-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VNETSV9thYA20fnZwJR7tUQvS/kTrFh9xzrUp/vcIofzJhMdY+3ZvCnKgrdgfU3Y Sh93UhucnlLJdyrd+w1mug== 0000905148-00-000798.txt : 20000331 0000905148-00-000798.hdr.sgml : 20000331 ACCESSION NUMBER: 0000905148-00-000798 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRITEL INC CENTRAL INDEX KEY: 0001088383 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 640896417 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-28435 FILM NUMBER: 586005 BUSINESS ADDRESS: STREET 1: 111 E CAPITOL ST STREET 2: SUITE 500 CITY: JACKSON STATE: MS ZIP: 39201 BUSINESS PHONE: 6039292606 MAIL ADDRESS: STREET 1: 1080 RIVER OAKS DRIVE STREET 2: SUITE B 100 CITY: JACKSON STATE: MS ZIP: 39208 10-K 1 T:\EDGAR\ZAINO\667551.TXT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ........... to ......... Commission File No. 0-28435 TRITEL, INC (Exact name of registrant as specified in its charter)
Delaware 64-0896417 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
111 E. Capitol Street, Suite 500 Jackson, MS 39201 (Registrant's Mailing Address) Registrant's telephone number, including area code: (601) 914-8000 Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, par value $0.01 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _ . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) On March 27, 2000 there were 97,798,181 shares of Class A Common Stock, 2,927,120 shares of Class B Common Stock, 1,380,448 shares of Class C Common Stock, 4,962,804 shares of Class D Common Stock and 6 shares of Voting Preference Common Stock outstanding. The aggregate market value of such shares held by non-affiliates on the reported closing price of $38.75 on the NASDAQ National Market on that date, was approximately $2,973,066,625. PART I Item 1. Business We are 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. We began to provide wireless services in eight of our major markets during 1999. In January 1999, we entered into our affiliation agreement with AT&T Wireless, our largest stockholder with 21.6% ownership of our company. We have also joined with two other AT&T Wireless affiliates to operate under a common regional brand name, SunCom. We provide our PCS services as a member of the AT&T Wireless Network, serving as the preferred roaming provider to AT&T Wireless' digital wireless customers in virtually all of our markets and co-branding our 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' existing digital and analog systems, PCS systems being constructed by four joint venture partners, including our company, and systems currently operated by third parties with which AT&T Wireless has roaming agreements. In the aggregate, these systems cover over 95% of the total population, called Pops, throughout the United States as of December 31, 1999. Our senior management team has substantial experience in the wireless communications industry, with a significant operating history in the south-central United States. We have commenced commercial PCS services in eight of our ten largest markets. We expect to be able to provide service to over 98% of the Pops in our license areas by the end of 2000. We define coverage to include an entire basic trading area if we have a significantly developed system in that basic trading area. The following table sets forth our ten largest markets and the date on which we have commenced or expect to commence commercial PCS service.
Commercial Market Launch Date 1998 Pops - -------------------------------------------------------------- --------------------------------- -------------- 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............................................ Expected 2nd Quarter 2000 1,297,800 Mobile, AL................................................ Expected 2nd Quarter 2000 653,900 - --------------------------------------------------------------
Our affiliation with AT&T Wireless is an integral part of our strategy. AT&T Wireless contributed PCS licenses covering 9.1 million Pops to us in exchange for its ownership stake in our company. As an AT&T Wireless affiliate, we enjoy numerous important benefits, including the following: o Use of AT&T Brand and Logo. We believe the AT&T brand is among the most recognized brands in the United States. We have the right to use the AT&T and SunCom brand names and logos in our markets, giving equal emphasis to each. o Preferred Provider of PCS to AT&T Wireless Customers. As a member of the AT&T Wireless Network, we are the preferred provider of mobile wireless services to AT&T Wireless' digital wireless customers in virtually all of our markets. We believe our AT&T Wireless affiliation will continue to provide us with a consistent base of recurring roaming revenue. o Coast-to-Coast Coverage. We are able to offer our customers immediate, coast-to-coast roaming on the AT&T Wireless Network. We believe that our ability to offer coast-to-coast coverage is a competitive advantage as customers increasingly choose national rate plans. We have also entered into an agreement with two other AT&T Wireless affiliates, Triton PCS, Inc. and TeleCorp PCS, Inc., to operate with those affiliates under a common regional brand name, SunCom, throughout an area covering approximately 43 million Pops primarily in the south-central and southeastern United States. Our license area is adjacent to and between the license areas of our SunCom partners. Merger with TeleCorp PCS, Inc. On February 28, 2000, Tritel and TeleCorp PCS, Inc. announced the signing of a definitive agreement and plan of reorganization and contribution, called the Merger Agreement, for an all stock, tax-free merger, called the Merger. The Merger Agreement provides for the creation of a new entity to be called TeleCorp PCS, Inc. Tritel and TeleCorp will merge into subsidiaries of the new entity. Under the Merger Agreement, Tritel's Class A common stock will be converted into the right to receive 0.76 shares of the new entity's Class A common stock for each share of Tritel common stock. This exchange ratio is fixed regardless of future stock price movement. The Merger has been unanimously approved by the Tritel and TeleCorp boards of directors with three members of the TeleCorp board abstaining. Shareholders with an excess of 50% of the voting power of each company have entered into agreements to vote in favor of the Merger. The Merger is still subject to regulatory approval and other conditions. The new entity will continue to provide, as an AT&T Wireless affiliate, digital wireless service under the SunCom and AT&T brand names, giving equal emphasis to each. In terms of licensed Pops, the new entity will cover approximately 35 million Pops and will become one of the top ten wireless service providers in the U.S. The Merger creates a new contiguous service area that connects the middle of the country and plays a more strategic role for the AT&T Wireless Network. The new entity will have sixteen of the top 100 markets located in fourteen states and the Commonwealth of Puerto Rico. We expect the Merger to be completed in the last quarter of 2000. The Tritel Network Our network offers advanced PCS services on a local and regional basis and through roaming agreements with AT&T Wireless and other carriers in many other markets throughout the United States. We intend to offer contiguous market coverage using our own network facilities, the regional markets covered by the SunCom brand alliance and the AT&T Wireless Network, all of which use a common technology platform, IS-136 Time Division Multiple Access, or TDMA. We believe that IS-136 TDMA provides our subscribers with excellent voice quality, fewer dropped calls than existing analog systems and coast-to-coast roaming over the AT&T Wireless Network. To maximize the commercial utility of IS-136 TDMA, we offer our customers tri-mode handsets, which can utilize IS-136 TDMA systems and analog as well as TDMA-based digital cellular systems throughout the nation. Several major wireless telecommunications service providers in North America have selected IS-136 TDMA for their digital PCS networks, including AT&T Wireless, 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 our markets. Our Own Network Facilities. We expect to be able to provide service to over 98% of the Pops in our license areas by the end of 2000. We have commenced PCS service in eight major markets: Jackson, Mississippi; Nashville, Knoxville and Chattanooga, Tennessee; Huntsville and Montgomery, Alabama; and Louisville and Lexington, Kentucky; and expect to commence PCS service in Birmingham and Mobile, Alabama during the second quarter of 2000. We have designed our PCS network to offer efficient and extensive coverage within our markets. Our cell site acquisition strategy is to co-locate as many of our cell sites as possible on existing towers and other transmitting or receiving facilities. We believe this strategy has reduced and will continue to reduce our site acquisition costs and minimize delays due to zoning and other local regulations. We launch service only after comprehensive and reliable coverage can be maintained within a particular market. We expect that there will be areas within our markets that we will ultimately build out, but where we will not, at least initially, have coverage. In these areas of our markets, we benefit from AT&T Wireless' existing roaming arrangements with other carriers to provide service. We may seek direct roaming agreements with some local carriers providing compatible service. These agreements will also allow us to launch our service at a lower level of capital expenditures than would otherwise be required, without adversely impacting the service we will be able to offer our customers. The SunCom Brand Alliance. We have entered into an agreement with two other AT&T Wireless affiliates, Triton PCS and TeleCorp PCS, 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 Pops 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. We and the other SunCom companies license the SunCom name from Affiliate License Co. The SunCom alliance will continue in effect between Telecorp PCS, Inc. and Triton PCS, Inc. after the Merger. To ensure that all SunCom customers will receive the same high quality service throughout the SunCom region, all three SunCom affiliates: o have agreed to build out their respective networks, adhering to the same AT&T Wireless quality standards, o have agreed to use tri-mode handsets with IS-136 TDMA technology, and o have entered into reciprocal roaming agreements. 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 Network provides coast-to-coast coverage for wireless services. We are the preferred provider of mobile PCS services for the AT&T Wireless Network using equal emphasis co-branding with AT&T within our markets, except for 790,000 Pops in Kentucky. AT&T Wireless has granted us a license to co-brand with the AT&T logo and other service marks in our covered markets. We also have established roaming, purchasing, engineering and other arrangements with AT&T Wireless. These arrangements will provide our customers immediate, coast-to-coast roaming on the AT&T Wireless Network. Strategic Alliance with AT&T Our 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 us, will provide AT&T Wireless subscribers roaming in our markets with features and functionality typically offered by the AT&T Wireless Network. The relationship with AT&T Wireless is valuable to us because, among other reasons, the relationship enables us to market our service using what we believe to be one of the world's most respected and recognizable brands, AT&T, in equal emphasis with the SunCom regional brand name. We also expect 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 our alliance with AT&T Wireless, AT&T Wireless contributed licenses for approximately 9.1 million of our 14.0 million total licensed Pops. In exchange for the AT&T contributed Pops 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 us, 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 our 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 our initial public offering. The AT&T Wireless licenses contributed to us 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. We will maximize the following benefits of our AT&T affiliation to distinguish ourselves from other PCS providers in our markets: Use of AT&T Brand and Logo. We believe the AT&T brand is among the most recognized brands in the United States. Management believes that branding has become increasingly important as the consumer base for wireless services has expanded. The AT&T brand affiliation will be the highest point of emphasis in marketing our services. Wherever possible, advertisements, handsets, product packaging, billing statements and in-store retail displays prominently display the AT&T logo in equal emphasis with the SunCom logo. We may not use the AT&T logo on the exterior of our retail stores. Preferred Provider of PCS to AT&T Wireless Customers. As a member of the AT&T Wireless Network, we are the preferred provider of mobile wireless services to AT&T Wireless' digital wireless customers in our markets, except for 790,000 Pops in Kentucky. We will provide PCS services to customers located in our markets responding to AT&T's national advertising and to AT&T's national account customers located in our markets. Coast-to-Coast Coverage. We expect to offer our customers immediate, coast-to-coast roaming on the AT&T Wireless Network. We believe many of the roaming arrangements negotiated by AT&T Wireless are at rates more favorable than we would be able to negotiate on our own. AT&T Sales Efforts. AT&T currently employs a sales force for long distance and other AT&T services within our markets. We expect to piggyback on AT&T's sales efforts to provide PCS services to those AT&T customers in our markets seeking wireless services as part of their AT&T service package. Marketing and Distribution Our 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 our coverage and our focus on customer service, all of which is provided at competitive prices. We employ a sales and marketing approach with highly definable measurable goals, which focuses primarily on the use of company stores to build our customer base. Company Stores. Our company-owned and operated retail stores are modeled after AT&T Wireless's retail stores, with the exception that we may not use the AT&T logo on the outside of our store fronts. Sales representatives in company stores receive in-depth training on the advantages of PCS and the AT&T Wireless and SunCom alliances. 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. Company stores are being designed to facilitate demonstration of the benefits of Tritel's PCS services and features. 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. We seek 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 located in retail shopping centers and range in size from 1,200 to 2,000 square feet. We had opened 30 company stores as of December 31, 1999 and plan to open an additional 53 stores by the end of 2000. Direct Sales Force. We also use a dedicated sales force. Our sales representatives are assigned to specific regions within our markets and use our company stores as their bases of operations. Sales representatives receive training on the advantages of PCS and are provided with product and service research, proposal writing and competitor analysis information. Our sales force will seek to coordinate with AT&T to offer bundled telephony and related services. We currently have a direct sales force of 61 people and plan to have approximately 134 sales people by the end of 2000. Indirect Distribution Channels. To augment our direct distribution efforts, we use mass retailers in our markets, including Circuit City, Office Depot and Best Buy. Management believes that the AT&T brand recognition along with over-the-air activation capability will facilitate distribution through mass retailers. In the future, we 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. Competition There are two established cellular providers in each of our 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 we do. In addition, in most of our markets, there are at least two or three other PCS providers currently offering commercial service or likely to begin offering service before we will. We also face competition from paging, dispatch and conventional mobile radio operations as well as SMR and ESMR, including those ESMR networks operated by Nextel and its affiliates in our markets. We are also competing with resellers of wireless services. Over the past several years, the FCC has auctioned, and will continue to auction large amounts of spectrum that could be used to compete with PCS services. We expect 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. We compete directly with up to five or more PCS and cellular providers in each of our markets. Principal existing PCS and cellular competitors in our markets are BellSouth, Powertel, GTE, Sprint PCS, Centurytel, PrimeCo and ALLTEL. Industry Overview Wireless telecommunications products and services evolved from basic paging services to mass-market voice only analog cellular services and have now progressed to PCS, digital cellular and wireless data. Each new generation of wireless telecommunications products and services has generally been characterized by improved product quality, broader service offerings and enhanced features. Because PCS operators have selected different technologies and are targeting different market segments, no uniform definition of PCS exists. Rather, individual operators have implemented separate service strategies with a wide range of differentiation in service offerings and targeted markets. The provision of cellular telephone service began with providers utilizing the 800 MHz band of radio frequency in 1982 when the FCC began issuing two licenses per market throughout the United States. Since then, the demand for wireless telecommunications has grown rapidly, driven by the increased availability of services, technological advancements, regulatory changes, increased competition and lower prices. In 1993, Congress directed the FCC to allocate additional radio spectrum for the provision of new wireless communications services. In response, the FCC allocated spectrum for a new class of service, known as personal communications services, called PCS. The FCC has described PCS as radio communications that encompass mobile and ancillary communication that provide services to individuals and businesses and can be integrated with a variety of competing networks. The FCC's stated objectives in auctioning bandwidth for PCS were to foster competition to existing carriers, increase availability of wireless services to a broader segment of the public, and bring innovative technology to the U.S. wireless industry. Since 1995, the FCC has been conducting auctions in which industry participants were awarded PCS licenses for designated areas throughout the United States, and we expect the FCC to continue to conduct periodic auctions for additional spectrum which could be used for competing PCS services. Industry Outlook. Wireless telecommunication technology developments are expected to evolve and continue to drive consumer growth as users demand more sophisticated services and products. Technological advancements, from longer battery life to improved voice quality, have begun to make wireless service increasingly comparable to wireline communications. Additionally, customers have begun to expect custom calling features that are similar to those available on a wireline network. Digital service, as opposed to analog service, permits wireless providers to offer these types of enhanced services to users. Existing and new wireless data technologies, coupled with the widespread use of the Internet, have caused wireless providers to focus on wireless data services offerings. These services predominantly have been used to date to carry corporate data applications. The introduction of new applications for corporate and eventually for consumer users, such as access to email, news, sports, weather summaries, travel services, financial information and services and comparison shopping applications, will drive the growth for wireless data network services. To this end, enabling technologies, such as Wireless Access Protocol, provide an environment that encourages developers to create innovative data services for wireless networks. In addition, applications, such as email, instant messages, banking, wireless portals and web services, are being developed and marketed. We believe that the initial success of PCS operators in the United States, and the corresponding acceleration of wireless penetration overall, supports the forecasted rapid growth of PCS services. GOVERNMENT REGULATION Overview As a recipient of licenses acquired through the C-Block auction and the F-Block auction, our ownership structure and operations are and will be subject to substantial FCC regulation. FCC Authority The Communications Act of 1934, as amended, grants the FCC the authority to regulate the licensing and operation of all non-federal government radio-based services in the United States. The scope of the FCC's authority includes: o allocating radio frequencies, or spectrum, for specific services; o establishing qualifications for applicants seeking authority to operate such services, including PCS applicants; o approving initial licenses, modifications thereto, license renewals, and the transfer or assignment of such licenses; o promulgating and enforcing rules and policies that govern the operation of spectrum licensees, including safe and efficient use of radio spectrum; o regulating the technical operation of wireless services, interconnection responsibilities between and among PCS, other wireless services such as cellular, and landline carriers; and o imposing monetary fines and license revocations for any substantial violations of those rules and regulations under its broad oversight authority. With respect to market entry and the promotion of a competitive marketplace for wireless providers, the FCC regularly conducts rulemaking and adjudicatory proceedings to determine and enforce rules and policies potentially affecting broadband PCS operations, and to periodically allocate additional spectrum. General PCS Regulations In June 1994, the FCC allocated spectrum for broadband PCS services between the 1850-to 1990-MHz bands. Of the 120 MHz available for licensed PCS services, the FCC created six separate blocks of spectrum identified as the A-, B-, C-, D-, E- and F-Blocks. The A-, B- and C-Blocks are each allocated 30 MHz of spectrum and the D-, E- and F-Blocks are allocated 10 MHz each. For each block, the FCC adopted a 10-year PCS license term with an opportunity to renew. The FCC also allocated 20 MHz of spectrum within the PCS band for unlicensed use. The FCC adopted a rebuttable presumption that all PCS licensees are common carriers, subject to Title II of the Communications Act. Accordingly, each PCS licensee deemed to be a common carrier must provide services upon reasonable request and the rates, terms and conditions of service must not be unjust, nor may the licensee unreasonably discriminate among similarly situated customers. Structure of PCS Block Allocations The FCC defines the geographic contours of the licenses within each PCS block based on the major trading areas and basic trading areas. The FCC awarded A- and B-Block licenses in 51 major trading areas. The C-, D-, E- and F-Block spectrum were allocated on the basis of 493 smaller basic trading areas. The auctioned A- and B-Block licenses were awarded in June 1995. Spectrum in the C- and F-Blocks is reserved for entrepreneurs. The FCC completed its initial auction for the C-Block on May 6, 1996 and relicensed 18 C-Block licenses on which initial auction winners defaulted in a re-auction that ended on July 16, 1996. The D-, E-, and F-Block licenses were auctioned simultaneously, with the auction closing on January 14, 1997. The FCC conducted a re-auction of the C-, D-, E- and F-Block spectrum, which closed on April 15, 1999. The FCC has scheduled another C-, D-, E- and F-Block re-auction, to commence on July 26, 2000. In addition, the FCC can be expected to conduct additional auctions for spectrum which could be used for competing PCS services. In December 1996, the FCC adopted rules permitting broadband PCS carriers to partition any service areas within their license areas and disaggregate any amount of spectrum within their spectrum blocks to entities that meet the eligibility requirements for the spectrum blocks. The purpose of the FCC's rule change was to permit existing PCS licensees and new PCS entrants to have greater flexibility to determine how much spectrum and geographic area they need or desire in order to provide PCS service. Thus, A-, B-, D- and E-Block licensees may sell or lease partitioned or disaggregated portions of their licenses at any time to entities that meet the minimum eligibility requirements of the Communications Act. C-and F- Block licensees may only sell or lease partitioned or disaggregated portions of their licenses to other qualified entrepreneurs during the first five years of their license terms, and such entities would take over partitioned service areas subject to separately established installment payment obligations. After five years, licenses are freely transferable, 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 auction preferences, such a sale would be subject to immediate payment of the outstanding balance of the government installment payment debt as a condition of transfer. A transfer to a company that qualifies for a lower level of auction preferences will be subject to partial repayment of bidding credits and installment payments as a condition of transfer. Additionally, such a sale may be subject to full repayment of the bidding credits. The 1996 Act On February 8, 1996, the President signed the 1996 Act, which effected a sweeping overhaul of the Communications Act. In particular, the 1996 Act substantially amended Title II of the Communications Act, which governs telecommunications common carriers. The policy underlying this legislative reform was the opening of the telephone exchange service markets to full competition. The 1996 Act makes unlawful state and local barriers to competition which prohibit or have the effect of prohibiting entry by competitors, whether they are direct or indirect. It directs the FCC to initiate rulemaking proceedings on local competition matters and to preempt inconsistent state and local laws and regulations. The 1996 Act requires incumbent landline local exchange carriers to open their networks to competition through interconnection and access to unbundled network elements and prohibits state and local barriers to the provision of interstate and intrastate telecommunications services. Some specific provisions of the 1996 Act that are expected to affect wireless providers are summarized below. These provisions generally have proven helpful to wireless carriers. There can be no assurance, however, that these provisions or their implementation by federal or state regulators will not have a material adverse effect on us. Expanded Interconnection Obligations The 1996 Act establishes a general duty of all telecommunications carriers, including PCS licensees, to interconnect with other telecommunications carriers, directly or indirectly. The 1996 Act also contains a detailed list of requirements with respect to the interconnection obligations of local exchange carriers. These interconnection obligations include resale, number portability, dialing parity, access to rights-of-way and reciprocal compensation. The FCC has determined that all CMRS carriers are considered telecommunications carriers, but for now, CMRS providers such as us do not meet the 1996 Act's definition of a local exchange carrier. The 1996 Act establishes a framework for state commissions to mediate and arbitrate negotiations between incumbent local exchange carriers and carriers requesting interconnection, services or network elements. The 1996 Act establishes deadlines and policy guidelines for state commission decision-making and federal preemption in the event a state commission fails to act. Review of Universal Service Requirements The 1996 Act contemplates that interstate telecommunications providers, including CMRS providers, will "make an equitable and non-discriminatory contribution" to support the cost of providing universal service, although the FCC can grant exemptions in certain circumstances. A decision adopted by the 1996 Act-mandated Federal-State Joint Board rejected arguments that CMRS providers should be exempted from universal service obligations and concluded that, to the extent such carriers provide interstate service, they must contribute to universal service support mechanisms. The Joint Board also found that states could require CMRS providers to contribute to state support mechanisms. The FCC now requires all CMRS carriers to contribute to a universal service fund. Prohibition Against Subsidized Telemessaging Services The 1996 Act prohibits incumbent local exchange carriers from subsidizing telemessaging services, including voice mail, voice storage/retrieval, live operator service, and related ancillary services from their telephone exchange service or exchange access and from discriminating in favor of their own telemessaging operations. Conditions on Regional Bell Operating Companies Provision of In-Region InterLATA Services The 1996 Act establishes conditions generally requiring that, before engaging in landline interexchange services in states in which they provide landline local service, referred to as in-region interLATA services, regional Bell Operating Companies and their affiliates must provide access and interconnection to one or more unaffiliated competing providers of telephone exchange service. Regional Bell Operating Companies and their affiliates may provide wireless services, including broadband PCS, in markets that cross LATA boundaries as an incidental interLATA service. Regional Bell Operating Companies Commercial Mobile Joint Marketing The regional Bell Operating Companies are permitted to market jointly and sell wireless services in conjunction with telephone exchange service, exchange access, intraLATA and interLATA telecommunications and information services. CMRS Facilities Siting The 1996 Act limits the rights of states and localities to regulate placement of CMRS facilities so as to prohibit or prohibit effectively the provision of wireless services or to discriminate among providers of such services. It also eliminates environmental effects from radiofrequency emissions, provided the wireless system complies with FCC rules, as a basis for states and localities to regulate the placement, construction or operation of wireless facilities. Equal Access The 1996 Act provides that wireless carriers are not required to provide equal access to common carriers for interexchange toll services. The FCC is authorized to require unblocked access to long distance providers of the user's choice subject to certain conditions. Deregulation The FCC is required to forebear from applying any statutory or regulatory provision that it determines is not necessary to keep telecommunications rates and terms reasonable or to protect consumers. A state may not apply a statutory or regulatory provision that the FCC decides to forebear from applying. In addition, the FCC must review its telecommunications regulations every two years and change any that are no longer necessary. The 1996 Act was explicit in its preemption of certain components of local regulation of CMRS carriers, including the authority to preclude antenna site construction due to concerns over radiofrequency emissions. Rather than directly challenge federal authority in this area, local governments have instituted moratoria on further construction while the health, safety and historic preservation aspects of this matter are studied further. Currently there are over 200 such moratoria in effect across the country. There are a number of bills pending in Congress, some of which would strengthen the federal government's preemption authority and some which would weaken federal authority. We can not predict how this issue will be resolved and the extent to which it may have a material impact on our ability to rapidly and efficiently construct our PCS network. Relocation of Fixed Microwave Licensees In an effort to balance the competing interests of existing microwave users and newly authorized PCS licensees in the spectrum allocated for PCS use, the FCC has adopted (a) a transition plan to relocate fixed microwave operators that currently are operating in the PCS spectrum, and (b) a cost sharing plan so that if the relocation of an incumbent benefits more than one PCS licensee, the benefiting PCS licensees will help defray the costs of the relocation. PCS licensees will only be required to relocate fixed microwave incumbents if they cannot share the same spectrum. The transition and cost sharing plans expire on April 4, 2005, at which time remaining incumbents in the PCS spectrum will be responsible for their costs to relocate their fixed microwave to alternate spectrum locations. Relocation generally involves a PCS operator compensating an incumbent for costs associated with system modifications and new equipment required to move to alternate, readily available spectrum. The transition plan, as modified, allows most microwave users to operate in the PCS spectrum for a two-year voluntary negotiation period and an additional one-year mandatory negotiation period. For public safety entities dedicating a majority of their system communications for police, fire or emergency medical service operations, the voluntary negotiation period is three years. The FCC recently shortened the voluntary negotiation period to one year for commercial microwave operators, but retained the three year negotiation period for public safety licenses. Parties unable to reach agreement within these time periods may refer the matter to the FCC for resolution, but the existing microwave user is permitted to continue its operations until final FCC resolution of the matter. The FCC's cost-sharing plan allows PCS licensees that relocate fixed microwave links outside of their licensed spectrum to receive reimbursements from later-entrant PCS licensees that benefit from the clearing of their spectrum. Two non-profit clearinghouses currently administer the FCC's cost-sharing plan. Thus, we may be required in certain circumstances to defray the cost of earlier relocations by A-, B-, C-, D-, E- and F-Block licensees. Including cost sharing for relocations performed by other PCS licensees and cost sharing reimbursements by other PCS licenses paid to us, we expect to spend a total of approximately 17.0 million for microwave relocation, approximately $3.5 million of which was expended through December 31, 1999. We have completed microwave relocations for all 1999 launch cities and do not expect any delays to our scheduled service launches in 2000. C-Block License Requirements Airwave Communications, one of our predecessor companies, was the winning bidder for six licenses in the original C-Block auction. The C-Block was designated as an entrepreneurs Block which means that each C-Block applicant must qualify as an entrepreneur in order to hold C-Block licenses and qualify as a small business in order to receive certain financing preferences. The FCC initially determined that Entrepreneurs that qualify as small businesses would be eligible to receive a C-Block Loan from the U.S. Government for 90% of the dollar amount of their net winning bids in the C-Block auction. For small businesses, the period during which C-Block licensees may make interest-only payments is six years, with payments of principal and interest amortized over the remaining four years of the license term. For licenses acquired in the first C-Block auction, the interest rate for outstanding principal is 7.0%. In the most recent C- and F-Block re-auction, the FCC did not use installment payments, but instead required all applicants to pay their net bid in cash prior to granting the licenses. In order to ensure continued compliance with the FCC rules, the FCC has announced its intention to conduct random audits during the initial ten-year PCS license terms. We have relied on representations of our investors to determine our compliance with the FCC's rules applicable to C-Block and F-Block licenses. There can be no assurance, however, that our investors or we will continue to satisfy these requirements during the terms of the PCS licenses granted to us or that we will be able to successfully implement divestiture or other mechanisms included in our Restated Certificate of Incorporation that are designed to ensure compliance with FCC rules. Any non-compliance with FCC rules could subject us to penalties, including a fine or revocation of our PCS licenses. Entrepreneurs Requirements In order to hold a C-Block license, an entity and its affiliates must have had (a) less than $125 million in gross revenues in each of fiscal 1993 and 1994 and (b) less than $500 million in total assets at the time it filed its application to qualify for the C-Block auction on FCC Form 175. Airwave Communications filed its Form 175 on November 6, 1995. In calculating a licensee's gross revenues and total assets for purposes of the entrepreneurs requirements, the FCC includes the gross revenues and total assets of the licensee's affiliates, those persons or entities that hold attributable interests in the licensee, and the affiliates of such persons or entities. However, the gross revenues and total assets of certain affiliates are not attributable to the licensee if the licensee maintains an organizational structure that satisfies certain control group requirements defined below. For at least five years after winning a C-Block license, a licensee must continue to meet the entrepreneurs requirements in order to remain eligible for the bidding credits and installment financing it received in the FCC's designated entity program. Airwave Communications qualified to enter the C-Block auction. If the FCC were to determine that Airwave Communications did not satisfy the entrepreneurs requirements at the time it participated in the C-Block auction or that we fail to meet the ongoing entrepreneurs requirements, the FCC could revoke our PCS licenses, require us to restructure in order to come into compliance with the relevant regulation, fine us, accelerate our installment payment obligations, or take other enforcement actions, including imposing the unjust enrichment penalties. Although we believe we have met the entrepreneurs requirements, there can be no assurance that we will continue to meet such requirements or that, if we fail to continue to meet such requirements, the FCC will not take action against us. Small Business Requirements An entity that meets the entrepreneurs requirements may also receive certain preferential financing terms if it meets certain other small business requirements. These preferential financing terms include a 25% bidding credit and the ability to make quarterly interest-only payments on its C-Block Loan for the first six years of the license term. To meet the small business requirements, a licensee must have had average annual gross revenues of not more than $40 million for the three calendar years preceding the date it filed its Form 175. In calculating a licensee's gross revenues for purposes of the small business requirements, the FCC includes the gross revenues of the licensee's affiliates, those persons or entities that hold attributable interests in the licensee, and the affiliates of such persons or entities. As a small business, Airwave Communications, our predecessor in interest, qualified for the 25% bidding credit and preferential financing. If the FCC were to determine that we no longer qualify as a small business, then we could be forced to repay the value of the bidding credit and preferential financing for which we were not qualified. Further, the FCC could revoke our PCS licenses, require us to restructure in order to come into compliance with the relevant regulation, accelerate our installment payment obligations, cause us to lose our bidding credits retroactively, fine us or take other enforcement actions, including imposing unjust enrichment penalties. Although we have been structured to meet the small business requirements, there can be no assurance that we will continue to meet such requirements or that, if we fail to continue to meet such requirements, the FCC will not take any of the aforementioned actions against us. Control Group Requirements If a C-Block licensee maintains an organizational structure in which at least 25% of its total equity on a fully-diluted basis is held by a control group that meets certain requirements, the FCC excludes the assets and revenues of certain investors from being attributed to such total revenue and gross asset calculations. The control group requirements mandate that the control group, among other things, have and maintain both actual and legal control of the licensee. Under the control group requirements: o an established group of investors meeting certain financial qualifications must own at least 15% of the licensee entity's total equity interest on a fully-diluted basis and at least 50.1% of the voting power in the licensee entity; o additional control group members must hold, on a fully-diluted basis, the remaining 10% control group equity interest in the licensee entity; and, o nonqualifying (passive) investors may own up to 25% of the total equity on a fully diluted basis and may vote up to 25% of the voting interests. Additional control group members must be either: o other qualifying investors in the control group; o individual members of the licensee's management; or o non-controlling institutional investors, including most venture capital firms meeting FCC-specified criteria. A C-Block licensee must have met the control group requirements at the time it filed its Form 175 and must continue to meet the control group requirements for five years following the license grant date, subject to possible unjust enrichment obligations for ten years. Commencing the fourth year of the license term, the FCC rules (a) eliminate the requirement that additional control group members hold the 10% control group equity interest and (b) allow the qualifying investors to reduce the minimum required control group equity interest from 15% to 10%. In order to assure that we can continue to comply with the FCC's control group rules, our Restated Certificate of Incorporation provides that our outstanding shares of capital stock will always be subject to redemption by action of our Board of Directors if, in the judgment of the Board of Directors, such redemption is necessary to prevent the loss or secure the reinstatement of any license from the FCC held by us or any of our subsidiaries. Although we believe that we have taken sufficient steps to meet the control group requirements, there can be no assurance that we have met or will continue to meet the control group requirements, or that the failure to meet such requirements would not have a material adverse effect on us, including the possible revocation of our PCS licenses by the FCC. Foreign Ownership Limitations The Communications Act provides that non-U.S. citizens, their representatives, foreign governments or corporations otherwise subject to domination and control by non-U.S. citizens may not own of record or vote (a) more than 20% of the capital contribution to a common carrier directly, or (b) more than 25% of the capital contribution to the parent corporation of a common carrier licensee, if the FCC determines such holdings are not within the public interest. Because the FCC classifies PCS as a common carrier offering, PCS licensees are subject to the foreign ownership limits. Congress recently eliminated restrictions on non-U.S. citizens serving as members on the board of directors and officers of a common carrier radio licensee or its parent. Under the World Trade Organization agreement, ratified by the United States and 69 other countries as of February 5, 1998, the United States has agreed to permit indirect foreign ownership of up to 100% of a licensed company; however direct ownership will continue to be limited to 20%. Entities wishing to exceed the 25% indirect ownership threshold will now be accorded a strong presumption that foreign investment by other World Trade Organization member countries would serve the public interest. The FCC will review applications to exceed the 25% benchmark on a streamlined processing schedule. Airwave Communications' license application, filed with the FCC after the completion of the C-Block auction, indicates that Airwave Communications is in compliance with the FCC's foreign ownership rules. However, if our foreign ownership were to exceed 25% in the future, the FCC could revoke our licenses, require us to restructure our ownership to come into compliance with the foreign ownership rules or impose other penalties. Further, our Restated Certificate of Incorporation enables us to redeem shares from holders of common stock whose acquisition of such shares results in a violation of such limitation. The restrictions on foreign ownership could adversely affect our ability to attract additional equity financing from entities that are, or are owned by, non-U.S. entities. F-Block License Requirements The FCC has for the most part extended its C-Block eligibility requirements and auction rules to the F-Block, with the following exceptions. For the purposes of determining the entrepreneur's asset limit, F-Block applicants do not count the value of C-Block licenses, although they must count other CMRS licenses, including A-Block and B-Block PCS licenses. F-Block auction participants, as well as D- and E-Block participants, were required to pay 20% of their net winning bid, as opposed to only 10% required of C-Block bidders. Participants in the F-Block auction could qualify for either of two bidding credit levels: applicants with average gross revenues of not more than $40 million during the previous three years received a 15% bidding credit, while applicants with average gross revenues of not more than $15 million for the same period are referred to as very small businesses and received a 25% bidding credit. For small businesses and very small businesses, the period during which F-Block licensees may make interest-only payments is two years, as opposed to six years for C-Block small businesses, with payments of principal and interest amortized over the remaining eight years of the license term. The interest rate applicable to Digital PCS, one of our predecessor companies and the winning bidder for 32 licenses in the D-, E- and F-Block auction, for outstanding principal is 6.125%. Furthermore, F-Block licensees that fall behind in scheduled installment payments will incur a 5% late payment fee if payment is made up to 90 days after the due date, and an additional 10% late payment fee if payment is made 91-180 days after the due date (for a total of 15%). After 180 days, the FCC takes the position that the license automatically cancels. By qualifying as a very small business, Airwave Communications qualified for the 25% bidding credit and the most favorable installment payment plan offered by the FCC. The markets acquired by Digital PCS are comprised of 29 licenses in the F-Block, one license in the D-Block and two licenses in the E-Block. With respect to those licenses won in the F-Block auction, we believe that Digital PCS structured itself to satisfy the FCC's very small business requirements, and we intend to maintain diligently our qualification as a very small business. We have relied on representations of our investors to determine our compliance with the FCC's rules applicable to C-Block and F-Block licenses. There can be no assurance, however, that our investors or we will continue to satisfy these requirements during the terms of the PCS licenses granted to us or that we will be able to successfully implement divestiture or other mechanisms included in our Restated Certificate of Incorporation that are designed to ensure compliance with FCC rules. Any non-compliance with FCC rules could subject us to penalties, including a fine or revocation of our PCS licenses. Transfer Restrictions Within the first five years of the grant of a C- or F-Block license, transfer of the license is permitted only to another entity eligible for the C- or F-Block, such as another small business or very small business. 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, such a sale would be subject to full payment of bidding credits and immediate payment of the outstanding balance of the government installment payment debt as a condition of transfer, known as the FCC unjust enrichment penalties. In addition, if we wish to make any changes in ownership structure during the initial license term involving the de facto or de jure control of us, we must seek FCC approval and may be subject to the FCC unjust enrichment penalties indicated above. Buildout Requirements The FCC has mandated that recipients of PCS licenses adhere to five-year and ten-year buildout requirements. Under both five- and ten-year buildout requirements, all 30-MHz PCS licensees, such as C-Block licensees, must construct facilities that offer coverage to at least one-third of the population in their service area within five years from the date of initial license grants. Service must be provided to two-thirds of the population within ten years. In the D-, E- and F-Blocks, 10 MHz PCS licenses and the 15 MHz Blocks resulting from the C-Block disaggregation option are required to reach one-quarter of the population within five years or make a showing of substantial service within five years. The FCC, however, has not defined the term "substantial service". If we fail to meet the FCC's construction benchmarks, the FCC takes the position that our license automatically cancels with respect to any unconstructed territory. Violations of these regulations could result in license revocations or forfeitures or fines or other sanctions, such as reductions in service areas. Penalties for Payment Default In the event that we default on our obligations under the government financing, the FCC takes the position that any license in payment default for more than 180 days cancels automatically. The FCC may in such instances reclaim some or possibly all of our licenses, re-auction them, and subject us to additional penalties to compensate the government for any shortfall incurred as a result of the default and cover the cost of conducting a re-auction. Other FCC Requirements The FCC imposes additional regulatory requirements on all Commercial Mobile Radio Service, or CMRS, operators, which include PCS and cellular systems, as well as some specialized mobile radio systems. Some of the current requirements include: Regulatory Parity. The FCC has adopted rules designed to create consistency in the manner in which it regulates similar types of mobile service providers. According to these rules, all CMRS providers that offer substantially similar services will be subject to similar regulation. A CMRS service is one in which the mobile radio service is provided for a profit, interconnected to the public switched telephone networks, and made available to the public. Under these rules, providers of SMR and ESMR services are subject to regulations similar to those governing cellular and PCS carriers if they offer an interconnected commercial mobile service. Commercial Mobile Radio Service Spectrum Ownership Limit. The FCC has limited the amount of broadband CMRS spectrum, including cellular, broadband PCS and SMR, in which an entity may hold an attributable interest in a given geographic area to 45 MHz (55 MHz in certain rural areas). For these purposes, only PCS and other CMRS licenses are attributed to an entity where its equity exceeds certain thresholds, the entity is, or has to the power to appoint an officer or director of a broadband PCS, cellular or SMR licensee, or certain other relationships exist which cause an interest to be attributable. Our ability to raise capital from entities with attributable broadband CMRS interests in certain geographic areas is likely to be limited by this restriction. See "Management's Discussion and Analysis--Pending License Acquisition". Resale. The FCC has adopted rules that prohibit broadband PCS, cellular and certain SMR and ESMR licensees from restricting the resale of their services. The FCC has determined that the availability of resale will increase competition at a faster pace by allowing new entrants to launch service quickly through the resale of their competitors' services while they are building out their own facilities. This prohibition is scheduled to expire in November 2002. However, the FCC has received petitions requesting the FCC to extend the five-year period. Roaming. The FCC requires such carriers to provide roaming service to subscribers of other CMRS carriers, through which roaming subscribers of other carriers may make calls after establishing a method of payment with a host carrier. Number Portability. The FCC has imposed number portability requirements on broadband PCS, cellular and certain SMR and ESMR providers. The Commission's number portability rules requires that such licensees provide their customers with the ability to change carriers while retaining phone numbers. By November 24, 2002, CMRS providers must be able to offer number portability without the impairment of quality, reliability or convenience when switching service providers, including the ability to support roaming throughout their networks. The FCC has solicited further comment on the appropriate cost-recovery methods regarding long-term number portability. E-911. The FCC requires cellular, PCS, and certain SMR and ESMR carriers to transmit all wireless 911 emergency calls to Public Safety Answering Points without any credit checks or validation. The FCC also requires that such carriers must be capable of transmitting 911 calls from individuals with speech or hearing disabilities through means such as text telephone devices. By October 2001, carriers must be able to provide the Public Safety Answering Point with the location of the mobile caller within a radius of 125 meters. The FCC proceeding implementing these requirements is ongoing and these requirements remain subject to further modification. On October 26, 1999, the Wireless Communications and Public Safety Act was signed into law by President Clinton. This new law seeks to enhance public safety by making 911 the universal emergency assistance number, promoting wireless communications, clarifying and enhancing the liability protections afforded to wireless carriers for both emergency and non-emergency service, and supporting the location of wireless consumers in distress. RF Emissions. In August 1996, as revised in August 1997, the FCC adopted new guidelines and methods for evaluating the effects of radiofrequency emissions from transmitters including PCS mobile telephones and base stations. The new guidelines, which are generally more stringent than previous requirements, were effective immediately for hand-held devices and became effective for other devices on October 15, 1998. Wiretap Act. Wireless providers are subject to the Communications Assistance for Law Enforcement Act also known as the Wiretap Act, which is under the purview of the Department of Justice. The Wiretap Act requires carriers to have a specific number of open ports available for law enforcement personnel with the appropriate legal authority to perform wiretaps on the carrier's network. Full implementation of the Wiretap Act's assistance capability requirements, however, is not required until June 30, 2000, because the FCC has found that there is a lack of equipment available to meet these requirements. Accessibility to Persons with Disabilities. Section 255 of the Communications Act of 1934 requires all carriers to ensure that service is accessible and usable by individuals with disabilities, if readily achievable. On September 29, 1999, the FCC adopted rules to implement Section 255, specifically affirming that all carriers are obligated to work toward meeting the telecommunications needs of consumers with disabilities. By March 1, 2001, all common carriers, including the Company, are required to provide speech-to speech relay services and interstate Spanish relay services for the hearing impaired. In determining whether a particular upgrade is "readily achievable", the FCC can be expected to examine the nature of the action needed, the costs of the action needed, the overall financial resources of the service provider, and the type of operations performed by the carrier. Accordingly, it is unclear at this time what impact, if any, these new regulatory requirements will have on the Company's operations. Calling Party Pays. The FCC is considering mechanisms to permit CMRS carriers to charge the party initiating the call (even if not the CMRS subscriber). Other Federal Regulations. Wireless networks are subject to certain Federal Aviation Administration, Environmental Protection Agency and FCC guidelines regarding the location, lighting and construction of transmitter towers and antennas. In addition, the FCC has authority to enforce certain provisions of the National Environmental Policy Act as they would apply to our facilities. We intend to use common carrier point-to-point microwave and traditional landline facilities to connect base station sites and to link them to their respective main switching offices. These microwave facilities have historically been separately licensed by the FCC on a first-come, first-served basis, although the FCC could decide to auction certain of such licenses, and are subject to specific service rules. Wireless providers also must satisfy a variety of FCC requirements relating to technical and reporting matters. One such requirement is the coordination of proposed frequency usage with adjacent wireless users, permittees and licensees in order to avoid radiofrequency interference between adjacent networks. In addition, the height and power of base station transmitting facilities and the type of signals they emit must fall within specified parameters. State and Local Regulation. The scope of state regulatory authority covers such matters as implementing those parts of the Communications Act governing the terms and conditions of interconnection between local exchange carriers and wireless carriers, customer billing information and practices, billing disputes, other consumer protection matters, environmental, zoning, and historical preservation, certain facilities construction issues, the bundling of services and equipment, and requirements relating to making capacity available to third party carriers on a wholesale basis. In these areas, particularly the terms and conditions of interconnection between local exchange carriers and wireless providers, the FCC and state regulatory authorities share regulatory responsibilities with respect to interstate and intrastate issues, respectively. We have been and intend to remain active participants in rulemaking and other administrative policy proceedings before the FCC and before state regulatory authorities. Proceedings with respect to the foregoing policy issues before the FCC and state regulatory authorities could have a significant impact on the competitive market structure among wireless providers and the relationships between wireless providers and other carriers. Personnel At December 31, 1999, we had 628 employees, including 109 in technical operations, 335 in marketing and sales operations, 74 in customer operations, 21 in management information systems, 22 in human resources and 67 in corporate and financial. Most of our employees are located at the corporate and customer service operations locations in Jackson, Mississippi. Technical operations and sales operations personnel are located in each of the regional markets of Birmingham, Chattanooga, Huntsville, Jackson, Knoxville, Louisville, Lexington, Mobile, Montgomery and Nashville. We consider our relations with our employees to be good. None of our employees is represented by a union. Operating Revenue For more information about our operating revenues and expenses please see the financial statements and notes thereto contained elsewhere in the report. All such information is incorporated herein by reference. Item 2. Properties We currently own no real property. We have entered into leases for an aggregate of 57,000 square feet of office space in Jackson, Mississippi for use as our 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. We have 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. Management expects that our current executive office and customer operations office facilities will be sufficient through at least 2001. We have entered into leases in Jackson, Birmingham, Mobile, Nashville, Knoxville, Louisville, Lexington and elsewhere for regional offices. We have 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 us 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 our markets and, accordingly, we do not expect to add switch centers in the future. Company retail stores will be located throughout our 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. We opened 30 company stores in 1999 and plan to open an additional 53 stores in 2000 to service all markets being launched in 1999 and 2000. We expect to lease approximately 90% of our 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, we have negotiated master lease agreements with other wireless providers and tower companies to lease space on their existing cell sites throughout our markets. We expect that our company will need to construct up to 114 greenfield cell sites for our planned network buildout through 2000. Item 3. Legal Proceedings We are a party to various legal proceedings, none of which, in the opinion of management, are material. Item 4. Submission of Matters to a Vote of Shareholders On December 9, 1999, the holders of 79,465,690 shares of Class A Common Stock and six shares of the Voting Preference Stock, by written consent in lieu of a special meeting: (i) approved an amendment to our Restated Certificate of Incorporation to (a) increase the total number of authorized shares to 1,019,100,009, (b) increase the term of each director to three years and divide the board into three classes (c) subject to certain restrictions, grant the existing directors the power to fill vacancies on the board, and, (d) subject to certain restrictions, to allow for the removal of directors only upon cause; (ii) approved the Amended and Restated Bylaws, dated December 9, 1999 to (a) eliminate the power of the stockholders to act by written consent in lieu of a meeting, (b) subject to certain restrictions, to eliminate the power to remove directors for any reason, and (c) to grant a majority of the directors the right to amend the bylaws subject to the powers of the shareholders; (iii) approved the adoption of the 1999 Stock Option Plan and authorized and approved for issuance thereunder 10,462,400 shares of Class A Common Stock; and (iv) approved the adoption of the 1999 Stock Option Plan for Non-Employee Directors and authorized and approved for issuance thereunder 100,000 shares of Class A Common Stock. PART II Item 5. Market for Registrant's Shares and Related Shareholder Matters Our common stock is currently traded on the Nasdaq National Market under the symbol "TTEL". As of March 2, 2000, there were approximately 9,128 holders of record of our common stock. Our common stock began trading on the Nasdaq National Market on December 14, 1999. For the period between December 14, 1999 and December 31, 1999, our highest price was $35.125 and our lowest was $25. We have never declared or paid any cash dividends on our capital stock and we do not anticipate paying cash dividends in the foreseeable future. Unregistered Sale of Securities On January 7, 1999, AT&T Wireless PCS, Inc. and TWR Cellular, Inc. contributed PCS licenses to Tritel and entered into agreements with Tritel for the use of the AT&T logo and other service marks, and for roaming arrangements. In exchange for the contributed assets, AT&T Wireless received 90,668 shares of Series A Convertible Preferred Stock and 46,374 shares of Series D Convertible Preferred Stock in Tritel with a stated value of $137,042,000. On January 7, 1999, Airwave Communications and Digital PCS transferred substantially all of their assets and liabilities at historical cost to Tritel in exchange for 18,262 shares of Series C Convertible Preferred Stock. On January 7, 1999, Tritel acquired all of the assets and liabilities of Central Alabama Partnership, LP 132 in exchange for 2,602 shares of Series C Convertible Preferred Stock in Tritel with a stated value of $2,602,000. On January 7, we completed a private offering of our Series C Convertible Preferred Stock pursuant to Rule 144A and Regulation S of the Securities Act of 1933, as amended, from which we received $163.4 million in gross proceeds. After deducting expenses, the net proceeds of the offering were $154.9 million. The proceeds of the offering were used for capital expenditures, including the buildout of our network, to cover financing fees and expenses, and as working capital. The Series C Convertible Preferred Stock issued on January 7, 1999 converted to an aggregate of 78,312,424 shares of our Class A and Class D Common Stock upon the closing of our initial public offering. Registered Sale of Securities On December 13, 1999, in connection with our initial public offering, our Registration Statement on Form S-1 (File no. 333-91207) was declared effective by the Securities and Exchange Commission, pursuant to which 10,781,250 million shares of our Class A Common Stock were sold at a price of $18.00 per share, generating gross proceeds of $194.1 million. The managing underwriters were Goldman, Sachs & Co, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co, Inc., and Donaldson, Lufkin & Jenrette. After deducting approximately $13.6 million in underwriting discounts and commissions and approximately $1.8 million in other offering expenses payable by us, the net proceeds were approximately $178.7 million. In addition, on December 17, 1999, we completed a concurrent private offering to certain of our existing stockholders of 884,019 shares of our Class A Common Stock and 2,927,120 shares of our Class B Common Stock at a price of $16.74 per share, from which we received proceeds of $63.8 million. As of December 31, 1999, we will use the proceeds of the offering for general corporate purposes, including capital expenditures in connection with the construction of our PCS network, sales and marketing activities and working capital. The foregoing use of the proceeds does not represent a material change in the use of net proceeds described in the registration statement. Item 6. Selected Financial Data Selected Consolidated Financial Data The following selected financial data for the periods indicated have been derived from the Consolidated Financial Statements of Tritel, Inc. which statements have been audited by KPMG LLP, independent certified public accountants, whose report thereon, other than operations for the period from inception through December 31, 1995 and for the year ended December 31, 1996 and balance sheets at December 31, 1995, 1996 and 1997, appears elsewhere in this Form 10-K. The selected financial data should be read in conjunction with "Management's Discussion and Analysis" and the Consolidated Financial Statements and notes thereto of Tritel included elsewhere in this Form 10-K.
Period from Inception to December Year Ended December 31, 31, --------------------------------------------------- 1995 1996 1997 1998 1999 --------------------------------------------------------------- (dollars in thousands) Statements of Operations: 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 -- (1,461) (3,154) (8,331) (275,897) (120) 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 $(120) $(1,461) $(3,154) (10,745) $(256,372) shareholders ========== ======== ======== ======== ========== Basic and diluted net loss per $(33.25) ========== common share Weighted average common shares outstanding (1) 7,710, 649 ==========
(1) Per share information is not included for periods prior to 1999 because our predecessor companies were limited liability companies with different capital structures.
December 31, --------------------------------------------------------------- 1995 1996 1997 1998 1999 --------------------------------------------------------------- (dollars in thousands) 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 FCC licensing costs 40 62,503 99,425 71,466 (1) 201,946 Intangible assets, net 3 186 1,027 1,933 59,508 Other assets -- -- -- -- 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 (2) 557,716 Other non-current liabilities -- -- 8,126 6,494 37,367 Total Series A redeemable preferred -- -- -- -- 99,586 stock Total stockholders' equity (deficit) 1,519 5,674 8,762 (1,983) 387,446 ---------- -------- -------- -------- ---------- Total liabilities and stockholders' $4,944 $67,731 $102,513 $89,021 $1,196,362 equity ========== ======== ======== ======== ========== Other Financial Data: ===================================== Ratio of earnings to fixed charges -- -- -- -- --
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. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto, which are included in this Form 10-K. See also "Information Regarding Forward Looking Statements and Market Data." General We are 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. We began providing wireless services in our Jackson, Mississippi market in September 1999 and in seven other major markets by year end. In January 1999, we entered into our affiliation agreement with AT&T Wireless, our largest equity shareholder with 21.6% ownership of our company. We have also joined with two other AT&T Wireless affiliates to operate under a common regional brand name, SunCom. We provide our PCS services as a member of the AT&T Wireless Network, serving as the preferred roaming provider to AT&T Wireless' digital customers in virtually all of our markets and co-branding our 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' existing digital and analog systems, PCS systems being constructed by four joint venture partners, including our company, 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 Pops throughout the United States as of December 31, 1999. We have incurred significant expenditures in conjunction with our organization and financing, PCS license acquisitions, hiring key personnel and the design and construction of our PCS network facilities. We have commenced commercial PCS services in eight of our ten largest markets. We expect to have commenced commercial PCS service in all of our 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 our site acquisition program, zoning and microwave relocation activities, equipment delivery schedules and local market and competitive considerations. We provided service to over 50% of the Pops in our license area at the end of 1999 and expect to be providing service to over 98% by the end of 2000. Thereafter, we will evaluate further coverage expansion on a market-by-market basis. The extent to which we are 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 our products and services. Revenues We generate substantially all of our revenues from the following sources: Service. We sell wireless personal communications services. The various types of service revenue associated with personal communications services for our 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. Our 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 our prepaid subscribers and non-recurring activation and deactivation service charges. Equipment. We sell wireless PCS handsets and accessories that are used by our customers in connection with our wireless services. Roaming. We charge monthly, non-recurring, per minute fees to other wireless companies whose customers use our 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, management believes that some deterioration in ARPU will continue. Management believes that certain direct operating costs, including billing, interconnect, roaming and long distance charges will decline. However, our ability to improve our margins will depend primarily on our ability to manage our variable costs, including selling, general and administrative expense and costs per new subscriber. A particular focus of our 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, we launch service in a new market only after we believe that comprehensive and reliable coverage and service can be maintained in that market. In addition, we have designed our billing system to provide simple and understandable options to our subscribers and to permit subscribers to select a flexible billing cycle. We also focus 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 Our cost of services and equipment has consisted of, and we expect, will continue to consist of, the following: Equipment. We purchase personal communications handsets and accessories from third party vendors to resell to our customers for use in connection with our services. The cost of handsets has been, and is expected to remain, higher than the resale price to the customer. This cost is recorded as a cost of services and equipment. We do not manufacture any of this equipment. Roaming Fees. We pay fees to other wireless communications companies based on airtime usage of our customers on other communications networks. It is expected that reciprocal roaming rates charged between our company and other carriers will decrease. Variable Interconnect. We pay monthly charges associated with the connection of our network with other carriers' networks. These fees are based on minutes of use by our customers. This is known as interconnection. Variable Long Distance. We pay monthly usage charges to other communications companies for long distance service provided to our customers. These variable charges are based on our subscribers' usage, applied at pre-negotiated rates with the other carriers. Clearinghouse Fees. We pay fees to an independent clearinghouse for processing our call data records and performing monthly intercarrier financial settlements for all charges that we pay to other wireless companies when our customers use their network, and that other wireless companies pay to us when their customers use our network. These fees are based on the number of transactions processed in a month. Operating Expenses Our operating expenses have consisted of, and we expect will continue to consist of, the following costs: Technical Operations. Our 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. Our general and administrative expense includes customer service, billing, information technology, finance, accounting, human resources and legal services. Sales and Marketing. Our sales and marketing expense includes salaries and benefits, commissions, advertising and promotions, retail distribution, sales training, and direct and indirect support. Stock Based Compensation. We have issued a total of 12,362,380 shares of our Class A and Class C common stock to members of our 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 us valued at their fair value. Based on the average closing price of our common stock for the last ten trading days of 1999, we 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 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 our Class A common stock continues to have a fair value of approximately $28.50 per share on the measurement date, we 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 our 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. 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 our markets. PCS license costs are amortized over 40 years beginning as PCS service is commenced in each of our 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 our cash and cash equivalents and restricted cash. Interest expense through December 1999 consists of interest due on our senior credit facilities and debt owed to the U.S. government related to our 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. We launched commercial service in Jackson, Mississippi in September 1999 and launched commercial service in seven other major markets during the fourth quarter of 1999. We had not previously recognized any revenues. Revenues consist primarily of revenues derived from service to our customers, roaming services provided to customers of other carriers, and the sale of handsets and accessories. We ended 1999 with approximately 24,600 subscribers in eight major markets. Our ARPU including service and feature revenue as well as airtime and incollect roaming charges was $45 for the fourth quarter of 1999. We expect an increase in ARPU as we begin to target business customers, implement a national accounts program, focus on value added features and provide incentives to our sales force for selling higher priced rate plans. We anticipate strong growth in 2000 in revenue and subscribers as we continue to expand our operations in our licensed areas. We expect to launch substantially all of our remaining markets during 2000. We expect to begin offering SunCom service in two of our largest markets, Birmingham and Mobile, Alabama in the second quarter of 2000. We expect roaming revenues to increase during 2000 as we expand our coverage areas as well as complete our 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 our system. These costs are expected to increase in future periods as subscribers are added to the system and usage of our 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 our network, cell site lease expense, charges incurred to connect our network to other carriers and construction site office expenses. We expect that the majority of our 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 lease costs, network personnel and repair and maintenance. We expect these costs to increase in future periods as we expand our coverage areas, add additional subscribers and incur a full year of operational expenses. Our 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 our network in 1999, as well as costs related to our redefined employment agreement with Jerry M. Sullivan, Jr. totaling $5.8 million recorded in 1999. Effective September 1, 1999, we and Mr. Sullivan entered into an agreement to redefine Mr. Sullivan's relationship with us. Mr. Sullivan resigned as one of our 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 us nor will he perform any functions for us. 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 common stock and has returned all other shares held by him, including his Voting Preference common stock, to us. Accordingly, we 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. We expect general and administrative expenses to increase during 2000 as we continue to launch additional markets and provide customer support functions to a larger customer base. Our 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. We expect to incur significant selling and marketing costs during 2000 primarily related to sales commissions, ongoing advertising and promotions in our 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 our 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 we complete the construction of our network as well as recognize a full year of depreciation expense on our 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 our investment of the cash received from equity investors of $163.4 million, advances under our 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 our initial public offering of approximately $242.5 million. Our 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. 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 our bank credit facility and the FCC 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, we 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 which 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, we took advantage of a reconsideration order by the FCC allowing companies holding C-Block PCS licenses several options to restructure their license holdings and associated obligations. We 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, we 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 FCC by $33.0 million. As a result of the disaggregation election, we recognized an extraordinary loss in 1998 of approximately $2.4 million. Liquidity and Capital Resources The buildout of our network and the marketing and distribution of our products and services will require substantial capital. We currently estimate that our capital requirements for the period from inception through the end of 2001, assuming substantial completion of our network buildout, will total approximately $1.4 billion. We estimate those capital requirements will be met as follows: 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 ======== On January 7, 1999, we 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: o a $250 million reducing revolving credit facility maturing on June 30, 2007, o a $100 million term credit facility maturing on June 30, 2007, and o 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. We estimate 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 us, 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, we could have borrowed up to a total of approximately $550 million pursuant to the terms of the bank facility. See "Description of Certain Indebtedness--Bank Facility". On May 11, 1999, we 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. We 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. Our predecessor companies received preferential financing from the U.S. Government for the C and F-Block licenses, which they contributed to us in exchange for Series C Preferred Stock. As a result, we are 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 our affiliation with AT&T Wireless, we 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 we received $14.2 million of cash from Airwave Communications and Digital PCS. Non-cash equity consists of: o 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, o 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 o 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, the Series C Preferred Stock converted to Class A and Class D common stock. As stated previously, we currently estimate that our 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 our network buildout will total approximately $1.4 billion. We estimate those capital requirements will be applied as follows: 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 ======== We have 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. 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, radiofrequency engineering, cell site acquisition and construction, and microwave relocation. The actual funds required to build out our 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. We have incurred approximately $260.3 million in capital expenditures through December 31, 1999. We estimate 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. We incurred approximately $28.0 million in cash interest and fees during the year ended December 31, 1999. We estimate 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 our PCS network. We believe that the proceeds from the initial public offering completed in December 1999, together with the proceeds from our sale of senior subordinated discount notes, the financing made available to us by the FCC, borrowings under our bank credit facility and the equity investments we have received, will provide us with sufficient funds to build out our existing network as planned and fund operating losses until we complete our planned network buildout and generate positive cash flow. Our ability to meet our capital requirements without additional financing is subject to our ability to construct our network and obtain customers in accordance with our plans and assumptions and a number of other risks and uncertainties. The development of our network may not be completed as projected and we may not be able to generate positive cash flow. If any of our projections are incorrect, we may not be able to meet our projected capital requirements. 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 last quarter of 2000 and is a tax-free exchange of stock. The Company 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 Pops in Florida and southern Georgia. These markets include the cities of Pensacola, Tallahassee and Panama City, Florida. As part of our formation, we received from Digital PCS an option to purchase these licenses for approximately 1.2 million shares of our Class A common stock (reflecting the conversion of Series C Preferred Stock and the stock split of our Class A common stock in December 1999) and our assumption of approximately $12.0 million of FCC debt. In May 1999, we exercised this option, and the licenses will be transferred to us after FCC approval. As part of our arrangements with AT&T Wireless, we have committed to sell, to an entity in which AT&T Wireless has a non-attributable interest, these licenses for the assumption of all outstanding FCC debt on the licenses and cash in the amount equal to 110% of the sum of (i) the amount payable to the FCC in respect of the licenses minus the amount of FCC debt assumed, plus (ii) the aggregate amount of interest paid on the FCC debt by us and Digital PCS. Merger with TeleCorp PCS, Inc. On February 28, 2000, Tritel and TeleCorp PCS, Inc. announced the signing of a definitive agreement and plan of reorganization and contribution, called the Merger Agreement, for an all stock, tax-free merger, called the Merger. The Merger Agreement provides for the creation of a new entity to be called TeleCorp PCS, Inc. Tritel and TeleCorp will merge into subsidiaries of the new entity. Under the Merger Agreement, Tritel's Class A common stock will be converted into the right to receive 0.76 shares of the new entity's Class A common stock per share of Tritel Inc.'s common stock. This exchange ratio is fixed regardless of future stock price movement. The Merger has been unanimously approved by the Tritel and TeleCorp boards of directors, with three members of the TeleCorp board abstaining. Shareholders with an excess of 50% of the voting power of each company have entered into agreements to vote in favor of the Merger. The Merger is still subject to regulatory approval and other conditions. The new entity will continue to provide, as an AT&T Wireless affiliate, digital wireless service under the SunCom and AT&T brand names, giving equal emphasis to each. In terms of licensed Pops, the new entity will cover approximately 35 million Pops and will become one of the top ten wireless service providers in the U.S. The Merger creates a new contiguous service area that connects the middle of the country and plays a more strategic role for the AT&T Wireless Network. The new entity will have sixteen of the top 100 markets located in fourteen states and the Commonwealth of Puerto Rico. It is expected that the Merger will be completed in the last quarter of 2000. Pending License Acquisition On March 23, 1999, the FCC commenced a re-auction of the C-, D-, E-and F-Block licenses that had been returned to the FCC under an FCC restructuring order or that had been forfeited for noncompliance with FCC rules or for default under the related FCC financing. Before the re-auction, we 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 FCC 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 Pops, all of which are already covered by our 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. We have increased our loan to ABC Wireless to $7.8 million. Our purchase of licenses from ABC Wireless would be subject to, among other things, the consent of AT&T Wireless. As a result of the re-auction and our contractual rights to purchase from ABC Wireless PCS licenses, we could hold an attributable interest in Commercial Mobile Radio Service, or CMRS, spectrum in excess of 45 MHz in several cities in our markets. Current FCC rules limit PCS licensees and certain PCS investors in PCS licensees from having an attributable interest in more than 45 MHz of CMRS spectrum (or 55 MHz where there is an overlap between a PCS service area and rural cellular service area) in any given geographic area. In order to exceed the 45 MHz spectrum limit, we and certain investors, including AT&T, would have to obtain the consent of the FCC. There is no assurance that the FCC will give its consent and seeking such consent could delay the processing of the required applications to assign the licenses from ABC Wireless to us. We believe the FCC will approve the disaggregation of spectrum from the ABC Wireless licenses and transfer to us portions of the licenses so we will be in compliance with the CMRS spectrum cap rules. 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. We implemented a Year 2000 program to ensure that our computer systems and applications would function properly after 1999. We believe that we allocated adequate resources for this purpose and successfully completed our Year 2000 compliance program on a timely basis. We did not incur material expenses or meaningful delays as a result of the Year 2000 date change. To date, we have 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 ("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. We are 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, we will be required to adopt FAS 133 on January 1, 2001. Presently, we have not yet quantified the impact that the adoption will have on our consolidated financial statements. Quantitative and Qualitative Disclosure about Market Risk We are exposed to market risk from changes in interest rates that could impact results of operations. We manage interest rates through a combination of fixed and variable rate debt. We have 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 we had $300 million of Term A and Term B Notes under our 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 FCC, due in quarterly installments from 2003 to 2006; and $9.5 million of 6 1/8%, discounted to yield 10%, debt to the FCC, due in quarterly installments from 2000 to 2008. Our senior subordinated discount notes and FCC debt are fixed interest rate and as a result we are less sensitive to market rate fluctuations. However, our Term A and Term B Notes outstanding and other amounts available to us under our bank facility agreement are variable interest rate. Beginning in May 1999, we entered into interest rate swap agreements with notional amounts totaling $200 million to manage our interest rate risk under the bank facility. The swap 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 we achieve operating cash flow breakeven. Market risk, due to potential fluctuations in interest rates, is inherent in swap agreements. The following table provides information about our market risk exposure associated with changing interest rates on our fixed rate debt at maturity value of the debt (dollars in millions):
EXPECTED MATURITY ------------------------------------------------------------------- 1999 2000 2001 2002 2003 Thereafter Total ---- ---- ---- ---- ---- ---------- ----- Face value of long-term fixed -- $0.9 $1.0 $1.1 $9.7 $406.8 $419.5 rate debt Average interest rate -- 6.1% 6.1% 6.1% 6.9% 12.2% --
Collectively, our fixed rate debt has a carrying value of $258.6 million at December 31, 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. We are also exposed to the impact of interest rate changes on our 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. We are not exposed to fluctuations in currency exchange rates since our operations are entirely within the United States. Forward Looking Statements; Cautionary Statements Statements in this report expressing our expectations and beliefs of the Company regarding our future results or performance are forward-looking statements that involve a number of risks and uncertainties. In particular, certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations which are not historical facts constitute "forward-looking statements." Our actual future results may differ significantly from those stated in any forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, risks discussed in our Registration Statement on Form S-1 (Reg. No. 333-91207) and from time to time in our other filings with the Securities and Exchange Commission, including, without limitation, the following: (1) we depend on our agreements with AT&T for our success, and under certain circumstances AT&T could terminate its exclusive relationship with us and our use of the AT&T brand name and logo, (2) we may not be able to manage the construction of our network or the growth of our business successfully, (3) we have substantial existing debt, and may incur substantial additional debt, that we may be unable to service, (4) we may not be able to obtain the additional financing we may need to complete our network and fund operating losses, (5) we have many competitors that have substantial coverage of our licensed areas, (6) difficulties in obtaining infrastructure equipment or sites may affect our ability to construct our network and meet our development requirements, (7) potential acquisitions may require us to incur substantial additional debt and integrate new technologies, operations and services, which may be costly and time consuming, (8) we may experience a high rate of customer turnover, (9) our association with the other SunCom companies may harm our reputation if consumers react unfavorably to them, (10) we depend upon consultants and contractors for our network services, (11) we may become subject to new health and safety regulations, which may result in a decrease in demand for our services, (12) changes in our licenses or other governmental action or regulation could affect how we do business, (13) we could lose our PCS licenses or incur financial penalties if the FCC determines we are not a very small business or if we do not meet the FCC's minimum construction requirements, (14) the technologies that we use may become obsolete, which would limit our ability to compete effectively, and (15) we may incur operating costs due to fraud. In addition, new factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statements. As a result of the foregoing and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect our business, financial condition, operating results and stock price. We specifically decline any obligation to publicly release the result of any revisions that may be made to forward- looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statement. Item 8. Financial Statements and Supplementary Data Our financial statements, including our consolidated balance sheets as of December 31, 1998 and 1999 and consolidated statements of operations, consolidated statements of cash flows and consolidated statements of changes in members' and stockholders' equity for the years ended December 31, 1997, 1998 and 1999, together the report of KPMG LLP, dated February 18, 2000, except with respect to Note 21 which is as of February 28, 2000, and the Notes thereto are attached to this report as pages F-1 - F-32. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant Information relating to directors and director nominees and executive officers of the Registrant will be provided in the Proxy Statement of the Registrant for the Company's 2000 Annual Meeting of shareholders, which definitive proxy statement will be filed pursuant to Regulation 14A not later than 120 days following the Company's fiscal year ended December 31, 1999, and is incorporated herein by this reference. Item 11. Executive Compensation Information relating to executive compensation of the Registrant will be provided in the Proxy Statement of the Registrant for the Company's 2000 Annual Meeting of shareholders, which definitive proxy statement will be filed pursuant to Regulation 14A not later than 120 days following the Company's fiscal year ended December 31, 1999, and is incorporated herein by this reference. Item 12. Securities Ownership of Certain Beneficial Owners and Management Information relating to security ownership of certain beneficial owners and management of the Registrant will be provided in the Proxy Statement of the Registrant for the Company's 2000 Annual Meeting of shareholders, which definitive proxy statement will be filed pursuant to Regulation 14A not later than 120 days following the Company's fiscal year ended December 31, 1999, and is incorporated herein by this reference. Item 13. Certain Relationships and Related Transactions Information relating to certain relationships and related transactions of the Registrant is will be provided in the Proxy Statement of the Registrant for the Company's 2000 Annual Meeting of shareholders, which definitive proxy statement will be filed pursuant to Regulation 14A not later than 120 days following the Company's fiscal year ended December 31, 1999, and is incorporated herein by this reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Exhibit Number Exhibit Description 2.1 Agreement and Plan of Reorganization and Contribution, between Tritel, Inc., TeleCorp PCS, Inc. and AT&T Wireless Services, Inc., dated February 28, 2000. 3.1+ Restated Certificate of Incorporation of Tritel, Inc., dated January 4, 1999. 3.2++ Certificate of Amendment to Restated Certificate of Incorporation, dated December 9, 1999. 3.2+ Amended and Restated Bylaws of Tritel, Inc., dated December 9, 1999. 10.1.1+ Stockholders' Agreement by and among AT&T Wireless PCS Inc., Cash Equity Investors, Management Stockholders, and Tritel, Inc. dated January 7, 1999. 10.1.2+ First Amendment to Stockholders' Agreement, dated August 27, 1999. 10.1.3+ Second Amendment to Stockholders' Agreement, dated as of September 1, 1999. 10.1.4++ Third Amendment to Stockholders' Agreement, dated November 18, 1999. 10.1.5++ Fourth Amendment to Stockholders' Agreement, dated December 10, 1999. 10.2+ 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. 10.3+ AT&T Wireless Services Network Membership License Agreement between AT&T Corp. and Tritel, Inc. dated January 7, 1999. 10.4+ Intercarrier Roamer Service Agreement between AT&T Wireless Services, Inc. and Tritel, Inc. dated January 7, 1999. 10.5+ 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. 10.6+ Form of Employment Agreement. 10.7++ Tritel, Inc. Amended and Restated 1999 Stock Option Plan, effective January 7, 1999. 10.8+ Form of Restricted Stock Agreements pursuant to the Tritel, Inc. Amended and Restated 1999 Stock Option Plan. 10.9++ Tritel, Inc. Amended and Restated 1999 Stock Option Plan for Nonemployee Directors, effective January 7, 1999. 10.10+ 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. 10.11+ 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. 10.12+ Master Lease Agreement between Tritel Communications, Inc. and Crown Communication Inc. dated October 30, 1998. 10.13+ Master Lease Agreement between Signal One, LLC and Tritel Communications, Inc. dated December 31, 1998. 10.14.1+ Management Agreement between Tritel Management, LLC and Tritel, Inc. dated January 1, 1999. 10.14.2+ First Amendment to Management Agreement, dated as of September 1, 1999. 10.15+ Master Antenna Site Lease No. D41 between Pinnacle Towers Inc. and Tritel Communications, Inc. dated October 23, 1998. 10.16+ 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. 10.17+ 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. 10.18+ Services Agreement by and between Tritel Communications, Inc. and Wireless Facilities, Inc., dated July 1, 1999. 10.19+ 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 FCC licenses owned or to be acquired by Tritel. 10.20.1+ 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. 10.20.2+ Addendum to June 1, 1998 Services Agreement, dated as of March 23, 1999. 10.21+ 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. 10.22+ Agreement by and between BellSouth Telecommunications, Inc. and Tritel Communications, Inc., effective as of March 16, 1999. 10.23+ Agreement for Project and Construction Management Services between Tritel Communications, Inc. and Tritel Finance, Inc. and Bechtel Corporation, dated November 24, 1998. 10.24+ Services Agreement by and between Tritel Communications, Inc. and SpectraSite Communications, Inc., dated as of July 28, 1998. 10.25+ 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. 10.26+ Securities Purchase Agreement by and among AT&T Wireless PCS Inc., TWR Cellular, Inc., Cash Equity Investors, Mercury PCS, LLC, Mercury PCS II, LLC, Management Stockholders and Tritel, Inc., dated as of May 20, 1998. 10.27+ Closing Agreement by and among AT&T Wireless PCS, Inc., TWR Cellular, Inc., Cash Equity Investors, Airwave Communications, LLC, Digital PCS, LLC, Management Stockholders, Mercury Investor Indemnitors and Tritel, Inc., dated as of January 7, 1999. 10.28+ Master Build To Suit And Lease Agreement between Tritel Communications, Inc., a Delaware corporation and American Tower, L.P., a Delaware limited partnership. 10.29+ Master Build To Suit And Lease Agreement between Tritel Communications, Inc. and SpectraSite Communications, Inc. 10.30+ Master Build To Suit Services And License Agreement between Tritel Communications, Inc. and Crown Communication Inc. 10.31+ Master Build To Suit And Lease Agreement by and between Tritel Communications, Inc. and SBA Towers, Inc. 10.32+ Master Site Agreement between Tritel Communications, Inc. and BellSouth Mobility Inc., dated July 2, 1999. 10.33+ Master Site Agreement between Tritel Communications, Inc. and BellSouth Mobility PCS, dated March 10, 1999. 10.34+ Consent to Exercise of Option between Tritel, Inc., AT&T Wireless PCS, Inc., TWR Cellular, Inc. and Management Stockholders dated May 20, 1999. 10.35+ License Purchase Agreement between Digital PCS, LLC and Tritel, Inc. dated as of May 20, 1999. 10.36+ Amended and Restated Employment Agreement of Jerry M. Sullivan, Jr., dated as of September 1, 1999. 10.37+ Stock Purchase Agreement between Jerry M. Sullivan, Jr. and Tritel, Inc., dated as of September 1, 1999. 10.38+ Mutual Release and Termination Agreement between Jerry M. Sullivan, Jr. and Tritel, Inc., dated as of September 1, 1999. 21+ Subsidiaries of Tritel, Inc. 23.1 Consent of KPMG LLP. 27 Financial Data Schedule. - ------------------------------------------------------------------------------------------------------------------- + Incorporated by reference to the Registration Statement on Form S-4 (File No. 333-82509) of Tritel PCS, Inc. ++ Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-91207) of Tritel, Inc.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Tritel, Inc. ------------ (Registrant) Date: March 28, 2000 By: /s/ E.B. Martin, Jr. --------------------- E.B. Martin, Jr. Executive Vice President, Treasurer, Chief Financial Officer and Director By: /s/ Karlen Turbeville --------------------- Karlen Turbeville Senior Vice President of Finance (Principal Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ William M. Mounger, II Chief Executive Officer and Director March 28, 2000 __________________________ William M. Mounger, II /s/ William S. Arnett President and Director March 28, 2000 __________________________ William S. Arnett /s/ E.B. Martin, Jr. Executive Vice President, Treasurer, Chief March 28, 2000 __________________________ E.B. Martin, Jr. Financial Officer and Director /s/ Scott Anderson Director March 28, 2000 __________________________ Scott Anderson /s/ Alexander P. Coleman Director March 28, 2000 __________________________ Alexander P. Coleman /s/ Gary S. Fuqua Director March 28, 2000 __________________________ Gary S. Fuqua /s/ Ann K. Hall Director March 28, 2000 __________________________ Ann K. Hall /s/ Andrew Hubregsen Director March 28, 2000 __________________________ Andrew Hubregsen /s/ David A. Jones, Jr. Director March 28, 2000 __________________________ David A. Jones, Jr. /s/ H. Lee Maschmann Director March 28, 2000 __________________________ H. Lee Maschmann /s/ Elizabeth Nichols Director March 28, 2000 __________________________ Elizabeth Nichols /s/ Kevin J. Shepherd Director March 28, 2000 __________________________ Kevin J. Shepherd
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. Jackson, Mississippi KPMG LLP February 18, 2000, except with respect to Note 21 which is as of February 28, 2000 TRITEL, INC. CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1999 (amounts in thousands, except share data)
December 31, Assets 1998 1999 ---- ---- 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 FCC 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
See accompanying notes to consolidated financial statements. TRITEL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 1997, 1998 and 1999 (amounts in thousands, except per share data)
Years Ended December 31, 1997 1998 1999 ---- ---- ---- 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) ========
See accompanying notes to consolidated financial statements. TRITEL, INC. CONSOLIDATED STATEMENTS OF MEMBERS' AND STOCKHOLDERS' EQUITY For the Years Ended December 31, 1997, 1998 and 1999 (amounts in thousands)
Additional Members' and Preferred Common Contributed Paid in Accumulated Stockholders' Stock Stock Capital Capital Deficit Equity ----- ----- ------- ------- ------- ------ 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 ========== ========= ========= ========= ========== ========
See accompanying notes to consolidated financial statements. TRITEL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1997, 1998 and 1999 (amounts in thousands)
Years Ended December 31, 1997 1998 1999 ---- ---- ---- 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 FCC licenses (3,935) -- -- Refund of FCC deposit 1,376 -- -- Advance under notes receivable -- -- (7,550) Capitalized interest on network construction and FCC 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 ============== =============== ==============
See accompanying notes to consolidated financial statements. TRITEL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Consolidated) TRITEL, INC. 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. 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. FCC 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 FCC 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 FCC licensing costs at December 31, 1999 was $597,000. The Company evaluates the propriety of the carrying amounts of its FCC 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 FCC 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 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 FCC 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. Weighted average common shares used for the purpose of calculating net loss per share for 1999 was 7,710,649. 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, we began commercial operations in certain of our markets late in 1999 and, therefore, have limited revenues to fund expenditures. We expect to grow rapidly while we develop and construct our PCS network and build our customer base. We expect this growth to strain our 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 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 us by the FCC, borrowings under our bank credit facility and the equity investment we have received, will provide us with sufficient funds to build out our existing network as planned and fund operating losses until we complete our 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: December 31, 1998 1999 ---- ---- (dollars in thousands) 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 ========= ======== (4) FCC LICENSING COSTS During 1996 and 1997, the FCC 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 FCC 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 FCC 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 FCC 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 FCC. 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 FCC 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 FCC. (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. 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 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 radiotelephone 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 FCC licenses that were returned to the FCC 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 to purchase these licenses for $7,789,000 and expects to consummate that purchase during 2000. 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 FCC, the FCC licenses awarded in the re-auction, and ranks pari passu with the notes to AT&T Wireless and Lafayette. (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: For the Year Ended December 31, 1999 ----------------------------------------- Current Deferred Total ------- -------- ----- (dollars in thousands) Federal $ - $(24,725) $(24,725) State - (3,718) (3,718) ------ --------- --------- Total $ - $(28,443) $(28,443) ======= ========= ========= Actual tax benefit differs from the "expected" tax benefit using the federal corporate rate of 35% as follows: December 31, 1999 ----------------------- (dollars in thousands) 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 (2,496) benefit Other (48) ------------ $(28,443) The tax effects of temporary differences that give rise to significant portions of the deferred tax liability at December 31, 1999 are as follows: December 31, 1999 --------------------- (dollars in thousands) 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 ------ Deferred tax liabilities: Intangible assets book basis in excess of tax basis 22,646 FCC licenses book basis in excess of tax basis 32,245 Capitalized interest book basis in excess of tax 12,779 basis Discount accretion book basis in excess of tax basis 2,130 ------ Total gross deferred tax liabilities 69,800 ------ Net deferred tax liability $25,705 ======= 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: December 31, -------------------------- 1998 1999 ---- ---- (dollars in thousands) Bank facility $ - $300,000 Senior Subordinated Discount Notes - 216,734 FCC debt 51,599 41,905 ----------- --------- 51,599 558,639 Less current maturities - (923) ----------- --------- $51,599 $557,716 =========== ========= 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 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 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. FCC Debt The FCC 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 FCC 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 FCC permitted such spectrum to be returned effective as of the original purchase. As a result, the Company reduced the discounted debt due to the FCC 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 FCC for the licenses acquired. Additionally, certain licenses and the related FCC 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 FCC debt were suspended for the period from January 1997 through March 1998 by the FCC. 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 FCC 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 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 FCC 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: December 31, 1999 ---------------------------- (dollars in thousands) 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 ======== (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. (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: o the Series B Preferred Stock is redeemable at any time at the option of Tritel, o the Series B Preferred Stock is not convertible into shares of any other security issued by Tritel, and o 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: o 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); o 300,000 shares designated "Series B Preferred Stock" (the "Series B Preferred Stock"), 10% cumulative, $1,000 stated and liquidation value (See Note 10); o 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 o 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. 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: o 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; o 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: o the holders of Series D Preferred Stock do not have any voting rights, other than those required by law or in certain circumstances; and o 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: o 500,000,000 shares designated "Class A Voting Common Stock" (the "Class A Common Stock"), o 500,000,000 shares designated "Class B Non-Voting Common Stock" (the "Class B Common Stock"), o 4,000,000 shares designated "Class C Common Stock" (the "Class C Common Stock"), o 12,000,000 shares designated "Class D Common Stock" (the "Class D Common Stock") and o 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: o dividends on the Tracked Common Stock track the assets and liabilities of Tritel C/F Holding Corp., a subsidiary of Tritel; o 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.; o 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; o in the event the FCC 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 FCC 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; o 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; o 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; o 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 o in the event the FCC 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. 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 our Class A common stock continues to have a fair value of approximately $28.50 per share on the measurement date, we 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 our 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 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): 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% The weighted average fair value of options granted during 1999 was $8.52 per share. At December 31, 1999, 9,000 options were exercisable. The following table summarizes information about stock options outstanding at December 31, 1999: Exercise Number of Remaining Price Options Outstanding Contractual Life ----- ------------------- ---------------- $18.00 2,119,572 10 years 31.69 6,850 10 years (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 FCC 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 FCC licenses and related FCC 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 FCC. Tritel has committed to sell to AT&T Wireless or its designee such licenses. (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: (dollars in thousands) 2000 $13,940 2001 13,846 2002 13,731 2003 13,239 2004 8,955 Thereafter 8,881 ------ Total $72,592 ====== (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. (18) QUARTERLY FINANCIAL DATA (UNAUDITED) Selected unaudited quarterly financial data is as follows:
(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 ---- ---- ---- ---- ---- ---- ---- ---- 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)
(19) SUPPLEMENTAL CASH FLOW INFORMATION
Years Ended December 31, ------------------------------ 1997 1998 1999 ---- ---- ---- (dollars in thousands) Cash paid for interest, net of amounts capitalized $ - $ - $ 14,362 Significant non-cash investing and financing activities: Long-term debt incurred to obtain FCC licenses, net of discount 23,116 - - Capitalized interest and discount on debt 6,799 7,614 10,062 Deposits applied to purchase of FCC licenses 5,000 - - Capital expenditures included in accounts payable - 5,762 81,913 Election of FCC disaggregation option for return of spectrum: Reduction in FCC licensing costs - 35,442 - Reduction in accrued interest payable and long-term - 33,028 - debt Preferred stock issued in exchange for assets and - - 156,837 liabilities
(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 Tritel PCS, Guarantor NonGuarantor Consolidated (dollars in thousands) Tritel, Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc. ---------------------------------------------------------------------------------------- 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 $ 29 1,240 111,257 1,721 - 114,247 other current liabilities 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 22,009 5,318 (20,024) 30,251 (187) 37,367 other ============================================================================================ 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 $ 509,070 968,592 275,121 201,946 (758,367) 1,196,362 equity ============================================================================================ ============================================================================================
Condensed Consolidating Statement of Operations For the Year Ended December 31, 1999 Tritel PCS, Guarantor NonGuarantor Consolidated (dollars in thousands) Tritel, Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc. ---------------------------------------------------------------------------------------- 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 (196,170) (8,416) (71,749) 438 - (275,897) taxes Income tax benefit (expense) 2,051 3,135 23,420 (163) - 28,443 ============================================================================================ Net loss $ (194,119) (5,281) (48,329) 275 - (247,454) ============================================================================================ ============================================================================================
Condensed Consolidating Statement of Cash Flows For the Year Ended December 31, 1999 Tritel PCS, Guarantor NonGuarantor Consolidated (dollars in thousands) Tritel, Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc. ---------------------------------------------------------------------------------------- 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 - 200,240 - - - 200,240 subordinated debt Repayments of notes payable (22,100) - - - - (22,100) Payment of debt issuance costs and other deferred (8,507) (30,202) - - - (38,709) charges Intercompany 4,556 (236,928) 222,612 9,760 - - receivable/payable 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 ============================================================================================
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. Combining Balance Sheet As of December 31, 1998 Predecessor Companies Tritel Eliminations Combined ------------------------------------------------------------- (dollars in thousands) 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 FCC 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' $89,043 $1,554 $(1,576) $89,021 equity (deficit) ============== =========== ============ ============
Combining Statement of Operations For the Year Ended December 31, 1998 Predecessor Companies Tritel Combined ----------------------------------------------------------- (dollars in thousands) 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) ================== =========== ================
Combining Statement of Cash Flows For the Year Ended December 31, 1998 Predecessor Companies Tritel Combined ------------------------------------------------ (dollars in thousands) 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 FCC 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 ================ ========= =============
Tritel, Inc. was formed during 1998. Therefore, the 1997 combining financial information is identical to the Consolidated Financial Statements. (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. EX-2.1 2 T:\EDGAR\ZAINO\681135.TXT Exhibit 2.1 EXECUTION COPY ============================================================================== 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 ============================================================================= 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 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 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 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 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 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 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 (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 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 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. 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); (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 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; (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 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 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 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. (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 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. (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. 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 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 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 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 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 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. 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 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 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 (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 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 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. 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, 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 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 (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. 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. 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 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 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, 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 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 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, 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, 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. 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 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 (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 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 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, 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 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 (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 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. (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 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. 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, 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 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. (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, 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. 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 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. 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 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 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 (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 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 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. 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 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 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. 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. (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 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 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 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 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 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 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 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. 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 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 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. (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 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 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"). (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 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. 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 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. 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 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. 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 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 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: (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 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; (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 $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). (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 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 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 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; (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 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 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 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 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 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 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 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 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 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 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 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. 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 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 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. (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 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). 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 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. (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 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 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 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 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. (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 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. (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; (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 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 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. 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. 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 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 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, 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, 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 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 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 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. [Intentionally Left Blank] 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:_____________________ 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 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) 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) 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) 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 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) 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) Waiver........................................................6.17(b) WARN Act......................................................3.16 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 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 of Voting Director 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. 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. EX-23.1 3 T:\EDGAR\ZAINO\682947.TXT Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors Tritel, Inc.: We consent to incorporation by reference in the registration statements (No. 333-92739 and No. 333-92727) on Forms S-8 of Tritel, Inc. of our report dated February 18, 2000, relating to the consolidated balance sheets of Tritel, Inc. and subsidiaries as of December 31, 1999, and 1998, 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, which report appears in the December 31, 1999, annual report on Form 10-K of Tritel, Inc. /s/ KPMG LLP Jackson, Mississippi March 29, 2000 EX-27 4 FDS --
5 0001088383 Tritel, Inc. 12-MOS DEC-31-1999 DEC-31-1999 609,269 0 7,647 (42) 8,957 630,564 269,177 (6,834) 1,196,362 114,247 557,716 99,586 46,374 1,071 340,001 1,196,362 6,759 6,759 6,966 6,966 265,239 42 (10,409) (275,897) (28,443) (247,454) 0 0 0 (247,454) (33.25) (33.25)
-----END PRIVACY-ENHANCED MESSAGE-----