cash on each
six month and yearly anniversary of the Series A and Series B closing date or,
if cash interest payments are prohibited under the Senior Credit Facility
and/or the Senior Subordinated Discount Notes, in additional Series A and
Series B Notes. As of December 31, 1998 and 1999, interest accrued under the
Series A Notes of $460 and $3,504, respectively has been included in long-term
debt.
The Company may redeem the Subordinated Notes held by Lucent or any of its
affiliates at any time. The Series A Notes that are not held by Lucent or any
of its affiliates may be redeemed by the Company prior to May 2002 and after
May 2007. The Series B Notes that are not held by Lucent or any of its
affiliates may be redeemed by the Company prior to May 2000 and after May 2005.
Any redemption after May 2007, in the case of the Series A Notes, and May 2005,
in the case of the Series B Notes, shall be subject to an interest rate
premium, as specified. All of the outstanding notes under the Lucent Note
Agreement as of December 31, 1998 and 1999 are held by Lucent. The Company must
comply with certain operating covenants. As of December 31, 1998 and 1999, the
Company was in compliance with these operating covenants.
In October 1999, the Company entered into an amended and restated note
purchase agreement with Lucent for the issuance of up to $12,500 of new Series
A Notes and up to $12,500 of new Series B Notes under a vendor expansion
facility in connection with prior acquisitions of licenses in certain markets.
The terms of these notes issued under these facilities are identical to the
original Lucent Series A and Series B Notes.
In addition, pursuant to the amended and restated note purchase agreement,
Lucent has agreed to make available up to an additional $50.0 million of new
vendor financing not to exceed an amount equal to 30% of the value of
equipment, software and services provided by Lucent in connection with any
additional markets the Company acquires. This $50.0 million of availability is
subject to a reduction up to $20 million on a dollar for dollar basis of any
additional amounts Lucent otherwise lends to the Company for such purposes
under the Company's senior credit facilities. Any notes purchased under this
facility would be divided equally between Lucent Series A and Series B Notes.
The terms of Lucent Series A and Series B Notes issued under these expansion
facilities would be identical to the terms of the original Lucent Series A and
Series B Notes as amended, including a maturity date of October 23, 2009.
In addition, any Lucent Series B Notes issued under the vendor expansion
facility will mature and will be subject to mandatory prepayment on a dollar
for dollar basis out of the net proceeds of any future public or private
offering or sale of debt securities, exclusive of any private placement of
notes issued to finance any additional markets and borrowings under the senior
credit facilities or any replacement facility.
U.S. Government financing
As of December 31, 1998 and 1999, the Company owes the U.S. Government
$9,192 and $20,247, less a discount of $1,268 and $2,471, respectively, for the
acquisition of PCS licenses.
The terms of the notes related to the PCS licenses in New Orleans, Memphis,
Beaumont and Little Rock obtained during the 1997 F-Block auction include: an
interest rate of 6.25%, quarterly interest payments which commenced in July
1998 and continue for the one year thereafter, then quarterly principal and
interest payments for the remaining nine years. The promissory notes are
collateralized by the underlying PCS licenses.
F-17
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
During the year ended December 31, 1999, the Company completed the
acquisition of additional PCS licenses from Digital PCS, LLC and Wireless 2000,
Inc. (see Note 10). As part of these acquisitions, the Company assumed
additional U.S. Government financing with the Federal Communications Commission
amounting to $11,551, less a discount of $1,631. The terms of the notes include
an interest rate of 6.125% for notes assumed from Digital PCS, LLC and 7.00%
for notes assumed from Wireless 2000, Inc., quarterly interest payments for a
two-year period and then quarterly principal and interest payments for the
remaining eight years.
The notes were discounted using management's best estimate of the prevailing
market interest rate at the time of issuance of 10.25%.
In connection with entering into the senior credit facilities and the
senior-subordinated discount notes, the Company incurred certain debt issuance
costs. The Company capitalized debt issuance costs of $9,110 and $12,742,
during the years ended December 31, 1998 and 1999, respectively. The financing
costs are being amortized using the straight-line method over the term of the
related debt. For the years ended December 31,
1998 and 1999, the Company recorded interest expense related to the
amortization of the deferred financing costs of $525 and $1,750, respectively.
As of December 31, 1999, minimum required annual principal repayment
(undiscounted) under all of the Company's outstanding debt obligations were as
follows:
<TABLE>
<S> <C>
For the year ending December 31,
2000.......................................................... $ 1,361
2001.......................................................... 1,448
2002.......................................................... 2,102
2003.......................................................... 5,561
2004.......................................................... 5,785
Thereafter.................................................... 847,494
--------
Total....................................................... $863,751
========
</TABLE>
9. AT&T Transaction
In January 1998, the Company entered into a Securities Purchase Agreement
(the Securities Purchase Agreement) with AT&T Wireless PCS, Inc. and TWR
Cellular Inc. (both subsidiaries of AT&T Corporation and collectively referred
to as AT&T PCS), the stockholders of Holding and various venture capital
investment firms (the Cash Equity Investors). The Securities Purchase Agreement
allows the Company to be a provider of wireless mobility services in its
licensed regions utilizing the AT&T brand name.
Upon the receipt of Federal Communications Commission approval in July 1998,
the Company finalized the transaction contemplated in the Securities Purchase
Agreement (the AT&T Transaction). As a result, the Company (i) issued preferred
stock and paid AT&T $21,000 in exchange for 20 MHz PCS licenses with a fair
value of $94,850 and certain operating agreements with AT&T for exclusivity,
network membership, long distance and roaming with a fair value of $27,050 (ii)
issued preferred and common stock for 100% of the outstanding ownership
interests in Holding, which includes 10 MHz PCS licenses which was recorded at
historical cost; and (iii) issued preferred and common stock for a cash
commitment from the initial investors other than AT&T Wireless of $128,000 to
be paid over a three year term plus an additional $5,000 upon the closing of
the Digital PCS, Inc. transaction (see Note 10).
F-18
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
The general terms of the operating agreements with AT&T are summarized
below:
AT&T Exclusivity: The Company will be AT&T's exclusive facilities-based
provider of mobile wireless telecommunications services within the
Company's BTAs for an initial ten year period. This agreement will
automatically renew for a one-year term and then operate on a year-to-
year basis unless one party terminates at least ninety (90) days prior
to the end of any one-year term.
The Company has determined the fair value of this agreement to be
$11,870 and is amortizing this value over the initial 10 year term.
Network Membership License Agreement: The Network Membership License
Agreement (the License Agreement) defines that AT&T will make available
to the Company use of the AT&T logo and the right to refer to itself as
a "Member of the AT&T Wireless Network" to market its PCS services.
Through the use of these rights, the Company expects to participate in
and benefit from AT&T promotional and marketing efforts. The License
Agreement has an initial five-year term with a five-year renewal term if
both the Company and AT&T elect to renew at least ninety 90 days prior
to the expiration of the initial term. The Company determined the fair
value of this agreement to be $8,480 and is amortizing this value over
the initial five-year term.
Intercarrier Roamer Services Agreement: AT&T and the Company have
entered into a twenty-year reciprocal roaming agreement provided that
their customers who own tri-mode phones will roam on
the other's mobile wireless systems at commercially reasonable rates to
the extent commercially and technologically feasible. Thereafter, this
agreement shall renew automatically on a year-to-year basis unless
either the Company or AT&T terminates this agreement by written notice
at least 90 days prior to the conclusion of the original or any
subsequent term. After ten years, this agreement may be terminated by
the Company or AT&T at any time upon 90 days prior written notice.
The Company has determined the value of this roaming agreement to be
$3,500 and is amortizing this value over the initial 10-year term.
Long Distance Agreement: The long distance agreement provides that AT&T
will be the exclusive provider for long distance services to the
Company's customers within the Company's licensed regions for an initial
three year period. The long distance agreement requires that the Company
meet a minimum traffic volume commitment during the term of the
agreement. If the Company fails to meet such volume commitments, the
Company must pay to AT&T the difference between the expected fee based
on the volume of the commitment and the fees based on actual volume.
The Company had determined the fair value of this agreement to be $3,200
and is amortizing this value over the initial three-year term.
Triton PCS, Inc. (Triton), Tritel Communications (Tritel), and the Company
have adopted a common brand, SunCom, which is co-branded with equal emphasis
with the AT&T brand name and logo. On April 16, 1999, Triton, Tritel and
TeleCorp Communications formed a new company, Affiliate License Co., L.L.C., to
own, register and maintain the marks SunCom, SunCom Wireless and other SunCom
and Sun formative marks (SunCom Marks) and to license the SunCom marks to
Triton, Tritel and the Company. Triton, Tritel and TeleCorp Communications each
have a 33% membership interest in Affiliate License Co., L.L.C. On April 16,
1999, Triton entered into an agreement to settle a potential dispute regarding
prior use of the SunCom brand. In connection with this settlement, Triton
agreed to pay $975 to acquire the SunCom Marks that were contributed to
Affiliate License Co., L.L.C. The Company paid $325 in royalty payments to
reimburse Triton for the contributed SunCom marks.
F-19
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
10. Acquisitions
On April 20, 1999, the Company completed the acquisition of 10 MHz PCS
licenses covering the Baton Rouge, Houma, Hammond and Lafayette, Louisiana
BTA's from Digital PCS, LLC. The total purchase price of $6,114 was comprised
of $2,335 of mandatorily redeemable preferred stock and common stock of the
Company, the assumption of U.S. Government financing with the Federal
Communications Commission of $4,102 less a discount of $609, and $286 in cash
as reimbursement to Digital PCS, LLC, for interest due to the Federal
Communications Commission incurred prior to close and legal costs. The entire
purchase price has been allocated to the PCS license.
As a result of completing the transaction with Digital PCS, LLC, the Cash
Equity Investors have irrevocably committed to contribute $5,000 in exchange
for mandatorily redeemable preferred stock and common stock over a two year
period from the close of this transaction. As of December 31, 1999 the Company
has received $2,200 of the $5,000 commitment.
On May 24, 1999, the Company sold mandatorily redeemable preferred stock and
preferred stock to AT&T for $40,000. On May 25, 1999, the Company acquired from
AT&T 20 MHz PCS licenses covering the San Juan MTA, 27 constructed cell sites,
a switching facility, leases for additional cell sites, the extension of the
Network Membership License Agreement, Long Distance Agreement, Intercarrier
Roamer Services Agreement and AT&T Exclusivity Agreement and the reimbursement
of AT&T for microwave relocation costs, salary and lease payments (the Puerto
Rico Transaction) incurred prior to acquisition. The total purchase price
of this asset acquisition was $99,694 in cash plus legal fees of $252. The
purchase price has been allocated to the assets acquired, based upon their
estimated fair value as follows:
<TABLE>
<S> <C>
PCS licenses.................................................... $70,421
Intangible assets--AT&T Agreements.............................. 17,310
Cell sites site acquisition, switching facility assets and other
assets......................................................... 9,015
Microwave relocation costs...................................... 3,200
-------
$99,946
=======
</TABLE>
As a result of completing this transaction, the Company's available
borrowings under the Lucent Note Agreement increased by $15,000 ($7,500 of
series A and $7,500 of series B) and certain Cash Equity Investors committed
$39,997 in cash in exchange for mandatorily redeemable preferred and common
stock. The Cash Equity Investors cash commitment of $39,997 will be funded over
a three-year period from the close of this transaction. As of December 31,
1999, the Company received $17,999 of this cash commitment. As a part of
obtaining this additional preferred and common stock financing, the Company
paid $2,000 to a Cash Equity Investor upon the closing of the transaction. In
addition, certain officers, the Chief Executive Officer and the Executive Vice
President and Chief Financial Officer of the Company were issued fixed and
variable awards of 5,318 and 2,380,536 restricted shares of mandatorily
redeemable Series E preferred stock and Class A common stock, respectively, in
exchange for their interest in Puerto Rico Acquisition Corporation. Puerto Rico
Acquisition Corporation was a special purpose entity wholly-owned by the
Company's Chief Executive Officer and Executive Vice President and Chief
Financial Officer. The fixed awards typically vest over a five-year period. The
estimated fair value of these shares has been recorded as deferred compensation
and is being amortized over the related vesting periods. The variable awards
vested based upon the completion of the Company's initial public offering.
On June 2, 1999 the Company acquired from Wireless 2000, Inc. 15 MHz PCS
licenses in the Alexandria, Lake Charles and Monroe, Louisiana BTAs. The total
purchase price of $7,448 was comprised of $371 of mandatorily redeemable
preferred stock and common stock of the Company, the assumption of U.S.
F-20
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Government financing with the Federal Communications Commission of $7,449 less
a discount of $1,022 and $650 in cash as reimbursement of microwave relocation
costs and reimbursement of Federal Communications Commission interest and legal
costs. The entire purchase price has been allocated to the PCS licenses
acquired.
In February 1999, Viper Wireless, Inc. (Viper), was formed to participate in
the C-Block PCS license reauction for additional spectrum in most of the
Company's markets. Viper was initially capitalized for $100 and was equally-
owned by the Company's Chief Executive Officer and Executive Vice President-
Chief Financial Officer. In order to participate in the reauction, the Company
paid the Federal Communications Commission an initial deposit of $17,819, on
behalf of Viper. Simultaneously, the Company transferred this initial deposit
to Viper in exchange for an 85% ownership interest which represented a 49.9%
voting interest.
On April 15, 1999, the Federal Communications Commission announced Viper was
the high bidder for 15 MHz licenses in New Orleans, Houma and Alexandria,
Louisiana, San Juan, Puerto Rico and Jackson, Tennessee and 30 MHz licenses in
Beaumont, Texas. The total auction price is $32,286 plus legal fees of $47.
During the year ended December 31, 1999, the Federal Communications Commission
refunded $11,361 of the initial deposit; however, the Company was required to
pay the Federal Communications Commission $11,059 as a final deposit on behalf
of Viper. As of and for the year ended December 31, 1999, Viper had no
financial activity other than its capitalization which includes the transfer of
the initial deposit to Viper. The Company received final regulatory approval of
the license transfer from the Federal Communications Commission on September 9,
1999. The entire purchase price has been allocated to the PCS licenses
acquired.
AT&T and certain of the Company's other stockholders have committed an
aggregate of up to approximately $32,300 in exchange for additional shares of
mandatorily redeemable preferred stock, series F preferred stock and common
stock of the Company. As part of this financing, the Company paid approximately
$500 to an affiliate of a Cash Equity Investor for closing this preferred and
common stock financing. In May
and July 1999, AT&T and certain Cash Equity Investors funded approximately
$17,516 of their commitment to the Company. The Company made its final payment
of $14,770 to the Federal Communications Commission on September 13, 1999 with
respect to these licenses and received the remaining funding commitments from
AT&T and the certain Cash Equity Investors on September 29, 1999.
11. Mandatorily Redeemable Preferred Stock and Stockholders' Equity
Holding
Holding's authorized capital stock consisted of 6,000 shares of no par value
mandatorily redeemable series A preferred stock, 125,000 shares of no par value
class A common stock, 175,000 shares of no par value class B common stock and
175,000 shares of no par value class C common stock. This capital stock was in
existence during 1996, 1997, and through July 1998, the closing of the AT&T
Transaction, at which time Holding became a wholly-owned subsidiary of the
Company. Subsequent to the AT&T Transaction, the authorized and outstanding
shares of Holding were cancelled and replaced with 1,000 authorized shares of
common stock of which 100 shares were issued to the Company.
F-21
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
TeleCorp
On May 14, 1999, TeleCorp restated its Certificate of Incorporation, which
was subsequently amended. The Restated Certificate of Incorporation, as
amended, provides the Company with the authority to issue 918,339,090 shares of
stock, consisting of the following:
<TABLE>
<CAPTION>
Par Shares
Preferred Stock Value Authorized
--------------- ----- ----------
<S> <C> <C>
Mandatorily redeemable
Series A............... $0.01 100,000
Mandatorily redeemable
Series B............... $0.01 200,000
Mandatorily redeemable
Series C............... $0.01 215,000
Mandatorily redeemable
Series D............... $0.01 50,000
Mandatorily redeemable
Series E............... $0.01 30,000
Series F................ $0.01 15,450,000
----------
Total................. 16,045,000
==========
</TABLE>
<TABLE>
<CAPTION>
Par Shares
Common Stock Value Authorized
------------ ----- -----------
<S> <C> <C>
Class A................... $0.01 608,550,000
Class B................... $0.01 308,550,000
Class C tracked........... $0.01 309,000
Class D tracked........... $0.01 927,000
Voting Preference......... $0.01 3,090
-----------
Total................... 918,339,090
===========
</TABLE>
The following schedules represent the transactions that took place with
respect to Holding's mandatorily redeemable preferred stock and common stock
for the year ended December 31, 1998.
<TABLE>
<CAPTION>
Series A
Preferred stock
------------------
Shares Amount
------ -----------
<S> <C> <C>
Balance, December 31, 1997............................... 367 $ 4,144,340
Accretion of preferred stock dividends................... -- 224,484
Recapitalization of Holding.............................. (367) (4,368,824)
---- -----------
Balance, December 31, 1998............................... -- $ --
==== ===========
</TABLE>
<TABLE>
<CAPTION>
Class A Class B Class C
Common Stock Common Stock Common Stock Common Stock
-------------- -------------- --------------- -------------
Shares Amount Shares Amount Shares Amount Shares Amount Total
------ ------ ------ ------ ------- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997................... 4,834 856 1,974 -- 12,527 856
Recapitalization of
Holding................ (4,834) (856) (1,974) -- (12,527) -- 100 -- (856)
Elimination of 100% of
equity interests in
Holding................ -- -- -- -- -- -- (100) -- --
------ ----- ------ ----- ------- ----- ---- ----- -----
Balance, December 31,
1998................... -- $ -- -- $ -- -- $ -- -- $ -- $ --
====== ===== ====== ===== ======= ===== ==== ===== =====
</TABLE>
F-22
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
The following schedule represents the transactions that took place with
respect to TeleCorp's mandatorily redeemable preferred stock, Series F
preferred stock and common stock for the period July 1998 to December 31, 1999:
<TABLE>
<CAPTION>
Series D Series E
Series A Series C Preferred Preferred
Preferred stock Preferred stock stock stock
--------------- ---------------- -------------- --------------
Shares Amount Shares Amount Shares Amount Shares Amount Total
------ -------- ------- -------- ------ ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mandatorily redeemable
preferred stock
Issuance of preferred
stock to AT&T PCS for
licenses and AT&T
Agreements............. 66,723 $ 66,723 -- $ -- 34,267 $34,143 -- $ -- $100,866
Issuance of preferred
stock to initial
investors other than
AT&T Wireless, net of
issuance costs of
$1,028................. -- -- 128,000 126,848 -- -- -- -- 126,848
Accretion of preferred
stock dividends........ -- 3,040 -- 3,819 -- 946 -- 541 8,346
Noncash issuance of
restricted stock....... -- -- -- -- -- -- 5,505 6 6
Repurchase of restricted
stock for cash......... -- -- -- -- -- -- (784) (1) (1)
Noncash issuance of
preferred stock for
equity of Holding...... -- -- 7,348 4,334 -- -- 14,156 10 4,344
------ -------- ------- -------- ------ ------- ------ ------ --------
Balance, December 31,
1998................... 66,723 69,763 135,348 135,001 34,267 35,089 18,877 556 240,409
Issuance of preferred
stock for cash, net of
issuance costs of
$2,500................. 30,750 30,454 72,382 51,089 15,150 11,080 -- -- 92,623
Issuance of preferred
stock for PCS licenses
and operating
agreements............. -- -- 2,878 2,674 -- -- -- -- 2,674
Accretion of preferred
stock dividends........ -- 9,124 -- 10,939 -- 2,646 -- 1,415 24,124
Noncash issuance of
restricted stock....... -- -- -- -- -- -- 6,741 353 353
Repurchase of restricted
stock or cash.......... -- -- -- -- -- -- (577) (1) (1)
------ -------- ------- -------- ------ ------- ------ ------ --------
Balance, December 31,
1999................... 97,473 $109,341 210,608 $199,703 49,417 $48,815 25,041 $2,323 $360,182
====== ======== ======= ======== ====== ======= ====== ====== ========
</TABLE>
F-23
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Class C Class D Voting
Series F Class A tracked tracked Preference
Preferred stock Common stock Common stock Common stock Common stock
----------------- ------------------ -------------- -------------- -------------
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Total
---------- ------ ---------- ------ ------- ------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series F preferred and
Common stock
Issuance of common Stock
to initial investors
other than AT&T
Wireless for cash...... -- $-- 37,540,390 $375 110,549 $ 1 827,487 $ 8 -- $-- $ 384
Issuance of preferred
Stock to AT&T PCS for
licenses and AT&T
agreements............. 10,308,676 103 -- -- -- -- -- -- -- -- 103
Exchange of 100% of
Equity interests in
Predecessor Company For
equity in the Company.. -- -- 7,583,463 76 173,264 2 23,942 -- 3,090 -- 78
Noncash issuance of
Restricted stock....... -- -- 3,095,473 31 -- -- -- -- -- -- 31
Repurchase of restricted
Stock for cash......... -- -- (552,474) -- -- -- -- -- -- -- --
---------- ---- ---------- ---- ------- --- ------- --- ----- ---- ------
Balance, December 31,
1998................... 10,308,676 103 47,666,852 482 283,813 3 851,429 8 3,090 596
Issuance of common Stock
and preferred Stock for
cash................... 4,604,102 46 22,366,242 224 -- -- -- -- -- -- 270
Issuance of Common Stock
in Initial Public
Offering............... -- -- 10,580,000 106 -- -- -- -- -- -- 106
Issuance of common Stock
for PCS Licenses and
operating Agreements... -- -- 865,089 9 -- -- -- -- -- -- 9
Noncash issuance of
Restricted stock....... -- -- 3,382,493 24 -- -- -- -- -- -- 24
Repurchase of restricted
Stock for cash......... -- -- (406,787) -- -- -- -- -- -- -- --
---------- ---- ---------- ---- ------- --- ------- --- ----- ---- ------
Balance, December 31,
1999................... 14,912,778 $149 84,453,889 $845 283,813 $ 3 851,429 $ 8 3,090 $-- $1,005
========== ==== ========== ==== ======= === ======= === ===== ==== ======
</TABLE>
Stock Split
On August 27, 1999 and on November 5, 1999, the Company filed amendments to
its certificate of incorporation with the Delaware Secretary of State to effect
a 100 for 1 stock split and 3.09 for 1 stock split respectively, of its
outstanding and authorized series F preferred stock and all classes of its
common stock. The stock splits have been retroactively reflected in the
financial statements for all periods presented. In addition, the amendment to
the Company's certificate of incorporation increased the authorized number of
shares of each of the class A common stock and the class B common stock by 15
million. In addition, the Board of Directors and the stockholders approved
further amendments and restatements to the Company's certificate of
incorporation becoming effective upon the closing of the Company's initial
public offering, including a 300 million increase in the number of authorized
shares of the Company's class A common stock.
F-24
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Initial Public Offering and Concurrent Offering
On November 23, 1999 in an initial public offering of 10.58 million shares
of class A common stock for $20.00 per share, the Company raised proceeds of
approximately $197,317, net of underwriter's discount of $3,703. Offering
costs, including legal, accounting and printing costs associated with the
offering totaled $1,801, and these costs were charged directly against paid-in
capital.
In a concurrent offering to AT&T Wireless, the Company issued 2,245,000
shares of class A common stock for $18.65 per share. The Company raised
proceeds of $41,869, which was received on January 18, 2000.
There are no issued or outstanding shares of series B preferred stock,
senior common stock or class B common stock as of December 31, 1999.
The conversion features and conversion prices of the Company's issued stock
are summarized below:
<TABLE>
<CAPTION>
Convertible Security Convertible Into Conversion Price
-------------------- ---------------------------- --------------------------------------
<S> <C> <C>
series A preferred stock After July 2006, at the The series A conversion rate is equal
holders' option, into class to the liquidation preference of the
A common stock series A preferred stock on the
conversion date divided by the market
price of the class A common stock on
the conversion date.
series C preferred stock At the option of the Company The liquidation preference of the
at the IPO date into either series C preferred stock divided by
class A or B common stock the IPO price of $20.00 per share.
series D preferred stock If series C preferred stock The liquidation preference divided by
is Converted then the IPO price of $20.00 per share.
automatically at the IPO
date into senior common
stock
series E preferred stock At the option of the Company The liquidation preference of the
at the IPO date into either series E preferred stock divided by
class A or class B common the IPO price of $20.00 per share.
stock
series F preferred stock At the holders' option, into One share of series F preferred stock
and senior common stock class A, class B or class D or senior common stock for one share
common stock, depending upon of either class A, class B or class D
the occurrence of certain common stock.
defined events
class A common stock At the holders' option into One share of class B common stock for
class B common stock one share of class A common stock.
class C tracked common Subject to Federal One share of class A or class B common
stock Communications Commission stock for one share of class C tracked
constraints and Board common stock.
approval, at the holders'
option and by affirmative
vote of at least 66 2/3% of
class A common stock into
class A or class B common
stock
class D tracked common Subject to Federal One share of class A or class B common
stock Communications Commission stock for one share of class D tracked
constraints and Board common stock.
approval, at the holders'
option and by affirmative
vote of at least 66 2/3% of
class A common stock into
class A or class B common
stock
</TABLE>
F-25
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
The conversion features and conversion prices of the Company's issued stock
are summarized below:
Liquidation rights
In the event of any liquidation, dissolution or winding up of the Company,
as defined, the stockholders of the Company are entitled to liquidation
preferences as follows:
<TABLE>
<CAPTION>
Order of
Distribution Stock Classification Distribution Preference
- ------------ --------------------------------- --------------------------------------
<S> <C> <C>
First series A and series B preferred $1,000 per share plus accrued and
stock unpaid dividends.
Second series C and series D preferred Series C: actual paid-in capital per
stock share plus accrued and unpaid
dividends plus interest of 6% per
annum on the actual paid-in capital,
compounded quarterly, less amount of
dividends declared and paid.
Series D: $1,000 per share plus
accrued and unpaid dividends plus an
amount equal to interest on $1,000 per
share at a rate of 6% per annum,
compounded quarterly, less amount of
dividends declared and paid.
Third series E preferred stock Accrued and unpaid dividends, plus an
amount equal to interest on $1,000 per
share at 6% per annum, compounded
quarterly, less dividends declared and
paid.
Fourth series F preferred stock and Series F preferred: $0.000032 per
senior common stock share plus accrued and unpaid
dividends.
Senior common stock: The sum of the
liquidation preference of each share
of series D and series F preferred
stock converted in senior common stock
divided by the aggregate number of
shares of senior common stock issued
upon conversion of shares of series D
and series F preferred stock
</TABLE>
Dividends and voting rights
The holders of the series A and series B preferred stock are entitled to
cumulative quarterly cash dividends at an annual rate of 10% of the liquidation
preference of the then outstanding shares. The holders of the remaining shares
of preferred and common stock are entitled to dividends if and when declared.
The class A common stock has 15,419,100 voting rights and the voting
preference common stock has 15,480,900 voting rights. The remaining shares of
preferred and common stock shall have no voting rights, except as provided by
law or in certain limited circumstances.
F-26
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Call and Redemption features
The preferred stock is callable at the option of the Company at a price
equal to the liquidation preference on the redemption date. The series A
preferred stock is callable thirty days after the 10th anniversary of the
issuance of such shares. The series B preferred stock is callable at any time.
The series C and series D preferred stock are callable at any time, provided
that the series C and series D preferred stock are called concurrently.
The series A, series B, series C, series D and series E preferred stock are
redeemable thirty days after the 20th anniversary of the issuance of such
shares at the option of the holder at a price equal to the liquidation
preference on the redemption date. The series F preferred stock is not
redeemable. Pursuant to a Management Agreement, the Company may redeem certain
shares of class A common stock and series E preferred stock held by the
Company's Chief Executive Officer and Executive Vice President (the TMC
officers). For the period from the finalization of the AT&T Transaction to
December 31, 1998, the Company accreted $8,345 of dividends in connection with
this redemption feature.
Tracked common stock
The class C and class D common stock have been designated as tracked common
stock. The holders of the tracked common stock are entitled to a dividend, when
available, equal to the excess of the fair value of the net assets of Holding
over the aggregate par value of the outstanding shares of the tracked common
stock. After all other preferential liquidating distributions have been made,
the holders of the tracked common stock will be entitled to a liquidation
preference equal to the excess of the fair value of the net assets of Holding.
Participating stock
The series F preferred stock, the senior common stock and the class A and B
common stock are participating stock, and the Board of Directors may not
declare dividends on or redeem, purchase or otherwise acquire for consideration
any shares of the Participating Stock, unless the Board of Directors makes such
declaration or payment on the same terms with respect to all shares of
participating stock, ratably in accordance with each class and series of
participating stock then outstanding.
Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss
per share:
<TABLE>
<CAPTION>
For the Year Ended December
31,
--------------------------------
1997 1998 1999
-------- ---------- ----------
<S> <C> <C> <C>
Numerator:
Net loss............................... $ (3,335) $ (51,155) $ (250,996)
Less: accretion of mandatorily redeemable
preferred stock......................... (726) (8,567) (24,124)
-------- ---------- ----------
Net loss attributable to common
equity................................ $ (4,061) $ (59,722) $ (275,120)
======== ========== ==========
Denominator:
Basic and diluted net loss per share--
weighted average shares................. 36,340 27,233,786 76,895,391
======== ========== ==========
Net loss attributable to common equity
per share--basic and diluted............ $(111.74) $ (2.19) $ (3.58)
======== ========== ==========
</TABLE>
F-27
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
The following equity instruments were not included in the diluted net loss
per share calculation because their effect would be anti-dilutive:
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------
1997 1998 1999
---- ---- -------
<S> <C> <C> <C>
Mandatorily redeemable preferred stock series A............ -- -- 97,473
Stock options.............................................. -- -- 545,497
</TABLE>
12. Restricted Stock Plan and Restricted Stock Awards
In July 1998, the Company adopted a Restricted Stock Plan (the Plan) to
attract and retain key employees and to reward outstanding performance. Key
employees selected by management may elect to become participants in the Plan
by entering into an agreement which provides for issuance of fixed and variable
units consisting of series E mandatorily redeemable preferred stock and class A
common stock. The fixed units typically vest over a five or six year period.
The variable units vest based upon certain events taking place, such as
buildout milestones, Pop coverage, the completion of an initial public offering
and other events. Unvested shares are forfeited upon termination of employment.
The shares issued under the Plan shall consist of units transferred to
participants without payment as additional compensation for their services to
the Company. The total number of units that may be awarded to key employees
shall not exceed 7,085 units and 4,000,000 shares of series E preferred stock
and class A common stock, respectively, as determined upon award. Any units not
granted on or prior to July 17, 2003 shall be awarded to two officers of the
Company. Each participant has voting, dividend and distribution rights with
respect to all shares of both vested and unvested common stock. After the class
A shares become publicly traded, the right of first offer will no longer exist
for the series E preferred shares. In addition the shares contain rights of
inclusion and first negotiation. The Company may repurchase unvested shares,
and under certain circumstances, vested shares of participants whose employment
with the Company terminates. The repurchase price is equal to $0.01 and
$0.00003 per share for the series E preferred and common stock, respectively.
Activity under the Plan is as follows:
<TABLE>
<CAPTION>
Series E Estimated Class A Estimated
preferred fair value common fair value
stock per share stock per share
--------- ------------- --------- ------------
<S> <C> <C> <C> <C>
Shares awarded............. 5,505 $ 1.00 3,095,473 $ 003
Repurchases................ (784) -- (552,474) --
----- ------------- --------- ------------
Balance, December 31,
1998...................... 4,721 $ 1.00 2,542,999 $ 003
Shares awarded............. 2,677 $52.00-$72.98 1,748,609 $.003-$20.00
Repurchases................ (577) -- (406,787) --
----- ------------- --------- ------------
Balance, December 31,
1999...................... 6,821 $ 1.00-$72.98 3,884,821 $.003-$20.00
===== =========
</TABLE>
Deferred compensation and compensation expense related to the issuance of
restricted stock to employees, based on the estimated fair value of the
preferred and common stock, was immaterial for the year ended December 31,
1998.
Certain awards granted under the Plan were variable awards. Upon the initial
offering, the variable stock awards became fixed. At that point, the Company
recorded deferred compensation expense based on the difference between the
estimated fair value and the exercise price of the award in the amount of
$61,999. For the year ended December 31, 1999, the Company recorded
compensation expense related to those restricted
F-28
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
stock awards of $29,997. The remaining deferred compensation balance related to
the restricted stock awards of $32,000 will be recognized as compensation
expense over the remaining vesting period. Outstanding fixed awards and
variable awards as of December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Series E preferred stock:
Fixed awards..................................... 3,664 6,821
Variable awards.................................. 1,057 --
--------- ---------
Total Series E awards.......................... 4,721 6,821
========= =========
Class A common stock:
Fixed awards..................................... 1,152,605 3,884,821
Variable awards.................................. 1,390,394 --
--------- ---------
Total Class A awards........................... 2,542,999 3,884,821
========= =========
</TABLE>
The Chief Executive Officer and the Executive Vice President were issued
variable restricted stock awards outside of the Restricted Stock Plan. Upon the
initial public offering, the variable stock awards became fixed. At that point,
the Company recorded deferred compensation expense based the difference between
the estimated fair value and the exercise price of the award. The company
recorded $19,613 as deferred compensation related to these awards and will
recognize that as compensation expense over the related vesting periods, of
which $14,809 was recorded as compensation expense for the year ended December
31, 1999.
13. Employee and Director Stock Option Plan
On July 22, 1999, the Company implemented the 1999 Stock Option Plan to
allow employees and members of the Board of Directors to acquire shares of
class B common stock. The options have an option term of 10 years, ratable
vesting over a three to four year period, exercise prices equal to the
estimated fair value of the underlying class B common stock on the date of
award and restrictions on exercisability until (i) a qualified initial public
offering (IPO) to which the class A voting common stock has been registered
under the Securities Act of 1933 for aggregate proceeds of $20,000, (ii) the
sale of all or substantially all of the assets of the Company or (iii) the sale
of all or substantially all of the outstanding capital stock of the Company.
The Company has reserved 1,814,321 shares of class A common stock for issuance
under this plan.
The 581,967 stock options awarded during the period from July 22, 1999 to
November 23, 1999 represented variable awards since their exercisability was
restricted until the completion of the initial public offering, sale of assets
or sale of the Company. Therefore, the measurement date occurred when the
exercisability restrictions were relieved, upon the initial public offering. At
that point, the Company recorded deferred compensation expense based on the
difference between the initial public offering of $20.00 per share and the
exercise price of the award. All awards after the initial public offering are
fixed awards. The Company recorded $11,050 as deferred compensation related to
the stock option awards and will recognize expense over the related vesting
periods, of which $1,473 was recorded as compensation expense for the year
ended December 31, 1999.
F-29
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
A summary of the status of the Company's stock option plan is presented
below:
<TABLE>
<CAPTION>
Weighted
Average
Remaining Weighted
Option Price Contractual Average
Range per Life Exercise
Shares share (Years) Price
------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Outstanding at December 31,
1998......................... -- $ -- -- $ --
Granted..................... 611,967 $0.0065-$37.88 3.2 $ 128
Exercised................... -- -- -- --
Forfeited................... (66,470) $ 0.0065 3.1 $0.0065
------- -------------- --- -------
Outstanding at December 31,
1999......................... 545,497 $0.0065-$37.88 3.2 $ 1.43
======= ============== === =======
Options vested at December 31,
1999......................... 76,801 $ 0.0065 3.1 $0.0065
======= ============== === =======
</TABLE>
No options were exercisable as of December 31, 1999.
Options Outstanding at December 31, 1999
----------------------------------------
<TABLE>
<CAPTION>
Weighted Average
Remaining
Weighted Average Number of Contractual Life
Exercise Price Shares (Years)
---------------- --------- ----------------
<S> <C> <C>
$ 0065 515,497 3.1
$20.00 20,000 4.0
$37.88 10,000 4.0
------ ------- ---
$ 1.43 545,497 3.2
====== ======= ===
</TABLE>
During the year ended December 31, 1999, the Company granted options to
purchase 611,967 shares of common stock, of which options to purchase 601,967
shares of common stock were granted at exercise prices below fair market value.
Options Granted for the Year Ended December 31, 1999
----------------------------------------------------
<TABLE>
<CAPTION>
Market Price
Weighted Average of Stock on Fair Value Weighted Average
Shares Exercise Price Grant Date of Options Remaining Life (year)
------ ---------------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C>
581,967 $0.0065 $20.00 $20.00 3.1
10,000 $ 20.00 $20.00 $18.34 3.9
10,000 $ 20.00 $36.97 $34.82 4.0
10,000 $ 37.88 $39.25 $36.09 4.0
------- ------- ------------- ------------- ---
611,967 $ 1.28 $20.00-$39.25 $18.34-$36.09 3.2
======= ======= ============= ============= ===
</TABLE>
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has elected to continue to follow the provisions of Accounting
Principle Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to
Employees," and to adopt the disclosure only provision of SFAS No. 123. If
compensation expense had been recorded based on the fair value at the grant
dates for awards under the Plan, the Company's pro forma net loss, pro forma
basic net loss per share and pro forma diluted net loss per share would have
been the same as their respective reported balances disclosed in the financial
statements.
F-30
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions used for
grants issued during the year ended December 31, 1999: volatility factor of
100%, weighted average expected life of 10 years, weighted-average risk free
interest rate of 6%, and no dividend yield. The weighted average fair value of
grants made during the year ended December 31, 1999 was $20.52.
14. Preferred and Common Stock Subscriptions Receivable
In connection with the AT&T Transaction described in Note 9 and the
acquisitions described in Note 10, the Company received various cash
commitments from the Cash Equity Investors in exchange for Series C preferred
stock and various classes of common stock. Through December 31, 1998 and 1999
the Company received $52,000 and $23,696 of the commitment. The Company has
recorded a preferred stock subscription receivable of $75,914 and $97,001 as of
December 31, 1998 and 1999, respectively, as a reduction to the mandatorily
redeemable preferred stock and a common stock subscription receivable of $86
and $191 as of December 31, 1998 and 1999, respectively, as a reduction to
stockholders' equity (deficit) for the unpaid commitment.
As of December 31, 1999, the agreements require the initial investors other
than AT&T Wireless to fund their unconditional and irrevocable obligations in
installments in accordance with the following schedules:
<TABLE>
<CAPTION>
For the year ended December 31, Amount
------------------------------- -------
<S> <C>
2000.............................................................. $37,650
2001.............................................................. 48,351
2002.............................................................. 11,000
-------
Total........................................................... $97,001
=======
</TABLE>
15. Income Taxes
There was no provision for income tax for the years ended December 31, 1997,
1998 and 1999, respectively. The tax effect of temporary differences which
gives rise to significant portions of the deferred tax assets as of December
31, 1998 and 1999, respectively, are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
-------- ---------
<S> <C> <C>
Capitalized start-up costs.............................. $ 17,599 $ 13,517
Net operating losses.................................... 3,635 92,579
Depreciation and amortization........................... 289 (14,180)
Original Issue Discount................................. 175 11,461
Other................................................... (843) 1,402
-------- ---------
20,855 104,779
Less valuation allowance................................ (20,855) (104,779)
-------- ---------
$ -- $ --
======== =========
</TABLE>
For federal income tax purposes, start-up costs are being amortized over
five years starting January 1, 1999 when active business operations commenced.
As of December 31, 1999, the Company had approximately $244,000 of net
operating losses. The net operating losses will begin to expire in 2012. There
may be a limitation on the annual utilization of net operating losses and
capitalized start-up costs as a result of certain
F-31
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
ownership changes that have occurred since the Company's inception. A valuation
allowance is recognized if, based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred tax asset will
not be realized. Based on the Company's financial results, management has
concluded that a full valuation allowance for all of the Company's deferred tax
assets is appropriate.
A reconciliation between income taxes from operations computed using the
federal statutory income tax rate and the Company's effective tax rate is as
follows:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Federal tax at statutory rates................................ 34.0%
State tax expense............................................. 3.5%
Stock based compensation...................................... (4.1%)
Change in valuation allowance................................. (33.4%)
-----
0.0%
=====
</TABLE>
16. Commitments
In May 1998, the Company entered into a vendor procurement contract (the
Vendor Procurement Contract) with Lucent, pursuant to which the Company may
purchase up to $285,000 of radio, switching and related equipment and services
for the development of the Company's wireless communications network. At
December 31, 1998 and 1999, the Company has purchased approximately $90,900 and
$294,500, respectively, of equipment and services from Lucent since the
inception of the Vendor Procurement Contract.
The Company has operating leases primarily related to retail store
locations, distribution outlets, office space, and rent for the Company's
network build-out. The terms of some of the leases include a reduction of
rental payments and scheduled rent increases at specified intervals during the
term of the leases. The Company is recognizing rent expense on a straight-line
basis over the life of the lease, which establishes deferred rent on
the balance sheet. As of December 31, 1999, the aggregate minimum rental
commitments under non-cancelable operating leases are as follows:
<TABLE>
<S> <C>
For the Year Ended December 31;
2000........................................................ $ 21,605
2001........................................................ 21,375
2002........................................................ 21,057
2003........................................................ 18,374
2004........................................................ 10,330
Thereafter.................................................. 27,999
--------
Total..................................................... $120,740
========
</TABLE>
Rental expense was approximately $157, $3,193 and $13,792 for the years
ended December 31, 1997, 1998, and 1999, respectively.
The Company has entered into letters of credit to facilitate local business
activities. The Company is liable under the letters of credit for
nonperformance of certain criteria under the individual contracts. The total
amount of outstanding letters of credit was $1,425 and $1,576 at December 31,
1998 and 1999, respectively. The outstanding letters of credit reduce the
amount available to be drawn under the Senior Credit Facility (see Note 8). The
Company is unaware of any events that would have resulted in nonperformance of
a contract during the years ended December 31, 1998 and 1999.
F-32
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
The Company has minimum purchase commitments of 15 million roaming minutes
from July 1999 to January 2002 from another wireless provider in Puerto Rico
relating to customers roaming outside its coverage area. The Company believes
it will be able to meet these minimum requirements.
Additionally, the Company has an obligation to AT&T Wireless to purchase a
minimum number of minutes of traffic annually over a specified time period and
a specified number of dedicated voice and data leased lines in order for it to
retain preferred pricing rates. The Company believes it will be able to meet
these minimum requirements.
17. Related Parties
The Company receives site acquisition, construction management, program
management, microwave relocation, and engineering services pursuant to a Master
Services Agreement with WFI. The Chief Executive Officer and Executive Vice
President and Chief Financial Office of the Company were formerly stockholders
and senior officers of WFI. Fees for the above services are as follows: $12 per
site for site acquisition services, $7 per site for construction management
services, $9 per site for program management and $1 for microwave relocation
services for all of the Company's existing regions. Fees for engineering
services are based upon WFI's customary hourly rates. For the years ended
December 31, 1997, 1998 and 1999, the Company paid $1,940, $30,720 and $75,975,
respectively, to WFI for these services. As of December 31, 1997, 1998 and
1999, the Company owed WFI $171, $21,178 and $15,053, respectively. Subsequent
to December 31, 1997, the Chief Executive Officer and Executive Vice President
sold 100% of their interests in WFI.
In April 1997, Holding entered into an agreement to transfer PCS licenses,
operating assets, liabilities and U.S. Government financing, for the Houston,
Tampa, Melbourne and Orlando BTAs to four newly-formed entities created by
Holding's existing stockholder group: THC of Houston, Inc.; THC of Tampa, Inc.;
THC of Melbourne, Inc.; and THC of Orlando, Inc. (the THC entities). These
assets and liabilities were transferred in exchange for investment units of the
newly-formed THC entities which consisted of class A, B and C common stock and
series A preferred stock in August 1997. The carrying amount of the total
assets and liabilities transferred was $15,679 and $12,034, respectively.
Simultaneously, Holding reacquired shares of its preferred and common stock in
a $6,370 partial stock redemption through the exchange of the investment units
in the newly-formed companies of $3,645, which represented the net difference
between the cost of the assets and liabilities transferred and the issuance of
an aggregate of $2,725, of notes payable to those newly-formed THC entities.
As a result of this transfer, Holding no longer retains any ownership
interest in the THC entities. Because this transaction was non-monetary in
nature and occurred between entities with the same stockholder group, the
transaction was recorded at historical cost. Subsequent to the transfer, the
Company reduced the notes payable by $653 which represented certain costs
incurred by the Company on behalf of the THC entities for the year ended
December 31, 1997 pursuant to Transfer Agreements and Management Agreements.
The combined amounts owed THC Houston, Inc., THC Tampa, Inc., THC Melbourne,
Inc., and THC Orlando, Inc. of $2,073 as of December 31, 1997 were repaid in
full during 1998. As of December 31, 1998 and December 31, 1999, the combined
amounts owed by the Company to THC Houston, Inc., THC Tampa, Inc., THC
Melbourne, Inc., and THC Orlando, Inc. were $547 and $0, respectively.
The Executive Vice President and Chief Financial Officer serves as a
consultant to ML Strategies, a division of the law firm, Mintz, Levin, Cohn,
Ferris, Glozsky, and Popeo, PC (the Firm). The Firm also provides services for
the Company. The Company incurred $506 during the year ended December 31, 1999
related services performed by the Firm and the Company owed the Firm $50 at
December 31, 1999.
F-33
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
As of December 31, 1997, the Company had amounts payable of $824, to
TeleCorp WCS, Inc. (WCS), an affiliate, formerly TeleCorp Management
Corporation, Inc. The amount payable to WCS represented $1,200 of funds
received by the Company on behalf of WCS related to wireless communications
service licenses owned by WCS reduced by expenses and other payments owed by
WCS to the Company. The entire balance due WCS as of December 31, 1997 was
repaid during 1998.
Pursuant to a Management Agreement, TeleCorp Management Corp. (TMC) provides
assistance to the Company in the form of administrative, operational,
marketing, regulatory and general business services. For these services,
beginning in July 1998, the Company pays a management fee to TMC of $550 per
year plus reimbursement of certain business expenses, payable in equal monthly
installments, plus an annual bonus. The management agreement has a five-year
term, but may be terminated by the Company upon the occurrence of certain
defined events. TMC may terminate the agreement at any time with proper notice.
The Officers of TMC own all of the ownership interest in TMC. For the years
ended December 31, 1998 and 1999, the Company paid approximately $533 and 1,665
respectively, to TMC for these services.
The Company has entered into a Master Site Lease Agreement with American
Towers, Inc., a company partially owned by certain stockholders of the Company.
Under this arrangement American Towers provides network site leases for PCS
deployment. The Company has incurred $17 and $77 expense for the years ended
December 31, 1998 and 1999, respectively.
18. Defined Contribution Plan
During 1998, the Company established the TeleCorp Communications, Inc.
401(k) Plan (the 401(k) Plan), a defined contribution plan in which all
employees over the age of 21 are immediately eligible to participate in the
401(k) Plan. TeleCorp Communications, Inc. is a wholly-owned subsidiary of the
Company. Under the 401(k) Plan, participants may elect to withhold up to 15% of
their annual compensation, limited to $160 of total compensation as adjusted
for inflation. The Company may make a matching contribution based on a
percentage of the participant's contributions. Participants vest in the
Company's matching contributions as follows: 20% after one year; 60% after two
years and 100% after three years. Total Company contributions to the 401(k)
Plan were $505 and $888 for the years ended December 31, 1998 and 1999,
respectively.
F-34
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
19. Subsidiary Guarantee
On April 23, 1999, the Company completed the issuance and sale of 11 5/8%
Senior Subordinated Discount Notes. The Notes are fully and unconditionally
guaranteed on a joint and several basis by TeleCorp Communications, Inc., one
of the Company's wholly-owned subsidiaries. Summarized financial information of
TeleCorp, TeleCorp Communications, Inc. and non-guarantor subsidiaries as of
December 31, 1998 and 1999, and for the years ended December 31, 1998 and 1999
are as follows:
Balance Sheet Information as of December 31, 1998:
<TABLE>
<CAPTION>
TeleCorp
Communications,
Inc.--Guarantor Non-Guarantor
TeleCorp Subsidiary Subsidiaries Eliminations Consolidated
-------- --------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 93,047 $ 21,441 $ (2,755) $ -- $111,733
Accounts receivable.... -- -- -- -- --
Inventory.............. -- 778 -- -- 778
Intercompany
receivables........... 279,078 -- -- (279,078) --
Prepaid expenses....... -- 812 1,374 -- 2,186
Other current assets... 637 581 -- -- 1,218
-------- -------- -------- --------- --------
Total current assets... 372,762 23,612 (1,381) (279,078) 115,915
Property and equipment,
net.................... 1,499 90,072 105,915 (17) 197,469
PCS licenses and
microwave relocation
Costs.................. -- 12,457 105,650 -- 118,107
Intangible assets--AT&T
agreements............. -- -- 26,285 -- 26,285
Deferred financing
costs, net............. 8,585 -- -- -- 8,585
Other assets............ 4,370 7 276 (4,370) 283
-------- -------- -------- --------- --------
Total assets.......... $387,216 $126,148 $236,745 $(283,465) $466,644
======== ======== ======== ========= ========
LIABILITIES, MANDATORILY
REDEEMABLE PREFERRED
STOCK AND
SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Due to affiliates...... $ -- $ 92,923 $186,155 $(279,078) $ --
Accounts payable....... -- 8,331 6,261 -- 14,592
Accrued expenses....... 13 41,645 53,214 -- 94,872
Microwave relocation
obligation............ -- 6,636 -- -- 6,636
Accrued interest....... 3,992 -- 499 -- 4,491
-------- -------- -------- --------- --------
Total current
liabilities.......... 4,005 149,535 246,129 (279,078) 120,591
Long-term debt.......... 235,460 -- 7,925 -- 243,385
Microwave relocation
obligation............. -- 2,481 -- -- 2,481
Accrued expenses and
other.................. -- -- 196 -- 196
-------- -------- -------- --------- --------
Total liabilities..... 239,465 152,016 254,250 (279,078) 366,653
-------- -------- -------- --------- --------
Mandatorily redeemable
preferred stock........ 240,409 -- -- -- 240,409
Deferred compensation... -- (4) -- -- (4)
Treasury stock.......... -- -- -- -- --
Preferred stock
subscriptions
Receivable............. (75,914) -- -- -- (75,914)
-------- -------- -------- --------- --------
Total mandatorily
redeemable preferred
stock.................. 164,495 (4) -- -- 164,491
-------- -------- -------- --------- --------
Series F preferred
stock.................. 103 -- -- -- 103
Common stock............ 493 -- -- -- 493
Additional paid in
capital................ -- -- 4,370 (4,370) --
Deferred compensation... -- (7) -- -- (7)
Common stock
subscriptions
Receivable............. (86) -- -- -- (86)
Treasury stock.......... -- -- -- -- --
Accumulated deficit..... (17,254) (25,856) (21,875) (17) (65,003)
-------- -------- -------- --------- --------
Total shareholders'
equity (deficit)..... (16,744) (25,864) (17,505) (4,387) (64,500)
-------- -------- -------- --------- --------
Total liabilities and
shareholders' equity
(deficit)............ $387,216 $126,148 $236,745 $(283,465) $466,644
======== ======== ======== ========= ========
</TABLE>
F-35
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Balance Sheet Information as of December 31, 1999:
<TABLE>
<CAPTION>
TeleCorp
Communications,
Inc.--Guarantor Non-Guarantor
TeleCorp Subsidiary Subsidiaries Eliminations Consolidated
---------- --------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 186,110 $ (2,724) $ (1,056) $ -- $ 182,330
Accounts receivable.... -- 23,443 138 -- 23,581
Inventory.............. -- 15,802 -- -- 15,802
Intercompany
receivables........... 831,623 (415,728) (415,895) -- --
Prepaid expenses....... -- 1,099 1,932 -- 3,031
Other current assets... 146 226 425 -- 797
---------- --------- --------- -------- ---------
Total current assets.. 1,017,879 (377,882) (414,456) -- 225,541
Property and equipment,
net................... 6,058 176,116 218,347 (71) 400,450
PCS licenses and
microwave relocation
costs................. 2,119 47,835 217,728 -- 267,682
Intangible assets--AT&T
agreements............. -- -- 37,908 -- 37,908
Deferred financing
costs, net............. 19,389 188 -- -- 19,577
Other assets............ 4,385 601 17,944 (21,886) 1,044
---------- --------- --------- -------- ---------
Total assets.......... $1,049,830 $(153,142) $ 77,471 $(21,957) $ 952,202
========== ========= ========= ======== =========
LIABILITIES, MANDATORILY
REDEEMABLE PREFERRED
STOCK AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable....... $ 96 $ 12,222 $ 26,585 $ -- $ 38,903
Accrued expenses....... (23) 48,983 3,017 -- 51,977
Microwave relocation
obligation............ -- 36,122 -- -- 36,122
Long-term debt, current
portion............... -- -- 1,361 -- 1,361
Accrued interest....... 675 -- 712 -- 1,387
Deferred revenue....... -- 1,709 -- -- 1,709
---------- --------- --------- -------- ---------
Total current
liabilities.......... 748 99,036 31,675 -- 131,459
Long-term debt.......... 622,795 -- 16,415 -- 639,210
Microwave relocation
obligation............. -- 2,365 -- -- 2,365
Accrued expenses........ -- -- 6,541 -- 6,541
---------- --------- --------- -------- ---------
Total liabilities..... 623,543 101,401 54,631 -- 779,575
---------- --------- --------- -------- ---------
Mandatorily redeemable
preferred Stock........ 360,182 -- -- -- 360,182
Preferred stock
subscriptions
Receivable............. (97,001) -- -- -- (97,001)
---------- --------- --------- -------- ---------
Total mandatorily
redeemable preferred
stock................ 263,181 -- -- -- 263,181
---------- --------- --------- -------- ---------
Stockholders' equity
(deficit):
Series F preferred
stock................. 149 -- -- -- 149
Common stock........... 856 -- -- -- 856
Additional paid in
capital............... 267,442 -- 21,886 (21,886) 267,442
Deferred compensation.. (42,811) -- -- -- (42,811)
Common stock
subscriptions
Receivable............ (191) -- -- -- (191)
Treasury stock......... -- -- -- -- --
Accumulated deficit.... (62,339) (254,543) 954 (71) (315,999)
---------- --------- --------- -------- ---------
Total shareholders'
equity (deficit)..... 163,106 (254,543) 22,840 (21,957) (90,554)
---------- --------- --------- -------- ---------
Total liabilities,
mandatorily
redeemable preferred
stock and
shareholders' equity
(deficit)............ $1,049,830 $(153,142) $ 77,471 $(21,957) $ 952,202
========== ========= ========= ======== =========
</TABLE>
F-36
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Statement of Operations Information for the year ended December 31, 1998:
<TABLE>
<CAPTION>
TeleCorp
Communications,
Inc.--Guarantor Non-Guarantor
TeleCorp Subsidiary Subsidiaries Eliminations Consolidated
-------- --------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Service............... $ -- $ -- $ -- $ -- $ --
Roaming............... -- 29 -- -- 29
Equipment............. -- 777 261 (1,038) --
-------- -------- -------- ------- --------
Total revenue....... -- 806 261 (1,038) 29
-------- -------- -------- ------- --------
Operating expenses:
Cost of revenue....... -- -- -- -- --
Operations and
development.......... -- 5,218 4,675 (121) 9,772
Selling and
marketing............ -- 4,920 1,405 -- 6,325
General and
administrative....... 975 16,137 10,027 (900) 26,239
Depreciation and
amortization......... -- 459 1,125 -- 1,584
-------- -------- -------- ------- --------
Total operating
expense............ 975 26,734 17,232 (1,021) 43,920
-------- -------- -------- ------- --------
Operating loss...... (975) (25,928) (16,971) (17) (43,891)
Other (income) expense:
Interest expense...... 11,923 -- 11 -- 11,934
Interest income....... (4,427) (87) (183) -- (4,697)
Other expense......... 21 5 1 -- 27
-------- -------- -------- ------- --------
Net loss............ (8,492) (25,846) (16,800) (17) (51,155)
Accretion of mandatorily
redeemable Preferred
stock.................. (8,567) -- -- -- (8,567)
-------- -------- -------- ------- --------
Net loss
attributable to
common equity...... $(17,059) $(25,846) $(16,800) $ (17) $(59,722)
======== ======== ======== ======= ========
</TABLE>
F-37
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Statement of Operations Information for the year ended December 31, 1999:
<TABLE>
<CAPTION>
TeleCorp
Communications,
Inc.--Guarantor Non-Guarantor
TeleCorp Subsidiary Subsidiaries Eliminations Consolidated
--------- --------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Service............... $ -- $ 41,100 $ 4,282 $(4,063) $ 41,319
Roaming............... -- 29,010 -- -- 29,010
Equipment............. -- 17,353 -- -- 17,353
--------- --------- -------- ------- ---------
Total Revenue....... -- 87,463 4,282 (4,063) 87,682
Operating expenses:
Cost of revenue....... -- 39,259 -- -- 39,259
Operations and
development.......... 1,472 26,833 11,682 (4,008) 35,979
Selling and
marketing............ 937 69,514 729 -- 71,180
General and
administrative....... 30,579 59,296 2,710 -- 92,585
Depreciation and
amortization......... 787 20,910 33,413 -- 55,110
--------- --------- -------- ------- ---------
Total operating
expense............ 33,775 215,812 48,534 (4,008) 294,113
--------- --------- -------- ------- ---------
Operating loss...... (33,775) (128,349) (44,252) (55) (206,431)
Other (income) expense:
Interest expense...... 49,356 15 1,942 -- 51,313
Interest income....... (6,200) (243) (21) -- (6,464)
Other expense......... -- (147) (137) -- (284)
--------- --------- -------- ------- ---------
Net loss............ (76,931) (127,974) (46,036) (55) (250,996)
Accretion of mandatorily
redeemable Preferred
stock.................. (24,124) -- -- -- (24,124)
--------- --------- -------- ------- ---------
Net loss
attributable to
common equity...... $(101,055) $(127,974) $(46,036) $ (55) $(275,120)
========= ========= ======== ======= =========
</TABLE>
F-38
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Cash Flow Information For The Year Ended December 31, 1998:
<TABLE>
<CAPTION>
TeleCorp
Communications,
Inc.--Guarantor
TeleCorp Subsidiary
--------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (8,496) $(26,645)
Adjustment to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... -- 581
Noncash interest expense associated with Lucent
notes and senior subordinated debt............... 460 --
Amortization of deferred financing costs.......... 525 --
Changes in cash flow from operations resulting
from changes in assets and liabilities:
Accounts receivable............................... (57) (473)
Inventory......................................... -- (778)
Prepaid expenses.................................. -- (816)
Other current assets.............................. (580) (104)
Other assets...................................... -- (7)
Accounts payable.................................. -- 2,260
Accrued expenses.................................. 13 16,211
Accrued interest.................................. 3,992 --
--------- --------
Net cash used in operating activities........... (4,143) (9,771)
--------- --------
Cash flows from investing activities:
Expenditures for network under development,
wireless network and property and Equipment...... -- (58,205)
Capitalized interest on network under development
and wireless network............................. (227) --
Expenditures for microwave relocation............. -- (3,339)
Purchase of PCS licenses.......................... (21,000) --
Partial refund of deposit on PCS licenses......... -- (61,544)
--------- --------
Net cash used in investing activities........... (21,227) (61,544)
--------- --------
Cash flows from financing activities:
Proceeds from sale of mandatorily redeemable
preferred stock.................................. 26,661 --
Direct issuance costs from sale of mandatorily
redeemable preferred stock....................... (1,027) --
Proceeds from sale of common stock................ 38 --
Proceeds from long-term debt...................... 235,000 --
Payments of deferred financing costs.............. (9,109) --
Proceeds from cash transfers from and expenses
paid by affiliates............................... 1,065 121,750
Payments on behalf of and transfers to
affiliates....................................... (134,215) (28,994)
--------- --------
Net cash provided by financing activities....... 118,417 92,756
--------- --------
Net increase in cash and cash equivalents......... 93,047 21,440
Cash and cash equivalents at the beginning of
period........................................... -- --
--------- --------
Cash and cash equivalents at the end of period.... $ 93,047 $ 21,441
========= ========
</TABLE>
F-39
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Cash Flow Information For The Year Ended December 31, 1999:
<TABLE>
<CAPTION>
TeleCorp
Communication,
Inc.--
Guarantor
TeleCorp Subsidiary
--------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (76,931) $(127,974)
Adjustment to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization...................... 787 18,102
Noncash compensation expense associated with the
issuance of restricted common stock and preferred
stock............................................. 31,817 --
Noncash accretion of Series E preferred stock......
Noncash interest expense associated with Lucent
Notes and High Yield facility..................... 26,895
Noncash general and administrative expense charged
by affiliates..................................... 2,962
Changes in cash flow from operations resulting from
changes in assets and liabilities:
Accounts receivable................................ -- (23,443)
Inventory.......................................... -- (15,024)
Prepaid expenses................................... -- (287)
Other current assets............................... 491 355
Other assets....................................... (15) 6,343
Accounts payable................................... 96 3,891
Accrued expenses................................... (36) 7,338
Accrued interest................................... (3,317) --
Deferred revenue................................... -- 1,709
--------- ---------
Net cash used in operating activities............ (20,213) (126,028)
--------- ---------
Cash flows from investing activities:
Expenditures for network under development,
wireless network and property and equipment....... (5,016) (92,575)
Capitalized interest on network under development
and wireless network.............................. (5,317) --
Expenditures for microwave relocation.............. -- (5,654)
Purchase of PCS licenses........................... (2,146) --
--------- ---------
Net cash used in investing activities............ (12,479) (98,229)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of mandatorily redeemable
preferred stock................................... 70,323 --
Proceeds from sale of common stock and series F
preferred stock................................... 21,725 --
Receipt of preferred stock subscription
receivable........................................ 9,414 --
Redeemable Preferred stock......................... (2,500) --
Proceeds associated with IPO....................... 197,317 --
Costs associated with IPO.......................... (1,801) --
Proceeds from long-term debt....................... 236,502 --
Payments of deferred financing costs............... (12,742) --
Proceeds from cash transfers from and expenses paid
by affiliates..................................... (392,483) 200,092
--------- ---------
Net cash provided by financing activities........ 125,755 200,092
--------- ---------
Net increase in cash and cash equivalents........ 93,063 (24,165)
Cash and cash equivalents at the beginning of
period.......................................... 93,047 21,441
--------- ---------
Cash and cash equivalents at the end of period..... $ 186,110 $ (2,724)
========= =========
</TABLE>
F-40
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
20. Subsequent Events
Acquisitions
On April 7, 2000, the Company completed its acquisition of TeleCorp LMDS,
Inc. (TeleCorp LMDS) through an exchange of all of the outstanding stock of
TeleCorp LMDS for 878,400 shares of the Company's class A common stock valued
at $45,896. TeleCorp LMDS's stockholders are Mr. Vento, Mr. Sullivan and three
of the Company's initial investors. As Mr. Vento and Mr. Sullivan have voting
control of the Company and TeleCorp LMDS, the acquisition is accounted for as
an acquisition between companies under common control. The licenses acquired
will be recorded by the Company at $2,707 which represents the cost basis of
TeleCorp LMDS. The remaining $43,189 is considered a distribution to
shareholders of TeleCorp LMDS. By acquiring TeleCorp LMDS, TeleCorp gained
local multipoint distribution service licenses covering 1100 MHz of airwaves in
the Little Rock, Arkansas basic trading area and 150 MHz of airwaves in each of
the Beaumont, Texas; New Orleans, Louisiana; San Juan and Mayaguez, Puerto
Rico; and U.S. Virgin Islands basic trading areas.
On April 11, 2000, the Company completed its acquisition of the 15% of Viper
Wireless, Inc. (Viper Wireless) that it did not already own from Mr. Vento and
Mr. Sullivan in exchange for an aggregate of 323,372 shares of TeleCorp's class
A common stock and 800 shares of its series E preferred stock. The Company
acquired 85% of Viper Wireless on March 1, 1999 in exchange for $32,286
contributed by AT&T and certain of the Company's other initial investors for
additional shares of its preferred and common stock. Viper Wireless used the
proceeds to participate in the Federal Communications Commission's reauction of
PCS licenses. Viper Wireless was subsequently granted six PCS licenses in the
reauction. In connection with the final closing, the Company recognized
compensation expense of $15,297 based on the fair value of the class A common
stock and series E preferred stock at the date of issuance.
On April 27, 2000, the Company completed its acquisition of 15 MHz of
additional airwaves in the Lake Charles, Louisiana basic trading area from Gulf
Telecom, LLC (Gulf Telecom). As consideration for the additional airwaves the
Company paid Gulf Telecom $262 in cash, assumed approximately $2,400 in Federal
Communications Commission debt related to the license and reimbursed Gulf
Telecom $471 for interest it paid to the Federal Communications Commission on
the debt related to the license from June 1998 through March 2000. The entire
purchase price will be allocated to acquired licenses.
Tritel Merger and Contribution and exchange with AT&T Wireless
On February 28, 2000, the Company agreed to merge with Tritel, Inc. through
a merger of each of the Company and Tritel into a newly formed subsidiary of a
new holding company. The merger will result in exchange of 100% of the
outstanding common and preferred stock of the Company and Tritel for common and
preferred stock of the newly formed entity, to be called TeleCorp PCS, Inc. The
new entity will be controlled by the Company's voting preference common
stockholders. Both the Company and Tritel will become subsidiaries of the
holding company.
This transaction will be accounted for using the purchase method of
accounting. The purchase price for Tritel will be determined based on the fair
value of the shares of the new holding company issued to the former
shareholders of Tritel plus cash, the fair value associated with the conversion
of outstanding Tritel options and warrants to holding company options and
warrants, liabilities assumed, and merger related costs. The fair value of the
shares issued will be determined based on the existing market price of the
Company's class A common
F-41
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
stock, which is publicly traded, and, for those shares that do not have a
readily available market price, through valuation by an investment banking
firm. The purchase price for this transaction will be allocated to the assets
acquired based on their estimated fair values. The excess of the purchase price
over the assets acquired will be recorded as goodwill and amortized over 20
years.
The proposed merger has been unanimously approved by the Company's and
Tritel's board of directors, with three of the Company's directors abstaining.
In addition, shareholders with greater than 50% of the voting power of each
company have agreed to vote in favor of the merger. The merger is subject to
regulatory approval and other conditions and is expected to close in the last
quarter of 2000.
In connection with the Company's merger with Tritel, AT&T has agreed to
contribute certain assets and rights to the Company. This contribution will
result in the Company acquiring various assets in exchange for the
consideration issued as follows:
The Company acquires:
. $20,000 cash from AT&T Wireless Services.
. The right to acquire all of the common and preferred stock of
Indus, Inc. (Indus).
. The right to acquire additional wireless properties and assets
from Airadigm Communications, Inc. (Airadigm).
. The two year extension and expansion of the AT&T network
membership licenses agreement to cover all people in Holding
Company's markets.
Consideration issued:
. 9,272,740 shares of class A common stock of the new holding
company formed from the Tritel merger to AT&T Wireless
Services.
Separately, AT&T Wireless and the Company entered into an Asset Exchange
Agreement pursuant to which the Company has agreed to exchange certain assets
with AT&T Wireless, among other consideration.
The Company is receiving certain consideration in exchange for assets as
follows:
The Company acquires:
. $80,000 in cash from AT&T Wireless.
. AT&T Wireless 10 MHZ PCS licenses in the areas covering part of
the Wisconsin market, in addition to adjacent licenses.
. AT&T Wireless's existing 10MHZ PCS licenses in Fort Dodge, and
Waterloo, Iowa.
. The right to acquire additional wireless properties from Polycell
Communications, Inc. (Polycell) and ABC Wireless, L.L.C. (ABC
Wireless).
F-42
<PAGE>
TELECORP PCS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
($ in thousands, except per share data)
Consideration issued:
. The Company's New England Market Segment to AT&T Wireless.
. Cash or class A common stock to Polycell and cash to ABC Wireless.
Further, AT&T has agreed to extend the term of the roaming agreement and to
expand the geographic Coverage of the AT&T operating agreements with TeleCorp
to include the new markets, either through amending TeleCorp's existing
agreements or by entering into new agreements with Holding Company on
substantially the same terms as TeleCorp's existing agreements. In addition,
TeleCorp has granted AT&T Wireless a "right of first refusal" with respect to
certain markets transferred by AT&T Wireless Services or AT&T Wireless
triggered in the event of a sale of the Company to a third party.
These transactions will be accounted for as an asset purchase and
disposition and recorded at fair value. The purchase price will be determined
based on cash paid, the fair value of the Class A common stock issued, and the
fair value of the assets relinquished. The purchase price will be
proportionately allocated to the noncurrent assets acquired based on their
estimated fair values. A gain is recognized as the difference between the fair
value of the New England assets disposed and their net book value. This
transaction is also subject to regulatory approval and other conditions and is
expected to close in the second half of 2000. The failure of these transactions
to occur does not prevent the Tritel merger from occurring.
F-43
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Tritel, Inc.:
We have audited the accompanying consolidated balance sheets of Tritel, Inc.
and subsidiaries (the Company) as of December 31, 1998 and 1999, and the
related consolidated statements of operations, members' and stockholders'
equity, and cash flows for each of the years in the three year period ended
December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Tritel, Inc. and subsidiaries as of December 31, 1998 and 1999, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 1999 in conformity with generally accepted
accounting principles.
KPMG LLP
Jackson, Mississippi
February 18, 2000, except with
respect to Note 21 which is
as of February 28, 2000
F-44
<PAGE>
TRITEL, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1999
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1999
-------- ----------
(amounts in
thousands, except
share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 846 $ 609,269
Due from affiliates.................................... 241 2,565
Accounts receivable, net............................... -- 5,040
Inventory.............................................. -- 8,957
Prepaid expenses and other current assets.............. 719 4,733
-------- ----------
Total current assets................................. 1,806 630,564
-------- ----------
Restricted cash.......................................... -- 6,594
Property and equipment, net.............................. 13,816 262,343
Federal Communications Commission licensing costs, net... 71,466 201,946
Intangible assets, net................................... -- 59,508
Other assets............................................. 1,933 35,407
-------- ----------
Total assets......................................... $ 89,021 $1,196,362
======== ==========
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.......................................... $ 22,405 $ --
Current maturities of long-term debt................... -- 923
Accounts payable....................................... 8,221 103,677
Accrued liabilities.................................... 2,285 9,647
-------- ----------
Total current liabilities............................ 32,911 114,247
-------- ----------
Non-current liabilities:
Long-term debt......................................... 51,599 557,716
Note payable to related party.......................... 6,270 --
Deferred income taxes and other liabilities............ 224 37,367
-------- ----------
Total non-current liabilities........................ 58,093 595,083
-------- ----------
Total liabilities.................................... 91,004 709,330
-------- ----------
Series A 10% redeemable convertible preferred stock...... -- 99,586
Stockholders' equity:
Preferred stock, 3,100,000 shares authorized:
Series D, 46,374 shares outstanding at December 31,
1999................................................ -- 46,374
Common stock, 30 shares issued and outstanding at
December 31, 1998..................................... -- --
Common stock issued and outstanding at December 31,
1999
Class A Voting--97,796,906 shares; Class B Non-voting--
2,927,120 shares; Class C--1,380,448 shares; Class D--
4,962,804 shares; Voting Preference--6 shares......... -- 1,071
Contributed capital--Predecessor Companies............. 13,497 --
Additional paid in capital............................. -- 611,277
Accumulated deficit.................................... (15,480) (271,276)
-------- ----------
Total stockholders' equity (deficit)................. (1,983) 387,446
-------- ----------
Total liabilities, redeemable preferred stock and
stockholders' equity................................ $ 89,021 $1,196,362
======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-45
<PAGE>
TRITEL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1998 1999
------- -------- ---------
(amounts in thousands,
except per share data)
<S> <C> <C> <C>
Revenues........................................ $ -- $ -- $ 6,759
------- -------- ---------
Operating expenses:
Cost of services and equipment................ -- -- 6,966
Technical operations.......................... 104 1,939 18,459
General and administrative.................... 3,123 4,947 22,915
Sales and marketing........................... 28 452 20,404
Stock-based compensation...................... -- -- 190,664
Depreciation and amortization................. 20 348 12,839
------- -------- ---------
Total operating expenses.................... 3,275 7,686 272,247
------- -------- ---------
Operating loss.................................. (3,275) (7,686) (265,488)
Interest income................................. 121 77 16,791
Financing cost.................................. -- -- (2,230)
Interest expense................................ -- (722) (24,970)
------- -------- ---------
Loss before extraordinary item and income
taxes.......................................... (3,154) (8,331) (275,897)
Income tax benefit.............................. -- -- 28,443
------- -------- ---------
Loss before extraordinary items................. (3,154) (8,331) (247,454)
Extraordinary item--
Loss on return of spectrum.................... -- (2,414) --
------- -------- ---------
Net loss........................................ (3,154) (10,745) (247,454)
Series A preferred dividend requirement......... -- -- (8,918)
------- -------- ---------
Net loss available to common stockholders....... $(3,154) $(10,745) $(256,372)
======= ======== =========
Basic and diluted net loss per share............ $ (33.25)
=========
Weighted Average Common Shares Outstanding...... 7,710,649
=========
</TABLE>
See accompanying notes to consolidated financial statements.
F-46
<PAGE>
TRITEL, INC.
CONSOLIDATED STATEMENTS OF MEMBERS' AND STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Additional Members' and
Preferred Common Contributed Paid in Accumulated Stockholders'
Stock Stock Capital Capital Deficit Equity
--------- ------ ----------- ---------- ----------- -------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... $ -- $ -- $ 7,255 $ -- $ (1,581) $ 5,674
Contributed capital, net
of expenses of $148.... -- -- 5,437 -- -- 5,437
Conversion of debt to
members' equity........ -- -- 805 -- -- 805
Net loss................ -- -- -- -- (3,154) (3,154)
--------- ------ -------- -------- --------- ---------
Balance at December 31,
1997................... -- -- 13,497 -- (4,735) 8,762
Net loss................ -- -- -- -- (10,745) (10,745)
--------- ------ -------- -------- --------- ---------
Balance at December 31,
1998................... -- -- 13,497 -- (15,480) (1,983)
Conversion of debt to
members' equity in
Predecessor Company.... -- -- 8,976 -- -- 8,976
Series C Preferred Stock
issued to Predecessor
Company, including
distribution of assets
and liabilities........ 17,193 -- (22,473) -- 576 (4,704)
Series C Preferred Stock
issued in exchange for
cash................... 163,370 -- -- -- -- 163,370
Payment of preferred
stock issuance costs... (8,507) -- -- -- -- (8,507)
Series C Preferred Stock
issued to Central
Alabama in exchange for
net assets............. 2,602 -- -- -- -- 2,602
Series D Preferred Stock
issued to AT&T Wireless
in exchange for
licenses and other
agreements............. 46,374 -- -- -- -- 46,374
Grant of unrestricted
rights in common stock
to officer............. -- -- -- 4,500 -- 4,500
Conversion of preferred
stock into common
stock.................. (174,658) 783 -- 173,875 -- --
Sale of common stock,
net of issuance costs
of $15,338............. -- 288 -- 242,238 -- 242,526
Stock-based
compensation........... -- -- -- 190,664 -- 190,664
Accrual of dividends on
Series A redeemable
preferred stock........ -- -- -- -- (8,918) (8,918)
Net loss................ -- -- -- -- (247,454) (247,454)
--------- ------ -------- -------- --------- ---------
Balance at December 31,
1999................... $ 46,374 $1,071 $ -- $611,277 $(271,276) $ 387,446
========= ====== ======== ======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-47
<PAGE>
TRITEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1998 1999
------- -------- ---------
(amounts in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(3,154) $(10,745) $(247,454)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on return of spectrum..................... -- 2,414 --
Financing costs................................ -- -- 2,230
Depreciation and amortization.................. 20 348 12,839
Stock-based compensation and grant of
unrestricted rights in common stock to
officer....................................... -- -- 195,164
Accretion of discount on debt and amortization
of debt issue costs........................... -- -- 10,608
Deferred income tax benefit.................... -- -- (28,443)
Changes in operating assets and liabilities:
Inventory...................................... -- -- (8,957)
Accounts payable and accrued expenses.......... 45 (180) 24,659
Other current assets and liabilities........... (814) (333) (11,721)
------- -------- ---------
Net cash used in operating activities........ (3,903) (8,496) (51,075)
------- -------- ---------
Cash flows from investing activities:
Capital expenditures........................... (6) (5,970) (172,448)
Payment for Federal Communications Commission
licenses...................................... (3,935) -- --
Refund of Federal Communications Commission
deposit....................................... 1,376 -- --
Advance under notes receivable................. -- -- (7,550)
Capitalized interest on network construction
and Federal Communications Commission
licensing costs............................... (415) (2,905) (13,623)
Increase in restricted cash.................... -- -- (6,594)
Other.......................................... (72) -- (614)
------- -------- ---------
Net cash used in investing activities........ (3,052) (8,875) (200,829)
------- -------- ---------
Cash flows from financing activities:
Proceeds from notes payable to related
parties....................................... 5,700 -- --
Proceeds from notes payable.................... 5,000 38,705 --
Proceeds from long-term debt................... -- -- 300,000
Proceeds from senior subordinated discount
notes......................................... -- -- 200,240
Repayments of notes payable.................... (6,200) (21,300) (22,100)
Payment of preferred stock issuance costs...... -- -- (8,507)
Payment of debt issuance costs and other
deferred charges.............................. (1,251) (951) (30,202)
Proceeds from vendor discount.................. -- -- 15,000
Issuance of preferred stock.................... -- -- 163,370
Issuance of common stock, net of issuance
costs......................................... -- -- 242,526
Capital contributions, net of related
expenses...................................... 5,437 -- --
------- -------- ---------
Net cash provided by financing activities.... 8,686 16,454 860,327
------- -------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... 1,731 (917) 608,423
Cash and cash equivalents at beginning of
period.......................................... 32 1,763 846
------- -------- ---------
Cash and cash equivalents at end of period....... $ 1,763 $ 846 $ 609,269
======= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-48
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Principles of Consolidation
Airwave Communications, LLC ("Airwave Communications") (formerly Mercury
PCS, LLC) and Digital PCS, LLC ("Digital PCS") (formerly Mercury PCS II, LLC)
were formed on July 27, 1995 and July 29, 1996, respectively, to acquire for
development Personal Communications Services ("PCS") licenses in markets in the
south-central United States. Airwave Communications and Digital PCS are
referred to collectively as "the Predecessor Company" or "the Predecessor
Companies."
Tritel, Inc. ("Tritel") was formed on April 23, 1998 by the controlling
shareholders of Airwave Communications and Digital PCS to develop PCS markets
in the south-central United States. Tritel's 1998 activities consisted of $1.5
million in capital expenditures and $32,000 in net loss. On January 7, 1999,
the Predecessor Companies transferred substantially all of their assets and
liabilities at historical cost to Tritel in exchange for 18,262 shares of
series C preferred stock in Tritel. The controlling shareholders of the
Predecessor Companies control Tritel. Tritel will continue the activities of
the Predecessor Companies and, for accounting purposes, this transaction was
accounted for as a reorganization of the Predecessor Company into a C
corporation and a name change to Tritel. Tritel and the Predecessor Company,
together with Tritel's subsidiaries, are referred to collectively as "the
Company."
Tritel began commercial operations during the fourth quarter of 1999. Prior
to that time, Tritel and the Predecessor Companies were considered to be in the
development stage.
The consolidated accounts of the Company include its subsidiaries, Tritel
PCS, Inc. ("Tritel PCS"); Tritel A/B Holding Corp.; Tritel C/F Holding Corp.;
Tritel Communications, Inc.; Tritel Finance, Inc.; and others. All significant
intercompany accounts or balances have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of financial statement classification, the Company considers
all highly liquid investments with original maturities of three months or less
to be cash equivalents.
Accounts Receivable
Accounts receivable balances are presented net of allowances for losses. The
Company's allowance for losses was $42,000 as of December 31, 1999.
Inventory
Inventory consisting primarily of wireless telephones and telephone
accessories is stated at cost.
Restricted Cash
On March 31, 1999, the Company entered into a deposit agreement with Toronto
Dominion (Texas), Inc., as administrative agent, on behalf of the depository
bank and the banks and other financial institutions who are a party to the bank
facility described in Note 8. Under the terms of the agreement, the Company has
placed on deposit $6,594,000 at December 31, 1999 with the depository bank,
which will be used for the payment of interest and/or commitment fees due under
the bank facility.
F-49
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
When assets are placed in service, depreciation is calculated using the
straight-line method over the estimated useful lives of the assets, generally
seven years for wireless network assets and three years for information systems
assets. Leasehold improvements are amortized over the lease term. The Company
capitalizes interest on certain of its wireless network construction
activities. Routine expenditures for repairs and maintenance are charged to
expense as incurred.
Federal Communications Commission Licensing Costs
Licensing costs are accounted for in accordance with industry standards and
include the value of license fees at date of acquisition and the direct costs
incurred to obtain the licenses. Licensing costs also include capitalized
interest during the period of time necessary to build out the wireless network.
The Federal Communications Commission grants licenses for terms of up to ten
years, and generally grants renewals if the licensee has complied with its
license obligations. The Company believes it will be able to secure renewal of
its PCS licenses. Amortization of such license costs, which begins for each
geographic service area upon commencement of service, is over a period of 40
years. Accumulated amortization on Federal Communications Commission licensing
costs at December 31, 1999 was $597,000.
The Company evaluates the propriety of the carrying amounts of its Federal
Communications Commission licensing costs whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. There
have been no impairments through December 31, 1999.
Derivative Financial Instruments
Derivative financial instruments in the form of interest rate swap
agreements are entered into by the Company to manage interest rate exposure.
These are contractual agreements between counterparties to exchange interest
streams based on notional principal amounts over a set period of time. Interest
rate swap agreements normally involve the exchange of fixed and floating rate
interest payment obligations without the exchange of the underlying principal
amounts. The notional or principal amount does not represent the amount at
risk, but is used only as a basis for determining the actual interest cash
flows to be exchanged related to the interest rate contracts. Market risk, due
to potential fluctuations in interest rates, is inherent in swap agreements.
Amounts paid or received under these agreements are included in interest
expense during the period accrued or earned.
Interest Capitalization
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
34, Tritel capitalizes interest expense related to the construction or purchase
of certain assets including its Federal Communications Commission licenses
which constitute activities preliminary to the commencement of the planned
principal operations. Interest capitalized in the years ended December 31,
1997, 1998, and 1999 was $7,214,000, $10,545,000 and $23,685,000, respectively.
Income Taxes
Because the Predecessor Company was a nontaxable entity, operating results
prior to January 7, 1999 were included in the income tax returns of its
members. Therefore, the accompanying consolidated financial
F-50
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
statements do not include any provision for income tax benefit for the years
ended December 31, 1997 and 1998 or any deferred income taxes on any temporary
differences in asset bases as of December 31, 1998.
As of January 7, 1999, the Company accounts for income taxes in accordance
with SFAS No. 109, which requires the use of the asset and liability method in
accounting for deferred taxes.
Revenue Recognition
The Company earns revenue by providing wireless services to both its
subscribers and subscribers of other wireless carriers traveling in the
Company's service area, as well as sale of equipment and accessories.
Generally, access fees, airtime and long distance are billed monthly and are
recognized as service is provided. Revenue from the sale of equipment is
recognized when sold to the customer.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs
totaled $6.2 million for the year ended December 31, 1999. No advertising costs
were incurred prior to 1999.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" encourages, but does
not require, companies to record compensation cost for stock-based compensation
plans at fair value. The Company has chosen to continue to account for stock-
based compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
See Note 12.
Use of Estimates
The preparation of financial statements in accordance 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. A significant estimate impacting the preparation of the
consolidated financial statements is the estimated useful life of Federal
Communications Commission licensing costs. Actual results could differ from
those estimates.
Per Share Amounts
The Company computes net loss per common share in accordance with SFAS No.
128, "Earnings per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB 98").
Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net loss per
common share is computed by dividing the net loss available to common
shareholders for the period by the weighted average number of shares of all
classes of common stock outstanding during the period. For purposes of this
calculation, common stock issued on January 7, 1999 was assumed to be
outstanding as of January 1, 1999. Series D preferred stock was included in the
computation of common shares outstanding after December 13, 1999, as 19,712,328
shares of common stock are issuable upon the conversion of series D preferred
stock. Such conversion can be made at any time at the option of the holder and
the number of shares to be received upon conversion is fixed. In accordance
with SFAS No. 128, outstanding stock options and nonvested restricted stock
grants have been excluded from these calculations as the effect would be
antidilutive.
F-51
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net loss per common share has not been reflected in the accompanying
financial statements for periods prior to 1999 because the Predecessor
Companies were limited liability corporations and did not have the existing
capital structure.
Comprehensive Income
Comprehensive income is the total of net income (loss) and all other non-
owner changes in stockholders' equity in a given period. The Company had no
comprehensive income components as of December 31, 1997, 1998, and 1999;
therefore, comprehensive loss is the same as net loss for all periods.
Segment Reporting
The Company presently operates in a single business segment as a provider of
wireless services in its licensed regions in the south-central United States.
Stock Split
On November 19, 1999, the board of directors approved a 400-for-1 stock
split for class A, class B, class C and class D common stock effective
immediately prior to the initial public offering. All common stock share data
have been retroactively adjusted to reflect this change.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS 133 will
significantly change the accounting treatment of derivative instruments and,
depending upon the underlying risk management strategy, these accounting
changes could affect future earnings, assets, liabilities, and shareholders'
equity. The Company is closely monitoring the deliberations of the FASB's
derivative implementation task force. With the issuance of SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133, which delayed the effective date of
SFAS 133, the Company will be required to adopt SFAS 133 on January 1, 2001.
Presently, the Company has not yet quantified the impact that the adoption will
have on its consolidated financial statements.
(2) LIQUIDITY
As reflected in the accompanying consolidated financial statements, the
Company began commercial operations in certain of its markets late in 1999 and,
therefore, has limited revenues to fund expenditures. The Company expects to
grow rapidly while it develops and constructs its PCS network and builds its
customer base. The Company expects this growth to strain its financial
resources and result in significant operating losses and negative cash flows.
The planned high level of indebtedness could have a material adverse effect
on the Company, including the effect of such indebtedness on: (i) the Company's
ability to fund internally, or obtain additional debt or equity financing in
the future for capital expenditures, working capital, debt service
requirements, operating losses, acquisitions and other purposes; (ii) the
Company's ability to dedicate funds for the wireless network buildout,
operations or other purposes, due to the need to dedicate a substantial portion
of operating cash flow to fund interest payments; (iii) the Company's
flexibility in planning for, or reacting to, changes in its business
F-52
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and market conditions; (iv) the Company's ability to compete with less highly
leveraged competitors; and (v) the Company's financial vulnerability in the
event of a downturn in its business or the economy.
The Company believes that the proceeds from the equity offerings in December
1999, together with the proceeds from the sale of senior subordinated discount
notes, the financing made available to it by the Federal Communications
Commission, borrowings under its bank credit facility and the equity investment
it has received, will provide it with sufficient funds to build out its
existing network as planned and fund operating losses until it completes its
planned network buildout and generate positive cash flow. There can be no
assurance that such funds will be adequate to complete the buildout of the
Company's PCS network. Under those circumstances, the Company could be required
to change its plans relating to the buildout of the network.
(3) PROPERTY AND EQUIPMENT
Major categories of property and equipment are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
------- --------
(dollars in
thousands)
<S> <C> <C>
Furniture and fixtures.................................... $ 1,779 $ 14,853
Network construction and development...................... 11,416 230,777
Leasehold improvements.................................... 728 22,082
------- --------
13,923 267,712
Less accumulated depreciation............................. (107) (6,834)
Deposits on equipment..................................... -- 1,465
------- --------
$13,816 $262,343
======= ========
</TABLE>
(4) FEDERAL COMMUNICATIONS COMMISSION LICENSING COSTS
During 1996 and 1997, the Federal Communications Commission granted to the
Predecessor Company as the successful bidder C-, D-, E- and F-Block licenses
with an aggregate license fee of $106,716,000 after deducting a 25% small
business discount.
The Federal Communications Commission provided below market rate financing
for a portion of the bid price of the C-and F-Block licenses. Based on the
Company's estimates of borrowing costs for similar debt, the Company discounted
the face amount of the debt to yield a market rate and the discount was applied
to reduce the carrying amount of the licenses and the debt. Accordingly, the
licenses were recorded at $90,475,000.
During July 1998, the Company took advantage of a reconsideration order by
the Federal Communications Commission allowing companies holding C-Block PCS
licenses several options to restructure their license holdings and associated
obligations. The Company elected the disaggregation option and returned one-
half of the broadcast spectrum originally acquired for each of the C-Block
license areas. As a result, the Company reduced the carrying amount of the
related licenses by one-half, or $35,442,000, and reduced the discounted debt
and accrued interest due to the Federal Communications Commission by
$33,028,000. As a result of the disaggregation election, the Company recognized
an extraordinary loss of approximately $2,414,000.
AT&T Wireless contributed certain A- and B-Block PCS licenses to the Company
on January 7, 1999 in exchange for preferred stock. The Company recorded such
licenses at $127,307,000 including related costs of the acquisition. Also, in
an acquisition of Central Alabama Partnership, LP 132, the Company acquired
certain C-Block licenses with an estimated fair value of $9,284,000, exclusive
of $6,072,000 of debt to the Federal Communications Commission.
F-53
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Additionally on January 7, 1999, licenses with a carrying amount, including
capitalized interest and costs, totaling $21,874,000 were retained by the
Predecessor Company (see Note 15). The assets and liabilities retained by the
Predecessor Company have been reflected in these financial statements as a
distribution to the Predecessor Company.
Each of the Company's licenses is subject to an Federal Communications
Commission requirement that the Company construct wireless network facilities
offering coverage to certain percentages of the population within certain time
periods following the grant of such licenses. Failure to comply with these
requirements could result in the revocation of the related licenses or the
imposition of fines on the Company by the Federal Communications Commission.
(5) AT&T TRANSACTION
On May 20, 1998, the Predecessor Company and Tritel entered into a
Securities Purchase Agreement with AT&T Wireless and the other stockholders of
Tritel, whereby the Company agreed to construct a PCS network and provide
wireless services using the AT&T and SunCom brand names, giving equal emphasis
to each, in the south-central United States. On January 7, 1999, the parties
closed the transactions contemplated in the Securities Purchase Agreement.
At the closing, Tritel issued preferred stock to AT&T Wireless in exchange
for 20 MHz A- and B-Block PCS licenses which were assigned to the Company, and
for certain other agreements covering the Company's markets, including the
following agreements.
License Agreement
Pursuant to a Network Membership License Agreement, dated January 7, 1999
(the "License Agreement"), between AT&T Corp. and the Company, AT&T granted to
the Company a royalty-free, nontransferable, non-exclusive, nonsublicensable,
limited right, and license to use certain licensed marks solely in connection
with certain licensed activities. The licensed marks include the logo
containing AT&T and the globe design and the expression "Member of the AT&T
Wireless Network." The "Licensed Activities" include (i) the provision to end-
users and resellers, solely within the territory as defined in the License
Agreement, of Company communications services as defined in the License
Agreement on frequencies licensed to the Company for Commercial Mobile Radio
Services ("CMRS") provided in accordance with the License Agreement
(collectively, the "Licensed Services") and (ii) marketing and offering the
Licensed Services within the territory. The License Agreement also grants to
the Company the right and license to use licensed marks on certain permitted
mobile phones.
The License Agreement contains numerous restrictions with respect to the use
and modification of any of the licensed marks. Furthermore, the Company is
obligated to use commercially reasonable efforts to cause all Licensed Services
marketed and provided using the licensed marks to be of comparable quality to
the Licensed Services marketed and provided by AT&T and its affiliates in areas
that are comparable to the territory taking into account, among other things,
the relative stage of development of the areas. The License Agreement also sets
forth specific testing procedures to determine compliance with these standards,
and affords the Company with a grace period to cure any instances of alleged
noncompliance therewith.
The Company may not assign or sublicense any of its rights under the License
Agreement; provided, however, that the License Agreement may be assigned to the
Company's lenders under the Bank Facility and after the expiration of any
applicable grace and cure periods under the Bank Facility, such lenders may
enforce the Company's rights under the License Agreement and assign the License
Agreement to any person with AT&T's consent.
F-54
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The term of the License Agreement is for five years and renews for an
additional five-year period if each party gives the other notice to renew the
Agreement. The License Agreement may be terminated by AT&T at any time in the
event of a significant breach by the Company, including the Company's misuse of
any licensed marks, the Company's licensing or assigning any of the rights in
the License Agreement, the Company's failure to maintain AT&T's quality
standards or if a change in control of the Company occurs. After the initial
five-year term, AT&T may also terminate the License Agreement upon the
occurrence of certain transactions described in the Stockholders' Agreement.
The License Agreement, along with the exclusivity provisions of the
Stockholders' Agreement and the Resale Agreement will be amortized on a
straight-line basis over the ten-year term of the agreement. Accumulated
amortization related to these agreements at December 31, 1999 was approximately
$4.8 million.
Roaming Agreement
Pursuant to the Intercarrier Roamer Service Agreement, dated as of January
7, 1999 (the "Roaming Agreement"), between AT&T Wireless, the Company, and
their affiliates, each party agrees to provide (each in its capacity as serving
provider, the "Serving Carrier") mobile wireless radio telephone service for
registered customers of the other party's (the "Home Carrier") customers while
such customers are out of the Home Carrier's geographic area and in the
geographic area where the Serving Carrier (itself or through affiliates) holds
a license or permit to construct and operate a mobile wireless radio/telephone
system and station. Each Home Carrier whose customers receive service from a
Serving Carrier shall pay to such Serving Carrier 100% of the Serving Carrier's
charges for wireless service and 100% of pass-through charges (i.e., toll or
other charges). Each Serving Carrier's service charges for use per minute or
partial minute for the first three years will be at a fixed rate, and
thereafter may be adjusted to a lower rate as the parties may negotiate from
time to time. Each Serving Carrier's toll charges per minute of use for the
first three years will be at a fixed rate, and thereafter such other rates as
the parties negotiate from time to time.
The Roaming Agreement has a term of 20 years, unless terminated earlier by a
party due to the other party's uncured breach of any term of the Roaming
Agreement.
Neither party may assign or transfer the Roaming Agreement or any of its
rights thereunder except to an assignee of all or part of its license or permit
to provide CMRS, provided that such assignee expressly assumes all or the
applicable part of the obligations of such party under the Roaming Agreement.
The Roaming Agreement will be amortized on a straight-line basis over the
20-year term of the agreement. Accumulated amortization related to this
agreement at December 31, 1999 was approximately $800,000.
(6) NOTE RECEIVABLE
On March 1, 1999, the Company entered into agreements with AT&T Wireless,
Lafayette Communications Company L.L.C. ("Lafayette") and ABC Wireless L.L.C.
("ABC") whereby the Company, AT&T Wireless and Lafayette would lend $29,500,000
to ABC to fund its participation in the re-auction of Federal Communications
Commission licenses that were returned to the Federal Communications Commission
by various companies under the July 1998 reconsideration order. The Company's
portion of this loan was $7,500,000 and was recorded in Other Assets.
Subsequent to closing of the agreements, ABC was the successful bidder for
licenses covering the Tritel markets with an aggregate purchase price of
$7,789,000. The Company has agreed, subject to Federal Communications
Commission approval, to purchase these licenses for $7,789,000. If the licenses
are not purchased by March 1, 2004, the note will mature on that date. The note
has a stated interest rate of 16% per year. There are no required payments of
principal or interest on the note until maturity. The note is secured by all
assets of ABC, including, if permitted by the Federal Communications
Commission, the Federal Communications Commission licenses awarded in the re-
auction, and ranks pari passu with the notes to AT&T Wireless and Lafayette.
F-55
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) INCOME TAXES
On January 7, 1999 the Company recorded a deferred tax liability of
$55,100,000 primarily related to the difference in asset bases on the assets
acquired from AT&T Wireless.
Because the Predecessor Company was a nontaxable entity, the results
presented below relate solely to the year ended December 31, 1999. Components
of income tax benefit for the year ended December 31, 1999 are as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1999
--------------------------
Current Deferred Total
------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Federal.......................................... $-- $(24,725) $(24,725)
State............................................ -- (3,718) (3,718)
---- -------- --------
Total.......................................... $-- $(28,443) $(28,443)
==== ======== ========
</TABLE>
Actual tax benefit differs from the "expected" tax benefit using the federal
corporate rate of 35% as follows:
<TABLE>
<CAPTION>
December 31, 1999
----------------------
(dollars in thousands)
<S> <C>
Computed "expected" tax benefit..................... $(96,564)
Reduction (increase) resulting from:
Change in valuation allowance for deferred tax
assets............................................. 1,020
Nondeductible compensation related expense.......... 68,308
Nontaxable loss of Predecessor Company.............. 780
Nondeductible portion of discount accretion......... 557
State income taxes, net of federal tax benefit...... (2,496)
Other............................................... (48)
--------
$(28,443)
========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liability at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
December 31, 1999
----------------------
(dollars in thousands)
<S> <C>
Deferred tax assets:
Net operating loss carryforward................... $25,232
Tax basis of capitalized start-up costs in excess
of book basis.................................... 11,533
Discount accretion in excess of tax basis......... 5,700
Tax basis of property and equipment in excess of
book basis....................................... 1,865
Other............................................. 785
-------
Total gross deferred tax assets..................... 45,115
Less: valuation allowance......................... (1,020)
-------
Net deferred tax assets............................. 44,095
-------
</TABLE>
F-56
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31, 1999
----------------------
(dollars in thousands)
<S> <C>
Deferred tax liabilities:
Intangible assets book basis in excess of tax
basis............................................ 22,646
Federal Communications Commission licenses book
basis in excess of tax basis..................... 32,245
Capitalized interest book basis in excess of tax
basis............................................ 12,779
Discount accretion book basis in excess of tax
basis............................................ 2,130
-------
Total gross deferred tax liabilities................ 69,800
-------
Net deferred tax liability.......................... $25,705
=======
</TABLE>
At December 31, 1999, the Company has net operating loss carryforwards for
federal income tax purposes of $65,965,000 which are available to offset future
federal taxable income, if any, through 2019.
The valuation allowance for the gross deferred tax asset at December 31,
1999 was $1,020,000. No valuation allowance has been provided for the remaining
gross deferred tax asset principally due to the existence of a deferred tax
liability which was recorded upon the closing of the AT&T Wireless transaction
on January 7, 1999. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the period in
which those temporary differences become deductible. Management considered the
scheduled reversal of deferred tax liabilities in making this assessment. Based
upon anticipated future taxable income over the periods in which the deferred
tax assets are realizable, management believes it is more likely than not the
Company will realize the benefits of these deferred tax assets.
(8) NOTES PAYABLE AND LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- --------
(dollars in
thousands)
<S> <C> <C>
Bank facility.............................................. $ -- $300,000
Senior Subordinated Discount Notes......................... -- 216,734
Federal Communications Commission debt..................... 51,599 41,905
------- --------
51,599 558,639
Less current maturities.................................... -- (923)
------- --------
$51,599 $557,716
======= ========
</TABLE>
Bank Facility
During 1999, the Company entered into a loan agreement (the "Bank
Facility"), which provides for (i) a $100,000,000 senior secured term loan (the
"Term Loan A"), (ii) a $200,000,000 senior secured term loan (the "Term Loan
B") and (iii) a $250,000,000 senior secured reducing revolving credit facility
(the "Revolver"). Tritel PCS Inc., Toronto Dominion (Texas), Inc., as
Administrative Agent, and certain banks and other financial institutions are
parties thereto.
The commitment to make loans under the Revolver automatically and
permanently reduces, quarterly beginning on December 31, 2002. The quarterly
reductions in the commitment are $6.25 million on December
F-57
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
31, 2002, $7.4 million for each quarter in 2003, $11.3 million for each quarter
in 2004, $13.3 million for each quarter in 2005, $16.0 million for each quarter
in 2006, and $25.8 million for the first two quarters of 2007.
Interest on the Revolver, Term Loan A and Term Loan B accrues, at the
Company's option, either at a LIBOR rate plus an applicable margin or the
higher of the issuing bank's prime rate and the Federal Funds Rate (as defined
in the Bank Facility) plus 0.5%, plus an applicable margin. The borrowings
outstanding at December 31, 1999 carried a 10.62% average interest rate as of
that date. The Revolver requires an annual commitment fee ranging from 0.50% to
1.75% of the unused portion of the Bank Facility.
The Bank Facility also required the Company to purchase an interest rate
hedging contract covering an amount equal to at least 50% of the total amount
of the outstanding indebtedness of the Company (other than indebtedness which
bears interest at a fixed rate). In May 1999, Tritel entered into such interest
rate hedging contracts which are further described in Note 9.
The Term Loans are required to be prepaid and commitments under the
Revolving Bank Facility reduced in an aggregate amount equal to 50% of excess
cash flow of each fiscal year commencing with the fiscal year ending December
31, 2001; 100% of the net proceeds of asset sales, in excess of a yearly
threshold, outside the ordinary course of business or unused insurance
proceeds; and 50% of the net cash proceeds of issuances of equity by Tritel PCS
or its subsidiaries.
All obligations of the Company under the facilities are unconditionally and
irrevocably guaranteed by Tritel and all subsidiaries of Tritel PCS. The bank
facilities and guarantees, and any related hedging contracts provided by the
lenders under the Bank Facility, are secured by substantially all of the assets
of Tritel PCS and certain subsidiaries of Tritel PCS, including a first
priority pledge of all of the capital stock held by Tritel or any of its
subsidiaries, but excluding the Company's PCS licenses. The PCS licenses will
be held by one or more single purpose subsidiaries of the Company and, in the
future if the Company is permitted to pledge its PCS licenses, they will be
pledged to secure the obligations of the Company under the Bank Facility.
The Bank Facility contains covenants customary for similar facilities and
transactions, including covenants relating to the amounts of indebtedness that
the Company may incur, limitations on dividends and distributions on, and
redemptions and repurchases of, capital stock and other similar payments and
various financial maintenance covenants. The Bank Facility also contains
covenants relating to the population covered by the Company's network and
number of customers, as well as customary representations, warranties,
indemnities, conditions precedent to borrowing, and events of default.
Loans under the Bank Facility are available to fund capital expenditures
related to the construction of the Company's PCS network, the acquisition of
related businesses, working capital needs of the Company, and customer
acquisition costs. All indebtedness under the Bank Facility will constitute
senior debt.
The terms of the Bank Facility allow the Company to incur senior
subordinated debt with gross proceeds of not more than $250,000,000.
As of December 31, 1999, the Company has drawn $300,000,000 of advances
under Term Loan A and Term Loan B.
Senior Subordinated Discount Notes
On May 11, 1999, Tritel PCS, Inc. ("Tritel PCS"), a wholly-owned subsidiary
of the Company, issued unsecured senior subordinated discount notes with a
principal amount at maturity of $372,000,000. Such notes were issued at a
discount from their principal amount at maturity for proceeds of $200.2
million. No interest
F-58
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
will be paid on the notes prior to May 15, 2004. Thereafter, Tritel PCS will be
required to pay interest semiannually at 12 3/4% per annum beginning on
November 15, 2004 until maturity of the notes on May 15, 2009.
The notes are fully unconditionally guaranteed on a joint and several basis
by the Company and by Tritel Communications, Inc. and Tritel Finance, Inc.,
both of which are wholly-owned subsidiaries of Tritel PCS. (See Note 20.) The
notes are subordinated in right of payment to amounts outstanding under the
Company's Bank Facility and to any future subordinated indebtedness of Tritel
PCS or the guarantors.
The indenture governing the notes limit, among other things, the Company's
ability to incur additional indebtedness, pay dividends, sell or exchange
assets, repurchase its stock, or make investments.
Federal Communications Commission Debt
The Federal Communications Commission provided below market rate financing
for 90% of the bid price of the C-Block PCS licenses and 80% of the bid price
of the F-Block PCS licenses. Such Federal Communications Commission debt is
secured by all of the Company's rights and interest in the licenses financed.
The debt incurred in 1996 by the Company for the purchase of the C-Block PCS
licenses totaled $63,890,000 (undiscounted). The debt bears interest at 7%;
however, based on the Company's estimate of borrowing costs for similar debt, a
rate of 10% was used to determine the debt's discounted present value of
$52,700,000. As discussed in Note 4, the Company elected to disaggregate and
return one-half of the broadcast spectrum of the C-block licenses. The Federal
Communications Commission permitted such spectrum to be returned effective as
of the original purchase. As a result, the Company reduced the discounted debt
due to the Federal Communications Commission for such licenses by $27,410,000.
F-Block licenses were granted in 1997. The debt incurred by the Company for
the purchase of such licenses totaled $28,167,000 (undiscounted). The debt
bears interest at 6.125%, however; based on the Company's estimate of borrowing
costs for similar debt, a rate of 10% was used to determine the debt's
discounted present value of $23,116,000.
In the acquisition of Central Alabama Partnership, LP 132 on January 7,
1999, the Company assumed debt of $6,072,000 payable to the Federal
Communications Commission for the licenses acquired.
Additionally, certain licenses and the related Federal Communications
Commission debt for those licenses were retained by the Predecessor Company.
The discounted carrying amount of the debt for the licenses retained by the
Predecessor Company was $15,889,000.
All the scheduled interest payments on the Federal Communications Commission
debt were suspended for the period from January 1997 through March 1998 by the
Federal Communications Commission. Payments of such suspended interest resumed
in July 1998 with the total suspended interest due in eight quarterly payments
through April 30, 2000. The Company is required to make quarterly principal and
interest payments on the Federal Communications Commission debt.
Notes Payable
At December 31, 1998, the Company had $22,100,000 payable under a
$28,500,000 loan agreement with a supplier. The loan agreement was secured by a
pledge of the membership equity interests of certain members
F-59
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of Predecessor Company management and the interest rate was 9%. Amounts
outstanding under this loan agreement were repaid in January 1999.
At December 31, 1998, the Predecessor Company had a $1,000,000 line of
credit with a commercial bank, that expired July 27, 1999 bearing interest at
the bank's prime rate of interest plus 1% at December 31, 1998. The amount
outstanding on the line of credit was $305,000 at December 31, 1998. This line
of credit related specifically to licenses that were retained by the
Predecessor Company. Amounts outstanding under this loan agreement were repaid
in January 1999.
Notes Payable to Related Party
In March 1997, the Predecessor Company entered into a loan agreement for a
$5,700,000 long-term note payable to Southern Farm Bureau Life Insurance
Company ("SFBLIC"). SFBLIC was a member of Mercury Southern, LLC, which was a
member of the Predecessor Company. This note was secured by a pledge of the
membership equity interests of certain members of Predecessor Company
management and interest accrued annually at 10% on the anniversary date of the
note. At December 31, 1998, the balance of the note was $6,270,000 as a result
of the capitalization of the first year's interest. The indebtedness under the
note was convertible into equity at the face amount at any time at the option
of SFBLIC, subject to Federal Communications Commission equity ownership
limitations applicable to entrepreneurial block license holders. The
Predecessor Company and SFBLIC subsequently negotiated a revised arrangement
under which the amount due of $6,270,000 plus accrued interest of $476,000 was
not paid but instead was converted into $8,976,000 of members' equity in the
Predecessor Company on January 7, 1999. The $2,230,000 preferred return to the
investor was accounted for as a financing cost during the year ended December
31, 1999. The interest accrued at the contractual rate was capitalized during
the accrual period.
As of December 31, 1999, the following is a schedule of future minimum
principal payments of the Company's long-term debt due within five years and
thereafter:
<TABLE>
<CAPTION>
December 31, 1999
----------------------
(dollars in thousands)
<S> <C>
December 31, 2000..................................... $ 923
December 31, 2001..................................... 1,004
December 31, 2002..................................... 5,567
December 31, 2003..................................... 23,548
December 31, 2004..................................... 30,483
Thereafter............................................ 657,950
---------
719,475
Less unamortized discount............................. (160,836)
---------
Total................................................. $ 558,639
=========
</TABLE>
(9) INTEREST RATE SWAP AGREEMENTS
As of December 31, 1999, the Company was a party to interest rate swap
agreements with a total notional amount of $200 million. The agreements
establish a fixed effective rate of 9.05% on $200.0 million of the current
balance outstanding under the Bank Facility through the earlier of March 31,
2002 or the date on which the Company achieves operating cash flow breakeven.
F-60
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(10) REDEEMABLE PREFERRED STOCK
Series A Preferred Stock
The series A preferred stock, with respect to dividend rights and rights on
liquidation, dissolution or winding up, ranks on a parity basis with the series
B preferred stock, and ranks senior to series C preferred stock, series D
preferred stock and common stock. The holders of series A preferred stock are
entitled to receive cumulative quarterly cash dividends at the annual rate of
10% multiplied by the liquidation preference, which is equal to $1,000 per
share plus declared but unpaid dividends. Tritel may elect to defer payment of
any such dividends until the date on which the 42nd quarterly dividend payment
is due, at which time, and not earlier, all deferred payments must be made.
Except as required by law or in certain circumstances, the holders of the
series A preferred stock do not have any voting rights. The series A preferred
stock is redeemable, in whole but not in part, at the option of Tritel on or
after January 15, 2009 and at the option of the holders of the series A
preferred stock on or after January 15, 2019. Additionally, on or after January
15, 2007, AT&T Wireless, and qualified transferees, have the right to convert
each share of series A preferred stock into shares of class A common stock. The
number of shares the holder will receive upon conversion will be the
liquidation preference per share divided by the market price of class A common
stock times the number of shares of series A preferred stock to be converted.
The Company issued 90,668 shares of series A preferred stock with a stated
value of $90,668,000 to AT&T Wireless on January 7, 1999.
Series B Preferred Stock
The series B preferred stock ranks on a parity basis with the series A
preferred stock and is identical in all respects to the series A preferred
stock, except:
. the series B preferred stock is redeemable at any time at the option of
Tritel,
. the series B preferred stock is not convertible into shares of any other
security issued by Tritel, and
. the series B preferred stock may be issued by Tritel pursuant to an
exchange event as defined in the Restated Certification of
Incorporation.
No series B preferred stock has been issued by the Company.
(11) STOCKHOLDERS' EQUITY
The Predecessor Companies were organized as limited liability corporations
(LLC) and as such had no outstanding stock. Owners (members) actually held a
membership interest in the LLC. As a result, the investment of those members in
the Predecessor Companies is reflected as contributed capital--Predecessor
Company in the accompanying balance sheet.
On January 7, 1999, the Company issued stock to the Predecessor Company as
well as other parties as described herein.
Preferred Stock
Following is a summary of the preferred stock of the Company:
3,100,000 shares of authorized preferred stock, par value $.01 per share
(the "preferred stock"), 1,100,000 of which have been designated as follows:
F-61
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
. 200,000 shares designated "Series A Convertible Preferred Stock" (the
"series A preferred stock"), 10% redeemable convertible, $1,000 stated
and liquidation value (See Note 10);
. 300,000 shares designated "Series B Preferred Stock" (the "series B
preferred stock"), 10% cumulative, $1,000 stated and liquidation value
(See Note 10);
. 500,000 shares designated "Series C Convertible Preferred Stock" (the
"series C preferred stock"), 6.5% cumulative convertible, $1,000 stated
and liquidation value; and
. 100,000 shares designated "Series D Convertible Preferred Stock" (the
"series D preferred stock"), 6.5% cumulative convertible, $1,000 stated
and liquidation value.
Series C Preferred Stock
Series C preferred stock (1) ranks junior to the series A preferred stock
and the series B preferred stock with respect to dividend rights and rights on
liquidation, dissolution or winding up, (2) ranks junior to the series D
preferred stock with respect to rights on a statutory liquidation, (3) ranks on
a parity basis with the series D preferred stock with respect to rights on
liquidation, dissolution or winding up, except a statutory liquidation, (4)
ranks on a parity basis with series D preferred stock and common stock with
respect to dividend rights, and (5) ranks senior to the common stock and any
other series or class of the Company's common or preferred stock, now or
hereafter authorized, other than series A preferred stock, series B preferred
stock or series D preferred stock, with respect to rights on liquidation,
dissolution and winding up.
Holders of series C preferred stock are entitled to dividends in cash or
property when, as and if declared by the Board of Directors of Tritel. Upon any
liquidation, dissolution or winding up of Tritel, holders of series C preferred
stock are entitled to receive, after payment to any stock ranking senior to the
series C preferred stock, a liquidation preference equal to (1) the quotient of
the aggregate paid-in-capital of all series C preferred stock held by a
stockholder divided by the total number of shares of series C preferred stock
held by that stockholder plus (2) declared but unpaid dividends on the series C
preferred stock, if any, plus (3) an amount equal to interest on the invested
amount at the rate of 6 1/2% per annum, compounded quarterly. The holders of
the series C preferred stock have the right at any time to convert each share
of series C preferred stock, and upon the initial public offering in December
1999, each share of series C preferred stock automatically converted into
shares of class A common stock of and class D common stock. The number of
shares the holder received upon conversion was determined by dividing the
aforementioned liquidation preference by the conversion price in effect at the
time of $2.50. On all matters to be submitted to the stockholders of Tritel,
the holders of series C preferred stock shall have the right to vote on an as-
converted basis as a single class with the holders of the common stock.
Additionally, the affirmative vote of the holders of a majority of the series C
preferred stock is required to approve certain matters. The series C preferred
stock is not redeemable.
The Company issued 18,262 shares of series C preferred stock with a stated
value of $18,262,000 to the Predecessor Company on January 7, 1999 in exchange
for certain of its assets, liabilities and continuing operations. The stock was
recorded at the historical cost of the assets and liabilities acquired from the
Predecessor Company since, for accounting purposes, this transaction was
accounted for as a reorganization of the Predecessor Company into a C
corporation and a name change to Tritel.
The Company also issued 14,130 shares of series C preferred stock with a
stated value of $14,130,000 to the Predecessor Company on January 7, 1999 in
exchange for cash of $14,130,000. In the same transaction, the Company also
issued 149,239 shares of series C preferred stock with a stated value of
$149,239,000 to investors on January 7, 1999 in exchange for cash. The stock
was recorded at its stated value and the costs associated with this transaction
have been offset against equity.
F-62
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Additionally, the Company issued 2,602 shares of series C preferred stock
with a stated value of $2,602,000 to Central Alabama Partnership, LP 132 on
January 7, 1999 in exchange for its net assets. The stock was recorded at its
stated value and the assets and liabilities were recorded at estimated fair
values.
All of the series C preferred stock outstanding converted into 73,349,620
shares of class A and 4,962,804 shares of class D common stock upon the closing
of the initial public offering on December 13, 1999.
Series D Preferred Stock
The series D preferred stock (1) ranks junior to the series A preferred
stock and the series B preferred stock with respect to dividend rights and
rights on liquidation, dissolution or winding up, (2) ranks senior to the
series C preferred stock with respect to rights on a statutory liquidation, (3)
ranks on a parity basis with series C preferred stock with respect to rights on
liquidation, dissolution and winding up, except a statutory liquidation, (4)
ranks on a parity basis with series C preferred stock and common stock with
respect to dividend rights, and (5) ranks senior to the common stock and any
other series or class of Tritel's common or preferred stock, now or hereafter
authorized, other than series A preferred stock, series B preferred stock or
series C preferred stock, with respect to rights on liquidation, dissolution
and winding up. Subject to the preceding sentence, the series D preferred stock
is identical in all respects to the series C preferred stock, except:
. the series D preferred stock is convertible into an equivalent number of
shares of series C preferred stock at any time. This stock is then
convertible to common stock at the conversion rate of the original
series C preferred stock set forth on the date of the initial public
offering, or 18,463,121 shares of class A common stock and 1,249,207
shares of class D common stock;
. the liquidation preference for series D preferred stock equals $1,000
per share plus declared but unpaid dividends plus an amount equal to
interest on $1,000 at the rate of 6 1/2% per annum, compounded
quarterly, from the date of issuance of such share to and including the
date of the payment:
. the holders of series D preferred stock do not have any voting rights,
other than those required by law or in certain circumstances; and
. shares of series D preferred stock are not automatically convertible
upon an initial public offering of the Company's stock.
The Company issued 46,374 shares of series D preferred stock with a stated
value of $46,374,000 to AT&T Wireless on January 7, 1999.
Common Stock
Following is a summary of the common stock of the Company:
. 1,016,000,009 shares of common stock, par value $.01 per share (the
"common stock"), which have been designated as follows:
. 500,000,000 shares designated "Class A Voting Common Stock" (the "class
A common stock"),
. 500,000,000 shares designated "Class B Non-Voting Common Stock" (the
"class B common stock"),
. 4,000,000 shares designated "Class C Common Stock" (the "class C common
stock"),
. 12,000,000 shares designated "Class D Common Stock" (the "class D common
stock") and
F-63
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
. nine shares designated "Voting Preference Common Stock" (the "voting
preference common stock")
The common stock of Tritel is divided into two groups, the "non-tracked
common stock," which is comprised of the class A common stock, the class B
common stock and the voting preference common stock, and the "tracked common
stock," which is comprised of the class C common stock and class D common
stock. Each share of common stock is identical, and entitles the holder thereof
to the same rights, powers and privileges of stockholders under Delaware law,
except:
. dividends on the tracked common stock track the assets and liabilities
of Tritel C/F Holding Corp., a subsidiary of Tritel;
. rights on liquidation, dissolution or winding up of Tritel of the
tracked common stock track the assets and liabilities of Tritel C/F
Holding Corp.;
. the class A common stock, together with the series C preferred stock,
has 4,990,000 votes, the class B common stock has no votes, the class C
common stock has no votes, the class D common stock has no votes and the
voting preference common stock has 5,010,000 votes, except that in any
matter requiring a separate class vote of any class of common stock or a
separate vote of two or more classes of common stock voting together as
a single class, for the purposes of such a class vote, each share of
common stock of such classes will be entitled to one vote per share;
. in the event the Federal Communications Commission indicates that the
class A common stock and the voting preference stock (1) may be voted as
a single class on all matters, (2) may be treated as a single class for
all quorum requirements and (3) may have one vote per share, then,
absent action by the Board of Directors and upon an affirmative vote of
66 2/3% or more of the class A common stock, Tritel must seek consent
from the Federal Communications Commission to permit the class A common
stock and the voting preference common stock to vote and act as a single
class in the manner described above;
. the holders of shares of class B common stock shall be entitled to vote
as a separate class on any amendment, repeal or modification of any
provision of the restated certificate of incorporation that adversely
affects the powers, preferences or special rights of the holders of the
class B common stock;
. each share of class B common stock may be converted, at any time at the
holder's option, into one share of class A common stock;
. each share of class A common stock may be converted, at any time at the
holder's option, into one share of class B common stock; and
. in the event the Federal Communications Commission indicates that it
will permit the conversion of tracked common stock into either class A
common stock or class B common stock, then, absent action by the Board
of Directors and upon an affirmative vote of 66 2/3% or more of the
class A common stock, such conversion will be allowed by Tritel at the
option of the holders of the tracked common stock.
As of December 31, 1999, the Company has issued 10,981,932 shares of class A
common stock, 1,380,448 shares of class C common stock and 6 shares of voting
preference common stock to certain members of management of the Company. The
class A and class C common stock issued to management are restricted shares
subject to repurchase agreements which require the holders to sell to the
Company at a $0.01 repurchase price per share, the number of shares that would
be equal to $2.50 per share on specified "Trigger Dates" including a change of
control, termination of employment, or the seventh anniversary of the
agreement.
F-64
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On the "Trigger Date," the holders must sell to the Company the number of
shares necessary, based on the then current fair value of the stock based on
the average closing price for the most recent ten trading days, to reduce the
number of shares of stock held by an amount equal to the number of shares then
held by the holder times $2.50 per share (in essence, requiring the holders to
pay $2.50 per share for their shares of stock). Also, in the event the Company
does not meet certain performance measurements, certain members of management
will be required to sell to the Company a fixed number of shares at $0.01 per
share.
Based on the terms of the repurchase agreement, this plan is being accounted
for as a variable stock plan. Accordingly, the Company will record Stock-based
Compensation Expense over the vesting period for the difference between the
quoted market price of the Company's stock at each measurement date and the
current fair value of the stock to be repurchased from the individuals.
Subsequent to year end, the Board of Directors approved a plan to modify these
awards to remove the provision that requires management to surrender a portion
of their shares. The effective date of this modification if and when completed
will become the measurement date upon which the value of the award will be
fixed. Assuming the Company's class A common stock continues to have a fair
value of approximately $28.50 per share on the measurement date, the Company
would record additional non-cash compensation expense related to these shares
for the period from 2000 to 2004 of approximately $131.0 million. Future stock
price movement will result in charges that differ from this amount. Each dollar
increase or decrease in the average closing price of the Company's common stock
for the last ten trading days of any quarter will result in an increase or
decrease in the non-cash compensation expense related to these shares of
approximately $12.4 million.
In conjunction with the Company's agreement with Mr. Sullivan (see Note 17),
the Company agreed to repurchase 1,276,000 shares of the officer's stock at
$0.01 per share and allow the officer to become fully vested in his remaining
1.8 million shares without restriction or repurchase rights. As a result, the
Company recorded $4.5 million as compensation expense and additional paid in
capital. Such amount represents the fair value of the stock at the time of the
agreement without restrictions or repurchase rights.
(12) STOCK OPTION PLANS
In January 1999, the Company adopted a stock option plan for employees and a
stock option plan for non-employee directors.
Tritel's 1999 Stock Option Plan (the "Stock Option Plan") authorizes the
grant of certain tax-advantaged stock options, nonqualified stock options and
stock appreciation rights for the purchase of an aggregate of up to 10,462,400
shares of common stock of Tritel. The Stock Option Plan benefits qualified
officers, employee directors and other key employees of, and consultants to,
Tritel and its subsidiaries in order to attract and retain those persons and to
provide those persons with appropriate incentives. The Stock Option Plan also
allows grants or sales of common stock to those persons. The maximum term of
any stock option to be granted under the Stock Option Plan is ten years. Grants
of options under the Stock Option Plan are determined by the Board of Directors
or a compensation committee designated by the Board.
The exercise price of incentive stock options under the Stock Option Plan
must not be less than the fair market value of the common stock on the grant
date and the exercise price of all other options must not be less that 75% of
such fair market value. The Stock Option Plan will terminate in 2009 unless
extended by amendment.
As of December 31, 1999, 4,585,028 restricted shares and 2,081,422 stock
options with an average exercise price of $18.05 were granted under the Stock
Option Plan. The restricted stock is subject to the repurchase agreements as
discussed in Note 11. The restricted shares will vest in varying percentages,
up to 80% vesting, over five years. The remaining 20% will vest if the Company
meets certain performance
F-65
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
benchmarks for development and construction of its wireless PCS network. Stock
options generally vest 25% on each of the first four anniversaries of the date
of the grant. A portion of the stock options granted to employees in connection
with the initial public offering vest 25% on the thirty-first day after grant
and 25% on each of the first three anniversaries of the date of the grant. The
stock options outstanding as of December 31, 1999 vest 100% upon a change of
control.
Tritel's 1999 Stock Option Plan for Non-employee Directors (the "Non-
employee Directors Plan") authorizes the grant of certain nonqualified stock
options for the purchase of an aggregate of up to 100,000 shares of common
stock of Tritel. The Non-employee Directors Plan benefits non-employee
directors of Tritel in order to attract and retain those persons and to provide
those persons with appropriate incentives. The maximum term of any stock option
to be granted under the Non-employee Directors Plan is ten years. Grants of
options under the Non-employee Directors are determined by the Board of
Directors.
The exercise price of nonqualified stock options granted under the Non-
employee Directors Plan must not be less than the fair market value of the
common stock on the grant date. The Non-employee Directors Plan will terminate
in 2009 unless extended by amendment.
As of December 31, 1999, 45,000 options with an exercise price of $18 per
share were outstanding under the Non-employee Directors Plan. These options
vest 20% on the date of grant and an additional 20% on each of the first four
anniversaries of the date of the grant and fully vest upon a change of control.
The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation has
been recognized for the stock options. If compensation cost had been determined
based on the fair value at grant date for awards in 1999 in accordance with
SFAS No. 123, the Company's net loss and net loss per share would have
increased to the pro forma amounts indicated below (dollars in thousands):
<TABLE>
<S> <C>
Net loss--As reported.............................................. $247,454
Net loss--Pro forma................................................ 250,608
Net loss per share--As reported.................................... 33.25
Net loss per share--Pro forma...................................... 33.66
The fair value of each option on the date of grant is estimated using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
Expected life...................................................... 5 Years
Risk-free interest rate............................................ 6.16%
Expected volatility................................................ 56%
Dividend yield..................................................... 0%
</TABLE>
The weighted average fair value of options granted during 1999 was $8.52 per
share. At December 31, 1999, 9,000 options were exercisable.
F-66
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Exercise Number of Remaining
Price Options Outstanding Contractual Life
-------- ------------------- ----------------
<S> <C> <C>
$18.00 2,119,572 10 years
31.69 6,850 10 years
</TABLE>
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made pursuant to SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments." Fair value estimates are subject to inherent
limitations. Estimates of fair value are made at a specific point in time,
based on relevant market information and information about the financial
instrument. The estimated fair values of financial instruments are not
necessarily indicative of amounts the Company might realize in actual market
transactions. Estimates of fair value are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect
the estimates. The carrying amounts at December 31, 1998 and 1999 for cash and
cash equivalents, accounts receivable, notes receivable, accounts payable,
accrued liabilities, notes payable, and variable rate long-term debt are
reasonable estimates of their fair values. The carrying amount of fixed-rate
long-term debt is believed to approximate fair value because such debt was
discounted to reflect market interest rate at inception and such discount is
believed to be approximate for valuation of this debt.
(14) RELATED PARTY TRANSACTIONS
On January 7, 1999, the Company entered into a secured promissory note
agreement under which it agreed to lend up to $2,500,000 to the Predecessor
Company. Interest on advances under the loan agreement is 10% per year. The
interest will compound annually and interest and principal are due at maturity
of the note. The note is secured by the Predecessor Company's ownership
interest in the Company. Any proceeds from the sales of licenses by the
Predecessor Company, net of the repayment of any Federal Communications
Commission debt, are required to be applied to the note balance. If the note
has not been repaid within five years, it will be repaid through a reduction of
the Predecessor Company's interest in the Company based on a valuation of the
Company's stock at that time. The balance of this note at December 31, 1999 was
approximately $2.3 million.
(15) ASSETS AND LIABILITIES RETAINED BY PREDECESSOR COMPANY
Certain assets and liabilities, with carrying amounts of $22,070,000 and
$17,367,000, respectively, principally for certain Federal Communications
Commission licenses and related Federal Communications Commission debt, which
were retained by the Predecessor Company have been reflected in these financial
statements as a distribution to the Predecessor Company. The Predecessor
Company is holding such assets and liabilities but is not currently developing
the PCS markets. Of the assets retained by the Predecessor Company, Tritel was
granted an option to acquire certain PCS licenses for approximately 1.2 million
shares of class A common stock. During May 1999, Tritel notified the
Predecessor Company of its intent to exercise this option. Such licenses will
be transferred to Tritel after approval by the Federal Communications
Commission. Tritel has committed to sell to AT&T Wireless or its designee such
licenses.
F-67
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(16) LEASES
The Company leases office space, equipment, and co-location tower space
under noncancelable operating leases. Expense under operating leases was
$3,000, $334,000 and $7.2 million for 1997, 1998 and 1999, respectively.
Management expects that in the normal course of business these leases will be
renewed or replaced by similar leases. The leases extend through 2008.
Future minimum lease payments under these leases at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
(dollars
in
thousands)
<S> <C>
2000............................................................ $13,940
2001............................................................ 13,846
2002............................................................ 13,731
2003............................................................ 13,239
2004............................................................ 8,955
Thereafter...................................................... 8,881
-------
Total......................................................... $72,592
=======
</TABLE>
(17) COMMITMENTS AND CONTINGENCIES
Effective September 1, 1999, Tritel, Inc. and Jerry M. Sullivan entered into
an agreement to redefine Mr. Sullivan's relationship with Tritel, Inc. and its
subsidiaries. Mr. Sullivan has resigned as an officer and a director of Tritel,
Inc. and all of its subsidiaries. Mr. Sullivan will retain the title Executive
Vice President of Tritel, Inc. through December 31, 2001; however, under the
agreement, he is not permitted to represent the Company nor will he perform any
functions for Tritel, Inc. As part of the agreement, Mr. Sullivan will also
receive an annual salary of $225,000 and an annual bonus of $112,500 through
December 31, 2002. Mr. Sullivan became fully vested in 1,800,000 shares of
class A common stock and returned all other shares held by him, including his
voting preference common stock to Tritel, Inc. Accordingly, the Company has
recorded $5.8 million in additional compensation expense during 1999. The $5.8
million was determined pursuant to the settlement of Mr. Sullivan's employment
relationship with the Company, and includes $4.5 million for the grant of
additional stock rights, $225,000 annual salary and $112,500 annual bonus
through December 31, 2002, and other related amounts.
Mr. Sullivan had served as Director, Executive Vice President and Chief
Operating Officer of Tritel, Inc. since 1993. The foregoing agreements
supersede the employment relationship between Tritel, Inc. and Mr. Sullivan
defined by the Management Agreement and Mr. Sullivan's employment agreement.
In December 1998, the Company entered into an acquisition agreement with an
equipment vendor whereby the Company agreed to purchase a minimum of
$300,000,000 of equipment, software and certain engineering services over a
five-year period in connection with the construction of its wireless
telecommunications network. The Company agreed that the equipment vendor would
be the exclusive provider of such equipment during the term of the agreement.
As part of this agreement, the vendor advanced $15,000,000 to the Company at
the closing of the transactions described herein. The $15,000,000 deferred
credit is accounted for as a reduction in the cost of the equipment as the
equipment is purchased.
F-68
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(18) QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data is as follows:
<TABLE>
<CAPTION>
For the Quarters Ended
----------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------------- --------------- ----------------- ------------------
1998 1999 1998 1999 1998 1999 1998 1999
----- ------- ----- -------- ------- -------- ------- ---------
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ $ $ $ $ $ 179 $ $ 6,580
Operating loss.......... (763) (7,471) (997) (8,801) (1,390) (22,305) (4,536) (226,911)
Loss before extraordi-
nary item.............. (743) (8,247) (990) (10,027) (1,398) (10,482) (5,200) (218,698)
Net loss................ (743) (8,247) (990) (10,027) (3,812) (10,482) (5,200) (218,698)
Net loss per common
share.................. $ (2.76) $ (3.30) $ (3.45) $ (9.20)
</TABLE>
(19) SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1998 1999
------- ------- --------
(dollars in thousands)
<S> <C> <C> <C>
Cash paid for interest, net of amounts capitalized..... $ -- $ -- $ 14,362
Significant non-cash investing and financing
activities:
Long-term debt incurred to obtain Federal
Communications Commission licenses, net of
discount............................................ 23,116 -- --
Capitalized interest and discount on debt............ 6,799 7,614 10,062
Deposits applied to purchase of Federal
Communications Commission licenses.................. 5,000 -- --
Capital expenditures included in accounts payable.... -- 5,762 81,913
Election of Federal Communications Commission
disaggregation option for return of spectrum:
Reduction in Federal Communications Commission
licensing costs................................... -- 35,442 --
Reduction in accrued interest payable and long-term
debt.............................................. -- 33,028 --
Preferred stock issued in exchange for assets and
liabilities........................................... -- -- 156,837
</TABLE>
F-69
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The following condensed consolidating financial statements as of and for the
year ended December 31, 1999 are presented for Tritel, Tritel PCS, those
subsidiaries of Tritel PCS who serve as guarantors and those subsidiaries who
do not serve as guarantors of the senior subordinated discount notes.
Condensed Consolidating Balance Sheet
As of December 31, 1999
<TABLE>
<CAPTION>
Tritel
Tritel, PCS, Guarantor NonGuarantor Consolidated
Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
-------- -------- ------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents.......... $ -- $613,999 $ (4,730) $ -- $ -- $ 609,269
Other current assets.. 2,462 1,407 17,426 -- -- 21,295
Intercompany
receivables.......... 1,799 210,673 -- -- (212,472) --
-------- -------- -------- -------- --------- ----------
Total current
assets............. 4,261 826,079 12,696 -- (212,472) 630,564
Restricted cash......... -- 6,594 -- -- -- 6,594
Property and equipment,
net.................... -- -- 262,343 -- -- 262,343
Licenses and other
intangibles............ 59,508 -- -- 201,946 -- 261,454
Investment in
subsidiaries........... 445,301 73,286 -- -- (518,587) --
Other long term assets.. -- 62,633 82 -- (27,308) 35,407
-------- -------- -------- -------- --------- ----------
Total assets........ $509,070 $968,592 $275,121 $201,946 $(758,367) $1,196,362
======== ======== ======== ======== ========= ==========
Current liabilities:
Accounts payable,
accrued expenses and
other current
liabilities.......... $ 29 $ 1,240 $111,257 $ 1,721 $ -- $ 114,247
Intercompany
payables............. -- -- 196,950 15,522 (212,472) --
-------- -------- -------- -------- --------- ----------
Total current
liabilities........ 29 1,240 308,207 17,243 (212,472) 114,247
Non-current liabilities:
Long-term debt........ -- 516,734 27,121 40,982 (27,121) 557,716
Deferred income taxes
and other............ 22,009 5,318 (20,024) 30,251 (187) 37,367
-------- -------- -------- -------- --------- ----------
Total liabilities... 22,038 523,292 315,304 88,476 (239,780) 709,330
Series A redeemable
convertible preferred
stock.................. 99,586 -- -- -- -- 99,586
-------- -------- -------- -------- --------- ----------
Stockholders' equity
(deficit).............. 387,446 445,300 (40,183) 113,470 (518,587) 387,446
-------- -------- -------- -------- --------- ----------
Total liabilities
and equity......... $509,070 $968,592 $275,121 $201,946 $(758,367) $1,196,362
======== ======== ======== ======== ========= ==========
</TABLE>
F-70
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Tritel
Tritel, PCS, Guarantor NonGuarantor Consolidated
Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
--------- -------- ------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ -- $ -- $ 7,974 $1,038 $(2,253) $ 6,759
--------- -------- -------- ------ ------- ---------
Operating Expenses:
Cost of services and
equipment............ -- -- 6,966 -- -- 6,966
Technical operations.. -- -- 18,459 -- -- 18,459
General and
administrative....... 56 45 25,065 2 (2,253) 22,915
Sales and marketing... -- -- 20,404 -- -- 20,404
Stock-based
compensation......... 190,664 -- -- -- -- 190,664
Depreciation and
amortization......... 5,620 -- 6,621 598 -- 12,839
--------- -------- -------- ------ ------- ---------
Total operating
expenses........... 196,340 45 77,515 600 (2,253) 272,247
--------- -------- -------- ------ ------- ---------
Operating loss.......... (196,340) (45) (69,541) 438 -- (265,488)
Interest income......... 170 16,553 255 -- (187) 16,791
Financing cost.......... -- -- (2,230) -- -- (2,230)
Interest expense........ -- (24,924) (233) -- 187 (24,970)
--------- -------- -------- ------ ------- ---------
Income (loss) before
income taxes........... (196,170) (8,416) (71,749) 438 -- (275,897)
Income tax benefit
(expense).............. 2,051 3,135 23,420 (163) -- 28,443
--------- -------- -------- ------ ------- ---------
Net loss............ $(194,119) $ (5,281) $(48,329) $ 275 $ -- $(247,454)
========= ======== ======== ====== ======= =========
</TABLE>
F-71
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Tritel, Tritel Guarantor NonGuarantor Consolidated
Inc. PCS, Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
--------- --------- ------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities............. $ (3,648) $ 3,554 $ (50,981) $ -- $-- $ (51,075)
--------- --------- --------- ------- ---- ---------
Cash flows from
investing activities:
Capital expenditures.. -- -- (172,448) -- -- (172,448)
Advance under notes
receivable........... -- (7,500) (50) -- -- (7,550)
Investment in
subsidiaries......... (376,718) 376,718 -- -- -- --
Capitalized interest
on debt.............. -- -- (3,863) (9,760) -- (13,623)
Decrease in other
assets............... (325) (6,883) -- -- -- (7,208)
--------- --------- --------- ------- ---- ---------
Net cash provided by
(used in) investing
activities:............ (377,043) 362,335 (176,361) (9,760) -- (200,829)
--------- --------- --------- ------- ---- ---------
Cash flows from
financing activities:
Proceeds from long
term debt............ -- 300,000 -- -- -- 300,000
Proceeds from senior
subordinated debt.... -- 200,240 -- -- -- 200,240
Repayments of notes
payable.............. (22,100) -- -- -- -- (22,100)
Payment of debt
issuance costs and
other deferred
charges.............. (8,507) (30,202) -- -- -- (38,709)
Intercompany
receivable/payable... 4,556 (236,928) 222,612 9,760 -- --
Proceeds from vendor
discount............. -- 15,000 -- -- -- 15,000
Issuance of preferred
stock................ 163,370 -- -- -- -- 163,370
Issuance of common
stock, net........... 242,526 -- -- -- -- 242,526
--------- --------- --------- ------- ---- ---------
Net cash provided by
financing activities:.. 379,845 248,110 222,612 9,760 -- 860,327
--------- --------- --------- ------- ---- ---------
Net increase (decrease)
in restricted cash,
cash and cash
equivalents............ (846) 613,999 (4,730) -- -- 608,423
Cash and cash
equivalents at
beginning of period.... 846 -- -- -- -- 846
--------- --------- --------- ------- ---- ---------
Cash and cash
equivalents at End of
period................. $ -- $ 613,999 $ (4,730) $ -- $-- $ 609,269
========= ========= ========= ======= ==== =========
</TABLE>
The condensed combining financial statements for 1998 of Tritel, Inc. and
the Predecessor Companies have been provided below to comply with the current
requirement to show consolidating data for guarantors and non-guarantors for
all periods presented. While Tritel, Inc. and its subsidiaries were formed
during 1998, their only activities in 1998 were the acquisition of property and
equipment approximating $1.5 million and losses totaling $32,000. The assets of
the Predecessor Companies and the assets acquired from AT&T Wireless and
Central Alabama were transferred to Tritel, Inc. and its subsidiaries during
1999. Therefore, the following statements do not correspond with the current
corporate structure and do not show data by guarantor and non-guarantor
relationship to the senior subordinated discount notes.
F-72
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Combining Balance Sheet
As of December 31, 1998
<TABLE>
<CAPTION>
Predecessor
Companies Tritel Eliminations Combined
----------- ------ ------------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 845 $ 1 $ -- $ 846
Due from affiliates............... 1,817 -- (1,576) 241
Other current assets.............. 719 -- -- 719
-------- ------ ------- --------
Total current assets............ 3,381 1 (1,576) 1,806
-------- ------ ------- --------
Property and equipment, net......... 12,263 1,553 -- 13,816
Federal Communications Commission
licensing costs.................... 71,466 -- -- 71,466
Other assets........................ 1,933 -- -- 1,933
-------- ------ ------- --------
Total assets.................... $ 89,043 $1,554 $(1,576) $ 89,021
======== ====== ======= ========
LIABILITIES AND MEMBERS' EQUITY
(DEFICIT)
Current liabilities:
Notes payable..................... $ 22,405 $ -- $ -- $ 22,405
Due to affiliates................. -- 1,576 (1,576) --
Accounts payable and accrued
expenses......................... 10,496 10 -- 10,506
-------- ------ ------- --------
Total current liabilities....... 32,901 1,586 (1,576) 32,911
-------- ------ ------- --------
Non-current liabilities:
Long-term debt.................... 51,599 -- -- 51,599
Note payable to related party..... 6,270 -- -- 6,270
Other liabilities................. 224 -- -- 224
-------- ------ ------- --------
Total non-current liabilities... 58,093 -- -- 58,093
-------- ------ ------- --------
Total liabilities............... 90,994 1,586 (1,576) 91,004
Contributed capital, net............ 13,497 -- -- 13,497
Deficit accumulated during
development stage.................. (15,448) (32) -- (15,480)
-------- ------ ------- --------
Total members' equity
(deficit)...................... (1,951) (32) -- (1,983)
-------- ------ ------- --------
Total liabilities and members'
equity (deficit)............... $ 89,043 $1,554 $(1,576) $ 89,021
======== ====== ======= ========
</TABLE>
F-73
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Combining Statement of Operations
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Predecessor
Companies Tritel Combined
----------- ------ --------
(dollars in thousands)
<S> <C> <C> <C>
Revenues: $ -- $-- $ --
-------- ---- --------
Operating expenses:
Technical operations............................ 1,918 21 1,939
General and administrative...................... 4,937 10 4,947
Sales and marketing............................. 451 1 452
Depreciation and amortization................... 348 -- 348
-------- ---- --------
7,654 32 7,686
-------- ---- --------
Operating loss.................................... (7,654) (32) (7,686)
Interest income................................... 77 -- 77
Interest expense.................................. (722) -- (722)
-------- ---- --------
Loss before extraordinary item.................... (8,299) (32) (8,331)
Loss on return of spectrum........................ (2,414) -- (2,414)
-------- ---- --------
Net loss.......................................... $(10,713) $(32) $(10,745)
======== ==== ========
</TABLE>
Combining Statement of Cash Flows
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Predecessor
Companies Tritel Combined
----------- ------- --------
(dollars in thousands)
<S> <C> <C> <C>
Net cash used in operating activities........... $(10,039) $ 1,543 $ (8,496)
-------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment............ (4,428) (1,542) (5,970)
Capitalized interest on debt used to obtain
Federal Communications Commission licenses... (2,905) -- (2,905)
-------- ------- --------
Net cash used in investing activities........... (7,333) (1,542) (8,875)
-------- ------- --------
Cash flows from financing activities:
Proceeds from notes payable to others......... 38,705 -- 38,705
Repayments of notes payable to others......... (21,300) -- (21,300)
Payment of debt issuance costs and other
deferred charges............................. (951) -- (951)
-------- ------- --------
Net cash provided by financing activities....... 16,454 -- 16,454
-------- ------- --------
Net increase (decrease) in cash and cash
equivalents.................................... (918) 1 (917)
Cash and cash equivalents at beginning of year.. 1,763 -- 1,763
-------- ------- --------
Cash and cash equivalents at end of year........ $ 845 $ 1 $ 846
======== ======= ========
</TABLE>
Tritel, Inc. was formed during 1998. Therefore, the 1997 combining financial
information is identical to the Consolidated Financial Statements.
F-74
<PAGE>
TRITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(21) SUBSEQUENT EVENT
On February 28, 2000, the Company announced an agreement to merge with
TeleCorp PCS, Inc., headquartered in Arlington, Virginia. This merger is
expected to take place during the second half of 2000 and is a tax-free
exchange of stock with Tritel shareholders receiving 0.76 shares of the new
entity's stock in exchange for each of their Tritel shares. The exchange ratio
is fixed regardless of future stock price movement. This transaction is
expected to be accounted for as a purchase business combination.
On the closing of the merger, AT&T will extend its initial five-year brand
sharing agreement for an additional two years.
F-75
<PAGE>
To the Board of Directors and Shareholder
TeleCorp-Tritel Holding Company:
In our opinion, the accompanying consolidated balance sheet presents fairly,
in all material respects, the financial position of TeleCorp-Tritel Holding
Company at April 28, 2000 in conformity with accounting principles generally
accepted in the United States. This financial statement is the responsibility
of the Company's management; our responsibility is to express an opinion on
this financial statement based on our audit. We conducted our audit of this
statement in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall balance sheet presentation. We believe that our audit of the
balance sheet provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
McLean, Virginia
May 10, 2000
F-76
<PAGE>
TELECORP-TRITEL HOLDING COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
April 28,
2000
---------
<S> <C>
ASSETS
Total current assets.................................................. $ --
-----
Total assets.......................................................... $ --
=====
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Total current liabilities............................................. $ --
-----
Total liabilities..................................................... --
Common Stock, par value $.01 per share 1,000 shares authorized, no
shares issued and outstanding...................................... --
Stockholders equity (deficit):........................................
-----
Total stockholders' equity (deficit).................................. --
-----
Total liabilities and stockholders' equity (deficit).................. $ --
=====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-77
<PAGE>
TELECORP-TRITEL HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
TeleCorp-Tritel Holding Company (Holding Company) was formed on April 28,
2000 in order to give effect to the Tritel merger and the AT&T exchange and
contribution (see Note 3). To date, the Holding Company has not conducted any
activities other than those incident to its formation. Upon completion of the
merger, TeleCorp and Tritel will become wholly owned subsidiaries of Holding
Company. The business of Holding Company will be the combined businesses
currently conducted by TeleCorp and Tritel.
2. Significant Accounting Policies
Basis of presentation
Holding Company has no assets, liabilities, stockholders' equity (deficit),
revenue or expenses and no principal activities. In addition, Holding Company
has not yet issued any equity securities.
Use of Estimates
The preparation of the 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. The estimates involve judgments with
respect to, among other things, various future factors which are difficult to
predict and are beyond the control of Holding Company. Actual amounts could
differ from these estimates.
3. Tritel Merger and AT&T Contribution and Exchange
On February 28, 2000, Telecorp agreed to merge with Tritel, through a merger
of each of Telecorp and Tritel into a newly formed subsidiary of Holding
Company. The merger will result in exchange of 100% of the outstanding common
and preferred stock of Telecorp and Tritel for common and preferred stock of
Holding Company. The new entity will be controlled by the TeleCorp's voting
preference common stockholders, and Telecorp and Tritel will become
subsidiaries of Holding Company.
This transaction will be accounted for using the purchase method of
accounting. The purchase price for Tritel will be determined based on the fair
value of the shares of the new holding company issued to the former
shareholders of Tritel plus cash, the fair value associated with the conversion
of outstanding Tritel options and warrants to Holding Company options and
warrants, liabilities assumed, and merger related costs. The fair value of the
shares issued will be determined based on the existing market price of the
Company's class A common stock, which is publicly traded, and, for those shares
that do not have a readily available market price, through valuation by an
investment banking firm. The purchase price for this transaction will be
allocated to the assets acquired based on their estimated fair values. The
excess of the purchase price over the assets acquired will be recorded as
goodwill and amortized over 20 years. The purchase price has been preliminarily
estimated to be approximately $6.6 billion with estimated residual goodwill of
$2.3 billion after allocation of the purchase price to the acquired assets,
including identifiable intangible assets.
The proposed merger has been unanimously approved by the Company's and
Tritel's board of directors, with three of the Company's directors abstaining.
In addition, shareholders with greater than 50% of the voting power of each
company have agreed to vote in favor of the merger. The merger is subject to
regulatory approval and other conditions and is expected to close in the last
quarter of 2000.
F-78
<PAGE>
TELECORP-TRITEL HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with the Company's merger with Tritel, AT&T has agreed to
contribute certain assets to the Company. This contribution will result in the
Company acquiring various assets in exchange for the consideration issued as
follows:
The Company acquires:
. $20 million cash from AT&T Wireless Services.
. The right to acquire all of the common and preferred stock of Indus,
Inc. (Indus).
. The right to acquire additional wireless properties and assets from
Airadigm Communications, Inc. (Airadigm).
. The two year extension and expansion of the AT&T network membership
licenses agreement to cover all people in Holding Company's markets.
Consideration issued:
. 9,272,740 shares of Class A common stock of the new holding company
formed from the Tritel merger to AT&T Wireless Services.
Separately, AT&T Wireless and the Company entered into an Asset Exchange
Agreement pursuant to which the Company has agreed to exchange certain assets
with AT&T Wireless, among other consideration.
The Company is receiving certain consideration in exchange for assets as
follows:
The Company acquires:
. $80 million in cash from AT&T Wireless.
. AT&T Wireless 10 MHZ PCS licenses in the areas covering part of the
Wisconsin market, in addition to adjacent licenses.
. AT&T Wireless's existing 10 MHZ PCS licenses in Fort Dodge, and
Waterloo, Iowa.
. The right to acquire additional wireless properties from Polycell
and ABC Wireless.
Consideration issued:
. The Company's New England market segment to AT&T Wireless.
. Cash or class A common stock to Polycell and cash to ABC Wireless.
Further, AT&T has agreed to extend the term of the roaming agreement and to
expand the geographic coverage of the AT&T operating agreements with TeleCorp
to include the new markets either through amending TeleCorp's existing
agreements or by entering into new agreements with Holding Company on
substantially the same terms as TeleCorp's existing agreements. In addition,
TeleCorp has granted AT&T Wireless a "right of first refusal" with respect to
certain markets transferred by AT&T Wireless Services or AT&T Wireless
triggered in the event of a sale of the Company to a third party.
These transactions will be accounted for as an asset purchase and
disposition and recorded at fair value. The purchase price will be determined
based on cash paid, the fair value of the class A common stock issued, and the
fair value of the assets relinquished. The purchase price will be
proportionately allocated to the noncurrent assets acquired based on their
estimated fair values. A gain is recognized as the difference between the fair
value of the New England assets disposed and their net book value.
F-79
<PAGE>
- --------------------------------------------------------------------------------
Annex A
AGREEMENT AND PLAN OF REORGANIZATION AND CONTRIBUTION
by and among
TELECORP PCS, INC.,
TRITEL, INC.
and
AT&T WIRELESS SERVICES, INC.
Dated as of February 28, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGERS AND THE CONTRIBUTION
1.1 The Mergers................................................3
1.2 Effective Time.............................................3
1.3 Effect of the Mergers......................................4
1.4 Certificates of Incorporation and By-laws of TeleCorp
II and Tritel II...........................................4
1.5 Directors and Officers.....................................5
1.6 Conversion of Capital Stock, Etc...........................5
1.7 Cancellation of Treasury Shares...........................11
1.8 Stock Options.............................................12
1.9 Capital Stock of the Merger Subs..........................14
1.10 Adjustments to Exchange Ratios............................14
1.11 Fractional Shares.........................................15
1.12 Surrender of Certificates.................................16
1.13 Further Ownership Rights in Shares........................19
1.14 Contribution..............................................20
1.15 Closing...................................................24
1.16 Lost, Stolen or Destroyed Certificates....................24
1.17 Tax Consequences..........................................25
ARTICLE II
STRUCTURE OF HOLDING COMPANY AND RELATED MATTERS
2.1 Organization of the Holding Company.......................25
2.2 Board of Directors of the Holding Company.................26
2.3 Officers of the Holding Company...........................27
2.4 Indemnification and Insurance.............................27
2.5 Headquarters of the Holding Company.......................29
2.6 Merger Subs Organization..................................29
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TELECORP
3.1 Organization and Qualification; Subsidiaries..............31
3.2 Certificate of Incorporation; By-laws.....................32
-i-
<PAGE>
3.3 Capitalization............................................32
3.4 Authority; Enforceability.................................35
3.5 Required Vote.............................................36
3.6 No Conflict; Required Filings and Consents................36
3.7 Material Agreements.......................................38
3.8 Compliance................................................39
3.9 SEC Filings; Financial Statements.........................40
3.10 Licenses and Authorizations...............................41
3.11 No Violation of Law.......................................43
3.12 Absence of Certain Changes or Events......................44
3.13 No Undisclosed Liabilities................................45
3.14 Absence of Litigation.....................................45
3.15 Employee Benefit Plans....................................45
3.16 Employment and Labor Matters..............................49
3.17 Registration Statement; Proxy Statement/Prospectus........49
3.18 Absence of Restrictions on Business Activities............51
3.19 Title to Assets; Leases...................................51
3.20 Taxes.....................................................51
3.21 Environmental Matters.....................................54
3.22 Intellectual Property.....................................56
3.23 No Restrictions on the Merger; Takeover Statutes..........57
3.24 Tax Matters...............................................57
3.25 Brokers...................................................57
3.26 Opinion of Financial Advisor..............................58
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TRITEL
4.1 Organization and Qualification; Subsidiaries..............59
4.2 Certificate of Incorporation; By-laws.....................60
4.3 Capitalization............................................60
4.4 Authority; Enforceability.................................63
4.5 Required Vote.............................................64
4.6 No Conflict; Required Filings and Consents................64
4.7 Material Agreements.......................................65
4.8 Compliance................................................67
4.9 SEC Filings; Financial Statements.........................67
4.10 Licenses and Authorizations...............................68
4.11 No Violation of Law.......................................70
4.12 Absence of Certain Changes or Events......................71
4.13 No Undisclosed Liabilities................................72
4.14 Absence of Litigation.....................................72
4.15 Employee Benefit Plans....................................72
4.16 Employment and Labor Matters..............................76
4.17 Registration Statement; Proxy Statement/Prospectus........76
-ii-
<PAGE>
4.18 Absence of Restrictions on Business Activities............77
4.19 Title to Assets; Leases...................................77
4.20 Taxes.....................................................78
4.21 Environmental Matters.....................................80
4.22 Intellectual Property.....................................81
4.23 No Restrictions on the Merger; Takeover Statutes..........82
4.24 Tax Matters...............................................83
4.25 Brokers...................................................83
4.26 Opinion of Financial Advisor..............................83
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AT&T
5.1 Authority; Enforceability.................................84
5.2 No Conflict; Required Filings and Consents................84
5.3 Tax Matters...............................................85
5.4 Brokers...................................................86
5.5 Registration Statement; Proxy Statement/Prospectus........86
5.6 Waiver....................................................86
5.7 Investment Experience.....................................87
5.8 Investment Intent.........................................87
5.9 Registration or Exemption Requirements....................88
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information; Confidentiality....................88
6.2 Conduct of Business Pending the Closing Date..............90
6.3 Registration Statement; Other Filings; Board
Recommendations..........................................100
6.4 Meeting of Company Stockholders..........................102
6.5 Non-Solicitation.........................................104
6.6 Subsequent Financial Statements..........................107
6.7 Nasdaq National Market Listing...........................108
6.8 Comfort Letters..........................................108
6.9 Further Actions..........................................108
6.10 Notification.............................................111
6.11 Notice of Breaches; Updates..............................111
6.12 No Inconsistent Action...................................112
6.13 Commercially Reasonable Efforts..........................112
6.14 Affiliates...............................................112
6.15 Blue Sky.................................................113
6.16 Tax-Free Exchange........................................113
6.17 AT&T Actions.............................................113
6.18 Transition Committee.....................................114
-iii-
<PAGE>
6.19 Employee Benefit Matters.................................114
6.20 Novation of Affiliation Agreements.......................115
6.21 Indemnity for Indus and Airadigm Liabilities.............115
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Obligations of TeleCorp and Tritel to
Effect the Mergers.......................................116
7.2 Additional Conditions to Obligations of TeleCorp.........119
7.3 Additional Conditions to the Obligations of Tritel.......120
7.4 Conditions to Obligations of the Holding Company to
Issue the Shares.........................................121
7.5 Conditions to Obligations of AT&T to Effect the
Contribution.............................................123
ARTICLE VIII
TERMINATION
8.1 General..................................................125
8.2 Obligations in Event of Termination......................127
8.3 Termination of Contribution..............................127
8.4 Obligations in Event of Termination of Contribution......128
ARTICLE IX
NO SURVIVAL
9.1 No Survival of Representations and Warranties............128
ARTICLE X
MISCELLANEOUS
10.1 Public Announcements.....................................129
10.2 Fees and Expenses........................................129
10.3 Notices..................................................130
10.4 Certain Definitions......................................132
10.5 Interpretation...........................................134
10.6 Entire Agreement.........................................135
10.7 Binding Effect; Benefit..................................135
10.8 Assignability............................................135
10.9 Amendment; Waiver........................................135
10.10 Section Headings; Table of Contents......................136
10.11 Severability.............................................136
10.12 Counterparts.............................................136
10.13 GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS.......136
-iv-
<PAGE>
EXHIBITS
EXHIBIT A - Voting Agreement
EXHIBIT B-1 - Form of Certificate of Merger
EXHIBIT B-2 - Form of Certificate of Merger
EXHIBIT C-1 - Certificate of Incorporation of TeleCorp II
EXHIBIT C-2 - Certificate of Incorporation of Tritel II
EXHIBIT D-1 - License Extension Amendment
EXHIBIT D-2 - Airadigm Letter of Intent
EXHIBIT E - Intentionally Omitted
EXHIBIT F - Plan of Reorganization
EXHIBIT G-1 - Indus Assignment
EXHIBIT G-2 - Indus Merger Agreement
EXHIBIT H - Form of the Holding Company Certificate of Incorporation
EXHIBIT I - Form of the Holding Company By-laws
EXHIBIT J - Affiliate Agreement
EXHIBIT I-1 - TeleCorp PCS, Inc. Tax Representations
EXHIBIT I-2 - Tritel, Inc. Tax Representations
EXHIBIT I-3 - The Holding Company Tax Representations Regarding TeleCorp
Merger
EXHIBIT I-4 - The Holding Company Tax Representations Regarding Tritel Merger
EXHIBIT I-5 - AT&T Tax Representations
EXHIBIT J-1 - Mounger Employment Agreement
EXHIBIT J-2 - Martin Employment Agreement
EXHIBIT K-1 New Network Membership License Agreement
EXHIBIT K-2 New Intercarrier Roamer Service Agreement
EXHIBIT K-3 New Roaming Administration Agreement
-v-
<PAGE>
SCHEDULES
SCHEDULE A - Directors and Officers of TeleCorp II,
Tritel II and the Holding Company
SCHEDULE B - Certain Actions Pending the Closing Date
SCHEDULE 1.8 - Tritel Restricted Stock Agreements
SCHEDULE 3.3(b) - The TeleCorp Options
SCHEDULE 3.10(c) - TeleCorp Authorizations
SCHEDULE 4.3(b) - The Tritel Options
SCHEDULE 3.10(c) - Tritel Authorizations
SCHEDULE 6.2(a) - TeleCorp's Conduct of Business Pending the Closing Date
SCHEDULE 6.2(b) - Tritel's Conduct of Business Pending the Closing Date
SCHEDULE 6.9 - Aggregate out-of-pocket costs to obtain consents
SCHEDULE 6.14 - All persons who are, or may be, as of the date hereof
"affiliates" of TeleCorp and Tritel
-vi-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION AND CONTRIBUTION
AGREEMENT AND PLAN OF REORGANIZATION AND CONTRIBUTION (this
"AGREEMENT"), dated as of February 28, 2000, by and among TeleCorp PCS, Inc., a
Delaware corporation ("TELECORP"), Tritel, Inc., a Delaware corporation
("TRITEL") and AT&T Wireless Services, Inc., a Delaware corporation ("AT&T").
WITNESSETH:
WHEREAS, the respective Boards of Directors of TeleCorp and Tritel
have each determined to engage in the transactions contemplated by this
Agreement. This Agreement provides for (A) the organization under the General
Corporation Law of the State of Delaware (the "DGCL") of a new holding company
(the "HOLDING COMPANY"), which will become the parent and sole stockholder of
both TeleCorp and Tritel pursuant to (i) the conversion of all outstanding
shares of capital stock of TeleCorp into shares of capital stock of the Holding
Company by means of a merger (the "FIRST MERGER") of a wholly owned subsidiary
of the Holding Company, to be organized under the DGCL (the "FIRST MERGER SUB"),
into and with TeleCorp, with TeleCorp as the surviving corporation, and (ii) the
conversion of all outstanding shares of capital stock of Tritel into shares of
capital stock of the Holding Company by means of a merger (the "SECOND MERGER"
and, together with the First Merger, the "MERGERS") of a wholly owned subsidiary
of the Holding Company, to be organized under the DGCL (the "SECOND MERGER SUB"
and, together with the First Merger Sub, the "MERGER SUBS"), with and into
Tritel, with Tritel as the surviving corporation and (B) as part of the
transaction, AT&T shall contribute or cause to be contributed certain property
to the Holding Company in consideration of the issuance to AT&T (or its
Affiliates) of 9,272,740 shares (the "SHARES") of Class A Voting Stock
<PAGE>
(as defined below) (the "CONTRIBUTION"). The Mergers shall be effected
simultaneously in accordance with the DGCL and it is intended that the
Contribution shall occur simultaneously with the Mergers. As a result of the
Mergers, the stockholders of TeleCorp and the stockholders of Tritel shall
become stockholders of the Holding Company, and TeleCorp and Tritel shall
continue to conduct their respective businesses and operations as wholly owned
subsidiaries of the Holding Company;
WHEREAS, as a condition to the willingness of, and an inducement to,
TeleCorp, Tritel and AT&T to enter into this Agreement, contemporaneously with
the execution and delivery of this Agreement, certain holders of shares of
capital stock of TeleCorp and Tritel are entering into simultaneously hereafter
agreements dated as of the date hereof and effective as of the Effective Time
(as defined below) providing for certain actions relating to the transactions
contemplated by this Agreement and the further governance of the Holding
Company;
WHEREAS, as an inducement to and a condition to Tritel entering into
this Agreement, certain stockholders of TeleCorp are entering into
simultaneously herewith a Voting Agreement relating to the agreement of such
stockholders to vote to approve the transactions contemplated by this Agreement
(the "TELECORP VOTING AGREEMENT"), in the form of EXHIBIT A;
WHEREAS, as an inducement to and a condition to TeleCorp entering
into this Agreement, certain stockholders of Tritel are entering into
simultaneously herewith a Voting Agreement relating to the agreement of such
stockholders to vote to approve the transactions contemplated by this Agreement
(the "TRITEL VOTING AGREEMENT") in the form of EXHIBIT A; and
WHEREAS, for Federal income tax purposes, it is intended that the
Mergers and the Contribution, taken together, will qualify as a tax-free
transaction within the meaning of
2
<PAGE>
Section 351 of the Internal Revenue Code of 1986, as amended (the "CODE"), that
the Mergers will each qualify as a tax-free reorganization under Section 368(a)
of the Code, that the stockholders of TeleCorp and Tritel will recognize no gain
or loss for Federal income tax purposes as a result of the consummation of the
Mergers and AT&T will recognize no gain or loss for Federal income tax purposes
as a result of consummation of the Contribution.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
THE MERGERS AND THE CONTRIBUTION
1.1 THE MERGERS. At the Effective Time (as defined in SECTION 1.2)
and subject to the terms and conditions of this Agreement, and in accordance
with the DGCL, the First Merger Sub shall be merged with and into TeleCorp, with
TeleCorp as the surviving corporation, and the Second Merger Sub shall be merged
with and into Tritel, with Tritel as the surviving corporation. From and after
the Effective Time, the separate corporate existences of the First Merger Sub
and the Second Merger Sub shall cease and TeleCorp, as the surviving corporation
in the First Merger, and Tritel, as the surviving corporation in the Second
Merger, shall continue their respective existence under the laws of the State of
Delaware as wholly owned subsidiaries of the Holding Company. TeleCorp, as the
surviving corporation after the First Merger, is hereinafter sometimes referred
to as "TELECORP II" and Tritel, as the surviving corporation after the Second
Merger, is hereinafter sometimes referred to as "TRITEL II."
1.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction
or, to the extent permitted hereunder, waiver of the conditions set forth in
ARTICLE VII, but in no event prior
3
<PAGE>
to the Closing (as defined below), TeleCorp and Tritel shall cause the Mergers
to be consummated by simultaneously filing two certificates of merger (the
"CERTIFICATES OF MERGER") with the Secretary of State of the State of Delaware,
in substantially the form of EXHIBITS B-1 and B-2 attached hereto, respectively,
and executed in accordance with the relevant provisions of the DGCL (the date
and time of such filing, or such later date and time as may be specified in the
Certificates of Merger, being the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGERS. At the Effective Time, the effect of the
Mergers shall be as provided in the applicable provisions of the DGCL and the
applicable Certificate of Merger. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time (i) all the assets,
property, rights, privileges, immunities, powers and franchises of TeleCorp and
the First Merger Sub shall vest in TeleCorp II, and all debts, liabilities and
duties of TeleCorp and the First Merger Sub shall become the debts, liabilities
and duties of TeleCorp II, and (ii) all the assets, property, rights,
privileges, immunities, powers and franchises of Tritel and the Second Merger
Sub shall vest in Tritel II, and all debts, liabilities and duties of Tritel and
the Second Merger Sub shall become the debts, liabilities and duties of Tritel
II.
1.4 CERTIFICATES OF INCORPORATION AND BY-LAWS OF TELECORP II AND
TRITEL II.
(a) At the Effective Time and without further action on the part of
any party, the Certificate of Incorporation of TeleCorp II shall be amended to
read in its entirety as set forth in EXHIBIT C-1 attached hereto, and the
By-laws of the First Merger Sub shall be the By-laws of TeleCorp II until
thereafter amended as provided by the DGCL.
(b) At the Effective Time and without further action on the part of
any party, the Certificate of Incorporation of Tritel II shall be amended to
read in its entirety as set forth in EXHIBIT C-2 attached hereto, and the
By-laws of the Second Merger Sub shall be the By-laws of Tritel II until
thereafter amended as provided by the DGCL.
4
<PAGE>
1.5 DIRECTORS AND OFFICERS.
(a) The directors and officers of TeleCorp II immediately following
the Effective Time, each to hold office in accordance with the Certificate of
Incorporation and the By-laws of TeleCorp II until their respective successors
are duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with TeleCorp II's Certificate of
Incorporation and By-laws, shall be as set forth on SCHEDULE A hereto.
(b) The directors and officers of Tritel II immediately following the
Effective Time, each to hold office in accordance with the Certificate of
Incorporation and the By-laws of Tritel II until their respective successors are
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with Tritel II's Certificate of
Incorporation and By-laws, shall be as set forth on SCHEDULE A hereto.
1.6 CONVERSION OF CAPITAL STOCK, ETC. Subject to the provisions of
this ARTICLE I, at the Effective Time, by virtue of the First Merger or the
Second Merger, as applicable, and without any action on the part of any party:
(a) With respect to each share of Common Stock, par value $0.01 per
share, of TeleCorp ("TELECORP COMMON STOCK"):
(i) each share of TeleCorp Class A Voting Common Stock, par value
$0.01 per share, issued and outstanding immediately prior to the Effective
Time (other than any shares to be canceled pursuant to SECTION 1.7) shall
be converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Class A Voting Common Stock, par value $0.01 per share
("CLASS A VOTING STOCK"), equal to the TeleCorp Exchange Ratio (as defined
in subsection (e) below);
5
<PAGE>
(ii) each share of TeleCorp Class B Non-Voting Common Stock, par
value $0.01 per share, issued and outstanding immediately prior to the
Effective Time (other than any shares to be canceled pursuant to SECTION
1.7) shall be converted automatically into and become exchangeable for
that number (expressed as a decimal) of fully paid and non-assessable
shares of the Holding Company Class A Voting Common Stock, par value $0.01
per share, equal to the TeleCorp Exchange Ratio;
(iii) each share of TeleCorp Class C Common Stock, par value $0.01
per share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Class C Common Stock, par value $0.01 per share ("CLASS C
COMMON STOCK"), equal to the TeleCorp Exchange Ratio;
(iv) each share of TeleCorp Class D Common Stock, par value $0.01 per
share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Class D Common Stock, par value $0.01 per share ("CLASS D
COMMON STOCK"), equal to the TeleCorp Exchange Ratio; and
(v) each share of TeleCorp Voting Preference Common Stock, par value
$0.01 per share, issued and outstanding immediately prior to the Effective
Time (other than any shares to be canceled pursuant to SECTION 1.7) shall
be converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Voting Preference Common Stock, par
6
<PAGE>
value $0.01 per share ("VOTING PREFERENCE Stock"), equal to the TeleCorp
Exchange Ratio.
(b) With respect to each share of Preferred Stock, par value $0.01
per share, of TeleCorp ("TELECORP PREFERRED STOCK" and, together with the
TeleCorp Common Stock, "TELECORP CAPITAL Stock"):
(i) each share of TeleCorp Series A Preferred Stock, par value $0.01
per share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Series A Preferred Stock, par value $0.01 per share
("SERIES A PREFERRED STOCK"), equal to the TeleCorp Exchange Ratio;
(ii) each share of TeleCorp Series C Preferred Stock, par value $0.01
per share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Series C Preferred Stock, par value $0.01 per share
("SERIES C PREFERRED STOCK"), equal to the TeleCorp Exchange Ratio;
(iii) each share of TeleCorp Series D Preferred Stock, par value
$0.01 per share, issued and outstanding immediately prior to the Effective
Time (other than any shares to be canceled pursuant to SECTION 1.7) shall
be converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Series D Preferred Stock, par value $0.01 per share
("SERIES D PREFERRED STOCK"), equal to the TeleCorp Exchange Ratio;
7
<PAGE>
(iv) each share of TeleCorp Series E Preferred Stock, par value $0.01
per share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Series E Preferred Stock, par value $0.01 per share
("SERIES E PREFERRED STOCK"), equal to the TeleCorp Exchange Ratio; and
(v) each share of TeleCorp Series F Preferred Stock, par value $0.01
per share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Series F Preferred Stock, par value $0.01 per share
("SERIES F PREFERRED STOCK"), equal to the TeleCorp Exchange Ratio.
(c) With respect to each share of Common Stock, par value $0.01 per
share, of Tritel ("TRITEL COMMON STOCK"):
(i) each share of Tritel Class A Voting Common Stock, par value $0.01
per share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of Class
A Voting Stock equal to the Tritel Exchange Ratio (as defined in
subsection (e) below);
(ii) each share of Tritel Class B Non-Voting Common Stock, par value
$0.01 per share, issued and outstanding immediately prior to the Effective
Time (other than any shares to be canceled pursuant to SECTION 1.7) shall
be converted automatically into and
8
<PAGE>
become exchangeable for that number (expressed as a decimal) of fully paid
and non-assessable shares of Class A Voting Stock equal to the Tritel
Exchange Ratio;
(iii) each share of Tritel Class C Common Stock, par value $0.01 per
share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Class E Common Stock, par value $0.01 per share ("CLASS E
COMMON STOCK"), equal to the Tritel Exchange Ratio multiplied by 0.01 and
that number (expressed as a decimal) of fully paid and non-assessable
shares of Class A Voting Stock equal to the Tritel Exchange Ratio
multiplied by 0.99;
(iv) each share of Tritel Class D Common Stock, par value $0.01 per
share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for that number
(expressed as a decimal) of fully paid and non-assessable shares of the
Holding Company Class F Common Stock, par value $0.01 per share ("CLASS F
COMMON STOCK"), equal to the Tritel Exchange Ratio multiplied by 0.01 and
that number (expressed as a decimal) of fully paid and non-assessable
shares of Class A Voting Stock equal to the Tritel Exchange Ratio
multiplied by 0.99; and
(v) all Tritel Voting Preference Common Stock, par value $0.01 per
share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for the right to
receive an aggregate amount of $10,000,000 in immediately available funds
to be paid at the Effective Time (which source of funds will come from
Tritel and not from TeleCorp or the Holding Company); all shares of Tritel
Voting
9
<PAGE>
Preference Common Stock owned by William M. Mounger, II shall be converted
into three shares of Voting Preference Stock; Messers. Martin and Mounger
own all the outstanding shares of Tritel Voting Preference Common Stock.
(d) With respect to each share of Preferred Stock, par value $0.01
per share, of Tritel ("TRITEL PREFERRED STOCK" and, together with the Tritel
Common Stock, "TRITEL CAPITAL STOCK"):
(i) each share of Tritel Series A Preferred Stock, par value $0.01
per share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for one fully paid
and non-assessable share of the Holding Company Series B Preferred Stock,
par value $0.01 per share ("SERIES B PREFERRED STOCK");
(ii) each share of Tritel Series D Preferred Stock, par value $0.01
per share, issued and outstanding immediately prior to the Effective Time
(other than any shares to be canceled pursuant to SECTION 1.7) shall be
converted automatically into and become exchangeable for one fully paid
and non-assessable share of the Holding Company Series G Preferred Stock,
par value $0.01 per share ("SERIES G PREFERRED STOCK").
(e) For purposes of this Agreement, the "TELECORP EXCHANGE Ratio"
shall initially be 1.00 and the "TRITEL EXCHANGE RATIO" shall initially be 0.76,
in each case subject to adjustment from time to time in accordance with SECTION
1.10. The TeleCorp and Tritel Exchange Ratios are sometimes referred to herein
as the "EXCHANGE RATIOS".
(f) As of the Effective Time, all shares of TeleCorp Capital Stock
shall no longer be outstanding and shall automatically be deemed canceled and
shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive the applicable Holding Company Capital Stock
10
<PAGE>
specified in SECTION 1.6(a) and (b) (the "TELECORP MERGER CONSIDERATION") as the
case may be, and any cash in lieu of fractional shares to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
SECTION 1.12 hereof without interest. For purposes hereof, the term "HOLDING
COMPANY COMMON STOCK" shall mean the Class A Voting Stock, the Class C Common
Stock, the Class D Common Stock, the Class E Common Stock, the Class F Common
Stock and the Voting Preference Stock; the term "HOLDING COMPANY PREFERRED
STOCK" shall mean the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock;
and the term "HOLDING COMPANY CAPITAL STOCK" shall mean the Holding Company
Common Stock and the Holding Company Preferred Stock, collectively.
(g) As of the Effective Time, all shares of Tritel Capital Stock
shall no longer be outstanding and shall automatically be redeemed and canceled
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive the applicable Holding Company Capital Stock specified in SECTION 1.6(c)
and (d) (the "TRITEL MERGER CONSIDERATION") and any cash in lieu of fractional
shares to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with SECTION 1.12 hereof without interest.
1.7 CANCELLATION OF TREASURY SHARES.
(a) At the Effective Time, each share of TeleCorp Capital Stock, if
any, held in the treasury of TeleCorp shall be canceled and extinguished without
any conversion thereof and no consideration shall be delivered in exchange
therefor.
11
<PAGE>
(b) At the Effective Time, each share of Tritel Capital Stock held in
the treasury of Tritel, shall be canceled and extinguished without any
conversion thereof and no consideration shall be delivered in exchange therefor.
1.8 STOCK OPTIONS.
(a) At the Effective Time, all options to purchase shares of TeleCorp
Common Stock then outstanding under the TeleCorp 1999 Stock Option Plan (the
"TELECORP 1999 PLAN"), by virtue of the First Merger and without any action on
the part of the holder thereof, shall no longer be options to acquire TeleCorp
Common Stock and shall become options to acquire Class A Voting Stock with such
terms as provided in SECTION 1.8(b). At the Effective Time, all options to
purchase shares of Tritel Common Stock then outstanding under the Tritel
Non-Employee Directors Stock Option Plan (the "TRITEL DIRECTORS PLAN") and the
Tritel 1999 Stock Option Plan (the "TRITEL 1999 PLAN," and with the TeleCorp
Option Plans and Tritel Directors Plan, the "OPTION PLANS"), by virtue of the
Second Merger and without any action on the part of the holder thereof, shall no
longer be options to acquire Tritel Common Stock and shall become options to
acquire Class A Voting Stock with such terms as provided in SECTION 1.8(b).
Outstanding options under the Option Plans are referred to herein as
"OUTSTANDING EMPLOYEE OPTIONS."
(b) Each such Outstanding Employee Option shall continue to have, and
be subject to, the same terms and conditions set forth in the relevant Option
Plan, option agreements thereunder and other relevant documentation immediately
prior to the Effective Time, except that such Outstanding Employee Options will
be exercisable solely for that number of whole shares of Class A Voting Stock
equal to the product of the number of shares of TeleCorp or Tritel Common Stock,
as the case may be, that were purchasable under such Outstanding Employee Option
immediately prior to the Effective Time multiplied by the applicable Exchange
12
<PAGE>
Ratio, rounded down to the nearest whole number of shares of the Holding Company
Common Stock and the per-share exercise price for the shares of Class A Voting
Stock issuable upon exercise of such assumed Outstanding Employee Options will
be equal to the quotient determined by dividing the exercise price per-share of
TeleCorp or Tritel Common Stock, as the case may be, at which such Outstanding
Employee Options were exercisable immediately prior to the Effective Time by the
relevant Exchange Ratio, and rounding the resulting exercise price up to the
nearest whole cent.
(c) The Holding Company shall reserve for issuance a sufficient
number of shares of Class A Voting Stock for delivery upon exercise of
Outstanding Employee Options. As soon as practicable after the Effective Time,
the Holding Company shall file a registration statement on Form S-8 under the
Securities Act covering the shares of Class A Voting Stock issuable upon the
exercise of the Outstanding Employee Options assumed by the Holding Company, and
shall use its reasonable efforts to cause such registration statement to become
effective as soon thereafter as practicable and to maintain such registration in
effect until the exercise or expiration of such assumed Outstanding Employee
Options.
(d) TeleCorp and Tritel shall take all such steps as may be required
to cause consummation of the transactions contemplated by SECTION 1.8(a) and (b)
and any other disposition of TeleCorp or Tritel equity securities (including
derivative securities) in connection with this Agreement by each individual who
(x) is a director or officer of TeleCorp or Tritel or (y) at the Effective Time
will be a director or officer of the Holding Company, to be exempt under Rule
16b-3 promulgated under the Exchange Act (as defined below), such steps to be
taken in accordance with the No-Action Letter dated January 12, 1999, issued by
the SEC (as defined below) to Skadden, Arps, Slate, Meagher & Flom LLP.
13
<PAGE>
(e) At the Effective Time, the Holding Company shall assume all of
the obligations of TeleCorp under the TeleCorp 1998 Restricted Stock Plan (the
"TELECORP RESTRICTED STOCK PLAN") and of Tritel under the Tritel Restricted
Stock Agreements specified in SCHEDULE 1.8.
1.9 CAPITAL STOCK OF THE MERGER SUBS.
(a) Each share of common stock, par value $0.01 per share, of the
First Merger Sub ("FIRST MERGER SUB COMMON STOCK") issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and non-assessable share of common stock of
TeleCorp II. Each stock certificate of First Merger Sub evidencing ownership of
any First Merger Sub Common Stock shall after the Effective Time evidence
ownership of such shares of capital stock of TeleCorp II.
(b) Each share of common stock, par value $0.01 per share, of the
Second Merger Sub ("SECOND MERGER SUB COMMON STOCK") issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and non-assessable share of common stock of
Tritel II. Each stock certificate of Second Merger Sub evidencing ownership of
any Second Merger Sub Common Stock shall, after the Effective Time, evidence
ownership of such shares of capital stock of Tritel II.
1.10 ADJUSTMENTS TO EXCHANGE RATIOS. Without limiting any other
provision of this Agreement, the TeleCorp Exchange Ratio and the Tritel Exchange
Ratio shall each be adjusted, at any time and from time to time, to fully
reflect the effect of any stock split, reverse split, stock dividend (including,
without limitation, any stock dividend of securities convertible into TeleCorp
Capital Stock or Tritel Capital Stock, as the case may be), reorganization,
recapitalization or other like change with respect to TeleCorp Capital Stock or
Tritel Capital Stock occurring or with a record date after the date hereof and
prior to the Effective Time.
14
<PAGE>
1.11 FRACTIONAL SHARES.
(a) No fraction of a share of Class A Voting Stock shall be issued,
but in lieu thereof each holder of shares of TeleCorp Common Stock or Tritel
Common Stock, as the case may be, who would otherwise be entitled to a fraction
of a share of Class A Stock (after aggregating all fractional shares of Class A
Voting Stock to be received by such holder) shall receive from the Exchange
Agent (as defined below) in lieu of such fractional shares of Class A Voting
Stock, an amount of cash (rounded to the nearest whole cent and without
interest) representing such holder's proportionate interest, if any, in the net
proceeds from the sale by the Exchange Agent in one or more transactions (which
sale transactions shall be made at such times, in such manner and on such terms
as the Exchange Agent shall determine in its reasonable discretion) on behalf of
all such holders of the aggregate of the fractional shares of Class A Voting
Stock which would otherwise have been issued (the "EXCESS SHARES"). The sale of
the Excess Shares by the Exchange Agent shall be executed on the Nasdaq National
Market System and shall be executed in round lots to the extent practicable.
Until the net proceeds of such sale or sales have been distributed to the
holders of TeleCorp Common Stock or Tritel Common Stock, as applicable, the
Exchange Agent will hold such proceeds in trust for the holders of the
applicable TeleCorp Common Stock and the Tritel Common Stock. The Holding
Company shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including, without limitation, the expenses and compensation
of the Exchange Agent, incurred in connection with such sale of the Excess
Shares. The Holding Company may decide, at its option, exercised prior to the
Effective Time, in lieu of the issuance and sale of Excess Shares and the making
of the payments heretofore contemplated by SECTION 2.4 that the Holding Company
shall pay to the Exchange Agent an amount sufficient for the Exchange Agent to
pay each holder of TeleCorp Common Stock and Tritel Common Stock the amount such
holder would have received pursuant
15
<PAGE>
to the foregoing assuming that the sales of Class A Stock were made at a price
equal to the average of the closing bid prices of the Class A Stock on the
Nasdaq National Market System, for the ten consecutive trading days immediately
following the Effective Time and, in such case, all references herein to the
cash proceeds of the sale of the Excess Shares and similar references shall be
deemed to mean and refer to the payments calculated as set forth in this
sentence. In such event, Excess Shares shall not be issued or otherwise
transferred to the Exchange Agent. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of TeleCorp
Common Stock or Tritel Common Stock, as applicable, in lieu of any fractional
shares of the applicable TeleCorp Common Stock and the Tritel Common Stock, the
Exchange Agent shall make available such amounts to such holders of shares of
the applicable TeleCorp Common Stock and the Tritel Common Stock without
interest.
(b) Fractions of a share of all classes and series of the Holding
Company Capital Stock, other than Class A Voting Stock, may be issued in
connection with the Mergers.
1.12 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, the Holding Company
shall designate a bank or trust company to act as exchange agent (the "EXCHANGE
AGENT") in connection with the Mergers.
(b) THE HOLDING COMPANY TO PROVIDE CAPITAL STOCK. When and as needed,
the Holding Company shall make available to the Exchange Agent for exchange in
accordance with this ARTICLE I, through such reasonable procedures as the
Holding Company may adopt, sufficient shares of the Holding Company Capital
Stock to be exchanged pursuant to SECTION 1.6.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Holding Company shall cause to be mailed to each holder of record of a
certificate or certificates (the "CERTIFICATES") which immediately prior to the
Effective Time represented outstanding shares of
16
<PAGE>
TeleCorp Capital Stock and Tritel Capital Stock whose shares were converted into
the right to receive shares of the Holding Company Capital Stock pursuant to
SECTION 1.6, a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as the TeleCorp and/or Tritel may reasonably specify)
and instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of the Holding Company Capital
Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holder of such Certificate shall
be entitled to receive in exchange therefor a certificate representing the
number and type of shares of the Holding Company Capital Stock or, in the case
of Class A Voting Stock, payment in lieu of fractional shares which such holder
has the right to receive pursuant to SECTION 1.11, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of TeleCorp
Capital Stock or Tritel Capital Stock, as the case may be, shall be deemed from
and after the Effective Time, for all legal purposes, to evidence only the right
to receive the number of shares of the Holding Company Capital Stock into which
the holder of such shares of TeleCorp Capital Stock or Tritel Capital Stock, as
the case may be, is entitled and, in the case of Class A Voting Stock, the right
to receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with SECTION 1.11. Any portion of the shares of the Holding Company
Capital Stock and cash deposited with the Exchange Agent pursuant to SECTION
1.12(b) which remains undistributed to the holders of Certificates representing
shares of TeleCorp Capital Stock or Tritel Capital Stock, as the case may be,
for six (6) months after the Effective Time shall be delivered to the Holding
Company, upon demand, and any holders of shares of
17
<PAGE>
TeleCorp Capital Stock or Tritel Capital Stock, as the case may be, who have not
theretofore complied with the provisions of this ARTICLE I shall thereafter look
only to the Holding Company and only as general creditors thereof for payment of
their claim for the Holding Company Capital Stock, any cash in lieu of
fractional shares of Class A Voting Stock and any dividends or distributions
with respect to the Holding Company Capital Stock to which such holders may then
be entitled.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
the Holding Company Capital Stock with a record date after the Effective Time
will be paid to the holder of any unsurrendered Certificate with respect to the
shares of the Holding Company Capital Stock represented thereby until the holder
of record of such Certificate shall surrender such Certificate. Subject to
applicable law, following the surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing shares of the Holding
Company Capital Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such shares of
the Holding Company Capital Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of the
Holding Company Capital Stock is to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered in the stock
register of TeleCorp or Tritel, as applicable, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
and otherwise be in proper form for transfer and that the stockholder requesting
such exchange shall have paid to the Holding Company, or any agent designated by
it, any transfer or other taxes required by reason of the issuance of a
certificate for shares of the Holding Company Capital Stock in any name other
than that of the registered holder of the
18
<PAGE>
Certificate surrendered, or established to the reasonable satisfaction of the
Holding Company or any agent designated by it that such tax has been paid or is
otherwise not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Agreement, none of the Exchange Agent, the Holding Company, TeleCorp II or
Tritel II shall be liable to a holder of shares of TeleCorp Capital Stock or
Tritel Capital Stock, as the case may be, for the Holding Company Capital Stock
or any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) WITHHOLDING OF TAX. Either the Holding Company or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of TeleCorp Capital
Stock or Tritel Capital Stock, as the case may be, such amounts as the Holding
Company (or any Affiliate thereof (as defined in SECTION 10.4)) or the Exchange
Agent shall determine in good faith they are required to deduct and withhold
with respect to the making of such payment under the Code or any provision of
any applicable state, local or foreign tax law. To the extent that amounts are
so withheld by the Holding Company or the Exchange Agent, such withheld amounts
will be treated for all purposes of this Agreement as having been paid to the
holder of the shares of TeleCorp Capital Stock or Tritel Capital Stock, as the
case may be, in respect of whom such deduction and withholding were made by the
Holding Company.
1.13 FURTHER OWNERSHIP RIGHTS IN SHARES. All shares of the Holding
Company Capital Stock issued upon the surrender for exchange of shares of
TeleCorp Capital Stock or Tritel Capital Stock, as the case may be, in
accordance with the terms of this ARTICLE I (including any cash paid in respect
thereof) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of TeleCorp Capital Stock or Tritel Capital Stock, as
the case may be, and there shall be no further registration of transfers on the
records of either TeleCorp II
19
<PAGE>
or Tritel II of shares of capital stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are presented
to either TeleCorp II or Tritel II for any reason, they shall be canceled and
exchanged as provided in this ARTICLE I.
1.14 CONTRIBUTION.
(a) As soon as practicable after the Effective Time and subject to,
and upon the terms and conditions of, this Agreement, AT&T shall deliver or
cause to be delivered (i) an amendment to the Network Membership License
Agreement, then in effect between AT&T Corp., a New York corporation, and the
Holding Company or TELECORP (the "EXISTING NETWORK MEMBERSHIP LICENSE
AGREEMENT"), in the form attached as EXHIBIT D-1 (the "LICENSE EXTENSION
AMENDMENT"), (ii) the Airadigm Assignment (as defined below), (iii) the Indus
Assignment (as defined below) and (iv) a wire transfer of immediately available
funds in the amount of $20,000,000 (the "CASH CONTRIBUTION") (the items
described in items (i) through (iv), the "CONTRIBUTED PROPERTY") and the Holding
Company shall, and shall cause TeleCorp to, as appropriate, execute the License
Extension Amendment, the Airadigm Assignment and the Indus Assignment and the
Holding Company shall issue to AT&T (or its Affiliates) the Shares. It is
expressly understood by the parties that the failure of the Contribution to
occur at the Effective Time shall not prevent the Mergers from occurring. As
used herein, the term "AIRADIGM ASSIGNMENT" shall mean the assignment by AT&T
(or one of its Affiliates) of all its rights, title and interest in, to and
under a certain Letter of Intent attached hereto as EXHIBIT D-2 (the "AIRADIGM
LETTER OF INTENT") which contemplates the entering into of an asset purchase
agreement (the "AIRADIGM PURCHASE AGREEMENT") between Airadigm Communications,
Inc., a Wisconsin corporation ("AIRADIGM"), and a buyer designated by AT&T (the
"AIRADIGM BUYER"), as part of, and subject to the approval of, a Plan of
Reorganization filed January 24, 2000 in connection with the bankruptcy
proceedings entitled IN RE AIRADIGM COMMUNICATIONS, INC., No.
20
<PAGE>
99-33500, Bktcy. W.D. Wisc., a copy of which is attached as EXHIBIT F (the "PLAN
OF REORGANIZATION"). In the event the Airadigm Purchase Agreement is entered
into, the term "Airadigm Assignment" shall mean the assignment by AT&T of all
its right, title and interest in, to and under the Airadigm Purchase Agreement.
As used herein, the term "INDUS ASSIGNMENT" shall mean the assignment by AT&T
(or its Affiliates) to the Holding Company or TeleCorp (or one of their
respective Affiliates) of all its right, title and interest in, to and under
that certain Agreement and Plan of Merger in the form of EXHIBIT G-1 dated as of
February 27, 2000, between Indus, Inc. Milwaukee PCS LLC, a Delaware limited
liability company (the "INDUS BUYER") and certain other parties (the "INDUS
MERGER AGREEMENT"), in the form of EXHIBIT G-2.
(b) The failure to occur of any or all of the transactions
contemplated by the Airadigm Assignment shall not prevent the Contribution from
occurring at the Effective Time with respect to the other aspects of the
Contribution with respect to which the conditions specified in SECTION 7.4 shall
have been satisfied.
(c) Notwithstanding anything to the contrary in this Agreement, prior
to the Effective Time, TeleCorp and AT&T will execute and deliver the Indus
Assignment and one or more amendments to the Network Membership License
Agreement between AT&T Corp. and TeleCorp dated as of July 17, 1998, the
Intercarrier Roamer Service Agreement between AT&T and TeleCorp dated as of July
17, 1998 and the Roaming Administration Agreement between AT&T and TeleCorp
dated as of July 17, 1998 extending the rights of TeleCorp under such agreements
to the Indus territory in form and substance acceptable to AT&T and TeleCorp
(the "INDUS AMENDMENTS"), as soon as the conditions to the consummation of the
transaction contemplated by the Indus Merger Agreement shall be satisfied if
such conditions shall be satisfied prior to the Effective Time (an "EARLY INDUS
CLOSING"). In the event of an Early Indus Closing, TeleCorp will not be required
to pay AT&T any consideration at the time of the Early
21
<PAGE>
Indus Closing. In the event the Early Indus Closing occurs and the Contribution
is consummated, the Early Indus Closing shall be deemed part of the
Contribution. In the event the Early Indus Closing occurs, TeleCorp or one of
its Affiliates will assume all of the obligations of AT&T (or its Affiliates)
pursuant to that certain Organizational Agreement effective as of February 27,
2000, among Kailas Rao, Indus, Inc., AT&T Wireless Services, Inc., the Indus
Buyer and AT&T Milwaukee JV, Inc. (the "INDUS ORGANIZATION AGREEMENT") (such
costs being referred to herein as the "INDUS TRANSACTION COSTS"). If the Early
Indus Closing occurs and this Agreement is (or the provisions of this Agreement
relating to the Contribution are) terminated without the Contribution occurring,
then at the option of AT&T: either (i) TeleCorp will re-assign and transfer to
AT&T (or its Affiliates or designees) all assets and rights which were assigned
and transferred to TeleCorp by AT&T in connection with the Early Indus Closing
(and AT&T will reimburse TeleCorp for all out-of-pocket costs incurred by
TeleCorp in connection with (x) the Indus Transaction Costs or (y) any
improvements to or maintenance of such assets to the extent that AT&T determines
reasonably and in good faith that, in the case of clause (x), such costs were
either reasonably incurred or were costs that are of the nature of costs that
AT&T (or its Affiliates) would incur under similar circumstances or, in the case
of clause (y), to the extent such costs improved the value of the Indus assets
or were costs that AT&T (or its Affiliates or successor in title) would have to
incur in any event; or (ii) TeleCorp will pay AT&T an amount in TeleCorp Class A
Voting Stock valued at the average of the closing bid prices for the TeleCorp
Class A Voting Stock for the ten trading days immediately preceding the date of
the Early Indus Closing equal to (1) $175 times the number of Indus POPS (where
"POPS" means Paul Kagan Associates, Inc. estimate of the 1998 population of a
geographic area), less (2) the amount of the purchase price that was paid plus
the amount of the Indus debt assumed pursuant to the Indus Merger Agreement or
(without duplication) the Indus Organization Agreement. In
22
<PAGE>
the event of an Early Indus Closing, if this Agreement is (or the provisions of
this Agreement relating to the Contribution are) terminated without the
Contribution occurring, AT&T and TeleCorp will take all action necessary so that
the Indus Amendments shall be terminated and all the rights thereunder shall
revert to AT&T (or its Affiliate).
(d) (i) In the event that AT&T is unable to deliver, or cause the
delivery of, the Indus Assets, then AT&T may in lieu thereof deliver or cause to
be delivered to the Holding Company executed assignments in form and substance
reasonably satisfactory to the Holding Company for 20 MHz of PCS licenses
(chosen at AT&T's option) for at least an equivalent number of POPs in the
Kansas City or Indianapolis BTAs and their surrounding BTAs or in such other
BTA's as the parties agree in good faith are reasonably equivalent to the
aforementioned regions (the "REPLACEMENT ASSETS"), PROVIDED that if AT&T chooses
to provide Replacement Assets, the Holding Company will deliver to AT&T (or its
Affiliates) an amount of the Class A Voting Stock (valued based on the average
of the closing prices of such stock for the ten trading days immediately
preceding delivery of such Class A Voting Stock by the Holding Company) equal to
the amount of the purchase price that was required to be paid (plus the amount
of the Indus debt to be assumed) pursuant to the Indus Merger Agreement and the
transactions contemplated thereby, and, if the number of POPs included in the
Replacement Assets chosen exceeds the number of Indus POPs, the Holding Company
will deliver to AT&T (or its Affiliates) an additional amount of Class A Voting
Stock, valued as described above, equal to $175 times the number of such excess
POPs (in which case the defined term "Shares" shall include such additional
shares of Class A Voting Stock).
(ii) In the event that AT&T is unable to deliver, or cause the
delivery of, the Indus Assets and AT&T does not elect to deliver or cause
to be delivered to the Holding Company Replacement Assets, AT&T shall
provide prompt notice thereof to TeleCorp
23
<PAGE>
(or, after the Effective Time, the Holding Company) and TeleCorp (or the
Holding Company) may, by notice given within five business days after
receipt of such notice from AT&T, elect to terminate the Contribution.
1.15 CLOSING. Unless this Agreement shall have been terminated and
the transactions contemplated by this Agreement abandoned pursuant to the
provisions of ARTICLE VIII, and subject to the provisions of ARTICLE VII, the
closing of the Mergers (the "CLOSING") shall take place at 10:00 a.m. (eastern
standard time) on a date (the "CLOSING DATE") to be mutually agreed upon by the
parties, which date shall be not later than the fifth business day after all the
conditions set forth in ARTICLE VII (excluding conditions that, by their nature,
cannot be satisfied until or on the Closing Date) shall have been satisfied (or
waived in accordance with ARTICLE VII, to the extent the same may be waived),
unless another time and/or date is agreed to in writing by the parties. The
Closing shall take place at the offices of Cadwalader, Wickersham & Taft, 100
Maiden Lane, New York, NY, unless another place is agreed to by the parties.
1.16 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of TeleCorp Capital Stock or Tritel Capital
Stock, as the case may be, shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
certificates, upon the making of an affidavit of that fact by the holder thereof
in form and substance reasonably acceptable to the Holding Company, such shares
of the Holding Company Capital Stock to which the holder of such Certificate
would otherwise be entitled to pursuant to the provisions of SECTION 1.6 and
cash for fractional shares, if any, as may be required pursuant to SECTION 1.11;
PROVIDED, HOWEVER, that the Holding Company may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as
24
<PAGE>
indemnity against any claim that may be made against the Holding Company or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.17 TAX CONSEQUENCES. For Federal income tax purposes, the parties
intend that the Mergers and the Contribution, taken together, will qualify as a
tax-free transaction within the meaning of Section 351 of the Code and that each
of the Mergers be treated as a tax-free reorganization under Section 368(a) of
the Code. Except to the extent otherwise required pursuant to a "determination"
within the meaning of Code Section 1313(a), the parties shall not take a
position on any Tax Return (as defined below) inconsistent with this SECTION
1.17.
ARTICLE II
STRUCTURE OF HOLDING COMPANY AND RELATED MATTERS
2.1 ORGANIZATION OF THE HOLDING COMPANY.
(a) The Holding Company shall be organized as a corporation under the
laws of the State of Delaware and at all times prior to the Effective Time be
50% owned by TeleCorp and 50% owned by Tritel. Upon the Effective Time, the
Holding Company shall change its name to "TeleCorp PCS, Inc." The Certificate of
Incorporation and By-laws of the Holding Company in effect immediately prior to
the Effective Time shall be in the form of EXHIBIT H and EXHIBIT I attached
hereto. TeleCorp and Tritel shall effect all steps to organize the Holding
Company as soon as practicable after the date of this Agreement. Prior to the
Effective Time, the Board of Directors of the Holding Company shall adopt
resolutions either designating the Holding Company Preferred Stock and
appropriate certificates of designation shall be filed with the Secretary of
State of the State of Delaware or amending and restating the Holding Company
Certificate of Incorporation and an appropriate Amended and Restated Certificate
of
25
<PAGE>
Incorporation of the Holding Company shall be filed with the Secretary of State
of the State of Delaware.
(b) At the Effective Time, each share of the Holding Company Common
Stock held by either TeleCorp or Tritel shall be canceled and all consideration
paid therefor shall be returned. Prior to the Effective Time, the Holding
Company shall not (i) conduct any business operations whatsoever or (ii) enter
into any contract or agreement of any kind, acquire any assets, or incur any
liability, except in connection with the organization of the Merger Subs, as may
be specifically contemplated by this Agreement, or as the parties may otherwise
agree in writing. In the event this Agreement is terminated prior to the
Effective Time, the Holding Company shall be promptly dissolved.
(c) Prior to the Effective Time, TeleCorp and Tritel will (i) cause
the Holding Company, First Merger Sub and Second Merger Sub to execute and
deliver a joinder to this Agreement pursuant to Section 251 of the DGCL, (ii)
execute a formal written consent under Section 228 of the DGCL as both of the
stockholders of the Holding Company, approving the execution, delivery and
performance of this Agreement by the Holding Company and (iii) cause the Holding
Company to execute a formal written consent under Section 228 of the DGCL as the
sole stockholder of First Merger Sub and Second Merger Sub, approving the
execution, delivery and performance of this Agreement by First Merger Sub and
Second Merger Sub.
2.2 BOARD OF DIRECTORS OF THE HOLDING COMPANY. The initial Board of
Directors of the Holding Company shall be as set forth on SCHEDULE A , and such
Board of Directors shall take all actions necessary to cause the Board of
Directors of the Holding Company, as of the Effective Time, to consist of the
persons identified on SCHEDULE A hereto, classified into three classes and with
terms expiring as set forth on such SCHEDULE A.
26
<PAGE>
2.3 OFFICERS OF THE HOLDING COMPANY. As of the Effective Time, the
Board of Directors of the Holding Company shall take all actions necessary to
elect as officers of the Holding Company the individuals set forth on SCHEDULE A
hereto.
2.4 INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, the Holding Company will, or
will cause TeleCorp II and Tritel II to, fulfill and honor in all respects the
obligations of TeleCorp and Tritel pursuant to their respective Certificates of
Incorporation and By-laws and any indemnification agreements between TeleCorp,
Tritel and each of their respective directors and officers existing prior to the
Effective Time. The Certificate of Incorporation and By-laws of each of TeleCorp
II and Tritel II will contain the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-laws of TeleCorp and Tritel,
respectively, prior to the Effective Time, which provisions shall not be
amended, repealed or otherwise modified for a period of six (6) years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, at any time prior to the Effective Time, were directors,
officers, employees or agents of TeleCorp or Tritel, unless such modification is
required by applicable law.
(b) From and after the Effective Time, the Holding Company will, and
will cause TeleCorp II and Tritel II, to the fullest extent permitted under
applicable law, to indemnify and hold harmless, each present and former director
and/or officer of TeleCorp and Tritel (collectively, the "INDEMNIFIED PARTIES")
against any costs or expenses (including, without limitation, attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, to the
extent arising out of or pertaining to any action or omission in his capacity as
a director or officer of TeleCorp or Tritel,
27
<PAGE>
respectively, for a period of six (6) years after the date hereof. Without
limiting any of the foregoing, in the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Parties for any period after
the Effective Time must be reasonably satisfactory to the Holding Company, (ii)
after the Effective Time, the Holding Company will pay, and will cause TeleCorp
II or Tritel II, as the case may be, to pay, the reasonable fees and expenses of
such counsel, promptly after statements therefor are received and (iii) the
Holding Company will, and will cause TeleCorp II or Tritel II, as the case may
be, to cooperate in the defense of any such matter; PROVIDED, HOWEVER, that
neither the Holding Company, TeleCorp II or Tritel II, as the case may be, shall
be liable for any settlement effected without its written consent (which consent
will not be unreasonably withheld or delayed); and PROVIDED, FURTHER, that, in
the event that any claim or claims for indemnification are asserted or made
within such six-year period, all rights to indemnification in respect of any
such claim or claims will continue until the disposition of any and all such
claims and PROVIDED, FURTHER, that nothing in this SECTION 2.4 shall impair any
rights or obligations of any present or former employees, agents, directors or
officers of TeleCorp or Tritel. The Indemnified Parties as a group may retain
only one law firm (in addition to local counsel) to represent them with respect
to any single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties. In the event that the Holding Company, TeleCorp II,
Tritel II or any of their respective successors or assigns (i) consolidates with
or merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of its properties and assets to any person,
then, and in each such case, to the extent necessary to effectuate the purposes
of this SECTION 2.4, proper provision shall be made so that the successors and
assigns of TeleCorp II and
28
<PAGE>
Tritel II assume the obligations set forth in this SECTION 2.4 and none of the
actions described in clause (i) or (ii) shall be taken until such provision is
made.
(c) For a period of six (6) years after the Effective Time, the
Holding Company will, or will cause TeleCorp II and Tritel II to, maintain in
effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by TeleCorp's and Tritel's directors'
and officers' liability insurance policies on terms at least comparable to those
in effect on the date hereof; PROVIDED, that in no event shall the Holding
Company be required to, or be required to cause TeleCorp II or Tritel II to,
maintain directors' and officers' liability insurance with comparable coverage
if the annual premium of such insurance is more than one hundred and twenty-five
percent (125%) of the cost of the most recent annual premium paid by TeleCorp or
Tritel, as applicable, but in such case, the Holding Company shall, and shall
cause, as much coverage as possible for such amount to be purchased.
(d) This SECTION 2.4 will survive the consummation of the Mergers, is
intended to benefit the Indemnified Parties, and shall be binding on all
successors and assigns of TeleCorp II, Tritel II and the Holding Company.
2.5 HEADQUARTERS OF THE HOLDING COMPANY. The headquarters of the
Holding Company shall be located in Arlington, Virginia. Following the Effective
Time, the principal corporate offices of TeleCorp II shall be located in
Arlington, Virginia, and the principal corporate offices of Tritel II shall be
located in Jackson, Mississippi.
2.6 MERGER SUBS ORGANIZATION. The Holding Company shall organize the
First Merger Sub and the Second Merger Sub under the laws of the State of
Delaware. Prior to the Effective Time, the outstanding capital stock of the
First Merger Sub and the Second Merger Sub shall each consist of 1,000 shares of
common stock, par value $0.01 per share, all of which shall be owned by the
Holding Company. Prior to the Effective Time, the Merger Subs shall not
29
<PAGE>
(i) conduct any business operations whatsoever or (ii) enter into any contract
or agreement of any kind, acquire any assets or incur any liability, except as
may be specifically contemplated by this Agreement. If this Agreement is
terminated prior to the Effective Time, the Merger Subs shall be promptly
dissolved.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TELECORP
Except as set forth in the TeleCorp SEC Reports (as defined in
SECTION 3.9) or the TeleCorp Disclosure Schedule previously delivered to Tritel
(the "TELECORP DISCLOSURE SCHEDULE"), TeleCorp, on behalf of itself and its
Subsidiaries (as defined in SECTION 10.4), represents and warrants to Tritel and
AT&T that the statements contained in this ARTICLE III are true, complete and
correct. The TeleCorp Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this ARTICLE
III, and the disclosure in any paragraph shall qualify only the corresponding
paragraph of this ARTICLE III, unless the disclosure contained in such paragraph
contains such information so as to enable a reasonable person to determine that
such disclosure qualifies or otherwise applies to other paragraphs of this
ARTICLE III. As used in this Agreement, a "TELECORP MATERIAL ADVERSE EFFECT"
means any change, event or effect that is materially adverse to the business,
assets (including intangible assets), financial condition or results of
operations of TeleCorp and its Subsidiaries, taken as a whole, excluding any
adverse change in, or effect on, the financial condition or revenues of TeleCorp
to the extent attributable to (i) general economic conditions in the United
States and (ii) conditions affecting the wireless communications industry
generally.
30
<PAGE>
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) TeleCorp is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all the
requisite corporate power and authority necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted. TeleCorp
is duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified would not, individually or in the aggregate, reasonably be expected to
have a TeleCorp Material Adverse Effect.
(b) All of the shares of capital stock of each Subsidiary (as defined
in SECTION 10.4 below) of TeleCorp are owned by TeleCorp or by a Subsidiary of
TeleCorp (other than director's qualifying shares in the case of foreign
Subsidiaries), and are validly issued, fully paid and non-assessable, and there
are no outstanding subscriptions, options, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions, arrangements, rights
or warrants with respect any such Subsidiaries capital stock.
(c) Each Subsidiary of TeleCorp is a legal entity, duly incorporated
or organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and has all the
requisite power and authority necessary to own, lease and operate its properties
and to carry on its business as it is now being conducted. Each Subsidiary of
TeleCorp is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be so
qualified would not, individually or in the aggregate, reasonably be expected to
have a TeleCorp Material Adverse Effect.
31
<PAGE>
3.2 CERTIFICATE OF INCORPORATION; BY-LAWS. TeleCorp has heretofore
made available to Tritel a true, complete and correct copy of its and each of
its Subsidiaries' respective Certificate of Incorporation and By-laws (or other
equivalent organizational documents), each as amended or restated to date. Each
such Certificate of Incorporation and By-laws (or other equivalent
organizational documents) of TeleCorp and each of its Subsidiaries are in full
force and effect. Neither TeleCorp nor any of its Subsidiaries is in violation
of any of the provisions of its Certificate of Incorporation or By-laws or other
equivalent organizational documents.
3.3 CAPITALIZATION.
(a) The authorized capital of TeleCorp consists of: (i) 918,339,090
shares of TeleCorp Common Stock, consisting of: (A) 608,550,000 shares of
TeleCorp Class A Voting Common Stock, (B) 308,550,000 shares of TeleCorp Class B
Non-Voting Common Stock, (C) 309,000 shares of TeleCorp Class C Common Stock,
(D) 927,000 shares of TeleCorp Class D Common Stock, and (E) 3,090 shares of
TeleCorp Voting Preference Common Stock; (ii) 17,045,000 shares of TeleCorp
Preferred Stock, consisting of: (A) 100,000 shares of TeleCorp Series A
Preferred Stock, (B) 200,000 shares of TeleCorp Series B Preferred Stock, (C)
215,000 shares of TeleCorp Series C Preferred Stock, (D) 50,000 shares of
TeleCorp Series D Preferred Stock, (E) 30,000 shares of TeleCorp Series E
Preferred Stock, (F) 15,450,000 shares of TeleCorp Series F Preferred Stock, and
(G) 1,000,000 undesignated shares;
(b) As of February 25, 2000: (i) 86,067,221 shares of TeleCorp Common
Stock were issued and outstanding, which consisted of: (A) 86,928,889 shares of
TeleCorp Class A Voting Common Stock, (B) 283,813 shares of TeleCorp Class C
Common Stock, (C) 851,429 shares of TeleCorp Class D Common Stock, and (D) 3,090
shares of TeleCorp Voting Preference Common Stock; (ii) 15,295,317 shares of
TeleCorp Preferred Stock were issued and outstanding, which consisted of: (A)
97,473 shares of TeleCorp Series A Preferred
32
<PAGE>
Stock, (B) 210,608 shares of TeleCorp Series C Preferred Stock, (C) 49,417
shares of TeleCorp Series D Preferred Stock, (D) 25,041 shares of TeleCorp
Series E Preferred Stock, and (E) 14,912,778 shares of TeleCorp Series F
Preferred Stock; (iii) no shares of TeleCorp Common Stock were held in treasury
of TeleCorp or any of its Subsidiaries; (iv) no shares of TeleCorp Capital Stock
were held by any Subsidiary of TeleCorp; (v) 503,022 shares of TeleCorp Class A
Voting Stock and 1,111.11 shares of TeleCorp Series E Preferred Stock reserved
for issuance pursuant to the TeleCorp Restricted Stock Plan and (vi) there were
outstanding employee and non-employee options in the amount set forth on
SCHEDULE 3.3(b) (the "TELECORP OPTIONS"), with the exercise price, vesting
schedule and name of each holder of such options and the amount of options held
by each such holder specified on SCHEDULE 3.3(b). None of the outstanding shares
of TeleCorp Common Stock are subject to, nor were they issued in violation of,
any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right.
(c) Except as set forth above, no shares of voting or non-voting
capital stock, other equity interests, or other voting securities of TeleCorp
were or are issued, reserved for issuance or outstanding. All outstanding shares
of TeleCorp Capital Stock are, and all shares which may be issued upon the
exercise of TeleCorp Options will be, when issued, duly authorized, validly
issued, fully paid and non-assessable and not subject to any kind of preemptive
(or similar) rights. There are no bonds, debentures, notes or other indebtedness
of TeleCorp with voting rights (or convertible into, or exchangeable for,
securities with voting rights) on any matters on which stockholders of TeleCorp
may vote.
(d) All of the outstanding shares of capital stock or other security
or equity interests of each of TeleCorp's Subsidiaries have been duly
authorized, validly issued, fully paid and non-assessable, are not subject to,
and were not issued in violation of, any preemptive (or similar) rights, and are
owned, of record and beneficially, by TeleCorp or one of its direct or
33
<PAGE>
indirect Subsidiaries, free and clear of all Liens (as defined in SECTION 10.4)
whatsoever. There are no restrictions of any kind which prevent the payment of
dividends, where applicable, by any of TeleCorp's Subsidiaries, and neither
TeleCorp nor any of its Subsidiaries is subject to any obligation or requirement
to provide funds for or to make any investment (in the form of a loan or capital
contribution) to or in any Person (as defined in SECTION 10.4).
(e) Section 3.3(e) of the TeleCorp Disclosure Schedule sets forth a
true, complete and correct list of all securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
(contingent or otherwise) to which TeleCorp or any of its Subsidiaries is a
party or by which any of them is bound obligating TeleCorp or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of TeleCorp
or of any of its Subsidiaries or obligating TeleCorp or any of its Subsidiaries
to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking (other than the
TeleCorp Options) and specifying the material terms of each such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking
including the applicable exercise price or purchase price and the name of the
person or entity to whom each such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking was issued. There are no
outstanding contractual obligations of TeleCorp or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock (or options
to acquire any such shares) or other security or equity interest of TeleCorp or
its Subsidiaries. There are not outstanding any stock-appreciation rights,
security-based performance units, "phantom" stock or other security rights or
other agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive any
payment or other value based on the revenues, earnings or financial performance,
34
<PAGE>
stock price performance or other attribute of TeleCorp or any of its
Subsidiaries or assets or calculated in accordance therewith (other than
ordinary course payments or commissions to sales representatives of TeleCorp
based upon revenues generated by them without augmentation as a result of the
transactions contemplated hereby) or to cause TeleCorp or any of its
Subsidiaries to file a registration statement under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), or which otherwise relate to the registration
of any securities of TeleCorp or its Subsidiaries.
(f) Except as set forth in the TeleCorp SEC Reports or as
contemplated by the Stockholders Agreement, there are no voting trusts, proxies
or other agreements, commitments or understandings of any character to which
TeleCorp or any of its Subsidiaries or, to the knowledge of TeleCorp, any of the
stockholders of TeleCorp, is a party or by which any of them is bound with
respect to the issuance, holding, acquisition, voting or disposition of any
shares of capital stock or other security or equity interest of TeleCorp or any
of its Subsidiaries.
3.4 AUTHORITY; ENFORCEABILITY. TeleCorp has all necessary corporate
power and authority to execute and deliver this Agreement, the Tritel Voting
Agreement, the Stockholders Agreement, the Investors Stockholder Agreement and
each other agreement or instrument required to be executed and delivered by it
at the Closing (each, including the TeleCorp Voting Agreement, the License
Extension Amendment, the Indus Amendments, the Airadigm Assignment and the Indus
Assignment, a "RELATED AGREEMENT"), and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by TeleCorp of this Agreement and each Related
Agreement to which it is a party, the performance of its obligations hereunder
and thereunder, and the consummation by TeleCorp of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
corporate action and no other corporate proceedings on the part of TeleCorp are
necessary to authorize this Agreement or any Related Agreement to
35
<PAGE>
which it is a party or to consummate the transactions so contemplated, other
than the approval and authorization of this Agreement and the First Merger by
votes of the holders of a majority of the outstanding shares of TeleCorp Capital
Stock entitled to vote thereon in accordance with the DGCL, TeleCorp's
Certificate of Incorporation and By-laws, and the Special Vote (as defined
below). Each of this Agreement and the Related Agreements to which TeleCorp is a
party has been duly and validly executed and delivered by TeleCorp and, assuming
the due authorization, execution and delivery thereof by all other parties to
each such agreement, constitutes a legal, valid and binding obligation of
TeleCorp in accordance with its terms.
3.5 REQUIRED VOTE. The Board of Directors of TeleCorp has, at a
meeting duly called and held, (i) approved and declared advisable this Agreement
and approved each Related Agreement to which it is a party, (ii) determined that
the transactions contemplated hereby and thereby are advisable, fair to and in
the best interests of the holders of TeleCorp Capital Stock, (iii) resolved to
recommend adoption of this Agreement, the First Merger and the other
transactions contemplated hereby and thereby to the stockholders of TeleCorp and
(iv) directed that this Agreement be submitted to the stockholders of TeleCorp
for their approval and authorization. The affirmative vote of a majority of the
voting power of all outstanding shares of TeleCorp Class A Voting Common Stock
and TeleCorp Voting Preference Common Stock voting together as one class, are
the only votes of the holders of any class or series of capital stock of
TeleCorp necessary to approve and authorize this Agreement, the First Merger,
the Related Agreements (to the extent TeleCorp is a party thereto) and the other
transactions contemplated hereby and thereby in their capacity as stockholders
of TeleCorp.
3.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery by TeleCorp of this Agreement and the
Related Agreements to which it is a party do not, and the performance of this
Agreement and the
36
<PAGE>
Related Agreements to which it is a party will not, (i) conflict with or violate
the Certificate of Incorporation or By-laws or other equivalent organizational
documents of TeleCorp or any of its Subsidiaries, (ii) conflict with or violate
any Law, Regulation or Order (as defined in SECTION 10.4) in each case
applicable to TeleCorp or any of its Subsidiaries or by which any of their
respective properties is bound or affected, or (iii) result in any breach or
violation of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair TeleCorp's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties or
assets of TeleCorp or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which TeleCorp or any of its Subsidiaries is a
party or by which TeleCorp or any of its Subsidiaries or its or any of their
respective properties is bound or affected, except in the case of clauses (ii)
or (iii) above, for any such conflicts, breaches, violations, defaults or other
occurrences that would not (x) individually or in the aggregate, reasonably be
expected to have a TeleCorp Material Adverse Effect, or (y) prevent or
materially impair or delay the consummation of the transactions contemplated by
this Agreement and the Related Agreements or (z) for purposes of this
representation being made to AT&T, individually, or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the value of the Shares.
(b) The execution and delivery by TeleCorp of this Agreement and the
Related Agreements to which it is a party do not, and the performance of this
Agreement and the Related Agreements, will not, require TeleCorp or any of its
Subsidiaries to obtain any approval of any Person or approval of, observe any
waiting period imposed by, or make any filing with or notification to, any
Governmental Authority (as defined in SECTION 10.4), domestic or foreign,
37
<PAGE>
except for (i) compliance with applicable requirements of the Securities Act,
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), state
securities laws ("BLUE SKY LAWS"), the pre-merger notification requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), or any Foreign Competition Laws (as defined in SECTION 10.4), the
Communications Act of 1934, as amended (the "COMMUNICATIONS ACT") and the
regulations of the Federal Communications Commission (the "FCC"), state public
utility, telecommunications or public service laws, (ii) the filing of the
Certificates of Merger in accordance with the DGCL and/or (iii) where the
failure to obtain such approvals, or to make such filings or notifications,
would not, individually or in the aggregate, reasonably be expected to have a
TeleCorp Material Adverse Effect or prevent or materially delay the consummation
of the transactions contemplated by this Agreement.
3.7 MATERIAL AGREEMENTS. Neither TeleCorp nor any of its Subsidiaries
has breached, or received in writing any claim or threat that it has breached,
any of the terms or conditions of any agreement, contract or commitment that is
of a type which is required to be included as an exhibit to the annual reports
on Form 10-K required to be filed by TeleCorp pursuant to Item 601 of Regulation
S-K promulgated by the Securities and Exchange Commission ("SEC") (collectively,
the "TELECORP MATERIAL Contracts") in such a manner as would permit any other
party to cancel or terminate the same or would permit any other party to collect
material damages from TeleCorp or any of its Subsidiaries under any TeleCorp
Material Contract. Each TeleCorp Material Agreement is in full force and effect,
is a valid and binding obligation of TeleCorp or such Subsidiary and, to the
knowledge of TeleCorp, of each other party thereto, and is enforceable against
TeleCorp or such Subsidiary in accordance with its terms, and, to the knowledge
of TeleCorp, enforceable against each other party thereto, in each case except
that the enforcement thereof may be limited by (i) the effects of bankruptcy,
38
<PAGE>
insolvency, reorganization, moratorium or other similar law now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law), and such TeleCorp Material Agreements will continue to be
valid, binding and enforceable in accordance with their respective terms and in
full force and effect immediately following the consummation of the transactions
contemplated hereby with no material alteration or acceleration or increase in
fees or liabilities. Neither TeleCorp nor any of its Subsidiaries is or is
alleged to be and, to the knowledge of TeleCorp, no other party is or is alleged
to be in default under, or in breach or violation of, any TeleCorp Material
Agreement, and, to the knowledge of TeleCorp, no event has occurred which
(whether with or without notice or lapse of time or both) would constitute such
a default, breach or violation. To the knowledge of TeleCorp, no party to a
TeleCorp Material Contract has terminated or in any way expressed an intent to
materially reduce or terminate the amount of business with TeleCorp and its
Subsidiaries in the future.
3.8 COMPLIANCE. Each of TeleCorp and its Subsidiaries is in
compliance in all respects with, and is not in default or violation of, (i) its
Certificate of Incorporation and By-laws or other equivalent organizational
documents, (ii) any Law or Order or by which any of their respective assets or
properties are bound or affected or (iii) any note, bond, mortgage, indenture,
contract, permit, franchise or other instruments or obligations to which any of
them are a party or by which any of them or any of their respective assets or
properties are bound or affected, except, in the case of clauses (ii) and (iii),
for any such failures of compliance, defaults and violations which would not,
individually or in the aggregate, reasonably be expected to have a TeleCorp
Material Adverse Effect.
39
<PAGE>
3.9 SEC FILINGS; FINANCIAL STATEMENTS.
(a) TeleCorp has timely filed all forms, reports, schedules,
statements and documents required to be filed by it with the SEC since October
13, 1999 (collectively, with the Registration Statement on Form S-1 dated
October 20, 1999, as amended (the "TELECORP S-1"), the "TELECORP SEC REPORTS")
pursuant to the Federal securities Laws and the SEC regulations promulgated
thereunder. The TeleCorp SEC Reports were prepared in accordance, and complied
as of their respective filing dates in all material respects, with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations promulgated thereunder and did not at the time they were filed (or
if amended or superseded by a filing prior to the date hereof, then on the date
of such filing) 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. None of TeleCorp's Subsidiaries has filed, or is obligated to
file, any forms, reports, schedules, statements or other documents with the SEC.
(b) Each of the audited and unaudited consolidated financial
statements (including, in each case, any related notes and schedules thereto)
contained in the TeleCorp SEC Reports (i) complied in all material respects with
applicable accounting requirements and the published regulations of the SEC with
respect thereto, (ii) were prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements, to
the extent otherwise permitted by Form 10-Q) applied on a consistent basis
throughout the periods involved (except as may be expressly described in the
notes thereto) and (iii) fairly present in all material respects the
consolidated financial position of TeleCorp and its Subsidiaries as at the
respective dates thereof and the consolidated results of its operations and
40
<PAGE>
cash flows for the periods indicated, subject in the case of interim financial
statements to normal year-end adjustments.
3.10 LICENSES AND AUTHORIZATIONS.
(a) TeleCorp and its Subsidiaries hold all licenses, permits,
certificates, franchises, ordinances, registrations, or other rights,
applications and authorizations required to be filed with or granted or issued
by any Governmental Authority, including, without limitation, the FCC or any
state authority asserting over TeleCorp, its Subsidiaries and their respective
properties and assets, that are required for the conduct of their businesses as
currently being conducted (each, as amended to date, the "TELECORP
AUTHORIZATIONS"), other than such licenses, permits, certificates, franchises,
ordinances, registrations, or other rights, applications and authorizations the
absence of which would not, individually or in the aggregate, be reasonably
likely to have a TeleCorp Material Adverse Effect or prevent or materially
impair or delay the ability of TeleCorp to consummate the transactions
contemplated hereby. TeleCorp has made available to Tritel a true, complete and
correct list of such TeleCorp Authorizations.
(b) TeleCorp has previously made available to Tritel and AT&T a true,
complete and correct list of (i) each application of TeleCorp or any of its
Subsidiaries pending before the FCC (the "TELECORP FCC APPLICATIONS"); (ii) each
FCC permit and FCC license which is not a TeleCorp Authorization but in which
TeleCorp or any of its Subsidiaries, directly or indirectly, holds an interest,
including as a stakeholder in the licensee (collectively, the "INDIRECT TELECORP
AUTHORIZATIONS"); and (iii) all licenses, permits, certificates, franchises,
ordinances, registrations, or other rights, applications and authorizations for
the benefit of TeleCorp or any of its Subsidiaries , as applicable, pending
before any state authority (collectively, the "TELECORP STATE AUTHORIZATIONS").
The TeleCorp Authorizations, the TeleCorp FCC Applications, the Indirect
TeleCorp Authorizations and the TeleCorp State Authorizations
41
<PAGE>
(collectively, the "TELECORP LICENSES AND APPLICATIONS") are the only Federal,
state or local licenses, permits, certificates, franchises, ordinances,
registrations, or other rights, applications and authorizations that are
required for the conduct of the business and operations of TeleCorp and its
Subsidiaries as currently conducted, other than such licenses, permits,
certificates, franchises, ordinances, registrations, or other rights,
applications and authorizations the absence of which would not, individually or
in the aggregate, be considered reasonably likely to have a TeleCorp Material
Adverse Effect or prevent or materially delay or impair the ability of TeleCorp
to consummate the transactions contemplated hereby.
(c) The TeleCorp Authorizations and, to the knowledge of TeleCorp,
the Indirect TeleCorp Authorizations, are in full force and effect and, except
as disclosed on SCHEDULE 3.10(c), have not been pledged or otherwise encumbered,
assigned, suspended or modified in any material respect (except as a result of
FCC rule changes applicable to the PCS industry generally), canceled or revoked,
and TeleCorp and each of its Subsidiaries have each operated in compliance with
all terms thereof or any renewals thereof applicable to them, other than where
the failure to so comply would not, individually or in the aggregate, be
considered reasonably likely to have a TeleCorp Material Adverse Effect or
materially impair the ability of TeleCorp to consummate the transactions
contemplated hereby. To the knowledge of TeleCorp, no event has occurred with
respect to any of the TeleCorp Authorizations which permits, or after notice or
lapse of time or both would permit, revocation or termination thereof or would
result in any other material impairment of the rights of the holder of any such
TeleCorp Authorizations. To the knowledge of TeleCorp, there is not pending any
application, petition, objection or other pleading with the FCC, any state
authority or any similar entity having jurisdiction or authority over the
operations of TeleCorp or any of its Subsidiaries which questions the validity
or contests any TeleCorp Authorization or which could reasonably be expected, if
accepted or
42
<PAGE>
granted, to result in the revocation, cancellation, suspension or any materially
adverse modification of any TeleCorp Authorization.
(d) Except for the approvals contemplated by SECTION 3.6, no permit,
consent, approval, authorization, qualification or registration of, or
declaration to or filing with, any Governmental Entity is required to be made or
obtained by TeleCorp or any of its Subsidiaries in connection with the transfer
or deemed transfer of the TeleCorp Licenses and Authorizations as a result of
the consummation of the transactions contemplated hereby and such transactions
will not result in a breach of such approvals, except where the failure to
obtain or make such permit, consent, approval, authorization, qualification,
registration, declaration or filing would not be considered reasonably likely to
have a TeleCorp Material Adverse Effect or prevent or materially impair or delay
the ability of TeleCorp to consummate the transactions contemplated hereby.
3.11 NO VIOLATION OF LAW. The business of TeleCorp and its
Subsidiaries is not being conducted in violation of any Laws, except for
possible violations none of which, individually or in the aggregate, would
reasonably be expected to have a TeleCorp Material Adverse Effect. Except as
disclosed in TeleCorp SEC Reports, no investigation, review or proceeding by any
Governmental Authority (including, without limitation, any stock exchange or
other self-regulatory body) with respect to TeleCorp or its Subsidiaries in
relation to any alleged violation of law or regulation is pending or, to
TeleCorp's knowledge, threatened, nor has any Governmental Authority (including,
without limitation, any stock exchange or other self-regulatory body) indicated
an intention to conduct the same, except for such investigations which, if they
resulted in adverse findings, would not reasonably be expected to have,
individually or in the aggregate, a TeleCorp Material Adverse Effect. Except as
set forth in the TeleCorp SEC Reports, neither TeleCorp nor any of its
Subsidiaries is subject to any cease and desist or other order, judgment,
injunction or decree issued by, or is a party to any written
43
<PAGE>
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or has adopted any board resolutions at the request of, any
Governmental Authority that materially restricts the conduct of its business or
which would reasonably be expected to have a TeleCorp Material Adverse Effect,
nor has TeleCorp or any of its Subsidiaries been advised that any Governmental
Authority is considering issuing or requesting any of the foregoing. None of the
representations and warranties made in this SECTION 3.11 are being made with
respect to Environmental Laws.
3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since September 30, 1999, TeleCorp and its Subsidiaries have
conducted their businesses only in the ordinary course of business consistent
with past practice (the "ORDINARY COURSE OF BUSINESS") and, since such date,
there has not been any change, event, development, damage or circumstance
affecting TeleCorp or any of its Subsidiaries which, individually or in the
aggregate, has had, or could reasonably be expected to have, a TeleCorp Material
Adverse Effect.
(b) Since September 30, 1999, (i) there has not been any material
change by TeleCorp in its accounting methods, principles or practices, any
revaluation by TeleCorp of any of its assets, including writing down the value
of inventory or writing off notes or accounts receivable other than in the
Ordinary Course of Business, and (ii) there has not been (A) any other action or
event, and neither TeleCorp nor any of its Subsidiaries has agreed in writing or
otherwise to take any other action, that would have required the consent of
Tritel pursuant to SECTION 6.2(a) had such action or event occurred after the
date hereof and prior to the Effective Time, or (B) any condition, event or
occurrence which could reasonably be expected to prevent,
44
<PAGE>
hinder or materially delay the ability of TeleCorp to consummate the
transactions contemplated by this Agreement or the Related Agreements to which
it is a party.
3.13 NO UNDISCLOSED LIABILITIES. TeleCorp and its Subsidiaries do not
have any liabilities or obligations of any nature (whether absolute, accrued,
fixed, contingent or otherwise) which would be required to be reflected in
financial statements prepared in accordance with GAAP, except liabilities or
obligations which (i) are reflected in the TeleCorp SEC Reports, or (ii) have
been incurred in the Ordinary Course of Business since September 30, 1999.
3.14 ABSENCE OF LITIGATION. There is no Litigation (as defined in
SECTION 10.4) pending or, to the knowledge of TeleCorp, threatened against
TeleCorp or any of its Subsidiaries, or any properties or rights of TeleCorp or
any of its Subsidiaries, before or subject to any Court (as defined in SECTION
10.4) or Governmental Authority which, individually or in the aggregate, has
had, or would reasonably be expected to have, a TeleCorp Material Adverse Effect
or would prevent, or materially hinder or delay TeleCorp from consummating the
transactions contemplated by this Agreement.
3.15 EMPLOYEE BENEFIT PLANS.
(a) TeleCorp has made available to Tritel true, complete and correct
copies of all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
stock or other security option, stock or other security purchase, stock or other
security appreciation rights, incentive, deferred compensation, retirement or
supplemental retirement, severance, golden parachute, vacation, cafeteria,
dependent care, medical care, employee assistance program, education or tuition
assistance programs, plant closing or similar benefit plans, retiree health or
life benefit plans, insurance and other similar fringe or employee benefit
plans, programs or arrangements, and any executive employment or executive
compensation or severance agreements, or a written
45
<PAGE>
summary of the material terms of any of the foregoing agreements if not in
writing, which have ever been sponsored, maintained, contributed to or entered
into for the benefit of, or relating to, any present or former employee,
officer, director or consultant of TeleCorp or any of its Subsidiaries, or any
trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with TeleCorp, or any
Subsidiary of TeleCorp, within the meaning of Section 414 of the Code or Section
4001 of ERISA (a "TELECORP ERISA AFFILIATE"), whether or not such plan is
terminated (together, the "TELECORP EMPLOYEE PLANS"). In addition, TeleCorp has
made available to Tritel with respect to each TeleCorp Employee Plan true,
complete and correct copies of each of the following, if applicable: the most
recent summary plan description and any subsequent summary of material
modifications, any related trust, insurance policy or other funding vehicle or
contract providing for benefits, and the three most recent Form 5500 series
Annual Report with all schedules filed with the IRS. Subject to the requirements
of ERISA, there are no restrictions on the ability of the sponsor of each
TeleCorp Employee Plan to amend or terminate any TeleCorp Employee Plan and each
TeleCorp Employee Plan may with the Consent of TeleCorp (or applicable
Subsidiary or TeleCorp ERISA Affiliate) be assumed by the Holding Company or the
First Merger Sub, as the case may be.
(b) There has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any TeleCorp Employee Plan; there are no claims pending (other than routine
claims for benefits) or threatened against any TeleCorp Employee Plan or against
the assets of any TeleCorp Employee Plan, nor are there any current or
threatened Liens on the assets of any TeleCorp Employee Plan; each TeleCorp
Employee Plan conforms to, and in its operation and administration is in all
material respects in compliance with the terms thereof and the requirements
prescribed by any and all statutes
46
<PAGE>
(including ERISA and the Code), orders, or governmental rules and regulations
currently in effect with respect thereto (including, without limitation, all
applicable requirements for notification, reporting and disclosure to
participants or the Department of Labor, the IRS or Secretary of the Treasury),
and TeleCorp, each of its Subsidiaries and TeleCorp ERISA Affiliates have
performed all obligations required to be performed by them under, are not in
default under or violation of, and have no knowledge of any default or in
violation by any other party with respect to, any TeleCorp Employee Plan; each
TeleCorp Employee Plan intended to qualify under Section 401(a) of the Code and
each corresponding trust intended to be exempt under Section 501 of the Code has
received or is the subject of a favorable determination or opinion letter from
the IRS (a true and complete copy of which has been provided by TeleCorp to
Tritel) and nothing has occurred which may be expected to cause the loss of such
qualification or exemption; all contributions (including premiums for any
insurance policy under which benefits for any TeleCorp Employee Plan are
provided) required to be made to any TeleCorp Employee Plan pursuant to Section
412 of the Code, or any contract, or the terms of the TeleCorp Employee Plan or
any collective bargaining agreement, or otherwise have been made on or before
their due dates and a reasonable amount has been accrued for contributions to
each TeleCorp Employee Plan for its current plan year; the transaction
contemplated herein will not directly or indirectly result in an increase of
benefits, acceleration of vesting or acceleration of timing for payment of any
benefit to any participant or beneficiary under any TeleCorp Employee Plan; each
TeleCorp Employee Plan, if any, which is maintained outside of the United States
has been operated in all material respects in conformance with the applicable
statutes or governmental regulations and rulings relating to such plans in the
jurisdictions in which such TeleCorp Employee Plan is present or operates and,
to the extent relevant, the United States; no TeleCorp Employee Plan is an
"employee pension benefit plan" (within the meaning of Section
47
<PAGE>
3(2) of ERISA) subject to Title IV of ERISA (a "DEFINED BENEFIT PLAN"), or a
Multiemployer Plan (as such term is defined in Section 3(37) of ERISA), or a
"single-employer plan which has two or more contributing sponsors at least two
of whom are not under common control" as described in Section 4063 of ERISA, and
none of TeleCorp, any of its Subsidiaries or any TeleCorp ERISA Affiliate has
ever maintained or sponsored, participated in, or made or been obligated to make
contributions to such a Defined Benefit Plan or such a Multiemployer Plan or
such a single employer plan as described in Section 4063 of ERISA.
(c) Each TeleCorp Employee Plan that is a "group health plan" (within
the meaning of Code Section 5000(b)(1)) has been operated in compliance in all
material respects with all laws applicable to such plan, its terms, and with the
group health plan continuation coverage requirements of Section 4980B of the
Code and Sections 601 through 608 of ERISA ("COBRA COVERAGE"), Section 4980D of
the Code and Sections 701 through 707 of ERISA, Title XXII of the Public Health
Service Act, the provisions of the Social Security Act, and the provisions of
any similar law of any state providing for continuation coverage, in each case
to the extent such requirements are applicable. No TeleCorp Employee Plan or
written or oral agreement exists which obligates TeleCorp, any of its
Subsidiaries or any TeleCorp ERISA Affiliate to provide health care coverage,
medical, surgical, hospitalization, death, life insurance or similar benefits
(whether or not insured) to any current or former employee, officer, director or
consultant of TeleCorp, any of its Subsidiaries or any TeleCorp ERISA Affiliate
or to any other person following such current or former employee's, officer's,
director's or consultant's termination of employment with TeleCorp, any of its
Subsidiaries or any TeleCorp ERISA Affiliate, other than COBRA Coverage.
48
<PAGE>
(d) The consummation of the transactions contemplated by this
Agreement will not constitute a "prohibited transaction" under ERISA or the Code
for which an exemption is unavailable.
3.16 EMPLOYMENT AND LABOR MATTERS. There are no controversies pending
or threatened, between TeleCorp or any of its Subsidiaries and any of their
respective employees which could reasonably be expected to have a TeleCorp
Material Adverse Effect; neither TeleCorp nor any of its Subsidiaries is a party
to any collective bargaining agreement or other labor union contract applicable
to persons employed by TeleCorp or its Subsidiaries nor to TeleCorp's knowledge
are there any activities or proceedings of any labor union to organize any such
employees of TeleCorp or any of its Subsidiaries. Since January 1, 1999, there
have been no strikes, slowdowns, work stoppages, lockouts, or threats thereof,
by or with respect to any employees of TeleCorp or any of its Subsidiaries.
TeleCorp does not have nor at the Closing will TeleCorp have any obligation
under the Worker Adjustment and Retraining Notification Act (the "WARN ACT") as
a result of any acts of TeleCorp taken in connection with the transactions
contemplated hereby. Except as would not reasonably be expected to result in a
TeleCorp Material Adverse Effect, each of TeleCorp and its Subsidiaries is in
compliance with all applicable Federal, state, local, and foreign employment,
wage and hour, labor non-discrimination and other applicable laws or
regulations, except where failure to comply with such laws would not be
reasonably expected to have a TeleCorp Material Adverse Effect.
3.17 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. None of the
information supplied by TeleCorp in writing for inclusion in the registration
statement on Form S-4, or any amendment or supplement thereto, pursuant to which
the shares of the Holding Company Capital Stock to be issued in the Mergers will
be registered with the SEC (including any amendments or supplements, the
"REGISTRATION STATEMENT") shall, at the time such document
49
<PAGE>
is filed, at the time amended or supplemented, at the time the Registration
Statement is declared effective by the SEC and at the Effective Time, 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, in light of the circumstances under which they were made, not
misleading. None of the information supplied by TeleCorp for inclusion in the
joint proxy statement/prospectus to be sent to the stockholders of TeleCorp and
Tritel in connection with the respective special meetings of the stockholders of
TeleCorp (the "TELECORP STOCKHOLDERS' MEETING"), and Tritel (the "TRITEL
STOCKHOLDERS' MEETING") in connection with the Mergers (such proxy
statement/prospectus, as amended or supplemented, is referred to herein as the
"JOINT PROXY STATEMENT") will, on the date the Joint Proxy Statement is first
mailed to the stockholders of TeleCorp and Tritel, at the time of the TeleCorp
Stockholders' Meeting and the Tritel Stockholders' Meeting and at the Effective
Time, 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 light
of the circumstances under which they were made, not misleading. If at any time
prior to the Effective Time any event relating to TeleCorp or any of its
Affiliates (as defined in SECTION 10.4), officers or directors should be
discovered by TeleCorp which should be set forth in an amendment or supplement
to the Registration Statement or an amendment or supplement to the Joint Proxy
Statement, TeleCorp shall promptly inform the Holding Company, AT&T and Tritel.
The Joint Proxy Statement (other then information relating solely to Tritel)
shall comply in all material respects as to form and substance with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder. Notwithstanding the foregoing, TeleCorp makes no representation or
warranty with respect to any information supplied by Tritel or AT&T which is
contained in the Registration Statement or Joint Proxy Statement.
50
<PAGE>
3.18 ABSENCE OF RESTRICTIONS ON BUSINESS ACTIVITIES. There is no
TeleCorp Material Agreement binding upon TeleCorp or any of its Subsidiaries or
any of their respective properties which has had or could reasonably be expected
to have the effect of prohibiting or materially impairing any business practice
of TeleCorp or any of its Subsidiaries or the conduct of business by TeleCorp or
any of its Subsidiaries as currently conducted.
3.19 TITLE TO ASSETS; LEASES. Each of TeleCorp and its Subsidiaries
has good title to all of their owned properties and assets, free and clear of
all Liens, charges and encumbrances, except Liens for Taxes (as defined in
SECTION 3.20) not yet due and payable and such Liens or other imperfections of
title, if any, as do not materially detract from the value of or interfere with
the present use of the property affected thereby (collectively, the "PERMITTED
ENCUMBRANCES"). All leases pursuant to which TeleCorp or any of its Subsidiaries
lease real or personal property from others are valid and effective in
accordance with their respective terms, and there is not, under any such lease,
any existing material default or event of default (or event which with notice or
lapse of time, or both, would constitute a material default) and in respect of
which TeleCorp or such Subsidiary has not taken adequate steps to prevent such a
default from occurring where such default would reasonably be expected to have a
TeleCorp Material Adverse Effect.
3.20 TAXES.
(a) For purposes of this Agreement, "TAX" or "TAXES" shall mean (i)
taxes and governmental impositions of any kind in the nature of (or similar to)
taxes, payable to any Federal, state, local or foreign taxing authority,
including but not limited to those on or measured by or referred to as income,
franchise, profits, gross receipts, capital ad valorem, custom duties,
alternative or add-on minimum taxes, estimated, environmental, disability,
registration, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding,
51
<PAGE>
employment, social security, workers' compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, and interest, penalties and additions to tax
imposed with respect thereto, (ii) liability for the payment of any amounts of
the types described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group, and (iii) liability for the
payment of any amounts as a result of being party to any tax sharing agreement
or as a result of any express or implied obligation to indemnify any other
person with respect to the payment of any amounts of the type described in
clause (i) or (ii); and "TAX RETURNS" shall mean returns, reports and
information statements, including any schedule or attachment thereto, with
respect to Taxes required to be filed with the IRS or any other governmental or
taxing authority or agency, domestic or foreign, including consolidated,
combined and unitary tax returns.
(b) All Federal, state, local and foreign Tax Returns required to be
filed (taking into account extensions) by or on behalf of TeleCorp, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group for
tax purposes of which TeleCorp or any of its Subsidiaries is or has been a
member have been timely filed, and all such Tax Returns are true, complete and
correct, except to the extent that any failure to file or any inaccuracies in
filed Tax Returns would not, individually or in the aggregate, reasonably be
expected to have a TeleCorp Material Adverse Effect.
(c) All Taxes due and payable by or with respect to TeleCorp and each
of its Subsidiaries have been timely paid, or are adequately reserved for (other
than a reserve for deferred Taxes established to reflect timing differences
between book and Tax treatment) in accordance with GAAP on TeleCorp's September
30, 1999 audited balance sheet (the "MOST RECENT TELECORP BALANCE SHEET"),
except to the extent that such amount would not, individually or in the
aggregate, reasonably be expected to have a TeleCorp Material Adverse Effect. No
52
<PAGE>
deficiencies, delinquencies or defaults for any Taxes have been proposed,
asserted or assessed either orally or in writing or become a Lien for taxes
against TeleCorp or any of its Subsidiaries that are not adequately reserved for
in accordance with GAAP on the Most Recent TeleCorp Balance Sheet nor are there
any outstanding Tax audits or inquiries. All assessments for Taxes due and owing
by or with respect to TeleCorp and each of its Subsidiaries with respect to
completed and settled examinations or concluded litigation have been paid.
(d) Neither TeleCorp nor any of its Subsidiaries has requested, or
been granted any waiver of any Federal, state, local or foreign statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No extension or waiver of time within which to file any Tax Return of,
or applicable to, TeleCorp or any of its Subsidiaries has been granted or
requested which has not since expired. None of the Federal income Tax Returns of
TeleCorp or any of its Subsidiaries consolidated in such returns either have
been examined and settled with the IRS or have been closed by virtue of the
applicable statute of limitations.
(e) Other than with respect to its Subsidiaries, TeleCorp is not and
has never been (nor does TeleCorp have any liability for unpaid Taxes because it
once was) a member of an affiliated, consolidated, combined or unitary group,
and neither TeleCorp nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement or is liable for the Taxes of any other party,
as transferee or successor, by contract, or otherwise.
(f) TeleCorp and its Subsidiaries have not made any payments, are not
obligated to make any payments, and are not a party to any agreements that under
any circumstances could obligate any of them to make any payments that will not
be deductible under Section 280G of the Code or would constitute compensation in
excess of the limitation set forth in Section 162(m) of the Code.
53
<PAGE>
(g) TeleCorp has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(h) Each of TeleCorp and its Subsidiaries has complied in all
material respects with all applicable Laws relating to the payment and
withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to Sections 1441, 1442 and 3406 of the Code or similar provisions under
any foreign Laws) and have, within the time and in the manner required by Law,
been withheld from employee wages and paid over to the proper Governmental
Authorities all amounts required to be so withheld and paid over under all
applicable Laws.
(i) Neither TeleCorp nor any Subsidiary has executed or entered into
any closing agreement under Section 7121 of the Code (or any similar provision
of state, local or foreign law) or has agreed to make any adjustment to its
income or deductions pursuant to Section 481(a) of the Code (or similar
provision of state, local or foreign law), in either case that could affect the
Tax liability after the Closing Date to any material extent.
(j) None of TeleCorp or any of its Subsidiaries shall be required to
include in a taxable period ending after the Effective Time a material amount of
a taxable income attributable to income that accrued in a prior taxable period
but was not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of accounting,
the long-term contract method of accounting, the cash method of accounting or
Section 481 of the Code or comparable provisions of state, local or foreign tax
law.
3.21 ENVIRONMENTAL MATTERS. Except for such instances, if any, which
would not, individually or in the aggregate, reasonably be expected to have a
TeleCorp Material Adverse Effect, (i) TeleCorp and each of its Subsidiaries have
obtained all applicable permits,
54
<PAGE>
licenses and other authorizations which are required under applicable
Environmental Laws as defined below; (ii) TeleCorp and each of its Subsidiaries
are in full compliance with all applicable Environmental Laws and with the terms
and conditions of all required permits, licenses and authorizations, and also
are in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such laws or contained in any applicable regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; and (iii) as of the date hereof, there has not been any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with the terms of such permits, licenses and authorizations or which would give
rise to any common law or statutory liability, or otherwise form the basis of
any claim, action, suit or proceeding, based on or resulting from TeleCorp's or
any of its Subsidiaries' (or any of their respective agent's) manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, or release into the environment, of any
Hazardous Material (as defined below); and (iv) TeleCorp and each of its
subsidiaries has taken all actions necessary under applicable requirements of
federal, state or local laws, rules or regulations to register any products or
materials required to be registered by TeleCorp or its Subsidiaries (or any of
their respective agents) thereunder. There is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or, to the knowledge
of TeleCorp, threatened against TeleCorp or any of its Subsidiaries relating in
any way to the Environmental Laws (as defined in SECTION 10.4) or any
Regulation, code, plan, Order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder.
55
<PAGE>
3.22 INTELLECTUAL PROPERTY.
(a) TeleCorp and its Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights and mask works, any applications for and registrations
of such patents, trademarks, trade names, service marks, copyrights and mask
works, and all processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of TeleCorp and its Subsidiaries as currently conducted, the absence of which
would be considered reasonably likely to have a TeleCorp Material Adverse Effect
(the "TELECORP INTELLECTUAL PROPERTY RIGHTS").
(b) Neither TeleCorp nor any of its Subsidiaries is, or will as a
result of the execution and delivery of this Agreement or the performance of
TeleCorp's obligations under this Agreement or otherwise be, in breach of any
license, sublicense or other agreement relating to the TeleCorp Intellectual
Property Rights, or any material licenses, sublicenses and other agreements as
to which TeleCorp or any of its Subsidiaries is a party and pursuant to which
TeleCorp or any of its Subsidiaries is authorized to use any third party
patents, trademarks or copyrights, including software ("TELECORP THIRD PARTY
INTELLECTUAL PROPERTY RIGHTS") which is used by TeleCorp or any of its
Subsidiaries, the breach of which would be considered reasonably likely to have
a TeleCorp Material Adverse Effect.
(c) All patents, registered trademarks, service marks and copyrights
which are held by TeleCorp or any of its Subsidiaries, and which are material to
the business of TeleCorp and its Subsidiaries, taken as a whole, are valid and
subsisting. TeleCorp (i) has not been sued in any suit, action or proceeding
which involves a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other proprietary right of
any third party; and (ii) has no knowledge that the marketing, licensing or sale
of its services infringes any
56
<PAGE>
patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party, which infringement would reasonably be expected to
have a TeleCorp Material Adverse Effect.
3.23 NO RESTRICTIONS ON THE MERGER; TAKEOVER STATUTES. No applicable
takeover statute or similar Law and no provision of the Certificate of
Incorporation or By-laws, or other organizational document or governing
instruments of TeleCorp or any of its Subsidiaries or any TeleCorp Material
Agreement to which any of them is a party (a) would or would purport to impose
restrictions which might adversely affect or delay the consummation of the
transactions contemplated by this Agreement, the TeleCorp Voting Agreement, the
Investor Stockholder Agreement or the Stockholders Agreement or (b) as a result
of the consummation of the transactions contemplated by this Agreement, the
TeleCorp Voting Agreement or the Stockholders Agreement (i) would or would
purport to restrict or impair the ability of the Holding Company to vote or
otherwise exercise the rights of a stockholder with respect to securities of
TeleCorp, any of its Subsidiaries or TeleCorp II or (ii) would or would purport
to entitle any Person to acquire securities of TeleCorp or TeleCorp II.
3.24 TAX MATTERS. Neither TeleCorp nor any of its Affiliates has
taken or agreed to take any action, failed to take any action or is aware of any
fact or circumstance that is reasonably likely to prevent the Mergers and the
Contribution, taken together, from constituting a tax-free transaction within
the meaning of Section 351 of the Code or that would cause either Merger to fail
to qualify as a tax-free reorganization under Section 368(a) of the Code.
3.25 BROKERS. Except for Lehman Brothers Inc. ("LEHMAN Brothers"), no
broker, financial advisor, finder or investment banker or other Person is
entitled to any broker's, financial advisor's, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of TeleCorp.
57
<PAGE>
TeleCorp has heretofore furnished to Tritel a true, complete and correct copy of
all agreements between TeleCorp and Lehman Brothers pursuant to which such firm
would be entitled to any payment relating to the transactions contemplated
hereunder.
3.26 OPINION OF FINANCIAL ADVISOR. TeleCorp has received the written
opinion of its financial advisor, Lehman Brothers, to the effect that, in its
opinion, as of the date hereof, from a financial point of view the exchange
ratio in the Mergers is fair to the stockholders of TeleCorp, and TeleCorp has
provided copies of such opinion to Tritel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TRITEL
Except as set forth in the Tritel SEC Reports (as defined in SECTION
4.9) or the Tritel Disclosure Schedule previously delivered to TeleCorp (the
"TRITEL DISCLOSURE SCHEDULE"), Tritel, on behalf of itself and its Subsidiaries,
represents and warrants to TeleCorp and AT&T that the statements contained in
this ARTICLE IV are true, complete and correct. The Tritel Disclosure Schedule
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this ARTICLE IV, and the disclosure in any paragraph
shall qualify only the corresponding paragraph of this ARTICLE IV, unless the
disclosure contained in such paragraph contains such information so as to enable
a reasonable person to determine that such disclosure qualifies or otherwise
applies to other paragraphs of this ARTICLE IV. As used in this Agreement, a
"TRITEL MATERIAL ADVERSE EFFECT" means any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Tritel and its Subsidiaries,
taken as a whole, excluding any adverse change in, or effect on, the financial
condition or revenues of Tritel to the extent attributable to (i) general
economic
58
<PAGE>
conditions in the United States and (ii) conditions affecting the wireless
communications industry generally.
4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Tritel is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all the
requisite corporate power and authority necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted. Tritel is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified would not, individually or in the aggregate, reasonably be expected to
have a Tritel Material Adverse Effect.
(b) All of the shares of capital stock of each Subsidiary of Tritel
are owned by Tritel or by a Subsidiary of Tritel (other than director's
qualifying shares in the case of foreign Subsidiaries), and are validly issued,
fully paid and non-assessable, and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants with respect any
such Subsidiaries capital stock.
(c) Each Subsidiary of Tritel is a legal entity, duly incorporated or
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and has all the
requisite power and authority necessary to own, lease and operate its properties
and to carry on its business as it is now being conducted. Each Subsidiary of
Tritel is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure
59
<PAGE>
to be so qualified would not, individually or in the aggregate, reasonably be
expected to have a Tritel Material Adverse Effect.
4.2 CERTIFICATE OF INCORPORATION; BY-LAWS. Tritel has heretofore made
available to TeleCorp a true, complete and correct copy of its and each of its
Subsidiaries' respective Certificate of Incorporation and By-laws (or other
equivalent organizational documents), each as amended or restated to date. Each
such Certificate of Incorporation and By-laws (or other equivalent
organizational documents) of Tritel and each of its Subsidiaries are in full
force and effect. Neither Tritel nor any of its Subsidiaries is in violation of
any of the provisions of its Certificate of Incorporation or By-laws or other
equivalent organizational documents.
4.3 CAPITALIZATION.
(a) The authorized capital of Tritel consists of: (i) 1,016,000,009
shares of Tritel Common Stock, consisting of: (A) 500,000,000 shares of Tritel
Class A Voting Common Stock, (B) 500,000,000 shares of Tritel Class B Non-Voting
Common Stock, (C) 4,000,000 shares of Tritel Class C Common Stock, (D)
12,000,000 shares of Tritel Class D Common Stock, and (E) nine shares of Tritel
Voting Preference Common Stock; (ii) 3,100,000 shares of Tritel Preferred Stock,
consisting of: (A) 200,000 shares of Tritel Series A Preferred Stock, (B)
300,000 shares of Tritel Series B Preferred Stock, (C) 500,000 shares of Tritel
Series C Preferred Stock, (D) 100,000 shares of Tritel Series D Preferred Stock,
and (E) 2,000,000 undesignated shares;
(b) As of January 31, 2000: (i) 107,068,559 shares of Tritel Common
Stock were issued and outstanding, which consisted of: (A) 97,798,181 shares of
Tritel Class A Voting Common Stock, (B) 2,927,120 shares of Tritel Class B
Common Stock, (C) 1,380,448 shares of Tritel Class C Common Stock, (D) 4,962,804
shares of Tritel Class D Common Stock and
60
<PAGE>
(E) six shares of Tritel Voting Preference Common Stock; (ii) 137,042 shares of
Tritel Preferred Stock were issued and outstanding, which consisted of: (A)
90,668 shares of Tritel Series A Preferred Stock, (B) 46,374 shares of Tritel
Series D Preferred Stock; (iii) 4,885.56 shares of Tritel Common Stock were held
in treasury; (iv) no shares of Tritel Capital Stock were held by any Subsidiary
of Tritel; and (v) there were outstanding employee and non-employee options in
the amount set forth on SCHEDULE 4.3(b) (the "TRITEL OPTIONS"), with the
exercise price, vesting schedule, and name of each holder of such options and
the amount of options held by each such holder specified on SCHEDULE 4.3(b).
None of the outstanding shares of Tritel Common Stock are subject to, nor were
they issued in violation of, any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right.
(c) Except as set forth above, no shares of voting or non-voting
capital stock, other equity interests, or other voting securities of Tritel were
or are issued, reserved for issuance or outstanding. All outstanding shares of
Tritel Capital Stock are, and all shares which may be issued upon the exercise
of Tritel Options will be, when issued, duly authorized, validly issued, fully
paid and non-assessable and not subject to any kind of preemptive (or similar)
rights. There are no bonds, debentures, notes or other indebtedness of Tritel
with voting rights (or convertible into, or exchangeable for, securities with
voting rights) on any matters on which stockholders of Tritel may vote.
(d) All of the outstanding shares of capital stock or other security
or equity interests of each of Tritel's Subsidiaries have been duly authorized,
validly issued, fully paid and non-assessable, are not subject to, and were not
issued in violation of, any preemptive (or similar) rights, and are owned, of
record and beneficially, by Tritel or one of its direct or indirect
Subsidiaries, free and clear of all Liens whatsoever. There are no restrictions
of any kind which prevent the payment of dividends, where applicable, by any of
Tritel's Subsidiaries, and neither
61
<PAGE>
Tritel nor any of its Subsidiaries is subject to any obligation or requirement
to provide funds for or to make any investment (in the form of a loan or capital
contribution) to or in any Person.
(e) Section 4.3(e) of Tritel Disclosure Schedule sets forth a true,
complete and correct list of all securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind (contingent or
otherwise) to which Tritel or any of its Subsidiaries is a party or by which any
of them is bound obligating Tritel or any of its Subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of Tritel or of any of its Subsidiaries or
obligating Tritel or any of its Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking (other than the Tritel Options) and specifying the
material terms of each such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking including the applicable exercise price or
purchase price and the name of the person or entity to whom each such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking
was issued. There are no outstanding contractual obligations of Tritel or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock (or options to acquire any such shares) or other security or
equity interest of Tritel or its Subsidiaries. There are not outstanding any
stock-appreciation rights, security-based performance units, "phantom" stock or
other security rights or other agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any Person is or may be
entitled to receive any payment or other value based on the revenues, earnings
or financial performance, stock price performance or other attribute of Tritel
or any of its Subsidiaries or assets or calculated in accordance therewith
(other than ordinary course payments or commissions to sales representatives of
Tritel based upon revenues generated by them without augmentation as a result of
the transactions contemplated hereby) or to cause
62
<PAGE>
Tritel or any of its Subsidiaries to file a registration statement under the
Securities Act, or which otherwise relate to the registration of any securities
of Tritel or its Subsidiaries.
(f) Except as set forth in the Tritel SEC Reports or as contemplated
by the Stockholders Agreement, there are no voting trusts, proxies or other
agreements, commitments or understandings of any character to which Tritel or
any of its Subsidiaries or, to the knowledge of Tritel, any of the stockholders
of Tritel, is a party or by which any of them is bound with respect to the
issuance, holding, acquisition, voting or disposition of any shares of capital
stock or other security or equity interest of Tritel or any of its Subsidiaries.
4.4 AUTHORITY; ENFORCEABILITY. Tritel has all necessary corporate
power and authority to execute and deliver this Agreement and each Related
Agreement to which it is a party, and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by Tritel of this Agreement and each Related
Agreement to which it is a party, the performance of its obligations hereunder
and thereunder, and the consummation by Tritel of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all corporate
action and no other corporate proceedings on the part of Tritel are necessary to
authorize this Agreement or any Related Agreement to which it is a party or to
consummate the transactions so contemplated, other than the approval and
authorization of this Agreement and the Second Merger by votes of the holders of
a majority of the outstanding shares of Tritel Capital Stock entitled to vote
thereon in accordance with the DGCL and Tritel's Certificate of Incorporation
and By-laws. Each of this Agreement and the Related Agreements to which Tritel
is a party has been duly and validly executed and delivered by Tritel and,
assuming the due authorization, execution and delivery thereof by all other
parties to such agreements, constitutes a legal, valid and binding obligation of
Tritel in accordance with its terms.
63
<PAGE>
4.5 REQUIRED VOTE. The Board of Directors of Tritel has, at a meeting
duly called and held, (i) approved and declared advisable this Agreement and
approved each Related Agreement to which it is a party, (ii) determined that the
transactions contemplated hereby and thereby are advisable, fair to and in the
best interests of the holders of Tritel Capital Stock, (iii) resolved to
recommend adoption of this Agreement, the Second Merger and the other
transactions contemplated hereby and thereby to the stockholders of Tritel and
(iv) directed that this Agreement be submitted to the stockholders of Tritel for
their approval and authorization. The affirmative vote of a majority of the
voting power of all outstanding shares of Tritel Class A Voting Stock and Tritel
Voting Preference Common Stock voting as a class is the only vote of the holders
of any class or series of capital stock of Tritel necessary to approve and
authorize this Agreement, the Second Merger, the Related Agreements (to the
extent Tritel is a party thereto) and the other transactions contemplated hereby
and thereby in their capacity as stockholders of Tritel.
4.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery by Tritel of this Agreement and the
Related Agreements to which it is a party do not, and the performance of this
Agreement and the Related Agreements to which it is a party will not, (i)
conflict with or violate the Certificate of Incorporation or By-laws or other
equivalent organizational documents of Tritel or any of its Subsidiaries, (ii)
conflict with or violate any Law, Regulation or Order in each case applicable to
Tritel or any of its Subsidiaries or by which any of their respective properties
is bound or affected, or (iii) result in any breach or violation of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Tritel's or any of its Subsidiaries'
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of
64
<PAGE>
a Lien on any of the properties or assets of Tritel or any of its Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Tritel or
any of its Subsidiaries is a party or by which Tritel or any of its Subsidiaries
or its or any of their respective properties is bound or affected, except in the
case of clauses (ii) or (iii) above, for any such conflicts, breaches,
violations, defaults or other occurrences that would not (x) individually or in
the aggregate, reasonably be expected to have a Tritel Material Adverse Effect,
(y) prevent or materially impair or delay the consummation of the transactions
contemplated by this Agreement and the Related Agreements or (z) for purposes of
this representation being made to AT&T, individually, or the aggregate,
reasonably be expected to have a Material Adverse Effect on the value of the
Shares.
(b) The execution and delivery by Tritel of this Agreement and the
Related Agreements to which it is a party do not, and the performance of this
Agreement and the Related Agreements, will not, require Tritel or any of its
Subsidiaries to obtain any approval of any Person or approval of, observe any
waiting period imposed by, or make any filing with or notification to, any
Governmental Authority domestic or foreign, except for (i) compliance with
applicable requirements of the Securities Act, the Securities Exchange Act, Blue
Sky Laws, the HSR Act, or any Foreign Competition Laws, the Communications Act,
and the regulations of the FCC, state public utility, telecommunications or
public service laws, (ii) the filing of the Certificates of Merger in accordance
with the DGCL and/or (iii) where the failure to obtain such approvals, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Tritel Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
4.7 MATERIAL AGREEMENTS. Neither Tritel nor any of its Subsidiaries
has breached, or received in writing any claim or threat that it has breached,
any of the terms or
65
<PAGE>
conditions of any agreement, contract or commitment that is of a type which is
required to be included as an exhibit to the annual reports on Form 10-K
required to be filed by Tritel pursuant to Item 601 of Regulation S-K
promulgated by the SEC (collectively, the "TRITEL MATERIAL CONTRACTS") in such a
manner as would permit any other party to cancel or terminate the same or would
permit any other party to collect material damages from Tritel or any of its
Subsidiaries under any Tritel Material Contract. Each Tritel Material Agreement
is in full force and effect, is a valid and binding obligation of Tritel or such
Subsidiary and, to the knowledge of Tritel, of each other party thereto and is
enforceable against Tritel or such Subsidiary in accordance with its terms, and,
to the knowledge of Tritel, enforceable against each other party thereto, in
each case except that the enforcement thereof may be limited by (i) the effects
of bankruptcy, insolvency, reorganization, moratorium or other similar law now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law), and such Tritel Material Agreements will
continue to be valid, binding and enforceable in accordance with their
respective terms and in full force and effect immediately following the
consummation of the transactions contemplated hereby with no material alteration
or acceleration or increase in fees or liabilities. Neither Tritel nor any of
its Subsidiaries is or is alleged to be and, to the knowledge of Tritel, no
other party is or is alleged to be in default under, or in breach or violation
of, any Tritel Material Agreement, and, to the knowledge of Tritel, no event has
occurred which (whether with or without notice or lapse of time or both) would
constitute such a default, breach or violation. To the knowledge of Tritel, no
party to a Tritel Material Contract has terminated or in any way expressed an
intent to materially reduce or terminate the amount of business with Tritel and
its Subsidiaries in the future.
66
<PAGE>
4.8 COMPLIANCE. Each of Tritel and its Subsidiaries is in compliance
in all material respects with, and is not in default or violation of, (i) its
Certificate of Incorporation and By-laws or other equivalent organizational
documents, (ii) any Law or Order or by which any of their respective assets or
properties are bound or affected or (iii) any note, bond, mortgage, indenture,
contract, permit, franchise or other instruments or obligations to which any of
them are a party or by which any of them or any of their respective assets or
properties are bound or affected, except, in the case of clauses (ii) and (iii),
for any such failures of compliance, defaults and violations which would not,
individually or in the aggregate, reasonably be expected to have a Tritel
Material Adverse Effect.
4.9 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Tritel has timely filed all forms, reports, schedules, statements
and documents required to be filed with the SEC since November 17, 1999
(collectively, with Registration Statement on Form S-1 dated November 18, 1999,
as amended (the "TRITEL S-1"), the "TRITEL SEC REPORTS") pursuant to the Federal
securities Laws and the SEC regulations promulgated thereunder. The Tritel SEC
Reports were prepared in accordance, and complied as of their respective filing
dates in all material respects, with the requirements of the Exchange Act and
the Securities Act and the rules and regulations promulgated thereunder and did
not at the time they were filed (or if amended or superseded by a filing prior
to the date hereof, then on the date of such filing) 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. None of Tritel's
Subsidiaries has filed, or is obligated to file, any forms, reports, schedules,
statements or other documents with the SEC.
67
<PAGE>
(b) Each of the audited and unaudited consolidated financial
statements (including, in each case, any related notes and schedules thereto)
contained in the Tritel SEC Reports (i) complied in all material respects with
applicable accounting requirements and the published regulations of the SEC with
respect thereto, (ii) were prepared in accordance with GAAP (except, in the case
of unaudited statements, to the extent otherwise permitted by Form 10-Q) applied
on a consistent basis throughout the periods involved (except as may be
expressly described in the notes thereto) and (iii) fairly present in all
material respects the consolidated financial position of Tritel and its
Subsidiaries as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, subject in the case of
interim financial statements to normal year-end adjustments.
4.10 LICENSES AND AUTHORIZATIONS.
(a) Tritel and its Subsidiaries hold all licenses, permits,
certificates, franchises, ordinances, registrations, or other rights,
applications and authorizations required to be filed with or granted or issued
by any Governmental Authority, including, without limitation, the FCC or any
state authority asserting over Tritel, its Subsidiaries and their respective
properties and assets, that are required for the conduct of their businesses as
currently being conducted (each, as amended to date, the "TRITEL
AUTHORIZATIONS"), other than such licenses, permits, certificates, franchises,
ordinances, registrations, or other rights, applications and authorizations the
absence of which would not, individually or in the aggregate, be reasonably
likely to have a Tritel Material Adverse Effect or prevent or materially impair
or delay the ability of Tritel to consummate the transactions contemplated
hereby. Tritel has made available to TeleCorp a true, complete and correct list
of such Tritel Authorizations.
(b) Tritel has previously made available to TeleCorp and AT&T a true,
complete and correct list of (i) each application of Tritel or any of its
Subsidiaries pending before
68
<PAGE>
the FCC (the "TRITEL FCC APPLICATIONS"); (ii) each FCC permit and FCC license
which is not a Tritel Authorization but in which Tritel or any of its
Subsidiaries, directly or indirectly, holds an interest, including as a
stakeholder in the licensee (collectively, the "INDIRECT TRITEL
AUTHORIZATIONS"); and (iii) all licenses, permits, certificates, franchises,
ordinances, registrations, or other rights, applications and authorizations for
the benefit of Tritel or any of its Subsidiaries, as applicable, pending before
any state authority (collectively, the "TRITEL STATE AUTHORIZATIONS"). The
Tritel Authorizations, the Tritel FCC Applications, the Indirect Tritel
Authorizations and the Tritel State Authorizations (collectively, the "TRITEL
LICENSES AND APPLICATIONS") are the only Federal, state or local licenses,
permits, certificates, franchises, ordinances, registrations, or other rights,
applications and authorizations that are required for the conduct of the
business and operations of Tritel and its Subsidiaries as currently conducted,
other than such licenses, permits, certificates, franchises, ordinances,
registrations, or other rights, applications and authorizations the absence of
which would not, individually or in the aggregate, be considered reasonably
likely to have a Tritel Material Adverse Effect or prevent or materially delay
or impair the ability of Tritel to consummate the transactions contemplated
hereby.
(c) The Tritel Authorizations and, to the knowledge of Tritel, the
Indirect Tritel Authorizations, are in full force and effect and, except as
disclosed on SCHEDULE 4.10(c) have not been pledged or otherwise encumbered,
assigned or suspended, modified in any material respect (except as a result of
FCC rule changes applicable to the PCS industry generally), canceled or revoked,
and Tritel and each of its Subsidiaries have each operated in compliance with
all terms thereof or any renewals thereof applicable to them, other than where
the failure to so comply would not, individually or in the aggregate, be
considered reasonably likely to have a Tritel Material Adverse Effect or
materially impair the ability of Tritel to consummate the transactions
contemplated hereby. To the knowledge of Tritel, no event has
69
<PAGE>
occurred with respect to any of the Tritel Authorizations which permits, or
after notice or lapse of time or both would permit, revocation or termination
thereof or would result in any other material impairment of the rights of the
holder of any such Tritel Authorizations. To the knowledge of Tritel, there is
not pending any application, petition, objection or other pleading with the FCC,
any state authority or any similar entity having jurisdiction or authority over
the operations of Tritel or any of its Subsidiaries which questions the validity
or contests any Tritel Authorization or which could reasonably be expected, if
accepted or granted, to result in the revocation, cancellation, suspension or
any materially adverse modification of any Tritel Authorization.
(d) Except for the approvals contemplated by SECTION 4.6, no permit,
consent, approval, authorization, qualification or registration of, or
declaration to or filing with, any Governmental Entity is required to be made or
obtained by Tritel or any of its Subsidiaries in connection with the transfer or
deemed transfer of the Tritel Licenses and Authorizations as a result of the
consummation of the transactions contemplated hereby and such transactions will
not result in a breach of such approvals, except where the failure to obtain or
make such permit, consent, approval, authorization, qualification, registration,
declaration or filing would not be considered reasonably likely to have a Tritel
Material Adverse Effect or prevent or materially impair or delay the ability of
Tritel to consummate the transactions contemplated hereby.
4.11 NO VIOLATION OF LAW. The business of Tritel and its Subsidiaries
is not being conducted in violation of any Laws, except for possible violations
none of which, individually or in the aggregate, would reasonably be expected to
have a Tritel Material Adverse Effect. Except as disclosed in Tritel SEC
Reports, no investigation, review or proceeding by any Governmental Authority
(including, without limitation, any stock exchange or other self-regulatory
body) with respect to Tritel or its Subsidiaries in relation to any alleged
violation of
70
<PAGE>
law or regulation is pending or, to Tritel's knowledge, threatened, nor has any
Governmental Authority (including, without limitation, any stock exchange or
other self-regulatory body) indicated an intention to conduct the same, except
for such investigations which, if they resulted in adverse findings, would not
reasonably be expected to have, individually or in the aggregate, a Tritel
Material Adverse Effect. Except as set forth in the Tritel SEC Reports, neither
Tritel nor any of its Subsidiaries is subject to any cease and desist or other
order, judgment, injunction or decree issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or has adopted any board resolutions at the request of, any
Governmental Authority that materially restricts the conduct of its business or
which would reasonably be expected to have a Tritel Material Adverse Effect, nor
has Tritel or any of its Subsidiaries been advised that any Governmental
Authority is considering issuing or requesting any of the foregoing. None of the
representations and warranties made in this SECTION 4.11 are being made with
respect to Environmental Laws.
4.12 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since September 30, 1999, Tritel and its Subsidiaries have
conducted their businesses only in the Ordinary Course of Business and, since
such date, there has not been any change, event, development, damage or
circumstance affecting Tritel or any of its Subsidiaries which, individually or
in the aggregate, has had, or could reasonably be expected to have, a Tritel
Material Adverse Effect.
(b) Since September 30, 1999, (i) there has not been any material
change by Tritel in its accounting methods, principles or practices, any
revaluation by Tritel of any of its assets, including, writing down the value of
inventory or writing off notes or accounts receivable other than in the Ordinary
Course of Business and (ii) there has not been (A) any other action or
71
<PAGE>
event, and neither Tritel nor any of its Subsidiaries has agreed in writing or
otherwise to take any other action, that would have required the consent of
TeleCorp pursuant to SECTION 6.2(b) had such action or event occurred after the
date hereof and prior to the Effective Time, or (B) any condition, event or
occurrence which could reasonably be expected to prevent, hinder or materially
delay the ability of Tritel to consummate the transactions contemplated by this
Agreement or the Related Agreements to which it is a party.
4.13 NO UNDISCLOSED LIABILITIES. Tritel and its Subsidiaries do not
have any liabilities or obligations of any nature (whether absolute, accrued,
fixed, contingent or otherwise) which would be required to be reflected in
financial statements prepared in accordance with GAAP, except liabilities or
obligations which (i) are reflected in the Tritel SEC Reports, or (ii) have been
incurred in the Ordinary Course of Business since September 30, 1999.
4.14 ABSENCE OF LITIGATION. There is no Litigation pending or, to the
knowledge of Tritel, threatened against Tritel or any of its Subsidiaries, or
any properties or rights of Tritel or any of its Subsidiaries, before or subject
to any Court or Governmental Authority which, individually or in the aggregate,
has had, or would reasonably be expected to have, a Tritel Material Adverse
Effect or would prevent, or materially hinder or delay Tritel from consummating
the transactions contemplated by this Agreement.
4.15 EMPLOYEE BENEFIT PLANS.
(a) Tritel has made available to TeleCorp true, complete and correct
copies of all employee benefit plans (as defined in Section 3(3) of the ERISA)
and all bonus, stock or other security option, stock or other security purchase,
stock or other security appreciation rights, incentive, deferred compensation,
retirement or supplemental retirement, severance, golden parachute, vacation,
cafeteria, dependent care, medical care, employee assistance program, education
or tuition assistance programs, plant closing or similar benefit plans, retiree
health or
72
<PAGE>
life benefit plans, insurance and other similar fringe or employee benefit
plans, programs or arrangements, and any executive employment or executive
compensation or severance agreements, or a written summary of the material terms
of any of the foregoing agreements if not in writing, which have ever been
sponsored, maintained, contributed to or entered into for the benefit of, or
relating to, any present or former employee, officer, director or consultant of
Tritel or any of its Subsidiaries, or any trade or business (whether or not
incorporated) which is a member of a controlled group or which is under common
control with Tritel, or any Subsidiary of Tritel, within the meaning of Section
414 of the Code or Section 4001 of ERISA (a "TRITEL ERISA AFFILIATE"), whether
or not such plan is terminated (together, the "TRITEL EMPLOYEE PLANS"). In
addition, Tritel has made available to TeleCorp with respect to each Tritel
Employee Plan true, complete and correct copies of each of the following, if
applicable: the most recent summary plan description and any subsequent summary
of material modifications; any related trust, insurance policy or other funding
vehicle or contract providing for benefits (including any trusts of the type
known as "rabbi trusts"); and the three most recent Form 5500 series Annual
Report with all schedules filed with the IRS. Subject to the requirements of
ERISA, there are no restrictions on the ability of the sponsor of each Tritel
Employee Plan to amend or terminate any Tritel Employee Plan and each Tritel
Employee Plan may with the consent of Tritel (or applicable Subsidiary or Tritel
ERISA Affiliate) be assumed by the Holding Company or the Second Merger Sub, as
the case may be.
(b) There has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Tritel Employee Plan; there are no claims pending (other than routine claims
for benefits) or threatened against any Tritel Employee Plan or against the
assets of any Tritel Employee Plan, nor are there any current or threatened
Liens on the assets of any Tritel Employee Plan; each Tritel Employee Plan
73
<PAGE>
conforms to, and in its operation and administration is in all material respects
in compliance with the terms thereof and the requirements prescribed by any and
all statutes (including ERISA and the Code), orders, or governmental rules and
regulations currently in effect with respect thereto (including, without
limitation, all applicable requirements for notification, reporting and
disclosure to participants or the Department of Labor, the IRS or Secretary of
the Treasury and, in the case of any "rabbi trust", the requirements of Revenue
Procedure 92-64, 1992-2 C.B. 422), and Tritel, each of its Subsidiaries and
Tritel ERISA Affiliates have performed all obligations required to be performed
by them under, are not in default under or in violation of, and have no
knowledge of any default or violation by any other party with respect to, any
Tritel Employee Plan; each Tritel Employee Plan intended to qualify under
Section 401(a) of the Code and each corresponding trust intended to be exempt
under Section 501 of the Code has received or is the subject of a favorable
determination or opinion letter from the IRS (a true and complete copy which has
been provided by Tritel to TeleCorp), and nothing has occurred which could
reasonably be expected to cause the loss of such qualification or exemption; all
contributions (including premiums for any insurance policy under which benefits
for any Tritel Employee Plan are provided) required to be made to any Tritel
Employee Plan pursuant to Section 412 of the Code, or any contract, or the terms
of the Tritel Employee Plan or any collective bargaining agreement, or otherwise
have been made on or before their due dates and a reasonable amount has been
accrued for contributions to each Tritel Employee Plan for its current plan
year; the transaction contemplated herein will not directly or indirectly result
in an increase of benefits, acceleration of vesting or acceleration of timing
for payment of any benefit to any participant or beneficiary under any Tritel
Employee Plan; each Tritel Employee Plan, if any, which is maintained outside of
the United States has been operated in all material respects in conformance with
the applicable statutes or governmental regulations and rulings relating to such
plans in the
74
<PAGE>
jurisdictions in which such Tritel Employee Plan is present or operates and, to
the extent relevant, the United States; no Tritel Employee Plan is a Defined
Benefit Plan, or a Multiemployer Plan (as such term is defined in Section 3(37)
of ERISA), or a "single-employer plan which has two or more contributing
sponsors at least two of whom are not under common control" as described in
Section 4063 of ERISA, and none of Tritel, any of its Subsidiaries or any Tritel
ERISA Affiliate has ever maintained or sponsored, participated in, or made or
been obligated to make contributions to such a Defined Benefit Plan or such a
Multiemployer Plan or such a single employer plan as described in Section 4063
of ERISA.
(c) Each Tritel Employee Plan that is a "group health plan" (within
the meaning of Code Section 5000(b)(1)) has been operated in compliance in all
material respects with all laws applicable to such plan, its terms, and with
COBRA Coverage, Section 4980D of the Code and Sections 701 through 707 of ERISA,
Title XXII of the Public Health Service Act, the provisions of the Social
Security Act, and the provisions of any similar law of any state providing for
continuation coverage, in each case to the extent such requirements are
applicable. No Tritel Employee Plan or written or oral agreement exists which
obligates Tritel, any of its Subsidiaries or any Tritel ERISA Affiliate to
provide health care coverage, medical, surgical, hospitalization, death, life
insurance or similar benefits (whether or not insured) to any current or former
employee, officer, director or consultant of Tritel, any of its Subsidiaries or
any Tritel ERISA Affiliate or to any other person following such current or
former employee's, officer's, director's or consultant's termination of
employment with Tritel, any of its Subsidiaries or any Tritel ERISA Affiliate,
other than COBRA Coverage.
(d) The consummation of the transactions contemplated by this
Agreement will not constitute a "prohibited transaction" under ERISA or the Code
for which an exemption is unavailable.
75
<PAGE>
4.16 EMPLOYMENT AND LABOR MATTERS. There are no controversies pending
or threatened, between Tritel or any of its Subsidiaries and any of their
respective employees which could reasonably be expected to have a Tritel
Material Adverse Effect; neither Tritel nor any of its Subsidiaries is a party
to any collective bargaining agreement or other labor union contract applicable
to persons employed by Tritel or its Subsidiaries nor to Tritel's knowledge are
there any activities or proceedings of any labor union to organize any such
employees of Tritel or any of its Subsidiaries. Since January 1, 1999, there
have been no strikes, slowdowns, work stoppages, lockouts, or threats thereof,
by or with respect to any employees of Tritel or any of its Subsidiaries. Tritel
does not have nor at the Closing will Tritel have any obligation under the WARN
Act as a result of any act of Tritel taken in connection with the transactions
contemplated hereby. Except as would not reasonably be expected to result in a
Tritel Material Adverse Effect, each of Tritel and its Subsidiaries is in
compliance with all applicable Federal, state, local, and foreign employment,
wage and hour, labor non-discrimination and other applicable laws or regulation
except where failure to comply with such laws would not be reasonably expected
to have a Tritel Material Adverse Effect.
4.17 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. None of the
information supplied by Tritel in writing for inclusion in the Registration
Statement shall, at the time such document is filed, at the time amended or
supplemented, at the time the Registration Statement is declared effective by
the SEC and at the Effective Time, 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, in light of the circumstances
under which they were made, not misleading. None of the information supplied by
Tritel for inclusion in the Joint Proxy Statement in connection with the
TeleCorp Stockholders' Meeting and the Tritel Stockholders' Meeting will, on the
date the Joint Proxy Statement is first mailed to the
76
<PAGE>
stockholders of Tritel and TeleCorp, at the time of the Tritel Stockholders'
Meeting and the TeleCorp Stockholders' Meeting and at the Effective Time,
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 light of the
circumstances under which they were made, not misleading. If at any time prior
to the Effective Time any event relating to Tritel or any of its Affiliates,
officers or directors should be discovered by Tritel which should be set forth
in an amendment or supplement to the Registration Statement or an amendment or
supplement to the Joint Proxy Statement, Tritel shall promptly inform the
Holding Company, AT&T and TeleCorp. The Joint Proxy Statement shall comply in
all material respects as to form and substance with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
Notwithstanding the foregoing, Tritel makes no representation or warranty with
respect to any information supplied by TeleCorp or AT&T which is contained in
the Registration Statement or Joint Proxy Statement.
4.18 ABSENCE OF RESTRICTIONS ON BUSINESS ACTIVITIES. There is no
Tritel Material Agreement binding upon Tritel or any of its Subsidiaries or any
of their respective properties which has had or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
Tritel or any of its Subsidiaries or the conduct of business by Tritel or any of
its Subsidiaries as currently conducted.
4.19 TITLE TO ASSETS; LEASES. Each of Tritel and its Subsidiaries has
good title to all of their owned properties and assets, free and clear of all
Liens, charges and encumbrances, except for Permitted Encumbrances. All leases
pursuant to which Tritel or any of its Subsidiaries lease real or personal
property from others are valid and effective in accordance with their respective
terms, and there is not, under any such lease, any existing material default or
event of default (or event which with notice or lapse of time, or both, would
constitute a
77
<PAGE>
material default) and in respect of which Tritel or such Subsidiary has not
taken adequate steps to prevent such a default from occurring where such default
would reasonably be expected to have a Tritel Material Adverse Effect.
4.20 TAXES.
(a) All Federal, state, local and foreign Tax Returns required to be
filed (taking into account extensions) by or on behalf of Tritel, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group for
tax purposes of which Tritel or any of its Subsidiaries is or has been a member
have been timely filed, and all such Tax Returns are true, complete and correct,
except to the extent that any failure to file or any inaccuracies in filed Tax
Returns would not, individually or in the aggregate, be reasonably expected to
have a Tritel Material Adverse Effect.
(b) All Taxes due and payable by or with respect to Tritel and each
of its Subsidiaries have been timely paid, or are adequately reserved for (other
than a reserve for deferred Taxes established to reflect timing differences
between book and Tax treatment) in accordance with GAAP on Tritel's September
30, 1999 audited balance sheet (the "MOST RECENT TRITEL BALANCE SHEET"), except
to the extent that such amount would not, individually or in the aggregate,
reasonably be expected to have a Tritel Material Adverse Effect. No
deficiencies, delinquencies or defaults for any Taxes have been proposed,
asserted or assessed either orally or in writing or become a Lien for taxes
against Tritel or any of its Subsidiaries that are not adequately reserved for
in accordance with GAAP on the Most Recent Tritel Balance Sheet nor are there
any outstanding Tax audits or inquiries. All assessments for Taxes due and owing
by or with respect to Tritel and each of its Subsidiaries with respect to
completed and settled examinations or concluded litigation have been paid.
78
<PAGE>
(c) Neither Tritel nor any of its Subsidiaries has requested, or been
granted any waiver of any Federal, state, local or foreign statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No extension or waiver of time within which to file any Tax Return of,
or applicable to, Tritel or any of its Subsidiaries has been granted or
requested which has not since expired. None of the Federal income Tax Returns of
Tritel or any of its Subsidiaries consolidated in such returns either have been
examined and settled with the IRS or have been closed by virtue of the
applicable statute of limitations.
(d) Other than with respect to its Subsidiaries, Tritel is not and
has never been (nor does Tritel have any liability for unpaid Taxes because it
once was) a member of an affiliated, consolidated, combined or unitary group,
and neither Tritel nor any of its Subsidiaries is a party to any Tax allocation
or sharing agreement or is liable for the Taxes of any other party, as
transferee or successor, by contract, or otherwise.
(e) Tritel and its Subsidiaries have not made any payments, are not
obligated to make any payments, and are not a party to any agreements that under
any circumstances could obligate any of them to make any payments that will not
be deductible under Section 280G of the Code or would constitute compensation in
excess of the limitation set forth in Section 162(m) of the Code.
(f) Tritel has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(g) Each of Tritel and its Subsidiaries has complied in all material
respects with all applicable Laws relating to the payment and withholding of
Taxes (including, without limitation, withholding of Taxes pursuant to Sections
1441, 1442 and 3406 of the Code or similar provisions under any foreign Laws)
and have, within the time and in the manner required
79
<PAGE>
by Law, been withheld from employee wages and paid over to the proper
Governmental Authorities all amounts required to be so withheld and paid over
under all applicable Laws.
(h) Neither Tritel nor any Subsidiary has executed or entered into
any closing agreement under Section 7121 of the Code (or any similar provision
of state, local or foreign law) or has agreed to make any adjustment to its
income or deductions pursuant to Section 481(a) of the Code (or similar
provision of state, local or foreign law), in either case that could affect the
Tax liability after the Closing Date to any material extent.
(i) None of Tritel or any of its Subsidiaries shall be required to
include in a taxable period ending after the Effective Time a material amount of
a taxable income attributable to income that accrued in a prior taxable period
but was not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of accounting,
the long-term contract method of accounting, the cash method of accounting or
Section 481 of the Code or comparable provisions of state, local or foreign tax
law.
4.21 ENVIRONMENTAL MATTERS. Except for such instances, if any, which
would not, individually or in the aggregate, reasonably be expected to have a
Tritel Material Adverse Effect, (i) Tritel and each of its Subsidiaries have
obtained all applicable permits, licenses and other authorizations which are
required under applicable Environmental Laws; (ii) Tritel and each of its
Subsidiaries are in full compliance with all applicable Environmental Laws and
with the terms and conditions of all required permits, licenses and
authorizations, and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in such laws or contained in any applicable
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder; and (iii) as of the date hereof,
there has not been any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably
80
<PAGE>
likely to interfere with or prevent continued compliance with the terms of such
permits, licenses and authorizations or which would give rise to any common law
or statutory liability, or otherwise form the basis of any claim, action, suit
or proceeding, based on or resulting from Tritel's or any of its Subsidiaries'
(or any of their respective agent's) manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, or release into the environment, of any Hazardous Material; and (iv)
Tritel and each of its Subsidiaries has taken all actions necessary under
applicable requirements of federal, state or local laws, rules or regulations to
register any products or materials required to be registered by Tritel or its
Subsidiaries (or any of their respective agents) thereunder. There is no civil,
criminal or administrative action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter pending or, to the
knowledge of Tritel, threatened against Tritel or any of its Subsidiaries
relating in any way to the Environmental Laws or any Regulation, code, plan,
Order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder.
4.22 INTELLECTUAL PROPERTY.
(a) Tritel and its Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights and mask works, any applications for and registrations
of such patents, trademarks, trade names, service marks, copyrights and mask
works, and all processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of Tritel its Subsidiaries as currently conducted, the absence of which would be
considered reasonably likely to have a Tritel Material Adverse Effect (the
"TRITEL INTELLECTUAL PROPERTY RIGHTS").
81
<PAGE>
(b) Neither Tritel nor any of its Subsidiaries is, or will as a
result of the execution and delivery of this Agreement or the performance of
Tritel's obligations under this Agreement or otherwise be, in breach of any
license, sublicense or other agreement relating to the Tritel Intellectual
Property Rights, or any material licenses, sublicenses and other agreements as
to which Tritel or any of its Subsidiaries is a party and pursuant to which
Tritel or any of its Subsidiaries is authorized to use any third party patents,
trademarks or copyrights, including software ("TRITEL THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS") which is used by Tritel or any of its Subsidiaries, the breach
of which would be considered reasonably likely to have a Tritel Material Adverse
Effect.
(c) All patents, registered trademarks, service marks and copyrights
which are held by Tritel or any of its Subsidiaries, and which are material to
the business of Tritel and its Subsidiaries, taken as a whole, are valid and
subsisting. Tritel (i) has not been sued in any suit, action or proceeding which
involves a claim of infringement of any patents, trademarks, service marks,
copyrights or violation of any trade secret or other proprietary right of any
third party; and (ii) has no knowledge that the marketing, licensing or sale of
its services infringes any patent, trademark, service mark, copyright, trade
secret or other proprietary right of any third party, which infringement would
reasonably be expected to have a Tritel Material Adverse Effect.
4.23 NO RESTRICTIONS ON THE MERGER; TAKEOVER STATUTES. No applicable
takeover statute or similar Law and no provision of the Certificate of
Incorporation or By-laws, or other organizational document or governing
instruments of Tritel or any of its Subsidiaries or any Tritel Material
Agreement to which any of them is a party (a) would or would purport to impose
restrictions which might adversely affect or delay the consummation of the
transactions contemplated by this Agreement, the Tritel Voting Agreement, the
Investor Stockholder
82
<PAGE>
Agreement or the Stockholders Agreement or (b) as a result of the consummation
of the transactions contemplated by this Agreement, the Tritel Voting Agreement
or the Stockholders Agreement (i) would or would purport to restrict or impair
the ability of the Holding Company to vote or otherwise exercise the rights of a
stockholder with respect to securities of Tritel, any of its Subsidiaries or
Tritel II or (ii) would or would purport to entitle any Person to acquire
securities of Tritel or Tritel II.
4.24 TAX MATTERS. Neither Tritel nor any of its Affiliates has taken
or agreed to take any action, failed to take any action or is aware of any fact
or circumstance that is reasonably likely to prevent the Mergers or the
Contribution from constituting part of a tax-free transaction within the meaning
of Section 351 of the Code or that would cause either Merger to fail to qualify
as a tax-free reorganization under Section 368(a) of the Code.
4.25 BROKERS. Except for Merrill Lynch, Pierce, Fenner & Smith
Incorporated, no broker, financial advisor, finder or investment banker or other
Person is entitled to any broker's, financial advisor's, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Tritel. Tritel has heretofore
furnished to TeleCorp a true, complete and correct copy of all agreements
between Tritel and Merrill Lynch, Pierce, Fenner & Smith Incorporated pursuant
to which such firm would be entitled to any payment relating to the transactions
contemplated hereunder.
4.26 OPINION OF FINANCIAL ADVISOR. Tritel has received the written
opinion of its financial advisor, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to the effect that, in its opinion, as of the date hereof, from a
financial point of view the exchange ratio in the Mergers is fair to the
stockholders of Tritel Class A Voting Common Stock (other than AT&T and its
Affiliates), and Tritel has provided copies of such opinion to TeleCorp.
83
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AT&T
AT&T represents and warrants to TeleCorp and Tritel as follows:
5.1 AUTHORITY; ENFORCEABILITY. AT&T has all necessary corporate power
and authority to execute and deliver this Agreement and each Related Agreement
to which it is a party, and to perform its obligations hereunder and thereunder
and each Related Agreement to which it is a party the transactions contemplated
hereby and thereby. Each of this Agreement and each Related Agreement to which
it is a party that has been (or will be at the Effective Time) duly and validly
executed and delivered by AT&T and, assuming the due authorization, execution
and delivery thereof by all other parties thereto, constitutes (or will
constitute when executed and delivered) a legal, valid and binding obligation of
AT&T in accordance with its terms.
5.2 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery by AT&T of this Agreement and each
Related Agreement to which it is a party do not, and the performance of this
Agreement and each Related Agreement to which it is a party by AT&T will not,
(i) conflict with or violate the Certificate of Incorporation or By-laws or
other equivalent organizational documents of AT&T or any of its Subsidiaries,
(ii) conflict with or violate any Law, Regulation or Order in each case
applicable to AT&T or any of its Subsidiaries or by which any of their
respective properties is bound or affected, or (iii) result in any breach or
violation of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair AT&T's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties or
assets of AT&T or any of its Subsidiaries pursuant to, any
84
<PAGE>
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which AT&T or any of its
Subsidiaries is a party or by which AT&T or any of its Subsidiaries or its or
any of their respective properties is bound or affected, except in the case of
clauses (ii) or (iii) above, for any such conflicts, breaches, violations,
defaults or other occurrences that would not (x) individually or in the
aggregate, reasonably be expected to have a material adverse effect on the value
of the Contribution to the Holding Company or (y) prevent or materially impair
or delay the consummation of the transactions contemplated by this Agreement and
the Related Agreements (an "AT&T MATERIAL ADVERSE EFFECT").
(b) The execution and delivery by AT&T of this Agreement and each
Related Agreement to which it is a party do not, and the performance of this
Agreement and each Related Agreement to which it is a Party, will not, require
AT&T or any of its Subsidiaries to obtain any approval of any Person or approval
of, observe any waiting period imposed by, or make any filing with or
notification to, any Governmental Authority domestic or foreign except for (i)
compliance with applicable requirements of the Securities Act, the Securities
Exchange Act, Blue Sky Laws, the HSR Act, or any Foreign Competition Laws, the
Communications Act, and the regulations of the FCC, state public utility,
telecommunications or public service laws, (ii) the filing of the Certificates
of Merger in accordance with the DCGL and/or (iii) where the failure to obtain
such approvals, or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have an AT&T
Material Adverse Effect.
5.3 TAX MATTERS. Neither AT&T nor any of its Affiliates has taken or
agreed to take any action, failed to take any action or is aware of any fact or
circumstance that is reasonably likely to prevent the Mergers and the
Contribution, taken together, from constituting a tax-free transaction within
the meaning of Section 351 of the Code.
85
<PAGE>
5.4 BROKERS. No broker, financial advisor, finder or investment
banker or other Person is entitled to any broker's, financial advisor's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement or the Related Agreements based upon arrangements
made by or on behalf of AT&T.
5.5 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. None of the
information supplied by AT&T in writing specifically for inclusion in the
Registration Statement shall, at the time such document is filed, at the time
amended or supplemented, at the time the Registration Statement is declared
effective by the SEC and at the time of the Tritel Stockholders Meeting and the
TeleCorp Stockholders Meeting, 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, in light of the circumstances under which
they were made, not misleading. None of the information supplied by AT&T in
writing specifically for inclusion in the Joint Proxy Statement in connection
with the TeleCorp Stockholders' Meeting and the Tritel Stockholders' Meeting
will, on the date the Joint Proxy Statement is first mailed to the stockholders
of Tritel and TeleCorp, and at the time of the Tritel Stockholders' Meeting and
the TeleCorp Stockholders' Meeting, 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 light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time any event
relating to AT&T or any of its respective Affiliates, officers or directors
should be discovered by AT&T which should be set forth in an amendment or
supplement to the Registration Statement or an amendment or supplement to the
Joint Proxy Statement, AT&T shall promptly inform the Holding Company, TeleCorp
and Tritel.
5.6 WAIVER. AT&T has all necessary corporate power and authority to
execute and deliver the Waiver (as defined below) contained in Section 6.17(b).
The granting of
86
<PAGE>
such Waiver has been duly and validly authorized by all corporate action on the
part of AT&T and no other corporate proceedings on the part of AT&T are
necessary to authorize the Waiver. The Waiver constitutes a legal, valid and
binding obligation of AT&T in accordance with its terms.
5.7 INVESTMENT EXPERIENCE. AT&T is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. AT&T has reviewed the TeleCorp
SEC Reports, the Tritel SEC Reports and this Agreement and all exhibits and
schedules hereto, and has had the opportunity to ask questions and receive
answers from representatives of TeleCorp and Tritel. AT&T is aware of TeleCorp's
and Tritel's business affairs and financial condition and has had access to and
has acquired sufficient information about the Holding Company to reach an
informed and knowledgeable decision to acquire the Shares. AT&T has such
business and financial experience as is required to give it the capacity to
evaluate the merits and risks of the investment in the Shares and to protect its
own interests in connection with the purchase of the Shares. AT&T is able to
bear the economic risk of holding the Shares to be purchased by it for an
indefinite period, including the loss of AT&T's entire investment. The Shares
were not offered or sold to AT&T by any form of general solicitation or
advertising within the meaning of Rule 502(c) under the Securities Act.
5.8 INVESTMENT INTENT. AT&T (or its Affiliate) is purchasing the
Shares for its own account as principal, for investment purposes only, and not
with a view to, or for, resale, distribution or fractionalization thereof, in
whole or in part, within the meaning of the Securities Act, in any manner that
would violate the Securities Act. AT&T understands that the acquisition of the
Shares has not been registered under the Securities Act or registered or
qualified under any state securities laws in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of AT&T's investment intent as expressed herein.
87
<PAGE>
5.9 REGISTRATION OR EXEMPTION REQUIREMENTS. AT&T acknowledges that
the Shares have not been registered under the Securities Act. AT&T further
acknowledges and understands that the Shares may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
pursuant to an exemption from the registration requirements of the Securities
Act. AT&T understands that the certificate(s) evidencing the Shares will be
imprinted with a legend that prohibits the transfer of such Shares unless: (i)
they are registered under the Securities Act or such registration is not
required, or (ii) (A) the transfer is pursuant to an exemption from
registration, and (B) if the Holding Company shall so request in writing, an
opinion satisfactory to the Holding Company of AT&T's counsel is obtained to the
effect that the transaction does not require registration under the Securities
Act, will not be in violation of the Securities Act and is in compliance with
any applicable federal and state laws.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) TeleCorp agrees that, during the period commencing on the date
hereof and ending on earlier to occur of the termination of this Agreement in
accordance with ARTICLE VIII or the Closing Date (in either case, the "INTERIM
PERIOD"), (i) it will give or cause to be given to Tritel and its counsel,
financial advisors, auditors and other authorized representatives (collectively,
"REPRESENTATIVES") such access, during normal business hours and upon reasonable
advance notice, to the plants, properties, books and records of TeleCorp and its
Subsidiaries as Tritel may from time to time reasonably request; PROVIDED,
HOWEVER, that TeleCorp shall have the right to have a representative present at
all such times, (ii) it will furnish or cause to be furnished to Tritel and its
Representatives such financial and operating data and other information as
Tritel
88
<PAGE>
may from time to time reasonably request, and (iii) it will provide Tritel and
its Representatives such access to the representatives, officers and employees
of TeleCorp and its Subsidiaries as Tritel may reasonably request; provided,
that all requests for information, to visit plants or facilities or to interview
employees shall be directed to the Chief Financial Officer of TeleCorp or such
other Person as he shall designate. Tritel agrees that it will, and will cause
its Representatives to, continue to treat all information so obtained from
TeleCorp as "EVALUATION MATERIAL" under the Letter Agreement entered into
between TeleCorp and Tritel dated as of February 24, 2000 ( the "CONFIDENTIALITY
AGREEMENT"), and will continue to honor its obligations thereunder and that, if
requested by TeleCorp, it will cause any of its Representatives so requested to
enter into a written agreement acknowledging the terms of the Confidentiality
Agreement and agreeing to be bound thereby.
(b) Tritel agrees that, during the Interim Period: (i) it will give
or cause to be given to TeleCorp and its Representatives such access, during
normal business hours and upon reasonable advance notice, to the plants,
properties, books and records of Tritel and its Subsidiaries as Tritel may from
time to time reasonably request; PROVIDED, HOWEVER, that Tritel shall have the
right to have a representative present at all such times, (ii) it will furnish
or cause to be furnished to TeleCorp and its Representatives such financial and
operating data and other information as TeleCorp may from time to time
reasonably request, and (iii) it will provide TeleCorp and its Representatives
such access to the representatives, officers and employees of Tritel and its
Subsidiaries as TeleCorp may reasonably request; provided, that all requests for
information, to visit plants or facilities or to interview employees shall be
directed to the Chief Financial Officer of Tritel or such other Person as he
shall designate. TeleCorp agrees that it will, and will cause its
Representatives to, continue to treat all information so obtained from Tritel as
"EVALUATION MATERIAL" under the Confidentiality Agreement, and will continue to
honor
89
<PAGE>
its obligations thereunder and that, if requested by Tritel, it will cause
any of its Representatives so requested to enter into a written agreement
acknowledging the terms of the Confidentiality Agreement and agreeing to be
bound thereby.
(c) Each of TeleCorp and Tritel agrees that, during the Interim
Period: (i) it will give or cause to be given to AT&T and its Representatives
such access, during normal business hours and upon reasonable advance notice, to
the plants, properties, books and records of it and its Subsidiaries as AT&T may
from time to time reasonably request; PROVIDED, HOWEVER, that TeleCorp or
Tritel, as applicable, shall have the right to have a representative present at
all such times; (ii) it will furnish or cause to be furnished to AT&T and its
Representatives such financial and operating data and other information as AT&T
may from time to time reasonably request; and (iii) it will provide AT&T and its
Representatives such access to the representatives, officers and employees of
TeleCorp and Tritel and their respective Subsidiaries as AT&T may reasonably
request PROVIDED that all requests for information to visit plants or facilities
or to interview employees shall be directed to the Chief Financial Officer of
Tritel or TeleCorp, as applicable, or to such other person as such Chief
Financial Officer shall designate. AT&T agrees that it will, and will cause its
Representatives to, continue to treat all information so obtained from Tritel or
TeleCorp, as applicable, as confidential under the confidentiality provisions of
its stockholders agreement with Tritel or TeleCorp, as applicable, and after the
Effective Time with the Holding Company, and will continue to honor its
obligations thereunder.
6.2 CONDUCT OF BUSINESS PENDING THE CLOSING DATE.
(a) TeleCorp agrees with Tritel that, except as permitted, required
or contemplated by this Agreement, as described on SCHEDULE B hereto, as
described in reasonable detail on SCHEDULE 6.2(a) or as otherwise consented to
in writing by Tritel (which consent shall not be unreasonably withheld or
delayed), during the Interim Period:
90
<PAGE>
(i) it shall cause its business to be conducted only in the Ordinary
Course of Business PROVIDED, HOWEVER, that no action by TeleCorp or any of
its Subsidiaries with respect to matters specifically addressed by any
other provision of this SECTION 6.2(a) shall be deemed a breach of this
clause (i) unless such action would constitute a breach of one or more of
such other provisions;
(ii) it will use all commercially reasonable efforts to preserve
substantially intact its business organization, to keep available the
services of its employees and to preserve the current relationships with
its customers, suppliers and other persons with which it has significant
business relations;
(iii) it shall not, and shall not permit any of its Subsidiaries to:
(A) amend its Certificate of Incorporation or By-laws or other
equivalent organizational document
(B) merge or consolidate, or obligate itself to do so, with or
into any other entity;
(C) issue or sell any shares of its capital stock or other
equity interests in or securities convertible into or exchangeable
for such shares or equity interests, or sell or transfer any assets,
except for the exercise of outstanding options or convertible
securities, sales of assets in the Ordinary Course of Business, other
asset sales for consideration aggregating not more than $25,000,000
in the aggregate, the issuance of up to 1,000,000 shares of TeleCorp
Class A Voting Common Stock in acquisition transactions, and the
granting of stock options to purchase Shares of Class A TeleCorp
Common Stock to employees, and no more than 25% of such options being
granted to employees who are in a category of senior vice president
or higher, in an aggregate amount
91
<PAGE>
not to exceed options to purchase more than 2 million shares of Class
A TeleCorp Common Stock, with an exercise price not less than the
average closing bid price of the TeleCorp Common Stock for the five
trading days prior to the date hereof and with a 4 year vesting
schedule (with 50% vesting in equal installment over such 4 year
period and 50% vesting at the end of such 4 year period);
(D) split, combine or reclassify any outstanding shares of its
capital stock;
(E) declare, set aside, make or pay any dividend (other than
dividends by Subsidiaries of TeleCorp to wholly owned Subsidiaries of
TeleCorp or to TeleCorp) or other distribution, payable in stock,
property or otherwise, with respect to any of its capital stock
except in the Ordinary Course of Business or redeem, purchase or
otherwise acquire or offer to redeem, purchase or otherwise acquire
any shares of its capital stock except the acquisition, redemption or
repurchase of capital stock pursuant to existing arrangements;
(F) establish or materially increase any bonus, insurance,
severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit
plan, or otherwise increase the compensation payable or to become
payable to any of its officers or key employees or those of any
Subsidiary, except in the Ordinary Course of Business, as permitted
under sub-clause (C) above or as may be required to comply with
applicable law or existing contractual arrangements;
92
<PAGE>
(G) enter into any employment or severance agreement with any
of its employees or establish, adopt or enter into any collective
bargaining agreement, except in the Ordinary Course of Business or as
may be required by applicable law or existing contractual
arrangements;
(H) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership, limited liability company, other business organization
or any division thereof for consideration in excess of $50,000,000 in
the aggregate or with capital stock other than in accordance with the
exception to sub-clause (C) above or enter into any joint venture;
(I) assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person,
or make any loans or advances, except in the Ordinary Course of
Business and except in connection with transaction permitted by
clause (M) below;
(J) make any capital expenditures that are not provided for in
the capital expenditure budget previously provided to Tritel
aggregating in excess of $25,000,000;
(K) make a purchase commitment inconsistent with past practice
or materially in excess of the normal, ordinary and usual
requirements;
(L) change accounting methods, principles or practices, except
insofar as may be required by a change in GAAP;
(M) incur any indebtedness for borrowed money other than (i)
indebtedness incurred pursuant to credit facilities in effect on the
date hereof, (ii) additional unsecured indebtedness in an aggregate
amount not to exceed
93
<PAGE>
$100,000,000, (iii) sale-leaseback transactions for tower facilities
and (iv) indebtedness assumed pursuant to acquisition transactions
permitted by clause (H) above, or mortgage or pledge any of its
property or assets relating to its business or subject any such
assets to any material encumbrance other than (i) Permitted
Encumbrances and (ii) in connection with indebtedness permitted to be
incurred pursuant to this clause (M);
(N) sell, assign, transfer or license any TeleCorp Intellectual
Property Rights, except in the Ordinary Course of Business;
(O) enter into, amend, terminate, take or omit to take any
action that would constitute a material violation of or default
under, or waive any material rights under, any TeleCorp Material
Contract;
(P) take any action or fail to take any reasonable action
permitted by this Agreement if such action or failure to take action
would result in (x) any of its representations and warranties set
forth in this Agreement becoming untrue in any material respect or
(y) any of the conditions to the Closing set forth in ARTICLE VII of
this Agreement not being satisfied;
(Q) take any action or fail to take any action that would
prevent the Mergers and the Contribution from constituting a tax-free
transaction within the meaning of Section 351 of the Code or that
would cause either Merger to fail to qualify as a tax-free
reorganization under Section 368(a) of the Code; or
(R) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter otherwise prohibited by this
SECTION 6.2(a).
94
<PAGE>
(b) Tritel agrees with TeleCorp that, except as permitted, required
or contemplated by this Agreement, as described on SCHEDULE B hereto, as
described in reasonable detail on SCHEDULE 6.2(b) or as otherwise consented to
in writing by TeleCorp (which consent shall not be unreasonably withheld or
delayed), during the Interim Period:
(i) it shall cause its business to be conducted only in the Ordinary
Course of Business PROVIDED, HOWEVER, that no action by Tritel or any of
its Subsidiaries with respect to matters specifically addressed by any
other provision of this SECTION 6.2(b) shall be deemed a breach of this
clause (i) unless such action would constitute a breach of one or more
such other provisions;
(ii) it will use all commercially reasonable efforts to preserve
substantially intact its business organization, to keep available the
services of its employees and to preserve the current relationships with
its customers, suppliers and other persons with which it has significant
business relations;
(iii) it shall not, and shall not permit any of its Subsidiaries to:
(A) amend its Certificate of Incorporation or By-laws or other
equivalent organizational document
(B) merge or consolidate, or obligate itself to do so, with or
into any other entity;
(C) issue or sell any shares of its capital stock or other
equity interests in or securities convertible into or exchangeable
for such shares or equity interests; or sell or transfer any Assets,
except for the exercise of outstanding options or convertible
securities, sales of assets in the Ordinary Course of Business, other
asset sales for consideration aggregating not more than $25,00,000 in
the aggregate, the issuance of up to 1,000,000 shares of Tritel Class
95
<PAGE>
A Voting Common Stock in acquisition transactions and the granting of
stock options to purchase shares of Tritel Class A Common Stock to
employees, and no more than 25% of such options being granted to
employees who are in a category of senior vice president or higher,
in an aggregate amount not to exceed options to purchase more than
2.6 million shares of Tritel Class A Common Stock with an exercise
price not less than the average closing bid price of the Tritel Class
A Common Stock for the five trading days prior to the date hereof and
with a 4 year vesting schedule (with 50% vesting in equal
installments over such 4 year period and 50% vesting at the end of
such 4 year period); it being understood that Tritel may amend the
1999 Tritel Stock Option Plan to permit the grants described herein.
(D) split, combine or reclassify any outstanding shares of its
capital stock;
(E) declare, set aside, make or pay any dividend (other than
dividends by Subsidiaries of Tritel to wholly owned Subsidiaries of
Tritel or to Tritel) or other distribution, payable in stock,
property or otherwise, with respect to any of its capital stock
except in the Ordinary Course of Business or redeem, purchase or
otherwise acquire any shares of its capital stock except the
acquisition, redemption or repurchase of capital stock pursuant to
existing arrangements;
(F) establish or materially increase any bonus, insurance,
severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit
plan, or otherwise increase the compensation payable or to
96
<PAGE>
become payable to any of its officers or key employees or those of
any Subsidiary, except in the Ordinary Course of Business, as
permitted under sub-clauses (C) above and (G) below or as may be
required to comply with applicable law or existing contractual
arrangements; (notwithstanding the foregoing, Tritel may amend its
Restricted Stock Agreements (a) to fully vest all recipients thereof
on or before December 31, 2002, and in the event (i) any recipient of
a grant thereunder is terminated without cause, (ii) there is a
diminution in the recipient's current authority, responsibilities,
duties, position or title or (iii) the recipient is required to
relocate more than 50 miles from Tritel's current headquarters in
Jackson, Mississippi; (b) to remove the automatic repurchase
provisions relating to the change of control that would be caused by
the Mergers; (c) to amend the provisions relating to the requirement
to pay upon exercise; (d) to provide for a payment to the recipient
of an amount necessary to offset the income and excise tax effects of
the amendments and the Merger with an aggregate cost to Tritel under
(i) this sub-clause (d), (ii) the PROVISO immediately succeeding this
sub-clause (d) (of the nature described in this sub-clause (d)) and
(iii) paragraph (G) of this SECTION 6.2(b)(III) (of the nature
described in this sub-clause (d)), not to exceed, in the aggregate,
$26,000,000; PROVIDED, however, that Tritel may amend the employment
agreement of Mr. William Arnett to fully vest all restricted stock
awards at the Effective Time and make other changes similar to those
to be made to the Restricted Stock Agreement; and; PROVIDED, FURTHER,
HOWEVER, Tritel may amend the Restricted Stock Agreement of Karlen
Turbeville to provide for immediate vesting of all her restricted
stock awards upon a significant change in the scope of her job
responsibilities (it being understood that any requirement of
97
<PAGE>
significant travel shall be deemed a significant change in scope of
responsibilities and that employment by Tritel II and not the Holding
Company shall not, per se, be a factor constituting a significant
change in scope of responsibilities);
(G) enter into any employment or severance agreement with any
of its employees, other than the agreements dated the date hereof
with Messrs. Mounger and Martin and attached as EXHIBITS J-1 and J-2
hereto, or establish, adopt or enter into any collective bargaining
agreement, except in the Ordinary Course of Business or as may be
required by applicable law or existing contractual arrangements;
(H) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership, limited liability company, other business organization
or any division thereof for consideration in excess of $50,000,000 in
the aggregate or with capital stock other than in accordance with the
exception to sub-clause (C) above or enter into any joint venture;
(I) assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person,
or make any loans or advances, except in the Ordinary Course of
Business and except in connection with transactions permitted by
clause (M) below;
(J) make any capital expenditures that are not provided for in
the capital expenditures budget previously provided to Tritel
aggregating in excess of $25,000,000;
(K) make a purchase commitment inconsistent with past practice
or materially in excess of the normal, ordinary and usual
requirements;
98
<PAGE>
(L) change accounting methods, principles or practices, except
insofar as may be required by a change in GAAP;
(M) incur any indebtedness for borrowed money other than (i)
indebtedness incurred pursuant to credit facilities in effect on the
date hereof, (ii) additional unsecured indebtedness in an aggregate
amount not to exceed $100,000,000, (iii) sale-leaseback transactions
for tower facilities and (iv) indebtedness assumed pursuant to
acquisition transactions permitted by clause (H) above, or mortgage
or pledge any of its property or assets relating to its business or
subject any such assets to any material encumbrance other than (i)
Permitted Encumbrances and (ii) in connection with indebtedness
permitted to be incurred pursuant this to clause (M);
(N) sell, assign, transfer or license any Tritel Intellectual
Property Rights, except in the Ordinary Course of Business;
(O) enter into, amend, terminate, take or omit to take any
action that would constitute a material violation of or default
under, or waive any material rights under, any Tritel Material
Contract;
(P) take any action or fail to take any reasonable action
permitted by this Agreement if such action or failure to take action
would result in (x) any of its representations and warranties set
forth in this Agreement becoming untrue in any material respect or
(y) any of the conditions to the Closing set forth in ARTICLE VII of
this Agreement not being satisfied;
(Q) take any action, or fail to take any action, that would
prevent the Mergers and the Contribution from constituting a tax-free
transaction within the
99
<PAGE>
meaning of Section 351 of the Code or that would cause either Merger
to fail to qualify as a tax-free reorganization under Section 368(a)
of the Code; or
(R) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter otherwise prohibited by this
SECTION 6.2(b).
(c) The provisions of this SECTION 6.2 shall be without prejudice to
any approval, veto or similar rights AT&T may have with respect to any of the
actions or events specified above.
6.3 REGISTRATION STATEMENT; OTHER FILINGS; BOARD RECOMMENDATIONS.
(a) As promptly as practicable after the execution of this Agreement,
TeleCorp and Tritel will cooperate in preparing and will cause the Holding
Company to, and the Holding Company shall, file with the SEC the Registration
Statement, which shall include the Joint Proxy Statement. Each of TeleCorp and
Tritel will respond jointly and promptly to any comments of the SEC, will use
its respective reasonable best efforts to cause the Holding Company to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing, and TeleCorp and Tritel will cause the Joint
Proxy Statement to be mailed to their respective stockholders at the earliest
practicable time after the Registration Statement has been declared effective by
the SEC. As promptly as practicable after the date of this Agreement, each of
TeleCorp and Tritel will prepare and file any other documents required to be
filed by it under the Exchange Act, the Securities Act or any other Federal,
state, foreign or Blue Sky or related laws relating to the Mergers and the
transactions contemplated by this Agreement (the "OTHER FILINGS"). No amendment
or supplement to the Joint Proxy Statement or the Registration Statement will be
made by TeleCorp, Tritel or the Holding Company, in the case of the Joint Proxy
Statement, without the prior approval of each
100
<PAGE>
other party, or, in the case of the Registration Statement, without the prior
approval or TeleCorp and Tritel. Each of the Holding Company, TeleCorp and
Tritel will notify the other promptly upon the receipt of any comments from the
SEC or its staff or any other government officials and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Registration Statement, the Joint Proxy Statement or any Other Filing or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Joint Proxy Statement, the
Mergers or any Other Filing. Each of the Holding Company, TeleCorp and Tritel
will cause all documents that it is responsible for filing with the SEC or other
regulatory authorities under this SECTION 6.3(a) to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs that is required to be set
forth in an amendment or supplement to the Joint Proxy Statement, the
Registration Statement or any Other Filing, the Holding Company, TeleCorp, or
Tritel, as the case may be, will promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of TeleCorp or Tritel, such amendment
or supplement. Tritel and TeleCorp will cooperate with AT&T and provide AT&T a
reasonable opportunity to review and comment on any public statements or filings
made with any Governmental Authority; it being understood that the consent of
AT&T will not be required as a condition to any such filings.
(b) The Joint Proxy Statement will include (x) the unanimous
recommendation of the TeleCorp Board of Directors in favor of the adoption and
approval of this Agreement and the First Merger (the "TELECORP PROPOSALS")
(except that, notwithstanding anything to the contrary contained in this
Agreement, the TeleCorp Board may withdraw, modify
101
<PAGE>
or refrain from making such recommendation or recommend a Superior Proposal (as
defined in SECTION 6.5 of this Agreement) to the extent that the TeleCorp Board
of Directors determines, in good faith, after consultation with, and based upon
the advice of, outside legal counsel, that such action is necessary for the
TeleCorp Board of Directors to comply with its fiduciary duties to its
stockholders under the DGCL) and (y) the unanimous recommendation of the Tritel
Board of Directors in favor of the adoption and approval of this Agreement and
the Second Merger (the "TRITEL PROPOSALS") (except that, notwithstanding
anything to the contrary contained in this Agreement, the Tritel Board of
Directors may withdraw, modify or refrain from making such recommendation or
recommend a Superior Proposal to the extent that the Tritel Board of Directors
determines, in good faith, after consultation with, and based upon the advice
of, outside legal counsel, that such action is necessary for the Tritel Board of
Directors to comply with its fiduciary duties to its stockholders under the
DGCL).
6.4 MEETING OF COMPANY STOCKHOLDERS.
(a) TeleCorp shall promptly after the date hereof take all action
necessary in accordance with the DGCL and its Certificate of Incorporation and
By-laws to duly call, give notice of and hold the TeleCorp Stockholders' Meeting
as soon as practicable following the date hereof in order to permit the
consummation of the First Merger prior to the Outside Date (as defined below),
for the purpose of obtaining approval of the TeleCorp Proposals. Once the
TeleCorp Stockholders' Meeting has been called and noticed, TeleCorp shall not
postpone or adjourn (other than for the absence of a quorum and then only to the
next possible future date) the TeleCorp Stockholders' Meeting. The Board of
Directors of TeleCorp has declared that this Agreement is advisable and, subject
to SECTION 6.3(b), shall recommend that this Agreement and the transactions
contemplated hereby be approved and authorized by the stockholders of TeleCorp
and shall include in the Registration Statement and Proxy Statement such
102
<PAGE>
recommendations. The Board of Directors of TeleCorp shall submit this Agreement
to the stockholders of TeleCorp, whether or not the Board of Directors of
TeleCorp at any time changes, withdraws or modifies its recommendation. TeleCorp
shall solicit from stockholders of TeleCorp proxies in favor of the First Merger
and shall take all other action necessary or advisable to secure the vote or
consent of stockholders required by the DGCL and its Certificate of
Incorporation to authorize this Agreement and the First Merger, except to the
extent the TeleCorp Board of Directors determines in good faith, after
consultation with counsel, that doing so would cause the TeleCorp Board or
Directors to breach its fiduciary duties to its stockholders under the DGCL.
Without limiting the generality of the foregoing, (i) TeleCorp agrees that its
obligation to duly call, give notice of, convene and hold the TeleCorp
Stockholders' Meeting as required by this SECTION 6.4, shall not be affected by
any withdrawal, amendment or modification of the Board of Directors'
recommendation of the First Merger and this Agreement, and (ii) TeleCorp agrees
that its obligations under this SECTION 6.4 shall not be affected by the
commencement, public proposal, public disclosure or communication to TeleCorp of
any Acquisition Proposal.
(b) Tritel shall promptly after the date hereof take all action
necessary in accordance with the DGCL and its Certificate of Incorporation and
By-laws to duly call, give notice of and hold the Tritel Stockholders' Meeting
as soon as practicable following the date hereof in order to permit the
consummation of the Second Merger prior to the Outside Date, for the purpose of
obtaining approval of the Tritel Proposals. Once the Tritel Stockholders'
Meeting has been called and noticed, Tritel shall not postpone or adjourn (other
than for the absence of a quorum and then only to the next possible future date)
the Tritel Stockholders' Meeting. The Board of Directors of Tritel has declared
that this Agreement is advisable and, subject to SECTION 6.3(b), shall recommend
that this Agreement and the transactions contemplated hereby be
103
<PAGE>
approved and authorized by the stockholders of Tritel and shall include in the
Registration Statement and Proxy Statement such recommendations. The Board of
Directors of Tritel shall submit this Agreement to the stockholders of Tritel,
whether or not the Board of Directors of Tritel at any time changes, withdraws
or modifies its recommendation. Tritel shall solicit from stockholders of Tritel
proxies in favor of the Second Merger and shall take all other action necessary
or advisable to secure the vote or consent of stockholders required by the DGCL
and its Certificate of Incorporation to authorize this Agreement and the Second
Merger, except to the extent the Tritel Board of Directors determines in good
faith, after consultation with counsel, that doing so would cause the Tritel
Board of Directors to breach its fiduciary duties to its stockholders under the
DGCL. Without limiting the generality of the foregoing, (i) Tritel agrees that
its obligation to duly call, give notice of, convene and hold the Tritel
Stockholders' Meeting as required by this SECTION 6.4, shall not be affected by
any withdrawal, amendment or modification of the Board of Directors'
recommendation of the Second Merger and this Agreement, and (ii) Tritel agrees
that its obligations under this SECTION 6.4 shall not be affected by the
commencement, public proposal, public disclosure or communication to Tritel any
Acquisition Proposal.
6.5 NON-SOLICITATION.
(a) From and after the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement in accordance with
ARTICLE VIII, neither TeleCorp nor Tritel shall, nor shall they permit any of
their Subsidiaries to, nor shall they authorize or permit any of their
respective officers, directors or employees to, and shall use their commercially
reasonable efforts to cause any investment banker, financial advisor, attorney,
accountant, or other representatives retained by them or any of their respective
Subsidiaries not to, directly or indirectly, through any other Person, (i)
solicit, initiate or encourage (including by way of
104
<PAGE>
furnishing information) any proposals that constitute, or could reasonably be
expected to result in, a proposal or offer for an Acquisition Proposal, or (ii)
engage in negotiations or discussions concerning, or provide any non-public
information regarding TeleCorp or Tritel, as applicable, to any person or entity
relating to, any Acquisition Proposal, or (iii) agree to, approve or recommend
to its stockholders any Acquisition Proposal; PROVIDED, HOWEVER, that nothing
contained in this Agreement shall prevent TeleCorp or its Board of Directors or
Tritel or its Board of Directors, as the case may be, from (A) furnishing
non-public information to, or entering into discussions with, any person or
entity in connection with an unsolicited bona fide written Acquisition Proposal
by such person or entity (including a new and unsolicited Acquisition Proposal
received by TeleCorp or Tritel after the execution of this Agreement from a
person or entity whose initial contact with TeleCorp or Tritel may have been
solicited by TeleCorp or Tritel, respectively, prior to the execution of this
Agreement) if and only to the extent that (1) the Board of Directors of TeleCorp
or the Board of Directors of Tritel, as the case may be, believes in good faith
(after consultation with its financial advisors) that such Acquisition Proposal
would, if consummated, result in a transaction more favorable to TeleCorp
stockholders or Tritel stockholders, respectively, from a financial point of
view than the transactions contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"SUPERIOR PROPOSAL") and the Board of Directors of TeleCorp or the Board of
Directors of Tritel determines in good faith after consultation with its outside
legal counsel that such action could be reasonably deemed necessary for the
Board of Directors of TeleCorp or the Board of Directors of Tritel, as the case
may be, to comply with its fiduciary duties to its stockholders under applicable
law and (2) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such Person or entity, such Board of Directors
receives from such Person or entity an executed non-disclosure
105
<PAGE>
agreement with terms no less favorable to such party than those contained in the
Confidentiality Agreement, (B) complying with Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act, with regard to an Acquisition Proposal or
(C) making any disclosure to its stockholders if, in the good faith judgment of
the Board of Directors of such party, after receipt of advice from outside
counsel, failure to disclose would result in a reasonable likelihood that such
Board of Directors would breach its duties to such party's stockholders under
applicable law. Each of TeleCorp and Tritel shall promptly notify the other
party and AT&T orally and in writing of any request for information or of any
proposal in connection with an Acquisition Proposal, the material terms and
conditions of such request or proposal and the identity of the person making
such request or proposal. Each of TeleCorp and Tritel will keep the other party
and AT&T reasonably informed of the status (including amendments or proposed
amendments) of such request or proposal on a current basis. Each of TeleCorp and
Tritel shall immediately cease and terminate any existing solicitation,
initiation, encouragement activity, discussion or negotiation with any persons
conducted heretofore by them or their representatives with respect to the
foregoing.
(b) Each of TeleCorp and Tritel (i) agrees not to release any Third
Party (as defined below) from, or waive any provision of, or fail to enforce,
any standstill agreement or similar agreement to which it is a party related to,
or which could affect, an Acquisition Proposal and (ii) acknowledges that the
provisions of clause (i) are an important and integral part of this Agreement.
(c) For purposes of this Agreement, "ACQUISITION PROPOSAL" means a
proposal or intended proposal, regarding any of (i) a transaction or series of
transactions pursuant to which any Person (or group of Persons) other than any
party hereto ("Party") and its Subsidiaries (a "THIRD PARTY") acquires or would
acquire, directly or indirectly, beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) of more than twenty percent (20%) of the outstanding
106
<PAGE>
shares of TeleCorp or Tritel, as the case may be, whether from TeleCorp or
Tritel, as the case may be, or pursuant to a tender offer or exchange offer or
otherwise, (ii) any acquisition or proposed acquisition of, or business
combination with TeleCorp or Tritel, as applicable, by a merger or other
business combination (including any so-called "merger-of-equals" and whether or
not TeleCorp or Tritel, as the case may be, is the entity surviving any such
merger or business combination), or (iii) any other transaction pursuant to
which any Third Party acquires or would acquire, directly or indirectly, control
of assets (including for this purpose the outstanding equity securities of
Subsidiaries of TeleCorp or Tritel, as the case may be, and any entity surviving
the merger or business combination including any of them) of TeleCorp or Tritel,
as the case may be, for consideration equal to twenty percent (20%) or more of
the fair market value of all of the outstanding shares of TeleCorp or twenty
percent (20%) or more of the fair market value of all of the outstanding shares
of Tritel, as the case may be, on the date of this Agreement.
6.6 SUBSEQUENT FINANCIAL STATEMENTS. Prior to the Effective Time,
each of TeleCorp or Tritel will timely file with the SEC, each Annual Report on
Form 10-K, Quarterly Report on Form 10-Q and Current Report on Form 8-K required
to be filed by such Party under the Exchange Act and the rules and regulations
promulgated thereunder and will promptly deliver to the other copies of each
such report filed with the SEC. As of their respective dates, none of such
reports shall contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The respective audited financial statements and unaudited interim
financial statements of each of TeleCorp or Tritel, as the case may be, included
in such reports will fairly present the financial position of such Party and its
Subsidiaries as at the dates thereof and the results of their operations and
cash flows for the periods then ended in accordance with GAAP applied on a
consistent basis and, subject, in the
107
<PAGE>
case of unaudited interim financial statements, to normal year-end adjustments
and any other adjustments described therein.
6.7 NASDAQ NATIONAL MARKET LISTING. TeleCorp and Tritel agree to
cooperate to have the shares of Class A Voting Common Stock issuable in
connection with the Mergers approved for quotation on the Nasdaq National Market
System subject only to official notice of issuance.
6.8 COMFORT LETTERS. TeleCorp shall use its reasonable best efforts
to cause PricewaterhouseCoopers LLP, certified public accountants to TeleCorp,
to provide a letter reasonably acceptable to Tritel, relating to their review of
the financial statements relating to TeleCorp contained in or incorporated by
reference in the Registration Statement. Tritel shall use its reasonable best
efforts to cause KPMG Peat Marwick, certified public accountants to Tritel, to
provide a letter reasonably acceptable to TeleCorp, relating to their review of
the financial statements relating to Tritel contained in or incorporated by
reference in the Registration Statement.
6.9 FURTHER ACTIONS.
(a) Subject to the terms and conditions hereof, TeleCorp, Tritel and
AT&T agree to use all reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
to consummate and make effective the transactions contemplated by this Agreement
and the Related Agreements, including, without limitation, using all reasonable
best efforts: (i) to obtain prior to the Closing Date all licenses,
certificates, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and any other Person, including Persons who
are parties to contracts with TeleCorp or any of its Subsidiaries, Tritel or any
of its Subsidiaries or AT&T or any of its Subsidiaries as are necessary for the
consummation of the transactions contemplated hereby or
108
<PAGE>
thereby, including, without limitation, such consents and approvals as may be
required under the Communications Act, the HSR Act and any similar Federal,
state or foreign legislation; (ii) to effect all necessary registrations and
filings; and (iii) to furnish to each other such information and assistance as
reasonably may be requested in connection with the foregoing. Each of TeleCorp,
Tritel and AT&T shall cooperate fully with each other to the extent reasonably
required to obtain such consents. Notwithstanding the foregoing or anything to
the contrary in this Agreement, (i) without the prior written consent of
TeleCorp, Tritel will not incur aggregate out-of-pocket costs (not including
legal fees) in excess of the amount specified in SCHEDULE 6.9 to obtain third
party consents and approvals (other than governmental consents and approvals) to
consummate the Mergers and (ii) AT&T shall not be required to expend any
significant moneys or make any other concessions to third parties to obtain any
consents or approvals required under this Agreement and the Related Agreements.
(b) Tritel, TeleCorp and AT&T shall make all filings which may be
required by each of them in connection with the consummation of the transactions
contemplated hereby under the HSR Act and any similar Federal, state or foreign
legislation no later than March 31, 2000.
(c) TeleCorp, Tritel and AT&T shall each use their reasonable best
efforts to resolve any competitive issues relating to or arising under the HSR
Act or any other Federal, state or foreign antitrust or fair trade law raised by
any Governmental Entity in connection with the transactions contemplated by this
Agreement or the Related Agreements. If such offers are not accepted by such
Governmental entity, TeleCorp (with Tritel's cooperation) shall pursue all
litigation resulting from such issues. The parties hereto will consult and
cooperate with one another, and consider in good faith the views of one another,
in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or
109
<PAGE>
submitted by or on behalf or any party hereto in connection with proceedings
under or relating to the HSR Act or any other Federal, state or foreign
antitrust or fair trade law. In the event of a challenge to the transaction
contemplated by this Agreement pursuant to the HSR Act, the parties hereto shall
use their reasonable best efforts to defeat such challenge, including by
institution and defense of litigation, or to settle such challenge on terms that
permit the consummation of the Mergers and the Contribution; PROVIDED, HOWEVER,
that nothing herein shall require either party to agree to divest or hold
separate any portion of its business or otherwise take action that could
reasonably be expected to impair the ability of (i) the Holding Company, to own
and operate the respective businesses of TeleCorp and Tritel after the Closing
or (ii) AT&T, to own the Shares after the Closing, or (iii) TeleCorp, Tritel or
AT&T, as the case may be, to own and operate their respective business if the
transactions contemplated hereby are not consummated, in either case, in
substantially the same manner as operated immediately prior to the date hereof
or impair the ability of the Holding Company to own and operate the Contributed
Property as contemplated by this Agreement. Without limiting the foregoing, in
the event that either the Federal Trade Commission or the Antitrust Division of
the United Department of Justice should issue a Request for Additional
Information or Documentary Material under 17 C.F.R. ss.803.20 (a "SECOND
REQUEST"), then TeleCorp, Tritel and, if applicable, AT&T each agree to use
their reasonable best efforts to respond fully to such Second Request within 20
days after its receipt and shall promptly make any further filings or
information submissions and use its reasonable efforts to make any employee
available for interview or testimony pursuant to the foregoing (both before and
after any Second Request) whose interview or testimony may be necessary, proper
or advisable.
110
<PAGE>
6.10 NOTIFICATION. Each party shall promptly notify the other parties
of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement or the Related Agreements;
(b) any material notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement or the
Related Agreements; and
(c) any action suit, claim, investigation or proceeding commenced or,
to its knowledge, threatened against or otherwise affecting such notifying
party, which relates to the consummation of the transactions contemplated by
this Agreement or the Related Agreements.
6.11 NOTICE OF BREACHES; UPDATES.
(a) TeleCorp shall promptly deliver to Tritel and AT&T written notice
of any event or development that would (i) render any statement, representation
or warranty of TeleCorp in this Agreement or the Related Agreements (including
the TeleCorp Disclosure Schedule) inaccurate or incomplete in any material
respect or (ii) constitute or result in a breach by TeleCorp of, or a failure by
TeleCorp or any Subsidiary of TeleCorp to comply with, any agreement or covenant
in this Agreement or the Related Agreements applicable to it. No such disclosure
shall be deemed to avoid or cure any such misrepresentation or breach.
(b) Tritel shall promptly deliver to TeleCorp and AT&T written notice
of any event or development that would (i) render any statement, representation
or warranty of the Tritel in this Agreement or the Related Agreements (including
the Tritel Disclosure Schedule) inaccurate or incomplete in any material respect
or (ii) constitute or result in a breach by the Tritel or a failure by Tritel or
any Subsidiary of Tritel to comply with, any agreement or
111
<PAGE>
covenant in this Agreement or the Related Agreements applicable to it. No such
disclosure shall be deemed to avoid or cure any such misrepresentation or
breach.
(c) AT&T shall promptly deliver to Tritel and TeleCorp written notice
of any event or development that would (i) render any statement, representation
or warranty of AT&T in this Agreement or the Related Agreements inaccurate or
incomplete in any material respect or (ii) constitute or result in a breach by
AT&T of, or a failure by AT&T or any Subsidiary to comply with, any agreement or
covenant in this Agreement or the Related Agreements applicable to it. No such
disclosure shall be deemed to avoid or cure any such misrepresentation or
breach.
6.12 NO INCONSISTENT ACTION. Subject to the provisions of SECTIONS
6.4 or 6.5, neither TeleCorp, Tritel nor AT&T shall take any action inconsistent
with their obligations under this Agreement or any of the Related Agreements or
which could materially hinder or delay the consummation of the transactions
contemplated by this Agreement.
6.13 COMMERCIALLY REASONABLE EFFORTS. Each of TeleCorp and Tritel
shall use its commercially reasonable efforts to obtain the opinions referred to
in SECTION 7.1(g).
6.14 AFFILIATES. Each of TeleCorp and Tritel, as applicable (i) has
disclosed to the other on SCHEDULE 6.14 hereof all persons who are, or may be,
as of the date hereof its "affiliates" for purposes of Rule 145 under the
Securities Act, and (ii) shall use all commercially reasonable efforts to cause
each person who is identified as its "affiliate" on SCHEDULE 6.14 to deliver to
the Holding Company as promptly as practicable but in no event later than the
Closing Date, a signed agreement substantially in the form attached hereto as
EXHIBIT J. Each of TeleCorp and Tritel shall notify the other from time to time
of any other persons who then are, or may be, such an "affiliate" and use all
commercially reasonable efforts to cause each additional
112
<PAGE>
person who is identified as an "affiliate" to execute a signed agreement as set
forth in this SECTION 6.14.
6.15 BLUE SKY. TeleCorp, Tritel and the Holding Company will use
their commercially reasonable efforts to obtain prior to the Effective Time all
necessary state securities or "blue sky" Permits and approvals required to
permit the distribution of the shares of the Holding Company to be issued in
accordance with the provisions of this Agreement.
6.16 TAX-FREE EXCHANGE. Each of the Parties will use its commercially
reasonable efforts, and each agrees to cooperate with the other Parties and
provide one another with such documentation, information and materials, as may
be reasonably necessary, proper or advisable, to cause the transactions to be
effected pursuant to this Agreement to qualify for U.S. Federal income tax
purposes as a tax-free transaction or series of transactions, reorganizations or
contributions, as the case may be.
6.17 AT&T ACTIONS.
(a) AT&T will use commercially reasonable efforts to obtain all
necessary corporate approvals for the Contribution.
(b) AT&T hereby waives all rights it may have to object to, and
otherwise consents to, the transactions expressly described in this Agreement,
including but not limited to any rights it has pursuant to Section 7.4 of the
Stockholders Agreement by and among AT&T, TeleCorp and the Management
Stockholders and Cash Equity Investors described therein dated as of July 17,
1998, as amended, (the "WAIVER").
(c) AT&T will cooperate after a reasonable request by TeleCorp in
exercising any rights AT&T may have under the Airadigm Purchase Agreement or the
Indus Merger Agreement.
113
<PAGE>
(d) From and after the Effective Time and/or the Contribution, AT&T
shall take all such further action as TeleCorp or the Holding Company shall
reasonably request to effectuate, or in furtherance of, the provisions of this
Agreement and the Related Agreements.
6.18 TRANSITION COMMITTEE. Commencing on the date when the condition
contained in SECTION 7.1(h) is first satisfied, all consents sought with regard
to SECTIONS 6.1 or 6.2 shall be submitted to a transition committee (the
"TRANSITION COMMITTEE") comprised of Jerry Vento, Thomas H. Sullivan, E.B.
Martin, Jr., William H. Mounger, II, Andrew Hubregsen, Michael H. Hannon and
Scott Anderson for a recommendation as to the advisability of such consent,
which recommendation shall be presented, together with the request for a consent
pursuant to SECTION 6.1 or 6.2, to TeleCorp or Tritel, as appropriate.
6.19 EMPLOYEE BENEFIT MATTERS. Following the Effective Time, the
Holding Company shall provide to officers and employees of Tritel and its
Subsidiaries employee benefits under employee benefit plans on terms and
conditions which are substantially similar in the aggregate to those provided by
Tritel and its Subsidiaries to their officers and employees prior to the
Effective Time but in no event less favorable than those provided to similarly
situated officers and employees of TeleCorp prior to the Effective Time. With
respect to any benefits plans of the Holding Company or its Subsidiaries in
which the officers and employees of the Tritel and its Subsidiaries participate
after the Effective Time, the Holding Company shall: (i) waive any limitations
as to pre-existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to such officers and
employees under any welfare benefit plan in which such employees may be eligible
to participate after the Effective Time (provided, however, that no such waiver
shall apply to a pre-existing condition of any such officer or employee who was,
as of the Effective Time, excluded from participation in a Tritel benefit plan
by nature of such pre-existing condition), (ii) provide each such officer and
114
<PAGE>
employee with credit for any co-payments and deductibles paid prior to the
Effective Time during the year in which the Effective Time occurs in satisfying
any applicable deductible or out-of-pocket requirements under any welfare
benefit plan in which such employees may be eligible to participate after the
Effective Time, and (iii) recognize all service of such officers and employees
with Tritel and its Subsidiaries (and their respective predecessors) for all
purposes (including without limitation purposes of eligibility to participate,
vesting credit, entitlement for benefits, and benefit accrual) in any benefit
plan in which such employees may be eligible to participate after the Effective
Time, except to the extent such treatment would result in duplicative accrual of
benefits for the same period of service.
6.20 NOVATION OF AFFILIATION AGREEMENTS. Prior to but effective as of
the Effective Time, AT&T, the Holding Company and, as appropriate, their
respective Affiliates shall enter into (i) a Network Membership License
Agreement in the form of EXHIBIT K-1 hereto, (ii) an Intercarrier Roamer Service
Agreement in the form of EXHIBIT K-2 hereto and (iii) a Roaming Administration
Agreement in the form of EXHIBIT K-3 hereto.
6.21 INDEMNITY FOR INDUS AND AIRADIGM LIABILITIES. Each of TeleCorp
and the Holding Company agrees to indemnify AT&T and its Affiliates and hold
each of them harmless against any liabilities retained by or asserted against
any of them in respect of Indus or Airadigm or the agreements they entered into
in connection with securing the rights to acquire Indus or Airadigm (and any
costs or losses incurred in connection therewith).
115
<PAGE>
ARTICLE VII
CLOSING CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF TELECORP AND TRITEL TO EFFECT THE
MERGERS. The respective obligations of TeleCorp and Tritel to effect the Mergers
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions:
(a) STOCKHOLDER APPROVAL OF TELECORP. The TeleCorp Proposals shall
each have been duly approved by the requisite vote under applicable law and the
rules of the National Association of Securities Dealers, Inc. by the
stockholders of TeleCorp.
(b) STOCKHOLDER APPROVAL OF TRITEL. The Tritel Proposals shall each
have been duly approved by the requisite vote under applicable law and the rules
of the National Association of Securities Dealers, Inc. by the stockholders of
Tritel.
(c) TELECORP CONSENTS. TeleCorp shall have obtained the consent or
approval of any Person (other than a Governmental Authority) whose consent or
approval shall be required under any agreement or instrument in order to permit
the consummation of the transactions contemplated hereby (other than the
Contribution) except those which the failure to obtain would not, individually
or in the aggregate, have a Tritel Material Adverse Effect or a TeleCorp
Material Adverse Effect.
(d) TRITEL CONSENTS. Tritel shall have obtained the consent or
approval of any Person (other than a Governmental Authority) whose consent or
approval shall be required in order to permit the consummation of the
transactions contemplated hereby (other than the Contribution) except those
which the failure to obtain would not, individually or in the aggregate, have a
TeleCorp Material Adverse Effect or a Tritel Material Adverse Effect.
(e) REGISTRATION STATEMENT EFFECTIVE; JOINT PROXY STATEMENT. The SEC
shall have declared the Registration Statement effective prior to the mailing of
the Joint Proxy
116
<PAGE>
Statements by each of TeleCorp and Tritel to its respective stockholders. No
stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and be in effect and no proceeding for that
purpose, and no similar proceeding in respect of the Joint Proxy Statement,
shall have been initiated or threatened in writing by the SEC and not concluded
or withdrawn.
(f) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of (i) prohibiting consummation of
the Mergers or (ii) creating a TeleCorp Material Adverse Effect or a Tritel
Material Adverse Effect.
(g) TAX OPINIONS. TeleCorp and Tritel shall each have received
substantially identical written opinions from their respective tax counsel
(Cadwalader, Wickersham & Taft and Brown & Wood LLP, respectively), in form and
substance reasonably acceptable to Tritel or TeleCorp, as the case may be, to
the effect that the First Merger and the Second Merger, respectively, will
constitute part of a tax-free transaction within the meaning of Section 351 of
the Code and that the First Merger and the Second Merger, respectively, will
each qualify as a tax-free reorganization under Section 368(a) of the Code and
such opinions shall not have been withdrawn. Tritel, TeleCorp and AT&T agree to
make reasonable and customary representations substantially in the form of
EXHIBITS I-1, I-2, I-3, I-4, and I-5 respectively, and counsel shall be entitled
to rely upon such representations in rendering such opinions.
(h) HSR ACT. Any waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated.
(i) BLUE SKY. All state securities or "blue sky" Permits or approvals
required to carry out the transactions contemplated hereby shall have been
received.
117
<PAGE>
(j) AFFILIATE AGREEMENTS. The Holding Company shall have received the
agreements required by SECTION 6.14 hereof to be delivered by TeleCorp and
Tritel "affiliates," duly executed by each "affiliate" of TeleCorp or Tritel, as
the case may be.
(k) GOVERNMENTAL FILINGS AND CONSENTS.
(i) All governmental filings (other than filings with the FCC)
required to be made prior to the Effective Time by TeleCorp, Tritel and
the Holding Company with, and all governmental consents (other than
consents of the FCC) required to be obtained prior to the Effective Time
by TeleCorp, Tritel, and the Holding Company from governmental and
regulatory authorities in connection with the execution and delivery of
this Agreement by TeleCorp and Tritel and the consummation of the
transactions contemplated hereby (other than the Contribution) shall have
been made or obtained, except where the failure to make such filing or
obtain such consent would not reasonably be expected to result in a
TeleCorp Material Adverse Effect or Tritel Material Adverse Effect, as the
case may be or a material adverse effect on the Holding Company (assuming
the First Merger and Second Merger had taken place).
(ii) All required consents of the FCC to all matters contemplated by
the Mergers shall have been obtained pursuant to Final Orders, free of any
conditions materially adverse to TeleCorp or Tritel, other than those
applicable to the PCS or wireless communications services industry
generally. For the purposes of this Agreement, "FINAL ORDER" means an
action or decision that has been granted by the FCC as to which (A) no
request for a stay or similar request is pending, no stay is in effect,
the action or decision has not been vacated, reversed, set aside, annulled
or suspended and any deadline for filing such request that may be
designated by statute or regulation has passed, (B) no petition for
rehearing or reconsideration or application for review is
118
<PAGE>
pending and the time for the filing of any such petition or application
has passed, (C) 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 (D) no appeal is pending, including
other administrative or judicial review, or in effect and any deadline for
filing any such appeal that may be designated by statute or rule has
passed.
(l) NASDAQ NATIONAL MARKET LISTING. The shares of Class A Voting
Stock issuable to stockholders of TeleCorp and Tritel pursuant to this Agreement
shall have been approved for quotation on the Nasdaq National Market System,
subject only to official notice of issuance.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TELECORP. The obligation
of TeleCorp to consummate and effect the First Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by TeleCorp:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Tritel contained in this Agreement shall have been true, complete
and correct as of the date of this Agreement and as of the Closing Date except
(i) to the extent that the failure of such representations and warranties (other
than the representation in SECTIONS 4.3, 4.4 and 4.6) to be true, complete and
correct in each case or in the aggregate does not constitute a Tritel Material
Adverse Effect, (ii) for changes contemplated by this Agreement and (iii) for
those representations and warranties which address matters only as of the date
of this Agreement or any other particular date (which shall have been true,
complete and correct as of such particular date except to the extent that the
failure of such representations and warranties to have been true, complete and
correct as of such particular date does not constitute a Tritel Material Adverse
Effect) (it being understood that, for purposes of determining the accuracy of
such
119
<PAGE>
representations and warranties all "Tritel Material Adverse Effect"
qualifications and other qualifications based on the word "material" or similar
phrases contained in such representations and warranties shall be disregarded).
TeleCorp shall have received a certificate with respect to the foregoing signed
on behalf of Tritel by the Chief Executive Officer and the Chief Financial
Officer of Tritel.
(b) AGREEMENTS AND COVENANTS. Tritel shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date, and TeleCorp shall have received a certificate to such effect signed on
behalf of Tritel by the Chief Executive Officer and the Chief Financial Officer
of Tritel.
(c) COMPLETION OF SECOND MERGER. The Second Merger shall have been or
shall be simultaneously completed.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF TRITEL. The
obligations of Tritel to consummate and effect the Second Merger shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Tritel:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of TeleCorp contained in this Agreement shall have been true,
complete and correct as of the date of this Agreement and as of the Closing Date
except (i) to the extent that the failure of such representations and warranties
(other than the representations in SECTIONS 3.3, 3.4 and 3.6) to be true,
complete and correct in each case or in the aggregate does not constitute a
TeleCorp Material Adverse Effect, (ii) for changes contemplated by this
Agreement and (iii) for those representations and warranties which address
matters only as of the date of this Agreement or any other particular date
(which shall have been true, complete and correct as of such particular
120
<PAGE>
date except to the extent that the failure of such representations and
warranties to be true, complete and correct as of such particular date does not
constitute a TeleCorp Material Adverse Effect) (it being understood that, for
purposes of determining the accuracy of such representations and warranties all
"TeleCorp Material Adverse Effect" qualifications and other qualifications based
on the word "material" or similar phrases contained in such representations and
warranties shall be disregarded). Tritel shall have received a certificate with
respect to the foregoing signed on behalf of TeleCorp by the Chief Executive
Officer and the Chief Financial Officer of TeleCorp.
(b) AGREEMENTS AND COVENANTS. TeleCorp shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Tritel shall have received a certificate to such effect signed on
behalf of TeleCorp by the Chief Executive Officer and the Chief Financial
Officer of TeleCorp.
(c) COMPLETION OF FIRST MERGER. The First Merger shall have been or
shall be simultaneously completed.
7.4 CONDITIONS TO OBLIGATIONS OF THE HOLDING COMPANY TO ISSUE THE
SHARES. The obligation of the Holding Company to issue the Shares to AT&T (or
its Affiliates) shall be subject to the satisfaction at or prior to the Closing
Date of each of the following conditions, any of which may be waived, in
writing, exclusively by the Holding Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of AT&T contained in this Agreement shall have been true, complete
and correct in all material respects as of the date of this Agreement and as of
the Closing Date except (i) for changes contemplated by this Agreement and (ii)
for those representations and warranties which address matters only as of a
particular date (which shall have been true, complete and correct in all
121
<PAGE>
material respects as of such particular date). The Holding Company shall have
received a certificate with respect to the foregoing signed on behalf of AT&T by
an appropriate officer of AT&T.
(b) AGREEMENTS AND COVENANTS. AT&T shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and the Holding Company shall have received a certificate to such effect
signed on behalf of AT&T by an appropriate officer of AT&T.
(c) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of (i) making the Contribution
illegal or otherwise prohibiting consummation of the Contribution or (ii)
creating a AT&T Material Adverse Effect.
(d) GOVERNMENTAL FILINGS AND CONSENTS. All governmental filings
required to be made prior to the Effective Time by AT&T with, and all
governmental consents required to be obtained prior to the Effective Time by
AT&T from, governmental and regulatory authorities in connection with the
execution and delivery of this Agreement by AT&T and the consummation of the
Contribution shall have been made or obtained, except where the failure to make
such filing or obtain such consent would not reasonably be expected to result in
a AT&T Material Adverse Effect.
(e) HSR ACT. Any waiting period applicable to the consummation of the
Contribution under the HSR Act shall have expired or been terminated.
122
<PAGE>
(f) THE AIRADIGM ASSIGNMENT. Subject to the provisions of SECTION
1.14(b), the Airadigm Assignment shall have been executed and delivered by AT&T
to the Holding Company.
(g) THE INDUS ASSIGNMENT. The Indus Merger Agreement and the Indus
Assignment and Assumption Agreement shall have been executed and delivered in
the respective forms attached hereto as EXHIBITS H and I and the conditions to
the consummation of the transactions contemplated thereby shall have been
satisfied.
(h) THE LICENSE EXTENSION AMENDMENT. AT&T shall have duly executed
and delivered the License Extension Amendment to the Holding Company.
(i) EXCHANGE AGREEMENT. The transactions contemplated by the Exchange
Agreement dated as of the date hereof between AT&T, and certain of its
Affiliates, and TeleCorp, and certain of its Affiliates (the "EXCHANGE
AGREEMENT"), shall have been consummated.
7.5 CONDITIONS TO OBLIGATIONS OF AT&T TO EFFECT THE Contribution. The
obligations of AT&T to effect the Contribution and execute the License Extension
Amendment shall be subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, any of which may be waived, in writing,
exclusively by AT&T:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each of TeleCorp and Tritel contained in this Agreement shall have
been true, complete and correct as of the date of this Agreement and as of the
Closing Date except (i) to the extent that the failure of such representations
and warranties (other than the representations in SECTIONS 3.3, 3.4 and 3.6) to
be true, complete and correct in each case or in the aggregate does not
constitute a TeleCorp Material Adverse Effect or a Tritel Material Adverse
Effect, as appropriate, (ii) for changes contemplated by this Agreement and
(iii) for those representations and warranties which
123
<PAGE>
address matters only as of a particular date (which shall have been true,
complete and correct as of such particular date except to the extent that the
failure of such representations and warranties to be true, complete and correct
as of such particular date does not constitute a TeleCorp Material Adverse
Effect or a Tritel Material Adverse Effect, as appropriate) (it being understood
that, for purposes of determining the accuracy of such representations and
warranties all "TeleCorp Material Adverse Effect" and "Tritel Material Adverse
Effect" qualifications and other qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall be
disregarded). AT&T shall have received a certificate with respect to the
foregoing signed on behalf of TeleCorp by the Chief Executive Officer and the
Chief Financial Officer of TeleCorp and on behalf of Tritel by the Chief
Executive Officer and the Chief Financial Officer of Tritel.
(b) AGREEMENTS AND COVENANTS. TeleCorp and Tritel shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by each of them at
or prior to the Closing Date, and AT&T shall have received a certificate to such
effect signed on behalf of TeleCorp by the Chief Executive Officer and the Chief
Financial Officer of TeleCorp and on behalf of Tritel by the Chief Executive
Officer and the Chief Financial Officer of TeleCorp.
(c) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of (i) making the Contribution
illegal or otherwise prohibiting consummation of the Contribution, (ii) creating
a TeleCorp Material Adverse Effect or a Tritel Material Adverse Effect or (iii)
which would reasonably be expected to have a material adverse effect on AT&T.
124
<PAGE>
(d) GOVERNMENTAL FILINGS AND CONSENTS. All governmental filings
required to be made prior to the Effective Time by TeleCorp, Tritel and the
Holding Company with, and all governmental consents required to be obtained
prior to the Effective Time by TeleCorp, Tritel, and the Holding Company from,
governmental and regulatory authorities in connection with the Contribution
shall have been made or obtained, except where the failure to make such filing
or obtain such consent would not reasonably be expected to result in a TeleCorp
Material Adverse Effect or Tritel Material Adverse Effect, as the case may be or
a material adverse effect on AT&T or the Holding Company (assuming the First
Merger and Second Merger had taken place), and the waiting periods under the HSR
Act for the consummation or the Contribution shall have expired or been
terminated.
(e) COMPLETION OF MERGERS. The First Merger and the Second Merger
shall have been completed.
(f) ISSUANCE OF SHARES. The Holding Company shall have issued or
shall simultaneously issue the Shares, to AT&T (or one of its Affiliates).
(g) EXCHANGE AGREEMENT. The transactions contemplated by the Exchange
Agreement shall have been consummated.
ARTICLE VIII
TERMINATION
8.1 GENERAL. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time
notwithstanding approval thereof by the stockholders of TeleCorp and the
stockholders of Tritel:
(a) by mutual written consent duly authorized by the Boards of
TeleCorp and Tritel;
125
<PAGE>
(b) by TeleCorp or Tritel if the Closing shall not have occurred on
or before December 31, 2000 (the "OUTSIDE DATE"); PROVIDED, HOWEVER, that if the
Merger shall not have been consummated solely due to the waiting period (or any
extension thereof) or approvals under the HSR Act or approvals or consent of the
FCC not having expired or been terminated or received, then such date shall be
extended to March 31, 2001; and PROVIDED, FURTHER, that the right to terminate
this Agreement under this SECTION 8.1(b) shall not be available to any party
whose willful failure to fulfill any material obligation under this Agreement
has been the cause of, or resulted in, the failure of the Closing to occur
before such date;
(c) by TeleCorp, (A) if Tritel shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (1) is incapable of being cured by Tritel prior to the
Outside Date, and (2) renders any condition under SECTIONS 7.1 or 7.2 incapable
of being satisfied prior to the Outside Date, or (B) if a condition under
SECTIONS 7.1 or 7.2 to TeleCorp obligations hereunder is incapable of being
satisfied prior to the Outside Date;
(d) by Tritel, (A) if TeleCorp shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (1) is incapable of being cured by TeleCorp prior to the
Outside Date, and (2) renders any condition under SECTIONS 7.1 or 7.3 incapable
of being satisfied prior to the Outside Date, or (B) if a condition under
SECTIONS 7.1 or 7.3 to Tritel obligations hereunder is incapable of being
satisfied prior to the Outside Date;
(e) by TeleCorp or Tritel, upon written notice to the other party, if
a governmental authority of competent jurisdiction shall have issued an
injunction, order or decree enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement (other than just the
Contribution), and such injunction, order or decree shall have
126
<PAGE>
become final and non-appealable; PROVIDED, HOWEVER, that the party seeking to
terminate this Agreement pursuant to this clause (v) has used reasonable best
efforts to remove such injunction, order or decree; or
(f) by either TeleCorp, Tritel or AT&T (with respect to the
Contribution only) if the TeleCorp Proposals or the Tritel Proposals shall fail
to have been approved as provided herein at the TeleCorp Stockholder Meeting or
the Tritel Stockholder Meeting, as applicable, including any adjournments
thereof.
8.2 OBLIGATIONS IN EVENT OF TERMINATION. In the event of any
termination of this Agreement as provided in SECTION 8.1, this Agreement shall
forthwith become wholly void and of no further force and effect and there shall
be no liability on the part of TeleCorp, Tritel or AT&T, except that the
obligations of the parties under the last sentence of SECTION 1.14(c), the last
sentences each of SECTIONS 6.1(a), (b) and (c), SECTION 6.21 (but only if an
Early Indus Closing shall have occurred), SECTION 10.2 and this SECTION 8.2
shall remain in full force and effect, and except that termination shall not
preclude any party from suing the other party for breach of this Agreement.
8.3 TERMINATION OF CONTRIBUTION. The provisions of this Agreement
relating to the Contribution may be terminated and the Contribution may be
abandoned at any time notwithstanding approval thereof by the stockholders of
TeleCorp and the stockholders of Tritel:
(a) by mutual written consent duly authorized by the Boards of the
Holding Company (or, before the Effective Time, TeleCorp) and AT&T;
(b) by either the Holding Company (or, before the Effective Time,
TeleCorp) or AT&T if the Closing shall have occurred but the Contribution shall
not have occurred on or before the Outside Date; PROVIDED, HOWEVER, that the
right to terminate the Contribution under this SECTION 8.3(b) shall not be
available to any party whose willful failure to fulfill any material
127
<PAGE>
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Contribution to occur before such date;
(c) by either the Holding Company (or, before the Effective Time,
TeleCorp) or AT&T, upon written notice to the other party, if a Governmental
Authority of competent jurisdiction shall have issued an injunction, order or
decree enjoining or otherwise prohibiting the consummation of the Contribution,
and such injunction, order or decree shall have become final and non-appealable;
PROVIDED, HOWEVER, that the party seeking to terminate this Agreement pursuant
to this SECTION 8.3(c) has used reasonable best efforts to remove such
injunction, order or decree; or
(d) by TeleCorp or the Holding Company pursuant to SECTION
1.14(d)(ii).
8.4 OBLIGATIONS IN EVENT OF TERMINATION OF CONTRIBUTION. In the event
of any termination of the provisions of this Agreement relating to the
Contribution, as provided in SECTION 8.3, such provisions shall forthwith become
wholly void and of no further force and effect and there shall be no liability
in respect thereof on the part of the Holding Company, TeleCorp, Tritel or AT&T,
except that the obligations of the parties under the last sentence of SECTION
1.14(c) shall remain in full force and effect, and except that such termination
shall not relieve any party from liability for breach of this Agreement.
ARTICLE IX
NO SURVIVAL
9.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties in this Agreement of any Party or in any
instrument delivered pursuant to this Agreement (each as modified by the
appropriate Disclosure Schedule) shall terminate at the Effective Time.
128
<PAGE>
ARTICLE X
MISCELLANEOUS
10.1 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, no news release
or other public announcement pertaining in any way to the transactions
contemplated by this Agreement will be made by either TeleCorp, Tritel or AT&T
without the prior consent of the other party, unless in the opinion of counsel
to such party such release or announcement is required by applicable law or the
requirements of the Nasdaq National Market.
10.2 FEES AND EXPENSES. (a) Except as set forth in this SECTION 10.2,
all fees and expenses, including Taxes, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the Mergers and the Contribution are
consummated; provided, HOWEVER, that TeleCorp and Tritel shall share equally all
fees and expenses, other than attorneys' and accountants' fees and expenses,
incurred in relation to the printing and filing (with the SEC) of the Joint
Proxy Statement (including any preliminary materials related thereto) and the
Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) The Holding Company shall file any return with respect to any
state or local transfer, stamp, sales or similar Taxes (including any penalties
or interest with respect thereto), if any, which are attributable to (i) the
transfer of the beneficial ownership of TeleCorp's or Tritel's real property or
(ii) the transfer of Tritel's Common or Preferred Stock or TeleCorp's Common or
Preferred Stock pursuant to this Agreement (collectively, the "TRANSFER TAXES")
as a result of the Mergers. Each of TeleCorp and Tritel acknowledges that the
amount of the Transfer Taxes payable with respect to any shares of TeleCorp's
Common or Preferred Stock or Tritel's Common or Preferred Stock may be withheld
by the Holding Company from the amount paid pursuant to the Mergers with respect
to such shares to the extent required by law.
129
<PAGE>
TeleCorp, AT&T and Tritel shall cooperate with the Holding Company in the filing
of such returns, including supplying in a timely manner a complete list of all
real property interests held by TeleCorp or Tritel and any information with
respect to such property that is reasonably necessary to complete such returns.
The fair market value of any real property of TeleCorp or Tritel subject to the
Transfer Taxes shall be determined by the Holding Company in its discretion.
10.3 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally, if telecopied
or mailed, first class mail, postage prepaid, return receipt requested, or by
overnight courier as follows:
If to TeleCorp:
TeleCorp PCS, Inc.
1010 Glebe Road
Arlington, VA 22201
Attn: Thomas Sullivan
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: John R. Pomerance
Fax: (617) 542-2241
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Brian Hoffmann
Fax: (212) 504-6666
130
<PAGE>
If to Tritel:
Tritel, Inc.
111 East Capital Street, Suite 500
Jackson, MS 39201
Attention: E.B. Martin
Fax: 601-914-8285
with a copy to:
Brown & Wood LLP
One World Trade Center
New York, NY 10048
Attention: Michael King
Fax: (212) 839-5599
If to AT&T:
AT&T Wireless Services, Inc.
7277 164th Avenue NE
Redmond, WA 98052
Attention: William H. Hague
Fax: (425) 580-8405
with a copy to:
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Attention: Marilyn J. Wasser
Fax: (908) 221-6618
with a copy to:
Wachtell Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Steven A. Rosenblum and Trevor S.
Norwitz
Fax: (212) 403-2000
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been
131
<PAGE>
received on the date of personal delivery or telecopy, on the third business day
after the mailing thereof or on the first day after delivery by overnight
courier.
10.4 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "AFFILIATE" means a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned Person;
(b) "COURT" means any court or arbitration tribunal of the United
States, any domestic state, or any foreign country, and any political
subdivision thereof.
(c) "ENVIRONMENTAL LAWS" means any Law pertaining to: (i) the
protection of the indoor or outdoor environment; (ii) the conservation,
management or use of natural resources and wildlife; (iii) the protection or use
of surface water and ground water; (iv) the management, manufacture, possession,
presence, use, generation, transportation, treatment, storage, disposal,
emission, discharge, release, threatened release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Material; or (v)
pollution of air, land, surface water and ground water; and includes, without
limitation, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980, as amended, and the Regulations promulgated thereunder
and the Solid Waste Disposal Act, as amended, 42 U.S.C. ss.ss. 6901 ET SEQ.
(d) "FOREIGN COMPETITION LAWS" means any foreign statutes, rules,
Regulations, Orders, administrative and judicial directives, and other foreign
Laws, that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization, lessening of competition or
restraint of trade.
(e) "GOVERNMENTAL AUTHORITY" means any governmental, legislature
agency or authority (other than a Court) of the United States, any domestic
state, or any foreign country,
132
<PAGE>
and any political subdivision or agency thereof, and includes any authority
having governmental or quasi-governmental powers, including any administrative
agency or commission.
(f) "HAZARDOUS MATERIAL" means any substance, chemical, compound,
product, solid, gas, liquid, waste, by-product, pollutant, contaminant or
material which is hazardous or toxic and is regulated under any Environmental
Law, and includes without limitation, asbestos or any substance containing
asbestos, polychlorinated biphenyls or petroleum (including crude oil or any
fraction thereof), or any substance defined or regulated as a "hazardous
material", "hazardous waste", "hazardous substance", "toxic substance", or
similar term under any Environmental Law or regulation promulgated thereunder.
(g) "LAW" means all laws, statutes, ordinances and Regulations of any
Governmental Authority including all decisions of Courts having the effect of
law in each such jurisdiction;
(h) "LIEN" means any mortgage, pledge, security interest, attachment,
encumbrance, lien (statutory or otherwise), option, conditional sale agreement,
right of first refusal, first offer, termination, participation or purchase or
charge of any kind (including any agreement to give any of the foregoing);
PROVIDED, HOWEVER, that the term "Lien" shall not include (i) statutory liens
for Taxes, which are not yet due and payable or are being contested in good
faith by appropriate proceedings, (ii) statutory or common law liens to secure
landlords, lessors or renters under leases or rental agreements confined to the
premises rented, (iii) deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age pension or
other social security programs mandated under applicable Laws, (iv) statutory or
common law liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens,
133
<PAGE>
and (v) restrictions on transfer of securities imposed by applicable state and
federal securities Laws;
(i) "LITIGATION" means any suit, action, arbitration, cause of
action, claim, complaint, criminal prosecution, investigation, demand letter,
governmental or other administrative proceeding, whether at law or at equity,
before or by any Court or Governmental Authority, before any arbitrator or other
tribunal;
(j) "PARTIES" shall mean the signatories to this Agreement, provided
that such term shall not include AT&T except in the context of the Contribution,
it being understood that AT&T's only obligations under the Agreeement relate to
the Contribution and the waiver contained in SECTION 6.17(b).
(k) "ORDER" means any judgment, order, writ, injunction, ruling or
decree of, or any settlement under the jurisdiction of any Court or Governmental
Authority.
(l) "PERSON" means an individual, corporation, partnership,
association, trust, unincorporated organization, limited liability company,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act);
(m) "REGULATION" means any rule or regulation of any Governmental
Entity having the effect of Law; and
(n) "SUBSIDIARY" or "SUBSIDIARIES" of any corporation, partnership,
joint venture, limited liability company or other legal entity of which such
Person (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
10.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, subsections, Schedules or Exhibits, such reference shall be to a
Section, subsection, Schedule or
134
<PAGE>
Exhibit to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The word "herein" and similar
references mean, except where a specific Section or Article reference is
expressly indicated, the entire Agreement rather than any specific Section or
Article.
10.6 ENTIRE AGREEMENT. This Agreement, the TeleCorp Voting Agreement,
the Tritel Voting Agreement, the Exchange Agreement, the Stockholders Agreement,
the Investors Stockholder Agreement, the License Extension Amendment and the
letter agreements executed by Tritel and TeleCorp on the date hereof with Mr.
William Mounger and Mr. E.B. Martin, including the Exhibits and Schedules
hereto, constitute the entire agreement between the parties hereto and
supersedes all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof.
10.7 BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Except as otherwise provided in SECTION 2.4, nothing in
this Agreement, expressed or implied, is intended to confer on any Person other
than the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.8 ASSIGNABILITY. This Agreement shall not be assignable by
TeleCorp without the prior written consent of Tritel and AT&T, by Tritel without
the prior written consent of TeleCorp and AT&T or by AT&T without the prior
written consent of TeleCorp and Tritel (except that AT&T may assign its rights
but not its obligations hereunder to an Affiliate of AT&T).
10.9 AMENDMENT; WAIVER. This Agreement may be amended, supplemented
or otherwise modified only by a written instrument executed by the parties
hereto. No waiver by
135
<PAGE>
either party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Except as
provided in the preceding sentence, no action taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained herein, and in any documents delivered or to be delivered pursuant to
this Agreement and in connection with the Closing hereunder. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.
10.10 SECTION HEADINGS; TABLE OF CONTENTS. The section headings
contained in this Agreement and the table of contents to this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
10.11 SEVERABILITY. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
10.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
10.13 GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE
136
<PAGE>
OF DELAWARE. EACH OF THE PARTIES HERETO IRREVOCABLY AGREES THAT ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR RECOGNITION AND ENFORCEMENT
OF ANY JUDGMENT IN RESPECT HEREOF BROUGHT BY ANY OTHER PARTY HERETO OR ITS
SUCCESSORS OR ASSIGNS MAY BE BROUGHT AND DETERMINED IN THE COURTS OF THE STATE
OF DELAWARE, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS WITH
REGARD TO ANY SUCH ACTION OR PROCEEDING FOR ITSELF AND IN RESPECT TO ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE,
IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY CLAIM (A) THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS FOR
ANY REASON, (B) THAT IT OR ITS PROPERTY IS EXEMPT OR IMMUNE FROM JURISDICTION OF
ANY SUCH COURT OR FROM ANY LEGAL PROCESS COMMENCED IN SUCH COURTS (WHETHER
THROUGH SERVICE OF JUDGMENT, EXECUTION OF JUDGMENT, OR OTHERWISE), OR (C) TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THAT (I) THE SUIT, ACTION OR
PROCEEDING IN SUCH COURT IS BROUGHT IN AN INCONVENIENT FORUM, (II) THE VENUE OF
SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER AND (III) THIS AGREEMENT, OR THE
SUBJECT MATTER HEREOF, MAY NOT BE ENFORCED IN OR BY SUCH COURTS.
137
<PAGE>
[INTENTIONALLY LEFT BLANK]
138
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
TELECORP PCS, INC.
By:
------------------------------
Name:
--------------------------
Title:
--------------------------
TRITEL, INC.
By:
------------------------------
Name:
--------------------------
Title:
--------------------------
AT&T WIRELESS SERVICES, INC.
By:
------------------------------
Name:
--------------------------
Title:
--------------------------
<PAGE>
GLOSSARY OF TERMS
Defined Term Section
- ------------ -------
Airadigm Assignment.................................1.14(a)
Airadigm Purchase Agreement.........................1.14
Affiliate...........................................10.4(a)
Agreement...........................................Preamble
License Extension Amendment.........................1.14
Acquisition Proposals...............................6.5(c)
Average Closing Price...............................1.11(c)
AT&T................................................Preamble
AT&T Excess Assets..................................1.14
Blue Sky Laws.......................................3.6(b)
Cash Contribution...................................1.14(a)
Certificates .......................................1.12(c)
Certificates of Merger..............................1.2
Class A Voting Stock................................1.6(a)(i)
Class C Common Stock................................1.6(a)(iii)
Class D Common Stock................................1.6(a)(iv)
Class E Common Stock................................1.6(c)(iii)
Class F Common Stock................................1.6(c)(iv)
Closing Date........................................1.15
Closing.............................................1.15
COBRA Coverage......................................3.15(d)
Code................................................Recitals
1
<PAGE>
Communications Act..................................3.6(b)
Confidentiality Agreement...........................6.1(a)
Contributed Property................................1.14(a)
Contribution........................................Recitals
Court...............................................10.4(b)
DGCL................................................Recitals
Effective Time......................................1.2
Environmental Laws..................................10.4(c)
ERISA Affiliate.....................................3.15(a)
ERISA...............................................3.15(a)
Evaluation Material.................................6.1(a) and (b)
Excess Shares.......................................1.11
Exchange Act........................................3.6(b)
Exchange Agent .....................................1.12(a)
Exchange Agreement .................................1.14
Exchange Ratios ....................................1.6(e)
Express Shares .....................................1.11
FCC.................................................3.6(b)
Final Order.........................................7.1(k)
First Merger........................................Recitals
First Merger Sub....................................Recitals
First Merger Sub Common Stock.......................1.9(a)
Foreign Competition Laws............................10.4(d)
GAAP................................................3.9(b)
2
<PAGE>
Governmental Authority..............................10.4(e)
Hazardous Material..................................10.4(f)
The Holding Company.................................Recitals
Holding Company Capital Stock.......................1.6(f)
Holding Company Common Stock .......................1.6(f)
Holding Company Preferred Stock ....................1.6(f)
HSR Act.............................................3.6(b)
Indemnified Parties.................................2.4(b)
Indirect Tritel Authorizations......................4.10(b)
Indirect TeleCorp Authorizations....................3.10(b)
Indus Amendments....................................1.14(c)
Indus Assignment and Assumption Agreement...........1.14(a)
Indus Merger Agreement..............................1.14(a)
Indus Transaction Costs.............................1.14(c)
Interim Period......................................6.1(a)
IRS.................................................3.15(b)
Joint Proxy Statement...............................3.17
Law.................................................10.4(g)
Lehman Brothers.....................................3.25
Lien................................................10.4(h)
Litigation..........................................10.4(i)
Merger Subs.........................................Recitals
Mergers.............................................Recitals
Most Recent Tritel Balance Sheet....................4.20(b)
3
<PAGE>
Most Recent TeleCorp Balance Sheet..................3.20(c)
Network Membership License Agreement................1.14(a)
Option Plans........................................1.8
Order...............................................10.4(j)
Ordinary Course of Business.........................3.12
Other Filings.......................................6.3(b)
Outside Date........................................8.1(b)
Outstanding Employee Options........................1.8
Outstanding Tritel Options .........................4.3(b)
Party...............................................6.5(c)
Permitted Encumbrances..............................3.19
Person..............................................10.4(k)
Plan of Reorganization..............................1.14(a)
Registration Statement..............................3.17
Regulation..........................................10.4(l)
Related Agreement...................................3.4
Replacement Assets..................................1.14(d)
Representatives.....................................6.1(a)
SEC.................................................3.7
Second Merger.......................................Recitals
Second Merger Sub...................................Recitals
Second Merger Sub Common Stock......................1.9(b)
Second Request......................................5.9(c)
Securities Act......................................3.3(h)
4
<PAGE>
Series A Preferred Stock............................1.6(b)(i)
Series B Preferred Stock ...........................1.6(b)(ii)
Series C Preferred Stock............................1.6(b)(iii)
Series D Preferred Stock............................1.6(b)(iv)
Series E Preferred Stock............................1.6(b)(v)
Series F Preferred Stock............................1.6(b)(vi)
Series G Preferred Stock............................1.6(d)
Shares..............................................Recitals
Special Vote........................................3.5
Subsidiary or Subsidiaries..........................10.4(m)
Superior Proposal...................................6.5(a)
Systems.............................................3.27(a)
Tritel..............................................Preamble
Tritel 1999 Plan....................................1.8(b)
Tritel Authorizations...............................4.10(a)
Tritel Capital Stock................................1.6(d)
Tritel Common Stock.................................1.6(c)
Tritel Directors Plan...............................1.8(a)
Tritel Disclosure Schedule..........................4
Tritel Employee Plans...............................4.15(a)
Tritel ERISA Affiliate..............................4.15(a)
Tritel Exchange Ratio...............................1.6(e)
Tritel FCC Application..............................4.10(b)
Tritel II...........................................1.1
5
<PAGE>
Tritel Intellectual Property Rights.................4.22(a)
Tritel Licenses and Applications....................4.10(b)
Tritel Material Adverse Effect......................4
Tritel Material Contracts...........................4.7
Tritel Merger Consideration.........................1.6(g)
Tritel Preferred stock..............................1.6(d)
Tritel Proposals....................................6.3(b)
Tritel S-1..........................................4.9(a)
Tritel SEC Reports..................................4.9(a)
Tritel State Authorizations.........................4.10(b)
Tritel Stockholders Meeting.........................3.17
Tritel Third Party Intellectual Property Rights.....4.22(b)
Tritel Voting Agreement.............................4.15(a)
Tax.................................................3.20(a)
Taxes...............................................3.20(a)
Tax Returns.........................................3.20(a)
TeleCorp............................................Preamble
TeleCorp 1998 Plan..................................1.8(a)
TeleCorp 1999 Plan..................................1.8(a)
TeleCorp Authorizations ............................3.10(a)
TeleCorp Capital Stock..............................1.6(b)
TeleCorp Common Stock...............................1.6(a)
TeleCorp Disclosure Schedule........................3
TeleCorp Employee Plans.............................3.15(a)
6
<PAGE>
TeleCorp ERISA Affiliate............................3.15(a)
TeleCorp Exchange Ratio.............................1.6(e)
TeleCorp FCC Applications...........................3.10(b)
TeleCorp II.........................................1.1
TeleCorp Intellectual Property Rights...............3.22(a)
TeleCorp Licenses and Applications..................3.10(b)
TeleCorp Material Adverse Effect ...................3
TeleCorp Material Contracts.........................3.7
TeleCorp Merger Considerations......................1.6(f)
TeleCorp Option Plan................................1.8(a)
TeleCorp Options....................................3.3(b)(v)
TeleCorp Preferred Stock............................1.6(b)
TeleCorp Proposals..................................6.3(b)
TeleCorp Restricted Stock Plan......................1.8(e)
TeleCorp S-1........................................3.9(a)
TeleCorp SEC Reports................................3.9(a)
TeleCorp State Authorizations.......................3.10(b)
TeleCorp Stockholders Meeting.......................3.17
TeleCorp Third Party Intellectual Property Rights...3.22(b)
TeleCorp Voting Agreement...........................3.4
Third Party.........................................6.5(c)
Transfer Taxes......................................10.2(b)
Transition Committee................................6.18
Voting Preference Stock.............................1.6(a)(v)
7
<PAGE>
Waiver..............................................6.17(b)
WARN Act............................................3.16
8
<PAGE>
SCHEDULE A
Board of Directors and Officers
TELECORP II:
OFFICERS:
- ----------------------------------------------------------------------
NAME POSITION
- ----------------------------------------------------------------------
Gerald T. Vento Chief Executive Officer
- ----------------------------------------------------------------------
Thomas H. Sullivan President, Treasurer and
Secretary
- ----------------------------------------------------------------------
Julie A. Dobson Chief Operating Officer
- ----------------------------------------------------------------------
Board of Directors:
- ----------------------------------------------------------------------
NAME POSITION
- ----------------------------------------------------------------------
Thomas H. Sullivan Director
- ----------------------------------------------------------------------
Gerald T. Vento Director
- ----------------------------------------------------------------------
TRITEL II:
Officers:
- ----------------------------------------------------------------------
NAME POSITION
- ----------------------------------------------------------------------
Gerald T. Vento Chief Executive Officer
- ----------------------------------------------------------------------
Thomas H. Sullivan President, Treasurer and
Secretary
- ----------------------------------------------------------------------
William Arnett Chief Operating Officer
- ----------------------------------------------------------------------
Board of Directors:
- ----------------------------------------------------------------------
NAME POSITION
- ----------------------------------------------------------------------
Thomas H. Sullivan Director
- ----------------------------------------------------------------------
Gerald T. Vento Director
- ----------------------------------------------------------------------
A-1
<PAGE>
HOLDING COMPANY:
Officers:
- ----------------------------------------------------------------------
NAME POSITION
- ----------------------------------------------------------------------
Gerald T. Vento Chief Executive Officer
- ----------------------------------------------------------------------
Thomas H. Sullivan Chief Financial Officer
- ----------------------------------------------------------------------
William M. Mounger Chairman of the Board of
Directors
- ----------------------------------------------------------------------
E.B. Martin Vice-Chairman of the Board of
Directors
- ----------------------------------------------------------------------
Board of Directors:
- ----------------------------------------------------------------------
CLASS NAME POSITION
- ----------------------------------------------------------------------
Class of 2001 Gerald T. Vento Director
Thomas H. Sullivan Director
William M. Mounger* Director
E.B. Martin* Director
- ----------------------------------------------------------------------
Class 2002 Alex P. Coleman Director
Michael R. Hannon Director
Michael Schwartz Director
Mary Hawkins-Key Director
Scott Anderson Director
- ----------------------------------------------------------------------
Class of 2003 James M. Hoak Director
David A. Jones, Jr. Director
Andrew Hubregsen Director
[Designee of Majority Director
of Voting Preferred
and Reasonably
Satisfactory to AT&T]
Rohit M. Desai Director
- ----------------------------------------------------------------------
* Mr. Mounger and Mr. Martin hold two seats, but are entitled to
one vote.
A-2
<PAGE>
SCHEDULE B
Certain Actions Pending the Closing Date
1. Notwithstanding anything to the contrary in the Agreement,
TeleCorp may enter into and consummate (with only immaterial changes therein)
the transactions contemplated by the Swap Agreement with AT&T (or its
Affiliates) pursuant to which TeleCorp is exchanging certain assets for assets
controlled by AT&T (or its Affiliates).
2. Notwithstanding anything to the contrary in the Agreement, in
the event that between the date hereof and Closing Date, either Party wishes to
participate in any Federal Communications Commission auctions of licenses to
radio spectrum for use in providing wireless communications services or wishes
to enter into any transactions with AT&T Wireless PCS, LLC for the acquisition
and/or disposition of any such licenses with a transaction value not to exceed
$500,000,000, such Party shall have the authority to take such actions if
approved by a majority of the Transition Committee.
B-1
<PAGE>
Annex B
AMENDMENT No. 1 TO THE
AGREEMENT AND PLAN OF REORGANIZATION AND CONTRIBUTION
This Amendment No. 1 is dated as of May 4, 2000 (the "Amendment No. 1")
---------------
and amends the Agreement and Plan of Reorganization and Contribution, dated as
of February 28, 2000 (the "Agreement"), by and among TeleCorp PCS, Inc., a
---------
Delaware corporation ("TeleCorp"), Tritel, Inc., a Delaware corporation
--------
("Tritel"), and AT&T Wireless Services, Inc., a Delaware corporation ("AT&T").
------ ----
WHEREAS, TeleCorp, Tritel, and AT&T desire to amend the Agreement;
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
1. All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Agreement.
2. Certificate of Incorporation. Exhibit H to the Agreement is hereby
----------------------------
amended by deleting Exhibit H in its entirety and replacing it with Annex I
attached hereto.
3. Conversion of Capital Stock, etc. Section 1.6(c)(v) is hereby
--------------------------------
amended by adding the words, "provided, however, that", after the semi-colon in
-------- -------
the first clause of Section 1.6(c)(v).
4. Organization of the Holding Company. Section 2.1 of the Agreement
-----------------------------------
is hereby amended as follows:
a. by replacing the words, "50% owned by TeleCorp and 50% owned by
Tritel" in the first sentence of Section 2.1(a) with "100% owned by
TeleCorp";
b. by deleting the words, "and Tritel", from the fourth sentence
of Section 2.1(a); and
c. by deleting the words, "either" and "or Tritel" from the first
sentence of Section 2.1(b).
5. Capitalization. Section 3.3(b) of the Agreement is hereby amended
--------------
by deleting subsection (i) from the first sentence of Section 3.3(b) in its
entirety and replacing it with "(i) 87,837,221 shares of TeleCorp Common Stock
were issued and outstanding, which consisted of: (A) 86,698,889 shares of
TeleCorp Class A Voting Common Stock, (B) 283,813 shares of TeleCorp Class C
Common Stock, (C) 851,429 shares of TeleCorp Class D Common Stock, and (D) 3,090
shares of TeleCorp Voting Preference Common Stock;"
6. Board of Directors and Officers. Schedule A to the Agreement is
-------------------------------
hereby amended by deleting Schedule A in its entirety and replacing it with
Annex II attached hereto.
<PAGE>
7. Limited Effect. Except as expressly amended and modified by this
--------------
Amendment No. 1, the Agreement shall continue to be, and shall remain, in full
force and effect in accordance with its terms.
8. Counterparts. This Amendment No. 1 may be executed by each of the
------------
parties hereto on any number of separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
instrument.
9. GOVERNING LAW. THIS AMENDMENT NO. 1 SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT
REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of the date first above written.
TELECORP PCS, INC.
By:__________________________
Name: ____________________
Title:____________________
TRITEL, INC.
By:__________________________
Name: ____________________
Title:____________________
AT&T WIRELESS SERVICES, INC.
By:___________________________
Name:______________________
Title:_____________________
2
<PAGE>
ANNEX I to
Amendment No. 1 to the Agreement and Plan of Reorganization and Contribution
EXHIBIT H
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TELECORP PCS, INC.
TeleCorp PCS, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is (the
------------------
"Corporation"). The original Certificate of Incorporation of the Corporation
-----------
was filed with the Secretary of State of the State of Delaware (the "Secretary
---------
of State") on (the "Certificate of Incorporation").
- -------- ------------------- ----------------------------
SECOND: This Amended and Restated Certificate of Incorporation (the
"Amended and Restated Certificate of Incorporation") has been duly adopted in
-------------------------------------------------
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware ("GCL") and written consent has been
---
given by the stockholders of the Corporation in accordance with Section 228 of
the GCL.
THIRD: The Certificate of Incorporation is hereby amended and
restated in its entirety as follows:
ARTICLE I
The name of the Corporation shall be TeleCorp PCS, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in, carry on and conduct
any lawful act or activity for which corporations may be organized under the
GCL.
ARTICLE IV
4.1 Classes of Stock. The total number of shares of all classes of stock
----------------
which the
1
<PAGE>
Corporation shall have authority to issue is , consisting
--------------------
of (a) 20,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock"), consisting of 100,000 shares designated "Series A
---------------
Convertible Preferred Stock" (the "Series A Preferred Stock"), 200,000 shares
------------------------
designated "Series B Preferred Stock" (the "Series B Preferred Stock"), 215,000
------------------------
shares designated "Series C Preferred Stock" (the "Series C Preferred Stock"),
------------------------
50,000 shares designated "Series D Preferred Stock" (the "Series D Preferred
------------------
Stock"), 30,000 shares designated "Series E Preferred Stock" (the "Series E
- ----- --------
Preferred Stock"), 15,450,000 shares designated "Series F Preferred Stock" (the
- ---------------
"Series F Preferred Stock"), 100,000 shares designated as "Series G Preferred
------------------------
Stock" (the "Series G Preferred Stock"), 200,000 shares designated as Series H
------------------------
Preferred Stock" (the "Series H Preferred Stock"), 300,000 shares designated as
------------------------
Series I Preferred Stock (the "Series I Preferred Stock") and 3,355,000
undesignated shares available for designation and issuance pursuant to Section
4.2, and (b) shares of common stock, par value $0.01 per share (the
------------
"Common Stock"), consisting of 1,108,550,000 shares designated "Class A Voting
------------
Common Stock" (the "Class A Common Stock"), 808,550,000 shares designated "Class
--------------------
B Non-Voting Common Stock" (the "Class B Common Stock"), 309,000 shares
--------------------
designated "Class C Common Stock" (the "Class C Common Stock"), 927,000 shares
--------------------
designated "Class D Common Stock" (the "Class D Common Stock"), 4,000,000 shares
--------------------
designated "Class E Common Stock" (the "Class E Common Stock"), 12,000,000
--------------------
shares designated "Class F Common Stock" (the "Class F Common Stock") and 3,093
--------------------
shares designated "Voting Preference Common Stock" (the "Voting Preference
-----------------
Common Stock"). (Capitalized terms used herein and not otherwise defined shall
- ------------
have the meanings set forth in Section 4.16.)
4.2 Additional Series of Preferred Stock and Voting Rights of Preferred
-------------------------------------------------------------------
Stock.
- -----
(a) Subject to approval by holders of shares of any class or series of
Preferred Stock to the extent such approval is required by its terms, the Board
of Directors of the Corporation (the "Board of Directors") is hereby expressly
------------------
authorized, by resolution or resolutions, to provide, out of the unissued shares
of Preferred Stock, for series of Preferred Stock in addition to the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock, the Series E Preferred Stock, the Series F Preferred
Stock, the Series G Preferred Stock, the Series H Preferred Stock and the Series
I Preferred Stock. Before any shares of any such series are issued, the Board
of Directors shall fix, and hereby is expressly empowered to fix, by
resolutions, the following provisions of the shares thereof:
(i) the designation of such series, the number of shares to constitute
such series and the stated value thereof if different from the par value
thereof;
(ii) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of such
voting rights, which may be general or limited;
(iii) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the conditions and
dates upon which
2
<PAGE>
such dividends shall be payable, the preference or relation which such dividends
shall bear to the dividends payable on any shares of stock of any other class or
any other series of this class;
(iv) whether the shares of such series shall be subject to redemption by
the Corporation, and, if so, the times, prices and other conditions of such
redemption;
(v) the amount or amounts payable upon shares of such series upon, and
the rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of the assets,
of the Corporation;
(vi) whether the shares of such series shall be subject to the operation
of a retirement or sinking fund and, if so, the extent to and manner in which
any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such series for retirement or other corporate
purposes and the terms and provisions relative to the operation thereof;
(vii) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of this
class or any other securities and, if so, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting the same,
and any other terms and conditions of conversion or exchange;
(viii) the limitations and restrictions, if any, to be effective while any
shares of such series are outstanding upon the payment of dividends or the
making of other distributions on, and upon the purchase, redemption other
acquisition by the Corporation of, the Common Stock or shares of stock of any
other class or any other series of this class;
(ix) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of this class
or of any other class; and
(x) any other powers, preferences and relative, participating, optional
and other special rights, and any qualifications, limitations and restrictions
thereof.
(b) The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be cumulative.
(c) Shares of Preferred Stock of any series that have been redeemed
(whether through the operation of a sinking fund or otherwise) or that, if
convertible or
3
<PAGE>
exchangeable, have been converted into or exchanged for any other
security shall have the status of authorized and unissued shares of Preferred
Stock of the same series and may be reissued as a part of the series of which
they were originally a part or may be reclassified and reissued as part of a new
series of shares of Preferred Stock to be created by resolution or resolutions
of the Board of Directors or as part of any other series of shares of Preferred
Stock, all subject to the conditions or restrictions on issuance set forth in
the resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of shares of Preferred Stock.
(d) Subject to the provisions of this Amended and Restated Certificate
of Incorporation and except as otherwise provided by law, the stock of the
Corporation, regardless of class, may be issued for such consideration and for
such corporate purposes as the Board of Directors may from time to time
determine.
(e) Voting.
------
(i) The holders of shares of Preferred Stock shall be entitled to
such voting rights as hereinafter provided, and shall be entitled to notice of
any stockholders' meeting and to vote upon such matters as provided herein and
in the Bylaws of the Corporation, and as may be provided by law. Holders of any
series of Preferred Stock shall not be entitled to cumulate their votes for any
purpose. Except as otherwise required by law or provided herein, regardless of
the number of shares of any series of Preferred Stock then outstanding, each
Series of Preferred Stock shall be entitled to the number of votes voting as a
class with all equity securities of the Corporation enumerated below and the
number of votes or fractional votes to which each share of a particular series
of Preferred Stock shall be entitled shall be the quotient determined by
dividing the aggregate number of votes to which such series of Preferred Stock
is entitled by the number of shares of such series of Preferred Stock then
outstanding. Except as otherwise required by law or provided herein, the Series
A Preferred Stock shall have 67,804 votes; the Series B Preferred Stock shall
have 61,608 votes; the Series C Preferred Stock shall have 124,096 votes; the
Series D Preferred Stock shall have 30,308 votes; the Series E Preferred Stock
shall have 16,184 votes; the Series H Preferred Stock shall have the number of
votes which shares of Series A Preferred Stock exchanged for such Series H
Preferred Stock in accordance with Section 4.14 previously had; the Series I
Preferred Stock shall have the number of votes which shares of Series B
Preferred Stock exchanged for such Series I Preferred Stock in accordance with
Section 4.14 previously had; and the Series F Preferred Stock and the Series G
Preferred Stock shall have the voting rights described in Section 4.12(c).
(ii) In any matter requiring a separate class vote of holders of any
series of Preferred Stock or a separate vote of two or more series of Preferred
Stock voting together as a single class, for the purposes of such a class vote,
each share of Preferred Stock of such series shall be entitled to one vote per
share.
4.3 Powers, Preferences and Rights of the Series A Preferred Stock. The
--------------------------------------------------------------
powers, preferences and rights of the Series A Preferred Stock and the
qualifications, limitations and restrictions thereof are as follows:
4
<PAGE>
(a) Ranking. The Series A Preferred Stock shall, with respect to the
-------
payment of dividends and the distribution of assets on liquidation, dissolution
or winding up, rank on a parity with the Series B Preferred Stock, the Series H
Preferred Stock and the Series I Preferred Stock, and rank senior to Junior
Stock.
(b) Dividends and Distributions.
---------------------------
(i) Dividends. The holders of shares of Series A Preferred Stock shall
---------
be entitled to receive, as and when declared by the Board of Directors, out of
funds legally available therefor, dividends on each outstanding share of Series
A Preferred Stock, at an annual rate per share equal to ten percent (10%) of the
Liquidation Preference, calculated on the basis of a 360-day year consisting of
twelve 30-day months. Dividends shall be paid quarterly in arrears commencing on
the Dividend Payment Date immediately following the last Dividend Payment Date
arising with respect to Predecessor Stock exchanged for the Series A Preferred
Stock in the manner provided in paragraph (iii) below.
(ii) Accrued Dividends, Record Date. Dividends payable pursuant to
------------------------------
paragraph (i) above shall begin to accrue and be cumulative from the date on
which shares of Series A Preferred Stock are issued, or, with respect to shares
of Series A Preferred Stock received in exchange for any Predecessor Stock, on
the date when such Predecessor Stock was issued, and shall begin to accrue on a
daily basis, in each case whether or not earned or declared. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of the dividends payable
pursuant to paragraph (i) above, which record date shall not be more than 60
days prior to the Dividend Payment Date.
(iii) Payment. All dividends shall be payable in cash. Until the
-------
December 2008 Dividend Payment Date, the Corporation shall have the option to
defer payment of dividends on Series A Preferred Stock. Any dividend payments
so deferred shall be payable on and not earlier than the December 2008 Dividend
Payment Date.
(iv) Dividends Pro Rata. All dividends paid with respect to shares of
------------------
Series A Preferred Stock pursuant to this Section 4.3(b) shall be paid pro rata
to the holders entitled thereto. In the event that the funds legally available
therefor shall be insufficient for the payment of the entire amount of cash
dividends payable at any Dividend Payment Date, subject to Section 4.3(c), such
funds shall be allocated for the payment of dividends with respect to the shares
of Series A Preferred Stock, Series B Preferred Stock, Series H Preferred Stock
and Series I Preferred Stock pro rata based upon the Liquidation Preference of
the outstanding shares.
(c) Certain Restrictions.
--------------------
(i) Notwithstanding the provisions of Sections 4.3(b), (e) and (f), cash
dividends on the Series A Preferred Stock may not be declared, paid or set apart
for payment, nor may the Corporation redeem, purchase or otherwise acquire any
shares of
5
<PAGE>
Series A Preferred Stock, if (A) the Corporation is not solvent or would be
rendered insolvent thereby or (B) at such time the terms and provisions of any
law or agreement of the Corporation, including any agreement relating to its
indebtedness, specifically prohibit such declaration, payment or setting apart
for payment or such redemption, purchase or other acquisition, or provide that
such declaration, payment or setting apart for payment or such redemption,
purchase or other acquisition would constitute a violation or breach thereof or
a default thereunder.
(ii) So long as shares of Series A Preferred Stock are outstanding or
dividends payable on shares of Series A Preferred Stock have not been paid in
full in cash, then the Corporation shall not declare or pay cash dividends on,
or redeem, purchase or otherwise acquire for consideration, any shares of Common
Stock or other shares of Junior Stock, except with the prior written consent of
holders of a majority of the outstanding shares of Series A Preferred Stock,
except that the Corporation may acquire, in accordance with the terms of any
agreement between the Corporation and its employees, shares of Common Stock or
Preferred Stock at a price not greater than the Market Price as of such date.
(iii) The Corporation shall not permit any Subsidiary of the Corporation,
or cause any other Person, to make any distribution with respect to, or purchase
or otherwise acquire for consideration, any shares of capital stock of the
Corporation, unless the Corporation could, pursuant to paragraph (ii) above,
make such distribution or purchase or otherwise acquire such shares at such time
and in such manner.
(d) Voting Rights; Election of Directors.
------------------------------------
(i) In addition to the voting rights set forth in Section 4.2(e) or
otherwise provided by law, the holders of shares of Series A Preferred Stock
shall have the voting rights provided in paragraphs (ii) and (iii) below.
(ii) Unless the consent or approval of a greater number of shares shall
then be required by law, the affirmative vote of the holders of a majority of
the outstanding shares of Series A Preferred Stock in person or by proxy, at
each special and annual meeting of stockholders called for the purpose, or by
written consent, shall be necessary to (A) authorize, increase the authorized
number of shares of or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any shares of any
class or classes of Senior Stock or Parity Stock or any additional shares of
Series A Preferred Stock, except upon conversion or exchange pursuant to Section
4.14 of outstanding securities, (B) authorize, adopt or approve each amendment
to this Amended and Restated Certificate of Incorporation that would increase or
decrease the par value of the shares of Series A Preferred Stock, alter or
change the powers, preferences or rights of the shares of Series A Preferred
Stock or alter or change the powers, preferences or rights of any other capital
stock of the Corporation if such alteration or change results in such capital
stock being Senior Stock or Parity Stock, (C) amend, alter or repeal any
provision of this Amended and Restated Certificate
6
<PAGE>
of Incorporation so as to affect the shares of Series A Preferred Stock
adversely, or (D) authorize or issue any security convertible into, exchangeable
for or evidencing the right to purchase or otherwise receive any shares of any
class or classes of Senior Stock or Parity Stock.
(iii) So long as the Initial Holders own in the aggregate an amount of
shares of Series A Preferred Stock equal to at least 44,481 shares, holders of
shares of Series A Preferred Stock shall have the exclusive right, voting
separately as a single class, to designate one director of the Corporation. The
foregoing right to designate one director may be exercised at any annual meeting
of stockholders or a special meeting of stockholders or holders of Series A
Preferred Stock held for such purpose or any adjournment thereof, or by the
written consent, delivered to the Secretary of the Corporation, of the holders
of a majority of the issued and outstanding shares of Series A Preferred Stock.
Notwithstanding the foregoing, the Initial Holders shall have the right,
exercisable at any time by written notice delivered to the Secretary of the
Corporation, to surrender and cancel irrevocably such right to designate one
director of the Corporation. So long as the Initial Holders own in the
aggregate an amount of shares of Series A Preferred Stock equal to at least
44,481 shares in the event any director so designated by the Initial Holders
ceases to be a director of the Corporation during such director's term (whether
or not such director resigns, is removed from the Board of Directors with or
without cause or ceases to be a director by reason of death, disability or for
any other reason), the Initial Holders shall have the right to designate a
replacement for such director, and the Corporation shall cause to be elected or
appointed for the remainder of the term of any director so replaced any person
designated by the Initial Holders, upon written notice to the Corporation and
the other members of the Board of Directors which notice shall set forth the
name of the member being replaced and the name of the new member.
(e) Redemption at Option of the Corporation. The Corporation shall have
---------------------------------------
the right to redeem shares of Series A Preferred Stock pursuant to the following
provisions:
(i) The Corporation shall not have any right to redeem shares of the
Series A Preferred Stock prior to, with respect to any shares of Series A
Preferred Stock, the 30th day after the twentieth anniversary of the issuance of
such shares. Thereafter, subject to the restrictions in Section 4.3(c)(i), the
Corporation shall have the right, at its sole option and election, to redeem the
shares of the Series A Preferred Stock, in whole but not in part, at any time at
a redemption price (the "Series A Redemption Price") per share equal to the
-------------------------
Liquidation Preference as of the redemption date;
(ii) Notice of any redemption of the Series A Preferred Stock shall be
mailed at least ten, but not more than 60, days prior to the date fixed for
redemption to each holder of Series A Preferred Stock to be redeemed, at such
holder's address as it appears on the books of the Corporation. In order to
facilitate the redemption of the Series A Preferred Stock, the Board of
Directors may fix a record date for the determination of holders of Series A
Preferred Stock to be redeemed, or may cause the transfer books of
7
<PAGE>
the Corporation to be closed for the transfer of the Series A Preferred Stock,
not more than 60 days prior to the date fixed for such redemption;
(iii) Within two Business Days after the redemption date specified in the
notice given pursuant to paragraph (ii) above and the surrender of the
certificate(s) representing shares of Series A Preferred Stock, the Corporation
shall pay to the holder of the shares being redeemed the Series A Redemption
Price therefor. Such payment shall be made by wire transfer of immediately
available funds to an account designated by such holder or by overnight delivery
(by a nationally recognized courier) of a bank check to such holder's address as
it appears on the books of the Corporation; and
(iv) Effective upon the date of the notice given pursuant to paragraph
(ii) above, notwithstanding that any certificate for such shares shall not have
been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding, the rights to receive dividends thereon shall
cease to accrue from and after the date of redemption designated in the notice
of redemption and all rights of the holders of the shares of the Series A
Preferred Stock called for redemption shall cease and terminate, excepting only
the right to receive the Series A Redemption Price therefor in accordance with
paragraph (iii) above and the right to convert such shares into shares of Class
A Common Stock until the close of business on the third Business Day preceding
the redemption date, as provided in Section 4.3(i).
(f) Redemption at Option of Holder.
------------------------------
(i) No holder of shares of Series A Preferred Stock shall have any right
to require the Corporation to redeem any shares of Series A Preferred Stock
prior to, with respect to any shares of Series A Preferred Stock, the 30th day
after the twentieth anniversary of the issuance of such shares. Thereafter,
subject to the restrictions set forth in Section 4.3(c)(i), each holder of
shares of Series A Preferred Stock shall have the right, at the sole option and
election of such holder, to require the Corporation to redeem all (but not less
than all) of the shares of Series A Preferred Stock owned by such holder at a
price per share equal to the Series A Redemption Price;
(ii) The holder of any shares of the Series A Preferred Stock may
exercise such holder's right to require the Corporation to redeem such shares by
surrendering for such purpose to the Corporation, at its principal office or at
such other office or agency maintained by the Corporation for that purpose,
certificates representing the shares of Series A Preferred Stock to be redeemed,
accompanied by a written notice stating that such holder elects to require the
Corporation to redeem all (but not less than all) of such shares in accordance
with the provisions of this Section 4.3(f), which notice may specify an account
for delivery of the Series A Redemption Price;
(iii) Within two Business Days after the surrender of such certificates,
the Corporation shall pay to the holder of the shares being redeemed the Series
A Redemption Price therefor. Such payment shall be made by wire transfer of
immediately
8
<PAGE>
available funds to an account designated by such holder or by overnight delivery
(by a nationally recognized courier) of a bank check to such holder's address as
it appears on the books of the Corporation; and
(iv) Such redemptions shall be deemed to have been made at the close of
business on the date of the receipt of such notice and of such surrender of the
certificates representing the shares of the Series A Preferred Stock to be
redeemed and the rights of the holder thereof, except for the right to receive
the Series A Redemption Price therefor in accordance herewith, shall cease on
such date of receipt and surrender.
(g) Reacquired Shares. Any shares of the Series A Preferred Stock
-----------------
redeemed or purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued pursuant to Section 4.2(c) as part
of a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions or restrictions on issuance
set forth herein.
(h) Liquidation, Dissolution or Winding Up.
--------------------------------------
(i) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, before any distribution or payment
to holders of Junior Stock, the holders of shares of Series A Preferred Stock
shall be entitled to be paid an amount equal to the Liquidation Preference with
respect to each share of Series A Preferred Stock.
(ii) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to the
holders of Series A Preferred Stock shall be insufficient to permit payment in
full to such holders of the sums which such holders are entitled to receive in
such case, then all of the assets available for distribution to holders of the
Series A Preferred Stock, Series B Preferred Stock, Series H Preferred Stock and
Series I Preferred Stock shall be distributed among and paid to such holders
ratably in proportion to the amounts that would be payable to such holders if
such assets were sufficient to permit payment in full.
(iii) Neither the consolidation or merger of the Corporation with or into
any other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Corporation, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4.3(h).
(i) Conversion.
----------
(i) Stockholders' Right To Convert. No holder of shares of Series A
------------------------------
Preferred Stock shall have any right to convert any shares of Series A Preferred
Stock into Class A Common Stock or any other securities of the Corporation prior
to July 17, 2006. Thereafter, each share of Series A Preferred Stock held by the
Initial Holders or a
9
<PAGE>
Qualified Transferee shall be convertible, at the sole option and election of
the Initial Holders or Qualified Transferee, into fully paid and non-assessable
shares of Class A Common Stock.
(ii) Number of Shares of Class A Common Stock Issuable upon Conversion.
-----------------------------------------------------------------
The number of shares of Class A Common Stock to be issued upon conversion of
shares of Series A Preferred Stock pursuant to paragraph (i) above shall be
equal to the product of (A) the Series A Conversion Rate as of the date of the
applicable notice pursuant to paragraph (iv) below, multiplied by (B) the number
of shares of Series A Preferred Stock to be converted.
(iii) Fractional Shares. Notwithstanding any other provision of this
-----------------
Amended and Restated Certificate of Incorporation, the Corporation shall not be
required to issue fractions of shares upon conversion of any shares of Series A
Preferred Stock or to distribute certificates which evidence fractional shares.
In lieu of fractional shares, the Corporation may pay therefor, at the time of
any conversion of shares of Series A Preferred Stock as herein provided, an
amount in cash equal to such fraction multiplied by the Market Price of a share
of Class A Common Stock on such date.
(iv) Mechanics of Conversion. The Initial Holders or Qualified Transferee
-----------------------
may exercise its option to convert by surrendering for such purpose to the
Corporation, at its principal office or such other office or agency maintained
by the Corporation for that purpose, certificates representing the shares of
Series A Preferred Stock to be converted, accompanied by a written notice,
delivered in accordance with the terms of the Stockholders Agreement, stating
that such holder elects to convert such shares in accordance with this Section
4.3(i). The date of receipt of such certificates and notice by the Corporation
at such office shall be the conversion date (the "Series A Conversion Date").
------------------------
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. Within ten Business Days after
the Series A Conversion Date (or, if at the time of such surrender the shares of
Class A Common Stock are not listed or admitted for trading on any national
securities exchange and are not quoted on NASDAQ or any similar service, within
ten Business Days of the determination of the Market Price pursuant to the
Appraisal Procedure), the Corporation shall issue to such holder a number of
shares of Class A Common Stock into which such shares of Series A Preferred
Stock are convertible pursuant to paragraph (ii) above. Certificates
representing such shares of Class A Common Stock shall be delivered to such
holder at such holder's address as it appears on the books of the Corporation.
(v) Termination of Rights. All shares of Series A Preferred Stock which
---------------------
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Series A Conversion Date, except only the right of the holders
thereof to receive shares of Class A
10
<PAGE>
Common Stock in exchange therefor and payment of any declared and unpaid
dividends thereon.
(vi) No Conversion Charge or Tax. The issuance and delivery of
---------------------------
certificates for shares of Class A Common Stock upon the conversion of shares of
Series A Preferred Stock shall be made without charge to the holder of shares of
Series A Preferred Stock for any issue or transfer tax, or other incidental
expense in respect of the issuance or delivery of such certificates or the
securities represented thereby, all of which taxes and expenses shall be paid by
the Corporation.
(vii) Reorganization, Reclassification and Merger Adjustment. If there
------------------------------------------------------
occurs any capital reorganization or any reclassification of the Class A Common
Stock of the Corporation, the consolidation or merger of the Corporation with or
into another Person (other than a merger or consolidation of the Corporation in
which the Corporation is the continuing corporation and which does not result in
any reclassification or change of outstanding shares of its Class A Common
Stock) or the sale or conveyance of all or substantially all of the assets of
the Corporation to another Person, then each share of Series A Preferred Stock
shall thereafter be convertible into the same kind and amounts of securities
(including shares of stock) or other assets, or both, which were issuable or
distributable to the holders of outstanding Class A Common Stock of the
Corporation upon such reorganization, reclassification, consolidation, merger,
sale or conveyance, in respect of that number of shares of Class A Common Stock
into which such share of Series A Preferred Stock might have been converted
immediately prior to such reorganization, reclassification, consolidation,
merger, sale or conveyance; and, in any such case, appropriate adjustments (as
determined in good faith by the Board of Directors of the Corporation, whose
determination shall be conclusive) shall be made to assure that the provisions
set forth herein shall thereafter be applicable, as nearly as reasonably may be
practicable, in relation to any securities or other assets thereafter
deliverable upon the conversion of the Series A Preferred Stock.
(viii) Notice of Adjustment. Whenever the securities or other property
--------------------
deliverable upon the conversion of the Series A Preferred Stock shall be
adjusted pursuant to the provisions hereof, the Corporation shall promptly give
written notice thereof to each holder of shares of Series A Preferred Stock at
such holder's address as it appears on the transfer books of the Corporation and
shall forthwith file, at its principal executive office and with any transfer
agent or agents for the Series A Preferred Stock and the Class A Common Stock, a
certificate, signed by the Chairman of the Board, President or one of the Vice
Presidents of the Corporation, and by its Chief Financial Officer, Treasurer or
one of its Assistant Treasurers, stating the securities or other property
deliverable per share of Series A Preferred Stock calculated to the nearest cent
or to the nearest one-hundredth of a share and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment and
upon which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment hereunder is required.
11
<PAGE>
(ix) Reservation of Class A Common Stock. The Corporation shall at all
-----------------------------------
times reserve and keep available for issuance upon the conversion of the shares
of Series A Preferred Stock the maximum number of its authorized but unissued
shares of Class A Common Stock as is reasonably anticipated to be sufficient to
permit the conversion of all outstanding shares of Series A Preferred Stock, and
shall take all action required to increase the authorized number of shares of
Class A Common Stock if at any time there shall be insufficient authorized but
unissued shares of Class A Common Stock to permit such reservation or to permit
the conversion of all outstanding shares of Series A Preferred Stock.
(j) Qualified Transfer. If at any time an Initial Holder or Qualified
------------------
Transferee desires to sell, transfer or otherwise dispose of shares of Series A
Preferred Stock pursuant to a Qualified Transfer, it shall, with respect to each
such proposed transfer, give written notice (a "Qualified Transfer Notice") to
-------------------------
the Corporation at its principal executive office specifying up to ten
prospective transferees. Upon receipt of such notice, the Corporation shall
have ten days to give written notice to the Initial Holders or Qualified
Transferee specifying its disapproval of (A) any or all of such prospective
transferees if it has good reason for such disapproval and specifying such
reason and (B) up to two of such prospective transferees with or without good
reason.
(k) Notice of Certain Events. In case the Corporation shall propose at
------------------------
any time or from time to time (i) to declare or pay any dividend payable in
stock of any class to the holders of Common Stock or to make any other
distribution to the holders of Common Stock, (ii) to offer to the holders of
Common Stock rights or warrants to subscribe for or to purchase any additional
shares of Common Stock or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its Common Stock,
(iv) to effect any consolidation, merger or sale, transfer or other disposition
of all or substantially all of the property, assets or business of the
Corporation which would, if consummated, adjust the Series A Conversion Rate or
the securities issuable upon conversion of shares of Series A Preferred Stock,
or (v) to effect the liquidation, dissolution or winding up of the Corporation,
then, in each such case, the Corporation shall mail to each holder of shares of
Series A Preferred Stock, at such holder's address as it appears on the transfer
books of the Corporation, a written notice of such proposed action, which shall
specify (A) the date on which a record is to be taken for the purpose of such
dividend or distribution of rights or warrants or, if a record is not to be
taken, the date as of which the holders of shares of Common Stock of record to
be entitled to such dividend or distribution of rights or warrants are to be
determined, or (B) the date on which such reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up is expected to
become effective, and such notice shall be so given as promptly as possible but
in any event at least ten Business Days prior to the applicable record,
determination or effective date, specified in such notice.
(l) Certain Remedies. Any registered holder of shares of Series A
----------------
Preferred Stock shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Amended and Restated Certificate of
Incorporation and to enforce
12
<PAGE>
specifically the terms and provisions of this Amended and Restated Certificate
of Incorporation in any court of the United States or any state thereof having
jurisdiction, this being in addition to any other remedy to which such holder
may be entitled at law or in equity.
4.4 Powers, Preferences and Rights of the Series B Preferred Stock. The
--------------------------------------------------------------
Series B Preferred Stock shall rank on a parity with the Series A Preferred
Stock, the Series H Preferred Stock and the Series I Preferred Stock, and the
powers, preferences and rights of the Series B Preferred Stock, and the
qualifications, limitations, and restrictions thereof, shall be identical to
those of the Series A Preferred Stock, except that (a) any references to the
"December 2008 Dividend Payment Date" shall instead be a reference to the "June
2009 Dividend Payment Date"; (b) holders shall have the right to designate one
director and designate replacements for such director, pursuant to Section
4.3(d)(iii), so long as the Initial Holders own, in the aggregate, an amount of
Series B Preferred Stock equal to at least 60,446 shares, (c) no holder of
Series B Preferred Stock shall have the right to convert Series B Preferred
Stock into Class A Common Stock or any other securities, pursuant to Section
4.3(i), prior to January 15, 2007; and (d) the words "Series B Preferred Stock"
and "Series A Preferred Stock" shall be substituted for all references in
Section 4.3 to Series A Preferred Stock and Series B Preferred Stock,
respectively, and any references in Section 4.3 to "TeleCorp PCS, Inc." shall
instead be a reference to "Tritel, Inc."
4.5 Powers, Preferences and Rights of the Series C Preferred Stock. The
--------------------------------------------------------------
powers, preferences and rights of the Series C Preferred Stock and the
qualifications, limitations and restrictions thereof are as follows:
(a) Ranking. The Series C Preferred Stock shall rank (i) junior to the
-------
Series A Preferred Stock, the Series B Preferred Stock, the Series H Preferred
Stock and the Series I Preferred Stock with respect to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up, (ii)
junior to the Series D Preferred Stock with respect to the distribution of
assets on a Statutory Liquidation, (iii) on a parity with the Series D Preferred
Stock with respect to the distribution of assets on liquidation, dissolution or
winding up (other than on a Statutory Liquidation), (iv) on a parity with the
Series D Preferred Stock and the Common Stock with respect to the payment of
dividends, and (v) senior to the Common Stock and any series or class of the
Corporation's common or preferred stock, now or hereafter authorized (other than
Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock,
Series H Preferred Stock or Series I Preferred Stock), with respect to the
payment of dividends and the distribution of assets on liquidation, dissolution
and winding up.
(b) Dividends. Holders of Series C Preferred Stock shall be entitled to
---------
dividends in cash or property when, as and if, declared by the Board of
Directors of the Corporation; provided that, in no event shall dividends in
--------
excess of the Liquidation Preference be declared or paid. So long as shares of
Series C Preferred Stock are outstanding or dividends payable on shares of
Series C Preferred Stock have not been paid in full in cash, the Corporation
shall not declare or pay cash dividends on, or
13
<PAGE>
redeem, purchase or otherwise acquire for consideration, any shares of any class
of common stock or series of preferred stock ranking junior to or on a parity
with the Series C Preferred Stock, except that the Corporation may acquire, in
accordance with the terms of any agreement between the Corporation and its
employees, shares of Common Stock or Preferred Stock at a price not greater than
the Market Price as of such date. The Corporation shall not declare or pay cash
dividends on, or redeem, purchase or otherwise acquire for consideration, any
shares of Series D Preferred Stock unless concurrently therewith the Corporation
shall declare or pay cash dividends on, or redeem, purchase or otherwise acquire
for consideration, as the case may be, shares of Series C Preferred Stock
ratably in accordance with the number of shares of Series C Preferred Stock and
Series D Preferred Stock then outstanding.
(c) Liquidation Preference.
----------------------
(i) In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series C Preferred Stock shall be entitled to
receive out of the assets of the Corporation, whether such assets are capital or
surplus of any nature, after payment is made to holders of all series of
preferred stock ranking senior to the Series C Preferred Stock with respect to
rights on liquidation, dissolution or winding up (including, in the case of a
Statutory Liquidation, the Series D Preferred Stock), but before any payment
shall be made or any assets distributed to the holders of Common Stock or any
series of preferred stock ranking junior to the Series C Preferred Stock with
respect to rights on liquidation, dissolution or winding up, an amount equal to
the Liquidation Preference and no more.
(ii) If upon any liquidation, dissolution or winding up of the
Corporation the assets of the Corporation to be distributed are insufficient to
permit the payment to all holders of Series C Preferred Stock and any other
series of preferred stock ranking on a parity with Series C Preferred Stock with
respect to rights on liquidation, dissolution or winding up (including, in the
case of a liquidation, dissolution or winding up other than a Statutory
Liquidation, the Series D Preferred Stock), to receive their full preferential
amounts, the entire assets of the Corporation shall be distributed among the
holders of Series C Preferred Stock and all such other series ratably in
accordance with their respective Liquidation Preference.
(iii) Neither the consolidation or merger of the Corporation with or into
any other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Corporation, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4.5(c).
(d) Voting Rights.
-------------
(i) In addition to the voting rights set forth in Section 4.2(e) or
otherwise provided by law, the holders of shares of Series C Preferred Stock
shall have the voting rights provided in paragraph (ii) below.
14
<PAGE>
(ii) The affirmative vote of holders of not less than a majority of Series
C Preferred Stock shall be required to (A) authorize, increase the authorized
number of shares of or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any shares of any
class or classes of stock ranking senior to or pari passu with the Series C
Preferred Stock or any additional shares of Series C Preferred Stock, except
upon conversion or exchange pursuant to Section 4.14 of outstanding securities,
(B) authorize, adopt or approve each amendment to this Amended and Restated
Certificate of Incorporation that would increase or decrease the par value of
the shares of Series C Preferred Stock, alter or change the powers, preferences
or rights of the shares of Series C Preferred Stock or alter or change the
powers, preferences or rights of any other capital stock of the Corporation if
such alteration or change results in such capital stock ranking senior to or
pari passu with the Series C Preferred Stock, (C) amend, alter or repeal any
provision of this Amended and Restated Certificate of Incorporation so as to
affect the shares of Series C Preferred Stock adversely, or (D) authorize or
issue any security convertible into, exchangeable for or evidencing the right to
purchase or otherwise receive any shares of any class or classes of stock senior
to or pari passu with the Series C Preferred Stock.
(e) Redemption at Option of the Corporation. The Corporation shall have
---------------------------------------
the right to redeem shares of Series C Preferred Stock pursuant to the following
provisions:
(i) Subject to the restrictions set forth in Section 4.5(g)(i), the
Corporation shall have the right, at its sole option and election, to redeem the
shares of the Series C Preferred Stock, in whole but not in part, at any time at
a redemption price per share (the "Series C Redemption Price") equal to the
Liquidation Preference thereof as of the redemption date; provided, that
concurrently with such redemption, the Corporation shall redeem the shares of
Series D Preferred Stock, in whole and not in part, at a redemption price per
share (the "Series D Redemption Price") equal to the Liquidation Preference
thereof as of the redemption date; provided, further, that if the funds legally
available to the Corporation are insufficient to effect the redemption of the
Series C Preferred Stock and the Series D Preferred Stock in full, such funds
shall be allocated among the shares of Series C Preferred Stock and Series D
Preferred Stock ratably in accordance with the number of shares of each Series
outstanding as of the redemption date;
(ii) Notice of any redemption of the Series C Preferred Stock and Series D
Preferred Stock shall be mailed at least ten but not more than 60 days prior to
the date fixed for redemption to each holder of Series C Preferred Stock and
Series D Preferred Stock to be redeemed, at such holder's address as it appears
on the books of the Corporation. In order to facilitate the redemption of the
Series C Preferred Stock and Series D Preferred Stock, the Board of Directors
may fix a record date for the determination of holders of Series C Preferred
Stock and Series D Preferred Stock to be redeemed, or may cause the transfer
books of the Corporation to be closed for the transfer of the Series C Preferred
Stock and Series D Preferred Stock, not more than 60 days prior to the date
fixed for such redemption;
15
<PAGE>
(iii) Within two Business Days after the redemption date specified in the
notice given pursuant to paragraph (ii) above and the surrender of the
certificate(s) representing shares of Series C Preferred Stock or Series D
Preferred Stock, as the case may be, the Corporation shall pay to the holder of
the shares being redeemed the Series C Redemption Price or the Series D
Redemption Price therefor. Such payment shall be made by wire transfer of
immediately available funds to an account designated by such holder or by
overnight delivery (by a nationally recognized courier) of a bank check to such
holder's address as it appears on the books of the Corporation; and
(iv) Effective upon the date of the notice given pursuant to paragraph
(ii) above, notwithstanding that any certificate for such shares shall not have
been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding, the rights to receive dividends thereon shall
cease to accrue from and after the date of redemption designated in the notice
of redemption and all rights of the holders of the shares of the Series C
Preferred Stock or Series D Preferred Stock, as the case may be, called for
redemption shall cease and terminate, excepting only the right to receive the
Series C Redemption Price or the Series D Redemption Price therefor in
accordance with paragraph (iii) above.
(f) Redemption at Option of Holder.
------------------------------
(i) No holder of shares of Series C Preferred Stock shall have any right
to require the Corporation to redeem any shares of Series C Preferred Stock
prior to, with respect to any shares of the Series C Preferred Stock, the 30th
day after the twentieth anniversary of the issuance of such shares. Thereafter,
subject to the restrictions set forth in Section 4.5(g)(i), each holder of
shares of Series C Preferred Stock shall have the right, at the sole option and
election of such holder, to require the Corporation to redeem all (but not less
than all) of the shares of Series C Preferred Stock owned by such holder at a
price per share equal to the Series C Redemption Price;
(ii) The holder of any shares of the Series C Preferred Stock may exercise
such holder's right to require the Corporation to redeem such shares by
surrendering for such purpose to the Corporation, at its principal office or at
such other office or agency maintained by the Corporation for that purpose,
certificates representing the shares of Series C Preferred Stock to be redeemed,
accompanied by a written notice stating that such holder elects to require the
Corporation to redeem all (but not less than all) of such shares in accordance
with the provisions of this Section 4.5(f), which notice may specify an account
for delivery of the Series C Redemption Price;
(iii) Within two Business Days after the surrender of such certificates,
the Corporation shall pay to the holder of the shares being redeemed the Series
C Redemption Price therefor. Such payment shall be made by wire transfer of
immediately available funds to an account designated by such holder or by
overnight delivery (by a nationally recognized courier) of a bank check to such
holder's address as it appears on the books of the Corporation; and
16
<PAGE>
(iv) Such redemptions shall be deemed to have been made at the close of
business on the date of the receipt of such notice and of such surrender of the
certificates representing the shares of the Series C Preferred Stock to be
redeemed and the rights of the holder thereof, except for the right to receive
the Series C Redemption Price therefor in accordance herewith, shall cease on
such date of receipt and surrender.
(g) Certain Restrictions.
--------------------
(i) Notwithstanding the provisions of Sections 4.5(b) or (f), cash
dividends on the Series C Preferred Stock may not be declared, paid or set apart
for payment, nor may the Corporation redeem, purchase or otherwise acquire any
shares of Series C Preferred Stock, if (A) the Corporation is not solvent or
would be rendered insolvent thereby or (B) at such time the terms and provisions
of any law or agreement of the Corporation, including any agreement relating to
its indebtedness, specifically prohibit such declaration, payment or setting
apart for payment or such redemption, purchase or other acquisition, or provide
that such declaration, payment or setting apart for payment or such redemption,
purchase or other acquisition would constitute a violation or breach thereof or
a default thereunder.
(ii) So long as shares of Series C Preferred Stock are outstanding or
dividends payable on shares of Series C Preferred Stock have not been paid in
full in cash, the Corporation shall not declare or pay cash dividends on, or
redeem, purchase or otherwise acquire for consideration, any shares of Common
Stock or other shares of capital stock of the Corporation ranking junior to or
on a parity basis with the Series C Preferred Stock, except with the prior
written consent of holders of a majority of the outstanding shares of Series C
Preferred Stock, except that the Corporation may acquire, in accordance with the
terms of any agreement between the Corporation and its employees, shares of
Common Stock from its employees at a price equal to such employee's purchase
price therefor without such consent.
(iii) The Corporation shall not permit any Subsidiary of the Corporation,
or cause any other Person, to make any distribution with respect to, or purchase
or otherwise acquire for consideration, any shares of Common Stock or other
shares of capital stock of the Corporation ranking junior to or on a parity
basis with the Series C Preferred Stock unless the Corporation could, pursuant
to paragraph (i) above, make such distribution or purchase or otherwise acquire
such shares at such time and in such manner.
4.6 Powers, Preferences and Rights of the Series D Preferred Stock.
(a) General. The powers, preferences and rights of the Series D
-------
Preferred Stock, and the qualifications, limitations, and restrictions thereof,
shall be identical to those of the Series C Preferred Stock, except that (i) the
Series D Preferred Stock shall rank with respect to the other series and classes
of capital stock of the Corporation as provided in paragraph (b) below, (ii) the
shares of Series D Preferred Stock shall be subject to redemption, pro rata with
the Series C Preferred Stock, in accordance with
17
<PAGE>
Section 4.5(e), and (iii) the words "Series D Preferred Stock" and "Series C
Preferred Stock" shall be substituted for all references in Section 4.5 to
Series C Preferred Stock and Series D Preferred Stock, respectively.
(b) Ranking. The Series D Preferred Stock shall rank (i) junior to the
-------
Series A Preferred Stock, the Series B Preferred Stock, the Series H Preferred
Stock and the Series I Preferred Stock with respect to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up, (ii)
senior to the Series C Preferred Stock with respect to the distribution of
assets on a Statutory Liquidation, (iii) on a parity with the Series C Preferred
Stock with respect to the distribution of assets on liquidation, dissolution or
winding up (other than on a Statutory Liquidation), (iv) on a parity with the
Series C Preferred Stock and the Common Stock with respect to the payment of
dividends, and (v) senior to the Common Stock and any series or class of the
Corporation's common or preferred stock, now or hereafter authorized (other than
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series H Preferred Stock or Series I Preferred Stock), with respect to the
payment of dividends and distribution of assets on liquidation, dissolution and
winding up.
4.7 Powers, Preferences and Rights of the Series E Preferred Stock. The
--------------------------------------------------------------
powers, preferences and rights of the Series E Preferred Stock, and the
qualifications, limitations and restrictions thereof, shall be identical to
those of the Series C Preferred Stock, except that (a) the Series E Preferred
Stock shall rank, with respect to the payment of dividends and the distribution
of assets on liquidation, dissolution or winding up, (i) junior to the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, the Series H Preferred Stock and the Series I Preferred Stock
and (ii) senior to the Series F Preferred Stock and the Common Stock and any
series or class of the Corporation's common or preferred stock, now or hereafter
authorized (other than the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series H Preferred Stock or
Series I Preferred Stock), (b) the provisos to Section 4.5(e)(i) shall not apply
to a redemption of the Series E Preferred Stock, and (c) the words "Series E
Preferred Stock" shall be substituted for all references in Section 4.5 to
Series C Preferred Stock.
4.8 Powers, Preferences and Rights of the Series F Preferred Stock. The
--------------------------------------------------------------
powers, preferences and rights of the Series F Preferred Stock, and the
qualifications, limitations and restrictions thereof are as follows:
(a) Ranking. The Series F Preferred Stock shall rank (i) junior to the
-------
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stock, the Series E Preferred Stock, the Series H
Preferred Stock and the Series I Preferred Stock with respect to the payment of
dividends and the distribution of assets on liquidation, dissolution or winding
up, (ii) on a parity with the Series G Preferred Stock with respect to the
payment of dividends and the distribution of assets on liquidation, dissolution
or winding up, (iii) on a parity with the Common Stock with respect to the
distribution of assets on liquidation, dissolution or winding up (other than on
a Statutory Liquidation), (iv) senior to the Common Stock with respect to the
18
<PAGE>
distribution of assets on a Statutory Liquidation, (v) on a parity with the
Common Stock with respect to the payment of dividends, and (vi) senior to any
series or class of the Corporation's common or preferred stock hereafter
authorized (other than Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock,
Series I Preferred Stock or Common Stock), with respect to the payment of
dividends and the distribution of assets on liquidation, dissolution and winding
up.
(b) Dividends. Holders of Series F Preferred Stock shall be entitled to
---------
dividends in cash or property when, as and if, declared by the Board of
Directors of the Corporation.
(c) Liquidation Preference.
----------------------
(i) In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series F Preferred Stock shall be entitled to
receive out of the assets of the Corporation, whether such assets are capital or
surplus of any nature, after payment is made to holders of all series of
preferred stock ranking senior to the Series F Preferred Stock with respect to
rights on liquidation, dissolution or winding up, but before any payment shall
be made or any assets distributed to the holders of Common Stock or any series
of preferred stock ranking junior to the Series F Preferred Stock with respect
to rights on liquidation, dissolution or winding up, an amount equal to the
Liquidation Preference and no more.
(ii) If upon any liquidation, dissolution or winding up of the Corporation
the assets of the Corporation to be distributed are insufficient to permit the
payment to all holders of Series F Preferred Stock and any other series of
preferred stock ranking on a parity with Series F Preferred Stock with respect
to rights on liquidation, dissolution or winding up, to receive their full
preferential amounts, the entire assets of the Corporation shall be distributed
among the holders of Series F Preferred Stock and all such other series ratably
in accordance with their respective Liquidation Preference.
(iii) After payment to the holders of Series F Preferred Stock of the
amounts set forth in paragraph (i) above, the entire remaining assets and funds
of the Corporation legally available for distribution, if any, shall be
distributed among the holders of the Participating Stock in proportion to the
shares of Participating Stock then held by them as of the date of the
liquidation, dissolution or winding up of the Corporation.
(iv) Neither the consolidation or merger of the Corporation with or into
any other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Corporation, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4.8(c).
(d) Voting Rights.
-------------
19
<PAGE>
(i) In addition to the voting rights set forth in Section 4.12(c)(i) or
otherwise provided by law, the holders of shares of Series F Preferred Stock
shall have the voting rights provided in paragraph (ii) below.
(ii) The affirmative vote of holders of not less than a majority of Series
F Preferred Stock shall be required to (A) authorize, increase the authorized
number of shares of or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any shares of any
class or classes of stock ranking senior to or pari passu with the Series F
Preferred Stock or any additional shares of Series F Preferred Stock, except
upon conversion or exchange of outstanding securities pursuant to Section 4.14,
(B) authorize, adopt or approve each amendment to this Amended and Restated
Certificate of Incorporation that would increase or decrease the par value of
the shares of Series F Preferred Stock, alter or change the powers, preferences
or rights of the shares of Series F Preferred Stock or alter or change the
powers, preferences or rights of any other capital stock of the Corporation if
such alteration or change results in such capital stock ranking senior to or
pari passu with the Series F Preferred Stock, (C) amend, alter or repeal any
provision of this Amended and Restated Certificate of Incorporation so as to
affect the shares of Series F Preferred Stock adversely, or (D) authorize or
issue any security convertible into, exchangeable for or evidencing the right to
purchase or otherwise receive any shares of any class or classes of stock senior
to or pari passu with the Series F Preferred Stock. For purposes hereof, Common
Stock shall not be deemed to be pari passu with or on parity with the Series F
Preferred Stock.
(e) Conversion. The shares of Series F Preferred Stock shall be
----------
convertible into shares of Common Stock as follows:
(i) Optional Conversion. Each share of Series F Preferred Stock shall be
-------------------
convertible, at the option of the holder thereof, at any time and from time to
time, into one fully paid and non-assessable share of Class A Common Stock;
provided that, unless and until the Tracked Common Stock shall be convertible
into Class A Common Stock in accordance with Section 4.12(e), each of the first
195,063 shares of Series F Preferred Stock converted pursuant to this paragraph
shall be convertible into one fully paid and non-assessable share of Class D
Common Stock.
(ii) Mechanics of Optional Conversion. In order for a holder of Series F
--------------------------------
Preferred Stock to convert such shares into shares of Common Stock, such holder
shall surrender the certificate(s) for such shares of Series F Preferred Stock
at the office of the transfer agent for the Series F Preferred Stock (or if the
Corporation serves as its own transfer agent, at the principal office of the
Corporation), together with written notice that such holder elects to convert
all or any number of the shares of the Series F Preferred Stock represented by
such certificate(s). If required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of
20
<PAGE>
such certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date (the
"Optional Conversion Date"). The Corporation shall, within ten Business Days
------------------------
after the Optional Conversion Date, issue and deliver at such office to such
holder of Series F Preferred Stock, or to his or its nominees, one or more
certificates for the number of whole shares of Common Stock (and any shares of
Series F Preferred Stock represented by the certificate delivered to the
Corporation by the holder thereof that are not converted into Common Stock)
issuable upon such conversion in accordance with the provisions hereof.
(iii) Reservation of Shares. The Corporation shall at all times when the
---------------------
Series F Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of the Series F Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series F Preferred Stock. Before taking any action
which would cause Common Stock upon the conversion of Series F Preferred Stock,
to be issued below the then par value of the shares of Common Stock the
Corporation will take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock, as the case may be,
to the holders of Series F Preferred Stock.
(iv) Adjustments for Dividends. Upon any conversion of Series F
-------------------------
Preferred Stock, no adjustment to the conversion ratio shall be made for
declared and unpaid dividends on the Series F Preferred Stock surrendered for
conversion or on the Common Stock delivered upon conversion.
(v) Termination of Rights. All shares of Series F Preferred Stock which
---------------------
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Optional Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor and payment of
any declared and unpaid dividends thereon. On and as of the Optional Conversion
Date, the shares of Common Stock issuable upon such conversion shall be deemed
to be outstanding, and the holder thereof shall be entitled to exercise and
enjoy all rights with respect to such shares of Common Stock including the
rights, if any, to receive notices and to vote. Shares of Series F Preferred
Stock converted into Common Stock will be restored to the status of authorized
but unissued shares of Common Stock or preferred stock without designation as to
class or series, and may thereafter be issued, whether or not designated as
shares of Class A Common Stock or Series F Preferred Stock.
(vi) No Conversion Charge or Tax. The issuance and delivery of
---------------------------
certificates for shares of Common Stock upon the conversion of shares of Series
F Preferred Stock shall be made without charge to the holder of shares of Series
F Preferred Stock for any issue or transfer tax, or other incidental expense in
respect of the issuance or delivery of
21
<PAGE>
such certificates or the securities represented thereby, all of which taxes and
expenses shall be paid by the Corporation.
(vii) Reorganization, Reclassification and Merger Adjustment. If there
------------------------------------------------------
occurs any capital reorganization or any reclassification of the Common Stock of
the Corporation, the consolidation or merger of the Corporation with or into
another Person (other than a merger or consolidation of the Corporation in which
the Corporation is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of its Common Stock) or the
sale or conveyance of all or substantially all of the assets of the Corporation
to another Person, then each share of Series F Preferred Stock shall thereafter
be convertible into the same kind and amounts of securities (including shares of
stock) or other assets, or both, which were issuable or distributable to the
holders of outstanding Common Stock of the Corporation upon such reorganization,
reclassification, consolidation, merger, sale or conveyance, in respect of that
number of shares of Common Stock into which such share of Series F Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification, consolidation, merger, sale or conveyance; and, in any such
case, appropriate adjustments (as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be conclusive) shall be
made to assure that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonably may be practicable, in relation to any
securities or other assets thereafter deliverable upon the conversion of the
Series F Preferred Stock.
(viii) Effect of Dividends, Distributions, Subdivisions of Combinations.
----------------------------------------------------------------
If the Corporation declares a dividend or other distribution payable in Common
Stock or Securities convertible into or exchangeable for Common Stock or
subdivides its outstanding shares of Common Stock into a larger number or
combines its outstanding shares of Common Stock into a smaller number, then the
number of shares of Common Stock issuable upon conversion of the Series F
Preferred Stock shall be appropriately adjusted to give effect to such dividend,
other distribution, subdivision or combination.
(ix) Effect of Distributions In Kind. In case the corporation shall
-------------------------------
distribute to the holders of its capital stock any additional shares of its
capital stock or other securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options, warrants or rights, then, in such case, immediately following the
record date fixed for the determination of the holders of common Stock entitled
to receive such distribution, the number of shares of Common Stock issuable upon
conversion of the Series F Preferred Stock shall be appropriately adjusted to
give effect to such distribution. Such adjustment shall be made on the date
such distribution is made, and shall become effective at the opening of business
on the business day following the record date for the determination of
stockholders entitled to such distribution.
22
<PAGE>
(f) Certain Restrictions.
--------------------
(i) Notwithstanding the provisions of Sections 4.8(b), cash dividends on
the Series F Preferred Stock may not be declared, paid or set apart for payment,
nor may the Corporation redeem, purchase or otherwise acquire any shares of
Series F Preferred Stock, if (A) the Corporation is not solvent or would be
rendered insolvent thereby or (B) at such time the terms and provisions of any
law or agreement of the Corporation, including any agreement relating to its
indebtedness, specifically prohibit such declaration, payment or setting apart
for payment or such redemption, purchase or other acquisition, or provide that
such declaration, payment or setting apart for payment or such redemption,
purchase or other acquisition would constitute a violation or breach thereof or
a default thereunder.
(ii) The Corporation shall not permit any Subsidiary of the Corporation,
or cause any other Person, to make any distribution with respect to, or purchase
or otherwise acquire for consideration, any shares of Common Stock or other
shares of capital stock of the Corporation ranking junior to or on a parity
basis with the Series F Preferred Stock unless the Corporation could, pursuant
to paragraph (i) above, make such distribution or purchase or otherwise acquire
such shares at such time and in such manner.
(g) Redemption. The Series F Preferred Stock is not redeemable.
----------
(h) Sinking Fund. There shall be no sinking fund for the payment of
------------
dividends or Liquidation Preferences on the Series F Preferred Stock.
4.9 Powers, Preferences and Rights of the Series G Preferred Stock
--------------------------------------------------------------
(a) The powers, preferences and rights of the Series G Preferred Stock,
and the qualifications, limitations, and restrictions thereof, shall be
identical to those of the Series F Preferred Stock, except that (i) unless and
until the Tracked Common Stock shall be convertible into Class A Common Stock or
Class B Common Stock in accordance with Section 4.12(e)(iii), instead of each
share of Class A Common Stock issuable upon conversion by a holder of Series G
Preferred Stock being convertible on a one-for-one basis, each holder shall
receive their pro rata share (based on the number of shares of Series G
Preferred Stock outstanding) of (i) 14,031,972 shares of Class A Common Stock
and (ii)(A) 949,398 shares of Class F Common Stock, or (B) if the Tritel
Tracking Stock is convertible into Class A or Class B Common Stock in accordance
with Section 4.12(e)(iii), an additional 949,398 shares of Class A Common Stock,
and (ii) the words "Series G Preferred Stock" and "Series F Preferred Stock"
shall be substituted for all references in Section 4.8 to Series F Preferred
Stock and Series G Preferred Stock, respectively.
4.10 Powers, Preferences and Rights of the Series H Preferred Stock. The
--------------------------------------------------------------
Series H Preferred Stock shall rank on a parity with the Series A Preferred
Stock, the Series B Preferred Stock and Series I Preferred Stock, and the
powers, preferences and rights of the Series H Preferred Stock, and the
qualifications, limitations, and restrictions thereof, shall be identical to
those of the Series A Preferred Stock, except that (a) shares of Series H
Preferred Stock shall not
23
<PAGE>
have any right to vote on any matters to be voted on by the stockholders of the
Corporation except as provided in Sections 4.2(e)(i) and 4.3(d)(i) and (ii), or
as provided by law, and shall not be included in determining the number of
shares voting or entitled to vote on any such matters (other than the matters
described in Sections 4.2 (e)(i) and 4.3(d)(i) and (ii) or otherwise required by
law), (b) shares of Series H Preferred Stock shall not be, pursuant to the terms
of Section 4.3(i) or otherwise, convertible into shares of Common Stock or any
other security issued by the Corporation, (c) the Corporation may redeem shares
of Series H Preferred Stock in accordance with the terms of Section 4.3(e) at
any time without regard to whether the redemption date is before, on or after
the date referred to in Section 4.3(e)(i), (d) shares of Series H Preferred
Stock may be issued by the Corporation in accordance with the terms of Section
4.14, (e) holders of Series H Preferred Stock shall not, pursuant to Section
4.3(d) or otherwise, have the right to designate any directors of the
Corporation (except to the extent provided in Section 4.2(e)(i)), and (f) the
words "Series H Preferred Stock" and "Series A Preferred Stock" shall be
substituted for all references in Section 4.3 to Series A Preferred Stock and
Series H Preferred Stock, respectively.
4.11 Powers, Preferences and Rights of the Series I Preferred Stock. The
--------------------------------------------------------------
Series I Preferred Stock shall rank on a parity with the Series A Preferred
Stock, the Series B Preferred Stock and Series H Preferred Stock, and the
powers, preferences and rights of the Series I Preferred Stock, and the
qualifications, limitations, and restrictions thereof, shall be identical to
those of the Series B Preferred Stock, except that (a) shares of Series I
Preferred Stock shall not have any right to vote on any matters to be voted on
by the stockholders of the Corporation (except as provided in Sections 4.2(e)(i)
and 4.3(d)(i) and (ii)), or as provided by law, and shall not be included in
determining the number of shares voting or entitled to vote on any such matters
(other than the matters described in Sections 4.2(e)(i) and 4.3(d)(i) and (ii)
or otherwise required by law), (b) shares of Series I Preferred Stock shall not
be, pursuant to the terms of Section 4.3(i) or otherwise, convertible into
shares of Common Stock or any other security issued by the Corporation, (c) the
Corporation may redeem shares of Series I Preferred Stock in accordance with the
terms of Section 4.3(e) at any time without regard to whether the redemption
date is before, on or after the date referred to in Section 4.3(e)(i), (d)
shares of Series I Preferred Stock may be issued by the Corporation in
accordance with the terms of Section 4.14, (e) holders of Series I Preferred
Stock shall not, pursuant to Section 4.3(d) or otherwise, have the right to
designate any directors of the Corporation (except to the extent provided in
Section 4.2(e)(i)), and (f) the words "Series I Preferred Stock" and "Series B
Preferred Stock" shall be substituted for all references in Section 4.4 to
Series B Preferred Stock and Series I Preferred Stock, respectively.
4.12 Common Stock.
------------
(a) General. Except as otherwise provided herein, all shares of Common
-------
Stock issued and outstanding shall be identical, and shall entitle the holders
thereof to the same rights, powers and privileges of stockholders under Delaware
law. For purposes of this Section 4.12 (and the definitions relating thereto),
the Class A Common Stock and the Class B Common Stock are herein collectively
referred to as the "Non-Tracked Common Stock" and the Class C Common Stock, the
Class D Common Stock, the Class
24
<PAGE>
E Common Stock and the Class F Common Stock are herein collectively referred to
as the "Tracked Common Stock".
(b) Dividends. Subject to Section 4.13(a)(ii) and (b)(ii) and the
---------
express terms of any outstanding series of Preferred Stock, dividends may be
paid in cash or otherwise with respect to each class of Common Stock out of the
assets of the Corporation, upon the terms, and subject to the limitations,
provided in this Section 4.12(b), as the Board of Directors may determine.
(i) Dividends on the Non-Tracked Common Stock. Dividends on the Non-
-----------------------------------------
Tracked Common Stock may be declared and paid only out of the excess of (A) the
funds of the Corporation legally available therefor over (B) the Tracked
Business Available Dividend Amount (the "Non-Tracked Business Available Dividend
---------------------------------------
Amount").
- ------
(ii) Dividends on Class C and D Common Stock. Dividends on the Class C
---------------------------------------
Common Stock and the Class D Common Stock (the "TeleCorp Tracking Stock") may be
declared and paid only out of the lesser of (A) the funds of the Corporation
legally available therefor and (B) the TeleCorp Tracked Business Available
Dividend Amount. The Corporation shall not declare or pay cash dividends on, or
redeem, purchase or otherwise acquire for consideration, any shares of TeleCorp
Tracking Stock unless concurrently therewith the Corporation shall declare or
pay cash dividends on, or redeem, purchase or otherwise acquire for
consideration, as the case may be, on the same terms, all shares of TeleCorp
Tracking Stock ratably in accordance with the number of shares of each class of
TeleCorp Tracking Stock then outstanding.
(iii) Dividends on the Class E and F Common Stock. Dividends on the Class
-------------------------------------------
E Common Stock and the Class F Common Stock (the "Tritel Tracking Stock") may be
declared and paid only out of the lesser of (A) the funds of the Corporation
legally available therefor and (B) the Tritel Tracked Business Available
Dividend Amount. The Corporation shall not declare or pay cash dividends on, or
redeem, purchase or otherwise acquire for consideration, any shares of Tritel
Tracking Stock unless concurrently therewith the Corporation shall declare or
pay cash dividends on, or redeem, purchase or otherwise acquire for
consideration, as the case may be, on the same terms, all shares of the Tritel
Tracking Stock ratably in accordance with the number of shares of each class of
Tritel Tracking Stock then outstanding.
(iv) Discrimination in Dividends Among the Tracked and Non-Tracked Common
--------------------------------------------------------------------
Stock. The Board of Directors may at any time, subject to the provisions of
- -----
Sections 4.12(b)(i), (ii) and (iii) and Section 4.13, declare and pay dividends
exclusively on the Non-Tracked Common Stock, exclusively on the TeleCorp
Tracking Stock, exclusively on the Tritel Tracking Stock or on each of such
category of Common Stock in equal or unequal amounts, notwithstanding the
relative amounts of the Non-Tracked Business Available Dividend Amount, the
TeleCorp Tracked Business Available Dividend Amount or the Tritel Tracked
Business Available Dividend Amount.
25
<PAGE>
(c) Voting.
------
(i) The holders of shares of Common Stock , Series F Preferred Stock and
Series G Preferred Stock shall be entitled to such voting rights as hereinafter
provided, and shall be entitled to notice of any stockholders' meeting and to
vote upon such matters as provided herein and in the Bylaws of the Corporation,
and as may be provided by law. Holders of any class of Common Stock, Series F
Preferred Stock or Series G Preferred Stock shall not be entitled to cumulate
their votes for any purpose. Except as otherwise required by law or provided
herein, regardless of the number of shares of any class of Common Stock, Series
F Preferred Stock or Series G Preferred then outstanding, the Common Stock
(other than the Class B Common Stock and the Voting Preference Common Stock),
the Series F Preferred Stock and the Series G Preferred Stock shall be entitled
to the number of votes set forth below and the number of votes or fractional
votes to which each share of a particular class of Common Stock (other than the
Class B Common Stock and the Voting Preference Common Stock), Series F Preferred
Stock and Series G Preferred Stock shall be entitled shall be the quotient
determined by dividing the aggregate number of votes to which the Common Stock
(other than the Class B Common Stock and Voting Preference Common Stock), the
Series F Preferred Stock and the Series G Preferred Stock is entitled by the
number of shares of all Common Stock (other than the Class B Common Stock and
Voting Preference Common Stock), Series F Preferred Stock and Series G Preferred
Stock then outstanding. For purposes of such vote, the shares of Series F
Preferred Stock and Series G Preferred Stock shall be entitled to the number of
votes that the holders thereof would receive upon conversion of such shares into
Common Stock. Except as otherwise required by law or provided herein, the
Common Stock (other than the Class B Common Stock and Voting Preference Common
Stock), the Series F Preferred Stock and the Series G Preferred Stock shall have
4,690,000 votes, the Voting Preference Common Stock shall have 5,010,000 votes
and the Class B Common Stock shall have no votes.
(ii) A quorum for the transaction of business shall be present when a
majority of the shares of Voting Preference Common Stock outstanding as of the
record date are present and when shares of all classes of Common Stock and
Preferred Stock with at least 5,010,000 votes are present, except that with
respect to actions requiring a majority vote of any of the Class A Common Stock,
Class B Common Stock, Class C Common Stock, Class D Common Stock, Class E Common
Stock, Class F Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock or
Series I Preferred Stock, the presence of a majority of the outstanding shares
of such class or series shall also be required for a quorum to be present.
Except as otherwise required by law or provided herein, the majority vote of the
Voting Preference Common Stock present at any meeting at which a quorum is
present shall be sufficient to approve any action required to be approved by the
holders of the Common Stock and Preferred Stock.
(iii) In any matter requiring a separate class vote of holders of any
class of
26
<PAGE>
Common Stock or a separate vote of two or more classes of Common Stock voting
together as a single class, for the purposes of such a class vote, each share of
Common Stock of such class shall be entitled to one vote per share.
(iv) In the event that the Corporation shall have received an opinion of
regulatory counsel of nationally recognized standing to the effect that the
rules, regulations or policies of the Federal Communications Commission (the
"FCC") permit the Class A Common Stock and the Voting Preference Common Stock
- ----
(x) to be voted as a single class on all matters, (y) to be treated as a single
class for purposes of all quorum requirements and (z) to have one vote per
share, then, unless the Board of Directors of the Corporation shall have
determined, within 30 days after the date of receipt of such opinion, that
obtaining the FCC consent described below would be reasonably expected to have a
significant detrimental effect on the Corporation, the Corporation shall, upon
the affirmative vote of 66-2/3% or more of the Class A Common Stock, seek
consent from the FCC to permit the Class A Common Stock and Voting Preference
Common Stock to vote and act as a single class in the manner described above.
From and after the date that such consent is obtained, the Class A Common Stock
and the Voting Preference Common Stock shall be voted as a single class on all
matters, shall be treated as a single class for purposes of all quorum
requirements, and shall have one vote per share; provided, that the voting
rights of the Class B Common Stock, Class C Common Stock, Class D Common Stock,
Class E Common Stock, Class F Common Stock and the Preferred Stock shall remain
unaffected.
(v) The holders of shares of Class B Common Stock shall be entitled to
vote as a separate class on any amendment, repeal or modification of any
provision of this Amended and Restated Certificate of Incorporation that
adversely affects the powers, preferences or special rights of the holders of
the Class B Common Stock.
(vi) The holders of shares of Voting Preference Common Stock shall have
the exclusive right, voting separately as a single class, to elect two directors
to the Board of Directors of the Corporation. Each director so elected shall be
entitled to 1/2 of a vote on all matters voted upon by the directors of the
Corporation. The foregoing right to elect two directors may be exercised at any
annual meeting of stockholders or a special meeting of stockholders or holders
of Voting Preference Common Stock held for such purpose or any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of a majority of the issued and outstanding shares
of Voting Preference Common Stock. Notwithstanding the foregoing, the holders of
a majority of the shares of Voting Preference Common Stock shall have the right,
exercisable at any time by written notice delivered to the Secretary of the
Corporation, to surrender and cancel irrevocably all or a portion of such right
to elect such directors. In the event any director so nominated by the holders
of the Voting Preference Common Stock ceases to be a director of the Corporation
during such director's term (whether or not such director resigns, is removed
from the Board of Directors with or without cause or ceases to be a director by
reason of death, disability or for any other reason), the remaining director
shall be entitled to one vote and the voting rights of the holders of the shares
of Voting Preference Common Stock set forth in this Section 4.12(e)(vi) shall
27
<PAGE>
terminate and be of no further force and effect. In the event the Corporation
receives an opinion from regulatory counsel as described in subparagraph (c)(iv)
of this Section, the voting rights of the holders of the shares of Voting
Preference Common Stock set forth in this Section 4.12(e)(vi) shall terminate
and be of no further force and effect.
(d) Dissolution, Liquidation or Winding Up. Upon the dissolution,
--------------------------------------
liquidation or winding up of the Corporation, after any preferential amounts to
be distributed to the holders of the Preferred Stock and any other class or
series of stock having a preference over the Common Stock then outstanding have
been paid or declared and funds sufficient for the payment thereof in full set
apart for payment, (i) the holders of the TeleCorp Tracking Stock shall be
entitled to receive pro rata the TeleCorp Tracked Business Available Liquidation
Amount, (ii) the holders of the Tritel Tracking Stock shall be entitled to
receive pro rata the Tritel Tracked Business Available Liquidation Amount and
(iii) the holders of the Non-Tracked Common Stock shall be entitled to receive
pro rata the excess of (A) all the remaining assets of the Corporation available
for distribution to its stockholders over (B) the TeleCorp Tracked Business
Available Liquidation Amount plus the Tritel Tracked Business Available
Liquidation Amount.
(e) Conversion.
----------
(i) Each share of Class B Common Stock may, at the option of the holder
thereof, at any time, be converted into one fully paid and non-assessable share
of Class A Common Stock.
(ii) Each share of Class A Common Stock may, at the option of the holder
thereof, at any time, be converted into one fully paid and non-assessable share
of Class B Common Stock.
(iii) In the event that the Corporation shall have received an opinion of
regulatory counsel of nationally recognized standing to the effect that the
rules, regulations or policies of the FCC permit the conversion of shares of
Tracked Common Stock into Class A Common Stock or Class B Common Stock, then,
unless the Board of Directors of the Corporation shall have determined, within
30 days after receipt of such opinion, that permitting such conversion would be
reasonably expected to have a significant detrimental effect on the Corporation,
each share of Class C Common Stock, Class D Common Stock, Class E Common Stock
and Class F Common Stock shall, at the option of the holder thereof and upon the
affirmative vote of 66-2/3% or more of the Class A Common Stock, be converted
into one fully paid and non-assessable share of Class A Common Stock or Class B
Common Stock.
4.13 Participating Stock.
-------------------
(a) Participating Stock
-------------------
(i) Changes in Capital Stock. The Corporation shall not effect any
------------------------
change in or reclassification of any class or series of the outstanding
Participating Stock whether
28
<PAGE>
through stock dividends, stock splits, reverse stock splits, combinations or
otherwise, without the payment to the Corporation of any consideration therefor
in money, services or property, unless concurrently therewith the Corporation
shall effect a corresponding change in each other class and series of the
outstanding Participating Stock.
(ii) Dividends and Distributions. The Corporation shall not declare or
---------------------------
pay cash dividends on, or redeem, purchase or otherwise acquire for
consideration, any shares of Participating Stock unless concurrently therewith
the Corporation shall declare or pay cash dividends on, or redeem, purchase or
otherwise acquire for consideration, as the case may be, on the same terms, all
shares of Participating Stock ratably in accordance with the number of shares of
each class and series of Participating Stock then outstanding.
(iii) Notices. Any written notice or communication by the Corporation to
-------
holders of any class or series of Participating Stock shall be sent to all
holders of Participating Stock.
(b) Tritel Tracking Stock.
---------------------
(i) Changes in Capital Stock. The Corporation shall not effect any
------------------------
change in or reclassification of any class or series of the outstanding Tritel
Tracking Stock, whether through stock dividends, stock splits, reverse stock
splits, combinations or otherwise, without the payment to the Corporation of any
consideration therefor in money, services or property, unless concurrently
therewith the Corporation shall effect a corresponding change in each other
class and series of the outstanding Tritel Tracking Stock.
(ii) Dividends and Distributions. The Corporation shall not declare or
---------------------------
pay cash dividends on, or redeem, purchase or otherwise acquire for
consideration, any shares of Tritel Tracking Stock unless concurrently therewith
the Corporation shall declare or pay cash dividends on, or redeem, purchase or
otherwise acquire for consideration, as the case may be, on the same terms, all
shares of Tritel Tracking Stock ratably in accordance with the number of shares
of each class and series of Tritel Tracking Stock then outstanding.
(iii) Notices. Any written notice or communication by the Corporation to
-------
holders of any class or series of Tritel Tracking Stock shall be sent to all
holders of Tritel Tracking Stock.
4.14 Exchange of Capital Stock. Notwithstanding any other provision of
-------------------------
this Amended and Restated Certificate of Incorporation to the contrary, in the
event that AT&T Wireless terminates its obligations under Section 8.6 of the
Stockholders Agreement pursuant to Section 8.8(c) thereof with respect to any
Overlap Territory (as defined therein) (any such termination being referred to
hereinafter as the "Exchange Event"), the following provisions shall apply:
--------------
(a) Right to Exchange. The Corporation shall have the right, exercisable
-----------------
in its sole discretion by written notice (the "Exchange Notice") given to the
---------------
Initial Holders and Section 4.14 Transferees within 60 days after the Exchange
Event, to:
29
<PAGE>
(i) require the Initial Holders and each Section 4.14 Transferee to
exchange for an equivalent number of shares of Series H Preferred Stock either
(A) all of the shares of Series A Preferred Stock then owned by the Initial
Holders and each Section 4.14 Transferee or (B) a number of shares of Series A
Preferred Stock then owned by each such holder equal to the product of (x) the
number of shares of Series A Preferred Stock then owned by such holder
multiplied by (y) a fraction, the numerator of which is equal to the number of
POPs (as defined in the Stockholders Agreement) in the Overlap Territory and the
denominator of which is equal to the total number of POPs in the Territory (as
defined in the Stockholders Agreement);
(ii) require the Initial Holders and each Section 4.14 Transferee to
exchange, for a number of shares of Series H Preferred Stock determined in
accordance with paragraph (b) below, either (A) all of the shares of capital
stock of the Corporation received in exchange for TeleCorp Original Shares and
that the Initial Holders or a Section 4.14 Transferee continues to own on the
date of delivery of the Exchange Notice (any such shares being referred to
hereinafter collectively as "TeleCorp Exchange Shares") or (B) a number of
------------------------
TeleCorp Exchange Shares equal to the product of (x) the number of TeleCorp
Exchange Shares then owned by each such holder, multiplied by (y) a fraction,
the numerator of which is equal to the number of POPs in the Overlap Territory
and the denominator of which is equal to the total number of POPs in the
Territory; provided, that (x) if the Corporation exercises its right under
clause (i)(A) of this paragraph (a), it shall be required to exercise its right
under clause (ii)(A) of this paragraph (a), and vice-versa; and if the
Corporation exercises its right under clause (i)(B) of this paragraph (a), it
shall be required to exercise its right under clause (ii)(B) of this paragraph
(a), and vice-versa and (y) the provisions of this Section 4.14(a) shall not
apply to any Section 4.14 Transferee which is a Cash Equity Investor;
(iii) require the Initial Holders and each Section 4.14 Transferee to
exchange for an equivalent number of shares of Series I Preferred Stock either
(A) all of the shares of Series B Preferred Stock then owned by the Initial
Holders and each Section 4.14 Transferee or (B) a number of shares of Series B
Preferred Stock then owned by each such holder equal to the product of (x) the
number of shares of Series B Preferred Stock then owned by such holder
multiplied by (y) a fraction, the numerator of which is equal to the number of
POPs (as defined in the Stockholders Agreement) in the Overlap Territory and the
denominator of which is equal to the total number of POPs in the Territory (as
defined in the Stockholders Agreement); and
(iv) require the Initial Holders and each Section 4.14 Transferee to
exchange, for a number of shares of Series I Preferred Stock determined in
accordance with paragraph (b) below, either (A) all of the shares of capital
stock of the Corporation received in exchange for Tritel Original Shares and
that the Initial Holders or a Section 4.14 Transferee continues to own on the
date of delivery of the Exchange Notice (any such shares being referred to
hereinafter collectively as "Tritel Exchange Shares") or (B) a number of Tritel
----------------------
Exchange Shares equal to the product of (x) the number of Tritel Exchange Shares
then owned by each such holder, multiplied by (y) a fraction, the
30
<PAGE>
numerator of which is equal to the number of POPs in the Overlap Territory and
the denominator of which is equal to the total number of POPs in the Territory;
provided, that (x) if the Corporation exercises its right under clause (iii)(A)
of this paragraph (a), it shall be required to exercise its right under clause
(iv)(A) of this paragraph (a), and vice-versa; and if the Corporation exercises
its right under clause (iii)(B) of this paragraph (a), it shall be required to
exercise its right under clause (iv)(B) of this paragraph (a), and vice-versa
and (y) the provisions of this Section 4.14(a) shall not apply to any Section
4.14 Transferee which is a Cash Equity Investor.
(TeleCorp Exchange Shares and Tritel Exchange Shares subject to exchange
pursuant to this Section 4.14 are hereinafter referred to collectively as
"Exchange Shares.")
- ----------------
(b) Number of Shares of Series H and I Preferred Stock Issuable in
--------------------------------------------------------------
Exchange. The number of shares of Series H Preferred Stock issuable in exchange
for TeleCorp Exchange Shares pursuant to clause (ii) of paragraph (a) above
shall be equal to the quotient of the aggregate purchase price paid by the
Initial Holders for the TeleCorp Exchange Shares being exchanged, divided by
$1,000. The number of shares of Series I Preferred Stock issuable in exchange
for Tritel Exchange Shares pursuant to clause (iv) of paragraph (a) above shall
be equal to the quotient of the aggregate purchase price paid by the Initial
Holders for the Tritel Exchange Shares being exchanged, divided by $1,000.
(c) Fractional Shares. Notwithstanding any other provision of this Amended
-----------------
and Restated Certificate of Incorporation, the Corporation shall not be required
to issue fractions of shares upon exchange of any Exchange Shares or to
distribute certificates which evidence fractional shares. In lieu of fractional
shares, the Corporation may pay therefor, at the time of any exchange of
Exchange Shares as herein provided, an amount in cash equal to such fraction
multiplied by the Market Price of a share of Common Stock on such date.
(d) Mechanics of Exchange. The Exchange Notice shall specify the date
---------------------
fixed for the exchange (the "Exchange Date"), which shall be at least ten but no
-------------
more than 60 days following delivery of the Exchange Notice, and the place
designated for exchange of the Exchange Shares pursuant to this Section 4.14.
Such notice will be sent by first class or registered mail, postage prepaid, to
the Initial Holders and each Section 4.14 Transferee at such holder's address
last shown on the records of the transfer agent for the Exchange Shares (or the
records of the Corporation if it serves as its own transfer agent). On or
before the Exchange Date, the Initial Holders and each Section 4.14 Transferee
shall surrender its certificate or certificates for all such shares to the
Corporation at the place designated in such notice. If required by the
Corporation, certificates surrendered for exchange shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the Initial Holders and each
Section 4.14 Transferee or its attorney duly authorized in writing.
(e) Termination of Rights. On and after the Exchange Date (whether or not
---------------------
the applicable certificates have theretofore been surrendered), all rights with
respect to
31
<PAGE>
the Exchange Shares, including the rights, if any, to receive notices and to
vote, will terminate, except only the rights of the Initial Holders and Section
4.14 Transferees to receive certificates for the number of shares of Series H
Preferred Stock or Series I Preferred Stock, as applicable, into which such
Exchange Shares have been exchanged, upon surrender of its certificate or
certificates therefor, and payment of any declared but unpaid dividends thereon
(which shall accrue and be payable at the times and on the other terms
applicable to such dividends when declared) and payment of any deferred
dividends in respect of Series A Preferred Stock and Series B Preferred Stock
which shall be payable as set forth in Section 4.3(b)(iii). Within ten Business
Days after the Exchange Date, the Corporation shall issue and deliver to the
Initial Holders and each Section 4.14 Transferee, or on its written order to its
nominees, a certificate or certificates for the number of whole shares of Series
H Preferred Stock or Series I Preferred Stock, as applicable, issuable upon such
exchange in accordance with the provisions hereof, together with cash in lieu of
fractional shares calculated in accordance with paragraph (c) of this Section
4.14.
(f) Reservation of Shares. The Corporation shall at all times reserve and
---------------------
keep available for issuance upon the exchange of Exchange Shares the maximum
number of its authorized but unissued shares of Series H Preferred Stock and
Series I Preferred Stock as is reasonably anticipated to be sufficient to permit
the exchange of all outstanding Exchange Shares, and shall take all action
required to increase the authorized number of shares of Series H Preferred Stock
and Series I Preferred Stock if at any time there shall be insufficient
authorized but unissued shares of Series H Preferred Stock or Series I Preferred
Stock to permit such reservation or to permit the exchange of all outstanding
Exchange Shares.
(g) Adjustments for Dividends. Upon any exchange of Exchange Shares, no
-------------------------
adjustment to the rate of conversion shall be made for accrued and unpaid
dividends (whether or not declared) on the Exchange Shares, as the case may be,
surrendered for exchange or on the Series H Preferred Stock or Series I
Preferred Stock delivered upon exchange.
(h) No Exchange Charge or Tax. The issuance and delivery of certificates
-------------------------
for shares of Series H Preferred Stock or Series I Preferred Stock upon the
exchange of Exchange Shares shall be made without charge to the Initial Holder
for any issue or transfer tax, or other incidental expense in respect of the
issuance or delivery of such certificates or the securities represented thereby,
all of which taxes and expenses shall be paid by the Corporation.
4.15 Redemption of Capital Stock; FCC Approval.
-----------------------------------------
(a) Redemption. Notwithstanding any other provision of this Amended and
----------
Restated Certificate of Incorporation to the contrary, outstanding shares of
capital stock of the Corporation held by Disqualified Holders shall always be
subject to redemption by the Corporation, by action of the Board of
32
<PAGE>
Directors, if, in the judgment of the Board of Directors, such action should be
taken, pursuant to Section 151(b) of the GCL or any other applicable provision
of law, to the extent necessary to prevent the loss or secure the reinstatement
of any license or franchise from any governmental agency held by the Corporation
or any of its subsidiaries to conduct any portion of the business of the
Corporation or any of its subsidiaries, which license or franchise is
conditioned upon some or all of the holders of the Corporation's stock
possessing prescribed qualifications. The terms and conditions of such
redemption shall be as follows:
(i) the redemption price of the shares to be redeemed pursuant to this
Section 4.15 shall be equal to the lesser of (x) the Market Price or (y) if such
stock was purchased by such Disqualified Holder within one year of the Section
4.15 Redemption Date, such Disqualified Holder's purchase price for such shares;
(ii) the redemption price of such shares may be paid in cash, Redemption
Securities or any combination thereof;
(iii) if less than all the shares held by Disqualified Holders are to be
redeemed, the shares to be redeemed shall be selected in such manner as shall be
determined by the Board of Directors, which may include selection first of the
most recently purchased shares thereof, selection by lot or selection in any
other manner determined by the Board of Directors;
(iv) at least 30 days' written notice of the Section 4.15 Redemption Date
shall be given to the record holders of the shares selected to be redeemed
(unless waived in writing by any such holder); provided, however, that only 10
days' written notice of the Redemption Date shall be given to record holders if
the cash or Redemption Securities necessary to effect the redemption shall have
been deposited in trust for the benefit of such record holders and subject to
immediate withdrawal by them upon surrender of the stock certificates for their
shares to be redeemed; provided, further, that the record holders of the shares
selected to be redeemed may transfer such shares prior to the Section 4.15
Redemption Date to any holder that is not a Disqualified Holder and, thereafter,
for so long as such shares are not held by a Disqualified Holder, such shares
shall not be subject to redemption by the Corporation;
(v) from and after the Section 4.15 Redemption Date, any and all rights of
whatever nature (including without limitation any rights to vote or participate
in dividends declared on stock of the same class or series as such shares) with
respect to the shares selected from redemption held by Disqualified Holders on
the Section 4.15 Redemption Date shall cease and terminate and such Disqualified
Holders thenceforth shall be entitled only to receive the cash or Redemption
Securities payable upon redemption; and
(vi) such other terms and conditions as the Board of Directors shall
determine.
(b) FCC Approval. Notwithstanding anything herein to the contrary, if
------------
Federal Communications Commission or other regulatory approval is required to be
33
<PAGE>
obtained prior to the conversion of shares of any series or class of Preferred
Stock or Common Stock, the holder thereof may nevertheless elect to convert any
or all of its shares by written notice given to the Corporation in accordance
with the applicable provision hereof, provided, that such conversion shall not
become effective until the close of business on the date of the receipt of the
last of any such approvals and of the surrender of the certificates representing
the shares of the applicable Preferred Stock or Common Stock to be converted,
and the rights of the holder thereof shall continue in full force and effect
pending the receipt of all such approvals, except that, in the case of the
Series A Preferred Stock and the Series B Preferred Stock, no dividends shall be
payable in respect of the period following the Series A Conversion Date or
Series B Conversion Date, respectively, unless the required approvals are not
obtained and the conversion has not been effected within one year of the Series
A Conversion Date or the Series B Conversion Date, as applicable, and the
applicable conversion notice is withdrawn, in which event the obligation to pay
dividends from and after the Series A Conversion Date or Series B Conversion
Date shall be payable in accordance with the terms of Section 4.3(b).
4.16 Definitions. For the purposes of this Amended and Restated
-----------
Certificate of Incorporation, the following terms shall have the meanings
indicated:
"Affiliate" means, with respect to any Person, any other Person that
---------
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with that Person. For purposes of this
definition, "control" (including the terms "controlling" and "controlled") means
the power to direct or cause the direction of the management and policies of a
Person, directly or indirectly, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
"Appraisal Procedure" means the following procedure for determining
-------------------
the Market Price, for the purpose of calculating the Series A Conversion Rate or
Series B Conversion Rate, in the event that the shares of Class A Common Stock
are not listed or admitted for trading on any national securities exchange and
are not quoted on NASDAQ or any similar service:
(i) Two independent accounting or investment banking firms of nationally
recognized standing (each, an "Appraiser"), one chosen by the Corporation and
---------
one chosen by the holders of a majority of the outstanding shares of Series A
Preferred Stock and the Series B Preferred Stock, as the case may be, shall each
determine and attempt to mutually agree upon, the Market Price. Each party
shall deliver a notice to the other appointing its Appraiser within 15 days
after the applicable notice and surrender pursuant to Section 4.3(e)(iv). If
either the Corporation or such holders fail to appoint an appraiser within such
15-day period, the Market Price shall be determined by the Appraiser that has
been so appointed.
(ii) If within 30 days after appointment of the two Appraisers they are
unable to agree upon the Market Price, an independent accounting or investment
banking firm of nationally recognized standing shall within ten days thereafter
be chosen to serve as a
34
<PAGE>
third Appraiser by the mutual consent of such first two Appraisers. The
determination of the Market Price by the third Appraiser so appointed and chosen
shall be made within 30 days after the selection of such third Appraiser.
(iii) If three Appraisers shall be appointed and the determination of one
Appraiser is disparate from the middle determination by more than twice the
amount by which the other determination is disparate from the middle
determination, then the determination of such Appraiser shall be excluded, the
remaining two determinations shall be averaged, and such average shall be
binding and conclusive on the Corporation and the holders of the Series A
Preferred Stock and the Series B Preferred Stock; as the case may be, otherwise
the average of all three determinations shall be binding and conclusive on the
Corporation and the holders of the Series A Preferred Stock and the Series B
Preferred Stock, as the case may be.
(iv) In connection with any appraisal conducted pursuant to this Appraisal
Procedure, the Appraiser shall adhere to the guidelines provided in the
definition of "Market Price" set forth below, including the proviso thereto.
(v) The fees and expenses of each Appraiser shall be borne by the
Corporation.
"AT&T Wireless" shall mean AT&T Wireless PCS, LLC, a Delaware limited
-------------
liability company.
"Board of Directors" has the meaning specified in Section 4.2(a).
------------------
"Business Day" shall mean any day other than a Saturday, Sunday or
------------
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Class A Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class B Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class C Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class D Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class E Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class F Common Stock" has the meaning specified in Section 4.1.
--------------------
"Closing Price" shall mean, with respect to each share of any class or
-------------
series of capital stock for any day, (i) the last reported sale price regular
way or, in case no such sale takes place on such day, the average of the closing
bid and asked prices regular way, in either case as reported on the principal
national securities exchange on which such class or series of capital
35
<PAGE>
stock is listed or admitted for trading or (ii) if such class or series of
capital stock is not listed or admitted for trading on any national securities
exchange, the last reported sale price or, in case no such sale takes place on
such day, the average of the highest reported bid and the lowest reported asked
quotation for such class or series of capital stock, in either case as reported
on NASDAQ or a similar service if NASDAQ is no longer reporting such
information.
"Common Stock" has the meaning specified in Section 4.1.
------------
"Disqualified Holder" shall mean any holder of shares of capital stock
-------------------
of the Corporation whose holding of such stock, either individually or when
taken together with the holding of shares of capital stock of the Corporation by
any other holders, may result, in the judgment of the Board of Directors, in the
loss of, or the failure to secure the reinstatement of, any license or franchise
from any governmental agency held by the Corporation or any of its subsidiaries
or affiliates to conduct any portion of the business of the Corporation or any
of its subsidiaries or affiliates.
"Dividend Payment Date" shall mean the last day of each March, June,
---------------------
September and December, except that if any Dividend Payment Date is not a
Business Day, then the next succeeding Business Day shall be the Dividend
Payment Date.
"Fully Diluted Basis" shall mean, with respect to the outstanding
-------------------
shares of Common Stock, the number of shares of Common Stock outstanding
assuming the conversion of all outstanding convertible securities (other than
the Series A Preferred Stock and Series B Preferred Stock) and the exercise of
all outstanding warrants, options or other rights to subscribe for or purchase
any shares of Common Stock.
"Initial Holder" means AT&T Wireless PCS, LLC, a Delaware limited
--------------
liability company and/or any of their respective Affiliates that is a Subsidiary
of AT&T Corp.
"Invested Amount" means, as of any date with respect to each share of
---------------
Series C Preferred Stock held by any stockholder, an amount equal to the
quotient of (i) the aggregate paid-in capital actually paid with respect to all
shares of Series C Preferred Stock held by such stockholder as of such date, or
any Predecessor Stock exchanged therefor, divided by (ii) the total number of
shares of Series C Preferred Stock held by such stockholder.
"Junior Stock" shall mean, with respect to shares of Series A
------------
Preferred Stock, Series B Preferred Stock, Series H Preferred Stock or Series I
Preferred Stock, any capital stock of the Corporation, including without
limitation the Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and the
Common Stock, ranking junior to the Series A Preferred Stock, Series B Preferred
Stock, Series H Preferred Stock or Series I Preferred Stock, as the case may be,
with respect to dividends, distribution in liquidation or any other preference,
right or power.
"Liquidation Preference" shall mean, as of any date, and subject to
----------------------
adjustment for subdivisions or combinations affecting the number of shares of
the applicable series of Preferred Stock:
36
<PAGE>
(i) with respect to each share of Series A Preferred Stock and Series
B Preferred Stock, $1,000 plus accrued and unpaid dividends thereon, and, with
respect to shares of Series A Preferred Stock and Series B Preferred Stock
received in exchange for any Predecessor Stock, $1,000 plus accrued and unpaid
dividends from the date when such Predecessor Stock was issued.
(ii) with respect to each share of Series C Preferred Stock, the
Invested Amount plus accrued and unpaid dividends on such share (if any), plus
an amount equal to interest on the Invested Amount at the rate of six percent
(6%) per annum, compounded quarterly, less the amount of dividends (if any)
theretofore declared and paid in respect of such share;
(iii) with respect to each share of Series D Preferred Stock, $1,000
plus accrued and unpaid dividends thereon (if any), plus an amount equal to
interest on $1,000 at the rate of six percent (6%) per annum, compounded
quarterly, from the date of issuance of such share and, with respect to shares
of Series D Preferred Stock received in exchange for any Predecessor Stock, the
date when such Predecessor Stock was issued, to and including the date of the
calculation, less the amount of dividends (if any) theretofore declared and paid
in respect of such share;
(iv) with respect to each share of Series E Preferred Stock, accrued
and unpaid dividends thereon (if any), plus an amount equal to interest on
$1,000 at the rate of six percent (6%) per annum, compounded quarterly, from the
date of issuance of such share and, with respect to shares of Series E Preferred
Stock received in exchange for any Predecessor Stock, the date when such
Predecessor Stock was issued, to and including the date of the calculation, less
the amount of dividends (if any) theretofore declared and paid in respect of
such share;
(v) with respect to each share of Series F Preferred Stock, $.000032
plus accrued and unpaid dividends thereon;
(vi) with respect to each share of Series G Preferred Stock, $1,000
plus declared but unpaid dividends thereon (if any), plus an amount equal to
interest on $1,000 at the rate of six and one-half percent (6.5%) per annum,
compounded quarterly, from the date of issuance of such share, with respect to
shares of Series G Preferred Stock received in exchange for any Predecessor
Stock, the date when such Predecessor Stock was issued, to and including the
date of calculation; and
(vii) with respect to each share of Series H Preferred Stock, $1,000
plus accrued and unpaid dividends thereon.
(viii) with respect to each share of Series I Preferred Stock, $1,000
plus accrued and unpaid dividends thereon.
"Market Price" shall mean, with respect to each share of any class or
------------
series of capital stock for any day, (i) the average of the daily Closing Prices
for the ten consecutive
37
<PAGE>
trading days commencing 15 days before the day in question or (ii) if on such
date the shares of such class or series of capital stock are not listed or
admitted for trading on any national securities exchange and are not quoted on
NASDAQ or any similar service, the cash amount that a willing buyer would pay a
willing seller (neither acting under compulsion) in an arm's-length transaction
without time constraints per share of such class or series of capital stock as
of such date, viewing the Corporation on a going concern basis, as determined
(A) in the case of a determination of "Market Price" for the purpose of
calculating the Series A Conversion Rate or Series B Conversion Rate, as the
case may be, pursuant to the Appraisal Procedure and (B) in the case of a
determination of Market Price for any other purpose, in good faith by the Board
of Directors, whose determination shall be conclusive; provided that, in
determining such cash amount, the following shall be ignored: (i) any contract
or legal limitation in respect of shares of Common Stock or Preferred Stock,
including transfer, voting and other rights, (ii) the "minority interest" or
"control" status of shares of Common Stock into which shares of Series A
Preferred Stock or Series B Preferred Stock, as the case may be, would be
converted, and (iii) any illiquidity arising by contract in respect of the
shares of Common Stock and any voting rights or control rights amongst the
stockholders.
"NASDAQ" shall mean the National Association of Securities Dealers
------
Automated Quotations System.
"Non-Tracked Common Stock" has the meaning specified in Section
------------------------
4.12(a).
"Non-Tracked Business Available Dividend Amount" has the meaning
----------------------------------------------
specified in Section 4.12(b)(i).
"Optional Conversion Date" has the meaning specified in 4.8(e)(ii).
------------------------
"Parity Stock" shall mean, with respect to shares of Series A
------------
Preferred Stock, Series B Preferred Stock, Series H Preferred Stock or Series I
Preferred Stock, any capital stock of the Corporation ranking on a parity with
the Series A Preferred Stock, Series B Preferred Stock, Series H Preferred
Stock, or Series I Preferred Stock, as the case may be, with respect to
dividends, distribution in liquidation or any other preference, right or power.
"Participating Stock" shall mean, collectively, the Series F Preferred
-------------------
Stock, the Series G Preferred Stock and the Non-Tracked Common Stock.
"Person" shall mean any individual, firm, corporation, partnership,
------
trust, incorporated or unincorporated association, joint venture, joint stock
company, governmental agency or political subdivision thereof or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" has the meaning specified in Section 4.1.
---------------
"Predecessor Stock" shall mean any share of Class A Voting Common
-----------------
Stock, Class B Non-Voting Common Stock, Class C Common Stock, Class D Common
Stock, Voting Preference Common Stock, Series A Convertible Preferred Stock,
Series B Preferred Stock,
38
<PAGE>
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, or
Series F Preferred Stock of TeleCorp PCS, Inc. or any share of Class A Voting
Common Stock, Class B Non-Voting Common Stock, Class C Common Stock, Class D
Common Stock, Voting Preference Stock, Series A Convertible Preferred Stock,
Series B Preferred Stock, Series C Convertible Preferred Stock and Series D
Preferred Stock of Tritel, Inc.
"Qualified Transfer" shall mean a sale, transfer or other disposition
------------------
of shares of Series A Preferred Stock or Series B Preferred Stock to any
prospective transferee specified in a Qualified Transfer Notice, other than a
prospective transferee as to which the Corporation disapproves in accordance
with the terms of the second sentence of Section 4.3(j), provided such sale,
transfer or other disposition is made pursuant to a binding agreement entered
into no later than 180 days after the applicable Qualified Transfer Notice is
given.
"Qualified Transferee" shall mean, with respect to any shares of
--------------------
Series A Preferred Stock or Series B Preferred Stock, (i) any Cash Equity
Investor that acquired such shares pursuant to Section 4.2 of the Stockholders
Agreement or (ii) any other holder that acquired such shares in a Qualified
Transfer from an Initial Holders or Qualified Transferee.
"Qualified Transfer Notice" has the meaning specified in Section
-------------------------
4.3(i)(x).
"Redemption Securities" shall mean any debt or equity securities of
---------------------
the Corporation, any of its subsidiaries or affiliates or any other corporation,
or any combination thereof, having such terms and conditions as shall be
approved by the Board of Directors and which, together with any cash to be paid
as part of the redemption price payable pursuant to Section 4.15, in the opinion
of any nationally recognized investment banking firm selected by the Board of
Directors (which may be a firm which provides investment banking, brokerage or
other services to the Corporation), has a value, at the time notice of
redemption is given pursuant to Section 4.15(d) at least equal to the price
required to be paid pursuant to Section 4.15(a) (assuming, in the case of
Redemption Securities to be publicly traded, that such Redemption Securities
were fully distributed and subject only to normal trading activity).
"Section 4.15 Transferee" shall mean any transferee of shares of (i)
------------------------
Series A Convertible Preferred Stock, Series D Preferred Stock and Series F
Preferred Stock of TeleCorp PCS, Inc. issued to the Initial Holder on July 17,
1998 or any capital stock of Holding Company exchanged therefor (or any shares
of Common Stock into which any such shares are converted) or (ii) Series A
Convertible Preferred Stock or Series D Convertible Preferred Stock of Tritel,
Inc. issued to an Initial Holder on January 7, 1999 or any capital stock of
Holding Company exchanged therefor (or any shares of Common Stock into which any
such shares are converted) that are acquired in a private transaction.
"Section 4.15 Redemption Date" shall mean the date fixed by the Board
----------------------------
of Directors for the redemption of any shares of stock of the Corporation
pursuant to Section 4.15.
"Senior Stock" shall mean, with respect to shares of Series A
------------
Preferred Stock, Series B Preferred Stock, Series H Preferred Stock or Series I
Preferred Stock, as the case may be, any capital stock of the Corporation
ranking senior to the Series A Preferred Stock, Series B
39
<PAGE>
Preferred Stock, Series H Preferred Stock or Series I Preferred Stock, as the
case may be, with respect to dividends, distribution in liquidation or any other
preference, right or power.
"Series A Conversion Date" has the meaning specified in Section
------------------------
4.3(i)(iv).
"Series A Conversion Rate" shall mean, as of any date of
------------------------
determination, a fraction in which the numerator is the Liquidation Preference
of one share of Series A Preferred Stock as of such date, and the denominator is
the Market Price of Class A Common Stock as of such date.
"Series A Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series A Redemption Price" has the meaning specified in Section
-------------------------
4.3(e)(i).
"Series B Conversion Rate" shall mean, as of any date of
------------------------
determination, a fraction in which the numerator is the Liquidation Preference
of one share of Series B Preferred Stock as of such date, and the denominator is
the Market Price of Class A Common Stock as of such date.
"Series B Redemption Price" the Liquidation Preference of the Series
-------------------------
B Preferred Stock as of any applicable redemption date.
"Series B Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series C Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series C Redemption Price" has the meaning specified in 4.5(e)(i).
-------------------------
"Series D Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series D Redemption Price" has the meaning specified in Section
-------------------------
4.5(e)(i).
"Series E Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series F Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series G Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series H Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series I Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Statutory Liquidation" means the liquidation of the Corporation
---------------------
pursuant to Section 275 of the GCL, as amended.
"Stockholders Agreement" means the Stockholders Agreement by and among
----------------------
the Corporation, and the other stockholders of the Corporation named therein,
dated as of
40
<PAGE>
__________________, 2000, as the same may be amended, modified or supplemented
in accordance with the terms thereof, a copy of which is available for
inspection by any stockholder at the principal executive offices of the
Corporation.
"Subsidiary" shall mean, with respect to any Person, a corporation or
----------
other entity of which 50% or more of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
"TeleCorp Common Stock" shall mean the Class A Voting Common Stock,
---------------------
$.01 par value per share, the Class B Non-Voting Common Stock, $.01 par value
per share, the Class C Common Stock, $.01 par value per share, and the Class D
Common Stock, $.01 par value per share, and the Voting Preference Common Stock,
$.01 par value per share, of TeleCorp PCS, Inc.
"TeleCorp Exchange Shares" shall have the meaning set forth in Section
------------------------
4.14(a)(ii).
"Tritel Exchange Shares" shall have the meaning set forth in Section
----------------------
4.14(a)(iv).
"TeleCorp Holding" shall mean TeleCorp Holding Corp., Inc., a Delaware
----------------
corporation, or any successor thereto.
"TeleCorp Original Shares" shall mean (i) the TeleCorp Common Stock
------------------------
held by the Initial Holders and TWR Cellular, Inc. on July 17, 1998, (ii) the
Series D Preferred Stock, $.01 par value per share, of TeleCorp PCS, Inc. held
by the Initial Holders and TWR Cellular Inc. on July 17, 1998, or any TeleCorp
Common Stock into which such shares were converted and (iii) the Series F
Preferred Stock, $.01 par value per share, of TeleCorp PCS, Inc. held by the
Initial Holders and TWR Cellular Inc. on July 17, 1998, or any TeleCorp Common
Stock into which such shares were converted.
"TeleCorp Tracking Stock" shall have the meaning set forth in Section
-----------------------
4.12(b)(ii).
"TeleCorp Tracked Business Available Dividend Amount" shall mean, on
---------------------------------------------------
any date, the excess (if any) of (i) the fair market value of the total assets
of TeleCorp Holding (including, without limitation, investments held by TeleCorp
Holding), less the total amount of the liabilities of TeleCorp Holding, in each
case as of such date determined in accordance with generally accepted accounting
principles, over (ii) the aggregate par value of, or any greater amount
determined in accordance with GCL to be capital in respect of, all outstanding
shares of the TeleCorp Tracking Stock.
"TeleCorp Tracked Business Available Liquidation Amount" shall mean,
------------------------------------------------------
on any date, the fair market value of the total assets of TeleCorp Holding
(including, without limitation, investments held by TeleCorp Holding, less the
total amount of the liabilities of TeleCorp Holding, in each case as of such
date determined in accordance with generally accepted accounting principles.
41
<PAGE>
"Tracked Business Available Dividend Amount" shall mean the aggregate
------------------------------------------
of the TeleCorp Tracked Business Available Dividend Amount plus the Tritel
Tracked Business Available Dividend Amount.
"Tracked Common Stock" has the meaning specified in Section 4.12(a).
--------------------
"Tritel Common Stock" shall mean the Class A Voting Common Stock, $.01
-------------------
par value per share, the Class B Non-Voting Common Stock, $.01 par value per
share, the Class C Common Stock, $.01 par value per share, and the Class D
Common Stock, $.01 par value per share, and the Voting Preference Common Stock,
$.01 par value per share, of Tritel PCS, Inc.
"Tritel Holding" shall mean Tritel C/F Holding Corp., a Delaware
--------------
corporation, or any successor thereto.
"Tritel Original Shares" shall mean the Series D Preferred Stock, $.01
----------------------
par value, of Tritel PCS, Inc. owned by the Initial Holders and TWR Cellular
Inc. on January 7, 1999, or any shares of Tritel Series C Preferred Stock or
Tritel Common Stock into which such shares or any shares of Tritel Series A
Preferred Stock or Tritel Series C Preferred Stock were converted.
"Tritel Series A Preferred Stock" shall mean the Series A Convertible
-------------------------------
Preferred Stock, $.01 par value, of Tritel PCS, Inc.
"Tritel Series C Preferred Stock" shall mean the Series C Convertible
-------------------------------
Preferred Stock, $.01 par value, of Tritel PCS, Inc.
"Tritel Tracking Stock" shall have the meaning set forth in Section
---------------------
4.12(b)(iii).
"Tritel Tracked Business Available Dividend Amount" shall mean, on any
-------------------------------------------------
date, the excess (if any) of (i) the fair market value of the total assets of
Tritel Holding (including, without limitation, investments held by Tritel
Holding), less the total amount of the liabilities of Tritel Holding, in each
case as of such date determined in accordance with generally accepted accounting
principles, over (ii) the aggregate par value of, or any greater amount
determined in accordance with GCL to be capital in respect of, all outstanding
shares of the Tritel Tracking Stock.
"Tritel Tracked Business Available Liquidation Amount" shall mean, on
----------------------------------------------------
any date, the fair market value of the total assets of Tritel Holding
(including, without limitation, investments held by Tritel Holding, less the
total amount of the liabilities of Tritel Holding, in each case as of such date
determined in accordance with generally accepted accounting principles.
ARTICLE V
Election of Directors need not be by written ballot.
ARTICLE VI
42
<PAGE>
6.1 Amendment of Amended and Restated Certificate of Incorporation.
--------------------------------------------------------------
Subject to the separate class vote requirements relating to any class or series
of Preferred Stock, the holders of shares of capital stock representing at least
two-thirds (2/3) of the votes entitled to be cast for the election of directors
of the Corporation, voting together as a single class, in person or by proxy, at
a special or annual meeting of stockholders called for the purpose, or by
written consent, may amend, alter or repeal this Amended and Restated
Certificate of Incorporation.
6.2 Amendment of the Bylaws. Except as otherwise provided by law or by
-----------------------
this Amended and Restated Certificate of Incorporation, the Bylaws of the
Corporation, as from time to time altered or amended, may be made, altered or
amended by the holders of shares of capital stock representing at least two-
thirds (2/3) of the votes entitled to be cast for the election of directors of
the Corporation, voting together as a single class, in person or by proxy at any
annual or special meeting of the stockholders called for such purpose, of which
the notice shall specify the subject matter of the proposed alteration or
amendment or new bylaw or the article or articles to be affected thereby, or by
written consent of such holders having such requisite number of votes. The
Bylaws may also be made, altered or amended by a majority of the whole number of
directors then in office. Notwithstanding anything to the contrary contained in
this Section 6.2, the rights of any Stockholder (as such term is defined in the
Stockholders Agreement) or group of Stockholders under Section 2.11(b) of the
Bylaws shall not be amended, altered or repealed without the prior written
approval of any such Stockholder or group of Stockholders, as the case may be.
ARTICLE VII
7.1 Indemnification. Any person who was or is a party or is threatened to
---------------
be made a party to any threatened, pending, or completed action, suit, or
proceeding (a "Proceeding"), whether civil, criminal, administrative, or
----------
investigative (whether or not by or in the right of the Corporation), by reason
of the fact that such person, or a person of whom such person is the legal
representative, is or was a director, officer, incorporator, employee, or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, incorporator, employee, partner, trustee, or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), shall be entitled to be indemnified by the
------------
Corporation to the full extent then permitted by law against expenses (including
counsel fees and disbursements), judgments, fines (including excise taxes
assessed on a person with respect to an employee benefit plan), and amounts paid
in settlement incurred by him in connection with such Proceeding. Persons who
are not Directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation or to an Other Entity at the request of
the Corporation to the extent the Board of Directors at any time specifies that
such persons are entitled to the benefits of this Article VII.
7.2 Advancement of Expenses. The Corporation shall, from time to time,
-----------------------
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding,
in advance of the final disposition of such Proceeding; provided, however, that,
if (and only if) required by the GCL, such expenses incurred by or on
43
<PAGE>
behalf of any Director or officer or other person may be paid in advance of the
final disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
7.3 Rights Not Exclusive. The rights to indemnification and reimbursement
--------------------
or advancement of expenses provided by, or granted pursuant to, this Article VII
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Amended and Restated Certificate
of Incorporation, the Bylaws, any agreement, any vote of stockholders or
disinterested Directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
7.4 Continuing Rights. The rights to indemnification and reimbursement or
-----------------
advancement of expenses provided by, or granted pursuant to, this Article VII
shall continue as to a person who has ceased to be a Director or officer (or
other person indemnified hereunder), shall inure to the benefit of the
executors, administrators, legatees and distributees of such person, and in
either case, shall inure whether or not the claim asserted is based on matters
which antedate the adoption of this Article VII.
7.5 Insurance. The Corporation shall have power to purchase and maintain
---------
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation, as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Article VII, the Bylaws or under Section
145 of the GCL or any other provision of law.
7.6 Contract Rights; No Repeal. The provisions of this Article VII shall
--------------------------
be a contract between the Corporation, on the one hand, and each Director and
officer who serves in such capacity at any time while this Article VII is in
effect and any other person indemnified hereunder, on the other hand, pursuant
to which the Corporation and each such Director, officer, or other person intend
to be legally bound. No repeal or modification of this Article VII shall affect
any rights or obligations with respect to any state of facts then or, heretofore
or thereafter brought or threatened based in whole or in part upon any such
state of facts.
7.7 Enforceability; Burden of Proof. The rights to indemnification and
-------------------------------
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article VII shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the
44
<PAGE>
commencement of such action that such indemnification or reimbursement or
advancement of expenses is proper in the circumstances nor an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) that such person is not entitled
to such indemnification or reimbursement or advancement of expenses shall
constitute a defense to the action or create a presumption that such person is
not so entitled. Such a person shall also be indemnified for any expenses
incurred in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such Proceeding.
7.8 Service at the Request of the Corporation. Any Director or officer of
-----------------------------------------
the Corporation serving in any capacity in (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
7.9 Right to Be Covered by Applicable Law. Any person entitled to be
-------------------------------------
indemnified or to reimbursement or advancement of expenses as a matter of right
pursuant to this Article VII may elect to have the right to indemnification or
reimbursement or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the applicable Proceeding, to the extent permitted by law, or on
the basis of the applicable law in effect at the time such indemnification or
reimbursement or advancement of expenses is sought. Such election shall be
made, by a notice in writing to the Corporation, at the time indemnification or
reimbursement or advancement of expenses is sought; provided, however, that if
no such notice is given, the right to indemnification or reimbursement or
advancement of expenses shall be determined by the law in effect at the time
indemnification or reimbursement or advancement of expenses is sought.
7.10 Section 203 Election. The Corporation elects not to have Section 203
--------------------
of the GCL govern the issuance of capital stock of the Corporation to (a) AT&T
Wireless or its Affiliates, (b) Gerald T. Vento or (c) Thomas H. Sullivan.
ARTICLE VIII
No Director of the Corporation shall be liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
Director, provided that this provision does not eliminate the liability of the
Director (i) for any breach of the Director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL or (iv) for any transaction from which the Director
derived an improper personal benefit. For purposes of the prior sentence, the
term "damages" shall, to the extent permitted by law, include without
limitation, any judgment, fine, amount paid in settlement, penalty, punitive
damages, excise or other tax assessed with respect to an employee benefit plan,
or expense of any nature (including, without limitation, counsel fees and
disbursements). Each person who serves as a Director of the Corporation while
this Article VIII is in effect shall be deemed to be doing so in reliance on the
provisions of this Article VIII, and neither the amendment or repeal of
45
<PAGE>
this Article VIII, nor the adoption of any provision of this Amended and
Restated Certificate of Incorporation inconsistent with this Article VIII, shall
apply to or have any effect on the liability or alleged liability of any
Director of the Corporation for, arising out of, based upon, or in connection
with any acts or omissions of such Director occurring prior to such amendment,
repeal, or adoption of an inconsistent provision. The provisions of this Article
VIII are cumulative and shall be in addition to and independent of any and all
other limitations on or eliminations of the liabilities of Directors of the
Corporation, as such, whether such limitations or eliminations arise under or
are created by any law, rule, regulation, bylaw, agreement, vote of stockholders
or disinterested Directors, or otherwise.
ARTICLE IX
9.1 Number, Terms and Election of Directors.
---------------------------------------
(a) Subject to the rights, if any, of the holders of any class or series of
Preferred Stock to elect additional directors under specified circumstances, the
number of directors of the Corporation shall be fixed and may be increased or
decreased from time to time by the Board of Directors, but in no case shall the
number be less than one nor more than fifteen.
(b) The directors, other than the directors designated by the holders of
the Voting Preference Common Stock pursuant to Section 3.1(e) of the
Stockholders' Agreement (the "Voting Preference Directors"), shall be divided
into three classes, as nearly equal in number as possible, by the affirmative
vote (which vote may be taken prior to such closing) of a majority of the
directors then holding office. One class of directors shall be appointed to the
Board of Directors for a term expiring at the first annual meeting of
stockholders to be held after the filing of this Amended and Restated
Certificate of Incorporation, another class of directors shall be appointed to
the Board of Directors for a term expiring at the second annual meeting of
stockholders to be held after the filing of this Amended and Restated
Certificate of Incorporation, and another class of directors shall be appointed
to the Board of Directors for a term expiring the third annual meeting of
stockholders to be held after the filing of this Amended and Restated
Certificate of Incorporation, with members of each class to hold office until
their successors are elected and qualified. At each succeeding annual meeting
of the stockholders of the Corporation, the successors of the class of directors
whose term expires at that meeting shall be elected by plurality vote of all
votes cast at such meeting to hold office for a term expiring at the annual
meeting of stockholders held in the third year following their year of election.
The Voting Preference Directors shall be elected to the Board of Directors for a
one year term expiring at each annual meeting.
9.2 Newly Created Directorships and Vacancies. Subject to the rights, if
-----------------------------------------
any, of the holders of any and all series of Preferred Stock to elect additional
directors pursuant to the terms and conditions of such Preferred Stock, newly
created directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote
46
<PAGE>
of a majority of the remaining directors then in office, even though less than a
quorum of the board of directors, or by a sole remaining director. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of an
incumbent director.
9.3 Removal. Subject to the rights, if any, of the holders of any and all
-------
series of Preferred Stock to elect additional directors pursuant to the terms
and conditions of such Preferred Stock, any director may be removed from office
by the stockholders with or without cause in the following manner. At any
annual meeting or special meeting of the stockholders of the Corporation, the
notice of which shall state that the removal of a director or directors is among
the purposes of the meeting, the affirmative vote of the holders of at least a
majority of the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of the directors, voting together as a single
class, may remove such director or directors with or without cause.
9.4 Additional Rights of Certain Stockholders Regarding Directors.
-------------------------------------------------------------
Notwithstanding anything to the contrary contained in this Article IX, so long
as a Stockholder (as such term is defined in the Stockholders' Agreement) or
group of Stockholders has the right to nominate one or more of the directors of
the Corporation pursuant to the terms of the Stockholders' Agreement or this
Amended and Restated Certificate of Incorporation (including, without
limitation, the right of the Initial Holders to nominate a director pursuant to
Section 4.3(d)(iii) and Section 4.4 hereof), then, with respect to any directors
so nominated by such Stockholder or group of Stockholders, such Stockholder or
group of Stockholders, as the case may be, shall have the right to cause the
Corporation to remove any director so nominated by such Stockholder or group of
stockholders, as the case may be, with or without cause, and any vacancy caused
by the removal of such director or otherwise during the term of such director
(whether or not such director resigns, is removed from the Board of Directors
with or without cause or ceases to be a director by reason of death, disability
or for any other reason) shall be filled in accordance with the terms of the
Stockholders' Agreement or this Amended and Restated Certificate of
Incorporation, as the case may be.
47
<PAGE>
IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed this Amended and Restated Certificate of Incorporation this _____ day
of _________, 2000.
______________________________
Name:
Title:
1
<PAGE>
ANNEX II to
Amendment No.1 to the Agreement and Plan of Reorganization and Contribution
1
<PAGE>
SCHEDULE A
Board of Directors and Officers
TELECORP II:
- -----------
Officers:
- ---------
<TABLE>
<CAPTION>
NAME POSITION
---- --------
- ------------------------------------------------------------------------------------------------
<S> <C>
Gerald T. Vento Chief Executive Officer
- ------------------------------------------------------------------------------------------------
Thomas H. Sullivan President, Treasurer, and Secretary
- ------------------------------------------------------------------------------------------------
Julie A. Dobson Chief Operating Officer
- ------------------------------------------------------------------------------------------------
</TABLE>
Board of Directors:
- ------------------
<TABLE>
<CAPTION>
NAME POSITION
---- --------
- ------------------------------------------------------------------------------------------------
<S> <C>
Thomas H. Sullivan Director
- ------------------------------------------------------------------------------------------------
Gerald T. Vento Director
- ------------------------------------------------------------------------------------------------
</TABLE>
TRITEL II:
- ---------
Officers:
- --------
<TABLE>
<CAPTION>
NAME POSITION
---- --------
- ------------------------------------------------------------------------------------------------
<S> <C>
Gerald T. Vento Chief Executive Officer
- ------------------------------------------------------------------------------------------------
Thomas H. Sullivan Executive Vice President-Chief Financial
Officer and Treasurer
- ------------------------------------------------------------------------------------------------
William Arnett President and Chief Operating Officer
- ------------------------------------------------------------------------------------------------
James H. Neeld, IV, Esq. Senior Vice President-General Counsel and
Secretary
- ------------------------------------------------------------------------------------------------
</TABLE>
Board of Directors:
- ------------------
<TABLE>
<CAPTION>
NAME POSITION
---- --------
- ------------------------------------------------------------------------------------------------
<S> <C>
Thomas H. Sullivan Director
- ------------------------------------------------------------------------------------------------
Gerald T. Vento Director
- ------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
HOLDING COMPANY:
- ---------------
A. Before the Merger.
Officers:
- --------
<TABLE>
<CAPTION>
NAME POSITION
---- --------
- ------------------------------------------------------------------------------------------------
<S> <C>
Gerald T. Vento President
- ------------------------------------------------------------------------------------------------
Thomas H. Sullivan Vice President, Treasurer, and Secretary
- ------------------------------------------------------------------------------------------------
</TABLE>
Board of Directors:
- ------------------
<TABLE>
<CAPTION>
NAME POSITION
---- --------
- ------------------------------------------------------------------------------------------------
<S> <C>
Gerald T. Vento Director
- ------------------------------------------------------------------------------------------------
Thomas H. Sullivan Director
- ------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
B. After the Merger.
Officers:
- --------
<TABLE>
<CAPTION>
NAME POSITION
---- --------
- ------------------------------------------------------------------------------------------------
<S> <C>
Gerald T. Vento Chief Executive Officer
- ------------------------------------------------------------------------------------------------
Thomas H. Sullivan Chief Financial Officer
- ------------------------------------------------------------------------------------------------
William M. Mounger Chairman of the Board of Directors
- ------------------------------------------------------------------------------------------------
E.B. Martin Vice-Chairman of the Board of Directors
- ------------------------------------------------------------------------------------------------
</TABLE>
Board of Directors:
- ------------------
<TABLE>
<CAPTION>
CLASS NAME POSITION
----- ---- --------
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Class of 2001 Gerald T. Vento Director
Thomas H. Sullivan Director
William M. Mounger* Director
E.B. Martin* Director
- --------------------------------------------------------------------------------------------------
Class 2002 Alex P. Coleman Director
Michael R. Hannon Director
Michael Schwartz Director
Mary Hawkins-Key Director
Scott Anderson Director
- --------------------------------------------------------------------------------------------------
Class of 2003 James M. Hoak Director
David A. Jones, Jr. Director
Andrew Hubregsen Director
William W. Hague Director
Rohit M. Desai Director
- --------------------------------------------------------------------------------------------------
</TABLE>
* Mr. Mounger and Mr. Martin hold two seats, but are entitled to one vote.
4
<PAGE>
Lehman Brothers
February 27, 2000
Board of Directors
TeleCorp PCS, Inc.
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
Members of the Board:
We understand that TeleCorp PCS, Inc., a Delaware corporation ("TeleCorp" or
the "Company"), Tritel PCS, Inc., a Delaware corporation ("Tritel"), and AT&T
Corp., a Delaware corporation ("AT&T"), are proposing to enter into an
agreement pursuant to which each of TeleCorp and Tritel will merge with and
into subsidiaries of a newly formed holding company ("Holdco"), and upon the
effectiveness of such merger, (a) each outstanding share of Class A Common
Stock of TeleCorp will be converted into the right to receive one share of
Class A common stock of Holdco (the "Class A Exchange Ratio"), (b) each
outstanding share of Class C common stock of TeleCorp will be converted into
the right to receive one share of Class C common stock of Holdco (the "Class C
Exchange Ratio"), (c) each outstanding share of Class D common stock of
TeleCorp will be converted into the right to receive one share of Class D
common stock of Holdco (the "Class D Exchange Ratio" and, together with the
Class A Exchange Ratio and the Class C Exchange Ratio, the "Exchange Ratios"),
(d) each outstanding share of voting preference common stock of TeleCorp will
be converted into the right to receive one share of voting preference common
stock of Holdco, (e) each outstanding share of Class A common stock and each
share of Class B common stock of Tritel will be converted into the right to
receive 0.76 shares of Class A common stock of Holdco, (f) each outstanding
share of Class C common stock of Tritel will be converted into the right to
receive one share of Class E common stock of Holdco, (g) each outstanding share
of Class D common stock of Tritel will be converted into the right to receive
one share of Class F common stock of Holdco, (h) three shares of voting
preference common stock of Tritel will each be converted into the right to
receive three shares of voting preference common stock of Holdco, and (i) three
shares of voting preference common stock of Tritel will each be converted into
the right to receive $10 million in cash and the right to certain additional
payments under certain circumstances (the "Proposed Merger"), and pursuant to
which (v) the Company will issue to AT&T $410 million of Class A common stock
of TeleCorp (or Holdco), (w) the Company will assume certain obligations
pursuant to certain purchase agreements, including the payment of $80 million
in cash for the acquisition of Indus, Inc. ("Indus"), a Wisconsin corporation
(the "Pending Acquisition Agreements"), relating to the pending acquisitions of
Indus, Polycell Communications, Inc., a Delaware corporation, and ABC Wireless,
L.L.C., a Delaware limited liability company (the "Targets"), (x) AT&T will pay
to TeleCorp $100 million cash, (y) AT&T will enter into a brand extension and
other operating agreements with TeleCorp, and (z) AT&T will assign to TeleCorp
all of its rights under the Pending Acquisition Agreements (the
"Contribution"). We further understand that the Proposed Transaction may
constitute a Transaction with an Affiliate under Section 4.07 of the Indenture
(the "Indenture") governing TeleCorp's outstanding 11 5/8% Senior Subordinated
Notes due 2009 (the "Bonds") and that Section 4.07 of the Indenture requires an
opinion of a nationally recognized investment banking firm with respect
thereto. The terms and conditions of the Proposed Merger and the Contribution
are set forth in more detail in the Agreement and Plan of Reorganization and
Contribution dated the date hereof by and among TeleCorp, Tritel and AT&T
(collectively, the "Agreements").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, (i)
to the holders of Class A common stock of the Company of the Class A Exchange
Ratio to be offered to such holders in the Proposed Merger, (ii) to the holders
of Class C common stock of the Company of the Class C Exchange Ratio to be
offered to such holders in the Proposed Merger, (iii) to the holders of Class D
common stock of the Company of the Class D Exchange Ratio to be
C-1
<PAGE>
offered to such holders in the Proposed Merger and (iv) to the holders of the
Bonds of the Exchange Ratios to be offered to the holders of the Company's
Class A common stock, Class C common stock and Class D common stock in the
Proposed Merger. We have not been requested to opine as to, and our opinion
does not in any manner address, the fairness of the Contribution to the Company
or any of its stockholders in this opinion. We also have not been requested to
opine as to, and our opinion does not in any manner address, the Company's
underlying business decision to proceed with or effect the Proposed Merger or
the Contribution.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Merger, (2) publicly available information
concerning the Company that we believe to be relevant to our analysis,
including the Registration Statement on Form S-1 declared effective on November
22, 1999 and the Quarterly Report on Form 10-Q for the quarter ended September
30, 1999, (3) publicly available information concerning Tritel that we believe
to be relevant to our analysis, including the Registration Statement on Form S-
1 declared effective on December 13, 1999, (4) financial and operating
information with respect to the business, operations and prospects of the
Company furnished to us by the Company, (5) financial and operating information
with respect to the business, operations and prospects of Tritel furnished to
us by Tritel, (6) a trading history of the Company's common stock from November
22, 1999 to the present and a comparison of that trading history with those of
other companies that we deemed relevant, (7) a trading history of Tritel's
common stock from December 13, 1999 to the present and a comparison of that
trading history with those of other companies that we deemed relevant, (8) a
comparison of the historical financial results and present financial condition
of the Company with those of other companies that we deemed relevant, (9) a
comparison of the historical financial results and present financial condition
of the Tritel with those of other companies that we deemed relevant, and (10) a
comparison of the financial terms of the Proposed Transaction with the
financial terms of certain other transactions that we deemed relevant, (11)
published estimates of third party research analysts with respect to the future
financial performance of Tritel, and (12) the relative contributions of
TeleCorp and Tritel, on a pro forma basis, to the future financial performance
of Holdco following consummation of the Proposed Merger. In addition, we have
had discussions with the managements of the Company and Tritel concerning their
respective businesses, operations, assets, financial conditions and prospects
and have undertaken such other studies, analyses and investigations as we
deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of managements of the Company and Tritel
that they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial projections
of the Company, upon advice of the Company we have assumed that such
projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company and that the Company will
perform substantially in accordance with such projections. We have not been
provided with, and did not have access to, financial projections of Tritel
prepared by the management of Tritel. Accordingly, upon advice of Tritel, we
have assumed that the published estimates of third party research analysts are
a reasonable basis upon which to evaluate the future financial performance of
Tritel and that Tritel will perform substantially in accordance with such
estimates. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of the Company or Tritel and have
not made or obtained any evaluations or appraisals of the assets or liabilities
of the Company or Tritel. Upon advice of the Company and its legal and
accounting advisors, we have assumed that the merger will qualify as a tax-free
transaction within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended, and a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended, and therefore as a tax-free
transaction to the stockholders of the Company. Our opinion necessarily is
based upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
In addition, we express no opinion as to the prices at which shares of
common stock of Holdco or the Bonds actually will trade following consummation
of the Proposed Merger and this opinion should not be
C-2
<PAGE>
viewed as providing any assurance that the market value of the shares of Holdco
to be held by the stockholders of the Company after the Proposed Merger will be
in excess of the market value of the shares of the Company's Class A common
stock owned by such stockholders at any time prior to announcement or
consummation of the Proposed Merger or that the market value of the Bonds prior
to the announcement or consummation of the Proposed Merger.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, (i) the Class A Exchange
Ratio to be offered to the holders of Class A common stock of the Company in
the Proposed Transaction is fair to such holders, (ii) the Class C Exchange
Ratio to be offered to the holders of Class C common stock of the Company in
the Proposed Transaction is fair to such holders, (iii) the Class D Exchange
Ratio to be offered to the holders of Class D common stock of the Company in
the Proposed Transaction is fair to such holders, and (iv) the Exchange Ratios
to be offered to the holders of the Company's Class A common stock, Class C
common stock and Class D common stock in the Proposed Transaction is fair to
the holders of the Bonds.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services, a substantial
portion of which is contingent upon the consummation of the Proposed Merger. In
addition, the Company has agreed to indemnify us for certain liabilities that
may arise out of the rendering of this opinion. We also have performed various
investment banking services for the Company in the past and have received
customary fees for such services. In the ordinary course of our business, we
actively trade in the debt and equity securities of the Company and Tritel for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as
to how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
C-3
<PAGE>
February 27, 2000
Board of Directors
Tritel, Inc.
111 East Capitol Street
Jackson, MS 39201
Members of the Board of Directors:
Tritel, Inc., a Delaware corporation ("Tritel"), TeleCorp PCS, Inc., a
Delaware corporation ("TeleCorp"), and AT&T Corp., a New York corporation
("AT&T"), propose to enter into an Agreement and Plan of Reorganization and
Contribution (the "Agreement") pursuant to which a new holding company (the
"Holding Company") will become the parent and sole shareholder of both Tritel
and TeleCorp and, as part of the transaction, AT&T will contribute certain
assets and rights to the Holding Company in exchange for shares of the Holding
Company (the "Contribution"). Pursuant to a merger to be effected pursuant to
the Agreement (the "Merger"), each outstanding share of the Class A Common
Stock, par value $ .01 per share, of Tritel (the "Class A Shares"), will be
converted into the right to receive 0.76 shares (the "Exchange Ratio") of the
Class A Common Stock, par value $ .01 per share, of the Holding Company (the
"Holding Company Shares"), to be issued in the Merger. The Merger, the
Contribution and the other transactions contemplated by the Agreement are
referred to herein as the "Transactions." You have asked us whether, in our
opinion, the Exchange Ratio is fair from a financial point of view to the
holders of the Class A Shares, other than AT&T Wireless PCS, LLC and its
affiliates.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed certain publicly available business and financial
information relating to Tritel and TeleCorp that we deemed to be relevant;
2. Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects of
Tritel and TeleCorp, furnished to us by Tritel and TeleCorp;
3. Conducted discussions with members of senior management and
representatives of Tritel and TeleCorp concerning the matters described in
clauses 1 and 2 above, as well as their respective businesses and prospects
before and after giving effect to the Transactions;
4. Reviewed the market prices and valuation multiples for the Class A
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
5. Reviewed the results of operations of Tritel and TeleCorp and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
6. Compared the proposed financial terms of the Transactions with the
financial terms of certain other transactions that we deemed to be
relevant;
7. Participated in certain discussions and negotiations among
representatives of Tritel and TeleCorp and their financial and legal
advisors;
8. Reviewed the potential pro forma impact of the Transactions;
9. Reviewed a draft, dated February 25, 2000, of the Agreement; and
10. Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
D-1
<PAGE>
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of Tritel or TeleCorp or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of Tritel or TeleCorp. With
respect to the financial forecast information furnished to or discussed with us
by Tritel or TeleCorp, we have assumed that they have been reasonably prepared
and reflect the best currently available estimates and judgment of Tritel's or
TeleCorp's management as to the expected future financial performance of Tritel
or TeleCorp, as the case may be. We have further assumed that the Merger will
qualify as a tax-free reorganization for U.S. federal income tax purposes. We
have also assumed that the final form of the Agreement will be substantially
similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Transactions, no restrictions, including any divestiture requirements
or amendments or modifications, will be imposed that will have a material
adverse effect on the contemplated benefits of the Transactions.
In connection with the preparation of this opinion, we have not been
authorized by Tritel or the Board of Directors of Tritel to solicit, nor have
we solicited, third-party indications of interest for the acquisition of all or
any part of Tritel.
We are acting as financial advisor to Tritel in connection with the
Transactions and will receive a fee from Tritel for our services, a significant
portion of which is contingent upon the consummation of the Transactions. In
addition, Tritel has agreed to indemnify us for certain liabilities arising out
of our engagement. We participated in the underwriting syndicate of the initial
public offering of Tritel in December 1999 and the initial public offering of
TeleCorp in November 1999. In addition, we are currently providing financial
advisory services to AT&T in connection with a proposed tracking stock issue
for its wireless unit and have, in the past, provided other financial advisory
and financing services to AT&T and may continue to do so and have received, and
may receive, fees for the rendering of such services. In addition, in the
ordinary course of our business, we may actively trade securities of Tritel,
TeleCorp and AT&T for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such security.
This opinion is for the use and benefit of the Board of Directors of Tritel.
Our opinion does not address the merits of the underlying decision by Tritel to
engage in the Transactions and does not constitute a recommendation to any
shareholder as to how such shareholder should vote on the proposed Merger or
any other matter related to the Transactions.
We are not expressing any opinion herein as to the prices at which any
securities of Tritel, TeleCorp or the Holding Company will trade following the
announcement or consummation of the Transactions.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view
to the holders of the Class A Shares other than AT&T Wireless PCS, LLC and its
affiliates.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH
INCORPORATED
D-2
<PAGE>
Annex E
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TELECORP PCS, INC.
TeleCorp PCS, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is __________________ (the
"Corporation"). The original Certificate of Incorporation of the Corporation
- ------------
was filed with the Secretary of State of the State of Delaware (the "Secretary
---------
of State") on __________________ (the "Certificate of Incorporation").
- -------- ----------------------------
SECOND: This Amended and Restated Certificate of Incorporation (the
"Amended and Restated Certificate of Incorporation") has been duly adopted in
- --------------------------------------------------
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware ("GCL") and written consent has been
---
given by the stockholders of the Corporation in accordance with Section 228 of
the GCL.
THIRD: The Certificate of Incorporation is hereby amended and
restated in its entirety as follows:
ARTICLE I
The name of the Corporation shall be TeleCorp PCS, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in, carry on and conduct
any lawful act or activity for which corporations may be organized under the
GCL.
ARTICLE IV
4.1 Classes of Stock. The total number of shares of all classes of stock
----------------
which the Corporation shall have authority to issue is ____________________,
consisting of (a) 20,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"), consisting of 100,000 shares designated "Series A
---------------
Convertible Preferred Stock" (the "Series A Preferred
------------------
1
<PAGE>
Stock"), 200,000 shares designated "Series B Preferred Stock" (the "Series B
- ----- --------
Preferred Stock"), 215,000 shares designated "Series C Preferred Stock" (the
- ---------------
"Series C Preferred Stock"), 50,000 shares designated "Series D Preferred Stock"
------------------------
(the "Series D Preferred Stock"), 30,000 shares designated "Series E Preferred
------------------------
Stock" (the "Series E Preferred Stock"), 15,450,000 shares designated "Series F
------------------------
Preferred Stock" (the "Series F Preferred Stock"), 100,000 shares designated as
------------------------
"Series G Preferred Stock" (the "Series G Preferred Stock"), 200,000 shares
------------------------
designated as Series H Preferred Stock" (the "Series H Preferred Stock"),
------------------------
300,000 shares designated as Series I Preferred Stock (the "Series I Preferred
------------------
Stock") and 3,355,000 undesignated shares available for designation and issuance
- -----
pursuant to Section 4.2, and (b) ____________ shares of common stock, par value
$0.01 per share (the "Common Stock"), consisting of 1,108,550,000 shares
------------
designated "Class A Voting Common Stock" (the "Class A Common Stock"),
--------------------
808,550,000 shares designated "Class B Non-Voting Common Stock" (the "Class B
-------
Common Stock"), 309,000 shares designated "Class C Common Stock" (the "Class C
- ------------ -------
Common Stock"), 927,000 shares designated "Class D Common Stock" (the "Class D
- ------------ -------
Common Stock"), 4,000,000 shares designated "Class E Common Stock" (the "Class E
- ------------ -------
Common Stock"), 12,000,000 shares designated "Class F Common Stock" (the "Class
- ------------ -----
F Common Stock") and 3,093 shares designated "Voting Preference Common Stock"
- --------------
(the "Voting Preference Common Stock"). (Capitalized terms used herein and not
------------------------------
otherwise defined shall have the meanings set forth in Section 4.16.)
4.2 Additional Series of Preferred Stock and Voting Rights of Preferred
-------------------------------------------------------------------
Stock.
- -----
(a) Subject to approval by holders of shares of any class or series of
Preferred Stock to the extent such approval is required by its terms, the Board
of Directors of the Corporation (the "Board of Directors") is hereby expressly
------------------
authorized, by resolution or resolutions, to provide, out of the unissued shares
of Preferred Stock, for series of Preferred Stock in addition to the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock, the Series E Preferred Stock, the Series F Preferred
Stock, the Series G Preferred Stock, the Series H Preferred Stock and the Series
I Preferred Stock. Before any shares of any such series are issued, the Board
of Directors shall fix, and hereby is expressly empowered to fix, by
resolutions, the following provisions of the shares thereof:
(i) the designation of such series, the number of shares to constitute
such series and the stated value thereof if different from the par value
thereof;
(ii) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of such
voting rights, which may be general or limited;
(iii) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the conditions and
dates upon which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any shares of stock
of any other class or any other series of this class;
2
<PAGE>
(iv) whether the shares of such series shall be subject to redemption by
the Corporation, and, if so, the times, prices and other conditions of such
redemption;
(v) the amount or amounts payable upon shares of such series upon, and
the rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of the assets,
of the Corporation;
(vi) whether the shares of such series shall be subject to the operation
of a retirement or sinking fund and, if so, the extent to and manner in which
any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such series for retirement or other corporate
purposes and the terms and provisions relative to the operation thereof;
(vii) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of this
class or any other securities and, if so, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting the same,
and any other terms and conditions of conversion or exchange;
(viii) the limitations and restrictions, if any, to be effective while any
shares of such series are outstanding upon the payment of dividends or the
making of other distributions on, and upon the purchase, redemption other
acquisition by the Corporation of, the Common Stock or shares of stock of any
other class or any other series of this class;
(ix) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of this class
or of any other class; and
(x) any other powers, preferences and relative, participating, optional
and other special rights, and any qualifications, limitations and restrictions
thereof.
(b) The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be cumulative.
(c) Shares of Preferred Stock of any series that have been redeemed
(whether through the operation of a sinking fund or otherwise) or that, if
convertible or exchangeable, have been converted into or exchanged for any other
security shall have the status of authorized and unissued shares of Preferred
Stock of the same series and may be reissued as a part of the series of which
they were originally a part or may be reclassified and reissued as part of a new
series of shares of Preferred Stock to be created
3
<PAGE>
by resolution or resolutions of the Board of Directors or as part of any other
series of shares of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the resolution or resolutions adopted by
the Board of Directors providing for the issue of any series of shares of
Preferred Stock.
(d) Subject to the provisions of this Amended and Restated Certificate of
Incorporation and except as otherwise provided by law, the stock of the
Corporation, regardless of class, may be issued for such consideration and for
such corporate purposes as the Board of Directors may from time to time
determine.
(e) Voting.
------
(i) The holders of shares of Preferred Stock shall be entitled to
such voting rights as hereinafter provided, and shall be entitled to notice of
any stockholders' meeting and to vote upon such matters as provided herein and
in the Bylaws of the Corporation, and as may be provided by law. Holders of any
series of Preferred Stock shall not be entitled to cumulate their votes for any
purpose. Except as otherwise required by law or provided herein, regardless of
the number of shares of any series of Preferred Stock then outstanding, each
Series of Preferred Stock shall be entitled to the number of votes voting as a
class with all equity securities of the Corporation enumerated below and the
number of votes or fractional votes to which each share of a particular series
of Preferred Stock shall be entitled shall be the quotient determined by
dividing the aggregate number of votes to which such series of Preferred Stock
is entitled by the number of shares of such series of Preferred Stock then
outstanding. Except as otherwise required by law or provided herein, the Series
A Preferred Stock shall have 67,804 votes; the Series B Preferred Stock shall
have 61,608 votes; the Series C Preferred Stock shall have 124,096 votes; the
Series D Preferred Stock shall have 30,308 votes; the Series E Preferred Stock
shall have 16,184 votes; the Series H Preferred Stock shall have the number of
votes which shares of Series A Preferred Stock exchanged for such Series H
Preferred Stock in accordance with Section 4.14 previously had; the Series I
Preferred Stock shall have the number of votes which shares of Series B
Preferred Stock exchanged for such Series I Preferred Stock in accordance with
Section 4.14 previously had; and the Series F Preferred Stock and the Series G
Preferred Stock shall have the voting rights described in Section 4.12(c).
(ii) In any matter requiring a separate class vote of holders of any
series of Preferred Stock or a separate vote of two or more series of Preferred
Stock voting together as a single class, for the purposes of such a class vote,
each share of Preferred Stock of such series shall be entitled to one vote per
share.
4.3 Powers, Preferences and Rights of the Series A Preferred Stock. The
--------------------------------------------------------------
powers, preferences and rights of the Series A Preferred Stock and the
qualifications, limitations and restrictions thereof are as follows:
(a) Ranking. The Series A Preferred Stock shall, with respect to the
-------
payment of dividends and the distribution of assets on liquidation, dissolution
or winding up, rank on a parity with the Series B Preferred Stock, the Series H
Preferred Stock and the Series
4
<PAGE>
I Preferred Stock, and rank senior to Junior Stock.
(b) Dividends and Distributions.
---------------------------
(i) Dividends. The holders of shares of Series A Preferred Stock shall
---------
be entitled to receive, as and when declared by the Board of Directors, out of
funds legally available therefor, dividends on each outstanding share of Series
A Preferred Stock, at an annual rate per share equal to ten percent (10%) of the
Liquidation Preference, calculated on the basis of a 360-day year consisting of
twelve 30-day months. Dividends shall be paid quarterly in arrears commencing on
the Dividend Payment Date immediately following the last Dividend Payment Date
arising with respect to Predecessor Stock exchanged for the Series A Preferred
Stock in the manner provided in paragraph (iii) below.
(ii) Accrued Dividends, Record Date. Dividends payable pursuant to
------------------------------
paragraph (i) above shall begin to accrue and be cumulative from the date on
which shares of Series A Preferred Stock are issued, or, with respect to shares
of Series A Preferred Stock received in exchange for any Predecessor Stock, on
the date when such Predecessor Stock was issued, and shall begin to accrue on a
daily basis, in each case whether or not earned or declared. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of the dividends payable
pursuant to paragraph (i) above, which record date shall not be more than 60
days prior to the Dividend Payment Date.
(iii) Payment. All dividends shall be payable in cash. Until the
-------
December 2008 Dividend Payment Date, the Corporation shall have the option to
defer payment of dividends on Series A Preferred Stock. Any dividend payments
so deferred shall be payable on and not earlier than the December 2008 Dividend
Payment Date.
(iv) Dividends Pro Rata. All dividends paid with respect to shares of
------------------
Series A Preferred Stock pursuant to this Section 4.3(b) shall be paid pro rata
to the holders entitled thereto. In the event that the funds legally available
therefor shall be insufficient for the payment of the entire amount of cash
dividends payable at any Dividend Payment Date, subject to Section 4.3(c), such
funds shall be allocated for the payment of dividends with respect to the shares
of Series A Preferred Stock, Series B Preferred Stock, Series H Preferred Stock
and Series I Preferred Stock pro rata based upon the Liquidation Preference of
the outstanding shares.
(c) Certain Restrictions.
--------------------
(i) Notwithstanding the provisions of Sections 4.3(b), (e) and (f), cash
dividends on the Series A Preferred Stock may not be declared, paid or set apart
for payment, nor may the Corporation redeem, purchase or otherwise acquire any
shares of Series A Preferred Stock, if (A) the Corporation is not solvent or
would be rendered insolvent thereby or (B) at such time the terms and provisions
of any law or agreement of the Corporation, including any agreement relating to
its indebtedness, specifically
5
<PAGE>
prohibit such declaration, payment or setting apart for payment or such
redemption, purchase or other acquisition, or provide that such declaration,
payment or setting apart for payment or such redemption, purchase or other
acquisition would constitute a violation or breach thereof or a default
thereunder.
(ii) So long as shares of Series A Preferred Stock are outstanding or
dividends payable on shares of Series A Preferred Stock have not been paid in
full in cash, then the Corporation shall not declare or pay cash dividends on,
or redeem, purchase or otherwise acquire for consideration, any shares of Common
Stock or other shares of Junior Stock, except with the prior written consent of
holders of a majority of the outstanding shares of Series A Preferred Stock,
except that the Corporation may acquire, in accordance with the terms of any
agreement between the Corporation and its employees, shares of Common Stock or
Preferred Stock at a price not greater than the Market Price as of such date.
(iii) The Corporation shall not permit any Subsidiary of the Corporation,
or cause any other Person, to make any distribution with respect to, or purchase
or otherwise acquire for consideration, any shares of capital stock of the
Corporation, unless the Corporation could, pursuant to paragraph (ii) above,
make such distribution or purchase or otherwise acquire such shares at such time
and in such manner.
(d) Voting Rights; Election of Directors.
------------------------------------
(i) In addition to the voting rights set forth in Section 4.2(e) or
otherwise provided by law, the holders of shares of Series A Preferred Stock
shall have the voting rights provided in paragraphs (ii) and (iii) below.
(ii) Unless the consent or approval of a greater number of shares shall
then be required by law, the affirmative vote of the holders of a majority of
the outstanding shares of Series A Preferred Stock in person or by proxy, at
each special and annual meeting of stockholders called for the purpose, or by
written consent, shall be necessary to (A) authorize, increase the authorized
number of shares of or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any shares of any
class or classes of Senior Stock or Parity Stock or any additional shares of
Series A Preferred Stock, except upon conversion or exchange pursuant to Section
4.14 of outstanding securities, (B) authorize, adopt or approve each amendment
to this Amended and Restated Certificate of Incorporation that would increase or
decrease the par value of the shares of Series A Preferred Stock, alter or
change the powers, preferences or rights of the shares of Series A Preferred
Stock or alter or change the powers, preferences or rights of any other capital
stock of the Corporation if such alteration or change results in such capital
stock being Senior Stock or Parity Stock, (C) amend, alter or repeal any
provision of this Amended and Restated Certificate of Incorporation so as to
affect the shares of Series A Preferred Stock adversely, or (D) authorize or
issue any security convertible into, exchangeable for or evidencing the right to
purchase or otherwise receive any shares of any class or classes of Senior Stock
or
6
<PAGE>
Parity Stock.
(iii) So long as the Initial Holders own in the aggregate an amount of
shares of Series A Preferred Stock equal to at least 44,481 shares, holders of
shares of Series A Preferred Stock shall have the exclusive right, voting
separately as a single class, to designate one director of the Corporation. The
foregoing right to designate one director may be exercised at any annual meeting
of stockholders or a special meeting of stockholders or holders of Series A
Preferred Stock held for such purpose or any adjournment thereof, or by the
written consent, delivered to the Secretary of the Corporation, of the holders
of a majority of the issued and outstanding shares of Series A Preferred Stock.
Notwithstanding the foregoing, the Initial Holders shall have the right,
exercisable at any time by written notice delivered to the Secretary of the
Corporation, to surrender and cancel irrevocably such right to designate one
director of the Corporation. So long as the Initial Holders own in the
aggregate an amount of shares of Series A Preferred Stock equal to at least
44,481 shares in the event any director so designated by the Initial Holders
ceases to be a director of the Corporation during such director's term (whether
or not such director resigns, is removed from the Board of Directors with or
without cause or ceases to be a director by reason of death, disability or for
any other reason), the Initial Holders shall have the right to designate a
replacement for such director, and the Corporation shall cause to be elected or
appointed for the remainder of the term of any director so replaced any person
designated by the Initial Holders, upon written notice to the Corporation and
the other members of the Board of Directors which notice shall set forth the
name of the member being replaced and the name of the new member.
(e) Redemption at Option of the Corporation. The Corporation shall have
---------------------------------------
the right to redeem shares of Series A Preferred Stock pursuant to the following
provisions:
(i) The Corporation shall not have any right to redeem shares of the
Series A Preferred Stock prior to, with respect to any shares of Series A
Preferred Stock, the 30th day after the twentieth anniversary of the issuance of
such shares. Thereafter, subject to the restrictions in Section 4.3(c)(i), the
Corporation shall have the right, at its sole option and election, to redeem the
shares of the Series A Preferred Stock, in whole but not in part, at any time at
a redemption price (the "Series A Redemption Price") per share equal to the
-------------------------
Liquidation Preference as of the redemption date;
(ii) Notice of any redemption of the Series A Preferred Stock shall be
mailed at least ten, but not more than 60, days prior to the date fixed for
redemption to each holder of Series A Preferred Stock to be redeemed, at such
holder's address as it appears on the books of the Corporation. In order to
facilitate the redemption of the Series A Preferred Stock, the Board of
Directors may fix a record date for the determination of holders of Series A
Preferred Stock to be redeemed, or may cause the transfer books of the
Corporation to be closed for the transfer of the Series A Preferred Stock, not
more than 60 days prior to the date fixed for such redemption;
7
<PAGE>
(iii) Within two Business Days after the redemption date specified in the
notice given pursuant to paragraph (ii) above and the surrender of the
certificate(s) representing shares of Series A Preferred Stock, the Corporation
shall pay to the holder of the shares being redeemed the Series A Redemption
Price therefor. Such payment shall be made by wire transfer of immediately
available funds to an account designated by such holder or by overnight delivery
(by a nationally recognized courier) of a bank check to such holder's address as
it appears on the books of the Corporation; and
(iv) Effective upon the date of the notice given pursuant to paragraph
(ii) above, notwithstanding that any certificate for such shares shall not have
been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding, the rights to receive dividends thereon shall
cease to accrue from and after the date of redemption designated in the notice
of redemption and all rights of the holders of the shares of the Series A
Preferred Stock called for redemption shall cease and terminate, excepting only
the right to receive the Series A Redemption Price therefor in accordance with
paragraph (iii) above and the right to convert such shares into shares of Class
A Common Stock until the close of business on the third Business Day preceding
the redemption date, as provided in Section 4.3(i).
(f) Redemption at Option of Holder.
------------------------------
(i) No holder of shares of Series A Preferred Stock shall have any right
to require the Corporation to redeem any shares of Series A Preferred Stock
prior to, with respect to any shares of Series A Preferred Stock, the 30th day
after the twentieth anniversary of the issuance of such shares. Thereafter,
subject to the restrictions set forth in Section 4.3(c)(i), each holder of
shares of Series A Preferred Stock shall have the right, at the sole option and
election of such holder, to require the Corporation to redeem all (but not less
than all) of the shares of Series A Preferred Stock owned by such holder at a
price per share equal to the Series A Redemption Price;
(ii) The holder of any shares of the Series A Preferred Stock may
exercise such holder's right to require the Corporation to redeem such shares by
surrendering for such purpose to the Corporation, at its principal office or at
such other office or agency maintained by the Corporation for that purpose,
certificates representing the shares of Series A Preferred Stock to be redeemed,
accompanied by a written notice stating that such holder elects to require the
Corporation to redeem all (but not less than all) of such shares in accordance
with the provisions of this Section 4.3(f), which notice may specify an account
for delivery of the Series A Redemption Price;
(iii) Within two Business Days after the surrender of such certificates,
the Corporation shall pay to the holder of the shares being redeemed the Series
A Redemption Price therefor. Such payment shall be made by wire transfer of
immediately available funds to an account designated by such holder or by
overnight delivery (by a nationally recognized courier) of a bank check to such
holder's address as it appears on the books of the Corporation; and
8
<PAGE>
(iv) Such redemptions shall be deemed to have been made at the close of
business on the date of the receipt of such notice and of such surrender of the
certificates representing the shares of the Series A Preferred Stock to be
redeemed and the rights of the holder thereof, except for the right to receive
the Series A Redemption Price therefor in accordance herewith, shall cease on
such date of receipt and surrender.
(g) Reacquired Shares. Any shares of the Series A Preferred Stock
-----------------
redeemed or purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued pursuant to Section 4.2(c) as part
of a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions or restrictions on issuance
set forth herein.
(h) Liquidation, Dissolution or Winding Up.
--------------------------------------
(i) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, before any distribution or payment
to holders of Junior Stock, the holders of shares of Series A Preferred Stock
shall be entitled to be paid an amount equal to the Liquidation Preference with
respect to each share of Series A Preferred Stock.
(ii) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to the
holders of Series A Preferred Stock shall be insufficient to permit payment in
full to such holders of the sums which such holders are entitled to receive in
such case, then all of the assets available for distribution to holders of the
Series A Preferred Stock, Series B Preferred Stock, Series H Preferred Stock and
Series I Preferred Stock shall be distributed among and paid to such holders
ratably in proportion to the amounts that would be payable to such holders if
such assets were sufficient to permit payment in full.
(iii) Neither the consolidation or merger of the Corporation with or into
any other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Corporation, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4.3(h).
(i) Conversion.
----------
(i) Stockholders' Right To Convert. No holder of shares of Series A
------------------------------
Preferred Stock shall have any right to convert any shares of Series A Preferred
Stock into Class A Common Stock or any other securities of the Corporation prior
to July 17, 2006. Thereafter, each share of Series A Preferred Stock held by the
Initial Holders or a Qualified Transferee shall be convertible, at the sole
option and election of the Initial Holders or Qualified Transferee, into fully
paid and non-assessable shares of Class A Common Stock.
9
<PAGE>
(ii) Number of Shares of Class A Common Stock Issuable upon Conversion.
-----------------------------------------------------------------
The number of shares of Class A Common Stock to be issued upon conversion of
shares of Series A Preferred Stock pursuant to paragraph (i) above shall be
equal to the product of (A) the Series A Conversion Rate as of the date of the
applicable notice pursuant to paragraph (iv) below, multiplied by (B) the number
of shares of Series A Preferred Stock to be converted.
(iii) Fractional Shares. Notwithstanding any other provision of this
-----------------
Amended and Restated Certificate of Incorporation, the Corporation shall not be
required to issue fractions of shares upon conversion of any shares of Series A
Preferred Stock or to distribute certificates which evidence fractional shares.
In lieu of fractional shares, the Corporation may pay therefor, at the time of
any conversion of shares of Series A Preferred Stock as herein provided, an
amount in cash equal to such fraction multiplied by the Market Price of a share
of Class A Common Stock on such date.
(iv) Mechanics of Conversion. The Initial Holders or Qualified
-----------------------
Transferee may exercise its option to convert by surrendering for such purpose
to the Corporation, at its principal office or such other office or agency
maintained by the Corporation for that purpose, certificates representing the
shares of Series A Preferred Stock to be converted, accompanied by a written
notice, delivered in accordance with the terms of the Stockholders Agreement,
stating that such holder elects to convert such shares in accordance with this
Section 4.3(i). The date of receipt of such certificates and notice by the
Corporation at such office shall be the conversion date (the "Series A
--------
Conversion Date"). If required by the Corporation, certificates surrendered for
- ---------------
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing.
Within ten Business Days after the Series A Conversion Date (or, if at the time
of such surrender the shares of Class A Common Stock are not listed or admitted
for trading on any national securities exchange and are not quoted on NASDAQ or
any similar service, within ten Business Days of the determination of the Market
Price pursuant to the Appraisal Procedure), the Corporation shall issue to such
holder a number of shares of Class A Common Stock into which such shares of
Series A Preferred Stock are convertible pursuant to paragraph (ii) above.
Certificates representing such shares of Class A Common Stock shall be delivered
to such holder at such holder's address as it appears on the books of the
Corporation.
(v) Termination of Rights. All shares of Series A Preferred Stock which
---------------------
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Series A Conversion Date, except only the right of the holders
thereof to receive shares of Class A Common Stock in exchange therefor and
payment of any declared and unpaid dividends thereon.
(vi) No Conversion Charge or Tax. The issuance and delivery of
---------------------------
10
<PAGE>
certificates for shares of Class A Common Stock upon the conversion of shares of
Series A Preferred Stock shall be made without charge to the holder of shares of
Series A Preferred Stock for any issue or transfer tax, or other incidental
expense in respect of the issuance or delivery of such certificates or the
securities represented thereby, all of which taxes and expenses shall be paid by
the Corporation.
(vii) Reorganization, Reclassification and Merger Adjustment. If there
------------------------------------------------------
occurs any capital reorganization or any reclassification of the Class A Common
Stock of the Corporation, the consolidation or merger of the Corporation with or
into another Person (other than a merger or consolidation of the Corporation in
which the Corporation is the continuing corporation and which does not result in
any reclassification or change of outstanding shares of its Class A Common
Stock) or the sale or conveyance of all or substantially all of the assets of
the Corporation to another Person, then each share of Series A Preferred Stock
shall thereafter be convertible into the same kind and amounts of securities
(including shares of stock) or other assets, or both, which were issuable or
distributable to the holders of outstanding Class A Common Stock of the
Corporation upon such reorganization, reclassification, consolidation, merger,
sale or conveyance, in respect of that number of shares of Class A Common Stock
into which such share of Series A Preferred Stock might have been converted
immediately prior to such reorganization, reclassification, consolidation,
merger, sale or conveyance; and, in any such case, appropriate adjustments (as
determined in good faith by the Board of Directors of the Corporation, whose
determination shall be conclusive) shall be made to assure that the provisions
set forth herein shall thereafter be applicable, as nearly as reasonably may be
practicable, in relation to any securities or other assets thereafter
deliverable upon the conversion of the Series A Preferred Stock.
(viii) Notice of Adjustment. Whenever the securities or other property
--------------------
deliverable upon the conversion of the Series A Preferred Stock shall be
adjusted pursuant to the provisions hereof, the Corporation shall promptly give
written notice thereof to each holder of shares of Series A Preferred Stock at
such holder's address as it appears on the transfer books of the Corporation and
shall forthwith file, at its principal executive office and with any transfer
agent or agents for the Series A Preferred Stock and the Class A Common Stock, a
certificate, signed by the Chairman of the Board, President or one of the Vice
Presidents of the Corporation, and by its Chief Financial Officer, Treasurer or
one of its Assistant Treasurers, stating the securities or other property
deliverable per share of Series A Preferred Stock calculated to the nearest cent
or to the nearest one-hundredth of a share and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment and
upon which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment hereunder is required.
(ix) Reservation of Class A Common Stock. The Corporation shall at all
-----------------------------------
times reserve and keep available for issuance upon the conversion of the shares
of Series A Preferred Stock the maximum number of its authorized but unissued
shares of Class A Common Stock as is reasonably anticipated to be sufficient to
permit the conversion of
11
<PAGE>
all outstanding shares of Series A Preferred Stock, and shall take all action
required to increase the authorized number of shares of Class A Common Stock if
at any time there shall be insufficient authorized but unissued shares of Class
A Common Stock to permit such reservation or to permit the conversion of all
outstanding shares of Series A Preferred Stock.
(j) Qualified Transfer. If at any time an Initial Holder or Qualified
------------------
Transferee desires to sell, transfer or otherwise dispose of shares of Series A
Preferred Stock pursuant to a Qualified Transfer, it shall, with respect to each
such proposed transfer, give written notice (a "Qualified Transfer Notice") to
-------------------------
the Corporation at its principal executive office specifying up to ten
prospective transferees. Upon receipt of such notice, the Corporation shall
have ten days to give written notice to the Initial Holders or Qualified
Transferee specifying its disapproval of (A) any or all of such prospective
transferees if it has good reason for such disapproval and specifying such
reason and (B) up to two of such prospective transferees with or without good
reason.
(k) Notice of Certain Events. In case the Corporation shall propose at any
------------------------
time or from time to time (i) to declare or pay any dividend payable in stock of
any class to the holders of Common Stock or to make any other distribution to
the holders of Common Stock, (ii) to offer to the holders of Common Stock rights
or warrants to subscribe for or to purchase any additional shares of Common
Stock or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Common Stock, (iv) to
effect any consolidation, merger or sale, transfer or other disposition of all
or substantially all of the property, assets or business of the Corporation
which would, if consummated, adjust the Series A Conversion Rate or the
securities issuable upon conversion of shares of Series A Preferred Stock, or
(v) to effect the liquidation, dissolution or winding up of the Corporation,
then, in each such case, the Corporation shall mail to each holder of shares of
Series A Preferred Stock, at such holder's address as it appears on the transfer
books of the Corporation, a written notice of such proposed action, which shall
specify (A) the date on which a record is to be taken for the purpose of such
dividend or distribution of rights or warrants or, if a record is not to be
taken, the date as of which the holders of shares of Common Stock of record to
be entitled to such dividend or distribution of rights or warrants are to be
determined, or (B) the date on which such reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up is expected to
become effective, and such notice shall be so given as promptly as possible but
in any event at least ten Business Days prior to the applicable record,
determination or effective date, specified in such notice.
(l) Certain Remedies. Any registered holder of shares of Series A
----------------
Preferred Stock shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Amended and Restated Certificate of
Incorporation and to enforce specifically the terms and provisions of this
Amended and Restated Certificate of Incorporation in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which such holder may be entitled at law or in equity.
12
<PAGE>
4.4 Powers, Preferences and Rights of the Series B Preferred Stock. The
--------------------------------------------------------------
Series B Preferred Stock shall rank on a parity with the Series A Preferred
Stock, the Series H Preferred Stock and the Series I Preferred Stock, and the
powers, preferences and rights of the Series B Preferred Stock, and the
qualifications, limitations, and restrictions thereof, shall be identical to
those of the Series A Preferred Stock, except that (a) any references to the
"December 2008 Dividend Payment Date" shall instead be a reference to the "June
2009 Dividend Payment Date"; (b) holders shall have the right to designate one
director and designate replacements for such director, pursuant to Section
4.3(d)(iii), so long as the Initial Holders own, in the aggregate, an amount of
Series B Preferred Stock equal to at least 60,446 shares, (c) no holder of
Series B Preferred Stock shall have the right to convert Series B Preferred
Stock into Class A Common Stock or any other securities, pursuant to Section
4.3(i), prior to January 15, 2007; and (d) the words "Series B Preferred Stock"
and "Series A Preferred Stock" shall be substituted for all references in
Section 4.3 to Series A Preferred Stock and Series B Preferred Stock,
respectively, and any references in Section 4.3 to "TeleCorp PCS, Inc." shall
instead be a reference to "Tritel, Inc."
4.5 Powers, Preferences and Rights of the Series C Preferred Stock. The
--------------------------------------------------------------
powers, preferences and rights of the Series C Preferred Stock and the
qualifications, limitations and restrictions thereof are as follows:
(a) Ranking. The Series C Preferred Stock shall rank (i) junior to the
-------
Series A Preferred Stock, the Series B Preferred Stock, the Series H Preferred
Stock and the Series I Preferred Stock with respect to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up, (ii)
junior to the Series D Preferred Stock with respect to the distribution of
assets on a Statutory Liquidation, (iii) on a parity with the Series D Preferred
Stock with respect to the distribution of assets on liquidation, dissolution or
winding up (other than on a Statutory Liquidation), (iv) on a parity with the
Series D Preferred Stock and the Common Stock with respect to the payment of
dividends, and (v) senior to the Common Stock and any series or class of the
Corporation's common or preferred stock, now or hereafter authorized (other than
Series A Preferred Stock, Series B Preferred Stock, Series D Preferred Stock,
Series H Preferred Stock or Series I Preferred Stock), with respect to the
payment of dividends and the distribution of assets on liquidation, dissolution
and winding up.
(b) Dividends. Holders of Series C Preferred Stock shall be entitled to
---------
dividends in cash or property when, as and if, declared by the Board of
Directors of the Corporation; provided that, in no event shall dividends in
--------
excess of the Liquidation Preference be declared or paid. So long as shares of
Series C Preferred Stock are outstanding or dividends payable on shares of
Series C Preferred Stock have not been paid in full in cash, the Corporation
shall not declare or pay cash dividends on, or redeem, purchase or otherwise
acquire for consideration, any shares of any class of common stock or series of
preferred stock ranking junior to or on a parity with the Series C Preferred
Stock, except that the Corporation may acquire, in accordance with the terms of
any agreement between the Corporation and its employees, shares of Common Stock
or Preferred Stock at a price not greater than the Market Price as of such date.
The
13
<PAGE>
Corporation shall not declare or pay cash dividends on, or redeem, purchase or
otherwise acquire for consideration, any shares of Series D Preferred Stock
unless concurrently therewith the Corporation shall declare or pay cash
dividends on, or redeem, purchase or otherwise acquire for consideration, as the
case may be, shares of Series C Preferred Stock ratably in accordance with the
number of shares of Series C Preferred Stock and Series D Preferred Stock then
outstanding.
(c) Liquidation Preference.
----------------------
(i) In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series C Preferred Stock shall be entitled to
receive out of the assets of the Corporation, whether such assets are capital or
surplus of any nature, after payment is made to holders of all series of
preferred stock ranking senior to the Series C Preferred Stock with respect to
rights on liquidation, dissolution or winding up (including, in the case of a
Statutory Liquidation, the Series D Preferred Stock), but before any payment
shall be made or any assets distributed to the holders of Common Stock or any
series of preferred stock ranking junior to the Series C Preferred Stock with
respect to rights on liquidation, dissolution or winding up, an amount equal to
the Liquidation Preference and no more.
(ii) If upon any liquidation, dissolution or winding up of the
Corporation the assets of the Corporation to be distributed are insufficient to
permit the payment to all holders of Series C Preferred Stock and any other
series of preferred stock ranking on a parity with Series C Preferred Stock with
respect to rights on liquidation, dissolution or winding up (including, in the
case of a liquidation, dissolution or winding up other than a Statutory
Liquidation, the Series D Preferred Stock), to receive their full preferential
amounts, the entire assets of the Corporation shall be distributed among the
holders of Series C Preferred Stock and all such other series ratably in
accordance with their respective Liquidation Preference.
(iii) Neither the consolidation or merger of the Corporation with or into
any other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Corporation, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4.5(c).
(d) Voting Rights.
-------------
(i) In addition to the voting rights set forth in Section 4.2(e) or
otherwise provided by law, the holders of shares of Series C Preferred Stock
shall have the voting rights provided in paragraph (ii) below.
(ii) The affirmative vote of holders of not less than a majority of
Series C Preferred Stock shall be required to (A) authorize, increase the
authorized number of shares of or issue (including on conversion or exchange of
any convertible or exchangeable securities or by reclassification) any shares of
any class or classes of stock ranking senior to or pari passu with the Series C
Preferred Stock or any additional shares
14
<PAGE>
of Series C Preferred Stock, except upon conversion or exchange pursuant to
Section 4.14 of outstanding securities, (B) authorize, adopt or approve each
amendment to this Amended and Restated Certificate of Incorporation that would
increase or decrease the par value of the shares of Series C Preferred Stock,
alter or change the powers, preferences or rights of the shares of Series C
Preferred Stock or alter or change the powers, preferences or rights of any
other capital stock of the Corporation if such alteration or change results in
such capital stock ranking senior to or pari passu with the Series C Preferred
Stock, (C) amend, alter or repeal any provision of this Amended and Restated
Certificate of Incorporation so as to affect the shares of Series C Preferred
Stock adversely, or (D) authorize or issue any security convertible into,
exchangeable for or evidencing the right to purchase or otherwise receive any
shares of any class or classes of stock senior to or pari passu with the Series
C Preferred Stock.
(e) Redemption at Option of the Corporation. The Corporation shall have
---------------------------------------
the right to redeem shares of Series C Preferred Stock pursuant to the following
provisions:
(i) Subject to the restrictions set forth in Section 4.5(g)(i), the
Corporation shall have the right, at its sole option and election, to redeem the
shares of the Series C Preferred Stock, in whole but not in part, at any time at
a redemption price per share (the "Series C Redemption Price") equal to the
Liquidation Preference thereof as of the redemption date; provided, that
concurrently with such redemption, the Corporation shall redeem the shares of
Series D Preferred Stock, in whole and not in part, at a redemption price per
share (the "Series D Redemption Price") equal to the Liquidation Preference
thereof as of the redemption date; provided, further, that if the funds legally
available to the Corporation are insufficient to effect the redemption of the
Series C Preferred Stock and the Series D Preferred Stock in full, such funds
shall be allocated among the shares of Series C Preferred Stock and Series D
Preferred Stock ratably in accordance with the number of shares of each Series
outstanding as of the redemption date;
(ii) Notice of any redemption of the Series C Preferred Stock and Series
D Preferred Stock shall be mailed at least ten but not more than 60 days prior
to the date fixed for redemption to each holder of Series C Preferred Stock and
Series D Preferred Stock to be redeemed, at such holder's address as it appears
on the books of the Corporation. In order to facilitate the redemption of the
Series C Preferred Stock and Series D Preferred Stock, the Board of Directors
may fix a record date for the determination of holders of Series C Preferred
Stock and Series D Preferred Stock to be redeemed, or may cause the transfer
books of the Corporation to be closed for the transfer of the Series C Preferred
Stock and Series D Preferred Stock, not more than 60 days prior to the date
fixed for such redemption;
(iii) Within two Business Days after the redemption date specified in the
notice given pursuant to paragraph (ii) above and the surrender of the
certificate(s) representing shares of Series C Preferred Stock or Series D
Preferred Stock, as the case may be, the Corporation shall pay to the holder of
the shares being redeemed the Series C Redemption Price or the Series D
Redemption Price therefor. Such payment shall be
15
<PAGE>
made by wire transfer of immediately available funds to an account designated by
such holder or by overnight delivery (by a nationally recognized courier) of a
bank check to such holder's address as it appears on the books of the
Corporation; and
(iv) Effective upon the date of the notice given pursuant to paragraph
(ii) above, notwithstanding that any certificate for such shares shall not have
been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding, the rights to receive dividends thereon shall
cease to accrue from and after the date of redemption designated in the notice
of redemption and all rights of the holders of the shares of the Series C
Preferred Stock or Series D Preferred Stock, as the case may be, called for
redemption shall cease and terminate, excepting only the right to receive the
Series C Redemption Price or the Series D Redemption Price therefor in
accordance with paragraph (iii) above.
(f) Redemption at Option of Holder.
------------------------------
(i) No holder of shares of Series C Preferred Stock shall have any right
to require the Corporation to redeem any shares of Series C Preferred Stock
prior to, with respect to any shares of the Series C Preferred Stock, the 30th
day after the twentieth anniversary of the issuance of such shares. Thereafter,
subject to the restrictions set forth in Section 4.5(g)(i), each holder of
shares of Series C Preferred Stock shall have the right, at the sole option and
election of such holder, to require the Corporation to redeem all (but not less
than all) of the shares of Series C Preferred Stock owned by such holder at a
price per share equal to the Series C Redemption Price;
(ii) The holder of any shares of the Series C Preferred Stock may
exercise such holder's right to require the Corporation to redeem such shares by
surrendering for such purpose to the Corporation, at its principal office or at
such other office or agency maintained by the Corporation for that purpose,
certificates representing the shares of Series C Preferred Stock to be redeemed,
accompanied by a written notice stating that such holder elects to require the
Corporation to redeem all (but not less than all) of such shares in accordance
with the provisions of this Section 4.5(f), which notice may specify an account
for delivery of the Series C Redemption Price;
(iii) Within two Business Days after the surrender of such certificates,
the Corporation shall pay to the holder of the shares being redeemed the Series
C Redemption Price therefor. Such payment shall be made by wire transfer of
immediately available funds to an account designated by such holder or by
overnight delivery (by a nationally recognized courier) of a bank check to such
holder's address as it appears on the books of the Corporation; and
(iv) Such redemptions shall be deemed to have been made at the close of
business on the date of the receipt of such notice and of such surrender of the
certificates representing the shares of the Series C Preferred Stock to be
redeemed and the rights of the holder thereof, except for the right to receive
the Series C Redemption Price therefor
16
<PAGE>
in accordance herewith, shall cease on such date of receipt and surrender.
(g) Certain Restrictions.
--------------------
(i) Notwithstanding the provisions of Sections 4.5(b) or (f), cash
dividends on the Series C Preferred Stock may not be declared, paid or set apart
for payment, nor may the Corporation redeem, purchase or otherwise acquire any
shares of Series C Preferred Stock, if (A) the Corporation is not solvent or
would be rendered insolvent thereby or (B) at such time the terms and provisions
of any law or agreement of the Corporation, including any agreement relating to
its indebtedness, specifically prohibit such declaration, payment or setting
apart for payment or such redemption, purchase or other acquisition, or provide
that such declaration, payment or setting apart for payment or such redemption,
purchase or other acquisition would constitute a violation or breach thereof or
a default thereunder.
(ii) So long as shares of Series C Preferred Stock are outstanding or
dividends payable on shares of Series C Preferred Stock have not been paid in
full in cash, the Corporation shall not declare or pay cash dividends on, or
redeem, purchase or otherwise acquire for consideration, any shares of Common
Stock or other shares of capital stock of the Corporation ranking junior to or
on a parity basis with the Series C Preferred Stock, except with the prior
written consent of holders of a majority of the outstanding shares of Series C
Preferred Stock, except that the Corporation may acquire, in accordance with the
terms of any agreement between the Corporation and its employees, shares of
Common Stock from its employees at a price equal to such employee's purchase
price therefor without such consent.
(iii) The Corporation shall not permit any Subsidiary of the Corporation,
or cause any other Person, to make any distribution with respect to, or purchase
or otherwise acquire for consideration, any shares of Common Stock or other
shares of capital stock of the Corporation ranking junior to or on a parity
basis with the Series C Preferred Stock unless the Corporation could, pursuant
to paragraph (i) above, make such distribution or purchase or otherwise acquire
such shares at such time and in such manner.
4.6 Powers, Preferences and Rights of the Series D Preferred Stock.
(a) General. The powers, preferences and rights of the Series D
-------
Preferred Stock, and the qualifications, limitations, and restrictions thereof,
shall be identical to those of the Series C Preferred Stock, except that (i) the
Series D Preferred Stock shall rank with respect to the other series and classes
of capital stock of the Corporation as provided in paragraph (b) below, (ii) the
shares of Series D Preferred Stock shall be subject to redemption, pro rata with
the Series C Preferred Stock, in accordance with Section 4.5(e), and (iii) the
words "Series D Preferred Stock" and "Series C Preferred Stock" shall be
substituted for all references in Section 4.5 to Series C Preferred Stock and
Series D Preferred Stock, respectively.
(b) Ranking. The Series D Preferred Stock shall rank (i) junior to the
-------
17
<PAGE>
Series A Preferred Stock, the Series B Preferred Stock, the Series H Preferred
Stock and the Series I Preferred Stock with respect to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up, (ii)
senior to the Series C Preferred Stock with respect to the distribution of
assets on a Statutory Liquidation, (iii) on a parity with the Series C Preferred
Stock with respect to the distribution of assets on liquidation, dissolution or
winding up (other than on a Statutory Liquidation), (iv) on a parity with the
Series C Preferred Stock and the Common Stock with respect to the payment of
dividends, and (v) senior to the Common Stock and any series or class of the
Corporation's common or preferred stock, now or hereafter authorized (other than
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series H Preferred Stock or Series I Preferred Stock), with respect to the
payment of dividends and distribution of assets on liquidation, dissolution and
winding up.
4.7 Powers, Preferences and Rights of the Series E Preferred Stock. The
--------------------------------------------------------------
powers, preferences and rights of the Series E Preferred Stock, and the
qualifications, limitations and restrictions thereof, shall be identical to
those of the Series C Preferred Stock, except that (a) the Series E Preferred
Stock shall rank, with respect to the payment of dividends and the distribution
of assets on liquidation, dissolution or winding up, (i) junior to the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, the Series H Preferred Stock and the Series I Preferred Stock
and (ii) senior to the Series F Preferred Stock and the Common Stock and any
series or class of the Corporation's common or preferred stock, now or hereafter
authorized (other than the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series H Preferred Stock or
Series I Preferred Stock), (b) the provisos to Section 4.5(e)(i) shall not apply
to a redemption of the Series E Preferred Stock, and (c) the words "Series E
Preferred Stock" shall be substituted for all references in Section 4.5 to
Series C Preferred Stock.
4.8 Powers, Preferences and Rights of the Series F Preferred Stock. The
--------------------------------------------------------------
powers, preferences and rights of the Series F Preferred Stock, and the
qualifications, limitations and restrictions thereof are as follows:
(a) Ranking. The Series F Preferred Stock shall rank (i) junior to the
-------
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stock, the Series E Preferred Stock, the Series H
Preferred Stock and the Series I Preferred Stock with respect to the payment of
dividends and the distribution of assets on liquidation, dissolution or winding
up, (ii) on a parity with the Series G Preferred Stock with respect to the
payment of dividends and the distribution of assets on liquidation, dissolution
or winding up, (iii) on a parity with the Common Stock with respect to the
distribution of assets on liquidation, dissolution or winding up (other than on
a Statutory Liquidation), (iv) senior to the Common Stock with respect to the
distribution of assets on a Statutory Liquidation, (v) on a parity with the
Common Stock with respect to the payment of dividends, and (vi) senior to any
series or class of the Corporation's common or preferred stock hereafter
authorized (other than Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock,
18
<PAGE>
Series H Preferred Stock, Series I Preferred Stock or Common Stock), with
respect to the payment of dividends and the distribution of assets on
liquidation, dissolution and winding up.
(b) Dividends. Holders of Series F Preferred Stock shall be entitled to
---------
dividends in cash or property when, as and if, declared by the Board of
Directors of the Corporation.
(c) Liquidation Preference.
----------------------
(i) In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series F Preferred Stock shall be entitled to
receive out of the assets of the Corporation, whether such assets are capital or
surplus of any nature, after payment is made to holders of all series of
preferred stock ranking senior to the Series F Preferred Stock with respect to
rights on liquidation, dissolution or winding up, but before any payment shall
be made or any assets distributed to the holders of Common Stock or any series
of preferred stock ranking junior to the Series F Preferred Stock with respect
to rights on liquidation, dissolution or winding up, an amount equal to the
Liquidation Preference and no more.
(ii) If upon any liquidation, dissolution or winding up of the
Corporation the assets of the Corporation to be distributed are insufficient to
permit the payment to all holders of Series F Preferred Stock and any other
series of preferred stock ranking on a parity with Series F Preferred Stock with
respect to rights on liquidation, dissolution or winding up, to receive their
full preferential amounts, the entire assets of the Corporation shall be
distributed among the holders of Series F Preferred Stock and all such other
series ratably in accordance with their respective Liquidation Preference.
(iii) After payment to the holders of Series F Preferred Stock of the
amounts set forth in paragraph (i) above, the entire remaining assets and funds
of the Corporation legally available for distribution, if any, shall be
distributed among the holders of the Participating Stock in proportion to the
shares of Participating Stock then held by them as of the date of the
liquidation, dissolution or winding up of the Corporation.
(iv) Neither the consolidation or merger of the Corporation with or into
any other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Corporation, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4.8(c).
(d) Voting Rights.
-------------
(i) In addition to the voting rights set forth in Section 4.12(c)(i) or
otherwise provided by law, the holders of shares of Series F Preferred Stock
shall have the voting rights provided in paragraph (ii) below.
(ii) The affirmative vote of holders of not less than a majority of
Series F
19
<PAGE>
Preferred Stock shall be required to (A) authorize, increase the authorized
number of shares of or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any shares of any
class or classes of stock ranking senior to or pari passu with the Series F
Preferred Stock or any additional shares of Series F Preferred Stock, except
upon conversion or exchange of outstanding securities pursuant to Section 4.14,
(B) authorize, adopt or approve each amendment to this Amended and Restated
Certificate of Incorporation that would increase or decrease the par value of
the shares of Series F Preferred Stock, alter or change the powers, preferences
or rights of the shares of Series F Preferred Stock or alter or change the
powers, preferences or rights of any other capital stock of the Corporation if
such alteration or change results in such capital stock ranking senior to or
pari passu with the Series F Preferred Stock, (C) amend, alter or repeal any
provision of this Amended and Restated Certificate of Incorporation so as to
affect the shares of Series F Preferred Stock adversely, or (D) authorize or
issue any security convertible into, exchangeable for or evidencing the right to
purchase or otherwise receive any shares of any class or classes of stock senior
to or pari passu with the Series F Preferred Stock. For purposes hereof, Common
Stock shall not be deemed to be pari passu with or on parity with the Series F
Preferred Stock.
(e) Conversion. The shares of Series F Preferred Stock shall be
----------
convertible into shares of Common Stock as follows:
(i) Optional Conversion. Each share of Series F Preferred Stock shall be
-------------------
convertible, at the option of the holder thereof, at any time and from time to
time, into one fully paid and non-assessable share of Class A Common Stock;
provided that, unless and until the Tracked Common Stock shall be convertible
into Class A Common Stock in accordance with Section 4.12(e), each of the first
195,063 shares of Series F Preferred Stock converted pursuant to this paragraph
shall be convertible into one fully paid and non-assessable share of Class D
Common Stock.
(ii) Mechanics of Optional Conversion. In order for a holder of Series F
--------------------------------
Preferred Stock to convert such shares into shares of Common Stock, such holder
shall surrender the certificate(s) for such shares of Series F Preferred Stock
at the office of the transfer agent for the Series F Preferred Stock (or if the
Corporation serves as its own transfer agent, at the principal office of the
Corporation), together with written notice that such holder elects to convert
all or any number of the shares of the Series F Preferred Stock represented by
such certificate(s). If required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date (the "Optional Conversion Date"). The Corporation shall, within
------------------------
ten Business Days after the Optional Conversion Date, issue and deliver at such
office to such holder of Series F Preferred Stock, or to his or its nominees,
one or more certificates for the number of whole shares of Common
20
<PAGE>
Stock (and any shares of Series F Preferred Stock represented by the certificate
delivered to the Corporation by the holder thereof that are not converted into
Common Stock) issuable upon such conversion in accordance with the provisions
hereof.
(iii) Reservation of Shares. The Corporation shall at all times when the
---------------------
Series F Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of the Series F Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series F Preferred Stock. Before taking any action
which would cause Common Stock upon the conversion of Series F Preferred Stock,
to be issued below the then par value of the shares of Common Stock the
Corporation will take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock, as the case may be,
to the holders of Series F Preferred Stock.
(iv) Adjustments for Dividends. Upon any conversion of Series F
-------------------------
Preferred Stock, no adjustment to the conversion ratio shall be made for
declared and unpaid dividends on the Series F Preferred Stock surrendered for
conversion or on the Common Stock delivered upon conversion.
(v) Termination of Rights. All shares of Series F Preferred Stock which
---------------------
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Optional Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor and payment of
any declared and unpaid dividends thereon. On and as of the Optional Conversion
Date, the shares of Common Stock issuable upon such conversion shall be deemed
to be outstanding, and the holder thereof shall be entitled to exercise and
enjoy all rights with respect to such shares of Common Stock including the
rights, if any, to receive notices and to vote. Shares of Series F Preferred
Stock converted into Common Stock will be restored to the status of authorized
but unissued shares of Common Stock or preferred stock without designation as to
class or series, and may thereafter be issued, whether or not designated as
shares of Class A Common Stock or Series F Preferred Stock.
(vi) No Conversion Charge or Tax. The issuance and delivery of
---------------------------
certificates for shares of Common Stock upon the conversion of shares of Series
F Preferred Stock shall be made without charge to the holder of shares of Series
F Preferred Stock for any issue or transfer tax, or other incidental expense in
respect of the issuance or delivery of such certificates or the securities
represented thereby, all of which taxes and expenses shall be paid by the
Corporation.
(vii) Reorganization, Reclassification and Merger Adjustment. If there
------------------------------------------------------
occurs any capital reorganization or any reclassification of the Common Stock of
the
21
<PAGE>
Corporation, the consolidation or merger of the Corporation with or into another
Person (other than a merger or consolidation of the Corporation in which the
Corporation is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of its Common Stock) or the
sale or conveyance of all or substantially all of the assets of the Corporation
to another Person, then each share of Series F Preferred Stock shall thereafter
be convertible into the same kind and amounts of securities (including shares of
stock) or other assets, or both, which were issuable or distributable to the
holders of outstanding Common Stock of the Corporation upon such reorganization,
reclassification, consolidation, merger, sale or conveyance, in respect of that
number of shares of Common Stock into which such share of Series F Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification, consolidation, merger, sale or conveyance; and, in any such
case, appropriate adjustments (as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be conclusive) shall be
made to assure that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonably may be practicable, in relation to any
securities or other assets thereafter deliverable upon the conversion of the
Series F Preferred Stock.
(viii) Effect of Dividends, Distributions, Subdivisions of Combinations.
----------------------------------------------------------------
If the Corporation declares a dividend or other distribution payable in Common
Stock or Securities convertible into or exchangeable for Common Stock or
subdivides its outstanding shares of Common Stock into a larger number or
combines its outstanding shares of Common Stock into a smaller number, then the
number of shares of Common Stock issuable upon conversion of the Series F
Preferred Stock shall be appropriately adjusted to give effect to such dividend,
other distribution, subdivision or combination.
(ix) Effect of Distributions In Kind. In case the corporation shall
-------------------------------
distribute to the holders of its capital stock any additional shares of its
capital stock or other securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options, warrants or rights, then, in such case, immediately following the
record date fixed for the determination of the holders of common Stock entitled
to receive such distribution, the number of shares of Common Stock issuable upon
conversion of the Series F Preferred Stock shall be appropriately adjusted to
give effect to such distribution. Such adjustment shall be made on the date
such distribution is made, and shall become effective at the opening of business
on the business day following the record date for the determination of
stockholders entitled to such distribution.
(f) Certain Restrictions.
--------------------
(i) Notwithstanding the provisions of Sections 4.8(b), cash dividends
on the Series F Preferred Stock may not be declared, paid or set apart for
payment, nor may the Corporation redeem, purchase or otherwise acquire any
shares of Series F Preferred Stock, if (A) the Corporation is not solvent or
would be rendered insolvent thereby or (B) at such time the terms and provisions
of any law or agreement of the Corporation,
22
<PAGE>
including any agreement relating to its indebtedness, specifically prohibit such
declaration, payment or setting apart for payment or such redemption, purchase
or other acquisition, or provide that such declaration, payment or setting apart
for payment or such redemption, purchase or other acquisition would constitute a
violation or breach thereof or a default thereunder.
(ii) The Corporation shall not permit any Subsidiary of the Corporation,
or cause any other Person, to make any distribution with respect to, or purchase
or otherwise acquire for consideration, any shares of Common Stock or other
shares of capital stock of the Corporation ranking junior to or on a parity
basis with the Series F Preferred Stock unless the Corporation could, pursuant
to paragraph (i) above, make such distribution or purchase or otherwise acquire
such shares at such time and in such manner.
(g) Redemption. The Series F Preferred Stock is not redeemable.
----------
(h) Sinking Fund. There shall be no sinking fund for the payment of
------------
dividends or Liquidation Preferences on the Series F Preferred Stock.
4.9 Powers, Preferences and Rights of the Series G Preferred Stock
--------------------------------------------------------------
(a) The powers, preferences and rights of the Series G Preferred Stock,
and the qualifications, limitations, and restrictions thereof, shall be
identical to those of the Series F Preferred Stock, except that (i) unless and
until the Tracked Common Stock shall be convertible into Class A Common Stock or
Class B Common Stock in accordance with Section 4.12(e)(iii), instead of each
share of Class A Common Stock issuable upon conversion by a holder of Series G
Preferred Stock being convertible on a one-for-one basis, each holder shall
receive their pro rata share (based on the number of shares of Series G
Preferred Stock outstanding) of (i) 14,031,972 shares of Class A Common Stock
and (ii)(A) 949,398 shares of Class F Common Stock, or (B) if the Tritel
Tracking Stock is convertible into Class A or Class B Common Stock in accordance
with Section 4.12(e)(iii), an additional 949,398 shares of Class A Common Stock,
and (ii) the words "Series G Preferred Stock" and "Series F Preferred Stock"
shall be substituted for all references in Section 4.8 to Series F Preferred
Stock and Series G Preferred Stock, respectively.
4.10 Powers, Preferences and Rights of the Series H Preferred Stock. The
--------------------------------------------------------------
Series H Preferred Stock shall rank on a parity with the Series A Preferred
Stock, the Series B Preferred Stock and Series I Preferred Stock, and the
powers, preferences and rights of the Series H Preferred Stock, and the
qualifications, limitations, and restrictions thereof, shall be identical to
those of the Series A Preferred Stock, except that (a) shares of Series H
Preferred Stock shall not have any right to vote on any matters to be voted on
by the stockholders of the Corporation except as provided in Sections 4.2(e)(i)
and 4.3(d)(i) and (ii), or as provided by law, and shall not be included in
determining the number of shares voting or entitled to vote on any such matters
(other than the matters described in Sections 4.2 (e)(i) and 4.3(d)(i) and (ii)
or otherwise required by law), (b) shares of Series H Preferred Stock shall not
be, pursuant to the terms of Section 4.3(i) or otherwise, convertible into
shares of Common Stock or any other security
23
<PAGE>
issued by the Corporation, (c) the Corporation may redeem shares of Series H
Preferred Stock in accordance with the terms of Section 4.3(e) at any time
without regard to whether the redemption date is before, on or after the date
referred to in Section 4.3(e)(i), (d) shares of Series H Preferred Stock may be
issued by the Corporation in accordance with the terms of Section 4.14, (e)
holders of Series H Preferred Stock shall not, pursuant to Section 4.3(d) or
otherwise, have the right to designate any directors of the Corporation (except
to the extent provided in Section 4.2(e)(i)), and (f) the words "Series H
Preferred Stock" and "Series A Preferred Stock" shall be substituted for all
references in Section 4.3 to Series A Preferred Stock and Series H Preferred
Stock, respectively.
4.11 Powers, Preferences and Rights of the Series I Preferred Stock. The
--------------------------------------------------------------
Series I Preferred Stock shall rank on a parity with the Series A Preferred
Stock, the Series B Preferred Stock and Series H Preferred Stock, and the
powers, preferences and rights of the Series I Preferred Stock, and the
qualifications, limitations, and restrictions thereof, shall be identical to
those of the Series B Preferred Stock, except that (a) shares of Series I
Preferred Stock shall not have any right to vote on any matters to be voted on
by the stockholders of the Corporation (except as provided in Sections 4.2(e)(i)
and 4.3(d)(i) and (ii)), or as provided by law, and shall not be included in
determining the number of shares voting or entitled to vote on any such matters
(other than the matters described in Sections 4.2(e)(i) and 4.3(d)(i) and (ii)
or otherwise required by law), (b) shares of Series I Preferred Stock shall not
be, pursuant to the terms of Section 4.3(i) or otherwise, convertible into
shares of Common Stock or any other security issued by the Corporation, (c) the
Corporation may redeem shares of Series I Preferred Stock in accordance with the
terms of Section 4.3(e) at any time without regard to whether the redemption
date is before, on or after the date referred to in Section 4.3(e)(i), (d)
shares of Series I Preferred Stock may be issued by the Corporation in
accordance with the terms of Section 4.14, (e) holders of Series I Preferred
Stock shall not, pursuant to Section 4.3(d) or otherwise, have the right to
designate any directors of the Corporation (except to the extent provided in
Section 4.2(e)(i)), and (f) the words "Series I Preferred Stock" and "Series B
Preferred Stock" shall be substituted for all references in Section 4.4 to
Series B Preferred Stock and Series I Preferred Stock, respectively.
4.12 Common Stock.
------------
(a) General. Except as otherwise provided herein, all shares of Common
-------
Stock issued and outstanding shall be identical, and shall entitle the holders
thereof to the same rights, powers and privileges of stockholders under Delaware
law. For purposes of this Section 4.12 (and the definitions relating thereto),
the Class A Common Stock and the Class B Common Stock are herein collectively
referred to as the "Non-Tracked Common Stock" and the Class C Common Stock, the
Class D Common Stock, the Class E Common Stock and the Class F Common Stock are
herein collectively referred to as the "Tracked Common Stock".
(b) Dividends. Subject to Section 4.13(a)(ii) and (b)(ii) and the
---------
express terms of any outstanding series of Preferred Stock, dividends may be
paid in cash or otherwise with respect to each class of Common Stock out of the
assets of the Corporation, upon
24
<PAGE>
the terms, and subject to the limitations, provided in this Section 4.12(b), as
the Board of Directors may determine.
(i) Dividends on the Non-Tracked Common Stock. Dividends on the Non-
-----------------------------------------
Tracked Common Stock may be declared and paid only out of the excess of (A) the
funds of the Corporation legally available therefor over (B) the Tracked
Business Available Dividend Amount (the "Non-Tracked Business Available Dividend
---------------------------------------
Amount").
- ------
(ii) Dividends on Class C and D Common Stock. Dividends on the Class C
---------------------------------------
Common Stock and the Class D Common Stock (the "TeleCorp Tracking Stock") may be
declared and paid only out of the lesser of (A) the funds of the Corporation
legally available therefor and (B) the TeleCorp Tracked Business Available
Dividend Amount. The Corporation shall not declare or pay cash dividends on, or
redeem, purchase or otherwise acquire for consideration, any shares of TeleCorp
Tracking Stock unless concurrently therewith the Corporation shall declare or
pay cash dividends on, or redeem, purchase or otherwise acquire for
consideration, as the case may be, on the same terms, all shares of TeleCorp
Tracking Stock ratably in accordance with the number of shares of each class of
TeleCorp Tracking Stock then outstanding.
(iii) Dividends on the Class E and F Common Stock. Dividends on the Class
-------------------------------------------
E Common Stock and the Class F Common Stock (the "Tritel Tracking Stock") may be
declared and paid only out of the lesser of (A) the funds of the Corporation
legally available therefor and (B) the Tritel Tracked Business Available
Dividend Amount. The Corporation shall not declare or pay cash dividends on, or
redeem, purchase or otherwise acquire for consideration, any shares of Tritel
Tracking Stock unless concurrently therewith the Corporation shall declare or
pay cash dividends on, or redeem, purchase or otherwise acquire for
consideration, as the case may be, on the same terms, all shares of the Tritel
Tracking Stock ratably in accordance with the number of shares of each class of
Tritel Tracking Stock then outstanding.
(iv) Discrimination in Dividends Among the Tracked and Non-Tracked Common
--------------------------------------------------------------------
Stock. The Board of Directors may at any time, subject to the provisions of
- -----
Sections 4.12(b)(i), (ii) and (iii) and Section 4.13, declare and pay dividends
exclusively on the Non-Tracked Common Stock, exclusively on the TeleCorp
Tracking Stock, exclusively on the Tritel Tracking Stock or on each of such
category of Common Stock in equal or unequal amounts, notwithstanding the
relative amounts of the Non-Tracked Business Available Dividend Amount, the
TeleCorp Tracked Business Available Dividend Amount or the Tritel Tracked
Business Available Dividend Amount.
(c) Voting.
------
(i) The holders of shares of Common Stock , Series F Preferred Stock and
Series G Preferred Stock shall be entitled to such voting rights as hereinafter
provided, and shall be entitled to notice of any stockholders' meeting and to
vote upon such matters as provided herein and in the Bylaws of the Corporation,
and as may be provided by law.
25
<PAGE>
Holders of any class of Common Stock, Series F Preferred Stock or Series G
Preferred Stock shall not be entitled to cumulate their votes for any purpose.
Except as otherwise required by law or provided herein, regardless of the number
of shares of any class of Common Stock, Series F Preferred Stock or Series G
Preferred then outstanding, the Common Stock (other than the Class B Common
Stock and the Voting Preference Common Stock), the Series F Preferred Stock and
the Series G Preferred Stock shall be entitled to the number of votes set forth
below and the number of votes or fractional votes to which each share of a
particular class of Common Stock (other than the Class B Common Stock and the
Voting Preference Common Stock), Series F Preferred Stock and Series G Preferred
Stock shall be entitled shall be the quotient determined by dividing the
aggregate number of votes to which the Common Stock (other than the Class B
Common Stock and Voting Preference Common Stock), the Series F Preferred Stock
and the Series G Preferred Stock is entitled by the number of shares of all
Common Stock (other than the Class B Common Stock and Voting Preference Common
Stock), Series F Preferred Stock and Series G Preferred Stock then outstanding.
For purposes of such vote, the shares of Series F Preferred Stock and Series G
Preferred Stock shall be entitled to the number of votes that the holders
thereof would receive upon conversion of such shares into Common Stock. Except
as otherwise required by law or provided herein, the Common Stock (other than
the Class B Common Stock and Voting Preference Common Stock), the Series F
Preferred Stock and the Series G Preferred Stock shall have 4,690,000 votes, the
Voting Preference Common Stock shall have 5,010,000 votes and the Class B Common
Stock shall have no votes.
(ii) A quorum for the transaction of business shall be present when a
majority of the shares of Voting Preference Common Stock outstanding as of the
record date are present and when shares of all classes of Common Stock and
Preferred Stock with at least 5,010,000 votes are present, except that with
respect to actions requiring a majority vote of any of the Class A Common Stock,
Class B Common Stock, Class C Common Stock, Class D Common Stock, Class E Common
Stock, Class F Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock or
Series I Preferred Stock, the presence of a majority of the outstanding shares
of such class or series shall also be required for a quorum to be present.
Except as otherwise required by law or provided herein, the majority vote of the
Voting Preference Common Stock present at any meeting at which a quorum is
present shall be sufficient to approve any action required to be approved by the
holders of the Common Stock and Preferred Stock.
(iii) In any matter requiring a separate class vote of holders of any
class of Common Stock or a separate vote of two or more classes of Common Stock
voting together as a single class, for the purposes of such a class vote, each
share of Common Stock of such class shall be entitled to one vote per share.
(iv) In the event that the Corporation shall have received an opinion of
regulatory counsel of nationally recognized standing to the effect that the
rules, regulations
26
<PAGE>
or policies of the Federal Communications Commission (the "FCC") permit
---
the Class A Common Stock and the Voting Preference Common Stock (x) to be voted
as a single class on all matters, (y) to be treated as a single class for
purposes of all quorum requirements and (z) to have one vote per share, then,
unless the Board of Directors of the Corporation shall have determined, within
30 days after the date of receipt of such opinion, that obtaining the FCC
consent described below would be reasonably expected to have a significant
detrimental effect on the Corporation, the Corporation shall, upon the
affirmative vote of 66-2/3% or more of the Class A Common Stock, seek consent
from the FCC to permit the Class A Common Stock and Voting Preference Common
Stock to vote and act as a single class in the manner described above. From and
after the date that such consent is obtained, the Class A Common Stock and the
Voting Preference Common Stock shall be voted as a single class on all matters,
shall be treated as a single class for purposes of all quorum requirements, and
shall have one vote per share; provided, that the voting rights of the Class B
Common Stock, Class C Common Stock, Class D Common Stock, Class E Common Stock,
Class F Common Stock and the Preferred Stock shall remain unaffected.
(v) The holders of shares of Class B Common Stock shall be entitled to
vote as a separate class on any amendment, repeal or modification of any
provision of this Amended and Restated Certificate of Incorporation that
adversely affects the powers, preferences or special rights of the holders of
the Class B Common Stock.
(vi) The holders of shares of Voting Preference Common Stock shall have the
exclusive right, voting separately as a single class, to elect two directors to
the Board of Directors of the Corporation. Each director so elected shall be
entitled to 1/2 of a vote on all matters voted upon by the directors of the
Corporation. The foregoing right to elect two directors may be exercised at any
annual meeting of stockholders or a special meeting of stockholders or holders
of Voting Preference Common Stock held for such purpose or any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of a majority of the issued and outstanding shares
of Voting Preference Common Stock. Notwithstanding the foregoing, the holders
of a majority of the shares of Voting Preference Common Stock shall have the
right, exercisable at any time by written notice delivered to the Secretary of
the Corporation, to surrender and cancel irrevocably all or a portion of such
right to elect such directors. In the event any director so nominated by the
holders of the Voting Preference Common Stock ceases to be a director of the
Corporation during such director's term (whether or not such director resigns,
is removed from the Board of Directors with or without cause or ceases to be a
director by reason of death, disability or for any other reason), the remaining
director shall be entitled to one vote and the voting rights of the holders of
the shares of Voting Preference Common Stock set forth in this Section
4.12(e)(vi) shall terminate and be of no further force and effect. In the event
the Corporation receives an opinion from regulatory counsel as described in
subparagraph (c)(iv) of this Section, the voting rights of the holders of the
shares of Voting Preference Common Stock set forth in this Section 4.12(e)(vi)
shall terminate and be of no further force and effect.
(d) Dissolution, Liquidation or Winding Up. Upon the dissolution,
--------------------------------------
liquidation
27
<PAGE>
or winding up of the Corporation, after any preferential amounts to be
distributed to the holders of the Preferred Stock and any other class or series
of stock having a preference over the Common Stock then outstanding have been
paid or declared and funds sufficient for the payment thereof in full set apart
for payment, (i) the holders of the TeleCorp Tracking Stock shall be entitled to
receive pro rata the TeleCorp Tracked Business Available Liquidation Amount,
(ii) the holders of the Tritel Tracking Stock shall be entitled to receive pro
rata the Tritel Tracked Business Available Liquidation Amount and (iii) the
holders of the Non-Tracked Common Stock shall be entitled to receive pro rata
the excess of (A) all the remaining assets of the Corporation available for
distribution to its stockholders over (B) the TeleCorp Tracked Business
Available Liquidation Amount plus the Tritel Tracked Business Available
Liquidation Amount.
(e) Conversion.
----------
(i) Each share of Class B Common Stock may, at the option of the holder
thereof, at any time, be converted into one fully paid and non-assessable share
of Class A Common Stock.
(ii) Each share of Class A Common Stock may, at the option of the holder
thereof, at any time, be converted into one fully paid and non-assessable share
of Class B Common Stock.
(iii) In the event that the Corporation shall have received an opinion of
regulatory counsel of nationally recognized standing to the effect that the
rules, regulations or policies of the FCC permit the conversion of shares of
Tracked Common Stock into Class A Common Stock or Class B Common Stock, then,
unless the Board of Directors of the Corporation shall have determined, within
30 days after receipt of such opinion, that permitting such conversion would be
reasonably expected to have a significant detrimental effect on the Corporation,
each share of Class C Common Stock, Class D Common Stock, Class E Common Stock
and Class F Common Stock shall, at the option of the holder thereof and upon the
affirmative vote of 66-2/3% or more of the Class A Common Stock, be converted
into one fully paid and non-assessable share of Class A Common Stock or Class B
Common Stock.
4.13 Participating Stock.
-------------------
(a) Participating Stock
-------------------
(i) Changes in Capital Stock. The Corporation shall not effect any
------------------------
change in or reclassification of any class or series of the outstanding
Participating Stock whether through stock dividends, stock splits, reverse stock
splits, combinations or otherwise, without the payment to the Corporation of any
consideration therefor in money, services or property, unless concurrently
therewith the Corporation shall effect a corresponding change in each other
class and series of the outstanding Participating Stock.
(ii) Dividends and Distributions. The Corporation shall not declare or
---------------------------
pay
28
<PAGE>
cash dividends on, or redeem, purchase or otherwise acquire for consideration,
any shares of Participating Stock unless concurrently therewith the Corporation
shall declare or pay cash dividends on, or redeem, purchase or otherwise acquire
for consideration, as the case may be, on the same terms, all shares of
Participating Stock ratably in accordance with the number of shares of each
class and series of Participating Stock then outstanding.
(iii) Notices. Any written notice or communication by the Corporation to
-------
holders of any class or series of Participating Stock shall be sent to all
holders of Participating Stock.
(b) Tritel Tracking Stock.
---------------------
(i) Changes in Capital Stock. The Corporation shall not effect any
------------------------
change in or reclassification of any class or series of the outstanding Tritel
Tracking Stock, whether through stock dividends, stock splits, reverse stock
splits, combinations or otherwise, without the payment to the Corporation of any
consideration therefor in money, services or property, unless concurrently
therewith the Corporation shall effect a corresponding change in each other
class and series of the outstanding Tritel Tracking Stock.
(ii) Dividends and Distributions. The Corporation shall not declare or
---------------------------
pay cash dividends on, or redeem, purchase or otherwise acquire for
consideration, any shares of Tritel Tracking Stock unless concurrently therewith
the Corporation shall declare or pay cash dividends on, or redeem, purchase or
otherwise acquire for consideration, as the case may be, on the same terms, all
shares of Tritel Tracking Stock ratably in accordance with the number of shares
of each class and series of Tritel Tracking Stock then outstanding.
(iii) Notices. Any written notice or communication by the Corporation to
-------
holders of any class or series of Tritel Tracking Stock shall be sent to all
holders of Tritel Tracking Stock.
4.14 Exchange of Capital Stock. Notwithstanding any other provision of
-------------------------
this Amended and Restated Certificate of Incorporation to the contrary, in the
event that AT&T Wireless terminates its obligations under Section 8.6 of the
Stockholders Agreement pursuant to Section 8.8(c) thereof with respect to any
Overlap Territory (as defined therein) (any such termination being referred to
hereinafter as the "Exchange Event"), the following provisions shall apply:
--------------
(a) Right to Exchange. The Corporation shall have the right,
-----------------
exercisable in its sole discretion by written notice (the "Exchange Notice")
---------------
given to the Initial Holders and Section 4.14 Transferees within 60 days after
the Exchange Event, to:
(i) require the Initial Holders and each Section 4.14 Transferee to
exchange for an equivalent number of shares of Series H Preferred Stock either
(A) all of the shares of Series A Preferred Stock then owned by the Initial
Holders and each Section 4.14 Transferee or (B) a number of shares of Series A
Preferred Stock then owned by each such holder equal to the product of (x) the
number of shares of Series A Preferred Stock
29
<PAGE>
then owned by such holder multiplied by (y) a fraction, the numerator of which
is equal to the number of POPs (as defined in the Stockholders Agreement) in the
Overlap Territory and the denominator of which is equal to the total number of
POPs in the Territory (as defined in the Stockholders Agreement);
(ii) require the Initial Holders and each Section 4.14 Transferee to
exchange, for a number of shares of Series H Preferred Stock determined in
accordance with paragraph (b) below, either (A) all of the shares of capital
stock of the Corporation received in exchange for TeleCorp Original Shares and
that the Initial Holders or a Section 4.14 Transferee continues to own on the
date of delivery of the Exchange Notice (any such shares being referred to
hereinafter collectively as "TeleCorp Exchange Shares") or (B) a number of
------------------------
TeleCorp Exchange Shares equal to the product of (x) the number of TeleCorp
Exchange Shares then owned by each such holder, multiplied by (y) a fraction,
the numerator of which is equal to the number of POPs in the Overlap Territory
and the denominator of which is equal to the total number of POPs in the
Territory; provided, that (x) if the Corporation exercises its right under
clause (i)(A) of this paragraph (a), it shall be required to exercise its right
under clause (ii)(A) of this paragraph (a), and vice-versa; and if the
Corporation exercises its right under clause (i)(B) of this paragraph (a), it
shall be required to exercise its right under clause (ii)(B) of this paragraph
(a), and vice-versa and (y) the provisions of this Section 4.14(a) shall not
apply to any Section 4.14 Transferee which is a Cash Equity Investor;
(iii) require the Initial Holders and each Section 4.14 Transferee to
exchange for an equivalent number of shares of Series I Preferred Stock either
(A) all of the shares of Series B Preferred Stock then owned by the Initial
Holders and each Section 4.14 Transferee or (B) a number of shares of Series B
Preferred Stock then owned by each such holder equal to the product of (x) the
number of shares of Series B Preferred Stock then owned by such holder
multiplied by (y) a fraction, the numerator of which is equal to the number of
POPs (as defined in the Stockholders Agreement) in the Overlap Territory and the
denominator of which is equal to the total number of POPs in the Territory (as
defined in the Stockholders Agreement); and
(iv) require the Initial Holders and each Section 4.14 Transferee to
exchange, for a number of shares of Series I Preferred Stock determined in
accordance with paragraph (b) below, either (A) all of the shares of capital
stock of the Corporation received in exchange for Tritel Original Shares and
that the Initial Holders or a Section 4.14 Transferee continues to own on the
date of delivery of the Exchange Notice (any such shares being referred to
hereinafter collectively as "Tritel Exchange Shares") or (B) a number of Tritel
----------------------
Exchange Shares equal to the product of (x) the number of Tritel Exchange Shares
then owned by each such holder, multiplied by (y) a fraction, the numerator of
which is equal to the number of POPs in the Overlap Territory and the
denominator of which is equal to the total number of POPs in the Territory;
provided, that (x) if the Corporation exercises its right under clause (iii)(A)
of this paragraph (a), it shall be required to exercise its right under clause
(iv)(A) of this paragraph (a), and vice-versa; and if the Corporation exercises
its right under clause (iii)(B) of this paragraph (a),
30
<PAGE>
it shall be required to exercise its right under clause (iv)(B) of this
paragraph (a), and vice-versa and (y) the provisions of this Section 4.14(a)
shall not apply to any Section 4.14 Transferee which is a Cash Equity Investor.
(TeleCorp Exchange Shares and Tritel Exchange Shares subject to exchange
pursuant to this Section 4.14 are hereinafter referred to collectively as
"Exchange Shares.")
- ----------------
(b) Number of Shares of Series H and I Preferred Stock Issuable in
--------------------------------------------------------------
Exchange. The number of shares of Series H Preferred Stock issuable in exchange
for TeleCorp Exchange Shares pursuant to clause (ii) of paragraph (a) above
shall be equal to the quotient of the aggregate purchase price paid by the
Initial Holders for the TeleCorp Exchange Shares being exchanged, divided by
$1,000. The number of shares of Series I Preferred Stock issuable in exchange
for Tritel Exchange Shares pursuant to clause (iv) of paragraph (a) above shall
be equal to the quotient of the aggregate purchase price paid by the Initial
Holders for the Tritel Exchange Shares being exchanged, divided by $1,000.
(c) Fractional Shares. Notwithstanding any other provision of this
-----------------
Amended and Restated Certificate of Incorporation, the Corporation shall not be
required to issue fractions of shares upon exchange of any Exchange Shares or to
distribute certificates which evidence fractional shares. In lieu of fractional
shares, the Corporation may pay therefor, at the time of any exchange of
Exchange Shares as herein provided, an amount in cash equal to such fraction
multiplied by the Market Price of a share of Common Stock on such date.
(d) Mechanics of Exchange. The Exchange Notice shall specify the date
---------------------
fixed for the exchange (the "Exchange Date"), which shall be at least ten but no
-------------
more than 60 days following delivery of the Exchange Notice, and the place
designated for exchange of the Exchange Shares pursuant to this Section 4.14.
Such notice will be sent by first class or registered mail, postage prepaid, to
the Initial Holders and each Section 4.14 Transferee at such holder's address
last shown on the records of the transfer agent for the Exchange Shares (or the
records of the Corporation if it serves as its own transfer agent). On or
before the Exchange Date, the Initial Holders and each Section 4.14 Transferee
shall surrender its certificate or certificates for all such shares to the
Corporation at the place designated in such notice. If required by the
Corporation, certificates surrendered for exchange shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the Initial Holders and each
Section 4.14 Transferee or its attorney duly authorized in writing.
(e) Termination of Rights. On and after the Exchange Date (whether or not
---------------------
the applicable certificates have theretofore been surrendered), all rights with
respect to the Exchange Shares, including the rights, if any, to receive notices
and to vote, will terminate, except only the rights of the Initial Holders and
Section 4.14 Transferees to receive certificates for the number of shares of
Series H Preferred Stock or Series I Preferred Stock, as applicable, into which
such Exchange Shares have been exchanged, upon surrender of its certificate or
certificates therefor, and payment of any declared but
31
<PAGE>
unpaid dividends thereon (which shall accrue and be payable at the times and on
the other terms applicable to such dividends when declared) and payment of any
deferred dividends in respect of Series A Preferred Stock and Series B Preferred
Stock which shall be payable as set forth in Section 4.3(b)(iii). Within ten
Business Days after the Exchange Date, the Corporation shall issue and deliver
to the Initial Holders and each Section 4.14 Transferee, or on its written order
to its nominees, a certificate or certificates for the number of whole shares of
Series H Preferred Stock or Series I Preferred Stock, as applicable, issuable
upon such exchange in accordance with the provisions hereof, together with cash
in lieu of fractional shares calculated in accordance with paragraph (c) of this
Section 4.14.
(f) Reservation of Shares. The Corporation shall at all times reserve and
---------------------
keep available for issuance upon the exchange of Exchange Shares the maximum
number of its authorized but unissued shares of Series H Preferred Stock and
Series I Preferred Stock as is reasonably anticipated to be sufficient to permit
the exchange of all outstanding Exchange Shares, and shall take all action
required to increase the authorized number of shares of Series H Preferred Stock
and Series I Preferred Stock if at any time there shall be insufficient
authorized but unissued shares of Series H Preferred Stock or Series I Preferred
Stock to permit such reservation or to permit the exchange of all outstanding
Exchange Shares.
(g) Adjustments for Dividends. Upon any exchange of Exchange Shares, no
-------------------------
adjustment to the rate of conversion shall be made for accrued and unpaid
dividends (whether or not declared) on the Exchange Shares, as the case may be,
surrendered for exchange or on the Series H Preferred Stock or Series I
Preferred Stock delivered upon exchange.
(h) No Exchange Charge or Tax. The issuance and delivery of certificates
-------------------------
for shares of Series H Preferred Stock or Series I Preferred Stock upon the
exchange of Exchange Shares shall be made without charge to the Initial Holder
for any issue or transfer tax, or other incidental expense in respect of the
issuance or delivery of such certificates or the securities represented thereby,
all of which taxes and expenses shall be paid by the Corporation.
4.15 Redemption of Capital Stock; FCC Approval.
-----------------------------------------
(a) Redemption. Notwithstanding any other provision of this Amended and
----------
Restated Certificate of Incorporation to the contrary, outstanding shares of
capital stock of the Corporation held by Disqualified Holders shall always be
subject to redemption by the Corporation, by action of the Board of Directors,
if, in the judgment of the Board of Directors, such action should be taken,
pursuant to Section 151(b) of the GCL or any other applicable provision of law,
to the extent necessary to prevent the loss or secure the reinstatement of any
license or franchise from any governmental agency held by the Corporation or any
of its subsidiaries to conduct any portion of the business of the Corporation or
any of its subsidiaries, which license or franchise is conditioned upon
32
<PAGE>
some or all of the holders of the Corporation's stock possessing prescribed
qualifications. The terms and conditions of such redemption shall be as follows:
(i) the redemption price of the shares to be redeemed pursuant to this
Section 4.15 shall be equal to the lesser of (x) the Market Price or (y) if such
stock was purchased by such Disqualified Holder within one year of the Section
4.15 Redemption Date, such Disqualified Holder's purchase price for such shares;
(ii) the redemption price of such shares may be paid in cash, Redemption
Securities or any combination thereof;
(iii) if less than all the shares held by Disqualified Holders are to be
redeemed, the shares to be redeemed shall be selected in such manner as shall be
determined by the Board of Directors, which may include selection first of the
most recently purchased shares thereof, selection by lot or selection in any
other manner determined by the Board of Directors;
(iv) at least 30 days' written notice of the Section 4.15 Redemption Date
shall be given to the record holders of the shares selected to be redeemed
(unless waived in writing by any such holder); provided, however, that only 10
days' written notice of the Redemption Date shall be given to record holders if
the cash or Redemption Securities necessary to effect the redemption shall have
been deposited in trust for the benefit of such record holders and subject to
immediate withdrawal by them upon surrender of the stock certificates for their
shares to be redeemed; provided, further, that the record holders of the shares
selected to be redeemed may transfer such shares prior to the Section 4.15
Redemption Date to any holder that is not a Disqualified Holder and, thereafter,
for so long as such shares are not held by a Disqualified Holder, such shares
shall not be subject to redemption by the Corporation;
(v) from and after the Section 4.15 Redemption Date, any and all rights
of whatever nature (including without limitation any rights to vote or
participate in dividends declared on stock of the same class or series as such
shares) with respect to the shares selected from redemption held by Disqualified
Holders on the Section 4.15 Redemption Date shall cease and terminate and such
Disqualified Holders thenceforth shall be entitled only to receive the cash or
Redemption Securities payable upon redemption; and
(vi) such other terms and conditions as the Board of Directors shall
determine.
(b) FCC Approval. Notwithstanding anything herein to the contrary, if
------------
Federal Communications Commission or other regulatory approval is required to be
obtained prior to the conversion of shares of any series or class of Preferred
Stock or Common Stock, the holder thereof may nevertheless elect to convert any
or all of its shares by written notice given to the Corporation in accordance
with the applicable provision hereof, provided, that such conversion shall not
become effective until the close of business on the date of the receipt of the
last of any such approvals and of the
33
<PAGE>
surrender of the certificates representing the shares of the applicable
Preferred Stock or Common Stock to be converted, and the rights of the holder
thereof shall continue in full force and effect pending the receipt of all such
approvals, except that, in the case of the Series A Preferred Stock and the
Series B Preferred Stock, no dividends shall be payable in respect of the period
following the Series A Conversion Date or Series B Conversion Date,
respectively, unless the required approvals are not obtained and the conversion
has not been effected within one year of the Series A Conversion Date or the
Series B Conversion Date, as applicable, and the applicable conversion notice is
withdrawn, in which event the obligation to pay dividends from and after the
Series A Conversion Date or Series B Conversion Date shall be payable in
accordance with the terms of Section 4.3(b).
4.16 Definitions. For the purposes of this Amended and Restated
-----------
Certificate of Incorporation, the following terms shall have the meanings
indicated:
"Affiliate" means, with respect to any Person, any other Person that
---------
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with that Person. For purposes of this
definition, "control" (including the terms "controlling" and "controlled") means
the power to direct or cause the direction of the management and policies of a
Person, directly or indirectly, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
"Appraisal Procedure" means the following procedure for determining
-------------------
the Market Price, for the purpose of calculating the Series A Conversion Rate or
Series B Conversion Rate, in the event that the shares of Class A Common Stock
are not listed or admitted for trading on any national securities exchange and
are not quoted on NASDAQ or any similar service:
(i) Two independent accounting or investment banking firms of nationally
recognized standing (each, an "Appraiser"), one chosen by the Corporation and
---------
one chosen by the holders of a majority of the outstanding shares of Series A
Preferred Stock and the Series B Preferred Stock, as the case may be, shall each
determine and attempt to mutually agree upon, the Market Price. Each party
shall deliver a notice to the other appointing its Appraiser within 15 days
after the applicable notice and surrender pursuant to Section 4.3(e)(iv). If
either the Corporation or such holders fail to appoint an appraiser within such
15-day period, the Market Price shall be determined by the Appraiser that has
been so appointed.
(ii) If within 30 days after appointment of the two Appraisers they are
unable to agree upon the Market Price, an independent accounting or investment
banking firm of nationally recognized standing shall within ten days thereafter
be chosen to serve as a third Appraiser by the mutual consent of such first two
Appraisers. The determination of the Market Price by the third Appraiser so
appointed and chosen shall be made within 30 days after the selection of such
third Appraiser.
(iii) If three Appraisers shall be appointed and the determination of one
34
<PAGE>
Appraiser is disparate from the middle determination by more than twice the
amount by which the other determination is disparate from the middle
determination, then the determination of such Appraiser shall be excluded, the
remaining two determinations shall be averaged, and such average shall be
binding and conclusive on the Corporation and the holders of the Series A
Preferred Stock and the Series B Preferred Stock; as the case may be, otherwise
the average of all three determinations shall be binding and conclusive on the
Corporation and the holders of the Series A Preferred Stock and the Series B
Preferred Stock, as the case may be.
(iv) In connection with any appraisal conducted pursuant to this Appraisal
Procedure, the Appraiser shall adhere to the guidelines provided in the
definition of "Market Price" set forth below, including the proviso thereto.
(v) The fees and expenses of each Appraiser shall be borne by the
Corporation.
"AT&T Wireless" shall mean AT&T Wireless PCS, LLC, a Delaware limited
-------------
liability company.
"Board of Directors" has the meaning specified in Section 4.2(a).
------------------
"Business Day" shall mean any day other than a Saturday, Sunday or
------------
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Class A Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class B Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class C Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class D Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class E Common Stock" has the meaning specified in Section 4.1.
--------------------
"Class F Common Stock" has the meaning specified in Section 4.1.
--------------------
"Closing Price" shall mean, with respect to each share of any class or
-------------
series of capital stock for any day, (i) the last reported sale price regular
way or, in case no such sale takes place on such day, the average of the closing
bid and asked prices regular way, in either case as reported on the principal
national securities exchange on which such class or series of capital stock is
listed or admitted for trading or (ii) if such class or series of capital stock
is not listed or admitted for trading on any national securities exchange, the
last reported sale price or, in case no such sale takes place on such day, the
average of the highest reported bid and the lowest reported asked quotation for
such class or series of capital stock, in either case as reported on NASDAQ or a
similar service if NASDAQ is no longer reporting such information.
35
<PAGE>
"Common Stock" has the meaning specified in Section 4.1.
------------
"Disqualified Holder" shall mean any holder of shares of capital stock
-------------------
of the Corporation whose holding of such stock, either individually or when
taken together with the holding of shares of capital stock of the Corporation by
any other holders, may result, in the judgment of the Board of Directors, in the
loss of, or the failure to secure the reinstatement of, any license or franchise
from any governmental agency held by the Corporation or any of its subsidiaries
or affiliates to conduct any portion of the business of the Corporation or any
of its subsidiaries or affiliates.
"Dividend Payment Date" shall mean the last day of each March, June,
---------------------
September and December, except that if any Dividend Payment Date is not a
Business Day, then the next succeeding Business Day shall be the Dividend
Payment Date.
"Fully Diluted Basis" shall mean, with respect to the outstanding
-------------------
shares of Common Stock, the number of shares of Common Stock outstanding
assuming the conversion of all outstanding convertible securities (other than
the Series A Preferred Stock and Series B Preferred Stock) and the exercise of
all outstanding warrants, options or other rights to subscribe for or purchase
any shares of Common Stock.
"Initial Holder" means AT&T Wireless PCS, LLC, a Delaware limited
--------------
liability company and/or any of their respective Affiliates that is a Subsidiary
of AT&T Corp.
"Invested Amount" means, as of any date with respect to each share of
---------------
Series C Preferred Stock held by any stockholder, an amount equal to the
quotient of (i) the aggregate paid-in capital actually paid with respect to all
shares of Series C Preferred Stock held by such stockholder as of such date, or
any Predecessor Stock exchanged therefor, divided by (ii) the total number of
shares of Series C Preferred Stock held by such stockholder.
"Junior Stock" shall mean, with respect to shares of Series A
------------
Preferred Stock, Series B Preferred Stock, Series H Preferred Stock or Series I
Preferred Stock, any capital stock of the Corporation, including without
limitation the Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and the
Common Stock, ranking junior to the Series A Preferred Stock, Series B Preferred
Stock, Series H Preferred Stock or Series I Preferred Stock, as the case may be,
with respect to dividends, distribution in liquidation or any other preference,
right or power.
"Liquidation Preference" shall mean, as of any date, and subject to
----------------------
adjustment for subdivisions or combinations affecting the number of shares of
the applicable series of Preferred Stock:
(i) with respect to each share of Series A Preferred Stock and Series
B Preferred Stock, $1,000 plus accrued and unpaid dividends thereon, and, with
respect to shares of Series A Preferred Stock and Series B Preferred Stock
received in exchange for any Predecessor Stock, $1,000 plus accrued and unpaid
dividends from the date when such Predecessor Stock was issued.
36
<PAGE>
(ii) with respect to each share of Series C Preferred Stock, the
Invested Amount plus accrued and unpaid dividends on such share (if any), plus
an amount equal to interest on the Invested Amount at the rate of six percent
(6%) per annum, compounded quarterly, less the amount of dividends (if any)
theretofore declared and paid in respect of such share;
(iii) with respect to each share of Series D Preferred Stock, $1,000
plus accrued and unpaid dividends thereon (if any), plus an amount equal to
interest on $1,000 at the rate of six percent (6%) per annum, compounded
quarterly, from the date of issuance of such share and, with respect to shares
of Series D Preferred Stock received in exchange for any Predecessor Stock, the
date when such Predecessor Stock was issued, to and including the date of the
calculation, less the amount of dividends (if any) theretofore declared and paid
in respect of such share;
(iv) with respect to each share of Series E Preferred Stock, accrued
and unpaid dividends thereon (if any), plus an amount equal to interest on
$1,000 at the rate of six percent (6%) per annum, compounded quarterly, from the
date of issuance of such share and, with respect to shares of Series E Preferred
Stock received in exchange for any Predecessor Stock, the date when such
Predecessor Stock was issued, to and including the date of the calculation, less
the amount of dividends (if any) theretofore declared and paid in respect of
such share;
(v) with respect to each share of Series F Preferred Stock,
$.000032 plus accrued and unpaid dividends thereon;
(vi) with respect to each share of Series G Preferred Stock, $1,000
plus declared but unpaid dividends thereon (if any), plus an amount equal to
interest on $1,000 at the rate of six and one-half percent (6.5%) per annum,
compounded quarterly, from the date of issuance of such share, with respect to
shares of Series G Preferred Stock received in exchange for any Predecessor
Stock, the date when such Predecessor Stock was issued, to and including the
date of calculation; and
(vii) with respect to each share of Series H Preferred Stock, $1,000
plus accrued and unpaid dividends thereon.
(viii) with respect to each share of Series I Preferred Stock, $1,000
plus accrued and unpaid dividends thereon.
"Market Price" shall mean, with respect to each share of any class or
------------
series of capital stock for any day, (i) the average of the daily Closing Prices
for the ten consecutive trading days commencing 15 days before the day in
question or (ii) if on such date the shares of such class or series of capital
stock are not listed or admitted for trading on any national securities exchange
and are not quoted on NASDAQ or any similar service, the cash amount that a
willing buyer would pay a willing seller (neither acting under compulsion) in an
arm's-length transaction without time constraints per share of such class or
series of capital stock as of such date, viewing the Corporation on a going
concern basis, as determined (A) in the case of a
37
<PAGE>
determination of "Market Price" for the purpose of calculating the Series A
Conversion Rate or Series B Conversion Rate, as the case may be, pursuant to the
Appraisal Procedure and (B) in the case of a determination of Market Price for
any other purpose, in good faith by the Board of Directors, whose determination
shall be conclusive; provided that, in determining such cash amount, the
following shall be ignored: (i) any contract or legal limitation in respect of
shares of Common Stock or Preferred Stock, including transfer, voting and other
rights, (ii) the "minority interest" or "control" status of shares of Common
Stock into which shares of Series A Preferred Stock or Series B Preferred Stock,
as the case may be, would be converted, and (iii) any illiquidity arising by
contract in respect of the shares of Common Stock and any voting rights or
control rights amongst the stockholders.
"NASDAQ" shall mean the National Association of Securities Dealers
------
Automated Quotations System.
"Non-Tracked Common Stock" has the meaning specified in Section
------------------------
4.12(a).
"Non-Tracked Business Available Dividend Amount" has the meaning
----------------------------------------------
specified in Section 4.12(b)(i).
"Optional Conversion Date" has the meaning specified in 4.8(e)(ii).
------------------------
"Parity Stock" shall mean, with respect to shares of Series A
------------
Preferred Stock, Series B Preferred Stock, Series H Preferred Stock or Series I
Preferred Stock, any capital stock of the Corporation ranking on a parity with
the Series A Preferred Stock, Series B Preferred Stock, Series H Preferred
Stock, or Series I Preferred Stock, as the case may be, with respect to
dividends, distribution in liquidation or any other preference, right or power.
"Participating Stock" shall mean, collectively, the Series F Preferred
-------------------
Stock, the Series G Preferred Stock and the Non-Tracked Common Stock.
"Person" shall mean any individual, firm, corporation, partnership,
------
trust, incorporated or unincorporated association, joint venture, joint stock
company, governmental agency or political subdivision thereof or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" has the meaning specified in Section 4.1.
---------------
"Predecessor Stock" shall mean any share of Class A Voting Common
-----------------
Stock, Class B Non-Voting Common Stock, Class C Common Stock, Class D Common
Stock, Voting Preference Common Stock, Series A Convertible Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock of TeleCorp PCS, Inc. or
any share of Class A Voting Common Stock, Class B Non-Voting Common Stock, Class
C Common Stock, Class D Common Stock, Voting Preference Stock, Series A
Convertible Preferred Stock, Series B Preferred Stock, Series C Convertible
Preferred Stock and Series D Preferred Stock of Tritel, Inc.
38
<PAGE>
"Qualified Transfer" shall mean a sale, transfer or other disposition
------------------
of shares of Series A Preferred Stock or Series B Preferred Stock to any
prospective transferee specified in a Qualified Transfer Notice, other than a
prospective transferee as to which the Corporation disapproves in accordance
with the terms of the second sentence of Section 4.3(j), provided such sale,
transfer or other disposition is made pursuant to a binding agreement entered
into no later than 180 days after the applicable Qualified Transfer Notice is
given.
"Qualified Transferee" shall mean, with respect to any shares of
--------------------
Series A Preferred Stock or Series B Preferred Stock, (i) any Cash Equity
Investor that acquired such shares pursuant to Section 4.2 of the Stockholders
Agreement or (ii) any other holder that acquired such shares in a Qualified
Transfer from an Initial Holders or Qualified Transferee.
"Qualified Transfer Notice" has the meaning specified in Section
-------------------------
4.3(i)(x).
"Redemption Securities" shall mean any debt or equity securities of
---------------------
the Corporation, any of its subsidiaries or affiliates or any other corporation,
or any combination thereof, having such terms and conditions as shall be
approved by the Board of Directors and which, together with any cash to be paid
as part of the redemption price payable pursuant to Section 4.15, in the opinion
of any nationally recognized investment banking firm selected by the Board of
Directors (which may be a firm which provides investment banking, brokerage or
other services to the Corporation), has a value, at the time notice of
redemption is given pursuant to Section 4.15(d) at least equal to the price
required to be paid pursuant to Section 4.15(a) (assuming, in the case of
Redemption Securities to be publicly traded, that such Redemption Securities
were fully distributed and subject only to normal trading activity).
"Section 4.15 Transferee" shall mean any transferee of shares of (i)
------------------------
Series A Convertible Preferred Stock, Series D Preferred Stock and Series F
Preferred Stock of TeleCorp PCS, Inc. issued to the Initial Holder on July 17,
1998 or any capital stock of Holding Company exchanged therefor (or any shares
of Common Stock into which any such shares are converted) or (ii) Series A
Convertible Preferred Stock or Series D Convertible Preferred Stock of Tritel,
Inc. issued to an Initial Holder on January 7, 1999 or any capital stock of
Holding Company exchanged therefor (or any shares of Common Stock into which any
such shares are converted) that are acquired in a private transaction.
"Section 4.15 Redemption Date" shall mean the date fixed by the Board
----------------------------
of Directors for the redemption of any shares of stock of the Corporation
pursuant to Section 4.15.
"Senior Stock" shall mean, with respect to shares of Series A
------------
Preferred Stock, Series B Preferred Stock, Series H Preferred Stock or Series I
Preferred Stock, as the case may be, any capital stock of the Corporation
ranking senior to the Series A Preferred Stock, Series B Preferred Stock, Series
H Preferred Stock or Series I Preferred Stock, as the case may be, with respect
to dividends, distribution in liquidation or any other preference, right or
power.
"Series A Conversion Date" has the meaning specified in Section
------------------------
4.3(i)(iv).
39
<PAGE>
"Series A Conversion Rate" shall mean, as of any date of
------------------------
determination, a fraction in which the numerator is the Liquidation Preference
of one share of Series A Preferred Stock as of such date, and the denominator is
the Market Price of Class A Common Stock as of such date.
"Series A Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series A Redemption Price" has the meaning specified in Section
-------------------------
4.3(e)(i).
"Series B Conversion Rate" shall mean, as of any date of
------------------------
determination, a fraction in which the numerator is the Liquidation Preference
of one share of Series B Preferred Stock as of such date, and the denominator is
the Market Price of Class A Common Stock as of such date.
"Series B Redemption Price" the Liquidation Preference of the Series
-------------------------
B Preferred Stock as of any applicable redemption date.
"Series B Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series C Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series C Redemption Price" has the meaning specified in 4.5(e)(i).
-------------------------
"Series D Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series D Redemption Price" has the meaning specified in Section
-------------------------
4.5(e)(i).
"Series E Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series F Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series G Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series H Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Series I Preferred Stock" has the meaning specified in Section 4.1.
------------------------
"Statutory Liquidation" means the liquidation of the Corporation
---------------------
pursuant to Section 275 of the GCL, as amended.
"Stockholders Agreement" means the Stockholders Agreement by and among
----------------------
the Corporation, and the other stockholders of the Corporation named therein,
dated as of __________________, 2000, as the same may be amended, modified or
supplemented in accordance with the terms thereof, a copy of which is available
for inspection by any stockholder at the principal executive offices of the
Corporation.
40
<PAGE>
"Subsidiary" shall mean, with respect to any Person, a corporation or
----------
other entity of which 50% or more of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
"TeleCorp Common Stock" shall mean the Class A Voting Common Stock,
---------------------
$.01 par value per share, the Class B Non-Voting Common Stock, $.01 par value
per share, the Class C Common Stock, $.01 par value per share, and the Class D
Common Stock, $.01 par value per share, and the Voting Preference Common Stock,
$.01 par value per share, of TeleCorp PCS, Inc.
"TeleCorp Exchange Shares" shall have the meaning set forth in Section
------------------------
4.14(a)(ii).
"Tritel Exchange Shares" shall have the meaning set forth in Section
----------------------
4.14(a)(iv).
"TeleCorp Holding" shall mean TeleCorp Holding Corp., Inc., a Delaware
----------------
corporation, or any successor thereto.
"TeleCorp Original Shares" shall mean (i) the TeleCorp Common Stock
------------------------
held by the Initial Holders and TWR Cellular, Inc. on July 17, 1998, (ii) the
Series D Preferred Stock, $.01 par value per share, of TeleCorp PCS, Inc. held
by the Initial Holders and TWR Cellular Inc. on July 17, 1998, or any TeleCorp
Common Stock into which such shares were converted and (iii) the Series F
Preferred Stock, $.01 par value per share, of TeleCorp PCS, Inc. held by the
Initial Holders and TWR Cellular Inc. on July 17, 1998, or any TeleCorp Common
Stock into which such shares were converted.
"TeleCorp Tracking Stock" shall have the meaning set forth in Section
-----------------------
4.12(b)(ii).
"TeleCorp Tracked Business Available Dividend Amount" shall mean, on
---------------------------------------------------
any date, the excess (if any) of (i) the fair market value of the total assets
of TeleCorp Holding (including, without limitation, investments held by TeleCorp
Holding), less the total amount of the liabilities of TeleCorp Holding, in each
case as of such date determined in accordance with generally accepted accounting
principles, over (ii) the aggregate par value of, or any greater amount
determined in accordance with GCL to be capital in respect of, all outstanding
shares of the TeleCorp Tracking Stock.
"TeleCorp Tracked Business Available Liquidation Amount" shall mean,
------------------------------------------------------
on any date, the fair market value of the total assets of TeleCorp Holding
(including, without limitation, investments held by TeleCorp Holding, less the
total amount of the liabilities of TeleCorp Holding, in each case as of such
date determined in accordance with generally accepted accounting principles.
"Tracked Business Available Dividend Amount" shall mean the aggregate
------------------------------------------
of the TeleCorp Tracked Business Available Dividend Amount plus the Tritel
Tracked Business Available Dividend Amount.
41
<PAGE>
"Tracked Common Stock" has the meaning specified in Section 4.12(a).
--------------------
"Tritel Common Stock" shall mean the Class A Voting Common Stock, $.01
-------------------
par value per share, the Class B Non-Voting Common Stock, $.01 par value per
share, the Class C Common Stock, $.01 par value per share, and the Class D
Common Stock, $.01 par value per share, and the Voting Preference Common Stock,
$.01 par value per share, of Tritel PCS, Inc.
"Tritel Holding" shall mean Tritel C/F Holding Corp., a Delaware
--------------
corporation, or any successor thereto.
"Tritel Original Shares" shall mean the Series D Preferred Stock, $.01
----------------------
par value, of Tritel PCS, Inc. owned by the Initial Holders and TWR Cellular
Inc. on January 7, 1999, or any shares of Tritel Series C Preferred Stock or
Tritel Common Stock into which such shares or any shares of Tritel Series A
Preferred Stock or Tritel Series C Preferred Stock were converted.
"Tritel Series A Preferred Stock" shall mean the Series A Convertible
-------------------------------
Preferred Stock, $.01 par value, of Tritel PCS, Inc.
"Tritel Series C Preferred Stock" shall mean the Series C Convertible
-------------------------------
Preferred Stock, $.01 par value, of Tritel PCS, Inc.
"Tritel Tracking Stock" shall have the meaning set forth in Section
---------------------
4.12(b)(iii).
"Tritel Tracked Business Available Dividend Amount" shall mean, on any
-------------------------------------------------
date, the excess (if any) of (i) the fair market value of the total assets of
Tritel Holding (including, without limitation, investments held by Tritel
Holding), less the total amount of the liabilities of Tritel Holding, in each
case as of such date determined in accordance with generally accepted accounting
principles, over (ii) the aggregate par value of, or any greater amount
determined in accordance with GCL to be capital in respect of, all outstanding
shares of the Tritel Tracking Stock.
"Tritel Tracked Business Available Liquidation Amount" shall mean, on
----------------------------------------------------
any date, the fair market value of the total assets of Tritel Holding
(including, without limitation, investments held by Tritel Holding, less the
total amount of the liabilities of Tritel Holding, in each case as of such date
determined in accordance with generally accepted accounting principles.
ARTICLE V
Election of Directors need not be by written ballot.
ARTICLE VI
6.1 Amendment of Amended and Restated Certificate of Incorporation.
--------------------------------------------------------------
Subject to the separate class vote requirements relating to any class or series
of Preferred Stock, the holders of shares of capital stock representing at least
two-thirds (2/3) of the votes entitled to be cast for the
42
<PAGE>
election of directors of the Corporation, voting together as a single class, in
person or by proxy, at a special or annual meeting of stockholders called for
the purpose, or by written consent, may amend, alter or repeal this Amended and
Restated Certificate of Incorporation.
6.2 Amendment of the Bylaws. Except as otherwise provided by law or by
-----------------------
this Amended and Restated Certificate of Incorporation, the Bylaws of the
Corporation, as from time to time altered or amended, may be made, altered or
amended by the holders of shares of capital stock representing at least two-
thirds (2/3) of the votes entitled to be cast for the election of directors of
the Corporation, voting together as a single class, in person or by proxy at any
annual or special meeting of the stockholders called for such purpose, of which
the notice shall specify the subject matter of the proposed alteration or
amendment or new bylaw or the article or articles to be affected thereby, or by
written consent of such holders having such requisite number of votes. The
Bylaws may also be made, altered or amended by a majority of the whole number of
directors then in office. Notwithstanding anything to the contrary contained in
this Section 6.2, the rights of any Stockholder (as such term is defined in the
Stockholders Agreement) or group of Stockholders under Section 2.11(b) of the
Bylaws shall not be amended, altered or repealed without the prior written
approval of any such Stockholder or group of Stockholders, as the case may be.
ARTICLE VII
7.1 Indemnification. Any person who was or is a party or is threatened to
---------------
be made a party to any threatened, pending, or completed action, suit, or
proceeding (a "Proceeding"), whether civil, criminal, administrative, or
----------
investigative (whether or not by or in the right of the Corporation), by reason
of the fact that such person, or a person of whom such person is the legal
representative, is or was a director, officer, incorporator, employee, or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, incorporator, employee, partner, trustee, or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), shall be entitled to be indemnified by the
------------
Corporation to the full extent then permitted by law against expenses (including
counsel fees and disbursements), judgments, fines (including excise taxes
assessed on a person with respect to an employee benefit plan), and amounts paid
in settlement incurred by him in connection with such Proceeding. Persons who
are not Directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation or to an Other Entity at the request of
the Corporation to the extent the Board of Directors at any time specifies that
such persons are entitled to the benefits of this Article VII.
7.2 Advancement of Expenses. The Corporation shall, from time to time,
-----------------------
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding,
in advance of the final disposition of such Proceeding; provided, however, that,
if (and only if) required by the GCL, such expenses incurred by or on behalf of
any Director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Director or officer (or other person
indemnified hereunder), to repay any such amount so
43
<PAGE>
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right of appeal that such Director, officer or other
person is not entitled to be indemnified for such expenses.
7.3 Rights Not Exclusive. The rights to indemnification and reimbursement
--------------------
or advancement of expenses provided by, or granted pursuant to, this Article VII
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Amended and Restated Certificate
of Incorporation, the Bylaws, any agreement, any vote of stockholders or
disinterested Directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
7.4 Continuing Rights. The rights to indemnification and reimbursement or
-----------------
advancement of expenses provided by, or granted pursuant to, this Article VII
shall continue as to a person who has ceased to be a Director or officer (or
other person indemnified hereunder), shall inure to the benefit of the
executors, administrators, legatees and distributees of such person, and in
either case, shall inure whether or not the claim asserted is based on matters
which antedate the adoption of this Article VII.
7.5 Insurance. The Corporation shall have power to purchase and maintain
---------
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation, as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Article VII, the Bylaws or under Section
145 of the GCL or any other provision of law.
7.6 Contract Rights; No Repeal. The provisions of this Article VII shall
--------------------------
be a contract between the Corporation, on the one hand, and each Director and
officer who serves in such capacity at any time while this Article VII is in
effect and any other person indemnified hereunder, on the other hand, pursuant
to which the Corporation and each such Director, officer, or other person intend
to be legally bound. No repeal or modification of this Article VII shall affect
any rights or obligations with respect to any state of facts then or, heretofore
or thereafter brought or threatened based in whole or in part upon any such
state of facts.
7.7 Enforceability; Burden of Proof. The rights to indemnification and
-------------------------------
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article VII shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Corporation (including its Board of Directors,
its independent legal counsel and its stockholders) that such
44
<PAGE>
person is not entitled to such indemnification or reimbursement or advancement
of expenses shall constitute a defense to the action or create a presumption
that such person is not so entitled. Such a person shall also be indemnified for
any expenses incurred in connection with successfully establishing his or her
right to such indemnification or reimbursement or advancement of expenses, in
whole or in part, in any such Proceeding.
7.8 Service at the Request of the Corporation. Any Director or officer of
-----------------------------------------
the Corporation serving in any capacity in (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
7.9 Right to Be Covered by Applicable Law. Any person entitled to be
-------------------------------------
indemnified or to reimbursement or advancement of expenses as a matter of right
pursuant to this Article VII may elect to have the right to indemnification or
reimbursement or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the applicable Proceeding, to the extent permitted by law, or on
the basis of the applicable law in effect at the time such indemnification or
reimbursement or advancement of expenses is sought. Such election shall be
made, by a notice in writing to the Corporation, at the time indemnification or
reimbursement or advancement of expenses is sought; provided, however, that if
no such notice is given, the right to indemnification or reimbursement or
advancement of expenses shall be determined by the law in effect at the time
indemnification or reimbursement or advancement of expenses is sought.
7.10 Section 203 Election. The Corporation elects not to have Section 203
--------------------
of the GCL govern the issuance of capital stock of the Corporation to (a) AT&T
Wireless or its Affiliates, (b) Gerald T. Vento or (c) Thomas H. Sullivan.
ARTICLE VIII
No Director of the Corporation shall be liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
Director, provided that this provision does not eliminate the liability of the
Director (i) for any breach of the Director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL or (iv) for any transaction from which the Director
derived an improper personal benefit. For purposes of the prior sentence, the
term "damages" shall, to the extent permitted by law, include without
limitation, any judgment, fine, amount paid in settlement, penalty, punitive
damages, excise or other tax assessed with respect to an employee benefit plan,
or expense of any nature (including, without limitation, counsel fees and
disbursements). Each person who serves as a Director of the Corporation while
this Article VIII is in effect shall be deemed to be doing so in reliance on the
provisions of this Article VIII, and neither the amendment or repeal of this
Article VIII, nor the adoption of any provision of this Amended and Restated
Certificate of Incorporation inconsistent with this Article VIII, shall apply to
or have any effect on the liability or alleged liability of any Director of the
Corporation for, arising out of, based upon, or in
45
<PAGE>
connection with any acts or omissions of such Director occurring prior to such
amendment, repeal, or adoption of an inconsistent provision. The provisions of
this Article VIII are cumulative and shall be in addition to and independent of
any and all other limitations on or eliminations of the liabilities of Directors
of the Corporation, as such, whether such limitations or eliminations arise
under or are created by any law, rule, regulation, bylaw, agreement, vote of
stockholders or disinterested Directors, or otherwise.
ARTICLE IX
9.1 Number, Terms and Election of Directors.
---------------------------------------
(a) Subject to the rights, if any, of the holders of any class or series
of Preferred Stock to elect additional directors under specified circumstances,
the number of directors of the Corporation shall be fixed and may be increased
or decreased from time to time by the Board of Directors, but in no case shall
the number be less than one nor more than fifteen.
(b) The directors, other than the directors designated by the holders of
the Voting Preference Common Stock pursuant to Section 3.1(e) of the
Stockholders' Agreement (the "Voting Preference Directors"), shall be divided
into three classes, as nearly equal in number as possible, by the affirmative
vote (which vote may be taken prior to such closing) of a majority of the
directors then holding office. One class of directors shall be appointed to the
Board of Directors for a term expiring at the first annual meeting of
stockholders to be held after the filing of this Amended and Restated
Certificate of Incorporation, another class of directors shall be appointed to
the Board of Directors for a term expiring at the second annual meeting of
stockholders to be held after the filing of this Amended and Restated
Certificate of Incorporation, and another class of directors shall be appointed
to the Board of Directors for a term expiring the third annual meeting of
stockholders to be held after the filing of this Amended and Restated
Certificate of Incorporation, with members of each class to hold office until
their successors are elected and qualified. At each succeeding annual meeting
of the stockholders of the Corporation, the successors of the class of directors
whose term expires at that meeting shall be elected by plurality vote of all
votes cast at such meeting to hold office for a term expiring at the annual
meeting of stockholders held in the third year following their year of election.
The Voting Preference Directors shall be elected to the Board of Directors for a
one year term expiring at each annual meeting.
9.2 Newly Created Directorships and Vacancies. Subject to the rights, if
-----------------------------------------
any, of the holders of any and all series of Preferred Stock to elect additional
directors pursuant to the terms and conditions of such Preferred Stock, newly
created directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the board of directors, or by a sole remaining
director. Any director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of directors in
46
<PAGE>
which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of an incumbent director.
9.3 Removal. Subject to the rights, if any, of the holders of any and all
-------
series of Preferred Stock to elect additional directors pursuant to the terms
and conditions of such Preferred Stock, any director may be removed from office
by the stockholders with or without cause in the following manner. At any
annual meeting or special meeting of the stockholders of the Corporation, the
notice of which shall state that the removal of a director or directors is among
the purposes of the meeting, the affirmative vote of the holders of at least a
majority of the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of the directors, voting together as a single
class, may remove such director or directors with or without cause.
9.4 Additional Rights of Certain Stockholders Regarding Directors.
-------------------------------------------------------------
Notwithstanding anything to the contrary contained in this Article IX, so long
as a Stockholder (as such term is defined in the Stockholders' Agreement) or
group of Stockholders has the right to nominate one or more of the directors of
the Corporation pursuant to the terms of the Stockholders' Agreement or this
Amended and Restated Certificate of Incorporation (including, without
limitation, the right of the Initial Holders to nominate a director pursuant to
Section 4.3(d)(iii) and Section 4.4 hereof), then, with respect to any directors
so nominated by such Stockholder or group of Stockholders, such Stockholder or
group of Stockholders, as the case may be, shall have the right to cause the
Corporation to remove any director so nominated by such Stockholder or group of
stockholders, as the case may be, with or without cause, and any vacancy caused
by the removal of such director or otherwise during the term of such director
(whether or not such director resigns, is removed from the Board of Directors
with or without cause or ceases to be a director by reason of death, disability
or for any other reason) shall be filled in accordance with the terms of the
Stockholders' Agreement or this Amended and Restated Certificate of
Incorporation, as the case may be.
47
<PAGE>
IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed this Amended and Restated Certificate of Incorporation this _____ day
of _________, 2000.
______________________________
Name:
Title:
1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOLDING COMPANY, INC.
BYLAWS
ADOPTED AS OF , 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
BYLAWS
HOLDING COMPANY, INC.
ARTICLE 1.
STOCKHOLDERS
1.1 Annual Meeting. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before such meeting shall be held at such place,
either within or without the State of Delaware, at 9:00 A.M. on the second
Wednesday of each April of each year (or, if such day is a legal holiday, then
on the next succeeding business day), or at such other date and hour, as may be
fixed from time to time by resolution of the Board of Directors and set forth
in the notice or waiver of notice of the meeting.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before an annual meeting. To be
properly brought before an annual meeting, business must be (i) specified in
the notice of the meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (ii) otherwise properly brought before the
meeting by or at the direction of the Board of Directors or (iii) otherwise
properly brought before the meeting by a stockholder of the Corporation who was
stockholder of record at the time of giving of notice provided for in this
Section, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation at
the principal executive office of the corporation. To be timely, a
stockholder's notice shall be delivered not less than 90 days prior to the
first anniversary of the preceding year's meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stockholder, to be timely, must be so delivered not later than the 10th day
following the day on which Public Announcement (as defined below) of the date
of such meeting is first made.
Such stockholder's notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (ii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the proposal is made (A) the name and
address of such stockholder, as they appear on the Corporation's books, and the
name and address of such beneficial owner and (B) the class and number of
shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner; and (iii) in the event that such
business includes a proposal to amend either the Certificate of Incorporation
or the Bylaws of the Corporation, the language of the proposed amendment.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the preceding
paragraph, and the Chairman of the Board or other person presiding at an annual
meeting of stockholders, may refuse to permit any business to be brought before
an annual meeting without compliance with the foregoing procedures. "Public
Announcement" shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or in
a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). In addition to the provisions of this
paragraph, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 1.1. Nothing in these Bylaws shall be deemed
to affect any rights of the Stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
1.2 Special Meetings. Special meetings of the stockholders may be called at
any time by the Chairman of the Board (or, in the event of his absence or
disability, by the President). A special meeting shall be called
F-1
<PAGE>
by the Chairman of the Board (or, in the event of his absence or disability, by
the President), or by the Secretary, immediately upon receipt of a written
request therefor by stockholders holding in the aggregate not less than 35% of
the outstanding shares of the Corporation at the time entitled to vote at any
meeting of the stockholders or by a request of a majority of the Board of
Directors. If the Chairman of the Board, the President or the Secretary shall
fail to so call such meeting within 20 days after receipt of such request, any
stockholder or member of the Board of Directors executing such request may call
such meeting.
Any such special meeting of the stockholders shall be held at such place,
within or without the State of Delaware, as shall be specified in the notice or
waiver of notice thereof.
1.3 Notice of Meetings; Waiver. The Secretary or any Assistant Secretary
shall cause written notice of the place, date and hour of each meeting of the
stockholders, and, in the case of a special meeting, the purpose or purposes
for which such meeting is called, to be given personally or by mail, not less
than ten nor more than 60 days before the date of the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited
in the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the record of stockholders of the Corporation, or, if
he shall have filed with the Secretary a written request that notices to him be
mailed to some other address, then directed to him at such other address. Such
further notice shall be given as may be required by law.
Whenever notice is required to be given to stockholders hereunder, a written
waiver, signed by a stockholder, whether before or after the time stated
therein, shall be deemed equivalent to notice. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in a written waiver of notice. The attendance of
any stockholder at a meeting of stockholders shall constitute a waiver of
notice of such meeting, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
1.4 Quorum: Voting. Except as otherwise required by law or by the
Corporation's Certificate of Incorporation, as then amended and in effect (the
"Certificate of Incorporation"), at any meeting of the stockholders, a majority
of all shares issued and outstanding and entitled to vote upon a question to be
considered at the meeting shall constitute a quorum when represented at such
meeting by the holders thereof in person or by their duly constituted and
authorized attorney or attorneys, but holders of a lesser interest may adjourn
any meeting from time to time, and the meeting may be held as adjourned without
further notice. When a quorum is present at any meeting, a majority of the
stock so represented thereat and voting on any question brought before such
meeting shall be determinative, except where a larger vote is required by law,
by the Certificate of Incorporation or by these by-laws, and except that the
vote required for the election of directors shall be as set forth in the
Certificate of Incorporation.
Except as set forth in the Certificate of Incorporation, if, pursuant to
Section 5.5 of these Bylaws, a record date has been fixed, every holder of
record of shares entitled to vote at a meeting of stockholders shall be
entitled to one vote for each share outstanding in his name on the books of the
Corporation at the close of business on such record date. If no record date has
been fixed, then every holder of record of shares entitled to vote at a meeting
of stockholders shall be entitled to one vote for each share of stock standing
in his name on the books of the Corporation at the close of business on the day
next preceding the day on which notice of the meeting is given, or, if notice
is waived, at the close of business on the day next preceding the day on which
the meeting is held.
1.5 Voting by Ballot. No vote of the stockholders need be taken by written
ballot or conducted by inspectors of election, unless otherwise required by
law. Any vote which need not be taken by ballot may be conducted in any manner
approved by the meeting.
1.6 Adjournment. If a quorum is not present at any meeting of the
stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a
F-2
<PAGE>
quorum is present. Notice of any adjourned meeting of the stockholders of the
Corporation need not be given if the place, date and hour thereof are announced
at the meeting at which the adjournment is taken, provided, however, that if
the adjournment is for more than 30 days, or if after the adjournment a new
record date for the adjourned meeting is fixed pursuant to Section 5.5 of these
Bylaws, a notice of the adjourned meeting, conforming to the requirements of
Section 1.3 hereof, shall be given to each stockholder of record entitled to
vote at such meeting. At any adjourned meeting at which a quorum is present,
any business may be transacted that might have been transacted on the original
date of the meeting.
1.7 Proxies. Any stockholder entitled to vote at any meeting of the
stockholders or to express consent to or dissent from corporate action without
a meeting may, by a written instrument signed by such stockholder or his
attorney-in-fact, authorize another person or persons to vote at any such
meeting and express such consent or dissent for him by proxy. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy
shall be revocable at the pleasure of the stockholder executing it, except in
those cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by filing another duly executed proxy bearing a later date with the
Secretary.
1.8 Organization; Procedure. At every meeting of stockholders the presiding
officer shall be the Chairman of the Board or, in the event of his absence or
disability, the President or, in the event of his absence or disability, a
presiding officer chosen by a majority of the stockholders present in person or
by proxy. The Secretary, or in the event of his absence or disability, the
Assistant Secretary, if any, or if there be no Assistant Secretary, in the
absence of the Secretary, an appointee of the presiding officer, shall act as
Secretary of the meeting. The order of business and all other matters of
procedure at every meeting of stockholders may be determined by such presiding
officer.
1.9 Consent of Stockholders in Lieu of Meeting. To the fullest extent
permitted by law, whenever the vote of the stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, such action may be taken without a meeting, without prior notice and
without a vote of stockholders, if the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted shall consent in writing to such corporate action being
taken. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not so consented in writing.
ARTICLE 2.
BOARD OF DIRECTORS
2.1 General Powers. Except as may otherwise be provided by law, by the
Certificate of Incorporation or by these Bylaws, the property, affairs and
business of the Corporation shall be managed by or under the direction of the
Board of Directors and the Board of Directors may exercise all the powers of
the Corporation.
2.2 Number; Election; Term of Office; Removal. The classification of the
board of directors, the term of each class of directors, the manner of election
and removal of directors and the filling of newly created directorships and
vacancies on the Board shall be as set forth in the Certificate of
Incorporation. Each Director (whenever elected) shall
hold office until his successor has been duly elected and qualified, or until
his earlier death, resignation or removal.
F-3
<PAGE>
2.3 Annual and Regular Meetings. The annual meeting of the Board of
Directors for the purpose of electing officers and for the transaction of such
other business as may come before the meeting shall be held as soon as possible
following adjournment of the annual meeting of the stockholders at the place of
such annual meeting of the stockholders. Notice of such annual meeting of the
Board of Directors need not be given. The Board of Directors from time to time
may by resolution provide for the holding of regular meetings and fix the place
(which may be within or without the State of Delaware) and the date and hour of
such meetings. Notice of regular meetings need not be given, provided; however,
that if the Board of Directors shall fix or change the time or place of any
regular meeting, notice of such action shall be mailed promptly, or sent by
telegram, facsimile or cable, to each Director who shall not have been present
at the meeting at which such action was taken, addressed to him at his usual
place of business, or shall be delivered to him personally. Notice of such
action need not be given to any Director who attends the first regular meeting
after such action is taken without protesting the lack of notice to him, prior
to or at the commencement of such meeting, or to any Director who submits a
signed waiver of notice, whether before or after such meeting.
2.4 Special Meeting Notice. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board or, in the event of his
absence or disability, by the President, at such place (within or without the
State of Delaware), date and hour as may be specified in the respective notices
or waivers of notice of such meetings. Special meetings of the Board of
Directors may be called on 24 hours' notice, if notice is given to each
Director personally or by telephone or facsimile, or on five days' notice, if
notice is mailed to each Director, addressed to him at his usual place of
business. Notice of any special meeting need not be given to any Director who
attends such meeting without protesting the lack of notice to him, prior to or
at the commencement of such meeting, or to any Director who submits a signed
waiver of notice, whether before or after such meeting, and any business may be
transacted thereat.
2.5 Quorum; Voting. At all meetings of the Board of Directors, the presence
of a majority of the total authorized number of Directors shall constitute a
quorum for the transaction of business. Except as otherwise required by law or
the Certificate of Incorporation, the vote of a majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors.
2.6 Adjournment. A majority of the Directors present, whether or not a
quorum is present, may adjourn any meeting of the Board of Directors to another
time or place. No notice need be given of any adjourned meeting unless the time
and place of the adjourned meeting are not announced at the time of
adjournment, in which case notice conforming to the requirements of Section 2.5
shall be given to each Director.
2.7 Action Without a Meeting. Any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting if all
members of the Board of Directors consent thereto in writing, and such writing
or writings are filed with the minutes of proceedings of the Board of
Directors.
2.8 Regulations: Manner of Acting. To the extent consistent with applicable
law, the Certificate of Incorporation and these Bylaws, the Board of Directors
may adopt such rules and regulations for the conduct of meetings of the Board
of Directors and for the management of the property, affairs and business of
the Corporation as the Board of Directors may deem appropriate. The Directors
shall act only as a Board, and the individual Directors shall have no power as
such.
2.9 Action by Telephonic Communications. Members of the Board of Directors
may participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this provision shall constitute presence in person at such
meeting.
F-4
<PAGE>
2.10 Designation. Any Director may resign at any time by delivering a
written notice of resignation, signed by such Director, to the Chairman of the
Board, the President or the Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery. No director need be a stockholder.
2.11 Nominations. (a) Except as otherwise provided by law or by the
Certificate of Incorporation, the business and affairs of the Corporation shall
be managed by the board of directors. Subject to the rights of holders of the
Corporation's preferred stock or the Stockholders (as defined in the
Stockholders' Agreement defined below) as set forth in the Stockholders'
Agreement, nominations for the election of directors may be made by the board
of directors or a committee appointed by the board of directors or by any
stockholder entitled to vote in the election of directors generally. However,
any stockholder entitled to vote in the election of directors may nominate one
or more persons for election as directors at a meeting only if written notice
of such stockholders intent to make such nomination or nominations has been
given, either by personal delivery or by United States mail, postage prepaid,
to the Secretary of the corporation not later than 90 days prior to the date of
any annual or special meeting. In the event that the date of such annual or
special meeting was not made by a Public Announcement (as defined in Section
1.1) more than 90 days prior to the meeting, notice by the stockholder to be
timely must be delivered to the Secretary of the Corporation not later than the
close of business on the tenth day following the day on which such announcement
of the date of the meeting was communicated to the stockholders. "Stockholders
Agreement" shall have the meaning ascribed to such term as is set forth in the
Corporation's Certificate of Incorporation. Each such notice shall set forth:
(i) the name and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (ii) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (iv) such
other information regarding each nominee proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee been nominated,
or intended to be nominated, by the board of directors; and (v) the consent of
each nominee to serve as a director of the Corporation if so elected.
(b) Notwithstanding anything to the contrary contained in this Section 2.11,
so long as one or more Stockholders (as such term is defined in the
Stockholders' Agreement) has the right to nominate one or more directors of the
Corporation pursuant to the Certificate of Incorporation or Stockholders'
Agreement, as the case may be, then, with respect to such Stockholder or group
of Stockholders, as the case may be, such Stockholder or group of Stockholders,
as the case may be, shall have the right to nominate such director by written
notice to the Company which notice shall set forth the name of the person being
nominated. The Company shall deliver written notice to the Stockholders or
group of Stockholders, as the case may be, so entitled to nominate such
director of the date the Company proposes to distribute any proxy solicitation
materials for its annual meeting at least thirty days prior to such earliest
proposed distribution date so as to enable such Stockholder or group of
Stockholders, as the case may be, to give notice to the Corporation of the
persons to be nominated thereby in accordance with the Certificate of
Incorporation or Stockholders Agreement, as applicable. The Company shall
include in any proxy solicitation materials related to the election of members
of the Board of Directors information and recommendations of the Board to
effect the nomination of any director so designated by such Stockholders or
group of Stockholders, as the case may be.
2.12 Compensation. The amount, if any, which each Director shall be entitled
to receive as compensation for his services as such shall be fixed from time to
time by resolution of the Board of Directors.
2.13 Reliance on Accounts and Reports, etc. A member of the Board of
Directors, or a member of any Committee designated by the Board of Directors,
shall, in the performance of his duties, be fully protected in relying in good
faith upon the records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or Committees of
F-5
<PAGE>
the Board of Directors, or by any other person as to matters the member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Corporation, including without limitation independent certified public
accountants and appraisers.
ARTICLE 3.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
3.1 How Constituted. The Board of Directors may designate one or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate one or more directors as
alternate members of any such Committee, who may replace any absent or
disqualified member or members at any meeting of such Committee. In addition,
unless the Board of Directors has so designated an alternate member of such
Committee, in the absence or disqualification of a member of such Committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Thereafter, members (and alternate
members, if any) of each such Committee may be designated at the annual meeting
of the Board of Directors. Any such Committee may be abolished or redesignated
from time to time by the Board of Directors. Each member (and each alternate
member) of any such Committee (whether designated at an annual meeting of the
Board of Directors or to fill a vacancy or otherwise) shall hold office until
his successor shall have been designated or until he shall cease to be a
Director, or until his earlier death, resignation or removal.
3.2 Powers. Each Committee shall have and may exercise such powers of the
Board of Directors as may be provided by resolution of the Board, provided,
that neither the Executive Committee nor any such other Committee shall have
the power or authority to (i) approve or adopt, or recommend to the
stockholders, any action or matter expressly required by the General
Corporation Law to be submitted to stockholders for approval or (ii) adopt,
amend or repeal any of these Bylaws. Each Committee may be granted by the Board
of Directors power to authorize the seal of the Corporation to be affixed to
any or all papers which may require it.
3.3 Quorum: Voting. Except as may be otherwise provided in the resolution
creating such Committee, at all meetings of any Committee the presence of
members (or alternate members) constituting a majority of the total authorized
membership of such Committee shall constitute a quorum for the transaction of
business. The act of a majority of the members present at any meeting at which
a quorum is present shall be the act of such Committee.
3.4 Action without a Meeting. Any action required or permitted to be taken
at any meeting of any such Committee may be taken without a meeting, if all
members of such Committee shall consent to such action in writing and such
writing or writings are filed with the minutes of the proceedings of the
Committee.
3.5 Regulations; Manner of Acting. Each such Committee may fix its own rules
of procedure and may meet at such place (within or without the State of
Delaware), at such time and upon such notice, if any, as it shall determine
from time to time. Each such Committee shall keep minutes of its proceedings
and shall report such proceedings to the Board of Directors at the meeting of
the Board of Directors next following any such proceeding. The members of any
such Committee shall act only as a Committee, and the individual members of
such Committee shall have no power as such.
3.6 Action by Telephonic Communications. Members of any Committee designated
by the Board of Directors may participate in a meeting of such Committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting.
F-6
<PAGE>
3.7 Resignation. Any member (and any alternate member) of any Committee may
resign at any time by delivering a written notice of resignation, signed by
such member, to the Chairman of the Board or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
3.8 Removal. Any member (any alternate member) of any Committee may be
removed at any time, with or without cause, by resolution adopted by a
majority of the whole Board of Directors.
3.9 Vacancies. If any vacancy shall occur in any Committee, by reason of
death, resignation, removal or otherwise, the remaining members (and any
alternate members) shall continue to act, and any such vacancy may be filled
by the Board of Directors or the remaining members of the Committee as
provided in Section 3.1 hereof.
ARTICLE 4
OFFICERS
4.1 Titles. The officers of the Corporation shall be chosen by the Board of
Directors and shall be the President, an Executive Vice President/Chief
Financial Officer, one or more Vice Presidents, a Secretary and a Treasurer.
The Board of Directors also may elect one or more Assistant Secretaries and
Assistant Treasurers in such numbers as the Board of Directors may determine,
and shall also elect a Chairman of the Board. Any number of offices may be
held by the same person. No officer need be a Director of the Corporation.
4.2 Election. Unless otherwise determined by the Board of Directors, the
officers of the Corporation shall be elected by the Board of Directors at the
annual meeting of the Board of Directors, and shall be elected to hold office
until the next succeeding annual meeting of the Board of Directors. In the
event of the failure to elect officers at such annual meeting, officers may be
elected at any regular or special meeting of the Board of Directors. Each
officer shall hold office until his successor has been elected and qualified,
or until his earlier death, resignation or removal.
4.3 Salaries. The salaries of all officers of the Corporation shall be
fixed by the Board of Directors.
4.4 Removal and Resignation: Vacancies. Any officer may be removed with or
without cause at any time by the Board of Directors. Any officer may resign at
any time by delivering a written notice of resignation, signed by. such
officer, to the Board of Directors or the Chairman of the Board. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors.
4.5 Authority and Duties. The officers of the Corporation shall have such
authority and shall exercise such powers and perform such duties as may be
specified in these Bylaws, except that in any event each officer shall
exercise such powers and perform such duties as may be required by law.
4.6 The Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the stockholders and directors. He shall also perform all
duties and exercise all powers usually pertaining to the office of a Chairman
of the Board of a corporation. He shall see that all orders and resolutions of
the Board of Directors are carried into effect. The Chairman of the Board
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
4.7 Vice Chairman. The Vice Chairman shall perform, in general, all duties
incident to the office of Vice Chairman and such other duties as may be
specified in these Bylaws or as may be assigned to him from time to time by
the Board of Directors.
4.8 The President. The President shall be the Chief Executive Officer of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. In the absence of the Chairman of the
Board, the President shall preside at all meetings of the stockholders and
directors. He shall manage and
F-7
<PAGE>
administer the Corporation's business and affairs and shall also perform all
duties and exercise all powers usually pertaining to the office of a Chief
Executive Officer of a corporation. He shall report to the Board of Directors.
4.9 Vice President/Chief Financial Officer. The Vice President/Chief
Financial Officer shall, subject to the direction of the Board of Directors and
the President, perform all duties and exercise all powers usually pertaining to
the office of a chief financial officer of a corporation and shall have general
control and supervision of legal and regulatory policies and operations of the
Corporation. He shall also be the chief business development officer of the
Corporation and in connection therewith shall perform all duties and exercise
all powers usually pertaining to the office of a chief business development
officer. He shall report to the Chief Executive Officer and to Board of
Directors.
4.10 The Vice Presidents. Each Vice President shall perform such duties and
exercise such powers as may be assigned to him from time to time by the
President. In the absence of the President, the duties of the President shall
be performed and his powers may be exercised by such Vice President as shall be
designated by the President, or failing such designation, such duties shall be
performed and such powers may be exercised by each Vice President in the order
of their election to that office; subject in any case to review and superseding
action by the President.
4.11 The Secretary. The Secretary shall perform, in general, all duties
incident to the office of secretary and such other duties as may be specified
in these Bylaws or as may be assigned to him from time to time by the Board of
Directors or the President.
4.12 The Treasurer. The Treasurer shall be the chief financial officer of
the corporation and shall perform, in general, all duties incident to the
office of treasurer and such other duties as may be specified in these Bylaws
or as may be assigned to him from time to time by the Board of Directors, or
the President.
4.13 Additional Officers. The Board of Directors may appoint such other
officers and agents as it my deem appropriate, and such other officers and
agents shall hold their offices for such terms and shall exercise such powers
and perform such duties as may be determined from time to time by the Board of
Directors. The Board of Directors from time to time may delegate to any officer
or agent the power to appoint subordinate officers or agents and to prescribe
their respective rights, terms of office, authorities and duties. Any such
officer or agent may remove any such subordinate officer or agent appointed by
him, with or without cause.
4.14 Security. The Board of Directors may direct that the Corporation secure
the fidelity of any or all of its officers or agents by bond or otherwise.
ARTICLE 5.
CAPITAL STOCK
5.1 Certificates of Stock, Uncertificated Shares. The shares of the
Corporation shall be represented by certificates, provided that the Board of
Directors may provide by resolution that some or all of any or all classes or
series of the stock of the Corporation shall be uncertificated shares. Any such
resolution shall not apply to shares rested by a certificate until each
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock in the
Corporation represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate signed by, or in
the name of the Corporation, by the Chairman of the Board, President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary,
F-8
<PAGE>
representing the number of shares registered in certificate form. Such
certificate shall be in such form as the Board of Directors may determine, to
the extent consistent with applicable law, the Certificate of Incorporation and
these Bylaws.
5.2 Signatures; Facsimile. All of such signatures on the certificate may be
a facsimile, engraved or printed, to the extent permitted by law. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
5.3 Lost. Stolen or Destroyed Certificates. The Secretary of the Corporation
may cause a new certificate of stock or uncertificated shares in place of any
certificate therefor issued by the Corporation, alleged to have been lost,
stolen or destroyed, upon delivery to the Secretary of an affidavit of the
owner or owners of such certificate, or his or their legal representative
setting forth such allegation. The Secretary may require the owner or owners of
such lost, stolen or destroyed certificate, or his or their legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of any such new
certificate or uncertificated shares.
5.4 Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares, duly endorsed or
accompanied by appropriate evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Within a reasonable time after the transfer of uncertificated stock, the
Corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to Section 151, 156, 202(a) or 218(a) of the General Corporation Law.
Subject to the provisions of the Certificate of Incorporation and these Bylaws,
the Board of Directors may prescribe such additional rules and regulations as
it may deem appropriate relating to the issue, transfer and registration of
shares of the Corporation.
5.5 Record Date. In order to determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than ten days before the date of such meeting, nor
more than 60 days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting, provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
5.6 Registered Stockholders. Prior to due surrender of a certificate for
registration of transfer, the Corporation may treat the registered owner as the
person exclusively entitled to receive dividends and other distributions, to
vote, to receive notice and otherwise to exercise all the rights and powers of
the owner of the shares represented by such certificate, and the Corporation
shall not be bound to recognize any equitable or legal claim to or interest in
such shares on the part of any other person, whether or not the Corporation
shall have notice of such claim or interest. Whenever any transfer of shares
shall be made for collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer if when the certificates are presented
to the Corporation for transfer or uncertificated shares are requested to be
transferred, both the transferor and transferee request the Corporation to do
so.
5.7 Transfer Agent and Registrar. The Board of Directors may appoint one or
more transfer agents and registrars, and may require all certificates
representing shares to bear the signature of any such transfer agents or
registrars.
F-9
<PAGE>
ARTICLE 6.
INDEMNIFICATION
6.1 Indemnification. The Corporation shall, to the fullest extent permitted
by applicable law from time to time in effect, indemnify any and all persons
who may serve or who have served at any time as Directors or officers of the
Corporation, or who at the request of the Corporation may serve or at any time
have served as Directors or officers of another corporation (including
subsidiaries of the Corporation) or of any partnership, joint venture, trust or
other enterprise, from and against any and all of the expenses, liabilities or
other matters referred to in or covered by said law. Such indemnification shall
continue as to a person who has ceased to be a Director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person. The Corporation may also indemnify any and all other persons whom it
shall have power to indemnify under any applicable law from time to time in
effect to the extent authorized by the Board of Directors and permitted by such
law. The indemnification provided by this Article shall not be deemed exclusive
of any other rights to which any person may be entitled under any provision of
the Certificate of Incorporation, other Bylaw, agreement, vote of stockholders
or disinterested Directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
6.2 Definition. For purposes of this Article, the term "Corporation" shall
include constituent corporations referred to in Subsection (h) of Section 145
of the General Corporation Law (or any similar provision of applicable law at
the time in effect).
ARTICLE 7.
OFFICES
7.1 Registered Office. The registered office of the Corporation in the State
of Delaware shall be located at Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801, and the Corporation's registered
agent shall be The Corporation Trust Company.
7.2 Other Offices. The Corporation may maintain offices or places of
business at such other locations within or without the State of Delaware as the
Board of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE 8.
GENERAL PROVISIONS
8.1 Dividends. Subject to any applicable provisions of law and the
Certificate of Incorporation, dividends upon the shares of the Corporation may
be declared by the Board of Directors at any regular or special meeting of the
Board of Directors and any such dividend may be paid in cash, property, or
shares of the Corporation.
8.2 Reserves. There may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, thinks proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation,
and the Board of Directors may similarly modify or abolish any such reserve.
8.3 Execution of Instruments. The President, any Executive Vice President,
any Vice President, the Secretary or the Treasurer may enter into any contract
or execute and deliver any instrument in the name and on behalf of the
Corporation. The Board of Directors or the President may authorize any other
officer or agent
F-10
<PAGE>
to enter into any contract or execute and deliver any instrument in the name
and on behalf of the Corporation. Any such authorization may be general or
limited to specific contracts or instruments.
8.4 Corporate Indebtedness. No loan shall be contracted on behalf of the
Corporation, and no evidence of indebtedness shall be issued in its name,
unless authorized by the Board of Directors. Such authorization may be general
or confined to specific instances. Loans so authorized may be effected at any
time for the Corporation from any bank, trust company or other institution, or
from any firm, corporation or individual. All bonds, debentures, notes and
other obligations or evidences of indebtedness of the Corporation issued for
such loans shall be made, executed and delivered as the Board of Directors
shall authorize. When so authorized by the Board of Directors, any part of or
all the properties, including contract rights, assets, business or good will of
the Corporation, whether then owned or thereafter acquired, may be mortgaged,
pledged, hypothecated or conveyed or assigned in trust as security for the
payment of such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of any interest thereon, by instruments
executed and delivered in the name of the Corporation.
8.5 Deposits. Any funds of the Corporation may be deposited from time to
time in such banks, trust companies or other depositaries as may be determined
by the Board of Directors or the President, or by such officers or agents as
may be authorized by the Board of Directors or the President to make such
determination.
8.6 Checks. All checks or demands for money and notes of the Corporation
shall be signed by such officer or offices or such agent or agents of the
Corporation, and in such manner, as the Board of Directors, the Chairman of the
Board, or the President from time to time may determine.
8.7 Sale. Transfer, etc. of Securities. To the extent authorized by the
Board of Directors or by the President, any Vice President, the Secretary or
the Treasurer, or any other officers designated by the Board of Directors, the
Chairman of the Board, or the President may sell, transfer, endorse, and assign
any shares of stock, bonds or other securities owned by or held in the name of
the Corporation, and may make, execute and deliver in the name of the
Corporation, under its corporate seal, any instruments that may be appropriate
to effect any such sale, transfer, endorsement or assignment.
8.8 Voting as Stockholder. Unless otherwise determined by resolution of the
Board of Directors, the President or any Vice President shall have full power
and authority on behalf of the Corporation to attend any meeting of
stockholders of any corporation in which the Corporation may hold stock, and to
act, vote (or execute proxies to vote) and exercise in person or by proxy all
other rights, powers and privileges incident to the ownership of such stock.
Such officers acting on behalf of the Corporation shall have full power and
authority to execute any instrument expressing consent to or dissent from any
action of any such corporation without a meeting. The Board of Directors may by
resolution from time to time confer such power and authority upon any other
person or persons.
8.9 Fiscal Year. The fiscal year of the Corporation shall commence on the
first day of January of each year (except for the Corporation's first fiscal
year which shall commence on the date of incorporation) and shall end in each
case on December 31.
8.10 Seal. The seal of the Corporation shall be circular in form and shall
contain the name of the Corporation, the year of its incorporation and the
words "Corporate Seal" and "Delaware". The form of such seal shall be subject
to alteration by the Board of Directors. The seal may be used by causing it or
a facsimile thereof to be impressed, affixed or reproduced, or may be used in
any other lawful manner.
8.11 Books and Records. Except to the extent otherwise required by law, the
books and records of the Corporation shall be kept at such place or places
within or without the State of Delaware as may be determined from time to time
by the Board of Directors.
F-11
<PAGE>
ARTICLE 9.
AMENDMENT OF BYLAWS.
9.1 Amendment. Except as otherwise provided by law or by the Certificate of
Incorporation, these Bylaws, as from time to time altered or amended, may be
made, altered or amended by the holders of shares of capital stock representing
at least two-thirds ( 2/3) of the votes entitled to be cast for the election of
directors of the Corporation voting together as a single class, in person or by
proxy at any annual or special meeting of the stockholders called for such
purpose, of which the notice shall specify the subject matter of the proposed
alteration or amendment or new bylaw or the article or articles to be affected
thereby, or by written consent of such holders of such number of shares. If the
Certificate of Incorporation so provides, these Bylaws may also be made,
altered or amended by a majority of the whole number of directors then in
office. Notwithstanding anything to the contrary contained in this Section 9.1,
the rights of any Stockholder or group of Stockholders under Section 2.11 (b)
of these Bylaws shall not be amended, altered or repealed without the prior
written approval of any such Stockholder or group of Stockholders, as the case
may be.
ARTICLE 10.
CONSTRUCTION
10.1 Construction. In the event of any conflict between the provisions of
these Bylaws as in effect from time to time and the provisions of the
Certificate of Incorporation as in effect from time to time, the provisions of
the Certificate of Incorporation shall be controlling.
F-12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 (a) of the General Corporation Law of the State of Delaware
("Delaware Corporation Law") provides, in general, that a corporation shall
have the power to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), because the person is or
was a director or officer of the corporation. Such indemnity may be against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding, if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and if, with respect to any criminal action or
proceeding, the person did not have reasonable cause to believe the person's
conduct was unlawful.
Section 145 (b) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor because the person is or was a director or officer of the
corporation, against any expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145 (g) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to purchase and maintain insurance on behalf
of any person who is or was a director or officer of the corporation against
any liability asserted against the person in any such capacity, or arising out
of the person's status as such, whether or not the corporation would have the
power to indemnify the person against such liability under the provisions of
the law.
Article X of the Registrant's by-laws provides for indemnification, at the
discretion of the board of directors, to the fullest extent permitted under
Delaware law for any person who is or was a director or officer of the
Registrant who is or was involved or threatened to be made so involved in any
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was serving as a director, officer, employee
or agent of the Registrant or was serving at the request of the Registrant as a
director, officer, employee or agent of any other enterprise. Such
indemnification is provided only if the director, officer, employee or agent
acted in good faith and in a manner that the director, officer, employee or
agent reasonably believed to be in, or not opposed to, the best interests of
the Registrant, and with respect to any criminal proceeding, had no reasonable
cause to believe that the conduct was unlawful.
The foregoing statements are subject to the detailed provisions of Section
145 of the Delaware Corporation Law and Article X of the by-laws of the
Registrant.
II-1
<PAGE>
Registrant
Item 21. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed herewith
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization and Contribution (included as
Annex A to the joint proxy statement-prospectus forming a part of
this Registration Statement and incorporated herein by reference),
dated February 28, 2000, by and between TeleCorp PCS and Tritel,
Inc.
2.2 Amendment No. 1 to the Agreement and Plan of Reorganization and
Contribution (included as Annex B to the joint proxy statement-
prospectus forming a part of this Registration Statement and
incorporated herein by reference).
3.1 Certificate of Incorporation of the Registrant.
3.2 Form of Restated Certificate of Incorporation of the Registrant
(included as Annex E to the joint proxy statement-prospectus
forming a part of this Registration Statement and incorporated
herein by reference).
3.3 By-laws of the Registrant.
3.4 Form of Restated By-laws of the Registrant (included as Annex F to
the joint proxy statement-prospectus forming part of this
Registration Statement and incorporated herein by reference).
5.1# Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality of securities being registered.
8.1# Opinion of Cadwalader, Wickersham & Taft regarding certain U.S.
income tax aspects of the merger.
8.2# Opinion of Brown & Wood LLP regarding certain U.S. income tax
aspects of the merger.
10.1 Telecorp PCS, Inc. Voting Agreement, dated February 28, 2000.
10.2 Tritel, Inc. Voting Agreement, dated February 28, 2000.
10.3 Side Letter Agreement regarding Milwaukee Option, dated February
28, 2000, by and between AT&T Wireless Services, Inc. and Telecorp
PCS, Inc.
10.4 Asset Exchange Agreement, dated as of February 28, 2000, by and
among AT&T Wireless PCS, LLC, Telecorp PCS, Inc., Telecorp PCS,
LLC, Telecorp Holding Corp, Inc., Telecorp Communications, Inc.,
Telecorp Equipment Leasing, L.P., and Telecorp Realty, LLC.
10.5 Side Letter regarding Additional Mutual Rights and Obligations in
Connection with the Asset Exchange Agreement and the Agreement and
Plan of Reconstruction and Contribution, dated as of February 28,
2000, by and between AT&T Wireless PCS, LLC and Telecorp PCS, Inc.
10.6.1 License Acquisition Agreement, between Polycell Communications,
Inc. and ABC Wireless, LLC, dated as of February 28, 2000.
10.6.2 Amended and Restated License Acquisition Agreement among Polycell
Communications, Inc., Clinton Communications, Inc. and ABC
Wireless, LLC, dated as of May 3, 2000.
10.7 License Acquisition Agreement, between ABC Wireless, LLC and AT&T
Wireless PCS, LLC, dated as of February 28, 2000.
10.8# Form of Intermediary Agreement, among AT&T Wireless PCS, LLC,
Telecorp PCS, Inc., Telecorp PCS, LLC, Telecorp Holding Corp,
Inc., Telecorp Communications, Inc., Telecorp Equipment Leasing,
L.P., Telecorp Realty, LLC and the Intermediary.
10.9 Transition Services Agreement, dated as of February 28, 2000, by
and between AT&T Wireless PCS, LLC and Telecorp PCS, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.10# Form of Assignment and Assumption Agreement, by and between
Milwaukee PCS, LLC, Milwaukee Acquisition Subsidiary, Inc., and
Telecorp PCS, Inc.
10.11 Agreement and Plan of Merger, dated February 27, 2000, by and
among Milwaukee PCS LLC, Milwaukee Acquisition Subsidiary, Inc.,
Kailas J. Rao, and Indus, Inc.
10.12 Airadigm Letter of Intent, dated January 24, 2000.
10.13* General Agreement for Purchase of PCS Systems and Services by and
between TeleCorp PCS, Inc. and Lucent Technologies, Inc., dated as
of May 12, 1998, as amended.
10.14* Securities Purchase Agreement by and among TeleCorp PCS, Inc.,
AT&T Wireless PCS Inc., TWR Cellular, Inc. and certain Initial
investors other than AT&T Wireless, TeleCorp Investors and
Management Stockholders identified, dated as of January 23, 1998.
10.15.1* Network Membership License Agreement, by and among AT&T Corp.,
including AT&T Wireless Services, Inc., and TeleCorp PCS, Inc.,
dated as of July 17, 1998.
10.15.2* Amendment No. 1 to Network Membership License Agreement, dated
March 30, 1999.
10.16# Form of Network Membership License Agreement by and between AT&T
Corp., including AT&T Wireless Services, Inc., and Holding
Company.
10.17.1* Management Agreement by and between TeleCorp Management Corp. and
TeleCorp PCS, Inc., dated as of July 17, 1998
10.17.2* Amendment No. 1 to the Management Agreement between TeleCorp
Management Corp. and TeleCorp PCS, Inc., dated as of May 25, 1999.
10.17.3** Amendment No. 2 to the Management Agreement between TeleCorp
Management Corp. and TeleCorp PCS, Inc., dated as of October 18,
1999.
10.18.1* Intercarrier Roamer Service Agreement by and between AT&T Wireless
Services, Inc. and TeleCorp PCS, Inc., dated as of July 17, 1998.
10.18.2* Amendment No. 1 to Intercarrier Roamer Service Agreement, dated
May 25, 1999.
10.19# Form of Intercarrier Roamer Service Agreement, by and between AT&T
Wireless Services, Inc. and Holding Company.
10.20* Roaming Administration Service Agreement by and between AT&T
Wireless Services, Inc. and TeleCorp PCS, Inc., dated as of July
17, 1998.
10.21# Form of Roaming Administration Service Agreement, by and between
AT&T Wireless Services, Inc., and Holding Company.
10.22.1* Credit Agreement by and among TeleCorp PCS, Inc., the Lenders
party to, and the Chase Manhattan Bank, as Administrative Agent
and Issuing Bank, TD Securities (USA) Inc., as Syndication Agent,
and Bankers Trust Company, as Documentation Agent, dated as of
July 17, 1998.
10.22.2* First Amendment, Consent, and Waiver to the TeleCorp Credit
Agreement, dated as of December 18, 1998.
10.22.3* Second Amendment and Waiver to the TeleCorp Credit Agreement,
dated as of March 1, 1999.
10.22.4* Third Amendment to the TeleCorp Credit Agreement, dated as of
March 30, 1999.
10.22.5* Fourth Amendment to the TeleCorp Credit Agreement, dated as of
March 31, 1999.
10.22.6* Fifth Amendment and Acceptance to the TeleCorp Credit Agreement,
dated as of April 7, 1999.
10.22.7* Sixth Amendment to the TeleCorp Credit Agreement, dated as of
April 7, 1999.
10.22.8* Seventh Amendment to the TeleCorp Credit Agreement, dated as of
May 21, 1999.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.22.9** Eighth Amendment to the TeleCorp Credit Agreement, dated as of
October 25, 1999.
10.22.10** Ninth Amendment to the TeleCorp Credit Agreement, dated as of
October 26, 1999.
10.23.1* Stock Purchase Agreement by and among TeleCorp PCS, Inc., AT&T
Wireless PCS, Inc. and certain Initial investors other than AT&T
Wireless identified in, dated as of March 22, 1999.
10.23.2* Amendment No. 1 to Stock Purchase Agreement by and among TeleCorp
PCS, Inc., AT&T Wireless PCS, Inc. and Initial investors other
than AT&T Wireless, dated as of March 30, 1999.
10.23.3* Amendment No. 2 to Stock Purchase Agreement by and among TeleCorp
PCS, Inc., AT&T Wireless PCS, Inc. and Initial investors other
than AT&T Wireless, dated as of April 6, 1999.
10.23.4* Amendment No. 3 to Stock Purchase Agreement by and among TeleCorp
PCS, Inc., AT&T Wireless PCS, Inc. and Initial investors other
than AT&T Wireless, dated as of May 14, 1999.
10.23.5* Amendment No. 4 to Stock Purchase Agreement by and among TeleCorp
PCS, Inc., AT&T Wireless PCS, Inc. and Initial investors other
than AT&T Wireless, dated as of July 15, 1999.
10.24* Stock Purchase Agreement by and among Viper Wireless, Inc.,
TeleCorp Holding Corp., Inc. and TeleCorp PCS, Inc., dated as of
March 1, 1999.
10.25* Puerto Rico Stock Purchase Agreement by and among TeleCorp PCS,
Inc., Puerto Rico Acquisition Corp. and certain Management
Stockholders and Initial investors other than AT&T Wireless, dated
as of March 30, 1999.
10.26*** Stock Purchase Agreement, dated as of October 18, 1999, by and
among Telecorp PCS, Inc., Telecorp Holding Corp., Inc., Gerald T.
Vento, Thomas H. Sullivan, OneLiberty Fund IV, L.P., Northwood
Ventures LLC, and Northwood Capital Partners LLC.
10.27* Asset Purchase Agreement, dated May 25, 1999, by and between AT&T
Wireless PCS Inc. and TeleCorp PCS, Inc.
10.28* Preferred Stock Purchase Agreement, dated May 24, 1999, by and
between AT&T Wireless PCS Inc. and TeleCorp PCS, Inc.
10.29* License Acquisition Agreement, dated May 15, 1998, by and between
Mercury PCS II, LLC and TeleCorp PCS, Inc.
10.30* License Acquisition Agreement, dated May 15, 1998, by and between
Wireless 2000, Inc. and TeleCorp PCS, Inc.
10.31.1* Stockholders' Agreement, dated as of July 17, 1998, by and among
AT&T Wireless PCS, Inc., TWR Cellular, Inc., Initial investors
other than AT&T Wireless, Management Stockholders, and TeleCorp
PCS, Inc.
10.31.2* Amendment No. 1 to Stockholders' Agreement dated May 25, 1999.
10.31.3* Amendment No. 2 to Stockholders' Agreement dated November 1, 1999.
10.32# Form of Stockholders' Agreement by and among AT&T Wireless PCS,
LLC, Initial investors other than AT&T Wireless, Management
Stockholders, Other Stockholders, and Holding Company, Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.33* Purchase Agreement, dated April 20, 1999, by and among Chase
Securities Inc., BT Alex. Brown Incorporated, Lehman Brothers
Inc., TeleCorp PCS, Inc. and TeleCorp Communications, Inc.
10.34* Exchange and Registration Rights Agreement, dated April 23, 1999,
by and among Chase Securities Inc., BT Alex. Brown Incorporated,
Lehman Brothers Inc., TeleCorp PCS, Inc. and TeleCorp
Communications, Inc.
10.35* Agreement, dated as of July 17, 1998, by and among AT&T Wireless
PCS Inc., TWR Cellular, Inc., the Initial investors other than
AT&T Wireless, the TeleCorp Investors and the Management
Stockholders.
10.36* Employment Agreement, dated as of July 17, 1998, by and between
TeleCorp PCS, Inc. and Julie A. Dobson.
10.37 Amendment to Employment Agreement, dated February 28, 2000, by and
between Telecorp PCS, Inc. and Julie A. Dobson.
10.38* Share Grant Agreement, dated July 16, 1998, by and between
TeleCorp PCS, Inc. and Julie A. Dobson.
10.39* Separation Agreement, dated as of March 8, 1999, by and among
TeleCorp PCS, Inc., TeleCorp Communications, Inc. and Robert
Dowski.
10.40* Agreement among the Parties, dated as of June 30, 1999, by and
among TeleCorp PCS, Inc., the Initial investors other than AT&T
Wireless, Entergy Technology Holding Company, AT&T Wireless PCS,
Inc., TWR Cellular Inc. and other stockholders.
10.41* Amended and Restated Agreement, dated April 16, 1999, by and among
TeleCorp Communications, Inc., Triton PCS, Inc., Tritel
Communications, Inc. and Affiliate License Co, L.L.C.
10.42* TeleCorp PCS, Inc. 1998 Restricted Stock Plan, as amended May 20,
1999.
10.43** TeleCorp PCS, Inc. 1999 Stock Option Plan, dated June 23, 1999, as
amended.
10.44** Indenture, dated as of April 23, 1999, by and between Bankers
Trust Company, as trustee, and TeleCorp PCS, Inc. relating to the
11 5/8% Senior Subordinated Discount Notes due 2009.
10.45** Form of Indemnification Agreement to be entered into between
TeleCorp PCS, Inc. and its directors and executive officers.
10.46.1++ Stockholders' Agreement by and among AT&T Wireless PCS Inc.,
Initial investors other than AT&T Wireless, Management
Stockholders, and Tritel, Inc. dated January 7, 1999.
10.46.2++ First Amendment to TeleCorp's Stockholders' Agreement, dated
August 27, 1999.
10.46.3++ Second Amendment to TeleCorp's Stockholders' Agreement, dated as
of September 1, 1999.
10.46.4+ Third Amendment to TeleCorp's Stockholders' Agreement, dated
November 18, 1999.
10.46.5+ Fourth Amendment to TeleCorp's Stockholders' Agreement, dated
December 10, 1999.
10.47++ Investors Stockholders' Agreement by and among Tritel, Inc.,
Washington National Insurance Company, United Presidential Life
Insurance Company, Dresdner Kleinwort Benson Private Equity
Partners LP, Toronto Dominion Investments, Inc., Entergy Wireless
Corporation, General Electric Capital Corporation, Triune PCS,
LLC, FCA Venture Partners II, L.P., Clayton Associates LLC,
Trillium PCS, LLC, Airwave Communications, LLC, Digital PCS, LLC,
and The Stockholders Named Herein dated January 7, 1999.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.48# Form of Investors Stockholder Agreement, by and among Holding
Company, Inc. and AT&T Wireless PCS, Inc. CB Capital Investors,
L.P., Private Equity Investors III, Equity-Linked Investors-II,
Whitney III, L.P., Whitney Strategic Partners III, L.P.,
Media/Communications Investors Limited Partnership,
Media/Communications Partners III Limited Partnership, Toronto
Dominion Investments, Inc., Northwood Capital Partners LLC,
OneLiberty Fund III, L.P., Hoak Communications Partners, L.P., HCP
Capital Fund, L.P., Cich, Incorporated LP, Dresdner Kleinworth
Benson Private Equity Partners LP, Toronto Dominion Investments,
Inc., Entergy Wireless Capital Corporation, General Electric
Capital Corporation, Triune PCS, LLC, FCA Venture Partners II, LP,
Clayton Associates LLC, Trillium PCS, LLC, Airwave Communications,
LLC, Digital PCS, LLC, and The Manufacturers Life Insurance
Company.
10.49++ AT&T Wireless Services, Inc. Network Membership License Agreement
between AT&T Corp. and Tritel, Inc. dated January 7, 1999.
10.50++ Intercarrier Roamer Service Agreement between AT&T Wireless
Services, Inc. and Tritel, Inc. dated January 7, 1999.
10.51++ Amended and Restated Agreement between TeleCorp Communications,
Inc., Triton PCS, Inc., Tritel Communications, Inc. and Affiliate
License Co., L.L.C. dated April 16, 1999.
10.52# Form of Employment Agreement, by and between Holding Company and
William M. Mounger, II.
10.53# Form of Employment Agreement, by and between Holding Company and
E.B. Martin, Jr.
10.54 Letter Agreement, dated February 28, 2000, by and among William
Mounger, II, TeleCorp PCS, Inc., Tritel, Inc., Thomas Sullivan,
and Gerald Vento.
10.55 Letter Agreement, dated February 28, 2000, by and among E.B.
Martin, Jr., TeleCorp PCS, Inc., Tritel, Inc., Thomas Sullivan,
and Gerald Vento.
10.56++ Form of Restricted Stock Agreements pursuant to the Tritel, Inc.
Amended and Restated 1999 Stock Option Plan.
10.57+ Tritel, Inc. Amended and Restated 1999 Stock Option Plan for Non-
employee Directors, effective January 7, 1999.
10.58++ Amended and Restated Loan Agreement among Tritel Holding Corp.,
Tritel, Inc., The Financial Institutions Signatory Hereto, and
Toronto Dominion (Texas), Inc. dated March 31, 1999.
10.59++ First Amendment to Amended and Restated Loan Agreement among
Tritel Holding Corp., Tritel, Inc., The Financial Institutions
Signatory Thereto, and Toronto Dominion (Texas), Inc. dated April
21, 1999.
10.60++ Master Lease Agreement between Tritel Communications, Inc. and
Crown Communication Inc. dated October 30, 1998.
10.61++ Master Lease Agreement between Signal One, LLC and Tritel
Communications, Inc. dated December 31, 1998.
10.62.1++ Management Agreement between Tritel Management, LLC and Tritel,
Inc. dated January 1, 1999.
10.62.2++ First Amendment to Management Agreement, dated as of September 1,
1999.
10.62.3 Agreement to Terminate Tritel Management Agreement, dated as of
February 28, 2000, by and between Tritel Management, LLC.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.63++ Master Antenna Site Lease No. D41 between Pinnacle Towers Inc. and
Tritel Communications, Inc. dated October 23, 1998.
10.64++ Installment Payment Plan Note made by Mercury PCS, LLC in favor of
the Federal Communications Commission in the amount of
$42,525,211.95, dated October 9, 1996.
10.65++ First Modification of Installment Payment Plan Note for Broadband
PCS F Block by and between Mercury PCS II, L.L.C. and the Federal
Communications Commission, dated July 2, 1998, effective as of
July 31, 1998.
10.66++ Letter Agreement by and between Tritel Communications, Inc. and
H.S.I. GeoTrans Wireless, dated July 2, 1998, referring to a
service agreement covering certain Site Acquisition Services
applicable to certain Federal Communications Commission licenses
owned or to be acquired by Tritel.
10.67.1++ Services Agreement by and between Tritel Communications, Inc. and
Galaxy Personal Communications Services, Inc., which is a wholly
owned subsidiary of World Access, Inc., dated as of June 1, 1998.
10.67.2++ Addendum to June 1, 1998 Services Agreement, dated as of March 23,
1999.
10.68++ Services Agreement by and between Tritel Communications, Inc. and
Galaxy Personal Communications Services, Inc., which is a wholly-
owned subsidiary of World Access, Inc., dated as of August 27,
1998.
10.69++ Agreement by and between BellSouth Telecommunications, Inc. and
Tritel Communications, Inc., effective as of March 16, 1999.
10.70++ Agreement for Project and Construction Management Services between
Tritel Communications, Inc. and Tritel Finance, Inc. and Bechtel
Corporation, dated November 24, 1998.
10.71++ Services Agreement by and between Tritel Communications, Inc. and
Spectrasite Communications, Inc., dated as of July 28, 1998.
10.72++ Acquisition Agreement Ericsson CMS 8800 Cellular Mobile Telephone
System by and between Tritel Finance, Inc. and Tritel
Communications, Inc. and Ericsson Inc., made and effective as of
December 30, 1998.
10.73++ Securities Purchase Agreement by and among AT&T Wireless PCS Inc.,
TWR Cellular, Inc., Initial investors other than AT&T Wireless,
Mercury PCS, LLC, Mercury PCS II, LLC, Management Stockholders and
Tritel, Inc., dated as of May 20, 1998.
10.74++ Closing Agreement by and among AT&T Wireless PCS, Inc., TWR
Cellular, Inc., Initial investors other than AT&T Wireless,
Airwave Communications, LLC, Digital PCS, LLC, Management
Stockholders, Mercury Investor Indemnitors and Tritel, Inc., dated
as of January 7, 1999.
10.75++ Master Build To Suit And Lease Agreement between Tritel
Communications, Inc., a Delaware corporation and American Tower,
L.P., a Delaware limited partnership.
10.76++ Master Build To Suit And Lease Agreement between Tritel
Communications, Inc. and SpectraSite Communications, Inc.
10.77++ Master Build To Suit Services And License Agreement between Tritel
Communications, Inc. and Crown Communication Inc.
10.78++ Master Build To Suit And Lease Agreement by and between Tritel
Communications, Inc. and SBA Towers, Inc.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.79++ Master Site Agreement between Tritel Communications, Inc. and
BellSouth Mobility Inc., dated July 2, 1999.
10.80++ Master Site Agreement between Tritel Communications, Inc. and
BellSouth Mobility PCS, dated March 10, 1999.
10.81++ Consent to Exercise of Option between Tritel, Inc., AT&T Wireless
PCS, Inc., TWR Cellular, Inc. and Management Stockholders dated
May 20, 1999.
10.82++ License Purchase Agreement between Digital PCS, LLC and Tritel,
Inc. dated as of May 20, 1999.
10.83++ Amended and Restated Employment Agreement, dated as of September
1, 1999. Amended and Restated Employment Agreement, dated as of
September 1, 1999.
10.84++ Stock Purchase Agreement, dated as of September 1, 1999.
10.85++ Mutual Release and Termination Agreement, dated as of September 1,
1999.
10.86# Form of Management Agreement between TeleCorp Management Corp,
Inc. and TeleCorp PCS, Inc.
23.1# Consents of Lehman Brothers.
23.2# Consents of Merrill Lynch.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of KPMG LLP.
23.5# Consent of Cadwalader, Wickersham & Taft.
23.6# Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
23.7# Consent of Brown & Wood llp.
23.8# Consent of William M. Mounger, II.
23.9# Consent of E.B. Martin, Jr.
23.10# Consent of Alex P. Coleman.
23.11# Consent of Michael R. Hannon.
23.12# Consent of Michael Schwartz.
23.13# Consent of Scott I. Anderson.
23.14# Consent of James M. Hoak.
23.15# Consent of David A. Jones, Jr.
23.16# Consent of Kevin J. Shepherd.
23.17# Consent of William W. Hague.
23.18# Consent of Rohit M. Desai.
23.19# Consent of Timothy L. McLaughlin.
24 Power of Attorney (included in signature page).
99.1# Form of Proxy of TeleCorp PCS.
99.2# Form of Proxy of Tritel, Inc.
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
99.3 Opinion of Lehman Brothers (included as Annex C to the joint proxy
statement-prospectus forming a part of this Registration Statement
and incorporated herein by reference).
99.4 Opinion of Merrill Lynch (included as Annex D to the joint proxy
statement-prospectus forming a part of this Registration Statement
and incorporated herein by reference).
</TABLE>
- --------
* Incorporated by reference to the Registration Statement on Form S-1
(File No. 333-89393) of TeleCorp PCS, Inc.
** Incorporated by reference to the Form 10-Q filed on November 15, 1999
(File No. 333-81313-01) of TeleCorp PCS, Inc.
*** Incorporated by reference to the Form 10-K filed on March 30, 2000 (File
No. 000-27901) of TeleCorp PCS, Inc.
+ Incorporated by reference to the Registration Statement on Form S-1
(File No. 333-91207) of Tritel, Inc.
++ Incorporated by reference to the Registration Statement on Form S-4
(File No. 333-82509) of Tritel PCS, Inc.
# To be filed by amendment.
Item 22. Undertakings
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered wold not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement; and
(c) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) that, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 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 this 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;
(3) 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), the issuer undertakes that 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-9
<PAGE>
(4) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act 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; and
(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 this registration statement when it
became effective.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is therefore unenforceable. If a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on May 12, 2000.
TeleCorp-Tritel Holding Company
/s/ Thomas H. Sullivan
_____________________________________
Thomas H. Sullivan
Vice President, Treasurer
and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Gerald T. Vento and Thomas H. Sullivan and each
of them, his true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this registration statement and to file the same with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof. This power of attorney may be executed in counterparts.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gerald T. Vento Director May 12, 2000
______________________________________
Gerald T. Vento
/s/ Thomas H. Sullivan Director May 12, 2000
______________________________________
Thomas H. Sullivan
</TABLE>
II-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization and Contribution (included as
Annex A to the joint proxy statement-prospectus forming a part of
this Registration Statement and incorporated herein by reference),
dated February 28, 2000, by and between TeleCorp PCS and Tritel,
Inc.
2.2 Amendment No. 1 to the Agreement and Plan of Reorganization and
Contribution (included as Annex B to the joint proxy statement-
prospectus forming a part of this Registration Statement and
incorporated herein by reference).
3.1 Certificate of Incorporation of the Registrant.
3.2 Form of Restated Certificate of Incorporation of the Registrant
(included as Annex E to the joint proxy statement-prospectus
forming a part of this Registration Statement and incorporated
herein by reference).
3.3 By-laws of the Registrant.
3.4 Form of Restated By-laws of the Registrant (included as Annex F to
the joint proxy statement-prospectus forming part of this
Registration Statement and incorporated herein by reference).
5.1# Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality of securities being registered.
8.1# Opinion of Cadwalader, Wickersham & Taft regarding certain U.S.
income tax aspects of the merger.
8.2# Opinion of Brown & Wood LLP regarding certain U.S. income tax
aspects of the merger.
10.1 TeleCorp PCS, Inc. Voting Agreement, dated February 28, 2000.
10.2 Tritel, Inc. Voting Agreement, dated February 28, 2000.
10.3 Side Letter Agreement regarding Milwaukee Option, dated February
28, 2000, by and between AT&T Wireless Services, Inc. and TeleCorp
PCS, Inc.
10.4 Asset Exchange Agreement, dated as of February 28, 2000, by and
among AT&T Wireless PCS, LLC, TeleCorp PCS, Inc., TeleCorp PCS,
LLC, TeleCorp Holding Corp, Inc., TeleCorp Communications, Inc.,
TeleCorp Equipment Leasing, L.P., and TeleCorp Realty, LLC.
10.5 Side Letter regarding Additional Mutual Rights and Obligations in
Connection with the Asset Exchange Agreement and the Agreement and
Plan of Reconstruction and Contribution, dated as of February 28,
2000, by and between AT&T Wireless PCS, LLC and TeleCorp PCS, Inc.
10.6.1 License Acquisition Agreement, between Polycell Communications,
Inc. and ABC Wireless, LLC, dated as of February 28, 2000.
10.6.2 Amended and Restated License Acquisition Agreement among Polycell
Communications, Inc., Clinton Communications, Inc. and ABC
Wireless, LLC, dated as of May 3, 2000.
10.7 License Acquisition Agreement, between ABC Wireless, LLC and AT&T
Wireless PCS, LLC, dated as of February 28, 2000.
10.8# Form of Intermediary Agreement, among AT&T Wireless PCS, LLC,
TeleCorp PCS, Inc., TeleCorp PCS, LLC, TeleCorp Holding Corp,
Inc., TeleCorp Communications, Inc., TeleCorp Equipment Leasing,
L.P., TeleCorp Realty, LLC and the Intermediary.
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.9 Transition Services Agreement, dated as of February 28, 2000, by
and between AT&T Wireless PCS, LLC and TeleCorp PCS, Inc.
10.10# Form of Assignment and Assumption Agreement, by and between
Milwaukee PCS, LLC, Milwaukee Acquisition Subsidiary, Inc., and
TeleCorp PCS, Inc.
10.11 Agreement and Plan of Merger, dated February 27, 2000, by and
among Milwaukee PCS LLC, Milwaukee Acquisition Subsidiary, Inc.,
Kailas J. Rao, and Indus, Inc.
10.12 Airadigm Letter of Intent, dated January 24, 2000.
10.13* General Agreement for Purchase of PCS Systems and Services by and
between TeleCorp PCS, Inc. and Lucent Technologies, Inc., dated as
of May 12, 1998, as amended.
10.14* Securities Purchase Agreement by and among TeleCorp PCS, Inc.,
AT&T Wireless PCS Inc, TWR Cellular, Inc. and certain Initial
investors other than AT&T Wireless, TeleCorp Investors and
Management Stockholders identified, dated as of January 23, 1998.
10.15.1* Network Membership License Agreement by and among AT&T Corp.,
including AT&T Wireless Services, Inc., and TeleCorp PCS, Inc.,
dated as of July 17, 1998.
10.15.2* Amendment No. 1 to Network Membership License Agreement, dated
March 30, 1999.
10.16# Form of Network Membership License Agreement, by and between AT&T
Corp., including AT&T Wireless Services, Inc., and Holding
Company.
10.17.1* Management Agreement by and between TeleCorp Management Corp. and
TeleCorp PCS, Inc., dated as of July 17, 1998.
10.17.2* Amendment No. 1 to the Management Agreement between TeleCorp
Management Corp. and TeleCorp PCS, Inc., dated as of May 25, 1999.
10.17.3** Amendment No. 2 to the Management Agreement between TeleCorp
Management Corp. and TeleCorp PCS, Inc., dated as of October 18,
1999.
10.18.1* Intercarrier Roamer Service Agreement by and between AT&T Wireless
Services, Inc. and TeleCorp PCS, Inc., dated as of July 17, 1998.
10.18.2* Amendment No. 1 to Intercarrier Roamer Service Agreement, dated
May 25, 1999.
10.19# Form of Intercarrier Roamer Service Agreement, by and between AT&T
Wireless Services, Inc. and Holding Company.
10.20* Roaming Administration Service Agreement, by and between AT&T
Wireless Services, Inc. and TeleCorp PCS, Inc., dated as of July
17, 1998.
10.21# Form of Roaming Administration Service Agreement, by and between
AT&T Wireless Services, Inc., and Holding Company.
10.22.1* Credit Agreement by and among TeleCorp PCS, Inc., the Lenders
party to, and the Chase Manhattan Bank, as Administrative Agent
and Issuing Bank, TD Securities (USA) Inc., as Syndication Agent,
and Bankers Trust Company, as Documentation Agent, dated as of
July 17, 1998.
10.22.2* First Amendment, Consent, and Waiver to the TeleCorp Credit
Agreement, dated as of December 18, 1998.
10.22.3* Second Amendment and Waiver to the TeleCorp Credit Agreement,
dated as of March 1, 1999.
10.22.4* Third Amendment to the TeleCorp Credit Agreement, dated as of
March 30, 1999.
</TABLE>
II-13
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.22.5* Fourth Amendment to the TeleCorp Credit Agreement, dated as of
March 31, 1999.
10.22.6* Fifth Amendment and Acceptance to the TeleCorp Credit Agreement,
dated as of April 7, 1999.
10.22.7* Sixth Amendment to the TeleCorp Credit Agreement, dated as of
April 7, 1999.
10.22.8* Seventh Amendment to the TeleCorp Credit Agreement, dated as of
May 21, 1999.
10.22.9** Eighth Amendment to the TeleCorp Credit Agreement, dated as of
October 25, 1999.
10.22.10** Ninth Amendment to the TeleCorp Credit Agreement, dated as of
October 26, 1999.
10.23.1* Stock Purchase Agreement by and among TeleCorp PCS, Inc., AT&T
Wireless PCS, Inc. and certain Initial investors other than AT&T
Wireless identified in, dated as of March 22, 1999.
10.23.2* Amendment No. 1 to Stock Purchase Agreement by and among TeleCorp
PCS, Inc., AT&T Wireless PCS, Inc. and Initial investors other
than AT&T Wireless, dated as of March 30, 1999.
10.23.3* Amendment No. 2 to Stock Purchase Agreement by and among TeleCorp
PCS, Inc., AT&T Wireless PCS, Inc. and Initial investors other
than AT&T Wireless, dated as of April 6, 1999.
10.23.4* Amendment No. 3 to Stock Purchase Agreement by and among TeleCorp
PCS, Inc., AT&T Wireless PCS, Inc. and Initial investors other
than AT&T Wireless, dated as of May 14, 1999.
10.23.5* Amendment No. 4 to Stock Purchase Agreement by and among TeleCorp
PCS, Inc., AT&T Wireless PCS, Inc. and Initial investors other
than AT&T Wireless, dated as of July 15, 1999.
10.24* Stock Purchase Agreement by and among Viper Wireless, Inc.,
TeleCorp Holding Corp., Inc. and TeleCorp PCS, Inc., dated as of
March 1, 1999.
10.25* Puerto Rico Stock Purchase Agreement by and among TeleCorp PCS,
Inc., Puerto Rico Acquisition Corp. and certain Management
Stockholders and Initial investors other than AT&T Wireless, dated
as of March 30, 1999.
10.26*** Stock Purchase Agreement, dated as of October 18, 1999, by and
among TeleCorp PCS, Inc., TeleCorp Holding Corp., Inc., Gerald T.
Vento, Thomas H. Sullivan, OneLiberty Fund IV, L.P., Northwood
Ventures LLC, and Northwood Capital Partners LLC.
10.27* Asset Purchase Agreement, dated May 25, 1999, by and between AT&T
Wireless PCS Inc. and TeleCorp PCS, Inc.
10.28* Preferred Stock Purchase Agreement, dated May 24, 1999, by and
between AT&T Wireless PCS Inc. and TeleCorp PCS, Inc.
10.29* License Acquisition Agreement, dated May 15, 1998, by and between
Mercury PCS II, LLC and TeleCorp PCS, Inc.
10.30* License Acquisition Agreement, dated May 15, 1998, by and between
Wireless 2000, Inc. and TeleCorp PCS, Inc.
10.31.1* Stockholders' Agreement, dated as of July 17, 1998, by and among
AT&T Wireless PCS, Inc., TWR Cellular, Inc., Initial investors
other than AT&T Wireless, Management Stockholders, and TeleCorp
PCS, Inc.
10.31.2* Amendment No. 1 to Stockholders' Agreement dated May 25, 1999.
10.31.3* Amendment No. 2 to Stockholders' Agreement dated November 1, 1999.
</TABLE>
II-14
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.32# Form of Stockholders' Agreement, by and among AT&T Wireless PCS,
LLC, Initial investors other than AT&T Wireless, Management
Stockholders, Other Stockholders, and Holding Company, Inc.
10.33* Purchase Agreement, dated April 20, 1999, by and among Chase
Securities Inc., BT Alex. Brown Incorporated, Lehman Brothers
Inc., TeleCorp PCS, Inc. and TeleCorp Communications, Inc.
10.34* Exchange and Registration Rights Agreement, dated April 23, 1999,
by and among Chase Securities Inc., BT Alex. Brown Incorporated,
Lehman Brothers Inc., TeleCorp PCS, Inc. and TeleCorp
Communications, Inc.
10.35* Agreement, dated as of July 17, 1998, by and among AT&T Wireless
PCS Inc., TWR Cellular, Inc., the Initial investors other than
AT&T Wireless, the TeleCorp Investors and the Management
Stockholders.
10.36* Employment Agreement, dated as of July 17, 1998, by and between
TeleCorp PCS, Inc. and Julie A. Dobson.
10.37 Amendment to Employment Agreement, dated February 28, 2000, by and
between TeleCorp PCS, Inc. and Julie A. Dobson.
10.38* Share Grant Agreement, dated July 16, 1998, by and between
TeleCorp PCS, Inc. and Julie A. Dobson.
10.39* Separation Agreement, dated as of March 8, 1999, by and among
TeleCorp PCS, Inc., TeleCorp Communications, Inc. and Robert
Dowski.
10.40* Agreement among the Parties, dated as of June 30, 1999, by and
among TeleCorp PCS, Inc., the Initial investors other than AT&T
Wireless, Entergy Technology Holding Company, AT&T Wireless PCS,
Inc., TWR Cellular Inc. and other stockholders.
10.41* Amended and Restated Agreement, dated April 16, 1999, by and among
TeleCorp Communications, Inc., Triton PCS, Inc., Tritel
Communications, Inc. and Affiliate License Co, L.L.C.
10.42* TeleCorp PCS, Inc. 1998 Restricted Stock Plan, as amended May 20,
1999.
10.43** TeleCorp PCS, Inc. Stock Option Plan, dated June 23, 1999, as
amended.
10.44* Indenture, dated as of April 23, 1999, by and between Bankers
Trust Company, as trustee, and TeleCorp PCS, Inc. relating to the
11 5/8% Senior Subordinated Discount Notes due 2009.
10.45** Form of Indemnification Agreement to be entered into between
TeleCorp PCS, Inc. and its directors and executive officers.
10.46.1++ Stockholders' Agreement by and among AT&T Wireless PCS Inc.,
Initial investors other than AT&T Wireless, Management
Stockholders, and Tritel, Inc. dated January 7, 1999.
10.46.2++ First Amendment to TeleCorp's Stockholders' Agreement, dated
August 27, 1999.
10.46.3++ Second Amendment to TeleCorp's Stockholders' Agreement, dated as
of September 1, 1999.
10.46.4+ Third Amendment to TeleCorp's Stockholders' Agreement, dated
November 18, 1999.
10.46.5+ Fourth Amendment to TeleCorp's Stockholders' Agreement, dated
December 10, 1999.
</TABLE>
II-15
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.47++ Investors Stockholders' Agreement by and among Tritel, Inc.,
Washington National Insurance Company, United Presidential Life
Insurance Company, Dresdner Kleinwort Benson Private Equity
Partners LP, Toronto Dominion Investments, Inc., Entergy Wireless
Corporation, General Electric Capital Corporation, Triune PCS,
LLC, FCA Venture Partners II, L.P., Clayton Associates LLC,
Trillium PCS, LLC, Airwave Communications, LLC, Digital PCS, LLC,
and The Stockholders Named Herein dated January 7, 1999.
10.48# Form of Investors Stockholder Agreement, by and among Holding
Company, Inc. and AT&T Wireless PCS, Inc. CB Capital Investors,
L.P., Private Equity Investors III, Equity-Linked Investors-II,
Whitney III, L.P., Whitney Strategic Partners III, L.P.,
Media/Communications Investors Limited Partnership,
Media/Communications Partners III Limited Partnership, Toronto
Dominion Investments, Inc., Northwood Capital Partners LLC,
OneLiberty Fund III, L.P., Hoak Communications Partners, L.P., HCP
Capital Fund, L.P., Cich, Incorporated LP, Dresdner Kleinworth
Benson Private Equity Partners LP, Toronto Dominion Investments,
Inc., Entergy Wireless Capital Corporation, General Electric
Capital Corporation, Triune PCS, LLC, FCA Venture Partners II, LP,
Clayton Associates LLC, Trillium PCS, LLC, Airwave Communications,
LLC, Digital PCS, LLC, and The Manufacturers Life Insurance
Company.
10.49++ AT&T Wireless Services, Inc. Network Membership License Agreement
between AT&T Corp. and Tritel, Inc. dated January 7, 1999.
10.50++ Intercarrier Roamer Service Agreement between AT&T Wireless
Services, Inc. and Tritel, Inc. dated January 7, 1999.
10.51++ Amended and Restated Agreement between TeleCorp Communications,
Inc., Triton PCS, Inc., Tritel Communications, Inc. and Affiliate
License Co., L.L.C. dated April 16, 1999.
10.52# Form of Employment Agreement, by and between Holding Company and
William M. Mounger, II.
10.53# Form of Employment Agreement, by and between Holding Company and
E.B. Martin, Jr.
10.54 Letter Agreement, dated February 28, 2000, by and among William
Mounger, II, TeleCorp PCS, Inc., Tritel, Inc., Thomas Sullivan,
and Gerald Vento.
10.55 Letter Agreement, dated February 28, 2000, by and among E.B.
Martin, Jr., TeleCorp PCS, Inc., Tritel, Inc., Thomas Sullivan,
and Gerald Vento.
10.56++ Form of Restricted Stock Agreements pursuant to the Tritel, Inc.
Amended and Restated 1999 Stock Option Plan.
10.57+ Tritel, Inc. Amended and Restated 1999 Stock Option Plan for Non-
employee Directors, effective January 7, 1999.
10.58++ Amended and Restated Loan Agreement among Tritel Holding Corp.,
Tritel, Inc., The Financial Institutions Signatory Hereto, and
Toronto Dominion (Texas), Inc. dated March 31, 1999.
10.59++ First Amendment to Amended and Restated Loan Agreement among
Tritel Holding Corp., Tritel, Inc., The Financial Institutions
Signatory Thereto, and Toronto Dominion (Texas), Inc. dated April
21, 1999.
10.60++ Master Lease Agreement between Tritel Communications, Inc. and
Crown Communication Inc. dated October 30, 1998.
10.61++ Master Lease Agreement between Signal One, LLC and Tritel
Communications, Inc. dated December 31, 1998.
</TABLE>
II-16
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.62.1++ Management Agreement between Tritel Management, LLC and Tritel,
Inc. dated January 1, 1999.
10.62.2++ First Amendment to Management Agreement, dated as of September 1,
1999.
10.62.3 Agreement to terminate Tritel Management Agreement, dated as of
February 28, 2000, by and between Tritel Management, LLC and
Tritel, Inc.
10.63++ Master Antenna Site Lease No. D41 between Pinnacle Towers Inc. and
Tritel Communications, Inc. dated October 23, 1998.
10.64++ Installment Payment Plan Note made by Mercury PCS, LLC in favor of
the Federal Communications Commission in the amount of
$42,525,211.95, dated October 9, 1996.
10.65++ First Modification of Installment Payment Plan Note for Broadband
PCS F Block by and between Mercury PCS II, L.L.C. and the Federal
Communications Commission, dated July 2, 1998, effective as of
July 31, 1998.
10.66++ Letter Agreement by and between Tritel Communications, Inc. and
H.S.I. GeoTrans Wireless, dated July 2, 1998, referring to a
service agreement covering certain Site Acquisition Services
applicable to certain Federal Communications Commission licenses
owned or to be acquired by Tritel.
10.67.1++ Services Agreement by and between Tritel Communications, Inc. and
Galaxy Personal Communications Services, Inc., which is a wholly
owned subsidiary of World Access, Inc., dated as of June 1, 1998.
10.67.2++ Addendum to June 1, 1998 Services Agreement, dated as of March 23,
1999.
10.68++ Services Agreement by and between Tritel Communications, Inc. and
Galaxy Personal Communications Services, Inc., which is a wholly-
owned subsidiary of World Access, Inc., dated as of August 27,
1998.
10.69++ Agreement by and between BellSouth Telecommunications, Inc. and
Tritel Communications, Inc., effective as of March 16, 1999.
10.70++ Agreement for Project and Construction Management Services between
Tritel Communications, Inc. and Tritel Finance, Inc. and Bechtel
Corporation, dated November 24, 1998.
10.71++ Services Agreement by and between Tritel Communications, Inc. and
Spectrasite Communications, Inc., dated as of July 28, 1998.
10.72++ Acquisition Agreement Ericsson CMS 8800 Cellular Mobile Telephone
System by and between Tritel Finance, Inc. and Tritel
Communications, Inc. and Ericsson Inc., made and effective as of
December 30, 1998.
10.73++ Securities Purchase Agreement by and among AT&T Wireless PCS Inc.,
TWR Cellular, Inc., Initial investors other than AT&T Wireless,
Mercury PCS, LLC, Mercury PCS II, LLC, Management Stockholders and
Tritel, Inc., dated as of May 20, 1998.
10.74++ Closing Agreement by and among AT&T Wireless PCS, Inc., TWR
Cellular, Inc., Initial investors other than AT&T Wireless,
Airwave Communications, LLC, Digital PCS, LLC, Management
Stockholders, Mercury Investor Indemnitors and Tritel, Inc., dated
as of January 7, 1999.
10.75++ Master Build To Suit And Lease Agreement between Tritel
Communications, Inc., a Delaware corporation and American Tower,
L.P., a Delaware limited partnership.
10.76++ Master Build To Suit And Lease Agreement between Tritel
Communications, Inc. and SpectraSite Communications, Inc.
</TABLE>
II-17
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.77++ Master Build To Suit Services And License Agreement between Tritel
Communications, Inc. and Crown Communication Inc.
10.78++ Master Build To Suit And Lease Agreement by and between Tritel
Communications, Inc. and SBA Towers, Inc.
10.79++ Master Site Agreement between Tritel Communications, Inc. and
BellSouth Mobility Inc., dated July 2, 1999.
10.80++ Master Site Agreement between Tritel Communications, Inc. and
BellSouth Mobility PCS, dated March 10, 1999.
10.81++ Consent to Exercise of Option between Tritel, Inc., AT&T Wireless
PCS, Inc., TWR Cellular, Inc. and Management Stockholders dated
May 20, 1999.
10.82++ License Purchase Agreement between Digital PCS, LLC and Tritel,
Inc. dated as of May 20, 1999.
10.83++ Amended and Restated Employment Agreement, dated as of September
1, 1999. Amended and Restated Employment Agreement, dated as of
September 1, 1999.
10.84++ Stock Purchase Agreement, dated as of September 1, 1999.
10.85++ Mutual Release and Termination Agreement, dated as of September 1,
1999.
10.86# Form of Management Agreement between TeleCorp Management Corp,
Inc. and TeleCorp PCS, Inc.
23.1# Consents of Lehman Brothers.
23.2# Consents of Merrill Lynch.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of KPMG LLP.
23.5# Consent of Cadwalader, Wickersham & Taft.
23.6# Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
23.7# Consent of Brown & Wood LLP.
23.8# Consent of William M. Mounger, II.
23.9# Consent of E.B. Martin, Jr.
23.10# Consent of Alex P. Coleman.
23.11# Consent of Michael R. Hannon.
23.12# Consent of Michael Schwartz.
23.13# Consent of Scott I. Anderson.
23.14# Consent of James M. Hoak.
23.15# Consent of David A. Jones, Jr.
23.16# Consent of Kevin J. Shepherd.
23.17# Consent of William W. Hague.
23.18# Consent of Rohit M. Desai.
23.19# Consent of Timothy L. McLaughlin.
24 Power of Attorney (included in signature page).
99.1# Form of Proxy of TeleCorp PCS.
99.2# Form of Proxy of Tritel, Inc.
</TABLE>
II-18
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
99.3 Opinion of Lehman Brothers (included as Annex C to the joint proxy
statement-prospectus forming a part of this Registration Statement
and incorporated herein by reference).
99.4 Opinion of Merrill Lynch (included as Annex D to the joint proxy
statement-prospectus forming a part of this Registration Statement
and incorporated herein by reference).
</TABLE>
- --------
* Incorporated by reference to the Registration Statement on Form S-1 (File
No. 333-89393) of TeleCorp PCS, Inc.
** Incorporated by reference to the Form 10-Q filed on November 15, 1999
(File No. 333-81313-01) of TeleCorp PCS, Inc.
*** Incorporated by reference to the Form 10-K filed on March 30, 2000 (File
No. 000-27901) of TeleCorp PCS, Inc.
+ Incorporated by reference to the Registration Statement on Form S-1 (File
No. 333-91207) of Tritel, Inc.
++ Incorporated by reference to the Registration Statement on Form S-4 (File
No. 333-82509) of Tritel PCS, Inc.
# To be filed by amendment.
19
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
TELECORP-TRITEL HOLDING COMPANY
The undersigned, in order to form a corporation for the purpose
hereinafter stated, under and pursuant to the provisions of the Delaware General
Corporation Law, hereby certifies that:
First. The name of the Corporation is TeleCorp-Tritel Holding Company
(the "Corporation").
Second. The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, DE 19801, in the County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
Third. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
Fourth. The total number of shares of stock which the Corporation is
authorized to issue is one thousand (1,000) shares of Common Stock, par value
$0.01 per share.
Fifth. The name and address of the incorporator is Woodruff A. Polk,
100 Maiden Lane, New York, New York 10038.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation on April __, 2000.
----------------------------------
Woodruff A. Polk
Sole Incorporator
<PAGE>
- -------------------------------------------------------------------------------
Exhibit 3.3
BYLAWS
OF
TELECORP-TRITEL HOLDING COMPANY
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
OFFICES
Section 1.1 Registered Office.....................................1
Section 1.2 Other Offices.........................................1
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.1 Time and Place........................................1
Section 2.2 Annual Meeting........................................1
Section 2.3 Special Meetings of Stockholders......................2
Section 2.4 Notice of Meetings....................................2
Section 2.5 Quorum and Adjournment of Meetings....................2
Section 2.6 Vote Required.........................................3
Section 2.7 Voting................................................3
Section 2.8 Proxies...............................................4
Section 2.9 Consents..............................................4
ARTICLE III
DIRECTORS
Section 3.1 Board of Directors....................................5
Section 3.2 Number, Election and Tenure...........................5
Section 3.3 Resignation and Removal...............................5
Section 3.4 Vacancies.............................................5
Section 3.5 Compensation..........................................6
ARTICLE IV
MEETINGS OF THE BOARD
Section 4.1 Time and Place........................................6
Section 4.2 Annual Meeting........................................6
Section 4.3 Regular Meetings......................................6
Section 4.4 Special Meetings......................................6
-i-
<PAGE>
Section 4.5 Quorum and Voting.....................................7
Section 4.6 Consents..............................................7
Section 4.7 Telephonic Meetings of Directors......................7
ARTICLE V
COMMITTEES OF THE BOARD
Section 5.1 Designation and Powers................................7
ARTICLE VI
NOTICES
Section 6.1 Delivery of Notices...................................8
Section 6.2 Waiver of Notice......................................8
ARTICLE VII
OFFICERS
Section 7.1 Executive Officers....................................8
Section 7.2 Other Officers and Agents.............................9
Section 7.3 Tenure; Resignation; Removal; Vacancies...............9
Section 7.4 Compensation.........................................10
Section 7.5 Authority and Duties.................................10
Section 7.6 Chairman of the Board................................10
Section 7.7 President............................................10
Section 7.8 The Vice President(s)................................11
Section 7.9 The Treasurer........................................11
Section 7.10 The Secretary........................................11
ARTICLE VIII
CERTIFICATES OF STOCK
Section 8.1 Form and Signature...................................12
Section 8.2 Lost or Destroyed Certificates.......................12
Section 8.3 Registration of Transfer.............................13
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Record Date..........................................13
Section 9.2 Registered Stockholders..............................14
-ii-
<PAGE>
Section 9.3 Dividends............................................14
Section 9.4 Checks and Notes.....................................14
Section 9.5 Fiscal Year..........................................14
Section 9.6 Voting of Securities of Other Corporations...........14
Section 9.7 Transfer Agent.......................................14
Section 9.8 Corporate Seal.......................................15
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification.....................................15
ARTICLE XI
AMENDMENTS
Section 11.1 By the Stockholders.................................19
Section 11.2 By the Board of Directors...........................19
-iii-
<PAGE>
BY-LAWS
OF
TELECORP-TRITEL HOLDING COMPANY
ARTICLE I
OFFICES
Section 1.1 REGISTERED OFFICE. The registered office of TeleCorp-Tritel
Holding Company (hereinafter called the "Corporation") in the State of Delaware
shall be The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801, and the registered agent in
charge thereof shall be The Corporation Trust Company.
Section 1.2 OTHER OFFICES. In addition to its registered office in the
State of Delaware, the Corporation may have an office or offices in such other
places as the Board of Directors (the "Board") may from time to time designate
or the business of the Corporation may require. The corporate headquarters of
the Corporation shall be initially located in Arlington, Virginia.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.1 TIME AND PLACE. All meetings of the stockholders of the
Corporation shall be held at such time and place, either within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2.2 ANNUAL MEETING. The annual meeting of stockholders of the
Corporation shall be held at such date, time and place, either within or without
the State of Delaware, as shall be determined by the Board and stated in the
notice of meeting.
<PAGE>
Section 2.3 SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of
stockholders for any purpose or purposes if not otherwise prescribed by statute
or by the Certificate of Incorporation, may be called by the Board, the Chairman
of the Board, or the Secretary and shall be called by the President or Secretary
at the request of stockholders owning a majority of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote at a meeting of
stockholders. Such request shall state the purpose or purposes of the proposed
meeting. The time of any such special meeting shall be fixed by the officer
calling the meeting and shall be stated in the notice of such meeting, which
notice shall specify the purpose or purposes thereof. Business transacted at any
special meeting shall be confined to the purposes stated in the notice of
meeting and matters germane thereto.
Section 2.4 NOTICE OF MEETINGS. Notice of the time and place of every
annual or special meeting of the stockholders shall be given not less than ten
nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting, in the manner prescribed by Section 6.1 of
these By-Laws, except that where the matter to be acted upon is a merger or
consolidation of the Corporation, or a sale, lease or exchange of all or
substantially all of its assets, such notice shall be given not less than twenty
nor more than sixty days prior to such meeting.
Section 2.5 QUORUM AND ADJOURNMENT OF MEETINGS. The holders of a
majority of the shares of capital stock issued and outstanding and entitled to
vote thereat, present in person, or represented by proxy, shall be requisite and
shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by the Certificate of
Incorporation. If a majority shall not be present in person or represented by
proxy at any meeting of the stockholders at which action is to be taken by the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power
-2-
<PAGE>
to adjourn the meeting from time to time without notice other than announcement
at the meeting, until holders of the requisite number of shares of stock
entitled to vote shall be present or represented by proxy. At such adjourned
meeting at which such holders of the requisite number of shares of capital stock
shall be present or represented by proxy, any business may be transacted which
might have been transacted at the meeting as originally called. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of adjourned meeting
shall be given to each stockholder of record entitled to vote thereat.
Section 2.6 VOTE REQUIRED. At any meeting of stockholders, directors
shall be elected by a plurality of votes, and all other matters shall be decided
by a majority of votes, cast by the stockholders present in person or
represented by proxy and entitled to vote, unless the matter is one for which,
by express provisions of statute, of the Certificate of Incorporation or of
these By-Laws, a different vote is required, in which case such express
provision shall govern and control the determination of such matter.
Section 2.7 VOTING. At any meeting of the stockholders, each
stockholder having the right to vote shall be entitled to vote in person or by
proxy. To determine the stockholders entitled to notice of or to vote at any
meeting of the stockholders or any adjournment thereof, the Board may fix, in
advance, a record date which shall be not more than sixty days nor less than ten
days before the date of such meeting. Except as otherwise provided by the
Certificate of Incorporation or by statute, each stockholder of record shall be
entitled to one vote for each outstanding share of capital stock standing in his
or her name on the books of the Corporation as of the record date. A complete
list of the stockholders entitled to vote at any meeting of stockholders
arranged in alphabetical order with the address of each and the number of shares
held by each, shall be prepared by the Secretary. Such list shall be open to the
-3-
<PAGE>
examination of any stockholder for any purpose germane to the meeting during
ordinary business hours for a period of at least ten days prior to the meeting,
at the locations specified by the Delaware General Corporation Law. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 2.8 PROXIES. Each proxy shall be in writing executed by the
stockholder giving the proxy or his or her duly authorized attorney. No proxy
shall be valid after the expiration of three years from its date, unless a
longer period is provided for in the proxy. Unless and until voted, every proxy
shall be revocable at the pleasure of the person who executed it or his or her
legal representatives or assigns, except in those cases where an irrevocable
proxy permitted by statute has been given.
Section 2.9 CONSENTS. The provision of these By-Laws covering notices
and meetings to the contrary notwithstanding, any action required or permitted
to be taken at any meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent in writing setting forth
the action so taken shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would have been necessary to
authorize or take such action at a meeting at which all shares of stock entitled
to vote thereon were present and voted. Where corporate action is taken in such
manner by less than unanimous written consent, prompt written notice of the
taking of such action shall be given to all stockholders who have not consented
in writing thereto and who, if the action had been taken at a meeting, would
have been entitled to notice of the meeting.
-4-
<PAGE>
ARTICLE III
DIRECTORS
Section 3.1 BOARD OF DIRECTORS. The business and affairs of the
Corporation shall be managed by a Board of Directors. The Board may exercise all
such powers of the Corporation and do all such lawful acts and things on its
behalf as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
Section 3.2 NUMBER, ELECTION AND TENURE. The number of directors shall
be fixed initially by the incorporator of the Corporation and thereafter such
number may be increased from time to time by the stockholders or by the Board or
may be decreased by the stockholders, PROVIDED that no decrease in the number of
directors shall shorten the term of any incumbent director. Except as provided
by law or these By-Laws, directors shall be elected each year at the annual
meeting of stockholders next succeeding his or her election until his or her
successor is elected and has qualified or until his or her earlier resignation
or removal.
Section 3.3 RESIGNATION AND REMOVAL. A director may resign at any time
by giving written notice to the Board or to the President of the Corporation.
Such resignation shall take effect upon receipt thereof by the Board or by the
President, unless otherwise specified therein. Any one or more of the directors
may be removed, either with or without cause, at any time by the affirmative
vote of a majority of the stockholders at any special meeting of the
stockholders called for such purpose.
Section 3.4 VACANCIES. A vacancy occurring for any reason and newly
created directorships resulting from an increase in the authorized number of
directors may be filled by the vote of a majority of the directors then in
office, although less than a quorum, or by the sole remaining director, or by
the stockholders.
-5-
<PAGE>
Section 3.5 COMPENSATION. Each director shall receive for services
rendered as a director of the Corporation such compensation as may be fixed by
the Board. Nothing herein contained shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
MEETINGS OF THE BOARD
Section 4.1 TIME AND PLACE. Meetings of the Board shall be held at such
places, within or without the State of Delaware, and within or without the
United States of America, as shall be determined in accordance with these
By-Laws.
Section 4.2 ANNUAL MEETING. Immediately after and at the place of the
annual meeting of the stockholders, or at such other place as the Board may
designate, a meeting of the newly elected Board for the purpose of organization
and the election of officers and otherwise may be held. Such meeting may be held
without notice.
Section 4.3 REGULAR MEETINGS. Regular meetings of the Board may be held
without notice, at such time and place as shall, from time to time, be
determined by the Board of Directors.
Section 4.4 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time and place as shall be determined by resolution
of the Board or upon the call of the Chairman, the President, the Secretary, or
any member of the Board on two days' notice to each director by mail or on one
day's notice personally or by telecopy, telephone or telegraph. Meetings of the
Board may be held at any time without notice if all the directors are present,
or if those not present waive notice of the meeting in writing, either before or
after the meeting.
-6-
<PAGE>
Section 4.5 QUORUM AND VOTING. A majority of the entire Board shall
constitute a quorum at any meeting of the Board of Directors and the act of a
majority of the directors shall be the act of the Board, except as may otherwise
be specifically provided by law, the Certificate of Incorporation or by these
By-Laws. If at any meeting of the Board there shall be less than a quorum
present, the director or directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall have been obtained.
Section 4.6 CONSENTS. Any action required or permitted to be taken at
any meeting of the Board may be taken without a meeting if all members of the
Board consent to such action in writing, and such writing or writings are filed
with the minutes of the proceedings of the Board.
Section 4.7 TELEPHONIC MEETINGS OF DIRECTORS. The Board may participate
in a meeting by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation by such means shall constitute presence in person at
such meeting.
ARTICLE V
COMMITTEES OF THE BOARD
Section 5.1 DESIGNATION AND POWERS. The Board may in its discretion
designate one or more committees. Each committee shall consist of one or more of
the directors of the Corporation. Such committee or committees shall have duties
and powers not inconsistent with the laws of the State of Delaware, the
Certificate of Incorporation, these By-Laws, and the respective resolution or
resolutions of the Board.
-7-
<PAGE>
ARTICLE VI
NOTICES
Section 6.1 DELIVERY OF NOTICES. Notices to directors and stockholders
shall be in writing and may be delivered personally or by mail. Notice by mail
shall be deemed to be given at the time when deposited in the United States
mail, postage prepaid, and addressed to directors or stockholders at their
respective addresses appearing on the books of the Corporation, unless any such
director or stockholder shall have filed with the Secretary of the Corporation a
written request that notices intended for him or her be mailed or delivered to
some other address, in which case the notice shall be mailed to or delivered at
the address designated in such request. Notice to directors may also be given by
telegram or by telecopy.
Section 6.2 WAIVER OF NOTICE. Whenever notice is required to be given
by statute, the Certificate of Incorporation or these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to such notice whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Attendance of a person at a meeting of stockholders,
directors or any committee of directors, as the case may be, shall constitute a
waiver of notice of such meeting, except where the person is attending for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of stockholders, directors or committee of directors
need be specified in any written waiver of notice.
ARTICLE VII
OFFICERS
Section 7.1 EXECUTIVE OFFICERS. At the annual meeting of directors the
Board shall elect a Chairman of the Board, President, Secretary and Treasurer
and may elect one or
-8-
<PAGE>
more Vice Presidents, Assistant Secretaries or Assistant Treasurers and such
other officers as the Board may from time to time designate or the business of
the Corporation may require. Except for the Chairman of the Board, no executive
officer need be a member of the Board. Any number of offices may be held by the
same person, except that the office of Secretary may not be held by the Chairman
of the Board or the President.
Section 7.2 OTHER OFFICERS AND AGENTS. The Board may also elect such
other officers and agents as the Board of Directors may at any time or from time
to time determine to be advisable, such officers and such agents to serve for
such terms and to exercise such powers and perform such duties as shall be
specified at any time or from time to time by the Board.
Section 7.3 TENURE; RESIGNATION; REMOVAL; VACANCIES. Each officer of
the Corporation shall hold office until his or her successor is elected and
qualified, or until his or her earlier resignation or removal; PROVIDED, that if
the term of office of any officer elected or appointed pursuant to Section 7.2
of these By-Laws shall have been fixed by the Board, he or she shall cease to
hold such office no later than the date of expiration of such term regardless of
whether any other person shall have been elected or appointed to succeed him or
her. Any officer elected by the Board may be removed at any time, with or
without cause, by the Board, PROVIDED, that any such removal shall be without
prejudice to the rights, if any, of the officer so employed under any employment
contract or other agreement with the Corporation. An officer may resign at any
time upon written notice to the Board. If the office of any officer becomes
vacant by reason of death, resignation, retirement, disqualification, removal
from office or otherwise, the Board may choose a successor or successors to hold
office for such term as may be specified by the Board.
-9-
<PAGE>
Section 7.4 COMPENSATION. Except as otherwise provided by these
By-Laws, the salaries of all officers and agents of the Corporation appointed by
the Board shall be fixed by the Board.
Section 7.5 AUTHORITY AND DUTIES. All officers as between themselves
and the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these By-Laws. In addition
to the powers and duties hereinafter specifically prescribed for the respective
officers, the Board may from time to time impose or confer upon any of the
officers such additional duties and powers as the Board may see fit, and the
Board may from time to time impose or confer any or all of the duties and powers
hereinafter specifically prescribed for any officer upon any other officer or
officers.
Section 7.6 CHAIRMAN OF THE BOARD. The Chairman of the Board, who shall
be a director, shall preside at all meetings of the stockholders and at all
meetings of the Board. As director, he or she shall perform such other duties as
may be assigned from time to time by the Board.
Section 7.7 PRESIDENT. The President shall be the chief executive
officer of the Corporation. He or she shall perform such duties as may be
assigned to him or her by the Board, and in the event of disability or absence
of the Chairman of the Board, perform the duties of the Chairman of the Board,
including presiding at meetings of stockholders and directors. He or she shall
from time to time report to the Board all matters within his or her knowledge
which the interest of the Corporation may require to be brought to their notice,
and shall also have such other powers and perform such other duties as may be
specifically assigned to him or her from time to time by the Board. The
President shall see that all resolutions and orders of the Board are carried
into effect, and in connection with the foregoing, shall be authorized to
delegate to the
-10-
<PAGE>
Vice President and the other officers such of his or her powers and such of his
or her duties as he or she may deem to be advisable.
Section 7.8 THE VICE PRESIDENT(S). The Vice President, or if there be
more than one, the Vice Presidents, shall perform such duties as may be assigned
to them from time to time by the Board or as may be designated by the President.
In case of the absence or disability of the President the duties of the office
shall, if the Board or the President has so authorized, be performed by the Vice
President, or if there be more than one Vice President, by such Vice President
as the Board or President shall designate.
Section 7.9 THE TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board or by
any officer of the Corporation authorized by the Board to make such designation.
The Treasurer shall exercise such powers and perform such duties as generally
pertain or are necessarily incident to his or her office and shall perform such
other duties as may be specifically assigned to him or her from time to time by
the Board or by the President or any Vice President.
Section 7.10 THE SECRETARY. The Secretary shall attend all meetings of
the Board and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for any committee when required. He or she shall give, or
cause to be given, notice of all meetings of the stockholders and, when
necessary, of the Board. The Secretary shall exercise such powers and perform
such duties as generally pertain or are necessarily incident to his or her
office and he
-11-
<PAGE>
or she shall perform such other duties as may be assigned to him or her from
time to time by the Board, the President or by any Vice President.
ARTICLE VIII
CERTIFICATES OF STOCK
Section 8.1 FORM AND SIGNATURE. The certificates of stock of the
Corporation shall be in such form or forms not inconsistent with the Certificate
of Incorporation as the Board shall approve. They shall be numbered, the
certificates for the shares of stock of each class to be numbered consecutively,
and shall be entered in the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by the
Chairman of the Board, the President or a Vice President and the Treasurer (or
any Assistant Treasurer) or the Secretary (or any Assistant Secretary);
PROVIDED, however, that where any such certificate is signed by a transfer agent
or an assistant transfer agent, or by a transfer clerk acting on behalf of the
Corporation, and registered by a registrar, the signature of any such President,
Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, may be a facsimile. In case any officer or officers who shall have
signed, or whose facsimile signature or signatures shall have been used on any
such certificate or certificates, shall cease to be such officer or officers of
the Corporation, whether because of death, resignation, removal or otherwise,
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer or officers of the Corporation.
Section 8.2 LOST OR DESTROYED CERTIFICATES. The Board may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued
-12-
<PAGE>
by the Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate or stock to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board may in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost or destroyed certificate or
certificates, or his or her legal representatives, to advertise the same in such
manner as it shall require, and to give a bond in such sum as the Board may
direct, indemnifying the Corporation, any transfer agent and any registrar
against any claim that may be made against them or any of them with respect to
the certificate alleged to have been lost or destroyed.
Section 8.3 REGISTRATION OF TRANSFER. Upon surrender to the Corporation
of a certificate for shares, duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, the Corporation shall issue a
new certificate to the person entitled thereto, cancel the old certificate, and
record the transaction on its books.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action.
-13-
<PAGE>
Section 9.2 REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and accordingly shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, save as expressly
provided by the laws of the State of Delaware.
Section 9.3 DIVIDENDS. Dividends upon the capital stock of the
Corporation shall in the discretion of the Board from time to time be declared
by the Board out of funds legally available therefor after setting aside of
proper reserves.
Section 9.4 CHECKS AND NOTES. All checks and drafts on the bank
accounts of the Corporation, all bills of exchange and promissory notes of the
Corporation, and all acceptances, obligations and other instruments for the
payment of money drawn, signed or accepted by the Corporation, shall be signed
or accepted, as the case may be, by such officer or officers, agent or agents as
shall be thereunto authorized from time to time by the Board or by officers of
the Corporation designated by the Board to make such authorization.
Section 9.5 FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by the Board.
Section 9.6 VOTING OF SECURITIES OF OTHER CORPORATIONS. In the event
that the Corporation shall at any time own and have power to vote any securities
(including but not limited to shares of stock) of any other issuer, such
securities shall be voted by such person or persons, to such extent and in such
manner, as may be determined by the Board.
Section 9.7 TRANSFER AGENT. The Board may make such rules and
regulations as it may deem expedient concerning the issue, transfer and
registration of stock. It may appoint one or more transfer agents and one or
more registrars and may require all stock certificates to bear the signature of
either or both.
-14-
<PAGE>
Section 9.8 CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware".
ARTICLE X
INDEMNIFICATION
Section 10.1 INDEMNIFICATION.
(a) ACTIONS, SUITS OR PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify any current or former director or
officer of the Corporation and may, at the discretion of the Board, indemnify
any current or former employee or agent of the Corporation who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent (including trustee) of another
corporation, partnership, joint venture, trust or other enterprise (including
employee benefit plans) (funds paid or required to be paid to any person as a
result of the provisions of this Section 10.1 shall be returned to the
Corporation or reduced, as the case may be, to the extent that such person
receives funds pursuant to an indemnification from any such other corporation,
partnership, joint venture, trust or enterprise) to the fullest extent
permissible under Delaware law, as then in effect, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, if he or she acted in good faith and in a manner he or she
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
-15-
<PAGE>
reasonable cause to believe that his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person seeking indemnification did not act
in good faith and in a manner which he or she 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 reasonable cause to believe that his or
her conduct was unlawful.
(b) ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any current or former director or officer of the
Corporation and may, at the discretion of the Board, indemnify any current or
former employee or agent of the Corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit, by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that such person is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent (including trustee) of
another corporation, partnership, joint venture, trust or other enterprise
(including employee benefit plans) (funds paid or required to be paid to any
person as a result of the provisions of this Section 10.1 shall be returned to
the Corporation or reduced, as the case may be, to the extent that such person
receives funds pursuant to an indemnification from any such other corporation,
partnership, joint venture, trust or enterprise) to the fullest extent permitted
under Delaware law, as then in effect, against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
-16-
<PAGE>
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. To the extent
that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraph (a) or (b) of this Section 10.1, or in
defense of any claim, issue or matter therein, such person shall be indemnified
by the Corporation against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
(d) DETERMINATION OF RIGHT TO INDEMNIFICATION. Any indemnification
under paragraph (a) or (b) of this Section 10.1 (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because such person has met the applicable
standard of conduct set forth in paragraphs (a) and (b) of this Section 10.1.
Such determination shall be made (1) by the Board by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
holders of a majority of the shares of capital stock of the Corporation entitled
to vote thereon.
(e) ADVANCEMENT OF EXPENSES. Expenses (including attorneys' fees)
incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
-17-
<PAGE>
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Section 10.1. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board deems appropriate.
(f) OTHER RIGHTS. The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this Section 10.1
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any By-Law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in another capacity while
holding such office.
(g) INSURANCE. By action of the Board, notwithstanding an interest of
the directors in the action, the Corporation may purchase and maintain
insurance, in such amounts as the Board deems appropriate, on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent (including trustee) of another corporation, partnership, joint
venture, trust or other enterprise (including employee benefit plans), against
any liability asserted against such person and incurred by such person in any
such capacity, or arising out of such person's status as such, whether or not
the Corporation shall have the power to indemnify such person against such
liability under the provisions of this Section 10.l.
(h) CONTINUATION OF RIGHTS TO INDEMNIFICATION. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Section 10.1
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
-18-
<PAGE>
(i) PROTECTION OF RIGHTS EXISTING AT TIME OF REPEAL OR MODIFICATION.
Any repeal or modification of this Section 10.1 shall not adversely affect any
right or protection of an indemnified person existing at the time of such repeal
or modification.
ARTICLE XI
AMENDMENTS
Section 11.1 BY THE STOCKHOLDERS. These By-Laws may be altered, amended
or repealed in whole or in part, and new By-Laws may be adopted, by the
affirmative vote of the holders of a majority of the shares of capital stock
issued and outstanding and entitled to vote at any annual or special meeting of
the stockholders, if notice thereof shall be contained in the notice of the
meeting.
Section 11.2 BY THE BOARD OF DIRECTORS. These By-Laws may be altered,
amended or repealed by the Board at any regular or special meeting of the Board
if notice thereof shall be contained in the notice of the meeting.
-19-
<PAGE>
EXECUTION COPY
Exhibit 10.1
VOTING AGREEMENT
Agreement dated as of February 28, 2000 among each of the shareholders
listed on the signature pages hereto (each, a "Shareholder") of TeleCorp PCS,
Inc., a Delaware corporation ("Virginia"), Virginia and Tritel Inc., a Delaware
corporation ("Mississippi").
(A) Virginia, Mississippi and certain other parties are parties to
an Agreement and Plan of Reorganization and Contribution dated as of the date
hereof (the "Reorganization Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meaning assigned such terms in the
Reorganization Agreement.
(B) Each of Mississippi and Virginia agreed to enter into the
Reorganization Agreement on the condition that the parties hereto enter into
this Voting Agreement.
Accordingly, the parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. Each Shareholder
hereby represents and warrants, severally and not jointly, to Mississippi and
Virginia as follows (with respect to itself only):
(a) TITLE. As of the date hereof, each Shareholder beneficially owns
the amount and class of capital stock of Virginia set forth after such
Shareholder's name on EXHIBIT A attached hereto (with respect to each
Shareholder, the capital stock specified after such Shareholder's name on
Exhibit A hereto shall be referred to herein as the "Shares").
(b) RIGHT TO VOTE. As of the date hereof and as of the date of the
Virginia Stockholder Meeting, except for this Agreement or as otherwise
permitted by this Agreement, each Shareholder has full legal power, authority
and right to vote all Shares, to the extent the Shares carry rights to vote
thereon, in favor of the Virginia Proposals without the consent or approval of,
or any other action on the part of, any other person or entity. Without limiting
the generality of the foregoing, except for this Agreement or as otherwise
permitted by this Agreement or as disclosed in Schedule 1 hereto, each
Shareholder has not entered into any voting agreement with any person or entity
with respect to any Shares, granted any person or entity any proxy (revocable or
irrevocable) or power of attorney with respect to any Shares, deposited any
Shares in a voting trust or entered into any arrangement or agreement with any
person or entity limiting or affecting its legal power, authority or right to
vote the Shares in favor of the Virginia Proposals. From and after the date
hereof, except as otherwise permitted by this Agreement, each Shareholder will
not commit any act that could restrict or otherwise affect such legal power,
authority and right to vote all Shares, to the extent the Shares carry the right
to vote thereon, in favor of the Virginia Proposals. Without limiting the
generality of the foregoing, except as otherwise permitted by this Agreement,
from and after the date hereof, each Shareholder will not enter into any voting
agreement with any person or entity with respect to any of the Shares, grant any
person or entity any proxy (revocable or irrevocable) or power of attorney with
respect to any of the Shares, deposit any of the Shares in a voting trust or
otherwise enter into any agreement or arrangement limiting or affecting such
Shareholder's legal power,
<PAGE>
authority or right to vote the Shares in favor of the approval of the Virginia
Proposals (other than this Agreement).
(c) AUTHORITY. Each Shareholder has full legal power, authority and
right to execute and deliver, and to perform his obligations under, this
Agreement. This Agreement has been duly and validly executed and delivered by
each Shareholder and constitutes a valid and binding agreement of each
Shareholder enforceable against each Shareholder in accordance with its terms,
subject to (i) bankruptcy, insolvency, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors rights generally and (ii)
general principles of equity (regardless of whether considered in a proceeding
at law or in equity).
(d) CONFLICTING INSTRUMENTS; NO TRANSFER. Neither the execution and
delivery of this Agreement nor the performance by each Shareholder of his
agreements and obligations hereunder will result in any breach or violation of
or be in conflict with or constitute a default under any term of any agreement,
judgment, injunction, order, decree, law, regulation or arrangement to which
such Shareholder is a party or by which such Shareholder (or any of his assets)
is bound, except for any such breach, violation, conflict or default which,
individually or in the aggregate, would not impair or adversely affect such
Shareholder's ability to perform its obligations under this Agreement.
2. RESTRICTION ON TRANSFER. Each Shareholder agrees that (other than
pursuant to the Reorganization Agreement) he will not, and will not agree to,
sell, assign, dispose of, encumber, mortgage, hypothecate or otherwise transfer
(collectively, "Transfer') any Shares, including, without limitation, tender any
of the shares in a tender offer.
3. AGREEMENT TO VOTE OF EACH SHAREHOLDER. Each Shareholder hereby
irrevocably and unconditionally agrees to vote or to cause to be voted all
Shares, to the extent the Shares carry the right to vote thereon, at the
Virginia Stockholders Meeting and at any other annual or special meeting of
shareholders of Virginia where any such proposal is submitted (a) in favor of
the Virginia Proposals and (b) against (i) approval of any proposal made in
opposition to or in competition with the transactions contemplated by the
Reorganization Agreement, (ii) any merger, consolidation, sale of assets,
business combination, share exchange, reorganization or recapitalization of
Virginia or any of its subsidiaries, with or involving any party other than as
contemplated by the Reorganization Agreement, (iii) any liquidation or winding
up of Virginia, (iv) any extraordinary dividend by Virginia, (v) any change in
the capital structure of Virginia (other than pursuant to the Reorganization
Agreement) and (vi) any other action that may reasonably be expected to impede,
interfere with, delay, postpone or attempt to discourage the consummation of the
transactions contemplated by the Reorganization Agreement or result in a breach
of any of the covenants, representations, warranties or other obligations or
agreements of Virginia under the Reorganization Agreement which would materially
and adversely affect Virginia or Mississippi or their respective abilities to
consummate the transactions contemplated by the Reorganization Agreement.
4. GRANTING OF PROXY. In furtherance of the terms and provisions of the
Agreement, each shareholder hereby grants an irrevocable proxy (Subject to
Section 10(b)), coupled with an interest, to the President and Secretary of
Mississippi to vote all Shares beneficially owned by such Shareholder in favor
of the approval of the Virginia Proposals and
-2-
<PAGE>
against any of the matters specified in clause (b) of Section 3. Each
Shareholder hereby ratifies and approves of each and every action taken by
Mississippi pursuant to the foregoing proxy. Notwithstanding the foregoing, if
requested by Mississippi, each Shareholder will execute and deliver applicable
proxy material in furtherance of the provisions of Section 3.
5. ACTION IN SHAREHOLDER CAPACITY ONLY. Each Shareholder makes no
agreement or understanding herein as director or officer of Virginia. Each
Shareholder signs solely in his capacity as a record holder and beneficial owner
of the Shares, and nothing herein shall limit or affect any actions taken in his
capacity as an officer or director of Virginia.
6. INVALID PROVISIONS. If any provision of this Agreement shall be
invalid or unenforceable under applicable law, such provision shall be
ineffective to the extent of such invalidity or unenforceability only, without
it affecting the remaining provisions of this Agreement.
7. EXECUTED IN COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be an original with the same effect as if the
signatures hereto and thereto were upon the same instrument.
8. SPECIFIC PERFORMANCE. The parties hereto agree that if for any
reason any Shareholder fails to perform any of his agreements or obligations
under this Agreement irreparable harm or injury to Virginia and Mississippi
would be caused with respect to which money damages would not be an adequate
remedy. Accordingly, each Shareholder agrees that, in seeking to enforce this
Agreement against each Shareholder, each of Mississippi and Virginia shall be
entitled, in addition to any other remedy available at law, equity or otherwise,
to specific performance and injunctive and other equitable relief.
9. GOVERNING LAW; SUBMISSION TO JURISDICTION. THE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE DOMESTIC LAWS OF
THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF
LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF DELAWARE. EACH OF THE PARTIES HERETO IRREVOCABLY AGREES
THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT HEREOF BROUGHT BY THE
OTHER PARTY HERETO OR ITS SUCCESSORS OR ASSIGNS MAY BE BROUGHT AND DETERMINED IN
THE COURTS OF THE STATE OF DELAWARE, AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMITS WITH REGARD TO ANY SUCH ACTION OR PROCEEDING FOR ITSELF AND
IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE,
COUNTERCLAIM OR OTHERWISE, IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, (a) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF THE ABOVE-NAMED COURTS FOR ANY REASON, (b) THAT IT OR ITS PROPERTY IS EXEMPT
OR IMMUNE FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS
COMMENCED IN SUCH COURTS (WHETHER THROUGH SERVICE OF JUDGMENT, EXECUTION OF
JUDGMENT, OR OTHERWISE), AND (c) TO THE FULLEST EXTENT PERMITTED BY THE
APPLICABLE LAW, THAT (i) THE SUIT, ACTION OR PROCEEDING IN SUCH COURT IS BROUGHT
IN AN INCONVENIENT FORUM, (ii) THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING
-3-
<PAGE>
IS IMPROPER AND (III) THIS AGREEMENT, OR THE SUBJECT MATTER HEREOF, MAY NOT BE
ENFORCED IN OR BY SUCH COURTS.
10. AMENDMENTS; TERMINATION. (a) This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by all parties hereto.
(b) The provisions of this Agreement shall terminate upon the earliest
to occur of (i) the consummation of the Mergers, and (ii) the date which is two
years after the date hereof and (iii) the termination of the Reorganization
Agreement.
(c) For purposes of this Agreement, the term "Reorganization Agreement"
includes the Reorganization Agreement, as the same may be modified or amended
from time to time.
11. ADDITIONAL SHARES. If, after the date hereof, any Shareholder
acquires beneficial ownership of any additional shares of capital stock of
Virginia (any such shares, "Additional Shares"), including, without limitation,
upon exercise of any option, warrant or right to acquire Shares of capital stock
of Virginia or through any stock dividend or stock split, the provisions of this
Agreement applicable to the Shares shall be applicable to such Additional Shares
as if such Additional Shares had been Shares as of the date hereof. The
provisions of the immediately preceding sentence shall be effective with respect
to Additional Shares without action by any person or entity immediately upon the
acquisition by any Shareholder of beneficial ownership of such Additional
Shares.
12. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal successors (including, in the case of any Shareholder or any other
individual, any executors, administrators, estates, legal representatives and
heirs of such Shareholder or such individual) and permitted assigns; PROVIDED,
HOWEVER, that, except as otherwise provided in this Agreement, no party may
assign, delegate or otherwise transfer any of its rights or obligations, under
this Agreement, without the consent of Mississippi and Virginia, in the case of
any Shareholder, the Shareholders and Virginia, in the case of Mississippi, and
the Shareholders and Mississippi, in the case of Virginia. Without limiting the
scope or effect of the restrictions on Transfer set forth in Section 2 hereof,
each Shareholder agrees that this Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation of
law or otherwise.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of this 28th day of February, 2000.
TeleCorp PCS, Inc.
By:
-----------------------------
Name:
----------------------
Title:
----------------------
Tritel, Inc.
By:
-----------------------------
Name:
----------------------
Title:
----------------------
Gerald T. Vento
By:
-----------------------------
Name:
----------------------
Title:
----------------------
Thomas H. Sullivan
By:
-----------------------------
Name:
----------------------
Title:
----------------------
<PAGE>
EXHIBIT A
SHAREHOLDER NAME AMOUNT AND CLASS OF SHARES
GERALD T. VENTO Class A Common Stock: 4,974,449(1)
Class C Common Stock: 105,444
Class D Common Stock: 14,503(2)
Voting Preference Common Stock:
Series C Preferred Stock: 420
Series E Preferred Stock 11,235
- -----------
(1) Consists of 492,064 shares of Class A Common Stock held by TeleCorp
Investment Corp. II, L.L.C. (TIC II) and 4,482,385 shares of Class A Common
Stock held by Mr. Vento. Mr. Vento serves as a manager and is a member of
TIC II.
(2) Consists of 11,366 shares of Class D Common Stock held by TIC II and 3,137
shares of Class D Common Stock held by Mr. Vento. Mr. Vento is a manager
and a member of TIC II.
SHAREHOLDER NAME AMOUNT AND CLASS OF SHARES
THOMAS H. SULLIVAN Class A Common Stock: 3,220,955(3)
Class C Common Stock: 65,373
Class D Common Stock: 12,065(4)
Voting Preference Common Stock: 1,540
Series C Preferred Stock: 109
Series E Preferred Stock 6,984
- -----------
(3) Consists of 492,064 shares of Class A Common Stock held by TIC II and
2,728,891 shares of Class A Common Stock held by Thomas H. Sullivan. Mr.
Sullivan serves as manager and is the manager of a member of TIC II.
(4) Consists of 11,366 shares of Class D Common Stock held by TIC II and 699
shares of Class D Common Stock held by Mr. Sullivan. Mr. Sullivan serves as
a manager and is the manager of a member of TIC II.
<PAGE>
SCHEDULE 1
The Stockholders' Agreement, dated as of June 17, 1998, by and among
TeleCorp PCS, Inc., Thomas H. Sullivan, Gerald T. Vento and the other
stockholders named therein.
<PAGE>
Exhibit 10.2
VOTING AGREEMENT
Agreement dated as of February 28, 2000 among each of the shareholders
listed on the signature pages hereto (each, a "Shareholder") of Tritel, Inc., a
Delaware corporation ("Mississippi"), Mississippi and TeleCorp PCS, Inc., a
Delaware corporation ("Virginia").
(A) Virginia, Mississippi and certain other parties are parties to an
Agreement and Plan of Reorganization and Contribution dated as of the date
hereof (the "Reorganization Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meaning assigned such terms in the
Reorganization Agreement.
(B) Each of Virginia and Mississippi agreed to enter into the
Reorganization Agreement on the condition that the parties hereto enter into
this Voting Agreement.
Accordingly, the parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. Each Shareholder
hereby represents and warrants, severally and not jointly, to Virginia and
Mississippi as follows (with respect to itself only):
(a) TITLE. As of the date hereof, each Shareholder beneficially owns
the amount and class of capital stock of Mississippi set forth after such
Shareholder's name on EXHIBIT A attached hereto (with respect to each
Shareholder, the capital stock specified after such Shareholder's name on
Exhibit A hereto shall be referred to herein as the "Shares").
(b) RIGHT TO VOTE. As of the date hereof and as of the date of the
Mississippi Stockholder Meeting, except for this Agreement or as otherwise
permitted by this Agreement, each Shareholder has full legal power, authority
and right to vote all Shares, to the extent the Shares carry rights to vote
thereon, in favor of the Mississippi Proposals without the consent or approval
of, or any other action on the part of, any other person or entity. Without
limiting the generality of the foregoing, except for this Agreement or as
otherwise permitted by this Agreement or as disclosed in Schedule 1 hereto, each
Shareholder has not entered into any voting agreement with any person or entity
with respect to any Shares, granted any person or entity any proxy (revocable or
irrevocable) or power of attorney with respect to any Shares, deposited any
Shares in a voting trust or entered into any arrangement or agreement with any
person or entity limiting or affecting its legal power, authority or right to
vote the Shares in favor of the Mississippi Proposals. From and after the date
hereof, except as otherwise permitted by this Agreement, each Shareholder will
not commit any act that could restrict or otherwise affect such legal power,
authority and right to vote all Shares, to the extent the Shares carry the right
to vote thereon, in favor of the Mississippi Proposals. Without limiting the
generality of the foregoing, except as otherwise permitted by this Agreement,
from and after the date hereof, each Shareholder will not enter into any voting
agreement with any person or entity with respect to any of the Shares, grant any
person or entity any proxy (revocable or irrevocable) or power of attorney with
respect to any of the Shares, deposit any of the Shares in a voting trust or
otherwise enter into any agreement or arrangement limiting or affecting such
Shareholder's legal power,
<PAGE>
authority or right to vote the Shares in favor of the approval of the
Mississippi Proposals (other than this Agreement).
(c) AUTHORITY. Each Shareholder has full legal power, authority and
right to execute and deliver, and to perform his obligations under, this
Agreement. This Agreement has been duly and validly executed and delivered by
each Shareholder and constitutes a valid and binding agreement of each
Shareholder enforceable against each Shareholder in accordance with its terms,
subject to (i) bankruptcy, insolvency, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors rights generally and (ii)
general principles of equity (regardless of whether considered in a proceeding
at law or in equity).
(d) CONFLICTING INSTRUMENTS; NO TRANSFER. Neither the execution and
delivery of this Agreement nor the performance by each Shareholder of his
agreements and obligations hereunder will result in any breach or violation of
or be in conflict with or constitute a default under any term of any agreement,
judgment, injunction, order, decree, law, regulation or arrangement to which
such Shareholder is a party or by which such Shareholder (or any of his assets)
is bound, except for any such breach, violation, conflict or default which,
individually or in the aggregate, would not impair or adversely affect such
Shareholder's ability to perform its obligations under this Agreement.
2. RESTRICTION ON TRANSFER. Each Shareholder agrees that (other than
pursuant to the Reorganization Agreement) he will not, and will not agree to,
sell, assign, dispose of, encumber, mortgage, hypothecate or otherwise transfer
(collectively, "Transfer') any Shares, including, without limitation, tendering
any of the shares in a tender offer.
3. AGREEMENT TO VOTE OF EACH SHAREHOLDER. Each Shareholder hereby
irrevocably and unconditionally agrees to vote or to cause to be voted all
Shares, to the extent the Shares carry the right to vote thereon, at the
Mississippi Stockholders Meeting and at any other annual or special meeting of
shareholders of Mississippi where any such proposal is submitted (a) in favor of
the Mississippi Proposals and (b) against (i) approval of any proposal made in
opposition to or in competition with the transactions contemplated by the
Reorganization Agreement, (ii) any merger, consolidation, sale of assets,
business combination, share exchange, reorganization or recapitalization of
Mississippi or any of its subsidiaries, with or involving any party other than
as contemplated by the Reorganization Agreement, (iii) any liquidation or
winding up of Mississippi, (iv) any extraordinary dividend by Mississippi, (v)
any change in the capital structure of Mississippi (other than pursuant to the
Reorganization Agreement) and (vi) any other action that may reasonably be
expected to impede, interfere with, delay, postpone or attempt to discourage the
consummation of the transactions contemplated by the Reorganization Agreement or
result in a breach of any of the covenants, representations, warranties or other
obligations or agreements of Mississippi under the Reorganization Agreement
which would materially and adversely affect Virginia or Mississippi or their
respective abilities to consummate the transactions contemplated by the
Reorganization Agreement.
4. GRANTING OF PROXY. In furtherance of the terms and provisions of
this Agreement, each Shareholder hereby grants an irrevocable proxy (subject to
Section 10(b)), coupled with an interest, to the President and Secretary of
Virginia to vote all Shares beneficially
-2-
<PAGE>
owned by such Shareholder in favor of the approval of the Mississippi Proposals
and against any of the matters specified in clause (b) of Section 3. Each
Shareholder hereby ratifies and approves of each and every action taken by
Virginia pursuant to the foregoing proxy. Notwithstanding the foregoing, if
requested by Virginia, each Shareholder will execute and deliver applicable
proxy material in furtherance of the provisions of Section 3.
5. ACTION IN SHAREHOLDER CAPACITY ONLY. Each Shareholder makes no
agreement or understanding herein as director or officer of Mississippi. Each
Shareholder signs solely in his capacity as a record holder and beneficial owner
of the Shares, and nothing herein shall limit or affect any actions taken in his
capacity as an officer or director of Mississippi.
6. INVALID PROVISIONS. If any provision of this Agreement shall be
invalid or unenforceable under applicable law, such provision shall be
ineffective to the extent of such invalidity or unenforceability only, without
it affecting the remaining provisions of this Agreement.
7. EXECUTED IN COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be an original with the same effect as if the
signatures hereto and thereto were upon the same instrument.
8. SPECIFIC PERFORMANCE. The parties hereto agree that if for any
reason any Shareholder fails to perform any of his agreements or obligations
under this Agreement irreparable harm or injury to Virginia and Mississippi
would be caused with respect to which money damages would not be an adequate
remedy. Accordingly, each Shareholder agrees that, in seeking to enforce this
Agreement against each Shareholder, each of Virginia and Mississippi shall be
entitled, in addition to any other remedy available at law, equity or otherwise,
to specific performance and injunctive and other equitable relief.
9. GOVERNING LAW; SUBMISSION TO JURISDICTION. THE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE DOMESTIC LAWS OF
THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF
LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF DELAWARE. EACH OF THE PARTIES HERETO IRREVOCABLY AGREES
THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT HEREOF BROUGHT BY THE
OTHER PARTY HERETO OR ITS SUCCESSORS OR ASSIGNS MAY BE BROUGHT AND DETERMINED IN
THE COURTS OF THE STATE OF DELAWARE, AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMITS WITH REGARD TO ANY SUCH ACTION OR PROCEEDING FOR ITSELF AND
IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE,
COUNTERCLAIM OR OTHERWISE, IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, (a) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF THE ABOVE-NAMED COURTS FOR ANY REASON, (b) THAT IT OR ITS PROPERTY IS EXEMPT
OR IMMUNE FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS
COMMENCED IN SUCH COURTS (WHETHER THROUGH SERVICE OF JUDGMENT, EXECUTION OF
JUDGMENT, OR OTHERWISE), AND (c) TO THE FULLEST EXTENT PERMITTED BY THE
APPLICABLE LAW, THAT (i) THE SUIT, ACTION OR PROCEEDING IN SUCH COURT IS BROUGHT
IN AN INCONVENIENT FORUM, (ii) THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING
-3-
<PAGE>
IS IMPROPER AND (iii) THIS AGREEMENT, OR THE SUBJECT MATTER HEREOF, MAY NOT BE
ENFORCED IN OR BY SUCH COURTS.
10. AMENDMENTS; TERMINATION. (a) This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by all parties hereto.
(b) The provisions of this Agreement shall terminate upon the earliest
to occur of (i) the consummation of the Mergers, and (ii) the date which is two
years after the date hereof and (iii) the termination of the Reorganization
Agreement.
(c) For purposes of this Agreement, the term "Reorganization Agreement"
includes the Reorganization Agreement, as the same may be modified or amended
from time to time.
11. ADDITIONAL SHARES. If, after the date hereof, any Shareholder
acquires beneficial ownership of any additional shares of capital stock of
Mississippi (any such shares, "Additional Shares"), including, without
limitation, upon exercise of any option, warrant or right to acquire Shares of
capital stock of Mississippi or through any stock dividend or stock split, the
provisions of this Agreement applicable to the Shares shall be applicable to
such Additional Shares as if such Additional Shares had been Shares as of the
date hereof. The provisions of the immediately preceding sentence shall be
effective with respect to Additional Shares without action by any person or
entity immediately upon the acquisition by any Shareholder of beneficial
ownership of such Additional Shares.
12. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal successors (including, in the case of any Shareholder or any other
individual, any executors, administrators, estates, legal representatives and
heirs of such Shareholder or such individual) and permitted assigns; PROVIDED,
HOWEVER, that, except as otherwise provided in this Agreement, no party may
assign, delegate or otherwise transfer any of its rights or obligations, under
this Agreement, without the consent of Virginia and Mississippi, in the case of
any Shareholder, the Shareholders and Mississippi, in the case of Virginia, and
the Shareholders and Virginia in the case of Mississippi. Without limiting the
scope or effect of the restrictions on Transfer set forth in Section 2 hereof,
each Shareholder agrees that this Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation of
law or otherwise.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of this 28 day of February, 2000.
Tritel, Inc.
By:
----------------------------------
Name:
---------------------------
Title:
---------------------------
TeleCorp PCS, Inc.
By:
----------------------------------
Name:
---------------------------
Title:
---------------------------
E.B. Martin, Jr.
By:
----------------------------------
Name:
---------------------------
Title:
---------------------------
William M. Mounger, II
By:
----------------------------------
Name:
---------------------------
Title:
---------------------------
<PAGE>
EXHIBIT A
SHAREHOLDER NAME AMOUNT AND CLASS OF SHARES
E.B. Martin Jr. Class A Common 2,384,544
Class C Common 690,224
Voting Preference 3
SHAREHOLDER NAME AMOUNT AND CLASS OF SHARES
William M. Mounger, II Class A Common 2,384,544 (directly)
Class A Common 2,379,072.22
(indirectly through a
trust, Trillium PCS,
and M3, LLC)
Class C Common 690,224
Class D Common 148,598.04(indirectly
through Trillium PCS
and M3, LLC)
Voting Preference 3
- -----------
Note: Mounger has a controlling interest in Trillium PCS, LLC and M3, LLC.
<PAGE>
SCHEDULE 1
The Stockholders' Agreement, dated as of January 7, 1999, by and among
Tritel, Inc., William M. Mounger, II, E.B. Martin, Jr. and the other
stockholders named therein.
<PAGE>
[AT&T letterhead]
Exhibit 10.3
February 28, 2000
TeleCorp PCS, Inc.
1010 North Glebe Road, Suite 800
Arlington, Virginia 22201
Attn: Thomas H. Sullivan
Reference is made to that certain Agreement and Plan of Reorganization
and Contribution dated February 28, 2000 (the "Merger Agreement") by and among
TeleCorp PCS, Inc. ("TeleCorp"), Tritel, Inc. and AT&T Wireless Services, Inc.
("AT&T"). Capitalized terms used but not defined in this Letter Agreement shall
have the meaning ascribed to them in the Merger Agreement.
In the event that AT&T is unable to deliver or cause the delivery of
the Indus Assets, and AT&T neither delivers or causes to be delivered to the
Holding Company Replacement Assets, in lieu of terminating the Contribution
pursuant to Section 1.14(d)(ii) of the Merger Agreement, TeleCorp shall have the
option, exercisable by notice given within five days after receipt of the
Non-Replacement Notice, to elect to have AT&T's 10 MHz license for the Milwaukee
BTA constitute Replacement Assets, and to accept delivery of that license in
lieu of, and in full satisfaction of, AT&T's obligation to deliver the Indus
Assets.
This letter Agreement shall terminate upon the earlier of notice by
TeleCorp to AT&T of its election to terminate this Letter Agreement, the Indus
Closing or the Closing.
AT&T WIRELESS SERVICES, INC.
By:
-------------------------
Accepted and Agreed
as of February 28, 2000
TELECORP PCS, INC.
By:
-------------------------
Thomas H. Sullivan
<PAGE>
Exhibit 10.4
ASSET EXCHANGE AGREEMENT
among
AT&T Wireless PCS, LLC
TeleCorp PCS, Inc.
TeleCorp PCS, LLC
TeleCorp Holding Corp, Inc.
TeleCorp Communications, Inc.
TeleCorp Equipment Leasing, L.P.
TeleCorp Realty, LLC
Dated as of February 28, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
SWAP TRANSACTIONS; RELATED AGREEMENTS
1.1 [Intentionally omitted.]....................................3
1.2 Swap Transactions...........................................3
1.3 Like-Kind Exchange..........................................3
1.4 Replacement Assets..........................................4
1.5 Intermediary................................................5
1.6 Transition Agreement........................................5
1.7 Return of Assets............................................5
ARTICLE II
CLOSING
2.1 Time and Place of Closing...................................6
2.2 Closing Actions and Deliveries..............................6
ARTICLE III
COVENANTS
3.1 Consummation of Transactions................................9
3.2 Confidentiality............................................12
3.3 Conduct Prior to Closing...................................13
3.4 Covenants of AT&T..........................................13
3.5 Covenants of TeleCorp Affiliates...........................14
3.6 FCC Construction Requirements..............................16
3.7 Treatment of Employees.....................................16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AT&T
4.1 Organization, Power and Authority..........................19
4.2 Consents; No Conflicts.....................................20
4.3 Litigation.................................................20
4.4 FCC Compliance.............................................20
-i-
<PAGE>
4.5 Brokers....................................................20
4.6 Licenses...................................................20
4.7 Compliance With Laws.......................................21
4.8 Taxes......................................................21
4.9 Acquisition Agreements.....................................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TELECORP
5.1 Organization, Power and Authority..........................22
5.2 Consents; No Conflicts.....................................23
5.3 Litigation.................................................23
5.4 FCC Compliance.............................................23
5.5 Brokers....................................................23
5.6 TeleCorp Assets; Liens.....................................24
5.7 TeleCorp Assets............................................25
5.8 Environmental and Safety Laws..............................25
5.9 TeleCorp Assigned Agreements...............................26
5.10 License....................................................27
5.11 Compliance With Laws.......................................27
5.12 Taxes......................................................28
5.13 Insurance..................................................28
5.14 Undisclosed Liabilities....................................28
5.15 Inventory..................................................29
5.16 Labor Relations............................................29
5.17 Licenses and Permits.......................................29
5.18 Employee Benefits..........................................29
5.19 No Material Adverse Change.................................30
5.20 Affiliate Agreements.......................................30
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of All Parties...................30
6.2 Conditions to Obligations of TeleCorp......................31
6.3 Conditions to the Obligations of AT&T......................31
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1 Survival...................................................32
7.2 Indemnification by AT&T....................................32
-ii-
<PAGE>
7.3 Indemnification by TeleCorp................................33
7.4 Procedures.................................................34
7.5 Tax costs and Tax benefits.................................35
ARTICLE VIII
TERMINATION
8.1 Termination................................................35
8.2 Effect of Termination; Tax Responsibility..................36
ARTICLE IX
DEFINITIONS
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification.................................45
10.2 Waiver of Compliance; Consents.............................45
10.3 Notices....................................................45
10.4 Parties in Interest; Assignment............................46
10.5 Applicable Law.............................................47
10.6 Counterparts...............................................47
10.7 Interpretation.............................................47
10.8 Entire Agreement...........................................47
10.9 Publicity..................................................47
10.10 Specific Performance.......................................47
10.11 Remedies Cumulative........................................48
10.12 Severability...............................................48
10.13 Beneficiaries of Agreement.................................48
10.14 Designated Transferee......................................48
10.15 Access to Records..........................................48
10.16 Agency.....................................................48
-iii-
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 0.1 TeleCorp Assets
Schedule 0.2 Polycell Licenses
Schedule 0.3 ABC Licenses
Schedule 0.4 Wisconsin Licenses
Schedule 0.5 Iowa Licenses
Schedule 1.3 Asset Match - Like Kind Exchange
Schedule 2.2(e) Delivery and Exchange of Assets
by/Intermediary Letter of Instruction
Schedule 3.7(a) Excluded Employees
Schedule 4.0 AT&T Disclosure Schedule
Section 4.6 AT&T/Iowa Licenses
Schedule 5.0 TeleCorp Disclosure Schedule
Section 5.6(a) TeleCorp Liens
Section 5.9 TeleCorp Assigned Agreements
Schedule 5.10 Boston Licenses
Schedule 5.18 Employee Benefits
-iv-
<PAGE>
EXHIBITS
Exhibit A Polycell Acquisition Agreement
Exhibit B Polycell Assignments
Exhibit B-1 ABC to AT&T (contract rights)
Exhibit B-2 AT&T to Intermediary (contract
rights)
Exhibit B-3 Intermediary to Telecorp (contract
rights)
Exhibit B-4 Polycell to Telecorp (license)
Exhibit C ABC Acquisition Agreement
Exhibit C-1 AT&T to Intermediary (contract
rights)
Exhibit C-2 Intermediary to Telecorp (contract
rights)
Exhibit C-3 ABC to Telecorp (license)
Exhibit D Intermediary Agreement
Exhibit E Transition Agreement
Exhibit F AT&T Assignments (WI/IA Licenses)
Exhibit G TeleCorp Bill of Sale and Assignment
Exhibit G-1 TeleCorp to Intermediary
Exhibit G-2 Intermediary to AT&T
Exhibit G-3 TeleCorp to AT&T (licenses)
Exhibit G-4 TeleCorp to AT&T Bill of Sale
Exhibit G-5 TeleCorp to AT&T Assignment and
Assumption of Leases and Contracts
-v-
<PAGE>
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT (this "AGREEMENT"), dated as of February
28, 2000, by and between AT&T Wireless PCS, LLC, a Delaware limited liability
company ("AT&T"), TeleCorp PCS, Inc., a Delaware corporation ("TELECORP"),
TeleCorp PCS, LLC, a Delaware limited liability company ("TELECORP LLC"),
TeleCorp Holding Corp, Inc., a Delaware corporation ("TELECORP HOLDING"),
TeleCorp Communications, Inc., a Delaware corporation ("TELECORP
COMMUNICATIONS"), TeleCorp Equipment Leasing, L.P., a Delaware limited
partnership ("TELECORP EQUIPMENT"), TeleCorp Realty, LLC, a Delaware limited
liability company ("TELECORP REALTY") (TeleCorp, TeleCorp LLC, TeleCorp Holding,
TeleCorp Communications, TeleCorp Equipment, and TeleCorp Realty hereinafter
collectively, the "TELECORP AFFILIATES"). Certain terms used in this Agreement
are defined in Article IX hereof.
WHEREAS, TeleCorp LLC holds (a) the 20MHz PCS licenses in the
Boston-Providence MTA listed on SCHEDULE 0.1 (the "BOSTON LICENSES") and (b) the
related operating assets and properties described on SCHEDULE 0.1, constituting
all of the assets and properties of TeleCorp primarily used or held for use for
its personal communications services business in such area (the "BOSTON
BUSINESS" and, collectively with the Boston Licenses, the "TELECORP ASSETS");
WHEREAS, (a) pursuant to a License Acquisition Agreement in the form of
EXHIBIT A (the "POLYCELL ACQUISITION AGREEMENT") between Polycell
Communications, Inc., a Delaware corporation ("POLYCELL"), and ABC Wireless,
L.L.C., a Delaware limited liability company ("ABC" or the "POLYCELL BUYER"),
the Polycell Buyer has obtained the right to purchase the licenses listed on
SCHEDULE 0.2 (the "POLYCELL LICENSES") and (b) the Polycell Buyer has agreed to
assign to AT&T (i) the right to direct the transfer of the right to hold the
Polycell Licenses to TeleCorp, and (ii) all other rights and obligations under
the Polycell Acquisition Agreement by an Assignment and Assumption Agreement
substantially in the form of EXHIBIT B (the "POLYCELL ASSIGNMENT");
WHEREAS, pursuant to a License Acquisition Agreement in the form of
EXHIBIT C (the "ABC ACQUISITION AGREEMENT") between ABC and AT&T, AT&T has
obtained the right to direct the transfer of the right to hold the licenses of
ABC listed on SCHEDULE 0.3 in the MTA (as defined below) of the Des Moines-Quad
Cities (the "ABC LICENSES" and, together with the Polycell Licenses, the "AT&T
ACQUIRED ASSETS") to TeleCorp, as well as assign to TeleCorp all other rights
and obligations under the ABC Acquisition Agreement;
WHEREAS, AT&T (or its Affiliate) holds the 10MHz licenses listed on
SCHEDULE 0.4 in the territory in Wisconsin set forth therein (the "WISCONSIN
LICENSES");
<PAGE>
WHEREAS, AT&T (or its Affiliate) holds the 10MHz licenses listed on
SCHEDULE 0.5 in the Fort Dodge, Iowa, and Waterloo, Iowa, BTAs (the "IOWA
LICENSES" and, together with the Wisconsin Licenses, the "AT&T OWNED ASSETS");
WHEREAS, the Polycell Acquisition Agreement and the ABC Acquisition
Agreement (collectively, the "ACQUISITION AGREEMENTS") require payments of cash
consideration equal to the purchase price stated in each such Agreement,
including the earnest money deposit held in escrow under the Polycell Agreement
(such cash consideration in the aggregate, the "CASH CONSIDERATION") and,
pursuant to the Polycell Acquisition Agreement, Polycell has the option to
substitute for a portion of its share of the Cash Consideration certain payments
in stock of TeleCorp (the "STOCK CONSIDERATION"), in connection with the
transfer, respectively, of the Polycell Licenses and the ABC Licenses and AT&T
is willing to fund the Cash Consideration in accordance with the terms hereof;
WHEREAS, the parties to this Agreement wish to effect, or cause to be
effected, an exchange (the "SWAP TRANSACTIONS") of (a) the Boston Licenses for
(b) (I) the AT&T Acquired Assets and (II) the AT&T Owned Assets (clauses (I) and
(II) collectively, the "AT&T ASSETS"), which Swap Transactions shall be effected
to the fullest extent possible in accordance with this Agreement as a like-kind
exchange of property for Federal income tax purposes pursuant to Section 1031 of
the Code;
WHEREAS, in addition to the Cash Consideration, AT&T shall pay to
TeleCorp an aggregate amount equal to (a) $80 million less (b) the Cash
Consideration (hereinafter, the "ASSET PAYMENT") for the Boston Business; and
WHEREAS, in order to effect the Swap Transactions and the other
transactions contemplated hereby, the parties hereto wish to enter into an
agreement substantially in the form of EXHIBIT D (the "INTERMEDIARY AGREEMENT")
with an intermediary corporation and exchange agent (the "INTERMEDIARY") that
meets all applicable requirements to act as a Qualified Intermediary (as defined
below), pursuant to which such Intermediary would (a) hold the TeleCorp Assets,
the AT&T Assets, the Cash Consideration, the Asset Payment, and the Stock
Consideration, if any, pending consummation of the Swap Transactions, (b) (i)
consummate the transactions contemplated by each of the Acquisition Agreements
and (ii) direct and cause the delivery of the AT&T Acquired Assets to TeleCorp
Holding, the AT&T Owned Assets to TeleCorp LLC and the Asset Payment to the
TeleCorp Affiliates designated on Schedule 1.3 (TeleCorp or such designated
Affiliates, as applicable, a "DESIGNATED TELECORP AFFILIATE" and collectively,
the "DESIGNATED TELECORP AFFILIATES") and (c) deliver on the Closing Date the
TeleCorp Assets to AT&T, all on the terms and subject to the conditions herein
set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants, conditions and agreements hereinafter
set forth, the parties agree as follows:
-2-
<PAGE>
ARTICLE I
SWAP TRANSACTIONS; RELATED AGREEMENTS
1.1 [Intentionally omitted.]
1.2 SWAP TRANSACTIONS. Upon the terms and subject to the conditions hereof
(including without limitation Section 1.3 below) and in reliance upon the
representations, warranties, covenants and agreements herein contained, the
Designated TeleCorp Affiliates and AT&T (or, if applicable in the case of
Replacement Assets, an Affiliate of AT&T designated by AT&T) shall exchange the
AT&T Owned Assets and the AT&T Acquired Assets and, to the extent applicable,
the Replacement Assets (as defined below), for the TeleCorp Assets (other than
the TeleCorp Excluded Assets), free and clear of all Liens (except Permitted
Liens).
1.3 LIKE-KIND EXCHANGE. (a) Subject to Sections 1.3(b), 1.4, 1.5 and 1.6
below, the Boston Licenses shall be exchanged for the AT&T Assets;
(b) TeleCorp Holding, TeleCorp LLC and AT&T shall use all commercially
reasonable efforts to structure the Swap Transactions in such a manner that the
Swap Transactions will qualify as a tax-free exchange of like-kind assets to the
maximum extent permitted by Section 1031 of the Code, including, as applicable,
a deferred like-kind exchange under Section 1031 of the Code. In accordance with
this Section and Schedule 1.3 and, subject to Sections 1.4 and 1.5 hereof, the
parties shall undertake to the extent possible to match like-kind assets with
like-kind assets of equivalent value.
(c) TeleCorp Holding, TeleCorp LLC and AT&T agree that the values on
the Closing Date of the TeleCorp Assets and AT&T Assets described in Section
1.3(a) above will be reflected on Schedule 1.3 and the parties will not take any
position on any tax returns inconsistent therewith and will prepare and file all
returns and reports relating to the exchange contemplated by this Agreement,
including all Federal, state and local Tax returns, in a manner which is
consistent with such Schedule 1.3 (which may be amended from time to time by
agreement of the parties), except to the extent otherwise required pursuant to a
"determination" within the meaning of Code Section 1313(a).
(d) All property to be transferred to a Designated TeleCorp Affiliate
pursuant to this Agreement shall be received by such Designated TeleCorp
Affiliate on or before the earlier of (i) 180 days after TeleCorp and its
Affiliates are treated as transferring any of the TeleCorp Assets and (ii) the
due date for TeleCorp's income tax return for the taxable year in which the
first transfer of any TeleCorp Asset occurs, in either case, within the meaning
of Regulations section 1.1031(k)-1(b)(2). All property to be transferred to AT&T
or its Affiliates pursuant to this Agreement shall be received by such entities
on or before the earlier of (i) 180 days after AT&T is treated as transferring
any of the AT&T Assets and (ii) the due date for AT&T's income tax return for
the taxable year in which the first transfer of any AT&T Asset occurs, in either
case, within the meaning of Regulations section 1.1031(k)-1(b)(2). None of the
parties to this
-3-
<PAGE>
Agreement shall have any right to receive, pledge, borrow, or otherwise obtain
the benefits of money or other property held by the Intermediary within the
meaning of Regulations section 1.1031(k)-1(g)(6), except as otherwise expressly
permitted under such section prior to the earlier of 180 days after each party
is treated as transferring any of its assets pursuant to this Agreement, or the
due date for such company's income tax return for the taxable year in which the
transfer of such company's assets pursuant to this Agreement occurs, in each
case within the meaning of Regulations section 1.1031(k)-1(b)(2)(ii).
1.4 REPLACEMENT ASSETS. (a) In the event that AT&T is unable to deliver, or
cause the delivery of, any of the Polycell Licenses and ABC Licenses within 35
days after any of TeleCorp and its Affiliates are treated as transferring any
TeleCorp Asset within the meaning of Regulation section 1.1031(k)-1(b)(2)(i)
(the "FIRST TRANSFER DATE"), then, within 45 days after the First Transfer Date,
AT&T shall deliver, or cause to be delivered, to the Intermediary, for delivery
to the Designated TeleCorp Affiliates, one of the following (chosen at AT&T's
option), which delivery will constitute full and complete satisfaction of AT&T's
obligations with respect to the Polycell Licenses or the ABC Licenses, as the
case may be: (A) cash in an amount equal to (1) $133 times the number of POPs
covered by the Polycell Licenses or the ABC Licenses, as the case may be, less
(2) the amount of the Cash Consideration that was required to be paid pursuant
to the Polycell Acquisition Agreement or the ABC Acquisition Agreement, as the
case may be, and the transactions contemplated thereby; (B) an amount of Class A
Common Stock of TeleCorp having a value equal to the cash payable under clause
(A) above, valued based on the average of the closing prices of such stock for
the ten trading days immediately preceding the date of Closing; or (C) executed
assignments in form and substance satisfactory to TeleCorp for PCS Licenses held
by AT&T and/or its Affiliates in markets of equivalent size and density to
markets covered by the ABC Licenses and Polycell Licenses and reasonably
acceptable to TeleCorp (the "REPLACEMENT ASSETS") for at least an equivalent
number of POPs, which shall be exchanged in accordance with Section 1.3(b)
above. In each case, TeleCorp may timely deliver to the Intermediary a signed
schedule identifying and designating such Replacement Assets as "replacement
assets" within the meaning of Regulations section 1.1031(k)-l(c)(2). If AT&T
chooses to comply with clause (C) above, TeleCorp will deliver to the
Intermediary, and shall cause the Intermediary to deliver to AT&T, an amount of
Class A Common Stock of TeleCorp, valued as set forth in clause (B) above, equal
to the amount of the Cash Consideration that was required to be paid pursuant to
the Polycell Acquisition Agreement or the ABC Acquisition Agreement, as the case
may be, and the transactions contemplated thereby, and, if the number of POPs
included in the Replacement Assets chosen exceeds the number of POPs covered by
the Polycell Licenses or the ABC Licenses, as the case may be, TeleCorp will
deliver to the Intermediary, and shall cause the Intermediary to deliver to
AT&T, an additional amount of TeleCorp Class A Common Stock, valued as set forth
in clause (B) above, equal to $133 times the number of such excess POPs.
(b) In the event TeleCorp LLC is unable to deliver the TeleCorp Assets,
or if this Agreement terminates prior to delivery of the TeleCorp Assets, and
prior to termination any TeleCorp Affiliate has acquired any of the AT&T
Acquired Assets
-4-
<PAGE>
pursuant to this Agreement, then promptly upon termination of this Agreement,
TeleCorp shall, as directed by AT&T, either (A) sell the Polycell Licenses or
the ABC Licenses, as the case may be, to an entity designated by AT&T, for a
purchase price and otherwise on the same terms and conditions as TeleCorp's
acquisition of the Polycell Licenses or the ABC Licenses or (B) issue to AT&T an
amount of Class A Common Stock of TeleCorp having a value equal to (1) $133
times the number of POPs covered by the Polycell Licenses or the ABC Licenses,
as the case may be, less (2) the amount of the Cash Consideration that was
required to be paid pursuant to the Polycell Acquisition Agreement or the ABC
Acquisition Agreement, as the case may be, and the transactions contemplated
thereby, such stock to be valued based on the average of the closing prices of
such stock for the ten trading days immediately preceding the date of Closing.
1.5 INTERMEDIARY. The parties shall (a) select an Intermediary that is a
Qualified Intermediary, (b) enter into the Intermediary Agreement and (c)
deliver, or cause to be delivered, to the Intermediary the AT&T Assignments (as
defined below), the Cash Consideration, the Asset Payment, the TeleCorp
Assignments, the Stock Consideration (if any) and all other documents, money and
other property required to be delivered pursuant to Section 2.2 below pending
consummation of the transactions contemplated hereby, PROVIDED, HOWEVER, that
nothing in this Agreement (other than Section 1.4 or 10.14 hereof) or the
Intermediary Agreement will alter the fact that, at Closing (or thereafter, as
applicable, pursuant to the Intermediary Agreement), title to the AT&T Assets
shall pass directly to the Designated TeleCorp Affiliates and title to the
TeleCorp Assets shall pass directly to AT&T. On the Closing Date (or thereafter,
as applicable, pursuant to the Intermediary Agreement), the Intermediary shall
consummate each of the transactions contemplated by each of the Acquisition
Agreements, and shall deliver or direct the delivery of the TeleCorp Assets and
AT&T Assets to the respective recipients thereof set forth in Schedule 1.3,
which may be amended by TeleCorp and AT&T from time to time, all in the manner
set forth in the Intermediary Agreement.
1.6 TRANSITION AGREEMENT. On the Closing Date, TeleCorp and AT&T shall enter
into the Transition Agreement attached hereto as EXHIBIT E, which Agreement
shall require TeleCorp to provide operational and administrative services for
AT&T with respect to the TeleCorp Assets for a period of time and subject to the
terms and conditions specified therein.
1.7 DECLINED ASSETS. Notwithstanding any other provision of this Agreement,
AT&T shall have the right to determine in its sole discretion that it does not
intend to, or is unable to, utilize any of the assets comprising the Boston
Business in connection with its ownership and operation of the Boston Licenses,
which determination shall be made the earlier of (i) one hundred and twenty
(120) days after the date hereof and (ii) the Closing Date. AT&T hereby
covenants and agrees that title to such declined assets will not be deemed to
have been transferred to AT&T under the terms of this Agreement.
-5-
<PAGE>
ARTICLE II
CLOSING
2.1 TIME AND PLACE OF CLOSING. Upon the terms and subject to the conditions
hereof, the closing of the Transactions (the "CLOSING") shall take place at the
offices of Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, NY 10038 at
10:00 a.m. local time on the date on which the last of the conditions precedent
set forth in Article VI hereof has been satisfied, or at such other place and/or
time and/or on such other date as the parties may agree or as may be necessary
to permit the fulfillment or waiver of any of the conditions set forth in
Article VI (the "CLOSING DATE"). The Closing shall be deemed to have occurred as
of 12:01 a.m. on the Closing Date.
2.2 CLOSING ACTIONS AND DELIVERIES. Upon the terms hereof and, subject to the
satisfaction or waiver by the appropriate party, if applicable, of the
conditions set forth in Article VI, to consummate the Transactions, on the
Closing Date (or, if applicable, the earlier closing of the acquisition of any
of the AT&T Acquired Assets), the parties shall take the following actions (or
in the event of the earlier closing of the AT&T Acquired Assets, such of the
following as may be applicable):
(a) AT&T ACTIONS WITH RESPECT TO INTERMEDIARY. AT&T shall (i) execute
and deliver to the Intermediary (A) assignments of the rights to direct the
transfer to TeleCorp Holding of (I) all rights to the AT&T Acquired Assets and
(II) the other rights and obligations of the Polycell Buyer and AT&T under the
Polycell Acquisition Agreement and the ABC Acquisition Agreement, respectively
(assignments of clauses (I) and (II) above collectively, the "AT&T ACQUISITION
ASSIGNMENTS") and (B) license assignments substantially in the form of EXHIBIT F
(the "AT&T LICENSE ASSIGNMENTS") to TeleCorp LLC of all of AT&T's rights to the
AT&T Owned Assets (the AT&T Acquisition Assignments and the AT&T License
Assignments collectively, the "AT&T ASSIGNMENTS"), (ii) deliver or cause to be
delivered to the Intermediary the Cash Consideration and the Asset Payment and
(iii) pursuant to the Intermediary Agreement, direct the Intermediary to take
all actions necessary to (A) consummate all of the transactions contemplated by
the Acquisition Agreements, including without limitation payment of the Cash
Consideration and the Stock Consideration, if any, to the respective recipients
thereof, (B) cause the AT&T Acquired Assets to be transferred to TeleCorp
Holding, (C) assign and transfer to TeleCorp all other rights and obligations
under the Acquisition Agreements, (D) cause the AT&T Owned Assets to be
transferred to TeleCorp LLC and (E) pay the Asset Payment to the Designated
TeleCorp Affiliates.
(b) AT&T DELIVERIES TO TELECORP. AT&T shall execute and deliver (or
cause to be executed and delivered) to TeleCorp:
(i) the opinion of Wachtell, Lipton, Rosen & Katz, counsel to AT&T,
dated the Closing Date, addressed to TeleCorp in form and substance reasonably
satisfactory to TeleCorp and its counsel;
-6-
<PAGE>
(ii) the opinion of David Jatlow, Esq., FCC counsel to AT&T, dated
the Closing Date, addressed to TeleCorp in form and substance reasonably
satisfactory to TeleCorp and its counsel;
(iii) a certificate of an officer of AT&T, dated the Closing Date,
certifying as to the fulfillment of the conditions set forth in Sections
6.2(a) and 6.2(b) and that each of the conditions precedent to the
obligations of AT&T hereunder have been waived by AT&T or have been
satisfied (which shall not affect any rights to indemnification under
Article VII hereof);
(iv) a certificate of an officer of AT&T, dated the Closing Date,
certifying as to (A) the resolutions adopted by AT&T duly authorizing the
execution, delivery and performance of this Agreement by AT&T and the
execution and delivery by AT&T of all instruments and documents
contemplated hereby (and stating that the resolutions thereby certified
have not been amended, modified, revoked or rescinded) and (B) the
signatures of the Persons who have been authorized to execute and deliver
this Agreement on behalf of AT&T and any other agreement executed or to be
executed in connection herewith;
(v) a good standing certificate of AT&T from the Secretary of State
of Delaware, dated no earlier than 30 days prior to the Closing;
(vi) a certification from AT&T under Section 1445(b)(2) of the Code
and Regulations thereunder, in form reasonably acceptable to TeleCorp,
stating the taxpayer identification number of AT&T and that AT&T is not a
foreign Person; and
(vii) all such other documents and instruments as TeleCorp or its
counsel may reasonably request in order to consummate the Swap
Transactions or to enable the TeleCorp Affiliates to protect, exercise and
enjoy all rights and benefits with respect to the AT&T Assets.
(c) TELECORP AFFILIATE ACTIONS WITH RESPECT TO INTERMEDIARY. The
TeleCorp Affiliates shall (i) execute and deliver, or cause to be executed and
delivered, to the Intermediary a bill of sale and an assignment and assumption
agreement substantially in the form of EXHIBIT G of all of its and any other
Designated TeleCorp Affiliate's rights to the TeleCorp Assets (the "TELECORP
ASSIGNMENTS"), (ii) deliver the Stock Consideration, if any, and (iii) direct
the Intermediary to cause all rights to the TeleCorp Assets to be transferred,
as applicable, to AT&T.
(d) TELECORP DELIVERIES TO AT&T. TeleCorp shall execute and deliver (or
cause to be executed and delivered) to AT&T:
(i) the opinion of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo,
P.C., counsel to TeleCorp, dated the Closing Date, addressed to AT&T in
form and substance reasonably satisfactory to AT&T and its counsel;
-7-
<PAGE>
(ii) the opinion of Wiley, Rein & Fielding, FCC Counsel to TeleCorp,
dated the Closing Date, addressed to AT&T in form and substance reasonably
satisfactory to AT&T and its counsel;
(iii) a certificate of an officer of TeleCorp, dated the Closing Date,
certifying as to the fulfillment of the conditions set forth in Sections
6.3(a) and 6.3(b) and that each of the conditions precedent to the
obligations of TeleCorp hereunder have been waived by TeleCorp or have
been satisfied (which shall not affect any rights to indemnification under
Article VII hereof);
(iv) a certificate of an officer of TeleCorp, dated the Closing Date,
certifying as to (A) the resolutions adopted by TeleCorp duly authorizing
the execution, delivery and performance of this Agreement by TeleCorp and
the execution and delivery by TeleCorp of all instruments and documents
contemplated hereby (and stating that the resolutions thereby certified
have not been amended, modified, revoked or rescinded) and (B) the
signatures of the Persons who have been authorized to execute and deliver
this Agreement on behalf of TeleCorp and any other agreement executed or
to be executed in connection herewith;
(v) a good standing certificate of each of the TeleCorp Affiliates
from the Secretary of State of Delaware, dated no earlier than 30 days
prior to the Closing;
(vi) evidence reasonably satisfactory to AT&T that all releases and
satisfaction pieces required to release all Liens (other than Permitted
Liens) on the TeleCorp Assets have been obtained;
(vii) an estoppel certificate, reasonably satisfactory to AT&T, from
each of the landlords, licensors or lessors under each of the TeleCorp
Assigned Leases;
(viii) a certification from TeleCorp under Section 1445(b)(2) of the
Code and the Regulations thereunder, in form reasonably acceptable to
AT&T, stating the taxpayer identification number of TeleCorp (and such
Affiliate of TeleCorp as owns for Federal income tax purposes any of the
TeleCorp Assets) and that TeleCorp (or such Affiliate) is not a foreign
Person;
(ix) the TeleCorp Books and Records; and
(x) all such other documents and instruments as AT&T or its counsel
may reasonably request in order to consummate the Transactions or to
enable AT&T to protect, exercise and enjoy all rights and benefits with
respect to the TeleCorp Assets.
(e) TELECORP AND AT&T DELIVERIES. The parties shall execute and
deliver to Intermediary a joint letter of instruction (the "LETTER OF
INSTRUCTION") confirming that all the conditions precedent to consummation of
the transactions contemplated hereby have been satisfied or waived by TeleCorp
and AT&T and directing
-8-
<PAGE>
Intermediary to effect the deliveries and exchange of like-kind assets in the
manner specified in SCHEDULE 1.3.
(f) INTERMEDIARY ACTIONS AND DELIVERIES. Intermediary shall, upon
receipt of the Letter of Instruction and the other items required to be
delivered to it by the parties hereto pursuant to the provisions of Article II
hereof and in accordance with the terms of the Intermediary Agreement, take the
following actions and effect the following deliveries:
(i) consummate the transactions contemplated by each of the
Acquisition Agreements in accordance with the provisions of each such
agreement. In connection therewith, Intermediary shall (A) deliver to each
of the counterparties to each such Acquisition Agreement that portion of
the Cash Consideration as is allocable to the purchase price required to
be paid under such Acquisition Agreement and such instruments,
certificates, opinions and other agreements as may be required pursuant to
the terms of each of the Acquisition Agreements to consummate the
transactions contemplated by each of such agreements, (B) deliver to
Polycell the required Stock Consideration, if any, and (C) direct that
such counterparties deliver any and all rights, and/or assign, as
applicable, all of the Polycell Licenses and the ABC Licenses and execute
and deliver such instruments, certificates, opinions and other agreements
as may be required pursuant to the terms of each of the Acquisition
Agreements to consummate the transactions contemplated by each of such
Agreements, to TeleCorp or another Designated TeleCorp Affiliate, as
applicable;
(ii) deliver the TeleCorp Assignments to AT&T, as applicable; and
(iii) deliver the AT&T Assignments and the Asset Payment to the
Designated TeleCorp Affiliates, as applicable.
ARTICLE III
COVENANTS
3.1 CONSUMMATION OF TRANSACTIONS. Each party shall use (except as otherwise
provided in this Section 3.1) all commercially reasonable efforts to take or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable and consistent with applicable Law to carry out
all of their respective obligations under this Agreement and to consummate the
Transactions at the earliest practicable date, which efforts shall include the
following:
(a) The parties shall use all commercially reasonable efforts to
cause the Closing to occur and the Transactions to be consummated in accordance
with the terms hereof, and, without limiting the generality of the foregoing, to
obtain all necessary Consents including the approval of this Agreement and the
Swap Transactions by all Governmental Authorities and agencies, including the
FCC, and any Consents necessary or advisable in the reasonable judgment of
TeleCorp and AT&T in connection with
-9-
<PAGE>
franchise laws applicable to the execution, delivery and performance of this
Agreement or the consummation of the Swap Transactions, and to make all filings
with and to give all notices to third parties which may be necessary or
reasonably required in order for the parties to consummate the Transactions.
(b) Each party shall furnish to the other party all information
concerning such party and its Affiliates reasonably required for inclusion in
any application or filing to be made by AT&T, TeleCorp or any other party in
connection with the Transactions or otherwise to comply with applicable FCC Law.
(c) Upon the request of another party, each party shall, without
further consideration, forthwith execute and deliver, or cause to be executed
and delivered, such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization and other documents, and shall take such
other action, as may reasonably be requested by such party in order to
effectuate the purposes of this Agreement.
(d) TeleCorp and AT&T each covenants and agrees from and after the
execution and delivery of this Agreement to and including the Closing Date as
follows:
(i) As soon as practicable, but in no event later than 30 days after
the date of this Agreement, each of the parties shall file with the FCC a
complete application requesting its approval and consent to the Swap
Transactions (the "FCC APPLICATIONS"); PROVIDED, that the parties shall
cooperate with each other in the preparation of the FCC
Applications and shall in good faith and with due diligence take all
reasonable steps necessary to expedite the processing of the FCC
Applications and to secure such Consents or approvals as expeditiously as
practicable. If the Closing shall not have occurred for any reason within
the initial effective periods of the granting of FCC approval of any of
the FCC Applications, and neither party shall have terminated this
Agreement under Article VIII, the parties shall jointly request and use
their respective best efforts to obtain one or more extensions of the
effective periods of such grants. Neither party will knowingly take, or
fail to take, any action the intent or reasonably anticipated consequence
of which would be to cause the FCC not to grant approval of the FCC
Applications, or to cause the FCC to intervene in a manner damaging to the
ability to operate the parties' respective businesses in the manner
contemplated following the Closing. The parties agree to oppose any
requests for reconsideration or judicial review of the granting of
approval of the FCC Applications.
(ii) Upon receipt of approval of the FCC of the applications to
approve the assignments of Licenses contemplated as part of the Swap
Transactions, as reported by public notice issued by the FCC, each shall
use all commercially reasonable efforts to take, or forbear from taking,
all such actions, so as to maintain such approval in full force and effect
and not to engage in, or forbear from engaging in, any activity which
would result in the revocation or modification of such approval. In
addition to FCC approval, it is understood that the Closing may be subject
to the prior approval of one or more state regulatory
-10-
<PAGE>
commissions. Each party shall use all commercially reasonable efforts to
file with any relevant state agency or agencies, as soon as practicable
following the date hereof and in no event later than ten (10) Business
Days from the date hereof, a joint application requesting the approval of
the assignments of Licenses contemplated as part of the Swap Transactions.
Each of the parties hereto shall diligently take or cooperate in the
taking of all steps that are necessary or appropriate to expedite the
prosecution and favorable consideration of such applications. The parties
covenant and agree to undertake all actions reasonably requested by any
regulatory authority and to file such material as shall be necessary or
any required to obtain any necessary waivers or other authority from the
any state agency or agencies in connection with the foregoing
applications.
(iii) Within fifteen (15) Business Days of the date of execution
hereof, the parties shall file, or cause to be filed, with the Federal
Trade Commission ("FTC") and the Antitrust Division of the Department of
Justice ("DOJ") any and all reports or notifications which are required to
be filed under the HSR Act or other Law.
(iv) Each party shall promptly comply with all requests for further
documents and information made by the DOJ or the FTC, shall use all
commercially reasonable efforts to obtain early termination of all waiting
periods under the HSR Act, and shall furnish to the other all such
information in its possession as may be necessary for the completion of
the reports or notifications to be filed by the other.
(e) Each party shall use all commercially reasonable efforts to
structure the Transactions in such a manner that no franchise Laws shall be
applicable to the relationship between AT&T and TeleCorp (or its Affiliates);
PROVIDED, that no party shall be obligated to agree to any modification that
adversely affects such party. Nothing in this Agreement shall be construed to
require the parties to consummate the Closing if any regulatory approval would
require that it (i) divest or hold separate any of its assets existing as of the
date hereof other than as contemplated by this Agreement or (ii) otherwise take
or commit to take any action that limits its freedom of action in any material
respect with respect to any of its businesses, product lines or assets other
than as contemplated by this Agreement.
(f) Each party shall refrain from taking any action (or failing to
take any action) if such action (or failure to take any action) could reasonably
be expected to result in the expiration, revocation, suspension or adverse
modification of any of the FCC Licenses with respect to any of the AT&T Assets
or the TeleCorp Assets, as the case may be.
(g) Each party shall refrain, and shall cause each of its Affiliates
to refrain, from agreeing, whether in writing or otherwise, to take any action
inconsistent with any of the foregoing.
-11-
<PAGE>
(h) TeleCorp shall take all actions as may be necessary to satisfy
the condition set forth in Section 6.2(d), except to the extent that taking such
action would have a material adverse effect on TeleCorp and its Affiliates taken
as a whole. For the purposes of the immediately preceding sentence, a "material
adverse effect" shall include having to spend in excess of $2,000,000 in order
to obtain the consent referred to in Section 6.2(d).
3.2 CONFIDENTIALITY.
(a) Each party shall, and shall cause each of its Affiliates, and
its and their respective shareholders, members, managers, directors, officers,
employees and agents (collectively, "REPRESENTATIVES") to, keep secret and
retain in strictest confidence any and all Confidential Information relating to
any other party that it receives in connection with the negotiation or
performance of this Agreement, and shall not disclose such Confidential
Information, and shall cause its Representatives not to disclose such
Confidential Information, to anyone except the receiving party's Affiliates and
Representatives and any other Person that agrees to keep in confidence all
Confidential Information in accordance with the terms of this Section 3.2. Until
the Closing, each party agrees to use Confidential Information received from
another party only to pursue such Transactions, but not for any other purpose.
All tangible embodiments of Confidential Information furnished pursuant to this
Agreement shall be returned promptly to the party to whom it belongs upon
request by such party.
(b) The obligations set forth in Section 3.2(a) shall be inoperative
with respect to Confidential Information that (i) is or becomes generally
available to the public other than as a result of disclosure by the receiving
party or its Representatives in violation of this Agreement, (ii) was available
to the receiving party on a nonconfidential basis prior to its disclosure to the
receiving party, or (iii) becomes available to the receiving party on a
nonconfidential basis from a source other than the providing party or its
agents, PROVIDED, that such source is not known by the receiving party to be
bound by a confidentiality agreement with the providing party or the providing
party's agents.
(c) To the fullest extent permitted by Law, if a party or any of its
Affiliates or Representatives breaches, or threatens to commit a breach of, this
Section 3.2, the party whose Confidential Information shall be disclosed, or
threatened to be disclosed, shall have the right and remedy to have this Section
3.2 specifically enforced by any court having jurisdiction, it being
acknowledged and agreed that money damages will not provide an adequate remedy
to such party. Nothing in this Section 3.2 shall be construed to limit the right
of any party to collect money damages in the event of breach of this Section
3.2.
(d) Anything else in this Agreement notwithstanding, each party
shall have the right to disclose any information, including Confidential
Information of the other party or such other party's Affiliates: (i) to the
other party and its Affiliates or Representatives; (ii) as otherwise required by
Law, including securities Laws; PROVIDED, that any such disclosure shall be as
limited in scope as possible and shall be made only after giving the other party
as much notice as practicable of such required disclosure and
-12-
<PAGE>
an opportunity to contest such disclosure if possible; (iii) as required by its
existing or potential lending sources (such lending sources to acknowledge that
any such Confidential Information disclosed to them is subject to the provisions
hereof); (iv) as required to enforce its rights under this Agreement; (v) as
required to obtain the Consents specified in Sections 6.1(a) through (c); or
(vi) in the case of TeleCorp and its Affiliates, relating solely to the AT&T
Assets, and in the case of AT&T and its Affiliates, relating solely to the
TeleCorp Assets, on and after the Closing Date.
3.3 CONDUCT PRIOR TO CLOSING. Each of the parties to this Agreement agrees
that neither it nor any of its respective Affiliates shall knowingly take any
actions that would cause the transactions contemplated hereby to fail to qualify
as a like-kind exchange under Section 1031 of the Code.
3.4 COVENANTS OF AT&T. From and after the execution and delivery of this
Agreement to and including the Closing Date, AT&T shall:
(a) Comply with all applicable Laws relating to the AT&T Assets
except to the extent that such failure to comply would not have an AT&T Material
Adverse Effect or a material adverse effect on the Transactions;
(b) Use all commercially reasonable efforts to maintain the
Wisconsin Licenses, the Iowa Licenses, the ABC Acquisition Agreement and its
rights under the Polycell Acquisition Agreement in full force and effect;
(c) Use all commercially reasonable efforts to assist (i) Polycell
in maintaining the Polycell Licenses in full force and effect, and (ii) ABC in
maintaining the ABC Licenses in full force and effect;
(d) Without TeleCorp's prior written consent, such consent not to be
unreasonably withheld, delayed or conditioned, not (i) create, incur or, with
respect to the AT&T Owned Assets only, suffer to exist any Lien of any nature
whatsoever relating to the AT&T Assets or any interest therein (other than
Permitted Liens), (ii) enter into any Contract or agreement relating to any of
the AT&T Assets other than those which are terminable by AT&T without penalty or
any liability at the Closing, (iii) amend or modify any of the Acquisition
Agreements in any material respect, or agree to or otherwise permit any
amendments or modifications to any thereof, or (iv) grant or issue any waivers
under any of the Acquisition Agreements;
(e) Not sell, transfer, assign or dispose of, or offer to, or enter
into any agreement, arrangement or understanding to, sell, transfer, assign or
dispose of any of the AT&T Owned Assets, or any interest therein, or any
interest in any of the Acquisition Agreements, or negotiate therefor;
(f) Furnish TeleCorp with all such information concerning the AT&T
Owned Assets (and, to the extent within AT&T's control and permitted under
applicable confidentiality agreements, concerning the AT&T Acquired Assets) as
TeleCorp may reasonably request and cause the appropriate officers, employees,
consultants, agents,
-13-
<PAGE>
accountants and attorneys of AT&T to cooperate with
TeleCorp in connection with such review and examination;
(g) Give written notice to TeleCorp promptly upon the commencement
of, or upon obtaining knowledge of any facts that would give rise to a threat
of, any claim, action or proceeding commenced against or relating to (other than
proceedings affecting the PCS or wireless communications services industry
generally) the AT&T Assets (in the case of AT&T Acquired Assets, to the extent
known by AT&T), and which could reasonably be expected to have an AT&T Material
Adverse Effect or a material adverse effect on the Transactions or AT&T's
ability to consummate the Transactions, and use its commercially reasonable
efforts to challenge and contest any such claim, action or proceeding brought
against or otherwise involving AT&T that could result in any of conditions to
the Closing not being satisfied;
(h) Promptly after obtaining knowledge of the occurrence of, or the
impending or threatened occurrence of, any event which would cause or constitute
a material breach of any of its warranties, representations, covenants or
agreements contained in this Agreement or any Acquisition Agreement, or which
would reasonably be expected to have an AT&T Material Adverse Effect or a
material adverse effect on the Transactions, give notice in writing of such
event or occurrence or impending or threatened event or occurrence (provided,
that such disclosure shall not be deemed to cure any violation or breach of any
such representation, warranty, covenant, agreement or provision), to TeleCorp
and use all commercially reasonable efforts to prevent or to promptly remedy
such breach; and
(i) Cause TeleCorp to be advised promptly in writing of (i) any
event, condition or state of facts known to it, which has had or would
reasonably be expected to have an AT&T Material Adverse Effect or a material
adverse effect on the Transactions (other than proceedings affecting the PCS or
wireless communications services industry generally), (ii) any claim, action or
proceeding which seeks to enjoin the consummation of the Transactions, and (iii)
any event, occurrence, transaction or other item that would have been required
to have been disclosed on any Exhibit or Schedule delivered hereunder, had such
event, occurrence, transaction or item existed on the date hereof.
3.5 COVENANTS OF TELECORP AFFILIATES. From and after the execution and
delivery of this Agreement to and including the Closing Date, TeleCorp and each
other Designated TeleCorp Affiliate, as applicable, including without limitation
TeleCorp LLC, shall operate the TeleCorp Assets in the ordinary course and in a
manner consistent with past practice, and without limitation of the foregoing:
(a) Comply with all applicable Laws, including all such Laws
relating to the TeleCorp Assets, except to the extent that such failure to
comply would not have a TeleCorp Material Adverse Effect or a material adverse
effect on the Transactions or TeleCorp's ability to consummate the Transactions;
(b) Use all commercially reasonable efforts to (i) maintain the
Boston Licenses in full force and effect and (ii) preserve substantially intact
the business
-14-
<PAGE>
organization of the TeleCorp Assets, (iii) keep available the services of its
employees and (iv) preserve the current relationships with its customers,
suppliers and other persons with which it has significant business relations;
(c) Without the prior written consent of AT&T, such consent not to
be unreasonably withheld, delayed or conditioned, not (i) create, incur or
suffer to exist any Lien of any nature whatsoever relating to the TeleCorp
Assets or any interest therein (other than Permitted Liens), or (ii) enter into
any Contract or agreement relating exclusively to the TeleCorp Assets other than
those which are terminable by TeleCorp without penalty or any liability at the
Closing;
(d) Not sell, transfer, assign or dispose of, or offer to, or enter
into any agreement, arrangement or understanding to, sell, transfer, assign or
dispose of the TeleCorp Assets or any interest therein, or negotiate therefor;
(e) Furnish AT&T with all such information concerning the TeleCorp
Assets as AT&T may reasonably request and cause the appropriate officers,
employees, consultants, agents, accountants and attorneys of TeleCorp to
cooperate with AT&T in connection with such review and examination;
(f) Give written notice to AT&T promptly upon the commencement of,
or upon obtaining knowledge of any facts that would give rise to a threat of,
any claim, action or proceeding commenced against or relating to (other than
proceedings affecting the PCS or wireless communications services industry
generally) the TeleCorp Assets and which could reasonably be expected to have a
TeleCorp Material Adverse Effect or a material adverse effect on the
Transactions and contest any such claim, action or proceeding brought against or
otherwise involving TeleCorp that could result in any of conditions to the
Closing not being satisfied;
(g) Promptly after obtaining knowledge of the occurrence of, or the
impending or threatened occurrence of, any event which would cause or constitute
a material breach of any of its warranties, representations, covenants or
agreements contained in this Agreement, or which would reasonably be expected to
have a TeleCorp Material Adverse Effect or a material adverse effect on the
Transactions, give notice in writing of such event or occurrence or impending or
threatened event or occurrence (provided, that such disclosure shall not be
deemed to cure any violation or breach of any such representation, warranty,
covenant, agreement or provision), to AT&T and use commercially reasonable
efforts to prevent or to promptly remedy such breach;
(h) Not authorize any capital expenditure that is not provided for
in the capital expenditures budget relating to the TeleCorp Assets previously
provided to AT&T, and make all capital expenditures that are provided for in
such capital expenditures budget relating to the TeleCorp Assets; and
(i) Cause AT&T to be advised promptly in writing of (i) any event,
condition or state of facts known to it, which has had or would reasonably be
expected to have a TeleCorp Material Adverse Effect or a material adverse effect
on the Transactions
-15-
<PAGE>
(other than proceedings affecting the PCS or wireless communications services
industry generally), (ii) any claim, action or proceeding which seeks to enjoin
the consummation of the Transactions, and (iii) any event, occurrence,
transaction or other item that would have been required to have been disclosed
on any Exhibit or Schedule delivered hereunder, had such event, occurrence,
transaction or item existed on the date hereof.
3.6 FCC CONSTRUCTION REQUIREMENTS. TeleCorp and AT&T hereby agree that, upon
the Closing, (i) TeleCorp shall (A) assume and be obligated to satisfy the
construction requirements set forth in 47 C.F.R. 24.203 with respect to the AT&T
Assets; and (B) be released from the obligation to provide "substantial service"
(as defined in 47 C.F.R. 24.16(a)) throughout the territory covered by the
Boston Licenses and (ii) AT&T shall (A) assume and be obligated to satisfy the
construction requirements set forth in 47 C.F.R. 24.203 with respect to the
Boston Licenses; and (B) be released from the obligation to provide "substantial
service" throughout the territory covered by the Wisconsin and Iowa Licenses.
3.7 TREATMENT OF EMPLOYEES.
(a) Except as set forth in this Section 3.7(a), AT&T may, but shall
have no obligation to employ or offer employment to, any employee of TeleCorp's
PCS business in the area encompassed by the Boston Licenses (collectively, the
"BOSTON EMPLOYEES") in connection with the Swap Transactions; PROVIDED, HOWEVER,
that TeleCorp shall be entitled to offer continued employment to its existing
employees set forth on SCHEDULE 3.7(A) attached hereto (the "EXCLUDED
EMPLOYEES"), which employees AT&T hereby agrees that, from the date hereof until
12 months following the Closing, it shall not solicit directly or indirectly
(other than general solicitations not directed at such employees) for employment
with AT&T or any of its Affiliates. Within 15 Business Days after the date of
execution of this Agreement, TeleCorp shall provide AT&T a list of all Boston
Employees as of a recent date, showing the original hire date, the then-current
positions and rates of compensation and whether the employee is subject to an
employment agreement, a collective bargaining agreement or represented by a
labor organization. Within 90 days after the date of execution of this
Agreement, or such other date as TeleCorp and AT&T may agree, AT&T will provide
to TeleCorp in writing a list of the Boston Employees to whom it or its
Affiliates will offer employment following the Closing, subject only to the
evaluations permitted by this Section. TeleCorp agrees, and shall cause its
appropriate Affiliates, to cooperate in all reasonable respects with AT&T to
allow AT&T or its Affiliates to evaluate the Boston Employees to make hiring
decisions. In this regard, AT&T shall have the opportunity to make such
appropriate pre-hire investigation of the Boston Employees, as it deems
necessary, including, subject to obtaining the consent of such Employee, the
right to review personnel files and conduct background checks and the right to
interview such Employees during normal working hours so long as such interviews
are conducted after notice to TeleCorp and do not unreasonably interfere with
TeleCorp's operations. TeleCorp will use its good faith efforts to obtain the
consent of each of its Boston Employees (other than the Excluded Employees) to
allow AT&T to review personnel files and to conduct background checks in
connection with the foregoing. AT&T or its Affiliates may, if it wishes,
condition any offer of employment upon the Boston Employee's passing a
pre-placement physical
-16-
<PAGE>
examination (including any required screening test) and the completion of a
satisfactory background check. AT&T shall bear the expense of such examination
but TeleCorp shall, upon reasonable notice, cooperate in the scheduling of such
examinations so long as the examinations do not unreasonably interfere with
TeleCorp's operations. As of the Closing Date, other than as specified herein,
AT&T shall have no obligation to TeleCorp, its Affiliates or to the Boston
Employees, with regard to any such Employee it has determined not to hire.
(b) TeleCorp shall pay to all of its Boston Employees all
compensation, including salaries, commissions, bonuses, deferred compensation,
severance (to the extent applicable), insurance, vacation and other compensation
or benefits to which they are entitled for periods prior to the Closing,
including all amounts, if any, payable on account of the termination of their
employment (whether payable before or after the Closing).
(c) TeleCorp shall be responsible for maintenance and distribution
of benefits accrued under any employee benefit plan (as defined in ERISA)
maintained by it, or its appropriate Affiliate, pursuant to the provisions of
such plan and any applicable Law. If TeleCorp determines that the transactions
contemplated by this Agreement will not permit a distribution to be made to a
Hired Employee (as defined below) from TeleCorp's tax qualified plan in
accordance with Section 401(k)(10) of the Code, then AT&T may in its sole
discretion elect to accept a plan-to-plan transfer of Hired Employees' plan
benefits to its own tax qualified plan. If there is no plan-to-plan transfer, in
order to permit TeleCorp, or its appropriate Affiliate, to make distributions to
any former Boston Employee who becomes a Hired Employee of the balance of such
employee's 401(k) account in TeleCorp's or its Affiliate's tax qualified plan,
if any, as soon as legally permitted, AT&T shall confirm, upon the request of
TeleCorp, the date of termination of such Employee's employment with AT&T for
any reason.
(d) All claims and obligations under, pursuant to or in connection
with any welfare, medical, insurance, disability or other employee benefit plans
of TeleCorp or any Affiliate or arising under any applicable Law affecting the
Boston Employees incurred on or before the Closing Date or resulting from or
arising from events or occurrences occurring or commencing on or before the
Closing Date will remain the responsibility of TeleCorp, or the appropriate
Affiliate, whether or not such Employees are hired by AT&T as of or after the
Closing. Neither party will have or assume any obligation or liability under or
in connection with any such plan of the other party or any Affiliate of the
other party.
(e) TeleCorp, or its appropriate Affiliate, will remain solely
responsible for, and will indemnify and hold AT&T harmless from and against all
Losses arising from or with respect to, all salaries and all severance,
vacation, holiday, continuation coverage and other compensation or benefits to
which the Boston Employees may be entitled, whether or not such Employees may be
hired by AT&T or any Affiliate of AT&T, as a result of their employment by
TeleCorp or any Affiliate of TeleCorp on or prior to the Closing Date, the
termination of their employment on or prior to the Closing Date, the
consummation of the transactions contemplated hereby or
-17-
<PAGE>
pursuant to any applicable Law or otherwise relating to their employment prior
to the Closing Date. Any liability under the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. ss. 2101, et seq., with regard to any employee
terminated on or prior to the Closing Date, or not hired by AT&T on or after the
Closing Date, shall, as a matter of contract between TeleCorp and AT&T, be the
responsibility of TeleCorp or its Affiliates. AT&T and its Affiliates shall
cooperate with TeleCorp and its Affiliates, if requested, in the giving of WARN
notices.
(f) Notwithstanding anything to the contrary herein, AT&T shall:
(i) recognize the service, before the Closing, with TeleCorp
Communications of each Boston Employee who is offered on or prior to the
Closing employment by AT&T and becomes an employee of AT&T after the
Closing Date (a "HIRED EMPLOYEE") for purposes of determining his or her
vacation time and sick time under AT&T's vacation and sick time policies;
(ii) recognize the service, before the Closing, with TeleCorp
Communications of each Hired Employee for purposes of participation in
AT&T's employee health and life insurance benefit plans to the same extent
as similarly situated employees of AT&T and their dependents are permitted
to participate;
(iii) give each Hired Employee credit for such employee's past service
with TeleCorp and its Affiliates as of the Closing Date (including past
service with any prior owner or operator of the other party's PCS
business) for purposes of eligibility and vesting under AT&T's 401(k) plan
to the same extent as other similarly situated employees of such party;
(iv) not subject any Hired Employee to any waiting periods or
limitations on benefits for pre-existing conditions under AT&T's employee
benefit plans, including any group health and disability plans, except to
the extent such employees were subject to such limitations under the
employee benefit plans of TeleCorp or any of its Affiliates; and
(v) give each Hired Employee credit under any group health plan for
any deductible amount previously met by such Hired Employee as of the
Closing Date under any of the group health plans of TeleCorp or any of its
Affiliates.
AT&T's obligation to comply with the foregoing provisions of this
Section 3.7(f) shall be contingent upon its having received from TeleCorp the
information necessary to enable AT&T to do so.
(g) Nothing in this Section or elsewhere in this Agreement shall be
deemed to make any employee of either party a third party beneficiary of this
Agreement.
-18-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AT&T
AT&T represents and warrants to the TeleCorp Affiliates that, except as
set forth on the AT&T Disclosure Schedule previously delivered to TeleCorp (the
"AT&T DISCLOSURE SCHEDULE"), which shall be arranged in paragraphs corresponding
to the numbered and lettered paragraphs contained in this Article IV, and the
disclosure in any paragraph shall qualify only the corresponding paragraph of
this Article IV, unless a reasonable person would determine that the disclosure
contained in such paragraph contains enough information to qualify or otherwise
apply to other paragraphs of this Article IV:
4.1 ORGANIZATION, POWER AND AUTHORITY.
(a) It is duly organized, validly existing and in good standing
under the Laws of the State of Delaware and has the requisite power and
authority to hold the Wisconsin Licenses and Iowa Licenses.
(b) It has the requisite power and authority to execute, deliver and
perform this Agreement and each other instrument, document, certificate and
agreement required or contemplated to be executed, delivered and performed by it
hereunder to which it is or will be a party (the "AT&T RELATED DOCUMENTS") and
(i) with respect to its rights, as applicable, to the AT&T Acquired Assets, to
assign the rights and obligations to acquire the AT&T Acquired Assets in
accordance with the terms and subject to the conditions of the Acquisition
Agreements, and to consummate the Transactions and (ii) with respect to its
rights, as applicable, to the AT&T Owned Assets, to convey to the Designated
TeleCorp Affiliate, as applicable, good and marketable rights to hold the AT&T
Owned Assets.
(c) It is duly qualified to do business in each jurisdiction where
the nature of its activities makes such qualification necessary other than any
such jurisdiction in which the failure to be so qualified would not have an AT&T
Material Adverse Effect or a material adverse effect on the Transactions.
(d) The execution and delivery of this Agreement and each of the
AT&T Related Documents by it and the consummation of the Transactions by it have
been duly and validly authorized by its Board of Directors (or equivalent body)
and no other corporate proceedings on its part which have not been taken
(including approval of its stockholders, partners or members) are necessary to
authorize this Agreement or to consummate the Transactions.
(e) This Agreement and each of the AT&T Related Documents have been
or will be duly executed and delivered by it and constitute (or will constitute)
its valid and binding obligation, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other
-19-
<PAGE>
similar Laws affecting or relating to enforcement of creditors' rights generally
or may be subject to general principles of equity.
4.2 CONSENTS; NO CONFLICTS. Neither the execution, delivery and performance by
it of this Agreement and each of the AT&T Related Documents nor the consummation
of the Transactions will (a) conflict with, or result in a breach or violation
of, any provision of its organizational documents; (b) constitute, with or
without the giving of notice or passage of time or both, a breach, violation or
default, create a Lien (other than Permitted Liens) on any of the AT&T Assets,
or give rise to any right of termination, modification, cancellation, prepayment
or acceleration, under (i) any Law applicable to any of the AT&T Owned Assets or
(ii) any note, bond, mortgage, indenture, lease, agreement or other instrument,
in each case which is applicable to or binding upon it or any of its assets; or
(c) (other than under the HSR Act and the Consent of the FCC) require any
Consent, except in the case of clauses (a) and (b), where such breach,
violation, default, Lien or right would not have an AT&T Material Adverse Effect
or a material adverse effect on the Transactions. To its knowledge, there is no
fact relating to it or its Affiliates that could be reasonably expected to
prevent it from consummating the Transactions or performing its obligations
under this Agreement or disqualify AT&T from obtaining the Consents (including
the Consent of the FCC) required in order to consummate the Transactions.
4.3 LITIGATION. There is no action, proceeding or investigation pending or, to
its knowledge, threatened, or any order, injunction or decree outstanding,
against it or any of its properties or assets that, if adversely determined,
would be reasonably expected to have a material adverse effect on its ability to
consummate the Transactions or to fulfill its obligations under this Agreement
or Intermediary's obligations under any of the Acquisition Agreements or which
seeks to prevent or challenge the Transactions or any part thereof.
4.4 FCC COMPLIANCE. To its knowledge, it is in compliance with all eligibility
rules issued by the FCC to hold broadband PCS Licenses, including FCC rules on
foreign ownership and the CMRS spectrum cap.
4.5 BROKERS. AT&T has not employed any broker, finder or investment banker and
has not incurred and will not incur any liability for any brokerage fees,
commissions or finder's fees in connection with the Transactions.
4.6 LICENSES. AT&T is the authorized legal and beneficial holder of, and has
good, marketable rights, free and clear of any Liens, to the Wisconsin Licenses
and Iowa Licenses, evidence of which is attached as SCHEDULE 4.6 to the AT&T
Disclosure Schedule. The Wisconsin Licenses and Iowa Licenses are, and on the
Closing Date will be, valid and in full force and effect. Except for proceedings
affecting the PCS or wireless communications services industry generally, there
is not pending, nor to the knowledge of AT&T, threatened against AT&T, against
the Wisconsin Licenses and/or Iowa Licenses any application, action, petition,
objection or other pleading, or any proceeding with the FCC which questions or
contests the validity of, or seeks the revocation, nonrenewal or suspension of,
any of the Wisconsin Licenses or Iowa
-20-
<PAGE>
Licenses, which seeks the imposition of any modification or amendment with
respect thereto, or which adversely affects the ability of TeleCorp to employ
any of the Wisconsin Licenses or Iowa Licenses in its business after the Closing
Date. Neither the Wisconsin Licenses nor the Iowa Licenses are subject to any
conditions other than those appearing on the face of Wisconsin Licenses and Iowa
Licenses, as applicable, themselves, and those imposed by FCC Law. All documents
required by 47 C.F.R. Section 73.3526 to be kept in the public inspection file
are in such file, other than documents the absence of which, individually or in
the aggregate, would not be reasonably expected to have any AT&T Material
Adverse Effect, and such file will be maintained in proper order and complete up
to and through the Closing Date, except for immaterial documents.
4.7 COMPLIANCE WITH LAWS. With respect to the Wisconsin Licenses and Iowa
Licenses, AT&T is in, and has operated in, compliance with all applicable Laws,
including all FCC Laws, except for noncompliance that, individually or in the
aggregate, has not and would not reasonably be expected to have an AT&T Material
Adverse Effect. AT&T has not received notice to the effect that, or otherwise
been advised that, it is not in compliance with any Laws with respect to
Wisconsin Licenses and Iowa Licenses, and AT&T has not taken any action or
failed to take any action that is a violation of any such Laws with respect to
any of the Wisconsin Licenses or Iowa Licenses, except for actions or failures
to take action that, individually or in the aggregate, have not and would not
reasonably be expected to have an AT&T Material Adverse Effect or a material
adverse effect on the Transactions.
4.8 TAXES. All Federal, state, local and foreign income, franchise, sales,
use, property, excise, payroll and other Tax returns and reports required to be
filed by AT&T or its Affiliates by Law where the failure to file such returns on
a duly and timely basis would reasonably be expected to result in a material
Lien on the AT&T Owned Assets or the imposition on TeleCorp of any material
liability for Taxes or assessments have been duly and timely filed in the proper
form with the appropriate Governmental Authority. All Taxes, fees and
assessments of whatever nature due or payable pursuant to said returns or
otherwise by AT&T or its Affiliates have been paid (except for such amounts as
are being contested diligently, in the appropriate forum and in good faith)
where the failure to pay or contest such amounts would reasonably be expected to
result in a material Lien on the AT&T Owned Assets or the imposition on TeleCorp
of any material liability for any Taxes or assessments. There are no Tax audits
pending and no outstanding agreements or waivers extending the statutory period
of limitations applicable to any Federal, state or local income Tax return of
AT&T or its Affiliates for any period, the result of which would reasonably be
expected to result in a material Lien on the AT&T Owned Assets or the imposition
on TeleCorp of any material liability for any Taxes or assessments. There are no
governmental investigations or other legal, administrative or Tax proceedings
pursuant to which AT&T is or could be made liable for any Taxes, penalties,
interest or other charges, the liability for which would reasonably be expected
to extend to TeleCorp as transferee of the AT&T Owned Assets, or which would
reasonably be expected to result in a material Lien on the AT&T Owned Assets
and, to the best of AT&T's knowledge, no event has occurred that would
-21-
<PAGE>
reasonably be expected to impose on TeleCorp any material liability for any
Taxes, penalties or interest due or to become due from AT&T.
4.9 ACQUISITION AGREEMENTS. Each of the representations and warranties made
by AT&T or any of its Affiliates in any of the Acquisition Agreements is true,
complete and correct in all material respects as of the date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TELECORP
TeleCorp and each other Designated TeleCorp Affiliate represents and
warrants to AT&T that, except as set forth on the TeleCorp Disclosure Schedule
previously delivered to AT&T (the "TELECORP DISCLOSURE SCHEDULE") which shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article V, and the disclosure in any paragraph shall qualify
only the corresponding paragraph of this Article V, unless a reasonable person
would determine that the disclosure contained in such paragraph contains enough
information to qualify or otherwise apply to other paragraphs of this Article V:
5.1 ORGANIZATION, POWER AND AUTHORITY.
(a) It is a corporation, limited liability company or limited
partnership, as applicable, duly formed, validly existing and in good standing
under the Laws of the State of Delaware and has the requisite power and
authority to hold, own, lease and operate its properties and to carry on its
business as now being conducted and proposed to be conducted.
(b) It has the requisite power and authority to execute, deliver and
perform this Agreement and each other instrument, document, certificate and
agreement required or contemplated to be executed, delivered and performed by it
hereunder and thereunder to which it is or will be a party (the "TELECORP
RELATED DOCUMENTS") and to convey good and marketable title and/or rights to
hold to AT&T with respect to the TeleCorp Assets and to consummate the
Transactions.
(c) It is duly qualified to do business in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary other than any such jurisdiction
in which the failure to be so qualified would not have a TeleCorp Material
Adverse Effect or a material adverse effect on the Transactions.
(d) The execution and delivery of this Agreement and each of the
TeleCorp Related Documents by it and the consummation of the Transactions by it,
have been duly and validly authorized by its Board of Directors (or equivalent
body) and no other proceedings on its part which have not been taken (including
stockholders) are necessary to authorize this Agreement or to consummate the
Transactions.
-22-
<PAGE>
(e) This Agreement and each of the TeleCorp Related Documents have
been (or will be) duly executed and delivered by it and constitute (or will
constitute) its valid and binding obligations, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar Laws affecting or relating
to enforcement of creditors' rights generally or may be subject to general
principles of equity.
5.2 CONSENTS; NO CONFLICTS. Neither the execution, delivery and performance
by it of this Agreement and each of the TeleCorp Related Documents nor the
consummation of the Transactions will (a) conflict with, or result in a breach
or violation of, any provision of its organizational documents; (b) constitute,
with or without the giving of notice or passage of time or both, a breach,
violation or default, create a Lien (other than Permitted Liens) on its assets,
including the TeleCorp Assets, or give rise to any right of termination,
modification, cancellation, prepayment or acceleration, under (i) any Law or the
TeleCorp Assets, or (ii) any note, bond, mortgage, indenture, lease, agreement
or other instrument, in each case which is applicable to or binding upon it or
any of its assets; or (c) (other than under the HSR Act and the Consent of the
FCC) require any Consent except in the case of clauses (a) and (b) where such
breach, violation, default, Lien or right would not have a TeleCorp Material
Adverse Effect or a material adverse effect on the Transactions. To its
knowledge, there is no fact relating to it or its Affiliates that would be
reasonably expected to prevent it from consummating the Transactions or
performing its obligations under this Agreement or disqualify it from obtaining
the Consents (including the Consent of the FCC) required in order to consummate
the Transactions.
5.3 LITIGATION. There is no action, proceeding or investigation pending or,
to its knowledge, threatened, or any order, injunction or decree outstanding,
against it or any of its properties or assets that, if adversely determined,
would have a material adverse effect on its ability to consummate the
Transactions or to fulfill its obligations under this Agreement or to operate
its business after the Closing Date, or which seeks to prevent or challenge the
Transactions. There is no judgment, decree, injunction, rule or order
outstanding against TeleCorp which would limit in any material respect its
ability to operate its business in the manner currently contemplated.
5.4 FCC COMPLIANCE. It complies, and after giving effect to the consummation
of the Transactions will comply, with all eligibility rules issued by the FCC to
hold broadband PCS Licenses, including FCC rules on foreign ownership and the
CMRS spectrum cap.
5.5 BROKERS. Except for Lehman Brothers Inc., whose fees will be paid by
TeleCorp, it has not employed any broker, finder or investment banker and has
not incurred and will not incur any liability for any brokerage fees,
commissions or finder's fees in connection with the Transactions.
-23-
<PAGE>
5.6 TELECORP ASSETS; LIENS.
(a) The Designated TeleCorp Affiliates transferring the TeleCorp
Assets are the sole and exclusive legal and beneficial owners of, and have good,
valid and marketable title to, the Boston Business. TeleCorp LLC is the sole and
exclusive legal and beneficial holder of , and has good, valid and marketable
rights to hold the Boston Licenses. None of the TeleCorp Assets is subject to
any Lien except Permitted Liens. Delivery by the Designated TeleCorp Affiliates
of the TeleCorp Assignments will deliver good and marketable title to the Boston
Business, and good and marketable rights to hold the Boston Licenses, free and
clear of Liens other than Permitted Liens.
(b) Sections 1 and 2(a) and Attachment E to Schedule 0.1 set forth
an accurate, correct and complete list of the depreciable assets included as
part of the TeleCorp Assets. All such machinery, equipment and other assets is
in good repair, reasonable wear and tear excepted, has been well maintained and
conforms in all respects to all applicable Laws, and such machinery and
equipment is in good working order.
(c) The applicable Designated TeleCorp Affiliate enjoys peaceful and
undisturbed possession under the TeleCorp Assigned Leases. All such leases are
in writing, valid, subsisting and in full force and effect, and there are no
uncured defaults of TeleCorp (or, to the knowledge of TeleCorp, any other party
thereto) under such leases. There exists no event, occurrence, condition or act
(including the purchase of the TeleCorp Assets hereunder) which, with the giving
of notice, the lapse of time or the happening of any further event or condition,
would become a default by TeleCorp (or, to the knowledge of TeleCorp, any other
party thereto) under any such lease. The TeleCorp Assets, including those
obtained pursuant to said TeleCorp Assigned Leases, are adequate to conduct the
operations currently conducted and presently proposed to be conducted by
TeleCorp and represent all assets of TeleCorp used or useful in the operation of
its business.
(d) Attachments A and C to SCHEDULE 0.1 set forth an accurate,
correct and complete list of the TeleCorp Real Property, including a street
address and Attachment B to Schedule 0.1 sets forth a list of all Contracts and
agreements, oral or written, encumbering, relating to or affecting the TeleCorp
Real Property or any interest therein. TeleCorp has delivered to AT&T accurate,
correct and complete copies of all such Contracts and agreements. A Designated
TeleCorp Affiliate is the sole and exclusive legal and equitable owner of all
right, title and interest in and has good, marketable and insurable title in fee
simple absolute to, and is in possession of, all TeleCorp Real Property which it
purports to own, including the buildings, structures, sidetracks and
improvements situated thereon and appurtenances thereto, in each case free and
clear of all tenancies and other possessory interests, Liens and other burdens.
All Contracts, easements, restrictions, covenants and other agreements and
undertakings affecting the TeleCorp Real Property are set forth in SCHEDULE 0.1
to the TeleCorp Disclosure Schedule and are legally valid and binding and in
full force and effect, and there are no defaults, offsets, counterclaims or
defenses thereunder, and TeleCorp has received no notice of default, offset,
counterclaim or defense under any such Contracts or agreements.
-24-
<PAGE>
(e) None of the TeleCorp Real Property is located within a flood or
lakeshore erosion hazard area. Neither the whole nor any portion of any TeleCorp
Real Property has been condemned, requisitioned or otherwise taken by any public
authority, and no notice of any such condemnation, requisition or taking has
been received. No such condemnation, requisition or taking is threatened or
contemplated. TeleCorp has no knowledge of any public improvements which may
result in special assessments against or otherwise affect the TeleCorp Real
Property.
(f) The TeleCorp Real Property is in compliance in all material
respects with all applicable zoning, building, health, fire, water, use or
similar Laws. The zoning of each parcel of TeleCorp Real Property permits the
existing improvements and the continuation following consummation of the
transaction contemplated hereby of the operations of TeleCorp as presently
conducted thereon. TeleCorp has all licenses, certificates of occupancy, permits
and authorizations required to operate TeleCorp and utilize the TeleCorp Real
Property. TeleCorp has all easements and rights necessary to conduct its
business, including easements for all utilities, services, roadway, railway and
other means of ingress and egress. The TeleCorp Real Property as conveyed
pursuant to this Agreement shall include all rights to any off-site facilities
necessary to ensure compliance in all material respects with all zoning,
building, health, fire, water, use or similar statutes, codes, ordinances, Laws,
rules or regulations. No fact or condition exists which would result in the
termination or impairment of access to the TeleCorp Real Property or
discontinuation of sewer, water, electric, gas, telephone, waste disposal or
other utilities or services. The facilities servicing the TeleCorp Real Property
are in full compliance with all codes, Laws, rules and regulations.
(g) TeleCorp has delivered to AT&T accurate, correct and complete
copies of all existing title insurance policies, title reports, surveys,
environmental audits and similar reports, if any, with respect to each parcel of
TeleCorp Real Property.
5.7 TELECORP ASSETS. Except for items included in the TeleCorp Excluded
Assets, the TeleCorp Assets constitute all of the assets primarily relating to,
and includes substantially all the assets necessary to conduct, the Boston
Business as it is being conducted on the date of this Agreement and in
compliance with all applicable legal requirements.
5.8 ENVIRONMENTAL AND SAFETY LAWS.
(a) Each parcel of TeleCorp Real Property is, and has in the past
been, in compliance in all material respects with all, and is not subject to any
liability under any, Environmental Laws and all applicable statutes, Laws or
regulations relating to occupational health and safety. There are no actions,
activities, circumstances, conditions, events or incidents, including the
release, emission, discharge, presence or disposal of any Materials of
Environmental Concern, which could interfere with or prevent continued
compliance with all Environmental Laws (as defined below).
(b) Except as expressly authorized under applicable Environmental
Laws, there is not currently, and has not in the past been, any release,
emission,
-26-
<PAGE>
discharge, presence or disposal of any Materials of Environmental Concern into
the environment (including the air, surface and groundwater and surface and
subsurface soils) at, on, into, under, or originating at any TeleCorp Real
Property. No TeleCorp Real Property is or has been the location of any hazardous
waste treatment, storage or disposal facility, any underground storage tank, or
any facilities or equipment containing asbestos or polychlorinated biphenyls. No
Lien has been imposed by a governmental entity or third party in connection with
the presence of any Materials of Environmental Concern on any TeleCorp Real
Property.
(c) TeleCorp has not (i) received any written communication from a
governmental, quasi-governmental or regulatory agency or other entity, citizens'
group, director, officer or employee of TeleCorp or other Person, alleging that
TeleCorp, any of its predecessors in interest or any Affiliate of TeleCorp is
not in compliance with or has violated any Environmental Law or that TeleCorp,
any of its predecessors in interest or any Affiliate of TeleCorp has any
liability under any Environmental Law or under common Law with respect to
pollution and/or protection of human health and/or the environment (including,
without limitation, any release, emission, discharge, presence or disposal of
any Materials of Environmental Concern); (ii) received any request for
information, notice or administrative inquiry under any Environmental Law; or
(iii) entered into or been subject to any consent decree, compliance order, or
administrative order with respect to any Environmental Law or any liability
under common Law with respect to pollution and/or protection of human health
and/or the environment (including, without limitation, any release, emission,
discharge, presence or disposal of any Materials of Environmental Concern), in
any event with respect to any parcel of TeleCorp Real Property.
(d) Neither TeleCorp, nor any Affiliate of TeleCorp, has conducted,
or arranged for the conduct of, an environmental audit, investigation or
assessment of any of TeleCorp's facilities or operations or of any TeleCorp Real
Property. TeleCorp has not received and has no knowledge of, and none of its
Affiliates has received, any such audit, investigation or assessment conducted
by any other party.
5.9 TELECORP ASSIGNED AGREEMENTS. SCHEDULE 5.9 to the TeleCorp Disclosure
Schedule contains a complete and accurate list of all material agreements of
TeleCorp (including the TeleCorp Assigned Leases) relating primarily to the
conduct of the Boston Business (the "TELECORP ASSIGNED AGREEMENTS"). SCHEDULE
5.9 to the TeleCorp Disclosure Schedule includes with respect to each TeleCorp
Assigned Agreement, whether oral or written, the names of the parties, the date
thereof, and its title or other general description. Each TeleCorp Assigned
Agreement sets forth the entire arrangement and understanding between TeleCorp
and the respective third-parties with respect to the subject matter thereof and,
except as indicated in such Schedule, there have been no amendments or side or
supplemental arrangements to or in respect of any TeleCorp Assigned Agreement.
TeleCorp has furnished to AT&T true and correct copies of all written TeleCorp
Assigned Agreements as currently in effect. Each TeleCorp Assigned Agreement is
valid and in full force and effect, and TeleCorp has performed all obligations
required to be performed by it thereunder. TeleCorp is not in default under or
in breach or violation of any TeleCorp Assigned Agreement or any other
agreement,
-26-
<PAGE>
decree, order, statute or governmental rule or regulation applicable to it,
except where such breach, violation or default would not have a TeleCorp
Material Adverse Effect or a material adverse effect on the Swap Transactions.
The execution and delivery of this Agreement and the consummation of the
Transactions will not result in default, breach or violation of any TeleCorp
Assigned Agreement, except where such breach, violation or default would not
have a TeleCorp Material Adverse Effect or a material adverse effect on the Swap
Transactions. There is no event which has occurred or existing condition which
constitutes, or with notice or lapse of time or both, would constitute a default
under any TeleCorp Assigned Agreement or would cause the acceleration of any
obligation of any party thereto, or give rise to any right of termination or
cancellation or cause the creation of any Lien (other than Permitted Liens) on
any of the TeleCorp Assets except where such default would not have a TeleCorp
Material Adverse Effect or a material adverse effect on the Swap Transactions.
With respect to each TeleCorp Assigned Agreement which is to be assigned to AT&T
pursuant to the terms thereof, AT&T will succeed to all the rights and benefits
of TeleCorp thereunder, subject only to the obligations of TeleCorp arising
thereunder after the Closing Date. TeleCorp will not modify, amend or waive any
provisions of any TeleCorp Assigned Agreement in a manner that would adversely
affect the TeleCorp Assets or terminate any TeleCorp Assigned Agreement prior to
the Closing other than in the ordinary course of business and with the prior
written consent of AT&T.
5.10 LICENSE. TeleCorp LLC is the authorized legal holder, free and clear of
any Liens, of the Boston Licenses, evidence of which is attached as SCHEDULE
5.10. The Boston Licenses are, and on the Closing Date the Boston Licenses will
be, valid and in full force and effect. Except for proceedings affecting the PCS
or wireless communications services industry generally, there is not pending,
nor to the knowledge of TeleCorp, threatened against it or against the Boston
Licenses, any application, action, petition, objection or other pleading, or any
proceeding with the FCC which questions or contests the validity of, or seeks
the revocation, nonrenewal or suspension of, the Boston Licenses, which seeks
the imposition of any modification or amendment with respect thereto, or which
adversely affects the ability of AT&T and its Affiliates to employ the Boston
Licenses in its business after the Closing Date. None of the Boston Licenses is
subject to any conditions other than those appearing on the face of such Boston
License itself and those imposed by FCC Law. All documents required by 47 C.F.R.
Section 73.3526 to be kept in the public inspection file are in such file, other
than documents the absence of which, individually or in the aggregate, would not
be reasonably expected to have any TeleCorp Material Adverse Effect, and such
file will be maintained in proper order and complete up to and through the
Closing Date, except for immaterial documents. To TeleCorp's knowledge, each
cell site included in the Boston Assets has been constructed, and is operating
substantially in compliance with, the terms of the Boston Licenses and the Law.
5.11 COMPLIANCE WITH LAWS. TeleCorp is in, and has operated in, compliance with
all applicable Laws, including all FCC Laws, except for noncompliance that,
individually or in the aggregate, has not and would not reasonably be expected
to have a TeleCorp Material Adverse Effect. It has not received notice to the
effect that, or otherwise been advised that, it is not in compliance with any
Laws, including with respect to the Boston Licenses or TeleCorp Assets, and it
has not taken any action or failed to take any action that is a violation of any
such Laws, including with respect to the Boston
-27-
<PAGE>
Licenses or the TeleCorp Assets, except for actions or failures to take action
that, individually or in the aggregate, have not and would not reasonably be
expected to have a TeleCorp Material Adverse Effect or a material adverse effect
on the Transactions.
5.12 TAXES. All Federal, state, local and foreign income, franchise, sales,
use, property, excise, payroll and other Tax returns and reports required to be
filed by TeleCorp or its Affiliates by Law where the failure to file such
returns on a duly and timely basis would reasonably be expected to result in a
material Lien on the TeleCorp Assets or the imposition on AT&T of any material
liability for Taxes or assessments have been duly and timely filed in the proper
form with the appropriate Governmental Authority. All Taxes, fees and
assessments of whatever nature due or payable pursuant to said returns or
otherwise by TeleCorp or its Affiliates have been paid (except for such amounts
as are being contested diligently, in the appropriate forum and in good faith)
where the failure to pay or contest such amounts would reasonably be expected to
result in a material Lien on the TeleCorp Assets or the imposition on AT&T of
any material liability for any Taxes or assessments. There are no Tax audits
pending and no outstanding agreements or waivers extending the statutory period
of limitations applicable to any Federal, state or local income Tax return of
TeleCorp or its Affiliates for any period, the result of which would reasonably
be expected to result in a material Lien on the TeleCorp Assets or the
imposition on AT&T of any material liability for any Taxes or assessments. There
are no governmental investigations or other legal, administrative or Tax
proceedings pursuant to which TeleCorp is or could be made liable for any Taxes,
penalties, interest or other charges, the liability for which would reasonably
be expected to extend to AT&T as transferee of the TeleCorp Assets, or which
would reasonably be expected to result in a material Lien on the TeleCorp Assets
and, to the best of TeleCorp's knowledge, no event has occurred that would
reasonably be expected to impose on AT&T any material liability for any Taxes,
penalties or interest due or to become due from TeleCorp.
5.13 INSURANCE. TeleCorp and its Affiliates have at all times maintained in
full force and effect property damage, liability and other insurance with
respect to the TeleCorp Assets with financially sound and reputable insurers at
levels of coverage reasonable and customary in the telecommunications industry.
TeleCorp has not received written notice from any such insurance carrier (i)
threatening a suspension, revocation, modification or cancellation of any
insurance policy or a material increase in any premium in connection therewith,
or (ii) informing TeleCorp that any coverage will or may not be available in the
future on substantially the same terms as now in effect.
5.14 UNDISCLOSED LIABILITIES. Neither TeleCorp nor any of its Affiliates has
any material liabilities, commitments or obligations (including without
limitation unasserted claims whether known or unknown), whether absolute or
contingent, liquidated or unliquidated, or due or to become due or otherwise,
relating to the TeleCorp Assets except for liabilities, commitments and
obligations (i) that have arisen since April 1, 1999 in the ordinary course of
business consistent with past practice or (ii) that are set forth on Section
5.14 of the TeleCorp Disclosure Schedule.
-28-
<PAGE>
5.15 INVENTORY. The values at which inventories of TeleCorp included in the
TeleCorp Assets are shown on the TeleCorp Books and Records have been determined
in accordance with the normal valuation policy of TeleCorp, consistently applied
and in accordance with generally accepted accounting principles. Such
inventories consist of items of (a) usable, merchantable quality which are new,
unused, undamaged, not defective and possess valid manufacturer's warranties,
and (b) a mix which is consistent with TeleCorp's past practices.
5.16 LABOR RELATIONS. TeleCorp is not a party to any collective bargaining
agreement covering the Boston Employees, and there are no controversies,
grievances or arbitrations pending or, to TeleCorp's knowledge, threatened
between TeleCorp and any of its current or former Boston Employees, or any labor
or other collective bargaining unit representing any current or former Boston
Employee, that could reasonably be expected to result in a labor strike,
dispute, slow-down or work stoppage. There are no administrative charges,
arbitration or mediation proceedings or court complaints relating to the Boston
Employees pending or, to TeleCorp's knowledge, threatened against TeleCorp
before the U.S. Equal Employment Opportunity Commission or any state or federal
court or agency or any other entity concerning alleged employment
discrimination, employment contract violation or any other matters relating to
the employment of labor. There is no unfair labor practice charge or complaint
relating to the Boston Employees pending or, to TeleCorp's knowledge, threatened
against TeleCorp before the National Labor Relations Board or any similar state
or local body. To the knowledge of TeleCorp, TeleCorp is not, and for the
12-month period prior to the date of this Agreement has not been, the subject of
any union organizational campaign with respect to the Boston Employees. TeleCorp
has no material labor negotiations in process with any labor union or other
labor organization covering the Boston Employees.
5.17 LICENSES AND PERMITS. All material Licenses (other than FCC Licenses) held
in connection with the operation of the TeleCorp Assets are in full force and
effect, except where the failure of any thereof to be in full force and effect
would not reasonably be expected to have a TeleCorp Material Adverse Effect, and
there are no proceedings in which TeleCorp is a party, pending or, to its
knowledge, threatened, which would result in the revocation or modification of
such Licenses, except where such revocation or modification would not reasonably
be expected to have a TeleCorp Material Adverse Effect.
5.18 EMPLOYEE BENEFITS. Schedule 5.18 contains a complete list of each material
employee benefit plan, program, policy, practice, or other arrangement providing
compensation or benefit to any Boston Employee that is sponsored or maintained
by TeleCorp or any of its Affiliates or to which any of them contributes or is
obligated to contribute, including without limitation any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA, any employee pension
benefit plan within the meaning of Section 3(2) of ERISA (whether or not such
plan is subject to ERISA) and any bonus, incentive, deferred compensation,
vacation, stock purchase, stock option, severance, employment, change of control
or fringe benefit plan, program or agreement.
-29-
<PAGE>
5.19 NO MATERIAL ADVERSE CHANGE. Since April 1, 1999, there has been no change,
effect, circumstance or condition known to any of the TeleCorp Affiliates that
has had or is reasonably likely to result in a TeleCorp Material Adverse Change.
5.20 AFFILIATE AGREEMENTS. No Affiliate of TeleCorp is a party to any material
transaction with TeleCorp relating to the Boston Business not in the ordinary
course of business.
ARTICLE VI
CLOSING CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF ALL PARTIES. The obligation of each of the
parties to consummate the Transactions contemplated to occur at the Closing (or
at any earlier closing of the acquisition of any of the AT&T Acquired Assets)
shall be conditioned on the following (each condition to be applied only to the
applicable AT&T Acquired Asset in respect of any early closing of the
acquisition of such AT&T Acquired Asset), unless waived, in writing, by each of
the parties at or prior to Closing:
(a) Any filings required to be made under the HSR Act shall have
been made and any applicable waiting period under the HSR Act shall have expired
or been terminated.
(b) The Consent of the FCC to each of the License transfers
contemplated as part of the Swap Transaction shall have been obtained pursuant
to a Final Order (as defined below), free of any conditions materially adverse
to TeleCorp or AT&T, other than those applicable to the PCS or wireless
communications services industry generally. For the purposes of this Agreement,
"FINAL ORDER" means an action or decision that has been granted by the FCC as to
which (i) no request for a stay or similar request is pending, no stay is in
effect, the action or decision has not been vacated, reversed, set aside,
annulled or suspended 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, including other administrative or judicial review, or in effect and any
deadline for filing any such appeal that may be designated by statute or rule
has passed.
(c) All Consents by any Governmental Authority (other than the
Consents referred to in paragraphs (a) and (b) above) required to permit the
consummation of the Transactions shall have been obtained, except where the
failure to obtain such Consents would not be reasonably expected to have an AT&T
Material Adverse Effect or a TeleCorp Material Adverse Effect or to materially
adversely affect the Transactions or the ability of any of the parties to
perform its obligations under this Agreement.
-30-
<PAGE>
(d) No preliminary or permanent injunction or other order, decree or
ruling issued by a Governmental Authority, nor any Law promulgated or enacted by
any Governmental Authority, shall be in effect that would (i) impose material
limitations on the ability of any party to consummate the Transactions or
prohibit such consummation, or (ii) as a result of the Transactions, impair in
any material respect the operations of TeleCorp or any of its Affiliates or AT&T
or any of its Affiliates.
6.2 CONDITIONS TO OBLIGATIONS OF TELECORP. The obligation of the Designated
TeleCorp Affiliates to consummate the Transactions contemplated to occur at the
Closing (or at any earlier closing of the acquisition of any of the AT&T
Acquired Assets) shall be further conditioned upon the satisfaction or
fulfillment, at or prior to the Closing, of the following conditions (each
condition to be applied only to the applicable AT&T Acquired Asset in respect of
any early closing of the acquisition of such AT&T Acquired Asset), unless
waived, in writing, by TeleCorp:
(a) The representations and warranties of AT&T contained herein
shall be true and correct, in each case when made and at and as of the Closing
(other than representations and warranties made as of a specified date, which
shall be true and correct as of such date) with the same force and effect as
though made at and as of such time, except in each case to the extent that the
failure of such representations and warranties to be true and correct in the
aggregate does not have an AT&T Material Adverse Effect.
(b) AT&T and its Affiliates shall have performed in all material
respects all agreements contained herein required to be performed by it at or
before the Closing.
(c) AT&T shall have delivered, or caused to be delivered, (i) to
TeleCorp the documents required pursuant to Section 2.2(b) and(ii) to the
Intermediary the AT&T Assignments, the Cash Consideration, the Asset Payment and
each of the other documents and instruments required pursuant to Section 2.2(a).
(d) TeleCorp shall have received any Consent of the lenders required
pursuant to the terms of that certain Credit Agreement dated as of July 17, 1998
among TeleCorp and the lenders and agents party thereto, as amended.
(e) TeleCorp shall have acquired all right, title and interest in
the assets of Indus pursuant to the Indus Purchase Agreement (or the assets
permitted to be substituted therefor), free of any and all Liens held by AT&T or
any of its Affiliates other than a right of first refusal should TeleCorp sell
such assets.
6.3 CONDITIONS TO THE OBLIGATIONS OF AT&T. The obligation of AT&T to
consummate the Transactions contemplated to occur at the Closing (or at any
earlier closing of the acquisition of any of the AT&T Acquired Assets) shall be
further conditioned upon the satisfaction or fulfillment, at or prior to the
Closing, of the following conditions (each condition to be applied only to the
applicable AT&T Acquired
-31-
<PAGE>
Asset in respect of any early closing of the acquisition of such AT&T Acquired
Asset), unless waived, in writing, by AT&T:
(a) The representations and warranties of TeleCorp contained herein
shall be true and correct, in each case when made and at and as of the Closing
(other than representations and warranties made as of a specified date, which
shall be true and correct as of such date) with the same force and effect as
though made at and as of such time, except in each case to the extent that the
failure of such representations and warranties to be true and correct in the
aggregate does not have an TeleCorp Material Adverse Effect.
(b) Each of the TeleCorp Affiliates shall have performed in all
material respects all agreements contained herein required to be performed by it
at or before the Closing.
(c) TeleCorp shall have delivered, or caused to be delivered, (i) to
AT&T the documents required pursuant to Section 2.2(d) and (ii) to Intermediary
the TeleCorp Assignments, the Stock Consideration, if applicable, and other
agreements and instruments required pursuant to Section 2.2(c).
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1 SURVIVAL. The representations and warranties contained in Sections 4.1(a),
(b), (d), (e) and (f), and Sections 5.1(a), (b), (d), (e) and (f) and Section
5.6(a) shall survive the Closing, without regard to any investigation made by
any of the parties hereto, until the expiration of the applicable statute of
limitations relating thereto), and the representations and warranties contained
herein in Sections 4.9 shall survive the Closing until the expiration of the
corresponding representations and warranties made by AT&T or any of its
Affiliates in the Acquisition Agreements. The representations and warranties
contained in Sections 4.8 and 5.12 shall not survive the Closing. All other
representations and warranties made in this Agreement shall terminate on the
second anniversary of the Closing Date. The right to indemnification pursuant to
this Article VII in respect of a breach of a representation or warranty that
survives the Closing shall expire upon the application of the applicable
survival period (except to the extent written notice asserting a claim
thereunder and describing such claim in reasonable detail shall have been given
prior to such expiration to the party from whom such indemnification is sought).
After the Closing, the sole and exclusive remedy of the parties for any breach
or inaccuracy of any representation or warranty contained in this Agreement that
survives the Closing or any other claim (whether or not alleging a breach of
this Agreement) that arises out of the facts and circumstances constituting such
breach or inaccuracy, shall be the indemnity provided in this Article VII.
7.2 INDEMNIFICATION BY AT&T. AT&T shall indemnify and hold harmless TeleCorp
and its Affiliates, and the shareholders, members, managers, officers,
employees, agents and/or the legal representatives of any of them (each, a
"TELECORP INDEMNIFIED PARTY"),
-32-
<PAGE>
against all liabilities and expenses (collectively, "LOSSES") incurred by any
TeleCorp Indemnified Party (including, without limitation, amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees and Losses incurred in connection with the investigation, defense, or
disposition of any action, suit or other proceeding in which any TeleCorp
Indemnified Party may be involved or with which any TeleCorp Indemnified Party
may be threatened (whether arising out of or relating to matters asserted by
third parties against a TeleCorp Indemnified Party or incurred or sustained by
such party in the absence of a third-party claim)), that arise out of or result
from (a) any representation or warranty of AT&T contained in this Agreement
being untrue (other than Section 4.8), (b) any default by AT&T or any of its
Affiliates in the performance of their respective obligations under this
Agreement, (c) the ownership or operation of any of the AT&T Owned Assets and
the conduct of AT&T's business prior to the Closing Date or (d) the ownership or
operation of any of the TeleCorp Assets and the conduct of AT&T's business after
the Closing Date, except to the extent (but only to the extent) that any such
Losses arise out of or result from the gross negligence or willful misconduct of
such TeleCorp Indemnified Party or its Affiliates, PROVIDED, HOWEVER, that the
aggregate liability of AT&T to indemnify TeleCorp Indemnified Parties against
Losses arising out of or resulting from (x) any representation or warranty of
AT&T contained in this Agreement being untrue (other than Section 4.8), or (y)
any default by AT&T or any of its Affiliates in the performance of their
respective obligations under this Agreement shall (except, in the case of clause
(y), to the extent (but only to the extent) any such Losses arise out of or
result from the gross negligence or willful misconduct of AT&T) be limited to
$100 Million Dollars.
7.3 INDEMNIFICATION BY TELECORP. TeleCorp shall indemnify and hold harmless
AT&T and its Affiliates, and the shareholders, members, managers, officers,
employees, agents and/or the legal representatives of any of them (each, an
"AT&T INDEMNIFIED PARTY"), against all Losses incurred by any AT&T Indemnified
Party (including, without limitation, amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees and Losses incurred
in connection with the investigation, defense, or disposition of any action,
suit or other proceeding in which any AT&T Indemnified Party may be involved or
with which any AT&T Indemnified Party may be threatened (whether arising out of
or relating to matters asserted by third parties against an AT&T Indemnified
Party or incurred or sustained by such party in the absence of a third party
claim)) that arise out of or result from (a) any representation or warranty of
TeleCorp contained in this Agreement (other than Section 5.12) being untrue (b)
any default by TeleCorp or any of its Affiliates in the performance of their
respective obligations under this Agreement, (c) the ownership or operation of
any of the TeleCorp Assets and the conduct of TeleCorp's business prior to the
Closing Date, (d) if the Closing occurs, the ownership or operation of the AT&T
Acquired Assets prior to the Closing Date or the obligations and other
provisions of the Acquisition Agreements, or (e) the ownership or operation of
any of the AT&T Assets and the conduct of TeleCorp's business after the Closing
Date, except to the extent (but only to the extent) that any such Losses arise
out of or result from the gross negligence or willful misconduct of such AT&T
Indemnified Party or its Affiliates; PROVIDED, HOWEVER, that the aggregate
liability of TeleCorp to indemnify AT&T Indemnified Parties against Losses
arising out of or resulting from (x) any representation or warranty of TeleCorp
contained in this
-33-
<PAGE>
Agreement (other than Section 5.12) being untrue , or (y) any default by
TeleCorp or any of its Affiliates in the performance of their respective
obligations under this Agreement shall (except, in the case of clause (y), to
the extent (but only to the extent) any such Losses arise out of or result from
the gross negligence or willful misconduct of TeleCorp) be limited to $100
Million Dollars.
7.4 PROCEDURES.
(a) The terms of this Section 7.4 shall apply to any third-party
claim (a "CLAIM") that may result in indemnification under the terms of Sections
7.2 or 7.3. The TeleCorp Indemnified Party or AT&T Indemnified Party (each, an
"INDEMNIFIED PARTY"), as the case may be, shall give prompt written notice of
such Claim to the indemnifying party (the "INDEMNIFYING PARTY") under the
applicable Section, which party may assume the defense thereof, PROVIDED, that
any delay or failure to so notify the Indemnifying Party shall relieve the
Indemnifying Party of its obligations hereunder only to the extent, if at all,
that it is materially prejudiced by reason of such delay or failure. The
Indemnified Party shall have the right to approve any counsel selected by the
Indemnifying Party and to approve the terms of any proposed settlement, such
approvals not to be unreasonably delayed or withheld (unless, in the case of
approval of a proposed settlement, such settlement provides only, as to the
Indemnified Party, the payment of money damages actually paid by the
Indemnifying Party and a complete release of the Indemnified Party in respect of
the claim in question). Notwithstanding any of the foregoing to the contrary,
the provisions of this Article VII shall not be construed so as to provide for
the indemnification of any Indemnified Party for any liability to the extent
(but only to the extent) that such indemnification would be in violation of
applicable Law or that such liability may not be waived, modified or limited
under applicable Law, but shall be construed so as to effectuate the provisions
of this Article VII to the fullest extent permitted by Law.
(b) If the Indemnifying Party undertakes the defense of any Claim,
the Indemnifying Party will keep the Indemnified Party advised as to all
material developments in connection with such Claim, including promptly
furnishing the Indemnified Party with copies of all material documents filed or
served in connection therewith.
(c) If the Indemnifying Party fails to assume the defense of any
Claim within thirty (30) days after receiving written notice thereof, the
Indemnified Party shall have the right, subject to the Indemnifying Party's
right to assume the defense pursuant to the provisions of this Article VII, to
undertake the defense, compromise or settlement of such Claim for the account of
the Indemnifying Party. Unless and until the Indemnified Party assumes the
defense of any Claim, the Indemnifying Party shall advance to the Indemnified
Party any of its reasonable attorneys' fees and other costs and expenses
incurred in connection with the defense of any such action or proceeding. Each
Indemnified Party shall agree in writing prior to any such advance that, in the
event he, she or it receives any such advance, such Indemnified Party shall
reimburse the Indemnifying Party for such fees, costs and expenses to the extent
that it shall be determined that he, she or it was not entitled to
indemnification under this Article VII.
-34-
<PAGE>
(d) In no event shall an Indemnifying Party be required to pay in
connection with any Claim for more than one firm of counsel (and local counsel)
for each of the following groups of Indemnified Parties: (i) AT&T, its
Affiliates, and the shareholders, members, managers, officers, employees, agents
and/or the legal representatives of any of them; and (ii) TeleCorp and its
Affiliates, and the shareholders, members, managers, officers, employees, agents
and/or the legal representatives of any of them.
7.5 TAX COSTS AND TAX BENEFITS. The amount of any Losses for which
indemnification is provided under any of Sections 7.2 or 7.3, shall be (i)
increased to take account of any net Tax cost incurred by the indemnified party
arising from the receipt of indemnity payments hereunder (grossed up for such
increase) and (ii) reduced to take account of any net Tax benefit realized by
the indemnified party arising from the incurrence or payment of any such Losses.
In computing the amount of any such Tax cost or Tax benefit, the indemnified
party shall be deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the receipt of any
indemnity payment hereunder or the incurrence or payment of any indemnified
Losses. Any indemnification payment hereunder shall initially be made without
regard to this Section and shall be increased or reduced to reflect any such net
Tax cost (including gross-up) or net Tax benefit only after the indemnified
party has actually realized such cost or benefit. For purposes of this
Agreement, an indemnified party shall be deemed to have "actually realized" a
net Tax cost or a net Tax benefit to the extent that, and at such time as, the
amount of Taxes payable by such indemnified party is increased above or reduced
below, as the case may be, the amount of Taxes that such indemnified party would
be required to pay but for the receipt of the indemnity payment or the
incurrence or payment of such Losses, as the case may be. The amount of any
increase or reduction hereunder shall be adjusted to reflect any final
determination (which shall include the execution of Form 870-AD or successor
form) with respect to the indemnified party's liability for Taxes and payments
between the parties to this Agreement to reflect such adjustment shall be made
if necessary. Any indemnity payment under this Agreement shall be treated as an
adjustment to the value of the asset upon which its underlying claim was based,
unless a final determination (which shall include the execution of a Form 870-AD
or successor form) with respect to the indemnified party or any of its
Affiliates causes any such payment not to be treated as an adjustment to the
value of the asset for United States Federal income Tax purposes.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. In addition to any other rights of termination set forth
herein, this Agreement may be terminated, and the Transactions abandoned,
without further obligation of any party, except as set forth herein, at any time
prior to the Closing Date:
(a) by mutual written consent of the parties;
-35-
<PAGE>
(b) by any party by written notice to the other parties, if the
Closing of all the Swap Transactions shall not have occurred on or before
December 31, 2000; PROVIDED, HOWEVER, that if the Transactions shall not have
been consummated solely due to the waiting period (or any extension thereof) or
approvals under the HSR Act or approvals or consent of the FCC not having
expired or been terminated or received, then such date shall be extended to
March 31, 2001; and PROVIDED, FURTHER, that the party electing to exercise such
right is not otherwise in breach of its obligations under this Agreement; or
(c) by any party by written notice to the other party, if the
consummation of the Transactions shall be prohibited by a final, nonappealable
order, decree or injunction of a court of competent jurisdiction.
8.2 EFFECT OF TERMINATION; TAX RESPONSIBILITY.
(a) Upon a termination of this Agreement, no party hereto shall have
any liability or further obligation to any other party to this Agreement, except
as set forth in paragraph (b) below, and except that nothing herein will relieve
any party from liability for any breach by such party of this Agreement.
(b) Upon a termination of this Agreement pursuant to Section 8.1,
all provisions of this Agreement shall terminate, except Section 1.4(b), Section
3.2 and this Section 8.2, and Articles VII, IX and X, except that nothing herein
will relieve any party from liability for any breach of this Agreement. Upon
such termination, Intermediary promptly shall return to TeleCorp all documents,
instruments and other property delivered to Intermediary by or at the direction
of TeleCorp pursuant to the provisions hereof, including, without limitation,
the TeleCorp Assignments and the Stock Consideration, if any, and return to AT&T
all documents, instruments and other property delivered to Intermediary by or at
the direction of AT&T pursuant to the provisions hereof, including, without
limitation, the AT&T Assignments, the Cash Consideration and the Asset Payment.
(c) Whether or not the Closing occurs, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses. Notwithstanding the foregoing, (i) TeleCorp
shall pay or cause to be paid at the Closing or, if due prior to the Closing,
shall reimburse AT&T at Closing for, or thereafter, promptly when due, all
Transfer Taxes (including sales taxes, gross receipts taxes, stamp taxes, and
other similar taxes) payable solely as a result of a transfer of assets pursuant
to this Agreement, but excluding any federal, state, local or other
jurisdictional income Taxes (or franchise, excise, gross receipts or other taxes
that are generally imposed on a party on a periodic basis as a result of a
party's status, presence, conduct of business, holding of assets, income,
revenues, activities or other items) ("TRANSFER TAXES") relating to the transfer
of the TeleCorp Assets; (ii) AT&T shall pay or cause to be paid at the Closing
or, if due prior to the Closing, shall reimburse TeleCorp at Closing for, or
thereafter, promptly when due, all transfer taxes (including sales taxes, gross
receipts taxes, stamp taxes, and other similar taxes) payable solely as a result
of a transfer of assets pursuant to this Agreement, but excluding any federal,
state, local
-36-
<PAGE>
or other jurisdictional income Taxes (or franchise, excise, gross receipts or
other Taxes that are generally imposed on a party on a periodic basis as a
result of a party's status, presence, conduct of business, holding of assets,
income, revenues, activities or other items) relating to the AT&T Owned Assets,
(iii) in the case of any Taxable period that includes (but does not begin on)
the Closing Date (the "TAX PERIOD") (x) real, personal and intangible property
Taxes (collectively, "PROPERTY TAXES") of AT&T for the AT&T Owned Assets on the
one hand, and the Property Taxes of TeleCorp for the TeleCorp Assets on the
other hand, for the pre-Closing Tax period shall be equal to the amount of such
Property Taxes for the entire Tax Period multiplied by a fraction, the numerator
of which is the number of full days during the Tax Period that are in the
pre-Closing Tax period and the denominator of which is the number of days in the
Tax Period; and (y) the Taxes (other than Property Taxes, income Taxes and
Transfer Taxes) of AT&T in respect of the AT&T Owned Assets, on the one hand,
and TeleCorp in respect of the TeleCorp Assets on the other hand, for the
pre-Closing Tax period shall be computed as if such Taxable period ended as of
the opening of business on the Closing Date; and (iv) TeleCorp and AT&T shall
each be responsible, with respect to their respective transferred assets, for
preparing and filing all Federal, state, local and other Tax returns and
conducting Tax audits that relate to operations or events affecting Tax periods
ending prior to the Closing Date, including Tax returns the due date of which is
after the Closing Date (or in the case of income Taxes, any Tax period).
(d) Notwithstanding any other provision of this Agreement:
(i) AT&T shall be responsible for, and shall hold the TeleCorp
Indemnified Parties harmless from and against (A) any income Taxes imposed
on AT&T or any of its Affiliates, (B) any Taxes (other than income Taxes)
imposed on AT&T or any of its Affiliates, which Taxes are not related to
nor imposed on or with respect to the AT&T Assets and (C) any Taxes (other
than income Taxes and Transfer Taxes) imposed on or with respect to (x)
the AT&T Owned Assets for any taxable period, or portion thereof, ending
prior to the Closing Date or (y) with respect to the TeleCorp Assets for
any taxable period, or portion thereof, beginning on the Closing Date
(calculated, in the case of (x) and (y) for a Tax Period, as set forth
above in Section 8.2(c));
(ii) TeleCorp shall be responsible for, and shall hold the AT&T
Indemnified Parties harmless from and against (A) any income Taxes imposed
on TeleCorp or any of its Affiliates, (B) any Taxes (other than income
Taxes) imposed on TeleCorp or any of its Affiliates, which Taxes are not
related to nor imposed on or with respect to the TeleCorp Assets and (C)
any Taxes (other than income Taxes and Transfer Taxes) imposed on or with
respect to (x) the TeleCorp Assets for any taxable period, or portion
thereof, ending prior to the Closing Date or (y) with respect to the AT&T
Owned Assets for any taxable period, or portion thereof, beginning on the
Closing Date (calculated, in the case of (x) and (y) for a Tax Period, as
set forth above in Section 8.2(c)); and
(iii) AT&T and TeleCorp, respectively, shall be entitled to control in
all respects (and no other Person shall have any rights with respect to)
any audit,
-37-
<PAGE>
examination or other Tax proceeding by or with a Governmental Authority
with respect to any consolidated, combined or unitary Tax return or any
other income Tax Return of AT&T (or any of its Affiliates) or TeleCorp (or
any of its Affiliates), respectively.
(e) In the case of an audit, examination or other Tax proceeding for
a Tax Period by or with a Governmental Authority which may result in
indemnification pursuant to Section 8.2(d)(i)(C) or 8.2(d)(ii)(C), the
provisions of Section 7.4 shall apply, provided that the party with respect to
which the claim by the Governmental Authority is greater shall, solely for
purposes of this sentence, have the rights and obligations set forth in Section
7.4 of the "Indemnifying Party," and the other party shall, solely for purpose
of the sentence, have the rights and obligations set forth in Section 7.4 of the
"Indemnified Party," with respect to such proceeding.
(f) TeleCorp and AT&T shall each pay one-half of all fees required
to be paid (i) under the HSR Act relating to the Transactions hereunder, and
(ii) to the FCC in connection with the filing of the applications for transfer
of the Licenses contemplated to be transferred in the Swap Transactions.
ARTICLE IX
DEFINITIONS
For purposes of this Agreement:
"ABC," "ABC LICENSES" and "ABC ACQUISITION AGREEMENT" have the meanings
set forth in the recitals.
"ACQUISITION AGREEMENTS" has the meaning set forth in the recitals.
"AFFILIATE" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with that Person. For purposes of this
definition, "control" (including the terms "controlling" and "controlled") means
the power to direct or cause the direction of the management and policies of a
Person, directly or indirectly, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
Notwithstanding the foregoing, for purposes of this Agreement, neither TeleCorp
and its Subsidiaries, on the one hand, nor AT&T and its Subsidiaries , on the
other hand, shall be considered an Affiliate of the other.
"AGREEMENT" has the meaning set forth in the preamble.
"ASSET PAYMENT" has the meaning set forth in the recitals.
"AT&T" has the meaning set forth in the preamble.
"AT&T ACQUIRED ASSETS" has the meaning set forth in the recitals.
-38-
<PAGE>
"AT&T ACQUISITION ASSIGNMENTS" has the meaning set forth in Section
2.2(a).
"AT&T ASSETS" has the meaning set forth in the recitals.
"AT&T ASSIGNMENTS" has the meaning set forth in Section 2.2(a).
"AT&T DISCLOSURE SCHEDULE" has the meaning set forth in Article IV.
"AT&T ENTITIES" has the meaning set forth in the preamble.
"AT&T INDEMNIFIED PARTY" has the meaning set forth in Section 7.3.
"AT&T LICENSE ASSIGNMENTS" has the meaning set forth in Section 2.2(a).
"AT&T MATERIAL ADVERSE EFFECT" means any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of the AT&T Assets, taken as a
whole, excluding any adverse change in, or effect on, the financial condition or
revenues of the AT&T Assets to the extent attributable to (i) general economic
conditions in the United States and (ii) conditions affecting the wireless
communications industry generally.
"AT&T OWNED ASSETS" has the meaning set forth in the recitals.
"AT&T RELATED DOCUMENTS" has the meaning set forth in Section 4.1(b).
"BOSTON BUSINESS" has the meaning set forth in the recitals.
"BOSTON EMPLOYEES" has the meaning set forth in Section
3.7(a).
"BOSTON LICENSES" has the meaning set forth in the recitals.
"BTA" means the unit of division (of which there are four hundred
ninety-three (493)) for the United States of America, devised by Rand McNally
based upon geography, population and other factors, which units form the basis
for the auction by the FCC of a portion of the Licenses for PCS Systems for
Basic Trading Areas, as defined by the FCC.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a legal
holiday in New York, New York or any other day on which commercial banks in New
York, New York are authorized by law or governmental decree to close.
"CASH CONSIDERATION" has the meaning set forth in recitals.
"CLOSING" has the meaning set forth in Section 2.1.
"CLOSING DATE" has the meaning set forth in Section 2.1.
-39-
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"CONFIDENTIAL INFORMATION" means any and all information regarding the
business, finances, operations, products, services and customers of the Person
specified and its Affiliates, in written or oral form or in any other medium.
"CONSENTS" means all consents and approvals of Governmental Authorities
or other third parties necessary to authorize, approve or permit the parties
hereto to consummate the Transactions and for TeleCorp to operate its business
(including the AT&T Assets) after the Closing Date as currently contemplated.
"CONTRACT" means any contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant, right
or other instrument, document, obligation or agreement, whether written or oral.
"DESIGNATED TRANSFEREE" has the meaning set forth in Section 10.14.
"DOJ" has the meaning set forth in Section 3.1(d)(iii).
"ENVIRONMENTAL LAWS" means: the Comprehensive Response, Compensation
and Liability Act, as amended by the Superfund Amendments and Reauthorization
Act (42 U.S.C. ss. 9601 et seq.) ("CERCLA") and/or the Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et
seq.) ("RCRA") and/or the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.) ("TSCA") and/or the Federal Insecticide, Fungicide and Rodenticide Act (7
U.S.C. ss. 136 et seq.) ("FIFRA") and/or the Clean Air Act (42 U.S.C. ss. 7401
et seq.) ("CAA") and/or the Federal Water Pollution Control Act (33 U.S.C. ss.
1251 et seq.) ("FWPCA") and/or the Safe Drinking Water Act (42 U.S.C. ss. 300f
et seq.) ("SDWA") and/or the Oil Pollution Act of 1990 (33 U.S.C. ss.ss.
2701-2761) ("OPA") and/or the Emergency Planning and Community Right-to-Know Act
of 1986 (42 U.S.C. ss.ss. 11001-11050) ("EPCRA") including any amendments or
extensions thereof; and/or the Building Occupancy Code Administration,
Occupational Safety and Health Act (29 U.S.C. ss.ss. 651 et seq.) and Codes of
the National Fire Protection Association; and all statutes, laws, regulations,
rules, ordinances, codes, licenses, permits, guidelines, standards, orders,
requirements, approvals and similar items of all governmental agencies,
departments, commissions, boards and instrumentalities of the United States, any
foreign country, or any state, or any political subdivision thereof relating to
pollution and/or the protection of human health and/or the environment,
including, without limitation, those relating to reporting, licensing,
permitting, investigating, removing or remediating Materials of Environmental
Concern.
"EXCLUDED EMPLOYEES" has the meaning set forth in Section 3.7(a).
"FCC" means the Federal Communications Commission or similar
regulatory authority established in replacement thereof.
"FCC APPLICATIONS" has the meaning set forth in Section 3.1(d)(i).
-40-
<PAGE>
"FCC LAW" means the Communications Act of 1934, as amended, including
as amended by the Telecommunications Act of 1996, and the rules, regulations and
policies promulgated thereunder.
"FINAL ORDER" has the meaning set forth in Section 6.1(b).
"FIRST TRANSFER DATE" has the meaning set forth in Section 1.4.
"FTC" has the meaning set forth in Section 3.1(d)(iii).
"GOVERNMENTAL AUTHORITY" means a Federal, state or local court,
legislature, governmental agency, commission or regulatory or administrative
authority or instrumentality.
"HIRED EMPLOYEE" has the meaning set forth in Section 3.7(f)(i).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" have the meanings set
forth in Section 7.4.
"INDUS" has the meaning set forth in the recitals.
"INDUS PURCHASE AGREEMENT" has the meaning set forth in the recitals.
"INTELLECTUAL PROPERTY" means any (a) trademarks, trade dress, trade
names, service marks, logos and other similar proprietary rights, (b) domain
names, (c) copyrights and (d) patents and patentable know-how, inventions and
processes.
"INTERMEDIARY" has the meaning set forth in the recitals.
"INTERMEDIARY AGREEMENT" has the meaning set forth in the recitals.
"IOWA LICENSES" has the meanings set forth in the recitals.
"LAW" means applicable common law and any statute, ordinance, code or
other law, rule, permit, permit condition, regulation, order, decree, technical
or other standard, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority.
"LETTER OF INSTRUCTION" has the meaning set forth in Section 2.2(e).
"LICENSE" means a license, permit, certificate of authority, waiver,
approval, certificate of public convenience and necessity, registration or other
authorization, consent or clearance to construct or operate a facility,
including any emissions, discharges or releases therefrom, or to transact an
activity or business, to construct a tower or to use an asset or process, in
each case issued or granted by a Governmental Authority.
-41-
<PAGE>
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, option, title defect, restriction, right of first
refusal or right of others therein, or encumbrance of any nature whatsoever in
respect of such asset.
"LOSSES" has the meaning set forth in Section 7.2.
"MATERIALS OF ENVIRONMENTAL CONCERN" means any substance: (a) the
presence of which requires investigation or remediation under any Environmental
Law; or (b) which is defined as a "hazardous waste," "hazardous substance,"
"hazardous material," toxic substance, pollutant or contaminant under any
Environmental Law; or (c) which is identified under any Environmental Laws as
toxic, explosive, corrosive, flammable, ignitable, reactive, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
restricted or regulated by any governmental, quasi-governmental or regulatory
authority, agency, department, commission, board, agency or instrumentality of
the United States, any foreign country, or any state, or any political
subdivision thereof; or (d) without limitation, which includes or contains
gasoline, diesel fuel or other petroleum hydrocarbons or byproducts.
"MTA" means the unit of division (of which there are fifty-one (51))
for the United States of America, devised by Rand McNally based upon geography,
population and other factors, which units form the basis for the auction by the
FCC of a portion of the Licenses for PCS Systems for Major Trading Areas, as
defined by the FCC.
"NEW YORK COURTS" has the meaning set forth in Section 10.5.
"PCS" means Personal Communications Services, which is the term to
describe the services that may be provided as a result of obtaining the
Licenses, the exchanges of which are contemplated hereby, under FCC Law.
"PERMITTED LIENS" means (a) Liens for Taxes, assessments and
governmental charges, in each case not yet due and payable, (b) zoning laws or
ordinances or any similar Laws, (c) rights reserved to any Governmental
Authority to regulate the affected property, (d) Liens described on SCHEDULE 5.6
of the TeleCorp Disclosure Schedule, which liens do not individually or in the
aggregate interfere with the right or ability of the applicable party to own,
use enjoy or operate the applicable assets in the manner currently used or to
convey good and marketable title or enforceable rights thereto, (e) as to leased
property the interests of the lessors thereof, (f) FCC Liens, and (g) as to Real
Property, any easements, rights-of-way, servitudes, conditions, covenants,
restrictions and minor imperfections or irregularities in title, in each case,
which are reflected in the public records and which do not individually or in
the aggregate interfere with the right or ability of the applicable party to
own, use, enjoy or operate the Real Property in the manner currently used or to
convey good, marketable and indefeasible fee simple title to the same; PROVIDED,
that "Permitted Liens" will not include any Lien which could prevent or inhibit
in any way (other than as permitted under clause (f)) the conduct of the
business of the affected Party.
-42-
<PAGE>
"PERSON" means an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental Authority,
business trust, unincorporated organization, or other legal entity.
"POLYCELL," "POLYCELL LICENSES" and "POLYCELL ACQUISITION AGREEMENT"
have the meanings set forth in the recitals.
"POLYCELL BUYER" has the meaning set forth in the recitals.
"POPS" mean the Paul Kagan Associates, Inc. estimate of the 1999
population of a geographic area.
"PROPERTY TAXES" has the meaning set forth in Section 8.2(c).
"QUALIFIED INTERMEDIARY" means a "qualified intermediary" as defined in
Regulations section 1.1031(k)-1(g)(4)(iii).
"REGULATIONS" means the Treasury Department regulations (including
temporary regulations) promulgated under the Code.
"REPLACEMENT ASSETS" has the meaning set forth in Section 1.4.
"REPRESENTATIVES" has the meaning set forth in Section 3.2(a).
"STOCK CONSIDERATION" has the meaning set forth in the recitals.
"SUBSIDIARY" shall mean, with respect to any Person, a corporation or
other entity of which 50% or more of the voting power or the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
"SWAP TRANSACTIONS" has the meaning set forth in the recitals.
"TAX" OR "TAXES" means any Federal, state, local or foreign tax, fee or
other like assessment or charge of any kind, including any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value-added, transfer, franchise, profits, license, withholding on
amounts paid to or by the taxpayer, payroll, employment, excise, severance,
stamp, capital stock occupation, property, environmental or windfall tax,
premium, custom, duty or other tax of any kind whatsoever, including any
interest, penalty or addition thereto.
"TAX PERIOD" has the meaning set forth in Section 8.2(c).
"TELECORP" has the meaning set forth in the preamble.
"TELECORP ASSETS" has the meaning set forth in the recitals.
"TELECORP ASSIGNED AGREEMENTS" has the meaning set forth in Section
5.9.
-43-
<PAGE>
"TELECORP ASSIGNED LEASES" means those leases included in the TeleCorp
Assets.
"TELECORP ASSIGNMENTS" has the meaning set forth in Section 2.2(c).
"TELECORP BOOKS AND RECORDS" means all engineering records, files,
data, drawings, blueprints, schematics, reports, lists, plans and procedures and
all other files of correspondence, lists, records and reports concerning the
Boston Business, including subscribers and prospective subscribers of the Boston
Business, dealings with Governmental Authorities with respect to the Boston
Business, including all reports filed with respect to the Boston Business by or
on behalf of TeleCorp or any Affiliate with the FCC, and including all
documents, reports and records relating to any employee of the Business who has
given consent to disclosure of such documents, reports and records or which may
otherwise be transferred without violation of the Law.
"TELECORP DISCLOSURE SCHEDULE" has the meaning set forth in Article V.
"TELECORP ENTITIES" has the meaning set forth in the preamble.
"TELECORP EXCLUDED ASSETS" means (i) bonds, letters of credit, surety
instruments and other similar items; (ii) cash and cash equivalents, including
cash relating to customer subscriber prepayments and deposits, and notes
receivable; (iii) Intellectual Property held by TeleCorp or any of its
Affiliates, other than AT&T; (iv) assets, rights or properties of TeleCorp or
its Affiliates used or held for use other than principally in connection with
the Boston Business, and (v) Claims, rights and interest in and to any refunds
of taxes or fees of any nature, or other Claims against third parties, relating
to the operation of the Boston Business prior to the Closing Date.
"TELECORP INDEMNIFIED PARTY" has the meaning set forth in Section 7.2.
"TELECORP MATERIAL ADVERSE EFFECT" means any change, event or effect
that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of the TeleCorp Assets or
the Boston Business, taken as a whole, excluding any adverse change in, or
effect on, the financial condition or revenues of the TeleCorp Assets or the
Boston Business to the extent attributable to (i) general economic conditions in
the United States and (ii) conditions affecting the wireless communications
industry generally.
"TELECORP REAL PROPERTY" means (i) any real property or facility
presently or previously owned by TeleCorp or any of its predecessors in
interest; (ii) any real property or facility presently or previously leased to
TeleCorp (or any predecessor in interest) by any Person; (iii) any real property
or facility presently or previously operated for TeleCorp or any of its
predecessors in interest by any Person; (iv) any real property or facility
presently or previously used or occupied by TeleCorp or any of its predecessors
in interest; and/or (v) any real property or facility at which the products or
equipment of TeleCorp or any of its predecessors in interest have been or are
being installed or used, in any event that is or was used in connection with
TeleCorp's operation of a PCS business in the areas covered by, or which are
otherwise included as part of the TeleCorp Assets.
-44-
<PAGE>
"TELECORP RELATED DOCUMENTS" has the meaning set forth in Section
5.1(b).
"TRANSFER TAXES" has the meaning set forth in Section 8.2(c).
"TRANSACTIONS" means the Swap Transactions and other transactions
contemplated by this Agreement.
"WISCONSIN LICENSES" have the meanings set forth in the recitals.
When a reference is made in this Agreement to an Article or a Section,
such reference shall be to an Article or a Section of this Agreement unless
otherwise indicated. Unless the context otherwise requires, the terms defined
hereunder shall have the meanings therein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
defined herein. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." The use of a gender herein shall be deemed to include the neuter,
masculine and feminine genders whenever necessary or appropriate. Whenever the
word "herein" or "hereof" is used in this Agreement, it shall be deemed to refer
to this Agreement and not to a particular Section of this Agreement unless
expressly stated otherwise.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or
supplemented only by written agreement of each of the parties.
10.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any of the parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the party or parties entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirement for a waiver of
compliance as set forth in this Section 10.2.
10.3 NOTICES. All notices or other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given upon receipt) by
delivery in person against receipt, by facsimile transmission with confirmation
of receipt, by overnight courier service, or by registered or certified mail
(return receipt requested), postage prepaid, with an acknowledgment of receipt
signed by the addressee or an authorized representative thereof, addressed as
follows (or to such other address for a party as shall be specified by like
notice; PROVIDED, that notice of a change of address shall be effective only
upon receipt thereof):
-45-
<PAGE>
If to AT&T at:
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Attention: Marilyn J. Wasser
Fax: (908) 221-6618
With a copy to:
Wachtell Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Steve A. Rosenblum and Trevor S. Norwitz
Fax: (212) 403-2000
Friedman, Kaplan & Seiler
875 Third Avenue
New York, NY
Attention: Gary Friedman
Fax:
If to TeleCorp or its Affiliates, to TeleCorp at:
1010 North Glebe Road, Suite 800
Arlington, Virginia 22201
Attention: Thomas H. Sullivan
Facsimile: (703) 236-1376
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Alicia M.V. Wyman
Facsimile: (617) 592-2241
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Brian Hoffman
Fax: (212) 504-6666
10.4 PARTIES IN INTEREST; ASSIGNMENT. This Agreement is binding upon, and is
solely for the benefit of (except to the extent set forth in Section 10.13) the
parties hereto and their respective Affiliates, permitted successors, legal
representatives and permitted
-46-
<PAGE>
assigns. Subject to Section 10.14, neither party may assign its rights and
obligations hereunder without the prior written consent of the other party.
10.5 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF. THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY CONSENT TO SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA LOCATED IN THE
STATE OF NEW YORK (THE "NEW YORK COURTS") FOR ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS, WAIVE ANY OBJECTION TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION IN THE NEW YORK COURTS AND AGREES NOT TO
PLEAD OR CLAIM IN ANY NEW YORK COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
10.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. Facsimile signatures on this Agreement
shall be deemed to be original signatures for all purposes.
10.7 INTERPRETATION. The article and section headings contained in this
Agreement are for convenience of reference only, are not part of the agreement
of the parties and shall not affect in any way the meaning or interpretation of
this Agreement.
10.8 ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedule
hereto and the certificates and instruments delivered pursuant to the terms of
this Agreement, embody the entire agreement and understanding of the parties
hereto in respect of the Transactions. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the
Transactions.
10.9 PUBLICITY. So long as this Agreement is in effect, the parties agree to
consult with each other in issuing any press release or otherwise making any
public statement with respect to the Transactions, and no party shall issue any
press release or make any such public statement prior to such consultation,
except as may be required by Law, including state and Federal securities Laws.
No press release or other public statement by a party shall disclose any of the
financial terms of the Transactions without the prior consent of the other
party, except as may be required by Law. A breach of the provisions of this
Section 10.9 by a party shall not give rise to any right to terminate this
Agreement.
10.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties
-47-
<PAGE>
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any New
York Courts.
10.11 REMEDIES CUMULATIVE. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of the exercise of
any thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.
10.12 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any court determines that any covenant or any part of any
covenant is invalid or unenforceable, such covenant shall be enforced to the
extent permitted by such court, and all other covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
10.13 BENEFICIARIES OF AGREEMENT. The representations, warranties, covenants
and agreements expressed in this Agreement are for the sole benefit of the
parties hereto and the TeleCorp Indemnified Parties and AT&T Indemnified
Parties, and are not intended to benefit, and may not be relied upon or enforced
by, any other party as a third party beneficiary or otherwise.
10.14 DESIGNATED TRANSFEREE. It is understood and agreed between the parties
that TeleCorp or AT&T, respectively, may cause one or more of its direct or
indirect Affiliates or wholly owned Subsidiaries (each a "DESIGNATED
TRANSFEREE") to acquire all or part of the AT&T Assets or TeleCorp Assets,
respectively, hereunder; PROVIDED, that notwithstanding any such designation,
TeleCorp and AT&T, respectively, shall remain fully liable for all of its
obligations and those of the Designated Transferee hereunder; PROVIDED, further,
that AT&T may cause its Designated Transferee to pay all or part of the Asset
Payment or Cash Consideration payable hereunder.
10.15 ACCESS TO RECORDS. From and after the Closing Date (i) AT&T shall furnish
TeleCorp with reasonable access to AT&T's books and records that after the
Closing are in the custody and control of AT&T and that relate solely to the
AT&T Assets as TeleCorp may reasonably request in order to comply with their
obligations under Law, and (ii) TeleCorp shall furnish AT&T with reasonable
access to TeleCorp's books and records that after the Closing are in the custody
and control of TeleCorp and that relate solely to the Boston Licenses and
TeleCorp Assets as AT&T reasonably request in order to comply with its
obligations under Law.
10.16 AGENCY. TeleCorp is hereby appointed agent of the Designated TeleCorp
Affiliates for purposes of effecting the transactions contemplated hereunder.
-48-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AT&T WIRELESS PCS, LLC
By:
Name:
Title:
TELECORP PCS, INC.
By:
Name:
Title:
TELECORP PCS, LLC
By:
Name:
Title:
TELECORP HOLDING CORP., INC.
By:
Name:
Title:
TELECORP COMMUNICATIONS, INC.
By:
Name:
Title:
-49-
<PAGE>
TELECORP EQUIPMENT LEASING, L.P.
By:
Name:
Title:
TELECORP REALTY, LLC
By:
Name:
Title:
-50-
<PAGE>
Exhibit 10.5
February 28, 2000
AT&T Wireless Services, Inc.
AT&T Wireless PCS, LLC
7277 164th Ave, NE
Redmond, WA 98052
Gentlemen:
In connection with the Asset Exchange Agreement, dated as of February 28, 2000,
by and among AT&T Wireless PCS, LLC, a Delaware limited liability company ("AT&T
PCS LLC"), TeleCorp PCS, Inc., a Delaware corporation ("TeleCorp"), TeleCorp
PCS, LLC, a Delaware limited liability company, TeleCorp Holding Corp, Inc., a
Delaware corporation, TeleCorp Communications, Inc., a Delaware corporation,
TeleCorp Equipment Leasing, L.P., a Delaware limited partnership, TeleCorp
Realty, LLC, a Delaware limited liability company (the "Exchange Agreement") and
the Agreement and Plan of Reorganization and Contribution, dated as of February
28, 2000, by and between TeleCorp, Tritel, Inc. and AT&T Wireless Services, Inc.
(together with AT&T PCS LLC, "AT&T PCS") (the "Merger Agreement"), TeleCorp and
AT&T PCS wish to set forth certain additional mutual rights and obligations, as
set forth in this Letter Agreement ("Letter Agreement").
The parties hereto agree as follows:
1. AT&T PCS agrees to notify TeleCorp prior to consummation of the
Exchange Agreement whether AT&T PCS intends to retain, pursuant to the Exchange
Agreement, the Home Location Register ("HLR") utilized by TeleCorp in
conjunction with the Boston Licenses. In the event that AT&T PCS elects to
retain the HLR, AT&T PCS agrees to permit continued usage of the HLR by TeleCorp
free of charge for as long as reasonably necessary to permit TeleCorp to
accomplish an orderly transition. TeleCorp agrees to use reasonable efforts to
effect a prompt transition. Both parties agree to use reasonable efforts to
minimize any problems which arise during the transition.
<PAGE>
-2- February 28, 2000
2. ADDITIONAL MARKETS. Effective upon the Closing (as such term is defined
in the Exchange Agreement) of the Exchange Agreement, the parties agree to the
following terms and conditions:
(a) DES MOINES-QUAD CITIES MTA. In the event that TeleCorp or an
affiliate acquires or enters into an agreement to acquire any PCS License in the
Des Moines-Quad Cities MTA within two years of the date of such Closing (an
"Additional Iowa License"), the area encompassed by any such Additional Iowa
License shall be included in the Licensed Territory under the Network Membership
License Agreement and shall be subject to the mutual obligations set forth in
the Roaming Agreement (as defined in the Stockholders' Agreement), provided that
AT&T PCS and its Affiliates shall not be obligated under Section 8.6(b)(i) of
the Stockholders' Agreement to program subscriber equipment so that PCS Systems
operated by TeleCorp in any such Area is the preferred provider for the
subscribers of AT&T PCS and its Affiliates.
(b) AIRADIGM. In the event that any PCS License originally granted to
Airadigm Communications, Inc. or an Affiliate is auctioned by the FCC, AT&T PCS
or an Affiliate shall enter into an agreement with a qualified entity selected
by AT&T PCS (the "Qualified Entity") pursuant to which (i) AT&T PCS shall fund
an amount equal to one-third of the purchase price of any such license for which
such Qualified Entity is the successful bidder (a "Reauctioned License"),
provided that AT&T PCS shall not be obligated to fund an amount in excess of
$33.333 million in total for such Reauctioned Licenses and TeleCorp agrees to
fund the remaining two-thirds, (ii) such Qualified Entity shall, subject to
applicable FCC requirements, promptly undertake all actions necessary to
disaggregate each Reauctioned License, so that 10 MHz of each such Reauctioned
License shall be retained by such Qualified Entity and 20 MHz of each such
Reauctioned License shall be assigned or otherwise transferred to TeleCorp. AT&T
PCS and TeleCorp shall cooperate in obtaining any regulatory approvals required
to effectuate the provisions of this Section 2(b).
3. RIGHT OF FIRST REFUSAL. Effective upon the Closing (as such term is
defined in the Merger Agreement) of the Merger Agreement, the parties agree to
the following terms and conditions:
(a) ASSET SALE. If TeleCorp enters into a binding agreement to sell,
assign, transfer or otherwise voluntarily alienate or dispose of, in one
transaction or a series of related transactions, any or all of the ROFR Assets
to any Person other than to a Subsidiary of TeleCorp, then AT&T PCS shall have a
right of first refusal to purchase all, but not less than all, of the ROFR
Assets agreed to be sold by TeleCorp (the "Offered Assets") at a per POP price
equal to the per POP price agreed to be paid by such Person. If the Offered
Assets are proposed to be sold as part of a group of assets including assets
that are not Offered Assets, the per POP price shall be equal to the per POP
price proposed to be paid for the entire group of assets (after adjusting for an
appropriate allocation of the aggregate price to any assets other than assets
relating to POPs). TeleCorp shall give notice thereof to AT&T PCS (the "Notice")
within ten
<PAGE>
-3- February 28, 2000
(10) business days after the execution of any agreement providing for the sale
of the Offered Assets, which Notice shall specify the party which has agreed to
purchase the Offered Assets, the ROFR Assets constituting the Offered Assets and
the calculation of the per POP purchase price for such Offered Assets (the
"Purchase Price"). The Notice shall constitute a binding offer by TeleCorp to
sell all, but not less than all, of the Offered Assets to AT&T PCS, at the
Purchase Price. Within ten (10) business days of AT&T's receipt of such Notice,
AT&T PCS shall notify TeleCorp whether or not it elects to purchase all, but not
less than all, of the Offered Assets by delivering to TeleCorp written notice
(the "Purchase Notice") stating that AT&T PCS has accepted the Offer, which
Purchase Notice, if affirmative, shall constitute an irrevocable and binding
acceptance of the Offer by AT&T PCS and which shall fix a time, location and
date for the closing of such purchase, which date shall be not less than fifteen
(15) nor more than thirty (30) days after the delivery of the Purchase Notice
provided that if any FCC approvals or other governmental approvals are required
prior to consummation of the Transfer of Control, the closing shall take place
five (5) business days after the FCC or such other governmental authority shall
have granted all such approvals.
(b) TRANSFER OF CONTROL. If TeleCorp enters into a binding agreement to
effect a consolidation, merger or reorganization of TeleCorp with or into any
other Person in which the stockholders of TeleCorp shall own less than sixty
percent (60%) (calculated on an as converted basis, fully diluted) of the voting
securities of the surviving Person, or any transaction or series of related
transactions in which in excess of forty percent (40%) of TeleCorp's voting
power is transferred, or the sale, transfer or lease of all or substantially all
of the assets of TeleCorp (a "Transfer of Control") of TeleCorp, AT&T PCS shall
have a right of first refusal to purchase all, but not less than all, of the
ROFR Assets then owned by TeleCorp at a per POP price equal to the per POP price
being paid for TeleCorp as a whole in connection with such Transfer of Control
(after adjusting for an appropriate allocation of the price being paid for any
assets other than assets relating to POPs). TeleCorp shall give notice thereof
to AT&T PCS (the "Control Notice") within ten (10) business days after the first
public announcement of the execution of any agreement providing for any Transfer
of Control, which Control Notice shall specify the party which is acquiring
control of TeleCorp and which shall contain TeleCorp's calculation of the
purchase price for such ROFR Assets (the "Control Purchase Price"). The Control
Notice shall constitute a binding offer by TeleCorp to sell all, but not less
than all, of the ROFR Assets then owned by TeleCorp to AT&T PCS, at the Control
Purchase Price. Within ten (10) business days of AT&T's receipt of such Control
Notice, AT&T PCS shall notify TeleCorp whether or not it elects to purchase all,
but not less than all, of the ROFR Assets then owned by TeleCorp by delivering
to TeleCorp written notice (the "Control Purchase Notice") stating that AT&T PCS
has accepted the offer, which Control Purchase Notice, if affirmative, shall
constitute an irrevocable and binding acceptance of the offer by AT&T PCS. The
time, location and date for the closing of such purchase shall be the time,
location and date of the consummation of the Transfer of Control. If a Transfer
of Control occurs within 18 months after the Closing Date of
<PAGE>
-4- February 28, 2000
the Merger Agreement and either (i) the markets covered by the ROFR Assets (the
"ROFR Markets") do not have at least negative 95 dB signal strength coverage
over 50% of the POPs in such markets (the "ROFR POPs") or (ii) the number of
active customers TeleCorp has in such markets is less than one percent of the
ROFR POPs, then the per POP price shall be reduced by multiplying it first by
the Penetration Percentage (as defined below) (provided that if such number is
not less than 1, it shall be deemed to be 1) and next by the Build Out
Percentage (provided that if such number is not less than 1, it shall be deemed
to be 1). The "Penetration Percentage" shall be 100 times that fraction, the
numerator of which is the number of active customers in the ROFR Markets and the
denominator of which is the total number of ROFR POPs; and the "Build Out
Percentage" shall be two multiplied by that fraction, the numerator of which is
the number of POPs covered by negative 95 dB signal strength and the denominator
of which is the total number of ROFR POPs; provided, however, that the aggregate
purchase price to be paid by AT&T PCS shall equal at least $175 per POP plus the
amount of any capital contributed and operating expenses paid by TeleCorp with
respect to the ROFR Assets.
(c) CLOSING. If AT&T PCS accepts the offer made by the Notice or
Control Notice, then the parties will enter into a purchase and sale agreement
with respect to the Offered Assets containing customary representations,
warranties and conditions; provided that, if the parties fail to do so, this
Letter Agreement will constitute the purchase and sale agreement and customary
representations, warranties and conditions shall be deemed to be incorporated by
reference herein. At the closing of such transaction, TeleCorp shall accept
payment of the Purchase Price or Control Purchase Price, as the case may be, in
cash or by certified or bank check or wire transfer, from AT&T PCS in exchange
for the Offered Assets or ROFR Assets as to which the Notice or Control Notice
applied, as the case may be, accompanied by duly executed instruments of
transfer in form and substance reasonably acceptable to AT&T PCS. Such closing
shall occur simultaneously with the closing of the Transfer of Control.
(d) TRANSFERS TO THIRD PARTIES. If AT&T PCS does not elect to purchase
all of the Offered Assets, or if AT&T PCS fails to respond in writing to the
Notice within the 10 business day period specified above, then TeleCorp shall be
free to sell all or any part of the Offered Assets, to one or more third party
transferees at an aggregate purchase price, in cash or by certified or bank
check or wire transfer, in an amount that equals or exceeds the Purchase Price
specified in the Notice; provided that such sale or issuance and sale (as the
case may be) is consummated within one hundred and twenty (120) days, with an
extension up to the earlier of (i) fifteen (15) days after governmental
approvals have been obtained and (ii) two hundred forty (240) days, after the
later of (y) the giving of the Purchase Notice to TeleCorp wherein AT&T PCS
elects not to purchase all of the Offered Assets and (z) the expiration of the
10 business day period following TeleCorp's delivery of the Notice to AT&T PCS.
If, in the event of a Transfer of Control, AT&T PCS does not elect to purchase
all of the ROFR Assets then owned by TeleCorp, or if AT&T PCS fails to respond
in writing to the Control Notice within the ten business day period specified
above, then TeleCorp
<PAGE>
-5- February 28, 2000
shall be free to effect the Transfer of Control which gave rise to such Control
Notice without regard to the right of first refusal provided in this Section
3(b) unless the per POP price being paid for TeleCorp in connection therewith is
reduced by more than 5% from the per POP price set forth in such Control Notice,
in which event the provisions of this Section 3(b) shall again be applicable.
(e) TERMINATION. Notwithstanding the foregoing, if any agreement giving
rise to a Transfer of Control is terminated without a Transfer of Control taking
place, AT&T PCS shall have no rights to acquire the Offered Assets or the ROFR
Assets unless a new sale of assets or Transfer of Control is proposed, in which
case this Section 3 will apply to such transaction.
4. AMENDMENT OF CERTAIN AGREEMENTS.
(a) Upon the consummation of the transactions contemplated by the
Exchange Agreement, the Network Membership License Agreement, the Stockholders
Agreement, the Intercarrier Roamer Services Agreement and the Roaming
Administration Agreement will be amended as shall be required to expand (or
contract) the territories to which such agreements apply to include (or exclude)
the territories covered by licenses transferred to (or by) Holding Company,
TeleCorp or an Affiliate pursuant to the Exchange Agreement.
(b) Upon the consummation of the Contribution contemplated by the
Merger Agreement, the Network Membership Agreement, the Stockholders Agreement,
the Intercarrier Roamer Services Agreement and the Roaming Administration
Agreement will be amended as shall be necessary to expand the territories to
which such agreements apply to include the territories covered by the licenses
transferred to Holding Company or an Affiliate pursuant to the Contribution.
(c) NEW AREAS MINIMUM BUILDOUT PLAN. TeleCorp hereby agrees, and
acknowledges that Holding Company, where applicable, shall be obligated to build
out new areas covered by leases transferred to the Company in the Exchange or
the Contribution ("New Areas") in accordance with a minimum buildout plan to be
agreed upon in customary form between TeleCorp or the Holding Company, as
applicable, and AT&T PCS within sixty (60) days from the date hereof, which will
provide that within five (5) years, specifying the year by year targets, the New
Areas will be built out to a level of 80% of the POPs in the Milwaukee B.T.A.
and 75% elsewhere, plus appropriate coverage of highways and interstates. POPs
are deemed built out if they have coverage of negative 95 dB signal strength (as
is currently the standard under Schedule V of the Stockholders Agreement).
5. The parties agree that at the written request of TeleCorp or AT&T PCS,
this Letter Agreement and all rights and obligations of TeleCorp hereunder shall
be assigned to and assumed by Holding Company. AT&T PCS agrees that it will
cause its Affiliates as appropriate to effect the amendments or take such other
actions as may be necessary to carry out AT&T PCS's obligations hereunder.
<PAGE>
-6- February 28, 2000
6. ADDITIONAL DEFINITIONS.
"AFFILIATE," "INTERCARRIER ROAMER SERVICES AGREEMENT," "NETWORK
MEMBERSHIP LEASE AGREEMENT," "PCS LICENSE," "PERSON" and "ROAMING
ADMINISTRATION AGREEMENT" shall have the meanings set forth in the
Stockholders Agreement.
"BOSTON LICENSES," "EXCHANGE" and "POP" shall have the meaning as set
forth in the Exchange Agreement.
"HOLDING COMPANY" shall mean the parent company formed pursuant to the
Merger Agreement after consummation of the transactions contemplated by
the Merger Agreement.
"ROFR ASSETS" shall mean, collectively: (i) the AT&T Assets, as such
term is defined in the Exchange Agreement; (ii) all of the assets to be
transferred under the terms of the Airadigm Purchase Agreement, as such
term is defined in the Exchange Agreement; and (iii) all of the Assets
currently held by Indus, Inc., as such term is defined in that certain
Agreement and Plan of Merger among Milwaukee PCS, LLC, Milwaukee
Acquisition Subsidiary, Inc., Indus, Inc. and Kailas J. Rao, dated as
of February 26, 2000.
"STOCKHOLDERS AGREEMENT" means that certain Stockholders' Agreement by
and among, inter alia, AT&T PCS and Holding Company to be executed in
conjunction with the closing of the transactions contemplated by the
Merger Agreement.
All notices and other communications hereunder must be in writing. Any notice or
other communication hereunder will be deemed duly delivered upon receipt after
it is sent by registered or certified mail, return receipt requested, postage
prepaid, or via a reputable international overnight courier service, in each
case to the intended recipient at the address therefor set forth on the
signature page hereto. Any party hereto may give any notice or other
communication hereunder by personal delivery or telecopy, but no such notice or
other communication will be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party may change
the address to which notices and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
This Letter Agreement represents the entire agreement among the parties hereto
with respect to the subject matter hereof and may not be contradicted by
evidence of prior or contemporaneous agreements of the parties. There are no
unwritten oral agreements between the parties relating to the subject matter
hereof. This Letter Agreement may not be amended or modified except by a written
instrument signed by each party hereto.
<PAGE>
-7- February 28, 2000
THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF
LAW.
<PAGE>
If you are in agreement with the foregoing, please execute the enclosed copy of
this Letter Agreement in the space provided below.
This Letter Agreement may be executed in counterparts which, taken together,
shall constitute one and the same instrument.
Very truly yours,
TELECORP PCS, INC.
By:
---------------------------
Name:
Title:
1010 North Glebe
Arlington, Virginia 22201
Attention: General Counsel
ACCEPTED AND AGREED TO:
AT&T WIRELESS PCS, LLC
- -----------------------------
By:
Title:
c/o AT&T Wireless Services, Inc.
7277 164th Avenue N.E.
Redmond, Washington 98052
Attention: William W. Hague
AT&T WIRELESS SERVICES, INC.
- ----------------------------
By:
Title:
7277 164th Avenue N.E.
Redmond, Washington 98052
Attention: William W. Hague
<PAGE>
EXHIBIT 10.6.1
TABLE OF CONTENTS
================================================================================
LICENSE ACQUISITION AGREEMENT
between
POLYCELL COMMUNICATIONS, INC.
and
ABC WIRELESS, LLC
Dated as of February 28, 2000
- --------------------------------------------------------------------------------
-i-
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS .................................................... 1
ARTICLE II PURCHASE AND SALE OF LICENSES; PAYMENT OF
CONSIDERATION; CERTAIN RESTRICTIONS ON TRANSFER ................ 4
2.1 Purchase and Sale of Licenses .................................. 4
2.2 Payment of Consideration ....................................... 4
2.3 Disposition of Deposit ......................................... 5
ARTICLE III CLOSING ........................................................ 5
3.1 Time and Place of Closing ...................................... 5
3.2 Closing Actions and Deliveries ................................. 5
(1) Assignment of Licenses ..................................... 6
(2) Payment of Funds ........................................... 6
(3) Assumption of Indebtedness ................................. 6
(4) Other Deliveries ........................................... 6
3.3 Payment of Transfer Taxes ...................................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF POLYCELL ..................... 6
4.1 Formation, Power and Authority ................................. 6
4.2 Consents; No Conflicts ......................................... 7
4.3 Litigation ..................................................... 7
4.4 Brokers ........................................................ 8
4.5 Polycell License ............................................... 8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................. 8
5.1 Organization, Power and Authority .............................. 8
5.2 Consents; No Conflicts ......................................... 9
5.3 Litigation ..................................................... 9
5.4 FCC Compliance ................................................. 10
5.5 Brokers ........................................................ l0
5.6 Financial Condition ............................................ 10
5.7 Affiliates ..................................................... 10
-ii-
<PAGE>
TABLE OF CONTENTS
ARTICLE VI COVENANTS ...................................................... 10
6.1 Consummation of Transaction .................................... 10
6.2 Confidentiality ................................................ 11
6.3 Certain Covenants .............................................. 11
6.4 FCC Filings .................................................... 13
6.5 Certain Advances for FCC Debt Interest Payments ................ 13
6.6 Unjust Enrichment .............................................. 14
ARTICLE VII CLOSING CONDITIONS ............................................. 14
7.1 Conditions to Obligations of All Parties ....................... 14
7.2 Conditions to Obligations of the Company ....................... 15
7.3 Conditions to the Obligations of Polycell ...................... 16
ARTICLE VIII SURVIVAL AND INDEMNIFICATION ................................... 17
8.1 Survival ....................................................... 17
8.2 Indemnification by Polycell .................................... 17
8.3 Indemnification by the Company ................................. 17
8.4 Procedures ..................................................... 18
ARTICLE IX TERMINATION .................................................... 19
9.1 Termination .................................................... 19
9.2 Effect of Termination .......................................... 20
ARTICLE X MISCELLANEOUS PROVISIONS ....................................... 20
10.1 Amendment and Modification ..................................... 20
10.2 Waiver of Compliance; Consents ................................. 20
10.3 Notices ........................................................ 21
10.4 Parties in Interest; Assignment ................................ 22
10.5 Applicable Law ................................................. 22
10.6 Counterparts ................................................... 22
10.7 Interpretation ................................................. 22
10.8 Entire Agreement ............................................... 22
10.9 Publicity ...................................................... 22
-iii-
<PAGE>
TABLE OF CONTENTS
10.10 Specific Performance ........................................... 22
10.11 Remedies Cumulative ............................................ 23
-iv-
<PAGE>
SCHEDULES AND EXHIBITS
Schedule I Polycell Licenses
Schedule II FCC Notes and Security Agreements
Exhibit A Form of Escrow Agreement
Exhibit B Form of License Transfer
================================================================================
<PAGE>
LICENSE ACQUISITION AGREEMENT
LICENSE ACQUISITION AGREEMENT, dated as of February 28, 2000,
between POLYCELL COMMUNICATIONS, INC., a Delaware corporation ("Polycell"), and
ABC WIRELESS, LLC, a Delaware limited liability company (the "Company").
WHEREAS, Polycell has been granted the 10 and 30 MHz PCS licenses
described on Schedule I (each a "Polycell License" and collectively, the
"Polycell Licenses"); and
WHEREAS, Polycell wishes to sell to the Company, and the Company
wishes to acquire from Polycell, the Polycell Licenses, all on the terms and
subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants, conditions and agreements hereinafter
set forth, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings
(unless indicated otherwise, all Section and Article references are to Sections
and Articles in this Agreement, and all Schedule and Exhibit references are to
Schedules and Exhibits to this Agreement):
"Advances" has the meaning set forth in Section 6.5.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with that Person. For purposes of this
definition, "control" (including the terms "controlling" and "controlled") means
the power to direct or cause the direction of the management and policies of a
Person, directly or indirectly, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
"Cash Closing Payment" has the meaning set forth in Section
2.2(3)(a).
"Claim" has the meaning set forth in Section 8.4.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Company" has the meaning set forth in the preamble.
<PAGE>
"Confidential Information" means any and all information regarding
the business, finances, operations, products, services and customers of the
Person specified and its Affiliates, in written or oral form or in any other
medium.
"Consents" means all consents and approvals of Governmental
Authorities or other third parties necessary to authorize, approve or permit the
parties hereto to consummate the Transaction and for the Company to operate its
business after the Closing Date as currently contemplated.
"Deposit" has the meaning set forth in Section 2.2(1).
"Escrow Agent" means Bankers Trust Company.
"Escrow Agreement" has the meaning set forth in Section 2.2(1).
"Escrow Fund" has the meaning set forth in Section 2 of the Escrow
Agreement attached hereto as Exhibit A.
"FCC" means the Federal Communications Commission or similar
regulatory authority established in replacement thereof.
"FCC Debt" means the outstanding principal balance of Nine Hundred
Sixty Thousand One Hundred Seventeen and 41/100 Dollars ($960,117.41) due to the
United States Department of the Treasury incurred in connection with Polycell's
acquisition of the Polycell Licenses, plus all accrued and/or "suspended"
interest and other obligations incident to license ownership, if any,
attributable to the Polycell Licenses, as of the Closing Date. A copy of the
promissory notes and security agreements executed by Polycell and delivered to
the FCC related to Polycell's acquisition of the Polycell Licenses is set forth
on Schedule II attached hereto.
"FCC Law" means the Communications Act of 1934, as amended by the
Telecommunications Act of 1996, and the rules, regulations and policies
promulgated thereunder.
"Final Order" has the meaning set forth in Section 7.1(1).
"Governmental Authority" means a Federal, state or local court,
legislature, governmental agency (including, without limitation, the United
States Department of Justice), commission or regulatory or administrative
authority or instrumentality.
"Indemnified Party" has the meaning set forth in Section 8.4(1).
"Indemnifying Party" has the meaning set forth in Section 8.4(1).
"Law" means applicable common law and any statute, ordinance, code
or other law, rule, permit, permit condition, regulation, order, decree,
technical or other standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Authority.
-2-
<PAGE>
"License" means a license, permit, certificate of authority, waiver,
approval, certificate of public convenience and necessity, registration or other
authorization, consent or clearance to construct or operate a facility,
including any emissions, discharges or releases therefrom, or to transact an
activity or business, to construct a tower or to use an asset or process, in
each case issued or granted by a Governmental Authority.
"License Transfer" has the meaning set forth in Section 3.2(1).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, right of first refusal or right of others therein, or
encumbrance of any nature whatsoever in respect of such asset.
"Losses" has the meaning set forth in Section 8.2.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, assets, liabilities or results of operations or
prospects of the Person specified.
"New York Courts" has the meaning set forth in Section 10.5.
"Payment Amount" has the meaning set forth in Section 6.5(1).
"Payment Due Date" has the meaning set forth in Section 6.5(1).
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental Authority,
business trust, unincorporated organization, or other legal entity.
"Polycell" has the meaning set forth in the preamble.
"Polycell License or Licenses" has the meaning set forth in the
first recital.
"Pops" means the Paul Kagan Associates, Inc. estimate of the 1997
population of a geographic area.
"Representatives" has the meaning set forth in Section 6.2(1).
"Section 8.2 Indemnified Party" has the meaning set forth in Section
8.2.
"Section 8.3 Indemnified Party" has the meaning set forth in Section
8.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock" has the meaning set forth in Section 2.2(3)(b).
"Stock Closing Payment" has the meaning set forth in Section
2.2(3)(b).
"TeleCorp" has the meaning set forth in Section 2.2(3)(b).
-3-
<PAGE>
"Transaction" means the transaction contemplated by this Agreement.
"Treasury" has the meaning set forth in Section 6.5.
ARTICLE II
PURCHASE AND SALE OF LICENSES; PAYMENT OF CONSIDERATION;
CERTAIN RESTRICTIONS ON TRANSFER
2.1 Purchase and Sale of Licenses. Upon the terms and subject to the
conditions hereof and in reliance upon the representations, warranties and
agreements herein contained, at the Closing, Polycell shall sell, transfer,
assign, convey and deliver to the Company (or its qualified designee), free and
clear of all Liens, and the Company agrees to purchase, acquire and accept from
Polycell, the Polycell Licenses in the frequencies identified on Schedule I.
2.2 Payment of Consideration. Upon the terms and subject to the conditions
hereof and in reliance upon the representations, warranties and agreements
herein contained, in consideration of the assignment of the Polycell Licenses,
the following shall occur (collectively, the "Purchase Price"):
(1) upon execution of this Agreement, the Company shall deliver to
the Escrow Agent an earnest money deposit of Three Million Three Hundred
Eighty-Four Thousand Three Hundred Fifty Dollars ($3,384,350) in immediately
available finds (the "Deposit"), which Deposit will be held and distributed in
accordance with the terms and conditions of the Escrow Agreement attached hereto
as Exhibit A (the "Escrow Agreement"); and
(2) at Closing, the Escrow Agent shall deliver the Deposit to
Polycell in accordance with the terms of the Escrow Agreement; and
(3) at the Closing the Company shall deliver to Polycell an amount
equal to Three Million Three Hundred Eighty-Four Thousand Three Hundred Fifty
Dollars ($3,384,350), at Polycell's option in any combination of, either:
(a) a cash payment in immediately available finds (the "Cash
Closing Payment") and/or
(b) the number of shares of common stock of TeleCorp PCS,
Inc., or an Affiliate of TeleCorp (the "Stock"), with a cash value, based on the
average trading price for the Stock for the five (5) business days preceding the
Closing Date, equal to: (i) Three Million Three Hundred Eighty-Four Thousand
Three Hundred Fifty Dollars ($3,384,350), minus (ii) the amount of the Cash
Closing Payment (the "Stock Closing Payment"); provided, that Polycell shall not
make an election to receive Stock under this Section 2.2(3)(b) until it has
received and reviewed a prospectus for such Stock.
-4-
<PAGE>
2.3 Disposition of Deposit.
(1) Upon Closing, the parties shall provide joint written
instructions to the Escrow Agent, instructing the Escrow Agent to transfer the
Escrow Fund to Polycell, all as more specifically set forth in the Escrow
Agreement.
(2) If Closing does not occur due to a breach of the terms of this
Agreement by the Company or any other failure by the Company to fulfill its
obligations hereunder, and Polycell is not in breach of any of its obligations
hereunder and has fully performed, or is fully willing and able to perform each
of its obligations hereunder, the parties shall provide joint written
instructions to the Escrow Agent, instructing the Escrow Agent to transfer the
Escrow Fund to Polycell.
(3) If Closing does not occur due to any cause other than that set
forth in Section 2.3(2) hereof, the parties shall provide joint written
instructions to the Escrow Agent, instructing the Escrow Agent to transfer the
Escrow Fund to the Company on the earlier to occur of February 28, 2001 or the
date that this Agreement is terminated.
ARTICLE III
CLOSING
3.1 Time and Place of Closing. Upon the terms and subject to the
conditions hereof, the closing of the Transaction (the "Closing") shall take
place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., at
10:00 a.m. local time on the twelfth (12th) business day following the date of
receipt of the last Consent required by subsections (1) through (3) of Section
7.1, or at such other place and/or time and/or on such other date as the parties
may agree or as may be necessary to permit the fulfillment or waiver of the
conditions set forth in Article VII (the "Closing Date").
3.2 Closing Actions and Deliveries. Upon the terms and subject to the
satisfaction or waiver by the appropriate party, if applicable, of the
conditions set forth in Article VII, to effect the purchase and sale of the
Polycell Licenses, the parties shall on the Closing Date take the following
actions:
(1) Assignment of Licenses. (a) Polycell shall pay in full the FCC
Debt in order to remove any and all Liens created thereby; and
(b) Polycell shall execute and deliver to the Company one or
more instruments of assignment, substantially in the form of
Exhibit B, sufficient to assign to the Company (or its
qualified designee) the Polycell Licenses (such assignment
being herein referred to as the "License Transfer").
-5-
<PAGE>
(2) Closing Payment. The Company shall deliver or cause to be
delivered to Polycell:
(a) the Cash Closing Payment, if any, by wire transfer or
other form of immediately available funds; and/or
(b) the Stock Closing Payment in the form of stock
certificates duly executed, if any.
(3) Deposit. The Escrow Agent shall deliver the Deposit to
Polycell in accordance with the terms of the Escrow Agreement.
(4) Other Deliveries. The parties shall execute and deliver or
cause to be executed and delivered all other documents,
instruments, opinions and certificates contemplated by this
Agreement to be delivered at the Closing or necessary and
appropriate in order to consummate the Transaction
contemplated to be consummated on the Closing Date.
3.3 Payment of Transfer Taxes. The Company shall pay or cause to be paid
at the Closing or, if due thereafter, promptly when due, all gross receipts
taxes, gains taxes (including, without limitation, real property gains tax or
other similar taxes), transfer taxes, sales taxes, stamp taxes, and any other
taxes, but excluding any Federal, State or local income taxes payable in
connection with the transfer of the Polycell Licenses.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF POLYCELL
Polycell represents and warrants to the Company as follows:
4.1 Formation, Power and Authority.
(1) It is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation
and has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business
as now being conducted. Polycell has furnished or will furnish
before closing to the Company a true and correct copy of its
Certificate of Incorporation and its Bylaws, as in effect on
the date hereof and as of the Closing Date.
(2) It has the requisite power and authority to execute, deliver
and perform this Agreement and each other instrument,
document, certificate and agreement required or
-6-
<PAGE>
contemplated to be executed, delivered and performed by it
hereunder and thereunder to which it is or will be a party.
(3) It is duly qualified to do business in each jurisdiction where
the character of its properties owned or held under lease or
the nature of its activities makes such qualification
necessary.
(4) The execution and delivery of this Agreement by it and the
consummation of the Transaction by it have been duly and
validly authorized by its Board of Directors (or equivalent
body) and no other proceedings on its part which have not been
taken (including, without limitation, approval of its
shareholders) are necessary to authorize this Agreement or to
consummate the Transaction.
(5) This Agreement has been duly executed and delivered by it and
constitutes its valid and binding obligation, enforceable
against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and may be subject
to general principles of equity.
(6) As of the Closing Date, after giving effect to the
Transaction, it is not in breach of any obligation under this
Agreement.
4.2 Consents: No Conflicts. Neither the execution, delivery and
performance by it of this Agreement nor the consummation of the Transaction will
(a) conflict with, or result in a breach or violation of, any provision of its
organizational documents; (b) constitute, with or without the giving of notice
or passage of time or both, a breach, violation or default, create a Lien, or
give rise to any right of termination, modification, cancellation, prepayment or
acceleration, under (i) any Law or License or (ii) any note, bond, mortgage,
indenture, lease, agreement or other instrument, in each case which is
applicable to or binding upon it or any of its assets; or (c) require any
Consent or the approval of its shareholders, officers, Board of Directors or
similar constituent bodies, as the case may be (which approvals have not been
obtained). There is no fact relating to it or its Affiliates that would be
reasonably expected to prevent it from consummating the Transaction or
disqualify the Company from obtaining the Consents (including without
limitation, FCC Consent) required in order to consummate the License Transfer as
provided for in this Agreement.
4.3 Litigation. There is no action, proceeding or investigation pending
or, threatened against it or any of its properties or assets that would be
reasonably expected to have an adverse effect on its ability to consummate the
Transaction or to fulfill its obligations under this Agreement, or which seeks
to prevent or challenge the Transaction. There is no judgment, decree,
injunction, rule or order outstanding against it which would
-7-
<PAGE>
limit in any material respect its ability to operate its business in the manner
currently contemplated.
4.4 Brokers. It has not employed any broker, finder or investment banker
or incurred any liability for any brokerage fees, commissions or finder's fees
in connection with the Transaction.
4.5 Polycell Licenses. It is the authorized legal holder, free and clear
of any Liens other than the FCC Debt, of each Polycell License, a true and
correct copy of which is attached to Schedule I. Each Polycell License is valid
and in full force and effect. There is not pending nor threatened against
Polycell or against any Polycell License, any application, action, petition,
objection or other pleading, or any proceeding with the FCC which questions or
contests the validity of, or seeks the revocation, nonrenewal or suspension of,
any Polycell License, which seeks the imposition of any modification or
amendment with respect thereto, or which would have a Material Adverse Effect on
the ability of the Company to employ any Polycell License in its business. None
of the Polycell Licenses is subject to any conditions other than those appearing
on the face of such Polycell License itself and those imposed by FCC Law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Polycell as follows:
5.1 Organization, Power and Authority.
(1) It is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to own,
lease and operate its properties and to carry on its business
as now being conducted and proposed to be conducted. The
Company has furnished, or will furnish prior to Closing, to
Polycell, a true and correct copy of its Certificate of
Formation and Operating Agreement, as in effect on the date
hereof and as of the Closing Date.
(2) It has the requisite power and authority to execute, deliver
and perform this Agreement and each other instrument,
document, certificate and agreement required or contemplated
to be executed, delivered and performed by it hereunder and
thereunder to which it is or will be a party.
(3) It is duly qualified to do business in each jurisdiction where
the character of its properties owned or held under lease or
the nature of its activities makes such qualification
necessary other than any such jurisdiction in which the
failure to be so
-8-
<PAGE>
qualified would not have a Material Adverse Effect on it or
materially adversely affect the Transaction or its ability to
perform its obligations under this Agreement within the time
frames contemplated herein.
(4) The execution and delivery of this Agreement by it and the
consummation of the Transaction by it have been duly and
validly authorized by its Board of Directors (or equivalent
body) and no other proceedings on its part which have not been
taken (including, without limitation, approval of its members,
managers or other constituent bodies, as the case may be) are
necessary to authorize this Agreement or to consummate the
Transaction.
(5) This Agreement has been duly executed and delivered by it and
constitutes the valid and binding obligation of it,
enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and may be subject
to general principles of equity.
(6) As of the Closing, after giving effect to the Transaction, it
is not in breach of any obligation under this Agreement.
5.2 Consents: No Conflicts. Neither the execution, delivery and
performance by it of this Agreement, nor the consummation of the Transaction
will (a) conflict with, or result in a breach or violation of, any provision of
its organizational documents; (b) constitute, with or without the giving of
notice or passage of time or both, a breach, violation or default, create a
Lien, or give rise to any right of termination, modification, cancellation,
prepayment or acceleration, under (i) any Law or License, or (ii) any note,
bond, mortgage, indenture, lease, agreement or other instrument, in each case
which is applicable to or binding upon it or any of its assets; or (c) require
any Consent on its part or the approval of its Board of Directors or equivalent
body (which approval has not been obtained), except in each case where such
breach, violation, default, Lien, right, or the failure to obtain or give such
Consent would not have a Material Adverse Effect on it or materially adversely
affect the Transaction or its ability to perform its obligations under this
Agreement. To its knowledge, there is no fact relating to it or its Affiliates
that would be reasonably expected to prevent it from consummating the
Transaction or performing its obligations under this Agreement or disqualify it
from obtaining the Consents (including -without limitation, FCC Consent)
required in order to consummate the License Transfer as provided for in this
Agreement.
5.3 Litigation. There is no action, proceeding or investigation pending
or, to its knowledge, threatened against it or any of its properties or assets
that would have an adverse effect on its ability to consummate the Transaction
or to fulfill its obligations under this Agreement, or which seeks to prevent or
challenge the Transaction. There is no
-9-
<PAGE>
judgment, decree, injunction, rule or order outstanding against it which would
limit in any material respect its ability to operate its business in the manner
currently contemplated.
5.4 FCC Compliance. It (or its qualified designee) complies with all
eligibility rules issued by the FCC to hold C Block and F Block broadband PCS
licenses, including without limitation, FCC rules on foreign ownership and the
CMRS spectrum cap.
5.5 Brokers. The Company has not employed any broker, finder or investment
banker or incurred any liability for any brokerage fees, commissions or finder's
fees in connection with the Transaction.
5.6 Financial Condition. The Company has sufficient funding to perform its
obligations hereunder.
5.7 Affiliates. Gerald Vento and Thomas Sullivan hold a majority of the
voting rights of the members of the Company and hold a majority of the voting
rights of the stockholders of TeleCorp.
ARTICLE VI
COVENANTS
6.1 Consummation of Transaction. Each party shall use all commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable and consistent with
applicable law to carry out all of their respective obligations under this
Agreement, to consummate the Transaction, which efforts shall include, without
limitation, the following:
(1) The parties shall use all commercially reasonable efforts to
cause the Closing to occur and the Transaction to be
consummated in accordance with the terms hereof, and, without
limiting the generality of the foregoing, to obtain all
necessary Consents including, without limitation, the approval
of this Agreement and the Transaction by all Governmental
Authorities and agencies, including the FCC, and to make all
filings with and to give all notices to third parties which
may be necessary or reasonably required in order for the
parties to consummate the Transaction. Polycell and the
Company (or its qualified designee) shall make all filings
with the FCC necessary to obtain FCC approval of the license
transfers contemplated hereunder no later than ten (10) days
following the date on which this Agreement is fully executed
by each of Polycell and the Company.
(2) Each party shall furnish to the other party all information
concerning such party and its Affiliates reasonably required
-10-
<PAGE>
for inclusion in any application or filing to be made by
Polycell or the Company or any other party in connection with
the Transaction or otherwise to determine compliance with
applicable FCC Rules.
(3) Upon the request of any other party, each party shall
forthwith execute and deliver, or cause to be executed and
delivered, such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other
documents as may reasonably be requested by such party in
order to effectuate the purposes of this Agreement.
Nothing in this Agreement shall be construed to require the parties
to consummate the Closing if any regulatory approval would require that it (i)
divest or hold separate any of its assets existing as of the date hereof other
than as contemplated by this Agreement or (ii) otherwise take or commit to take
any action that limits its freedom of action in any material respect with
respect to any of its businesses, product lines or assets.
6.2 Confidentiality.
(1) Each party shall, and shall cause each of its Affiliates, and
its and their respective shareholders, members, managers,
directors, officers, employees and agents (collectively,
"Representatives") to, keep secret and retain in strictest
confidence any and all Confidential Information relating to
any other party that it receives in connection with the
negotiation or performance of this Agreement, and shall not
disclose such Confidential Information, and shall cause its
Representatives not to disclose such Confidential Information,
to anyone except the receiving party's Affiliates,
Representatives and legal and financial advisors. Until the
Closing, each party agrees to use Confidential Information
received from another party only (i) to evaluate its interest
in pursuing the Transaction and (ii) to pursue such
Transaction, but not for any other purpose. All Confidential
Information furnished pursuant to this Agreement shall be
returned promptly to the party to whom it belongs upon request
by such party.
(2) The obligations set forth in Section 6.2(1) shall be
inoperative with respect to Confidential Information that (i)
is or becomes generally available to the public other than as
a result of disclosure by the receiving party or its
Representatives, (ii) was available to the receiving party on
a non-confidential basis prior to its disclosure to the
receiving party, or (iii) becomes available to the receiving
party on a non-confidential basis from a source other than the
providing
-11-
<PAGE>
party or its agents, provided that such source is not known by
the receiving party to be bound by a confidentiality agreement
with the providing party or the Representatives or was
otherwise prohibited from obtaining or disseminating
Confidential Information.
(3) To the fullest extent permitted by law, if a party or any of
its Affiliates or Representatives breaches, or threatens to
commit a breach of, this Section 6.2, the party whose
Confidential Information shall be disclosed, or threatened to
be disclosed, shall have the right and remedy to have this
Section 6.2 specifically enforced by any court having
jurisdiction, it being acknowledged and agreed that money
damages will not provide an adequate remedy to such party.
Nothing in this Section 6.2 shall be construed to limit the
right of any party to collect money damages in the event of
breach of this Section 6.2.
(4) Anything else in this Agreement notwithstanding, each party
shall have the right to disclose any information, including
Confidential Information of the other party or such other
party's Affiliates, in any filing with any regulatory agency,
court or other authority or any disclosure to a trustee of
public debt of a party to the extent that the disclosing party
determines in good faith that it is required by Law,
regulation or the terms of such debt to do so, provided that
any such disclosure shall be as limited in scope as possible
and shall be made only after giving the other party as much
notice as practicable of such required disclosure and an
opportunity to contest such disclosure if possible.
6.3 Certain Covenants. From and after the execution and delivery of this
Agreement to and including the Closing Date, Polycell shall:
(1) comply with all applicable Laws, including all such Laws
relating to, or that would be reasonably expected to relate
to, any Polycell License or its use;
(2) maintain each Polycell License in full force and effect;
(3) except to effect the transfer of the Polycell Licenses to the
Company as contemplated hereunder, not (i) sell, transfer,
assign or dispose of, or offer to, or enter into any
agreement, arrangement or understanding to, sell, transfer,
assign or dispose of any Polycell License or any interest
therein, or negotiate therefor, or (ii) create, incur or
suffer to exist any Lien of any nature whatsoever relating to
any Polycell
-12-
<PAGE>
License or any interest therein. Without limiting the
foregoing, Polycell shall not incur any material obligation or
liability, absolute or contingent, relating to or affecting
any Polycell License or its use.
(4) give written notice to the Company promptly upon the
commencement of, or upon obtaining knowledge of any facts that
would give rise to a threat of, any claim, action or
proceeding commenced against or relating to (i) it, its
properties or assets, including any Polycell License or its
use, and which could have a Material Adverse Effect on it or
materially adversely affect the Transaction, or (ii) any
Polycell License or its use;
(5) promptly after obtaining knowledge of the occurrence of, or
the impending or threatened occurrence of, any event which
could cause or constitute a material breach of any of its
warranties, representations, covenants or agreements contained
in this Agreement, give notice in writing of such event, or
occurrence or impending or threatened event or occurrence, to
the other party and use best efforts to prevent or to promptly
remedy such breach; and
(6) cause the Company to be advised promptly in writing of(i) any
event, condition or state of facts known to it, which has had
or could have a Material Adverse Effect on it, or materially
adversely affect any Polycell License or its use or the
Transaction or (ii) any claim, action or proceeding which
seeks to enjoin the consummation of the Transaction.
6.4 FCC Filings. From and after the execution and delivery of this
Agreement to and including the Closing Date, Polycell shall not make any filings
with the FCC or agree to any proposal, settlement, amendment or alteration with
the FCC with respect to any Polycell License without the Company's prior written
consent, which consent shall not be unreasonably withheld.
6.5 Certain Advances for FCC Debt Payments. After the execution date
hereof, the Company shall to make payments of principal and/or interest to the
FCC or the United States Department of the Treasury ("Treasury") on behalf of
Polycell that may become due under the FCC Debt prior to Closing, which is
approximately $30,000 in the aggregate per quarter (collectively, "Advances").
(1) No earlier than thirty (30) days nor later than twenty (20) days
prior to a scheduled payment under the FCC Debt, Polycell shall deliver a
written notice to the Company that sets forth the payment due date (the "Payment
Due Date") and the exact amount of such interest payment ("Payment Amount").
Upon receipt of such notice, the Company shall deliver funds to the FCC or the
Treasury
-13-
<PAGE>
in an amount equal to the Payment Amount via wire transfer in immediately
available funds no later than the Payment Due Date.
(2) In the event this Agreement is terminated prior to Closing in
accordance with Section 9.1 below, due to Polycell's breach or failure to
otherwise perform and the Company is not itself in breach, Polycell shall, no
later than twenty (20) days after such termination, deliver via wire transfer in
immediately available funds to the Company funds in an amount equal to all of
the Advances made by the Company hereunder as of such termination date.
(3) At Closing, Advances shall be deemed satisfied in full without
payment or transfer by Polycell.
6.6 Unjust Enrichment. To the extent that any unjust enrichment
penalties are assessed against Polycell as result of the License Transfer, the
Company shall assume all of Polycell's obligations and liabilities related to
such penalty.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Obligations of All Parties. The obligation of each of
the parties to consummate the Transaction contemplated to occur at the Closing
shall be conditioned on the following, unless waived by each of the parties:
(1) The Consent of the FCC to the License Transfer shall have been
obtained pursuant to a Final Order, free of any conditions
materially adverse to the Company (or its qualified designee)
or Polycell. For the purposes of this paragraph, "Final Order"
means an action or decision that has been granted by the FCC
as to which (i) no request for a stay or similar request is
pending, no stay is in effect, the action or decision has not
been vacated, reversed, set aside, annulled or suspended 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 including other
administrative or judicial review, or in effect and any
deadline for filing any such appeal that may be designated by
statute or rule has passed.
(2) All Consents by any Governmental Authority (other than the
Consents referred to in paragraph (1) above) required to
-14-
<PAGE>
permit the consummation of the Transaction, the failure to
obtain or make which would be reasonably expected to have a
Material Adverse Effect on the Company (or its qualified
designee) or Polycell or to materially adversely affect the
Transaction or the parties' ability to perform their
obligations under this Agreement shall have been obtained or
made.
(3) No preliminary or permanent injunction or other order, decree
or ruling issued by a Governmental Authority, nor any statute,
rule, regulation or executive order promulgated or enacted by
any Governmental Authority, shall be in effect that would (i)
impose material limitations on the ability of any party to
consummate the Transaction or prohibit such consummation, or
(ii) impair in any material respect the operation of the
Company.
7.2 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Transaction contemplated to occur at the Closing shall
be further conditioned upon the satisfaction or fulfillment, at or prior to the
Closing, of the following conditions by each of the other parties, unless waived
by the Company:
(1) The representations and warranties of Polycell contained
herein shall be true and correct in all material respects
(except for representations and warranties that are qualified
as to materiality, which shall be true and correct), in each
case when made and at and as of the Closing (except for
representations and warranties made as of a specified date,
which shall be true and correct as of such date) with the same
force and effect as though made at and as of such time.
(2) Polycell shall have performed in all respects all agreements
contained herein required to be performed by it at or before
the Closing.
(3) An officer of Polycell shall have delivered to the Company a
certificate, dated the Closing Date, certifying as to the
fulfillment of the conditions set forth in paragraphs (1) and
(2) above as to Polycell.
(4) Polycell shall have furnished the Company with opinions of
counsel, each dated the Closing Date, customary for a
transaction of this nature and, reasonably satisfactory to the
Company and its counsel.
(5) All corporate and other proceedings of Polycell in connection
with the License Transfer, and all documents and
-15-
<PAGE>
instruments incident thereto, shall be satisfactory in form
and substance to the Company, and Polycell shall have
delivered to the Company such receipts, documents, instruments
and certificates, in form and substance reasonably
satisfactory to the Company, which the Company shall have
requested.
7.3 Conditions to the Obligations of Polycell. The obligation of Polycell
to consummate the Transaction contemplated to occur at the Closing shall be
further conditioned upon the satisfaction or fulfillment, at or prior to the
Closing, of the following conditions, unless waived by Polycell:
(1) The representations and warranties of the Company contained
herein shall be true and correct in all material respects
(except for representations and warranties that are qualified
as to materiality, which shall be true and correct), in each
case when made and at and as of the Closing (except for
representations and warranties made as of a specified date,
which shall be true and correct as of such date) with the same
force and effect as though made at and as of such time, except
for inaccuracies in respect of the representations and
warranties set forth in Section 5.3 (disregarding any
qualifications as to materiality contained therein) that in
the aggregate would not be reasonably expected to have a
Material Adverse Effect on the Company or its ability to
perform its obligations under this Agreement or to materially
adversely affect the Transaction.
(2) The Company shall have performed in all material respects all
agreements contained herein required to be performed by it at
or before the Closing.
(3) An officer of the Company shall have delivered to Polycell a
certificate, dated the Closing Date, certifying as to the
Company the fulfillment of the conditions set forth in
paragraphs (1) and (2) above as to the Company.
(4) The Company shall have furnished Policy with opinions of
counsel, each dated the Closing Date, customary for a
transaction of this nature and, reasonably satisfactory to the
Policy and its counsel.
(5) All limited liability company and other proceedings of the
Company in connection with the License Transfer, and all
documents and instruments incident thereto, shall be
reasonably satisfactory in form and substance to Polycell, and
the Company shall have delivered to Polycell such receipts,
documents, instruments and certificates, in form
-16-
<PAGE>
and substance reasonably satisfactory to Polycell, which
Polycell shall have reasonably requested.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival. The representations and warranties made in this Agreement
shall survive the Closing until the second (2nd) annual anniversary thereof and
shall thereupon expire together with any right to indemnification in respect
thereof (except to the extent a written notice asserting a claim for breach of
any such representation or warranty and describing such claim in reasonable
detail shall have been given prior to such date to the party which made such
representation or warranty). The covenants and agreements contained herein to be
performed or complied with prior to the Closing shall expire at the Closing. The
covenants and agreements contained in this Agreement to be performed or complied
with after the Closing shall survive the Closing; provided that the right to
indemnification pursuant to this Article VIII in respect of a breach of a
representation or warranty shall expire on the second (2nd) annual anniversary
of the Closing (except to the extent written notice asserting a claim thereunder
and describing such claim in reasonable detail shall have been given prior to
such date to the party from whom such indemnification is sought). After the
Closing, the sole and exclusive remedy of the parties for any breach or
inaccuracy of any representation or warranty contained in this Agreement, or any
other claim (whether or not alleging a breach of this Agreement) that arises out
of the facts and circumstances constituting such breach or inaccuracy, shall be
the indemnity provided in this Article VIII. For purposes of determining
materiality thresholds in Section 8.2 and 8.3 below, any qualifications as to
materiality contained elsewhere herein shall be disregarded.
8.2 Indemnification by Polycell. Polycell shall indemnify and hold
harmless the Company and its Affiliates, and the shareholders, members,
managers, directors, officers, employees, agents and/or the legal
representatives of any of them (each, a "Section 8.2 Indemnified Party"),
against all liabilities and expenses (including amounts paid in satisfaction of
judgments, in compromise, as fines and penalties, and as counsel fees)
(collectively, "Losses") incurred by him or it in connection with the
investigation, defense, or disposition of any action, claim, charge, suit or
other proceeding in which any Section 8.2 Indemnified Party may be involved or
with which he or it may be threatened that arises out of or results from (a) any
representation or warranty of such indemnifying party contained in this
Agreement being untrue in any material respect as of the date on which it was
made, (b) any material default by such indemnifying party or any of its
Affiliates in the performance of their respective obligations under this
Agreement, except to the extent (but only to the extent) any such Losses arise
out of or result from the gross negligence or willful misconduct of such Section
8.2 Indemnified Party or his or its Affiliates.
8.3 Indemnification by the Company. The Company shall indemnify and hold
harmless Polycell and its Affiliates, and the shareholders, members, managers,
directors, officers, employees, agents and/or the legal representatives of any
of them (each, a
-17-
<PAGE>
"Section 8.3 Indemnified Party"), against all Losses incurred by him or it in
connection with the investigation, defense, or disposition of any action, suit
or other proceeding in which any Section 8.3 Indemnified Party may be involved
or with which he or it may be threatened that arises out of or results from (a)
any representation or warranty of the Company contained in this Agreement being
untrue in any material respect as of the date on which it was made or (b) any
material default by the Company or any of its Affiliates in the performance of
their respective obligations under this Agreement, except to the extent (but
only to the extent) any such Losses arise out of or result from the gross
negligence or willful misconduct of such Section 8.3 Indemnified Party or his or
its Affiliates.
8.4 Procedures.
(1) The terms of this Section 8.4 shall apply to any claim (a
"Claim") for indemnification under the terms of Sections 8.2
or 8.3. The Section 8.2 Indemnified Party or Section 8.3
Indemnified Party Indemnified Party (each, an "Indemnified
Party") as the case may be, shall give prompt written notice
of such Claim to the indemnifying party (the "Indemnifying
Party") under the applicable Section, which party may assume
the defense thereof, provided that any delay or failure to so
notify the Indemnifying Party shall relieve the Indemnifying
Party of its obligations hereunder only to the extent, if at
all, that it is materially prejudiced by reason of such delay
or failure. The Indemnified Party shall have the right to
approve any counsel selected by the Indemnifying Party and to
approve the terms of any proposed settlement, each of such
approvals not to be unreasonably delayed or withheld (unless
such settlement provides only, as to the Indemnified Party,
the payment of money damages actually paid by the Indemnifying
Party and a complete release of the Indemnified Party in
respect of the claim in question). Notwithstanding any of the
foregoing to the contrary, the provisions of this Article VIII
shall not be construed so as to provide for the
indemnification of any Indemnified Party for any liability to
the extent (but only to the extent) that such indemnification
would be in violation of applicable law or that such liability
may not be waived, modified or limited under applicable law,
but shall be construed so as to effectuate the provisions of
this Article VIII to the fullest extent permitted by law.
(2) In the event that the Indemnifying Party undertakes the
defense of any Claim, the Indemnifying Party will keep the
Indemnified Party advised as to all material developments in
connection with such Claim, including, but not limited to,
promptly furnishing the Indemnified Party with copies of all
material documents filed or served in connection therewith.
-18-
<PAGE>
(3) In the event that the Indemnifying Party fails to assume the
defense of any Claim within ten business days after receiving
written notice thereof, the Indemnified Party shall have the
right, subject to the Indemnifying Party's right to assume the
defense pursuant to the provisions of this Article VIII, to
undertake the defense, compromise or settlement of such Claim
for the account of the Indemnifying Party. Unless and until
the Indemnified Party assumes the defense of any Claim, the
Indemnifying Party shall advance to the Indemnified Party any
of its reasonable attorneys' fees and other costs and expenses
incurred in connection with the defense of any such action or
proceeding. Each Indemnified Party shall agree in writing
prior to any such advancement that, in the event he or it
receives any such advance, such Indemnified Party shall
reimburse the Indemnifying Party for such fees, costs and
expenses to the extent that it shall be determined that he or
it was not entitled to indemnification under this Article
VIII.
(4) In no event shall an Indemnifying Party be required to pay in
connection with any Claim for more than one firm of counsel
(and local counsel) for each of the following groups of
Indemnified Parties: (i) Polycell, its Affiliates, and the
shareholders, members, managers, directors, officers,
employees, agents and/or the legal representatives of any of
them; and (ii) the Company and its Affiliates, and the
shareholders, members, managers, directors, officers,
employees, agents and/or the legal representatives of any of
them.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated, and the Transaction
abandoned, without further obligation of any party, except as set forth herein,
at any time prior to the Closing Date:
(1) by mutual written consent of the parties;
(2) by any party by written notice to the other party, if the
Closing shall not have occurred on or before February 28,
2001; provided that the party electing to exercise such right
is not otherwise in breach of its obligations under this
Agreement;
-19-
<PAGE>
(3) by any party (provided that such party is not otherwise in
breach) if any other party has breached a material
representation, warranty, covenant or agreement set forth
herein and fails to cure such breach within thirty (30) days
of written notice thereof (except that no cure period shall be
provided for a breach that by its nature cannot be cured); or
(4) by any party by written notice to the other party, if the
consummation of the Transaction shall be prohibited by a
final, non-appealable order, decree or injunction of a court
of competent jurisdiction.
9.2 Effect of Termination. In the event of a termination of this
Agreement, no party hereto shall have any liability or further obligation to any
other party to this Agreement, except as set forth in paragraphs (1) and (2)
below, and except that nothing herein will relieve any party from liability for
any breach by such party of this Agreement.
(1) In the event of a termination of this Agreement pursuant to
Section 9.1, all provisions of this Agreement shall terminate,
except Section 6.2 and Articles VIII and X, and unless such
termination occurs based upon a breach or other failure to
perform by the Company, the Escrow Agent shall immediately
refund the Deposit to the Company as more particularly
provided in Section 2.3.
(2) Whether or not the Closing occurs, all costs and expenses
incurred in connection with this Agreement and the Transaction
shall be paid by the party incurring such expenses.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended, modified
or supplemented only by written agreement of each of the parties.
10.2 Waiver of Compliance; Consents. Any failure of any of the parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the party or parties entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirement for a waiver of
compliance as set forth in this Section 10.2.
-20-
<PAGE>
10.3 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered or certified mail, return receipt requested, postage prepaid.
If to the Company: ABC Wireless, LLC
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
Attn: Thomas H. Sullivan
Fax: (703) 236-1376
With a copy to: Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Alicia M.V. Wyman, Esq.
Fax: (617) 542-2241
If to Polycell: Polycell Communications, Inc.
27W 281 Geneva Road, Suite K2
Winfield, IL 60190
Facsimile: (630) 752-2855
With a copy to: Thomas Gutierrez, Esq.
Lukas, Nace, Gutierrez & Sachs
Chartered
1111 19th Street, N.W., Suite 1200
Washington, D.C. 20036
Facsimile: (202) 828-8410
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the 5th business day following the day such mailing is
made.
10.4 Parties in Interest; Assignment. This Agreement is binding upon and
is solely for the benefit of the parties hereto and their respective permitted
successors, legal representatives and permitted assigns. Neither party may
assign its rights and obligations hereunder without the prior written consent of
the other party, except that the Company
-21-
<PAGE>
shall have the right to assign its rights under this Agreement, in whole or in
part, without Polycell's consent, to AT&T Wireless PCS, LLC ("AT&T"), or its
Affiliate, with the express requirement that AT&T assign such rights and
obligations to TeleCorp and/or its subsidiaries through an intermediary;
provided, that TeleCorp assumes the obligations and liabilities of the Company
under this Agreement related to the rights and interests assigned to TeleCorp.
10.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflicts of law principles thereof. The parties hereto hereby irrevocably and
unconditionally consent to submit to the non-exclusive jurisdiction of the
courts of the State of Delaware and of the United States of America located in
the District of Columbia (the "DC Courts") for any litigation arising out of or
relating to this Agreement and the Transaction, waive any objection to the
laying of venue of any such litigation in the DC Courts and agrees not to plead
or claim in any DC Court that such litigation brought therein has been brought
in an inconvenient forum.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.7 Interpretation. The article and section headings contained in this
Agreement are for convenience of reference only, are not part of the agreement
of the parties and shall not affect in any way the meaning or interpretation of
this Agreement. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
antecedent Person or Person may require.
10.8 Entire Agreement. This Agreement, including the exhibits and
schedules hereto and the certificates and instruments delivered pursuant to the
terms of this Agreement, embody the entire agreement and understanding of the
parties hereto in respect of the Transaction. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
Transaction.
10.9 Publicity. So long as this Agreement is in effect, the parties agree
to consult with each other in issuing any press release or otherwise making any
public statement with respect to the Transaction, and no party shall issue any
press release or make any such public statement prior to such consultation,
except as may be required by Law. No press release or other public statement by
the parties hereto shall disclose any of the financial terms of the Transaction
without the prior consent of the other parties, except as may be required by
Law. A breach of the provisions of this Section 10.9 by a party shall not give
rise to any right to terminate this Agreement.
10.10 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly
-22-
<PAGE>
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any DC Courts.
10.11 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
POLYCELL COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
ABC WIRELESS, LLC
By: /s/ [ILLEGIBLE]
--------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
daze first above written.
POLYCELL COMMUNICATIONS, INC.
By: /s/ Mark R. Erickson
--------------------------
Name: Mark R. Erickson
Title: Operations Manager
ABC WIRELESS, LLC
By:__________________________
Name:
Title:
<PAGE>
SCHEDULE I
Polycell License
- --------------------------------------------------------------------------------
BTA Block MHz
- --------------------------------------------------------------------------------
Clinton, IA C 30
- --------------------------------------------------------------------------------
Burlington, IA F 10
- --------------------------------------------------------------------------------
Lincoln, NE F 10
- --------------------------------------------------------------------------------
Quincy, IL F 10
- --------------------------------------------------------------------------------
<PAGE>
Schedule II
FCC Notes and Security Agreements
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is entered into as of February 28,
2000, by and among Polycell Communications, Inc., a Delaware corporation
("Polycell"), ABC Wireless, LLC, a Delaware limited liability company (the
"Company"), and Bankers Trust Company, as escrow agent ("Escrow Agent").
RECITALS
A. Pursuant to that certain License Acquisition Agreement, dated as of
February 28, 2000, by and among Polycell and the Company (the "Acquisition
Agreement") the Company is acquiring certain PCS licenses from Polycell as more
particularly described therein. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings given such terms in the
Acquisition Agreement. Escrow Agent acknowledges receipt of the Acquisition
Agreement.
B. Pursuant to Section 2.2(1) of the Acquisition Agreement, the Company
has agreed that, upon execution of the Acquisition Agreement (the "Execution
Date"), the Company shall deposit an earnest money deposit of Three Million
Three Hundred Eighty-Four Thousand Three Hundred Fifty Dollars ($3,384,350) in
immediately available funds (the "Deposit") into an escrow account (the "Escrow
Account").
C. Escrow Agent is willing to hold the Escrow Account in escrow in
accordance with the provisions of this Agreement, and to act as escrow agent
hereunder.
NOW, THEREFORE, for and in consideration of Ten and No/l00 Dollars
($10.00) in hand paid, the mutual premises and covenants set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged conclusively, the parties hereto, intending to be and
being legally bound, agree as follows:
1. Appointment of the Escrow Agent. The Company and Polycell hereby
appoint and designate the Escrow Agent as escrow agent for the purposes set
forth herein, and the Escrow Agent hereby accepts such appointment, subject to
the terms and conditions contained herein.
2. Delivery of Deposit. Simultaneously with the execution of this
Agreement, the Company has delivered or caused to be delivered to the Escrow
Agent, the Deposit (collectively, with the Escrowed Interest, as hereinafter
defined, the "Escrow Fund"), to be held by the Escrow Agent pursuant to the
terms and conditions of this Agreement. The Escrow Agent acknowledges receipt of
the Deposit and agrees to hold and distribute the Escrow Fund as provided
herein.
3. Treatment of Escrow Fund. The Escrow Agent shall, upon the written
request of Polycell, which shall occur no more frequently than one time per
calendar quarter, invest and reinvest the Deposit in money market mutual funds,
direct obligations
<PAGE>
of the United States government, in federally insured savings accounts or in
bank certificates of deposits, as Polycell shall instruct, and shall be fully
protected in acting upon such instructions. Interest from the investment of the
Deposit (the "Escrow Interest") (i) shall become part of the Escrow Fund, and
(ii) shall be segregated and deposited in instruments in the same manner as the
principal of the Deposit, but shall be accounted for separately. The Escrow
Agent shall not be responsible for any loss incurred on the sale of any
investment which is required to be sold or liquidated to make a payment required
hereunder.
4. Disposition of Escrow Fund. (a) Upon receipt of joint written
instructions signed by the representatives of the Company and Polycell listed in
the notice provisions (Section 8(a)), the Escrow Agent shall deliver the Escrow
Fund in accordance with such written instructions.
(b) If the Escrow Agent shall not have received such joint written
instructions by February 15, 2001 (or the first (1st) business thereafter is
that date is not a business day), and a controversy exists between the Company
and Polycell as to the correct disposition of the Escrow Fund, the Escrow Agent
shall continue to hold the Escrow Fund until (i) the Company and Polycell
subsequently deliver to the Escrow Agent joint written instructions with respect
to the disposition of the Escrow Fund, or (ii) the Escrow Agent receives a
certified copy of a final decree, order or decision of a court of competent
jurisdiction constituting the final determination of any dispute between the
Company and Polycell with respect to the Escrow Fund to be distributed
hereunder, which distribution shall be made in accordance with such notice or
judicial determination.
5. Escrow Agent.
(a) Duties and Responsibilities. The duties and responsibilities of the
Escrow Agent hereunder shall be limited to those expressly set forth in this
Agreement, and the Escrow Agent shall not be bound in any way by any other
contract or agreement between the parties hereto, whether or not the Escrow
Agent has knowledge of any such contract or agreement or of the terms or
conditions thereof. In the event the Escrow Agent shall be uncertain as to any
duties or responsibilities hereunder or shall receive instructions from any of
the parties hereto with respect to the Escrow Fund which in its belief are in
conflict with any of the provisions of this Agreement, it shall be entitled to
refrain from taking any action until it has consulted with its counsel or it
shall be directed to do so in writing by the parties hereto or by order of a
court of competent jurisdiction in proceedings which the Escrow Agent or any
other party hereto shall be entitled to commence. The Escrow Agent may act upon
the advice of its counsel in taking or refraining from taking any action
hereunder and may act upon any instrument or other writing believed in good
faith to be genuine and to be signed and presented by the proper person or
persons.
(b) Liability. The Escrow Agent shall not be liable to anyone for any
damage, loss or expense incurred as a result of any act or omission of the
Escrow Agent, unless such damage, loss or expense is caused by the Escrow
Agent's willful default or gross negligence. Accordingly, and without limiting
the foregoing, the Escrow Agent shall not incur any such liability with respect
to (i) any action taken or omitted under this
<PAGE>
Agreement, or (ii) any action taken or omitted in reliance upon any instrument,
including any written notice or instruction provided for herein, not only as to
its due execution by an authorized person and as to the validity and
effectiveness of such instrument, but also as to the truth and accuracy of any
information contained therein.
(c) Disputes. In the event of a dispute between any of the parties hereto
sufficient in the discretion of the Escrow Agent to justify its doing so, the
Escrow Agent shall be entitled to tender the Escrow Fund into the registry or
custody of any court of competent jurisdiction, to initiate such legal
proceedings as it deems appropriate, and pursuant thereto, to be discharged from
all further duties and liabilities under this Agreement with respect to the
Escrow Fund so tendered. Any such legal action may be brought in any such court
as the Escrow Agent shall determine to have jurisdiction with respect to such
matter. The filing of any such legal proceedings shall not deprive the Escrow
Agent of its rights to indemnification hereunder.
(d) Attachment. In the event all or any part of the Escrow Fund shall be
attached, garnished or levied upon pursuant to any court order, or the delivery
thereof shall be stayed or enjoined by a court order, or any other order,
judgment or decree shall be made or entered by any court affecting the Escrow
Fund or any part hereof or any act of the Escrow Agent, the Escrow Agent is
authorized to obey and comply with all writs, orders, judgments or decrees so
entered or issued by any such court, without the necessity of inquiring whether
such court has jurisdiction; and if the Escrow Agent obeys or complies with any
such writ, order, or decree, it shall not be liable to any of the parties hereto
or any other person by reason of such compliance.
(e) Legal Action. The Escrow Agent shall have no duty to incur any
out-of-pocket expenses or to take any legal action in connection with this
Agreement or towards its enforcement, or to appear in, prosecute or defend any
action or legal proceeding that would result in or might require it to incur any
cost, expense, loss, or liability, unless and until it shall be indemnified with
respect thereto in accordance with Section 5(f) of this Agreement.
(f) Indemnification. Without determining or limiting any rights as between
the Company and Polycell, which rights shall exist outside this Agreement and
not be prejudiced hereby, the Company and Polycell jointly and severally hereby
agree to indemnify and hold harmless the Escrow Agent against any and all cost,
loss, damage, disbursement, liability, and expense, including reasonable
attorneys' fees, which may be imposed upon or incurred by the Escrow Agent
hereunder, or in connection with the performance of its duties hereunder,
including any litigation arising out of this Agreement, or involving the subject
matter hereof, except only costs, losses, claims, damages, disbursements,
liabilities and expenses arising out of the Escrow Agent's acts or omissions for
which the Escrow Agent is adjudged willfully malfeasant or grossly negligent by
a final decree, order or judgment of a court of competent jurisdiction from
which no appeal is taken within the applicable appeals period.
<PAGE>
(g) Resignation. The Escrow Agent, and the Escrow Agent's successors
hereinafter appointed, may at any time resign by giving notice in writing to the
Company and Polycell and shall be discharged of all duties hereunder upon the
appointment of a successor escrow agent which shall be appointed by mutual
agreement of the Company and Polycell. If the Company and Polycell are unable to
agree on a successor escrow agent, either party may petition a court of
competent jurisdiction to appoint one. From the date upon which the Escrow Agent
sends notice of any resignation until the acceptance by a successor escrow agent
appointed as provided herein, the Escrow Agent's sole obligation hereunder shall
be to hold the Escrow Fund delivered to it in accordance with this Agreement.
Any such successor escrow agent shall deliver to the Company and Polycell a
written certificate accepting such appointment hereunder, and thereupon it shall
succeed to all the rights and duties of the Escrow Agent hereunder and shall be
entitled to receive the benefit of the provisions set forth above.
(h) Law Firm Escrow Agent. Nothing contained herein shall be deemed to
prevent any law firm serving as the Escrow Agent, or as a successor escrow
agent, from acting as counsel for the Company or Polycell, any of their
respective stockholders, or any of their respective affiliates, or any other
party in any matter, including resolution of disputes and claims subject to,
arising under or related to the Asset Purchase Agreement or this Agreement.
6. Escrow Agent Fees and Expenses. The Escrow Agent shall be entitled to
reasonable compensation for its services hereunder as Escrow Agent and for
reimbursement for its out of pocket costs and expenses. Such amounts, including
attorneys' fees, shall be borne one half by the Company and one half by
Polycell, provided, however, that if the Escrow Agent's only actions hereunder
are to invest and reinvest the Escrow Fund and to distribute the Escrow Fund
pursuant to Section 4 hereof and there are no disputes of any nature with
respect to the subject matter hereof, such amounts shall be borne by the
Company.
7. Termination of Agreement. When all of the Escrow Fund shall have been
distributed pursuant to the provisions of this Agreement, this Agreement, except
for the provisions of Sections 5(b) and 5(f) hereof, shall terminate.
8. Miscellaneous.
(a) Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered or certified mail, return receipt requested, postage prepaid.
If to the Company: ABC Wireless, LLC
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
Attn: Thomas H. Sullivan
<PAGE>
Fax: (703) 236-1376
With a copy to: Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Alicia M.V. Wyman, Esq.
Fax: (617) 542-2241
If to Polycell: Polycell Communications, Inc.
27W 281 Geneva Road, Suite K2
Winfield, IL 60190
Attn: Mark Erickson
Facsimile: (630) 752-2855
With a copy to: Thomas Gutierrez, Esq.
Lukas, Nace, Gutierrez & Sachs
Chartered
1111 19th Street, N.W., Suite 1200
Washington, D.C. 20036
Facsimile: (202) 828-8410
If to the Escrow
Agent: Bankers Trust Company
4 Albany Street
4th Floor
New York, NY 10006
Attn: Escrow Department
Facsimile (212) 250-6725
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the 5th business day following the day such mailing is
made.
(b) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any
kind not expressly
<PAGE>
set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this
Agreement.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
POLYCELL COMMUNICATIONS, INC.
By:_____________________________
Name:___________________________
Its:____________________________
ABC WIRELESS, LLC
By:_____________________________
Name:___________________________
Its:____________________________
BANKERS TRUST COMPANY
By: /s/ Damian Harmon
----------------------------
Name: Damian Harmon
Its: Assistant Treasurer
<PAGE>
set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this
Agreement.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
POLYCELL COMMUNICATIONS, INC.
By:_____________________________
Name:___________________________
Its:____________________________
ABC WIRELESS, LLC
By: /s/ [ILLEGIBLE]
----------------------------
Name:___________________________
Its:____________________________
BANKERS TRUST COMPANY
By:_____________________________
Name:___________________________
Its:____________________________
<PAGE>
set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this
Agreement.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
POLYCELL COMMUNICATIONS, INC.
By /s/ Mark R. Erickson
----------------------------
Name: Mark R. Erickson
Its: Operations Manager
ABC WIRELESS, LLC
By:_____________________________
Name:___________________________
Its:____________________________
BANKERS TRUST COMPANY
By:_____________________________
Name:___________________________
Its:____________________________
<PAGE>
WIRE INSTRUCTIONS
Please include the following information:
Bankers Trust Company
4 Albany Street
New York, New York
ABA Number: 021-001-033
A/C: 01-419-647
For the A/C of: Polycell/ABC Wireless Escrow
Attn: Corporate Trust & Agency Services
Carson Mclean
MAILING INSTRUCTIONS
Please include the following information:
Bankers Trust Company
Corporate Trust & Agency Services
4 Albany Street -MS 5041
Attn: Escrow Services, 4th floor
New York, NY 10006
<PAGE>
EXHIBIT B
Form of License Transfer
ASSIGNMENT
This Assignment (the "Assignment"), dated as of ________________, 2000, is
executed by Polycell Communications, Inc. (the "Assignor") in favor of
______________________________ ("Assignee").
WHEREAS, the Assignor is the present owner of all right, title and
interest in the _____ MHz PCS license for the BTA located in
___________________________ (individually a "License" and collectively, the
"Licenses"); and
WHEREAS, pursuant to Section 3.2(b) of the License Acquisition Agreement
between Assignor and ABC Wireless, L.L.C. ("ABC"), of even date herewith
("Acquisition Agreement"), Assignor desires to assign to Assignee, and Assignee
desires to accept and assume from Assignor, effective as of the date hereof, all
of Assignor's right, title and interest in and to the Licenses.
NOW THEREFORE, in consideration of the purchase price provided in the
Acquisition Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Assignment. Assignor does hereby, assign, transfer and convey to
Assignee, its successors and assigns to and for its or their use
forever, all of Assignor's right, title and interest in and to the
Licenses.
2. Limitations. Nothing contained in this Assignment shall in any way
supersede, modify, replace, amend, change, rescind, waive, exceed,
expend, enlarge or in any way affect the provisions, including
warranties, covenants, agreements, conditions, representations or,
in general any of the rights and remedies, and any of the
obligations and indemnifications of Assignor or ABC, its successors
or assigns set forth in the Acquisition Agreement, including without
limitation any limits on indemnification specified therein. This
Assignment is intended only to effect the transfer of a certain
interest the transfer of which is contemplated in the Acquisition
Agreement and shall be governed in accordance with the terms and
conditions of the Acquisition Agreement.
3. Miscellaneous. This Assignment: (i) may be executed in counterparts,
each of which as so executed shall be deemed to be an original, but
all of which together shall constitute one instrument; and (ii)
shall be governed by and in accordance with the internal laws of the
State of Delaware, without regard to the principles of conflicts of
law thereof.
<PAGE>
IN WITNESS THEREOF, Assignor has caused this Assignment to be duly
executed and delivered as of this ___ day of February, 2000.
[ASSIGNOR]
By:__________________________________
Name:________________________________
Its:_________________________________
<PAGE>
EXHIBIT 10.6.2
================================================================================
AMENDED AND RESTATED
LICENSE ACQUISITION AGREEMENT
among
POLYCELL COMMUNICATIONS, INC.,
CLINTON COMMUNICATIONS, INC.
and
ABC WIRELESS, LLC
Dated as of May 3, 2000
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<C> <S> <C>
ARTICLE I DEFINITIONS........................................................................................ 1
ARTICLE II PURCHASE AND SALE OF LICENSES; PAYMENT OF CONSIDERATION; CERTAIN RESTRICTIONS ON TRANSFER......... 4
2.1 Purchase and Sale of Licenses...................................................................... 4
2.2 Payment of Consideration........................................................................... 4
2.3 Disposition of Deposit............................................................................. 5
ARTICLE III CLOSING............................................................................................ 6
3.1 Time and Place of Closing.......................................................................... 6
3.2 Closing Actions and Deliveries..................................................................... 6
(1) Assignment of Licenses............................................................................. 6
(2) Payment of Funds................................................................................... 6
(3) Assumption of Indebtedness......................................................................... 6
(4) Other Deliveries................................................................................... 6
3.3 Payment of Transfer Taxes.......................................................................... 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF POLYCELL......................................................... 7
4.1 Formation, Power and Authority..................................................................... 7
4.2 Consents; No Conflicts............................................................................. 8
4.3 Litigation......................................................................................... 8
4.4 Brokers............................................................................................ 8
4.5 Polycell License................................................................................... 8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................... 9
5.1 Organization, Power and Authority.................................................................. 9
5.2 Consents; No Conflicts............................................................................. 10
5.3 Litigation......................................................................................... 10
5.4 FCC Compliance..................................................................................... 10
5.5 Brokers............................................................................................ 10
5.6 Financial Condition................................................................................ 10
5.7 Affiliates......................................................................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<C> <S> <C>
ARTICLE VI COVENANTS.......................................................................................... 11
6.1 Consummation of Transaction........................................................................ 11
6.2 Confidentiality.................................................................................... 12
6.3 Certain Covenants.................................................................................. 13
6.4 FCC Filings........................................................................................ 14
6.5 Certain Advances for FCC Debt Interest Payments.................................................... 15
6.6 Unjust Enrichment.................................................................................. 15
ARTICLE VII CLOSING CONDITIONS................................................................................. 15
7.1 Conditions to Obligations of All Parties........................................................... 15
7.2 Conditions to Obligations of the Company........................................................... 16
7.3 Conditions to the Obligations of Polycell.......................................................... 17
ARTICLE VIII SURVIVAL AND INDEMNIFICATION 18
8.1 Survival........................................................................................... 18
8.2 Indemnification by Polycell........................................................................ 18
8.3 Indemnification by the Company..................................................................... 18
8.4 Procedures......................................................................................... 20
ARTICLE IX TERMINATION........................................................................................ 20
9.1 Termination........................................................................................ 21
9.2 Effect of Termination.............................................................................. 21
ARTICLE X MISCELLANEOUS PROVISIONS........................................................................... 21
10.1 Amendment and Modification......................................................................... 21
10.2 Waiver of Compliance; Consents..................................................................... 21
10.3 Notices............................................................................................ 22
10.4 Parties in Interest; Assignment.................................................................... 23
10.5 Applicable Law..................................................................................... 23
10.6 Counterparts....................................................................................... 23
10.7 Interpretation..................................................................................... 23
10.8 Entire Agreement................................................................................... 23
10.9 Publicity.......................................................................................... 23
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<C> <S> <C>
10.10 Specific Performance............................................................................... 24
10.11 Remedies Cumulative................................................................................ 24
</TABLE>
iii
<PAGE>
SCHEDULES AND EXHIBITS
----------------------
Schedule I Polycell Licenses
Schedule II FCC Notes and Security Agreements
Exhibit A Form of Escrow Agreement
Exhibit B Form of License Transfer
================================================================================
iv
<PAGE>
AMENDED AND RESTATED
LICENSE ACQUISITION AGREEMENT
-----------------------------
AMENDED AND RESTATED LICENSE ACQUISITION AGREEMENT, dated as of May 3,
2000, among POLYCELL COMMUNICATIONS, INC., a Delaware corporation ("Polycell")
--------
and Clinton Communications, Inc., a Delaware corporation ("Clinton" and together
-------
with Polycell, the "Sellers"), and ABC WIRELESS, LLC, a Delaware limited
-------
liability company (the "Company").
-------
WHEREAS, Polycell was granted the 10 and 30 MHz PCS licenses described
on Schedule I (each a "Polycell License" and collectively, the "Polycell
---------- ---------------- --------
Licenses"); and
- --------
WHEREAS, Polycell and the Company entered into that certain License
Acquisition Agreement dated as of February 28, 2000 (the "Original Agreement");
------------------
and
WHEREAS, prior to the execution of the Original Agreement, Polycell
formed Clinton as its wholly-owned subsidiary and transferred ownership of the
Polycell License identified on Schedule I to Clinton; and
----------
WHEREAS, Polycell, Clinton and the Company wish to amend and restate
the Original Agreement in order for Clinton as well as Polycell to sell the
Polycell Licenses to the Company, all on the terms and subject to the conditions
herein set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants, conditions and agreements hereinafter
set forth, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used herein, the following terms have the following meanings
(unless indicated otherwise, all Section and Article references are to Sections
and Articles in this Agreement, and all Schedule and Exhibit references are to
Schedules and Exhibits to this Agreement):
"Advances" has the meaning set forth in Section 6.5.
--------
"Affiliate" means, with respect to any Person, any other Person that
---------
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with that Person. For purposes of this
definition, "control" (including the terms "controlling" and "controlled") means
------- ----------- ----------
the power to direct or cause the direction of the management and policies of a
Person, directly or indirectly, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
"Cash Closing Payment" has the meaning set forth in Section 2.2(3)(a).
--------------------
<PAGE>
"Claim" has the meaning set forth in Section 8.4.
-----
"Clinton" has the meaning set forth in the preamble.
-------
"Closing" has the meaning set forth in Section 3.1.
-------
"Closing Date" has the meaning set forth in Section 3.1.
------------
"Company" has the meaning set forth in the preamble.
-------
"Confidential Information" means any and all information regarding the
------------------------
business, finances, operations, products, services and customers of the Person
specified and its Affiliates, in written or oral form or in any other medium.
"Consents" means all consents and approvals of Governmental
--------
Authorities or other third parties necessary to authorize, approve or permit the
parties hereto to consummate the Transaction and for the Company to operate its
business after the Closing Date as currently contemplated.
"Deposit" has the meaning set forth in Section 2.2(1).
-------
"Escrow Agent" means Bankers Trust Company.
------------
"Escrow Agreement" has the meaning set forth in Section 2.2(1).
----------------
"Escrow Fund" has the meaning set forth in Section 2 of the Escrow
-----------
Agreement attached hereto as Exhibit A.
"Escrow Interest" has the meaning set forth in Section 3 of the Escrow
---------------
Agreement attached hereto as Exhibit A.
"FCC" means the Federal Communications Commission or similar
---
regulatory authority established in replacement thereof.
"FCC Debt" means the outstanding principal balance of Nine Hundred
--------
Sixty Thousand One Hundred Seventeen and 41/100 Dollars ($960,117.41) due to the
United States Department of the Treasury incurred in connection with Polycell's
acquisition of the Polycell Licenses, plus all accrued and/or "suspended"
interest and other obligations incident to license ownership, if any,
attributable to the Polycell Licenses, as of the Closing Date. A copy of the
promissory notes and security agreements executed by Polycell and delivered to
the FCC related to Polycell's acquisition of the Polycell Licenses is set forth
on Schedule II attached hereto.
"FCC Filing" has the meaning set forth in Section 6.1(1) hereof.
----------
"FCC Law" means the Communications Act of 1934, as amended by the
-------
Telecommunications Act of 1996, and the rules, regulations and policies
promulgated thereunder.
-2-
<PAGE>
"Final Order" has the meaning set forth in Section 7.1(1).
-----------
"Governmental Authority" means a Federal, state or local court,
----------------------
legislature, governmental agency (including, without limitation, the United
States Department of Justice), commission or regulatory or administrative
authority or instrumentality.
"Indemnified Party" has the meaning set forth in Section 8.4(1).
-----------------
"Indemnifying Party" has the meaning set forth in Section 8.4(1).
------------------
"Law" means applicable common law and any statute, ordinance, code or
---
other law, rule, permit, permit condition, regulation, order, decree, technical
or other standard, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority.
"License" means a license, permit, certificate of authority, waiver,
-------
approval, certificate of public convenience and necessity, registration or other
authorization, consent or clearance to construct or operate a facility,
including any emissions, discharges or releases therefrom, or to transact an
activity or business, to construct a tower or to use an asset or process, in
each case issued or granted by a Governmental Authority.
"License Transfer" has the meaning set forth in Section 3.2(1).
----------------
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest, right of first refusal or right of others therein, or
encumbrance of any nature whatsoever in respect of such asset.
"Losses" has the meaning set forth in Section 8.2.
------
"Material Adverse Effect" means a material adverse effect on the
-----------------------
business, financial condition, assets, liabilities or results of operations or
prospects of the Person specified.
"New York Courts" has the meaning set forth in Section 10.5.
---------------
"Payment Amount" has the meaning set forth in Section 6.5(1).
--------------
"Payment Due Date" has the meaning set forth in Section 6.5(1).
----------------
"Person" means an individual, corporation, partnership, limited
------
liability company, association, joint stock company, Governmental Authority,
business trust, unincorporated organization, or other legal entity.
"Polycell" has the meaning set forth in the preamble.
--------
"Polycell License or Licenses" has the meaning set forth in the first
----------------------------
recital.
-3-
<PAGE>
"Pops" means the Paul Kagan Associates, Inc. estimate of the 1997
----
population of a geographic area.
"Primary Filing" has the meaning set forth in section 6.1(4) hereof.
--------------
"Representatives" has the meaning set forth in Section 6.2(1).
---------------
"Section 8.2 Indemnified Party" has the meaning set forth in Section
-----------------------------
8.2.
"Section 8.3 Indemnified Party" has the meaning set forth in Section
-----------------------------
8.3.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Sellers" has the meaning set forth in the preamble.
-------
"Stock" has the meaning set forth in Section 2.2(3)(b).
-----
"Stock Closing Payment" has the meaning set forth in Section
---------------------
2.2(3)(b).
"TeleCorp" has the meaning set forth in Section 2.2(3)(b).
--------
"Transaction" means the transaction contemplated by this Agreement.
-----------
"Treasury" has the meaning set forth in Section 6.5.
--------
ARTICLE II
PURCHASE AND SALE OF LICENSES; PAYMENT OF CONSIDERATION;
--------------------------------------------------------
CERTAIN RESTRICTIONS ON TRANSFER
--------------------------------
2.1 Purchase and Sale of Licenses. Upon the terms and subject to the
-----------------------------
conditions hereof and in reliance upon the representations, warranties and
agreements herein contained, at the Closing, the Sellers shall sell, transfer,
assign, convey and deliver to the Company (or its qualified designee), free and
clear of all Liens, and the Company agrees to purchase, acquire and accept from
the Sellers, the Polycell Licenses in the frequencies identified on Schedule I.
----------
2.2 Payment of Consideration. Upon the terms and subject to the
------------------------
conditions hereof and in reliance upon the representations, warranties and
agreements herein contained, in consideration of the assignment of the Polycell
Licenses, the following shall occur (collectively, the "Purchase Price"):
--------------
(1) upon execution of the Original Agreement, the Company
delivered to the Escrow Agent an earnest money deposit of Three Million Three
Hundred Eighty-Four Thousand Three Hundred Fifty Dollars ($3,384,350) in
immediately available funds (the "Deposit"), which Deposit will be held and
-------
distributed in accordance with the terms and conditions of the Escrow Agreement
attached hereto as Exhibit A (the "Escrow Agreement"); and
--------- ----------------
-4-
<PAGE>
(2) at Closing, the Escrow Agent shall deliver the Deposit to
Polycell in accordance with the terms of the Escrow Agreement; and
(3) at the Closing the Company shall deliver to Polycell and
Clinton an aggregate amount equal to Three Million Three Hundred Eighty-Four
Thousand Three Hundred Fifty Dollars ($3,384,350) in accordance with the
allocations set forth on Schedule I, at Polycell's and Clinton's respective
----------
options in any combination of, either:
(a) a cash payment in immediately available funds (the "Cash
----
Closing Payment"); and/or
- ---------------
(b) the number of shares of common stock of TeleCorp PCS, Inc.,
or an Affiliate of TeleCorp (the "Stock"), with a cash value, based on the
average trading price for the Stock for the five (5) business days preceding the
Closing Date, equal in the aggregate, as between Polycell and Clinton, to: (i)
Three Million Three Hundred Eighty-Four Thousand Three Hundred Fifty Dollars
($3,384,350), minus (ii) the amount of the Cash Closing Payment (the "Stock
-----
Closing Payment"); provided, that neither Polycell nor Clinton shall make an
- ---------------
election to receive Stock under this Section 2.2(3)(b) until it has received and
reviewed a prospectus for such Stock.
2.3 Disposition of Deposit.
----------------------
(1) Upon Closing, Polycell and the Company shall provide joint
written instructions to the Escrow Agent, instructing the Escrow Agent to
transfer the Escrow Fund and any Escrow Interest to Polycell, all as more
specifically set forth in the Escrow Agreement.
(2) If Closing does not occur due to a breach of the terms of
this Agreement by the Company or any other failure by the Company to fulfill its
obligations hereunder, and neither Polycell nor Clinton is in breach of any of
its obligations hereunder and has fully performed, or is fully willing and able
to perform each of its obligations hereunder, the Company and Polycell shall
provide joint written instructions to the Escrow Agent, instructing the Escrow
Agent to transfer the Escrow Fund to Polycell.
(3) If Closing does not occur due to any cause other than that
set forth in Section 2.3(2) hereof, the Company and Polycell shall provide joint
written instructions to the Escrow Agent, instructing the Escrow Agent to
transfer the Escrow Fund to the Company on the earlier to occur of February 28,
2001 or the date that this Agreement is terminated.
-5-
<PAGE>
ARTICLE III
CLOSING
-------
3.1 Time and Place of Closing. Upon the terms and subject to the
-------------------------
conditions hereof, the closing of the Transaction (the "Closing") shall take
-------
place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., at
10:00 a.m. local time on the twelfth (12th) business day following the date of
receipt of the last Consent required by subsections (1) through (3) of Section
7.1, or at such other place and/or time and/or on such other date as the parties
may agree or as may be necessary to permit the fulfillment or waiver of the
conditions set forth in Article VII (the "Closing Date").
------------
3.2 Closing Actions and Deliveries. Upon the terms and subject to the
------------------------------
satisfaction or waiver by the appropriate party, if applicable, of the
conditions set forth in Article VII, to effect the purchase and sale of the
Polycell Licenses, the parties shall on the Closing Date take the following
actions:
(1) Assignment of Licenses. (a) The Sellers shall pay in full
----------------------
the FCC Debt in order to remove any and all Liens created
thereby; and
(b) The Sellers shall execute and deliver to the Company
one or more instruments of assignment, substantially in the
form of Exhibit B, sufficient to assign to the Company (or
---------
its qualified designee) the Polycell Licenses (such
assignment being herein referred to as the "License
-------
Transfer").
--------
(2) Closing Payment. The Company shall deliver or cause to be
---------------
delivered to the Sellers:
(a) the Cash Closing Payment, if any, by wire transfer or
other form of immediately available funds; and/or
(b) the Stock Closing Payment in the form of stock
certificates duly executed, if any.
(3) Deposit. The Escrow Agent shall deliver the Deposit to
-------
Polycell in accordance with the terms of the Escrow
Agreement.
(4) Other Deliveries. The parties shall execute and deliver or
----------------
cause to be executed and delivered all other documents,
instruments, opinions and certificates contemplated by this
Agreement to be delivered at the Closing or necessary and
appropriate in order to consummate the Transaction
contemplated to be consummated on the Closing Date.
-6-
<PAGE>
3.3 Payment of Transfer Taxes. The Company shall pay or cause to be
-------------------------
paid at the Closing or, if due thereafter, promptly when due, all gross receipts
taxes, gains taxes (including, without limitation, real property gains tax or
other similar taxes), transfer taxes, sales taxes, stamp taxes, and any other
taxes, but excluding any Federal, State or local income taxes payable in
connection with the transfer of the Polycell Licenses.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
Each of the Sellers represents and warrants to the Company as follows:
4.1 Formation, Power and Authority.
------------------------------
(1) It is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation
and has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business
as now being conducted. Each of them has furnished or will
furnish before closing to the Company a true and correct copy
of its Certificate of Incorporation and its Bylaws, as in
effect on the date hereof and as of the Closing Date.
(2) It has the requisite power and authority to execute, deliver
and perform this Agreement and each other instrument,
document, certificate and agreement required or contemplated
to be executed, delivered and performed by it hereunder and
thereunder to which it is or will be a party.
(3) It is duly qualified to do business in each jurisdiction where
the character of its properties owned or held under lease or
the nature of its activities makes such qualification
necessary.
(4) The execution and delivery of this Agreement by it and the
consummation of the Transaction by it have been duly and
validly authorized by its Board of Directors (or equivalent
body) and no other proceedings on its part which have not been
taken (including, without limitation, approval of its
shareholders) are necessary to authorize this Agreement or to
consummate the Transaction.
(5) This Agreement has been duly executed and delivered by it and
constitutes its valid and binding obligation, enforceable
against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to
-7-
<PAGE>
enforcement of creditors' rights generally and may be subject
to general principles of equity.
(6) As of the Closing Date, after giving effect to the
Transaction, it is not in breach of any obligation under this
Agreement.
4.2 Consents; No Conflicts. Neither the execution, delivery and
----------------------
performance by it of this Agreement nor the consummation of the Transaction will
(a) conflict with, or result in a breach or violation of, any provision of its
organizational documents; (b) constitute, with or without the giving of notice
or passage of time or both, a breach, violation or default, create a Lien, or
give rise to any right of termination, modification, cancellation, prepayment or
acceleration, under (i) any Law or License or (ii) any note, bond, mortgage,
indenture, lease, agreement or other instrument, in each case which is
applicable to or binding upon it or any of its assets; or (c) require any
Consent or the approval of its shareholders, officers, Board of Directors or
similar constituent bodies, as the case may be (which approvals have not been
obtained). There is no fact relating to it or its Affiliates that would be
reasonably expected to prevent it from consummating the Transaction or
disqualify the Company from obtaining the Consents (including without
limitation, FCC Consent) required in order to consummate the License Transfer as
provided for in this Agreement.
4.3 Litigation. There is no action, proceeding or investigation
----------
pending or, threatened against it or any of its properties or assets that would
be reasonably expected to have an adverse effect on its ability to consummate
the Transaction or to fulfill its obligations under this Agreement, or which
seeks to prevent or challenge the Transaction. There is no judgment, decree,
injunction, rule or order outstanding against it which would limit in any
material respect its ability to operate its business in the manner currently
contemplated.
4.4 Brokers. It has not employed any broker, finder or investment
-------
banker or incurred any liability for any brokerage fees, commissions or finder's
fees in connection with the Transaction.
4.5 Polycell Licenses. It is the authorized legal holder, free and
-----------------
clear of any Liens other than the FCC Debt, of each of the Polycell Licenses
designated on Schedule I, a true and correct copy of which is attached to
----------
Schedule I. Each Polycell License is valid and in full force and effect. There
- ----------
is not pending nor threatened against it or against any Polycell License, any
application, action, petition, objection or other pleading, or any proceeding
with the FCC which questions or contests the validity of, or seeks the
revocation, nonrenewal or suspension of, any Polycell License, which seeks the
imposition of any modification or amendment with respect thereto, or which would
have a Material Adverse Effect on the ability of the Company to employ any
Polycell License in its business. None of the Polycell Licenses is subject to
any conditions other than those appearing on the face of such Polycell License
itself and those imposed by FCC Law.
-8-
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Sellers as follows:
5.1 Organization, Power and Authority.
---------------------------------
(1) It is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to own,
lease and operate its properties and to carry on its business
as now being conducted and proposed to be conducted. The
Company has furnished, or will furnish prior to Closing, to
the Sellers, a true and correct copy of its Certificate of
Formation and Operating Agreement, as in effect on the date
hereof and as of the Closing Date.
(2) It has the requisite power and authority to execute, deliver
and perform this Agreement and each other instrument,
document, certificate and agreement required or contemplated
to be executed, delivered and performed by it hereunder and
thereunder to which it is or will be a party.
(3) It is duly qualified to do business in each jurisdiction where
the character of its properties owned or held under lease or
the nature of its activities makes such qualification
necessary other than any such jurisdiction in which the
failure to be so qualified would not have a Material Adverse
Effect on it or materially adversely affect the Transaction or
its ability to perform its obligations under this Agreement
within the time frames contemplated herein.
(4) The execution and delivery of this Agreement by it and the
consummation of the Transaction by it have been duly and
validly authorized by its Board of Directors (or equivalent
body) and no other proceedings on its part which have not been
taken (including, without limitation, approval of its members,
managers or other constituent bodies, as the case may be) are
necessary to authorize this Agreement or to consummate the
Transaction.
(5) This Agreement has been duly executed and delivered by it and
constitutes the valid and binding obligation of it,
enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or
-9-
<PAGE>
relating to enforcement of creditors' rights generally and may
be subject to general principles of equity.
(6) As of the Closing, after giving effect to the Transaction, it
is not in breach of any obligation under this Agreement.
5.2 Consents; No Conflicts. Neither the execution, delivery and
----------------------
performance by it of this Agreement, nor the consummation of the Transaction
will (a) conflict with, or result in a breach or violation of, any provision of
its organizational documents; (b) constitute, with or without the giving of
notice or passage of time or both, a breach, violation or default, create a
Lien, or give rise to any right of termination, modification, cancellation,
prepayment or acceleration, under (i) any Law or License, or (ii) any note,
bond, mortgage, indenture, lease, agreement or other instrument, in each case
which is applicable to or binding upon it or any of its assets; or (c) require
any Consent on its part or the approval of its Board of Directors or equivalent
body (which approval has not been obtained), except in each case where such
breach, violation, default, Lien, right, or the failure to obtain or give such
Consent would not have a Material Adverse Effect on it or materially adversely
affect the Transaction or its ability to perform its obligations under this
Agreement. To its knowledge, there is no fact relating to it or its Affiliates
that would be reasonably expected to prevent it from consummating the
Transaction or performing its obligations under this Agreement or disqualify it
from obtaining the Consents (including without limitation, FCC Consent) required
in order to consummate the License Transfer as provided for in this Agreement.
5.3 Litigation. There is no action, proceeding or investigation
----------
pending or, to its knowledge, threatened against it or any of its properties or
assets that would have an adverse effect on its ability to consummate the
Transaction or to fulfill its obligations under this Agreement, or which seeks
to prevent or challenge the Transaction. There is no judgment, decree,
injunction, rule or order outstanding against it which would limit in any
material respect its ability to operate its business in the manner currently
contemplated.
5.4 FCC Compliance. It (or its qualified designee) complies with all
--------------
eligibility rules issued by the FCC to hold C Block and F Block broadband PCS
licenses, including without limitation, FCC rules on foreign ownership and the
CMRS spectrum cap.
5.5 Brokers. The Company has not employed any broker, finder or
-------
investment banker or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the Transaction.
5.6 Financial Condition. The Company has sufficient funding to perform
-------------------
its obligations hereunder.
5.7 Affiliates. Gerald Vento and Thomas Sullivan hold a majority of
----------
the voting rights of the members of the Company and hold a majority of the
voting rights of the stockholders of TeleCorp.
-10-
<PAGE>
ARTICLE VI
COVENANTS
---------
6.1 Consummation of Transaction. Each party shall use all commercially
---------------------------
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable and consistent with
applicable law to carry out all of their respective obligations under this
Agreement, to consummate the Transaction, which efforts shall include, without
limitation, the following:
(1) The parties shall use all commercially reasonable efforts to
cause the Closing to occur and the Transaction to be
consummated in accordance with the terms hereof, and, without
limiting the generality of the foregoing, to obtain all
necessary Consents including, without limitation, the approval
of this Agreement and the Transaction by all Governmental
Authorities and agencies, including the FCC, and to make all
filings with and to give all notices to third parties which
may be necessary or reasonably required in order for the
parties to consummate the Transaction. The Sellers and the
Company (or its qualified designee) shall make all filings
with the FCC necessary to obtain FCC approval of the license
transfers contemplated hereunder (the "FCC Filing") no later
than [five (5)] days following the date on which this
Agreement is fully executed by each of the Sellers and the
Company.
(2) Each party shall furnish to the other party all information
concerning such party and its Affiliates reasonably required
for inclusion in any application or filing to be made by the
Sellers or the Company or any other party in connection with
the Transaction or otherwise to determine compliance with
applicable FCC Rules.
(3) Upon the request of any other party, each party shall
forthwith execute and deliver, or cause to be executed and
delivered, such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other
documents as may reasonably be requested by such party in
order to effectuate the purposes of this Agreement.
(4) Without limiting the foregoing, the parties agree that the
Company may make its FCC Filing as part of a filing to be made
in connection with certain transactions entered into by the
Company and other telecommunications carriers as of February
28, 2000 (the "Primary Filing"); provided, that: (i) the
--------
Primary Filing is made no later than ten (10) days
-11-
<PAGE>
after the date of this Agreement; and (ii) if any protests or
other objections are filed in response to the Primary Filing
which will delay approval of the license transfers
contemplated hereunder, and such protests do not address the
portion of such filing related to this Agreement, the Company
will take appropriate action to segregate its FCC Filing in
connection with this Agreement from the Primary Filing and to
proceed with its FCC Filing as required by this Agreement.
Nothing in this Agreement shall be construed to require the parties to
consummate the Closing if any regulatory approval would require that it (i)
divest or hold separate any of its assets existing as of the date hereof other
than as contemplated by this Agreement or (ii) otherwise take or commit to take
any action that limits its freedom of action in any material respect with
respect to any of its businesses, product lines or assets.
6.3 Confidentiality.
---------------
(1) Each party shall, and shall cause each of its Affiliates, and
its and their respective shareholders, members, managers,
directors, officers, employees and agents (collectively,
"Representatives") to, keep secret and retain in strictest
---------------
confidence any and all Confidential Information relating to
any other party that it receives in connection with the
negotiation or performance of this Agreement, and shall not
disclose such Confidential Information, and shall cause its
Representatives not to disclose such Confidential Information,
to anyone except the receiving party's Affiliates,
Representatives and legal and financial advisors. Until the
Closing, each party agrees to use Confidential Information
received from another party only (i) to evaluate its interest
in pursuing the Transaction and (ii) to pursue such
Transaction, but not for any other purpose. All Confidential
Information furnished pursuant to this Agreement shall be
returned promptly to the party to whom it belongs upon request
by such party.
(2) The obligations set forth in Section 6.2(1) shall be
inoperative with respect to Confidential Information that (i)
is or becomes generally available to the public other than as
a result of disclosure by the receiving party or its
Representatives, (ii) was available to the receiving party on
a non-confidential basis prior to its disclosure to the
receiving party, or (iii) becomes available to the receiving
party on a non-confidential basis from a source other than the
providing party or its agents, provided that such source is
--------
not known by the receiving party to be bound by a
confidentiality
-12-
<PAGE>
agreement with the providing party or the Representatives or
was otherwise prohibited from obtaining or disseminating
Confidential Information.
(3) To the fullest extent permitted by law, if a party or any of
its Affiliates or Representatives breaches, or threatens to
commit a breach of, this Section 6.2, the party whose
Confidential Information shall be disclosed, or threatened to
be disclosed, shall have the right and remedy to have this
Section 6.2 specifically enforced by any court having
jurisdiction, it being acknowledged and agreed that money
damages will not provide an adequate remedy to such party.
Nothing in this Section 6.2 shall be construed to limit the
right of any party to collect money damages in the event of
breach of this Section 6.2.
(4) Anything else in this Agreement notwithstanding, each party
shall have the right to disclose any information, including
Confidential Information of the other party or such other
party's Affiliates, in any filing with any regulatory agency,
court or other authority or any disclosure to a trustee of
public debt of a party to the extent that the disclosing party
determines in good faith that it is required by Law,
regulation or the terms of such debt to do so, provided that
--------
any such disclosure shall be as limited in scope as possible
and shall be made only after giving the other party as much
notice as practicable of such required disclosure and an
opportunity to contest such disclosure if possible.
6.3 Certain Covenants. From and after the execution and delivery of
-----------------
this Agreement to and including the Closing Date, the Sellers shall:
(1) comply with all applicable Laws, including all such Laws
relating to, or that would be reasonably expected to relate
to, any Polycell License or its use;
(2) maintain each Polycell License in full force and effect;
(3) except to effect the transfer of the Polycell Licenses to the
Company as contemplated hereunder, not (i) sell, transfer,
assign or dispose of, or offer to, or enter into any
agreement, arrangement or understanding to, sell, transfer,
assign or dispose of any Polycell License or any interest
therein, or negotiate therefor, or (ii) create, incur or
suffer to exist any Lien of any nature whatsoever relating to
any Polycell License or any interest therein. Without limiting
the foregoing, the Sellers shall not incur any material
obligation
-13-
<PAGE>
or liability, absolute or contingent, relating to or affecting
any Polycell License or its use.
(4) give written notice to the Company promptly upon the
commencement of, or upon obtaining knowledge of any facts that
would give rise to a threat of, any claim, action or
proceeding commenced against or relating to (i) it, its
properties or assets, including any Polycell License or its
use, and which could have a Material Adverse Effect on it or
materially adversely affect the Transaction, or (ii) any
Polycell License or its use;
(5) promptly after obtaining knowledge of the occurrence of, or
the impending or threatened occurrence of, any event which
could cause or constitute a material breach of any of its
warranties, representations, covenants or agreements contained
in this Agreement, give notice in writing of such event, or
occurrence or impending or threatened event or occurrence, to
the other party and use best efforts to prevent or to promptly
remedy such breach; and
(6) cause the Company to be advised promptly in writing of (i) any
event, condition or state of facts known to it, which has had
or could have a Material Adverse Effect on it, or materially
adversely affect any Polycell License or its use or the
Transaction or (ii) any claim, action or proceeding which
seeks to enjoin the consummation of the Transaction.
6.4 FCC Filings. From and after the execution and delivery of this
-----------
Agreement to and including the Closing Date, the Sellers shall not make any
filings with the FCC or agree to any proposal, settlement, amendment or
alteration with the FCC with respect to any Polycell License without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
6.5 Certain Advances for FCC Debt Payments. After the execution date
--------------------------------------
hereof, the Company shall to make payments of principal and/or interest to the
FCC or the United States Department of the Treasury ("Treasury") on behalf of
--------
the Sellers that may become due under the FCC Debt prior to Closing, which is
approximately $30,000 in the aggregate per quarter (collectively, "Advances").
--------
(1) No earlier than thirty (30) days nor later than twenty (20)
days prior to a scheduled payment under the FCC Debt, the Sellers shall deliver
a written notice to the Company that sets forth the payment due date (the
"Payment Due Date") and the exact amount of such interest payment ("Payment
---------------- -------
Amount"). Upon receipt of such notice, the Company shall deliver funds to the
- ------ -------
FCC or the Treasury in an amount equal to the Payment Amount via wire transfer
in immediately available funds no later than the Payment Due Date.
-14-
<PAGE>
(2) In the event this Agreement is terminated prior to Closing in
accordance with Section 9.1 below, due to Polycell's or Clinton's breach or
failure to otherwise perform and the Company is not itself in breach, Polycell
and Clinton shall, no later than twenty (20) days after such termination,
deliver via wire transfer in immediately available funds to the Company funds in
an amount equal to in aggregate all of the Advances made by the Company
hereunder as of such termination date.
(3) At Closing, Advances shall be deemed satisfied in full without
payment or transfer by the Sellers.
6.6 Unjust Enrichment. To the extent that any unjust enrichment
-----------------
penalties are assessed against one or both of the Sellers as result of the
License Transfer, the Company shall assume all of the Sellers' obligations and
liabilities related to such penalty.
ARTICLE VII
CLOSING CONDITIONS
------------------
7.1 Conditions to Obligations of All Parties. The obligation of each
----------------------------------------
of the parties to consummate the Transaction contemplated to occur at the
Closing shall be conditioned on the following, unless waived by each of the
parties:
(1) The Consent of the FCC to the License Transfer shall have been
obtained pursuant to a Final Order, free of any conditions
materially adverse to the Company (or its qualified designee)
or the Sellers. For the purposes of this paragraph, "Final
-----
Order" means an action or decision that has been granted by
-----
the FCC as to which (i) no request for a stay or similar
request is pending, no stay is in effect, the action or
decision has not been vacated, reversed, set aside, annulled
or suspended 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
including other administrative or judicial review, or in
effect and any deadline for filing any such appeal that may be
designated by statute or rule has passed.
(2) All Consents by any Governmental Authority (other than the
Consents referred to in paragraph (1) above) required to
permit the consummation of the Transaction, the failure to
-15-
<PAGE>
obtain or make which would be reasonably expected to have a
Material Adverse Effect on the Company (or its qualified
designee) or the Sellers or to materially adversely affect the
Transaction or the parties' ability to perform their
obligations under this Agreement shall have been obtained or
made.
(3) No preliminary or permanent injunction or other order, decree
or ruling issued by a Governmental Authority, nor any statute,
rule, regulation or executive order promulgated or enacted by
any Governmental Authority, shall be in effect that would (i)
impose material limitations on the ability of any party to
consummate the Transaction or prohibit such consummation, or
(ii) impair in any material respect the operation of the
Company.
7.2 Conditions to Obligations of the Company. The obligation of the
----------------------------------------
Company to consummate the Transaction contemplated to occur at the Closing shall
be further conditioned upon the satisfaction or fulfillment, at or prior to the
Closing, of the following conditions by each of the other parties, unless waived
by the Company:
(1) The representations and warranties of the Sellers contained
herein shall be true and correct in all material respects
(except for representations and warranties that are qualified
as to materiality, which shall be true and correct), in each
case when made and at and as of the Closing (except for
representations and warranties made as of a specified date,
which shall be true and correct as of such date) with the same
force and effect as though made at and as of such time.
(2) The Sellers shall have performed in all respects all
agreements contained herein required to be performed by each
of them at or before the Closing.
(3) An officer of each of Polycell and Clinton shall have
delivered to the Company a certificate, dated the Closing
Date, certifying as to the fulfillment of the conditions set
forth in paragraphs (1) and (2) above as to Polycell and
Clinton, as the case may be.
(4) Each of Polycell and Clinton shall have furnished the Company
with opinions of counsel, each dated the Closing Date,
customary for a transaction of this nature and, reasonably
satisfactory to the Company and its counsel.
(5) All corporate and other proceedings of and Clinton in
connection with the License Transfer, and all documents and
-16-
<PAGE>
instruments incident thereto, shall be satisfactory in form
and substance to the Company, and Polycell and Clinton shall
have delivered to the Company such receipts, documents,
instruments and certificates, in form and substance reasonably
satisfactory to the Company, which the Company shall have
requested.
7.3 Conditions to the Obligations of the Sellers. The obligation of
--------------------------------------------
the Sellers to consummate the Transaction contemplated to occur at the Closing
shall be further conditioned upon the satisfaction or fulfillment, at or prior
to the Closing, of the following conditions, unless waived by the Sellers:
(1) The representations and warranties of the Company contained
herein shall be true and correct in all material respects
(except for representations and warranties that are qualified
as to materiality, which shall be true and correct), in each
case when made and at and as of the Closing (except for
representations and warranties made as of a specified date,
which shall be true and correct as of such date) with the same
force and effect as though made at and as of such time, except
for inaccuracies in respect of the representations and
warranties set forth in Section 5.3 (disregarding any
qualifications as to materiality contained therein) that in
the aggregate would not be reasonably expected to have a
Material Adverse Effect on the Company or its ability to
perform its obligations under this Agreement or to materially
adversely affect the Transaction.
(2) The Company shall have performed in all material respects all
agreements contained herein required to be performed by it at
or before the Closing.
(3) An officer of the Company shall have delivered to the Sellers
a certificate, dated the Closing Date, certifying as to the
Company the fulfillment of the conditions set forth in
paragraphs (1) and (2) above as to the Company.
(4) The Company shall have furnished the Sellers with opinions of
counsel, each dated the Closing Date, customary for a
transaction of this nature and, reasonably satisfactory to the
Sellers and their counsel.
(5) All limited liability company and other proceedings of the
Company in connection with the License Transfer, and all
documents and instruments incident thereto, shall be
reasonably satisfactory in form and substance to the Sellers,
and the Company shall have delivered to the Sellers such
-17-
<PAGE>
receipts, documents, instruments and certificates, in form and
substance reasonably satisfactory to the Sellers, which the
Sellers shall have reasonably requested.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
----------------------------
8.1 Survival. The representations and warranties made in this
--------
Agreement shall survive the Closing until the second (2nd) annual anniversary
thereof and shall thereupon expire together with any right to indemnification in
respect thereof (except to the extent a written notice asserting a claim for
breach of any such representation or warranty and describing such claim in
reasonable detail shall have been given prior to such date to the party which
made such representation or warranty). The covenants and agreements contained
herein to be performed or complied with prior to the Closing shall expire at the
Closing. The covenants and agreements contained in this Agreement to be
performed or complied with after the Closing shall survive the Closing; provided
--------
that the right to indemnification pursuant to this Article VIII in respect of a
breach of a representation or warranty shall expire on the second (2nd) annual
anniversary of the Closing (except to the extent written notice asserting a
claim thereunder and describing such claim in reasonable detail shall have been
given prior to such date to the party from whom such indemnification is sought).
After the Closing, the sole and exclusive remedy of the parties for any breach
or inaccuracy of any representation or warranty contained in this Agreement, or
any other claim (whether or not alleging a breach of this Agreement) that arises
out of the facts and circumstances constituting such breach or inaccuracy, shall
be the indemnity provided in this Article VIII. For purposes of determining
materiality thresholds in Section 8.2 and 8.3 below, any qualifications as to
materiality contained elsewhere herein shall be disregarded.
8.2 Indemnification by the Sellers. The Sellers shall jointly and
------------------------------
severally indemnify and hold harmless the Company and its Affiliates, and the
shareholders, members, managers, directors, officers, employees, agents and/or
the legal representatives of any of them (each, a "Section 8.2 Indemnified
-----------------------
Party"), against all liabilities and expenses (including amounts paid in
- -----
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) (collectively, "Losses") incurred by him or it in connection with the
------
investigation, defense, or disposition of any action, claim, charge, suit or
other proceeding in which any Section 8.2 Indemnified Party may be involved or
with which he or it may be threatened that arises out of or results from (a) any
representation or warranty of the Sellers contained in this Agreement being
untrue in any material respect as of the date on which it was made, (b) any
material default by the Sellers or any of their respective Affiliates in the
performance of their respective obligations under this Agreement, except to the
extent (but only to the extent) any such Losses arise out of or result from the
gross negligence or willful misconduct of such Section 8.2 Indemnified Party or
his or its Affiliates.
8.3 Indemnification by the Company. The Company shall indemnify and
------------------------------
hold harmless each of the Sellers and their respective Affiliates, and the
shareholders, members,
-18-
<PAGE>
managers, directors, officers, employees, agents and/or the legal
representatives of any of them (each, a "Section 8.3 Indemnified Party"),
-----------------------------
against all Losses incurred by him or it in connection with the investigation,
defense, or disposition of any action, suit or other proceeding in which any
Section 8.3 Indemnified Party may be involved or with which he or it may be
threatened that arises out of or results from (a) any representation or warranty
of the Company contained in this Agreement being untrue in any material respect
as of the date on which it was made or (b) any material default by the Company
or any of its Affiliates in the performance of their respective obligations
under this Agreement, except to the extent (but only to the extent) any such
Losses arise out of or result from the gross negligence or willful misconduct of
such Section 8.3 Indemnified Party or his or its Affiliates.
8.4 Procedures.
----------
(1) The terms of this Section 8.4 shall apply to any claim (a
"Claim") for indemnification under the terms of Sections 8.2
-----
or 8.3. The Section 8.2 Indemnified Party or Section 8.3
Indemnified Party Indemnified Party (each, an "Indemnified
-----------
Party"), as the case may be, shall give prompt written notice
-----
of such Claim to the indemnifying party (the "Indemnifying
------------
Party") under the applicable Section, which party may assume
-----
the defense thereof, provided that any delay or failure to so
--------
notify the Indemnifying Party shall relieve the Indemnifying
Party of its obligations hereunder only to the extent, if at
all, that it is materially prejudiced by reason of such delay
or failure. The Indemnified Party shall have the right to
approve any counsel selected by the Indemnifying Party and to
approve the terms of any proposed settlement, each of such
approvals not to be unreasonably delayed or withheld (unless
such settlement provides only, as to the Indemnified Party,
the payment of money damages actually paid by the Indemnifying
Party and a complete release of the Indemnified Party in
respect of the claim in question). Notwithstanding any of the
foregoing to the contrary, the provisions of this Article VIII
shall not be construed so as to provide for the
indemnification of any Indemnified Party for any liability to
the extent (but only to the extent) that such indemnification
would be in violation of applicable law or that such liability
may not be waived, modified or limited under applicable law,
but shall be construed so as to effectuate the provisions of
this Article VIII to the fullest extent permitted by law.
(2) In the event that the Indemnifying Party undertakes the
defense of any Claim, the Indemnifying Party will keep the
Indemnified Party advised as to all material developments in
connection with such Claim, including, but not limited to,
-19-
<PAGE>
promptly furnishing the Indemnified Party with copies of all
material documents filed or served in connection therewith.
(3) In the event that the Indemnifying Party fails to assume the
defense of any Claim within ten business days after receiving
written notice thereof, the Indemnified Party shall have the
right, subject to the Indemnifying Party's right to assume the
defense pursuant to the provisions of this Article VIII, to
undertake the defense, compromise or settlement of such Claim
for the account of the Indemnifying Party. Unless and until
the Indemnified Party assumes the defense of any Claim, the
Indemnifying Party shall advance to the Indemnified Party any
of its reasonable attorneys' fees and other costs and expenses
incurred in connection with the defense of any such action or
proceeding. Each Indemnified Party shall agree in writing
prior to any such advancement that, in the event he or it
receives any such advance, such Indemnified Party shall
reimburse the Indemnifying Party for such fees, costs and
expenses to the extent that it shall be determined that he or
it was not entitled to indemnification under this Article
VIII.
(4) In no event shall an Indemnifying Party be required to pay in
connection with any Claim for more than one firm of counsel
(and local counsel) for each of the following groups of
Indemnified Parties: (i) the Sellers, their respective
Affiliates, and the shareholders, members, managers,
directors, officers, employees, agents and/or the legal
representatives of any of them; and (ii) the Company and its
Affiliates, and the shareholders, members, managers,
directors, officers, employees, agents and/or the legal
representatives of any of them.
ARTICLE IX
TERMINATION
-----------
9.1 Termination. This Agreement may be terminated, and the Transaction
-----------
abandoned, without further obligation of any party, except as set forth herein,
at any time prior to the Closing Date:
(1) by mutual written consent of the parties;
(2) by any party by written notice to the other party, if the
Closing shall not have occurred on or before February 28,
2001; provided that the party electing to exercise such right
--------
-20-
<PAGE>
is not otherwise in breach of its obligations under this
Agreement;
(3) by the Sellers on the one hand, or the Company on the other
hand, (provided that the terminating party is not otherwise in
breach) if the Company or either of the Sellers, as the case
may be, has breached a material representation, warranty,
covenant or agreement set forth herein and fails to cure such
breach within thirty (30) days of written notice thereof
(except that no cure period shall be provided for a breach
that by its nature cannot be cured); or
(4) by any party by written notice to the other party, if the
consummation of the Transaction shall be prohibited by a
final, non-appealable order, decree or injunction of a court
of competent jurisdiction.
9.2 Effect of Termination. In the event of a termination of this
---------------------
Agreement, no party hereto shall have any liability or further obligation to any
other party to this Agreement, except as set forth in paragraphs (1) and (2)
below, and except that nothing herein will relieve any party from liability for
any breach by such party of this Agreement.
(1) In the event of a termination of this Agreement pursuant to
Section 9.1, all provisions of this Agreement shall terminate,
except Section 6.2 and Articles VIII and X, and unless such
termination occurs based upon a breach or other failure to
perform by the Company, the Escrow Agent shall immediately
refund the Deposit to the Company as more particularly
provided in Section 2.3.
(2) Whether or not the Closing occurs, all costs and expenses
incurred in connection with this Agreement and the Transaction
shall be paid by the party incurring such expenses.
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.1 Amendment and Modification. This Agreement may be amended,
--------------------------
modified or supplemented only by written agreement of each of the parties.
10.2 Waiver of Compliance; Consents. Any failure of any of the parties
------------------------------
to comply with any obligation, covenant, agreement or condition herein may be
waived by the party or parties entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or
-21-
<PAGE>
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirement
for a waiver of compliance as set forth in this Section 10.2.
10.3 Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered or certified mail, return receipt requested, postage prepaid.
If to the Company: ABC Wireless, LLC
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
Attn: Thomas H. Sullivan
Fax: (703) 236-1376
With a copy to: Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Alicia M.V. Wyman, Esq.
Fax: (617) 542-2241
If to the Sellers: Polycell Communications, Inc.
27W 281 Geneva Road, Suite K2
Winfield, IL 60190
Facsimile: (630) 752-2855
With a copy to: Thomas Gutierrez, Esq.
Lukas, Nace, Gutierrez & Sachs Chartered
1111 19th Street, N.W., Suite 1200
Washington, D.C. 20036
Facsimile: (202) 828-8410
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the 5th business day following the day such mailing is
made.
-22-
<PAGE>
10.4 Parties in Interest; Assignment. This Agreement is binding upon
-------------------------------
and is solely for the benefit of the parties hereto and their respective
permitted successors, legal representatives and permitted assigns. Neither party
may assign its rights and obligations hereunder without the prior written
consent of the other party, except that the Company shall have the right to
assign its rights under this Agreement, in whole or in part, without the
Sellers' consent, to AT&T Wireless PCS, LLC ("AT&T"), or its Affiliate, with the
express requirement that AT&T assign such rights and obligations to TeleCorp
and/or its subsidiaries through an intermediary; provided, that TeleCorp assumes
--------
the obligations and liabilities of the Company under this Agreement related to
the rights and interests assigned to TeleCorp.
10.5 Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Delaware without giving effect to
the conflicts of law principles thereof. The parties hereto hereby irrevocably
and unconditionally consent to submit to the non-exclusive jurisdiction of the
courts of the State of Delaware and of the United States of America located in
the District of Columbia (the "DC Courts") for any litigation arising out of or
---------
relating to this Agreement and the Transaction, waive any objection to the
laying of venue of any such litigation in the DC Courts and agrees not to plead
or claim in any DC Court that such litigation brought therein has been brought
in an inconvenient forum.
10.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.7 Interpretation. The article and section headings contained in
--------------
this Agreement are for convenience of reference only, are not part of the
agreement of the parties and shall not affect in any way the meaning or
interpretation of this Agreement. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the antecedent Person or Person may require.
10.8 Entire Agreement. This Agreement, including the exhibits and
----------------
schedules hereto and the certificates and instruments delivered pursuant to the
terms of this Agreement, embody the entire agreement and understanding of the
parties hereto in respect of the Transaction. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
Transaction.
10.9 Publicity. So long as this Agreement is in effect, the parties
---------
agree to consult with each other in issuing any press release or otherwise
making any public statement with respect to the Transaction, and no party shall
issue any press release or make any such public statement prior to such
consultation, except as may be required by Law. No press release or other public
statement by the parties hereto shall disclose any of the financial terms of the
Transaction without the prior consent of the other parties, except
-23-
<PAGE>
as may be required by Law. A breach of the provisions of this Section 10.9 by a
party shall not give rise to any right to terminate this Agreement.
10.10 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any DC Courts.
10.11 Remedies Cumulative. All rights, powers and remedies provided
-------------------
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
POLYCELL COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
CLINTON COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
ABC WIRELESS, LLC
By: ______________________________
Name:
Title:
<PAGE>
SCHEDULE I
Polycell License
----------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
BTA Block MHz Purchase Price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Clinton, IA (owned by C 30 $2,959,600.00
Clinton)
- --------------------------------------------------------------------------------------------------
Burlington, IA (owned by F 10 $1,375,400.00
Polycell)
- --------------------------------------------------------------------------------------------------
Lincoln, NE (owned by F 10 $1,547,600.00
Polycell)
- --------------------------------------------------------------------------------------------------
Quincy, IL (owned by F 10 $ 886,100.00
Polycell)
- --------------------------------------------------------------------------------------------------
Total $6,768,700.00
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule II
FCC Notes and Security Agreements
---------------------------------
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT ("Agreement") is entered into as of February 28,
---------
2000, by and among Polycell Communications, Inc., a _________________
corporation ("Polycell"), ABC Wireless, LLC, a Delaware limited liability
company (the "Company"), and Bankers Trust Company, as escrow agent ("Escrow
------- ------
Agent").
- -----
RECITALS
--------
A. Pursuant to that certain License Acquisition Agreement, dated as of
February 28, 2000, by and among Polycell and the Company (the "Acquisition
-----------
Agreement") the Company is acquiring certain PCS licenses from Polycell as more
- ---------
particularly described therein. Capitalized terms used in this Agreement and
not otherwise defined herein shall have the meanings given such terms in the
Acquisition Agreement. Escrow Agent acknowledges receipt of the Acquisition
Agreement.
B. Pursuant to Section 2.2(1) of the Acquisition Agreement, the Company
has agreed that, upon execution of the Acquisition Agreement (the "Execution
---------
Date"), the Company shall deposit an earnest money deposit of Three Million
- ----
Three Hundred Eighty-Four Thousand Three Hundred Fifty Dollars ($3,384,350) in
immediately available funds (the "Deposit") into an escrow account (the "Escrow
------- ------
Account").
- -------
C. Escrow Agent is willing to hold the Escrow Account in escrow in
accordance with the provisions of this Agreement, and to act as escrow agent
hereunder.
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00)
in hand paid, the mutual premises and covenants set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged conclusively, the parties hereto, intending to be and being legally
bound, agree as follows:
1. Appointment of the Escrow Agent. The Company and Polycell hereby appoint
-------------------------------
and designate the Escrow Agent as escrow agent for the purposes set forth
herein, and the Escrow Agent hereby accepts such appointment, subject to the
terms and conditions contained herein.
2. Delivery of Deposit. Simultaneously with the execution of this Agreement,
-------------------
the Company has delivered or caused to be delivered to the Escrow Agent, the
Deposit (collectively, with the Escrowed Interest, as hereinafter defined, the
"Escrow Fund"), to be held by the Escrow Agent pursuant to the terms and
- ------------
conditions of this Agreement. The Escrow Agent acknowledges receipt of the
Deposit and agrees to hold and distribute the Escrow Fund as provided herein.
3. Treatment of Escrow Fund. The Escrow Agent shall, upon the written
------------------------
request of Polycell, which shall occur no more frequently than one time per
calendar quarter, invest and reinvest the Deposit in money market mutual funds,
direct obligations
<PAGE>
of the United States government, in federally insured savings accounts or in
bank certificates of deposits, as Polycell shall instruct, and shall be fully
protected in acting upon such instructions. Interest from the investment of the
Deposit (the "Escrow Interest") (i) shall become part of the Escrow Fund, and
---------------
(ii) shall be segregated and deposited in instruments in the same manner as the
principal of the Deposit, but shall be accounted for separately. The Escrow
Agent shall not be responsible for any loss incurred on the sale of any
investment which is required to be sold or liquidated to make a payment required
hereunder.
4. Disposition of Escrow Fund. (a) Upon receipt of joint written
--------------------------
instructions signed by the representatives of the Company and Polycell listed in
the notice provisions (Section 8(a)), the Escrow Agent shall deliver the Escrow
Fund in accordance with such written instructions.
(b) If the Escrow Agent shall not have received such joint written
instructions by February 15, 2001 (or the first (1st) business thereafter is
that date is not a business day), and a controversy exists between the Company
and Polycell as to the correct disposition of the Escrow Fund, the Escrow Agent
shall continue to hold the Escrow Fund until (i) the Company and Polycell
subsequently deliver to the Escrow Agent joint written instructions with respect
to the disposition of the Escrow Fund, or (ii) the Escrow Agent receives a
certified copy of a final decree, order or decision of a court of competent
jurisdiction constituting the final determination of any dispute between the
Company and Polycell with respect to the Escrow Fund to be distributed
hereunder, which distribution shall be made in accordance with such notice or
judicial determination.
5. Escrow Agent.
------------
(a) Duties and Responsibilities. The duties and responsibilities of the
---------------------------
Escrow Agent hereunder shall be limited to those expressly set forth in this
Agreement, and the Escrow Agent shall not be bound in any way by any other
contract or agreement between the parties hereto, whether or not the Escrow
Agent has knowledge of any such contract or agreement or of the terms or
conditions thereof. In the event the Escrow Agent shall be uncertain as to any
duties or responsibilities hereunder or shall receive instructions from any of
the parties hereto with respect to the Escrow Fund which in its belief are in
conflict with any of the provisions of this Agreement, it shall be entitled to
refrain from taking any action until it has consulted with its counsel or it
shall be directed to do so in writing by the parties hereto or by order of a
court of competent jurisdiction in proceedings which the Escrow Agent or any
other party hereto shall be entitled to commence. The Escrow Agent may act upon
the advice of its counsel in taking or refraining from taking any action
hereunder and may act upon any instrument or other writing believed in good
faith to be genuine and to be signed and presented by the proper person or
persons.
(b) Liability. The Escrow Agent shall not be liable to anyone for any
---------
damage, loss or expense incurred as a result of any act or omission of the
Escrow Agent, unless such damage, loss or expense is caused by the Escrow
Agent's willful default or gross negligence. Accordingly, and without limiting
the foregoing, the Escrow Agent shall not incur any such liability with respect
to (i) any action taken or omitted under this
<PAGE>
Agreement, or (ii) any action taken or omitted in reliance upon any instrument,
including any written notice or instruction provided for herein, not only as to
its due execution by an authorized person and as to the validity and
effectiveness of such instrument, but also as to the truth and accuracy of any
information contained therein.
(c) Disputes. In the event of a dispute between any of the parties hereto
--------
sufficient in the discretion of the Escrow Agent to justify its doing so, the
Escrow Agent shall be entitled to tender the Escrow Fund into the registry or
custody of any court of competent jurisdiction, to initiate such legal
proceedings as it deems appropriate, and pursuant thereto, to be discharged from
all further duties and liabilities under this Agreement with respect to the
Escrow Fund so tendered. Any such legal action may be brought in any such court
as the Escrow Agent shall determine to have jurisdiction with respect to such
matter. The filing of any such legal proceedings shall not deprive the Escrow
Agent of its rights to indemnification hereunder.
(d) Attachment. In the event all or any part of the Escrow Fund shall be
----------
attached, garnished or levied upon pursuant to any court order, or the delivery
thereof shall be stayed or enjoined by a court order, or any other order,
judgment or decree shall be made or entered by any court affecting the Escrow
Fund or any part hereof or any act of the Escrow Agent, the Escrow Agent is
authorized to obey and comply with all writs, orders, judgments or decrees so
entered or issued by any such court, without the necessity of inquiring whether
such court has jurisdiction; and if the Escrow Agent obeys or complies with any
such writ, order, or decree, it shall not be liable to any of the parties hereto
or any other person by reason of such compliance.
(e) Legal Action. The Escrow Agent shall have no duty to incur any out-of-
------------
pocket expenses or to take any legal action in connection with this Agreement or
towards its enforcement, or to appear in, prosecute or defend any action or
legal proceeding that would result in or might require it to incur any cost,
expense, loss, or liability, unless and until it shall be indemnified with
respect thereto in accordance with Section 5(f) of this Agreement.
(f) Indemnification. Without determining or limiting any rights as between
---------------
the Company and Polycell, which rights shall exist outside this Agreement and
not be prejudiced hereby, the Company and Polycell jointly and severally hereby
agree to indemnify and hold harmless the Escrow Agent against any and all cost,
loss, damage, disbursement, liability, and expense, including reasonable
attorneys' fees, which may be imposed upon or incurred by the Escrow Agent
hereunder, or in connection with the performance of its duties hereunder,
including any litigation arising out of this Agreement, or involving the subject
matter hereof, except only costs, losses, claims, damages, disbursements,
liabilities and expenses arising out of the Escrow Agent's acts or omissions for
which the Escrow Agent is adjudged willfully malfeasant or grossly negligent by
a final decree, order or judgment of a court of competent jurisdiction from
which no appeal is taken within the applicable appeals period.
<PAGE>
(g) Resignation. The Escrow Agent, and the Escrow Agent's successors
-----------
hereinafter appointed, may at any time resign by giving notice in writing to the
Company and Polycell and shall be discharged of all duties hereunder upon the
appointment of a successor escrow agent which shall be appointed by mutual
agreement of the Company and Polycell. If the Company and Polycell are unable
to agree on a successor escrow agent, either party may petition a court of
competent jurisdiction to appoint one. From the date upon which the Escrow
Agent sends notice of any resignation until the acceptance by a successor escrow
agent appointed as provided herein, the Escrow Agent's sole obligation hereunder
shall be to hold the Escrow Fund delivered to it in accordance with this
Agreement. Any such successor escrow agent shall deliver to the Company and
Polycell a written certificate accepting such appointment hereunder, and
thereupon it shall succeed to all the rights and duties of the Escrow Agent
hereunder and shall be entitled to receive the benefit of the provisions set
forth above.
(h) Law Firm Escrow Agent. Nothing contained herein shall be deemed to
---------------------
prevent any law firm serving as the Escrow Agent, or as a successor escrow
agent, from acting as counsel for the Company or Polycell, any of their
respective stockholders, or any of their respective affiliates, or any other
party in any matter, including resolution of disputes and claims subject to,
arising under or related to the Asset Purchase Agreement or this Agreement.
6. Escrow Agent Fees and Expenses. The Escrow Agent shall be entitled to
------------------------------
reasonable compensation for its services hereunder as Escrow Agent and for
reimbursement for its out of pocket costs and expenses. Such amounts, including
attorneys' fees, shall be borne one half by the Company and one half by
Polycell, provided, however, that if the Escrow Agent's only actions hereunder
are to invest and reinvest the Escrow Fund and to distribute the Escrow Fund
pursuant to Section 4 hereof and there are no disputes of any nature with
respect to the subject matter hereof, such amounts shall be borne by Polycell.
7. Termination of Agreement. When all of the Escrow Fund shall have been
------------------------
distributed pursuant to the provisions of this Agreement, this Agreement, except
for the provisions of Sections 5(b) and 5(f) hereof, shall terminate.
8. Miscellaneous.
-------------
(a) Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered or certified mail, return receipt requested, postage prepaid.
If to the Company: ABC Wireless, LLC
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
Attn: Thomas H. Sullivan
<PAGE>
Fax: (703) 236-1376
With a copy to: Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Alicia M.V. Wyman, Esq.
Fax: (617) 542-2241
If to Polycell: Polycell Communications, Inc.
27W 281 Geneva Road, Suite K2
Winfield, IL 60190
Attn: Mark Erickson
Facsimile: (630) 752-2855
With a copy to: Thomas Gutierrez, Esq.
Lukas, Nace, Gutierrez & Sachs Chartered
1111 19th Street, N.W., Suite 1200
Washington, D.C. 20036
Facsimile: (202) 828-8410
If to the Escrow
Agent: Bankers Trust Company
4 Albany Street
4th Floor
New York, NY 10006
Attn: Escrow Department
Facsimile (212) 250-6725
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the 5th business day following the day such mailing is
made.
(b) Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior oral or written agreements and
understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement of any kind not
expressly
<PAGE>
set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this
Agreement.
(c) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
POLYCELL COMMUNICATIONS, INC.
By:_________________________________
Name:______________________________
Its:_________________________________
ABC WIRELESS, LLC
By:_________________________________
Name:______________________________
Its:_________________________________
BANKERS TRUST COMPANY
By:_________________________________
Name:______________________________
Its:_________________________________
<PAGE>
EXHIBIT B
Form of License Transfer
ASSIGNMENT
This Assignment (the "Assignment"), dated as of ____________ ____,
2000, is executed by Polycell Communications, Inc. (the "Assignor") in favor of
_______________________ ("Assignee").
WHEREAS, the Assignor is the present owner of all right, title and
interest in the ___ MHz PCS license for the BTA located in
____________________________ (individually a "License" and collectively, the
"Licenses"); and
WHEREAS, pursuant to Section 3.2(b) of the License Acquisition
Agreement between Assignor and ABC Wireless, L.L.C. ("ABC"), of even date
herewith ("Acquisition Agreement"), Assignor desires to assign to Assignee, and
Assignee desires to accept and assume from Assignor, effective as of the date
hereof, all of Assignor's right, title and interest in and to the Licenses.
NOW THEREFORE, in consideration of the purchase price provided in the
Acquisition Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Assignment. Assignor does hereby, assign, transfer and convey to
----------
Assignee, its successors and assigns to and for its or their use
forever, all of Assignor's right, title and interest in and to the
Licenses.
2. Limitations. Nothing contained in this Assignment shall in any way
-----------
supersede, modify, replace, amend, change, rescind, waive, exceed,
expend, enlarge or in any way affect the provisions, including
warranties, covenants, agreements, conditions, representations or,
in general any of the rights and remedies, and any of the
obligations and indemnifications of Assignor or ABC, its successors
or assigns set forth in the Acquisition Agreement, including without
limitation any limits on indemnification specified therein. This
Assignment is intended only to effect the transfer of a certain
interest the transfer of which is contemplated in the Acquisition
Agreement and shall be governed in accordance with the terms and
conditions of the Acquisition Agreement.
3. Miscellaneous. This Assignment: (i) may be executed in
-------------
counterparts, each of which as so executed shall be deemed to be an
original, but all of which together shall constitute one instrument;
and (ii) shall be governed by and in accordance with the internal
laws of the State of New York, without regard to the principles of
conflicts of law thereof.
<PAGE>
IN WITNESS THEREOF, Assignor has caused this Assignment to be duly executed
and delivered as of this ____ day of February, 2000.
[ASSIGNOR]
By:__________________________________________
Name:________________________________________
Its:___________________________________________
<PAGE>
EXHIBIT 10.7
================================================================================
LICENSE ACQUISITION AGREEMENT
between
ABC WIRELESS, L.L.C.
and
AT&T WIRELESS PCS, LLC
Dated as of February 28, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS .........................................................1
ARTICLE II PURCHASE AND SALE OF LICENSES; PAYMENT OF
PURCHASE PRICE ..........................................................3
2.1 Purchase and Sale of Licenses .....................................3
2.2 Payment of Purchase Price .........................................3
ARTICLE III CLOSING ...........................................................3
3.1 Time and Place of Closing .........................................3
3.2 Closing Actions and Deliveries ....................................4
(1) Assignment of Licenses ......................................4
(2) Closing Payment .............................................4
(3) Other Deliveries ............................................4
3.3 Payment of Transfer Taxes .........................................4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ABC ..............................4
4.1 Formation, Power and Authority ....................................4
4.2 Consents; No Conflicts ............................................5
4.3 Litigation ........................................................6
4.4 Brokers ...........................................................6
4.5 ABC Licenses ......................................................6
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY .......................6
5.1 Organization, Power and Authority .................................6
5.2 Consents; No Conflicts ............................................7
5.3 Litigation ........................................................8
5.4 FCC Compliance ....................................................8
5.5 Brokers ...........................................................8
ARTICLE VI COVENANTS ..........................................................8
6.1 Consummation of Transaction .......................................8
6.2 Confidentiality ...................................................9
6.3 Certain Covenants ................................................10
6.4 FCC Filings ......................................................11
ARTICLE VII CLOSING CONDITIONS ...............................................11
7.1 Conditions to Obligations of All Parties .........................11
<PAGE>
7.2 Conditions to Obligations of the Company .........................12
ARTICLE VIII SURVIVAL AND INDEMNIFICATION ....................................13
8.3 Indemnification by the Company ...................................14
8.4 Procedures .......................................................14
ARTICLE IX TERMINATION .......................................................16
9.1 Termination ......................................................16
9.2 Effect of Termination ............................................16
ARTICLE X MISCELLANEOUS PROVISIONS ...........................................16
10.1 Amendment and Modification .......................................16
10.2 Waiver of Compliance; Consents ...................................16
10.3 Notices ..........................................................17
10.4 Parties in Interest; Assignment ..................................17
10.5 Applicable Law ...................................................18
10.6 Counterparts .....................................................18
10.7 Interpretation ...................................................18
10.8 Entire Agreement .................................................18
10.9 Publicity ........................................................18
10.10 Specific Performance .............................................18
10.11 Remedies Cumulative ..............................................19
SCHEDULES AND EXHIBITS
Schedule I ABC Licenses
================================================================================
<PAGE>
LICENSE ACQUISITION AGREEMENT
LICENSE ACQUISITION AGREEMENT, dated as of February 28, 2000,
between ABC WIRELESS, L.L.C., a Delaware limited liability company ("ABC"), and
AT&T Wireless PCS, LLC, a Delaware limited liability company (the "Company").
WHEREAS, ABC has been granted the 30 MHz PCS licenses described on
Schedule I (each an "ABC License" and collectively, the "ABC Licenses"); and
WHEREAS, ABC wishes to sell to the Company's qualified designee, and
the Company wishes to acquire the right from ABC to direct the transfer of the
ABC Licenses to a qualified designee, all on the terms and subject to the
conditions herein set forth.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants, conditions and agreements hereinafter
set forth, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings
(unless indicated otherwise, all Section and Article references are to Sections
and Articles in this Agreement, and all Schedule and Exhibit references are to
Schedules and Exhibits to this Agreement):
"ABC" has the meaning set forth in the preamble.
"ABC License or Licenses" has the meaning set forth in the first
recital.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with that Person. For purposes of this
definition, "control" (including the terms "controlling" and "controlled") means
the power to direct or cause the direction of the management and policies of a
Person, directly or indirectly, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
"Claim" has the meaning set forth in Section 8.4(1).
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Company" has the meaning set forth in the preamble.
<PAGE>
"Confidential Information" means any and all information regarding
the business, finances, operations, products, services and customers of the
Person specified and its Affiliates, in written or oral form or in any other
medium.
"Consents" means all consents and approvals of Governmental
Authorities or other third parties necessary to authorize, approve or permit the
parties hereto to consummate the Transaction and for the Company to operate its
business after the Closing Date as currently contemplated.
"FCC" means the Federal Communications Commission or similar
regulatory authority established in replacement thereof.
"FCC Law" means the Communications Act of 1934, as amended by the
Telecommunications Act of 1996, and the rules, regulations and policies
promulgated thereunder.
"Final Order" has the meaning set forth in Section 7.1(1).
"Governmental Authority" means a Federal, state or local court,
legislature, governmental agency (including, without limitation, the United
States Department of Justice), commission or regulatory or administrative
authority or instrumentality.
"Indemnified Party" has the meaning set forth in Section 8.4(1).
"Indemnifying Party" has the meaning set forth in Section 8.4(1).
"Law" means applicable common law and any statute, ordinance, code
or other law, rule, permit, permit condition, regulation, order, decree,
technical or other standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Authority.
"License" means a license, permit, certificate of authority, waiver,
approval, certificate of public convenience and necessity, registration or other
authorization, consent or clearance to construct or operate a facility,
including any emissions, discharges or releases therefrom, or to transact an
activity or business, to construct a tower or to use an asset or process, in
each case issued or granted by a Governmental Authority.
"License Transfer" has the meaning set forth in Section 3.2(1)(b).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, right of first refusal or right of others therein, or
encumbrance of any nature whatsoever in respect of such asset.
"Losses" has the meaning set forth in Section 8.2.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, assets, liabilities or results of operations or
prospects of the Person specified.
-2-
<PAGE>
"New York Courts" has the meaning set forth in Section 10.5.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental Authority,
business trust, unincorporated organization, or other legal entity.
"Pops" means the Paul Kagan Associates, Inc. estimate of the 1999
population of a geographic area.
"Representatives" has the meaning set forth in Section 6.2(1).
"Section 8.2 Indemnified Party" has the meaning set forth in Section
8.2.
"Section 8.3 Indemnified Party" has the meaning set forth in Section
8.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Transaction" means the transaction contemplated by this Agreement.
ARTICLE II
PURCHASE AND SALE OF LICENSES; PAYMENT OF PURCHASE PRICE
2.1 Purchase and Sale of Licenses. Upon the terms and subject to the
conditions hereof and in reliance upon the representations, warranties and
agreements herein contained, at the Closing, ABC shall sell, transfer, assign,
convey and deliver to the Company's qualified designee, free and clear of all
Liens, and the Company agrees to cause its qualified designee to purchase,
acquire and accept from ABC, the ABC Licenses identified on Schedule I.
2.2 Payment of Purchase Price. Upon the terms and subject to the
conditions hereof and in reliance upon the representations, warranties and
agreements herein contained, and in consideration of the assignment of the ABC
Licenses, at Closing, the Company shall pay to ABC in immediately available
funds, an amount equal to Six Million Eight Hundred Sixty-Seven Thousand Seven
Hundred Fifty Dollars ($6,867,750) (the "Purchase Price").
ARTICLE III
CLOSING
3.1 Time and Place of Closing. Upon the terms and subject to the
conditions hereof, the closing of the Transaction (the "Closing") shall take
place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
Boston, MA at 10:00 a.m. local time on the twelfth (12th) business day following
the date of receipt of the last Consent required by subsections (1) through (3)
of Section 7.1, or at such other place and/or time and/or on
-3-
<PAGE>
such other date as the parties may agree or as may be necessary to permit the
fulfillment or waiver of the conditions set forth in Article VII (the "Closing
Date").
3.2 Closing Actions and Deliveries. Upon the terms and subject to the
satisfaction or waiver by the appropriate party, if applicable, of the
conditions set forth in Article VII, to effect the purchase and sale of the ABC
Licenses, the parties shall on the Closing Date take the following actions:
(1) Assignment of Licenses. (a) ABC shall pay and satisfy in full
any and all loans, debts, obligations or other commitments
secured by the ABC Licenses in a manner sufficient to remove
any and all Liens created thereby; and
(b) ABC shall execute and deliver to the Company one or more
instruments of assignment, in a form reasonably acceptable to
the Company, sufficient to assign to the Company's qualified
designee the ABC Licenses (such assignment being herein
referred to as the "License Transfer").
(2) Closing Payment. The Company shall deliver or cause to be
delivered to ABC, the Purchase Price by wire transfer or other
form of immediately available funds.
(3) Other Deliveries. The parties shall execute and deliver or
cause to be executed and delivered all other documents,
instruments, opinions and certificates contemplated by this
Agreement to be delivered at the Closing or necessary and
appropriate in order to consummate the Transaction.
3.3 Payment of Transfer Taxes. The Company shall pay or cause to be paid
at the Closing or, if due thereafter, promptly when due, all gross receipts
taxes, gains taxes (including, without limitation, real property gains tax or
other similar taxes), transfer taxes, sales taxes, stamp taxes, and any other
taxes, but excluding any Federal, State or local income taxes payable in
connection with the transfer of the ABC Licenses.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ABC
ABC represents and warrants to the Company as follows:
4.1 Formation, Power and Authority.
(1) It is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to own,
lease and operate its properties
-4-
<PAGE>
and to carry on its business as now being conducted and
proposed to be conducted.
(2) It has the requisite power and authority to execute, deliver
and perform this Agreement and each other instrument,
document, certificate and agreement required or contemplated
to be executed, delivered and performed by it hereunder and
thereunder to which it is or will be a party.
(3) It is duly qualified to do business in each jurisdiction where
the character of its properties owned or held under lease or
the nature of its activities makes such qualification
necessary other than any such jurisdiction in which the
failure to be so qualified would not have a Material Adverse
Effect on it or materially adversely affect the Transaction or
its ability to perform its obligations under this Agreement.
(4) The execution and delivery of this Agreement by it and the
consummation of the Transaction by it have been duly and
validly authorized by its Board of Directors (or equivalent
body) and no other proceedings on its part which have not been
taken (including, without limitation, approval of its members,
managers or other constituent bodies, as the case may be) are
necessary to authorize this Agreement or to consummate the
Transaction.
(5) This Agreement has been duly executed and delivered by it and
constitutes the valid and binding obligation of it,
enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and may be subject
to general principles of equity.
(6) As of the Closing, after giving effect to the Transaction, it
is not in breach of any obligation under this Agreement.
4.2 Consents; No Conflicts. Neither the execution, delivery and
performance by it of this Agreement nor the consummation of the Transaction will
(a) conflict with, or result in a breach or violation of, any provision of its
organizational documents; (b) constitute, with or without the giving of notice
or passage of time or both, a breach, violation or default, create a Lien, or
give rise to any right of termination, modification, cancellation, prepayment or
acceleration, under (i) any Law or License or (ii) any note, bond, mortgage,
indenture, lease, agreement or other instrument, in each case which is
applicable to or binding upon it or any of its assets; or (c) other than the
consents of the FCC and its lenders, require any Consent or the approval of its
members, officers, Board of Directors or similar constituent bodies, as the case
may be (which approvals have not been obtained). There is no fact relating to it
or its Affiliates that would be reasonably expected to prevent it from
consummating the Transaction or disqualify the Company from
-5-
<PAGE>
obtaining the Consents (including without limitation, FCC Consent) required in
order to consummate the License Transfer as provided for in this Agreement.
4.3 Litigation. There is no action, proceeding or investigation pending
or, to its knowledge threatened against it or any of its properties or assets
that would be reasonably expected to have an adverse effect on its ability to
consummate the Transaction or to fulfill its obligations under this Agreement,
or which seeks to prevent or challenge the Transaction.
4.4 Brokers. It has not employed any broker, finder or investment banker
or incurred any liability for any brokerage fees, commissions or finder's fees
in connection with the Transaction.
4.5 ABC Licenses. It is the authorized legal holder of each ABC License, a
true and correct copy of which is attached hereto as Schedule I, which, as of
Closing, will be free and clear of any Liens. Each ABC License is valid and in
full force and effect. There is not pending nor to its knowledge threatened
against ABC or against any ABC License, any application, action, petition,
objection or other pleading, or any proceeding with the FCC which questions or
contests the validity of, or seeks the revocation, nonrenewal or suspension of,
any ABC License, which seeks the imposition of any modification or amendment
with respect thereto, or which would have a Material Adverse Effect on the
ability of the Company to employ any ABC License in its business. None of the
ABC Licenses is subject to any conditions other than those appearing on the face
of such ABC License itself and those imposed by FCC Law. It complies in all
material respects with all aspects of FCC Law, including: (i) the rules,
regulations and policies pertaining to eligibility to hold Broadband PCS
licenses in general, and the ABC Licenses, in particular, including without
limitation Section 24.709 of the FCC's rules; and (ii) the rules, regulations
and policies governing the CMRS spectrum cap and restricting foreign ownership
of radio licenses.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to ABC as follows:
5.1 Organization, Power and Authority.
(1) It is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to own,
lease and operate its properties and to carry on its business
as now being conducted and proposed to be conducted.
(2) It has the requisite power and authority to execute, deliver
and perform this Agreement and each other instrument,
document, certificate and agreement required or contemplated
to be executed,
-6-
<PAGE>
delivered and performed by it hereunder and thereunder to
which it is or will be a party.
(3) It is duly qualified to do business in each jurisdiction where
the character of its properties owned or held under lease or
the nature of its activities makes such qualification
necessary other than any such jurisdiction in which the
failure to be so qualified would not have a Material Adverse
Effect on it or materially adversely affect the Transaction or
its ability to perform its obligations under this Agreement.
(4) The execution and delivery of this Agreement by it and the
consummation of the Transaction by it have been duly and
validly authorized by its Board of Directors (or equivalent
body) and no other proceedings on its part which have not been
taken (including, without limitation, approval of its members,
managers or other constituent bodies, as the case may be) are
necessary to authorize this Agreement or to consummate the
Transaction.
(5) This Agreement has been duly executed and delivered by it and
constitutes the valid and binding obligation of it,
enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and may be subject
to general principles of equity.
(6) As of the Closing, after giving effect to the Transaction, it
is not in breach of any obligation under this Agreement.
5.2 Consents; No Conflicts. Neither the execution, delivery and
performance by it of this Agreement, nor the consummation of the Transaction
will (a) conflict with, or result in a breach or violation of, any provision of
its organizational documents; (b) constitute, with or without the giving of
notice or passage of time or both, a breach, violation or default, create a
Lien, or give rise to any right of termination, modification, cancellation,
prepayment or acceleration, under (i) any Law or License, or (ii) any note,
bond, mortgage, indenture, lease, agreement or other instrument, in each case
which is applicable to or binding upon it or any of its assets; or (c) other
than the consent of the FCC, require any Consent on its part or the approval of
its Board of Directors or equivalent body (which approval has been obtained),
except in each case where such breach, violation, default, Lien, right, or the
failure to obtain or give such Consent would not have a Material Adverse Effect
on it or materially adversely affect the Transaction or its ability to perform
its obligations under this Agreement. To its knowledge, there is no fact
relating to it or its Affiliates that would be reasonably expected to prevent it
from consummating the Transaction or performing its obligations under this
Agreement or disqualify it from obtaining the Consents (including without
limitation, FCC Consent) required in order to consummate the License Transfer as
provided for in this Agreement.
-7-
<PAGE>
5.3 Litigation. There is no action, proceeding or investigation pending
or, to its knowledge, threatened against it or any of its properties or assets
that would have an adverse effect on its ability to consummate the Transaction
or to fulfill its obligations under this Agreement, or which seeks to prevent or
challenge the Transaction. There is no judgment, decree, injunction, rule or
order outstanding against it which would limit in any material respect its
ability to operate its business in the manner currently contemplated.
5.4 FCC Compliance. Its qualified designee will comply with all
eligibility rules issued by the FCC to hold C Block broadband PCS licenses,
including without limitation, FCC rules on foreign ownership and the CMRS
spectrum cap.
5.5 Brokers. The Company has not employed any broker, finder or investment
banker or incurred any liability for any brokerage fees, commissions or finder's
fees in connection with the Transaction.
ARTICLE VI
COVENANTS
6.1 Consummation of Transaction. Each party shall use all commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable and consistent with
applicable law to carry out all of their respective obligations under this
Agreement, to consummate the Transaction, which efforts shall include, without
limitation, the following:
(1) The parties shall use all commercially reasonable efforts to
cause the Closing to occur and the Transaction to be
consummated in accordance with the terms hereof, and, without
limiting the generality of the foregoing, to obtain all
necessary Consents including, without limitation, the approval
of this Agreement and the Transaction by all Governmental
Authorities and agencies, including the FCC, and make all
filings with and to give all notices to third parties which
may be necessary or reasonably required in order for the
parties to consummate the Transaction. ABC and the Company (or
its qualified designee) shall make all filings with the FCC
necessary to obtain FCC approval of the license transfers
contemplated hereunder no later than ten (10) days following
the date on which this Agreement is fully executed by each of
ABC and the Company.
(2) Each party shall furnish to the other party all information
concerning such party and its Affiliates reasonably required
for inclusion in any application or filing to be made by ABC
or the Company or any other party in connection with the
Transaction or otherwise to determine compliance with
applicable FCC Rules.
-8-
<PAGE>
(3) Upon the request of any other party, each party shall
forthwith execute and deliver, or cause to be executed and
delivered, such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other
documents as may reasonably be requested by such party in
order to effectuate the purposes of this Agreement.
Nothing in this Agreement shall be construed to require the parties
to consummate the Closing if any regulatory approval would require that it (i)
divest or hold separate any of its assets existing as of the date hereof other
than as contemplated by this Agreement or (ii) otherwise take or commit to take
any action that limits its freedom of action in any material respect with
respect to any of its businesses, product lines or assets.
6.2 Confidentiality.
(1) Each party shall, and shall cause each of its Affiliates, and
its and their respective shareholders, members, managers,
directors, officers, employees and agents (collectively,
"Representatives") to, keep secret and retain in strictest
confidence any and all Confidential Information relating to
any other party that it receives in connection with the
negotiation or performance of this Agreement, and shall not
disclose such Confidential Information, and shall cause its
Representatives not to disclose such Confidential Information,
to anyone except the receiving party's Affiliates and
Representatives and any other Person that agrees in writing to
keep in confidence all Confidential Information in accordance
with the terms of this Section 6.2. Until the Closing, each
party agrees to use Confidential Information received from
another party only (i) to evaluate its interest in pursuing
the Transaction and (ii) to pursue such Transaction, but not
for any other purpose. All Confidential Information furnished
pursuant to this Agreement shall be returned promptly to the
party to whom it belongs upon request by such party.
(2) The obligations set forth in Section 6.2(1) shall be
inoperative with respect to Confidential Information that (i)
is or becomes generally available to the public other than as
a result of disclosure by the receiving party or its
Representatives, (ii) was available to the receiving party on
a non-confidential basis prior to its disclosure to the
receiving party, or (iii) becomes available to the receiving
party on a non-confidential basis from a source other than the
providing party or its agents, provided that such source is
not known by the receiving party to be bound by a
confidentiality agreement with the providing party or the
Representatives.
(3) To the fullest extent permitted by law, if a party or any of
its Affiliates or Representatives breaches, or threatens to
commit a
-9-
<PAGE>
breach of, this Section 6.2, the party whose Confidential
Information shall be disclosed, or threatened to be disclosed,
shall have the right and remedy to have this Section 6.2
specifically enforced by any court having jurisdiction, it
being acknowledged and agreed that money damages will not
provide an adequate remedy to such party. Nothing in this
Section 6.2 shall be construed to limit the right of any party
to collect money damages in the event of breach of this
Section 6.2.
(4) Anything else in this Agreement notwithstanding, each party
shall have the right to disclose any information, including
Confidential Information of the other party or such other
party's Affiliates, in any filing with any regulatory agency,
court or other authority or any disclosure to a trustee of
public debt of a party to the extent that the disclosing party
determines in good faith that it is required by Law,
regulation or the terms of such debt to do so, provided that
any such disclosure shall be as limited in scope as possible
and shall be made only after giving the other party as much
notice as practicable of such required disclosure and an
opportunity to contest such disclosure if possible.
6.3 Certain Covenants. From and after the execution and delivery of this
Agreement to and including the Closing Date, ABC shall:
(1) comply with all applicable Laws, including all such Laws
relating to, or that would be reasonably expected to relate
to, any ABC License or its use;
(2) maintain each ABC License in full force and effect;
(3) except to effect the transfer of the ABC Licenses to the
Company as contemplated hereunder, not (i) sell, transfer,
assign or dispose of, or offer to, or enter into any
agreement, arrangement or understanding to, sell, transfer,
assign or dispose of any ABC License or any interest therein,
or negotiate therefor, or (ii) create, incur or suffer to
exist any Lien of any nature whatsoever relating to any ABC
License or any interest therein. Without limiting the
foregoing, ABC shall not incur any material obligation or
liability, absolute or contingent, relating to or affecting
any ABC License or its use.
(4) give written notice to the Company promptly upon the
commencement of, or upon obtaining knowledge of any facts that
would give rise to a threat of, any claim, action or
proceeding commenced against or relating to (i) it, its
properties or assets, including any ABC License or its use,
and which could have a Material Adverse Effect on it or
materially adversely affect the Transaction, or (ii) any ABC
License or its use;
-10-
<PAGE>
(5) promptly after obtaining knowledge of the occurrence of, or
the impending or threatened occurrence of, any event which
could cause or constitute a material breach of any of its
warranties, representations, covenants or agreements contained
in this Agreement, give notice in writing of such event, or
occurrence or impending or threatened event or occurrence, to
the other party and use best efforts to prevent or to promptly
remedy such breach; and
(6) cause the Company to be advised promptly in writing of (i) any
event, condition or state of facts known to it, which has had
or could have a Material Adverse Effect on it, or materially
adversely affect any ABC License or its use or the Transaction
or (ii) any claim, action or proceeding which seeks to enjoin
the consummation of the Transaction.
6.4 FCC Filings. From and after the execution and delivery of this
Agreement to and including the Closing Date, ABC shall not make any filings with
the FCC or agree to any proposal, settlement, amendment or alteration with the
FCC with respect to any ABC License without the Company's prior written consent.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Obligations of All Parties. The obligation of each of
the parties to consummate the Transaction contemplated to occur at the Closing
shall be conditioned on the following, unless waived by each of the parties:
(1) The Consent of the FCC to the License Transfer shall have been
obtained pursuant to a Final Order, free of any conditions
materially adverse to the Company, its qualified designee or
ABC. For the purposes of this paragraph, "Final Order" means
an action or decision that has been granted by the FCC as to
which (i) no request for a stay or similar request is pending,
no stay is in effect, the action or decision has not been
vacated, reversed, set aside, annulled or suspended 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 including other
administrative or judicial review, or in effect and any
deadline for filing any such appeal that may be designated by
statute or rule has passed.
-11-
<PAGE>
(2) All Consents by any Governmental Authority (other than the
Consents referred to in paragraph (1) above) required to
permit the consummation of the Transaction, the failure to
obtain or make which would be reasonably expected to have a
Material Adverse Effect on the Company, its qualified designee
or ABC or to materially adversely affect the Transaction or
the parties' ability to perform their obligations under this
Agreement shall have been obtained or made.
(3) No preliminary or permanent injunction or other order, decree
or ruling issued by a Governmental Authority, nor any statute,
rule, regulation or executive order promulgated or enacted by
any Governmental Authority, shall be in effect that would (i)
impose material limitations on the ability of any party to
consummate the Transaction or prohibit such consummation, or
(ii) impair in any material respect the operation of the
Company.
(4) Receipt of the consent of ABC's lenders to the License
Transfer.
7.2 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Transaction contemplated to occur at the Closing shall
be further conditioned upon the satisfaction or fulfillment, at or prior to the
Closing, of the following conditions by each of the other parties, unless waived
by the Company:
(1) The representations and warranties of ABC contained herein
shall be true and correct in all material respects, in each
case when made and at and as of the Closing (except for
representations and warranties made as of a specified date,
which shall be true and correct as of such date) with the same
force and effect as though made at and as of such time.
(2) ABC shall have performed in all respects all agreements
contained herein required to be performed by it at or before
the Closing.
(3) All limited liability company and other proceedings of ABC in
connection with the License Transfer, and all documents and
instruments incident thereto, shall be satisfactory in form
and substance to the Company, and ABC shall have delivered to
the Company (or its qualified designee) such receipts,
documents, instruments and certificates, in form and substance
satisfactory to the Company, which the Company shall have
requested.
(4) The opinion of Wiley, Rein & Fielding, P.C., FCC counsel to
ABC, dated the Closing Date, addressed to the Company, in a
form reasonably acceptable to the Company.
-12-
<PAGE>
7.3 Conditions to the Obligations of ABC. The obligation of ABC to
consummate the Transaction contemplated to occur at the Closing shall be further
conditioned upon the satisfaction or fulfillment, at or prior to the Closing, of
the following conditions, unless waived by ABC:
(1) The representations and warranties of the Company contained
herein shall be true and correct in all material respects, in
each case when made and at and as of the Closing (except for
representations and warranties made as of a specified date,
which shall be true and correct as of such date) with the same
force and effect as though made at and as of such time.
(2) The Company and its qualified designee shall have performed in
all respects all agreements contained herein required to be
performed by them at or before the Closing.
(3) All limited liability company and other proceedings of the
Company and its qualified designee in connection with the
License Transfer, and all documents and instruments incident
thereto, shall be satisfactory in form and substance to the
ABC, and the Company and its qualified designee shall have
delivered to ABC such receipts, documents, instruments and
certificates, in form and substance satisfactory to ABC, which
ABC shall have requested.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival. The representations and warranties made in this Agreement
shall survive the Closing until the second (2nd) annual anniversary thereof and
shall thereupon expire together with any right to indemnification in respect
thereof (except to the extent a written notice asserting a claim for breach of
any such representation or warranty and describing such claim in reasonable
detail shall have been given prior to such date to the party which made such
representation or warranty). The covenants and agreements contained herein to be
performed or complied with prior to the Closing shall expire at the Closing. The
covenants and agreements contained in this Agreement to be performed or complied
with after the Closing shall survive the Closing; provided that the right to
indemnification pursuant to this Article VIII in respect of a breach of a
representation or warranty shall expire on the second (2nd) annual anniversary
of the Closing (except to the extent written notice asserting a claim thereunder
and describing such claim in reasonable detail shall have been given prior to
such date to the party from whom such indemnification is sought). After the
Closing, the sole and exclusive remedy of the parties for any breach or
inaccuracy of any representation or warranty contained in this Agreement, or any
other claim (whether or not alleging a breach of this Agreement) that arises out
of the facts and circumstances constituting such breach or inaccuracy, shall be
the indemnity provided in this Article VIII. For
-13-
<PAGE>
purposes of determining materiality thresholds in Section 8.2 and 8.3 below, any
qualifications as to materiality contained elsewhere herein shall be
disregarded.
8.2 Indemnification by ABC. ABC shall indemnify and hold harmless the
Company its qualified designee and their respective Affiliates, and the
shareholders, members, managers, directors, officers, employees, agents and/or
the legal representatives of any of them (each, a "Section 8.2 Indemnified
Party"), against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) (collectively, "Losses") incurred by him or it in connection with the
investigation, defense, or disposition of any action, claim, charge, suit or
other proceeding in which any Section 8.2 Indemnified Party may be involved or
with which he or it may be threatened that arises out of or results from (a) any
representation or warranty of such indemnifying party contained in this
Agreement being untrue in any material respect as of the date on which it was
made, (b) any material default by such indemnifying party or any of its
Affiliates in the performance of their respective obligations under this
Agreement, except to the extent (but only to the extent) any such Losses arise
out of or result from the gross negligence or willful misconduct of such Section
8.2 Indemnified Party or his or its Affiliates.
8.3 Indemnification by the Company. The Company shall, and shall cause its
qualified designee to, indemnify and hold harmless ABC and its Affiliates, and
the shareholders, members, managers, directors, officers, employees, agents
and/or the legal representatives of any of them (each, a "Section 8.3
Indemnified Party"), against all Losses incurred by him or it in connection with
the investigation, defense, or disposition of any action, suit or other
proceeding in which any Section 8.3 Indemnified Party may be involved or with
which he or it may be threatened that arises out of or results from (a) any
representation or warranty of the Company contained in this Agreement being
untrue in any material respect as of the date on which it was made or (b) any
material default by the Company, its qualified designee or any of their
respective Affiliates in the performance of their respective obligations under
this Agreement, except to the extent (but only to the extent) any such Losses
arise out of or result from the gross negligence or willful misconduct of such
Section 8.3 Indemnified Party or his or its Affiliates.
8.4 Procedures.
(1) The terms of this Section 8.4 shall apply to any claim (a
"Claim") for indemnification under the terms of Sections 8.2
or 8.3. The Section 8.2 Indemnified Party or Section 8.3
Indemnified Party Indemnified Party (each, an "Indemnified
Party"), as the case may be, shall give prompt written notice
of such Claim to the indemnifying party (the "Indemnifying
Party") under the applicable Section, which party may assume
the defense thereof, provided that any delay or failure to so
notify the Indemnifying Party shall relieve the Indemnifying
Party of its obligations hereunder only to the extent, if at
all, that it is materially prejudiced by reason of such delay
or failure. The Indemnified Party shall have the right to
-14-
<PAGE>
approve any counsel selected by the Indemnifying Party and to
approve the terms of any proposed settlement, such approval
not to be unreasonably delayed or withheld (unless such
settlement provides only, as to the Indemnified Party, the
payment of money damages actually paid by the Indemnifying
Party and a complete release of the Indemnified Party in
respect of the claim in question). Notwithstanding any of the
foregoing to the contrary, the provisions of this Article VIII
shall not be construed so as to provide for the
indemnification of any Indemnified Party for any liability to
the extent (but only to the extent) that such indemnification
would be in violation of applicable law or that such liability
may not be waived, modified or limited under applicable law,
but shall be construed so as to effectuate the provisions of
this Article VIII to the fullest extent permitted by law.
(2) In the event that the Indemnifying Party undertakes the
defense of any Claim, the Indemnifying Party will keep the
Indemnified Party advised as to all material developments in
connection with such Claim, including, but not limited to,
promptly furnishing the Indemnified Party with copies of all
material documents filed or served in connection therewith.
(3) In the event that the Indemnifying Party fails to assume the
defense of any Claim within ten business days after receiving
written notice thereof, the Indemnified Party shall have the
right, subject to the Indemnifying Party's right to assume the
defense pursuant to the provisions of this Article VIII, to
undertake the defense, compromise or settlement of such Claim
for the account of the Indemnifying Party. Unless and until
the Indemnified Party assumes the defense of any Claim, the
Indemnifying Party shall advance to the Indemnified Party any
of its reasonable attorneys' fees and other costs and expenses
incurred in connection with the defense of any such action or
proceeding. Each Indemnified Party shall agree in writing
prior to any such advancement that, in the event he or it
receives any such advance, such Indemnified Party shall
reimburse the Indemnifying Party for such fees, costs and
expenses to the extent that it shall be determined that he or
it was not entitled to indemnification under this Article
VIII.
(4) In no event shall an Indemnifying Party be required to pay in
connection with any Claim for more than one firm of counsel
(and local counsel) for each of the following groups of
Indemnified Parties: (i) ABC, its Affiliates, and the
shareholders, members, managers, directors, officers,
employees, agents and/or the legal representatives of any of
them; and (ii) the Company and its Affiliates, and the
shareholders, members, managers, directors,
-15-
<PAGE>
officers, employees, agents and/or the legal representatives
of any of them.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated, and the Transaction
abandoned, without further obligation of any party, except as set forth herein,
at any time prior to the Closing Date:
(1) by mutual written consent of the parties;
(2) by any party by written notice to the other party, if the
Closing shall not have occurred on or before February 15,
2001; provided that the party electing to exercise such right
is not otherwise in breach of its obligations under this
Agreement;
(3) by any party by written notice to the other party, if the
consummation of the Transaction shall be prohibited by a
final, non-appealable order, decree or injunction of a court
of competent jurisdiction.
9.2 Effect of Termination. In the event of a termination of this
Agreement, no party hereto shall have any liability or further obligation to any
other party to this Agreement, except as set forth in paragraph (2) below, and
except that nothing herein will relieve any party from liability for any breach
by such party of this Agreement.
(1) In the event of a termination of this Agreement pursuant to
Section 9.1, all provisions of this Agreement shall terminate,
except Section 6.2 and Articles VIII and X..
(2) Whether or not the Closing occurs, all costs and expenses
incurred in connection with this Agreement and the Transaction
shall be paid by the party incurring such expenses.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended, modified
or supplemented only by written agreement of each of the parties.
10.2 Waiver of Compliance; Consents. Any failure of any of the parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the party or parties entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or
-16-
<PAGE>
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirement
for a waiver of compliance as set forth in this Section 10.2.
10.3 Notices. All notices or other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by facsimile transmission, or by registered or
certified mail (return receipt requested), postage prepaid, with an
acknowledgment of receipt signed by the addressee or an authorized
representative thereof, addressed as follows (or to such other address for a
party as shall be specified by like notice; provided that notice of a change of
address shall be effective only upon receipt thereof):
If to the Company:
AT&T Wireless PCS, LLC
7277 164th Avenue Northeast
Redmond, WA 98052
Attn: William H. Hague, Esq.
Facsimile: (425) 580-8405
With a copy to:
Friedman, Kaplan & Seiler, LLP
875 Third Avenue
New York, NY 10022
Attn: Greg S. Lerner, Esq.
Facsimile: (703) 236-1106
If to ABC:
ABC Wireless, L.L.C.
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
Attn: Thomas H. Sullivan
Facsimile: (703) 236-1376
With a copy to:
Alicia M.V. Wyman, Esq.
Mintz, Levin, Cohn, Ferris
Glovsky and Popeo, P.C.
Boston, MA 02111
10.4 Parties in Interest; Assignment. This Agreement is binding upon and
is solely for the benefit of the parties hereto and their respective permitted
successors, legal representatives and permitted assigns. Neither party may
assign its rights and obligations
-17-
<PAGE>
hereunder without the prior written consent of the other party, except that the
Company shall have the right to assign its rights under this Agreement, without
ABC's consent, to TeleCorp PCS, Inc. ("TeleCorp") or a designated Affiliate of
TeleCorp qualified to own and operate the ABC Licenses (herein known as a
"qualified designee").
10.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflicts of law principles thereof. The parties hereto hereby irrevocably and
unconditionally consent to submit to the non-exclusive jurisdiction of the
courts of the State of New York and of the United States of America located in
the County of New York, New York (the "New York Courts") for any litigation
arising out of or relating to this Agreement and the Transaction, waive any
objection to the laying of venue of any such litigation in the New York Courts
and agrees not to plead or claim in any New York Court that such litigation
brought therein has been brought in an inconvenient forum.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.7 Interpretation. The article and section headings contained in this
Agreement are for convenience of reference only, are not part of the agreement
of the parties and shall not affect in any way the meaning or interpretation of
this Agreement. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
antecedent Person or Person may require.
10.8 Entire Agreement. This Agreement, including the exhibits and
schedules hereto and the certificates and instruments delivered pursuant to the
terms of this Agreement, embody the entire agreement and understanding of the
parties hereto in respect of the Transaction. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
Transaction.
10.9 Publicity. So long as this Agreement is in effect, the parties agree
to consult with each other in issuing any press release or otherwise making any
public statement with respect to the Transaction, and no party shall issue any
press release or make any such public statement prior to such consultation,
except as may be required by Law. No press release or other public statement by
the parties hereto shall disclose any of the financial terms of the Transaction
without the prior consent of the other parties, except as may be required by
Law. A breach of the provisions of this Section 10.9 by a party shall not give
rise to any right to terminate this Agreement.
10.10 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches
-18-
<PAGE>
of this Agreement and to enforce specifically the terms and provisions hereof in
any New York Courts.
10.11 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ABC WIRELESS, L.L.C.
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title:
AT&T WIRELESS PCS, LLC
By: /s/ Michael Schwartz
------------------------------------
Name: Michael Schwartz
Title: VP
<PAGE>
SCHEDULE I
ABC LICENSES
======================================================
Market MHz Licensee
------------------------------------------------------
Davenport, IA-Moline, IL 30 ABC Wireless
------------------------------------------------------
Des Moines, IA 30 ABC Wireless
------------------------------------------------------
Dubuque, IA 30 ABC Wireless
------------------------------------------------------
Iowa City, IA 30 ABC Wireless
======================================================
<PAGE>
Exhibit 10.9
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT is made as of February 28, 2000, by
and between AT&T WIRELESS PCS, LLC, a Delaware corporation ("AT&T PCS") and
TELECORP PCS, INC., a Delaware corporation ("TELECORP").
WHEREAS, AT&T PCS and Telecorp are parties to that certain License and
Asset Exchange and Acquisition Agreement bearing date even herewith (the
"EXCHANGE AND ACQUISITION AGREEMENT"), pursuant to which, INTER ALIA, Telecorp
will exchange various assets and licenses in the Worcester, Boston and Hyannis,
MA and Manchester, NH markets listed on Schedule 1 of the Exchange and
Acquisition Agreement (the "BOSTON ASSETS") in return for the Wisconsin Licenses
and the Iowa Licenses (as defined in the Exchange and Acquisition Agreement);
WHEREAS, prior to the consummation of the transactions contemplated by
the Exchange and Acquisition Agreement, Telecorp has owned and operated the
Boston Assets; and
WHEREAS, AT&T PCS will require Telecorp's services with regard to
certain operations related to the Boston Assets during a transition period
specified herein subsequent to the closing of the Exchange and Acquisition
Agreement, and Telecorp has agreed to provide such services, on the terms and
conditions as hereinafter provided.
NOW THEREFORE, in consideration of the mutual agreements and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
"AFFILIATE" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with that Person. For purposes of this
definition, "control" (including the terms "controlling" and "controlled") means
the power to direct or cause the direction of the management and policies of a
Person, directly or indirectly, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
Notwithstanding the foregoing, for purposes of this Agreement, neither Telecorp
nor AT&T PCS shall be considered an Affiliate of the other.
"AGREEMENT" means this Transition Services Agreement, including the
schedules and tables hereto, as the same may be amended, modified or
supplemented in accordance with the terms hereof.
"AT&T PCS" has the meaning set forth in the preamble.
"AT&T PCS INDEMNIFIED PARTY" has the meaning set forth in Section 5.2.
"BOSTON ASSETS" has the meaning set forth in the preamble.
"CLOSING" shall mean the closing of the transactions set forth in the
Exchange and Acquisition Agreement.
"CLOSING DATE" has the meaning set forth in the Exchange and
Acquisition Agreement.
"CONFIDENTIAL INFORMATION" means any and all information regarding the
business, finances, operations, products, services and customers of the Person
specified and its Affiliates, in written or oral form or in any other medium.
Without limiting the generality of the foregoing, Confidential Information of
AT&T PCS shall include any and all such information relating to the Boston
Assets.
<PAGE>
"CONSENT" means all consents, licenses, sublicenses and approvals of
Governmental Authorities or other third parties necessary to authorize, approve,
or permit Telecorp to provide the Transition Services.
"EXCHANGE AND ACQUISITION AGREEMENT" has the meaning set forth in the
recitals.
"GOVERNMENTAL AUTHORITY" means a Federal, state or local court,
legislature, governmental agency, commission or regulatory or administrative
authority or instrumentality.
"LOSSES" has the meaning set forth in Section 5.1.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental Authority,
business trust, unincorporated organization, or other legal entity.
"REPRESENTATIVES" has the meaning set forth in Section 6.1(a).
"SUBSCRIBER" has the meaning set forth in Schedule A hereto.
"TELECORP" has the meaning set forth in the preamble.
"TELECORP INDEMNIFIED PARTY" has the meaning set forth in Section 5.1.
"TRANSITION SERVICES" has the meaning set forth in Section 2.1(b).
All other capitalized terms used herein and not otherwise defined
herein have the meanings given to such terms in the Exchange and Acquisition
Agreement.
ARTICLE II
SERVICES TO BE PERFORMED; TERM; PERFORMANCE AND
COOPERATION.
2.1 SERVICES. (a) Upon the terms and subject to the conditions hereof,
commencing on the Closing Date and ending on the 180th day following the Closing
Date or such other date as the parties may otherwise agree (the "Termination
Date"), subject to extension as provided in Section 2.4, Telecorp will provide
the Transition Services in the amounts and to the extent specified with respect
to each such Service in the applicable Schedule. Telecorp shall cooperate with
AT&T PCS with regard to the exchange of information, providing electronic access
to data systems used in connection with the Transition Services. In addition,
each Party shall use commercially reasonable efforts to obtain all Consents
necessary or desirable to permit each party to perform its obligations
hereunder. AT&T PCS will provide any data feeds necessary for Telecorp to
perform its obligations hereunder, including any from the systems being
transferred to AT&T PCS under the Exchange and Acquisition Agreement.
(b) The parties will cooperate in good faith to identify as
expeditiously as practicable after the date hereof the transition services (the
"Transition Services") to be provided by Telecorp hereunder so that the
customers of the Boston Business will continue to enjoy all of their existing
customer and network services, and features and functionalities. The Transition
Services will be set forth in Exhibit 2.1(b) hereto.
2.2 PERFORMANCE. Telecorp shall provide the Transition Services in a
time frame consistent with its past practices and at substantially the same
level and quality as provided by Telecorp as of the Closing Date. Telecorp may
use third-party vendors to perform the Transition Services, in which event
Telecorp shall use commercially reasonable efforts to cause such vendors to
perform such Services in accordance with this Agreement. If any vendor fails to
so perform, AT&T PCS may seek (and Telecorp shall cooperate with AT&T PCS to
seek) redress against such vendor, and not against Telecorp, which shall not
(except to the extent provided in the preceding sentence) be responsible for any
action or failure to act by third-party vendors selected in good faith by
Telecorp. Telecorp will maintain complete and accurate books and records
documenting the performance of Transition Services under this Agreement. As
needed from time to time during the period during which Transition Services are
provided, and upon termination of the provision of any Transition Services,
Telecorp will provide AT&T PCS with all records in its possession (in an
agreed-upon format, electronic or otherwise) related to the
<PAGE>
provision of Transition Services under this Agreement and such other information
as may be reasonably requested necessary AT&T PCS for the operation, use or
maintenance of the Boston Assets, including, but not limited to, billing and
other related records.
2.3 ADDITIONAL SERVICES. The parties will consult with each other in
good faith, as required, with respect to the furnishing of and payment for
special or additional services, extraordinary items and the like, and will
establish pre-approval routines for such additional services to the extent
reasonably feasible.
2.4 TERM. This Agreement shall become effective as of the Closing Date
and shall terminate on the Termination Date; provided, that AT&T PCS may elect
to extend this Agreement with respect to certain of the Transition Services (to
be determined by agreement of the parties) for an additional 90 days upon notice
to Telecorp given at least ten days prior to the Termination Date.
2.5 TERMINATION. Notwithstanding anything to the contrary contained
herein, this Agreement may be terminated, in whole or in part, at any time:
(a) by the mutual consent of Telecorp and AT&T PCS;
(b) by AT&T PCS on 15 days' prior notice to Telecorp; or
(c) by Telecorp in the event of any material breach or default by AT&T
PCS's obligations under this Agreement and the failure of AT&T PCS to cure such
breach or default within fifteen (15) days after receipt of notice from Telecorp
requesting such breach or default to be cured.
ARTICLE I ARTICLE III
PAYMENT
3.1 CONSIDERATION. (a) AT&T PCS shall reimburse Telecorp for all
out-of-pocket expenses ("Out-of-Pocket Expenses") reasonably incurred by
Telecorp for goods and services provided by third parties to, for or on behalf
of AT&T PCS or incurred by Telecorp in the performance of its duties and
responsibilities hereunder. Telecorp shall provide AT&T PCS with a statement
setting forth in reasonable detail (and with copies of invoices or other
supporting documentation) the Out-of-Pocket Expenses claimed within thirty (30)
days after they are incurred, provided, that Out-of-Pocket Expenses incurred in
the last thirty (30) days of any fiscal year shall be claimed or estimated in
good faith at least two weeks prior to the end of such fiscal year. AT&T PCS
shall pay to Telecorp each such amount within thirty (30) days of receipt of
such statement and invoices or other supporting documentation (it being
understood that estimated Out-of-Pocket Expenses will not be reimbursed until
Telecorp provides AT&T PCS with the invoices or other supporting documentation
therefor). AT&T PCS shall also be responsible for the payment of any applicable
sales, use and other taxes, levies and charges relating to the provision of
goods or services received with respect to the Transition Services provided by
Telecorp hereunder, but not any taxes attributable to Telecorp's net income. If
Telecorp is required to pay any such taxes, levies or charges, AT&T PCS will
promptly reimburse Telecorp therefor. Amounts not paid when due will bear
interest at one percent (1%) per month or portion thereof overdue.
(b) To the maximum extent practicable, Telecorp will specifically
identify costs associated with the Transition Services, which shall be
reimbursed by AT&T PCS as Out-of-Pocket Expenses in accordance with Section
3.1(a). To the extent that such specific identification is impracticable,
Telecorp shall charge AT&T PCS "Cost Allocations" for those common costs which
benefit AT&T PCS. Cost Allocations shall be calculated in the manner reasonably
determined by the parties as expeditiously as practicable after the date hereof
and set forth in Exhibit 3.1(b). Telecorp shall cause to be furnished to AT&T
PCS an accounting of any such Cost Allocations, and AT&T PCS shall pay to
Telecorp such amount within thirty (30) days of receipt of such accounting.
Amounts not paid when due will bear interest at one percent (1%) per month or
portion thereof overdue.
<PAGE>
ARTICLE IV
RELATIONSHIP OF PARTIES.
4.1 TELECORP'S EMPLOYEES. All employees and representatives of Telecorp
providing Transition Services hereunder shall be deemed for purposes of all
compensation and employee benefits to be employees or representatives solely of
Telecorp, and not to be employees or representatives of AT&T PCS. In performing
their respective duties hereunder, all such employees and representatives of
Telecorp shall be under the direction, control and supervision of Telecorp (and
not of AT&T PCS) and Telecorp shall have the sole right to exercise all
authority with respect to the employment (including termination of employment),
assignment and compensation of such employees and representatives.
4.2 INDEPENDENT CONTRACTORS. The parties hereto are independent
contractors, and neither party nor its employees or agents will be deemed to be
employees or agents of the other for any purpose or under any circumstances. No
partnership, joint venture, alliance, fiduciary or any relationship other than
that of independent contractors is created hereby, expressly or by implication.
ARTICLE II ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY AT&T PCS. AT&T PCS shall indemnify, defend, and
hold harmless Telecorp and its Affiliates, and the respective directors,
officers, shareholders, employees, agents and/or legal representatives of any of
them (each, a "TELECORP INDEMNIFIED PARTY"), against all liabilities and
expenses (collectively, "LOSSES") incurred by any Telecorp Indemnified Party
(including, without limitation, amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as reasonable counsel fees and Losses
incurred in connection with the investigation, defense, or disposition of any
action, suit or other proceeding in which any Telecorp Indemnified Party may be
involved or with which any Telecorp Indemnified Party may be threatened (whether
arising out of or relating to matters asserted by third parties against an
Telecorp Indemnified Party or incurred or sustained by such party in the absence
of a Third-Party claim)), that arise out of or result from a demand, claim,
lawsuit, action or proceeding relating to any such Telecorp Indemnified Party's
conduct in connection with the provision of Transition Services to AT&T PCS
under this Agreement, provided that such conduct did not constitute negligence,
willful misconduct, willful refusal to act or breach of this Agreement by any
Telecorp Indemnified Party.
5.2 INDEMNIFICATION BY TELECORP. Telecorp shall indemnify, defend, and
hold harmless AT&T PCS and its Affiliates, and the respective directors,
officers, shareholders, employees, agents and/or legal representatives of any of
them (each, a "AT&T PCS INDEMNIFIED PARTY"), against all Losses incurred by any
AT&T PCS Indemnified Party (including, without limitation, amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as
reasonable counsel fees and Losses incurred in connection with the
investigation, defense, or disposition of any action, suit or other proceeding
in which any AT&T PCS Indemnified Party may be involved or with which any AT&T
PCS Indemnified Party may be threatened (whether arising out of or relating to
matters asserted by third parties against a AT&T PCS Indemnified Party or
incurred or sustained by such party in the absence of a Third-Party claim)),
that arise out of or result from negligence, willful misconduct or willful
refusal to act on the part of any Telecorp Indemnified Party in the provision of
Transition Services to AT&T PCS. Telecorp shall not be liable, responsible or
accountable for Losses under this Agreement except as expressly set forth in the
immediately preceding sentence.
5.3 NOTICE AND DEFENSE OF CLAIMS. Each party shall give prompt written
notice to the other of the assertion or commencement of any claim, demand,
investigation, action, suit or other legal proceeding in respect of which
indemnity is or may be sought hereunder; provided, however, that this notice
requirement shall not apply to any claim, demand, investigation, action, suit or
other legal proceeding in which the parties are litigating claims against each
other. Any claim, demand, investigation, action, suit or legal proceeding
brought by one party against the other shall state with reasonable specificity
the basis of such claim, including the section of this Agreement
<PAGE>
allegedly breached or inaccurate. The failure by any party to give such notice
to the other party shall relieve such other party of its obligations under this
Article V if and only to the extent that it has been prejudiced by the lack of
timely and adequate notice. The indemnifying party shall have the right and
obligation to assume, at its own expense, the defense or settlement of any
third-party claim, demand, investigation, action, suit or other legal proceeding
in respect of which it is obligated to provide indemnity hereunder; provided,
however, that the indemnifying party shall not settle or compromise any such
claim, demand, investigation, action, suit or other legal proceeding without the
indemnified party's prior written consent thereto, unless the terms of such
settlement or compromise unconditionally discharge and release the indemnified
party from any and all liabilities and obligations thereunder and do not involve
a remedy other than the payment of money solely by the indemnifying party.
Notwithstanding the foregoing, the indemnified party at all times shall have the
right, at its option and expense, to participate fully in the defense or
settlement of such claim, demand, investigation, action, suit or other legal
proceeding. The parties shall cooperate fully in defending or settling any
third-party claim, demand, investigation, action, suit or other legal
proceeding, and the defending or settling party shall have reasonable access to
the books and records and personnel of the other party that are relevant to such
claim, demand, investigation, action, suit or other legal proceeding.
5.4 LIMITATION. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS OR LOST REVENUES) OF THE OTHER PARTY, ITS SUCCESSORS, ASSIGNS OR
THEIR RESPECTIVE AFFILIATES, AS A RESULT OF OR ARISING FROM THIS AGREEMENT,
REGARDLESS OF WHETHER SUCH LIABILITY ARISES IN TORT, CONTRACT, BREACH OF
WARRANTY, INDEMNIFICATION OR OTHERWISE.
ARTICLE VI
CONFIDENTIALITY
6.1 CONFIDENTIALITY.
(a) Each party shall, and shall cause each of its Affiliates, and
its and their respective shareholders, members, managers, directors,
officers, employees and agents (collectively, "Representatives") to,
keep secret and retain in strictest confidence any and all Confidential
Information relating to any other party, and shall not disclose such
Confidential Information, and shall cause its Representatives not to
disclose such Confidential Information, to anyone except the receiving
party's Affiliates and Representatives and any other Person that agrees
in writing to keep in confidence all Confidential Information in
accordance with the terms of this Section 6.1. Each party agrees to use
Confidential Information received from the other party only for
purposes of this Agreement.
(b) The obligations set forth in Section 6.1(a) shall be
inoperative with respect to Confidential Information that (i) is or
becomes generally available to the public other than as a result of
disclosure by the receiving party or its Representatives, (ii) was
available to the receiving party on a nonconfidential basis prior to
its disclosure to the receiving party, or (iii) becomes available to
the receiving party on a nonconfidential basis from a source other than
the providing party or its agents, provided, that such source is not
bound by a confidentiality agreement or obligation with the providing
party or the providing party's agents.
(c) To the fullest extent permitted by Law, if a party or any of
its Affiliates or Representatives breaches, or threatens to commit a
breach of, this Section 6.1, the party whose Confidential Information
shall be disclosed, or threatened to be disclosed, shall have the right
and remedy to have this Section 6.1 specifically enforced by any court
having jurisdiction, it being acknowledged and agreed that money
damages will not provide an adequate remedy to such party. Nothing in
this Section 6.1 shall be construed to limit the right of any party to
collect money damages in the event of breach of this Section 6.1.
(d) Anything else in this Agreement notwithstanding, each party
shall have the right to disclose any information, including
Confidential Information of the other party or such other party's
Affiliates: (i) to the other party and its Affiliates or
Representatives; (ii) as otherwise required by Law or
<PAGE>
legal process, including securities Laws; provided, that any such
disclosure shall be as limited in scope as possible and shall be made
only after giving the other party as much notice as practicable of such
required disclosure and an opportunity to contest such disclosure if
applicable; or (iii) as required to enforce its rights under this
Agreement.
(i) ARTICLE VII
(ii) MISCELLANEOUS PROVISIONS
7.1 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified
or supplemented only by written agreement of each of the parties.
7.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any of the parties
to comply with any obligation, covenant, agreement or condition herein may be
waived by the party or parties entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
consent by or on behalf of any party hereto, such consent shall not be
unreasonably withheld, conditioned or delayed.
7.3 NOTICES. All notices or other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person against receipt, by facsimile transmission with
confirmation of receipt, addressed as follows (or to such other address for a
party as shall be specified by like notice; provided, that notice of a change of
address shall be effective only upon receipt thereof):
If to AT&T PCS: 7277 164th Avenue, N.E.
Redmond, WA 98052
Attn: Jeanne Wiggers
Facsimile No.: 425-580-6606
If to Telecorp: 1010 N. Glebe Road
Arlington, VA 22201
Attn:Thomas H. Sullivan
Facsimile No.: 703-236-1376
7.4 PARTIES IN INTEREST; SUBCONTRACTING; ASSIGNMENT. This Agreement is
binding upon, and is solely for the benefit of the parties hereto, and the AT&T
PCS Indemnified Parties and the Telecorp Indemnified Parties to the extent
provided in Article V, and their respective permitted successors, legal
representatives and permitted assigns, provided, that neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assignable or
transferable by either party without the prior written consent of the other
party hereto, and any such unauthorized assignment or transfer will be void..
Telecorp may subcontract any or all of the functions or Transition Services to
be performed by Telecorp under this Agreement to any reputable third party
vendor used by Telecorp to provide similar services in comparable markets,
provided that such third party vendor agrees in writing to perform such
Transition Services on the terms set forth herein.
7.5 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the Laws of the State of New York without giving effect to
the conflicts of law principles thereof. The parties hereto hereby irrevocably
and unconditionally consent to submit to the nonexclusive jurisdiction of the
courts of the State of New York and of the United States of America located in
the State of New York (the "NEW YORK COURTS") for any litigation arising out of
or relating to this Agreement, waive any objection to the laying of venue of any
such litigation in the New York Courts and agrees not to plead or claim in any
New York Court that such litigation brought therein has been brought in an
inconvenient forum.
<PAGE>
7.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Facsimile signatures on
this Agreement shall be deemed to be original signatures for all purposes.
7.7 INTERPRETATION. The article and section headings contained in this
Agreement are for convenience of reference only, are not part of the agreement
of the parties and shall not affect in any way the meaning or interpretation of
this Agreement.
7.8 ENTIRE AGREEMENT. This Agreement, including the schedules and
tables hereto, embodies the entire agreement and understanding of the parties
hereto in respect of the transactions contemplated hereby.
7.9 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any court determines that any covenant or any part of any
covenant is invalid or unenforceable, such covenant shall be enforced to the
extent permitted by such court, and all other covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
7.10 FORCE MAJEURE. Neither party will have any liability for damages
or delay due to fire, explosion, lightning, pest damage, power failure or
surges, strikes or labor disputes, water or flood, acts of God, the elements,
war, civil disturbances, acts of civil or military authorities or the public
enemy, acts or omissions of communications or other carriers, or any other cause
beyond a party's reasonable control, whether or not similar to the foregoing.
7.11 REPRESENTATIVES. AT&T PCS hereby appoints Jeanne Wiggers, and
Telecorp hereby appoints Thomas H. Sullivan, as its representative to facilitate
communications and performance under this Agreement. Each party shall treat, and
shall be entitled to treat, an act of the representative of the other party as
being authorized by such other party without inquiring behind such act or
ascertaining whether such representative had authority to so act. Each party
shall have the right at any time and from time to time to replace its
representative by giving notice to the other party setting forth the name and
address information of the replacement.
7.12 WAIVERS. The failure of any party to require the performance or
satisfaction of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent subsequent enforcement
of such term or obligation or be deemed a waiver of any subsequent breach.
7.13 SURVIVAL OF OBLIGATIONS. The obligations of the parties under
Articles III, V, VI and VII shall survive the termination of this Agreement.
7.14 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
7.15 AUTHORITY. Each of the parties hereto represents to the other that
(a) it has the corporate power and authority to execute, deliver and perform
this Agreement, (b) the execution, delivery and performance of this Agreement by
it has been duly authorized by all necessary corporate or other action, (c) it
has duly and validly executed this Agreement, and (d) this Agreement is a legal,
valid and binding obligation, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium,
or other similar laws affecting creditor's rights generally and general equity
principles.
7.16 FURTHER ASSURANCES. Each of the parties hereto shall perform such
actions and shall deliver documents, records and other information necessary or
appropriate to effectuate, carry out and transition the Transition Services
hereunder.
<PAGE>
IN WITNESS WHEREOF, both Telecorp and AT&T PCS have caused this
Agreement to be duly executed on its behalf by its duly authorized officer as of
the date first written above.
TELECORP PCS, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
AT&T WIRELESS PCS, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
<PAGE>
Exhibit 2.1(b) - Transition Services
[To be provided]
<PAGE>
Exhibit 3.1(b) - Cost Allocations
[To be provided]
<PAGE>
EXHIBIT 10.11
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into this
27th day of February, 2000, by and among MILWAUKEE PCS LLC, a Delaware limited
liability company ("Buyer"), MILWAUKEE ACQUISITION SUBSIDIARY, INC., a Delaware
corporation ("Acquisition Sub"), KAILAS J. RAO ("Rao") and INDUS, INC., a
Wisconsin corporation d/b/a Industar Digital PCS ("Indus" and together with the
Buyer, the Acquisition Sub and Rao, the "Parties" and each a "Party").
RECITALS
WHEREAS, Indus has been granted the PCS License attached as Exhibit A for
the Milwaukee BTA (the "PCS License"); and
WHEREAS, Rao is the holder of all of the issued and outstanding Class A
Common Stock of Indus.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and to mutual
representations, warranties, covenants, conditions and agreements hereinafter
set forth, the Parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
"Acquisition Sub" has the meaning set forth in the preamble.
"Affiliate" means, with respect to Indus, Kailas J. Rao and Becky Rao and,
with respect to any other Person, any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with that Person. For purposes of this definition, "control"
(including the term "controlled") means the power to direct or cause the
direction of the management and policies of a Person, directly or indirectly,
whether through the ownership of securities or partnership or other ownership
interests, by contract or otherwise.
"Agreement" means this Agreement and Plan of Merger, as the same may be
amended, modified or supplemented in accordance with the terms hereof.
"Articles of Merger" means the Articles of Merger in the form attached
hereto as Exhibit B-1 and Exhibit B-2, to be filed in accordance with Section
2.2.
"Assets" includes the following, as set forth in greater detail on
Schedules 5.9(a), 5.9(c) and 5.10(a):
(a) the PCS License and all other permits and licenses;
1
<PAGE>
(b) the towers, antennas, computer hardware and software, cabling,
switches, radios and radio transmission and recovery equipment transmission
lines, air conditioning units, shelters and other fixtures owned or leased by
Indus;
(c) the Leases;
(d) the Indus Agreements;
(e) all prepaid property taxes, prepaid rent and other prepaid
expenses and deposits of Indus relating to the development of a PCS system in
the Milwaukee BTA;
(f) all rights and benefits obtained by Indus in respect of
microwave clearing of the frequencies covered by the PCS License;
(g) all cash on hand, cash equivalents, and accounts receivable; and
(h) all other assets, real and personal, tangible and intangible
including, without limitation, those reflected on the Most Recent Balance Sheet.
"AT&T Sub" means AT&T Milwaukee JV, Inc., a Delaware corporation.
"Benefit Arrangement" means any employment, severance or similar contract
or arrangement (whether or not written) or any plan, policy, fund, program or
contract or arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option, or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other benefits) or
any other benefit that (i) is not an Employee Plan, (ii) is entered into,
maintained, administered or contributed to, as the case may be, by Indus or any
of its Affiliates, and (iii) covers any Employee or former employee of Indus.
"Bridge Note" means that certain Promissory Note (Multiple Advances) dated
December 22, 1999 in the amount of $5,000,000 payable by Indus to the order of
Wireless.
"BTA" means the unit of division (of which there are four hundred
ninety-three (493)) for the United States of America, devised by Rand McNally,
as modified by the FCC, based upon geography, population and other factors,
which units form the basis for the auction by the FCC of a portion of the
Licenses for PC5 Systems for Basic Trading Areas, as defined by the FCC.
"Business Day" means any day other than a Saturday, Sunday or a legal
holiday in New York, New York or any other day on which commercial banks in New
York, New York are authorized by law or governmental decree to close.
"Buyer" has the meaning set forth in the preamble.
"Claim" has the meaning set forth in Section 8.4(a).
2
<PAGE>
"Class A Common Stock" means the issued and outstanding Class A Common
Stock, par value $.01, of Indus.
"Class A Merger Consideration" has the meaning set forth in Section
2.2(e).
"Class B Common Stock" means the issued and outstanding Class B Common
Stock, par value $.01, of Indus.
"Class B Merger Consideration" has the meaning set forth in Section
2.2(e).
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any and all information that is not
publicly available regarding the business, finances, operations, products,
services and customers of the Person specified and its Affiliates, in written or
oral form or in any other medium.
"Consents" means all consents and approvals of Governmental Authorities or
other third parties necessary to authorize, approve or permit the Parties to
consummate the Transactions and for Acquisition Sub or the Buyer to operate its
business after the Closing Date as currently contemplated.
"Designated Purchaser" has the meaning set forth in Section 10.4.
"DGCL" has the meaning set forth in Section 2.1.
"Dissenting Share" means any Indus Share with respect to which the
Stockholder thereof has exercised and perfected his/her/its appraisal rights
under the WBCL.
"Effective Date" has the meaning set forth in Section 2.2.
"Employees" means the employees of Indus as of the date hereof.
"Employee Plan" means any "employee benefit plan," as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by Indus, and (iii) covers any
Employee or former employee of Indus.
"Employment Contracts" has the meaning set forth in Section 5.21(a).
"Environmental Claim" means any claim, order, investigation, action, suit,
proceeding, injunction, demand or violation of any Environmental Law or
liability under any Environmental Law or liability under common law with respect
to pollution and/or protection of human health and/or the environment (including
any release, emission, discharge, presence or disposal of any Materials of
Environmental Concern), including any claim, order investigation, action, suit,
proceeding, injunction, demand or violation with respect to health effects to
persons, personal injury, investigation and cleanup costs, property damage
and/or damage to natural resources
3
<PAGE>
brought or alleged by any Governmental Authority or other Person, and any
written notice advising Indus of any of the foregoing.
"Environmental Laws" means the Comprehensive Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act
(42 U.S.C.ss. 9601 et seq.), the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act (42 U.S.C.ss.6901 et seq.) and/or the
Toxic Substances Control Act (15 U.S.C.ss. 2601 et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C.ss. 136 et seq.), the Clean
Air Act (42 U.S.C.ss. 7401 et seq.), the Federal Water Pollution Control Act (33
U.S.C.ss.1251 et seq.), the Safe Drinking Water Act (42 U.S.C.ss. 300f et seq.),
the Oil Pollution Act of 1990 (33 U.S.C.ss.ss.2701-2761) and/or the Emergency
Planning and Community Right-to-Know Act of 1986 (42 U.S.C.ss.ss.11001-11050)
including any amendments or extensions thereof; and all other applicable Laws
relating to pollution and/or the protection of human health and/or the
environment, including those relating to reporting, licensing, permitting,
investigating, removing or remediating Materials of Environmental Concern.
"Excess Expenses" has the meaning set forth in Section 10.15.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FCC" means the Federal Communications Commission or similar regulatory
authority established in replacement thereof.
"FCC Debt" means the outstanding balance (including principal and
suspended and accrued interest) of approximately Sixty Million Dollars
($60,000,000) due to the United States Department of the Treasury incurred in
connection with Indus' acquisition of the PCS License, plus all accrued interest
and other obligations incident to license ownership payable through the
FCC-Sanctioned Cost Clearing House, if any, attributable to the PCS License, as
of the Closing Date, as well as any payment obligation imposed by the FCC as a
condition of its approval of the transfer of the PCS License to the Buyer,
Acquisition Sub, or the Designated Purchaser, including any unjust enrichment
penalty imposed pursuant to 47 CFR ss. 1.2111. A copy of the promissory note
evidencing the FCC Debt and the related security agreement is attached as
Exhibit C hereto.
"FCC Law" means the Communications Act of 1934, as amended, including as
amended by the Telecommunications Act of 1996, and the rules, regulations and
policies promulgated thereunder.
"Final Order" has the meaning set forth in Section 7.1(b).
"Financial Statements" has the meaning set forth in Section 5.14.
"Governmental Authority" means a federal, state, local or foreign court,
legislature, governmental agency, commission or regulatory or administrative
authority or instrumentality.
"Holdback Agreement" has the meaning set forth in Section 2.3(e).
"Holdback Funds" has the meaning set forth in Section 2.3(a).
4
<PAGE>
"HNS Agreements" means any and all agreements, contracts, or commitments
entered into by and between Indus and Hughes Network Systems or its Affiliates
or any participations therein, including (i) that certain Hughes Maintenance
Agreement by and between Indus and Hughes Network Systems dated November 6,
1997, as amended; (ii) that certain Hughes Master Supply Contract by and between
Indus and Hughes Network Systems dated November 6, 1997, as amended; (iii) that
certain Credit Agreement by and between Indus and Hughes Network Systems dated
November 6, 1997, as amended; (iv) that certain Promissory Note by Indus in
favor of Hughes Network Systems dated December 18, 1997; and (v) that certain
Participation Agreement by and between Alcatel and Hughes Network Systems dated
November 6,1997.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" has the meaning set forth in Section 8.4(a).
"Indemnifying Party" has the meaning set forth in Section 8.4(a).
"Indus" has the meaning set forth in the preamble.
"Indus Agreements" has the meaning set forth in Section 5.10.
"Indus Interim Management Agreement" has the meaning set forth in the
Organizational Agreement.
"Indus Investment Agreement" has the meaning set forth in Section 5.2.
"Indus Material Adverse Effect" means a material adverse effect on (i) the
PCS License, the Assets or liabilities of Indus (exclusive of any effect
primarily caused by the actions or decisions of Wireless as manager pursuant to
the Indus Interim Management Agreement) or actions or omissions approved by
Wireless, the Buyer, or the Designated Purchaser or (ii) the Transactions.
"Indus' Knowledge" means, with respect to any of the representations,
warranties and covenants of Indus, the knowledge of Rao, Terry O'Reilly, R.
Scott Miswald, Charles Bale, Terry Kyne and James Kommer.
"Indus Shares" has the meaning set forth in Section 5.2.
"IRS" means the Internal Revenue Service.
"Intellectual Property" means and includes all patents, trademarks,
service marks, trade names, copyrights, mask works, inventions, processes, trade
secrets and know-how, including all such rights in software and any
documentation relating to the manufacture, marketing, installation, service and
operation of products.
"Investments" has the meaning set forth in Section 5.24.
5
<PAGE>
"Law" means applicable common law and any applicable statute, ordinance,
code or other law, rule, permit, permit condition, regulation, order, decree,
technical or other standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Authority.
"Leased Property" means (i) any real property or facility presently or
previously leased to Indus by any Person; (ii) any real property or facility
presently or previously operated for Indus or any of its predecessors in
interest by any Person; and (iii) any real property or facility presently or
previously used or occupied by Indus or any of its predecessors in interest.
"Leases" has the meaning set forth in Section 5.9(c).
"License" means a license, permit, certificate of authority, waiver,
approval, certificate of public convenience and necessity, registration or other
authorization, consent or clearance to construct or operate a facility,
including any emissions, discharges or releases therefrom, to transact an
activity or business, to construct a tower or to use an asset or process, in
each case issued or granted by a Governmental Authority.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, right of first refusal or right of others therein, or
encumbrance of any nature whatsoever in respect of such asset.
"Losses" has the meaning set forth in Section 8.2.
"Materials of Environmental Concern" means any substance: (a) the presence
of which requires investigation or remediation under any Environmental Law; (b)
which is defined as a "hazardous waste," "hazardous substance," "hazardous
material," toxic substance, pollutant or contaminant under any Environmental
Law; (c) which is identified under any Environmental Law as toxic, explosive,
corrosive, flammable, ignitable, reactive, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes restricted or
regulated by any Governmental Authority; or (d) which includes or contains
gasoline, diesel fuel or other petroleum hydrocarbons or byproducts.
"Maximum Transaction Tax Amount" shall have the meaning set forth in
Section 4.7(c).
"Merger" has the meaning set forth in Section 2.1.
"Merger Consideration" means the Class A Merger Consideration, Class B
Merger Consideration and Preferred Stock Consideration.
"Most Recent Balance Sheet" has the meaning set forth in Section 5.14.
"Most Recent Fiscal Year End' has the meaning set forth in Section 5.14.
"Most Recent Financial Statement" has the meaning set forth in Section
5.14.
"Organizational Agreement" means that certain Organizational Agreement of
even date herewith by and among Rao, Indus, Buyer, Wireless and AT&T Sub.
6
<PAGE>
"PCS" means Personal Communications Services as described in, or
authorized under, Part 24 of the rules of the FCC, and which may be provided as
a result of obtaining the PCS License under FCC Law.
"PCS License" has the meaning set forth in the recitals.
"PCS License Assignment" has the meaning set forth in Section 4.1(d)(i).
"Paying Agent" has the meaning set forth in Section 2.3(a).
"Payment Fund" has the meaning set forth in Section 2.3(a).
"Permitted Liens" has the meaning set forth in Section 5.9(a).
"Person" means an individual, corporation, partnership, limited liability
company, association, joint stock company, Governmental Authority, business
trust, unincorporated organization, or other legal entity.
"Preferred Stock" means the 6.50% Convertible Preferred Stock, Series A of
Indus.
"Preferred Stock Consideration" has the meaning set forth in Section
2.2(e).
"Rao" has the meaning set forth in the preamble.
"Rao Liabilities" has the meaning set forth in Section 3.3.
"Rao Notes" has the meaning set forth in Section 3.3.
"Related Agreements" means the Organizational Agreement, the Indus Interim
Management Agreement the Holdback Agreement and each of the other instruments,
documents, certificates and agreements required or contemplated to be executed,
delivered and performed by a Party hereunder and thereunder to which such Party
is or will be a Party.
"Representatives" has the meaning set forth in Section 4.2(a).
"Returns" means all returns, reports, statements, schedules, notices,
forms or other documents or information required to be filed with any
Governmental Authority by, or with respect to, Indus, in connection with the
determination, assessment, collection or payment of any Tax.
"Search Results" has the meaning set forth in Section 4.4.
"Section 8.2 Indemnified Party" has the meaning set forth in Section 8.2.
"Section 8.3 Indemnified Party" has the meaning set forth in Section 8.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholders" means the holders of record of capital stock of Indus.
7
<PAGE>
"Stub Period" has the meaning set forth in Section 4.7(b).
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Subsidiary" means, with respect to any Person, a corporation or other
entity of which 50% or more of the voting power or the voting equity securities
or equity interests is owned, directly or indirectly, by such Person.
"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") means any federal, state, local, or foreign income, gross receipts,
business, occupation, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Proceeding" has the meaning set forth in Section 4.7(d).
"Third-Party Proposal" has the meaning specified in Section 4.5(a).
"Transactions" means the transactions contemplated by this Agreement.
"WBCL" has the meaning set forth in Section 2.1.
"Wireless" means AT&T Wireless Services, Inc., a Delaware corporation.
When a reference is made in this Agreement to an Article or a Section,
such reference shall be to an Article or a Section of this Agreement unless
otherwise indicated. Unless the context otherwise requires, the terms defined
hereunder shall have the meanings therein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
defined herein. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." The use of a gender herein shall be deemed to include the neuter,
masculine and feminine genders whenever necessary or appropriate. Whenever the
word "herein" or "hereof" is used in this Agreement, it shall be deemed to refer
to this Agreement and not to a particular Section of this Agreement unless
expressly stated otherwise.
ARTICLE II
MERGER
2.1 Merger. Subject to the terms and conditions hereof and the
requirements of all applicable Laws, including FCC Law, and pursuant to the
Wisconsin Business Corporation Law ("WBCL") and the General Corporation Law of
the State of Delaware ("DGCL"), and in reliance upon the representations,
warranties, covenants and agreements herein contained, on the Effective Date,
Indus shall be merged with and into Acquisition Sub (the "Merger"). From and
after the Effective Date, Acquisition Sub shall be the surviving corporation
(the "Surviving
8
<PAGE>
Corporation"), which shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of Indus shall thereupon cease.
2.2 Effect of Merger.
(a) General. The Merger shall become effective at the time (the
"Effective Date") the Acquisition Sub and Indus file Articles of Merger with the
Department of Financial Institutions of the State of Wisconsin in the form
attached hereto as Exhibit B-1 and Articles of Merger with the Secretary of the
State of Delaware in the form attached hereto as Exhibit B-2. The Merger shall
have the effect set forth in the WBCL and DGCL. The foregoing merger filings
shall be made simultaneously with or as soon as practicable after the Closing
contemplated by this Agreement. The Surviving Corporation may, at any time after
the Effective Date, take any actions (including executing and delivering any
document) in the name and on behalf of either Acquisition Sub or Indus in order
to carry out and effectuate the Transactions.
(b) Articles of Incorporation. The Articles of Incorporation of
Acquisition Sub shall be those of the Surviving Corporation without modification
or amendment.
(c) Bylaws. The Bylaws of Acquisition Sub shall be those of the
Surviving Corporation without modification or amendment.
(d) Directors and Officers. The directors and officers of the
Acquisition Sub shall continue to be the directors and officers of the Surviving
Corporation at and as of the Effective Date (retaining their respective
positions and terms of office).
(e) Conversion of Indus Shares. At and as of the Effective Date, (A)
each share of Class A Common Stock of Indus shall be converted into the right to
receive an amount (the "Class A Merger Consideration") equal to Two and
Six-and-Two-Thirds Hundredths Dollars ($2.06 2/3) in cash; (B) each share of
Class B Common Stock of Indus (other than any Dissenting Shares) shall be
converted into the right to receive an amount (the "Class B Merger
Consideration") equal to Five Dollars ($5.00) in cash; (C) each share of
Preferred Stock (other than any Dissenting Shares) shall be converted into the
right to receive an amount (the "Preferred Stock Consideration") equal to One
Thousand Twenty-Seven and Seventy-Eight Hundredths Dollars ($1,027.78); and (D)
each Dissenting Share shall be converted into the right to receive payment from
the Surviving Corporation in accordance with the WBCL; provided, however, that
the Class A Merger Consideration, Class B Merger Consideration and Preferred
Stock Consideration shall each be subject to equitable adjustment in the event
of any stock split, stock dividend, reverse stock split, or other change in the
number of outstanding shares of Class A Common Stock, Class B Common Stock and
Preferred Stock, respectively. No Indus Share shall be deemed to be outstanding
or to have any rights other than those set forth in this Section 2.2(e) after
the Effective Date.
2.3 Procedure for Payment.
(a) Immediately after the Effective Date, the Buyer will cause the
Surviving Corporation to furnish to the third party paying agent designated by
the Buyer (the "Paying Agent") an amount (the "Payment Fund") equal to the
Merger Consideration less (i) Three Million Five Hundred Thousand Dollars
($3,500,000) of the Class A Merger Consideration (the
9
<PAGE>
"Holdback Funds") and (ii) amounts which need to be withheld pursuant to Section
1445 of the Code, if any, from the Merger Consideration for those Stockholders
listed in Schedule 5.17(j). Promptly thereafter, the Buyer will cause the Paying
Agent to mail a letter of transmittal (with instructions for its use) to each
record holder of outstanding Indus Shares (other than Dissenting Shares) for the
holder to use in surrendering the certificates which represented his, her or its
Indus Shares against payment of the Merger Consideration. No interest will
accrue or be paid to the holder of any outstanding Indus Shares. The Buyer shall
have no obligation to pay any amounts of Merger Consideration hereunder beyond
the Payment Fund and the Holdback Funds as provided in Section 2.3(e).
(b) The Buyer may cause the Paying Agent to invest the Payment Fund
in one or more interest bearing accounts; provided, however, that the terms and
conditions thereof shall be such as to permit the Paying Agent to make prompt
payment of the Merger Consideration as necessary. The Buyer may cause the Paying
Agent to pay over to the Surviving Corporation any interest accrued on the
Payment Fund.
(c) The Buyer may cause the Paying Agent to pay over to the
Surviving Corporation any portion of the Payment Fund (including any accrued
interest thereon) remaining six (6) months after the Effective Date, and
thereafter all former Stockholders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat, and other similar laws) as
general creditors thereof with respect to the cash payable upon surrender of
their certificates.
(d) The Buyer shall cause the Surviving Corporation to pay all
charges and expenses of the Paying Agent.
(e) The Holdback Funds shall be released in accordance with the
Holdback Agreement attached hereto as Exhibit D (the "Holdback Agreement").
2.4 Books and Records. On the Effective Date, Indus shall deliver to Buyer
all books, contracts, and records of Indus.
2.5 Closing of Transfer Records. After the close of business on the
Closing Date, transfers of Indus Shares outstanding prior to the Effective Date
shall not be made on the stock transfer books of Indus.
2.6 Allocation of the Merger Consideration. The Parties shall agree upon
an allocation of the Merger Consideration prior to the Closing Date. The Parties
shall report the transaction as an asset acquisition by the Buyer consistently
with the allocation as provided for in this Section 2.6 on all Tax Returns
(including IRS Form 8594, Asset Acquisition Statement).
ARTICLE III
CLOSING
3.1 Time and Place of Closing. Upon the terms and subject to the
conditions hereof, the closing of the Transactions (the "Closing") shall take
place at the offices of Riddell Williams, P.S., 1001 Fourth Avenue Plaza, Suite
4500, Seattle, Washington 98154, at 10:00 a.m. local time on the third (3rd)
Business Day following the date of receipt of the last Consent required by
10
<PAGE>
subsections (a) through (d) of Section 7.1, or at such other place and/or time
and/or on such other date as the Parties may agree or as may be necessary to
permit the fulfillment or waiver of the conditions set forth in Article VII (the
"Closing Date").
3.2 Closing Actions and Deliveries. Upon the terms and subject to the
satisfaction or waiver by the appropriate Party, if applicable, of the
conditions set forth in Article VII, to effect the Merger and the payment of the
Merger Consideration in consideration therefor, the Parties shall on the Closing
Date take the following actions:
(a) Rao shall execute and deliver to the Buyer the Holdback
Agreement and shall direct Wireless to deliver to the Buyer the Rao Notes, and
pay to Indus the amounts owed by Rao to Indus reflected on Schedule 5.27.
(b) Indus shall execute and deliver or cause to be executed and
delivered to the Buyer:
(i) Articles of Merger in the forms attached as Exhibit B-1
and B-2;
(ii) the opinion of Foley & Lardner, counsel to Indus, dated
the Closing Date and addressed to the Buyer in form and substance reasonably
acceptable to the Buyer and otherwise as customarily provided in similar
transactions;
(iii) the opinion of Willkie Farr & Gallagher, FCC counsel to
Indus, dated the Closing Date and addressed to the Buyer relating to the PCS
License and FCC matters in form and substance reasonably acceptable to the Buyer
and otherwise as customarily provided in similar transactions;
(iv) a certificate signed by Rao and Terry O'Reilly as
officers of Indus, dated the Closing Date, certifying as to the fulfillment of
the conditions set forth in Sections 7.2(a) and 7.2(b) and that all of the
conditions precedent to the obligations of Indus hereunder have been waived by
Indus or satisfied;
(v) a certificate signed by Rao and Terry O'Reilly as officers
of Indus, dated the Closing Date, certifying as to (A) the resolutions adopted
by Indus duly authorizing the execution, delivery and performance of this
Agreement by Indus and the execution and delivery by Indus of all Related
Agreements to which it is party, (B) the signatures of the Persons who have been
authorized to execute and deliver on behalf of Indus this Agreement and any
Related Agreements to which it is party, and (C) the Articles of Incorporation
and By-laws of Indus, in each case as amended as of the Closing Date;
(vi) a certificate of corporate status of Indus from the
Department of Financial Institutions of Wisconsin, dated no earlier than thirty
(30) days prior to the Closing Date;
(vii) all Consents set forth on Schedule 5.3 which are
designated as material therein except consents required by the HNS Agreements;
11
<PAGE>
(viii) the Search Results, as set forth in Section 4.4,
together with all releases and satisfaction pieces required to release the Liens
on the Assets shown in the Search Results (other than Permitted Liens);
(ix) those estoppel certificates that Indus has obtained from
landlords, licensors or lessors under the Leases pursuant to Section 4.6; and
(x) all such other documents and instruments as the Buyer or
its counsel may reasonably request in order to consummate the Transactions.
(c) The Buyer shall execute and deliver or cause to be executed and
delivered to Rao the Holdback Agreement and shall pay or cause the Rao
Liabilities to be paid in accordance with Section 3.3.
(d) The Buyer shall execute and deliver or cause to be executed and
delivered the following to Indus:
(i) the opinion of Riddell Williams, P.S., counsel to the
Buyer or Designated Purchaser's counsel dated the Closing Date, addressed to
Indus and substantially in form and substance reasonably acceptable to Indus and
otherwise as customarily provided in similar transactions;
(ii) a certificate of an officer of each of the Buyer and
Acquisition Sub, dated the Closing Date, certifying as to the fulfillment of the
conditions set forth in Sections 7.3(a) and 7.3(b) and that all of the
conditions precedent to the obligations of the Buyer hereunder have been waived
by the Buyer or satisfied;
(iii) a certificate of an officer of each of the Buyer and
Acquisition Sub, dated the Closing Date, certifying as to (I) the resolutions
adopted by the Buyer and Acquisition Sub, duly authorizing the execution,
delivery and performance of this Agreement by the Buyer and Acquisition Sub and
the execution and delivery by the Buyer and Acquisition Sub of all Related
Agreements to which each of them is party, and (II) the signatures of the
Persons who have been authorized to execute and deliver on behalf of the Buyer
and Acquisition Sub this Agreement;
(iv) good standing certificates of the Buyer and Acquisition
Sub from the Secretary of State of the State of Delaware, dated no earlier than
ten (10) days prior to the Closing;
(v) all such other documents and instruments as Indus or its
counsel may reasonably request in order to consummate the Transactions.
(e) The Buyer shall pay or cause the Payment Fund to be paid to the
Paying Agent.
(f) The Buyer shall pay or cause to be paid the dividends accrued on
the Preferred Stock to the Closing at the rate specified in the Restated
Articles of Incorporation of Indus as amended to date.
12
<PAGE>
3.3 Rao Liabilities. The Buyer shall cause Indus on and as of the Closing
Date, and provide Indus with the necessary funds to pay the amounts owed by
Indus to Rao reflected on the Most Recent Balance Sheet, which consist of
principal and interest payable by Indus to Rao pursuant to (a) that certain
Multiple Advance Promissory Note in the amount of Three Million Dollars
($3,000,000) (undated); (b) that certain Promissory Note dated July 25, 1999 in
the amount of Two Million Three Hundred Thousand Dollars ($2,300,000) and (c)
that certain Promissory Note dated September 25, 1999 in the amount of Four
Hundred Eighty-Six Thousand Four Hundred Thirty-Three Dollars ($486,433)
(collectively, the "Rao Notes"), together with additional interest accrued from
December 31, 1999 to the Closing in accordance with the terms of the Rao Notes
(collectively, the "Rao Liabilities"). Upon the foregoing payment of the Rao
Liabilities, Rao shall deliver all Rao Promissory Notes to the Buyer marked
"cancelled," and neither Indus nor the Surviving Corporation shall have any
further liability or obligation to Rao except as expressly provided in this
Agreement or the Organizational Agreement.
3.4 HNS Agreements. Following the Effective Date, the Buyer, Acquisition
Sub or the Designated Purchaser will pay to the person entitled thereto any and
all amounts determined to be owing by Indus, its successors or assigns under the
HNS Agreements, any judgments or arbitration awards for such amounts and the
related legal fees and other expenses incurred by the Buyer, Acquisition Sub, or
the Designated Purchaser.
ARTICLE IV
COVENANTS
4.1 Consummation of Transactions. Each Party shall use all its 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 and consistent with Law to carry
out all of their respective obligations under this Agreement to consummate the
Transactions, which efforts shall include the following:
(a) The Parties shall use their best efforts to cause the Closing to
occur and the Transactions to be consummated in accordance with the terms
hereof, and, without limiting the generality of the foregoing and as more
specifically set forth in Section 4.1(d)(i), to obtain all necessary Consents
including the approval of this Agreement and the Transactions by all
Governmental Authorities and third parties (exclusive of consents relating to
the HNS Agreements) and to make all filings with and to give all notices to
third parties which may be necessary or reasonably required in order for the
Parties to consummate the Transactions, and, in the case of Indus, to promptly
obtain the approval of the Transactions by its Board of Directors and
Stockholders; provided, however, that no filings shall be made with Governmental
Authorities unless approved in advance by the Buyer, which approval will not be
unreasonably withheld.
(b) Each Party shall furnish to the other Party all information
concerning such Party and its Affiliates reasonably required for inclusion in
any application or filing to be made by Indus or the Buyer or any other Party in
connection with the Transactions or otherwise to comply with applicable FCC Law.
(c) Upon the request of another Party, each Party shall forthwith
execute and deliver, or cause to be executed and delivered, such further
instruments of assignment, transfer,
13
<PAGE>
assumption, conveyance, endorsement, direction or authorization and other
documents as may reasonably be requested by such Party in order to effectuate
the purposes of this Agreement.
(d) Each Party covenants and agrees from and after the execution and
delivery of this Agreement to and including the Closing Date as follows:
(i) It is understood that the Closing is subject to prior
approval of the FCC and may be subject to the prior approval of one or more
state regulatory commissions. The Parties shall use their best efforts to file
with the FCC and any relevant state agency or agencies, as soon as practicable
following the date of execution hereof, a joint application requesting the
approval of the assignment of the PCS License by Indus to the Buyer, Acquisition
Sub or the Designated Purchaser as contemplated by this Agreement (the "PCS
License Assignment"). Each of the Parties hereto shall diligently take or
cooperate in the taking of all steps which are necessary or appropriate to
expedite the prosecution and favorable consideration of such applications;
provided, that Indus shall make no filings without the express prior consent of
the Buyer, which consent shall not be unreasonably withheld. The Parties
covenant and agree to undertake all actions reasonably requested by the FCC or
other regulatory authority and to file such material as shall be necessary or
required to obtain any necessary waivers or other authority from the FCC or such
state agency or agencies in connection with the foregoing applications. The
Buyer and Acquisition Sub, or Designated Purchaser respectively agree to bear
the expense of any payments to the United States Treasury that may be required
as a condition to the FCC's approval of PCS License Assignment to the Buyer,
Acquisition Sub, or the Designated Purchaser, including any unjust enrichment
penalty imposed pursuant to 47 CFR ss. 1.2111 of the FCC Law.
(ii) As soon as practicable following the date of execution
hereof, the Parties shall file, or cause to be filed, with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, any and all
reports and notifications required to be filed under the HSR Act or other Law;
provided, that Indus shall make no filings without the express prior consent of
the Buyer, which consent shall not be unreasonably withheld. The Buyer shall pay
any fee under the HSR Act relating to the Transactions, if any HSR Act filing is
required.
4.2 Confidentiality.
(a) Each Party shall, and shall cause each of its Affiliates, and
its and their respective shareholders, members, managers, directors, officers,
employees and agents (collectively, "Representatives") to keep secret, and
retain in strictest confidence, any and all Confidential Information relating to
any other Party that it receives in connection with the negotiation or
performance of this Agreement, and shall not disclose such Confidential
Information, and shall cause its Affiliates and Representatives not to disclose
such Confidential Information, to anyone except the receiving Party's Affiliates
and Representatives and any other Person that agrees in writing to keep in
confidence all Confidential Information in accordance with the terms of this
Section 4.2. Until the Closing, each Party agrees to use Confidential
Information received from another Party only to pursue the Transactions, but not
for any other purpose. All tangible embodiments of Confidential Information
furnished pursuant to this Agreement shall be returned promptly to the Party to
whom it belongs upon request by such Party.
14
<PAGE>
(b) The obligations set forth in Section 4.2(a) shall not apply to
Confidential Information that (i) is or becomes generally available to the
public other than as a result of disclosure by the receiving Party or its
Affiliates or Representatives, (ii) was available to the receiving Party on a
non-confidential basis prior to its disclosure to the receiving Party, or (iii)
becomes available to the receiving Party on a non-confidential basis from a
source other than the providing Party or its agents, provided that such source
is not known by the receiving Party to be bound by a confidentiality agreement
with the providing Party or the providing Party's agents. In addition, from and
after the Closing the obligations set forth in Section 4.2(a) shall not apply to
the Buyer or its Affiliates or its or their Representatives with respect to
Confidential Information relating to Indus.
(c) To the fullest extent permitted by Law, if a Party or any of its
Affiliates or Representatives breaches, or threatens to commit a breach of, this
Section 4.2, the Party whose Confidential Information shall be disclosed, or
threatened to be disclosed, shall have the right and remedy to have this Section
4.2 specifically enforced by any court having jurisdiction, it being
acknowledged and agreed that monetary damages will not provide an adequate
remedy to such Party. Indus agrees that it will not seek, and hereby waives any
requirement for, the security or posting of a bond or proving actual damages in
connection with the Buyer's seeking or obtaining such relief. Nothing in this
Section 4.2 shall be construed to limit the right of any Party to collect
monetary damages in the event of a breach of this Section 4.2.
(d) Anything else in this Agreement notwithstanding, each Party
shall have the right to disclose any information, including Confidential
Information of the other Party: (i) to the disclosing Party's Affiliates and
Representatives; (ii) in any filing with any Governmental Authority or any
disclosure to a trustee of public debt of a Party to the extent that the
disclosing Party determines in good faith that it is required by Law or the
terms of such debt to do so; provided, that any such disclosure shall be as
limited in scope as possible and shall be made only after giving the other Party
as much notice as practicable of such required disclosure and an opportunity to
contest such disclosure if possible; (iii) as required by its existing or
potential lending sources (such lending sources to acknowledge that any such
Confidential Information disclosed to them is subject to the provisions hereof);
(iv) as required to enforce its rights under this Agreement; or (v) as required
to obtain the Consents specified in Sections 7.1(a) through (d).
4.3 Covenants of Indus. From and after the execution and delivery of this
Agreement to and including the Closing Date, and except as expressly
contemplated hereunder or under the Related Agreements or primarily caused by
the actions or omissions of Wireless as manager pursuant to the Indus Interim
Management Agreement, Indus shall:
(a) Without the Buyer's prior consent, which consent may be withheld
in the Buyer's sole discretion, not (i) sell, transfer, assign or dispose of, or
offer to, or enter into any agreement, arrangement or understanding to, sell,
transfer, assign or dispose of any of its material Assets or any interest
therein, or negotiate therefor, or (ii) create, incur or suffer to exist any
Lien of any nature whatsoever relating to any of Indus' Assets or any interest
therein (other than Permitted Liens);
15
<PAGE>
(b) Deliver to the Buyer copies of all environmental assessment
reports, if any, that it has in its possession covering any real property that
is leased pursuant to any Lease;
(c) Give notice to the Buyer promptly upon the commencement of, or
upon obtaining knowledge of, any facts that would reasonably be expected to give
rise to a threat of, any claim, action or proceeding commenced against or
relating to Indus or the Transactions contemplated by this Agreement (including
the PCS License Assignment) and which would reasonably be expected to have an
Indus Material Adverse Effect;
(d) Give notice to the Buyer promptly of (i) any event, condition or
state of facts known to Indus, which has had or would reasonably be expected to
have an Indus Material Adverse Effect or which causes or is likely to cause a
breach of any of Indus' representations and warranties hereunder, (ii) any
claim, action or proceeding which seeks to delay, enjoin, prevent or interfere
with the consummation of the Transactions, and (iii) any event, occurrence,
transaction or other item that would have been required to have been disclosed
on any Exhibit or Schedule delivered hereunder, had such event, occurrence,
transaction or item existed on the date hereof (disclosure by Indus pursuant to
this Section 4.3(f) shall not be deemed to amend or supplement the Exhibits or
Schedules hereto or to prevent or cure any misrepresentation, breach of warranty
or breach of covenant hereunder);
(e) Except for the HNS Agreements, use commercially reasonable
efforts to preserve its relationships with all parties to the Indus Agreements
and to perform in all respects all of its payment obligations under the Indus
Agreements according to the terms and conditions thereof, provided that Indus
receives funds loaned by the Buyer or Designated Purchaser sufficient to pay the
same;
(f) Not fail to pay when due any liability or obligations that, if
unpaid, would become a Lien upon any of the Assets, provided that Indus receives
funds loaned by the Buyer or Designated Purchaser sufficient to pay the same;
(g) Obtain the Consents to the Transactions set forth on Schedule
5.3 which are designated as material therein except Consents required by the HNS
Agreements;
(h) Comply with all of the terms and conditions of the Indus Interim
Management Agreement;
(i) Without the prior consent of the Buyer, which consent may be
withheld in the Buyer's sole discretion: (i) issue any additional capital stock
or other equity other than pursuant to the conversion of currently outstanding
Preferred Stock, (ii) incur any additional debt for borrowed money other than
pursuant to the Bridge Note and in accordance with the Indus Interim Management
Agreement, (iii) pay any liabilities of Indus or other amounts other than in
accordance with the Bridge Loan and the Indus Interim Management Agreement, (iv)
modify, amend, cancel, breach or terminate any existing agreement material to
its business or waive any rights of material value thereunder, (v) enter into
any new agreement, contract or commitment, (vi) set aside or pay any
distribution to any of the Stockholders or redeem, purchase or otherwise acquire
any of the equity interests in Indus (other than the Preferred Stock pursuant to
Section 4.10 and payment of the dividends on the Preferred Stock, for which, as
of the date
16
<PAGE>
hereof no more than Thirty-Five Thousand Dollars ($35,000) is outstanding and
payable), or (vii) otherwise engage in any practice, take any action, or enter
into any transaction of the sort described in Section 4.5 below;
(j) Provide the Buyer and its Representatives with full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of Indus, to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
Indus for purposes of the Buyer's due diligence review;
(k) Obtain from the holders of each of the options, and any rights
in, or to acquire, any of the capital stock of Indus (including those set forth
on Schedule 5.2(b), but not including any warrant holders listed therein or
pursuant to Section 5.18 of that certain Credit Agreement by and between Indus
and Hughes Network Systems dated November 6, 1997), other than the holders of
the Class A Common Stock, Class B Common Stock and Preferred Stock disclosed on
Schedule 5.2(a), written confirmation of the termination of any such options and
rights, in form and substance satisfactory to, and otherwise on terms acceptable
to, the Buyer.
(l) Comply with all applicable Laws relating to the PCS License and
its Assets and their use; and
(m) Maintain the PCS License in full force and effect, provided that
Indus receives sufficient funds to make required payments under the FCC Debt,
and otherwise keep substantially intact its assets, physical facilities, and
relationships with lessors and licensors, and Employees;
4.4 Lien Searches. Indus shall deliver to the Buyer UCC, tax and judgment
lien search reports issued by all applicable jurisdictions with respect to Indus
(the "Search Results") dated no earlier than thirty (30) days prior to the
Closing Date. If the Search Results reveal that any Liens exist, Indus shall,
unless directed otherwise by the Buyer, have such Liens removed as of the
Closing, except for Permitted Liens.
4.5 Non-Solicitation.
(a) From the date hereof until the Closing Date or the termination
of this Agreement, Indus shall not, and shall cause its Representatives not to,
solicit, initiate, encourage or participate in negotiations in any manner with
respect to, or furnish or cause or permit to be furnished any information to any
Person (other than to the Stockholders, the Buyer and the Buyer's
Representatives) in connection with, any inquiry or offer for any purchase,
sale, lease or other disposition, directly or indirectly, of any of the Assets,
any purchase or sale of the Indus Shares (or options, rights or warrants to
purchase, or securities convertible into, or exchangeable for, such Indus
Shares, or any acquisition of any right to acquire beneficial ownership, as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, of such Indus
Shares), or any merger, consolidation, share exchange, joint venture,
combination, or similar transaction relating to Indus or its Assets
(collectively, a "Third-Party Proposal"). During such period, Indus shall give
prompt notice to the Buyer of the occurrence of a Third-Party Proposal and the
terms thereof (including the identity of the prospective soliciting party).
17
<PAGE>
(b) If Indus or any of its Representatives breaches or threatens to
commit a breach of any of the provisions of this Section 4.5, the Buyer shall
have the right (in addition to any other rights and remedies available to the
Buyer at law or in equity) to equitable relief (including injunctions) against
such breach or threatened breach, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable harm to the Buyer and that
monetary damages would not be an adequate remedy to the Buyer. Indus agrees that
it will not seek, and hereby waives any requirement for, the securing or posting
of a bond or proving actual damages in connection with the Buyer's seeking or
obtaining such relief. Nothing in this Section 4.5 shall be construed to limit
the right of any Party to collect monetary damages in the event of a breach of
this Section 4.5.
4.6 Estoppel Agreements. Prior to the Closing, Indus shall use all
reasonable efforts to obtain an estoppel certificate in form and substance
reasonably satisfactory to the Buyer from each of the landlords, licensors or
lessors under each of the Leases.
4.7 Tax Provisions.
(a) Indus shall cause its accountant, Ernst & Young, to prepare,
and, subject to the Buyer's review and approval, shall timely file, all federal
and applicable state and local Tax Returns for Indus which are due on or before
the Closing Date (with such extensions as may be approved by the Buyer) together
with any Tax Returns for 1999.
(b) Following the Closing, the Buyer shall cause to be prepared and
filed on a timely basis federal and applicable state and local Tax Returns for
Indus for the period from January 1, 2000 through the Closing Date (the "Stub
Period"). The Buyer shall provide copies of such Tax Returns as filed to Rao.
Indus warrants and covenants that (A) the tax basis of Indus in the Assets,
including the PCS License that may be used to reduce Indus' income or gain
required to be recognized on the Transactions and (B) the net operating losses
that may be used to offset Indus' income or gain required to be recognized on
the Transactions together shall not be less than One Hundred Fifteen Million
Dollars ($115,000,000) (the "Transaction Tax Assumptions").
(c) Transaction Taxes. The Buyer agrees to pay those Taxes of Indus
(the "Transaction Taxes") required to be reflected on the Stub Period Tax Return
which relate to income or gain recognized by Indus as a result of the
Transactions contemplated hereby to the extent such Taxes do not exceed the
Maximum Transaction Tax Amount, as defined below. The "Maximum Transaction Tax
Amount" means the amount of Transaction Taxes that would be payable by Indus on
the Stub Return based on the Transaction Tax Assumptions for Indus' tax basis
reducing gain recognized on the Transaction, and Indus' net operating losses
offsetting such gain. The Parties further agree to use all commercially
reasonable efforts permitted by law to minimize the Transaction Taxes.
(d) Tax Proceedings. Whenever any taxing authority sends a notice of
an audit, initiates an examination of Indus or otherwise asserts a claim, makes
an assessment or disputes (each a "Tax Proceeding") the amount of Taxes for any
taxable period that may affect the Buyer's liability for Transaction Taxes under
this Agreement, the Buyer shall promptly inform Rao pursuant to the procedures
in Section 10.3 and keep Rao advised of the status of, any Tax Proceeding. The
Buyer shall have the right to control, at its cost, any resulting Tax
18
<PAGE>
Proceedings and to determine whether and when to settle any Tax Proceedings that
may affect the amount of the Transaction Taxes for which Buyer or Acquisition
Sub is liable under this Agreement or otherwise in relation to Indus. Rao shall
indemnify each of the Buyer and its Affiliates for any increases which are not
attributable to the error of the Buyer or any of its Affiliates in the past,
present or future Tax liability of the Buyer or any of its Affiliates as a
result of any Tax Proceeding related to Indus, attributable to the breach of the
warranties and covenants under Section 4.7(b), subject to the threshold amounts
and limits in Section 8.1 and 8.2, and for any adjustment within the Tax
Proceeding that may be timing differences (and not permanent differences),
reduced by the present value of future tax savings resulting from the timing
difference adjustment. The Buyer shall be entitled to receive and retain for its
sole use any refund or other adjustment arising out of any Tax Proceeding.
4.8 Rao Proxy. Rao shall execute and deliver to the Buyer contemporaneous
herewith an irrevocable proxy in the form of Exhibit E hereto solely for the
purpose of voting Rao's Indus Shares in favor of the Transactions.
4.9 Approval. Indus shall submit this Agreement for approval at a meeting
of its Board of Directors on or before March 10, 2000, and thereafter, if
approved by the Board of Directors, submit this Agreement to the Stockholders
for approval at a meeting within twenty-five (25) days of the date of approval
of this Agreement by the Indus Board of Directors.
4.10 MEDC Stock Power. Indus shall obtain an irrevocable proxy at least
five (5) days in advance of the special meeting of Stockholders referred to in
Section 4.9 in favor of the Buyer or Designated Purchaser Milwaukee Economic
Development Corporation in form and substance satisfactory to the Buyer for the
purpose of voting Milwaukee Economic Development Corporation's Preferred Stock
in favor of the Transactions. If Indus fails to obtain such irrevocable proxy
within such period, Indus shall thereupon immediately redeem the Preferred Stock
provided that Buyer or Designated Purchaser has loaned Indus the funds for such
redemption in an amount not to exceed the redemption price set forth in the
Articles of Incorporation of Indus.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF INDUS
As a material inducement for the Buyer and Acquisition Sub to enter into
this Agreement and to consummate the Transactions, Indus hereby represents and
warrants to the Buyer and Acquisition Sub that the representations and
warranties contained in this Article V are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date:
5.1 Organization, Power and Authority.
(a) Indus is a corporation duly organized and validly existing under
the laws of Wisconsin and has the requisite corporate power and authority to
own, lease and operate its Assets and to carry on its business as now being
conducted.
19
<PAGE>
(b) Indus has the requisite power and authority to execute, deliver
and perform this Agreement, the Related Agreements to which it is party and each
other instrument, document, certificate and agreement required or contemplated
to be executed, delivered and performed by it hereunder and thereunder.
(c) Indus is only qualified to do business in Wisconsin, and it need
not be qualified to do business in any other jurisdiction, other than any
jurisdiction in which the failure to be so qualified would not have an Indus
Material Adverse Effect.
(d) The execution, delivery and performance by Indus of this
Agreement and each of the Related Agreements to which it is party, and the
consummation by Indus of the Transactions are subject only to the approvals of
the Board of Directors and of the Stockholders, and there are no other
proceedings on its part which have not been taken that are necessary to
authorize this Agreement or such Related Agreements or to consummate the
Transactions.
(e) This Agreement and each of the Related Agreements to which Indus
is party have been duly executed and delivered by Indus and constitute its valid
and binding obligation, enforceable against it in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally or by general principles of equity.
5.2 Capitalization. The entire authorized capital stock of Indus consists
of Fifty Million (50,000,000) shares consisting of (i) Nine Million (9,000,000)
shares of a class designated "Class A Common Stock" with a par value of $.01 per
share; (ii) Forty Million (40,000,000) shares of a class designated "Class B
Common Stock" with a par value of $.01 per share; and (iii) One Million
(1,000,000) shares of a class designated "Preferred Stock" with a par value of
$.01 per share. The issued and outstanding shares of capital stock of Indus (the
"Indus Shares") are held of record by the respective Stockholders as set forth
on Schedule 5.2(a), and no shares of capital stock of Indus are held in
treasury. All of the issued and outstanding Indus Shares have been duly
authorized and are validly issued, fully paid, and nonassessable, except insofar
as personal liability may be imposed upon the holders of Indus Shares pursuant
to Section 180.0622(2)(b) of the WBCL as judicially interpreted. Each
Stockholder holds of record and to Indus' knowledge owns beneficially the number
of Indus Shares set forth next to his/her/its name in Schedule 5.2(a) free and
clear of any restrictions on transfer (other than any restrictions under the
Investment Agreement dated November 6, 1997, between certain investors and Indus
as amended and supplemented (the "Indus Investment Agreement") (which, except
for Sections 5 and 6 thereof, is not implicated by the Transactions), the
Securities Act and state securities laws), Taxes, Liens, options, warrants,
purchase rights, contracts, commitments, equities, claims and demands. To Indus'
Knowledge, no Stockholder is party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
Indus. Except as set forth on Schedule 5.2(b), there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
Indus to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to Indus.
20
<PAGE>
5.3 Consents; No Conflicts. Assuming that the Buyer, Acquisition Sub or
the Designated Purchaser is a Designated Entity (as such term is defined in 47
CFR ss. 24.709), neither the execution, delivery and performance by Indus of
this Agreement nor the consummation of the Transactions will (a) conflict with,
or result in a breach or violation of, any provision of its organizational
documents or any Law; (b) subject to obtaining the Consents set forth on
Schedule 5.3 constitute, with or without the giving of notice or lapse of time
or both, a breach, violation or default, create a Lien on any of the Assets, or
give rise to any right of termination, modification, cancellation, prepayment or
acceleration, under (i) the PCS License, (ii) any Indus Agreement or Lease, or
(c) require any Consent, other than those set forth on Schedule 5.3. To Indus'
Knowledge, there is no fact relating to Indus or its Affiliates that would
reasonably be expected to prevent it from consummating the Transactions or
disqualify Indus from obtaining the Consents (including the Consent of the FCC
but excluding Consents required by the HNS Agreements) required in order to
consummate the PCS License Assignment and the other Transactions.
5.4 Litigation. Except as set forth in Schedule 5.4. there is no action,
suit, audit, investigation or proceeding at law or in equity by any Person or
any arbitration or any administrative or other proceeding by or before any
Governmental Authority or other instrumentality or agency, pending or to the
knowledge of Indus, threatened, nor to Indus' knowledge, is there any valid
basis therefor (a) against Indus or any of the Assets, (b) which seeks to
prevent or challenge the Transactions, (c) against any director, officer or
Employee of Indus which relates to the affairs of Indus or the right of any
director, officer or Employee to participate in the business of Indus or (d)
with respect to any alleged violation by Indus of any Law, including any FCC
Law.
5.5 FCC Compliance. Indus is in all material respects in compliance with
FCC Law and with all applicable rules, regulations and policies of the FCC.
Except as set forth in Schedule 5.5, no event has occurred which (a) results in,
or alter notice or lapse of time or both would result in, revocation,
suspension, adverse modification, non-renewal, impairment, restriction or
termination of, or order of forfeiture with respect to, the PCS License or (b)
adversely affects or could reasonably be expected in the future to adversely
affect any of the rights of Indus or, following Closing, of Acquisition Sub
thereunder, except for legislation or rule making of general applicability.
Indus has duly filed and paid in a timely manner all fees, reports,
applications, documents, instruments and information required to be filed by it
under FCC Law, and all such filings are true, correct and complete in all
material respects. Indus complied at the time of filing initial applications for
the PCS License, and has since that time complied in all material respects with
all eligibility and basic qualification requirements to hold PCS licenses
generally and to hold the PCS License specifically, including (v) the spectrum
cap rule of 47 C.F.R. Section 20.6; (w) the alien ownership limitations of
Section 310(b) of the FCC Law and 47 C.F.R. Section 20.5; (x) Section 5301 of
the Anti-Drug Abuse Act of 1988, 21 U.S.C. Section 862; (y) the entrepreneurial
eligibility requirements for C Block licenses of 47 C.F.R. Section 24.709(a)(1);
and (z) the small business requirements of 47 C.F.R. Section 24.720(b)(1).
5.6 Brokers. Neither Indus nor any of its Representatives has employed any
broker, finder or investment banker in connection with the Transactions, and
Indus has not incurred and
21
<PAGE>
will not incur any liability for any brokerage fees, commissions or finder's
fees in connection with the Transactions.
5.7 No Offer. Except as set forth on Schedule 5.7 and as otherwise
contemplated in this Agreement, or the Related Agreements since December 9,
1999, Indus has not, directly or indirectly, singly or with others, offered,
solicited offers for or sold, assigned, pledged or otherwise transferred any of
the Assets, and none of the foregoing has occurred prior to such date which is
binding upon Indus or its Assets or will result in any claims, liabilities or
obligations for Indus, Buyer, Acquisition Sub, or Designated Purchaser. It has
not, directly or indirectly, through any Representative or otherwise, (i)
solicited, initiated or encouraged any Third-Party Proposal, or (ii)
participated in any discussions or negotiations regarding, furnished to any
other Person any nonpublic information with respect to, or otherwise cooperated
in any way with, assisted, participated in, facilitated or encouraged any effort
or attempt by any other Person to do or seek to do, any Third-Party Proposal.
5.8 License. Indus is the authorized legal holder, free and clear of any
Liens, except as otherwise set forth on Schedule 5.8, of the PCS License,
evidence of which is attached as Exhibit A. The PCS License is, and on the
Closing Date the PCS License will be, valid and in full force and effect. There
is not pending nor, to the knowledge of Indus, threatened against Indus or
against the PCS License, any application, action, petition, or other pleading,
or any proceeding with the FCC which questions or contests the validity of, or
seeks the revocation, nonrenewal or suspension of, the PCS License, which seeks
the imposition of any modification or amendment with respect thereto, or which
adversely affects in any material respect the ability of Acquisition Sub or the
Buyer to employ the PCS License in its business after the Closing Date. The PCS
License is not subject to any conditions other than those appearing on the face
of the PCS License itself and those imposed by FCC Law and the FCC Debt.
5.9 Title to Assets; Encumbrances; Future Operations.
(a) Schedule 5.9(a) sets forth a list of the Assets of Indus which
is accurate, correct, and complete in all material respects. Indus is the sole
and exclusive legal and beneficial owner of, and has good, valid and marketable
title to, all of the Assets, including all those reflected in the Financial
Statements (except for leased Assets and such Assets as may since have been sold
or otherwise disposed of in the ordinary course of business or subsequent to the
date of this Agreement with the prior consent of Wireless pursuant to the Indus
Interim Management Agreement or otherwise or of the Buyer). None of the Assets
is subject to any Lien except (collectively, the "Permitted Liens"):
(i) Liens reflected in Schedule 5.9(a)(i);
(ii) Liens consisting of zoning or planning restrictions,
easements, permits end other restrictions or limitations on the use of real
property or irregularities in title thereto which do not detract from the value
of, or impair the use of, the Assets by Indus in the operation of its business;
22
<PAGE>
(iii) Liens and leases incurred or made in the ordinary course
of business which do not impair the usefulness of the Assets in the conduct of
the business of Indus (but excluding Liens securing payment of indebtedness);
(iv) Liens arising by operation of law; and
(v) Liens for current Taxes not yet due and delinquent.
(b) Except as set forth on Schedule 5.9(b), the Assets are in good
operating condition and repair (reasonable wear and tear excepted).
(c) Schedule 5.9(c) sets forth by an accurate, correct, and complete
list of all real property and equipment leases entered into by Indus (the
"Leases"). Indus enjoys peaceful and undisturbed possession under each of the
Leases. Except as disclosed on Schedule 5.9(c), none of the Leases is with Rao,
any Stockholder, or any officer, Employee or director of Indus or any of their
respective Affiliates. All Leases are in writing, valid, subsisting and in full
force and effect, and, except as disclosed in Schedule 5.10(b), there are no
material uncured defaults of Indus under the Leases. Except as disclosed in
Schedule 5.10(b), there exists no event, occurrence, condition or act (including
the consummation of the Transactions) which, with the giving of notice, the
lapse of time or the happening of any further event or condition, would become a
default by Indus under any of the Leases.
(d) Schedule 5.9(d) sets forth an accurate, correct and complete
list of all motor vehicles operated by Indus, whether owned or leased. All such
vehicles are (a) properly licensed and registered in accordance with applicable
Law; (b) insured as set forth in Schedule 5.23; (c) in good operating condition
and repair (reasonable wear and tear excepted); and (d) not subject to any Lien
except for Permitted Liens or as described in Schedule 5.9(d).
(e) Indus does not own, and has never owned, any real property.
5.10 Indus Agreements.
(a) Schedule 5.10(a) sets forth a list of all of the following to
which Indus is a party or by which it or any of its Assets may be bound, whether
written or oral (the "Indus Agreements"), which is accurate, correct, and
complete in all material respects:
(i) Contracts with respect to Indus' business, including all
contracts between Indus and its customers, suppliers and consultants;
(ii) Licenses, contracts and other arrangements with respect
to any property of Indus or pursuant to which Indus has any right to occupy real
property or use equipment;
(iii) Contracts (written or oral) with respect to which Indus
has any liability or obligation, contingent or otherwise, involving more than
One Thousand Dollars ($1,000), which may otherwise have any continuing effect
after the Closing, or which place any material limitation on the method of
conducting or the scope of Indus' business;
23
<PAGE>
(iv) Contracts with Representatives of Indus or the spouses or
relatives of such Persons;
(v) Compensation arrangements for consultants and independent
contractors of Indus including rates of pay and other benefits and the amounts
of compensation and other benefits accrued as of January 1, 2000;
(vi) Agreements, contracts and instruments of Indus relating
to the borrowing of money, or the guaranty of any obligation for the borrowing
of money;
(vii) Contracts between officers, directors or Employees of
Indus and any other Person which purport to restrict Indus' business activities
or use of information in Indus's business, including any covenant not to
compete;
(viii) Confidentiality agreements to which Indus is a party;
(ix) Contracts and agreements between Indus and any
Governmental Authority; and
(x) Other contracts, instruments, commitments, plans and
arrangements of Indus.
Schedules 5.9(c) and 5.10(a) include, with respect to each Indus Agreement and
each Lease, whether oral or written, the names of the parties, the date thereof,
and its title or other general description. Each Indus Agreement and each Lease
sets forth the entire arrangement and understanding between Indus and the
respective third parties with respect to the subject matter thereof and, except
as indicated in such Schedules, there have been no amendments or side or
supplemental arrangements to or in respect of such Indus Agreements or Leases.
Indus has furnished to the Buyer true and correct copies of all written Indus
Agreements and Leases as currently in effect, and will furnish any further
information that the Buyer may reasonably request in connection with any of the
Indus Agreements and the Leases. Each Indus Agreement and each Lease is valid
and in full force and effect, and, except for the HNS Agreements and the Leases
and Indus Agreements specified in Schedule 5.10(b), Indus has performed all
material obligations required to be performed by it thereunder. Indus is not in
default under or in breach or violation of any Indus Agreement or Lease, except
for the HNS Agreements and the Leases and Indus Agreements specified in Schedule
5.10(b), in a manner which has or will have an Indus Material Adverse Effect.
There is no event which has occurred or existing condition which constitutes, or
with notice or lapse of time or both, would constitute a default under any Indus
Agreement or Lease, other than the HNS Agreements and the Leases and Indus
Agreements specified in Schedule 5.10(b), or would cause the acceleration of any
obligation of any party thereto, or give rise to any right of termination or
cancellation or cause the creation of any Lien on any Asset of Indus. No third
party is in default under any provision of any Indus Agreement or Lease other
than the HNS Agreements. There is no term of any Indus Agreement or Lease, other
than the HNS Agreements, which now or in the future may, so far as Indus can now
reasonably foresee, have an Indus Material Adverse Effect. With respect to each
Indus Agreement and each Lease, Acquisition Sub or the Buyer will succeed to all
of the rights and benefits of Indus thereunder.
24
<PAGE>
(b) Except as set forth on Schedule 5.10(b), Indus has made all
payments required to be paid by it under all Indus Agreements and the Leases
through and including the date hereof other than the Leases and Indus Agreements
set forth in Schedule 5.10(b). Indus has complied in all material respects with
all of its obligations under the Indus Agreements and the Leases other than the
Leases and Indus Agreements set forth in Schedule 5.10(b) in connection with the
construction by Indus of cell sites. Each of the Indus Agreements and Leases has
been lawfully entered into and, except as otherwise expressly contemplated
herein or pursuant to the Indus Interim Management Agreement, is or will be
valid and in full force and effect and is or will be enforceable in accordance
with its terms at the Effective Date. Except for the HNS Agreements, as of the
date hereof, Indus has not received written notice from any party to any Indus
Agreement or Lease threatening cancellation of, or asserting the existence of,
any outstanding disputes or defaults under, any Indus Agreement or Lease. Indus
will not modify, amend or waive any provisions of any Indus Agreement or Lease
in a manner that would adversely affect the Assets or terminate any Indus
Agreement or Lease prior to the Closing other than in the ordinary course of
business and with the prior consent of the Buyer.
5.11 Environmental and Safety Laws.
(a) Except as set forth on Schedule 5.11(a), to Indus' Knowledge the
Leased Property, is in material compliance with all, and have no liability under
any, applicable Environmental Laws or Laws relating to occupational health and
safety. Indus has been operated and is in material compliance with all
applicable Environmental Laws. Neither Indus nor any of its employees, agents,
representatives or subcontractors have disturbed, moved, or adversely affected
any Materials of Environmental Concern at any of the Leased Property. To Indus'
Knowledge, there are no actions, activities, circumstances, conditions, events
or incidents relating to the Leased Property, including the release, emission,
discharge, presence or disposal of any Materials of Environmental Concern on any
Leased Property, which could interfere with or prevent the continued operation
of the Leased Property in compliance in all material respects with all
applicable Environmental Laws.
(b) Except as set forth on Schedule 5.11(b), Indus has not done or
failed to do anything that has caused or is reasonably likely to cause and, to
Indus' Knowledge, there is not currently, and has not in the past been, any
release, emission, discharge, presence or disposal of any Materials of
Environmental Concern into the environment (including the air, surface and
groundwater and surface and subsurface soils) at, on, into, under, or
originating at the Leased Property in violation of applicable Environmental
Laws. To Indus' Knowledge, except as set forth on Schedule 5.11(b), no Leased
Property is or has been the location of any hazardous waste treatment, storage
or disposal facility, or any underground storage tank, or any facilities or
equipment containing asbestos or polychlorinated biphenyls. No Lien has been
imposed by any Governmental Authority or third party in connection with the
presence of any Materials of Environmental Concern on any Leased Property.
(c) Except as set forth on Schedule 5.11(c), Indus and, to Indus
Knowledge, its predecessors in interest have not (i) received any written
communication from a Governmental Authority, citizens' group, director, officer
or Employee of Indus or other Person, alleging that Indus has any liability
under any Environmental Law or under common law with respect to pollution and/or
protection of human health and/or the environment arising out of
25
<PAGE>
conditions relating to any Leased Property (including any release, emission,
discharge, presence or disposal of any materials of Environmental Concern on any
Leased Property); (ii) received any request for information, notice or
administrative inquiry under any Environmental Law relating to any Leased
Property; (iii) entered into or been subject to any consent decree, compliance
order, or administrative order with respect to any Environmental Law arising out
of conditions relating to any Leased Property (including any release, emission,
discharge, presence or disposal of any Materials of Environmental Concern on any
Leased Property).
(d) Except as set forth on Schedule 5.11(d), Indus has not
conducted, or arranged for the conduct of an environmental audit, investigation
or assessment of any of the facilities or operations on any Leased Property, and
Indus has not received and has no knowledge of the results of any such audit,
investigation or assessment performed by any other Person.
(e) Except as set forth on Schedule 5.11(e), to Indus' Knowledge,
there are not any past or present actions, activities, circumstances,
conditions, events or incidents related to any Leased Property, including the
release, emission, discharge, presence or disposal of any Materials of
Environmental Concern, that could reasonably be expected to form the basis of
any Environmental Claim against Indus.
(f) Except as set forth on Schedule 5.11(f), Indus has all material
Licenses that it is required to hold under applicable Environmental Laws.
5.12 Compliance With Laws. Indus is in, and has operated in, compliance
with all applicable Laws, including all FCC Laws, Environmental Laws, federal
and state securities Laws, and Laws relating to Taxes, except for failures to be
in compliance which do not have, or cannot reasonably be expected to have, an
Indus Material Adverse Effect. Indus has not received written notice to the
effect that it is not in compliance with any Laws with respect to its operations
or its Assets, and Indus has not taken any action or failed to take any action
that is a violation of any such Laws with respect to its operations or its
Assets, except for action or failures which do not have, or cannot reasonably be
expected to have, an Indus Material Adverse Effect.
5.13 Subsidiaries and Interests in Other Entities. Indus has no
Subsidiaries and does not, directly or indirectly, own or control, or have any
interest or the right to acquire any equity interest whatsoever in, any other
Person. Indus has not made any investment in or advance of cash or other
extension of credit to any Person. Other than the Stockholders, there is no
Person controlling, controlled by or under control with Indus, nor is there any
Person which on or prior to the Closing Date is or was a member of the same
controlled group or affiliated service group or was under common control with
Indus within the respective meanings of Sections 414(b), (m) and (c) of the
Code.
5.14 Financial Statements. Financial statements, including balance sheets
and statements of income and cash flow, of Indus have been supplied by Indus to
the Buyer as of and for the eight months ended December 31, 1997 and the year
ended December 31, 1998, in each case audited by Indus' independent accountants.
Indus has also supplied to the Buyer unaudited balance sheet (the "Most Recent
Balance Sheet") and an unaudited statement of income and cash flows (together,
the "Most Recent Financial Statements") as of and for the fiscal year ended
26
<PAGE>
December 31, 1999 (the "Most Recent Fiscal Year End"). Collectively, all of such
financial statements, including the footnotes thereto, are the "Financial
Statements," and are attached hereto as Exhibit F. All of the Financial
Statements except as indicated therein (i) have been prepared in accordance with
generally accepted accounting principles consistently applied, except for the
absence of footnotes to and subject to normal year end adjustments for, the Most
Recent Financial Statements, (ii) have been prepared on a consistent basis and,
in the case of the Financial Statements other then the Most Recent Financial
Statements, following normal year-end closing procedures, (iii) present fairly
the financial condition of Indus as at their respective dates, (iv) are true,
correct and complete, and (v) are consistent with the books and records of Indus
(which books and records are correct and complete). Indus has no debts,
liabilities or obligations of any nature whatsoever which are not disclosed on
such Financial Statements or set forth on Schedule 5.15(a).
5.15 Undisclosed Liabilities.
(a) Except as set forth on Schedule 5.15(a), Indus does not have any
liability (and there is no basis for any present or future action, suit,
proceeding, hearing, audit, investigation, charge, complaint, claim or demand
against Indus by any Stockholder, any Affiliate of any Stockholder, any former
stockholder of Indus or any Affiliate of any former stockholder of Indus giving
rise to any liability, and there is no basis for any present or future action,
suit, proceeding, hearing, audit, investigation, charge, complaint, claim or
demand against Indus by any other Person giving rise to any liability), fixed,
contingent or otherwise, except for (i) liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto), and (ii)
liabilities which have arisen or may arise in the ordinary course subsequent to
December 31, 1999 or incurred with the approval of Wireless pursuant to the
Indus Interim Management Agreement or with the prior consent of the Buyer or
pursuant to the Indus Interim Management Agreement.
(b) Without in any way limiting the representation and warranty set
forth in Section 5.15(a) above, Indus does not have any unfunded liabilities in
connection with any workers' compensation, employers' liability, or group health
plan except as described in Schedule 5.15(b).
5.16 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of Indus.
5.17 Taxes.
(a) Indus has timely filed or caused to be timely filed, or will
timely file or cause to be timely filed on or prior to the Closing Date, all
Returns required to be filed on or prior to the Closing Date (taking into
account any extension of time to file granted to or on behalf of Indus). All
such Returns are correct and complete in all respects and no Return of Indus has
ever been audited, except that 1995 and 1996 Wisconsin tax returns have been
audited and such audits have been completed and there are no further liabilities
of Indus with respect thereto. Schedule 5.17(a) lists all Returns filed by
Indus. Indus has delivered complete and correct copies of the Returns. All Taxes
for the respective periods covered by the Returns have been, or prior to the
Closing Date will be, timely paid.
27
<PAGE>
(b) Neither the IRS nor any other Governmental Authority has
asserted or threatened to assert, or is now asserting or threatening to assert,
against Indus any deficiency or claim for additional Taxes.
(c) Indus has withheld from its employees' or its other payees'
gross compensation or other payments, and has paid over to appropriate
governmental authorities, all Tax withholdings required by Law.
(d) There are no waivers or extensions in effect of the applicable
statutory period of limitation for the assessment of Taxes of Indus for any
taxable period.
(e) No deficiency assessment or proposed adjustment with respect to
any Tax liability of Indus for any taxable period is pending or, to the
Knowledge of Indus, threatened.
(f) No claim has ever been made by a Governmental Authority in a
jurisdiction where Indus does not file Returns that it is or may be subject to
taxation by that jurisdiction.
(g) There are no Liens for Taxes (other than for current Taxes not
yet due and payable) on any of the Assets of Indus, and no basis exists for the
imposition of any such Liens.
(h) Indus is not a party to, or bound by, any agreement providing
for the allocation or sharing of Taxes.
(i) Indus neither (i) has been a member of an affiliated group
filing a consolidated federal income tax return (other than a group the common
parent of which was Indus), nor (ii) has any liability for the Taxes of any
other Person under Treas. Reg. ss. 1.1502-6 (or any similar provision of Law),
as a transferee or successor, by contract or otherwise.
(j) Except as disclosed in Schedule 5.17(i), none of the
Stockholders is a foreign person within the meaning of, and no Tax is required
to be withheld as a result of the transfers contemplated by this Agreement
pursuant to, Section 1445 of the Code.
(k) None of the Assets owned by Indus is property that is required
to be treated as owned by any other Person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, as in effect immediately prior to the
enactment of the Tax Reform Act of 1986, or is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(l) The unpaid Taxes for Indus (A) did not, as of the Most Recent
Fiscal Year End, exceed the reserve for liability for Taxes set forth on the
face of the Most Recent Balance Sheet and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of Indus in filing its Returns.
(m) Indus has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. Indus has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Indus has disclosed on its federal income Tax Returns all
28
<PAGE>
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662 of the Code.
5.18 Conduct of Business; Absence of Adverse Changes. Since December 31,
1999, except as otherwise contemplated by this Agreement and the Related
Agreements, including the Indus Interim Management Agreement, and except for the
application of the proceeds of the Bridge Note, there has been (i) no sale,
transfer or other disposition of any of the Assets or capital stock of Indus
(except 100 shares of Class B Common Stock issued pursuant to an option
exercise); (ii) no Lien placed upon Indus' Assets; and (iii) no other event or
condition known to Indus which has had or which is reasonably likely to have an
Indus Material Adverse Effect. In particular, and without limiting the
generality of the foregoing, since December 31, 1999, Indus has not done any of
the following, except as otherwise contemplated herein or in the Related
Agreements or primarily caused by the actions or decisions of Wireless as
manager pursuant to the Indus Interim Management Agreement:
(a) terminated the services of any Employee, consultant or agent of
Indus other than Persons disclosed in Schedule 5.18(a);
(b) increased the compensation payable or to become payable to any
officer, director, Employee, consultant, or agent of Indus or made or entered
into any bonus payment arrangement with any officer, director, Employee,
consultant, or agent, or hired or engaged any additional management personnel,
consultants or contractors for the business of Indus;
(c) made any loan to, or entered into any other transaction with,
any of its directors, officers, Employees or Stockholders, or any member of
their respective families, or any Affiliate of any Stockholder, outside of
Indus' ordinary course of business;
(d) adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance or other plan, contract or commitment for
the benefit of any of its officers, directors, Employees, consultants or agents
(or taken any such action with respect to any of its Benefit Arrangements or
Employee Plans);
(e) directly or indirectly redeemed, purchased or otherwise acquired
or disposed of any properties or Assets except in the ordinary course of
business;
(f) subjected any of its properties or Assets to any Lien;
(g) modified, amended, canceled or terminated any existing agreement
material to its business, other than the termination of options and warrants,
for which termination Indus shall have no liability or obligation, including the
making of any substantial prepayment on any existing obligation, except in the
ordinary course of business;
(h) made any change in the accounting methods or practices employed
by Indus in respect of the business of Indus;
(i) delayed or postponed the payment of its accounts payable and
other liabilities outside its ordinary course of business, except as set forth
on Schedule 5.18(i), none of
29
<PAGE>
which shall individually or in the aggregate have an Indus Material Adverse
Effect, and except for payments pursuant to the HNS Agreements;
(j) entered into any contract or commitment involving in any
instance aggregate payment by Indus of more than One Thousand Dollars ($1,000)
or extending beyond the Closing Date, except in connection with the Transactions
or in the ordinary course of business consistent with past practice;
(k) waived any rights of material value or modified, amended,
altered, breached or terminated any Indus Agreement;
(l) granted or amended any license or sublicense of any of its
rights under or with respect to any of its Intellectual Property; or
(m) directly or indirectly offered, solicited or entertained offers
for or taken any other action with a view to the sale of all or any substantial
part of the assets, capital stock or business of Indus.
5.19 Intellectual Property; Trade Secrets; Software.
(a) Schedule 5.19(a) contains a list of all Intellectual Property
and registrations and applications owned or used by Indus. Indus has clear and
unencumbered title to the Intellectual Property set forth in Schedule 5.19(a)
which is listed as owned by Indus and such title has not been challenged or
threatened by others except for the Liens listed at Schedule 5.19(a). No rights
or licenses to use Intellectual Property have been granted or acquired by Indus
except those listed at Schedule 5.19(a). Except as listed at Schedule 5.19(a),
there have been no written claims or assertions made by others and sent to Indus
that Indus has infringed any rights to any Intellectual Property of others.
Except as listed at Schedule 5.19(a), Indus has not received notice of, and has
no knowledge of, any infringement or allegation of infringement of Intellectual
Property of Indus by others. All granted patents, registered trademarks and
service marks, and registered copyrights owned by Indus are in good standing,
and are recorded on the public record in the name of Indus. All rights of Indus
in and to the Intellectual Property will not be adversely affected by the
Transactions as contemplated herein, and no consent or other approval need be
obtained by Indus in relation thereto. To Indus' Knowledge, the operation by
Acquisition Sub or the Buyer after the Closing in the manner and geographic
areas in which it was previously conducted by Indus will not interfere with or
infringe upon any patent or trademark or any asserted rights of others with
respect to the current trade dress or packaging of any products. Indus is not
subject to any judgment, order, writ, injunction or decree of any Governmental
Authority or any arbitrator, and has not entered into any contract, which
restricts or impairs the use of any Intellectual Property. No filing or
recording fees, stamp or transfer taxes or other governmental fees, costs or
taxes of any kind in excess of $500 will be payable by Indus in connection with
the consummation of the Transactions.
(b) To Indus' Knowledge, Indus has all necessary right, title and
interest to all electronic data processing systems, information systems,
computer software programs, program specifications, charts, procedures, source
codes, input data, routines, data bases and report
30
<PAGE>
layouts and formats, record file layouts, diagrams, functional specifications
and narrative descriptions, flow charts and other related material used by it.
5.20 Licenses. Indus presently holds, and at all times prior to the
Closing will hold, all Licenses necessary or appropriate for the conduct of its
business as previously conducted. All such presently held Licenses are listed on
Schedule 5.20. The consummation of the Transactions will not render such
Licenses invalid or otherwise require any notices, applications or other filings
except as noted on Schedule 5.20.
5.21 Employees and Compensation.
(a) Schedule 5.21(a) sets forth an accurate, correct and complete
list and summary description of all agreements, arrangements or understandings,
written or oral, with officers, directors and Employees of Indus, regarding
services to be rendered, terms and conditions of employment, and compensation
(the "Employment Contracts"). To Indus' Knowledge, the services of all Employees
will continue to be available on substantially the same terms and conditions to
Acquisition Sub or the Buyer following the Closing.
(b) Schedule 5.21(b) sets forth an accurate, correct and complete
list of all Employees, including name, title or position, the present annual
compensation (including bonuses, commissions and deferred compensation), years
of service and any interests in any incentive compensation plan. Schedule
5.21(b) sets forth an accurate, correct and complete list of each Employee who
may become entitled to receive supplementary retirement benefits or allowances,
whether pursuant to a contractual obligation or otherwise, and the estimated
amounts of such payments. Except as set forth on Schedule 5.21(b), Indus has not
since December 31, 1999, (i) paid, or made any accrual or arrangement for the
payment of, bonuses or special compensation of any kind, including any severance
or termination pay, to any present or former officer or employee, (ii) made any
general wage or salary increases or (iii) increased any other benefits or
insurance provided to any Employee.
(c) Except as set forth in Schedule 5.21(c), there are no
controversies pending or, to the Knowledge of Indus, threatened involving any
Employees or former employees. Indus has not suffered or sustained any work
stoppage and no such work stoppage is threatened. Indus is not a party to any
collective bargaining agreement. No union organizing or election activities
involving any Employees of Indus are in progress or to the Knowledge of Indus,
threatened.
(d) Indus has complied with all Laws relating to the employment of
labor, including provisions relating to wages, hours, equal opportunity,
occupational health and safety, severance, collective bargaining and the payment
of social security and other taxes. Except as disclosed in Schedule 5.21(d),
there is not and will not be any duty, responsibility, liability or obligation
under any Laws relating to employment or any common law trust or contractual
duty or standard of care arising from an employment relationship attributable to
an event occurring or a state of facts existing prior to the Closing Date. As of
the Closing Date, Indus shall have complied with the Worker Adjustment and
Retaining Notification Act and its regulations, as applicable.
31
<PAGE>
5.22 Employee Benefits.
(a) Except as disclosed on Schedule 5.22. there are no Employee
Plans or Benefit Arrangements maintained or contributed to by Indus.
(b) Indus has delivered to the Buyer true and complete copies of all
documents, as they may have been amended to the date hereof, as well as working
copies, embodying or relating to Employee Plans and Benefit Arrangements. Except
as disclosed in Schedule 5.22. there have been no written communications with
respect to any Employee Plan or Benefit Arrangement with the IRS, U.S.
Department of Labor, PBGC or the Securities and Exchange Commission, or with any
other Governmental Authority. Indus shall further make available to the Buyer
any documents or other information relating to the Employee Plans and Benefit
Arrangements as may be reasonably requested by the Buyer.
(c) All Employee Plans and Benefit Arrangements are now, and have
always been, established, maintained and operated in accordance with all
applicable laws (including ERISA and the Code) except for such noncompliance
that cannot reasonably be expected to have an Indus Material Adverse Effect.
(d) Except as disclosed in Schedule 5.22, each Employee Plan and
Benefit Arrangement is now and has always been established in writing. With
respect to any Employee Plan or Benefit Arrangement not established in writing,
a true and complete description of such Employee Plan or Benefit Arrangement is
set forth in Schedule 5.22.
(e) Indus has never maintained an Employee Plan intended to meet the
requirements under Section 401(a) of the Code.
(f) All contributions required to be made to each Employee Plan and
Benefit Arrangement have been timely and completely made.
(g) All benefits and other payments required to be made under or by
each Employee Plan and Benefit Arrangement have been completed and timely paid.
(h) Except as set forth on Schedule 5.22, Indus does not have any
obligations to pay severance benefits that will arise as a result of the
Transactions, and no benefit obligations have given or will give rise to an
"excess parachute payment," as such term is defined in Section 280G of the Code.
(i) No Employee Plan or Benefit Arrangement which is an "employee
welfare benefit plan" provides for continuing benefits or coverage, including
medical, health or life insurance, to an Employee or former employee following
termination of employment with Indus other than that required by Section 4980B
of the Code and Sections 601 through 609 of ERISA.
(j) No Employee Plan is subject to Title IV of ERISA or Section 412
of the Code. No Employees are, or have been, at any time, participants in any
"multiemployer plan" (within the meaning of Section 3(37) of ERISA), "multiple
employer welfare arrangement" (within the meaning of Section 3(40) of ERISA) or
"voluntary employees' beneficiary
32
<PAGE>
association" (within the meaning of Section 501(c)(9) of the Code) by virtue of
their employment with Indus.
(k) There is no suit, action, dispute, claim, arbitration or legal,
administrative or other proceeding or governmental investigation pending, or to
Indus' Knowledge threatened, alleging any breach of the terms of any Employee
Plan or Benefit Arrangement or of any fiduciary duties thereunder or violation
of any applicable Law with respect to any Employee Plan or Benefit Arrangement,
nor any arbitration, proceeding or investigation.
Solely for purposes of this Section 5.22, the term Indus includes any controlled
group (within the meaning of Section 414(b) of the Code) of which Indus is a
member, all trades or businesses under common control (within the meaning of
Section 414(c) of the Code) of which Indus is a member, and all affiliated
service groups (within the meaning of Section 414(m) of the Code) of which Indus
is a member. Except as disclosed on Schedule 5.22, Indus is not a member of any
controlled group, any trade or business under common control, or any affiliated
service group as previously defined.
5.23 Insurance. Indus maintains property, general liability and workers'
compensation insurance covering the operations of Indus' business through the
policies listed in Schedule 5.23. Such policies are in full force and effect,
all premiums due thereon have been paid, and Indus has complied in all material
respects with the provisions of such policies. Except as otherwise indicated on
Schedule 5.23, all liability insurance policies are on an "occurrence" basis.
The insurance listed in Schedule 5.23 is in amounts adequate to cover losses on
physical assets. Schedule 5.23 also lists all outstanding claims against such
policies as of the date hereof, and all claims made since July 1, 1996 against
such policies or any prior insurance policies maintained by Indus. To Indus'
Knowledge, all insurance has been issued by financially sound insurance
companies under valid and enforceable policies or binders for the benefit of
Indus, and all such policies or binders are in amounts and for risks, casualties
and contingencies customarily insured against by enterprises in operations
similar to Indus. There are no pending or asserted claims against any such
policies as to which any insurer has denied liability, and there are no claims
under any such policies that have been disallowed or improperly filed. No notice
of cancellation or nonrenewal with respect to, or material increase of premium
for, any insurance has been received by Indus. Indus has no Knowledge of any
facts or the occurrence of any event which (i) might form the basis of any claim
against it relating to the conduct or operations of Indus and which will
materially increase the insurance premiums payable under any insurance, or (ii)
otherwise will materially increase the insurance premiums payable under any
insurance.
5.24 Books and Records. All corporate actions of Indus' board of directors
and the Stockholders have been duly authorized in accordance with applicable law
and the Articles of Incorporation and Bylaws of Indus, and have been duly and
accurately recorded in Indus' minute books. The general ledgers and books of
Indus and all of Indus' other books, accounts and records are complete and
correct in all material respects and have been maintained in accordance with
good business practice and, in all material respects, all applicable Laws.
5.25 Banking Relationships; Investments. All of the arrangements which
Indus has with any banking institutions are completely and accurately described
in all material respects in Schedule 5.25, indicating with respect to each such
arrangement the type of arrangement
33
<PAGE>
maintained (including checking account, borrowing arrangement, lockbox or safe
deposit box) and the Person or Persons authorized in respect thereto. Schedule
5.25 sets forth an accurate, correct and complete list of all certificates of
deposit, debt or equity securities and other investments owned beneficially or
of record by Indus ("Investments"). Indus has good and marketable title to all
Investments. The Investments reflected on the Most Recent Balance Sheet are (a)
properly valued at the lower of cost or market, (b) readily marketable, and (c)
fully paid and not subject to assessment or other claims upon the holder
thereof.
5.26 Disclosure. None of the representations and warranties of Indus
contained herein, including the Schedules and Exhibits thereto, nor any other
document certificate or written statement furnished by Indus to the Buyer or the
Buyer's Representatives in connection herewith contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein complete and not misleading as of the
dates thereof in light of the circumstances in which they were made. Indus is
not aware of any information necessary to enable a prospective purchaser to make
an informed investment decision to enter into the Transactions which has not
been expressly disclosed to the Buyer in writing. To Indus' Knowledge, there is
no fact which causes, or in the future will (so far as Indus can now foresee)
cause, an Indus Material Adverse Effect, or which materially adversely affects
the ability of Indus to fully perform this Agreement and the Transactions, which
has not been set forth or described in this Agreement or in a Schedule,
certificate or other written statement furnished to the Buyer. To Indus'
Knowledge, there is no fact, other than general economic conditions, which
cause, or might reasonably be expected to cause, an Indus Material Adverse
Effect which has not been set forth or referred to in this Agreement, including
the Schedules.
5.27 Transactions with Affiliates. Since its inception, there has not been
any dividend or other distribution of assets by Indus. Except as set forth in
Schedule 5.27, no Affiliate of Indus:
(a) Owns, directly or indirectly, any debt, equity or other interest
or investment in any Person which is a competitor, lessor, lessee, customer,
supplier or advertiser of Indus;
(b) Except for the Rao Liabilities and Rao Notes, has any cause of
action or other claim whatsoever against or owes any material amount to, or is
owed any material amount by, Indus;
(c) Has any interest in or owns any property or right used in the
conduct of Indus' business operations;
(d) Except for the Rao Liabilities and the Rao Notes, has lent or
advanced any money to, or is owed any money from, or is the guarantor of or
otherwise liable for any indebtedness or other obligations of Indus;
(e) Is a party to any contract, lease, agreement, arrangement or
commitment with Indus; or
34
<PAGE>
(f) Received from or furnished to Indus any goods or services (with
or without consideration) since its inception.
The debt evidenced by the Rao Note and the Rao Liabilities reflects amounts
actually loaned by Rao to, and funds actually provided by Rao to, Indus.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION SUB
Each of the Buyer and the Acquisition Sub represents and warrants to Indus
that the statements contained in this Article VI are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date:
6.1 Organization, Power and Authority.
(a) The Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation
and has the requisite company power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and as proposed
to be conducted. The Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted
and as proposed to be conducted.
(b) Each of the Buyer and the Acquisition Sub has the requisite
power and authority to execute, deliver and perform this Agreement, each of the
Related Agreements to which it is a party, and each other instrument, document,
certificate and agreement required or contemplated to be executed, delivered and
performed by it hereunder and thereunder.
(c) This Agreement and each of the Related Agreements to which the
Buyer or Acquisition Sub is a party has been duly executed and delivered by the
Buyer and Acquisition Sub, as the case may be, and constitutes its valid and
binding obligation, enforceable against it in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar Laws affecting or relating to enforcement of creditors' rights
generally or by general principles of equity.
6.2 Consents; No Conflicts. Neither the execution, delivery and
performance by the Buyer or the Acquisition Sub of this Agreement or any of the
Related Agreements to which either of them is a party, nor the consummation of
the Transactions will (a) conflict with, or result in a breach or violation of;
any provision of their respective organizational documents; (b) subject to
obtaining the Consents set forth on Schedule 6.2, constitute, with or without
the giving of notice or lapse of time or both, a breach, violation or default,
create a Lien on its assets, or give rise to any right of termination,
modification, cancellation, prepayment or acceleration, monetary forfeiture or
other penalty under any note, bond, mortgage, indenture, lease, agreement or
other instrument, in each case which is applicable to or binding upon it a any
of its assets; or (c) require any Consent other than those set forth on Schedule
6.2 and the approval of the Board of Directors of Acquisition Sub and its
stockholder, the Buyer (which approvals have been obtained), except where such
breach, violation, default, Lien or right would not have a material adverse
effect on the Transactions. To their knowledge, there is no fact relating to
either the
35
<PAGE>
Buyer or Acquisition Sub or their Affiliates that would be reasonably expected
to prevent them from consummating the Transactions or performing their
respective obligations under this Agreement or any of the Related Agreements or
disqualify the Buyer or Acquisition Sub from obtaining the Consents (including
the Consent of the FCC) required in order to consummate the Transactions.
6.3 Litigation. There is no action, proceeding or investigation pending
or, to the Buyer's or Acquisition Sub's knowledge, threatened against either of
them or their respective properties or assets that would have a material adverse
effect on their respective abilities to consummate the Transactions or to
fulfill their respective obligations under this Agreement, or which seeks to
prevent or challenge the Transactions.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Obligations of All Parties. The obligation of each of
the Parties to consummate the Transactions shall be conditioned on the
following, unless waived by each of the Parties at or prior to Closing:
(a) Any applicable waiting period under the HSR Act shall have
expired or been terminated or the Transactions shall have been approved by the
Federal Trade Commission.
(b) The Consent of the FCC to the PCS License Assignment shall have
been obtained pursuant to a Final Order, free of any conditions materially
adverse to the Buyer, Acquisition Sub, or Indus, other than (i) the imposition
of payment obligations by the FCC as a condition to the approval of the PCS
License Assignment, including unjust enrichment penalties pursuant to 47 CFR ss.
1.2111 or (ii) those applicable to the PCS or wireless communications services
industry generally. For the purposes of this Agreement, "Final Order" means an
action or decision that has been granted by the FCC as to which (i) no request
for a stay or similar request is pending, no stay is in effect, the action or
decision has not been vacated, reversed, set aside, annulled or suspended and
any deadline for filing such request that may be designated by Law 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, including other administrative or
judicial review, or in effect and any deadline for filing any such appeal that
may be designated by Law rule has passed.
(c) All Consents of Governmental Authorities (other than the
Consents referred to in paragraphs (a) and (b) above) required to permit the
consummation of the Transactions shall have been obtained.
(d) All approvals by the directors, shareholders and members of the
Buyer, Indus, and Acquisition Sub of this Agreement, the Related Agreements and
the Transactions shall have been obtained in accordance with applicable Law and,
in the case of Indus, Section 6 of the Indus Investment Agreement.
36
<PAGE>
(e) No preliminary or permanent injunction or other order, decree or
ruling issued by a Governmental Authority, nor any Law promulgated or enacted by
any Governmental Authority, shall be in effect that would (i) impose material
limitations on the ability of any Party to consummate the Transactions or
prohibit such consummation, or (ii) impair in any material respect the operation
by Acquisition Sub or the Buyer of the business previously conducted by Indus.
(f) At the Closing, the Buyer or the Designated Purchaser shall be a
"Designated Entity" (as such term is defined in 47 CFR ss. 24.709) fully
qualified to hold C and F Block PCS Licenses. Notwithstanding any other
provision of this Section 7.1, the condition set forth in this Section 7.1(f)
may not be waived by any Party.
7.2 Conditions to Obligations of the Buyer and Acquisition Sub. The
obligations of the Buyer and Acquisition Sub to consummate the Transactions
contemplated to occur at the Closing shall be further conditioned upon the
satisfaction or fulfillment, at or prior to the Closing, of the following
conditions unless waived by the Buyer and Acquisition Sub, at or prior to
Closing:
(a) The representations and warranties of Indus contained herein
shall be true and correct in all material respects, in each case when made and
at and as of the Closing (except for representations made as of a specified
date, which shall be true and correct as of such date, except for
representations and warranties that are qualified as to materiality which shall
be true and correct to the extent so qualified and except for representations or
warranties that are no longer true at Closing due primarily to acts or omissions
of Wireless pursuant to the Indus Interim Management Agreement or actions or
omissions approved by the Buyer, Wireless or Designated Purchaser) with the same
force and effect as though made at and as of such time.
(b) Indus and Rao shall have performed and complied with in all
material respects all agreements and covenants contained herein required to be
performed by it at or before the Closing, except for agreements and covenants
that are not performed or not complied with primarily because of Wireless'
actions or omissions as manager pursuant to the Indus Interim Management
Agreement.
(c) Rao shall have delivered to the Buyer the documents required
pursuant to Section 3(a), and Indus shall have delivered to the Buyer the
documents required pursuant to Section 3(b).
(d) Neither Hughes Network Systems nor its successors or assigns
shall have initiated any actions set forth in Section 7.1(e) or taken any action
that could reasonably be expected to have a material adverse affect upon the
Parties' ability to accomplish the PCS License Assignment or the conditions
therefor.
(e) All Consents (other than Consents required by the HNS
Agreements) shall have been obtained and delivered to the Buyer.
(f) Indus and Rao shall have each performed all of their respective
agreements and covenants under the Organizational Agreement.
37
<PAGE>
(g) The number of Dissenting Shares shall not exceed 20% of the
Indus Shares.
(h) There shall be no outstanding options, or rights in or to
acquire, any of the capital stock of Indus (other than the warrants listed in
Schedule 5.2(b) and any conversion rights pursuant to Section 5.18 of that
certain Credit Agreement by and between Indus and Hughes Network Systems dated
November 6, 1997), and the Buyer shall have received written evidence, in form
satisfactory to the Buyer, of the satisfaction of the foregoing (other than
warrants listed in Schedule 5.2(b) and any conversion rights pursuant to Section
5.18 of that certain Credit Agreement by and between Indus and Hughes Network
Systems dated November 6, 1997).
7.3 Conditions to the Obligations of Indus and Rao. The obligations of
Indus and Rao to consummate the Transactions contemplated to occur at the
Closing shall be further conditioned upon the satisfaction or fulfillment, at or
prior to the Closing, of the following conditions, unless waived by Indus and
Rao at or prior to Closing:
(a) The representations and warranties of the Buyer and the
Acquisition Sub contained herein shall be true and correct in all material
respects, in each case when made and at and as of the Closing (except for
representations and warranties made as of a specified date, which shall be true
and correct as of such date and except for representations and warranties that
are qualified as to materiality which shall be true and correct as so qualified)
with the same force and effect as though made at and as of such time.
(b) The Buyer and Acquisition Sub or the Designated Purchaser shall
have performed in all material respects all agreements contained herein required
to be performed by either of them at or before the Closing, including all
payment obligations under Sections 3.2(c), (e), and (f) and 4.1(d)(i).
(c) The Buyer and Acquisition Sub or the Designated Purchaser shall
have delivered (i) to Indus the documents required pursuant to Section 3(d), and
(ii) to Rao the documents required pursuant to Section 3(c).
(d) The approval of the Stockholders and the Board of Directors of
Indus of the Merger shall have been obtained in accordance with WBCL and Section
6 of the Indus Investment Agreement.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival. Except for the representations and warranties in Sections
5.1, 5.2, and 5.3, which shall continue indefinitely, and except for the
representations and warranties in Sections 5.8, 5.17, and 5.21, which shall
survive the Closing Date until thirty (30) days following the expiration of the
longest applicable statute of limitations, the representations and warranties
made in this Agreement shall survive the Closing without regard to any
investigation made by any of the Parties until the second anniversary thereof
and shall thereupon expire together with any right to indemnification in respect
thereof (except to the extent a notice asserting a claim for breach of any such
representation or warranty and describing such claim in reasonable detail shall
have been given prior to the expiration of the applicable survival period to the
Party which
38
<PAGE>
made such representation or warranty). The covenants and agreements contained
herein to be performed or complied with prior to the Closing shall expire at the
Closing. The covenants and agreements contained in this Agreement to be
performed or complied with after the Closing shall survive the Closing. After
the Closing, the sole and exclusive remedy of the Parties (except in the case of
fraud or where this Agreement expressly provides for specific performance) for
any breach or inaccuracy of any representation or warranty contained in this
Agreement, or any other claim (whether or not alleging a breach of this
Agreement) that arises out of the facts and circumstances constituting such
breach or inaccuracy, shall be the indemnity provided in this Article VIII;
provided, that an indemnified Party shall not be entitled to indemnification
under this Article VIII for breach of a representation or warranty (other than
Section 5.6, for which no indemnification threshold shall apply), unless the
aggregate amount owed to such Party under this Article VIII exceeds $100,000, in
which event, such Party shall be entitled to indemnification in full for all
Losses in excess of $100,000 resulting from breaches of representations and
warranties, subject to any limitations set forth below.
8.2 Indemnification by Indus and Rao. Indus (prior to the Effective Date)
and Rao thereafter shall each indemnify and hold harmless Acquisition Sub and
the Buyer, and their respective Affiliates, directors, shareholders, members,
managers, officers, employees, agents and/or the legal representatives of any of
them (each, a "Section 8.2 Indemnified Party"), against all damages, claims,
costs, losses, liabilities and expenses (including amounts paid in satisfaction
of judgements, in compromise, as fines and penalties, and as counsel fees)
(collectively, "Losses") incurred by any Section 8.2 Indemnified Party and
Losses incurred in connection with the investigation, defense, or disposition of
any action, suit or other proceeding in which any Section 8.2 Indemnified Party
may be involved or with which any Section 8.2 Indemnified Party may be
threatened (whether arising out of or relating to matters asserted by third
parties against a Section 8.2 Indemnified Party or incurred or sustained by such
party in the absence of a third-party claim), that arise out of or result from
(a) any representation or warranty of Indus contained in this Agreement being
untrue, (b) any default by Indus or any of its Affiliates in the performance of
their respective obligations under this Agreement or (c) any Excess Expenses and
pursuant to Section 4.7(d); provided that the aggregate liability of Rao to
indemnify the Section 8.2 Indemnified Parties against Losses and Excess Expenses
shall be limited to the Holdback Funds, and for any Losses under this Article
VIII that are indemnifiable following any release of the Holdback Funds to Rao
pursuant to the Holdback Agreement, Rao's liability shall be limited to the
amount of such Holdback Funds released to Rao. Anything to the contrary herein
notwithstanding, Rao shall not be obligated to indemnify the Buyer or
Acquisition Sub or any other person for (i) any payment obligation imposed by
the FCC as a condition of its approval of the transfer of the PCS License to
Buyer, Acquisition Sub or the Designated Purchaser including any unjust
enrichment penalty, or (ii) any amounts paid or payable by Buyer, Acquisition
Sub or Designated Purchaser pursuant to Section 3.4.
8.3 Indemnification by the Buyer. The Buyer shall indemnify and hold
harmless Indus and its Affiliates, and the directors, shareholders, members,
managers, officers, employees, agents and/or the legal representatives of any of
them (each, a "Section 8.3 Indemnified Party"), against all Losses incurred by
any Section 8.3 Indemnified Party and Losses incurred in connection with the
investigation, defense, or disposition of any action, suit or other proceeding
in which any Section 8.3 Indemnified Party may be involved or with which any
Section 8.3 Indemnified Party may be threatened (whether arising out of or
relating to matters asserted by
39
<PAGE>
third parties against a Section 8.3 Indemnified Party or incurred or sustained
by such party in the absence of a third party claim) that arise out of or result
from (a) any representation or warranty of the Buyer contained in this Agreement
being untrue, or (b) any default by the Buyer or the Designated Purchaser or any
of its Affiliates in the performance of their respective obligations under this
Agreement.
8.4 Procedures.
(a) The terms of this Section 8.4 shall apply to any claim (a
"Claim") for indemnification under the terms of Sections 8.2 or 8.3. The Section
8.2 Indemnified Party or Section 8.3 Indemnified Party (each, an "Indemnified
Party"), as the case may be, shall give prompt notice of such Claim to the
indemnifying party (the "Indemnifying Party") under the applicable Section,
which Party may assume the defense thereof, provided, that any delay or failure
to so notify the Indemnifying Party shall relieve the Indemnifying Party of its
obligations hereunder only to the extent, if at all, that it is materially
prejudiced by reason of such delay or failure. The Indemnified Party shall have
the right to approve any counsel selected by the Indemnifying Party and to
approve the terms of any proposed settlement, such approvals not to be
unreasonably delayed or withheld (unless, in the case of approval of a proposed
settlement, such settlement provides only for the payment of monetary damages by
the Indemnifying Party and includes a complete release of the Indemnified Party
in respect of the claim in question). Notwithstanding any of the foregoing to
the contrary, the provisions of this Article VIII shall not be construed so as
to provide for the indemnification of any Indemnified Party for any liability to
the extent (but only to the extent) that such indemnification would be in
violation of applicable Law, but shall be construed so as to effectuate the
provisions of this Article VIII to the fullest extent permitted by Law.
(b) In the event that the Indemnifying Party undertakes the defense
of any Claim, the Indemnifying Party will keep the Indemnified Party advised as
to all material developments in connection with such Claim, including promptly
furnishing the Indemnified Party with copies of all material documents filed or
served in connection therewith.
(c) In the event that the Indemnifying Party fails to assume the
defense of any Claim within ten (10) Business Days after receiving notice
thereof, the Indemnified Party shall have the right, subject to the Indemnifying
Party's right to assume the defense pursuant to the provisions of this Article
VIII, to undertake the defense, compromise or settlement of such Claim for the
account of the Indemnifying Party. Unless and until the Indemnifying Party
assumes the defense of any Claim, the Indemnifying Party shall advance to the
Indemnified Party any of its reasonable attorneys' fees and other costs and
expenses incurred in connection with such Claim. Each Indemnified Party shall
agree in writing prior to any such advancement that, in the event he or it
receives any such advance, such Indemnified Party shall reimburse the
Indemnifying Party for such fees, costs and expenses to the extent that it shall
be determined that he or it was not entitled to indemnification under this
Article VIII.
(d) In no event shall an Indemnifying Party be required to pay in
connection with any Claim for more than one firm of counsel (and local counsel)
for each of the following groups of Indemnified Parties: (i) Indus, its
Affiliates, and the shareholders, members, managers, officers, employees, agents
and/or the legal representatives of any of them; and (ii) the
40
<PAGE>
Buyer, Acquisition Sub, and their respective Affiliates, and the shareholders,
members, managers, officers, employees, agents and/or the legal representatives
of any of them.
ARTICLE IX
TERMINATION
9.1 Termination. In addition to any other rights of termination set forth
herein, this Agreement may be terminated, and the Transactions abandoned,
without further obligation of any Party, except as set forth herein, at any time
prior to the Closing Date:
(a) by mutual written consent of the Parties;
(b) by any Party by written notice to the other Parties, if the
Closing shall not have occurred on or before the date that is one (1) year after
the date hereof, provided, that the Party electing to exercise such right is not
otherwise in breach of its obligations under this Agreement, and provided
further that if the reason closing has not occurred within such period is that
the FCC has not approved the PCS License Assignment, but such approval remains
under consideration by the FCC the Parties will extend such date for an
additional six (6) months;
(c) by any Party by written notice to the other Party, if the
consummation of the Transactions shall be prohibited by a final, non-appealable
order, decree or injunction of a court of competent jurisdiction;
(d) by either Party by written notice to the other Party if the
Board of Directors or Stockholders of Indus vote not to approve this Agreement;
or
(e) by the Buyer and Acquisition Sub, by giving written notice to
Indus and Rao at any time prior to the Closing in the event Rao or Indus has
breached any material representation, warranty or covenant contained in this
Agreement or the Related Agreements in any material respect, the Buyer and
Acquisition Sub have notified Indus and Rao of the breach, and the breach has
continued without cure for a period of thirty (30) days after the notice of
breach; or
(f) by Rao and Indus, by giving written notice to Buyer and
Acquisition Sub at any time prior to the Closing in the event Buyer or
Acquisition Sub has breached any material representation, warranty or covenant
contained in this Agreement or the Related Agreement in any material respect,
Rao and Indus have notified the Buyer and Acquisition Sub of the breach, and the
breach has continued without cure for a period of thirty (30) days after the
notice of the breach.
9.2 Effect of Termination.
(a) In the event of a termination of this Agreement, no Party hereto
shall have any liability or further obligation to any other Party to this
Agreement, except (i) as set forth in paragraph (b) below, (ii) pursuant to the
Bridge Note and any security for Indus' obligations thereunder, and (iii) that
nothing herein will relieve any Party from liability for any breach by such
Party of this Agreement.
41
<PAGE>
(b) In the event of a termination of this Agreement pursuant to
Section 9.1, all provisions of this Agreement shall terminate, except Section
4.2 and Articles VIII and X, except that nothing herein will relieve any Party
from liability for any breach by such Party of this Agreement.
(c) Except as provided in Section 10.15, whether or not the Closing
occurs, all costs and expenses incurred in connection with this Agreement and
the Transactions shall be paid by the Party incurring such expenses.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended, modified
or supplemented only by written agreement of each of the Parties.
10.2 Waiver of Compliance; Consents. Any failure of any of the Parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the Party or Parties entitled to the benefits thereof only by a
written instrument signed by the Party or Parties granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any Party, such consent shall be
given in writing in a manner consistent with the requirement for a waiver of
compliance as set forth in this Section 10.2.
10.3 Notices. All notices, consents, approvals or other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person against receipt, by
facsimile transmission with confirmation of receipt, or by registered or
certified mail (return receipt requested), postage prepaid, with an
acknowledgment of receipt signed by the addressee or an authorized
representative thereof, addressed as follows (or to such other address for a
Party as shall be specified by like notice; provided, that notice of a change of
address shall be effective only upon receipt thereof):
If to the Buyer or Acquisition Sub, to it at:
Milwaukee PCS LLC
c/o AT&T Wireless Services, Inc.
RTC 1
7277 164th Avenue N.E.
Redmond, WA 98052
Attn: Michael C. Schwartz
Facsimile: (425) 580-8405
42
<PAGE>
With a copy (which shall not constitute notice) to:
Frank Woodruff
Riddell Williams P.S.
1001 Fourth Avenue Plaza, Suite 4500
Seattle, WA 98154-1065
Facsimile: (206) 389-1708
If to Indus or to Rao, to it/him at:
Indus, Inc.
633 East Mason Street
Milwaukee, WI 53202
Attn: President
With a copy (which shall not constitute notice) to:
Michael S. Nolan
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
Facsimile: (414) 297-4900
10.4 Designated Purchaser. Each of the Buyer and Acquisition Sub (and
their permitted assigns) shall have the right to assign, in whole or in part,
directly or indirectly, its rights and obligations under this Agreement, without
the consent of Indus or Rao, to TeleCorp PCS, Inc. and/or its Affiliates,
provided that Telecorp PCS, Inc. (and any such Affiliate) shall in all such
cases assume the obligations of Buyer and Acquisition Sub hereunder. Any Person
or Persons to whom an assignment is ultimately made pursuant to this Section
10.4 shall be a designated purchaser (the "Designated Purchaser").
10.5 Parties in Interest; Assignment. This Agreement is binding upon and
is solely for the benefit of the Parties and their respective permitted
successors, legal representatives and permitted assigns. Neither Indus nor Rao
may assign its or his rights and obligations hereunder without the prior consent
of the Buyer.
10.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington without giving effect to the
conflicts of law principles thereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Facsimile signatures on
this Agreement shall be deemed to be original signatures for all purposes.
10.8 Interpretation. The Article and Section headings contained in this
Agreement are for convenience of reference only, are not part of the agreement
of the Parties and shall not affect in any way the meaning or interpretation of
this Agreement.
43
<PAGE>
10.9 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto and the certificates and instruments delivered pursuant to the
terms of this Agreement, the Related Agreements, and the Bridge Note and that
certain Guaranty and Pledge Agreement of even date therewith, embody the entire
agreement and understanding of the Parties hereto in respect of the
Transactions. This Agreement and such other agreements, documents and
instruments supersedes all prior agreements and understandings between the
Parties with respect to the Transactions, including that certain letter of
intent dated December 9, 1999 among Wireless, Rao and Indus, as amended.
10.10 Publicity. So long as this Agreement is in effect, the Parties agree
to consult with each other in issuing any press release or otherwise making any
public statement with respect to the Transactions, and no Party shall issue any
press release or make any such public statement prior to such consultation,
except as may be required by Law. The Parties acknowledge and agree that Indus
will make a public statement with respect to the Transactions following approval
by its Board of Directors and prior to submitting this Agreement to the
Stockholders for approval, subject, however, to the consultation required by
this Section 10.10. No press release or other public statement by a Party shall
disclose any of the financial terms of the Transactions without the prior
consent of the other Party, except as may be required by Law. A breach of the
provisions of this Section 10.10 by a Party shall not give rise to any right to
terminate this Agreement.
10.11 Specific Performance. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached prior to the Closing. It is accordingly agreed that the Parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
Designated Courts.
10.12 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any Party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such Party.
10.13 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any court determines that any covenant or any part of any
covenant is invalid or unenforceable, such covenant shall be enforced to the
extent permitted by such court, and all other covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
10.14 Beneficiaries of Agreement. The representations, warranties,
covenants and agreements expressed in this Agreement are for the sole benefit of
the other parties hereto and the Section 8.2 Indemnified Parties and Section 8.3
Indemnified Parties and are not intended to benefit, and may not be relied upon
or enforced by, any other party as a third party beneficiary or otherwise.
Without limiting the foregoing, nothing contained in this Agreement shall confer
44
<PAGE>
upon any Employee any right with respect to continued employment by Acquisition
Sub or Buyer following the Closing.
10.15 Expenses. Each of the Parties will bear its costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the Transactions, provided, that promptly following the
Closing, the Buyer or Acquisition Sub shall pay all of Indus' then reasonable
unpaid costs and expenses incurred in connection with this Agreement and the
Transactions; provided, however, that any such costs and expenses of Indus
beyond those which are reasonable (the "Excess Expenses") shall be subject to a
claim by the Buyer against the Holdback Funds under the Holdback Agreement
without regard to the threshold for making any claims provided in Section 8.1.
10.16 Continued Representation of Rao by Foley & Lardner. The Buyer and
Acquisition Sub consent to Foley & Lardner's and/or Willkie, Farr & Gallagher's
representation of any one or more of the Stockholders in any matter adverse to
the Buyer, Acquisition Sub, or Designated Purchaser relating to this Agreement,
the Related Agreements or the Transactions notwithstanding such representation
by Foley & Lardner or Willkie, Farr & Gallagher prior to the Closing and the use
by Foley & Lardner or Willkie, Farr & Gallagher in connection with such matter
of any confidential or privileged information of Indus obtained by Foley &
Lardner or Willkie, Farr & Gallagher prior to the Closing, provided that the
foregoing shall not include representation by either of the foregoing law firms
of Hughes Network Systems or its Affiliates or related parties in relation to
this Agreement, the Related Agreements, the Transactions, or the HNS
Agreements..
45
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
MILWAUKEE PCS LLC
By: /s/ Michael Schwartz
---------------------------------
Name: Michael Schwartz
Title:
MILWAUKEE ACQUISITION
SUBSIDIARY, INC.
By: /s/ Michael Schwartz
---------------------------------
Name: Michael Schwartz
Title: VP
____________________________________
Kailas J. Rao
INDUS, INC.
By: ________________________________
Name:
Title:
Spousal Consent
The undersigned, the spouse of Kailas J. Rao, has read the foregoing
Agreement and Plan of Merger, consents to the undersigned's spouse's execution
and delivery of the foregoing Agreement and Plan of Merger, and agrees to be
bound thereby.
Signature: _________________________
Name[Print]:________________________
46
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
MILWAUKEE PCS LLC
By: ________________________________
Name:
Title:
MILWAUKEE ACQUISITION
SUBSIDIARY, INC.
By: ________________________________
Name:
Title:
/s/ Kailas J. Rao
------------------------------------
Kailas J. Rao
INDUS, INC.
By: /s/ Kailas J. Rao
---------------------------------
Name: Kailas J. Rao
Title: President
Spousal Consent
The undersigned, the spouse of Kailas J. Rao, has read the foregoing
Agreement and Plan of Merger, consents to the undersigned's spouse's execution
and delivery of the foregoing Agreement and Plan of Merger, and agrees to be
bound thereby.
Signature: /s/ Becky L. Rao
--------------------------
Name[Print]: Becky L. Rao
------------------------
46
<PAGE>
Exhibit A PCS License
Exhibit B-1 Articles of Merger - Wisconsin
Exhibit B-2 Articles of Merger - Delaware
Exhibit C FCC Promissory Note and Security Agreement
Exhibit D Holdback Agreement
Exhibit E Stock Power
Exhibit F Financial Statements
Schedule 5.2(a) Capitalization
Schedule 5.2(b) Options, Warrants, etc.
Schedule 5.3 Indus Consents
Schedule 5.4 Litigation
Schedule 5.5 FCC Compliance
Schedule 5.7 No Offers
Schedule 5.8 Liens on PCS License
Schedule 5.9(a) Assets
Schedule 5.9(a)(i) Permitted Liens
Schedule 5.9(b) No Changes
Schedule 5.9(c) Leases
Schedule 5.9(d) Automobiles
Schedule 5.10(a) Indus Agreements
Schedule 5.10(b) Cancellation or Default of Indus Agreements
Schedules 5.11(a), (b),
(c), (d), (e) and (f) Environmental Matters
Schedule 5.15(a) Undisclosed Liabilities
Schedule 5.15(b) Unfunded Liabilities
Schedule 5.17(a) Tax Returns
<PAGE>
Schedule 5.17(j) FIRPTA
Schedule 5.18(a) Termination of Employees
Schedule 5.18(i) Delayed or Postponed Accounts Payable
Schedule 5.19(a) Intellectual Property
Schedule 5.20 Licenses
Schedule 5.21(a) Employment Contracts
Schedule 5.21(b) Employees
Schedule 5.21(c) Employment Disputes
Schedule 5.21(d) Obligations under Employment Laws
Schedule 5.22 Employee Plans and Benefit Arrangements
Schedule 5.23 Insurance
Schedule 5.25 Bank Relationships
Schedule 5.27 Transactions with Affiliates
Schedule 6.2 Buyer/Acquisition Sub Consents
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .........................................................1
ARTICLE II MERGER .............................................................8
2.1 Merger ............................................................8
2.2 Effect of Merger ..................................................9
2.3 Procedure for Payment .............................................9
2.4 Books and Records ................................................10
2.5 Closing of Transfer Records ......................................10
2.6 Allocation of the Merger Consideration ...........................10
ARTICLE III CLOSING ..........................................................10
3.1 Time and Place of Closing ........................................10
3.2 Closing Actions and Deliveries ...................................11
3.3 Rao Liabilities ..................................................13
3.4 HNS Agreements ...................................................13
ARTICLE IV COVENANTS .........................................................13
4.1 Consummation of Transactions .....................................13
4.2 Confidentiality ..................................................14
4.3 Covenants of Indus ...............................................15
4.4 Lien Searches ....................................................17
4.5 Non-Solicitation .................................................17
4.6 Estoppel Agreements ..............................................18
4.7 Tax Provisions ...................................................18
4.8 Rao Proxy ........................................................19
4.9 Approval .........................................................19
4.10 MEDC Stock Power .................................................19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF INDUS ............................19
5.1 Organization, Power and Authority ................................19
5.2 Capitalization ...................................................20
5.3 Consents; No Conflicts ...........................................21
5.4 Litigation .......................................................21
5.5 FCC Compliance ...................................................21
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
5.6 Brokers ..........................................................21
5.7 No Offer .........................................................22
5.8 License ..........................................................22
5.9 Title to Assets; Encumbrances; Future Operations .................22
5.10 Indus Agreements .................................................23
5.11 Environmental and Safety Laws ....................................25
5.12 Compliance With Laws .............................................26
5.13 Subsidiaries and Interests in Other Entities .....................26
5.14 Financial Statements .............................................26
5.15 Undisclosed Liabilities ..........................................27
5.16 Powers of Attorney ...............................................27
5.17 Taxes ............................................................27
5.18 Conduct of Business; Absence of Adverse Changes ..................29
5.19 Intellectual Property; Trade Secrets; Software ...................30
5.20 Licenses .........................................................31
5.21 Employees and Compensation .......................................31
5.22 Employee Benefits ................................................32
5.23 Insurance ........................................................33
5.24 Books and Records ................................................33
5.25 Banking Relationships; Investments ...............................33
5.26 Disclosure .......................................................34
5.27 Transactions with Affiliates .....................................34
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION SUB .......35
6.1 Organization, Power and Authority ................................35
6.2 Consents; No Conflicts ...........................................35
6.3 Litigation .......................................................36
ARTICLE VII CLOSING CONDITIONS ...............................................36
7.1 Conditions to Obligations of All Parties .........................36
7.2 Conditions to Obligations of the Buyer and Acquisition Sub .......37
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
7.3 Conditions to the Obligations of Indus and Rao ...................38
ARTICLE VIII SURVIVAL AND INDEMNIFICATION ....................................38
8.1 Survival .........................................................38
8.2 Indemnification by Indus and Rao .................................39
8.3 Indemnification by the Buyer .....................................39
8.4 Procedures .......................................................40
ARTICLE IX TERMINATION .......................................................41
9.1 Termination ......................................................41
9.2 Effect of Termination ............................................41
ARTICLE X MISCELLANEOUS PROVISIONS ...........................................42
10.1 Amendment and Modification .......................................42
10.2 Waiver of Compliance; Consents ...................................42
10.3 Notices ..........................................................42
10.4 Designated Purchaser .............................................43
10.5 Parties in Interest; Assignment ..................................43
10.6 Applicable Law ...................................................43
10.7 Counterparts .....................................................43
10.8 Interpretation ...................................................43
10.9 Entire Agreement .................................................44
10.10 Publicity ........................................................44
10.11 Specific Performance .............................................44
10.12 Remedies Cumulative ..............................................44
10.13 Severability .....................................................44
10.14 Beneficiaries of Agreement .......................................44
10.15 Expenses .........................................................45
10.16 Continued Representation of Rao by Foley & Lardner ...............45
iii
<PAGE>
An extra section break has been inserted above this paragraph. Do not
delete this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE>
ORGANIZATIONAL AGREEMENT
THIS ORGANIZATIONAL AGREEMENT is entered into and effective as of February
25, 2000, by and among KAILAS J. RAO ("Rao"), an individual, INDUS, INC., a
Wisconsin corporation ("Indus"), AT&T WIRELESS SERVICES, INC., a Delaware
corporation ("Wireless"), MILWAUKEE PCS LLC, a Delaware limited liability
company (the "Company"), and AT&T MILWAUKEE JV, INC., a Delaware corporation
("Wireless Sub," and together with Rao, Indus, Wireless and the Company, the
"Parties," and each a "Party").
RECITALS
A. The Company and Milwaukee Acquisition Subsidiary, Inc., a Delaware
corporation ("Acquisition Sub"), Indus and Rao have entered into that certain
Agreement and Plan of Merger of even date herewith (the "Merger Agreement")
(capitalized terms used but not defined herein will have the meanings given
those terms in the Merger Agreement).
B. The Parties desire to enter into this Agreement to set forth certain
additional agreements among them in connection with the Transactions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the Parties hereby agree as follows:
ARTICLE 1
REORGANIZATION OF THE COMPANY
1.1 Membership Interests. Currently, the sole member of the Company is
Wireless Sub, which is a wholly-owned subsidiary of Wireless. Wireless Sub
acquired its membership interest in the Company in exchange for a capital
contribution of $100. Immediately prior to or simultaneous with the Closing, the
Company will redeem this membership interest of Wireless Sub for $100, and the
Company shall be reorganized and capitalized, and new membership and debt
interests in the Company (the "Interests") shall be issued, as follows:
(a) Rao will contribute $2,000,000 to the capital of the Company in
exchange for (i) an Interest entitling him to 12.5% of the equity of the Company
and 6.25% of the voting rights in the Company, and (ii) a preferred voting
Interest entitling him to .033% of the equity of the Company and 18.7667% of the
voting rights in the Company.
(b) Wireless shall cause one or more Persons selected by Wireless
(such Person or Persons shall be referred to collectively as the "Designated
Member") to contribute $4,000,000 to the capital of the Company in exchange for
(i) one or more Interests entitling the Designated Member to 25% of the equity
of the Company and 12.5% of the voting rights in the Company, and (ii) one or
more preferred voting Interests entitling the Designated Member to .067% of the
equity of the Company and 37.5333% of the voting rights in the Company. Wireless
shall select the Designated
1
<PAGE>
Member so that, following the reorganization under this Section 1.1, the
interests of the Designated Member shall not cause the Company to fail to
constitute a "Designated Entity," within the meaning of 47 CFR ss.24.709 of the
FCC Law, fully qualified under the FCC Law to control the PCS License.
(c) Rao will contribute an additional $2,000,000 to the capital of
the Company in exchange for a nonvoting Interest entitling him to 12.5% of the
equity of the Company. One-third (1/3) of this Interest will vest on each of the
first three (3) anniversaries of the Closing Date. If Rao's employment under the
Employment Agreement (as defined below) terminates for any reason other than
termination of his employment by the Company without cause or by Rao for good
reason, this Interest will cease vesting and any unvested portion thereof will
automatically be added to the Interests of the Designated Member under Section
1.1(b)(i) (or added proportionately to the respective Interests under Section
1.1(b)(i) of the Persons comprising the Designated Member, if two or more
Persons comprise the Designated Member).
(d) Wireless Sub will contribute $8,000,000 to the capital of the
Company in exchange for an Interest entitling it to 49.9% of the equity of the
Company and 24.95% of the voting rights in the Company.
(e) Wireless Sub will acquire from the Company a nonvoting Interest
(or, at its election, a promissory note) in exchange for its commitment to
advance $275,000,000 to the Company in amounts called by the Company from time
to time (the "Financing Interest"). The Financing Interest will have the right
to distributions (or payments of principal and interest) from the Company, prior
to any distributions to the members holding other Interests, equal to the sum of
(i) the aggregate amounts actually called by the Company, and (ii) an amount
determined in accordance with the following formula (where "n" represents the
number of whole and fractional years elapsed from the Closing Date to the date
of full payment of all distributions (or payments of principal and interest) to
which the Financing Interest is entitled):
$275,000,000 x (1.22/n/-1)
Upon termination of the Management Agreement (as defined below), the Company
shall immediately pay to Wireless Sub all distributions (or payments of
principal and interest) to which it is entitled on account of the Financing
Interest. Any tax deductions allowable to the Company with respect to the
Financing Interest will be specially allocated to Wireless Sub.
(f) References in this Agreement to a percentage Interest in the
"equity" of the Company shall mean the right to share in that percentage of the
profits, losses and distributions from the Company, after payment of any amount
distributable with respect to the Financing Interest.
1.2 LLC Agreement. Effective as of the Closing Date, Wireless Sub and Rao
shall, and Wireless shall cause the Designated Member to, enter into a limited
liability company agreement with respect to the Company (such agreement, as it
may be
2
<PAGE>
amended from time to time, will be referred to as the "LLC Agreement") providing
for the issuance of Interests as described in Section 1.1. The LLC Agreement
shall also contain the following terms and conditions:
(a) Modification of Interests. At such time as the Company shall
have received an opinion of regulatory counsel of nationally recognized standing
to the effect that FCC Law permits the voting Interests to have percentage
voting rights equal to one and one-sevenths (1-1/7) times their percentage
equity rights in the Company, the Company will seek FCC consent to make this
change, to the extent that FCC consent is required under FCC Law. Upon receipt
of such consent or a determination by such regulatory counsel that such consent
is not required under FCC Law, Rao, Wireless and the Designated Member shall
amend the LLC Agreement as necessary to effectuate this change.
(b) Additional Interests. Wireless Sub shall have a right of first
offer and right of first refusal with respect to the issuances of any additional
Interests by the Company, other than any Interests issued pursuant to Section
1.2(a).
(c) Voting. Except as provided in Section 2.2, Rao and the
Designated Member (the "Control Group") shall agree to vote their voting
Interests in accordance with the votes of the members of the Control Group
holding a majority of all of the voting Interests held by the Control Group.
(d) Management.
(i) The Company shall be managed by a management committee
consisting of the following: Rao (chairman), two (2) managers appointed by the
Designated Member, and two (2) managers appointed by Wireless Sub.
(ii) The managers appointed by the Designated Member shall
each receive an annual retainer of $100,000 payable in arrears in quarterly
installments. Rao shall serve on the management committee without compensation
other than the amounts payable to him under the Employment Agreement.
(iii) The Company and Rao shall enter into a three-year
employment agreement effective as of the Closing Date (the "Employment
Agreement"). Rao will receive a $200,000 annual salary, together with a bonus
opportunity of up to $200,000 each year during the term of the Employment
Agreement. Bonus criteria and performance against those criteria will be
determined by the other four managers. Rao will report to, and be subject to,
the direction of the management committee. Rao's activities on behalf of the
Company will be directed by the other managers in consultation with the senior
operational personnel of the Company. On a daily operations basis, Rao's
activities (e.g. participating in sales calls, contacts with the press, etc.)
will also be subject to the direction of the individual serving as the general
manager under the Management Agreement, who will act under delegated authority
from the other four (4) managers.
3
<PAGE>
(iv) The LLC Agreement will include a five-year budget (the
"Budget") mutually agreeable to the Control Group and Wireless Sub. The LLC
Agreement will specify certain significant matters, including the following,
which will require approval of the holders of 80% of the voting Interests: any
transaction between the Company and any member of the Control Group; any sale or
acquisition of material assets; merger, consolidation or business combination;
any issuance of an additional Interest or repurchase of an existing Interest
that, in the judgment of any member voting against the issuance or repurchase,
is not being issued or repurchased at fair market value; any dividends or
distributions with respect to Interests; any capital call against the Financing
Interest (Wireless Sub's consent not to be unreasonably withheld); any
incurrence of debt or capital spending exceeding the amounts set forth in the
Budget by $100,000 in any quarter or $500,000 in any calendar year; and any
settlement of the dispute with Hughes Network Systems. The LLC Agreement will
entitle Wireless Sub to take action on behalf of the Company, without the
approval of any of the managers or the other members, to the extent provided in
Section 1.2(f)(iii) and Section 1.2(f)(v).
(e) Distributions. Except as provided in Section 1.1(e), the Company
shall not make any distributions to any of its members or redeem any Interests
prior to the tenth (10th) anniversary of the Closing Date, other than
distributions to pay taxes on income of the members that is attributable to
their Interests.
(f) Transfers and Liquidity. The Interests of the members of the
Control Group will be subject to the following provisions:
(i) Until the fifth (5th) anniversary of the Closing Date, a
member of the Control Group shall not sell, transfer, encumber or otherwise
dispose of all or any portion of the member's Interests to any Person other than
Wireless Sub or one or more of its Affiliates or designees. In the event of the
death of a member of the Control Group (A) the portion of the member's Interests
that represents the right to share in the equity of the Company may be
transferred pursuant to a will or applicable laws of descent and distribution,
but the transferee or transferees thereof shall continue to be bound by all of
the terms and conditions of the LLC Agreement, and (B) the portion of the
member's Interests that represents voting rights in the Company shall -
(I) if the deceased member is Rao, automatically be
added to the Interests of the Designated Member under Section 1.1(b)(i)
(or added proportionately to the respective Interests under Section
1.1(b)(i) of the Persons comprising the Designated Member, if two or more
Persons comprise the Designated Member);
(II) if two or more Persons comprise the Designated
Member and the deceased member is one of such Persons, automatically be
added to the Interests under Section 1.1(b)(i) of the other Person
comprising the Designated Member (or added proportionately to the
respective Interests under Section 1.1(b)(i) of the other Persons
comprising the Designated Member, if two or more other Persons comprise
the Designated Member); or
4
<PAGE>
(III) if one Person comprises the Designated Member,
pass to the transferee or transferees under clause (A) above of the
portion of the member's Interests that represents the right to share in
the equity of the Company, and the transferee or transferees thereof shall
continue to be bound by all of the terms and conditions of the LLC
Agreement.
(ii) On and after the fifth (5th) anniversary of the Closing
Date, a member of the Control Group may sell, transfer, encumber or otherwise
dispose of all or any portion of the member's Interests, provided that the
member first notifies Wireless Sub in writing of the proposed transfer and
offers to sell the Interests to Wireless Sub at their Fair Market Value (as
defined below).
(iii) Each member of the Control Group shall have the right,
exercisable by written notice to Wireless Sub and the Company, to put all (but
not less than all) of the Interests the member holds to the Company at their
Fair Market Value; provided that (A) the exercise of the put is permitted under
the FCC Law, and (B) no unjust enrichment penalty will be imposed on the
exercise. If an unjust enrichment penalty will be imposed on the exercise, the
put can still be exercised if the member or the Company agrees to bear the cost
of the penalty. If neither the member nor the Company agrees to bear the cost of
the penalty, the exercise of the put will be of no force or effect, but the
member shall retain the right to exercise the put on the same terms and
conditions until the put's expiration. The put will terminate at the later of
(I) six (6) months after the first day on which the member could have exercised
the put (without being required to bear the cost of an unjust enrichment penalty
because either no unjust enrichment penalty applies, or Wireless Sub has
notified the member on behalf of the Company that the Company agrees to bear the
cost of any unjust enrichment penalty), and (II) thirty-nine (39) months after
the Closing Date. The members of the Control Group shall agree that, if members
of the Control Group holding a majority of all of the voting Interests held by
the Control Group exercise their put, all other members of the Control Group
shall immediately exercise their put, and this agreement shall be secured by a
pledge to the Company of the Interests of the members of the Control Group.
Wireless Sub shall have the right to determine on behalf of the Company whether
the Company is agreeable to bearing the cost of the unjust enrichment penalty
referred to in this subparagraph (iii). Wireless shall guaranty the performance
of the Company's obligations under the put arrangement.
(iv) The "Fair Market Value" of a member's Interests shall be
either (A) the amount originally paid for the Interests plus such additional
amount as will result in a 20% per annum internal rate of return on that
investment, or (B) the cash price at which a willing seller would sell and a
willing buyer would buy the Interests in a transaction negotiated at arm's
length between unaffiliated parties acting without time constraints or
compulsion and each being apprised of and considering all relevant facts,
circumstances and factors (e.g. the Interests are illiquid, minority interests),
but assuming that (I) neither Wireless nor any Person in which it or any of its
Affiliates has a 10% or greater equity stake is a potential acquiror, (II) the
royalty rate under the Brand Agreement (as defined below) increases to 16%
(which the Parties agree and the Designated Member will agree is a market rate),
and (III) Wireless and its Affiliates
5
<PAGE>
have programmed their customers' phones to roam on a network other than the
Company's. A member of the Control Group who may or will be transferring
Interests to Wireless Sub pursuant to the right of first refusal under
subparagraph (ii) above or to the Company upon exercise of the put under
subparagraph (iii) above shall irrevocably elect in the notice under such clause
(the "Notice") whether to have the Fair Market Value of the Interests valued
under clause (A) or clause (B) above, and such election shall be binding on
Wireless Sub or the Company, as the case may be. For purposes of determining the
Fair Market Value of the Interests of Rao and the Designated Member, each of
such Interests shall be treated separate from the others as a non-controlling
minority interest. The Interests of each member shall be valued separately, even
if more than one member of the Control Group will be transferring their
Interests at or about the same time.
(v) If the Fair Market Value of Interests are to be valued
under clause (B) of subparagraph (iv) above, the following procedure shall
apply: Each of Wireless Sub and the member holding the Interests to be so valued
will select a nationally recognized investment banking firm experienced in the
field of wireless telecommunications (each, an "IBank"). Wireless Sub shall
select the IBank on its own behalf, if the Fair Market Value is being determined
in connection with the exercise of the right of first refusal under subparagraph
(ii) above, or on behalf of the Company, if the Fair Market Value is being
determined in connection with the exercise of the put under subparagraph (iii)
above, and such IBank will in either event be referred to as the "Buyer IBank."
If two or more members hold Interests to be so valued, those members shall
jointly select a single IBank (the IBank selected by the member or members will
be referred to as the "Seller IBank"). The selected IBanks will act for the
Person or Persons on whose behalves they are selected to determine the Fair
Market Value of the Interests to be valued in the manner described in said
clause (B). Each IBank will, within thirty (30) Business Days after the Notice
is received by Wireless Sub (and by the Company, if the Fair Market Value is
being determined in connection with the exercise of the put under subparagraph
(iii) above), deliver to the other IBank and to the Person or Persons on whose
behalves it was selected a written valuation report that sets forth the
delivering IBank's valuation and explains it in reasonable detail. If the value
determined by the Buyer IBank is higher than the value determined by the Seller
IBank, or if the value determined by the Seller IBank is not more than 20%
greater than the value determined by the Buyer IBank, then the Fair Market Value
of the Interests being valued will be the average of such values. If the Fair
Market Value of the Interests as determined by the Seller IBank is more than 20%
higher than the value determined by the Buyer IBank, then the parties shall
attempt for a period of twenty-five (25) Business Days to agree on a value. If
no agreement is reached in such period, either Wireless Sub or the member or
members holding the Interests to be valued may refer the dispute to a third
IBank to be agreed upon by Wireless Sub and such member or members (Wireless Sub
in so doing be acting on its own behalf, if the Fair Market Value is being
determined in connection with the exercise of the right of first refusal under
subparagraph (ii) above, or on behalf of the Company, if the Fair Market Value
is being determined in connection with the exercise of the put under
subparagraph (iii) above). This third IBank will determine the Fair Market Value
of the Interests to be valued in the manner described in said clause (B), taking
into account to the extent appropriate the
6
<PAGE>
valuations developed by the other IBanks. The Fair Market Value of the Interests
to be valued shall be the value determined by the third IBank; provided that, if
the third IBank's valuation exceeds the value determined by the Seller IBank,
the third IBank's value shall be deemed to be the value determined by the Seller
IBank, and if the third IBank's valuation is less than the value determined by
the Buyer IBank, the third IBank's value shall be deemed to be the value
determined by the Buyer IBank. The fees and costs of the third IBank shall be
shared equally by the member or members whose Interests are being valued, on the
one hand, and by Wireless Sub (if the Fair Market Value is being determined in
connection with the exercise of the right of first refusal under subparagraph
(ii) above) or the Company (if the Fair Market Value is being determined in
connection with the exercise of the put under subparagraph (iii) above), on the
other hand.
ARTICLE 2
ADDITIONAL AGREEMENTS
2.1 Indus Interim Management Agreement. Indus and Wireless shall promptly
negotiate reasonable terms and conditions of an interim management agreement
(the "Indus Interim Management Agreement") under which, subject to the ultimate
supervision, authority and control of Indus, Wireless will manage the business
of Indus pending the Closing. If the Company and/or Acquisition Sub assign its
or their rights and delegate its or their obligations under the Merger Agreement
to a Designated Purchaser, Wireless shall be entitled to assign its rights and
delegate its obligations under the Indus Interim Management Agreement to such
Designated Purchaser or any Affiliate thereof.
2.2 Management Agreement. Effective as of the Closing Date, the Company
and Wireless will negotiate and enter into a five-year management agreement (the
"Management Agreement"), under which, subject to the ultimate supervision,
authority and control of the Company, Wireless will manage the business of the
Company following the Closing in exchange for reimbursement of its costs plus 6%
of the gross revenues of the Company. The Management Agreement will be
terminable if Wireless does not hit agreed upon standards, or by the Company on
one years notice. On an annual basis, the management committee will review the
Management Agreement and make a determination whether or not to terminate it.
The managers designated by Wireless Sub shall not participate in any decision to
terminate the Management Agreement. Anything else to the contrary herein
notwithstanding (including without limitation the voting agreement under Section
1.2(c)), for termination to be effective, each member of the Control Group must
vote in favor of termination.
2.3 Roaming Agreement. Effective as of the Closing Date, the Company and
Wireless will enter into a twenty-year roaming agreement (the "Roaming
Agreement") under which the Company will commit to interoperability, including
upgrading and changing technology as required to remain interoperable, with the
PCS service of Wireless. The initial rates under the Roaming Agreement will be
the same as the rates under the prior roaming agreement between Indus and
Wireless. If the Management Agreement is terminated, Wireless' obligation to
program its phones to roam on the
7
<PAGE>
Company's markets will be terminable at the option of Wireless.
2.4 Brand Agreement. Effective as of the Closing Date, the Company and
Wireless will enter into a five-year branding agreement (the "Brand Agreement")
under which Wireless will grant to the Company a license, and the Company will
commit, to use the "AT&T" brand in connection with the provision of its PCS
service. In consideration of this license, the Company shall pay Wireless an
annual royalty equal to 13% of its gross revenues. If the Management Agreement
is terminated, Wireless will have the option to terminate the Brand Agreement.
2.5 Fees and Expense. Promptly following the Closing Date, the Company
shall pay the reasonable legal and accounting fees incurred by the Parties in
connection with the transactions contemplated by this Agreement.
ARTICLE 3
COVENANTS
3.1 Consummation of Transactions. Each Party will use the Party's best
efforts to enter into the Indus Interim Management Agreement as expeditiously as
practicable and to enter into the LLC Agreement, the Employment Agreement, the
Management Agreement, the Roaming Agreement and the Brand Agreement effective as
of the Closing Date (all of such agreements will be referred to as the
"Ancillary Agreements"). The Parties agree that they are legally obligated in
good faith to negotiate the definitive terms and conditions of the Ancillary
Agreements, which shall consist of the terms and conditions set forth in this
Agreement together with such other terms and conditions and conditions as are
mutually acceptable to the Parties to the respective Ancillary Agreements.
3.2 Financing of Interim Operations. Wireless agrees to lend Indus such
amounts as may be reasonably necessary to provide for Indus' operating expenses
incurred in the ordinary course of Indus' business until the earlier of the
Closing Date or the termination of this Agreement, provided that Wireless will
determine, in its reasonable discretion, the validity, amount and timing of any
loan advances by Wireless to Indus, following receipt by Wireless of all
information reasonably requested in relation thereto. Such loan shall be
evidenced by a promissory note of like tenor with the Bridge Note (the "Second
Bridge Note"), shall be secured by a perfected security interest in all of the
assets of Indus, and shall be further secured by a guaranty from Rao secured on
a non-recourse basis by a pledge of all of his Class A Common Stock and all of
the Rao Liabilities (the guaranty and pledge (the "Second Bridge Note Security
Documents") shall be on the same terms and conditions as the Guaranty and Pledge
Agreement of even date with the Bridge Note, except that Rao shall have no
personal liability thereunder). Wireless' obligation under this Section 3.2 is
subject to the condition that neither Indus nor Rao shall be in default at any
time under this Agreement, the Merger Agreement, the Bridge Note or the Guaranty
and Pledge Agreement of even date therewith. No further advances will be made
under the Bridge Note.
8
<PAGE>
3.3 Further Assurances; Acceleration of Reorganization. Each Party shall
use the Party's 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 and
consistent with applicable law to carry out its obligations under this Agreement
and to consummate the transactions contemplated hereby. If FCC counsel to
Wireless and Indus reasonably determine that the reorganization of the Company
under Article 1 should be accelerated in order to facilitate the application to
the FCC for approval of the PCS License Transfer, then the Parties agree to
accelerate such reorganization in order that the Company will constitute a
Designated Entity at the time of such application; provided, that payment for
the Interests shall be deferred until immediately prior to or simultaneous with
the Closing.
ARTICLE 4
TERMINATION
4.1 Termination. This Agreement may be terminated by any Party by notice
to the other Parties without further obligation of any Party, except as set
forth herein, at any time prior to the Closing Date, upon any termination of the
Merger Agreement.
4.2 Effect of Termination. In the event of a termination of this
Agreement:
(a) No Party shall have any liability or further obligation to any
other Party, except (i) as set forth in paragraph (b) below, (ii) pursuant to
the Bridge Note and any security for Indus' obligations thereunder, and (iii)
that nothing herein will relieve any Party from liability for any breach by such
Party of this Agreement.
(b) All provisions of this Agreement shall terminate, except that
nothing herein will relieve any Party from liability for any breach by such
Party of this Agreement.
(c) If the Closing does not occur, all costs and expenses incurred
in connection with this Agreement shall be paid by the Party incurring such
expenses.
ARTICLE 5
MISCELLANEOUS
5.1 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by written agreement of each of the Parties.
5.2 Waiver of Compliance; Consents. Any failure of any of the Parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the Party or Parties entitled to the benefits thereof only by a
written instrument signed by the Party or Parties granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any Party, such consent shall be
given in writing in a manner consistent with the requirement for a waiver of
compliance as set forth in this Section 5.2.
9
<PAGE>
5.3 Notices. All notices, consents, approvals or other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person against receipt, by
facsimile transmission with confirmation of receipt, or by registered or
certified mail (return receipt requested), postage prepaid, with an
acknowledgment of receipt signed by the addressee or an authorized
representative thereof, addressed as follows (or to such other address for a
Party as shall be specified by like notice; provided, that notice of a change of
address shall be effective only upon receipt thereof):
If to Rao or to Indus, to such Party at:
Indus, Inc.
633 East Mason Street
Milwaukee, WI 53202
Attn: President
With a copy (which shall not constitute notice) to:
Michael S. Nolan
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
Facsimile: (414) 297-4900
If to Wireless, the Company or Wireless Sub, to it at:
AT&T Wireless Services, Inc.
RTC 1
7277 164th Avenue N.E.
Redmond, WA 98052
Attn: Michael C. Schwartz
Facsimile: (425) 580-8405
With a copy (which shall not constitute notice) to:
Frank Woodruff
Riddell Williams P.S.
1001 Fourth Avenue Plaza, Suite 4500
Seattle, WA 98154-1065
Facsimile: (206) 389-1708
5.4 Parties in Interest; Assignment.
(a) This Agreement is binding upon and is solely for the benefit of
the Parties and their respective permitted successors, legal representatives and
permitted assigns. Neither Indus nor Rao may assign its or his rights and
obligations hereunder without the prior consent of the other Parties. Any one or
more of Wireless, Wireless Sub and the Company may assign all or any portion of
its rights and obligations
10
<PAGE>
hereunder without the prior consent of the other Parties.
(b) If the Company and/or Acquisition Sub directly or indirectly
assign its or their rights and delegate its or their obligations under the
Merger Agreement to a Designated Purchaser, or if Wireless Sub transfers control
of the Company to any other Person that constitutes a "Designated Entity" within
the meaning of 47 CFR ss.24.709 of the FCC Law and is fully qualified under the
FCC Law to control the PCS License, then Wireless, Wireless Sub and the Company
may elect, by notice to Rao and Indus, to terminate the provisions of Article 1
of this Agreement. If Wireless, Wireless Sub and the Company so elect, then
Wireless shall pay or cause to be paid to Rao, promptly following the Closing
(but if and only if the Closing occurs), the sum of $3,000,000 (which is
intended to compensate Rao for the loss of the opportunity to invest in the
Company).
(c) If any one or more of Wireless, Wireless Sub and the Company
shall assign all or any portion of its rights and obligations hereunder, if the
Company and/or Acquisition Sub directly or indirectly assign its or their rights
and delegate its or their obligations under the Merger Agreement to a Designated
Purchaser, or if Wireless Sub transfers control of the Company to any other
Person, Wireless agrees to take such steps as may be necessary so that there
will be a Person with adequate financial resources to assure performance by the
ultimate assignee(s) or transferee(s) of their obligations under this Agreement
and the Merger Agreement.
5.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflicts of law principles thereof.
5.6 Dispute. If a dispute arises out of or relating to this Agreement or
the transactions contemplated hereby or the construction, interpretation,
performance, breach, termination, enforceability or validity hereof, the
primarily prevailing Party or Parties in such dispute shall be entitled to an
award of all costs and expenses (including reasonable attorney's fees) incurred
in the resolution of such dispute.
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Facsimile signatures on
this Agreement shall be deemed to be original signatures for all purposes.
5.8 Interpretation. The article and section headings contained in this
Agreement are for convenience of reference only, are not part of the agreement
of the
11
<PAGE>
Parties and shall not affect in any way the meaning or interpretation of this
Agreement.
5.9 Entire Agreement. This Agreement and the other Related Agreement,
together with the Merger Agreement (including the schedules and exhibits
thereto), the Bridge Note, that certain Guaranty and Pledge Agreement of even
date therewith, the Second Bridge Note and the Second Bridge Note Security
Documents embody or will embody the entire agreement and understanding of the
Parties hereto in respect of the transactions contemplated hereby and thereby.
This Agreement and such other agreements, documents and instruments supersede
all prior agreements and understandings between the Parties with respect to such
Transactions, including that certain letter of intent dated December 9, 1999
among Wireless, Rao and Indus, as amended.
5.10 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any Party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such Party.
5.11 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any court determines that any covenant or any part of any
covenant is invalid or unenforceable, such covenant shall be enforced to the
extent permitted by such court, and all other covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
12
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
KAILAS J. RAO
INDUS, INC.
By:
Name:
Title:
AT&T WIRELESS SERVICES, INC.
By:
Name:
Title:
MILWAUKEE PCS LLC
By:
Name:
Title:
AT&T MILWAUKEE JV, INC.
By:
Name:
Title:
13
<PAGE>
EXHIBIT 10.12
January 24, 2000
Mr. Robert Galle
Airadigm Communications, Inc.
2301 Keble Dr.
Little Chute, Wisconsin 54140
Re: Letter of Intent
Dear Bob:
We recently discussed with you and legal counsel for Airadigm
Communications, Inc. ("Airadigm" or "Debtor"), the acquisition of substantially
all of Airadigm's assets ("Assets") by RW Acquisition LLC, a limited liability
company that is a designated entity (the "Buyer"). AT&T Wireless Services, Inc.
("AWS") will hold a minority, non-attributable interest in Buyer and hereby
agrees to guarantee, as more specifically set forth below, the funding to Buyer
to enable Buyer to perform its obligations as set forth in this letter. This
letter of intent ("LOI") sets forth our agreement concerning the acquisition
(the "Transaction") and will serve as the basis for the preparation of a
definitive agreement. The principal terms of our agreement follow:
1. Structure of Transaction. Airadigm is currently a debtor in possession in In
re Airadigm Communications, Inc., Bkcy. No. 99-33500, in the Bankruptcy Court
for the Western District of Wisconsin at Madison (the "Court"). On Monday,
January 24, 2000, Airadigm will file a plan of reorganization (the "Plan") as
described in more detail below and will seek an Order approving this LOI.
Airadigm will request an expedited hearing date for a hearing as soon as
permitted by the Court but no later than twenty-one days after the filing of the
Plan (the "Hearing Date") to seek Court approval of the terms and conditions of
this LOI.
1.1 The Reorganization Plan. Pursuant to the Plan, the Buyer will acquire
substantially all assets of Airadigm, including cash and deposits, free and
clear of all liens, claims and encumbrances, and including Airadigm's C-Block
and F-Block PCS Licenses, subject to the assumption by Buyer of the obligations
to the Federal Communications Commission ("FCC") related to the Licenses
(collectively the "Assets") and pursuant to which the Buyer will not assume any
liabilities of Airadigm other than those existing under any executory contracts
or unexpired leases that the Buyer requests in writing that Airadigm assume and
assign to it under the Plan, except as otherwise set forth in the term sheet
attached hereto and made a part hereof (the "Plan Term Sheet") setting forth the
proposed treatment of the various classes of Airadigm's creditors in the Plan.
<PAGE>
1.2 Binding Nature of This Agreement. Airadigm and Buyer recognize that
they cannot enter into a binding agreement for the sale of the Assets without
the approval of the Court. Airadigm and Buyer covenant and agree that they shall
use all commercially reasonable efforts to obtain Court approval of the terms
and conditions of this LOI, making such non-material modifications as the Court
may require in an effort to preserve the benefit of the bargain intended to be
struck by the parties.
1.3 Due Diligence. Immediately upon execution of this LOI, Buyer shall
complete its due diligence investigation of Airadigm. Airadigm shall provide
Buyer with the access to information described in Section 6 below. If, as a
result of its due diligence investigation, Buyer is dissatisfied, it shall have
the right to terminate this LOI with no further obligations to Airadigm by
providing written notice pursuant to Section 12 actually received by Airadigm no
later than February 10, 2000.
1.4 Buyer is Preferred Buyer. Airadigm has already spent considerable time
and effort in marketing its Assets and has concluded in its reasonable business
judgment that the proposal set out herein makes the Buyer the preferred buyer of
substantially all of Airadigm's Assets, on the condition of AWS' guarantee of
funding of Buyer's performance of its obligations to Airadigm under this LOI.
Commencing upon its execution of the LOI, and continuing until the
consummation of the purchase of the Assets by Buyer or the termination of this
LOI, Airadigm agrees that it will not (and will not permit any of its officers,
directors or controlled affiliates to) solicit any commitments, agreements or
understandings to any person, firm or corporation (other than Buyer) in respect
of any sale or disposition in any manner of the assets or business (or any
material portion thereof) of Airadigm or any transaction which would frustrate
the intent hereof. If Airadigm is contacted by another potential purchaser of a
material portion of its assets or receives any unsolicited proposal (whether
oral or written), Airadigm shall immediately notify Buyer of the substance of
any unsolicited proposal or any discussions and negotiations. Commencing upon
court approval of this LOI, Airadigm may not proceed with any other proposal
unless the Court so directs and unless such proposal is a "qualified offer" and
is subject to the right to match set forth below in Section 1.5.
1.5 Right to Match. If Airadigm is directed by the Court to proceed with
an unsolicited proposal higher than that of Buyer, then Airadigm shall send a
copy of the offer to Buyer, which shall have a period of five (5) business days
in which to notify Airadigm that Buyer intends to match the higher offer. If
Buyer matches the higher offer, then Airadigm shall accept Buyers higher offer.
To be a qualified offer, a competing offer to purchase the Assets of
Airadigm must be in writing and received by Airadigm no later than fourteen (14)
days from the date on which the Court approves this LOI, unless the Court
directs that a longer period is required. The offer must match the offer of
Buyer in all respects except price and must exceed the Buyer offer by at least
$2.5 million.
2
<PAGE>
To make a qualified offer, an offeror must represent and warrant that it
is financially and legally ready to perform if it is the successful offeror,
subject to no conditions other than those to which Buyer is subject, and that,
if it is not the successful offeror, it will not engage in acts or conduct that
will interfere with or disrupt Airadigm's efforts to confirm a plan or obtain an
order incorporating the offer of Buyer.
To encourage Buyer to make the offer set forth in this letter and to
compensate it for its due diligence and other expenses, Airadigm shall pay Buyer
a breakup fee of $1 Million upon Court approval of Airadigm's acceptance of an
offer from another party to buy all or substantially all the Assets at a time
when Buyer was ready, willing and able to consummate the purchase of Assets
under this LOI. The breakup fee shall be a super-priority administrative claim
with priority above all other claims, except for professional and employee
administrative claims not to exceed $1 million, and shall be payable to Buyer
within twenty (20) business days after Court approval of Airadigm's acceptance
of an offer from a party other than Buyer, unless the Court for good cause sets
a different date of payment or if Airadigm is unable to perform under its
acceptance of the other offer solely due to the FCC's revocation of its C-Block
and F-Block licenses.
2. Purchase Price. The Purchase Price for the Assets (the "Purchase Price") will
be an aggregate of approximately One Hundred Forty Seven Million Dollars
($147,000,000), as set forth on the Plan Term Sheet. The Purchase Price will be
paid by the assumption of certain outstanding debt obligations and the payment
of cash, as follows:
2.1 Assumption of the outstanding Federal Communications Commission
("FCC") obligation of approximately $74 million plus interest that accrues after
the date hereof (which assumption shall include paying such interest and late
fee in cash as FCC regulations require);
2.2 Payment of approximately $73 million in cash, to be allocated
substantially in compliance with the allocations made on the Plan Term Sheet.
3. Definitive Agreement. Upon the execution of this LOI, Airadigm and Buyer
shall proceed in good faith to negotiate a definitive agreement (the "Definitive
Agreement") that shall embody the terms set forth herein and containing
customary representations, warranties, covenants, and conditions. The Agreement
shall contain a representation and warranty by Buyer that Buyer is (or will upon
the filing of the FCC application be) fully qualified to be the assignee of
Airadigm's C-block and F-block PCS licenses without the need for waiver of the
FCC's designated entity rules from the FCC. The Agreement shall be conditioned
upon Airadigm's C-Block and F-Block PCS Licenses being in effect and
transferable to Buyer. The conditions to Buyer's obligation to close shall be
limited to the requirement of FCC consent to the assignment of the FCC licenses
to the Buyer, approval of the Court (to the extent not previously obtained) of
the transactions set forth in this LOI, and Hart-Scott-Rodino approval, if
necessary, and those identified in Section 4 below. Although the parties intend
to enter into a definitive agreement containing additional terms and provisions
beyond those contained in this LOI, they acknowledge that this LOI represents
their agreement on all material terms
3
<PAGE>
and intend to be bound hereby (subject to Court approval and approval pursuant
to Section 4.1 below), regardless of whether they ultimately enter into a
definitive agreement.
4. Additional Conditions.
4.1 AWS shall execute this LOI and the Definitive Agreement to acknowledge
its commitment to guarantee funding to Buyer to enable Buyer to meet its
commitments under this LOI; provided, however, this LOI, and its terms which
shall be embodied in the Definitive Agreement, shall be subject to prior review
and approval by senior management and the Board of Directors (or an appropriate
committee thereof) of AT&T Corp. If such approval is not received by February
17, then Airadigm may terminate this LOI. Airadigm shall be an intended third
party beneficiary of the commitment by AWS to guarantee funding to Buyer set
forth herein with the ability to enforce directly the commitment.
4.2 Except as approved by Airadigm and Buyer (and, if approved, taken into
account in reduction of the Purchase Price), except for the FCC obligations
related to the PCS C-Block and F-Block licenses, and except as contemplated by
the Plan Term Sheet, the Assets owned by Airadigm shall be free and clear of any
and all liens, claims, encumbrances and rights of third parties.
4.3 To the extent that Buyer requests Airadigm to assume and assign any
leases, executory contracts, or licenses that are not current as of the Closing,
Buyer shall pay the cost to cure.
4.4 There shall be no material adverse change in Airadigm's PCS licenses
or business (unless such changes are agreed by Airadigm and Buyer) between the
date of this LOI and the Closing.
4.5 Orders shall have been entered by the Court, in form and content
reasonably satisfactory to Buyer and Airadigm: (1) approving the LOI, including
its Right to Match, (2) approving the disclosure statement filed in connection
with the Plan, and (3) confirming the Plan
5. Closing. The Closing of the Transaction contemplated by this LOI (the
"Closing") shall take place on the last business day of the month (or, if such
day is the last day of Buyer' fiscal quarter, on the next business day) after
which: (1) the order of the FCC approving the Transaction shall have become
final and non-appealable; (2) the order of any applicable state public utilities
commission approving the Transaction shall have become final and non-appealable;
(3) the Order of the Court confirming the Plan has been entered which has not
been reversed, vacated, or stayed, and (4) all other conditions to closing are
either satisfied or waived by the party entitled to waive such conditions;
provided that either party may terminate the Agreement if Closing has not
occurred within 6 months after the date of the FCC Public Notice of the filing
of the application for consent to the Transaction, unless such failure is due to
a breach of the Agreement by the party seeking to terminate; provided further
that, neither Buyer nor
4
<PAGE>
Airadigm shall have any right to terminate the Agreement until 12 months after
the date of the FCC Public Notice if the delay in Closing is caused by the
absence of requisite FCC approval of the Transaction due to the filing of any
petition with the FCC seeking to deny such approval or seeking reconsideration
of such approval.
6. Access to Information. In connection with the negotiation and preparation of
the Agreement and other related documents, Airadigm will, subject to appropriate
confidentiality and nondisclosure agreements, make available to Buyer all
information relating to Airadigm's PCS systems, and the identity and nature of
the claims of all persons who assert claims against Airadigm, equity interests
in Airadigm, or any right to receive or subscribe to stock of Airadigm, and
Airadigm will provide reasonable access to the management and facilities of
Airadigm so that Buyer may conduct a business and legal due diligence
investigation as to all matters pertaining to Airadigm's business, assets,
liabilities and the Transaction. In the event that the Transaction is not
consummated, all documents and copies provided to Buyer by Airadigm and copies
of any of the foregoing documents made by Buyer shall be returned to Airadigm.
7. Expenses. Except as set forth in Section 1 with regard to the breakup fee,
each party hereto shall bear its own legal and accounting fees and other
expenses (including but not limited to any brokerage expenses) incurred by it in
connection with the transactions contemplated hereby. Buyer will pay all FCC and
other governmental filing fees (including any H-S-R fees) related to the
Transaction. Each party represents that it has not utilized the services of any
broker or agent in connection with the Transaction. Each party hereby
indemnifies and agrees to defend and hold harmless the other party from and
against any claims, actions, liabilities, expenses, and losses relating to any
finders' or brokers' fees of, or other claims by, any finder or broker engaged
or purported to have been engaged by the indemnifying party in connection with
the Transaction.
8. Timing. The terms of this LOI shall expire and be deemed void if: (1) a
signed copy of this letter is not received by Buyer or before 5:00 p.m., PST, on
January 31, 2000; or (2) a Court Order approving this LOI is not entered by
February 17, 2000.
9. Confidentiality. Except for disclosure to the creditors of Airadigm, Airadigm
and Buyer shall keep this proposed Transaction, this LOI, and the terms of this
LOI confidential unless and until Airadigm files a motion with the Court for
approval of this LOI.
10. Governing Law. To the extent that the matters set forth in this LOI are
governed by state law, this LOI shall be governed by and construed in accordance
with the internal laws of the State of New York, without reference to the choice
of law provisions thereof.
11. Counterparts. This LOI may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. Facsimile signatures are
acceptable.
5
<PAGE>
12. Notices. Any notices to be given to Airadigm hereunder shall be delivered by
facsimile to
Mr. Robert Galle, Chief Executive Officer
Airadigm Communications, Inc.
(714) 536-4166
with copies to
James F. Rogers, Esq.
(202) 637-2201
William B. Finkelstein, Esq.
(214) 939-6100
Mark Metz, Esq.
(414) 298-8097
Leonard Leverson
(414) 271-8135
and
Albert Solochek
(414) 272-7265
Any notices to be given to Buyer hereunder shall be delivered by
facsimile to:
With copies to:
Kris Cone
(425) 580-4529
Joe Shickich, Esq.
(206) 389-1708
Tom Sullivan
703-236-1376
Alicia Wyman
617-542-2241
6
<PAGE>
If the foregoing accurately sets forth our understanding, we request
that you evidence your approval by signing the copy of this letter of intent and
returning it to the undersigned.
Sincerely,
RW Acquisition LLC
By:_____________________________________
Its:_________________________________
Accepted and Agreed to this
____ day of _______,2000:
Airadigm Communications, Inc.
By_____________________________
Its__________________________
AT&T Wireless Services, Inc.
By_____________________________
Its__________________________
7
<PAGE>
PLAN TERM SHEET
A. LIABILITIES TO BE RESTRUCTURED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Estimated
---------
Classes of Claims Treatment Claim Amount Distributions Notes
----------------- --------- ------------ ------------- -----
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1.A. Administrative Claims Cash 1,000,000 1,000,000 1
- -------------------------------------------------------------------------------------------
1.B. Administrative Claims Paid in ordinary
(Post-petition trade course of business on 500,000 500,000 2
payables) customary credit
terms
- -------------------------------------------------------------------------------------------
2. Priority claims (primarily Cash/Deferral
taxes, wages, etc.) 169,000 169,000
- -------------------------------------------------------------------------------------------
3. Secured (DIP Financing) Assumed 5,000,000 5,000,000 3
- -------------------------------------------------------------------------------------------
4. Secured Claims
- -------------------------------------------------------------------------------------------
4.A. Ericsson Compromised; paid in
cash 56,875,000 40,000,000 3A
- -------------------------------------------------------------------------------------------
4.B. OEDA Compromised; paid in
cash and stock 42,425,000 25,000,000 4
- -------------------------------------------------------------------------------------------
4.C. Wagner real estate Undecided 157,500 0 5
- -------------------------------------------------------------------------------------------
4.D. Motor vehicles Undecided 162,750 0 5
- -------------------------------------------------------------------------------------------
5. FCC Claim Assumed 74,272,011 74,272,011 6
- -------------------------------------------------------------------------------------------
6. Assumed contracts and Undecided; cure
equipment leases
- -------------------------------------------------------------------------------------------
7. Assumed real property Undecided; cure
leases
- -------------------------------------------------------------------------------------------
8.A. Unsecured claims (trade
creditor and Wisconsin Paid in cash $2,028,000 2,300,000 7
Wireless claims)
- -------------------------------------------------------------------------------------------
8.B. Unsecured claims (ss.502(g)
rejection claims Paid in cash 8, 9
- -------------------------------------------------------------------------------------------
9. Existing shareholder/equity Compromised
- -------------------------------------------------------------------------------------------
9.A Oneida Tribe Cancelled 49.9% - 0 -
- -------------------------------------------------------------------------------------------
9.B. Wisconsin Wireless Cancelled 50.1% - 0 -
- -------------------------------------------------------------------------------------------
TOTAL $182,589,261 148,241,011
-------------------------------------------------------
</TABLE>
- ----------
NOTES: (1) Includes $100,000 retainer paid to Debtor's counsel and
$50,000 paid to Debtor's special counsel.
(2) Buyer will advance no more than $500,000 to pay post-petition
trade payables, and only after all availability under the DIP
Financing facility has been exhausted.
(3) Buyer shall pay the DIP Lenders in cash and succeed to rights
of lenders under DIP facility.
(3A) This includes all claims of Ericsson, whether secured,
unsecured or administrative, and whether pre-petition or
post-petition.
8
<PAGE>
(4) Includes $5 million of AT&T Corp. Common Stock to be delivered
upon closing.
(5) To be excluded from Assets and will not be conveyed unless
purchaser assumes all debt.
(6) Plus accrued interest from the date of this LOI.
(7) Sum of $1,500,000 is to be shared by holders of allowed
unsecured claims on a pro rata basis, excluding holders of
ss.502(g) rejection claims whose claims arise as a result of
Buyer's direction to Airadigm not to assume the holders'
executory contracts or unexpired leases. This class shall
include any and all claims by Wisconsin Wireless whether
secured, unsecured or administrative, and whether pre-petition
or post-petition, but shall exclude claims by Ericsson, Inc.
or its related or affiliated companies.
(8) Buyer shall pay, in cash, holders of ss.502(g) rejection
claims whose claims arise as a result of Buyer's direction to
Airadigm not to assume the holders' executory contracts or
unexpired leases a percentage of their claims that is the same
percentage actually received by holders of allowed unsecured
claims who share in the $1.5 million fund under 8.A.
(9) Distributions to be made only to holders of allowed claims.
Buyer shall be entitled to object to allowance of claims.
Airadigm shall have duty to investigate claims and an
obligation to object to claims that it reasonably concludes
are objectionable in whole or in part.
9
<PAGE>
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WISCONSIN
- --------------------------------------------------------------------------------
In re:
AIRADIGM COMMUNICATIONS, INC., Case No. 99-33500
Chapter 11
Debtor.
- --------------------------------------------------------------------------------
ORDER GRANTING MOTION FOR APPROVAL
OF TERMS OF LETTER OF INTENT
- --------------------------------------------------------------------------------
On January 27,2000, Airadigm Communications, Inc. (the "Debtor") moved for
approval of the terms of a letter of intent with RW Acquisition LLC, and
requested an expedited hearing on its motion. The Debtor gave notice of its
motion to all creditors and other parties in interest. On February 7, 2000, the
Court conducted a hearing on the Debtor's motion. For cause shown, and upon all
the records, files, and proceedings had herein, it is hereby ORDERED:
1. The terms of the Letter of Intent (the "LOI") attached as Exhibit A to
the Debtor's motion are approved, except as modified by this order.
2. Paragraph 8.A. of the Plan Term Sheet attached to the LOI is modified
to provide that the distributions to unsecured creditors, other than holders of
Code ss. 502(g) rejection claims, shall be modified to read "the lesser of
$2,300,000 or the allowed amount of such claims," instead of "$1,500,000.00."
The Committee shall review and object to claims as is appropriate.
3. The first sentence of the second paragraph of Paragraph 1.5 of the LOI
shall read: "To be a qualified offer, a competing offer to purchase the Assets
of Airadigm must be in writing and received by Airadigm no later than March
1, 2000."
<PAGE>
4. Paragraph 1.5 of the LOI is further modified to provide that "the
breakup fee shall be a super-priority administrative expense with priority above
all other claims; except for professional, employee, and U.S. Trustee fee
administrative claims, not to exceed $1 million."
5. Paragraph 1.5 of the LOI is further modified by the addition of the
following words at the end of that paragraph; "or the FCC's refusal to transfer
the licenses, provided the FCC's refusal is not related to matters having to do
with the offeror. In exchange for receipt of the $1 million breakup fee, Buyer
shall represent and warrant that it will not engage in acts or conduct that will
interfere with or disrupt Airadigm's efforts to confirm a plan or obtain an
order incorporating the offer of the offeror. Airadigm shall nor accept an offer
from another party to buy all or substantially all the Assets unless either: (a)
Ericsson Inc. and OEDA consent, or (b) the Court, after notice to Ericsson Inc.,
OEDA, and the Committee, and a hearing determines that Ericsson Inc. and OEDA
are adequately protected as to the DIP Loan and Ericsson Inc.'s first priority
pre-petition secured loan and OEDA's second priority pre-petition secured loan."
6. The second sentence of Paragraph 4.1 of the LOI shall read as follows:
"If such approval is not received by February 17, then either Buyer or Airadigm
may terminate this LOI."
7. The approval of the LOI shall not prejudice the rights of, or bind, any
creditor, including but not limited to Ericsson Inc., OEDA and the Committee,
with regard to the distribution or allocation among themselves of the Purchase
Price (as defined in the LOI) pursuant to the LOI, any plan of reorganization,
or otherwise.
2
<PAGE>
Dated at Madison in the Western District of Wisconsin, this ____ day of
February, 2000.
BY THE COURT:
________________________________________
The Honorable Robert D. Mania
Chief Bankruptcy Judge
Approved as to form:
ERICSSON INC. AIRADIGM COMMUNICATIONS, INC.
By: /s/ William Finkelstein By: /s/ Leonard G. Leverson
----------------------------- ------------------------------------
William Finkelstein Leonard G. Leverson
Roy Prange
ONEIDA ENTERPRISE DEVELOPMENT UNITED STATES OF AMERICA
AUTHORITY
By: /s/ Mark Metz By: /s/ Peter Miller
----------------------------- ------------------------------------
Mark Metz Peter Miller
OFFICIAL UNSECURED CREDITORS' RW ACQUISITION LLC
COMMITTEE
By: /s/ Albert Solochek By: /s/ Joseph Shickich, Jr.
----------------------------- ------------------------------------
Albert Solochek Joseph Shickich, Jr.
3
<PAGE>
EXECUTION COPY
Exhibit 10.37
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT, dated February 28, 2000 (the "Amendment") is by and
between TeleCorp PCS, Inc., a Delaware corporation (the "Company") and Julie
Dobson ("Executive").
WHEREAS, the Company and Executive executed and delivered an Employment
Agreement dated as of June 17, 1998 (the "Agreement"); and
WHEREAS, on February 28, 2000, the Company, Tritel, Inc. ("Tritel") and
AT&T Wireless PCS, LLC ("AT&T") entered into that certain Agreement and Plan of
Reorganization and Contribution (the "Merger Agreement") providing for the
merger of First Merger Sub into the Company and the merger of Second Merger Sub
with and into Tritel, (the "Mergers"); and
WHEREAS, the Company and Executive desire to amend certain provisions
of the Agreement, which shall be effective on the Effective Date under the
Merger Agreement, as set forth herein.
NOW THEREFORE, intending to be legally bound and in consideration of
the mutual covenants and agreements contained herein, the Company and Executive
agree as follows:
1. Unless otherwise specified herein, all capitalized terms used herein
shall have the meanings ascribed to them in the Agreement.
2. As of the Effective Date, Section 7 of the Agreement is amended by
the following paragraph (c) to the end of such Section:
"(c) Notwithstanding anything contained herein to the contrary, if
Executive's employment with the Company is terminated by the Company
without cause or by the Executive for Good Reason, any shares of the
Company's stock granted to Executive pursuant to the Company's 1998
Restricted Stock Option Plan or any other stock or award plan
pursuant to which Executive shall have been granted stock awards or
options that have not previously vested shall immediately vest (and
shall not be subject to repurchase by the Company) on the date of
such termination. For the purposes of this provision, "Good Reason"
shall mean:
(i) if the Company has failed to make any payment pursuant to
Section 3 within thirty (30) business days following Executive's
written notice to the Company of such failure;
<PAGE>
(ii) in the event of a material breach of this Agreement by the
Company (other than a payment default) which has not been cured
within thirty (30) days following notice thereof from the
Company;
(iii) in the event that (x) Executive is demoted or removed from
her offices or there is a material diminishment of Executive's
responsibilities, duties or status which diminishment is not
rescinded within 30 days after the date of receipt by the Board
of Directors of the Company from Executive of her written notice
referring to this provision and describing such diminishment, or
(ii) the Company relocates its principal offices without
Executive's consent to a location more than 50 miles from the
principal offices of the Company in Arlington, Virginia.
Notwithstanding the foregoing or anything to the contrary in the
Agreement, in no event shall the transactions contemplated by
the Agreement and Plan of Reorganization and Contribution by and
among the Company, Tritel and AT&T, dated as of February 28,
2000, be deemed to be a demotion or diminishment of Executive's
responsibilities, duties or status for purposes of Executive
terminating her employment for "Good Reason" under this Section
7 of this Agreement.
3. Except as amended by this Amendment, the Agreement shall continue in
full force and effect. The parties hereby acknowledge and agree that
any term or provision of any of the Exhibits to the Agreement that
refers to the Purchase Agreement shall be deemed to refer to the
Agreement as amended by this Amendment.
4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
5. THIS AMENDMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE
PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH
OF VIRGINIA, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
[The balance of this page is intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
TeleCorp PCS, Inc.
By:
------------------------
Name:
Title:
EXECUTIVE
Julie Dobson
----------------------------
<PAGE>
EXHIBIT 10.62.3
TERMINATION AGREEMENT
This Termination Agreement (the "Agreement") is entered into and is
effective as of February 28, 2000 (the Effective Date"), by and between Tritel
Management, LLC, a Mississippi limited liability company ("Manager"), and
TRITEL,INC., a Delaware corporation (the "Company"). Capitalized terms used but
not defined in this Agreement shall have the meanings given to such terms in the
Stockholders Agreement of the Company, dated as of the date hereof (the
"Stockholders Agreement").
WITNESSETH:
WHEREAS Manager and Company have previously entered into a management
agreement, dated January 7, 1999 (the "Management Agreement") by which Manager
agreed to provide management services to Company in exchange for compensation;
and
WHEREAS Company has entered into a merger agreement, dated February ___,
2000 (the "Merger Agreement") with TeleCorp PCS, Inc., a Delaware corporation,
and desires to end the management of Company's business by Manager.
NOW, THEREFORE, for and in consideration of the premises, the covenants
and agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged by the execution and delivery
hereof, the parties agree as follows:
Section 1. Termination. As of the effective date, Company and Manager
hereby agree to terminate the Management Agreement, including, without
limitation, their respective rights, privileges and obligations relating
thereto. Company and Manager shall be relieved of all liabilities and
obligations of any type with respect to the Management Agreement.
Section 2. Entire Agreement. The Agreement, constitutes the entire
agreement and understanding between the parties hereto regarding the subject
matter addressed therein.
Section 3. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands effective as of
the date first written above.
COMPANY:
TRITEL, INC.
/s/ E.B. Martin, Jr.
By:____________________________
Name:
Title:
MANAGER:
TRITEL MANAGEMENT, LLC
/s/ E.B. Martin, Jr.
By:____________________________
Name:
Title:
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-4
of TeleCorp-Tritel Holding Company of our report dated March 10, 2000, except
for certain information in Note 20 for which the date is April 27, 2000 relating
to the consolidated financial statements of TeleCorp PCS, Inc. and Subsidiaries
and Predecessor Company and our report dated May 10, 2000 relating to the
consolidated balance sheet of TeleCorp-Tritel Holding Company, which appear in
such Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
McLean, Virginia
May 10, 2000
<PAGE>
Exhibit 23.4
Independent Auditors' Consent
The Board of Directors
Tritel, Inc.:
We consent to the use of our report dated February 18, 2000, except with respect
to Note 21 which is as of February 28, 2000, related to the consolidated
financial statements of Tritel, Inc. as of December 31, 1998 and 1999 and for
each of the years in the three-year period ended December 31, 1999 included
herein and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG LLP
Jackson, Mississippi
May 12, 2000
