AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 28, 2001
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AT&T WIRELESS SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 91-1379052
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
------------------------
7277 164TH AVENUE, NE
REDMOND, WA 98052
(425) 580-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GREGORY P. LANDIS, ESQ.
EXECUTIVE VICE PRESIDENT & GENERAL COUNSEL
AT&T WIRELESS SERVICES, INC.
7277 164TH AVENUE, NE
REDMOND, WA 98052
(425) 580-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
STEVEN A. ROSENBLUM GREGG S. LERNER BRIAN HOFFMANN
WACHTELL, LIPTON, ROSEN & KATZ FRIEDMAN KAPLAN SEILER ADELMAN LLP CADWALADER, WICKERSHAM & TAFT
51 WEST 52ND STREET 875 THIRD AVENUE 100 MAIDEN LANE
NEW YORK, NY 10019 NEW YORK, NY 10022 NEW YORK, NY 10038
(212) 403-1000 (212) 833-1100 (212) 504-6000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective time of this Registration Statement and all
other conditions to the merger pursuant to the merger agreement described in the
enclosed proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
(continued on next page)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(continued from previous page)
CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01 per
share................................. 194,622,786(1) (2) $2,814,590,565(3) $758,936
Series C Preferred Stock................ 210,608.43 $215,780,863(4)
Series E Preferred Stock................ 25,428.57 $5,372,187(5)
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
(1) The number of shares registered represents the estimated number of shares of
AT&T Wireless Services, Inc. ("AT&T Wireless") common stock to be issued in
the merger described in this Registration Statement (the "Merger"), based
upon (i) the exchange ratio of 0.9 applicable to the exchange of shares of
TeleCorp PCS, Inc. ("TeleCorp") common stock, par value $0.01 per share,
TeleCorp Series F Preferred Stock, par value $0.01 per share, and TeleCorp
Series G Preferred Stock, par value $0.01 per share (based on 195,961,323.11
such shares outstanding on October 31, 2001 and 1,596,181 such shares
issuable pursuant to the exercise of options), (ii) the exchange ratio of
82.9849 applicable to the exchange of shares of TeleCorp Series A
Convertible Preferred Stock, par value $0.01 per share (based on 97,472.84
such shares outstanding on October 31, 2001), (iii) the exchange ratio of
81.2439 applicable to the exchange of shares of TeleCorp Series B Preferred
Stock, par value $0.01 per share (based on 90,668.33 such shares outstanding
on October 31, 2001), and (iv) the exchange ratio of 27.6425 applicable to
the exchange of shares of TeleCorp Series D Preferred Stock, par value $0.01
per share (based on 49,416.98 such shares outstanding on October 31, 2001).
(2) Not Applicable.
(3) Estimated solely for the purpose of calculating the registration fee. The
registration fee was computed pursuant to Rules 457(c), 457(f)(1) and
457(f)(2) promulgated under the Securities Act of 1933, as amended, by
calculating the sum of (a) $2,285,523,295.83 the product of (1) $12.71, the
average of the high and low prices of the TeleCorp Class A Voting Common
Stock, par value $0.01 per share, on the Nasdaq National Market on November
23, 2001, 2001, as reported in published financial sources (the "Market
Price") and (2) 179,820,873, the total number of outstanding shares of
TeleCorp Class A Voting Common Stock, par value $0.01 per share, expected to
be canceled in the Merger, (b) $205,145,120.90, the product of the Market
Price and 16,140,450.11, the total number of outstanding shares of TeleCorp
Class C Common Stock, par value $0.01 per share, Class D Common Stock, par
value $0.01 per share, Class E Common Stock, par value $0.01 per share,
Class F Common Stock, par value $0.01 per share, Voting Preference Common
Stock, par value $0.01 per share, Series F Preferred Stock, par value $0.01
per share, and Series G Preferred Stock, par value $0.01 per share (all
shares of which classes and series are deemed to be equivalent to shares of
TeleCorp Class A Voting Common Stock and are being converted at the same
exchange ratio of 0.9 in the Merger), expected to be canceled in the Merger,
(c) $20,287,460.51, the product of the Market Price and 1,596,181, the total
number of outstanding options to purchase TeleCorp Class A Common Stock, par
value $0.01 per share, expected to be canceled in the Merger, (d)
$130,144,816.90, the aggregate book value of all outstanding shares of
TeleCorp Series A Convertible Preferred Stock, par value $0.01 per share,
expected to be canceled in the Merger, (e) $118,525,747.66, the aggregate
book value of all outstanding shares of TeleCorp Series B Preferred Stock,
par value $0.01 per share, expected to be canceled in the Merger, and (f)
$54,964,122.61, the aggregate book value of all outstanding shares of
TeleCorp Series D Preferred Stock, par value $0.01 per share, expected to be
canceled in the Merger. In each case in which the aggregate book value was
used, the aggregate book value was computed as of September 30, 2001, the
latest practicable date prior to the date of the filing of the registration
statement.
(4) Estimated solely for purposes of calculating the registration fee. The
registration fee was computed pursuant to Rule 457(f)(2) under the
Securities Act on the basis of $215,780,862.82, the aggregate book value of
all outstanding shares of TeleCorp Series C Preferred Stock on September 30,
2001, the latest practicable date prior to the date of the filing of the
registration statement.
(5) Estimated solely for purposes of calculating the registration fee. The
registration fee was computed pursuant to Rule 457(f)(2) under the
Securities Act on the basis of $5,372,186.82, the aggregate book value of
all outstanding shares of TeleCorp Series E Preferred Stock on September 30,
2001, the latest practicable date prior to the date of the filing of the
registration statement.
The information in this proxy statement/prospectus is not complete and may
be changed. We may not sell the securities until the registration statement
filed with the Securities and Exchange Commission is effective. This proxy
statement/prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
PROSPECTUS -- SUBJECT TO COMPLETION -- DATED NOVEMBER 28, 2001
[TELECORP LOGO]
Dear Stockholders:
TeleCorp PCS, Inc., AT&T Wireless Services, Inc. and a wholly owned
subsidiary of AT&T Wireless have entered into a merger agreement under which
AT&T Wireless will acquire the capital stock of TeleCorp that it does not
currently own. We are proposing the merger because we believe the merger will
benefit the stockholders of TeleCorp, and we ask for your support in voting for
the merger proposal at our special meeting. The special meeting will be held on
[ ], 2002 at [ ].
If the merger is completed, TeleCorp will become a wholly owned subsidiary
of AT&T Wireless and:
- each share of TeleCorp common stock will be converted into the right to
receive 0.9 of a share of AT&T Wireless common stock; and
- each share of TeleCorp series C and series E preferred stock will be
converted into the right to receive a share of AT&T Wireless preferred
stock that is substantially identical to the TeleCorp preferred share.
The AT&T Wireless common stock issued in exchange for shares of TeleCorp
stock will be authorized for listing on the New York Stock Exchange upon
official notice of issuance under the ticker symbol "AWE."
THE BOARD OF DIRECTORS OF TELECORP (WITH TWO DIRECTORS DISSENTING AND
WITHOUT THE PARTICIPATION OF THE THREE DIRECTORS AFFILIATED WITH AT&T WIRELESS)
HAS APPROVED THE MERGER AND RECOMMENDS THAT OUR STOCKHOLDERS VOTE "FOR" THE
MERGER AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. Information
about the merger is contained in the accompanying proxy statement/prospectus. WE
URGE YOU TO READ THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS CAREFULLY,
INCLUDING THE SECTION DESCRIBING RISK FACTORS THAT BEGINS ON PAGE 14.
Your vote is very important. To be certain that your shares are voted at
the special meeting, please sign, date and return the enclosed proxy card as
soon as possible, whether or not you plan to attend the special meeting in
person.
I strongly support this combination of our companies and join with the
majority of the board of directors in enthusiastically recommending that you
vote in favor of the merger.
Very truly yours,
GERALD T. VENTO
Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN
CONNECTION WITH THE MERGER OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated [ ], 2001, and is first
being mailed to stockholders on or about [ ], 200[].
TELECORP PCS, INC.
1010 N. GLEBE ROAD, SUITE 800
ARLINGTON, VIRGINIA 22201
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
[ ], 2002
AT [ ] A.M.
To the Stockholders of TeleCorp:
Notice is hereby given that a special meeting of stockholders of TeleCorp
PCS, Inc. will be held on [ ], 2002 at [ ] a.m.,
local time, at [ ], for the following purposes:
1. To consider and vote upon a proposal to adopt an Agreement and Plan
of Merger, dated as of October 7, 2001, among TeleCorp, AT&T Wireless
Services, Inc. and TL Acquisition Corp., a direct wholly owned subsidiary
of AT&T Wireless. Adoption of the merger agreement will also constitute
approval of the merger and the other transactions contemplated by the
merger agreement. Under the merger agreement, TeleCorp will become a wholly
owned subsidiary of AT&T Wireless and:
- each issued and outstanding share of TeleCorp common stock will be
converted into and become exchangeable for 0.9 of a share of AT&T
Wireless common stock;
- each issued and outstanding share of TeleCorp series C and E preferred
stock will be converted into the right to receive one share of AT&T
Wireless preferred stock that is substantially identical to the
TeleCorp preferred share;
- each issued and outstanding share of TeleCorp series A convertible
preferred stock will be converted into the right to receive 82.9849
shares of AT&T Wireless common stock;
- each issued and outstanding share of TeleCorp series B preferred stock
will be converted into the right to receive 81.2439 shares of AT&T
Wireless common stock;
- each issued and outstanding share of TeleCorp series D preferred stock
will be converted into the right to receive 27.6425 shares of AT&T
Wireless common stock; and
- each issued and outstanding share of TeleCorp series F and G preferred
stock will be converted into the right to receive 0.9 of a share of
AT&T Wireless common stock.
2. To transact any other business as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
The board of directors of TeleCorp recommends that you vote "FOR" the
approval of the merger.
Only stockholders of record at the close of business on [ ],
200[ ] will be entitled to vote at the TeleCorp special meeting and any
adjournment or postponement thereof. Your vote is very important. Whether or not
you plan to attend the special meeting, please complete, sign and date the
enclosed proxy card and return it promptly in the enclosed postage-paid
envelope. You can also vote in person at the special meeting.
By order of the Board of Directors of
TeleCorp PCS, Inc.
THOMAS H. SULLIVAN
Executive Vice President and
Chief Financial Officer
Arlington, Virginia
[ ], 200[ ]
Whether or not you plan to attend the special meeting in person, you are
urged to read the attached proxy statement/prospectus carefully and then sign,
date and return the enclosed proxy card in the enclosed postage-paid envelope by
following the instructions on the enclosed proxy card. If you later desire to
revoke your proxy for any reason, you may do so in the manner set forth in the
attached proxy statement/prospectus.
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about AT&T Wireless and TeleCorp from other documents
filed with the Securities and Exchange Commission that are not included in or
delivered with this proxy statement/prospectus. This information is available to
you without charge upon your written or oral request. You can obtain the
documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate company at one
of the following addresses:
AT&T WIRELESS SERVICES, INC. TELECORP PCS, INC.
7277 164th Avenue NE, Building 1 1010 N. Glebe Road, Suite 800
Redmond, WA 98052 Arlington, VA 22201
(425) 580-6000 (703) 236-1100
Attn: Corporate Secretary Attn: Investor Relations
IF YOU WOULD LIKE TO REQUEST ANY DOCUMENTS, PLEASE DO SO BY [ ],
200[ ], IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
In addition, if you have questions about the merger you may contact:
Georgeson Shareholder Communications Inc.
111 Commerce Road
Carlstadt, NJ 07072
1-866-884-5922
i
WHERE YOU CAN FIND MORE INFORMATION
AT&T Wireless has filed with the Securities and Exchange Commission, which
we refer to as the "SEC," a registration statement on Form S-4 under the
Securities Act of 1933 that registers the shares of AT&T Wireless common stock
and preferred stock to be issued to TeleCorp stockholders under the terms of the
merger agreement. This proxy statement/prospectus forms a part of that
registration statement and constitutes a prospectus of AT&T Wireless in addition
to being a proxy statement of TeleCorp for the special meeting. The registration
statement, including the exhibits and schedules to the registration statement,
contains additional relevant information about AT&T Wireless and the AT&T
Wireless common stock and preferred stock. The rules and regulations of the SEC
allow AT&T Wireless to omit some of the information included in the registration
statement and the exhibits and schedules to the registration statement from this
proxy statement/prospectus.
In addition, AT&T Wireless and TeleCorp each file annual, quarterly and
current reports, prospectuses and other information with the SEC.
You may also read and copy this information at the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Further
information on the operation of the SEC's Public Reference Room in Washington,
D.C. can be obtained by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an internet world wide website that contains annual,
quarterly and current reports, proxy statements and other information about
issuers, including AT&T Wireless and TeleCorp, who file electronically with the
SEC. The address of that site is http://www.sec.gov.
AT&T Wireless common stock is listed on the New York Stock Exchange, and
TeleCorp class A voting common stock is quoted on the Nasdaq National Market.
You may inspect annual, quarterly and current reports, proxy statements and
other information about AT&T Wireless at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, NY 10005, and about TeleCorp at the
offices of the National Association of Securities Dealers Inc., 9801
Washingtonian Boulevard, Gaithersburg, MD 20878 (5th Floor).
The SEC allows AT&T Wireless and TeleCorp to "incorporate by reference"
information in this proxy statement/prospectus. This means that AT&T Wireless
can disclose important business, financial and other information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information in
this proxy statement/prospectus. This proxy statement/prospectus incorporates by
reference the documents set forth below that each of AT&T Wireless and TeleCorp
has previously filed with the SEC. These documents contain important information
about AT&T Wireless and TeleCorp and their finances.
This information is available to you without charge upon your written or
oral request. You can obtain documents incorporated by reference in this proxy
statement/prospectus, other than exhibits to a filing unless the exhibit is
specifically incorporated by reference into the filing, by requesting them in
writing or by telephone from the appropriate company at the following contact
information:
AT&T WIRELESS SERVICES, INC. TELECORP PCS, INC.
7277 164th Avenue NE, Building 1 1010 N. Glebe Road, Suite 800
Redmond, WA 98052 Arlington, VA 22201
(425) 580-6000 (703) 236-1100
Attn: Corporate Secretary Attn: Investor Relations
In addition to the incorporation by reference of documents previously filed
by AT&T Wireless and TeleCorp with the SEC, each of AT&T Wireless and TeleCorp
also incorporates by reference additional documents that it may file with the
SEC between the date of this proxy statement/prospectus and the date of the
special meeting. These documents include periodic reports, including, for
example, annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K, as well as proxy statements.
ii
This proxy statement/prospectus incorporates by reference the documents
listed below that AT&T Wireless and TeleCorp have previously filed with the SEC.
They contain important information about our companies and their financial
condition.
AT&T WIRELESS SEC FILINGS (FILE NO. 001-16567) PERIOD OR DATE FILED
---------------------------------------------- --------------------
Quarterly Reports on Form 10-Q Quarters ended June 30, 2001 and
September 30, 2001
Amendment No. 4 to the Registration Statement Filed on July 6, 2001
on Form S-1 (including the prospectus filed
on July 9, 2001 and deemed pursuant to Rule
430A to be part of the Registration
Statement)
The description of AT&T Wireless common stock Filed on June 26, 2001
contained in the registration statement on
Form 8-A
Current Report on Form 8-K Filed on October 12, 2001
TELECORP SEC FILINGS (FILE NO. 000-31941) PERIOD OR DATE FILED
----------------------------------------- --------------------
Annual Report on Form 10-K Year ended December 31, 2000
Quarterly Reports on Form 10-Q Quarters ended March 31, 2001, June 30,
2001 and September 30, 2001
Proxy Statement For TeleCorp's annual meeting held on
May 23, 2001
The description of TeleCorp class A Filed on November 11, 2000
voting common stock contained in the
registration statement on Form 8-A
Current Reports on Form 8-K Filed on:
- January 17, 2001
- January 19, 2001
- January 22, 2001
- March 15, 2001
- April 4, 2001
- April 30, 2001
- October 10, 2001
- October 11, 2001
- October 26, 2001
- November 28, 2001
Any information contained in an incorporated document will be deemed to be
modified or superseded for purposes of this proxy statement/prospectus to the
extent that information contained in this proxy statement/prospectus or in any
other subsequently filed incorporated document modifies or supersedes that
information. Any information that is modified or superseded will not be deemed,
except as modified or superseded, to constitute a part of this proxy
statement/prospectus.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. NEITHER AT&T
WIRELESS NOR TELECORP HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT FROM OR IN ADDITION TO WHAT IS CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS DATED [ ]. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE,
AND NEITHER THE MAILING OF THE PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS OF
TELECORP NOR THE ISSUANCE OF AT&T WIRELESS COMMON STOCK IN THE MERGER SHALL
CREATE ANY IMPLICATION TO THE CONTRARY.
AT&T WIRELESS HAS SUPPLIED ALL INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS RELATING TO AT&T WIRELESS, AND
TELECORP HAS SUPPLIED ALL INFORMATION RELATING TO TELECORP.
iii
TABLE OF CONTENTS
PAGE
----
ADDITIONAL INFORMATION...................................... i
WHERE YOU CAN FIND MORE INFORMATION......................... ii
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 2
RISK FACTORS................................................ 14
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 25
THE COMPANIES............................................... 27
THE TELECORP SPECIAL MEETING................................ 28
Date, Time and Place of the Special Meeting............... 28
Purpose of the Special Meeting............................ 28
Record Date and Stockholders Entitled to Vote............. 28
Vote Required at the Special Meeting...................... 29
Proxies................................................... 30
Solicitation of Proxies................................... 31
THE MERGER.................................................. 32
Background of the Merger.................................. 32
TeleCorp's Reasons for the Merger; Recommendation of the
TeleCorp Board......................................... 37
AT&T Wireless's Reasons for the Merger.................... 42
Opinions of TeleCorp's Financial Advisors................. 42
Material Federal Income Tax Consequences.................. 55
Accounting Treatment...................................... 56
Consents and Regulatory Approvals......................... 57
Listing of the AT&T Wireless Shares on the NYSE........... 57
Resale of the AT&T Wireless Shares Issued in the Merger... 58
Interests of TeleCorp Directors and Officers in the
Merger; Relationships with AT&T Wireless............... 58
Exchange of Certificates.................................. 79
Litigation Regarding the Merger........................... 80
Appraisal Rights.......................................... 80
THE MERGER AGREEMENT........................................ 82
The Merger................................................ 82
Merger Consideration; Conversion of Securities............ 82
Representations and Warranties............................ 83
Covenants................................................. 85
Meeting of TeleCorp Stockholders and TeleCorp Board
Recommendation......................................... 86
No Solicitation........................................... 87
Further Actions........................................... 88
Conditions to the Merger.................................. 88
Termination............................................... 89
Termination Fee........................................... 90
Fees and Expenses......................................... 90
Amendment, Extension and Waiver........................... 90
iv
PAGE
----
OTHER AGREEMENTS............................................ 91
Voting Agreements......................................... 91
Stockholders Agreement Amendment.......................... 92
Transfer Agreements....................................... 93
DESCRIPTION OF AT&T WIRELESS CAPITAL STOCK.................. 94
Authorized Capital Stock.................................. 94
AT&T Wireless Common Stock................................ 94
AT&T Wireless Preferred Stock............................. 94
Anti-Takeover Effects of AT&T Wireless's Amended and
Restated Certificates of Incorporation and By-Laws..... 96
COMPARISON OF RIGHTS OF AT&T WIRELESS AND TELECORP
STOCKHOLDERS.............................................. 100
STOCKHOLDER PROPOSALS....................................... 105
LEGAL OPINIONS.............................................. 105
EXPERTS..................................................... 105
UNAUDITED AT&T WIRELESS PRO FORMA FINANCIAL INFORMATION..... 106
APPENDIX A -- Agreement and Plan of Merger
APPENDIX B -- Certificate of Designation of AT&T Wireless
Series C Preferred Stock
APPENDIX C -- Certificate of Designation of AT&T Wireless
Series E Preferred Stock
APPENDIX D -- Opinions of Lehman Brothers Inc.
APPENDIX E -- Opinions of J.P. Morgan Securities Inc.
APPENDIX F -- Section 262 of the Delaware General
Corporation Law
v
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE PROPOSED TRANSACTION?
A: AT&T Wireless will acquire the capital stock of TeleCorp that it does not
currently own by merging TeleCorp into a subsidiary of AT&T Wireless.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: For each TeleCorp common share you own, you will receive 0.9 of a share of
AT&T Wireless common stock. If you own TeleCorp preferred stock, you will
receive either AT&T Wireless common stock or AT&T Wireless preferred stock,
depending on which series of TeleCorp preferred stock you own.
Q: HOW DO I VOTE?
A: You vote by indicating on the enclosed proxy card how you want to vote and
signing and mailing the enclosed proxy card, or by appearing in person at the
special meeting. Please vote as soon as possible to ensure that your shares
are represented at the special meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares for you only if you provide instructions to
your broker on how to vote. You should follow the directions provided by your
broker regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted on the merger, which will have
the same effect as voting against the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY?
A: Yes. You can change your vote in one of three ways.
- You can send to the Secretary of TeleCorp a written notice that is
received before the special meeting stating that you would like to revoke
your proxy.
- You can complete and send to the Secretary of TeleCorp a new proxy card
that is received before the special meeting.
- You can attend, and vote in person by ballot at, the special meeting.
You should send any written notice or a new proxy card to the Secretary of
TeleCorp at the following address: TeleCorp PCS, Inc., 1010 N. Glebe Road,
Suite 800, Arlington, VA 22201, Tel: (703) 236-1100.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After AT&T Wireless and TeleCorp complete the merger, AT&T Wireless's
exchange agent will send you instructions on how to exchange your share
certificates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We currently expect to complete the merger in the first half of 2002. Because
the merger is subject to government approvals and other conditions, we cannot
predict the exact timing.
Q: WHOM SHOULD I CALL WITH QUESTIONS OR TO OBTAIN ADDITIONAL COPIES OF THE PROXY
STATEMENT/PROSPECTUS?
A: You should call Georgeson Shareholder Communications Inc. at 1-866-884-5922.
1
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the terms of the merger, we encourage you to read carefully this
entire proxy statement/prospectus, the documents to which we have referred you,
and the documents we have incorporated by reference in this proxy
statement/prospectus.
THE COMPANIES (SEE PAGE 27)
AT&T Wireless Services, Inc.
7277 164th Avenue NE
Building 1
Redmond, WA 98052
(425) 580-6000
AT&T Wireless is one of the largest wireless communications service
providers in the United States, and it operates one of the largest U.S. digital
wireless networks. As of September 30, 2001, it and its affiliates (including
TeleCorp) and partner held 850 megahertz and 1900 megahertz licenses to provide
wireless services covering 98% of the U.S. population. AT&T Wireless has not
been affiliated with AT&T Corp., its former corporate parent, since its
split-off from AT&T Corp. on July 9, 2001.
TeleCorp PCS, Inc.
1010 N. Glebe Road
Suite 800
Arlington, VA 22201
(703) 236-1100
TeleCorp, through its operating subsidiaries, TeleCorp Wireless, Inc., and
Tritel, Inc., is the largest AT&T Wireless affiliate in the United States,
providing digital wireless personal communications services to a licensed
service area covering approximately 37 million people.
THE SPECIAL MEETING (SEE PAGE 28)
The special meeting of TeleCorp stockholders will be held at [ ],
on [ ], 2002, at [ ]:00 a.m., local time. At the special meeting, you
will be asked to consider and vote upon a proposal to approve the merger
agreement.
RECORD DATE; VOTE REQUIRED (SEE PAGES 28 AND 29)
Only TeleCorp stockholders at the close of business on the record date,
[ ], will be entitled to notice of, and to vote at, the special
meeting.
Adoption of the merger agreement requires the affirmative vote of a
majority of the voting power of outstanding TeleCorp capital stock entitled to
vote, voting together as one class in accordance with TeleCorp's amended and
restated certificate of incorporation. Stockholders of TeleCorp holding a
majority of the voting power of outstanding TeleCorp capital stock entitled to
vote at the special meeting have entered into voting agreements to vote in favor
of the merger. See "Voting Agreements" below.
No vote of AT&T Wireless stockholders is required to approve the merger.
THE MERGER AGREEMENT (SEE PAGE 82)
The merger agreement is the legal document that governs the merger. The
merger agreement is attached as Appendix A to this proxy statement/prospectus,
and we encourage you to read it carefully.
2
WHAT TELECORP STOCKHOLDERS WILL RECEIVE IN THE MERGER (SEE PAGE 82)
Upon completion of the merger, each share of TeleCorp common stock and
preferred stock will be converted into a right to receive securities of AT&T
Wireless, as follows:
Common Stock.............................. 0.9 of a share of AT&T Wireless common stock
Series C and E preferred stock............ one share of AT&T Wireless preferred stock with
substantially identical terms
Series A convertible preferred stock...... 82.9849 shares of AT&T Wireless common stock
Series B preferred stock.................. 81.2439 shares of AT&T Wireless common stock
Series D preferred stock.................. 27.6425 shares of AT&T Wireless common stock
Series F and G preferred stock............ 0.9 of a share of AT&T Wireless common stock
FAIRNESS OPINIONS (SEE PAGE 42)
TeleCorp's financial advisors, Lehman Brothers Inc. and J.P. Morgan
Securities, each delivered their oral opinions to the TeleCorp board of
directors at the October 7, 2001 meeting of the TeleCorp board of directors,
which were subsequently confirmed in writing, to the effect that, as of October
7, 2001, and based on and subject to the assumptions, limitations,
qualifications and other matters set forth in the opinions, the applicable
exchange ratio to be received in the merger by (1) the holders (other than AT&T
Wireless) of TeleCorp common stock, other than voting preference common stock,
is fair, from a financial point of view, to those stockholders and (2) the
holders (other than AT&T Wireless) of TeleCorp series C and E preferred stock is
fair, from a financial point of view, to those stockholders. Copies of these
opinions are attached as Appendices D and E to this proxy statement/prospectus.
We urge you to read these opinions in their entirety.
RECOMMENDATION OF TELECORP'S BOARD OF DIRECTORS (SEE PAGE 37)
Based on TeleCorp's reasons for the merger described in this proxy
statement/prospectus, including the fairness opinions from Lehman Brothers and
JPMorgan, the TeleCorp board of directors (with two directors dissenting and
without the participation of the three directors affiliated with AT&T Wireless)
determined the merger is advisable, fair to and in the best interests of
TeleCorp's stockholders and has approved the merger agreement. The TeleCorp
board of directors recommends that you vote "FOR" adoption of the merger
agreement at the special meeting.
VOTING AGREEMENTS (SEE PAGE 91)
As an inducement to AT&T Wireless to enter into the merger agreement,
Gerald T. Vento, TeleCorp's chief executive officer, Thomas H. Sullivan,
TeleCorp's chief financial officer, and other stockholders have entered into
voting agreements with AT&T Wireless and TeleCorp. In these agreements, holders
of a majority of the voting power of outstanding TeleCorp capital stock entitled
to vote at the special meeting agreed to vote all of their shares of TeleCorp
capital stock in favor of the merger and against proposals for other
transactions. Accordingly, stockholder approval of the merger is assured. Those
TeleCorp stockholders also agreed, with specific exceptions, not to transfer
their shares of TeleCorp capital stock before the completion of the merger.
REGULATORY APPROVALS (SEE PAGE 57)
AT&T Wireless and TeleCorp were required to make notifications under U.S.
federal antitrust laws and to allow a required waiting period to expire or
terminate. On October 23, 2001 and October 24, 2001, respectively, AT&T Wireless
and TeleCorp submitted the required notifications. On November 19, 2001, AT&T
Wireless and TeleCorp received notification that early termination of the
waiting period under the U.S. federal antitrust laws was granted.
In addition, AT&T Wireless and TeleCorp are required to obtain approvals
from the Federal Communications Commission, which we refer to as the "FCC." On
October 19, 2001 and October 22, 2001, respectively, AT&T Wireless and TeleCorp
filed the required applications with the FCC, seeking approval of the transfer
of control to AT&T Wireless of the FCC licenses and authorizations held by
3
TeleCorp subsidiaries. The applications have been listed on an FCC Public
Notice. Interested parties may file comments or petitions to deny until December
10, 2001.
CONDITIONS TO THE MERGER (SEE PAGE 88)
Completion of the merger depends upon a number of conditions being
satisfied or waived by the party entitled to assert the condition. The
conditions to the merger include:
- approval of the merger agreement by TeleCorp stockholders;
- obtaining the final approval of the FCC without the imposition of
conditions that would materially impair the ability of AT&T Wireless to
operate its business or that of TeleCorp;
- dissenters' rights not being asserted for shares representing more than
5% of the voting power of TeleCorp stock;
- receipt of legal opinions regarding the treatment of the merger as a
"reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended;
- termination of the TeleCorp management agreement with no further
obligations on the part of TeleCorp, although particular provisions will
survive;
- calling by TeleCorp, on or before January 15, 2002, of the unfunded
commitment of specific investors of TeleCorp under the TeleCorp Stock
Purchase Agreement, dated January 23, 1998; and
- other customary conditions specified in the merger agreement.
The merger will occur as soon as practicable after TeleCorp and AT&T
Wireless satisfy or waive all of the conditions in the merger agreement.
TERMINATION (SEE PAGE 89)
The merger agreement may be terminated, and the merger abandoned, only in a
limited number of circumstances, including the following:
- if the merger is not completed by August 7, 2002, which may be extended
to March 7, 2003 if the merger has not been completed solely due to the
waiting period (or any extension thereof) or approvals under U.S. federal
antitrust laws or approvals or consent of the FCC not having expired or
been terminated or received;
- if the merger agreement is not approved by TeleCorp stockholders at the
special meeting;
- by AT&T Wireless, if the TeleCorp board of directors withdraws or
adversely modifies its recommendation of the merger to TeleCorp
stockholders; or if the TeleCorp board of directors approves, or
determines to recommend to the stockholders of TeleCorp that they
approve, an alternative acquisition proposal; or if for any reason
TeleCorp fails to call or hold the special meeting within six months of
the date of the merger agreement, with an exception relating to the date
that the registration statement of which this proxy statement/prospectus
is a part becomes effective;
- if there is a final, non-appealable legal prohibition against the merger;
- if AT&T Wireless and TeleCorp agree to terminate the merger agreement;
and
- by either AT&T Wireless or TeleCorp if the other party breaches in any
material respect any of its representations or warranties or fails to
perform in any material respect any of its covenants or other agreements
in the merger agreement, if the breach or failure to perform cannot be
cured by August 7, 2002 (or March 7, 2003 as described above) and renders
any condition incapable of being satisfied by that date.
4
TERMINATION FEE (SEE PAGE 90)
The merger agreement provides for a termination fee of $65 million to be
paid by TeleCorp to AT&T Wireless in the following cases:
- if AT&T Wireless terminates the merger agreement because TeleCorp fails
to call or hold the TeleCorp special meeting within six months of the
date of the merger agreement, with an exception relating to the date that
the registration statement of which this proxy statement/prospectus is a
part becomes effective;
- if either AT&T Wireless or TeleCorp terminates the merger agreement
because the merger agreement is not adopted by TeleCorp stockholders at
the special meeting; or
- if an alternative acquisition proposal has been made and AT&T Wireless
terminates the merger agreement because TeleCorp has failed to satisfy a
closing condition relating to representations or warranties or covenants,
and within 12 months of termination TeleCorp enters into a definitive
agreement for any alternative transaction or its board of directors
recommends acceptance by the TeleCorp stockholders of a tender offer or
exchange offer for an alternative transaction.
INTERESTS OF DIRECTORS AND OFFICERS OF TELECORP IN THE MERGER (SEE PAGE 58)
Some members of TeleCorp management and of the TeleCorp board of directors
have interests in the merger or relationships with AT&T Wireless that are
different from, or in addition to, the interests of the other TeleCorp
stockholders. The TeleCorp board of directors was aware of these interests and
relationships and considered them, among other matters, in approving the merger
agreement and the related transactions.
ACCOUNTING TREATMENT (SEE PAGE 56)
In accordance with recently issued Statement of Financial Accounting
Standards No. 141, Business Combinations, and Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, AT&T Wireless will use
the purchase method of accounting for a business combination to account for the
merger, as well as new accounting and reporting regulations for goodwill and
other intangibles.
TAX CONSEQUENCES (SEE PAGE 55)
We have structured the merger to be a tax-free reorganization for U.S.
federal income tax purposes, and it is a condition to the merger that AT&T
Wireless and TeleCorp each receive legal opinions to that effect. Assuming the
merger is a reorganization, holders of TeleCorp class A voting common stock will
not recognize gain or loss for U.S. federal income tax purposes in the merger,
except for gain or loss recognized because of cash received instead of
fractional shares of AT&T Wireless common stock.
APPRAISAL RIGHTS (SEE PAGE 80)
Under Delaware law, holders of TeleCorp class A voting common stock are not
entitled to appraisal rights in connection with the merger.
Holders of all other classes of TeleCorp stock are entitled under Delaware
law to seek appraisal of and payment of the fair value of their shares in lieu
of receiving the merger consideration, as long as these stockholders comply with
the procedural requirements set forth under Delaware law for perfecting this
right, as described in the section entitled "The Merger -- Appraisal Rights" and
set forth in Appendix F.
5
AT&T WIRELESS SELECTED HISTORICAL FINANCIAL DATA
In the table below you are provided with selected historical consolidated
financial data of AT&T Wireless. For periods prior to AT&T Wireless's split-off
from AT&T Corp. on July 9, 2001, this selected historical financial data
reflects the results of and balance sheet data for the AT&T Wireless Group of
AT&T Corp. In the split-off, AT&T Corp. contributed to AT&T Wireless all of the
businesses and assets, and AT&T Wireless assumed all of the liabilities, that
constituted the AT&T Wireless Group. These contributions have been accounted for
in a manner similar to a pooling of interests.
The following information was derived using the consolidated financial
statements of AT&T Wireless at and for each of the nine months ended September
30, 2001 and 2000, and each of the fiscal years in the five-year period ended
December 31, 2000. The consolidated statement of operations and cash flow data
below for each of the years in the three-year period ended December 31, 2000 and
the consolidated balance sheet data at December 31, 2000 and 1999, were derived
from audited consolidated financial statements, which are incorporated by
reference in this proxy statement/prospectus. The consolidated statement of
operations and cash flow data below for the years ended December 31, 1997 and
1996 and the consolidated balance sheet data at December 31, 1998, 1997, and
1996, were derived from unaudited consolidated financial statements. The data
for each of the nine months ended September 30, 2001 and 2000 were derived from
unaudited consolidated financial statements, which are incorporated by reference
in this proxy statement/prospectus. Data presented under the heading "Other
Operating Data" is not derived from audited or unaudited historical consolidated
financial statements and has been presented to provide additional information.
The financial data presented below is not necessarily comparable from
period to period as a result of several transactions, including acquisitions and
dispositions of consolidated subsidiaries. In addition, in October 2001, AT&T
Wireless announced its intention to exit the fixed wireless business. Although
exit plans have not yet been approved by AT&T Wireless's board of directors, it
is anticipated that this decision will result in pre-tax charges during the
fourth quarter of 2001 of approximately $1.3 billion, reflecting a write-down of
the assets and the impact of a phased exit plan. For this and other reasons, you
should read the selected historical financial data provided below in conjunction
with AT&T Wireless's consolidated financial statements and accompanying notes,
which are incorporated by reference in this proxy statement/prospectus (See
"Where You Can Find More Information") as well as the pro forma financial
information included in this proxy statement/prospectus (See "Unaudited AT&T
Wireless Pro Forma Financial Information").
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- --------- --------- ---------
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS AND FINANCIAL AND OTHER OPERATING DATA)
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenue................................ $ 10,094 $ 7,474 $ 10,448 $ 7,627 $ 5,406 $ 4,668 $ 4,246
Operating income (loss)................ 285 160 (38) (666) (343) (70) 234
Net income (loss) available to common
shareowners.......................... 264 159 528 (461) 108 69 261
Net income (loss) per share -- basic... $ .10 $ .06 $ .21 $ (.18) $ .04 $ .03 $ .10
Net income (loss) per
share -- diluted..................... $ .10 $ .06 $ .21 $ (.18) $ .04 $ .03 $ .10
Weighted average shares -- basic....... 2,530 2,530 2,530 2,530 2,530 2,530 2,530
Weighted average shares -- diluted..... 2,532 2,532 2,532 2,530 2,532 2,532 2,532
Cash dividends declared per share...... $ -- $ -- $ -- $ -- $ -- $ -- $ --
BALANCE SHEET DATA:
Total assets........................... $ 42,831 $ 33,045 $ 35,302 $ 23,512 $19,460 $19,040 $17,852
Total debt(1).......................... 6,577 1,958 2,551 3,558 2,589 2,447 2,217
Preferred stock held by AT&T........... -- 3,000 3,000 1,000 1,000 1,000 1,000
Mandatorily redeemable common stock.... 7,664 -- -- -- -- -- --
Shareowners' equity.................... 20,425 21,502 21,877 12,997 10,532 10,187 9,497
6
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- --------- --------- ---------
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS AND FINANCIAL AND OTHER OPERATING DATA)
(UNAUDITED)
CASH FLOW DATA:
Net cash provided by operating
activities........................... $ 2,255 $ 861 $ 1,635 $ 867 $ 414 $ 1,338 $ 1,183
Capital expenditures and other
additions............................ (3,850) (3,010) (4,012) (2,272) (1,219) (1,931) (1,832)
Net acquisitions of licenses........... (21) (218) (247) (47) (65) (443) (327)
Equity investment distributions and
sales................................ 658 319 360 236 1,354 294 176
Equity investment contributions,
advances, and purchases.............. (1,249) (122) (1,645) (284) (156) (84) (32)
Net (acquisitions) dispositions of
businesses including cash acquired... -- (3,168) (4,763) 244 324 -- 156
Net (decrease) increase in debt due to
AT&T................................. (2,438) 400 400 900 100 200 200
Proceeds from issuance of long-term
debt due to others, net of issuance
costs................................ 6,345 -- -- -- -- -- --
Proceeds attributed from DoCoMo
investment, net of costs............. 6,139 -- -- -- -- -- --
Redemption of preferred stock held by
AT&T................................. (3,000) -- -- -- -- -- --
Proceeds attributed from AT&T Wireless
Group tracking stock offering........ -- 7,000 7,000 -- -- -- --
Transfer from (to) AT&T, net........... -- 806 1,001 344 (694) 611 476
OTHER FINANCIAL DATA:
EBITDA(2).............................. $ 2,200 $ 1,376 $ 1,648 $ 587 $ 736 $ 756 $ 894
EBITDA (excluding asset impairment and
restructuring charges)............... 2,200 1,376 1,648 1,118 856 916 894
Ratio of earnings to combined fixed
charges and preferred stock
dividends............................ 2.0 2.3 1.9 (0.4) 1.9 1.2 2.4
OTHER OPERATING DATA:
(in thousands, except ($) are actual)
Consolidated subscribers............... 17,120 12,631 15,163 9,569 7,174 5,964 5,032
Consolidated digital subscribers....... 16,161 11,052 13,666 7,580 4,354 1,746 909
Covered population(3).................. 166,293 136,417 162,896 114,217 -- -- --
Licensed population(3)................. 216,444 197,170 214,188 191,742 -- -- --
Subscriber churn....................... 3.0% 2.8% 2.9% 2.6% 2.7% 2.5% 2.3%
Total cost per gross subscriber
addition............................. $ 331 $ 357 $ 367 $ 367 $ 392 $ 432 $ 345
---------------
(1) Includes $4 million of long-term debt that is included in other long-term
liabilities at September 30, 2000, and at December 31, 2000 and 1999.
(2) EBITDA is defined as operating income, plus depreciation and amortization.
AT&T Wireless believes EBITDA to be relevant and useful information, as
EBITDA is the primary metric used by AT&T Wireless management to measure the
performance of its business. EBITDA should be considered in addition to, but
not as a substitute for, other measures of financial performance reported in
accordance with generally accepted accounting principles, including its cash
flows from operating, investing and financing activities.
(3) Population, or POPs (the number of persons within a license's coverage
area), represent AT&T Wireless's consolidated operations and do not include
partnership or affiliate markets. POPs are counted once whether a POP is
covered/licensed only by wireless licenses at the 850 megahertz frequency or
wireless licenses at the 1900 megahertz frequency or by both. The amount of
wireless spectrum licensed varies by geographic territory.
7
TELECORP'S SELECTED HISTORICAL FINANCIAL DATA
TeleCorp's selected historical balance sheet data presented below as of
December 31, 1999 and 2000 and selected historical statements of operations data
for each of the years in the three-year period ended December 31, 2000 have been
derived from audited consolidated financial statements, which are incorporated
by reference in this proxy statement/prospectus. The selected historical balance
sheet data below as of December 31, 1998, 1997 and 1996 and the selected
statement of operations data for the period from inception on July 29, 1996 to
December 31, 1996 and for the year ended December 31, 1997 have been derived
from audited consolidated financial statements which are not incorporated by
reference in this proxy statement/prospectus. The selected historical balance
sheet data presented below as of September 30, 2001 and the selected statement
of operations data for the nine months ended September 30, 2001 and 2000 have
been derived from unaudited consolidated financial statements, which are
incorporated by reference in this proxy statement/prospectus. "Other Data" is
not derived from audited or unaudited historical consolidated financial
statements and has been presented to provide additional information. You should
read this information together with TeleCorp's historical consolidated financial
statements and notes thereto, which are incorporated by reference in this proxy
statement/ prospectus. See "Where You Can Find More Information."
FOR THE NINE JULY 29, 1996
MONTHS ENDED FOR THE YEAR ENDED (INCEPTION) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------- ------------------------------------------------ --------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ----------- ---------- ---------- -------- --------------
(UNAUDITED)
($ IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS AND OTHER DATA)
STATEMENTS OF OPERATIONS
DATA:...................
Revenue:
Service................. $ 392,712 $ 152,328 $ 237,234 $ 41,319 $ -- $ -- $ --
Roaming................. 97,140 44,458 67,663 29,010 29 -- --
Equipment............... 41,631 22,562 35,552 17,353 -- -- --
----------- ----------- ----------- ---------- ---------- -------- -------
Total revenue.... 531,483 219,348 340,449 87,682 29 -- --
----------- ----------- ----------- ---------- ---------- -------- -------
Operating expense:
Cost of revenue......... 150,278 67,906 104,863 39,259 -- -- --
Operations and
development(a)........ 109,780 39,578 64,836 35,979 9,772 -- --
Selling and
marketing(a).......... 222,465 118,455 185,165 71,180 6,325 304 10
General and
administrative(a)..... 169,245 105,776 148,425 92,585 26,239 2,637 515
Depreciation and
amortization.......... 425,661 82,770 161,813 55,110 1,584 11 --
----------- ----------- ----------- ---------- ---------- -------- -------
Total operating
expense........ 1,077,429 414,485 665,102 294,113 43,920 2,952 525
----------- ----------- ----------- ---------- ---------- -------- -------
Operating loss... (545,946) (195,137) (324,653) (206,431) (43,891) (2,952) (525)
Other income (expense):
Interest expense........ (196,670) (63,989) (111,082) (51,313) (11,934) (396) --
Interest income and
other................. 16,002 9,261 17,467 6,748 4,670 13 --
Loss on derivatives..... (4,910) -- -- -- -- -- --
Gain on disposal of New
England assets........ -- -- 330,756 -- -- -- --
----------- ----------- ----------- ---------- ---------- -------- -------
Net loss before
income taxes... (731,524) (249,865) (87,512) (250,996) (51,155) (3,335) (525)
8
FOR THE NINE JULY 29, 1996
MONTHS ENDED FOR THE YEAR ENDED (INCEPTION) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------- ------------------------------------------------ --------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ----------- ---------- ---------- -------- --------------
(UNAUDITED)
($ IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS AND OTHER DATA)
Income tax benefit........ 240,428 -- 31,572 -- -- -- --
----------- ----------- ----------- ---------- ---------- -------- -------
Net loss before
cumulative
effect of
change in
accounting
principle...... (491,096) (249,865) (55,940) (250,996) (51,155) (3,335) (525)
Cumulative effect of
change in accounting
principle, net of
tax................... 807 -- -- -- -- -- --
----------- ----------- ----------- ---------- ---------- -------- -------
Net loss......... (490,289) (249,865) (55,940) (250,996) (51,155) (3,335) (525)
Accretion of mandatorily
redeemable preferred
stock................. (32,523) (24,181) (33,996) (24,124) (8,567) (726) (289)
----------- ----------- ----------- ---------- ---------- -------- -------
Net loss
attributable to
common equity.. $ (522,812) $ (274,046) $ (89,936) $ (275,120) $ (59,722) $ (4,061) $ (814)
=========== =========== =========== ========== ========== ======== =======
Net loss attributable to
common equity per share-
basic and diluted....... $ (2.69) $ (2.72) $ (0.80) $ (3.58) $ (2.19) $(111.74) $(44.45)
=========== =========== =========== ========== ========== ======== =======
Weighted average common
equity shares
outstanding-basic and
diluted................. 194,004,545 100,789,980 112,819,874 76,895,391 27,233,786 36,340 18,313
=========== =========== =========== ========== ========== ======== =======
9
AS OF AS OF DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
------------- ------------- ----------- ----------- ---------- ---------
(UNAUDITED) ($ IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS AND OTHER DATA)
BALANCE SHEET DATA:
Cash and cash equivalents.... $ 244,706 $ 260,809 $182,330 $111,733 $ 2,567 $ 52
Working capital (deficit).... 119,354 (35,952) 94,082 (4,676) (6,656) (524)
Property and equipment,
net........................ 1,383,648 1,223,253 400,450 197,469 3,609 1
PCS licenses and microwave
relocation costs, net...... 3,697,006 3,698,436 267,682 118,107 10,018 --
Goodwill, net................ 2,417,559 2,506,737 -- -- -- --
Intangible assets -- AT&T
agreements, net............ 711,029 783,185 37,908 26,286 -- --
Total assets................. 8,710,799 8,701,016 952,202 466,644 16,295 7,574
Total debt................... 2,662,445 1,925,543 640,571 243,385 12,608 499
Mandatorily redeemable
preferred stock,
net(d)(e).................. 524,787 443,563 263,181 164,491 4,144 7,789
Total stockholders' equity
(deficit).................. $4,388,626 $4,910,895 $(90,554) $(64,500) $(4,875) $ (812)
OTHER DATA:
Customers (end of
period)................. 915,895 666,425 142,231 -- -- --
ARPU(b).................... $ 55 $ 61 $ 77 $ -- $ -- $ --
Churn(c)................... 3.5% 2.8% 1.7% -- -- --
Covered population (end of
period, in millions).... 33 28 11 -- -- --
---------------
(a) Includes non-cash stock compensation as disclosed in TeleCorp's consolidated
financial statements contained in TeleCorp's Form 10-K for the year ended
December 31, 2000 and TeleCorp's Form 10-Q for the period ended September
30, 2001, each of which was filed with the SEC.
(b) Average revenue per unit, or ARPU, is defined as service revenue, including
airtime and incollect roaming revenue but excluding outcollect roaming
revenue, for the periods indicated, divided by the average number of
customers for those periods.
(c) Churn is defined as the number of disconnected customers for the periods
indicated, divided by the product of the number of months for those periods
and the average number of customers for those periods.
(d) Net of deferred compensation and preferred stock subscription receivable of
$4 and $75,914, respectively, as of December 31, 1998.
(e) Net of preferred stock subscription receivable of $97,001, $59,542, and
$10,841 as of December 31, 1999 and 2000 and September 30, 2001,
respectively.
10
COMPARATIVE PER SHARE INFORMATION
The table below contains AT&T Wireless and TeleCorp per share information
as of September 30, 2001 and December 31, 2000 on both a historical and pro
forma basis and on a per share equivalent pro forma basis for TeleCorp.
AT&T Wireless's historical per share information as of September 30, 2001
was calculated on the basis of the number of shares of AT&T Wireless common
stock outstanding on that date. AT&T Wireless's historical per share information
as of December 31, 2000 was computed based on the 2.53 billion shares of AT&T
Wireless common stock outstanding at the time of the split-off from AT&T Corp.
on July 9, 2001, including the 406 million shares issued in conjunction with the
investment by NTT DoCoMo which occurred in January 2001. The AT&T Wireless
combined pro forma information gives effect to the merger with TeleCorp and
those transactions identified in the pro forma financial information included in
this proxy statement/prospectus. The TeleCorp combined pro forma equivalent
information is based on the assumed conversion of each of the TeleCorp common
shares into 0.9 of a share of AT&T Wireless common stock.
Cash dividends have never been paid on AT&T Wireless common stock, AT&T
Wireless Group tracking stock or TeleCorp common stock.
You should read the information below together with the consolidated
financial statements and accompanying notes of AT&T Wireless and TeleCorp
included in the documents that are described under "Where You Can Find More
Information" and which are incorporated in this proxy statement/prospectus by
reference as well as the pro forma financial information included in this proxy
statement/prospectus (See "Unaudited AT&T Wireless Pro Forma Financial
Information"). You should not rely on the unaudited historical comparative per
share data as an indication of the results of operations or the financial
position that would have been achieved if the merger had taken place earlier or
of the results of operations or financial position of AT&T Wireless after
completion of the merger.
AT&T TELECORP
WIRELESS COMBINED
AT&T COMBINED PRO FORMA
WIRELESS TELECORP PRO FORMA EQUIVALENT
-------- -------- --------- ----------
Consolidated book value per share
At September 30, 2001.......................... $11.10 $ 27.14 [ ] [ ]
At December 31, 2000........................... $ 8.65 $ 29.63 [ ] [ ]
Income from continuing operations
Per common share -- basic:
For the nine months ended September 30,
2001...................................... $ 0.10 $ (2.69) [ ] [ ]
For the year ended December 31, 2000........ $ 0.21 $ (0.80) [ ] [ ]
Per common share -- diluted:
For the nine months ended September 30,
2001...................................... $ 0.10 $ (2.69) [ ] [ ]
For the year ended December 31, 2000........ $ 0.21 $ (0.80) [ ] [ ]
11
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
AT&T WIRELESS AND TELECORP MARKET PRICE
AT&T Wireless common stock has been traded on the NYSE under the ticker
symbol "AWE" since July 9, 2001, the date AT&T Wireless was split-off from AT&T
Corp. AT&T Wireless Group tracking stock was traded on the NYSE under the symbol
"AWE" for the period from April 27, 2000 until July 8, 2001. TeleCorp class A
voting common stock is quoted on the Nasdaq National Market under the ticker
symbol "TLCP."
The table below sets forth, for the calendar quarters indicated, the high
and low intraday sale prices of shares of AT&T Wireless common stock, AT&T
Wireless Group tracking stock and TeleCorp class A voting common stock as
reported on the NYSE Composite Transaction Tape and the Nasdaq National Market,
respectively.
AT&T AT&T TELECORP CLASS A
WIRELESS WIRELESS GROUP VOTING
COMMON STOCK TRACKING STOCK COMMON STOCK
---------------- ---------------- ----------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
2000
First Quarter........................ -- -- -- -- $55.00 $31.00
Second Quarter (from April 27, 2000
for AT&T Wireless Group tracking
stock)............................. -- -- $36.00 $23.56 $54.25 $26.31
Third Quarter........................ -- -- $29.56 $20.50 $47.00 $18.69
Fourth Quarter....................... -- -- $24.94 $16.38 $28.81 $12.75
2001
First Quarter........................ -- -- $27.30 $17.06 $27.88 $13.63
Second Quarter....................... -- -- $21.10 $15.29 $20.00 $11.50
Third Quarter (through July 8, 2001
for AT&T Wireless Group tracking
stock and from July 9, 2001 for
AT&T Wireless common stock)........ $19.92 $12.27 $17.20 $16.29 $19.00 $10.35
Fourth Quarter (through November 26,
2001).............................. $16.22 $12.51 -- -- $14.18 $ 9.41
RECENT CLOSING PRICES
The following table sets forth the closing prices per share of AT&T
Wireless common stock and TeleCorp class A voting common stock as reported on
the NYSE Composite Transaction Tape and the Nasdaq National Market,
respectively, on October 5, 2001, the last full trading day prior to the public
announcement of the merger agreement, and [ ], 2001, the last full
trading day for which closing prices were available at the time of the printing
of this proxy statement/prospectus. This table also sets forth the equivalent
price per share of TeleCorp class A voting common stock on those dates. The
equivalent price per share is equal to the closing price of a share of AT&T
Wireless common stock on that date multiplied by 0.9, the applicable exchange
ratio in the merger.
TELECORP CLASS A TELECORP CLASS A
VOTING AT&T WIRELESS VOTING COMMON STOCK
DATE COMMON STOCK COMMON STOCK PER SHARE EQUIVALENT
---- ---------------- ------------- --------------------
October 5, 2001............................ $10.04 $16.12 $14.51
[ ], 2001......................... $ $ $
DIVIDENDS
TeleCorp has never declared or paid cash dividends. If the merger does not
occur, TeleCorp currently intends to retain earnings. TeleCorp's board of
directors will determine whether to pay dividends on its
12
common stock primarily based upon the company's financial condition, results of
its operations, requirements of any financing agreements to which it is a party,
and its business requirements.
Cash dividends have never been declared or paid on AT&T Wireless common
stock or, prior to AT&T Wireless's split-off from AT&T Corp. on July 9, 2001, on
AT&T Wireless Group tracking stock. AT&T Wireless's board of directors will
determine whether to pay dividends on its common stock primarily based upon the
company's financial condition, results of its operations, requirements of any
financing agreements to which it may be a party, and its business requirements;
however, AT&T Wireless does not expect to pay any dividends on its common stock
for the foreseeable future.
13
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this proxy statement/prospectus, you should carefully consider each of the
following risks and uncertainties related to the merger.
Risk Factors Relating to the Merger
THE VALUE OF AT&T WIRELESS COMMON STOCK MAY DECREASE SIGNIFICANTLY BETWEEN
THE TIME YOU VOTE ON THE MERGER AND THE TIME THE MERGER IS COMPLETED. AS A
RESULT, AT THE TIME YOU VOTE ON THE MERGER YOU WILL NOT KNOW THE MARKET VALUE OF
THE AT&T WIRELESS COMMON STOCK YOU WILL RECEIVE FOR YOUR TELECORP SHARES.
The exchange ratio for the number of shares of AT&T Wireless common stock
you are to receive in exchange for your shares of TeleCorp common stock and
preferred stock is fixed, and the merger agreement contains no mechanism to
adjust the exchange ratio in the event that the market price of AT&T Wireless
common stock declines prior to the merger.
THE FCC MUST APPROVE THE MERGER AND COULD DELAY OR REFUSE TO APPROVE THE
MERGER OR IMPOSE CONDITIONS THAT COULD ADVERSELY AFFECT OUR BUSINESS OR
FINANCIAL CONDITION.
U.S. federal law and FCC rules require the FCC's prior approval of the
transfer of control of TeleCorp's licenses to AT&T Wireless. Completion of the
merger is conditioned, among other factors, upon grants of the requisite FCC
consents becoming final. A "final" FCC order is one that has not been stayed and
is no longer subject to review by the FCC or the courts because the statutory
period for seeking such review has expired without any request for review or
stay pending. Following the FCC's grant of consent to the merger, there might be
actions by the FCC or the courts that would delay or prevent finality.
The FCC might not grant the applications for transfer of control or the FCC
might grant the applications with conditions. In addition, there might be a
delay caused by the filing of a challenge to the transfer applications.
Conditions imposed on any licenses granted or delays in granting of the licenses
could jeopardize or delay completion of the merger or may impair the value of
the licenses and reduce the value of AT&T Wireless capital stock.
WE MAY FAIL TO INTEGRATE OUR OPERATIONS SUCCESSFULLY. AS A RESULT, WE MAY
NOT ACHIEVE THE ANTICIPATED POTENTIAL BENEFITS OF THE MERGER.
The merger will combine two companies that have previously operated
independently. We expect to face significant challenges in consolidating
operations, integrating our organizations and services in a timely and efficient
manner, refinancing or consolidating indebtedness and retaining key TeleCorp
executives and other personnel. The integration of AT&T Wireless and TeleCorp
also will require substantial attention from management, particularly in light
of the geographically dispersed operations and different business cultures and
compensation structures at the two companies. In addition, after the completion
of the merger, AT&T Wireless may elect, or be required, to refinance or
renegotiate all or a portion of the TeleCorp long-term debt not held by AT&T
Wireless and, in doing so, AT&T Wireless may incur additional costs. The
diversion of management attention and any difficulties associated with
integrating the two companies could have a material adverse effect on the
revenues, the level of expenses and the operating and financial results of the
combined company and the value of AT&T Wireless capital stock.
Risk Factors Relating to AT&T Wireless's Common Stock
AT&T CORP.'S SALE, EXCHANGE OR MONETIZATION OF AT&T WIRELESS'S COMMON STOCK
COULD ADVERSELY AFFECT ITS MARKET PRICE.
In connection with AT&T Wireless's split-off from AT&T Corp., its former
corporate parent, on July 9, 2001, AT&T Corp. retained approximately 91 million
shares, or about 3.6%, of AT&T Wireless's common stock for its own account for
sale, exchange or monetization. The sale, exchange or monetization of these
shares, or the perception by the market that these transactions might occur,
could adversely affect the market price of AT&T Wireless's common stock.
14
FUTURE SALES OF AT&T WIRELESS'S COMMON STOCK COULD ADVERSELY AFFECT THE
COMMON STOCK'S MARKET PRICE AND AT&T WIRELESS'S ABILITY TO RAISE CAPITAL IN THE
FUTURE.
Sales of substantial amounts of AT&T Wireless's common stock, including any
sales by AT&T Corp., could hurt the common stock's market price. This also could
hurt AT&T Wireless's ability to raise capital in the future. Any sales of
substantial amounts of AT&T Wireless's common stock in the public market, or the
perception that those sales might occur, could materially adversely affect the
market price of AT&T Wireless's common stock. AT&T Wireless will not solicit the
approval of its stockholders for the issuance of authorized but unissued shares
of its stock unless this approval is deemed advisable by its board of directors
or is required by applicable law, regulation or stock exchange listing
requirements. The issuance of those shares could dilute the value of shares of
AT&T Wireless's common stock.
AT&T WIRELESS DOES NOT EXPECT TO PAY DIVIDENDS ON ITS COMMON STOCK.
AT&T Wireless's board of directors will determine whether to pay dividends
on its common stock primarily based upon the company's financial condition,
results of its operations and its business requirements. AT&T Wireless does not
expect to pay any dividends on its common stock for the foreseeable future.
THE MARKET PRICE AND TRADING VOLUME OF AT&T WIRELESS'S COMMON STOCK MAY BE
VOLATILE AND MAY FACE NEGATIVE PRESSURE.
Numerous factors may result in short- or long-term negative pressure on the
trading price of shares of AT&T Wireless's common stock, including sales of its
common stock by AT&T Corp. The market price of AT&T Wireless's common stock
could fluctuate significantly for many reasons, including in response to the
risk factors listed in this document, or for specific reasons unrelated to AT&T
Wireless's performance. Investors may consider AT&T Wireless's common stock as a
technology stock. Technology stocks have recently experienced extreme price and
volume fluctuations. Therefore, the market price and trading volume of AT&T
Wireless's common stock also may be extremely volatile.
Risk Factors Relating to AT&T Wireless's Business
AT&T WIRELESS'S PLAN TO EXIT THE FIXED WIRELESS BUSINESS MAY HAVE UNFORESEEN
NEGATIVE IMPACTS TO ITS BUSINESS.
In October 2001, AT&T Wireless announced its intention to exit its fixed
wireless business. Although exit plans have not yet been approved by AT&T
Wireless's board of directors, AT&T Wireless currently anticipates that its
decision to exit its fixed wireless business will result in fourth quarter
pre-tax charges of approximately $1.3 billion, reflecting a write-down of the
assets of the fixed wireless business and the impact of phased exit charges. The
decision to exit a business involves special risks and uncertainties, some of
which may not be foreseeable or within AT&T Wireless's control, such as
unforeseen severance costs, contractual liabilities, disputes with customers,
suppliers, vendors, terminated employees, or a buyer of the fixed wireless
business or certain assets.
In addition, AT&T Wireless faces a number of other uncertainties and risks
relating to its exit from the fixed wireless business including the following:
- AT&T Wireless may not be able to sell or otherwise monetize any part of
its assets of the fixed wireless business on attractive terms or at all;
- the time it takes AT&T Wireless and the costs it incurs to exit from its
fixed wireless business may be affected by regulatory concerns and other
matters;
- AT&T Wireless's implementation of the exit strategy may disrupt other
operations and distract management from other needs of its business; and
- perceived uncertainties as to the future direction of AT&T Wireless may
result in the loss of employees or business partners.
15
Such unforeseen costs and uncertainties could have a material adverse
effect on AT&T Wireless's business, financial condition and results of
operations.
AT&T WIRELESS MAY SUBSTANTIALLY INCREASE ITS DEBT IN THE FUTURE, WHICH
COULD SUBJECT IT TO VARIOUS RESTRICTIONS AND HIGHER INTEREST COSTS AND DECREASE
ITS CASH FLOW AND EARNINGS.
AT&T Wireless may substantially increase its debt in the future (including
by virtue of the debt it is assuming under the merger), which could subject it
to various restrictions and higher interest costs and decrease its cash flow and
earnings. AT&T Wireless may also encounter difficulties in obtaining all the
financing it needs to fund its business and growth strategy on desirable terms.
AT&T Wireless anticipates requiring substantial additional financing for
the foreseeable future to fund capital expenditures, license purchases and costs
and expenses in connection with funding its operations, domestic and
international investments and growth strategy. AT&T Wireless is exploring and
evaluating the relative advantages and disadvantages of various funding
mechanisms. Other funding mechanisms that still may be considered include other
forms of public and private debt facilities. The decision on debt composition is
dependent on, among other things, AT&T Wireless's business and financial plans
and the market conditions at the time of financing. The agreements governing
this indebtedness may contain financial and other covenants that could impair
AT&T Wireless's flexibility and restrict its ability to pursue growth
opportunities.
AT&T WIRELESS'S RELATIONSHIP WITH NTT DOCOMO, INC. CONTAINS FEATURES THAT
COULD ADVERSELY AFFECT AT&T WIRELESS'S FINANCIAL CONDITION OR THE WAY IN WHICH
ITS BUSINESS IS CONDUCTED.
DoCoMo, a leading Japanese wireless communications company, is AT&T
Wireless's largest stockholder, and the agreements relating to DoCoMo's
investment contain requirements and contingencies that could materially
adversely affect AT&T Wireless's financial condition and technology strategies.
The terms of the DoCoMo investment enable DoCoMo to terminate its investment and
require repayment of its $9.8 billion investment, plus interest, if AT&T
Wireless fails, under some circumstances, to commence service using an agreed-on
technology in at least 13 of the top 50 domestic markets by June 30, 2004. If
DoCoMo requires repayment, AT&T Wireless will have to fund the entire repurchase
obligation. If DoCoMo requires repayment of its investment, it may also
terminate the technology rights provided to AT&T Wireless in connection with its
investment. AT&T Wireless needs to obtain DoCoMo's consent to make any
fundamental change in the nature of AT&T Wireless's business or to allow another
wireless operator to acquire more than 15% but less than 50% of AT&T Wireless's
equity. These limitations could prevent AT&T Wireless from taking advantage of
some business opportunities or relationships that it might otherwise pursue.
AT&T WIRELESS'S SIGNIFICANT NETWORK BUILD-OUT REQUIREMENTS MAY NOT BE
COMPLETED AS PLANNED.
AT&T Wireless needs to complete significant build-out activities, including
completion of regularly required build-out activities in some of its existing
wireless markets. Failure or delay to complete the build-out of its network and
launch of operations, or increased costs of this build-out and launch of
operations, could have a material adverse effect on AT&T Wireless's operations
and financial condition. As AT&T Wireless continues to build out its network, it
must, among other things, continue to:
- lease, acquire or otherwise obtain rights to a large number of cell and
switch sites;
- obtain zoning variances or other local governmental or third-party
approvals or permits for network construction;
- complete the radio frequency design, including cell site design,
frequency planning and network optimization, for each of its markets; and
- expand and maintain customer care, network management, billing and other
financial and management systems.
16
In addition, in the next several years, AT&T Wireless will be upgrading its
network to implement the next generation of digital technology. These events may
not occur in the time frame AT&T Wireless assumes or that the FCC requires, at
the cost AT&T Wireless assumes, or at all.
In addition, problems in vendor equipment availability, technical resources
or system performance could delay the launch of new or expanded operations in
new or existing markets or result in increased costs in all markets. AT&T
Wireless intends to rely on the services of various companies that are
experienced in design and build-out of wireless networks in order to accomplish
its build-out schedule. However, AT&T Wireless may not be able to obtain
satisfactory contractors on economically attractive terms or ensure that its
contractors will perform as it expects.
AT&T WIRELESS HAS SUBSTANTIAL CAPITAL REQUIREMENTS THAT IT MAY NOT BE ABLE
TO FUND.
AT&T Wireless's strategy and business plan will continue to require
substantial capital, which it may not be able to obtain on favorable terms or at
all. A failure to obtain necessary capital would have a material adverse effect
on AT&T Wireless, and result in the delay, change or abandonment of its
development or expansion plans and the failure to meet regulatory build out
requirements. AT&T Wireless currently estimates that its capital expenditures
for the build out of its mobility networks will total approximately $5.0 billion
during 2001, as compared to $3.7 billion in 2000. It also expects to incur
substantial capital expenditures in future years. The actual amount of the funds
required to finance AT&T Wireless's network build-out and other capital
expenditures may vary materially from management's estimate. AT&T Wireless has
entered into various contractual commitments associated with the development of
its third-generation strategy, of which approximately $1.9 billion were
outstanding at September 30, 2001. These include purchase commitments for
network equipment, as well as handsets. In addition, AT&T Wireless anticipates
that it will enter into material purchase commitments in the future. It also may
require substantial additional capital for, among other uses, acquisitions of
providers of wireless services, spectrum license or system acquisitions, system
development and network capacity expansion. AT&T Wireless has also entered into
agreements for investments and ventures which have required or will require
substantial capital, including its agreement to invest $2.6 billion in exchange
for a combination of a non-controlling equity interest in, and debt securities
issued by, Alaska Native Wireless, which was the successful bidder for licenses
costing approximately $2.9 billion in the recently concluded 1900 megahertz
auction. These agreements also may contain provisions potentially requiring
substantial additional capital in future circumstances, such as allowing the
other investors to require AT&T Wireless to purchase assets or investments.
THE ACTUAL AMOUNT OF FUNDS NECESSARY TO IMPLEMENT AT&T WIRELESS'S STRATEGY
AND BUSINESS PLAN MAY MATERIALLY EXCEED CURRENT ESTIMATES, WHICH COULD HAVE A
MATERIAL ADVERSE EFFECT ON AT&T WIRELESS'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The actual amount of funds necessary to implement AT&T Wireless's strategy
and business plan may materially exceed AT&T Wireless's current estimates in the
event of various factors including: departures from its current business plan,
unforeseen delays, cost overruns, unanticipated expenses, regulatory
developments, engineering design changes, and technological and other risks. If
actual costs do materially exceed AT&T Wireless's current estimates for these or
other reasons, this could have a material adverse effect on AT&T Wireless's
financial condition and results of operations.
AT&T WIRELESS'S BUSINESS AND OPERATIONS WOULD BE ADVERSELY AFFECTED IF IT
FAILED TO ACQUIRE ADEQUATE RADIO SPECTRUM IN FCC AUCTIONS OR THROUGH OTHER
TRANSACTIONS.
AT&T Wireless's domestic business depends on the ability to use portions of
the radio spectrum licensed by the FCC. AT&T Wireless could fail to obtain
sufficient spectrum capacity in new and existing markets, whether through FCC
auctions or other transactions, in order to meet the expanded demands for its
existing services, as well as to enable development of third-generation
services. This type of failure would have a material adverse impact on the
quality of AT&T Wireless's services or its ability to roll out such future
services in some markets. AT&T Wireless intends to continue to acquire more
spectrum through a combination of alternatives, including participation in
spectrum auctions, purchase of spectrum
17
licenses from companies that own them or purchase of these companies outright.
As required by law, the FCC periodically conducts auctions for licenses to use
some parts of the radio spectrum. The decision to conduct auctions, and the
determination of what spectrum frequencies will be made available for auction,
are provided for by laws administered by the FCC. The FCC may not allocate
spectrum sufficient to meet the demands of all those wishing to obtain licenses.
Even if the FCC determines to conduct further auctions in the future, AT&T
Wireless may not be successful in those future auctions in obtaining the
spectrum that it believes is necessary to implement its business and technology
strategies. AT&T Wireless may also seek to acquire radio spectrum through
purchases and swaps with other spectrum licensees or otherwise, including by
purchases of other licensees outright. However, AT&T Wireless may not be able to
acquire sufficient spectrum through these types of transactions, and it may not
be able to complete any of these transactions on favorable terms.
AT&T WIRELESS'S BUSINESS AND OPERATIONS COULD BE HURT IF IT IS UNABLE TO
ESTABLISH NEW AFFILIATES TO EXPAND ITS DIGITAL NETWORK OR IF ITS EXISTING OR ANY
NEW AFFILIATES DO NOT OR CANNOT DEVELOP THEIR SYSTEMS IN A MANNER CONSISTENT
WITH AT&T WIRELESS'S SYSTEMS.
To accelerate the build out of widescale coverage of the United States by a
digital mobile wireless network operating on the technical standards AT&T
Wireless has adopted, AT&T Wireless has entered into affiliation agreements with
other entities that provide wireless service or hold spectrum licenses. Through
contractual arrangements between AT&T Wireless and these affiliates, AT&T
Wireless's customers are able to obtain service in the affiliates' territories,
and the affiliates' customers are able to obtain service in AT&T Wireless's
territory. In all markets where these affiliates operate, AT&T Wireless is at
risk because it does not control the affiliates. As a result, these affiliates
are not obligated to implement AT&T Wireless's third-generation strategy. AT&T
Wireless's ability to provide service on a nationwide level and to implement its
third-generation strategy would be adversely affected if these affiliates decide
not to participate in the further development of AT&T Wireless's digital
network. AT&T Wireless may establish additional affiliate relationships to
accelerate build out of its digital mobile network. If AT&T Wireless is unable
to establish such affiliate relationships, or if any such affiliates are unable
to or do not develop their systems in a manner consistent with AT&T Wireless's
network, AT&T Wireless's ability to service its customers and expand the
geographic coverage of its digital network could be adversely affected.
IF THE FCC DENIES ALASKA NATIVE WIRELESS'S APPLICATION TO ACQUIRE LICENSES
FOR WHICH IT WAS THE SUCCESSFUL BIDDER IN THE RECENT SPECTRUM AUCTION, OR, IN
THE FUTURE, REVOKES LICENSES AWARDED TO ALASKA NATIVE WIRELESS, AT&T WIRELESS'S
ABILITY TO IMPLEMENT ITS THIRD-GENERATION STRATEGY COULD BE ADVERSELY AFFECTED
OR IT COULD BECOME OBLIGATED TO REPURCHASE OTHER INVESTORS' INTERESTS IN ALASKA
NATIVE WIRELESS.
AT&T Wireless has agreed to invest $2.6 billion in exchange for a
combination of a non-controlling equity interest in and debt securities issued
by Alaska Native Wireless, which was the successful bidder for licenses costing
$2.9 billion in the recently concluded 1900 megahertz auction, which occurred in
early 2001. One auction participant has challenged the qualifications of Alaska
Native Wireless to acquire "closed" licenses, which constituted most of the
licenses for which Alaska Native Wireless was the successful bidder. If the FCC
determines that Alaska Native Wireless was not qualified, the FCC could refuse
to grant Alaska Native Wireless the closed licenses. On June 22, 2001, a federal
appeals court ruled in favor of the trustee in the Chapter 11 bankruptcy
proceeding of NextWave Telecom, Inc. and the unsecured creditors of NextWave
with respect to the litigation they commenced relating to the 1900 megahertz
auction. The court ruled that the FCC had acted improperly in repossessing from
NextWave the spectrum offered in the 1900 megahertz auction. The United States,
the FCC, NextWave Telecom, Inc. and several of its affiliates and certain
winning bidders in the 1900 megahertz auction, including Alaska Native Wireless,
signed a settlement agreement effective as of November 26, 2001. Under the
settlement agreement, NextWave and its affiliates would return all of those
licenses to the FCC, which thereafter would award the licenses in accordance
with the auction. The settlement is subject to a number of conditions, including
bankruptcy court approval and the adoption of federal legislation necessary to
implement the terms of the settlement. If this settlement does not become
effective, or if the appeals court decision is not appealed or otherwise
settled, or if Alaska Native Wireless is otherwise unable to acquire
18
the licenses for which it was the successful bidder, it could have a significant
adverse impact on AT&T Wireless's opportunities to provide or enhance services
in key new and existing markets. In specified circumstances, if a winning bid of
Alaska Native Wireless in the recently concluded 1900 megahertz spectrum auction
is rejected or if any license granted to it is revoked, AT&T Wireless would
become obligated to compensate other investors for making capital available to
the venture. In specified circumstances, if the grant of those licenses is
challenged, AT&T Wireless may be obligated to purchase the interests of other
investors.
IF AT&T WIRELESS IS UNABLE TO REACH AGREEMENT WITH ALASKA NATIVE WIRELESS
REGARDING THE DEVELOPMENT AND USE OF LICENSES FOR WHICH IT WAS THE SUCCESSFUL
BIDDER IN THE RECENT SPECTRUM AUCTION, ITS ABILITY TO IMPLEMENT ITS
THIRD-GENERATION STRATEGY MAY BE ADVERSELY AFFECTED.
AT&T Wireless has not reached any agreements with Alaska Native Wireless as
to whether it will participate in AT&T Wireless's digital mobile wireless
network. Alaska Native Wireless is not obligated to use or develop any spectrum
it acquires in a manner that will further, or be consistent with, AT&T
Wireless's strategic objectives, although Alaska Native Wireless is obligated to
use technology that is compatible and interoperable with AT&T Wireless's digital
mobile wireless network. If Alaska Native Wireless does not enter into
agreements with AT&T Wireless regarding the use and development of this spectrum
similar to those AT&T Wireless has entered into with its affiliates for its
existing networks, AT&T Wireless could experience a material adverse impact on
the timing and cost of implementing its third-generation strategy.
POTENTIAL ACQUISITIONS MAY REQUIRE AT&T WIRELESS TO INCUR SUBSTANTIAL
ADDITIONAL DEBT AND INTEGRATE NEW TECHNOLOGIES, OPERATIONS AND SERVICES, WHICH
MAY BE COSTLY AND TIME-CONSUMING.
An element of AT&T Wireless's strategy is to expand its network, which it
intends to accomplish in part through the acquisition of TeleCorp and which it
may pursue through other acquisitions of licenses, systems and wireless
providers. The acquisition of TeleCorp will result in AT&T Wireless's assumption
of substantial additional indebtedness. Further, other acquisitions may cause
AT&T Wireless to incur substantial additional indebtedness to finance such
acquisitions or to assume indebtedness of the entities that are acquired. In
addition, AT&T Wireless may encounter difficulties in integrating those acquired
operations into its own operations, including as a result of different
technologies, systems, services or service offerings. These actions could prove
costly or time-consuming or divert its management's attention from other
business matters.
FAILURE TO DEVELOP FUTURE BUSINESS OPPORTUNITIES MAY HAVE AN ADVERSE EFFECT
ON AT&T WIRELESS'S GROWTH POTENTIAL.
AT&T Wireless intends to pursue a number of new growth opportunities,
primarily related to wireless data services. The ability to deploy and deliver
these services relies, in many instances, on new and unproven technology. AT&T
Wireless's existing technology may not perform as expected and AT&T Wireless may
not be able to successfully develop new technology to effectively and
economically deliver these services. These opportunities also require
substantial capital outlays and spectrum availability to deploy on a large
scale. This capital or spectrum may not be available to support these services.
The success of wireless data services is substantially dependent on the ability
of others to develop applications for wireless devices and to develop and
manufacture devices that support wireless applications. These applications or
devices may not be developed or developed in sufficient quantities to support
the deployment of wireless data services. These services may not be widely
introduced and fully implemented at all or in a timely fashion. These services
may not be successful when they are in place, and customers may not purchase the
services offered. If these services are not successful or costs associated with
implementation and completion of the rollout of these services materially exceed
those currently estimated by us, AT&T Wireless's financial condition and
prospects could be materially adversely affected.
AT&T WIRELESS FACES SUBSTANTIAL COMPETITION.
There is substantial competition in the wireless telecommunications
industry. AT&T Wireless expects competition to intensify as a result of the
entry of new competitors and the development of new
19
technologies, products and services. Other two-way wireless providers, including
other cellular and personal communications services, operators and resellers,
serve each of the markets in which AT&T Wireless competes. A majority of U.S.
markets likely will have five or more commercial mobile radio service providers,
and all of the top 50 U.S. metropolitan markets likely will have at least four,
and in some cases as many as seven or more, facilities-based wireless service
providers offering wireless services on cellular, personal communications
services or specialized mobile radio frequency. Competition also may increase to
the extent that smaller, stand-alone wireless providers transfer licenses to
larger, better capitalized and more experienced wireless providers.
MARKET PRICES FOR WIRELESS SERVICES MAY DECLINE IN THE FUTURE.
AT&T Wireless anticipates that market prices for two-way wireless services
generally will decline in the future due to increased competition. AT&T Wireless
expects significant competition among wireless providers, including from new
entrants, to continue to drive service and equipment prices lower. AT&T Wireless
also expects that there will be increases in advertising and promotional
spending, along with increased demands on access to distribution channels. All
of this may lead to greater choices for customers, possible consumer confusion,
and increasing movement of customers between competitors, which AT&T Wireless
refers to as "churn." AT&T Wireless may also adopt customer policies or programs
to be more competitive, including credit policies, which policies or programs
may also affect churn. AT&T Wireless's ability to compete successfully also will
depend on marketing, and on its ability to anticipate and respond to various
competitive factors affecting the industry, including new services, changes in
consumer preferences, demographic trends, economic conditions and discount
pricing strategies by competitors.
CONSOLIDATION IN THE WIRELESS COMMUNICATIONS INDUSTRY MAY ADVERSELY AFFECT
AT&T WIRELESS.
The wireless communications industry has been experiencing significant
consolidation and AT&T Wireless expects that this consolidation will continue.
The previously announced mergers or joint ventures of Bell Atlantic
Corporation/GTE Corporation/Vodafone AirTouch, now called Verizon,
SBC/BellSouth, now called Cingular, and Deutsche Telekom/VoiceStream Wireless,
have created large, well-capitalized competitors with substantial financial,
technical, marketing and other resources to respond to AT&T Wireless's
offerings. These mergers or ventures have caused AT&T Wireless's ranking to
decline to third in U.S. revenue and U.S. subscriber share. In terms of U.S.
population covered by licenses, AT&T Wireless, including its partnership and
affiliates, ranks third. As a result, these competitors may be able to offer
nationwide services and plans more quickly and more economically than AT&T
Wireless, to obtain roaming rates that are more favorable than those obtained by
AT&T Wireless, and may be better able to respond to AT&T Wireless's offers.
SIGNIFICANT TECHNOLOGICAL CHANGES IN THE WIRELESS INDUSTRY COULD MATERIALLY
ADVERSELY AFFECT AT&T WIRELESS.
The wireless communications industry is experiencing significant
technological change. This change includes the increasing pace of digital
upgrades in existing analog wireless systems, evolving industry standards,
ongoing improvements in the capacity and quality of digital technology, shorter
development cycles for new products, enhancements and changes in end-user needs
and preferences and increased importance of data and broadband capabilities. The
pace and extent of customer demand may not continue to increase, and airtime and
monthly recurring charges may continue to decline. As a result, the future
prospects of the industry and of AT&T Wireless and the success of AT&T
Wireless's competitive services remain uncertain. Also, alternative technologies
may develop for the provision of services to customers that may provide wireless
communications service or alternative service superior to that available from
AT&T Wireless. Technological developments may therefore materially adversely
affect AT&T Wireless.
TERMINATION OR IMPAIRMENT OF AT&T WIRELESS'S RELATIONSHIP WITH A SMALL
NUMBER OF KEY SUPPLIERS COULD ADVERSELY AFFECT ITS REVENUES AND RESULTS OF
OPERATIONS.
AT&T Wireless has developed relationships with a small number of key
vendors, including Nokia Mobile Phones, Inc., Telefonaktiebolaget LM Ericsson,
Mitsubishi Corporation, and Motorola, Inc., for its
20
supply of wireless handsets, Lucent Technologies, Inc., Nortel Networks, Inc.,
Ericsson and Nokia Networks, Inc. for its supply of telecommunications
infrastructure equipment and Convergys Information Management Group for its
billing services. AT&T Wireless does not have operational or financial control
over its key suppliers and has limited influence with respect to the manner in
which these key suppliers conduct their businesses. If these key suppliers were
unable to honor their obligations to AT&T Wireless, AT&T Wireless could
experience disruptions of its business and adverse effects on its revenues and
results of operations.
AT&T WIRELESS'S TECHNOLOGY MAY NOT BE COMPETITIVE WITH OTHER TECHNOLOGIES
OR BE COMPATIBLE WITH NEXT GENERATION TECHNOLOGY.
There are three existing digital transmission technologies, none of which
is compatible with the others. AT&T Wireless selected time division multiple
access technology for its second-generation network because AT&T Wireless
believes that this technology offers several advantages over other second-
generation technologies. However, a number of other wireless service providers
chose code division multiple access or global system for mobile communications
as their digital wireless technology. For AT&T Wireless's path to next
generation technology, it has chosen a global system for mobile communications
platform to make available enhanced data services using general packet radio
service technology, and third-generation capabilities using enhanced data rates
for global evolution and ultimately universal mobile telecommunications systems
technologies. These technologies may not provide the advantages AT&T Wireless
expects. Other wireless providers have chosen a competing wideband technology as
their third-generation technology. If the universal mobile telecommunications
standard does not gain widespread acceptance, it would materially adversely
affect AT&T Wireless's business, financial condition and prospects. As AT&T
Wireless implements its plans for deployment of technology for third-generation
capabilities, it will continue to incur substantial costs associated with
maintaining its time division multiple access networks. Also, these networks are
not compatible, and customers with phones that operate on one network will not
initially be able to use those phones on the other network. There are risks
inherent in the development of new third-generation equipment and AT&T Wireless
may face unforeseen costs, delays or problems that may have a material adverse
effect on the company.
AT&T WIRELESS RELIES ON FAVORABLE ROAMING ARRANGEMENTS, WHICH IT MAY BE
UNABLE TO CONTINUE TO OBTAIN.
AT&T Wireless may not continue to be able to obtain or maintain roaming
agreements with other providers on terms that are acceptable to it. AT&T
Wireless's customers automatically can access another provider's analog cellular
or digital system only if the other provider allows AT&T Wireless's customers to
roam on its network. AT&T Wireless relies on agreements to provide roaming
capability to its customers in many areas of the United States that its network
does not serve. Some competitors, because of their call volumes or their
affiliations with, or ownership of, wireless providers, however, may be able to
obtain roaming rates that are lower than those rates obtained by AT&T Wireless.
In addition, the quality of service that a wireless provider delivers during a
roaming call may be inferior to the quality of service AT&T Wireless or an
affiliated company provides, the price of a roaming call may not be competitive
with prices of other wireless providers for such call, and AT&T Wireless's
customers may not be able to use any of the advanced features, such as voicemail
notification, that the customer enjoys when making calls within AT&T Wireless's
network. Finally, AT&T Wireless may not be able to obtain favorable roaming
agreements for its third-generation products and services that it intends to
offer using the technologies it plans to deploy for interim enhanced data and
third-generation services.
AT&T WIRELESS'S BUSINESS IS SEASONAL AND IT DEPENDS ON FOURTH QUARTER
RESULTS, WHICH MAY NOT CONTINUE TO BE STRONG.
The wireless industry, including AT&T Wireless, has experienced a trend of
generating a significantly higher number of customer additions and handset sales
in the fourth quarter of each year as compared to the other three fiscal
quarters. A number of factors contribute to this trend, including the increasing
use of retail distribution, which is dependent upon the year-end holiday
shopping season, the timing of new product and service announcements and
introductions, competitive pricing pressures, and aggressive
21
marketing and promotions. Strong fourth quarter results for customer additions
and handset sales may not continue for the wireless industry or for AT&T
Wireless. In the future, the number of AT&T Wireless's customer additions and
handset sales in the fourth quarter could decline for a variety of reasons,
including its inability to match or beat pricing plans offered by competitors,
failure to adequately promote its products, services and pricing plans, or
failure to have an adequate supply or selection of handsets. If in any year
fourth quarter results fail to significantly improve upon customer additions and
handset sales from the year's previous quarters, this could adversely impact
AT&T Wireless's results for the following year.
MEDIA REPORTS HAVE SUGGESTED RADIO FREQUENCY EMISSIONS MAY BE LINKED TO
VARIOUS HEALTH CONCERNS AND INTERFERE WITH VARIOUS MEDICAL DEVICES, AND AT&T
WIRELESS MAY BE SUBJECT TO POTENTIAL LITIGATION RELATING TO THESE HEALTH
CONCERNS.
Media and other reports have linked radio frequency emissions from wireless
handsets to various health concerns, including cancer, and to interference with
various electronic medical devices, including hearing aids and pacemakers.
Research and studies are ongoing. Whether or not such research or studies
conclude there is a link between radio frequency emissions and health, these
concerns over radio frequency emissions may discourage the use of wireless
handsets or expose AT&T Wireless to potential litigation, which could have a
material adverse effect on AT&T Wireless's results of operations. Several class
action lawsuits have been filed against AT&T Wireless, several other wireless
service operators and several wireless phone manufacturers, asserting products
liability, breach of warranty and other claims relating to radio frequency
transmissions to and from wireless phones. The complaints seek damages for
personal injuries and the costs of headsets for wireless phone users as well as
injunctive relief.
AT&T WIRELESS'S OPERATIONS ARE SUBJECT TO GOVERNMENT REGULATION THAT COULD
HAVE ADVERSE EFFECTS ON AT&T WIRELESS'S BUSINESS.
The licensing, construction, operation, sale, resale and interconnection
arrangements of wireless communications systems are regulated to varying degrees
by the FCC, and, depending on the jurisdiction, state and local regulatory
agencies. These regulations may include, among other things, required service
features and capabilities, such as number portability or emergency 911 service.
In addition, the FCC, together with the U.S. Federal Aviation Administration,
regulates tower marking and lighting. Any of these agencies having jurisdiction
over AT&T Wireless's business could adopt regulations or take other actions that
could adversely affect AT&T Wireless's business. FCC licenses to provide
wireless services or personal communications services are subject to renewal and
revocation. There may be competition for AT&T Wireless's licenses upon their
expiration and it is possible that the FCC will not renew them. FCC rules
require all wireless and personal communications services licensees to meet
specified build out requirements. AT&T Wireless may not be able to meet these
requirements in each market. Failure to comply with these requirements in a
given license area could result in revocation or forfeiture of AT&T Wireless's
license for that license area or the imposition of fines on AT&T Wireless by the
FCC.
AT&T WIRELESS MAY BE SUBJECT TO POTENTIAL LITIGATION RELATING TO THE USE OF
WIRELESS PHONES WHILE DRIVING.
Some studies have indicated that some aspects of using wireless phones
while driving may impair drivers' attention in some circumstances, making
accidents more likely. These concerns could lead to potential litigation
relating to accidents, deaths or serious bodily injuries, or to new restrictions
or regulations on wireless phone use, any of which also could have material
adverse effects on AT&T Wireless's results of operations.
STATE AND LOCAL LEGISLATION RESTRICTING OR PROHIBITING WIRELESS PHONE USE
WHILE DRIVING COULD CAUSE SUBSCRIBER USAGE TO DECLINE.
Some state and local legislative bodies have proposed legislation
restricting or prohibiting the use of wireless phones while driving motor
vehicles. Similar laws have been enacted in other countries. On June 28, 2001,
New York State enacted a law prohibiting the use of handheld wireless phones
while driving motor vehicles other than through the use of hands-free equipment.
To date, a small number of communities in the United States have also passed
restrictive local ordinances. These laws, or if passed,
22
other laws prohibiting or restricting the use of wireless phones while driving,
could have the effect of reducing subscriber usage, which could cause a material
adverse effect on AT&T Wireless's results of operations.
AT&T WIRELESS MAY BE UNABLE TO MAKE THE CHANGES NECESSARY TO OPERATE AS AN
INDEPENDENT ENTITY AND MAY INCUR GREATER COSTS.
AT&T Wireless has been part of an integrated telecommunications provider
since its acquisition by AT&T Corp. in 1994. Following the split-off from AT&T
Corp. on July 9, 2001, however, AT&T Corp. has no obligation to provide
financial, operational or organizational assistance to AT&T Wireless other than
limited services. AT&T Wireless may not be able to implement successfully the
changes necessary to operate independently. AT&T Wireless may also incur
additional costs relating to operating independently that would cause its cash
flow and results of operations to decline materially. In addition, although AT&T
Wireless may be able to participate in some of AT&T Corp.'s supplier
arrangements where those arrangements permit or the vendors agree, AT&T
Wireless's supplier arrangements may not be as favorable as has historically
been the case.
Agreements that AT&T Wireless has entered into in connection with the
split-off provide that its business will be conducted differently and that its
relationship with AT&T Corp. will be different from what it has historically
been prior to the split-off. These differences may have a detrimental effect on
AT&T Wireless's results of operations or financial condition.
THE HISTORICAL FINANCIAL INFORMATION OF AT&T WIRELESS GROUP MAY NOT BE
REPRESENTATIVE OF AT&T WIRELESS'S RESULTS AS AN INDEPENDENT ENTITY AND,
THEREFORE, MAY NOT BE RELIABLE AS AN INDICATOR OF AT&T WIRELESS'S HISTORICAL OR
FUTURE RESULTS.
The historical financial information of AT&T Wireless Group may not reflect
what AT&T Wireless's results of operations, financial position and cash flows
would have been had it been an independent entity during the periods presented.
This is because the financial information reflects allocations for services
provided to AT&T Wireless Group by AT&T Corp., which allocations may not reflect
the costs AT&T Wireless incurs for similar or incremental services as an
independent entity.
AT&T WIRELESS WILL GENERALLY BE RESPONSIBLE FOR TAX LIABILITY IF THE
SPLIT-OFF IS TAXABLE.
Under the separation and distribution agreement between AT&T Wireless and
AT&T Corp., subject to limited exceptions, AT&T Wireless will be responsible for
any tax liability and any related liability that results from the split-off
failing to qualify as a tax-free transaction. If the split-off failed to qualify
as a tax-free transaction, this liability would have a material adverse effect
on AT&T Wireless.
AT&T WIRELESS MAY NO LONGER RECEIVE TAX SHARING PAYMENTS FROM AT&T CORP.
SINCE IT CEASED TO BE A MEMBER OF THE AT&T CORP. CONSOLIDATED TAX RETURN GROUP,
AND AT&T WIRELESS MAY INCUR OTHER TAX LIABILITIES AS A RESULT OF THE SPLIT-OFF
AND PRE-SPLIT-OFF TRANSACTIONS.
As a result of the split-off, AT&T Wireless ceased to be a member of the
consolidated federal income tax return group of which AT&T Corp. is the common
parent. Consequently, taxable income and losses, and AT&T Wireless's other tax
attributes in post-split-off taxable periods can generally no longer offset
taxable income or losses and other tax attributes of the AT&T Corp. consolidated
tax return group. For two taxable years after the split-off, under U.S. federal
income tax rules, AT&T Wireless would generally be able to carry back any such
tax losses, subject to limitations, against taxable income, if any, of members
of AT&T Wireless Group for pre-split-off periods. Under AT&T Wireless's tax
sharing agreement with AT&T Corp., however, AT&T Wireless generally may only
carry back net operating losses (and not other tax attributes) from
post-split-off taxable periods to pre-split-off taxable periods, and only if
those losses are significant and with the consent of AT&T Corp., which consent
AT&T Corp. has agreed not to withhold unreasonably. To the extent AT&T Wireless
has tax losses in post-split-off taxable periods, it would generally no longer
receive current tax sharing payments with respect to those losses. Instead,
except where those losses can be carried back, AT&T Wireless would benefit from
those losses only if and when it generated sufficient taxable income in future
years to utilize those tax losses on a stand-alone basis.
23
In addition, there may be tax costs associated with the split-off that
result from AT&T Wireless's ceasing to be a member of the AT&T Corp.
consolidated tax return group, as well as from pre-split-off transactions. If
incurred, these costs could be material to AT&T Wireless's results.
VARIOUS FACTORS MAY INTERFERE WITH AT&T WIRELESS'S ABILITY TO ENGAGE IN
DESIRABLE STRATEGIC TRANSACTIONS AND EQUITY ISSUANCES.
AT&T Wireless may be prevented from engaging in some desirable strategic
transactions. The Internal Revenue Code restricts the ability of a company which
has undergone a tax-free split-off from particular issuances of shares generally
within a two-year period after the split-off. In addition, the separation and
distribution agreement prohibits AT&T Wireless, for a period of 30 months
following the split-off, from entering into particular transactions that could
render the split-off taxable. This may discourage, delay or prevent a merger,
change of control, or other strategic or capital raising transactions involving
AT&T Wireless's issuance of equity. Provisions of AT&T Wireless's amended and
restated certificate of incorporation and by-laws, rights plan, applicable law
and the DoCoMo agreements may also have the effect of discouraging, delaying or
preventing change of control transactions that AT&T Wireless stockholders find
desirable.
AT&T WIRELESS MAY LOSE RIGHTS UNDER AGREEMENTS WITH AT&T CORP. IF A CHANGE
OF CONTROL OCCURS.
Some of the agreements that AT&T Wireless has entered into with AT&T Corp.
in connection with the split-off, including the brand license agreement, master
carrier agreement and other commercial agreements, contain provisions that give
one party rights in the event of a change of control of the other party. These
provisions may deter a change of control. In the event of a change of control,
the exercise of these rights could have a material adverse effect on AT&T
Wireless.
AT&T CORP.'S RESTRUCTURING MAY ADVERSELY IMPACT AT&T WIRELESS'S COMPETITIVE
POSITION.
In connection with AT&T Corp.'s restructuring, there is a risk that AT&T
Wireless and AT&T Corp.'s other separated business units may not be able to
create effective intercompany agreements to facilitate effective cost sharing or
to maintain or enter into arrangements for combining their respective services
in customer offerings or other forms of bundling arrangements. Competition
between AT&T Wireless and the other AT&T Corp. units in overlapping markets
could result in more downward price pressure. AT&T Wireless expects that the
different businesses and companies will share the AT&T brand after the
restructuring, which will likely increase this level of competition. In
addition, any incremental costs associated with implementing AT&T Corp.'s
restructuring plan may materially adversely affect the different businesses and
companies, including AT&T Wireless's business.
24
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking information. The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking information to encourage companies to provide prospective
information about themselves without fear of litigation so long as that
information is identified as forward-looking and is accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in the information.
Forward-looking information may be included in this proxy statement/prospectus
or may be incorporated by reference from other documents filed with the SEC by
AT&T Wireless and TeleCorp and may include statements for the periods from and
after the completion of the merger. You can find many of these statements by
looking for words including, for example, "believes," "expects," "anticipates,"
"estimates" or similar expressions in this proxy statement/prospectus or in
documents incorporated by reference in this proxy statement/prospectus.
These forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those contemplated by these forward-looking
statements. You should understand that various factors, in addition to those
discussed elsewhere in this proxy statement/prospectus and in the documents
referred to in this proxy statement/prospectus, could affect the future results
of the combined company following the merger and could cause results to differ
materially from those expressed in these forward-looking statements, including:
- revenues following the merger may be lower than expected;
- synergies expected to be realized as a result of the merger may be lower
than anticipated;
- costs or difficulties related to the integration of the business of AT&T
Wireless and TeleCorp may be greater than expected;
- competitive pressures may increase in the industry or markets in which
the companies operate;
- delays in receiving regulatory approval of the merger and the risks that
such approvals could include restrictive conditions;
- changes in general economic conditions or in political forces;
- changes in the securities or currency-exchange markets;
- dependence on key personnel to manage the integration of the two
companies;
- risks associated with the implementation of a third-generation network
and business strategy, including risks relating to the operations of new
systems and technologies, substantial required expenditures and potential
unanticipated costs, the need to enter into roaming agreements with third
parties, uncertainties regarding the adequacy of suppliers and consumer
acceptance of the products and services to be offered;
- potential impact of NTT DoCoMo, Inc.'s investment in AT&T Wireless,
including provisions of the agreements that restrict AT&T Wireless's
future operations, and provisions that may require the repurchase of
DoCoMo's investment under some circumstances if AT&T Wireless fails to
meet specified conditions;
- risks associated with AT&T Wireless operating as an independent entity as
opposed to as part of an integrated telecommunications provider with AT&T
Corp., its former corporate parent;
- introduction or popularity of new products and services, including
prepaid phone products, which could increase churn;
- impact of oversupply of capacity resulting from excessive deployment of
network capacity in the markets that AT&T Wireless and TeleCorp serve;
25
- ability to enter into agreements to provide, and the cost of entering new
markets necessary to provide, nationwide services;
- ability to establish a significant market presence in new geographic and
service markets;
- availability and cost of capital and the consequences of increased
leverage;
- impact of any unusual items resulting from ongoing evaluations of
business strategies;
- requirements imposed on the combined company or latitude allowed to
competitors by the FCC or state regulatory commissions under the
Telecommunications Act of 1996 or other applicable laws and regulations;
- risks and costs associated with the need to acquire additional spectrum
for current and future services;
- risks associated with technological requirements, technology substitution
and changes and other technological developments;
- risks associated with AT&T Wireless's decision to exit the fixed wireless
business;
- risks described under "Risk Factors;" and
- other risks described in AT&T Wireless's and TeleCorp's other filings
with the SEC.
You are cautioned not to place undue reliance on these statements, which
speak only as of the date of this document or, in the case of documents
incorporated by reference, the dates of those documents.
All subsequent written and oral forward-looking statements attributable to
AT&T Wireless or TeleCorp or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to in this section. Neither AT&T Wireless nor TeleCorp undertakes any obligation
to release publicly any revisions to these forward-looking statements to reflect
events or circumstances after the date of this proxy statement/prospectus or to
reflect the occurrence of unanticipated events, except as may be required under
applicable securities law.
26
THE COMPANIES
AT&T WIRELESS
AT&T Wireless is one of the largest wireless communications service
providers in the United States. AT&T Wireless seeks to expand its customer base
and revenue stream by providing high-quality, innovative wireless services. As
of September 30, 2001, AT&T Wireless had 17.1 million consolidated subscribers.
For the year ended December 31, 2000 AT&T Wireless had:
- $10.4 billion of consolidated revenues, and
- $658 million of consolidated net income.
AT&T Wireless operates one of the largest U.S. digital wireless networks.
As of September 30, 2001, AT&T Wireless and its affiliates (including TeleCorp)
and partner held 850 megahertz and 1900 megahertz licenses to provide wireless
services covering 98% of the U.S. population. As of that date, AT&T Wireless,
its affiliates (including TeleCorp) and its partner covered approximately 83% of
the U.S. population with at least 30 megahertz of wireless spectrum. At the same
date, AT&T Wireless's networks and those of its affiliates (including TeleCorp)
and partner operated in markets including over 77% of the U.S. population and in
all 50 of the largest U.S. metropolitan areas. AT&T Wireless supplements its
operations with roaming agreements that allow its subscribers to use other
providers' wireless services in regions where it does not have operations. With
these roaming agreements, AT&T Wireless is able to offer customers wireless
services covering over 95% of the U.S. population. AT&T Wireless plans to
continue to increase its coverage and the quality of its services by expanding
its coverage area and the capacity of its network through new network
construction, acquisitions, and partnerships with other wireless providers.
AT&T Wireless has not been affiliated with AT&T Corp., its former corporate
parent, since its split-off from AT&T Corp. on July 9, 2001.
AT&T Wireless's principal executive offices are located at 16331 NE 72 Way,
Building 1, Redmond, WA 98052. The telephone number is (425) 580-6000.
TL ACQUISITION CORP.
TL Acquisition Corp. is a newly formed wholly owned subsidiary of AT&T
Wireless formed for the purpose of effecting the merger.
TELECORP
TeleCorp, through its operating subsidiaries, TeleCorp Wireless and Tritel,
is the largest AT&T Wireless affiliate in the United States, providing digital
wireless personal communications services to a licensed service area covering
approximately 37 million people. As of September 30, 2001, TeleCorp had launched
service in 91 markets having approximately 33 million people and representing
approximately 89% of the population where it holds licenses in the United States
and Puerto Rico. As of September 30, 2001, TeleCorp Wireless and Tritel
collectively had more than 915,000 customers. Together with Triton PCS, Inc.,
another AT&T Wireless affiliate, TeleCorp operates under a common regional brand
name, SunCom(R).
The markets in which TeleCorp provides coverage encompass a contiguous
territory (other than Puerto Rico) including the following 16 of the 100 largest
metropolitan areas in the United States and Puerto Rico: New Orleans and Baton
Rouge, Louisiana; Memphis, Nashville and Knoxville, Tennessee; Little Rock,
Arkansas; Milwaukee and Madison, Wisconsin; Des Moines, Iowa; Jackson,
Mississippi; Birmingham and Mobile, Alabama; Louisville and Lexington, Kentucky;
and San Juan and Mayaguez, Puerto Rico.
27
THE TELECORP SPECIAL MEETING
This proxy statement/prospectus is being furnished to you in connection
with the solicitation of proxies by the TeleCorp board of directors in
connection with the merger and any other matters to be voted upon at the
TeleCorp special meeting or postponement thereof. This proxy
statement/prospectus is first being mailed to stockholders of TeleCorp on
[ ].
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting is scheduled to be held as follows:
[Date], 200[ ]
[Time], local time
[Location]
PURPOSE OF THE SPECIAL MEETING
The special meeting is being held so that TeleCorp stockholders may
consider and vote upon a proposal to adopt a merger agreement among TeleCorp,
AT&T Wireless and TL Acquisition Corp., a wholly owned subsidiary of AT&T
Wireless, pursuant to which TeleCorp will become a wholly owned subsidiary of
AT&T Wireless, and to transact any other business that properly comes before the
special meeting or any adjournment or postponement of the special meeting.
Adoption of the merger agreement will also constitute approval of the merger and
the other transactions contemplated by the merger agreement.
RECORD DATE AND STOCKHOLDERS ENTITLED TO VOTE
The board of directors of TeleCorp has fixed the close of business on
[ ], 200[ ] as the record date for determination of TeleCorp
stockholders entitled to notice of, and to vote at, the special meeting. On the
record date, there were:
- [ ] shares of class A voting common stock outstanding, held
by approximately [ ] holders of record;
- 283,813 shares of class C common stock outstanding, held by approximately
[ ] holders of record;
- 851,429 shares of class D common stock outstanding, held by approximately
[ ] holders of record;
- 5,245.70 shares of class E common stock outstanding, held by one holder
of record;
- 37,717.31 shares of class F common stock outstanding, held by
approximately [ ] holders of record;
- 3,093 shares of voting preference common stock outstanding, held by three
holders of record;
- 97,472.84 shares of series A convertible preferred stock outstanding,
held by one holder of record;
- 90,668.33 shares of series B preferred stock outstanding, held by one
holder of record;
- 210,608.01 shares of series C preferred stock outstanding, held by
approximately [ ] holders of record;
- 49,916.98 shares of series D preferred stock outstanding, held by one
holder of record;
- 25,454.59 shares of series E preferred stock outstanding, held by
approximately [ ] holders of record;
- 14,912,778 shares of series F preferred stock outstanding, held by one
holder of record; and
- 46,374.10 shares of series G preferred stock outstanding, held by one
holder of record.
28
VOTE REQUIRED AT THE SPECIAL MEETING
When a majority of the TeleCorp voting preference common stock outstanding
as of the record date is represented, and when shares of all classes of common
stock and preferred stock with at least 5,010,000 votes are represented, either
in person or by proxy, a quorum will be present at the special meeting. The
affirmative vote of holders of a majority of the voting power of shares, voting
as a single class, outstanding as of the record date and voting at the special
meeting, is required to adopt the merger agreement. Except as otherwise required
by law, if a quorum is present at the special meeting, the majority vote of the
voting preference common stock will be sufficient to adopt the merger agreement.
At the special meeting:
- the holders of the class A voting common stock, class C common stock,
class D common stock, class E common stock and class F common stock,
together with the holders of the series F preferred stock and series G
preferred stock, are entitled to an aggregate of 4,690,000 votes, as a
class, regardless of the number of shares outstanding;
- the holders of series A convertible preferred stock are entitled to an
aggregate of 67,804 votes regardless of the number of shares outstanding;
- the holders of series B preferred stock are entitled to an aggregate of
61,608 votes regardless of the number of shares outstanding;
- the holders of series C preferred stock are entitled to an aggregate of
124,096 votes regardless of the number of shares outstanding;
- the holders of series D preferred stock are entitled to an aggregate of
30,308 votes regardless of the number of shares outstanding;
- the holders of series E preferred stock are entitled to an aggregate of
16,184 votes regardless of the number of shares outstanding; and
- the holders of the voting preference common stock are entitled to an
aggregate of 5,010,000 votes.
The number of votes to which each share of each class or series of stock is
entitled is more fully set forth in the following table:
NUMBER OF SHARES VOTES VOTES
OUTSTANDING PER CLASS PER SHARE
---------------- ------------- ---------
COMMON STOCK:(a)
class A voting common stock................. [ ] [ ] [ ]
class C common stock........................ 283,813 [ ] [ ]
class D common stock........................ 851,429 [ ] [ ]
class E common stock........................ 5,245.70 [ ] [ ]
class F common stock........................ 37,717.31 [ ] [ ]
series F preferred stock(b)(c).............. 14,912,778 [ ] [ ]
series G preferred stock(b)(d).............. 46,374.10 [ ] [ ]
PREFERRED STOCK:
series A convertible preferred stock........ 97,472.84 67,804 [ ]
series B preferred stock.................... 90,668.33 61,608 [ ]
series C preferred stock.................... 210,608.01 124,096 [ ]
series D preferred stock.................... 49,916.98 30,308 [ ]
series E preferred stock.................... 25,454.59 16,184 [ ]
VOTING PREFERENCE COMMON STOCK:
voting preference common stock.............. 3,093 5,010,000.00 1,619.787
---------- ------------- ---------
TOTAL:...................................... [ ] 10,000,000.00 N/A
---------------
(a) The votes per share are calculated by dividing (1) the total votes
allocated to the holders of the class A voting common stock, class C common
stock, class D common stock, class E common stock
29
and class F common stock, together with the holders of the series F
preferred stock and series G preferred stock (4,690,000.00) by (2) the
aggregate outstanding shares of such classes and series ( ). The votes
per class are calculated by multiplying the number of outstanding shares of
each such class by the quotient derived under the prior sentence ( ).
The votes per share figures indicated in this table have been rounded for
convenience purposes; however, such rounding was not utilized in
calculating the votes per class.
(b) Series F and G shares are combined with common stock for voting purposes.
(c) Represents 14,717,715 shares of class A voting common stock and 195,063
shares of class D common stock into which the outstanding series F
convertible preferred stock is convertible.
(d) Represents 14,971,876 shares of class A voting common stock and 9,494 shares
of class F common stock into which the outstanding series G convertible
preferred stock is convertible.
AS OF THE RECORD DATE, TELECORP DIRECTORS AND EXECUTIVE OFFICERS, INCLUDING
MESSRS. VENTO AND SULLIVAN, OWNED A MAJORITY OF THE VOTING POWER OF TELECORP
CAPITAL STOCK ENTITLED TO VOTE AT THE TELECORP SPECIAL MEETING. UNDER THE VOTING
AGREEMENTS WITH TELECORP AND AT&T WIRELESS, MESSRS. VENTO AND SULLIVAN AND OTHER
STOCKHOLDERS OF TELECORP HAVE AGREED TO VOTE ALL OF THEIR SHARES OF TELECORP
CAPITAL STOCK, WHICH REPRESENTS A MAJORITY OF THE VOTING POWER OF TELECORP
CAPITAL STOCK ENTITLED TO VOTE AT THE SPECIAL MEETING, IN FAVOR OF THE ADOPTION
OF THE MERGER AGREEMENT AND AGAINST COMPETING PROPOSALS. ACCORDINGLY,
STOCKHOLDER ADOPTION OF THE MERGER AGREEMENT IS ASSURED.
PROXIES
All shares of TeleCorp capital stock represented by properly executed
proxies or voting instructions received before or at the TeleCorp special
meeting will, unless the proxies or voting instructions are revoked, be voted in
accordance with the instructions indicated on those proxies or voting
instructions. If no instructions are indicated on a properly executed proxy card
or voting instruction, the shares will be voted "FOR" adoption of the merger
agreement. You are urged to mark the box on the proxy card to indicate how to
vote your shares.
If a properly executed proxy card or voting instruction is returned and the
stockholder has abstained from voting on adoption of the merger agreement, the
TeleCorp capital stock represented by the proxy or voting instruction will be
considered present at the special meeting for purposes of determining a quorum,
but will not be considered to have been voted in favor of adoption of the merger
agreement. If your shares are held in an account at a brokerage firm or bank,
you must instruct them on how to vote your shares. If an executed proxy card is
returned by a broker or bank holding shares which indicates that the broker or
bank does not have discretionary authority to vote on adoption of the merger
agreement, the shares will be considered present at the special meeting for
purposes of determining the presence of a quorum, but will not be considered to
have been voted in favor of adoption of the merger agreement. Your broker or
bank will vote your shares only if you provide instructions on how to vote by
following the information provided to you by your bank or broker.
TeleCorp does not expect that any matter other than the adoption of the
merger agreement will be brought before its special meeting. If, however, other
matters are properly presented, the persons named as proxies will vote in
accordance with their judgment with respect to those matters, unless authority
to do so is withheld on the proxy card.
A stockholder may revoke his or her proxy at any time before it is voted
by:
- notifying in writing the Secretary of TeleCorp at 1010 N. Glebe Road,
Suite 800, Arlington, VA 22201;
- granting a subsequently dated proxy; or
- appearing in person and voting at the special meeting if you are a holder
of record.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
30
SOLICITATION OF PROXIES
TeleCorp and AT&T Wireless will equally share the expenses incurred in
connection with the printing and mailing of this proxy statement/prospectus.
TeleCorp will also request banks, brokers and other intermediaries holding
shares of TeleCorp capital stock beneficially owned by others to send this proxy
statement/prospectus to, and obtain proxies from, the beneficial owners and will
reimburse the holders for their reasonable expenses in doing so. TeleCorp has
also retained Georgeson Shareholder Communications Inc. to aid in the
solicitation of proxies from TeleCorp stockholders in connection with the
special meeting. Georgeson will receive a fee of approximately $10,500 as
compensation for its services, plus reimbursement of reasonable out-of-pocket
expenses. TeleCorp may also use its regular employees, who will not be specially
compensated, to solicit proxies from TeleCorp stockholders, either personally or
by mail, telephone, internet, fax or other means.
YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. A
TRANSMITTAL LETTER WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES
WILL BE MAILED TO YOU AS SOON AS PRACTICABLE AFTER COMPLETION OF THE MERGER.
31
THE MERGER
BACKGROUND OF THE MERGER
AT&T Wireless participated in the formation of TeleCorp in 1998, and
TeleCorp has been one of AT&T Wireless's business affiliates throughout
TeleCorp's existence. Since TeleCorp's initial public offering in 1999, AT&T
Wireless has periodically reviewed and considered whether to increase its
investment, or seek to consolidate, the wireless communications operations of
the two companies. Similarly, TeleCorp, both before and after its recent
combination with Tritel, has continually reviewed and considered its strategic
alternatives in light of developing trends in the wireless communications
industry, including significant industry consolidation, the availability of
capital to finance network construction and subscriber growth, and its
relationship with AT&T Wireless.
In late July 2001, Rohit M. Desai, a non-management director of TeleCorp,
contacted William Hague, Executive Vice President, Corporate Development,
Mergers and Acquisitions at AT&T Wireless, to suggest that it might be an
appropriate time for AT&T Wireless to consider making a proposal to acquire the
equity of TeleCorp that AT&T Wireless did not already own. This contact led to a
meeting at which informal discussions were held during the first week of August
between Mr. Hague, Mr. Desai, James M. Hoak, Jr. and Michael R. Hannon, each a
non-management director of TeleCorp, and, separately, with Gerald T. Vento,
chief executive officer and director of TeleCorp, and Thomas H. Sullivan,
executive vice president, chief financial officer and director of TeleCorp. No
specific terms or transactions were proposed in these discussions and, in late
August 2001, Mr. Hague informed Messrs. Vento and Sullivan and several other
TeleCorp directors that AT&T Wireless was not prepared to make an acquisition
proposal at that time.
On Friday, September 28, 2001, Mr. Hague and Lewis M. Chakrin, Executive
Vice President/Corporate Strategy & Planning of AT&T Wireless, contacted Messrs.
Hannon, Hoak, Sullivan and Vento and indicated that, while AT&T Wireless had not
determined whether to make any proposal, AT&T Wireless would like to discuss the
parameters pursuant to which AT&T Wireless would consider the possibility of
making a proposal to acquire the shares of TeleCorp that AT&T Wireless did not
already own, including possible structures, ranges of prices or exchange ratios,
and timing. In particular, the AT&T Wireless representatives indicated that any
exchange ratio proposal would be unlikely to be above 0.8 of a share of AT&T
Wireless common stock for each share of TeleCorp common stock. Messrs. Hague and
Chakrin also left a telephone message for Mr. Desai to similar effect. While not
agreeing to any particular parameters, the TeleCorp directors agreed that
representatives of AT&T Wireless and TeleCorp should meet during the following
week.
On Monday, October 1, 2001, three non-management directors of TeleCorp,
Messrs. Hannon, Hoak and Desai, and two management directors of TeleCorp,
Messrs. Vento and Sullivan, as well as other TeleCorp senior management, held a
preliminary meeting with Lehman Brothers and JPMorgan (the financial advisors to
TeleCorp), Cadwalader, Wickersham & Taft (outside legal counsel to TeleCorp) and
Andrew Hubregsen, a representative of CTIHC, Inc. (the largest TeleCorp
stockholder other than AT&T Wireless), at the offices of JPMorgan in New York
City. At this meeting, TeleCorp's financial advisors presented preliminary
financial analyses relating to TeleCorp, AT&T Wireless and a possible
acquisition of TeleCorp by AT&T Wireless, including information designed to
assist TeleCorp in negotiating a higher exchange ratio than the exchange ratio
then contemplated by AT&T Wireless. Management and its legal and financial
advisors responded to questions posed to them by TeleCorp directors present at
the meeting. TeleCorp board members, management, legal and financial advisors
and the representative of CTIHC then discussed negotiating tactics and possible
transaction parameters in the event that discussions with AT&T Wireless were to
proceed. In addition, the non-management directors and the CTIHC representative
asked Mr. Hannon to participate with the senior management in any discussions
with AT&T Wireless and to keep Messrs. Hoak and Desai and the representative of
CTIHC apprised of any discussions.
On Tuesday, October 2, 2001, Messrs. Hannon, Vento and Sullivan, and other
TeleCorp senior management and the financial and legal advisors of TeleCorp met
with Messrs. Hague and Chakrin, other
32
representatives of AT&T Wireless management, and the financial and legal
advisors of AT&T Wireless at the offices of Wachtell, Lipton, Rosen & Katz
(outside legal counsel to AT&T Wireless), in New York City. During the course of
the meeting, representatives of AT&T Wireless indicated that they were exploring
the possible interest of AT&T Wireless in acquiring TeleCorp and described the
parameters that they might consider in this regard. In particular, the AT&T
Wireless representatives reiterated their view that any exchange ratio proposal
would be unlikely to be above 0.8 of a share of AT&T Wireless common stock for
each share of TeleCorp common stock. AT&T Wireless also indicated that any
possible agreement with it would require stockholders representing a majority of
the TeleCorp voting power to enter into agreements with AT&T Wireless requiring
such stockholders to vote their TeleCorp shares in favor of the transaction and
preventing those holders from selling or transferring their shares for specified
periods of time. AT&T Wireless suggested that in a possible proposal, TeleCorp
series C and E preferred stock (the only series of preferred stock that were not
owned exclusively by subsidiaries of AT&T Wireless) could be converted into AT&T
Wireless common stock at a discount from its liquidation preference, but invited
further discussion on this point. AT&T Wireless also expressed concern that
leaks or rumors concerning a possible transaction could affect the relative
trading prices of AT&T Wireless and TeleCorp common stock, which could affect
the ability of the parties to achieve a transaction at an exchange ratio
acceptable to both. As a result, AT&T Wireless indicated that if it were to
proceed with merger discussions, it would terminate discussions if a definitive
merger agreement were not executed before the open of stock market trading on
Monday, October 8, 2001 or if TeleCorp failed to pursue such discussions with
AT&T Wireless on an exclusive basis. Further, AT&T Wireless stated that, as a
stockholder of TeleCorp, AT&T Wireless was not a seller of its TeleCorp shares
and was not prepared to support an alternative transaction between TeleCorp and
a third party and would likely withhold any consent to any such competing
transaction required of AT&T Wireless under the TeleCorp stockholders agreement.
Discussions continued throughout the day, including as to ranges of
potential exchange ratios and the treatment of the TeleCorp series C and E
preferred stock, with the TeleCorp representatives periodically updating and
receiving guidance from Messrs. Hoak and Desai as well as the representative of
CTIHC. Ultimately, these directors (with the exception of Mr. Desai) reached a
consensus that they would be willing to recommend to the TeleCorp board of
directors a proposal that provided for a common stock exchange ratio of 0.9 and
for the conversion of TeleCorp series C and E preferred shares into
substantially identical AT&T Wireless preferred shares, and also provided
TeleCorp with adequate capital raising flexibility to fund its business plan and
other expenses. That evening, the TeleCorp representatives informed AT&T
Wireless of this consensus. The AT&T Wireless representatives indicated that
they would consider TeleCorp's position, and a meeting was scheduled between
AT&T Wireless and TeleCorp representatives for Wednesday, October 3, 2001.
Also on Tuesday, October 2, 2001, AT&T Wireless and TeleCorp executed a
customary confidentiality agreement permitting the exchange of confidential
information for due diligence purposes.
Meetings between representatives of AT&T Wireless and TeleCorp, including
separate sessions between the respective financial advisors, continued
throughout the morning and afternoon of Wednesday, October 3, 2001. Initially,
AT&T Wireless discussed a range of exchange ratios above that discussed the
previous day, but below the 0.9 exchange ratio suggested by the TeleCorp
representatives. The TeleCorp representatives stated that they would terminate
discussions with respect to any possible transaction that did not provide for an
exchange ratio for the TeleCorp common stock of at least 0.9. At one point, AT&T
Wireless's financial advisor suggested that a collar mechanism could perhaps
bridge the gap between the range of exchange ratios discussed by the AT&T
Wireless representatives and the 0.9 exchange ratio suggested by the TeleCorp
representatives. The TeleCorp representatives did not agree to this suggestion,
and reiterated their position with respect to the common stock exchange ratio.
Later in the day, after internal discussion, the AT&T Wireless representatives
informed the TeleCorp representatives that, subject to the relative trading
ratio of the public stock of the two companies remaining relatively stable, the
representatives would be willing to consider and discuss with the AT&T Wireless
board of directors the possibility of making a proposal that would meet
TeleCorp's requirements for a 0.9 common stock
33
exchange ratio and conversion of TeleCorp series C and E preferred shares into
substantially identical AT&T Wireless preferred shares and would address
TeleCorp's need for capital raising flexibility.
Later on Wednesday afternoon, October 3, 2001, Messrs. Hannon, Vento and
Sullivan contacted the remaining members of the TeleCorp board of directors to
inform them of the discussions with AT&T Wireless. A special meeting of the
TeleCorp board of directors was called for Thursday, October 4, 2001.
Beginning on Thursday, October 4, 2001, and continuing through Sunday,
October 7, 2001, AT&T Wireless and TeleCorp and their respective representatives
conducted legal and financial diligence activities in anticipation of a possible
transaction.
On Thursday, October 4, 2001, TeleCorp held a special meeting of its board
of directors, with some directors attending this meeting by telephone. In
addition to members of the board of directors, the meeting was attended by
TeleCorp senior management; TeleCorp's financial advisors; Cadwalader,
Wickersham & Taft; Richards Layton & Finger (special Delaware counsel to
TeleCorp); Sullivan & Cromwell (counsel to Mr. Desai) and Simpson Thacher &
Bartlett (counsel to the financial advisors of TeleCorp). As previously
contemplated, Gary Wendt, the chief executive officer of Conseco Inc., the
ultimate parent of CTIHC, was elected to the TeleCorp board of directors. Mr.
Hague, Michael Benson and Ann K. Hall, each of whom were then employees of AT&T
Wireless, left the meeting after Mr. Wendt's election. Thereafter, Messrs. Vento
and Sullivan reviewed the possible proposal with the directors, including the
strategic reasons favoring a transaction with AT&T Wireless, and the principal
expected terms and potential risks and benefits associated with such a
transaction. They also reviewed the strategic and financial alternatives
available to TeleCorp in the absence of such a transaction and the financial
condition and business operations of TeleCorp. TeleCorp's legal advisors
provided an overview of the directors' fiduciary duties in the context of a
possible transaction with AT&T Wireless. TeleCorp's legal advisors then reviewed
for the board of directors the potential interests that each member of the board
of directors might be deemed to have in connection with a possible transaction,
as more fully described in "The Merger -- Interests of Directors and Officers of
TeleCorp in the Merger" and the relationships, if any, of TeleCorp's financial
advisors with either TeleCorp or AT&T Wireless, as more fully described in "The
Merger -- Opinions of TeleCorp's Financial Advisors." Several directors asked
questions of senior management and TeleCorp's legal and financial advisors, and
a lengthy discussion and debate regarding the proposed transaction and its
potential risks and benefits ensued. In particular, the directors discussed (1)
whether TeleCorp should solicit other potential acquirors, (2) the proposed
timing for submitting a possible proposal to the board of directors, (3) AT&T
Wireless's requirement in connection with a possible proposal that it receive a
termination fee should a definitive merger agreement be executed but the merger
not be completed under specified circumstances, (4) whether AT&T Wireless would
agree to a contract provision permitting the TeleCorp board of directors to
terminate the merger agreement in order to accept a superior proposal from a
third party, and (5) whether a higher exchange ratio could be negotiated with
AT&T Wireless and, in each case, the directors discussed the risk that AT&T
Wireless would terminate discussions if TeleCorp insisted on any of such
matters. In addition, Mr. Desai suggested the desirability of making the
possible transaction contingent upon receiving the consent of stockholders
representing a majority of the TeleCorp class A voting common stock held by the
general public.
At the meeting, the TeleCorp board of directors determined that TeleCorp
should pursue further discussions with AT&T Wireless regarding a possible
proposal, but should seek improvements in the terms, including inquiring whether
AT&T Wireless would consider conditioning any proposed transaction on the
receipt of approval of stockholders representing a majority of the TeleCorp
class A voting common stock held by the general public or allowing the TeleCorp
board of directors to have the right to terminate the merger agreement in order
to accept a superior proposal from a third party. The TeleCorp board of
directors also authorized TeleCorp management to execute definitive engagement
agreements with Lehman Brothers and JPMorgan as the financial advisors for
TeleCorp with respect to a possible transaction, which TeleCorp management did.
34
On Thursday, October 4, 2001, outside counsel to AT&T Wireless provided
outside counsel to TeleCorp with a form of merger agreement and forms of voting
agreements from which to begin discussions on the type of definitive
documentation that would be appropriate for a transaction should AT&T Wireless
make a proposal and the board of directors of each company decide to pursue such
a proposed transaction.
Additionally, beginning on Thursday, October 4, 2001, and continuing
throughout the weekend, Messrs. Hannon, Vento and Sullivan, and other TeleCorp
senior management contacted some of the TeleCorp stockholders who are
signatories to the TeleCorp stockholders agreement with regard to the
possibility of amending the stockholders agreement in order to permit
stockholders representing a majority of the voting power of TeleCorp to enter
into voting agreements with AT&T Wireless in the event that AT&T Wireless were
to make a proposal that was approved by the TeleCorp board of directors.
On Friday, October 5, 2001, Mr. Wendt resigned from the TeleCorp board of
directors for reasons that he indicated were not related to the board's
consideration of the possible proposal from AT&T Wireless.
Negotiations and discussions between the parties and their respective legal
and financial advisors continued on Friday, October 5, 2001, principally at the
offices of Wachtell, Lipton, Rosen & Katz. At 5:30 p.m., New York time, AT&T
Wireless held a telephonic meeting of its board of directors at which the
directors received an update and recommendation from the AT&T Wireless senior
management and AT&T Wireless's financial and legal advisors. Following this
meeting, at which AT&T Wireless's management was authorized to proceed with the
discussions, representatives of AT&T Wireless met with TeleCorp's
representatives and made a proposal to acquire TeleCorp in a merger transaction
providing for an exchange ratio of 0.9 of a share of AT&T Wireless common stock
for each share of TeleCorp common stock, conversion of TeleCorp series C and E
preferred stock into substantially identical AT&T Wireless preferred stock and
otherwise on the terms set forth in the forms of merger agreement and voting
agreements previously provided by advisors to AT&T Wireless. AT&T Wireless
reiterated that it would withdraw its proposal if a definitive merger agreement
were not executed before the open of stock market trading on Monday, October 8,
2001 or if TeleCorp failed to negotiate with AT&T Wireless on an exclusive
basis.
Following the proposal on the evening of October 5, 2001, diligence
activities and negotiations continued throughout the weekend, including with
respect to TeleCorp's request for inclusion of a right for TeleCorp to terminate
the merger agreement to accept a superior proposal, which AT&T Wireless did not
agree to, and with respect to the amount of the termination fee AT&T Wireless
would receive under some circumstances, which AT&T Wireless agreed to reduce
from the $150 million that was previously requested to $65 million. During these
discussions, the parties also established the exchange ratios for the shares of
the TeleCorp series A, B, D, F and G preferred stock (those series of TeleCorp
preferred stock owned solely by subsidiaries of AT&T Wireless).
On Sunday, October 7, 2001, the TeleCorp board of directors met for
approximately seven hours to consider and vote upon the proposed transaction. In
addition to the members of the TeleCorp board of directors, the meeting was
attended by members of TeleCorp management, and representatives of Cadwalader,
Wickersham & Taft; Richards Layton & Finger; Wiley, Rein & Fielding LLP (FCC
special counsel to TeleCorp); TeleCorp's financial advisors; Sullivan &
Cromwell; and Simpson Thacher & Bartlett. Messrs. Hague and Benson and Ms. Hall
did not attend the meeting until near the end of the meeting, after all
deliberations, as discussed below.
During the meeting, Messrs. Vento and Sullivan updated the directors as to
the status of negotiations with AT&T Wireless and reviewed for the directors the
background, strategic rationale and potential benefits and risks of the proposed
transaction, including those discussed under "-- TeleCorp's Reasons for the
Merger" and "Risk Factors -- Risk Factors Relating to the Merger." TeleCorp's
legal advisors made a detailed presentation as to the directors' fiduciary
duties to TeleCorp and its stockholders and conducted a detailed discussion of
the material terms of the merger agreement and the related documents, including
provisions intended to provide TeleCorp with sufficient capital raising
flexibility prior to the expected
35
completion of the merger, as well as the contractual restrictions of the
TeleCorp stockholders agreement which have the effect of limiting the ability of
TeleCorp to pursue some merger and asset sales transactions without the prior
written consent of a wholly owned subsidiary of AT&T Wireless. In particular,
TeleCorp's legal advisors reported that AT&T Wireless had insisted that the
merger agreement include provisions limiting the ability of TeleCorp to solicit
or approve offers from other potential buyers and would not agree to condition
the proposed transaction on the consent of stockholders representing a majority
of the TeleCorp class A voting common stock held by the general public or allow
the TeleCorp board of directors to terminate the merger agreement to accept a
superior proposal. They also reported that AT&T Wireless had agreed to lower the
amount of the termination fee it would receive if the merger agreement were
terminated in specified circumstances from $150 million to $65 million. They
also reported that AT&T Wireless had indicated that it was still concerned about
the risk of unauthorized disclosure on the relative trading prices of AT&T
Wireless and TeleCorp public stock and, consequently, it would withdraw its
proposal if a definitive merger agreement were not executed before the open of
stock market trading on Monday, October 8, 2001 or if TeleCorp failed to
negotiate with AT&T Wireless on an exclusive basis. At the meeting, TeleCorp's
legal advisors offered the board members an opportunity to supplement
disclosures regarding and/or ask questions regarding the interests of board
members in the proposed transaction as described for the board of directors at
the previous meeting and the TeleCorp legal advisors also responded to
questions. Finally, the directors were informed that, as required by AT&T
Wireless, holders of a majority of the voting power in TeleCorp had indicated
that if the TeleCorp board of directors were to approve a transaction with AT&T
Wireless, those holders would enter into voting agreements committing them to
vote their shares in favor of the transaction.
Next, representatives of TeleCorp's financial advisors presented to the
directors a summary of their financial analyses related to the merger.
TeleCorp's financial advisors discussed their views concerning the strategic
rationale of the merger as well as the view that the likelihood of a successful
transaction with an alternative acquirer was low, particularly in light of the
contractual restrictions imposed on TeleCorp by the TeleCorp stockholders
agreement. TeleCorp's financial advisors responded to questions from the board
of directors. In addition, TeleCorp's financial advisors orally delivered their
opinions (which were later confirmed in writing), to the effect that, as of the
date thereof and based on and subject to the assumptions, limitations and
qualifications set forth in the applicable opinion,
- other than with respect to AT&T Wireless, the proposed exchange ratio
applicable to the TeleCorp class A voting, class C, class D, class E and
class F common stock was fair, from a financial point of view, to the
holders of those classes of common stock; and
- other than with respect to AT&T Wireless, the proposed exchange ratio
applicable to the TeleCorp series C and E preferred stock was fair, from
a financial point of view, to the holders of those series of preferred
stock.
The financial advisors were not requested to, and did not express opinions
as to the fairness of the transaction for the holders of the voting preference
common stock, all shares of which are held by Messrs. Vento, Sullivan and
Mounger, or the series A, B, D, F or G preferred stock, all shares of which are
wholly owned by subsidiaries of AT&T Wireless.
After an extensive review and discussion of the proposed merger, the
TeleCorp board of directors, without the participation of Messrs. Hague and
Benson and Ms. Hall, by a vote of five to two, with Messrs. Desai and Mounger
voting against, approved the merger agreement and the transactions contemplated
thereby, declared them in the best interests of the TeleCorp stockholders and
resolved to recommend that the TeleCorp stockholders approve the proposed
merger. At the request of the five board members who approved the merger
agreement, in order to ensure that technical requirements contained in
TeleCorp's stockholders agreement were satisfied, the proposed merger was then
approved by the full TeleCorp board of directors, including Messrs. Hague and
Benson and Ms. Hall, by a vote of eight to two, with Messrs. Desai and Mounger
voting against.
The AT&T Wireless board of directors also met on the afternoon of October
7, 2001. At this meeting, the AT&T Wireless board of directors received updates
from its senior management and legal
36
and financial advisors, and unanimously approved the merger agreement and the
related agreements and the transactions contemplated thereby.
Following the respective board meetings, representatives of TeleCorp and
AT&T Wireless finalized the merger agreement and the related documents, and
stockholders of TeleCorp, including a wholly owned subsidiary of AT&T Wireless,
executed and delivered an amendment to the TeleCorp stockholders agreement
allowing stockholders to enter into voting agreements in connection with the
merger. Messrs. Vento and Sullivan and CB Capital Investors, L.P., CTIHC, Hoak
Communications Partners and HCP Capital Fund, L.P. executed voting agreements
with TeleCorp and AT&T Wireless pursuant to which they agreed to vote their
TeleCorp stock in favor of the merger and to restrictions on their ability to
transfer their TeleCorp shares. TeleCorp, AT&T Wireless and TL Acquisition Corp.
executed the merger agreement, and, on the morning of Monday, October 8, 2001,
issued a press release to that effect.
TELECORP'S REASONS FOR THE MERGER; RECOMMENDATION OF THE TELECORP BOARD
Recommendation of the TeleCorp Board
The TeleCorp board of directors, by a vote of five to two, with three
directors affiliated with AT&T Wireless not participating, has determined that
the terms of the merger agreement are advisable, fair to and in the best
interests of TeleCorp and its stockholders and has approved the merger agreement
and the transactions contemplated by it.
ACCORDINGLY, THE TELECORP BOARD RECOMMENDS THAT TELECORP STOCKHOLDERS VOTE
"FOR" ADOPTION OF THE MERGER AGREEMENT.
TeleCorp's Reasons for the Merger
In light of the developing trends in the telecommunications industry and
consolidation in the wireless PCS market, the TeleCorp board of directors
believes that the merger represents a strategic opportunity to allow the
stockholders of TeleCorp to realize superior long-term returns. The TeleCorp
board of directors believes that, following the merger, the combined company
will have greater financial strength, operational efficiencies and growth
potential than either TeleCorp or AT&T Wireless would have had on its own.
TeleCorp's board of directors identified a number of potential benefits of
the merger and considered the following material factors supporting the decision
to approve the merger agreement and the transactions contemplated thereby.
Risks associated with Financing and Executing TeleCorp's Transition to
GSM/GPRS. The TeleCorp board of directors believed that it would be necessary
for TeleCorp to build a GSM/GPRS network if it were to continue its existence as
an independent entity in order to realize the benefits of its relationship with
AT&T Wireless. The board of directors realized that developing and building a
GSM/GPRS network would require a substantial capital expenditure, that
additional funding would be necessary, that the plans and expected expenditures
to complete the network were uncertain and that there could be no guarantee of a
positive return on its investment.
The board of directors considered the difficulty in raising the funding
necessary to design and build a GSM/GPRS network in light of uncertainties
concerning the ability and willingness of Lucent Technologies Inc. to fulfill
its financing obligations to TeleCorp, the difficulty of obtaining other debt
funding due to market conditions in general, and the difficulty of making a
public equity offering in light of current market conditions in general, as well
as the downward pressure exerted on the price of TeleCorp class A voting common
stock as a result of sales, and possible future sales, of large amounts of stock
by TeleCorp's initial investors seeking liquidity. The directors were also aware
that the credit agreement of Tritel, a TeleCorp subsidiary, would need to be
amended, and considered the likelihood that the terms of such amendment would be
unfavorable.
37
The board of directors believed that the financing concerns would be
alleviated by the merger because the combined entity would have a significantly
greater amount of financial resources available and a higher credit rating than
TeleCorp on a stand-alone basis.
Financial Terms of the Transaction -- Premium Valuation; Continuing
Interest in the Combined Company. The board of directors considered the
following factors and determined that the merger was financially attractive to
TeleCorp and its stockholders in light of the historical market prices and
volatility of TeleCorp and AT&T Wireless stock:
- the 0.9 exchange ratio would represent a substantial premium to TeleCorp
stockholders based on the closing prices of TeleCorp class A voting
common stock and AT&T Wireless common stock during various recent periods
prior to the announcement of the merger (which premium was equal to
approximately 45% on the last day of market trading prior to announcement
of the merger) and a risk existed that if the signing of the merger
agreement were delayed, the exchange ratios offered in the future, if
offered at all, would not be as attractive;
- the TeleCorp board of directors believed that not only the TeleCorp class
A voting common stock, but also the AT&T Wireless common stock, was
undervalued by the market and recognized that the holders of TeleCorp
common stock would receive AT&T Wireless common stock, and not cash, in
exchange for their TeleCorp shares;
- the TeleCorp board of directors also recognized that holders of TeleCorp
common stock would receive AT&T Wireless common stock in exchange for
their TeleCorp common stock, would therefore obtain a continuing interest
in the combined company on favorable terms, and would participate in any
appreciation in the trading price of AT&T Wireless common stock occurring
after October 7, 2001, the date the merger agreement was signed;
- the greater liquidity of AT&T Wireless common stock when compared with
the liquidity of TeleCorp common stock;
- the expectation that the merger would generally be tax-free for federal
income tax purposes;
- the possibility that TeleCorp's stockholders who retain their AT&T
Wireless shares received in the merger might benefit from an additional
premium if AT&T Wireless were to be acquired by another company at some
point in the future, taking into account the potential tax consequences
to AT&T Wireless should such a transaction occur; and
- the expectation that, due to AT&T Wireless's superior credit rating, the
AT&T Wireless series C preferred shares and AT&T Wireless series E
preferred shares would have greater value than the TeleCorp series C
preferred shares and TeleCorp series E preferred shares that such shares
would replace.
Alternatives to the Merger. The TeleCorp board of directors considered a
number of strategic alternatives and concluded that the merger represented the
most desirable strategic alternative for TeleCorp, as well as the most
attractive opportunity that was available to TeleCorp and its stockholders.
Specifically, the board of directors considered:
- the risks of TeleCorp continuing as an independent entity including those
associated with designing, building and financing a GSM/GPRS network, as
described above;
- the current industry, economic and market conditions and trends,
including the likelihood of continuing consolidation and increased
competition in the wireless communications industry, and the belief that
a combined and larger company would be better positioned to succeed by
taking advantage of economies of scale, its stronger capital structure
and greater financial resources; and
- the relatively low likelihood that another merger partner could provide a
better alternative to TeleCorp and its stockholders based upon the
existing relationship between AT&T Wireless and TeleCorp, the ability of
AT&T Wireless to impede a merger between TeleCorp and another entity, the
fact that TeleCorp's service area was a better fit with AT&T Wireless's
service area than that
38
of other wireless service providers and the presentations of TeleCorp's
financial advisors which the TeleCorp board of directors believed indicated a
scarcity of other attractive potential merger partners.
Relatively Low Integration Risk. The TeleCorp board of directors
determined that there would be a strong strategic and technological fit between
TeleCorp's and AT&T Wireless's wireless communications business and operations.
In particular, the board of directors noted that the mobile communications
services of each company are based on compatible network platforms using TDMA
technology and that TeleCorp's services are already marketed using AT&T Wireless
co-branding.
New Opportunities for Growth. The TeleCorp board of directors believed
that combining the wireless communications business of TeleCorp and AT&T
Wireless will create growth opportunities not available to TeleCorp without the
merger. These include opportunities:
- to offer seamless services in an expanded area;
- to accelerate the introduction of next-generation wireless voice and data
services; and
- to use AT&T Wireless's greater financial resources to expand the AT&T
Wireless network.
Stockholder Support. The TeleCorp board of directors considered the
support of TeleCorp stockholders for the merger as evidenced by the following:
- TeleCorp stockholders (other than AT&T Wireless and its subsidiaries)
owning approximately 42% of the outstanding TeleCorp class A voting
common stock executed an amendment to the TeleCorp stockholders agreement
allowing stockholders to enter into the voting agreements described
below.
- Holders of TeleCorp common stock representing 61.5% of the voting power
of TeleCorp stock, and 28.1% of the total TeleCorp class A voting common
stock outstanding, supported and agreed to vote in favor of the merger.
Opinion of Financial Advisor. TeleCorp's financial advisors, Lehman
Brothers and JPMorgan, made detailed presentations and responded to questions of
the TeleCorp board members at both of the special meetings of the TeleCorp board
of directors. The presentations included a description of the financial aspects
of the merger and of the various strategic alternatives available to TeleCorp.
At the October 7, 2001 special meeting of the TeleCorp board of directors, the
financial advisors delivered their oral opinions, which were subsequently
confirmed in writing, to the effect that, as of October 7, 2001, and based on
and subject to the assumptions, limitations, qualifications and other matters
set forth in the opinions, that the applicable exchange ratio to be received by
(1) the holders of TeleCorp common stock (other than the voting preference
common stock and other than with respect to AT&T Wireless) is fair, from a
financial point of view, to those stockholders and (2) the holders of TeleCorp
series C and E preferred stock (other than AT&T Wireless) is fair, from a
financial point of view, to those stockholders.
Likelihood of Completion. The TeleCorp board of directors believed that
the nature and relatively limited number of conditions to the completion of the
merger, and the ability of TeleCorp and AT&T Wireless to fulfill those
conditions, would increase the likelihood that the merger would be completed.
TeleCorp's board of directors also identified a number of potential risks
of the merger and considered factors unfavorable to the decision to approve the
merger agreement and the transactions contemplated thereby, including the
following factors and risks:
- the risk that, because the exchange ratio is fixed, the market value of
AT&T Wireless common shares to be received in the merger may decrease
significantly after the date that the merger agreement is executed, and
the absence of any provision allowing for an adjustment of the exchange
ratio or termination of the merger agreement in that event;
- the risk that the anticipated potential benefits from the merger may not
be fully achieved (see "Risk Factors");
39
- the management and employee distraction inherent in integrating two
companies (see "Risk Factors");
- the other risks associated with an investment in AT&T Wireless, described
under "Risk Factors";
- the risk that the FCC or other regulatory authorities may delay or refuse
to approve the merger or impose conditions that could adversely affect
the business or financial condition of the combined company;
- the limitations imposed by the merger agreement on the conduct of
TeleCorp's business prior to the merger;
- the limitations placed on the ability of the TeleCorp board of directors
by the terms of the merger agreement to respond to possible superior
third-party proposals to acquire TeleCorp; and
- the statements, views and concerns expressed by the dissenting directors,
including the following:
- those in a letter from Mr. Mounger on October 6, 2001, a day prior to
the final board meeting to consider the transaction, to the TeleCorp
board of directors in which Mr. Mounger: (1) expressed his belief that
(a) he had not been provided with sufficient information to make an
informed decision concerning the proposed transaction, (b) based on the
information then in his possession, the proposed transaction may not be
in the best interests of stockholders and (c) the proposed exchange
ratio of 0.9 appeared inadequate; (2) expressed his concerns that (a) he
and the other TeleCorp board members may not have sufficient time to
evaluate any additional information provided prior to the board meeting
on October 7, 2001 and, in connection therewith, suggested that the
October 7th meeting be postponed, (b) in his opinion, Cadwalader,
Wickersham & Taft and certain of the board members negotiating on behalf
of TeleCorp may have conflicts with respect to representing TeleCorp in
negotiating the proposed transaction; (3) inquired as to what actions
may have been taken by the TeleCorp representatives negotiating the
proposed transaction to seek other entities that may be interested in
acquiring TeleCorp and, in connection with the foregoing, Mr. Mounger
noted the letter agreements, dated November 13, 2000, and amended as of
December 22, 2000 (see "Interests of TeleCorp Directors and Officers in
the Merger; Relationships with AT&T Wireless -- AT&T Wireless Right of
First Refusal to Purchase Shares of TeleCorp Stock"), and (4) stated
that he had not as of that time determined whether he would vote for or
against approving the merger agreement;
- those expressed verbally by Mr. Mounger at the October 7, 2001 board
meeting including: (1) his belief that the exchange ratio for the common
stock was not as high as he would like even when considering the
downward pressure exerted on the price of TeleCorp stock previously
discussed; (2) his preference, even when considering market and
financial risks, to delay a transaction with AT&T Wireless because he
believed that the number of TeleCorp subscribers would increase,
TeleCorp would improve its financial condition and TeleCorp senior
management was doing a good job; and (3) his statement that if Messrs.
Vento and Sullivan were willing to disclose the financial terms of a
series of equity purchase agreements (see "-- Interests of TeleCorp
Directors and Officers in the Merger; Relationships with AT&T
Wireless"), then he might vote in favor of the merger; and
- those in the following statement read by Mr. Desai at the October 7,
2001 meeting of the TeleCorp board of directors:
"I am voting against the proposed transaction with AT&T Wireless because
I believe that the exchange ratio that has been proposed is inadequate.
A decision is being taken today to sell Telecorp when its share price
languishes near an all-time low. Furthermore, I believe that the
proposed exchange ratio translates into selling the Company below its
intrinsic value. The Company's own investment bankers have previously
presented to us an analysis of intrinsic value materially in excess of
the current offer. The underlying spectrum together with the network and
subscribers of the Company is worth substantially more than what AT&T
Wireless is offering. In
40
addition, I believe that the combination of Telecorp and AT&T Wireless
presents significant potential synergies which are not being adequately
reflected in the exchange ratio to benefit Telecorp's stockholders.
I also believe that under these circumstances the proposed merger should
be approved by a majority of the public stockholders of the Company."
In regard to the investment banker analysis referred to by Mr. Desai
(presented on October 1, 2001), the directors considered that JPMorgan had
informed the TeleCorp board at the board meeting on October 7, 2001 that the
preliminary analysis was neither prepared for the purpose of valuing TeleCorp
nor used by JPMorgan in rendering its fairness opinion with respect to the
exchange ratio. Instead, the analysis was prepared at the request of TeleCorp as
a basis with which to negotiate a higher exchange ratio with AT&T Wireless. The
analysis in question compared the actual trading prices of TeleCorp class A
voting common stock and AT&T Wireless common stock on September 28, 2001 to a
hypothetical intrinsic equity value per share based upon the estimated aggregate
value of subscribers, spectrum, and net property, plant and equipment (less
debt) of each entity. The analysis indicated that the per share prices of both
AT&T Wireless common stock and TeleCorp class A voting common stock were trading
at a discount to their respective hypothetical intrinsic equity value per share
set forth in the analysis.
TeleCorp's board of directors also considered the following factors:
- the presentations made by, and discussions with, TeleCorp's senior
management and representatives of TeleCorp's legal and financial advisors
regarding the terms and conditions of the merger agreement and the
structure of the merger;
- the totality of information available to the directors concerning the
transaction and AT&T Wireless in light of, among other things, the
extensive presentations and discussions conducted by TeleCorp's legal and
financial advisors; the fact that, because of the existing relationship
of TeleCorp and AT&T Wireless, management and the directors were familiar
with AT&T Wireless and the effects of the AT&T Wireless/TeleCorp
relationships on TeleCorp's business; and the fact that three directors
directly participated in the negotiations relating to the merger and
regularly consulted with an additional two directors regarding the terms
of the transaction;
- the impact of the merger and the newly-adopted change of control policy
on the employees of TeleCorp;
- the interests of TeleCorp directors and officers and the relationships
with AT&T Wireless described under "-- Interests of TeleCorp Directors
and Officers in the Merger; Relationships with AT&T Wireless";
- the impact of the September 11, 2001 terrorist attacks on the United
States on the ability of TeleCorp to obtain additional funding and the
stock prices and businesses of TeleCorp and AT&T Wireless;
- historical information concerning the financial performance and
condition, business operations and capital of TeleCorp and AT&T Wireless
on a stand-alone and a combined basis; and
- the relative contributions of TeleCorp and AT&T Wireless to the net
revenues and EBITDA of the combined company.
The TeleCorp directors who voted in favor of the merger agreement, and
therefore the TeleCorp board of directors, believed that the risks were
outweighed by the potential benefits to be realized by the merger.
The foregoing discussion of the information and factors considered by the
TeleCorp board of directors is not intended to be exhaustive but includes all
material factors considered by the TeleCorp board of directors. In view of the
wide variety of information and factors considered, the board of directors did
not find it practical to, and did not, assign any relative or special weights to
the foregoing factors, and individual directors may have given differing weights
to different factors. In considering the opinions of its financial advisors,
TeleCorp's board of directors considered each of the opinions as a whole and did
not
41
assign any particular weight to any individual analysis performed by its
financial advisors. TeleCorp's financial advisors did not specify to the board
whether any particular analysis did or did not support the fairness of the
applicable exchange ratio from a financial point of view. The TeleCorp board of
directors approved the merger agreement and the transactions contemplated
thereby in consideration of all of the facts, matters and information brought to
its attention.
AT&T WIRELESS'S REASONS FOR THE MERGER
As part of its overall business strategy, AT&T Wireless continually seeks
opportunities to continue the expansion of its domestic network in order to
increase the territory covered by AT&T Wireless's network, add additional
spectrum to AT&T Wireless's network, improve quality, achieve greater
efficiencies, provide consistent features regardless of location and speed
deployment of new and advanced wireless services. In addition, AT&T Wireless
participated in the formation of TeleCorp in 1998, and since TeleCorp's initial
public offering in 1999, AT&T Wireless has periodically reviewed and considered
whether to increase its investment or seek to consolidate the wireless
communications operations of the two companies. AT&T Wireless expects that the
acquisition of TeleCorp's wireless communications business will advance its
strategic objectives, in that the acquisition of TeleCorp will:
- allow AT&T Wireless to provide AT&T Wireless-branded service to 33
million additional potential customers in 91 markets, including 16 of the
100 largest markets and 8 of the 50 largest markets; and
- enable AT&T Wireless to include TeleCorp's markets in AT&T Wireless's
planned build out of its next-generation network.
As a result, AT&T Wireless believes that with the acquisition and
integration of TeleCorp, AT&T Wireless will have greater prospects for growth
and will generate significant opportunities to deliver greater value to AT&T
Wireless stockholders, including TeleCorp stockholders who become AT&T Wireless
stockholders in the merger.
OPINIONS OF TELECORP'S FINANCIAL ADVISORS
Opinion of Lehman Brothers
Lehman Brothers acted as financial advisor to TeleCorp in connection with
the merger and delivered its oral opinions to the TeleCorp board of directors at
the October 7, 2001 meeting of the TeleCorp board of directors, which opinions
were subsequently confirmed in writing, to the effect that, as of October 7,
2001, and based on and subject to the assumptions, limitations, qualifications
and other matters set forth in the opinions, the applicable exchange ratio to be
received in the merger by (1) the holders (other than AT&T Wireless) of TeleCorp
common stock, other than voting preference common stock, was fair, from a
financial point of view, to such stockholders and (2) the holders (other than
AT&T Wireless) of TeleCorp series C and E preferred stock was fair, from a
financial point of view, to such stockholders. Lehman Brothers was not asked to
opine on and its opinions did not extend to the TeleCorp voting preference
common stock or any series of preferred stock other than the series C and E
preferred stock. Accordingly, references to the TeleCorp common stock in the
following summary do not refer to the TeleCorp voting preference common stock.
The summary of the Lehman Brothers opinions set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the opinions attached as Appendix D to this proxy statement/prospectus.
Stockholders are urged to and should read the opinions in their entirety for a
discussion of assumptions made, matters considered and limitations of the review
undertaken by Lehman Brothers in rendering its opinions.
No limitations were imposed by TeleCorp on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinions, except that TeleCorp did not authorize Lehman Brothers to solicit,
and Lehman Brothers did not solicit, any indications of interest from any third
party with respect to a purchase of TeleCorp. Lehman Brothers was not requested
to and did not make any recommendation to the TeleCorp board of directors as to
the form or amount of the
42
consideration to be received by TeleCorp stockholders, which was determined
through arms-length negotiations between the parties. In arriving at its
opinions Lehman Brothers did not ascribe a specific range of values to TeleCorp
but rather compared the relative value of TeleCorp common stock to the relative
value of AT&T Wireless capital stock using the financial and comparative
analyses described below to determine the fairness, from a financial point of
view, of the applicable exchange ratio to be received by the holders of TeleCorp
common stock and TeleCorp series C and E preferred stock other than AT&T
Wireless. The Lehman Brothers opinions are for the use and benefit of the
TeleCorp board of directors and were rendered to the TeleCorp board of directors
in connection with its consideration of the merger. Lehman Brothers was not
requested to opine as to, and its opinions do not address, TeleCorp's underlying
business decision to proceed with or effect the merger. The Lehman Brothers
opinions were provided to the TeleCorp board of directors for its use and
benefit in connection with its consideration of the merger. These opinions were
not intended to be and do not constitute a recommendation to any stockholder of
TeleCorp with respect to how any stockholder should vote with respect to the
merger.
In connection with the preparation and delivery of its opinions to the
TeleCorp board of directors, Lehman Brothers performed a variety of financial
and comparative analyses, as described below. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial and comparative analysis and the application of those
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at its
opinions, Lehman Brothers did not attribute any particular weight to any
analysis or factor considered by it but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portion of such analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying its opinions. In its analyses, Lehman Brothers made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of TeleCorp
and AT&T Wireless. Any estimates or projections contained in these analyses are
not necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of a business do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
In arriving at its opinions, Lehman Brothers reviewed and analyzed:
- the merger agreement and specific terms of the merger;
- publicly available information concerning TeleCorp and AT&T Wireless that
Lehman Brothers believed to be relevant including, without limitation,
TeleCorp's Form 10-K for the fiscal year ended December 31, 2000 and
TeleCorp's and AT&T Wireless's Forms 10-Q for the fiscal quarters ended
March 31, 2001 and June 30, 2001;
- financial and operating information with respect to the businesses,
operations and prospects of TeleCorp and AT&T Wireless furnished to
Lehman Brothers by TeleCorp and AT&T Wireless;
- with respect to its opinion on TeleCorp common stock, trading histories
of TeleCorp class A voting common stock and AT&T Wireless common stock
and a comparison of these trading histories with each other and with
those of other companies Lehman Brothers deemed relevant;
- with respect to its opinion on TeleCorp series C and E preferred stock,
the terms of those series of preferred stock;
- a comparison of historical financial and operating results and financial
condition of TeleCorp and AT&T Wireless with those of other companies
that Lehman Brothers deemed relevant;
- with respect to its opinion on TeleCorp common stock, a comparison of the
financial terms of the merger with the financial terms of other
transactions that Lehman Brothers deemed relevant;
- third-party research analysts' estimates, valuation analyses and target
prices for TeleCorp and AT&T Wireless;
- agreements with respect to the outstanding indebtedness or obligations of
TeleCorp;
43
- information provided to Lehman Brothers by TeleCorp and its legal advisor
regarding contractual rights of AT&T Wireless with respect to the sale of
TeleCorp;
- with respect to its opinion on TeleCorp common stock, the relative
contribution of TeleCorp, on a pro forma basis, to AT&T Wireless
following completion of the merger; and
- with respect to its opinion on TeleCorp series C and E preferred stock,
published reports of internationally recognized credit rating agencies
relating to TeleCorp and AT&T Wireless.
In addition, Lehman Brothers had discussions with the respective management
of TeleCorp and AT&T Wireless concerning their respective businesses,
operations, assets, financial condition and prospects and undertook such other
studies, analyses and investigations as Lehman Brothers deemed appropriate.
In arriving at its opinions, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for the independent verification of such
information and further relied upon the assurances of the respective members of
management of TeleCorp and AT&T Wireless that they were not aware of any facts
or circumstances that would make such information inaccurate or misleading. With
respect to the financial projections provided by TeleCorp, upon advice of
TeleCorp, Lehman Brothers assumed that such projections were reasonably prepared
on a basis reflecting the best currently available estimates and judgments of
the management of TeleCorp as to the future financial performance of TeleCorp,
and Lehman Brothers reviewed such projections in performing its analysis. Upon
advice of TeleCorp, however, Lehman Brothers assumed that the published earnings
estimates of third-party research analysts are a more reasonable basis upon
which to evaluate the future performance of TeleCorp and that TeleCorp will
perform substantially in accordance with such estimates. Lehman Brothers was not
provided with, and did not have access to, financial projections of AT&T
Wireless prepared by the management of AT&T Wireless. Accordingly, Lehman
Brothers assumed that the published earnings estimates of third-party research
analysts are a reasonable basis upon which to evaluate the future financial
performance of AT&T Wireless and that AT&T Wireless will perform substantially
in accordance with such estimates. In arriving at its opinions, Lehman Brothers
did not conduct a physical inspection of the properties and facilities of
TeleCorp or AT&T Wireless and did not make or obtain any evaluations or
appraisals of the assets or liabilities of TeleCorp or AT&T Wireless. Upon
advice of TeleCorp and its legal advisors, Lehman Brothers assumed that the
merger will qualify as a tax-free reorganization within the meaning of Section
368(a) of the Internal Revenue Code, and therefore will be tax free to the
holders of TeleCorp common stock and TeleCorp series C and E preferred stock.
Lehman Brothers further assumed (1) that the representations and warranties of
each party contained in the merger agreement and the other agreements executed
in connection with the merger agreement are true and correct, that each party
will perform all of the covenants and agreements required to be performed by it
under the merger agreement and that all conditions to the completion of the
merger will be satisfied without waiver, (2) that the merger and other
transactions contemplated by the merger agreement will be completed as described
in the merger agreement, and (3) that the terms of the series C and E preferred
stock of AT&T Wireless to be issued in the merger upon conversion of TeleCorp
series C and E preferred stock are substantially identical to the terms of the
respective classes of TeleCorp series C and E preferred stock. Lehman Brothers
further assumed that all material governmental, regulatory or other consents and
approvals necessary for the completion of the merger will be obtained without
any adverse effect on TeleCorp or AT&T Wireless or on the contemplated benefits
of the merger. Lehman Brothers' opinions necessarily are based upon market,
economic and other conditions as they existed on, and can be evaluated as of,
the date of the opinions.
Lehman Brothers expressed no opinion as to the prices at which shares of
AT&T Wireless common stock may trade prior to or following the completion of the
merger and these opinions should not be viewed as providing any assurance that
the market value of the AT&T Wireless common stock to be held by stockholders of
TeleCorp after the merger will be in excess of the market value of the shares of
TeleCorp owned by such stockholders at any time prior to the announcement or
completion of the merger. In addition, with TeleCorp's consent, Lehman Brothers
assumed that shares of the TeleCorp class C, class D, class E and class F common
stock are equivalent in value to shares of TeleCorp class A voting common stock
for purposes of rendering its opinion with respect to TeleCorp common stock.
44
The following is a summary of the material financial and comparative
analyses performed by Lehman Brothers and presented to the TeleCorp board of
directors. Some analyses include information presented in tabular or graphic
format. In order to fully understand the financial analyses used by Lehman
Brothers, the tables and graphs must be read together with the text of each
summary. The tables and graphs alone do not constitute a complete description of
the financial analyses.
MARKET IMPLIED EXCHANGE RATIO COMPARISON
Lehman Brothers compared the price levels of AT&T Wireless common stock to
TeleCorp class A voting common stock for specific periods from October 5, 2000
to October 5, 2001. The relative price levels implied an exchange ratio prior to
the AT&T Wireless merger announcement ranging from 0.62 to 1.37 as set forth
below.
HISTORICAL EXCHANGE RATIOS
IMPLIED
EXCHANGE
PERIOD RATIO
------ --------
Close (10/05/01)............................................ 0.62
52-Week High (12/11/00)..................................... 1.37
52-Week Low (10/02/01)...................................... 0.61
5-Day Trading Average (as of 10/05/01)...................... 0.67
10-Day Trading Average (as of 10/05/01)..................... 0.69
Since 9/11/01 Trading Average (as of 10/05/01).............. 0.73
1-Month Trading Average (as of 10/05/01).................... 0.78
3-Month Trading Average (as of 10/05/01).................... 0.85
6-Month Trading Average (as of 10/05/01).................... 0.87
Year-To-Date Trading Average (as of 10/05/01)............... 0.89
[HISTORICAL EXCHANGE RATIOS CHART]
HISTORICAL EXCHANGE RATIO
-------------------------
10/5/00 0.87
10/6/00 0.78
10/9/00 0.85
10/10/00 0.85
10/11/00 0.82
10/12/00 0.85
10/13/00 0.76
10/16/00 0.76
10/17/00 0.79
10/18/00 0.69
10/19/00 0.70
10/20/00 0.65
10/23/00 0.66
10/24/00 0.71
10/25/00 0.66
10/26/00 0.67
10/27/00 0.63
10/30/00 0.61
10/31/00 0.75
11/1/00 0.82
11/2/00 0.89
11/3/00 0.93
11/6/00 0.97
11/7/00 0.99
11/8/00 1.08
11/9/00 1.08
11/10/00 1.02
11/13/00 0.93
11/14/00 1.00
11/15/00 1.00
11/16/00 0.95
11/17/00 1.01
11/20/00 0.92
11/21/00 0.89
11/22/00 1.00
11/24/00 1.01
11/27/00 0.94
11/28/00 0.96
11/29/00 1.03
11/30/00 1.05
12/1/00 1.14
12/4/00 1.20
12/5/00 1.16
12/6/00 1.09
12/7/00 1.12
12/8/00 1.16
12/11/00 1.35
12/12/00 1.12
12/13/00 1.15
12/14/00 1.15
12/15/00 1.28
12/18/00 1.37
12/19/00 1.21
12/20/00 1.18
12/21/00 1.14
12/22/00 1.15
12/26/00 1.21
12/27/00 1.24
12/28/00 1.16
12/29/00 1.29
1/2/01 1.08
1/3/01 0.85
1/4/01 0.86
1/5/01 0.92
1/8/01 0.95
1/9/01 0.95
1/10/01 1.07
1/11/01 1.06
1/12/01 1.09
1/16/01 1.06
1/17/01 1.09
1/18/01 1.09
1/19/01 1.08
1/22/01 1.01
1/23/01 0.95
1/24/01 0.92
1/25/01 0.93
1/26/01 0.95
1/29/01 0.88
1/30/01 0.86
1/31/01 0.92
2/1/01 0.88
2/2/01 0.90
2/5/01 0.86
2/6/01 0.90
2/7/01 0.91
2/8/01 0.92
2/9/01 1.00
2/12/01 0.96
2/13/01 0.99
2/14/01 1.09
2/15/01 1.06
2/16/01 1.03
2/20/01 1.14
2/21/01 1.14
2/22/01 1.12
2/23/01 1.17
2/26/01 1.06
2/27/01 1.03
2/28/01 1.02
3/1/01 1.04
3/2/01 0.97
3/5/01 0.94
3/6/01 0.90
3/7/01 0.91
3/8/01 0.85
3/9/01 0.86
3/12/01 0.91
3/13/01 0.89
3/14/01 0.93
3/15/01 0.87
3/16/01 0.89
3/19/01 0.87
3/20/01 0.90
3/21/01 0.88
3/22/01 0.87
3/23/01 0.89
3/26/01 0.82
3/27/01 0.78
3/28/01 0.81
3/29/01 0.81
3/30/01 0.79
4/2/01 0.76
4/3/01 0.70
4/4/01 0.73
4/5/01 0.68
4/6/01 0.67
4/9/01 0.66
4/10/01 0.67
4/11/01 0.70
4/12/01 0.69
4/16/01 0.71
4/17/01 0.69
4/18/01 0.76
4/19/01 0.72
4/20/01 0.77
4/23/01 0.73
4/24/01 0.77
4/25/01 0.78
4/26/01 0.78
4/27/01 0.78
4/30/01 0.80
5/1/01 0.80
5/2/01 0.89
5/3/01 0.88
5/4/01 0.89
5/7/01 0.77
5/8/01 0.78
5/9/01 0.77
5/10/01 0.77
5/11/01 0.73
5/14/01 0.73
5/15/01 0.75
5/16/01 0.73
5/17/01 0.77
5/18/01 0.76
5/21/01 0.78
5/22/01 0.87
5/23/01 0.94
5/24/01 0.94
5/25/01 0.94
5/29/01 0.99
5/30/01 0.97
5/31/01 0.95
6/1/01 0.99
6/4/01 1.02
6/5/01 0.96
6/6/01 1.01
6/7/01 1.07
6/8/01 1.10
6/11/01 1.06
6/12/01 1.08
6/13/01 1.06
6/14/01 1.11
6/15/01 1.10
6/18/01 1.10
6/19/01 1.07
6/20/01 1.07
6/21/01 1.01
6/22/01 1.03
6/25/01 1.07
6/26/01 1.07
6/27/01 1.09
6/28/01 1.06
6/29/01 1.18
7/2/01 1.11
7/3/01 1.01
7/5/01 1.02
7/6/01 0.99
7/9/01 1.02
7/10/01 1.04
7/11/01 1.01
7/12/01 1.00
7/13/01 0.96
7/16/01 0.97
7/17/01 0.99
7/18/01 0.98
7/19/01 0.95
7/20/01 0.98
7/23/01 0.98
7/24/01 1.00
7/25/01 0.93
7/26/01 0.92
7/27/01 0.84
7/30/01 0.83
7/31/01 0.81
8/1/01 0.76
8/2/01 0.75
8/3/01 0.73
8/6/01 0.72
8/7/01 0.77
8/8/01 0.75
8/9/01 0.79
8/10/01 0.73
8/13/01 0.71
8/14/01 0.75
8/15/01 0.85
8/16/01 0.87
8/17/01 0.82
8/20/01 0.82
8/21/01 0.83
8/22/01 0.87
8/23/01 0.86
8/24/01 0.83
8/27/01 0.85
8/28/01 0.85
8/29/01 0.90
8/30/01 0.91
8/31/01 0.87
9/4/01 0.92
9/5/01 0.97
9/6/01 0.99
9/7/01 0.96
9/10/01 0.94
9/17/01 0.88
9/18/01 0.86
9/19/01 0.79
9/20/01 0.74
9/21/01 0.73
9/24/01 0.67
9/25/01 0.69
9/26/01 0.72
9/27/01 0.76
9/28/01 0.74
10/1/01 0.67
10/2/01 0.67
10/3/01 0.68
10/4/01 0.70
10/5/01 0.62
RELATIVE RESEARCH ANALYST PRICE TARGETS
Lehman Brothers compared the following research analysts' price targets
published in 2001 for AT&T Wireless common stock to their price targets
published in 2001 for TeleCorp class A voting common stock. These targets
reflected each analyst's estimate of the future price of TeleCorp class A voting
common stock or AT&T Wireless common stock at the end of the particular time
period considered for each estimate, typically 12 months.
45
RESEARCH ANALYST PRICE TARGETS
TELECORP AT&T WIRELESS
RESEARCH RESEARCH
ESTIMATES ESTIMATES
------------- ------------- IMPLIED
TARGET TARGET EXCHANGE
FIRM DATE PRICE DATE PRICE RATIO
---- ---- ------ ---- ------ --------
Credit Suisse First Boston.................. 9/14 $21.00 7/27 $25.00 0.84
Deutsche Banc Alex. Brown................... 8/14 26.00 7/25 28.00 0.93
JPMorgan.................................... 8/15 40.00 8/1 28.00 1.43
Lehman Brothers............................. 8/27 37.00 8/13 33.00 1.12
Merrill Lynch............................... 8/15 17.00 6/18 22.00 0.77
Robert W. Baird & Co........................ 8/15 22.00 9/11 25.00 0.88
Salomon Smith Barney........................ 9/10 20.00 8/17 25.00 0.80
The relative price targets implied an exchange ratio ranging from 0.77 to
1.43.
RELATIVE VALUATION DERIVED FROM PUBLIC COMPARABLES ANALYSIS
Using publicly available information including estimates in published
third-party research reports, Lehman Brothers reviewed and compared particular
financial statistics of TeleCorp with corresponding financial statistics for
selected companies in the personal communications services, or "PCS" industry.
For TeleCorp common stock, Lehman Brothers examined, among other things,
enterprise value as a multiple of total POPs and derived a reference range of
$130 to $200 per POP. Enterprise value is the market valuation of a company's
common stock plus the amount of its outstanding debt less the amount of cash it
has on hand. POPs are the number of persons within TeleCorp's licensed coverage
area. From this analysis, Lehman Brothers derived implied per share values of
TeleCorp common stock from $10.25 to $22.55.
Using publicly available information, including estimates in published
third-party research reports, Lehman Brothers reviewed and compared particular
financial statistics of AT&T Wireless with corresponding financial statistics
for other cellular and PCS companies. For AT&T Wireless common stock, Lehman
Brothers examined, among other things, consolidated enterprise value as a
multiple of 2002 estimated earnings before interest, taxes, depreciation and
amortization, or EBITDA, and derived a reference range of 10.0x to 14.0x.
Consolidated enterprise value is the market valuation of a company's common
stock plus the amount of its outstanding debt less the amount of cash it has on
hand less non-consolidated assets. From this analysis, Lehman Brothers derived
implied per share values of AT&T Wireless common stock from $17.45 to $24.07.
The implied per share values from these analyses in turn implied exchange
ratios ranging from 0.43 to 1.29.
Because of the inherent differences in the businesses, operations,
financial conditions and prospects of AT&T Wireless and TeleCorp and the
comparable companies, Lehman Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the public
comparables analysis and, accordingly, also made qualitative judgments
concerning differences between the characteristics of the comparable companies
and AT&T Wireless and TeleCorp. In particular, Lehman Brothers considered the
size and desirability of the markets of operation and current levels and
historical rates of growth of TeleCorp, AT&T Wireless and their respective
comparable companies.
RELATIVE VALUATION BASED ON PRECEDENT TRANSACTIONS
As part of its analysis, Lehman Brothers reviewed publicly available
information regarding the terms and financial characteristics in a number of
transactions involving domestic cellular and PCS companies since 1997 in order
to derive the relative values of TeleCorp and AT&T Wireless based on the
multiples paid in these transactions.
46
For TeleCorp common stock, Lehman Brothers reviewed the prices paid and
calculated the enterprise value as a multiple of total POPs of each PCS
transaction and determined a reference range of $150 to $210 per POP. From this
analysis, Lehman Brothers derived implied per share values of TeleCorp common
stock from $13.76 to $24.31.
For AT&T Wireless common stock, Lehman Brothers reviewed the prices paid
and calculated the enterprise value as a multiple of estimated EBITDA in the
year following the announcement of each cellular transaction and determined a
reference range of 11.0x to 14.0x. From this analysis, Lehman Brothers derived
implied per share values of AT&T Wireless common stock from $19.10 to $24.07.
The relative price levels implied exchange ratios ranging from 0.57 to
1.27.
Because the reasons for and the circumstances surrounding each of the
transactions analyzed were specific to each transaction and because of the
inherent differences between the businesses, operations and prospects of the
acquired companies included in the selected transactions, Lehman Brothers
believed that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the precedent transactions analysis, and accordingly
made qualitative judgments concerning differences between the characteristics of
these transactions and the merger that would affect the acquisition values of
TeleCorp and such acquired companies. In particular, Lehman Brothers considered
the size and desirability of the markets of operation, the strategic fit of the
acquired company, the form of consideration offered and the tax characteristics
of the transaction.
DISCOUNTED CASH FLOW ANALYSIS
Lehman Brothers performed a discounted cash flow analysis of both TeleCorp
and AT&T Wireless for the period commencing on December 31, 2001 and ending on
December 31, 2010, using projections based on an average of the latest publicly
available reports by three equity research analysts:
- John Bensche from Lehman Brothers, dated August 13, 2001 and August 27,
2001;
- Thomas Lee from JPMorgan, dated August 1, 2001 and August 15, 2001; and
- Cynthia Motz from Credit Suisse First Boston, dated July 13, 2001 and
September 14, 2001.
A discounted cash flow analysis is one method used to value businesses and
involves an analysis of the present value of projected cash flows of a business
for a specified number of years into the future and the present value of the
projected value of the business at the end of that period of years, which is
commonly referred to as terminal value.
The discounted cash flow analysis value per share of TeleCorp common stock
was estimated using weighted average cost of capital, or WACC, discount rates
ranging from 12.0% to 14.0% and terminal multiples of estimated EBITDA for
TeleCorp's fiscal year ending December 31, 2010, ranging from 9.0x to 11.0x. The
analysis yielded implied per share values of TeleCorp common stock of $16.18 to
$26.47.
The discounted cash flow analysis value per share of AT&T Wireless common
stock was estimated using WACC discount rates ranging from 11.0% to 13.0% and
terminal multiples of estimated EBITDA for AT&T Wireless' fiscal year ending
December 31, 2010, ranging from 8.5x to 10.5x. The analysis yielded implied per
share values of AT&T Wireless common stock of $18.42 to $25.06.
The relative price levels implied exchange ratios ranging from 0.65 to
1.44.
CONTRIBUTION ANALYSIS
Lehman Brothers conducted a contribution analysis which compared the
current total POPs, the total estimated customers and the projected EBITDA for
the years 2001 - 2005 that TeleCorp is contributing to the combined company
relative to the AT&T Wireless contribution to these items. The projections for
customers and EBITDA were based on an average of equity research estimates
available as of October 5,
47
2001. By analyzing the relative contributions of each company's operating
statistics, Lehman Brothers derived the following implied exchange ratios:
CONTRIBUTION ANALYSIS IMPLIED EXCHANGE RATIOS
METRIC 2001 2002 2003 2004 2005
------ ---- ---- ---- ---- ----
POPs..................................... 1.11 -- -- -- --
EBITDA................................... N/M N/M N/M 0.09 0.27
Customers................................ N/M 0.09 0.25 0.36 0.45
Valuation of TeleCorp's Series C and E Preferred Stock. Lehman Brothers
noted that on a stand-alone basis, TeleCorp's operating companies' senior
subordinated bonds carry a credit rating of B3 and AT&T Wireless has a credit
rating of Baa2/BBB. Upon the completion of the merger, TeleCorp would become a
wholly owned subsidiary of AT&T Wireless, and Lehman Brothers believes that the
combined entity will continue to carry the same credit rating as AT&T Wireless.
Lehman Brothers performed a net present value calculation to estimate the
fair value of TeleCorp series C and E preferred stock assuming both TeleCorp's
current credit profile and the combined entity's credit profile in each case
valued at the completion of the merger, which was estimated at April 30, 2002.
Lehman Brothers estimated a discount rate range of 20.25% to 21.75% assuming
TeleCorp's current credit profile and a discount rate range of 9.55% to 10.30%
assuming the combined entity's credit profile.
Lehman Brothers estimated that the net present value of TeleCorp series C
preferred stock is estimated at $11.9 to $14.9 million under TeleCorp's current
credit profile and $74.6 to $84.8 million under the pro forma combined entity's
credit profile.
Lehman Brothers estimated that the net present value of TeleCorp series E
preferred stock at $1.2 to $1.5 million under TeleCorp's current credit profile
and $6.2 to $6.9 million under the pro forma combined entity's credit profile.
GENERAL
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and other securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The TeleCorp board of directors
selected Lehman Brothers because of its expertise, reputation and familiarity
with TeleCorp in particular and the telecommunications industries in general,
and because its investment banking professionals have substantial experience in
transactions similar to the merger.
As compensation for its services in connection with the merger, TeleCorp
has agreed to pay Lehman Brothers a fee for acting as financial advisor in
connection with the merger, including rendering its opinions. Under the terms of
an engagement letter between Lehman Brothers and TeleCorp, TeleCorp has agreed
to pay Lehman Brothers a fee of $10 million for its financial advisory services
in connection with the merger, a portion of which was payable upon the rendering
of Lehman Brothers' opinions and the remainder of which is contingent upon the
completion of a transaction. In addition, TeleCorp has agreed to reimburse
Lehman Brothers for reasonable out-of-pocket expenses incurred in connection
with the merger and to generally indemnify Lehman Brothers for liabilities that
may arise out of its engagements by TeleCorp and the rendering of its opinions.
Lehman Brothers is acting as a financial advisor to TeleCorp in connection
with the merger. Lehman Brothers has also performed various investment banking
services for TeleCorp in the past and has received customary fees for such
services. In the ordinary course of its business, Lehman Brothers may actively
trade in TeleCorp or AT&T Wireless debt and equity securities for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities.
48
Opinion of JPMorgan
Pursuant to an engagement letter dated as of September 28, 2001, TeleCorp
retained JPMorgan as its financial advisor and to deliver fairness opinions in
connection with the merger.
At the meeting of the TeleCorp board of directors on October 7, 2001,
JPMorgan rendered its oral opinions to the TeleCorp board of directors, which
were subsequently confirmed in writing, that, subject to the matters set forth
in the opinions, as of such date, the exchange ratio applicable to TeleCorp
common stock and TeleCorp series C and E preferred stock in the merger was fair,
from a financial point of view, to the holders, other than AT&T Wireless, of
TeleCorp common stock and TeleCorp series C and E preferred stock, respectively.
JPMorgan was not asked to opine on and its opinions did not extend to the voting
preference common stock or any series of preferred stock other than the series C
and E preferred stock. Accordingly, references to the TeleCorp common stock in
the following summary do not refer to the voting preference common stock. No
limitations were imposed by the TeleCorp board of directors upon JPMorgan with
respect to the investigations made or procedures followed by it in rendering its
opinions except that JPMorgan was not authorized to and did not solicit any
expressions of interest from any other parties with respect to the sale of all
or any part of TeleCorp or any other alternative transaction.
The summary of the opinions of JPMorgan set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the full text
of such opinions, which are attached as Appendix E to this proxy
statement/prospectus. TeleCorp stockholders are urged to, and should, read the
opinions in their entirety for a discussion of the assumptions made, the matters
considered and the limits on the review undertaken by JPMorgan in rendering its
opinions. JPMorgan's written opinions are addressed to the TeleCorp board of
directors, are directed only to fairness, from a financial point of view, of the
exchange ratio applicable to TeleCorp common stock and TeleCorp series C and E
preferred stock in the merger and do not constitute a recommendation to any
stockholder of TeleCorp as to how such stockholder should vote at the TeleCorp
special meeting.
In arriving at its opinions, JPMorgan undertook the following activities:
- reviewed the merger agreement;
- with respect to its opinion on TeleCorp series C and E preferred stock,
reviewed the terms of those series of preferred stock;
- reviewed publicly available business and financial information it deemed
relevant concerning TeleCorp and AT&T Wireless and the industries in
which they operate;
- with respect to its opinion on TeleCorp common stock, compared the
proposed financial terms of the merger with the publicly available
financial terms of transactions involving companies JPMorgan deemed
relevant and the consideration received for those companies;
- compared the financial and operating performance of TeleCorp and AT&T
Wireless with publicly available information concerning other companies
JPMorgan deemed relevant;
- with respect to its opinion on TeleCorp common stock, reviewed the
current and historical market prices of TeleCorp common stock and AT&T
Wireless common stock and publicly traded securities of those other
companies;
- reviewed internal financial analyses and forecasts prepared by the
management of TeleCorp relating to its business;
- reviewed published earnings estimates, valuation analyses and target
price estimates of third-party research analysts with respect to the
future financial performance of TeleCorp and AT&T Wireless;
- reviewed agreements with respect to the outstanding indebtedness or
obligations of TeleCorp and information provided to JPMorgan by TeleCorp
and its legal advisor regarding contractual rights of AT&T Wireless with
respect to the sale of TeleCorp;
49
- with respect to its opinion on TeleCorp series C and E preferred stock,
reviewed published reports of internationally recognized credit rating
agencies relating to TeleCorp and AT&T Wireless; and
- performed such other financial studies and analyses and considered such
other information as JPMorgan deemed appropriate for the purposes of its
opinions.
JPMorgan also held discussions with some members of the management of TeleCorp
and AT&T Wireless with respect to aspects of the merger, the past and current
business operations of TeleCorp and AT&T Wireless, the financial condition and
future prospects and operations of TeleCorp and AT&T Wireless, the effects of
the merger on the financial condition and future prospects and operations of
TeleCorp and AT&T Wireless, and other matters JPMorgan believed necessary or
appropriate to its inquiry.
JPMorgan relied upon and assumed, without assuming any responsibility for
independent verification, the accuracy and completeness of all information that
was publicly available or that was furnished to or discussed with it by TeleCorp
and AT&T Wireless or otherwise reviewed by JPMorgan, and JPMorgan has not
assumed any responsibility or liability therefor. JPMorgan has not conducted any
valuation or appraisal of any assets or liabilities, nor have any such
valuations or appraisals been provided to JPMorgan. In relying on financial
analyses and forecasts provided to it, JPMorgan has assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future results of
operations and financial condition of TeleCorp to which such analyses or
forecasts relate. JPMorgan also considered published earnings estimates of third
party research analysts and, with TeleCorp's consent, assumed that the
combination of management guidance, such estimates and JPMorgan's own analysis
provided a more reasonable basis to evaluate the future performance of TeleCorp
than the financial projections prepared by TeleCorp alone. JPMorgan was not
provided with, and did not have access to, financial projections of AT&T
Wireless prepared by the management of AT&T Wireless. Accordingly, JPMorgan
assumed that the published earnings estimates of third party research analysts
were a reasonable basis upon which to evaluate the future financial performance
of AT&T Wireless. With TeleCorp's consent, JPMorgan also assumed that shares of
the class C, class D, class E, and class F common stock are equivalent in value
to shares of TeleCorp class A voting common stock for purposes of rendering its
opinion with respect to TeleCorp common stock. Upon advice of TeleCorp and its
legal advisors, JPMorgan assumed that the merger will qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and therefore will be tax free to the holders of TeleCorp common stock and
TeleCorp series C and E preferred stock. For purposes of rendering its opinions
JPMorgan also assumed, in all respects material to its analysis, (1) that the
representations and warranties of each party contained in the merger agreement
and the other related agreements are true and correct, that each party will
perform all of the covenants and agreements required to be performed by it under
the merger agreement and that all conditions to the completion of the merger
will be satisfied without waiver thereof, (2) with respect to its opinion on
TeleCorp series C and E preferred stock, that the terms of the series C and E
preferred stock of AT&T Wireless to be issued upon conversion of TeleCorp series
C and E preferred stock will be substantially identical to the series C and E
TeleCorp preferred stock and (3) that the merger and other transactions
contemplated by the merger agreement will be completed as described in the
merger agreement. JPMorgan further assumed that all material governmental,
regulatory or other consents and approvals necessary for the completion of the
merger will be obtained without any adverse effect on TeleCorp or AT&T Wireless
or on the contemplated benefits of the merger. JPMorgan relied as to all legal
matters relevant to rendering its opinions upon the advice of counsel.
JPMorgan's opinions are based on economic, market and other conditions as
in effect on, and the information made available to JPMorgan as of, the date of
such opinions. Subsequent developments may affect the written opinions dated
October 7, 2001 and JPMorgan does not have any obligation to update, revise, or
reaffirm such opinions. JPMorgan's opinions are limited to the fairness, from a
financial point of view, to the holders (other than AT&T Wireless) of TeleCorp
common stock and TeleCorp preferred stock, of the exchange ratio applicable to
TeleCorp common stock and TeleCorp preferred stock in the merger, and JPMorgan
has expressed no opinion as to the underlying decision by TeleCorp to engage in
the merger. JPMorgan has also expressed no opinion herein as to the price at
which shares of TeleCorp
50
class A voting common stock or AT&T Wireless common stock may trade at any time
prior to or following the completion of the merger.
JPMorgan was not authorized to and did not solicit any expressions of
interest from any other parties with respect to the sale of all or any part of
TeleCorp or any other alternative transaction. Consequently, no opinion was
expressed as to whether any alternative transaction might produce consideration
for TeleCorp's stockholders in an amount in excess of that contemplated in the
merger.
In accordance with customary investment banking practice, JPMorgan employed
generally accepted valuation methods in reaching its opinions. The following is
a summary of the material financial analyses utilized by JPMorgan in connection
with providing its opinions. We have presented some of the summaries of
financial analyses in tabular format. In order to understand the financial
analyses used by JPMorgan more fully, you should read the tables together with
the text of each summary. The tables do not constitute a complete description of
JPMorgan's financial analyses.
CONTRIBUTION ANALYSIS
JPMorgan reviewed and analyzed the relative contributions to be made by
TeleCorp and AT&T Wireless to the combined company using the following three
metrics: the mean of 2001, 2002, and 2003 financial projections of revenue,
EBITDA and number of subscribers (based upon third-party equity research analyst
estimates available as of October 5, 2001) and the calculated discounted cash
flow equity values of each of TeleCorp and AT&T Wireless on a stand-alone basis
(the basis for calculating such discounted cash flow is indicated below under
the discounted cash flow analysis for each of TeleCorp and AT&T Wireless). These
analyses indicated:
METRIC TELECORP CONTRIBUTION
------ ---------------------
Mean of 2001E metrics....................................... 3.6%
Mean of 2002E metrics....................................... 4.6%
Mean of 2003E metrics....................................... 6.6%
Discounted cash flow equity mid-point....................... 4.7%
JPMorgan observed that holders of TeleCorp common stock would have a 7%
ownership stake in the combined company, based on the exchange ratios.
RELATIVE EXCHANGE RATIO ANALYSIS
JPMorgan compared the average of the ratios of the historical closing
prices of TeleCorp class A voting common stock to the corresponding closing
prices of AT&T Wireless common stock over various periods from October 5, 2000
through October 5, 2001.
PERIOD HISTORIC RATIO
------ --------------
At 10/05/01................................................. 0.62x
5-day average............................................... 0.67x
1-month average............................................. 0.80x
2-month average............................................. 0.82x
6-month average............................................. 0.87x
1-year average.............................................. 0.92x
52-week high................................................ 1.37x
52-week low................................................. 0.61x
51
COMPARISON OF PREMIUMS
JPMorgan compared the implied premium as of October 1, 2001 to be paid by
AT&T Wireless in the merger to the premiums paid in other selected transactions
as of one week prior to announcement:
METRIC OBSERVED PREMIUMS
------ -----------------
Median -- all transactions (through August 31, 2001)........ 33%
Median -- telecom, media & technology transactions (through
August 31, 2001).......................................... 39%
Median -- selected wireless transactions since 2000......... 30%
As of October 5, 2001, JPMorgan estimated that the implied price per share
of AT&T Wireless common stock that holders of TeleCorp common stock would
receive in the merger would be $14.51, based on the AT&T Wireless common stock
closing price as of October 5, 2001 of $16.12 and the applicable exchange ratio
of 0.9. JPMorgan observed that this price per share represented a 44.9% premium
over the TeleCorp class A voting common stock October 1, 2001 closing price of
$10.01.
It should be noted that no company or transaction utilized in the analysis
above is identical to TeleCorp and AT&T Wireless or the merger, respectively.
VALUATION OF TELECORP
Public Trading Multiples. Using publicly available information, JPMorgan
compared selected financial data of TeleCorp with similar data for selected
publicly traded companies engaged in businesses which JPMorgan deemed to be
relevant. For each such company, the growth adjusted 2001 year-end estimated
subscriber multiple was computed. The growth subscriber multiple is the ratio of
adjusted enterprise value to estimated subscribers, normalized for growth over
three and five year periods. JPMorgan selected a range of growth adjusted
subscriber multiples which were then applied to TeleCorp's growth adjusted 2001
estimated subscribers, yielding implied trading values for TeleCorp common stock
ranging between approximately $12 and $15 per share.
It should be noted that no company utilized in the analysis above is
identical to TeleCorp. In evaluating companies identified by JPMorgan as
comparable to TeleCorp, JPMorgan made judgments and assumptions with regard to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of TeleCorp,
such as the impact of competition on the business of TeleCorp and the industry
generally, industry growth and the absence of any material change in the
financial condition and prospects of TeleCorp or the industry or in the
financial markets in general.
Selected Transaction Analysis. JPMorgan reviewed publicly available
financial information related to the multiples implied by the ratio of price
paid to estimated current year-end subscribers and estimated current year-end
licensed POPs for cellular and PCS acquisitions announced since January 1, 2000.
JPMorgan then applied such derived multiples to TeleCorp estimated current
year-end subscribers and estimated current year-end licensed POPs, and arrived
at an estimated range of equity values for TeleCorp common stock of between $10
and $21 per share.
It should be noted that no company or transaction utilized in the analysis
above is identical to TeleCorp or the merger, respectively.
Discounted Cash Flow Analysis. JPMorgan conducted a discounted cash flow
analysis for the purpose of determining the fully diluted equity value per share
for TeleCorp common stock. JPMorgan calculated the unlevered free cash flows
that TeleCorp is expected to generate during fiscal years 2002 through 2007
(based upon third-party equity research analyst estimates available as of
October 5, 2001, management guidance and JPMorgan's analysis). Unlevered free
cash flows are EBITDA less capital expenditures, changes in working capital and
taxes and before interest charges. JPMorgan also calculated a terminal value of
TeleCorp at the end of 2007 by applying a terminal value EBITDA multiple ranging
from 9.5x to 10.5x. The unlevered free cash flows and the range of terminal
values were then discounted to
52
present values using a range of discount rates from 13% to 15%, which were
chosen by JPMorgan based upon an analysis of the weighted average cost of
capital of TeleCorp. The present value of the unlevered free cash flows and the
range of terminal values were then adjusted for TeleCorp's current period
(ending June 30, 2001) excess cash, option exercise proceeds and total debt as
of June 30, 2001. Based on the unlevered free cash flows, the range of terminal
value EBITDA multiples and the range of discount rates indicated above, the
discounted cash flow analysis indicated a range of equity values of between $11
and $16 per share of TeleCorp common stock on a stand-alone basis.
VALUATION OF AT&T WIRELESS
Public Trading Multiples. Using publicly available information, JPMorgan
compared selected financial data of AT&T Wireless with similar data for selected
publicly traded companies engaged in businesses which JPMorgan deemed to be
relevant. For each such company, publicly available financial performance was
measured and estimated 2002 EBITDA and estimated 2001 and 2002 subscriber
multiples were computed. JPMorgan selected the mean and the median value for
each multiple and these multiples were then applied to AT&T Wireless's estimated
2002 EBITDA and estimated 2001 and 2002 subscribers, in each case, based upon
third-party equity research analyst estimates available as of October 5, 2001,
yielding implied trading values for AT&T Wireless common stock ranging between
approximately $12 and $25 per share.
It should be noted that no company utilized in the analysis above is
identical to AT&T Wireless. In evaluating companies identified by JPMorgan as
comparable to AT&T Wireless, JPMorgan made judgments and assumptions with regard
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of AT&T
Wireless, such as the impact of competition on the business of AT&T Wireless and
the industry generally, industry growth and the absence of any material change
in the financial condition and prospects of AT&T Wireless or the industry or in
the financial markets in general.
Selected Transaction Analysis. Using publicly available information:
- JPMorgan examined the multiples implied by the ratio of price per share
to estimated 2001 EBITDA for cellular transactions over $1 billion
announced since January 1, 2000. JPMorgan applied a range of multiples
derived from such analysis to AT&T Wireless's estimated 2001 EBITDA,
based upon third-party equity research analyst estimates available as of
October 5, 2001;
- JPMorgan examined the prices paid by DoCoMo in its acquisition of 16% of
AT&T Wireless.
This analysis yielded an estimated range of equity values for AT&T Wireless
common stock of between $19 and $27 per share. It should be noted that no
company or transaction utilized in the analysis above is identical to AT&T
Wireless or the merger, respectively.
Discounted Cash Flow Analysis. JPMorgan conducted a discounted cash flow
analysis for the purpose of determining the fully diluted equity value per share
for AT&T Wireless common stock. JPMorgan calculated the unlevered free cash
flows that AT&T Wireless is expected to generate during fiscal years 2002
through 2007, based upon third-party equity research analyst estimates available
as of October 5, 2001 and JPMorgan's analysis. JPMorgan also calculated a
terminal value of AT&T Wireless at the end of 2007 by applying a terminal value
EBITDA multiple ranging from 8x to 10x. The unlevered free cash flows and the
range of terminal values were then discounted to present values using a range of
discount rates from 10% to 12%, which were chosen by JPMorgan based upon an
analysis of the weighted average cost of capital of AT&T Wireless. The present
value of the unlevered free cash flows and the range of terminal values were
then adjusted for AT&T Wireless' excess cash, option exercise proceeds and total
debt as of June 30, 2001. Based on the unlevered free cash flows, the range of
terminal value EBITDA multiples and the range of discount rates indicated above,
the discounted cash flow analysis indicated a range of equity values of between
$19 and $25 per share of AT&T Wireless common stock on a stand-alone basis.
53
VALUATION OF TELECORP'S SERIES C AND E PREFERRED STOCK
JPMorgan conducted a discounted cash flow analysis to determine the
economic impact to the holders of TeleCorp series C and E preferred stock as a
result of the merger. JPMorgan modeled separately the liquidation preference of
TeleCorp series C and E preferred stock held to maturity. JPMorgan then
discounted to present values the liquidation preferences of TeleCorp series C
and E preferred stock assuming first, a range of discount rates based on
TeleCorp's operating companies' current credit rating, and second, a range of
discount rates based on AT&T Wireless's expected credit rating following the
merger. In both cases, JPMorgan made adjustments to the discount rate to reflect
particular characteristics of TeleCorp series C and E preferred stock. JPMorgan
estimated a cost of preferred capital for TeleCorp under its current credit
rating of 20% to 22%. This discount rate considered the current trading levels
of the senior subordinated discount notes at TeleCorp Wireless and Tritel and
incorporated additional premiums based on the extended maturity, additional
subordination, reduced liquidity and lack of covenant protection on TeleCorp
series C and E preferred stock. JPMorgan estimated that AT&T Wireless's cost of
preferred capital following the merger would be in the range of 8% to 12%. This
discount rate considered the expected cost of AT&T Wireless's debt following the
merger as well as its estimated cost of equity.
The comparison of net present values in the analysis showed that TeleCorp
series C and E preferred stock holders would benefit from a rollover of their
holdings due to the expected improvement in credit rating as a result of the
merger. The net present value increase is shown below:
SERIES C SERIES E
-------------------------- -------------------------
TELECORP AT&T WIRELESS TELECORP AT&T WIRELESS
--------- ------------- -------- -------------
Discount rate............... 20%-22% 8%-12% 20%-22% 8%-12%
Net present value........... $11-$16MM $56-$110MM $1-$2MM $5-$9MM
GENERAL
The summary set forth above does not purport to be a complete description
of the analyses or data presented by JPMorgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. JPMorgan believes that the summary set forth
above and their analyses must be considered as a whole and that selecting
portions thereof, without considering all of its analyses, could create an
incomplete view of the process underlying its analyses and opinions. JPMorgan
based its analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions and
industry-specific factors. The other principal assumptions upon which JPMorgan
based its analyses are set forth above under the description of each such
analysis. JPMorgan's analyses are not necessarily indicative of actual values or
actual future results that might be achieved, which values may be higher or
lower than those indicated. Moreover, JPMorgan's analyses are not and do not
purport to be appraisals or otherwise reflective of the prices at which
businesses actually could be bought or sold.
As a part of its investment banking business, JPMorgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. JPMorgan was selected to advise TeleCorp and to deliver its
opinions to the TeleCorp board of directors with respect to the merger on the
basis of such experience and its familiarity with TeleCorp.
As compensation for its services in connection with the merger, TeleCorp
has agreed to pay JPMorgan a fee for acting as financial advisor in connection
with the merger, including rendering its opinions. Under the terms of the
engagement letter, TeleCorp has agreed to pay JPMorgan a fee of $10 million for
its financial advisory services in connection with the merger, a portion of
which was payable upon the rendering of JP Morgan's opinions and the remainder
of which is contingent upon the completion of a transaction. In addition,
TeleCorp has agreed to reimburse JPMorgan for its expenses incurred in
connection with its services, including the fees and disbursements of counsel,
and will generally
54
indemnify JPMorgan against liabilities, including liabilities arising under U.S.
federal securities laws. In the ordinary course of their businesses, JPMorgan
and its affiliates may actively trade the debt and equity securities or senior
loans of TeleCorp or AT&T Wireless for their own account or for the accounts of
customers and, accordingly, they may at any time hold long or short positions in
such securities or loans.
JPMorgan and its affiliates, in the ordinary course of business, provide,
for customary compensation, commercial and investment banking services to
TeleCorp and AT&T Wireless and their respective affiliates and in that regard
JPMorgan's affiliate, The Chase Manhattan Bank, currently acts as agent and bank
under the respective bank credit facilities of TeleCorp and AT&T Wireless. An
affiliate of JPMorgan owns approximately 7.3% of TeleCorp's capital stock,
consisting of 15,265,692 shares of class A voting common stock, 27,489 shares of
class C common stock, 199,522 shares of class D common stock and 49,411.14
shares of series C preferred stock, and Michael R. Hannon, a partner of that
affiliate, is a member of the TeleCorp board of directors.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the anticipated material U.S.
federal income tax consequences of the merger to holders of TeleCorp class A
voting common stock that exchange their TeleCorp class A voting common stock for
AT&T Wireless common stock in the merger. This discussion addresses only those
TeleCorp stockholders that hold their TeleCorp class A voting common stock as a
capital asset, and does not address all the U.S. federal income tax consequences
that may be relevant to particular TeleCorp stockholders in light of their
individual circumstances or to TeleCorp stockholders that are subject to special
rules, such as:
- financial institutions;
- mutual funds;
- tax-exempt organizations;
- insurance companies;
- dealers in securities or foreign currencies;
- traders in securities that elect to apply a mark-to-market method of
accounting;
- foreign holders;
- persons that hold their shares as a hedge against currency risk or as
part of a straddle, constructive sale or conversion transaction; or
- holders that acquired their shares upon the exercise of TeleCorp stock
options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code, laws, regulations, rulings and
decisions in effect as of the date of this proxy statement/ prospectus, all of
which are subject to change, possibly with retroactive effect. Tax consequences
under U.S. state and local and foreign laws and U.S. federal laws other than
U.S. federal income tax laws are not addressed.
Holders of TeleCorp class A voting common stock are strongly urged to
consult their tax advisors as to the specific tax consequences to them of the
merger, including the applicability and effect of U.S. federal, state and local
and foreign income and other tax laws in their particular circumstances.
AT&T Wireless and TeleCorp have structured the merger so that it is
anticipated that the merger will be a reorganization for U.S. federal income tax
purposes. It is a condition to the completion of the merger that (1) TeleCorp
receive a written opinion from Cadwalader, Wickersham & Taft, counsel to
TeleCorp, dated the date of completion of the merger, to the effect that for
U.S. federal income tax purposes, the merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code and (2) AT&T
Wireless receive a written opinion from Wachtell, Lipton, Rosen & Katz, counsel
to
55
AT&T Wireless, dated the date of completion of the merger, to the effect that
for U.S. federal income tax purposes, the merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. The opinions will be based on customary assumptions, including an
assumption regarding the completion of the merger in the manner contemplated by
the merger agreement, and customary representations made by, among others,
TeleCorp and AT&T Wireless, including representations contained in certificates
of officers of TeleCorp and AT&T Wireless. An opinion of counsel represents
counsel's best legal judgment and is not binding on the Internal Revenue Service
or any court. No ruling has been, or will be, sought from the Internal Revenue
Service as to the U.S. federal income tax consequences of the merger.
Holders Whose Merger Consideration Consists Solely of AT&T Wireless Common
Stock
Assuming the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, holders of TeleCorp class A voting
common stock that exchange their TeleCorp class A voting common stock solely for
AT&T Wireless common stock in the merger will not recognize gain or loss for
U.S. federal income tax purposes, except with respect to cash, if any, they
receive in lieu of a fractional share of AT&T Wireless common stock. Each
holder's aggregate tax basis in the AT&T Wireless common stock received in the
merger will be the same as that holder's aggregate tax basis in the TeleCorp
class A voting common stock surrendered in the merger, decreased by the amount
of any tax basis allocable to any fractional share interest for which cash is
received. The holding period of the AT&T Wireless common stock received in the
merger by a holder of TeleCorp class A voting common stock will include the
holding period of TeleCorp class A voting common stock that the holder
surrendered in the merger.
A holder of TeleCorp class A voting common stock that receives cash in lieu
of a fractional share of AT&T Wireless common stock will recognize gain or loss
equal to the difference between the amount of cash received and that holder's
tax basis in the AT&T Wireless common stock that is allocable to the fractional
share of AT&T Wireless common stock. That gain or loss generally will constitute
capital gain or loss. In the case of an individual stockholder, any such capital
gain generally will be long term capital gain if the individual has held his or
her TeleCorp class A voting common stock for more than 12 months on the date of
the merger. The deductibility of capital losses is subject to limitations for
both individuals and corporations.
Under the Internal Revenue Code, an individual holder of TeleCorp class A
voting common stock may be subject, under particular circumstances, to backup
withholding at a rate equal to the fourth lowest ordinary income tax rate
applicable to unmarried individuals (30.5% from August 7, 2001 and 30% from
January 1, 2002) with respect to the amount of cash, if any, received in the
merger, including cash in lieu of fractional shares unless the holder provides
proof of an applicable exemption or provides a correct taxpayer identification
number on Internal Revenue Service Form W-9 or a substitute Form W-9 and
otherwise complies with all applicable requirements of the backup withholding
rules. Any amount withheld under the backup withholding rules is not additional
tax and may be refunded or credited against the holder's federal income tax
liability, so long as the required information is furnished to the Internal
Revenue Service.
ACCOUNTING TREATMENT
In accordance with recently issued Statement of Financial Accounting
Standards No. 141, Business Combinations, and Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, as well as the new
accounting and reporting regulations for goodwill and other intangibles, AT&T
Wireless will use the purchase method of accounting for a business combination
to account for the merger. Under these methods of accounting, the assets and
liabilities of TeleCorp, including all intangible assets, will be recorded at
their respective fair values. All intangible assets will be amortized over their
estimated useful lives with the exception of goodwill and any other intangibles
with indefinite lives. The financial position, results of operations and cash
flows of TeleCorp will be included in AT&T Wireless's financial statements
prospectively as of the completion of the merger.
56
CONSENTS AND REGULATORY APPROVALS
Antitrust Authorities. As a condition to the merger and under law, AT&T
Wireless and TeleCorp were required to observe the notification and waiting
period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder. The HSR Act
provides for an initial 30-calendar-day waiting period following the filing with
the U.S. Federal Trade Commission and the Antitrust Division of the U.S.
Department of Justice of notification and report forms by the parties to the
merger.
On October 23, 2001 and October 24, 2001, respectively, AT&T Wireless and
TeleCorp filed the Notification and Report Forms with the FTC and the Antitrust
Division for review in connection with the merger. The associated initial 30-day
waiting period was scheduled to expire on November 23, 2001. AT&T Wireless and
TeleCorp sought early termination of the applicable waiting periods. On November
19, 2001, AT&T Wireless and TeleCorp received notification that early
termination of the waiting period under the HSR Act was granted.
Although the waiting periods are terminated, at any time before or after
the completion of the merger, the FTC, the Antitrust Division or others could
take action under the antitrust laws with respect to the merger, including
seeking to enjoin the completion of the merger or seeking the divestiture by
AT&T Wireless of all or part of the shares or assets of TeleCorp, or of other
business conducted by AT&T Wireless, or seeking to subject AT&T Wireless or
TeleCorp to operating conditions, before or after the merger is completed. There
can be no assurance that a challenge to the merger will not be made or that, if
such a challenge is made, AT&T Wireless will prevail.
Federal Communications Commission. In addition, as a condition to the
merger and under law, AT&T Wireless and TeleCorp are required to obtain
approvals from the FCC. On October 19, 2001 and October 22, 2001, respectively,
AT&T Wireless and TeleCorp filed the required applications with the FCC, seeking
approval of the transfer of control to AT&T Wireless of the FCC radio and
international operating licenses and authorizations held by TeleCorp
subsidiaries. In addition, on October 19, 2001 and October 22, 2001, TeleCorp
filed applications for consent to assign some of its licenses to a third party,
as required in connection with the merger. The applications were listed on an
FCC Public Notice on November 8, 2001. Interested parties may file comments
regarding or petitions to deny the applications until December 10, 2001. Should
comments or petitions be submitted, TeleCorp and AT&T Wireless will have the
opportunity to file oppositions in response by December 20, 2001. The entities
that filed the original comments or petitions will have until December 28, 2001
to file responses to the oppositions. The responses are the final pleadings that
may be submitted.
Completion of the merger is conditioned, among other factors, upon grants
of the requisite FCC consents becoming final. A "final" FCC order is one that
has not been stayed and is no longer subject to review by the FCC or the courts
because the statutory period for seeking such review has expired without any
request for review or stay pending. Following grant by the staff of the FCC of
the applications for consent to transfer control, there may be post-grant
challenges by private parties or actions by the full FCC or the courts that
would delay or prevent finality.
While we can make no assurances, we currently anticipate receiving all
necessary FCC clearances during the first half of 2002.
LISTING OF THE AT&T WIRELESS SHARES ON THE NYSE
AT&T Wireless common stock is listed on the NYSE under the symbol "AWE",
and it is a condition to the merger that the AT&T Wireless common stock that is
to be issued in the merger be listed for trading on the NYSE.
57
RESALE OF AT&T WIRELESS SHARES ISSUED IN THE MERGER
Shares of AT&T Wireless capital stock received in the merger by TeleCorp
stockholders generally will be freely transferable, except that:
- AT&T Wireless shares received by persons who are deemed to be affiliates
of TeleCorp under the Securities Act of 1933 at the time of the special
meeting may be resold by them only in transactions permitted by Rule 145
under the Securities Act or as otherwise permitted under the Securities
Act. Persons who may be deemed to be affiliates of TeleCorp for these
purposes generally include individuals or entities that control, are
controlled by, or are under common control with, TeleCorp, and include
TeleCorp's directors and executive officers. The merger agreement
requires TeleCorp to use all reasonable efforts to cause each of its
affiliates to deliver to AT&T Wireless on or prior to the tenth day prior
to the completion of the merger a signed agreement to the effect that the
affiliate will not offer, sell or otherwise dispose of any AT&T Wireless
shares issued to the affiliate in the merger in violation of the
Securities Act or the related SEC rules; and
- some of the stockholders who have entered into the voting agreements with
AT&T Wireless and TeleCorp will be subject to resale restrictions on
their TeleCorp shares prior to the completion of the merger, as described
under "Other Agreements -- Voting Agreements."
INTERESTS OF TELECORP DIRECTORS AND OFFICERS IN THE MERGER; RELATIONSHIPS WITH
AT&T WIRELESS
In considering the recommendation of the board of directors of TeleCorp to
vote for the merger, stockholders of TeleCorp should be aware that members of
the TeleCorp board of directors and members of TeleCorp's management team may
have interests in the merger or relationships with AT&T Wireless that may differ
from, or be in addition to, those of other TeleCorp stockholders. The TeleCorp
board of directors was aware of these interests and relationships during its
deliberations of the merits of the merger and in determining to recommend to the
stockholders of TeleCorp that they vote for the merger.
INTERESTS OF TELECORP DIRECTORS AND OFFICERS IN THE MERGER
TeleCorp Employee Stock Options and Restricted Shares. Under the terms of
the merger agreement, upon completion of the merger, each TeleCorp employee
stock option outstanding at the time of the merger will be converted into an
option to acquire a number of shares of AT&T Wireless common stock equal to the
number of shares of TeleCorp stock subject to the option immediately before the
completion of the merger times 0.9, rounded to the nearest whole share. The
exercise price for the converted options will be the exercise price for the
corresponding TeleCorp employee stock option immediately before completion of
the merger divided by 0.9. The converted employee stock options will otherwise
continue to be governed by the same terms and conditions as immediately prior to
the completion of the merger.
Under the terms of the merger agreement, TeleCorp has the right to grant to
its employees additional options to purchase TeleCorp common stock at a per
share exercise price equal to the fair market value of TeleCorp common stock on
the date of grant. These grants must be consistent with grants made under the
TeleCorp option plans during the 12-month period ending October 5, 2001. In any
case, TeleCorp may not grant any options such that there are outstanding options
to purchase more than 13,278,252 shares of TeleCorp common stock, assuming that
no options are exercised between signing of the merger agreement and completion
of the merger. None of the options that are granted under the merger agreement
as described above will vest upon completion of the merger, unless they vest as
a result of a qualifying termination of the optionee's employment under the
severance policy, as described below.
After completion of the merger, all shares reserved for issuance under the
TeleCorp stock option and restricted stock plans will be issued as shares of
AT&T Wireless stock rather than as shares of TeleCorp stock.
For example, if the merger occurs on March 31, 2002, based on particular
assumptions and current information, options to purchase 152,318 shares of
TeleCorp class A voting common stock held by
58
Mr. O'Connor will be converted into options to purchase 137,086 shares of AT&T
Wireless common stock.
TeleCorp PCS, Inc. (f/k/a TeleCorp Wireless Inc.) 1998 Restricted Stock
Plan. On November 13, 2000, TeleCorp assumed the obligations of TeleCorp
Wireless under a 1998 Restricted Stock Plan. The plan originally authorized the
issuance of 7,085.22 shares of TeleCorp Wireless series E preferred stock and
12,955.33 shares of TeleCorp Wireless class A voting common stock. As a result
of a stock split occurring in August 1999 and a stock split occurring in
connection with the initial public offering of TeleCorp Wireless, which together
resulted in a 309 to 1 split of the TeleCorp Wireless class A voting common
stock, the number of shares of class A voting common stock issuable under the
plan was increased to 4,003,196.97. The shares of the series E preferred stock
and the class A voting common stock authorized to be issued under the plan were
converted into an equal number of shares of TeleCorp series E preferred stock
and class A voting common stock, respectively, in connection with the
acquisition of Tritel by TeleCorp on November 13, 2000.
Upon completion of the merger, AT&T Wireless will assume all of TeleCorp's
obligations under the plan, and each restricted share of TeleCorp class A voting
common stock will be converted into 0.9 of a restricted share of AT&T Wireless
common stock. In addition, the restricted shares of the TeleCorp series E
preferred stock will be converted into restricted shares of a substantially
identical series of AT&T Wireless preferred stock.
Any of the stock not granted in accordance with the terms of the plan by
July 17, 2003 will be awarded to Messrs. Vento and Sullivan on a pro rata basis.
As of October 4, 2001, 6,435.46 shares of TeleCorp series E preferred stock and
3,641,453 shares of TeleCorp class A voting common stock have been granted and
remain outstanding under the plan.
If the merger occurs on March 31, 2002, based on particular assumptions and
current information, 218,765 shares of restricted TeleCorp class A voting common
stock awarded to Mr. O'Connor and 1,601,279 shares of restricted TeleCorp class
A voting common stock awarded to Ms. Dobson will be converted into 196,889
shares and 1,441,151 shares of restricted AT&T Wireless common stock,
respectively. In addition, 255.59 shares of restricted TeleCorp series E
preferred stock held by Mr. O'Connor and 3,120.03 shares of restricted TeleCorp
series E preferred stock awarded to Ms. Dobson will each be converted into an
equal number of shares of restricted AT&T Wireless preferred stock.
TeleCorp Tracking, Voting Preference Common and Preferred Stock Holdings of
Directors and Officers of TeleCorp. The chart below lists the holdings of
TeleCorp class C, D, E and F common stock, voting preference common stock and
series A convertible, B, C, D, E, F and G preferred stock of current TeleCorp
board members, former TeleCorp board members, entities related to the current
and former board members and executive officers of TeleCorp as of October 4,
2001. We refer to the TeleCorp class C, D, E and F common stock as the tracking
common stock.
TELECORP STOCK
HOLDINGS OF ENTITY(IES) RELATED TO TELECORP STOCK
BOARD MEMBER OR BOARD MEMBER BOARD MEMBER OR HOLDINGS OF RELATED
EXECUTIVE OFFICER OR EXECUTIVE OFFICER EXECUTIVE OFFICER ENTITY(IES)
----------------- -------------------- ---------------------- -------------------
Gerald T. Vento 108,581 shares of tracking TeleCorp Investment 11,366 shares of tracking
TeleCorp Chief Executive stock Corp. II, L.L.C. stock
Officer and Director 1,545 shares of voting 1,670.17 shares of series
preference common C preferred stock
490.29 shares of series C
preferred
11,728.46 shares of series
E preferred
59
TELECORP STOCK
HOLDINGS OF ENTITY(IES) RELATED TO TELECORP STOCK
BOARD MEMBER OR BOARD MEMBER BOARD MEMBER OR HOLDINGS OF RELATED
EXECUTIVE OFFICER OR EXECUTIVE OFFICER EXECUTIVE OFFICER ENTITY(IES)
----------------- -------------------- ---------------------- -------------------
Thomas H. Sullivan 66,072 shares of tracking TeleCorp Investment 11,366 shares of tracking
TeleCorp Chief Financial stock Corp. II, L.L.C. stock
Officer, Executive Vice 1,545 shares of voting 1,670.17 shares of series
President and Director preference common C preferred stock
108.95 shares of series C
preferred
7,290.67 shares of series
E preferred
William M. Mounger, II 5,245.70 shares of Trillium PCS, LLC 1,129.34 shares of
Chairman of the tracking stock M3, LLC tracking stock
TeleCorp Board of 3 shares of voting Digital PCS, LLC 2,332.55 shares of series
Directors preference common Airwave Communications C preferred stock
LLC
Telos Foundation, Inc.
Michael R. Hannon J.P. Morgan Partners 231,366 shares of tracking
TeleCorp Director (23A SBIC), LLC stock
TeleCorp Investment 50,571.14 shares of series
Corp., L.L.C. C preferred stock
James M. Hoak HCP Capital Fund, L.P. 165,907 shares of tracking
TeleCorp Director Hoak Communications stock
Partners, L.P. 36,027.82 shares of series
C preferred stock
Scott I. Anderson TeleCorp Investment 11,366 shares of tracking
TeleCorp Director Corp. II, L.L.C. stock
1,670.17 shares of series
C preferred stock
Ann K. Hall AT&T Wireless PCS, LLC 23,211.31 shares of
TeleCorp Director tracking stock
97,472.84 shares of series
A convertible preferred
stock
90,668.33 shares of series
B preferred stock
3,070.58 shares of series
C preferred stock
49,416.98 shares of series
D preferred stock
14,912,778 shares of
series F preferred stock
46,374.10 shares of series
G preferred stock
60
TELECORP STOCK
HOLDINGS OF ENTITY(IES) RELATED TO TELECORP STOCK
BOARD MEMBER OR BOARD MEMBER BOARD MEMBER OR HOLDINGS OF RELATED
EXECUTIVE OFFICER OR EXECUTIVE OFFICER EXECUTIVE OFFICER ENTITY(IES)
----------------- -------------------- ---------------------- -------------------
William W. Hague AT&T Wireless PCS, LLC 23,211.31 shares of
TeleCorp Director tracking stock
97,472.84 shares of series
A preferred stock
90,668.33 shares of series
B preferred stock
3,070.58 shares of series
C preferred stock
49,416.98 shares of series
D preferred stock
14,912,778 shares of
series F preferred stock
46,374.10 shares of series
G preferred stock
Michael Benson AT&T Wireless PCS, LLC 23,211.31 shares of
TeleCorp Director tracking stock
97,472.84 shares of series
A preferred stock
90,668.33 shares of series
B preferred stock
3,070.58 shares of series
C preferred stock
49,416.98 shares of series
D preferred stock
14,912,778 shares of
series F preferred stock
46,374.10 shares of series
G preferred stock
Julie Dobson 3,120.03 shares of series
TeleCorp Wireless Chief E preferred stock
Operating Officer
Michael O'Connor 255.59 shares of series E
TeleCorp Wireless Senior preferred stock
Vice President, Finance
E.B. Martin* Digital PCS, LLC 2,332.55 shares of series
C preferred stock
Gary Wendt* CTIHC, Inc. 10,895.50 shares of
tracking stock
Alexander P. Coleman* Dresdner Kleinwort 5,732.32 shares of
Wasserstein tracking stock
Kevin J. Shepherd* Triune PCS, LLC 4,941.88 shares of
tracking stock
David A. Jones* J.G. Funding, LLC 373.83 shares of tracking
stock
Rohit M. Desai** Private Equity 221,202 shares of tracking
TeleCorp Director Investors III, L.P. stock
Equity-Linked 48,038.12 shares of series
Investors-II C preferred stock
---------------
* The individual no longer serves as a director of TeleCorp but did serve as a
director of TeleCorp since the beginning of TeleCorp's last fiscal year. The
individual did not participate in the deliberations on
61
whether to approve the merger agreement or to recommend the transactions
contemplated by the merger agreement to the TeleCorp stockholders.
** Mr. Desai resigned from the TeleCorp board of directors on November 28, 2001.
Letter Agreement among Gerald T. Vento, Thomas H. Sullivan and
TeleCorp. TeleCorp entered into a letter agreement on October 8, 2001 with
Messrs. Vento and Sullivan, each as an individual and as an owner and officer of
TeleCorp Management Corp. Inc., through which they currently provide management
services to TeleCorp.
Under the terms of the letter agreement, TeleCorp agreed to pay TeleCorp
Management Corp. a retention award in exchange for specified services and the
promise that each of Messrs. Vento and Sullivan and TeleCorp Management Corp.
will enter into non-competition and non-solicitation agreements with TeleCorp
and AT&T Wireless at or prior to the completion of the merger. The retention
award consists of a cash lump-sum payment equal to three times the sum of (1)
the "management fees" that TeleCorp Management Corp. receives under the TeleCorp
management agreement and (2) the highest annual bonus earned for the last three
full fiscal years prior to the completion of the merger, if:
- TeleCorp Management Corp. provides its services to TeleCorp through the
completion of the merger;
- the management agreement is terminated by TeleCorp for any reason other
than "cause;"
- the management agreement is terminated by TeleCorp Management Corp. for
"good reason;" or
- either of Mr. Vento or Mr. Sullivan dies or becomes disabled prior to the
completion of the merger.
In the event that either of Mr. Sullivan or Mr. Vento or the management
agreement is terminated for any reason other than those set forth above, Messrs.
Sullivan and Vento will not be entitled to a retention award.
Messrs. Vento and Sullivan agreed to waive any right to terminate the
management agreement that might arise as a result of the merger agreement or the
transactions contemplated thereby.
In addition, all parties agreed to terminate the management agreement upon
the completion of the merger, except that the following provisions of the
management agreement will survive the termination of the agreement:
- TeleCorp Management Corp. will not be liable for any failure or delay in
its performance, unless the failure is a result of its gross negligence
or willful misconduct;
- TeleCorp Management Corp. will not be liable for damages to TeleCorp or
its subscribers due to any failure of system or performance;
- neither Mr. Vento nor Mr. Sullivan will be liable for his failure to use
good faith efforts to cause the other to perform all of his obligations
under the management agreement;
- if either Mr. Vento or Mr. Sullivan is threatened to be made a party in a
legal proceeding because of his status as a TeleCorp employee, he shall
be indemnified by TeleCorp to the fullest extent permitted by law; and
- both Messrs. Vento and Sullivan will be eligible for reimbursements for
out-of-pocket expenses incurred prior to the termination of the
management agreement.
Under the management agreement, some restricted shares of TeleCorp capital
stock granted to Messrs. Vento and Sullivan immediately vest, and cease to be
subject to repurchase by TeleCorp, upon a termination of the management
agreement by TeleCorp Management Corp. due to, among other events, the removal
of Messrs. Vento and Sullivan as directors of TeleCorp or from their respective
offices of TeleCorp or the diminishment of their responsibilities. The shares
will also vest if the management agreement is terminated by TeleCorp for reasons
other than "cause."
62
The letter agreement will be void and have no further force or effect if
the merger agreement is terminated.
If the merger were to be completed on March 31, 2002, and the management
agreement is terminated under the letter agreement on the same date, the cash
amount payable to TeleCorp Management Corp., based on particular assumptions and
currently available information, would be approximately $3,300,000. In addition,
approximately 1,183,080 shares of TeleCorp class A voting common stock and
approximately 1,873 shares of restricted TeleCorp series E preferred stock
awarded to Mr. Vento would vest and no longer be subject to repurchase by
TeleCorp and approximately 735,407 shares of TeleCorp class A voting common
stock and approximately 1,164 shares of restricted TeleCorp series E preferred
stock awarded to Mr. Sullivan would vest and no longer be subject to repurchase
by TeleCorp.
Change of Control Severance Policy. On October 7, 2001, TeleCorp adopted
the TeleCorp change of control severance policy which was subsequently modified
effective November 14, 2001, subject to ratification by the TeleCorp board of
directors. The modified severance policy separates participants into three
tiers, Tier I, Tier II and Tier III. Both Mr. O'Connor and Ms. Dobson are Tier I
participants. Participants in this severance policy are entitled to separation
benefits if, prior to the first anniversary of a change of control, such as the
merger, the participant's employment with TeleCorp or its successor is
terminated:
- by TeleCorp or its successors or affiliates, as applicable, other than
(1) for "cause," (2) by reason of the participant's death or (3) by
reason of the participant's disability; or
- by the participant within 90 days following an event constituting "good
reason."
Upon a qualifying termination, but subject to the participant's execution
and non-revocation of a release, a non-competition covenant and a
non-solicitation covenant, a participant will receive a lump-sum cash payment
equal to the sum of:
- two, in the case of a Tier I participant, one, in the case of a Tier II
participant, and one-half, in the case of a Tier III participant times
the sum of (1) the higher of the participant's annual base salary as in
effect immediately prior to the change of control or the participant's
highest annual base salary in effect at any time subsequent to the change
of control and (2) the participant's target bonus for the fiscal year in
which the participant's employment is terminated;
- a pro rata bonus through the date of termination for the year in which
the participant's termination of employment occurs;
- the participant's accrued but unpaid base salary; and
- any accrued but unpaid vacation pay.
In addition, for a period of two years following the qualifying termination
in the case of a Tier I participant, one year following the qualifying
termination in the case of a Tier II participant, and six months following the
qualifying termination in the case of a Tier III participant, the participant
and the participant's dependents will continue to be provided with medical and
life insurance benefits equivalent to those that the participant and the
participant's dependents received immediately prior to the change of control or
such medical and life insurance benefits provided to active senior executives of
TeleCorp until the participant becomes reemployed with another employer and is
eligible to receive medical or life insurance benefits, and so long as the
participant continues to make the required plan contributions.
Upon a qualifying termination, all equity-based compensation awards held by
a participant will vest in full and become immediately exercisable.
In the event that any amounts payable or benefits provided under the
severance policy or any other arrangement would otherwise be subjected to the
golden parachute excise taxes imposed under Section 4999 of the Internal Revenue
Code, amounts payable under the policy will be reduced to the maximum amount
permissible to avoid imposition of such taxes.
63
Any successor of TeleCorp, its assets or its businesses, will be bound by
the terms of this severance policy in the same manner and to the same extent
that TeleCorp would be obligated to perform its duties if no succession had
taken place.
The amounts payable under the terms of this severance policy will be
reduced by other severance benefits payable under any plan, program, policy,
practice, agreement or arrangement between the participant and TeleCorp.
For example, if the merger were to be completed on March 31, 2002 and Mr.
O'Connor's and Ms. Dobson's employment were immediately terminated in a
qualifying termination on that date, the cash amount payable to Mr. O'Connor and
Ms. Dobson under this severance policy, based upon particular assumptions and
currently available information, would be approximately $1,060,000 and $780,000,
respectively. In addition, approximately 141,579 shares of restricted TeleCorp
class A voting common stock, 153.35 shares of restricted TeleCorp series E
preferred stock and options to purchase 132,795 shares of TeleCorp class A
voting common stock awarded to Mr. O'Connor, and approximately 720,576 shares of
restricted TeleCorp class A voting common stock and approximately 1,404 shares
of restricted TeleCorp series E preferred stock awarded to Ms. Dobson, would
vest. The foregoing dollar, option and share amounts are calculated without
regard to the employment agreements of Mr. O'Connor and Ms. Dobson. The
foregoing benefits to be received by Ms. Dobson upon a qualifying termination
will be reduced by any benefits received under her employment agreement due to
her termination. The foregoing benefits to be received by Mr. O'Connor will be
reduced by any benefits received by Mr. O'Connor pursuant to his employment
agreement upon completion of the merger. In addition, the foregoing benefits
were calculated without regard to any reduction that may be required to avoid
imposition of the golden parachute excise taxes under the terms of the modified
change of control severance policy.
Employment Agreement with Julie Dobson. On February 28, 2000, TeleCorp
Wireless entered into an employment agreement with Ms. Dobson, under which Ms.
Dobson serves as TeleCorp Wireless's Chief Operating Officer. Under the terms of
the agreement, Ms. Dobson receives an annual base salary of $250,000 with an
annual bonus opportunity based upon the achievement of performance-based
objectives established by TeleCorp Wireless.
In the event that Ms. Dobson's employment with TeleCorp Wireless is
terminated by TeleCorp Wireless without "cause," Ms. Dobson will receive any
accrued but unpaid base salary through the date of termination of her
employment, 12 months of her then-current annual base salary, payable in normal
intervals, and for a period of 12 months following the date of termination of
her employment, continuation of the same or equivalent hospital, medical and
dental coverage as Ms. Dobson received immediately prior to such termination. In
addition, if Ms. Dobson's employment with TeleCorp Wireless is terminated by
TeleCorp Wireless without "cause" or by Ms. Dobson for "good reason," any shares
of TeleCorp stock or options to purchase TeleCorp stock granted to Ms. Dobson
under any TeleCorp or TeleCorp Wireless stock or option plan that have not
previously vested will immediately vest on the date of termination of her
employment.
For purposes of the employment agreement, "good reason" means (1) Ms.
Dobson's demotion or removal from her position, (2) the material diminution of
Ms. Dobson's responsibilities, duties or status without cure or (3) the
relocation of the principal offices of TeleCorp Wireless, without Ms. Dobson's
consent, to a location more than 50 miles from its current location.
For example, if the merger were to be completed on March 31, 2002 and Ms.
Dobson's employment was terminated on that date without cause, based upon
particular assumptions and currently available information, approximately
720,576 shares of restricted TeleCorp class A voting common stock and
approximately 1,404 shares of restricted TeleCorp series E preferred stock
awarded to Ms. Dobson would vest.
Employment Agreement with Michael O'Connor. On October 7, 2001, TeleCorp
Communications executed an amendment to Mr. O'Connor's employment agreement that
becomes effective immediately prior to the completion of the merger. Under the
terms of Mr. O'Connor's amended agreement,
64
Mr. O'Connor is paid an annual base salary of $190,000 and is eligible for an
annual bonus opportunity of up to 50% of his annual base salary. If Mr.
O'Connor's employment is terminated under the agreement other than for "cause,"
Mr. O'Connor will be entitled to receive any stock options that are vested as of
the termination date, and for a period of 24 months following the date of
termination, will continue to receive the same or equivalent hospital, medical
and dental coverage as he received immediately prior to the termination. In
addition, if Mr. O'Connor's employment with TeleCorp Communications is
terminated by TeleCorp Communications without "cause" or by Mr. O'Connor for
"good reason," or if a "change of control" occurs (without regard to whether Mr.
O'Connor's employment is terminated), subject to Mr. O'Connor's compliance with
a covenant not to compete and a covenant not to solicit employees of TeleCorp
during Mr. O'Connor's employment with TeleCorp and for one year following the
date of termination of Mr. O'Connor's employment, Mr. O'Connor will be entitled
to:
- a lump sum payment equal to any accrued but unpaid compensation;
- an amount equal to two times the sum of Mr. O'Connor's base salary and
his target bonus for the year in which Mr. O'Connor's employment is
terminated; and
- vesting of, and lapse of restrictions on, any stock options and
restricted stock.
For the purposes of the employment agreement, "good reason" means (1) Mr.
O'Connor's demotion or removal from his position, (2) the material diminution of
any of his responsibilities, duties or status, without cure, and (3) relocation
of the principal offices of TeleCorp Communications, without Mr. O'Connor's
consent, to a location that is more than 50 miles from its current location.
If the amendment becomes effective, the merger will constitute a change of
control for purposes of the employment agreement.
The amendment to Mr. O'Connor's employment agreement will be void and have
no further force or effect if the merger agreement is terminated.
For example, if the merger were to be completed on March 31, 2002, under
the employment agreement, based upon particular assumptions and currently
available information, the cash amount payable to Mr. O'Connor would be
approximately $1,040,000 and approximately 141,579 shares of restricted TeleCorp
class A voting common stock, 153.35 shares of restricted TeleCorp series E
preferred stock and options to purchase 132,795 shares of TeleCorp class A
voting common stock awarded to Mr. O'Connor would vest.
Employment Agreement with William Mounger, II. TeleCorp is a party to an
employment agreement with Mr. Mounger dated as of November 13, 2000. Under the
agreement, Mr. Mounger serves as the chairman of the TeleCorp board of directors
and will be paid during such period an annual base salary of $250,000, subject
to annual increases of $25,000 per year, except that in no event will Mr.
Mounger be paid a lower annual salary than Mr. Vento. In addition, Mr. Mounger
is entitled to an annual bonus under the agreement equal to the greater of 50%
of his annual salary and the annual bonus paid to Mr. Vento.
Upon the termination of Mr. Mounger's employment, Mr. Mounger will receive
an amount equal to his accrued but unpaid compensation plus any other amounts
that are vested or to which Mr. Mounger is otherwise entitled under the terms of
any plan or agreement with TeleCorp. In addition, Mr. Mounger will receive a
lump sum payment in an amount equal to the annual base salary for the period
beginning on the date of termination and ending on January 7, 2004 and the
annual bonus for each calendar year during the period beginning on the date of
termination and ending on January 7, 2004 (except for any annual bonus with
respect to 2004), assuming for this purpose that Mr. Mounger had remained
employed by TeleCorp during such period.
Finally, upon termination of Mr. Mounger's employment with TeleCorp for any
reason, the shares of TeleCorp class E common stock held by Mr. Mounger on the
date of termination must be purchased by Messrs. Vento and Sullivan or TeleCorp
or any other person that TeleCorp may designate to purchase the shares at the
average price of TeleCorp class A voting common stock, as quoted on the Nasdaq
National
65
Market for the 20 trading days immediately preceding the termination of the
employment term. Mr. Mounger currently holds 5,245.70 shares of TeleCorp class E
common stock that would be subject to the purchase requirement.
During the employment term and for a period of six months following the
termination of employment, Mr. Mounger is subject to a covenant not to compete
with TeleCorp. In addition, during the employment term and for a period of one
year following the termination of employment, Mr. Mounger is subject to a
covenant not to solicit employees of TeleCorp and its subsidiaries.
For example, if the merger were to be completed on March 31, 2002, and Mr.
Mounger's employment were terminated on that date, based upon particular
assumptions and currently available information, the cash amount payable to Mr.
Mounger would be approximately $875,000.
Mounger Letter Agreement, dated as of October 31, 2000. Mr. Mounger owns
three shares of TeleCorp voting preference common stock. Under an agreement
dated as of October 31, 2000, Mr. Mounger has a put right to sell these shares
to Tritel for $10 million. If Mr. Mounger has not exercised his put right by the
time the merger is completed, he will be deemed to have exercised his put right
and will be entitled to receive $10 million from Tritel.
TeleCorp Indemnification and Insurance. The merger agreement provides
that, to the fullest extent permitted by law, at the completion of the merger,
AT&T Wireless and the surviving corporation will indemnify, defend and hold
harmless all past and present directors, officers and employees of TeleCorp and
its subsidiaries for actions and omissions in their capacities as directors or
officers of TeleCorp on or prior to the completion of the merger. Following the
completion of the merger, with respect to such persons, the surviving
corporation shall honor all indemnification agreements and all indemnification
obligations provided by the TeleCorp amended and restated certificate of
incorporation and by-laws as of the date of the merger agreement. In addition,
for a period of six years after the completion of the merger, the limitation of
liability and indemnification provisions of the certificate of incorporation of
the surviving entity may not be amended in any manner that would adversely
affect the rights of the TeleCorp directors or officers holding such office at
the completion of the merger.
The merger agreement also provides that AT&T Wireless will cause to be
maintained, for a period of six years after the completion of the merger,
policies of directors' and officers' liability insurance in respect of acts or
omissions occurring prior to the completion of the merger covering such persons
as are currently covered by TeleCorp's policies on terms with respect to
coverage and in amounts no less favorable than those maintained by TeleCorp on
October 7, 2001. AT&T Wireless will not be required to expend in any one year an
amount in excess of 250% of the annual premiums currently paid by TeleCorp for
directors' and officers' liability insurance.
Management Voting Agreements. Messrs. Vento and Sullivan together own
substantially all of the TeleCorp voting preference common stock, which
represents approximately 50.1% of the voting power of all of the outstanding
voting stock of TeleCorp. Messrs. Vento and Sullivan have agreed, under their
respective voting agreements, to vote all of their shares of TeleCorp stock
entitled to vote upon the merger in favor of the merger and not to transfer or
agree to transfer any of their shares of TeleCorp voting preference common
stock. At the completion of the merger, each share of TeleCorp voting preference
common stock will be converted into 0.9 of a share of AT&T Wireless common
stock. See "Other Agreements -- Voting Agreements" for a further description of
these restrictions.
Cash Equity Investors Voting Agreements. Two members of the board of
directors of TeleCorp, Mr. Hoak, on behalf of Hoak Communications Partners, L.P.
and HCP Capital Fund, L.P., and Mr. Hannon, on behalf of CB Capital Investors,
L.P., each entered into voting agreements to vote all of their shares of
TeleCorp stock entitled to vote upon the merger in favor the transaction. The
voting agreements executed by Messrs. Hoak and Hannon also restrict the amount
of shares of TeleCorp stock that each of the entities party to the voting
agreements may sell. See "Other Agreements -- Voting Agreements" for a further
description of these restrictions.
66
RELATIONSHIPS WITH AT&T WIRELESS
General
On November 13, 2000, Tritel was acquired by TeleCorp Wireless through the
mergers of each of Tritel and TeleCorp Wireless with two newly formed
subsidiaries of a new holding company now known as TeleCorp. In accordance with
the terms of the merger agreement, all of the capital stock of TeleCorp Wireless
and Tritel was converted into the right to receive capital stock in TeleCorp. As
a result of the merger, TeleCorp is controlled by the former holders of the
voting preference common stock of TeleCorp Wireless, namely, Gerald T. Vento and
Thomas H. Sullivan. In connection with the acquisition, AT&T Wireless
contributed cash and other assets to TeleCorp in exchange for 9,272,740 shares
of the class A voting common stock of TeleCorp, thereby increasing AT&T
Wireless's holdings in TeleCorp from approximately 18% to approximately 23% of
the as converted TeleCorp class A voting common stock. This transaction was
completed immediately after the acquisition of Tritel by TeleCorp Wireless in
November 2000.
On November 13, 2000, TeleCorp Wireless exchanged its Boston operating
division, which included PCS licenses in several New England markets, for
wireless properties or rights to designate a qualified assignee for additional
wireless properties of AT&T Wireless in the Milwaukee, Wisconsin and Des Moines,
Iowa markets, and a cash payment of approximately $80 million.
TeleCorp Wireless Securities Purchase Agreement
Under a securities purchase agreement, dated as of January 23, 1998, as
amended, among TeleCorp Wireless, its initial investors, the former stockholders
of TeleCorp Holding Corp., and Messrs. Vento and Sullivan, TeleCorp received PCS
licenses from AT&T Wireless and its affiliate, TWR Cellular, Inc., in exchange
for shares of TeleCorp Wireless's series A preferred stock, series D preferred
stock and series F preferred stock and $21 million in cash. TeleCorp Wireless's
initial investors include AT&T Wireless, Chase Capital Partners, Desai
Associates, Hoak Capital Corporation, J. H. Whitney & Co., M/C Partners, One
Liberty Fund III, L.P., Toronto Dominion Investments, Inc. and Northwood Capital
Partners. Under the securities purchase agreement, the TeleCorp Wireless initial
investors other than AT&T Wireless agreed to contribute $128 million to TeleCorp
Wireless in exchange for shares of TeleCorp Wireless's series C preferred stock,
class A voting common stock, class C common stock, and class D common stock.
Tritel Securities Purchase Agreement
Under a securities purchase agreement, dated as of May 20, 1998, as
amended, among Tritel, its initial investors and William M. Mounger, II, E.B.
Martin, Jr. and Jerry M. Sullivan, Jr.:
- AT&T Wireless and TWR Cellular, Inc. assigned PCS licenses to Tritel in
exchange for shares of Tritel series A preferred stock and series D
preferred stock;
- Airwave Communications and Digital PCS assigned to Tritel their
contributed licensed areas and other assets in exchange for shares of
Tritel series C preferred stock and the assumption of particular
liabilities of Airwave Communications and Digital PCS, including the
indebtedness owed to the U.S. Department of the Treasury for the Airwave
Communications and Digital PCS contributed licensed areas; and
- Tritel's initial investors other than AT&T Wireless purchased shares of
Tritel series C preferred stock.
The licenses contributed by AT&T Wireless PCS under both the TeleCorp
Wireless securities purchase agreement and Tritel securities purchase agreement
provide for the right to use 20 MHz of airwave capacity in particular geographic
areas, which AT&T Wireless PCS has partitioned and disaggregated from some of
its 30 MHz A- and B-Block PCS licenses. AT&T Wireless PCS has reserved the right
to use, market and sell to others any services on the 10 MHz of airwave capacity
that it retained, subject to the stockholders agreement and the network
membership license agreement.
67
Intercarrier Roamer Service Agreement
TeleCorp Wireless and Tritel each entered into an intercarrier roamer
service agreement with AT&T Wireless and several of its affiliates, dated as of
July 17, 1998 and January 7, 1999, respectively. Each of the agreements was
amended as of November 13, 2000. The intercarrier roamer service agreements
provide that each party, in its capacity as a serving provider, will provide
services to each other's customers where it has a license or permit to operate a
wireless communications system. Each home carrier whose customers receive
service from a serving provider will pay to the serving provider all of the
serving provider's charges for wireless service. Under TeleCorp Wireless's
intercarrier roamer service agreement, each serving provider's service charges
per minute or partial minute for use for the first four years will be fixed at a
declining rate and service charges in years five through 20 will be the lower of
a fixed rate or AT&T Wireless's average home rate. Under Tritel's intercarrier
roamer service agreement, each service provider's service charges per minute or
partial minute for use for the first three years will be fixed and the service
charges in years four through 20 will be the lower of a fixed rate or AT&T
Wireless's average home rate. In addition, after the expiration of the first
three years under the Tritel agreement, and each anniversary thereafter, roaming
rates are to be negotiated by Tritel and AT&T Wireless and such rates may not be
increased.
Each intercarrier roamer service agreement has a term of 20 years, which is
automatically renewed on a year-to-year basis with respect to the TeleCorp
Wireless agreement and on a month-to-month basis with respect to the Tritel
agreement, unless terminated by either party upon 90 days' prior written notice.
Each intercarrier roamer service agreement may be terminated immediately by
either party upon written notice to the other of a default of the other party
or, with respect to TeleCorp Wireless, after 10 years by either party upon 90
days' prior written notice. A party will be in default under each intercarrier
roamer service agreement upon any of the following:
- a material breach of any material term of the intercarrier roamer service
agreement by a party that continues for 30 days after receipt of written
notice of the breach from the non-breaching party;
- voluntary liquidation or dissolution or the approval by the management or
owners of a party of any plan or arrangement for the voluntary
liquidation or dissolution of the party;
- a final order by the FCC revoking or denying a material PCS license or
permit granted to either party; or
- bankruptcy or insolvency of a party.
Each intercarrier roamer service agreement may also be suspended by either
party immediately upon written notice to the other party of the existence of a
breach of the agreement, whether or not the breach constitutes a default, if the
breach materially affects the service being provided to the customers of the
non-breaching party. While the suspension is in effect, either in whole or in
part, the parties will work together to resolve as quickly as possible the
difficulty that caused the suspension. When the party who originally gave notice
of suspension concludes that the problem causing the suspension has been
resolved, that party will give to the other written notice to this effect, and
the agreement will resume in full effect within five business days after the
parties have mutually agreed that the problem has been resolved. No party to the
intercarrier roamer service agreements may assign or transfer its rights and
obligations under the respective agreement without the written consent of the
other party, except to an affiliate or an assignee of its license.
Roaming Administrative Service Agreement
TeleCorp Wireless and Tritel each entered into a roaming administrative
service agreement with AT&T Wireless, dated as of July 17, 1998 and January 7,
1999, respectively. Each of the agreements was amended as of November 13, 2000.
In the roaming administrative service agreements, AT&T Wireless has agreed to
make available to TeleCorp Wireless and Tritel the benefits of the intercarrier
roaming services agreements it has entered into with other wireless carriers,
subject to the consent of the other wireless
68
carriers and to TeleCorp Wireless or Tritel, as applicable, remaining a member
in good standing of the North American Cellular Network.
Each roaming administrative service agreement has an initial term of two
years, which is automatically renewed on a year-to-year basis unless terminated
by either party upon 90 days' prior written notice. Either party may terminate
the roaming administrative service agreement for any reason at any time upon 180
days' prior written notice. Either party may also terminate each of the roaming
administrative service agreements:
- upon a material breach of the other party that is not cured or for which
cure is not reasonably begun within 30 days after written notice of the
claimed breach; or
- immediately, after reasonable prior notice, if the other party's
operations materially and unreasonably interfere with its operations and
the interference is not eliminated within 10 days.
AT&T Wireless can terminate each of the roaming administrative service
agreements if:
- TeleCorp Wireless or Tritel, as applicable, is no longer a member in good
standing of the North American Cellular Network; or
- the agreement under which AT&T Wireless receives roaming administration
services from a third party is terminated or expires; provided, however,
that AT&T Wireless will offer to resume its services in the event that it
extends or continues that agreement.
No party to the roaming administration service agreements may assign or
transfer its rights or obligations under the agreement without the written
consent of the other party, except to an affiliate or an assignee of its
license, except that AT&T Wireless may subcontract its duties to a third party.
Resale Agreement
The TeleCorp stockholders agreement provides that, from time to time, at
the request of AT&T Wireless, TeleCorp is required to enter into a resale
agreement with AT&T Wireless or its affiliates or no more than one third party.
The resale agreement would grant to AT&T Wireless or its designees the right to
purchase from TeleCorp its wireless services on a non-exclusive basis within a
designated area and resell access to, and use of, its services. AT&T Wireless
must pay charges for any services that are resold, including usage, roaming,
directory assistance and long distance charges, and taxes and tariffs. Any
resale agreement would have an initial term of ten years that would be
automatically renewed on a year-to-year basis unless terminated by either party
upon 90 days' prior written notice. In addition, AT&T Wireless would be able to
terminate any resale agreement for any reason at any time upon 180 days' prior
written notice. The rates, terms and conditions of service that TeleCorp
provides are to be at least as favorable, and to the extent permitted by
applicable law, more favorable, to AT&T Wireless, taken as a whole, as the
rates, terms and conditions that TeleCorp provides to other resellers.
Puerto Rico License
In a series of transactions, TeleCorp Wireless acquired a license and
related assets covering the San Juan, Puerto Rico major trading area from AT&T
Wireless on May 25, 1999. The following transactions took place ultimately to
effect the acquisition of the license and related assets from AT&T Wireless:
- on May 24, 1999, TeleCorp Wireless sold to AT&T Wireless 30,750 shares of
its series A preferred stock, 10,250 shares of its series D preferred
stock, and 3,090,000 shares of its series F preferred stock for $40
million under a preferred stock purchase agreement;
- on May 25, 1999, TeleCorp Wireless sold to its initial investors, other
than AT&T Wireless, 39,997 shares of its series C preferred stock and
12,358,950 shares of its class A voting common stock in exchange for an
aggregate amount of $40 million in cash under a stock purchase agreement
which will be funded over a three-year period;
69
- on May 25, 1999, TeleCorp Wireless purchased the license for the San Juan
major trading area and related assets, which included 27 constructed
network equipment sites, call connection equipment and leases for
additional network equipment sites, from AT&T Wireless for $96.5 million
in cash under an asset purchase agreement; and
- TeleCorp Wireless incurred $3.2 million for microwave relocation and $0.3
million for legal expenses in connection with this acquisition.
Under these agreements, TeleCorp Wireless's initial investors committed to
make additional equity contributions. As of September 30, 2001, approximately
$29 million of the contribution obligations have been paid and commitments for
approximately $11 million remain outstanding, subject to the same payment
obligations as contained in the July 1998 securities purchase agreement. The
outstanding commitments of $11 million are scheduled to be paid by March 31,
2002.
In addition, Messrs. Vento and Sullivan were issued fixed and variable
awards of 4,063 and 1,633,899 restricted shares of TeleCorp Wireless series E
preferred stock and class A voting common stock, respectively, in exchange for
their interest in Puerto Rico Acquisition Corporation. Puerto Rico Acquisition
Corporation was an entity wholly owned by Messrs. Vento and Sullivan that was
created for the special purpose of acquiring the license and related assets of
the San Juan major trading area. The fixed awards vest over a five-year period.
The variable awards vest based upon particular events taking place,
including TeleCorp's reaching milestones in its minimum construction plan. The
TeleCorp stockholders agreement sets forth network development requirements for
the Puerto Rico license. The San Juan major trading area covers a population of
approximately 3.9 million people in Puerto Rico, as well as the U.S. Virgin
Islands.
Stockholders Agreement
General. TeleCorp entered into a stockholders agreement, dated as of
November 13, 2000, with AT&T Wireless, some of TeleCorp Wireless's and Tritel's
initial investors, and Messrs. Mounger, Martin, Vento and Sullivan.
Board of Directors. The stockholders agreement requires that any action of
the TeleCorp board of directors be approved by the affirmative vote of a
majority of its entire board of directors, except in circumstances where voting
by particular classes of directors is required.
The stockholders agreement also provides that the TeleCorp board of
directors will consist of 13 directors.
The parties to the stockholders agreement have agreed to vote all of their
shares of TeleCorp class A voting common stock and voting preference common
stock to cause the election of the following 13 individuals to the TeleCorp
board of directors:
- Messrs. Vento and Sullivan, so long as each remains an officer and the
management agreement with TeleCorp Management Corp. remains in effect;
- subject to the provisions described below which limit such selection
rights, two individuals selected by holders of a majority in interest of
the class A voting common stock beneficially owned by TeleCorp Wireless's
initial investors other than AT&T Wireless;
- subject to the provisions described below which limit such selection
rights, two individuals selected by holders of a majority in interest of
the class A voting common stock beneficially owned by Tritel's initial
investors other than AT&T Wireless;
- two individuals designated by AT&T Wireless in its capacity as a holder
of TeleCorp series A convertible preferred stock and series B convertible
preferred stock so long as AT&T Wireless has the right to elect each such
director in accordance with the TeleCorp certificate of incorporation;
and
- five individuals designated by the holders of the TeleCorp voting
preference common stock, which include:
- one individual who must be reasonably acceptable to AT&T Wireless;
70
- Mr. Mounger so long as he remains an officer and employee of TeleCorp,
or one individual who must be reasonably acceptable to Mr. Mounger; and
- three individuals who must be reasonably acceptable to holders of a
majority in interest of the TeleCorp class A voting common stock
beneficially owned by AT&T Wireless on the one hand, and the TeleCorp
Wireless and Tritel initial investors other than AT&T Wireless, on the
other hand, so long as the TeleCorp Wireless and Tritel initial
investors other than AT&T Wireless remain entitled to designate at least
two directors, or, if they are not entitled, then by the remaining
directors on the board of directors.
In the event that Mr. Mounger ceases to be an officer or employee of
TeleCorp and either the number of shares of TeleCorp common stock beneficially
owned by Messrs. Mounger and Martin, in aggregate, falls below 70% of the number
of shares of common stock beneficially owned by them on November 13, 2000, or
two years have elapsed from November 13, 2000, Mr. Mounger will resign or be
removed from the board of directors. In the event that Mr. Mounger is no longer
a member of the board of directors, the number of directors designated by the
holders of the voting preference common stock who require approval by Mr.
Mounger will be reduced to zero, and the number of directors designated by the
holders of the voting preference common stock and acceptable to holders of a
majority in interest of the TeleCorp class A voting common stock beneficially
owned by AT&T Wireless, on one hand, and TeleCorp Wireless's initial investors
and Tritel's initial investors other than AT&T Wireless on the other hand will
be increased to four.
In the event that Mr. Vento or Mr. Sullivan ceases to be an officer of
TeleCorp, or the management agreement between TeleCorp and TeleCorp Management
Corp. ceases to be in full force and effect, Mr. Vento or Mr. Sullivan, as
applicable, will resign or be removed from the board of directors and the
holders of the voting preference common stock will select a replacement or
replacements who must be acceptable to a majority in interest of the TeleCorp
Wireless and Tritel initial investors, other than AT&T Wireless, and AT&T
Wireless, in their sole discretion. In the event that AT&T Wireless ceases to be
entitled to designate directors, the director or directors designated by AT&T
Wireless will resign or be removed from the TeleCorp board of directors and the
size of the TeleCorp board of directors will be reduced accordingly.
The number of directors that the TeleCorp Wireless and Tritel initial
investors other than AT&T Wireless will be permitted to designate will be
reduced when the number of shares of common stock of TeleCorp beneficially owned
by the initial investors of TeleCorp Wireless and Tritel other than AT&T
Wireless on a fully diluted basis falls below:
- 85% of the number of shares of common stock of TeleCorp beneficially
owned by them on November 13, 2000;
- 70% of the number of shares of common stock of TeleCorp beneficially
owned by them on November 13, 2000;
- 60% of the number of shares of common stock of TeleCorp beneficially
owned by them on November 13, 2000; and
- 50% of the number of shares of common stock of TeleCorp beneficially
owned by them on November 13, 2000.
The effect of this arrangement is that the initial investors of TeleCorp
Wireless and Tritel other than AT&T Wireless will be permitted to designate
three, two, one or zero directors respectively; provided, however, that the
reductions in the board of directors may not take place or may be delayed if
some of the initial investors of TeleCorp Wireless and Tritel other than AT&T
Wireless hold or maintain a specified percentage of common stock as set forth in
the stockholders agreement.
In each instance in which the number of directors the initial investors of
TeleCorp Wireless and Tritel other than AT&T Wireless are entitled to designate
is reduced, the director designated by the TeleCorp Wireless initial investor or
Tritel initial investor other than AT&T Wireless beneficially owning the
71
smallest percentage of shares of common stock then owned by any of the initial
investors of TeleCorp Wireless and Tritel other than AT&T Wireless whose
designees then remain as directors will resign or be removed from the board of
directors and the size of the TeleCorp board of directors will be reduced
accordingly. In the event that either:
- the number of directors the initial investors of TeleCorp Wireless and
Tritel other than AT&T Wireless are entitled to designate falls below
two; or
- both the initial investors of TeleCorp Wireless and Tritel other than
AT&T Wireless entitled to designate the last two directors that the
initial investors of TeleCorp Wireless and Tritel other than AT&T
Wireless may designate cease to beneficially own at least 75% of the
number of shares of common stock beneficially owned by them on the
completion of the acquisition of Tritel by TeleCorp Wireless,
the initial investors of TeleCorp Wireless and Tritel other than AT&T Wireless
will no longer be entitled to approve any designation of TeleCorp directors or
approve any director that replaces Messrs. Vento or Sullivan on the board of
directors.
Exclusivity. The parties to the stockholders agreement have agreed that,
during the term of the stockholders agreement, neither they nor any of their
respective affiliates will provide or resell, or act as the agent for any person
offering, within the areas covered by licenses of TeleCorp, wireless
communications services initiated or terminated using TDMA and portions of the
airwaves licensed by the FCC, except that AT&T Wireless and its affiliates will
be able to:
- resell or act as agent for TeleCorp in connection with mobile wireless
communications services;
- provide or resell wireless communications services only to or from
specific locations, provided that any equipment sold in connection with
the service must be capable of providing TeleCorp wireless communications
services; and
- resell mobile wireless communications services from another person in any
area where TeleCorp has not placed a system into commercial service.
In addition, with respect to some markets identified in the intercarrier
roamer service agreements with AT&T Wireless, each of TeleCorp and AT&T Wireless
has agreed to cause its respective affiliates in its home carrier capacities to:
- program and direct the programming of customer equipment so that the
other party, in its capacity as the serving carrier, is the preferred
provider in these markets; and
- refrain from inducing any of its customers to change such programming.
AT&T Wireless has retained some PCS licenses within the areas covered by
TeleCorp licenses for which TeleCorp has a right of negotiation in the event of
a proposed transfer.
If TeleCorp materially breaches any of its obligations, AT&T Wireless may
terminate its exclusivity obligations under the stockholders agreement and may
terminate the rights of TeleCorp to the AT&T brand and logo under the license
agreement if a default continues after the applicable cure periods lapse. These
material breaches include, if:
- TeleCorp fails to meet its minimum build-out requirements for its systems
as set forth in the stockholders agreement;
- AT&T Wireless and its affiliates decide to adopt a new technology
standard other than TDMA in a majority of its markets, and TeleCorp
declines to adopt the new technology;
- each portion of the TeleCorp network does not, within one year after
being placed into service, meet or exceed technical standards that AT&T
Wireless has developed regarding voice quality and performance of network
and call completion equipment. Each portion of the network must, within
one year after being placed into service, perform on a level, measured by
these standards manuals,
72
that meets or exceeds the levels achieved by the average of all
comparable wireless communications networks owned and operated by AT&T
Wireless;
- TeleCorp fails to satisfy specific performance targets that its entire
network, measured as a single system, must meet, including percentage of
calls completed, percentage of established calls dropped, percentages of
calls not successfully transferred from one network equipment site to
another as a handset moves, as well as technical standards regarding the
functioning of network and call connection equipment; or
- TeleCorp fails to meet specified customer care, reception quality and
network reliability standards.
The exclusivity provisions in the stockholders agreement do not apply to
AT&T Wireless or its affiliates with respect to portions of Kentucky in which
AT&T Wireless and its affiliates had an existing roaming agreement in place with
another wireless provider or in East Carroll, Franklin, Madison, Morehouse,
Ouachita, Richland, Tensas, Union or West Carroll, Louisiana.
Construction. The stockholders agreement requires TeleCorp to construct a
PCS system in the areas covered by its licenses according to a minimum build-out
plan prepared by the company and approved by AT&T Wireless, which upon projected
completion at sometime before July 17, 2003, will cover over 75% of the people
in the areas covered by the licenses of TeleCorp in accordance with FCC
build-out requirements.
Disqualifying Transactions. If AT&T Corp. (or any of its affiliates) and an
entity that:
- derives annual revenues from communications businesses in excess of $5
billion;
- derives less than one-third of its aggregate revenues from wireless
communications; and
- owns FCC licenses to offer, and does offer, mobile wireless
communications services serving more than 25% of the residents, as
determined by Paul Kagan Associates, within the areas covered by TeleCorp
subsidiaries,
merge, consolidate, acquire or dispose of assets to each other, or otherwise
combine, then AT&T Wireless, upon written notice to TeleCorp, may terminate its
exclusivity obligations where the territory covered by the licenses of TeleCorp
overlaps with commercial mobile radio service licenses of the business
combination partner. Upon such termination, TeleCorp will have the right to
cause AT&T Wireless or any transferee that acquired any shares of TeleCorp
series A convertible preferred stock, series B preferred stock, series D
preferred stock, series F preferred stock or series G preferred stock then owned
by AT&T Wireless, and any shares of TeleCorp common stock into which any of
these shares are converted, to exchange all, or a proportionate share based on
overlapping service areas after such disqualifying transaction, of their shares
into shares of series H and I preferred stock. In the event of any such
exchange, AT&T Wireless will be able to terminate its exclusivity obligations in
all of TeleCorp's markets.
Once so converted, TeleCorp will be able to redeem the shares of series H
and I preferred stock at any time in accordance with its restated certificate of
incorporation.
Under some circumstances, if AT&T Wireless proposes to sell, transfer or
assign to any person that is not an affiliate of AT&T Wireless, any PCS system
owned and operated by AT&T Wireless and its affiliates in any of the St. Louis,
Missouri; Louisville, Kentucky; or Atlanta, Georgia basic trading areas, then
AT&T Wireless will have to provide TeleCorp with the opportunity to offer its
network in such areas for sale jointly with AT&T Wireless for a 90-day period.
Acquisition of Licenses. TeleCorp may acquire any PCS licenses within its
territory. The stockholders agreement also provides that TeleCorp may acquire
any cellular license that its board of directors has determined is a
demonstrably superior alternative to constructing a PCS system within the
corresponding areas covered by its licenses, if:
- a majority of the population covered by the license is within the areas
covered by the licenses of TeleCorp;
73
- AT&T Wireless and its affiliates do not own commercial mobile radio
service licenses in the area covered by the license; and
- the ownership of the license by TeleCorp will not cause AT&T Wireless or
any affiliate to be in breach of any law or contract.
Vendor Discounts; Roaming Agreements. AT&T Wireless has agreed in the
stockholders agreement that, if TeleCorp requests, and if such request shall not
result in any adverse impact to AT&T Wireless, it will use all commercially
reasonable efforts:
- to assist TeleCorp in obtaining discounts from any AT&T Wireless vendor
with whom it is negotiating for the purchase of any infrastructure
equipment or billing services; and
- to enable TeleCorp to become a party to the roaming agreements between
AT&T Wireless and its affiliates and operators of other cellular and PCS
systems.
Subsidiaries. The stockholders agreement provides that all of the
subsidiaries of TeleCorp must be direct or indirect wholly owned subsidiaries.
The stockholders agreement also provides that with respect to such subsidiaries,
TeleCorp may not sell or dispose of a substantial portion of the assets or any
of the capital stock of any of such subsidiaries except in connection with a
pledge to secure indebtedness.
Restrictions on Transfer. The stockholders agreement restricts the sale,
transfer or other disposition of TeleCorp capital stock, such as by giving
rights of first offer and tag along rights and providing demand and piggyback
registration rights.
If one of the TeleCorp stockholders who is a party to the stockholders
agreement desires to transfer any or all of its shares of the TeleCorp preferred
or common stock, other than voting preference common stock, class C common stock
or class E common stock, the selling stockholder must first give written notice
to TeleCorp and:
- if the selling stockholder is one of the initial investors of TeleCorp
Wireless or Tritel other than AT&T Wireless or any other stockholder who
is a party to the stockholders agreement, to AT&T Wireless; and
- if the selling stockholder is AT&T Wireless, to each of the initial
investors of TeleCorp Wireless or Tritel other than AT&T Wireless.
The stockholders who receive notice from the selling stockholders may
acquire all, but not less than all, of the shares offered to be sold at the
price offered by the selling stockholder. If none of the stockholders opts to
purchase the shares of the selling stockholder, the selling stockholder will be
able to sell its shares to any other person on the same terms and conditions as
originally offered to the stockholders. The right of first offer does not apply
to the repurchase of any shares of TeleCorp class A voting common stock or
series E preferred stock from one of the employees of TeleCorp in connection
with the termination of the employee's employment with TeleCorp.
A stockholder subject to the stockholders agreement may not transfer 25%
(on a fully diluted basis as calculated under the stockholders agreement) or
more of any of the shares of TeleCorp capital stock, whether alone or with other
stockholders or whether in one transaction or a series of transactions, unless
the proposed transfer includes an offer to AT&T Wireless, the TeleCorp Wireless
initial investors and Tritel initial investors other than AT&T Wireless and Mr.
Vento and Mr. Sullivan to join in the transfer in accordance with the procedures
included in the stockholders agreement regarding the inclusion of other
stockholders in the proposed transfer.
TeleCorp Acquisition Transactions. The stockholders agreement provides
that, without the consent of a subsidiary of AT&T Wireless, TeleCorp and its
subsidiaries may not merge, combine or consolidate with any entity, or dispose
of a substantial portion of its assets, or liquidate, dissolve or wind up.
However, TeleCorp and its subsidiaries may acquire another entity by
merger, combination or consolidation, without the consent of a subsidiary of
AT&T Wireless, if such transaction does not affect
74
the capital structure of TeleCorp (except to the extent TeleCorp issues common
stock to the stockholders of the other entity under the terms of such
transaction) and the surviving corporation is a wholly owned subsidiary of
TeleCorp.
Moreover, TeleCorp and its subsidiaries may merge, combine, or consolidate
with another entity or dispose of a substantial portion of their assets, without
the consent of a subsidiary of AT&T Wireless, if
- such transaction has no material effect on the equity interest in
TeleCorp (and the seniority thereof) of such subsidiary of AT&T Wireless
or such subsidiary's rights under the stockholders agreement;
- TeleCorp's direct or indirect interest in its assets is unaffected by
such transaction in any material respect; and
- such transaction is otherwise equivalent in all material respects, with
respect to a subsidiary of AT&T Wireless, to the sale by each of the
other TeleCorp stockholders that are party to the stockholders agreement
of their equity interests in TeleCorp for cash or marketable securities.
A subsidiary of AT&T Wireless has a right of first refusal relating to any
such transaction with TeleCorp.
Registration Rights. The TeleCorp stockholders that are party to the
stockholders agreement also have demand and piggyback registration rights. In
some circumstances, the TeleCorp stockholders may demand that TeleCorp register
some or all of their securities with the SEC under the Securities Act of 1933.
Also, if TeleCorp proposes to register any shares of class A voting common stock
or securities convertible into or exchangeable for class A voting common stock
with the SEC under the Securities Act, TeleCorp will have to notify stockholders
party to the stockholders agreement of its intention to do so, and such
stockholders may be able to include in the registration their shares of class A
voting common stock or securities convertible into or exchangeable for class A
voting common stock, subject to cutback provisions based on limitations on the
number of shares which may be offered as determined by the underwriters in the
offering.
Amendments. The terms of the stockholders agreement may only be amended if
agreed to in writing by TeleCorp and the beneficial holders of a majority of the
class A voting common stock party to the stockholders agreement including AT&T
Wireless, and 66 2/3% of the class A voting common stock beneficially owned by
TeleCorp Wireless initial investors and Tritel initial investors other than AT&T
Wireless, and 66 2/3% of the class A voting common stock beneficially owned by
Messrs. Vento and Sullivan.
Termination. The stockholders agreement will terminate upon the earliest
to occur of:
- the written consent of each party;
- July 17, 2009; and
- the date on which a single stockholder beneficially owns all of the
outstanding shares of class A voting common stock.
Amendment No. 1 to Stockholders Agreement
The TeleCorp stockholders agreement was amended on October 7, 2001 to allow
stockholders of TeleCorp to enter into voting agreements in connection with the
merger. See "Other Agreements -- Stockholders Agreement Amendment" for a further
description of this amendment.
Put and Call Agreement
In connection with its acquisition of PCS licenses and equipment from
ALLTEL, Tritel PCS, Inc., a wholly owned subsidiary of Tritel, entered into a
put and call agreement with AT&T Wireless on October 20, 2000. Under the put and
call agreement Tritel has the right to sell the two licenses acquired
75
from ALLTEL to AT&T Wireless for $50 million at any time during the 18 months
following the completion of the ALLTEL acquisition on December 29, 2000.
Similarly, unless within 10 days of notice from AT&T Wireless of its intention
to exercise its call right, Tritel renounces its put right, upon which the put
and call agreement will terminate, AT&T Wireless has the right to purchase the
two licenses from Tritel during the same 18-month period for $50 million. In the
event of the acquisition of all of TeleCorp's voting preference common stock by
an AT&T Wireless competitor that is not approved by AT&T Wireless, Tritel's
right to renounce the put right and negate the exercise of AT&T Wireless's call
right will terminate. In addition, during the period between the signing of
definitive documents to complete such an acquisition and the completion of such
an acquisition, Tritel's right to negate the exercise of AT&T Wireless's call
right and AT&T Wireless's call right will both be suspended. If such a change of
control is not completed, all rights under the put and call agreement will be
reinstated.
The agreement was amended by the merger agreement so that if the merger
agreement is terminated in accordance with its terms, Tritel's put right with
respect to the two licenses will be exercisable through the fifth day following
such termination.
AT&T Wireless Right of First Refusal to Purchase Shares of TeleCorp Stock
On November 13, 2000 each of Gerald T. Vento and Thomas H. Sullivan granted
AT&T Wireless or its designee a right of first refusal to purchase their
respective shares of TeleCorp voting preference common stock, class C common
stock or class D common stock. These agreements were amended as of December 22,
2000. Currently, the holders of TeleCorp voting preference common stock control
a majority of the voting power of TeleCorp. In the event that either Mr. Vento
or Mr. Sullivan receives a bona fide offer that he intends to accept from a
third party to purchase all of his shares of TeleCorp voting preference common
stock, class C common stock or class D common stock, AT&T Wireless or its
designee has the option, but not the obligation, to purchase all such shares on
the same terms as the third party offer. The purchase price per share payable by
AT&T Wireless or its designee for any of the subject shares would be equal to
the lesser of:
- the price offered by the third party; and
- the average closing price per share for the TeleCorp class A voting
common stock for the five trading days ending two days prior to the date
of execution of the third party offer.
Letter Agreement Terminating Equity Purchase and Put Rights Agreements
On February 14, 2001, Mr. Gerald T. Vento, Mr. Thomas H. Sullivan and AT&T
Wireless entered into a letter agreement that terminated the equity purchase
agreement and the put rights agreement described below.
The equity purchase agreement, which was dated as of December 22, 2000,
provided for AT&T Wireless to purchase 1,339,602 shares of TeleCorp class A
voting common stock, 490 shares of TeleCorp series C preferred stock and 6,540
shares of TeleCorp series E preferred stock from Mr. Vento, and 896,064 shares
of TeleCorp class A voting common stock, 108 shares of TeleCorp series C
preferred stock and 4,009 shares of TeleCorp series E preferred stock from Mr.
Sullivan, in each case at a purchase price of $21 per share, payable in cash or
marketable securities. The equity purchase agreement also provided that the
completion of such purchase and sale would occur, subject to the receipt of
regulatory approvals and the fulfillment or waiver of other conditions, on the
earlier of January 2, 2002 and three business days following notice from AT&T
Wireless.
Under the put rights agreement, which was dated as of December 22, 2000,
Messrs. Vento and Sullivan had the right to require AT&T Wireless to purchase up
to 2,917,988 shares and 2,003,901 shares, respectively, of TeleCorp class A
voting common stock at a purchase price equal to the lesser of $18.30 and the
20-trading day average closing price of the TeleCorp class A voting common stock
at the time of the purchase and sale, payable in cash or marketable securities.
This right was exercisable from August 1, 2003 through July 31, 2005. However,
if the average closing price of the TeleCorp class A voting common stock was
$16.30 or more during any 20-trading day period before July 31, 2004, the
exercise period would
76
expire on July 31, 2004, and if the average closing price of the TeleCorp class
A voting common stock was $16.30 or more during any 20-trading day period after
July 31, 2004 but before July 31, 2005, the exercise period would expire ten
days after the end of such 20-trading day period.
Equity Purchase Agreements
Messrs. Sullivan and Vento owned a number of privately held entities formed
for the purpose of acquiring and holding C and F block PCS licenses, none of
which cover areas in which TeleCorp is contractually permitted to operate. Some
of the entities were formed prior to the organization of TeleCorp. Scott I.
Anderson, a member of the board of directors of TeleCorp, has a one-third
interest in three of these entities. AT&T Wireless has financed license
acquisitions and operating expenses of these entities.
On December 22, 2000, Messrs. Sullivan and Vento agreed to sell their
interests in each of the entities for substantial consideration to a company in
which AT&T Wireless holds an 85% interest. These transactions are expected to
close during the first quarter of 2002.
On December 22, 2000, Mr. Anderson agreed to relinquish his interests in
the entities in exchange for the transfer to him, or to a limited liability
company in which he has a controlling interest, of a number of the C and F block
PCS licenses held by the entities, plus the cancellation of his indebtedness
with respect to these entities, other than the indebtedness incurred with
respect to the licenses assigned to him or to the limited liability company.
AT&T Wireless also agreed to pay, or to enable the limited liability company to
pay, significant consideration to the members of the limited liability company
if the limited liability company was unable to generate a certain amount from
the sale of its licenses. These transactions are expected to close during the
first quarter of 2002. AT&T Wireless has extended a line of credit to the
limited liability company to be used for license acquisitions and operating
expenses. The line of credit is evidenced by a promissory note that is
convertible into an aggregate of 15% of the interests of the limited liability
company.
Commitment Agreement
AT&T Wireless and TeleCorp intend to enter into a commitment agreement
under which AT&T Wireless will agree to provide a total of $500 million in
financing to TeleCorp and its subsidiary TeleCorp Wireless, Inc. The obligation
of AT&T Wireless to provide the financing contemplated by the commitment
agreement will not be conditioned on the completion of the merger.
The financing contemplated by the commitment agreement will take the form
of senior subordinated debt and senior debt as follows:
- $151,591,000 in aggregate principal amount at maturity of senior
subordinated debt, evidenced by 10% discount notes due 2011 of TeleCorp,
yielding TeleCorp gross proceeds of $100 million, to be advanced on
January 10, 2002;
- $162,520,000 in aggregate principal amount at maturity of senior
subordinated debt, evidenced by 10% discount notes due 2011 of TeleCorp,
yielding TeleCorp gross proceeds of $110 million, to be advanced on April
15, 2002;
- up to $250 million in aggregate principal amount of senior subordinated
debt, evidenced by 9% notes due 2009 of TeleCorp Wireless, to be advanced
at the election of TeleCorp Wireless from time to time on or prior to
March 30, 2002; and
- $40 million of term loans under the senior credit facility of TeleCorp
Wireless to be advanced from time to time on or before March 30, 2002.
10% Senior Subordinated Discount Notes due 2011 of TeleCorp. The 10%
senior subordinated discount notes will be issued under the indenture dated as
of April 6, 2001 relating to TeleCorp's senior subordinated discount notes due
2011. Cash interest will not accrue or be payable on the 10% senior subordinated
discount notes before April 15, 2006. Cash interest will begin to accrue on
April 15, 2006 at an annual rate of 10% and will be payable semiannually.
77
Beginning April 15, 2006, TeleCorp will have the option to redeem the 10%
senior subordinated discount notes at the following prices:
April 15, 2006 - April 14, 2007 105.000% of principal amount
April 15, 2007 - April 14, 2008 103.333% of principal amount
April 15, 2008 - April 14, 2009 101.667% of principal amount
April 15, 2009 and thereafter 100.000% of principal amount
In addition, TeleCorp will have the option to redeem up to 35% of the
aggregate principal amount at maturity of the 10% senior subordinated discount
notes at any time and from time to time before April 15, 2004 at a price of
110.000% of the accreted value on the redemption date with the proceeds of one
or more private or public offerings of equity securities which do not mature and
are not mandatorily redeemable or redeemable at the option of the holder.
The indenture for the 10% senior subordinated discount notes contains
covenants that are customary for similar senior subordinated indebtedness,
including covenants that restrict the incurrence of indebtedness, particular
payments, including the payment of dividends or distributions in respect of
capital stock and prepayments of subordinated loans, sales of assets, particular
transactions with affiliates, and particular mergers, consolidations and
liquidations. In addition, TeleCorp's restricted subsidiaries may not restrict
their ability to make payments to TeleCorp or its restricted subsidiaries.
Under some circumstances, including in the event that a person or group
(other than specified entities including AT&T Wireless) acquires more than 50%
of TeleCorp's voting stock, TeleCorp will be required to offer to purchase each
holder's 10% senior subordinated discount notes at a purchase price in cash
equal to 101% of the accreted value of the holder's notes if the purchase date
is on or before April 15, 2006, or 101% of the principal amount at maturity if
the purchase date is after April 15, 2006, plus accrued and unpaid interest.
9% Senior Subordinated Notes due 2009 of TeleCorp Wireless. The 9% senior
subordinated notes will be issued under an indenture substantially similar to
the indenture dated as of July 14, 2000 relating to the 10 5/8% senior
subordinated notes due 2010 of TeleCorp Wireless, except for terms relating to
interest payments, maturity and optional redemption. Beginning on April 1, 2002,
TeleCorp Wireless will make semiannual interest payments at an annual rate of 9%
on the 9% senior subordinated notes.
Beginning April 1, 2006, TeleCorp Wireless will have the option to redeem
the 9% senior subordinated notes at the following prices:
April 1, 2006 - March 31, 2007 104.500% of principal amount
April 1, 2007 - March 31, 2008 102.250% of principal amount
April 1, 2008 and thereafter 100.000% of principal amount
In addition, TeleCorp Wireless will have the option to redeem up to 35% of
the aggregate principal amount at maturity of the 9% senior subordinated notes
at any time and from time to time before April 1, 2006 at a price of 109.000% of
the principal amount on the redemption date with the proceeds of one or more
private or public offerings of equity securities of TeleCorp Wireless or
TeleCorp (if TeleCorp contributes the offering proceeds to TeleCorp Wireless)
which do not mature and are not mandatorily redeemable or redeemable at the
option of the holder.
The indenture for the 9% senior subordinated notes will contain covenants
that are customary for similar senior subordinated indebtedness, including the
covenants, described above, applicable to the 10% senior subordinated discount
notes.
Under some circumstances, including in the event that a person or group
(other than specified entities including AT&T Wireless) acquires more than 50%
of TeleCorp's voting stock, TeleCorp will be required to offer to purchase each
holder's 9% senior subordinated notes at a purchase price in cash equal to 101%
of the principal amount, plus accrued and unpaid interest.
78
TeleCorp will pay AT&T Wireless a commitment fee, payable on April 1, 2002,
at a rate of 6% per year on the unfunded portion of the $250 million commitment.
The purchase by AT&T Wireless of the 9% senior subordinated notes will
reduce on a dollar-for-dollar basis the amount of indebtedness that TeleCorp and
its subsidiaries are entitled to incur in accordance with the terms of the
merger agreement.
Term Loans under Credit Agreement. At the election of TeleCorp Wireless
from time to time on or before March 30, 2002, AT&T Wireless will advance up to
$40 million in term loans under the senior credit facility of TeleCorp Wireless.
The loans will mature on July 17, 2008 and have an interest rate equal to LIBOR
plus 3.50% per year.
Any advance made by AT&T Wireless to TeleCorp Wireless under the senior
credit facility of TeleCorp Wireless will reduce on a dollar-for-dollar basis
the amount of indebtedness that TeleCorp and its subsidiaries are entitled to
incur in accordance with the terms of the merger agreement.
Purchase from Lucent of TeleCorp Senior Subordinated Discount Notes
Under a note purchase agreement that AT&T Wireless intends to enter into
with Lucent Technologies Inc., AT&T Wireless would acquire from Lucent
Technologies Inc. a total of $220,500,000 in aggregate accreted value of senior
subordinated debt of TeleCorp. This indebtedness is evidenced by $358,248,000 in
aggregate principal amount at maturity of 11% senior subordinated discount notes
due April 15, 2011 of TeleCorp. These 11% senior subordinated discount notes
were issued under the indenture, dated as of April 6, 2001, described above.
AT&T Wireless would acquire this TeleCorp indebtedness from Lucent for a total
of $209 million.
Directors Affiliated with AT&T Wireless
Under the stockholders agreement, AT&T Wireless, as holder of the TeleCorp
series A convertible preferred stock and series B preferred stock, has the right
to designate two directors to the board of directors of TeleCorp. In addition,
one of five individuals selected by the holders of the TeleCorp voting
preference common stock must be reasonably acceptable to AT&T Wireless and an
additional three of such directors must be reasonably acceptable to particular
stockholders, including AT&T Wireless. Under the exclusive appointment and
approval rights of AT&T Wireless, Messrs. Benson and Hague and Ms. Hall were
designated or approved by AT&T Wireless as directors of TeleCorp. Messrs. Benson
and Hague and Ms. Hall did not participate in the deliberations of the TeleCorp
board meeting with regard to the merger.
EXCHANGE OF CERTIFICATES
After the merger is completed, EquiServe Trust Company, N.A., acting as
exchange agent for AT&T Wireless, will mail to each holder of record of shares
of TeleCorp common stock or TeleCorp preferred stock instructions and a form of
transmittal letter, for the exchange of the holder's TeleCorp stock certificates
for a certificate representing AT&T Wireless common stock or, in the case of
holders of TeleCorp series C and E preferred stock, AT&T Wireless preferred
stock. You should not send in your certificates until you receive the letter of
transmittal form and instructions.
No dividend or other distribution declared on AT&T Wireless common stock
after completion of the merger will be paid to the holder of any certificates
for shares of TeleCorp capital stock until after the certificates have been
surrendered for exchange. When the exchange agent receives a surrendered
certificate or certificates from a holder of TeleCorp capital stock, together
with a properly completed letter of transmittal, it will issue and mail to the
stockholder a certificate representing the number of whole shares of AT&T
Wireless common stock or AT&T Wireless preferred stock to which the stockholder
is entitled, plus cash for the amount of any remaining fractional share and any
cash dividends that are payable with respect to the shares of AT&T Wireless
common stock so issued. No interest will be paid on the fractional share amount
or amounts payable as dividends or other distributions.
79
A certificate for AT&T Wireless common stock or preferred stock may be
issued in a name other than the name in which the surrendered certificate is
registered if (1) the certificate surrendered is properly endorsed and
accompanied by all documents required to transfer the shares to the new holder
and (2) the person requesting the issuance of the AT&T Wireless common stock or
preferred stock certificate either pays to the exchange agent in advance any
transfer and other taxes due or establishes to the satisfaction of the exchange
agent that such taxes have been paid or are not due.
The exchange agent will issue stock certificates for AT&T Wireless common
stock or preferred stock in exchange for lost, stolen or destroyed certificates
for TeleCorp common stock or TeleCorp preferred stock upon receipt of a lost
certificate affidavit and a bond indemnifying AT&T Wireless for any claim that
may be made against AT&T Wireless as a result of the lost, stolen or destroyed
certificates.
After completion of the merger, no stock transfers will be permitted on the
books of TeleCorp. If, after completion of the merger, certificates for TeleCorp
common stock or TeleCorp preferred stock are presented for transfer to the
exchange agent, they will be canceled and exchanged for certificates
representing AT&T Wireless common stock or preferred stock.
None of AT&T Wireless, TeleCorp, the exchange agent or any other person
will be liable to any former holder of TeleCorp common stock or TeleCorp
preferred stock for any amount delivered in good faith to a public official
under applicable abandoned property, escheat or similar laws.
LITIGATION REGARDING THE MERGER
TeleCorp, TeleCorp's directors and AT&T Wireless are named as defendants in
several lawsuits brought in the Court of Chancery, County of New Castle, State
of Delaware arising out of the merger. The complaints in these actions, which
are substantially the same, allege that the consideration to be received by the
public stockholders of TeleCorp in the merger is unfair and grossly inadequate,
and that the directors of TeleCorp breached their fiduciary duties in connection
with the approval of the merger. The complaints also allege, among other things,
that AT&T Wireless has aided and abetted the alleged breaches of fiduciary
duties by TeleCorp's directors. The complaints are brought on behalf of a
purported nationwide class of all public stockholders of TeleCorp (excluding
defendants, including AT&T Wireless). As relief, the complaints seek, among
other things, an injunction against completion of the merger, rescission of the
merger if it occurs, and/or an award of damages in an unspecified amount. AT&T
Wireless and TeleCorp each believes that the allegations of the complaints are
without merit.
APPRAISAL RIGHTS
Under Delaware law, holders of TeleCorp class A voting common stock are not
entitled to appraisal rights in connection with the merger.
Holders of all other classes of TeleCorp capital stock are entitled to
appraisal rights under Delaware law and, accordingly, have the right to demand
and receive payment of the fair value of their shares in lieu of receiving the
merger consideration, provided that these stockholders comply with the
procedural requirements set forth under Delaware law for perfecting this right.
In order to exercise appraisal rights, a stockholder must demand and
perfect the rights in accordance with Section 262 of the Delaware General
Corporation Law. The following is a summary of the material provisions of
Section 262 and is qualified in its entirety by reference to Section 262, a
complete copy of which is attached as Annex F to this proxy
statement/prospectus. You should carefully review Section 262 as well as the
information discussed below to determine your appraisal rights.
In order to perfect your appraisal rights, you must:
- deliver to TeleCorp at its main office in Arlington, Virginia a written
demand for appraisal of the applicable shares before the vote is taken on
the merger agreement at the TeleCorp special meeting. This written demand
for appraisal must be in addition to and separate from any proxy or vote
against the merger agreement because voting against or abstaining from
voting or failing to
80
vote on the merger agreement will not constitute a demand for appraisal within
the meaning of Section 262;
- not vote in favor of, or consent in writing to, the merger agreement.
Failing to vote or abstaining from voting will satisfy this requirement,
but a vote in favor of the merger agreement, by proxy or in person, or
the return of a signed proxy card that does not specify a vote against
approval and adoption of the merger agreement, will constitute a waiver
of the TeleCorp stockholder's right of appraisal and will nullify any
previously filed written demand for appraisal; and
- continuously hold such shares through the completion of the merger.
All written demands for appraisal should be addressed to TeleCorp PCS,
Inc., 1010 North Glebe Road, Suite 800, Arlington, VA 22201, Attention: Investor
Relations. This demand must reasonably inform TeleCorp of the identity of the
stockholder and that the stockholder is demanding appraisal of the applicable
shares.
Within 10 days after the completion of the merger, the surviving
corporation of the merger will give written notice of the completion of the
merger to each TeleCorp stockholder that has satisfied the requirements of
Section 262 and has not voted for or consented to the proposal to approve and
adopt the merger agreement and the transactions contemplated by the merger
agreement. We refer to such a stockholder as a "dissenting stockholder."
Within 120 days after the completion of the merger, the surviving
corporation or any dissenting stockholder may file a petition in the Delaware
Court of Chancery demanding a determination of the fair value of the applicable
shares that are held by all dissenting stockholders holding shares of such
class. We advise any dissenting stockholder desiring to file this petition to
file such petition on a timely basis unless the dissenting stockholder receives
notice that a petition has already been filed with respect to such shares by the
surviving corporation or another dissenting stockholder.
If a petition for appraisal is timely filed, the court will determine which
stockholders are entitled to appraisal rights. The court will then determine the
fair value of the applicable shares held by the dissenting stockholders,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, but together with a fair rate of interest, if any, to be paid on
the amount determined to be fair value. In determining the fair value, the court
will take into account all relevant factors. The court may determine the fair
value to be more than, less than or equal to the consideration that the
dissenting stockholder would otherwise be entitled to receive under the merger
agreement. If a petition for appraisal is not timely filed, then the right to an
appraisal will cease. The costs of the appraisal proceeding may be determined by
the court and charged against the parties as the court determines to be
equitable under the circumstances. Upon application of a stockholder, the court
may order all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts, to be charged
pro rata against the value of all shares which are the subject of the appraisal.
From and after the completion of the merger, no dissenting stockholder will
have any rights of a TeleCorp stockholder with respect to the shares which are
the subject of the appraisal, except to receive payment of their fair value and
to receive payment of dividends or other distributions on the applicable shares,
if any, payable to TeleCorp stockholders of record holding such shares as of a
date prior to the completion of the merger. If a dissenting stockholder delivers
to the surviving corporation a written withdrawal of the demand for an appraisal
within 60 days after the completion of the merger, or if no petition for
appraisal is filed within 120 days after the completion of the merger, then the
right of that dissenting stockholder to an appraisal will cease and the
dissenting stockholder will be entitled to receive only the merger
consideration.
81
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement. The summary is qualified in its entirety by reference to the merger
agreement and you are urged to read the merger agreement carefully, as it is the
legal document governing the merger. A copy of the merger agreement is
incorporated by reference and attached as Appendix A to this proxy
statement/prospectus.
THE MERGER
The merger agreement provides that, at the time the merger is completed, TL
Acquisition Corp., a wholly owned subsidiary of AT&T Wireless, will merge with
and into TeleCorp. TeleCorp will be the surviving corporation in the merger and
will become a wholly owned subsidiary of AT&T Wireless. If necessary in order to
permit delivery of the required tax opinions, AT&T Wireless will merge the
resulting subsidiary into AT&T Wireless immediately after the merger.
MERGER CONSIDERATION; CONVERSION OF SECURITIES
Upon completion of the merger, each share of TeleCorp common stock and
preferred stock will be converted into securities of AT&T Wireless, as follows:
Common Stock. Each share of TeleCorp common stock will be exchanged for
0.9 of a share of AT&T Wireless common stock.
Preferred Stock. Each share of TeleCorp preferred stock will be converted
into either shares of AT&T Wireless common stock or shares of AT&T Wireless
preferred stock, as follows:
- each share of TeleCorp series A convertible preferred stock will be
converted into 82.9849 shares of AT&T Wireless common stock;
- each share of TeleCorp series B preferred stock will be converted into
81.2439 shares of AT&T Wireless common stock;
- each share of TeleCorp series C preferred stock will be exchanged on a
one-to-one basis for one share of a new series of AT&T Wireless preferred
stock having terms substantially identical to the terms of the TeleCorp
series C preferred stock;
- each share of TeleCorp series D preferred stock will be converted into
27.6425 shares of AT&T Wireless common stock;
- each share of TeleCorp series E preferred stock will be exchanged on a
one-to-one basis for one share of a new series of AT&T Wireless preferred
stock having terms substantially identical to the terms of the TeleCorp
series E preferred stock;
- each share of TeleCorp series F preferred stock will be converted into
0.9 of a share of AT&T Wireless common stock; and
- each share of TeleCorp series G preferred stock will be converted into
0.9 of a share of AT&T Wireless common stock.
Cancellation of Shares. Shares of TeleCorp capital stock owned by TeleCorp
or owned by AT&T Wireless directly, and not through a subsidiary, will be
cancelled in the merger and will not be exchanged for the merger consideration.
Options. All outstanding options to purchase TeleCorp common stock under
the TeleCorp option plans will automatically become options to acquire AT&T
Wireless common stock in the following manner:
- the number of shares of AT&T Wireless common stock to be subject to the
new option will be the product of the number of shares of TeleCorp common
stock that were purchasable under the
82
TeleCorp option immediately prior to the merger and 0.9, rounded up to
the nearest whole number; and
- the new exercise price will be equal to the pre-merger exercise price of
the options divided by 0.9, rounded to the nearest whole cent.
The options will otherwise continue to have the same terms and conditions
as they had before the merger.
Restricted Stock. When the merger is completed, all shares of restricted
and unvested TeleCorp common stock will automatically be converted into a number
of restricted shares of AT&T Wireless common stock equal to the product of the
number of restricted shares held by the grantee immediately before the merger
and the applicable exchange ratio. The restricted shares will otherwise continue
to have the same terms and conditions as they had before the merger. When the
merger is completed, AT&T Wireless will assume all of the obligations of
TeleCorp under the TeleCorp 1998 restricted stock plan.
Adjustments. If at any time during the period between the signing of the
merger agreement and the completion of the merger any change in the outstanding
shares of TeleCorp capital stock or AT&T Wireless common stock occurs by reason
of any reclassification, recapitalization, stock split or combination, exchange
or readjustment of shares, or any similar transaction, or any stock dividend,
the merger consideration will be appropriately adjusted to provide the holders
of TeleCorp capital stock and AT&T Wireless common stock the same economic
effect as contemplated by the merger agreement. The merger consideration may
also be similarly adjusted if TeleCorp's representations concerning the extent
of its authorized and outstanding capital stock are untrue.
Fractional Shares. No fractional shares of AT&T Wireless common stock will
be issued in the merger. Any holder of shares of TeleCorp stock who would
otherwise be entitled to receive a fractional share of AT&T Wireless common
stock will instead receive a cash payment. The cash payment will equal the
holder's proportionate interest in the net proceeds from the sale of all of the
fractional shares or, at AT&T Wireless's option, an amount equal to the value
(determined by reference to the average closing prices of AT&T Wireless common
stock on the NYSE for the ten consecutive trading days immediately following the
completion of the merger) of such fractional interest.
Dissenting Shares. Shares held by stockholders who neither vote in favor
of the merger nor consent thereto in writing and who demand appraisal of their
shares under applicable Delaware law will not be converted into AT&T Wireless
shares. Such stockholders will be entitled to receive payment of the appraised
value of their shares in accordance with Delaware law. Holders of TeleCorp class
A voting common stock do not have appraisal rights.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of TeleCorp
relating to, among other things:
- corporate organization and similar corporate matters;
- ownership of subsidiaries;
- capitalization;
- corporate authority and enforceability;
- absence of conflicts between the merger and governing corporate documents
and other contracts;
- required filings and consents;
- material agreements;
- compliance with organizational documents and other corporate obligations;
- documents filed with the SEC;
83
- accuracy of financial statements;
- government licenses and authorizations;
- compliance with applicable laws;
- absence of material adverse changes to the business since December 31,
2000;
- absence of undisclosed liabilities;
- absence of litigation;
- employee benefits;
- employment and labor matters;
- accuracy of information supplied in connection with this proxy
statement/prospectus and the registration statement of which it is a
part;
- microwave clearing;
- title and leases;
- taxes and tax matters;
- environment;
- intellectual property;
- non-applicability of anti-takeover statutes;
- satisfaction of particular FCC build-out requirements;
- absence of undisclosed broker's fees; and
- opinions of financial advisors.
The merger agreement contains representations and warranties of AT&T
Wireless relating to, among other things:
- corporate organization and similar corporate matters;
- capitalization;
- corporate authority and enforceability;
- absence of conflicts between the merger and governing corporate documents
and other contracts;
- required filings and consents;
- documents filed with the SEC;
- accuracy of financial statements;
- government licenses and authorizations;
- compliance with applicable laws;
- absence of undisclosed litigation;
- accuracy of information supplied in connection with this proxy
statement/prospectus and the registration statement of which it is a
part;
- taxes and tax matters;
- absence of undisclosed material adverse changes to the business since
July 9, 2001;
- absence of undisclosed broker's fees; and
84
- change of control severance policy and letter agreement with TeleCorp
Management Corp.
Some representations and warranties are qualified by materiality
thresholds, including "material adverse effect." The term "material adverse
effect," when used in reference to any entity, means any event, change,
occurrence, state of facts or effect that is materially adverse to or materially
impairs the business, assets, liabilities, financial condition or results of
operations of the entity and its subsidiaries, taken as a whole, or that is
materially adverse to or materially impairs the ability of the entity to perform
its obligations under the merger agreement or prevents completion of any of the
transactions contemplated by the merger agreement.
However, except to the extent that the entity is affected in a materially
disproportionate manner as compared to other wireless telecommunications service
providers, none of the following shall be considered a material adverse effect:
- changes in general economic conditions in the United States;
- conditions affecting the wireless communications industry generally; or
- any changes resulting from announcement of the merger.
COVENANTS
Conduct of Business Pending the Merger. Under the merger agreement,
TeleCorp has agreed that, during the period before completion of the merger,
except as expressly permitted by the merger agreement, or unless AT&T Wireless
consents in writing, it will carry on its business in the ordinary course in the
same manner as previously conducted, and will use all reasonable efforts to
preserve intact its business organization, its relationships with third parties
and the services of its employees.
Other Covenants. In addition, TeleCorp has agreed to specific restrictions
relating to the following matters:
- amendment of its certificate of incorporation or by-laws;
- merger or consolidation with other entities;
- disposition of assets, business enterprises or operations;
- issuance or sale of capital stock or other equity interests, and of
securities convertible into or exchangeable for such shares or equity
interests;
- alteration of share capital, including, among other things, stock splits,
combinations or reclassifications;
- declaration or payment of dividends;
- repurchase or redemption of capital stock;
- compensation of directors, executive officers and key employees;
- employment or severance agreements;
- acquisition of assets or other entities;
- assumption or guarantee of loans or advances;
- making of capital expenditures;
- incurrence of purchase commitments;
- changes in accounting policies and procedures;
- incurrence of debt, except as described below;
- transfer or license of intellectual property;
85
- actions that would result in a material violation, default or waiver of
rights under any material agreements;
- actions or failure to take actions that would result in any of the
representations and warranties becoming untrue in any material respect,
or any of the conditions to the merger not being satisfied;
- making of any material tax election or the entering into of any
settlement or compromise of any material tax liability;
- entering into of any agreement or arrangement that materially limits
TeleCorp from engaging in the business of providing wireless
communication services or otherwise from engaging in any other business,
or that would reasonably be expected to have such effect on AT&T Wireless
after the completion of the merger;
- settlement or compromise of suits, actions, or claims above a particular
threshold;
- entering into, amendment of, or waiver of rights under any agreement with
any affiliates of TeleCorp; and
- internal computer systems and processes, including those for billing,
database management, customer information and call processing.
Additional Indebtedness. TeleCorp may incur new or additional indebtedness
as follows:
- under existing financing agreements with Lucent Technologies;
- up to an additional $250 million under new arrangements having terms
reasonably within the range of then-prevailing market terms; and
- up to $40 million from an expansion tranche under an existing bank credit
agreement.
See "The Merger -- Interests of TeleCorp Directors and Officers in the
Merger; Relationships with AT&T Wireless -- Commitment Agreement."
New Technology. TeleCorp has agreed that, before completion of the merger,
it will not build, deploy or purchase any equipment or network relating to the
provision of, or provide or offer any, services that are so-called "2.5G" or
"3G" or "Third Generation" services, including global system for mobile
communications/generalized packet radio service or "GSM/GPRS." TeleCorp and AT&T
Wireless have agreed to discuss at either party's request, after the expiration
or termination of any U.S. federal antitrust law waiting period, TeleCorp's
short- and long-term plans for the development and deployment of these new
services.
MEETING OF TELECORP STOCKHOLDERS AND TELECORP BOARD RECOMMENDATION
TeleCorp has agreed to hold the special meeting as soon as practicable
after the signing of the merger agreement to obtain the approval of its
stockholders. The board of directors of TeleCorp has agreed to submit the merger
agreement to TeleCorp's stockholders, whether or not it changes, withdraws or
modifies its recommendation. Under the merger agreement, the board of directors
of TeleCorp has agreed to recommend to its stockholders that they adopt the
merger agreement and the transactions contemplated thereby. However, the board
of directors of TeleCorp may withdraw or modify its recommendation if it
determines, in good faith, after consultation with outside legal counsel, that
such action is required in order for the TeleCorp directors to comply with their
fiduciary duties to TeleCorp's stockholders under applicable law.
86
NO SOLICITATION
TeleCorp has agreed that, except under circumstances described below, it
and its subsidiaries will not, directly or indirectly:
- solicit, initiate or encourage any proposals, including by furnishing
information, that constitute, or could reasonably be expected to result
in, an acquisition proposal; or
- have any discussion or engage in any negotiations with, or provide any
non-public information to, any person relating to an acquisition
proposal.
Under the merger agreement, an acquisition proposal is a proposal or offer
regarding or indication of interest in:
- any acquisition of a business or assets of TeleCorp or any of its
subsidiaries that constitutes 15% or more of the net revenues, net income
or assets of TeleCorp and its subsidiaries, taken as a whole;
- any direct or indirect acquisition or purchase of 15% or more of any
class of shares of, or voting power of, TeleCorp or some of its
subsidiaries;
- any tender or exchange offer for the equity securities of TeleCorp that,
if completed, would give the buyer 15% or more of any class of shares of,
or voting power of, TeleCorp or some of its subsidiaries; or
- any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving TeleCorp or
some of its subsidiaries.
Prior to the receipt of stockholder approval at the special meeting,
TeleCorp may engage in discussions with, or provide any non-public information
to, any person or entity in response to an unsolicited bona fide written
acquisition proposal by that person or entity, if and only to the extent that:
- TeleCorp is not otherwise in breach of the no-solicitation provisions;
- its board of directors believes in good faith, after consulting with its
financial advisors, that the acquisition proposal constitutes or may
reasonably be expected to result in a superior proposal;
- its board of directors, after consultation with outside counsel,
determines in good faith that the failure to take such action may
constitute a breach of its fiduciary duties under applicable law; and
- before providing any non-public information to, or engaging in any
discussions or negotiations with, any person or entity in connection with
an acquisition proposal by that person or entity, its board of directors
receives from that person or entity an executed confidentiality agreement
with terms no less restrictive than the comparable terms in the
confidentiality agreement between AT&T Wireless and TeleCorp.
Under the merger agreement, a superior proposal is a bona fide written
acquisition proposal for all of the outstanding TeleCorp capital stock, on terms
that TeleCorp's board of directors determines in its good faith judgment are
more favorable to its stockholders than the terms of the merger agreement with
AT&T Wireless.
In addition, the merger agreement does not prevent TeleCorp from disclosing
to its stockholders a position with respect to a tender or exchange offer to the
extent required by federal law.
Under the merger agreement, TeleCorp must promptly notify AT&T Wireless if
it receives any acquisition proposal and identify the person or entity making
such proposal.
87
FURTHER ACTIONS
AT&T Wireless and TeleCorp have agreed to cooperate with one another and to
use all reasonable efforts to take all actions and do all things necessary,
proper and advisable under the merger agreement and applicable laws to complete
the merger. Accordingly, each has agreed to use all reasonable efforts to:
- obtain all necessary licenses, certificates, permits, consents,
approvals, authorizations, qualifications, and orders of governmental
authorities and any other person;
- effect all necessary registrations and filings; and
- furnish to each other such information and assistance as reasonably may
be requested in connection with the foregoing.
AT&T Wireless and TeleCorp have agreed to use their reasonable best efforts
to resolve any issues and to defeat or settle any challenges raised by
governmental authorities under federal anti-trust and communications laws.
AT&T Wireless is not required to divest or hold separate any portion of, or
restrict or limit the operations of, any of its business or TeleCorp's business
or otherwise take action that could reasonably be expected to impair the ability
of AT&T Wireless to own and operate its business, or materially impair the
ability of AT&T Wireless to own and operate the TeleCorp business after the
merger is completed. TeleCorp may not, without AT&T Wireless's prior written
consent, commit to any divestiture or hold separate any business, and TeleCorp
will commit to take such actions if AT&T Wireless so requests in some
circumstances.
TeleCorp has agreed to cause its subsidiaries to divest specified FCC
licenses to the extent required under FCC regulations to enable receipt of FCC
approval of the merger. These licenses are not material to TeleCorp's business.
The merger agreement also contains covenants relating to the cooperation
between AT&T Wireless and TeleCorp in the preparation of this proxy
statement/prospectus and additional agreements between them relating to, among
other things, confidentiality, blue sky approvals, mutual notice of specified
matters, and employee benefits.
CONDITIONS TO THE MERGER
Each of AT&T Wireless's and TeleCorp's obligations to complete the merger
are subject to the satisfaction or waiver of the following conditions before
completion of the merger:
- the adoption of the merger agreement at the special meeting by the
affirmative vote of a majority of the voting power of all outstanding
shares of TeleCorp voting stock;
- the declaration of effectiveness of the registration statement on Form
S-4, of which this proxy statement/prospectus forms a part, by the SEC,
and the absence of any stop order or threatened or pending proceedings
seeking a stop order;
- the absence of any law, order or injunction prohibiting completion of the
merger;
- the expiration or termination of the applicable waiting periods under the
HSR Act; and
- the approval for listing, by the New York Stock Exchange, of the shares
of AT&T Wireless common stock to be issued, or to be reserved for
issuance, in connection with the merger, subject to official notice of
issuance.
88
TeleCorp's obligations to complete the merger are subject to the
satisfaction or waiver of the following additional conditions before completion
of the merger:
- performance by AT&T Wireless in all material respects of its covenants
and agreements;
- accuracy of AT&T Wireless's representations and warranties other than, in
general, inaccuracies that, taken together, do not have a material
adverse effect on AT&T Wireless;
- receipt of a written opinion from Cadwalader, Wickersham & Taft to the
effect that for federal income tax purposes, the merger (or the
combination of the merger and the follow-on merger, if applicable) will
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code; and
- receipt of required FCC approvals.
AT&T Wireless's obligations to complete the merger are subject to the
satisfaction or waiver of the following additional conditions before completion
of the merger:
- performance by TeleCorp in all material respects of its covenants and
agreements;
- accuracy of TeleCorp's representations and warranties other than, in
general, inaccuracies that, taken together, do not have a material
adverse effect on TeleCorp;
- the receipt of a written opinion from Wachtell, Lipton, Rosen & Katz to
the effect that for federal income tax purposes, the merger (or the
combination of the merger and the follow-on merger, if applicable) will
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code;
- receipt of non-governmental third-party consents or approvals that are
necessary in order to permit the merger to happen, unless failure to
receive such consents or approvals would not in the aggregate have a
material adverse effect on either TeleCorp or AT&T Wireless;
- receipt of required FCC approvals pursuant to a final, nonappealable
order, free of any requirement to take action that would not be required
to be taken by AT&T Wireless under the merger agreement;
- receipt of other governmental approvals, other than those the absence of
which could not reasonably be expected to have a material adverse effect
on either TeleCorp or AT&T Wireless;
- the shares with respect to which dissent rights have been exercised must
not represent more than 5% of the voting power of the outstanding
TeleCorp capital stock;
- the management agreement between TeleCorp Management Corp. and TeleCorp
must be terminated (although particular provisions will survive); and
- the unfunded commitment of TeleCorp investors under the TeleCorp Stock
Purchase Agreement, dated January 23, 1998, as amended, must be called by
TeleCorp on or before January 15, 2002.
TERMINATION
The merger agreement may be terminated at any time, whether before or after
the stockholder approval has been obtained:
- by mutual consent of AT&T Wireless and TeleCorp;
- by either AT&T Wireless or TeleCorp if the merger is not completed on or
before August 7, 2002, or March 7, 2003 if the merger has not been
completed because the waiting period or approvals under federal antitrust
or communication law have not expired or been terminated or received.
However, this right to terminate the merger agreement will not be
available to any party whose failure to fulfill any material obligation
under the merger agreement has been the cause of, or has resulted in, the
failure of the merger to be completed by such date;
89
- by either AT&T Wireless or TeleCorp if the other party breaches or fails
to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in the merger
agreement in such a way as to render the conditions to the completion of
the merger contained in the merger agreement incapable of being satisfied
before the deadlines referred to above;
- by either AT&T Wireless or TeleCorp if any governmental authority enjoins
or otherwise prohibits the merger, and the injunction or prohibition
becomes final and nonappealable;
- by either AT&T Wireless or TeleCorp if the merger agreement is not
adopted by TeleCorp stockholders at the special meeting; or
- by AT&T Wireless, if the TeleCorp board of directors withdraws or
adversely modifies its recommendation of the merger to TeleCorp
stockholders, or if the TeleCorp board of directors approves, or
determines to recommend to the stockholders of TeleCorp that they
approve, an alternative acquisition proposal, or if for any reason
TeleCorp fails to call or hold the special meeting within six months of
the date of the merger agreement, with an exception relating to the date
that the registration statement of which this proxy statement/prospectus
is a part becomes effective.
TERMINATION FEE
The merger agreement provides for a termination fee of $65 million to be
paid by TeleCorp to AT&T Wireless in the following cases:
- if AT&T Wireless terminates the merger agreement because TeleCorp fails
to call or hold the TeleCorp special meeting of stockholders within six
months after the date of the merger agreement, with an exception relating
to the date that the registration statement of which this proxy
statement/prospectus is a part becomes effective;
- if either AT&T Wireless or TeleCorp terminates the merger agreement
because the merger agreement is not adopted by the TeleCorp stockholders;
or
- if an alternative acquisition proposal has been made and AT&T Wireless
terminates the merger agreement because TeleCorp has breached a closing
condition relating to representations or covenants, and within 12 months
of termination TeleCorp enters into a definitive agreement with respect
to any alternative transaction or its board of directors recommends
acceptance by the TeleCorp stockholders of a tender offer or exchange
offer with respect to an acquisition proposal.
FEES AND EXPENSES
Whether or not the merger is completed, with some exceptions, all expenses
and fees incurred in connection with the merger agreement and the merger will be
paid by the party incurring the expenses or fees, except that all expenses and
fees incurred in connection with the filing, printing and mailing of this proxy
statement/prospectus and the registration statement of which it is a part will
be shared equally by TeleCorp and AT&T Wireless.
AMENDMENT, EXTENSION AND WAIVER
The merger agreement may be amended by the parties and provisions of the
merger agreement may be waived. All amendments and waivers to the merger
agreement must be in writing signed by each party.
90
OTHER AGREEMENTS
The following is a summary of the material provisions of several agreements
that were entered into at the same time as the merger agreement. Copies of the
voting agreements summarized below are incorporated by reference in this proxy
statement/prospectus and have been filed as exhibits to the registration
statement of which this proxy statement/prospectus is a part.
VOTING AGREEMENTS
As an inducement to AT&T Wireless to enter into the merger agreement,
Gerald T. Vento, and Thomas H. Sullivan, who own approximately 51.3% of the
voting power of TeleCorp capital stock entitled to vote at the special meeting,
have entered into separate voting agreements with AT&T Wireless and TeleCorp in
which they agreed to vote all of the respective shares of TeleCorp capital stock
owned by them at the time of the special meeting in favor of the adoption of the
merger agreement and against proposals for other transactions.
As an inducement to AT&T Wireless to enter into the merger agreement, some
cash equity stockholders of TeleCorp, who own approximately 10.2% of the voting
power of TeleCorp capital stock entitled to vote at the special meeting, have
entered into three separate voting agreements with AT&T Wireless and TeleCorp in
which they agreed to vote all of the respective shares of TeleCorp capital stock
owned by them at the time of the special meeting in favor of the adoption of the
merger agreement and against proposals for other transactions.
Accordingly, stockholder approval of the merger is assured.
Agreements to Vote.
Each stockholder subject to a voting agreement agreed to vote his or its
shares in favor of the merger and against:
- any proposal made in opposition to or in competition with the
transactions under the merger agreement;
- any merger, consolidation, sale of assets, business combination, share
exchange, reorganization or recapitalization of TeleCorp or any of its
subsidiaries with or involving any other person other than as
contemplated under the merger agreement;
- any liquidation or winding up of TeleCorp;
- any extraordinary dividend by TeleCorp;
- any change in the capital structure of TeleCorp (other than under the
merger agreement);
- any other action that may reasonably be expected to interfere with or
delay the completion of the merger or result in a breach of any of the
covenants, representations, warranties or other obligations or agreements
of TeleCorp or which would materially and adversely affect TeleCorp's or
AT&T Wireless's ability to complete the merger; and
- authorizing TeleCorp to seek the consent of the FCC to permit the class A
voting common stock and voting preference common stock to vote and act as
a single class as provided by the amended and restated certificate of
incorporation of TeleCorp.
In furtherance of the foregoing agreements, each stockholder subject to a
voting agreement granted to AT&T Wireless an irrevocable proxy to vote such
stockholder's shares in accordance with such agreement.
Transfer Restrictions.
The voting agreements executed by Messrs. Vento and Sullivan provide that,
prior to the completion of the merger, neither of them may transfer his shares
of TeleCorp voting preference common stock or sell short shares of AT&T Wireless
common stock to be received in connection with the merger. The voting
91
agreements do not restrict transfers by Messrs. Vento and Sullivan of shares of
other classes of TeleCorp stock owned by them; however, the restrictions with
respect to transfers of shares of such other classes of stock under the
stockholders agreement of TeleCorp remain in effect. See "The
Merger -- Interests of TeleCorp Directors and Officers in the Merger;
Relationships with AT&T Wireless."
Subject to the exceptions noted below, the voting agreements executed by
the cash equity stockholders provide that, prior to the completion of the
merger, no stockholder may transfer its TeleCorp shares or sell short shares of
AT&T Wireless common stock to be received in connection with the merger. The
exceptions to the foregoing transfer restrictions are as follows:
- at any time, a cash equity stockholder may transfer up to one-third of
the shares of class A voting common stock owned of record or beneficially
by it as of October 7, 2001;
- commencing on the earlier of the date of the TeleCorp special meeting and
March 31, 2002, a cash equity stockholder may transfer an additional
one-third of the shares of class A voting common stock owned of record or
beneficially by it as of October 7, 2001;
- commencing on the earlier of the date of the completion of the merger and
June 30, 2002, a cash equity stockholder may transfer the balance of the
shares of class A voting common stock owned of record or beneficially by
it as of October 7, 2001; and
- at any time transfers may be made without volume limitations to
affiliates of a cash equity stockholder or by operation of law, provided
that the transferee agrees in writing to be bound by the terms of the
cash equity stockholder voting agreement.
Each cash equity stockholder party to a voting agreement may assign its
transfer rights during each of the foregoing periods to another cash equity
stockholder subject to a voting agreement, thereby increasing the number of
shares which may be transferred by the assignee cash equity stockholder during
the applicable period.
Termination.
Except for several surviving provisions, the voting agreements executed by
the cash equity stockholders terminate upon the earliest to occur of:
- the completion of the merger;
- December 31, 2002;
- the date of effectiveness of any amendment to the merger agreement that
changes the type or amount of merger consideration in a way that is
materially adverse to any of the cash equity stockholders party to a
voting agreement; and
- the termination of the merger agreement in accordance with its terms.
Except for several surviving provisions, the voting agreements executed by
Messrs. Vento and Sullivan terminate upon the earliest to occur of:
- the completion of the merger;
- December 31, 2002; and
- the termination of the merger agreement in accordance with its terms.
STOCKHOLDERS AGREEMENT AMENDMENT
Concurrently with the execution of the merger agreement, the TeleCorp
stockholders agreement was amended by AT&T Wireless, TeleCorp, Messrs. Vento and
Sullivan, and at least 66 2/3% of the class A voting common stock beneficially
owned by TeleCorp's initial investors other than AT&T Wireless, to permit the
TeleCorp stockholders who are parties to the voting agreements to execute,
deliver and perform their obligations under the voting agreements.
92
TRANSFER AGREEMENTS
Concurrently with the execution of the merger agreement, TeleCorp entered
into an agreement with a third party to provide for the transfer to such third
party of C- and F- block FCC licenses which TeleCorp owns or has agreed to
acquire and which, under applicable FCC rules, it will not be permitted to hold
following completion of the merger. These licenses are not material to
TeleCorp's business. Generally, the licenses will be transferred only if the
merger is completed. If the merger agreement is terminated, the agreement to
transfer the licenses shall also terminate. In addition, pursuant to a separate
agreement with the same third party, the rights to acquire certain licenses have
been assigned to the third party; however, TeleCorp has a call right to
purchase, at the assignee's cost, the rights to acquire the licenses, or the
actual licenses if then owned by the assignee, should the merger agreement be
terminated. If the merger agreement is terminated, and other conditions
(including TeleCorp's failure to waive its right to be the exclusive provider of
mobile wireless communications services under the AT&T Wireless brand name in
those service areas covered by licenses acquired pursuant to the assigned rights
which are then owned by the assignee) are met, the assignee has a put right with
respect to the rights to acquire the licenses, or the licenses, if then owned,
at the assignee's cost.
93
DESCRIPTION OF AT&T WIRELESS CAPITAL STOCK
The following description of the material terms of AT&T Wireless's capital
stock does not purport to be complete, and is qualified in its entirety by
reference to AT&T Wireless's amended and restated certificate of incorporation,
by-laws, the certificates of designation of the AT&T Wireless series C and E
preferred stock, rights agreement and Delaware law. We have attached the
certificates of designation of the AT&T Wireless series C and E preferred stock
as Appendix B and C to this proxy statement/ prospectus. AT&T Wireless's amended
and restated certificate of incorporation, by-laws and rights agreement have
been filed with the SEC.
AUTHORIZED CAPITAL STOCK
AT&T Wireless's authorized capital stock consists of 1 billion shares of
preferred stock, par value $.01, and 10 billion shares of common stock, par
value $.01.
AT&T WIRELESS COMMON STOCK
The holders of AT&T Wireless common stock have one vote per share on all
matters voted on by stockholders, including elections of directors. AT&T
Wireless's amended and restated certificate of incorporation does not provide
for cumulative voting in the election of directors. Subject to any preferential
rights of any outstanding series of AT&T Wireless's preferred stock created by
AT&T Wireless's board of directors from time to time, the holders of AT&T
Wireless common stock are entitled to such dividends as may be declared from
time to time by AT&T Wireless's board of directors.
AT&T WIRELESS PREFERRED STOCK
AT&T Wireless's amended and restated certificate of incorporation
authorizes AT&T Wireless's board of directors to establish one or more series of
preferred stock and to determine, with respect to any series of preferred stock,
the terms and rights of such series.
Fifty million shares of AT&T Wireless series A junior participating
preferred stock have been reserved for issuance upon exercise of the rights
issued under AT&T Wireless's rights agreement. For a more complete discussion of
AT&T Wireless's rights agreement, see "-- Anti-Takeover Effects of AT&T
Wireless's Amended and Restated Certificate of Incorporation and
By-Laws -- Rights Agreement."
At the completion of the merger, AT&T Wireless will designate 210,608
shares of series C preferred stock and 25,428 shares of series E preferred
stock. The rights of the series C and E preferred will be substantially
identical to the rights of TeleCorp series C preferred stock and series E
preferred stock, respectively.
VOTING RIGHTS. Regardless of the number of shares of any series of
preferred stock then outstanding, the holders of the series C preferred stock
and the series E preferred stock shall have the following aggregate number of
votes, in each case voting as a class with the common stock:
- the series C preferred stock shall have 1,926,069 votes; and
- the series E preferred stock shall have 251,189 votes.
The number of votes to which each share of series C preferred stock and
series E preferred stock is entitled shall be determined in proportion to the
number of shares of such series of preferred stock then outstanding.
SPECIAL VOTING RIGHTS OF PREFERRED STOCK. The affirmative vote of the
holders of a majority of the outstanding shares of series C preferred stock or
series E preferred stock shall be necessary to:
- authorize, increase the authorized number of shares of or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of any class or classes or
series of stock ranking senior to or pari passu with the series or any
additional shares of the series;
94
- authorize, adopt or approve each amendment to AT&T Wireless's amended and
restated certificate of incorporation that would increase or decrease the
par value of the shares of the series or alter or change the powers,
preferences or rights of the shares of the series or alter or change the
powers, preferences or rights of any of AT&T Wireless's other capital
stock if such alteration or change results in such capital stock ranking
senior to or pari passu with such series;
- amend, alter or repeal any provision of AT&T Wireless's amended and
restated certificate of incorporation so as to affect the shares of the
series adversely; or
- authorize or issue any security convertible into, exchangeable for or
evidencing the right to purchase or otherwise receive any shares of any
class or classes of stock senior to or pari passu with the series.
RANKING. With respect to the payment of dividends and distribution of
assets upon liquidation, dissolution or winding up, the outstanding series C
preferred stock and the series E preferred stock ranks as follows:
CLASS OF STOCK PARITY WITH JUNIOR TO SENIOR TO
-------------- ----------- --------- ---------
series C preferred None None Common stock and any series or class
of common or preferred stock, now or
hereafter authorized
series E preferred None series C preferred Common stock and any series or class
of common or preferred stock, now or
hereafter authorized (other than the
series C preferred)
DIVIDENDS. The holders of AT&T Wireless series C preferred stock and
series E preferred stock are entitled to receive dividends in cash or property
when, as and if, declared by the board of directors up to the liquidation
preference for such shares. So long as shares of series C or series E preferred
stock are outstanding and dividends payable on shares of series C or series E
preferred stock have not been paid in full in cash, no cash dividends may be
declared or paid, and no redemption, purchase or other acquisition for
consideration may occur, with respect to any shares of any class of common stock
or series of preferred stock ranking junior to or on parity with the series C or
series E preferred stock, except that AT&T Wireless may acquire, in accordance
with the terms of any agreement between AT&T Wireless and its employees, shares
of common stock or preferred stock at a price not greater than the market price
as of such date.
LIQUIDATION RIGHTS. The holders of series C preferred stock and series E
preferred stock are entitled to preferences with respect to distributions upon
AT&T Wireless's liquidation, dissolution or winding up as follows:
- a holder of series C preferred stock is entitled to a preference per
share equal to the sum of
- the quotient of (A) the aggregate paid-in capital actually paid with
respect to all shares of series C preferred stock held by such holder,
and all shares of capital stock of TeleCorp or its
predecessors-in-interest, TeleCorp Wireless and Tritel, in each case as
of the applicable date of determination, divided by (B) the total number
of shares of series C preferred stock held by such holder as of such
date and
- accrued and unpaid dividends (if any), plus interest on the
aforementioned quotient at the rate of 6% per annum, compounded
quarterly, less
- the amount of dividends (if any) already declared and paid in respect of
such shares; and
- a holder of series E preferred stock is entitled to a preference per
share equal to the sum of accrued and unpaid dividends (if any), plus
interest on $1,000 at the rate of 6% per annum, compounded
95
quarterly, from the date of issuance of such share (relating back, as the
case may be, to the original date of issuance for series E preferred
stock received in exchange for capital stock of any
predecessor-in-interest to TeleCorp or its subsidiaries) to and including
the date of the calculation, less the amount of dividends (if any)
declared and paid in respect of such share.
REDEMPTION. AT&T Wireless has the right to redeem shares of series C
preferred stock and series E preferred stock at any time, in whole but not in
part, at a redemption price per share equal to the liquidation preference per
share; provided, that if the funds legally available are insufficient to effect
the redemption in full of the series C preferred stock or the series E preferred
stock, as the case may be, such funds shall be allocated among the shares of
such series ratably in accordance with the number of shares of such series
outstanding as of the redemption date.
Following December 13, 2020, each holder of shares of series C preferred
stock and series E preferred stock shall have the right, at the election of such
holder, to require AT&T Wireless to redeem all (but not less than all) of the
shares of such series owned by such holder at a price per share equal to the
liquidation preference of such series as of the redemption date.
Neither AT&T Wireless nor any holder of shares of series C preferred stock
or series E preferred stock may cause AT&T Wireless to redeem its capital stock
if, at the time:
- AT&T Wireless is insolvent or the redemption will render AT&T Wireless
insolvent; or
- any law or any of AT&T Wireless's agreements prohibits the redemption.
Further, AT&T Wireless will not permit any of AT&T Wireless's subsidiaries,
or any other person, to make any distribution with respect to, or purchase or
otherwise acquire for consideration, any shares of AT&T Wireless's common stock
or other shares of capital stock ranking junior to or on parity with the series
C preferred stock or the series E preferred stock, as the case may be, unless
AT&T Wireless could make such distribution or purchase or otherwise acquire such
shares at such time without becoming insolvent, violating any law, or defaulting
under, breaching or violating any of AT&T Wireless's agreements.
ANTI-TAKEOVER EFFECTS OF AT&T WIRELESS'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND BY-LAWS
Board of Directors
AT&T Wireless's directors are classified into three classes, as nearly
equal in number as possible.
Subject to the rights of any class or series of preferred stock having the
right under a preferred stock designation to elect directors under specified
circumstances, no director may be removed from office except for cause by the
affirmative vote of the holders of at least a majority of the voting power of
all voting stock then outstanding, voting together as a single class.
No Stockholder Action by Written Consent; Special Meetings
AT&T Wireless's amended and restated certificate of incorporation and
by-laws provide that stockholders must effect any action required or permitted
to be taken at a duly called annual or special meeting of stockholders and that
those actions may not be effected by any consent in writing by the stockholders.
Except as otherwise required by law or by any preferred stock designation,
special meetings of stockholders may be called only by a majority of the whole
board or by the chairman of the board. No business other than that stated in the
notice of meeting may be transacted at any special meeting. These provisions may
have the effect of delaying consideration of a stockholder proposal until the
next annual meeting unless a special meeting is called by a majority of the
whole board or the chairman of the board.
96
Advance Notice Procedures
AT&T Wireless's by-laws establish an advance notice procedure for
stockholders to nominate candidates for election as directors or to bring other
business before an annual meeting of stockholders. These stockholder notice
procedures also provide that only persons who are nominated by AT&T Wireless's
board of directors, or by a stockholder who was a stockholder of record at the
time of giving notice and has given timely written notice to AT&T Wireless's
secretary before the meeting at which directors are to be elected, will be
eligible for election as directors.
Rights Agreement
AT&T Wireless's board of directors has adopted a rights agreement. Under
the rights agreement, AT&T Wireless has issued one preferred share purchase
right for each outstanding share of AT&T Wireless's common stock. Each right
will entitle the registered holder to purchase from AT&T Wireless one
one-hundredth of a share of AT&T Wireless's series A junior participating
preferred stock, par value $.01 per share, at a price of $100, per one
one-hundredth of a share, subject to adjustment in some circumstances.
The purpose of the rights agreement is to encourage potential acquirers to
negotiate with the AT&T Wireless board of directors before attempting a takeover
bid and to provide the AT&T Wireless board of directors with leverage in
negotiating on behalf of the AT&T Wireless stockholders the terms of any
proposed takeover. The rights agreement may have anti-takeover effects. It
should not, however, interfere with any merger or other business combination
approved by the AT&T Wireless board of directors.
The rights will be evidenced by the certificates representing AT&T
Wireless's common stock until the "distribution date," which is defined as the
earlier to occur of:
- ten days following a public announcement that a person or group of
affiliated or associated persons, with specified persons and categories
of persons excepted, has acquired beneficial ownership of 15% or more of
the outstanding shares of AT&T Wireless's common stock (such person or
group, an "acquiring person"); or
- ten business days or a later date determined by AT&T Wireless's board of
directors following the commencement of a tender offer or exchange offer
the completion of which would result in the beneficial ownership by a
person or group, with specified persons and categories of persons
excepted, of 15% or more of such outstanding shares of AT&T Wireless's
common stock (such person or group, an "acquiring person").
The rights agreement exempts DoCoMo's ownership of more than 15% of AT&T
Wireless's common stock, but only to the extent of the shares of AT&T Wireless's
common stock that DoCoMo owns as a result of its January 22, 2001 investment in
AT&T Wireless and any shares of common stock that DoCoMo could purchase as a
result of its investment rights.
The rights agreement provides that, until the distribution date, the rights
will be transferred with and only with AT&T Wireless's common stock.
The rights will not be exercisable until the distribution date. The rights
will expire on July 9, 2010, unless the final expiration date is extended or
unless the rights are earlier redeemed or exchanged by AT&T Wireless, in each
case, as summarized below.
In the event that any person or group of affiliated or associated persons
becomes an acquiring person, each holder of a right, other than rights
beneficially owned by the acquiring person, which will thereafter be void, will
have the right to receive upon exercise that number of shares of AT&T Wireless's
common stock having a market value of two times the exercise price of the right.
If AT&T Wireless is acquired in a merger or other business combination
transaction or 50% or more of AT&T Wireless's consolidated assets or earning
power are sold after a person or group of affiliated or associated persons
becomes an acquiring person, each holder of a right will thereafter have the
right to receive, upon the exercise thereof at the then-current exercise price
of the right, that number of shares of common stock of the acquiring
97
company which at the time of the transaction will have a market value of two
times the exercise price of the right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of AT&T Wireless's
outstanding common stock and before the acquisition by the person or group of
50% or more of AT&T Wireless's outstanding common stock, AT&T Wireless's board
of directors may exchange the rights, other than rights owned by the person or
group which, have become void, in whole or in part, at an exchange ratio of one
share of AT&T Wireless's common stock, or one one-hundredth of one of AT&T
Wireless's junior preferred shares, or of a share of a class or series of
preferred stock having equivalent rights, preferences and privileges, per right
subject to adjustment.
At any time before any person becomes an acquiring person, AT&T Wireless's
board of directors may redeem the rights in whole, but not in part, at a price
of $.01 per right, as adjusted. The redemption of the rights may be made
effective at such time, on such basis and with such conditions as AT&T
Wireless's board of directors, in its sole discretion, may establish.
Immediately upon any redemption of the rights, the right to exercise the rights
will terminate and the only right that the holders of the rights will be
eligible to receive will be the redemption price.
The terms of the rights may be amended by AT&T Wireless's board of
directors without the consent of the holders of the rights; provided, however,
that AT&T Wireless's board may not reduce the threshold at which a person or
group becomes an acquiring person to below 10% of AT&T Wireless's outstanding
common stock, and from and after such time as any person or group of affiliated
or associated persons becomes an acquiring person, no amendment may adversely
affect the interests of the holders of the rights.
Until a right is exercised, the holder of that right, as a holder, will
have no additional rights as AT&T Wireless's stockholder solely by virtue of
holding that right, including, without limitation, the right to vote or to
receive dividends.
The number of outstanding rights and the number of one one-hundredths of
AT&T Wireless's junior preferred shares issuable upon exercise of each right
also will be subject to adjustment in the event of a stock split of AT&T
Wireless's common stock or a stock dividend on AT&T Wireless's common stock
payable in AT&T Wireless's common stock or subdivisions, consolidations or
combinations of AT&T Wireless's common stock occurring, in any case, before the
distribution date.
The purchase price payable, and the number of shares of capital stock
issuable, upon exercise of the rights will be subject to adjustment from time to
time to prevent dilution:
- in the event of a stock dividend on, or a subdivision, combination or
reclassification of, AT&T Wireless's series A junior participating
preferred shares;
- upon the grant to holders of AT&T Wireless's junior preferred shares of
rights or warrants to subscribe for or purchase AT&T Wireless's series A
junior participating preferred shares at a price, or securities
convertible into AT&T Wireless's series A junior participating preferred
shares with a conversion price, less than the then-current market price
of AT&T Wireless's series A junior participating preferred shares; or
- upon the distribution to holders of AT&T Wireless's series A junior
participating preferred shares of evidences of indebtedness or assets
(excluding regular periodic cash dividends or dividends payable in AT&T
Wireless's series A junior participating preferred shares) or of
subscription rights or warrants other than those to purchase series A
junior participating preferred shares.
With some exceptions, no adjustment in the purchase price will be required
until cumulative adjustments require an adjustment of at least 1% in the
purchase price. No fractional junior preferred shares will be issued, other than
fractions that are integral multiples of one one-hundredth of one of AT&T
Wireless's junior preferred shares, which may, at AT&T Wireless's election, be
evidenced by depositary receipts and instead, an adjustment in cash will be made
based on the market price of AT&T Wireless's junior preferred shares on the last
trading day before the date of exercise.
98
AT&T Wireless's series A junior participating preferred shares purchasable
upon exercise of the rights will not be redeemable. Each of AT&T Wireless's
series A junior participating preferred shares will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but will be entitled
to an aggregate dividend of 100 times the dividend declared per share of AT&T
Wireless's common stock. In the event of liquidation, dissolution or winding-up,
the holders of AT&T Wireless's series A junior participating preferred shares
will be entitled to a minimum preferential liquidation payment of $100 per share
but will be entitled to an aggregate payment of 100 times the payment made per
share of common stock. Each of AT&T Wireless's series A junior participating
preferred shares is entitled to 100 votes voting together with AT&T Wireless's
common stock. In the event of any merger, consolidation or other transaction in
which shares of common stock are exchanged, each one of AT&T Wireless's series A
junior participating preferred shares will be entitled to receive 100 times the
amount received per share of common stock. These rights are protected by
customary anti-dilution provisions.
Due to the nature of AT&T Wireless's junior preferred shares' dividend,
liquidation and voting rights, the value of the one one-hundredth interest in
one of AT&T Wireless's junior preferred shares purchasable upon exercise of each
right should approximate the value of one share of common stock.
The rights have anti-takeover effects. The rights will cause substantial
dilution to a person or group of persons that attempts to acquire AT&T Wireless
on terms not approved by its board of directors. The rights should not interfere
with any merger or other business combination approved by AT&T Wireless's board
before the time that a person or group has acquired beneficial ownership of 15%
percent or more of the common stock since the rights may be redeemed by AT&T
Wireless at the redemption price.
Delaware Business Combinations Statute
Section 203 of the Delaware General Corporation Law provides that, subject
to some exceptions, an interested stockholder of a Delaware corporation shall
not engage in any business combination, including mergers or consolidations or
acquisitions of additional shares of the corporation, with the corporation for a
three-year period following the date that the stockholder becomes an interested
stockholder unless:
- before the date of the business combination, the board of directors of
the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder;
- upon completion of the transaction that resulted in the stockholder
becoming an "interested stockholder," the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding some shares; or
- on or after that date, the business combination is approved by the board
of directors of the corporation and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of
the outstanding voting stock that is not owned by the interested
stockholder.
Except as otherwise specified in Section 203, an interested stockholder is
defined to include:
- any person that is the owner of 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within three years immediately
before the date of determination; and
- the affiliates and associates of the stockholder.
Under some circumstances, Section 203 makes it more difficult for an
interested stockholder to effect various business combinations with a
corporation for a three-year period. AT&T Wireless has not elected to be exempt
from the restrictions imposed under Section 203.
99
COMPARISON OF RIGHTS OF AT&T WIRELESS
AND TELECORP STOCKHOLDERS
AT&T Wireless and TeleCorp are both organized under the laws of Delaware.
Accordingly, differences in the rights of holders of AT&T Wireless capital stock
and holders of TeleCorp capital stock arise primarily from differences in their
respective certificates of incorporation and by-laws. Upon completion of the
merger, holders of TeleCorp capital stock will become holders of AT&T Wireless
capital stock and their rights will be governed by Delaware law and AT&T
Wireless's amended and restated certificate of incorporation and by-laws. The
following table describes some of the material differences between the rights of
AT&T Wireless stockholders and TeleCorp stockholders. This summary does not
include a complete description of all of the differences among the rights of
these stockholders, nor does it include a complete description of the specific
rights of these stockholders. In addition, references to AT&T Wireless's series
C and E preferred stock assume the completion of the merger, at which time such
shares will be issued for the first time. You are urged to read carefully the
relevant provisions of Delaware law, as well as the amended and restated
certificates of incorporation and by-laws of AT&T Wireless and TeleCorp, which
are incorporated by reference in this proxy statement/prospectus and will be
sent to TeleCorp stockholders upon request. See "Where You Can Find More
Information."
CAPITALIZATION
TeleCorp AT&T Wireless
1,934,463,093 authorized shares of common 10 billion authorized shares of common
stock, par value $0.01 per share, with the stock, par value $0.01 per share.
following designated shares:
1 billion authorized shares of preferred
- 1,108,550,000 shares of class A voting stock, par value $0.01 per share, with the
common stock following shares to be issued upon
completion of the merger:
- 808,550,000 shares of class B non-voting
common stock - 215,000 shares of series C preferred stock
- 313,000 shares of class C common stock - 30,000 shares of series E preferred stock
- 1,047,000 shares of class D common stock
- 4,000,000 shares of class E common stock
- 12,000,000 shares of class F common stock
- 3,093 shares of voting preference common
stock
20,000,000 authorized shares of preferred
stock, par value $0.01 per share, consisting
of:
- 100,000 shares of series A convertible
preferred stock
- 200,000 shares of series B preferred stock
- 215,000 shares of series C preferred stock
- 50,000 shares of series D preferred stock
- 30,000 shares of series E preferred stock
- 15,450,000 shares of series F preferred
stock
- 100,000 shares of series G preferred stock
- 200,000 shares of series H preferred stock
- 300,000 shares of series I preferred stock
- 3,355,000 undesignated shares
100
VOTING RIGHTS
TeleCorp AT&T Wireless
Holders of all classes of common stock Holders of common stock have 1 vote per
(except the class B common stock, which is share.
non-voting, and the voting preference common
stock), series F preferred stock and series Holders of series C preferred stock have an
G preferred stock have an aggregate of aggregate of 1,926,069 votes.
4,690,000 votes.
Holders of series E preferred stock have an
Holders of voting preference common stock aggregate of 251,189 votes.
have an aggregate of 5,010,000 votes. Upon
the occurrence of specified events,
involving an opinion of regulatory counsel
and a consent from the FCC, the voting
preference common stock will be voted as a
single class with the class A voting common
stock on all matters and will have one vote
per share.
Holders of class B non-voting common stock
have no voting rights (other than those
described below in "-- Class Voting
Rights").
Holders of series A convertible preferred
stock have an aggregate of 67,804 votes.
Holders of series B preferred stock have an
aggregate of 61,608 votes.
Holders of series C preferred stock have an
aggregate of 124,096 votes.
Holders of series D preferred stock have
30,308 aggregate votes.
Holders of series E preferred stock have an
aggregate of 16,184 votes.
CLASS VOTING RIGHTS
TeleCorp AT&T Wireless
Holders of class B common stock are entitled The affirmative vote of the holders of a
to vote as a separate class on any majority of the outstanding shares of series
amendment, repeal or modification of the C or E preferred stock, as applicable, shall
amended and restated certificate of be necessary to:
incorporation that adversely affects the
powers, preferences or special rights of - authorize, increase the authorized number
holders of class B common stock. of shares of or issue (including on
conversion or exchange of any convertible
The holders of each series of preferred or exchangeable securities or by
stock have the right to vote as a class, reclassification) any shares of any class
with a majority vote of the class required or classes of stock ranking senior to or
to approve, any measure to: pari passu with the class or any
additional shares of the class;
- authorize, increase the authorized number
of shares of or issue (including on - authorize, adopt or approve each amendment
conversion or exchange of any convertible to the amended and restated certificate of
or exchangeable securities or by incorporation that would increase or
reclassification) any shares of any class decrease the par value of the shares of
or classes of stock ranking senior to or the series or alter or change the powers,
pari passu with the class or any preferences or rights of the shares of the
additional shares of the class; series or alter or change the powers,
preferences or rights of any of AT&T
- authorize, adopt or approve each amendment Wireless's other capital stock if such
to the amended and restated certificate of alteration or change results in such
incorporation that would increase or capital stock ranking senior to or pari
decrease the par value of the shares of passu with such series;
the series or alter
101
or change the powers, preferences or - amend, alter or repeal any provision of
rights of the shares of the series or the amended and restated certificate of
alter or change the powers, preferences or incorporation so as to affect the shares
rights of any of TeleCorp's other capital of the series adversely; or
stock if such alteration or change results
in such capital stock ranking senior to or - authorize or issue any security
pari passu with such series; convertible into, exchangeable for or
evidencing the right to purchase or
- amend, alter or repeal any provision of otherwise receive any shares of any class
the amended and restated certificate of or classes of stock senior to or pari
incorporation so as to affect the shares passu with the series.
of the series adversely; or
- authorize or issue any security
convertible into, exchangeable for or
evidencing the right to purchase or
otherwise receive any shares of any class
or classes of stock senior to or pari
passu with the series.
QUORUM
TeleCorp AT&T Wireless
A quorum is present if a majority of the A quorum is present if a majority of
outstanding voting preference common stock outstanding shares entitled to vote is
and shares representing at least 5,010,000 present. When a class vote is required, a
votes of all shares of capital stock are majority of that class must also be present.
present. When a class vote is required, a
majority of that class must also be present.
AMENDMENTS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
TeleCorp AT&T Wireless
Subject to the class voting rights described Holders of shares of capital stock
above, holders of shares of capital stock representing the majority of the voting
representing at least two-thirds ( 2/3) of power then outstanding may amend, alter or
the votes entitled to be cast for the repeal the amended and restated certificate
election of directors may amend, alter or of incorporation. However, the vote of at
repeal the amended and restated certificate least 80% of the voting power then
of incorporation. outstanding shall be required to amend,
alter or adopt specified provisions.
Holders of shares of capital stock
representing at least two-thirds ( 2/3) of Holders of shares of capital stock
the votes entitled to be cast for the representing at least two-thirds ( 2/3) of
election of directors may amend, alter or the voting power then outstanding may amend,
repeal the by-laws. The by-laws may also be alter or repeal the by- laws. However, the
amended, altered or repealed by a majority vote of at least 80% of the voting power
of the board. Notwithstanding the foregoing, then outstanding shall be required to amend,
the voting rights of particular stockholders alter or repeal specified provisions. The
may not be amended without their written by-laws may also be amended, altered or
consent. repealed by a majority of the board.
NUMBER AND ELECTION OF DIRECTORS
TeleCorp AT&T Wireless
There are currently ten members serving on There are currently nine members of the
the board of directors, divided into three board of directors, divided into three
classes, with three vacancies. Each class classes. Each class serves a staggered
serves a staggered three-year term where three-year term where one-third of the board
one-third of the board of directors is of directors is elected each year.
elected each year.
Holders of series A convertible and B
preferred stock may each nominate one
director under specified circumstances.
102
Holders of voting preference common stock
have the exclusive right, voting together as
a single class, to elect one director.
ACTIONS BY WRITTEN CONSENT
TeleCorp AT&T Wireless
Stockholders may act by written consent. Stockholders may not act by written consent.
NOTICE OF STOCKHOLDER ACTION
TeleCorp AT&T Wireless
Stockholders wishing to bring any business Stockholders wishing to bring any business
before an annual meeting of stockholders before an annual meeting of stockholders
must deliver written notice to TeleCorp not must deliver written notice to AT&T Wireless
less than 90 days prior to the first not less than 90 days or earlier than 120
anniversary of the previous year's meeting; days prior to the anniversary date of the
however, if the annual meeting is advanced previous annual meeting.
by more than 30 days or delayed by more than
60 days from such anniversary date, notice
by the stockholder must be delivered not
later than the 10th day following the day on
which the date of the meeting is disclosed
in a press release reported by a major
national news service or in a document
publicly filed with the SEC under Section
13, 14 or 15(d) of the Securities Exchange
Act of 1934.
LIMITATION OF PERSONAL LIABILITY OF
DIRECTORS
TeleCorp AT&T Wireless
Personal liability of directors and Materially the same as TeleCorp.
executive officers for monetary damages for
breach of fiduciary duty as a director or
executive officer, is eliminated by
provisions of the amended and restated
certificate of incorporation except:
- for any breach of the director's or
executive officer's duty of loyalty to
TeleCorp or its stockholders;
- for acts or omissions not in good faith or
that involve intentional misconduct or a
knowing violation of law;
- for unlawful dividends and stock purchases
and redemptions under the Delaware General
Corporation Law; or
- for any transaction from which the
director derived an improper personal
benefit.
103
INDEMNIFICATION OF DIRECTORS OR OFFICERS
TeleCorp AT&T Wireless
- TeleCorp's by-laws provide for the AT&T Wireless's amended and restated
indemnification of directors and officers certificate of incorporation contains
to the fullest extent permitted by indemnification provisions substantially the
Delaware law, subject to very limited same as those of TeleCorp.
exceptions; and
- TeleCorp must advance expenses, as
incurred, to its directors and executive
officers in connection with any legal
proceeding to the fullest extent permitted
by Delaware law, subject to limited
exceptions.
104
STOCKHOLDER PROPOSALS
TeleCorp will hold the 2002 annual stockholders meeting only if the merger
has not been completed by the date set for the meeting.
To be considered for inclusion in the proxy statement relating to the
TeleCorp annual meeting of stockholders to be held in 2002, stockholder
proposals must be received no later than December 21, 2001. To be considered for
presentation at the 2002 annual meeting, although not included in the proxy
statement, proposals must be received no later than February 22, 2002. In the
event that the date of the 2002 annual meeting is advanced or delayed by more
than 30 days from May 23, 2002, or in the case of a special meeting of the
TeleCorp stockholders, proposals must be delivered no later than the 10th day
following the day on which TeleCorp publishes notice of the date of the meeting.
Proposals received after the applicable dates referred to above will not be
voted on at the 2002 annual meeting or special meeting, as applicable. If a
proposal is received before such date, the proxies that the TeleCorp management
solicits for the meeting may confer on the proxy holders authority to vote in
their discretion on such proposal under circumstances consistent with the proxy
rules of the SEC. Any proposal submitted to be considered for presentation at a
stockholders meeting must contain the information required to be included
therein by the by-laws of TeleCorp. All stockholder proposals should be marked
for the attention of Thomas H. Sullivan, Secretary, at the offices of TeleCorp
at 1010 N. Glebe Road, Suite 800, Arlington, Virginia 22201.
LEGAL OPINIONS
The legality of the AT&T Wireless shares to be issued in connection with
the merger is being passed upon for AT&T Wireless by Gregory P. Landis,
Executive Vice President and General Counsel, AT&T Wireless. As of [ ],
2001, Mr. Landis beneficially owned [ ] shares of AT&T Wireless common
stock and held unvested options to purchase an additional [ ] shares of
AT&T Wireless common stock.
Some of the tax consequences of the merger will be passed upon at the
completion of the merger, as a condition to the merger, by Wachtell, Lipton,
Rosen & Katz on behalf of AT&T Wireless, and by Cadwalader, Wickersham & Taft on
behalf of TeleCorp. See "The Merger -- Material Federal Income Tax
Consequences."
EXPERTS
The audited financial statements of AT&T Wireless incorporated in this
proxy statement/prospectus on Form S-4 by reference to the AT&T Wireless
Services, Inc. Registration Statement on Form S-1 filed on July 6, 2001 (No.
333-60472), except as they relate to Vanguard Cellular Systems, Inc., have been
audited by PricewaterhouseCoopers LLP, independent accountants (and, insofar as
they relate to Vanguard Cellular Systems, Inc., by Arthur Andersen LLP,
independent accountants), whose reports thereon are incorporated by reference.
Such financial statements have been incorporated by reference in reliance on the
report of such independent accountants, given on the authority of such firms as
experts in auditing and accounting.
The audited financial statements of TeleCorp incorporated in this proxy
statement/prospectus on Form S-4 by reference to the TeleCorp Annual Report on
Form 10-K filed on March 30, 2001, except as they relate to Tritel, Inc., have
been audited by PricewaterhouseCoopers LLP, independent accountants (and,
insofar as they relate to Tritel, Inc., by KPMG LLP, independent accountants),
whose reports thereon are incorporated by reference. Such financial statements
have been incorporated by reference in reliance on the report of such
independent accountants, given on the authority of such firms as experts in
auditing and accounting.
105
UNAUDITED AT&T WIRELESS
PRO FORMA FINANCIAL INFORMATION
AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements set forth
below for AT&T Wireless Services, Inc. and subsidiaries gives effect to:
- the anticipated exit from the fixed wireless business as if such event
had been completed on January 1, 1998 for statement of operations
purposes, and at September 30, 2001 for balance sheet purposes;
- the settlement of all intercompany obligations between AT&T Corp. and
AT&T Wireless in accordance with the separation and distribution
agreement between AT&T Corp. and AT&T Wireless as if such event had been
completed on January 1, 2000 for statement of operations purposes; and
- the $6.5 billion debt offering of Senior Notes of AT&T Wireless which
occurred on March 1, 2001 as if such event had been completed on January
1, 2000 for statement of operations purposes.
In October 2001, AT&T Wireless announced its intention to exit the fixed
wireless business. Although exit plans have not yet been approved by AT&T
Wireless's board of directors, AT&T Wireless anticipates that this decision will
result in pre-tax charges during the fourth quarter of approximately $1.3
billion, reflecting a write-down of the assets and the impact of phased exit
charges. Subsequent to the exit plans being finalized and approved by our board
of directors, AT&T Wireless will report the results of fixed wireless as
Discontinued Operations, in accordance with Accounting Principles Board (APB)
Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" (APB 30).
The pro forma adjustments included herein are based on available
information and certain assumptions that management believes are reasonable and
are described in the accompanying notes to the pro forma financial statements.
The unaudited pro forma condensed combined financial statements do not
necessarily represent what AT&T Wireless's financial position or results of
operations would have been had these items occurred on such dates or to project
AT&T Wireless's financial position or results of operations at or for any future
date or period. In the opinion of management, all adjustments necessary to
present fairly the unaudited pro forma financial information have been made. The
unaudited pro forma condensed combined financial statements should be read in
conjunction with the historical financial statements of AT&T Wireless, as
incorporated by reference into this proxy statement/prospectus.
106
AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT SEPTEMBER 30, 2001
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
AT&T FIXED WIRELESS PRO FORMA
WIRELESS PRO FORMA AT&T WIRELESS
SERVICES(1) ADJUSTMENTS(2) SERVICES
----------- -------------- -------------
ASSETS:
Cash and cash equivalents............................. $ 4,875 $ $ 4,875
Accounts receivable, net.............................. 2,125 (6) 2,119
Other current assets.................................. 581 (7) 574
------- ------- -------
TOTAL CURRENT ASSETS.................................. 7,581 (13) 7,568
Property, plant and equipment, net.................... 11,796 (897) 10,899
Licensing costs, net.................................. 13,382 (192) 13,190
Investments in and advances to unconsolidated
subsidiaries........................................ 4,125 4,125
Goodwill, net......................................... 4,798 (52) 4,746
Other assets, net..................................... 1,149 (31) 1,118
Assets from discontinued operations................... -- 1,185 185
(1,000)(3)
------- ------- -------
TOTAL ASSETS.......................................... $42,831 $(1,000) $41,831
======= ======= =======
LIABILITIES:
Accounts payable...................................... $ 791 $ 791
Payroll and benefit-related liabilities............... 354 354
Due on demand notes payable........................... 89 89
Other current liabilities............................. 1,706 300(3) 2,006
------- ------- -------
TOTAL CURRENT LIABILITIES............................. 2,940 300 3,240
Long-term debt........................................ 6,488 6,488
Deferred income taxes................................. 4,843 (497)(6) 4,346
Other long-term liabilities........................... 426 426
------- ------- -------
TOTAL LIABILITIES..................................... 14,697 (197) 14,500
MINORITY INTEREST..................................... 45 45
MANDATORILY REDEEMABLE COMMON STOCK................... 7,664 7,664
SHAREOWNER'S EQUITY:
Common stock, $0.01 par value, 10,000 shares
authorized, 2,124 shares issued and outstanding..... 21 21
Additional paid-in capital............................ 20,417 20,417
Retained earnings (accumulated deficit)............... 77 (1,300)(3) (726)
497(6)
Accumulated other comprehensive loss.................. (90) (90)
------- ------- -------
TOTAL SHAREOWNER'S EQUITY............................. 20,425 (803) 19,622
------- ------- -------
TOTAL LIABILITIES AND SHAREOWNER'S EQUITY............. $42,831 $(1,000) $41,831
======= ======= =======
SEE NOTES TO UNAUDITED PRO FORMA AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED COMBINED FINANCIAL STATEMENTS
107
AT&T WIRELESS SERVICES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
AT&T FIXED WIRELESS OTHER PRO FORMA
WIRELESS PRO FORMA PRO FORMA AT&T WIRELESS
SERVICES(1) ADJUSTMENTS(2) ADJUSTMENTS SERVICES
----------- -------------- ----------- -------------
REVENUE................................... $10,094 $ (12) $ $10,082
OPERATING EXPENSES
Costs of services......................... 3,035 (140) 2,895
Costs of equipment sales.................. 1,471 1,471
Selling, general and administrative....... 3,388 (113) 3,275
Depreciation and amortization............. 1,915 (109) 1,806
------- ----- ----- -------
Total operating expenses.................. 9,809 (362) 9,447
------- ----- ----- -------
OPERATING INCOME.......................... 285 350 635
Other income (loss)....................... 327 (1) 326
Interest expense.......................... 287 (70)(4) 311
94(5)
------- ----- ----- -------
INCOME (LOSS) BEFORE INCOME TAXES AND NET
EQUITY EARNINGS FROM INVESTMENTS........ 325 349 (24) 650
Provision (benefit) for income taxes...... 159 133 (9)(6) 283
Net equity earnings from investments...... 174 174
------- ----- ----- -------
NET INCOME (LOSS)......................... 340 216 (15) 541
Dividend requirements on preferred stock
held by AT&T, net....................... 76 (76)(4) --
------- ----- ----- -------
NET INCOME AVAILABLE TO COMMON
SHAREOWNERS............................. $ 264 $ 216 $ 61 $ 541
======= ===== ===== =======
NET INCOME PER SHARE:
Basic................................... $ 0.10 $0.09 $0.02 $ 0.21
Diluted................................. $ 0.10 $0.09 $0.02 $ 0.21
WEIGHTED AVERAGE SHARES USED TO COMPUTE
NET INCOME PER SHARE:
Basic................................... 2,530 2,530
Diluted................................. 2,532 2,532
SEE NOTES TO UNAUDITED PRO FORMA AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED COMBINED FINANCIAL STATEMENTS
108
AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
AT&T FIXED WIRELESS OTHER PRO FORMA
WIRELESS PRO FORMA PRO FORMA AT&T WIRELESS
SERVICES(1) ADJUSTMENTS(2) ADJUSTMENTS SERVICES
----------- -------------- ----------- -------------
REVENUE................................... $10,448 $ (2) $ $10,446
OPERATING EXPENSES
Costs of services......................... 3,169 (152) 3,017
Costs of equipment sales.................. 2,041 2,041
Selling, general and administrative....... 3,590 (78) 3,512
Depreciation and amortization............. 1,686 (47) 1,639
------- ----- ------ -------
Total operating expenses.................. 10,486 (277) 10,209
------- ----- ------ -------
OPERATING (LOSS) INCOME................... (38) 275 237
Other income.............................. 534 534
Interest expense.......................... 85 (196)(4) 419
530(5)
------- ----- ------ -------
INCOME (LOSS) BEFORE INCOME TAXES AND NET
EQUITY EARNINGS FROM INVESTMENTS........ 411 275 (334) 352
Provision (benefit) for income taxes...... 141 105 (128)(6) 118
Net equity earnings from investments...... 388 388
------- ----- ------ -------
NET INCOME (LOSS)......................... 658 170 (206) 622
Dividend requirements on preferred stock
held by AT&T, net....................... 130 (130)(4) --
------- ----- ------ -------
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREOWNERS............................. $ 528 $ 170 $ (76) $ 622
======= ===== ====== =======
NET INCOME (LOSS) PER SHARE:
Basic................................... $ 0.21 $0.07 $(0.03) $ 0.25
Diluted................................. $ 0.21 $0.07 $(0.03) $ 0.25
WEIGHTED AVERAGE SHARES USED TO COMPUTE
NET INCOME (LOSS) PER SHARE:
Basic................................... 2,530 2,530
Diluted................................. 2,532 2,532
SEE NOTES TO UNAUDITED PRO FORMA AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED COMBINED FINANCIAL STATEMENTS
109
AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
AT&T FIXED WIRELESS PRO FORMA
WIRELESS PRO FORMA AT&T WIRELESS
SERVICES(1) ADJUSTMENTS(2) SERVICES
----------- -------------- -------------
REVENUE............................................... $7,627 $ $7,627
OPERATING EXPENSES
Costs of services..................................... 2,580 (50) 2,530
Costs of equipment sales.............................. 1,266 1,266
Selling, general and administrative................... 2,663 (22) 2,641
Depreciation and amortization......................... 1,253 (22) 1,231
Asset impairment and restructuring charges............ 531 (3) 528
------ ----- ------
Total operating expenses.............................. 8,293 (97) 8,196
------ ----- ------
OPERATING (LOSS) INCOME............................... (666) 97 (569)
Other income.......................................... 122 122
Interest expense...................................... 136 136
------ ----- ------
(LOSS) INCOME BEFORE INCOME TAXES AND NET EQUITY
LOSSES FROM INVESTMENTS............................. (680) 97 (583)
(Benefit) Provision for income taxes.................. (294) 37 (257)
Net equity losses from investments.................... (19) (19)
------ ----- ------
NET (LOSS) INCOME..................................... (405) 60 (345)
Dividend requirements on preferred stock held by AT&T,
net................................................. 56 56
------ ----- ------
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREOWNERS..... $ (461) $ 60 $ (401)
====== ===== ======
NET (LOSS) INCOME PER SHARE:
Basic............................................... $(0.18) $0.02 $(0.16)
Diluted............................................. $(0.18) $0.02 $(0.16)
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET (LOSS)
INCOME PER SHARE:
Basic............................................... 2,530 2,530
Diluted............................................. 2,530 2,530
See Notes to Unaudited Pro Forma AT&T Wireless Services, Inc. and Subsidiaries
Condensed Combined Financial Statements
110
AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
AT&T FIXED WIRELESS PRO FORMA
WIRELESS PRO FORMA AT&T WIRELESS
SERVICES(1) ADJUSTMENTS(2) SERVICES
----------- -------------- -------------
REVENUE............................................... $5,406 $ $5,406
OPERATING EXPENSES
Costs of services..................................... 1,428 (32) 1,396
Costs of equipment sales.............................. 1,000 1,000
Selling, general and administrative................... 2,122 (17) 2,105
Depreciation and amortization......................... 1,079 (15) 1,064
Asset impairment and restructuring charges............ 120 120
------ ----- ------
Total operating expenses.............................. 5,749 (64) 5,685
------ ----- ------
OPERATING (LOSS) INCOME............................... (343) 64 (279)
Other income.......................................... 650 650
Interest expense...................................... 120 120
------ ----- ------
INCOME BEFORE INCOME TAXES AND NET EQUITY EARNINGS
FROM INVESTMENTS.................................... 187 64 251
Provision for income taxes............................ 59 25 84
Net equity earnings from investments.................. 36 36
------ ----- ------
NET INCOME............................................ 164 39 203
Dividend requirements on preferred stock held by AT&T
Corp., net.......................................... 56 56
------ ----- ------
NET INCOME AVAILABLE TO COMMON SHAREOWNERS............ $ 108 $ 39 $ 147
====== ===== ======
NET INCOME PER SHARE:
Basic............................................... $ 0.04 $0.02 $ 0.06
Diluted............................................. $ 0.04 $0.02 $ 0.06
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET INCOME PER
SHARE:
Basic............................................... 2,530 2,530
Diluted............................................. 2,532 2,532
SEE NOTES TO UNAUDITED PRO FORMA AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED COMBINED FINANCIAL STATEMENTS
111
AT&T WIRELESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. This column reflects the historical consolidated results of operations
and financial position of AT&T Wireless Services, Inc. and subsidiaries.
2. The adjustments presented deduct the historical results of operations
and the historical financial position of the fixed wireless business
from AT&T Wireless.
3. This adjustment represents the estimated pretax charge of $1.3 billion
that will be recorded subsequent to exit plans being finalized and
approved by AT&T Wireless's board of directors. Due to the fact that
this charge is a one-time, non-recurring charge, its effect has not been
included as a pro forma adjustment to the statement of operations,
however it has been included as a pro forma adjustment to the balance
sheet. The $1.3 billion represents an estimated $1.0 billion of asset
write-downs and $300 million associated with exit costs.
4. The adjustments presented eliminate the amounts of interest expense
related to the intercompany short-term and long-term debt and dividends
on preferred stock to AT&T Corp. as if the intercompany short-term and
long-term debt and preferred stock had been repaid as of January 1, 2000
for statement of operations purposes.
5. Gives effect to the March 1, 2001 private placement of $6.5 billion in
Senior Notes as if such private placement occurred on January 1, 2000
for statement of operations purposes. The notes included $1.0 billion
paying interest at 7.350% due in 2006, $3.0 billion paying interest at
7.875% due in 2011, and $2.5 billion paying interest at 8.750% due in
2031.
6. Reflects the federal statutory and blended state tax effects on the pro
forma adjustments.
112
APPENDIX A
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AT&T WIRELESS SERVICES, INC.
TL ACQUISITION CORP.
AND
TELECORP PCS, INC.
DATED AS OF OCTOBER 7, 2001
--------------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I
THE MERGER
PAGE
----
1.1 The Merger.................................................. A-1
1.2 Effective Time.............................................. A-1
1.3 Effect of the Merger........................................ A-1
1.4 Certificate of Incorporation and By-laws of the Surviving A-2
Corporation.................................................
1.5 Directors and Officers...................................... A-2
1.6 Conversion of Capital Stock, Etc............................ A-2
1.7 Cancellation of Certain Shares; Conversion of Merger Sub A-4
Stock.......................................................
1.8 Stock Options; Restricted Stock............................. A-4
1.9 Adjustments................................................. A-5
1.10 Fractional Shares........................................... A-5
1.11 Surrender of Certificates................................... A-5
1.12 Further Ownership Rights in Shares.......................... A-7
1.13 Closing..................................................... A-7
1.14 Lost, Stolen or Destroyed Certificates...................... A-7
1.15 Follow-On Merger............................................ A-7
1.16 Dissenting Shares........................................... A-7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TELECORP
2.1 Organization and Qualification; Subsidiaries................ A-8
2.2 Certificate of Incorporation; By-laws....................... A-8
2.3 Capitalization.............................................. A-9
2.4 Authority; Enforceability................................... A-10
2.5 Board Recommendation; Required Vote......................... A-11
2.6 No Conflict; Required Filings and Consents.................. A-11
2.7 Material Agreements......................................... A-12
2.8 Compliance.................................................. A-13
2.9 SEC Filings; Financial Statements........................... A-13
2.10 Licenses and Authorizations................................. A-14
2.11 No Violation of Law......................................... A-16
2.12 Absence of Certain Changes or Events........................ A-16
2.13 Absence of Liabilities...................................... A-16
2.14 Absence of Litigation....................................... A-16
2.15 Employee Benefit Plans...................................... A-17
2.16 Employment and Labor Matters................................ A-18
2.17 Registration Statement; Proxy Statement/Prospectus.......... A-19
2.18 Microwave Clearing.......................................... A-19
2.19 Title to Assets; Leases..................................... A-19
2.20 Taxes....................................................... A-19
2.21 Environmental Matters....................................... A-21
2.22 Intellectual Property....................................... A-21
-i-
2.23 No Restrictions on the Merger; Takeover Statutes............ A-22
2.24 Tax Matters................................................. A-22
2.25 Build-out Requirements...................................... A-22
2.26 Brokers..................................................... A-22
2.27 Opinion of Financial Advisor................................ A-23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AWS
3.1 Organization and Qualification; Subsidiaries................ A-23
3.2 Certificate of Incorporation; By-laws....................... A-23
3.3 Capitalization.............................................. A-24
3.4 Authority; Enforceability................................... A-24
3.5 No Conflict; Required Filings and Consents.................. A-24
3.6 Compliance.................................................. A-25
3.7 SEC Filings; Financial Statements........................... A-25
3.8 Licenses and Authorizations................................. A-26
3.9 No Violation of Law......................................... A-26
3.10 Absence of Litigation....................................... A-26
3.11 Registration Statement; Proxy Statement/Prospectus.......... A-26
3.12 Taxes....................................................... A-26
3.13 Tax Matters................................................. A-27
3.14 Absence of Changes.......................................... A-27
3.15 Brokers..................................................... A-27
3.16 Severance Policy; Letter Agreement.......................... A-27
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Access to Information; Confidentiality...................... A-28
4.2 Conduct of Business Pending the Closing Date................ A-28
4.3 Registration Statement; Other Filings; Board A-31
Recommendations.............................................
4.4 Meeting of TeleCorp Stockholders............................ A-31
4.5 Non-Solicitation............................................ A-32
4.6 Blue Sky.................................................... A-33
4.7 Registration and Listing of AWS Capital Stock............... A-33
4.8 Further Actions............................................. A-33
4.9 Notification................................................ A-35
4.10 Notice of Breaches; Updates................................. A-35
4.11 Affiliates.................................................. A-35
4.12 Employee Benefit Matters.................................... A-35
4.13 Indemnification and Insurance............................... A-36
4.14 Plan of Reorganization...................................... A-36
4.15 Tax-Free Exchange........................................... A-36
4.16 Extension of Birmingham/Tuscaloosa Put Right................ A-37
-ii-
ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to Obligations of TeleCorp and AWS to Effect the A-37
Merger......................................................
5.2 Additional Conditions to Obligations of TeleCorp............ A-37
5.3 Additional Conditions to the Obligations of AWS............. A-38
ARTICLE VI
TERMINATION
6.1 General..................................................... A-39
6.2 Obligations in Event of Termination......................... A-40
6.3 Termination Fees............................................ A-40
ARTICLE VII
NO SURVIVAL
7.1 No Survival of Representations and Warranties............... A-41
ARTICLE VIII
MISCELLANEOUS
8.1 Public Announcements........................................ A-41
8.2 Fees and Expenses........................................... A-41
8.3 Notices..................................................... A-41
8.4 Certain Definitions......................................... A-42
8.5 Interpretation.............................................. A-44
8.6 Entire Agreement............................................ A-44
8.7 Binding Effect; Benefit..................................... A-44
8.8 Assignability............................................... A-44
8.9 Amendment; Waiver........................................... A-44
8.10 Section Headings; Table of Contents......................... A-44
8.11 Severability................................................ A-44
8.12 Counterparts................................................ A-44
8.13 Governing Law; Jurisdiction and Service of Process.......... A-44
8.14 Waiver of Jury Trial........................................ A-45
EXHIBITS
Exhibit A AWS Series C Preferred Certificate of Designations
Exhibit B Form of AWS Series E Preferred Certificate of Designations
Exhibit C Form of Affiliates Letter
Exhibit D Form of AWS Tax Representation Letter
Exhibit E Form of TeleCorp Tax Representation Letter
Exhibit F Transfer Agreements
Exhibit G Change of Control Severance Policy
Exhibit H Letter Agreement with TeleCorp Management Corp.
-iii-
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October 7,
2001, by and among TeleCorp PCS, Inc., a Delaware corporation ("TeleCorp"), AT&T
Wireless Services, Inc., a Delaware corporation ("AWS") and TL Acquisition
Corp., a newly formed Delaware corporation and a wholly owned subsidiary of AWS
("Merger Sub").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of TeleCorp, AWS and Merger
Sub, as well as all of the directors of TeleCorp who are not employees of AWS
(the "Disinterested Directors"), have approved this Agreement, and deem it
advisable and in the best interests of their respective stockholders to
consummate the merger of Merger Sub with and into TeleCorp on the terms and
conditions set forth in this Agreement (the "Merger");
WHEREAS, for United States federal income tax purposes, it is intended that
either the Merger or the combination of the Merger and the Follow-On Merger, as
applicable, qualify as a "reorganization" within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder;
WHEREAS, as an inducement to and a condition to AWS entering into this
Agreement, simultaneously herewith certain stockholders of TeleCorp are entering
into Voting Agreements relating to the agreement of such stockholders to vote to
approve the transactions contemplated by this Agreement (the "Voting
Agreements"); and
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 MERGER
1.1 The Merger. At the Effective Time and subject to the terms and
conditions of this Agreement, and in accordance with the General Corporation Law
of the State of Delaware ("DGCL"), Merger Sub shall be merged with and into
TeleCorp, with TeleCorp as the surviving corporation. From and after the
Effective Time, the separate corporate existence of Merger Sub shall cease, and
TeleCorp, as the surviving corporation, shall continue its existence under the
laws of the State of Delaware as a wholly owned subsidiary of AWS. TeleCorp, as
the surviving corporation after the Merger, is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Effective Time. As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of the conditions set forth in Article V
(excluding, but subject to the satisfaction or waiver of, conditions that, by
their nature, cannot be satisfied prior to the Closing Date), but in no event
prior to the Closing, TeleCorp and AWS shall cause the Merger to be consummated
by filing a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, 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 by mutual agreement in the Certificate of
Merger, being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the DGCL and the
Certificate of Merger. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the assets, property, rights,
privileges, immunities, powers and franchises of TeleCorp and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
TeleCorp and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
A-1
1.4 Certificate of Incorporation and By-laws of the Surviving
Corporation. At the Effective Time, by virtue of the Merger and without further
action on the part of any party, the Restated Certificate of Incorporation of
TeleCorp shall be amended to read in its entirety as the certificate of
incorporation of Merger Sub in effect immediately prior to the Effective Time
(except that the name of the corporation shall remain TeleCorp, and the
provision relating to the incorporator shall be omitted) and as so amended shall
be the certificate of incorporation of the Surviving Corporation, until
thereafter amended as provided by the DGCL; provided that, if the votes received
in connection with the Required Stockholder Approval are not sufficient under
the Restated Certificate of Incorporation of TeleCorp to cause such amendment,
then the Restated Certificate of Incorporation of TeleCorp as in effect
immediately prior to the Effective Time shall remain the certificate of
incorporation of the Surviving Corporation, until thereafter amended as provided
by the DGCL. At the Effective Time, the by-laws of Merger Sub shall be the
by-laws of the Surviving Corporation until thereafter amended as provided by the
DGCL.
1.5 Directors and Officers.
(a) The directors of Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and the By-laws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.
(b) The officers of TeleCorp immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and the By-laws of Merger Sub
until their respective successors are duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with Merger
Sub's Certificate of Incorporation and By-laws.
1.6 Conversion of Capital Stock, Etc. Subject to the provisions of this
Article I, at the Effective Time, by virtue of the Merger, 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 changeable for .9 shares of AWS,
par value $0.01 per share ("AWS Common Stock");
(ii) 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for .9 shares of AWS Common Stock;
(iii) 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for .9 shares of AWS Common Stock;
(iv) each share of TeleCorp Class E 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for .9 shares of AWS Common Stock;
(v) each share of TeleCorp Class F 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for .9 shares of AWS Common Stock; and
A-2
(vi) 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for .9 shares of AWS Common Stock.
(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") that is outstanding:
(i) each share of TeleCorp Series A Convertible 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 or the Dissenting Shares) shall be converted automatically into and
become exchangeable for 82.9849 shares of AWS Common Stock;
(ii) each share of TeleCorp Series B 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for 81.2439 shares of AWS Common Stock;
(iii) 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for one share of a new series of preferred stock of AWS to be
designated as Series C Preferred Stock of AWS ("AWS Series C Preferred
Stock") having terms substantially as set forth in the form of the Series C
Preferred Certificate of Designation attached as Exhibit A hereto;
(iv) 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for 27.6425 shares of AWS Common Stock;
(v) 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for one share of a new series of Preferred Stock of AWS to be
designated as Series E Preferred Stock of AWS, having terms substantially
as set forth in the form of the Series E Preferred Certificate of
Designation attached as Exhibit B hereto (together with the AWS Series C
Preferred Stock, the "AWS Preferred Stock"; the AWS Common Stock and the
AWS Preferred Stock, the "AWS Capital Stock");
(vi) 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for .9 shares of AWS Common Stock; and
(vii) each share of TeleCorp Series G 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 or the
Dissenting Shares) shall be converted automatically into and become
exchangeable for .9 shares of AWS Common Stock.
(c) 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
shares of the applicable AWS Capital Stock as specified in Section 1.6 (the
"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 1.10 hereof without interest. The number of shares of
AWS Capital
A-3
Stock into which shares of each class of TeleCorp Capital Stock are converted in
accordance with Section 1.6 shall be, with respect to such class, the "Exchange
Ratio."
1.7 Cancellation of Certain Shares; Conversion of Merger Sub Stock.
(a) At the Effective Time, each share of TeleCorp Capital Stock held in the
treasury of TeleCorp or owned by AWS immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof and no
consideration shall be delivered in exchange therefor.
(b) Each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one share of common stock of the Surviving Corporation.
1.8 Stock Options; Restricted Stock.
(a) At the Effective Time, all options (the "Outstanding Employee Options")
to purchase shares of TeleCorp Common Stock then outstanding and unexercised
under the TeleCorp PCS, Inc. 2000 Employee, Director and Consultant Stock Plan,
the TeleCorp PCS, Inc. 1999 Stock Option Plan, as amended to the date hereof,
the Amended and Restated Tritel, Inc. 1999 Stock Option Plan, and the Amended
and Restated Tritel, Inc. 1999 Stock Option Plan for Non-employee Directors (the
"TeleCorp Option Plans"), whether or not then vested or exercisable, by virtue
of the Merger and without any action on the part of the holder thereof, shall no
longer be options to acquire TeleCorp Common Stock and shall automatically
become options to acquire AWS Common Stock with such terms as provided in
Section 1.8(b).
(b) At the Effective Time, each such Outstanding Employee Option shall
continue to have, and be subject to, the same terms and conditions set forth in
the TeleCorp Option Plans, option agreements thereunder and other relevant
documentation immediately prior to the Effective Time, except that such
Outstanding Employee Options will cease to represent an option to purchase
shares of TeleCorp Common Stock and will be automatically converted into an
option to purchase that number of whole shares of AWS Common Stock equal to the
product of (i) the number of shares of TeleCorp Common Stock that were
purchasable under such Outstanding Employee Options immediately prior to the
Effective Time and (ii) the applicable Exchange Ratio, rounded up to the nearest
whole number of shares of AWS Common Stock. The per-share exercise price for the
shares of AWS Common Stock issuable upon exercise of such converted Outstanding
Employee Options will be equal to the quotient determined by dividing (x) the
exercise price per share of TeleCorp Common Stock at which such Outstanding
Employee Options were exercisable immediately prior to the Effective Time by (y)
the applicable Exchange Ratio, and rounding the resulting exercise price to the
nearest whole cent.
(c) At the Effective Time, all shares of restricted and unvested TeleCorp
Common Stock ("Restricted Shares") granted under any of the TeleCorp Option
Plans or otherwise, which are outstanding and subject to restriction as of the
Effective Time, shall, without any further action on the part of the holders
thereof, automatically and immediately be converted into a number of restricted
shares of AWS Common Stock ("AWS Restricted Shares") equal to the product of (i)
the number of Restricted Shares held by the grantee immediately prior to the
Effective Time and (ii) the applicable Exchange Ratio. Following the Effective
Time, each AWS Restricted Share will otherwise continue to be subject to the
same terms and conditions set forth in the TeleCorp Option Plans, restricted
stock agreements thereunder and any other relevant documentation immediately
prior to the Effective Time. At the Effective Time, AWS shall assume all of the
further obligations of TeleCorp under the TeleCorp PCS, Inc. 1998 Restricted
Stock Plan, which was assumed by TeleCorp on November 13, 2000.
(d) AWS or one of its Affiliates shall reserve for issuance a sufficient
number of shares of AWS Common Stock for delivery upon exercise of Outstanding
Employee Options. As soon as practicable after the Effective Time, AWS shall
file a registration statement on Form S-8 (or any successor form or other
appropriate form) under the Securities Act covering the shares of AWS Common
Stock issuable upon the exercise of the Outstanding Employee Options assumed by
AWS, and shall use all its reasonable efforts to
A-4
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.
(e) Notwithstanding the foregoing, the number of shares and the per share
exercise price of each Outstanding Employee Option that is intended to be an
"incentive stock option" (as defined in Section 422 of the Code) shall be
adjusted in accordance with the requirements of Section 422 of the Code.
(f) TeleCorp shall take all steps necessary prior to the Effective Time to
ensure that no individual shall have the right to exercise any Outstanding
Employee Options (or other TeleCorp equity awards) for TeleCorp Common Stock
following the Effective Time.
1.9 Adjustments. If at any time during the period between the date of this
Agreement and the Effective Time, (a) any change in the outstanding shares of
TeleCorp Capital Stock or AWS Common Stock shall occur by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any similar transaction, or any stock dividend
thereon with a record date during such period, or (b) if the representations set
forth in Section 2.3(a), Section 2.3(b) or the first sentence of Section 2.3(c)
shall not be true and correct and, solely in the case of clause (b) AWS elects
to do so, the Merger Consideration shall be appropriately adjusted to provide
the holders of shares of TeleCorp Capital Stock or AWS, as the case may be, the
same economic effect as contemplated by this Agreement prior to such event or in
the absence of such failure to be true and correct, as the case may be.
1.10 Fractional Shares. No fraction of a share of AWS Common Stock shall
be issued, but in lieu thereof each holder of shares of TeleCorp Capital Stock
who would otherwise be entitled to a fraction of a share of AWS Common Stock
(after aggregating all fractional shares of AWS Common Stock to be received by
such holder) shall receive from the Exchange Agent (as defined below) in lieu of
such fractional shares of AWS Common 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 AWS Common 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 New York Stock Exchange 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 Capital Stock,
the Exchange Agent will hold such proceeds in trust for the holders of TeleCorp
Capital Stock. AWS shall pay or cause to be paid 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. AWS may decide, at its sole option, exercised
prior to the Effective Time, in lieu of the issuance and sale of Excess Shares
that AWS shall pay or cause to be paid to the Exchange Agent an amount
sufficient for the Exchange Agent to pay each holder of TeleCorp Capital Stock
the amount such holder would have received pursuant to the foregoing assuming
that the sales of AWS Common Stock were made at a price equal to the average of
the closing bid prices of AWS Common Stock on the New York Stock Exchange, 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 Capital Stock in lieu of any fractional shares of AWS Common
Stock, the Exchange Agent shall make available such amounts to such holders of
shares of the applicable TeleCorp Capital Stock without interest.
1.11 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, AWS shall designate a
bank or trust company to act as exchange agent (the "Exchange Agent") in
connection with the Merger.
A-5
(b) AWS to Provide Capital Stock. When and as needed, AWS shall use
reasonable best efforts to make available to the Exchange Agent for exchange in
accordance with this Article I, through such reasonable procedures as AWS may
adopt, the Merger Consideration.
(c) Exchange Procedures. Promptly after the Effective Time (but in no
event later than five days after the Effective Time), AWS 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 whose shares were converted into
the right to receive shares of AWS 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 TeleCorp may reasonably specify) and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of AWS 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 AWS Capital Stock
or, as the case may be, payment in lieu of fractional shares which such holder
has the right to receive pursuant to Section 1.10, 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 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 AWS
Capital Stock into which the holder of such shares of TeleCorp Capital Stock is
entitled and, as the case may be, the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 1.10. Any
portion of the shares of AWS Capital Stock and cash deposited with the Exchange
Agent pursuant to Section 1.11(b) which remains undistributed to the holders of
Certificates representing shares of TeleCorp Capital Stock for six months after
the Effective Time shall be delivered to AWS, upon demand, and any holders of
shares of TeleCorp Capital Stock who have not theretofore complied with the
provisions of this Article I shall thereafter look only to AWS and only as
general creditors thereof for payment of their claim for AWS Capital Stock, any
cash in lieu of fractional shares and any dividends or distributions with
respect to AWS 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
AWS 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 AWS
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 AWS 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 AWS Capital Stock.
(e) Transfers of Ownership. If any certificate for shares of AWS 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, 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
AWS, or any agent designated by it, any transfer or other taxes required by
reason of the issuance of a certificate for shares of AWS Capital Stock in any
name other than that of the registered holder of the Certificate surrendered, or
established to the reasonable satisfaction of AWS 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, AWS or the Surviving Corporation shall be
liable to a holder of shares of TeleCorp Capital Stock or any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
A-6
(g) Withholding of Tax. Either AWS 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 such amounts as AWS
(or any Affiliate thereof) 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 AWS 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 in respect of whom such deduction and withholding were made by AWS.
1.12 Further Ownership Rights in Shares. All shares of AWS Capital Stock
issued upon the surrender for exchange of shares of TeleCorp Capital Stock 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, and there shall be no
further registration of transfers on the records of either AWS or the Surviving
Corporation of shares of capital stock of TeleCorp which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to either AWS or the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.13 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article VI, and subject to the provisions of Article V, the closing of the
Merger (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 third business day after all the conditions set
forth in Article V (excluding, but subject to the satisfaction or waiver of,
conditions that, by their nature, cannot be satisfied prior to the Closing Date)
shall have been satisfied or waived, unless another time and/or date is agreed
to in writing by the parties. The Closing shall take place at the offices of
Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, NY, unless
another place is agreed to by the parties.
1.14 Lost, Stolen or Destroyed Certificates. In the event any Certificates
evidencing shares of TeleCorp Capital Stock 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 AWS, such shares
of AWS 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 1.10; provided, however,
that AWS 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 AWS or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.15 Follow-On Merger. In the event that either of the tax opinions
required by Section 5.2(b) and 5.3(b) could otherwise not be delivered, AWS
shall cause the Surviving Corporation to be merged with and into AWS immediately
after the Effective Time (the "Follow-On Merger").
1.16 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, shares
of TeleCorp Capital Stock (other than the TeleCorp Class A Voting Common Stock,
par value $0.01 per share) that are outstanding immediately prior to the
Effective Time and that are held by stockholders who shall have neither voted in
favor of the Merger nor consented thereto in writing and who shall have demanded
properly in writing appraisal for such shares in accordance with Section 262 of
the DGCL (collectively, the "Dissenting Shares") shall not be converted into, or
represent the right to receive, the Merger Consideration. Such stockholders
shall be entitled to receive payment of the appraised value of such shares held
by them in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares under such Section 262 shall thereupon be deemed to have been converted
into, and to have become exchangeable for, as of the Effective Time, the right
to receive the Merger
A-7
Consideration, without any interest thereon, upon surrender, in the manner
provided in Section 1.11, of the certificate or certificates that formerly
evidenced such shares.
(b) TeleCorp shall give AWS (i) prompt notice of any demands for appraisal
received by TeleCorp, withdrawals of such demands, and any other instruments
served pursuant to the DGCL and received by TeleCorp and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. TeleCorp shall not, except with the prior written consent of
AWS, make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TELECORP
Except as set forth in the TeleCorp Disclosure Schedule delivered to AWS
concurrently herewith (the "TeleCorp Disclosure Schedule"), TeleCorp, on behalf
of itself and its Subsidiaries, represents and warrants to AWS that the
statements contained in this Article II 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 II, and the
disclosure in any paragraph shall qualify only the corresponding paragraph of
this Article II. As used in this Agreement, a "TeleCorp Material Adverse Effect"
means any change, event, occurrence, effect or state of facts (a) that is
materially adverse to or materially impairs (i) the business, assets (including
intangible assets), liabilities, financial condition or results of operations of
TeleCorp and its Subsidiaries, taken as a whole, or (ii) the ability of TeleCorp
to perform its obligations under this Agreement, or (b) prevents consummation of
any of the transactions contemplated by this Agreement; provided that none of
the following shall be considered a Material Adverse Effect except to the extent
TeleCorp is affected in a materially disproportionate manner as compared to
other wireless telecommunications service providers: (x) changes in general
economic conditions in the United States, (y) conditions affecting the wireless
telecommunications services industry generally, and (z) any changes resulting
from the announcement of the Merger.
2.1 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 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.
2.2 Certificate of Incorporation; By-laws. TeleCorp has heretofore made
available to AWS a true, complete and correct copy of its and each of its
Subsidiaries' respective Certificate of Incorporation and
A-8
By-laws (or other equivalent organizational or constitutive 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.
2.3 Capitalization.
(a) The authorized capital of TeleCorp consists of: (i) 1,934,463,093
shares of TeleCorp Common Stock, consisting of: (A) 1,108,550,000 shares of
TeleCorp Class A Voting Common Stock, (B) 808,550,000 shares of TeleCorp Class B
Non-Voting Common Stock, (C) 313,000 shares of TeleCorp Class C Common Stock,
(D) 1,047,000 shares of TeleCorp Class D Common Stock, (E) 4,000,000 shares of
TeleCorp Class E Common Stock, (F) 12,000,000 shares of TeleCorp Class F Common
Stock, and (G) 3,093 shares of TeleCorp Voting Preference Common Stock; (ii)
20,000,000 shares of TeleCorp Preferred Stock, consisting of: (A) 100,000 shares
of TeleCorp Series A Convertible 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, (G) 100,000 shares of TeleCorp Series G Preferred Stock, (H)
200,000 shares of TeleCorp Series H Preferred Stock, (I) 300,000 shares of
TeleCorp Series I Preferred Stock, and (J) 3,355,000 undesignated shares.
(b) As of October 7, 2001, 2001: (i) 180,960,930.01 shares of TeleCorp
Common Stock were issued and outstanding, which consisted of: (A) 179,779,632
shares of TeleCorp Class A Voting Common Stock, (B) no shares of TeleCorp Class
B Non-Voting Common Stock, (C) 283,813 shares of TeleCorp Class C Common Stock,
(D) 851,429 shares of TeleCorp Class D Common Stock, (E) 5,245.70 shares of
TeleCorp Class E Common Stock, (F) 37,717.31 shares of TeleCorp Class F Common
Stock, and (G) 3,093 shares of TeleCorp Voting Preference Common Stock; (ii)
15,433,244.82 shares of TeleCorp Preferred Stock were issued and outstanding,
which consisted of: (A) 97,472.84 shares of TeleCorp Series A Preferred Stock,
(B) 90,666.33 shares of TeleCorp Series B Preferred Stock, (C) 210,608 shares of
TeleCorp Series C Preferred Stock, (D) 49,916.98 shares of TeleCorp Series D
Preferred Stock, (E) 25,428.57 shares of TeleCorp Series E Preferred Stock, (F)
14,912,778 shares of TeleCorp Series F Preferred Stock, (G) 46,374.10 shares of
TeleCorp Series G Preferred Stock, (H) no shares of TeleCorp Series H Preferred
Stock, and (I) no shares of TeleCorp Series I Preferred Stock; (iii) 281,525
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) 361,744 shares of TeleCorp Class A Voting Stock and
649.76 shares of TeleCorp Series E Preferred Stock were reserved for issuance
pursuant to the TeleCorp PCS, Inc. 2000 Employee, Director and Consultant Stock
Plan and TeleCorp PCS, Inc. 1998 Restricted Stock Plan, as amended; and (vi)
there were outstanding employee and non-employee options in the amount set forth
in Section 2.3(b) of the TeleCorp Disclosure Schedule (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 in Section
2.3(b) of the TeleCorp Disclosure Schedule, and 22,703,376 shares of TeleCorp
Class A Common Stock were reserved for issuance in respect thereof. None of the
outstanding shares of TeleCorp Capital 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 or other securities or equity interests 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 (including under
the Securities Act), 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.
A-9
(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 any and all Liens 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.
(e) Section 2.3(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, whether upon conversion, exchange or otherwise, 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 and other than as set forth in Section 2.3(b) or 2.3(e) of the
TeleCorp Disclosure Schedule, there are no such securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings
outstanding. 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 for the Voting Agreements and the Stockholders Agreement, dated
November 13, 2000 by and among TeleCorp, AWS and the other parties specified
therein (the "Stockholders Agreement"), and such other agreements to which AWS
is a party, 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.
2.4 Authority; Enforceability. TeleCorp has all necessary corporate power
and authority to execute and deliver this Agreement, Amendment No. 1 to the
Stockholders Agreement (the "Stockholders Agreement Amendment"), and the
Transfer Agreement (collectively, the "Related Agreements") and to perform its
obligations hereunder and thereunder and, assuming the requisite stockholder
approval is received, 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 or to consummate
the transactions so contemplated, other than the Required
A-10
Stockholder Approval. Each of this Agreement and each Related Agreement 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, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or law).
2.5 Board Recommendation; Required Vote. A majority of the Disinterested
Directors have, and the full 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, (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 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 recommendations referred to in this sentence, the "Directors'
Recommendation"). The affirmative vote of a majority of the voting power of all
outstanding shares of TeleCorp Class A Voting Common Stock, TeleCorp Class C
Common Stock, TeleCorp Class D Common Stock, TeleCorp Class E Common Stock,
TeleCorp Class F Common Stock, and TeleCorp Voting Preference Common Stock,
TeleCorp Series A Convertible Preferred Stock, TeleCorp Series B Preferred
Stock, TeleCorp Series C Preferred Stock, TeleCorp Series D Preferred Stock,
TeleCorp Series E Preferred Stock, and TeleCorp Series F Preferred Stock, voting
together as one class in accordance with TeleCorp's Certificate of
Incorporation, 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
Merger and the Related Agreements and the other transactions contemplated hereby
and thereby in their capacity as stockholders of TeleCorp (such vote, the
"Required Stockholder Approval"). As of the date hereof, the Persons who are
signatories to the Voting Agreements in the aggregate possess sufficient voting
power to cause the Required Stockholder Approval to be given without the vote of
any other stockholder of TeleCorp. The Stockholders Agreement Amendment was and
is effective to amend the Stockholders Agreement in the manner and to the extent
provided for in the Stockholders Agreement Amendment.
2.6 No Conflict; Required Filings and Consents.
(a) The execution and delivery by TeleCorp of this Agreement and the
Related Agreements do not, and the performance of this Agreement and the Related
Agreements will not, (i) conflict with or violate the Certificate of
Incorporation or By-laws or other equivalent organizational or constitutive
documents of TeleCorp or any of its Subsidiaries, (ii) conflict with or violate
any Law, Regulation or Order 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, (y) prevent or materially impair or delay the
consummation of the transactions contemplated by this Agreement and the Related
Agreements or (z) individually, or in the aggregate, reasonably be expected to
have a material adverse effect on the value of TeleCorp's Capital Stock.
(b) The execution and delivery by TeleCorp of this Agreement and the
Related Agreements 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 or seek any approval or authorization
from any Governmental
A-11
Authority, domestic or foreign, except for (i) compliance with applicable
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the pre-merger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
Communications Act of 1934, as amended, including, without limitation, as
amended by the Telecommunications Act of 1996 (the "Communications Act") and any
rules, regulations or policies promulgated by the Federal Communications
Commission (the "FCC"), state public utility, telecommunications or public
service laws, (ii) the filing of the Certificate 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. The approval
or authorization required to be obtained from the FCC pursuant to the
Communications Act and/or the rules and regulations of the FCC, are referred to
herein as the "Required TeleCorp Governmental Approvals").
2.7 Material Agreements. (a) Each agreement, contract or commitment that
is of a type which is required, pursuant to Items 404 or 601 of Regulation S-K
promulgated by the Securities and Exchange Commission (the "SEC"), to be
disclosed or included as an exhibit to a TeleCorp SEC Report filed on or after
December 31, 2000 has been so disclosed or so included in TeleCorp's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000, or one of its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 or June 30,
2001 (any such agreement required to be so disclosed or included, together with
any agreements actually disclosed or included, the "TeleCorp SEC Agreements").
Except as entered into after the date hereof without violation of this
Agreement, Section 2.7(a) of the TeleCorp Disclosure Schedule sets forth a true
and correct list of (i) all uncompleted contracts, arrangements, agreements or
understandings with vendors or otherwise for the purchase of equipment or
services involving the payment of $3 million or more in any 12 month period or
$8 million in the aggregate; and (ii) all contracts, arrangements, agreements or
understandings to purchase or acquire any rights under any FCC License or other
service licenses or permits; and (iii) all contracts, arrangements, agreements
or understandings to purchase, acquire, dispose or transfer any tower or
wireless system or part thereof or cell site or any other local service or
access system (including any shares of capital stock of any Subsidiary holding
any such interest) or material business enterprise or operation. The TeleCorp
SEC Agreements, together with the agreements required to be disclosed in Section
2.7(a) of the TeleCorp Disclosure Schedule are referred to herein as the
"TeleCorp Material Contracts". TeleCorp has previously made available to AWS
true and complete copies of each of the foregoing agreements.
(b) Neither TeleCorp nor any of its Subsidiaries has breached or violated
any provision of, or committed or failed to perform any act which with or
without notice, lapse of time or both would constitute a default under any of
the provisions of, or received in writing any claim or threat that it has
breached or is in default under, any of the terms or conditions of any TeleCorp
Material Contract 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 Contract (i) is in full force and effect, (ii) is a valid
and binding obligation of TeleCorp or such Subsidiary, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
creditors generally or by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or law) and, to the
knowledge of TeleCorp, of each other party thereto, and (iii) is enforceable
against TeleCorp or such Subsidiary in accordance with its terms, and, to the
knowledge of TeleCorp, enforceable against each other party thereto, and such
TeleCorp Material Contracts 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 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 Contract, and no event has
occurred which (whether with or without notice or lapse of time or both) would
constitute such a default, breach or violation. No party to a TeleCorp Material
Contract has terminated or notified TeleCorp in writing of an intent to
materially reduce or terminate the amount of business with TeleCorp and its
Subsidiaries in the future, except as would not individually or in the
aggregate, reasonably be expected to have a TeleCorp Material Adverse Effect.
A-12
(c) There is no agreement, contract or understanding 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 impairing
any business or operations of AWS or any of its Affiliates (other than TeleCorp
or its Subsidiaries) or any business practice of AWS or any of its Affiliates
(other than TeleCorp or its Subsidiaries) as currently conducted. Without
limiting the generality of the foregoing, the exclusivity terms of each of the
General Agreement for Purchase of Personal Communications Systems and Services,
dated as of May 1, 1998, among Lucent Technologies Inc. and TeleCorp PCS, Inc.,
and the Acquisition Agreement, dated as of December 30, 1998 among Ericsson
Inc., Tritel Finance, Inc. and Tritel Communications, Inc. do not apply to or
limit or bind TeleCorp or its Subsidiaries beyond December 30, 2005 and May 1,
2003, respectively, and shall not be or purport to be applicable to, be
enforceable against, limit or bind AWS or any of Subsidiaries (other than the
Surviving Corporation) at any time.
(d) Section 2.7(d) of the TeleCorp Disclosure Schedule contains a true and
accurate list of (i) all contracts, arrangements, agreements or understandings
that are of the type that are required to be disclosed or described pursuant to
Item 404 of Regulation S-K, other than those that are filed as an exhibit to a
TeleCorp SEC Report filed prior to the date hereof, and (ii) all agreements or
understandings, whether written or oral, giving any Person the right to require
TeleCorp to register shares of capital stock or to participate in any such
registration.
2.8 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, or (ii)
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 clause (ii), 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.
2.9 SEC Filings; Financial Statements.
(a) TeleCorp has timely and accurately filed all forms, reports, schedules,
statements and documents required to be filed by it with the SEC since October
13, 1999 (the "TeleCorp SEC Reports") pursuant to the federal securities Laws
and the SEC regulations promulgated thereunder. Each of TeleCorp's Subsidiaries
that are obligated to file with the SEC has timely and accurately filed all
forms, reports, schedules, statements and documents required to be filed by it
with the SEC since October 13, 1999 (the "TeleCorp Subsidiary SEC Reports")
pursuant to the federal securities laws and the SEC regulations promulgated
thereunder. The TeleCorp SEC Reports and TeleCorp Subsidiary SEC Reports were
(i) 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 (ii)
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.
(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 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 and accurately 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.
A-13
2.10 Licenses and Authorizations.
(a) TeleCorp and its Subsidiaries hold all licenses, permits, certificates,
franchises, ordinances, registrations, or other rights, applications and
authorizations granted or issued by any Governmental Authority, including,
without limitation, the FCC or any state authority asserting jurisdiction 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
AWS a true, complete and correct list of the TeleCorp Authorizations issued by
the FCC.
(b) TeleCorp has previously made available to AWS 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"); and (ii) each FCC
permit and FCC license which is not a TeleCorp Authorization but in which
TeleCorp, any of its Subsidiaries or any of its Affiliates, directly or
indirectly, holds an interest, including as a stakeholder in the licensee
(collectively, the "Indirect TeleCorp Authorizations"). The TeleCorp
Authorizations, the TeleCorp FCC Applications, and the Indirect TeleCorp
Authorizations are the only 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) Except as disclosed in Section 2.10(c) of the TeleCorp Disclosure
Schedule:
(i) The TeleCorp Authorizations and the Indirect TeleCorp
Authorizations are in full force and effect and have not been pledged or
otherwise encumbered (except for such pledges and encumbrances securing the
TeleCorp Licensee's indebtedness to the FCC and/or the United States
Department of Treasury ("USDT"), as the case may be), assigned, suspended
or modified in any material respect (except as a result of FCC rule changes
applicable to the 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.
(ii) 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.
(iii) 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 material adverse modification of any
TeleCorp Authorization.
(d) Except as disclosed in Section 2.10(c) of the TeleCorp Disclosure
Schedule:
(i) Each wholly-owned Subsidiary of TeleCorp set forth in Section
2.10(d) of the TeleCorp Disclosure Schedule hereto (a "TeleCorp Licensee")
holds the FCC licenses (each an "FCC License" and collectively, the "FCC
Licenses") set forth below its name on such same schedule. Such TeleCorp
Licensee has good and marketable title, free and clear of any Liens, to
such FCC Licenses,
A-14
except for such liens securing the TeleCorp Licensee's indebtedness to the
FCC and/or USDT, as the case may be, not in excess of $140 million in the
aggregate.
(ii) No person or entity other than the applicable TeleCorp Licensee
and the FCC has any right, claim or interest in or to any of the FCC
Licenses.
(iii) The FCC Licenses have been validly issued in the name of such
TeleCorp Licensee, are in full force and effect, have been granted by Final
Order and TeleCorp has no reason to believe that such licenses will not
remain in full force and effect until the respective expiration dates set
forth on the FCC Licenses.
(iv) Except for proceedings affecting the PCS or wireless
communications services industry generally, there is not pending, nor to
the knowledge of TeleCorp, threatened against TeleCorp or any TeleCorp
Licensee or against any of the TeleCorp Licenses, nor is TeleCorp aware of
any basis for, any application, action, petition, objection or other
pleading, or any proceeding with the FCC or any other Governmental
Authority which questions or contests the validity of, or seeks the
revocation, forfeiture, non-renewal or suspension of, any of the FCC
Licenses, which seeks the imposition of any modification or amendment with
respect thereto, or which would adversely affect the ability of AWS to
employ any of the FCC Licenses (other than those licenses set forth in
Section 2.25(b) of the TeleCorp Disclosure Schedule) in its business after
the Closing Date or seeks the payment of a fine, sanction, penalty, damages
or contribution in connection with the use of any of the FCC Licenses.
(v) Each of the FCC Licenses is unimpaired by any acts or omissions of
TeleCorp or any TeleCorp Licensee.
(vi) All material documents required to be filed or fees to be paid at
any time by TeleCorp or the applicable TeleCorp Licensee with the FCC with
respect to any of the FCC Licenses have been filed or payments made or the
time period for such filing or payment has not lapsed. All such documents
filed since the date that each of the FCC Licenses was issued or
transferred to the applicable TeleCorp Licensee are true and correct in all
material respects.
(vii) None of the FCC Licenses is subject to any conditions other than
those generally applicable to the industry at large, those imposed by FCC
Law generally upon a specific class of FCC licenses or licensees, and those
appearing on the face of the applicable FCC License.
(viii) TeleCorp and each TeleCorp Licensee complies in all material
respects with all pertinent aspects of FCC Law, including without
limitation (1) the rules, regulations and policies pertaining to
eligibility to hold broadband PCS licenses in general, and the applicable
FCC Licenses in particular, including where applicable, Section 24.709 of
the FCC's rules, (2) the rules, regulations and policies governing the CMRS
spectrum cap and restricting foreign ownership of radio licenses, (3) the
Regulations and policies relating to wireless E911 (as set forth in Section
20.18 of the FCC's CMRS rules), and (4) the rules, regulations and policies
relating to implementation of Communications Assistance for Law Enforcement
Act.
(ix) TeleCorp and each TeleCorp Licensee is in compliance with all
terms and conditions of, and all of its obligations under, the applicable
FCC Licenses. Without limiting the foregoing, TeleCorp or the applicable
TeleCorp Licensee, where applicable, has made all installment payments due
in connection with the applicable FCC Licenses to the FCC and/or the USDT,
as the case may be, on a timely basis and has not been assessed any unpaid
late payment fees or any unpaid additional interest charges for failing to
make installment payments to the FCC or USDT.
(x) No person or entity other than TeleCorp or the applicable TeleCorp
Licensee is authorized to use the spectrum described in Section 2.10(d) of
the TeleCorp Disclosure Schedule.
(e) Except for the approvals contemplated by Section 2.6, no permit,
consent, approval, authorization, qualification or registration of, or
declaration to or filing with, any Governmental Authority is required to be made
or obtained by TeleCorp or any of its Subsidiaries in connection with the
transfer or deemed transfer of the FCC Licenses and Authorizations as a result
of the consummation of the transactions
A-15
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.
2.11 No Violation of Law. Except as disclosed in Section 2.11 of the
TeleCorp Disclosure Schedule, the business of TeleCorp and its Subsidiaries is
not currently conducted nor has such business ever been conducted in violation
of any Laws, except for possible violations none of which, individually or in
the aggregate, could have a TeleCorp Material Adverse Effect. Except as
disclosed in TeleCorp SEC Reports filed prior to the date of this Agreement,
and, with respect to the FCC, as disclosed in Section 2.11 of the TeleCorp
Disclosure Schedule, 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.
2.12 Absence of Certain Changes or Events.
(a) Since December 31, 2000, except as expressly disclosed in the TeleCorp
SEC Reports filed prior to the date hereof (other than in the "risk factors" or
similar section of any such TeleCorp SEC Report), (i) 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,
(ii) 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 December 31, 2000, (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 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.
2.13 Absence of Liabilities. TeleCorp and its Subsidiaries do not have any
liabilities or obligations of any nature (whether absolute, accrued, fixed,
contingent or otherwise) other than (i) liabilities or obligations (1) which are
accrued or reserved against in the consolidated financial statements of TeleCorp
and its Subsidiaries included in TeleCorp's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 or reflected in the notes thereto or (2)
which were incurred after December 31, 2000 in the Ordinary Course of Business,
(ii) liabilities or obligations which have been discharged or paid in full prior
to the date hereof in the Ordinary Course of Business, (iii) liabilities and
obligations which are of a nature not required to be reflected in the
consolidated financial statements of TeleCorp and its Subsidiaries prepared in
accordance with GAAP.
2.14 Absence of Litigation. Except as disclosed in the TeleCorp SEC
Reports filed prior to the date of this Agreement, there is no Litigation
pending or, to the knowledge of TeleCorp, threatened against
A-16
TeleCorp or any of its Subsidiaries, or any properties or rights of TeleCorp 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 TeleCorp Material Adverse Effect.
2.15 Employee Benefit Plans.
(a) TeleCorp has delivered to AWS 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 options, stock or other security purchase, stock or other security
appreciation right, 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 by 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") for the benefit of, or
relating to, any present or former employee, officer, director or consultant of
such entity, whether or not such plan is terminated (together, the "TeleCorp
Employee Plans").
(b) TeleCorp has delivered to AWS with respect to each TeleCorp Employee
Plan true, complete and correct copies of each of the following, if applicable:
(i) the most recent summary plan description and any subsequent summary of
material modifications, (ii) any related trust, insurance policy or other
funding vehicle or contract providing for benefits, (iii) the two most recently
filed Form 5500 series Annual Reports with all schedules, (iv) the most recent
determination letter from the IRS, (v) the most recent annual financial report
and (vi) the most recent annual actuarial report. 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 AWS or the Surviving Corporation, as the
case may be.
(c) Except as specifically provided in the foregoing documents delivered to
AWS, there are no amendments to any TeleCorp Employee Plan that have been
adopted or approved nor has TeleCorp or any of its Subsidiaries undertaken or
committed to make any such amendments or to adopt or approve any new TeleCorp
Employee Plan.
(d) (i) None of TeleCorp and its Subsidiaries nor, to the knowledge of
TeleCorp, any other person, including any fiduciary, has engaged in any
"prohibited transaction" (as defined in Section 4975 of the Code or Section 406
of ERISA), which could subject TeleCorp, any of its ERISA Affiliates or any
person that TeleCorp or any of its ERISA Affiliates has an obligation to
indemnify, to any material tax or penalty imposed under Section 4975 of the Code
or Section 502 of ERISA; (ii) 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; (iii) 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 each TeleCorp ERISA Affiliate 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; (iv) 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 is so
A-17
qualified or exempt, has received or is the subject of a favorable determination
or opinion letter from the IRS and nothing has occurred which may be expected to
cause the loss of such qualification or exemption; (v) 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; (vi) 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; and (vii)
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.
(e) 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.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting,
funding or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer or director of TeleCorp or any of its
Subsidiaries, or result in any limitation on the right of TeleCorp or any of its
Subsidiaries to amend, merge, terminate or receive a reversion of assets from
any TeleCorp Employee Plan or related trust. Without limiting the generality of
the foregoing, no amount paid or payable (whether in cash, property, or in the
form of benefits) by TeleCorp or any of its Subsidiaries in connection with the
transactions contemplated hereby (either solely as a result thereof or as a
result of such transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(g) 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.
(h) 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 would
constitute compensation in excess of the limitation set forth in Section 162(m)
of the Code.
2.16 Employment and Labor Matters. There are no controversies pending or,
to TeleCorp's knowledge, threatened, between TeleCorp or any of its Subsidiaries
and any of their respective employees; neither TeleCorp nor any of its
Subsidiaries is a party to any collective bargaining agreement or other
A-18
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 December 31, 2000, 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 as a result of any acts of TeleCorp taken in
connection with the transactions contemplated hereby. 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.
2.17 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 AWS Common Stock to be issued in the Merger will be registered
with the SEC (including any amendments or supplements thereto, 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 special meeting of the stockholders of TeleCorp
in connection with the Merger (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 TeleCorp for inclusion in the
proxy statement/ prospectus to be sent to the stockholders of TeleCorp in
connection with the TeleCorp Stockholders Meeting (such proxy
statement/prospectus, as amended or supplemented, is referred to herein as the
"Proxy Statement") will, on the date the Proxy Statement is first mailed to the
stockholders of TeleCorp and at the time of 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 TeleCorp or any of its Affiliates,
officers or directors should be discovered by TeleCorp which should be or should
have been set forth in an amendment or supplement to the Registration Statement
or an amendment or supplement to the Proxy Statement, TeleCorp shall promptly
inform AWS of such event. The 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,
TeleCorp makes no representation or warranty with respect to any information
supplied by AWS which is contained in the Registration Statement or Proxy
Statement.
2.18 Microwave Clearing. Section 2.18 of the TeleCorp Disclosure Schedule
lists each of the microwave relocation agreements relating to the FCC Licenses
(collectively, the "Relocation Agreements"). With respect to each Relocation
Agreement, Section 2.18 of the TeleCorp Disclosure Schedule sets forth (i) the
number of links being cleared, (ii) the projected timing of completion, (iii)
the projected costs related to each such link and (iv) the costs incurred to
date with respect to each such link.
2.19 Title to Assets; Leases. Each of TeleCorp and its Subsidiaries has
good and valid title to all of their owned properties and assets. 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 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.
TeleCorp has all permits or licenses necessary to use its leased property.
2.20 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,
A-19
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) on or before the Effective Time 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 or will be timely filed, and all
such Tax Returns are or will be 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 on or before the Effective Time by or with
respect to TeleCorp and each of its Subsidiaries have been or will be timely
paid, or in the case of Taxes due (taking into account extensions) prior to June
30, 2001, are adequately reserved for, including for claims yet unasserted for
items that have been assessed in the past (other than a reserve for deferred
Taxes established to reflect timing differences between book and Tax treatment)
in accordance with GAAP on TeleCorp's balance sheet filed with Form 10-Q for the
quarter ending June 30, 2001 and will be 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 balance sheet as
of the date of the Effective Time, except to the extent that any failure to pay
or reserve for such Taxes would not, individually or in the aggregate,
reasonably be expected to have a TeleCorp Material Adverse Effect.
(d) There are no audits, disputes or administrative proceedings pending, or
claims asserted in writing, for Taxes or assessments for which TeleCorp or any
of its Subsidiaries is responsible, nor has TeleCorp or any of its Subsidiaries
been requested to give or has been granted any currently effective waivers
extending the statutory period of limitation applicable to any Federal, state,
local or foreign income Tax return for which TeleCorp is responsible for any
period which audits, disputes, administrative proceedings, claims, assessments
or waivers would reasonably be expected, individually or in the aggregate, to
have a TeleCorp Material Adverse Effect. All material 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 or accrued.
(e) Other than with respect to its Subsidiaries, TeleCorp is not and has
never been (nor does TeleCorp have any liability for 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 that will be effective as of the Effective Time or that will have
further effect for any taxable year (whether the current year, a future year or
a past year) or is liable for the Taxes of any other party under Treasury
Regulations Section 1.1502-6 (or similar provision of state, local or foreign
law), as transferee or successor, by contract, or otherwise.
(f) 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.
(g) Each of TeleCorp and its Subsidiaries has complied in substantially all
respects with all applicable Laws relating to the payment and withholding of
Taxes (including, without limitation,
A-20
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, withheld and paid over to the proper Governmental
Authorities substantially all Taxes required to have been withheld and paid over
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party. Each of TeleCorp and its
Subsidiaries have duly and timely collected and remitted to the proper
Governmental Authorities all material Taxes required to be collected from
customers. The federal and state universal service charges are passed through to
customers and as of the Closing Date, the amount collected from customers will
not be materially different from the amounts paid or payable to the relevant
governmental authorities.
(h) 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
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 any other provisions of Federal, state, local or foreign tax law.
2.21 Environmental Matters. Except as disclosed in the TeleCorp SEC
Reports filed prior to the date of this Agreement, and 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, to the knowledge of TeleCorp, 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, to the
knowledge of TeleCorp, 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 or any Regulation,
code, plan, Order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder, except as would not individually or in the
aggregate, reasonably be expected to have a TeleCorp Material Adverse Effect.
2.22 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 in use or 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").
A-21
(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 or otherwise
cause the termination of or limit 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 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, trademarks, service marks (or any applications or
registrations therefor) and copyrights which are held by TeleCorp or any of its
Subsidiaries, and which are material to the business of TeleCorp and its
Subsidiaries, are current, in effect, valid and subsisting. TeleCorp (i) has not
been sued in any suit, action or proceeding or received any demands or claims
that are still pending 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.
(d) Section 2.22(d) of the TeleCorp Disclosure Schedule sets forth a true
and accurate list of all of the agreements, contracts and licenses that are
related to, affect, or give rise to any rights or obligation of TeleCorp or any
of its subsidiaries with respect to, the "SunCom" trademark, and related trade
names, service names, copyrights and marks, including, without limitation, as
relate to Affiliate License Co., LLC or any other entity through which TeleCorp
or any of its Subsidiaries holds any such rights.
2.23 No Restrictions on the Merger; Takeover Statutes. The Board of
Directors of TeleCorp has taken the necessary action to render Section 203 of
the DGCL, and any other potentially applicable anti-takeover or similar statute
or regulation or provision of the Certificate of Incorporation or By-laws, or
other organizational or constitutive document or governing instruments of
TeleCorp or any of its Subsidiaries or any TeleCorp Material Agreement to which
any of them is a party, inapplicable to this Agreement and the Voting Agreements
and the transactions contemplated hereby and thereby.
2.24 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 Merger or the combination
of the Merger and Follow-On Merger, as applicable, from qualifying as a tax-
free reorganization under Section 368(a) of the Code.
2.25 Build-out Requirements. Other than as set forth in Section 2.10(c)of
the TeleCorp Disclosure Schedule, where the five-year deadline for satisfaction
of the minimum build-out requirement under 47 C.F.R. 24.203 has passed, TeleCorp
has satisfied the build-out requirement and has so notified the FCC in a timely
manner. Furthermore, other than for those licenses set forth in Section 2.25(b)
of the TeleCorp Disclosure Schedule, TeleCorp has filed notifications of
satisfaction of minimum build-out requirements for all C- and F- Block
designated entity licenses that are not otherwise freely transferable to AWS.
TeleCorp has not received from the FCC any notice indicating that any FCC
License with respect to which TeleCorp has submitted to the FCC a minimum
build-out certification failed or fails to satisfy the minimum build-out
requirement in respect of such FCC License. Other than as set forth in Section
2.10(c) of the TeleCorp Disclosure Schedule, TeleCorp is not in breach or
otherwise in violation of any FCC build-out requirement relating to any FCC
License. On or prior to the date hereof, TeleCorp has entered into the agreement
(the "Transfer Agreement"), attached hereto as Exhibit F, to transfer control
of, assign, or otherwise convey an interest in, on or prior to Closing, the FCC
Licenses set forth in Section 2.25(b) of the TeleCorp Disclosure Schedule.
2.26 Brokers. Except for JP Morgan Chase & Co. and Lehman Bros. Inc., 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 AWS a true,
A-22
complete and correct copy of all agreements between TeleCorp and JP Morgan Chase
& Co. and Lehman Bros. Inc. pursuant to which such firms would be entitled to
any payment relating to the transactions contemplated hereunder. The total fees
and expenses of JP Morgan Chase & Co. and Lehman Bros. Inc. relating to the
transactions contemplated hereunder, shall not exceed the amount set forth in
Section 2.26 of the TeleCorp Disclosure Schedule.
2.27 Opinion of Financial Advisor. TeleCorp has received the written
opinions of its financial advisors, Lehman Bros. Inc. and J.P. Morgan Securities
Inc., to the effect that, in their opinion, (i) the Exchange Ratio applicable to
each class of TeleCorp Common Stock (other than TeleCorp Voting Preference
Common Stock) is fair, from a financial point of view, to the holders (other
than AWS) of such class of stock and (ii) the Exchange Ratio applicable to each
of the TeleCorp Series C Preferred Stock and TeleCorp Series E Preferred Stock
is fair, from a financial point of view, to the holders (other than AWS) of such
stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AWS
Except as set forth in the AWS Disclosure Schedule previously delivered to
TeleCorp concurrently herewith (the "AWS Disclosure Schedule"), AWS, on behalf
of itself and Merger Sub, represents and warrants to TeleCorp that the
statements contained in this Article III are true, complete and correct. The AWS
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. As used in this Agreement, an "AWS Material Adverse Effect"
means any change, event, occurrence, effect or state of facts (a) that is
materially adverse to or materially impairs (i) the business, assets (including
intangible assets), liabilities, financial condition or results of operations of
AWS and its Subsidiaries, taken as a whole, or (ii) the ability of AWS to
perform its obligations under this Agreement, (b) prevents consummation of any
of the transactions contemplated by this Agreement; provided that none of the
following shall be considered a Material Adverse Effect except to the extent AWS
is affected in a materially disproportionate manner as compared to other
wireless telecommunications service providers: (x) changes in general economic
conditions in the United States, (y) conditions affecting the wireless
telecommunications services industry generally and (z) any changes resulting
from announcement of the Merger.
3.1 Organization and Qualification; Subsidiaries.
(a) AWS 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 carry on its business as it is now
being conducted. AWS 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 an AWS Material Adverse Effect.
(b) Each Subsidiary of AWS 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
AWS 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 an AWS Material Adverse Effect. Merger Sub has not engaged in any
activities other than in connection with the fulfillment of its or AWS's
obligations under this Agreement.
3.2 Certificate of Incorporation; By-laws. AWS has heretofore made
available to TeleCorp a true, complete and correct copy of its and Merger Sub's
respective Certificate of Incorporation and By-laws (or
A-23
other equivalent organizational or constitutive documents), each as amended or
restated to date. Each such Certificate of Incorporation and By-laws of AWS and
Merger Sub are in full force and effect. Neither AWS nor Merger Sub 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 AWS consists of: 10,000,000,000 shares of AWS
Common Stock and 1,000,000,000 shares of Preferred Stock, $0.01 par value per
share.
(b) As of September 28, 2001: (i) 2,529,907,793 shares of AWS Common Stock
were issued and outstanding, and (ii) no shares of Preferred Stock, $0.01 par
value per share, of AWS were issued and outstanding; and as of the close of
business on September 28, 2001 there were outstanding options to acquire
177,367,550 shares of AWS Common Stock and outstanding warrants (all of which
warrants had an exercise price on such date of $35.00 per share of AWS Common
Stock) to acquire 41,784,273 shares of AWS Common Stock. Except as set forth
above, there are no other outstanding rights, options, warrants, conversion
rights, or agreements that obligate AWS to issue or sell any shares of AWS
Common Stock. None of the outstanding shares of AWS 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) All outstanding shares of AWS Common Stock are duly authorized, validly
issued (including pursuant to the Securities Act), fully paid and non-assessable
and not subject to any kind of preemptive (or similar) rights.
(d) As of October 7, 2001, AWS and its Subsidiaries own: (i) 18,288,835
shares of TeleCorp Class A Voting Common Stock, (ii) no shares of TeleCorp Class
C Common Stock, (iii) 20,902 shares of TeleCorp Class D Common Stock, (iv) no
shares of TeleCorp Class E Common Stock, (v) 2,309.31 shares of TeleCorp Class F
Common Stock, (vi) 97,472.84 shares of TeleCorp Series A Preferred Stock, (vii)
90,688.33 shares of TeleCorp Series B Preferred Stock, (viii) 3,070.58 shares of
TeleCorp Series C Preferred Stock, (ix) 49,416.98 shares of TeleCorp Series D
Preferred Stock, (x) no shares of TeleCorp Series E Preferred Stock, (xi)
14,912,778 shares of TeleCorp Series F Preferred Stock and (xii) 46,374 shares
of TeleCorp Series G Preferred Stock.
3.4 Authority; Enforceability. AWS has all necessary corporate power and
authority to execute and deliver this Agreement and the Stockholders Agreement
Amendment and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by AWS of this Agreement and the Stockholders Agreement Amendment, the
performance of its obligations hereunder and thereunder, and the consummation by
AWS 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 AWS are necessary to authorize this Agreement or the Stockholders
Agreement Amendment or to consummate the transactions so contemplated. Each of
this Agreement and the Stockholders Agreement Amendment has been duly and
validly executed and delivered by AWS and, assuming the due authorization,
execution and delivery thereof by all other parties to such agreements,
constitutes a legal, valid and binding obligation of AWS in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar
laws relating to or affecting creditors generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or law).
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery by each of AWS and Merger Sub of this
Agreement and the Stockholders Agreement Amendment do not, and the performance
of this Agreement and the Stockholders Agreement Amendment will not, (i)
conflict with or violate the Certificate of Incorporation or By-laws or other
equivalent organizational or constitutive documents of AWS or Merger Sub, (ii)
conflict with or violate any Law, Regulation or Order in each case applicable to
AWS or Merger Sub or by which any of their respective properties is bound or
affected, or (iii) result in any breach or violation
A-24
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair AWS's or Merger Sub's 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 AWS or Merger Sub
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which AWS or
Merger Sub is a party or by which AWS or Merger Sub 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 individually or in the aggregate, reasonably be
expected to have an AWS Material Adverse Effect or prevent or materially impair
or delay the consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery by AWS of this Agreement and the
Stockholders Agreement Amendment do not, and the performance of this Agreement
and the and Stockholders Agreement Amendment will not, require AWS 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 Certificate 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 an AWS Material Adverse Effect. The approval or authorization
required to be obtained from the FCC pursuant to the Communications Act and/or
the rules and regulations of the FCC, are referred to herein as the "Required
AWS Governmental Approvals" and, together with the Required TeleCorp
Governmental Approvals, as the "Required Governmental Approvals").
3.6 Compliance. Except as disclosed in the AWS SEC Reports filed prior to
the date of this Agreement, each of AWS and Merger Sub 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 or
constitutive documents or (ii) any material 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 an AWS Material
Adverse Effect.
3.7 SEC Filings; Financial Statements.
(a) AWS has timely filed all forms, reports, schedules, statements and
documents required to be filed with the SEC since July 9, 2001 (such filings,
together with Amendment No. 4 to Registration Statement on Form S-1 dated July
6, 2001, collectively, the "AWS SEC Reports") pursuant to the Federal securities
Laws and the SEC regulations promulgated thereunder. The AWS 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.
(b) Each of the audited and unaudited consolidated financial statements
(including, in each case, any related notes and schedules thereto) contained in
the AWS 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 AWS and its Subsidiaries as at
the respective dates thereof and the
A-25
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.
3.8 Licenses and Authorizations. Except as disclosed in the AWS SEC
Reports filed prior to the date of this Agreement, AWS 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 AWS and 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
"AWS 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 an AWS Material Adverse Effect.
3.9 No Violation of Law. Except as set forth in the AWS SEC Reports filed
prior to the date of this Agreement, neither AWS 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 an AWS Material Adverse Effect, nor has AWS or any of its
Subsidiaries been advised that any Governmental Authority is considering issuing
or requesting any of the foregoing.
3.10 Absence of Litigation. Except as disclosed in the AWS SEC Reports
filed prior to the date of this Agreement, there is no Litigation pending or, to
the knowledge of AWS, threatened against AWS or Merger Sub, or any properties or
rights of AWS or Merger Sub, before or subject to any Court or Governmental
Authority which, individually or in the aggregate, has had, or would reasonably
be expected to have, an AWS Material Adverse Effect.
3.11 Registration Statement; Proxy Statement/Prospectus. None of the
information supplied by AWS 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 date of 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 AWS for inclusion in the Proxy Statement in connection
with the TeleCorp Stockholders' Meeting will, on the date the Proxy Statement is
first mailed to the stockholders of TeleCorp and at the date of 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 AWS or any of its
Affiliates, officers or directors should be discovered by AWS which should be
set forth in an amendment or supplement to the Registration Statement or an
amendment or supplement to the Proxy Statement, AWS shall promptly inform
TeleCorp. Notwithstanding the foregoing, AWS makes no representation or warranty
with respect to any information supplied by TeleCorp which is contained in the
Registration Statement or Proxy Statement.
3.12 Taxes.
(a) All Federal, state, local and foreign Tax Returns required to be filed
(taking into account extensions) on or before the Effective Time by or on behalf
of AWS, Merger Sub, and each affiliated, combined, consolidated or unitary group
for Tax purposes of which AWS or Merger Sub is or has been a member have been or
will be timely filed, and all such Tax Returns are or will be 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 an AWS Material Adverse Effect.
(b) All Taxes due and payable on or before the Effective Time by or with
respect to AWS and Merger Sub have been or will be timely paid, or, in the case
of Taxes due (taking into account
A-26
extensions) prior to June 30, 2001, are adequately reserved for including for
claims yet unasserted for items that have been assessed in the past (other than
a reserve for deferred Taxes established to reflect timing differences between
book and Tax treatment) in accordance with GAAP on AWS's balance sheet filed
with Form 10-Q for the quarter ending June 30, 2001 and will be 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
AWS's balance sheet as of the date of the Effective Time, except to the extent
that any failure to pay or reserve for such Taxes would not, individually or in
the aggregate, reasonably be expected to have an AWS Material Adverse Effect.
(c) There are no audits, disputes pending or administrative proceedings, or
claims asserted in writing, for Taxes or assessments for which AWS or Merger Sub
is responsible, nor has AWS or Merger Sub been requested to give or has been
granted any currently effective waivers extending the statutory period of
limitation applicable to any Federal, state, local or foreign income Tax return
for which AWS is responsible for any period which audits, disputes,
administrative proceedings, claims, assessments or waivers would reasonably be
expected, individually or in the aggregate, to have an AWS Material Adverse
Effect. All assessments for Taxes due and owing by or with respect to AWS and
Merger Sub with respect to completed and settled examinations or concluded
litigation have been paid or accrued.
(d) None of AWS or any of its Subsidiaries shall be required to include in
a taxable period ending after the Effective Time an amount of 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 cash method of
accounting or Section 481 of the Code or any other provisions of Federal, state,
local or foreign tax law, if any such inclusion of income would reasonably be
expected, individually or in the aggregate, to have an AWS Material Adverse
Effect.
(e) AWS has not distributed the stock of a "controlled corporation" as
defined in Section 355(a) of the Code, and other than pursuant to the
distribution by AWS's former parent on July 9, 2001 (the "AWS Spin-Off"), AWS
stock has not been distributed in a transaction intended to qualify under
section 355 of the Code. The Merger is not part of a plan or series of related
transactions together with the Spin-Off pursuant to which one or more persons
acquire directly or indirectly AWS stock representing a 50% or greater interest
in AWS.
3.13 Tax Matters. AWS 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 Merger or the combination
of the Merger and the Follow-On Merger, as applicable, from qualifying as a
tax-free reorganization under Section 368(a) of the Code.
3.14 Absence of Changes. Since July 9, 2001, except as expressly disclosed
in the AWS SEC Reports filed prior to the date hereof (other than in the "risk
factors" or similar section of any such AWS SEC Report), (i) AWS and its
Subsidiaries have conducted their businesses only in the Ordinary Course of
Business and (ii) there has not been any change, event, development, damage or
circumstance affecting AWS or any of its Subsidiaries which, individually or in
the aggregate, has had, or could reasonably be expected to have, an AWS Material
Adverse Effect.
3.15 Brokers. Except for Merrill Lynch & Co., 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 AWS.
3.16 Severance Policy; Letter Agreement. TeleCorp has adopted the Change
of Control Severance Policy in the form attached hereto as Exhibit G, and has
entered into the letter agreement with TeleCorp Management Corp. in the form
attached hereto as Exhibit H.
A-27
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Access to Information; Confidentiality. 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 VI or the Closing Date
(in either case, the "Interim Period") and subject to applicable law, (i) it
will give or cause to be given to AWS and its counsel, financial advisors,
auditors and other authorized representatives (collectively, "AWS
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 AWS may from time to time reasonably request, (ii) it will
furnish or cause to be furnished to AWS and the AWS Representatives such
financial and operating data and other information as it may from time to time
reasonably request and (iii) it will provide AWS and the AWS Representatives
such access to the representatives, officers and employees of it and its
Subsidiaries as AWS may reasonably request. TeleCorp shall not be required to
provide access to or disclose information where such access of disclosure would
contravene any applicable Law. AWS agrees that it will, and will cause the AWS
Representatives to, continue to treat all information obtained hereunder as
"Evaluation Material" under the Confidentiality Agreement, dated October 2, 2001
("Confidentiality Agreement").
4.2 Conduct of Business Pending the Closing Date.
(a) TeleCorp agrees and hereby covenants that, except as permitted,
required or contemplated by this Agreement or as described in clear detail in
Section 4.2 of the Company Disclosure Schedule or as otherwise consented to in
writing by AWS during the Interim Period:
(i) it shall (x) cause its business (including that of its
Subsidiaries) to be conducted only in the Ordinary Course of Business
consistent with reasonably anticipated subscriber growth and in compliance
with applicable Laws and (y) use all reasonable efforts to preserve intact
TeleCorp's business organization, keep available the services of its
employees and preserve the current relationships with its customers,
suppliers and other persons with which it has significant business
relations; and
(ii) without limiting the foregoing, 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) (1) merge, consolidate or engage in a similar business
combination or (2) make any disposition of any direct or indirect
ownership interest in or assets comprising any tower or wireless system
or part thereof or cell site or any other local service or access system
(including any shares of capital stock of any Subsidiary holding any
such interest) or other investment (other than cash equivalents) or
material business enterprise or operation (except for the replacement or
upgrade of assets, or disposition of redundant assets, in each case in
the Ordinary Course of Business), except sales of individual assets
(other than inventory) in the Ordinary Course of Business and sales of
licenses to the extent permitted by Section 4.2(a)(ii)(G)(4);
(C) issue or sell any shares of its capital stock or other equity
or equity-based interests in or securities convertible into or
exchangeable for such shares or equity interests, except for (A) the
issuance of additional options to purchase TeleCorp Class A Voting
Common Stock pursuant to the TeleCorp Option Plans in a manner and
amount that is consistent as to timing and amount with the timing and
amount of such grants made under such plans during the 12 months ending
October 5, 2001 and in any case does not result in there being
outstanding options to purchase more than 13,278,252 shares of TeleCorp
Class A Voting Stock (assuming, for purposes of this clause (A), that no
outstanding options are exercised), and provided that the consummation
of the transactions contemplated hereby shall not constitute a change of
control with respect to any of such options (except that any such
options held by participants in Titan's Change of Control Severance
Policy shall be subject to such accelerated vesting provisions as may be
provided in
A-28
such plan), and provided, further that the exercise price of such
options shall be no less than the fair market value of such shares on
the date of grant, and (B) the issuance of TeleCorp Class A Voting
Common Stock issuable upon exercise of the Outstanding TeleCorp Options
and any options granted in accordance with clause (A);
(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 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 and
required by existing arrangements;
(F) (1) establish, or increase compensation or benefits provided
under, any stay, bonus, incentive, insurance, severance, termination,
change of control, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards, restricted
stock awards or similar instruments), stock purchase or other employee
benefit plan, program, policy, or agreement or arrangement or (2)
otherwise increase or accelerate the vesting or payment of the
compensation payable or the benefits provided or to become payable or
provided to any of its current or former directors, officers, employees,
consultants or service providers or those of any Subsidiary, or
otherwise pay any amounts not due such individual, (3) enter into any
new or amend any existing employment or consulting agreement with any
director, officer, employees, consultants or service provider or hire
retain the services of any such person if the compensation (base and
bonus) shall exceed $150,000 or (4) establish, adopt or enter into any
collective bargaining agreement, except in each of clauses (1) and (2),
as may be required to comply with applicable law or existing contractual
arrangements;
(G) (1) 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, (2) acquire any amount of assets of any of the
foregoing other than to the extent not prohibited by Section
4.2(a)(ii)(I) or (J), (3) enter into any joint venture, partnership or
similar arrangement or (4) acquire or dispose of any FCC Licenses
(except the acquisitions and swap of FCC Licenses set forth in Section
2.7(a)(ii) of the TeleCorp Disclosure Schedule);
(H) assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of, or make any loans or
advances to, any Person other than TeleCorp or a wholly-owned Subsidiary
of TeleCorp, other than FCC or USDT debt assumed in connection with the
license acquisitions permitted by Section 4.2(a)(ii)(G)(4) not in excess
of $10 million in the aggregate;
(I) make any capital expenditures that are not provided for in the
capital expenditure budget set forth in Section 4.2 of the TeleCorp
Disclosure Schedule;
(J) make a purchase commitment outside the Ordinary Course of
Business or materially in excess of the normal, ordinary and usual
requirements;
(K) change accounting methods, principles or practices, except
insofar as may be required by a change in GAAP;
(L) incur any indebtedness for borrowed money other than to the
extent permitted in Section 4.2(c);
(M) sell, assign, transfer or license any TeleCorp Intellectual
Property Rights, except in the Ordinary Course of Business;
A-29
(N) 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 Contracts or any
agreement, contract or understanding of the type referred to in 2.7(c)
and (d);
(O) 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 V of this Agreement not
being satisfied;
(P) make any material Tax election or enter into any settlement or
compromise of any material Tax liability except as required by a change
in applicable Law;
(Q) enter into any agreement, contract or arrangement that
materially limits or otherwise materially restricts TeleCorp or any of
its Subsidiaries or Affiliates or that would reasonably be expected,
after the Effective Time, to limit or restrict AWS or any of its
Subsidiaries or Affiliates, from engaging in the business of providing
wireless communication services or otherwise from engaging in any other
business, in each case at any time or in any geographic location;
(R) settle or compromise any action, suit or claim, in excess of $1
million individually, or $5 million in the aggregate, or enter into any
consent decree, injunction or similar restraint or form of equitable
relief in settlement of any action, suit or claim;
(S) enter into, or amend or waive any right under, any agreement
with any Affiliates of the Company (other than its Subsidiaries or AWS);
or
(T) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter otherwise prohibited by this
Section 4.2.
(b) Systems. TeleCorp shall use all reasonable efforts to complete the
conversion of its billing system to the Convergys system. Other than as provided
for in the immediately preceding sentence, TeleCorp shall not, without AWS's
advance written consent, materially change or replace its internal computer
systems and processes, including for those billing, data base management,
customer information and call processing.
(c) Additional Indebtedness. Section 4.2(a)(ii)(L) notwithstanding: (i)
TeleCorp and its Subsidiaries, may incur new or additional indebtedness under
agreements with Lucent Technologies, Inc. existing on the date hereof, (ii)
TeleCorp and its Subsidiaries may incur additional indebtedness for borrowed
money ("Additional Debt"), provided that (x) the total amount of such Additional
Debt incurred by TeleCorp and its Subsidiaries shall not exceed $250 million,
and (y) the terms of any such Additional Debt shall be reasonably within the
range of then-prevailing market terms, and (iii) TeleCorp and its Subsidiaries
may incur Additional Debt of up to $40 million from an expansion tranche under
its bank credit agreement existing on the date hereof.
(d) New Technology.
(i) During the Interim Period, neither TeleCorp nor any of its
Subsidiaries shall construct, build, deploy or purchase any equipment or
network relating to the provision of, or provide or offer any, services
that are so-called "2.5G" or "3G" or "Third Generation" services, as those
terms are commonly understood in the wireless communications industry or as
defined herein, including, with limitation, global system for mobile
communications/generalized packet radio service or "GSM"/"GPRS"
(collectively, "Advanced Services").
(ii) From and after the expiration or termination of any applicable
waiting period under the HSR Act, TeleCorp and AWS agree to discuss from
time to time at either party's request TeleCorp's short-and long-term plans
for the development and deployment of Advanced Services, including its
plans for commencing Advanced Services.
A-30
4.3 Registration Statement; Other Filings; Board Recommendations.
(a) As promptly as practicable after the execution of this Agreement,
TeleCorp and AWS will cooperate in preparing and will file with the SEC the
Registration Statement, which shall include the Proxy Statement. Each of
TeleCorp and AWS will respond jointly and promptly to any comments of the SEC,
will use all reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing,
and TeleCorp will cause the Proxy Statement to be mailed to its 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 AWS 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 Merger
and the transactions contemplated by this Agreement (the "Other Filings"). No
amendment or supplement to the Proxy Statement or the Registration Statement
will be made by TeleCorp or AWS, without the prior approval of the other party
except as required by Law, and then only to the extent necessary. Each of
TeleCorp and AWS 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 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 Proxy Statement, the
Merger or any Other Filing. Each of TeleCorp and AWS will cause all documents
that it is responsible for filing with the SEC or other regulatory authorities
under this Section 4.3(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 Proxy Statement, the Registration Statement or any Other
Filing, TeleCorp or AWS, 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, such amendment
or supplement.
(b) The Directors' Recommendations shall be included in the Proxy
Statement, except that the TeleCorp Board may, to the extent required, withdraw
or modify in a manner adverse to AWS such recommendation only if the TeleCorp
Board of Directors determines, in good faith, after consultation with, outside
legal counsel, that such action is required in order for the TeleCorp directors
to comply with their fiduciary duties to its stockholders under applicable law.
4.4 Meeting of TeleCorp Stockholders. 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 Merger as promptly as
practicable, for the purpose of obtaining the Required Stockholder Approval.
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
without AWS's consent. 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
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 Merger, subject to Section
4.3(b). 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 4.4 shall not be affected by
any withdrawal, amendment or modification of the TeleCorp Board of Directors'
recommendation of the Merger and this Agreement, and (ii) TeleCorp agrees that
its obligations under this Section 4.4 shall not be affected by the
commencement, public proposal, public disclosure or communication to TeleCorp of
any Acquisition Proposal.
A-31
4.5 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
VI, TeleCorp shall not, nor shall TeleCorp permit any of their Subsidiaries to,
nor shall TeleCorp authorize or permit any of its officers, directors or
employees to, and shall use its reasonable best efforts to cause any investment
banker, financial advisor, attorney, accountant, or other representatives
retained by them or any of their respective Subsidiaries not to (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 any of
its Subsidiaries to any person or entity relating to, any Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent
TeleCorp or its Board of Directors from, (A) prior to receipt of the Required
Stockholder Approval, 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 if and only to the
extent that (1) the Company is not then in breach of its obligations under this
Section 4.5(a), (2) the Board of Directors of TeleCorp believes in good faith
(after consultation with its financial advisors) that such Acquisition Proposal
constitutes or may reasonably be expected to result in a Superior Proposal and
the Board of Directors of TeleCorp determines in good faith after consultation
with its outside legal counsel that failure to take such action may constitute a
breach of the Board of Directors' fiduciary duties to its stockholders under
applicable law and (3) prior to furnishing such nonpublic 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
confidentiality agreement with terms no less restrictive than those contained in
the Confidentiality Agreement or (B) complying with Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act with regard to an Acquisition Proposal.
(b) Upon receiving an Acquisition Proposal, TeleCorp will promptly notify
AWS (which notice shall be provided orally and in writing and shall identify the
Person making the Acquisition Proposal), after receipt of any Acquisition
Proposal or any amendment or change in any previously received Acquisition
Proposal, or any request for nonpublic information relating to TeleCorp or any
Subsidiary of TeleCorp or for access to the properties, books or records of
TeleCorp or any Subsidiary of TeleCorp by any Person that has made, or to
TeleCorp's knowledge may be considering making, an Acquisition Proposal.
TeleCorp shall, and shall cause its Subsidiaries to, immediately cease and cause
to be terminated, and use best efforts to cause its officers, directors,
employees, investment bankers, consultants, attorneys, accountants, agents and
other representatives to, immediately cease and cause to be terminated, all
discussions and negotiations, if any, that have taken place prior to the date
hereof with any Persons with respect to any Acquisition Proposal and shall
request the return or destruction of all confidential information provided to
any such Person.
(c) TeleCorp (i) agrees not to release any Person 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.
(d) For purposes of this Agreement, "Acquisition Proposal" means any offer
or proposal for, or any indication of interest in, any (i) direct or indirect
acquisition or purchase of a business or asset of TeleCorp or any of its
Subsidiaries that constitutes 15% or more of the net revenues, net income or
assets of TeleCorp and its Subsidiaries, taken as a whole; (ii) direct or
indirect acquisition or purchase of 15% or more of any class of equity
securities, or 15% of the voting power, of TeleCorp or any of its Subsidiaries
whose business constitutes 15% or more of the net revenues, net income or assets
of TeleCorp and its Subsidiaries, taken as a whole; (iii) tender offer or
exchange offer that, if consummated, would result in any Person beneficially
owning 15% or more of any class of equity securities, or 15% of the voting
power, of TeleCorp or any of its Subsidiaries whose business constitutes 15% or
more of the net revenues, net income or assets of TeleCorp and its Subsidiaries,
taken as a whole; or (iv) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
TeleCorp or any of its
A-32
Subsidiaries whose business constitutes 15% or more of the net revenue, net
income or assets of TeleCorp and its Subsidiaries, taken as a whole, other than
the transactions contemplated by this Agreement. For purposes of this Agreement,
"Superior Proposal" means any bona fide written Acquisition Proposal obtained
not in breach of this Section 4.5 for or in respect of all of the outstanding
TeleCorp Capital Stock, on terms that the Board of Directors of TeleCorp
determines in its good faith judgment (after consultation with its financial
advisors and taking into account all the terms and conditions of the Acquisition
Proposal and this Agreement deemed relevant by such Board of Directors,
including any break-up fees, expense reimbursement provisions, conditions to and
expected timing and risks of consummation, and the ability of the party making
such proposal to obtain financing for such Acquisition Proposal and taking into
account all other legal, financial, regulatory and all other aspects of such
proposal) are more favorable to its stockholders than the Merger.
4.6 Blue Sky. TeleCorp and AWS will use all their respective 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 AWS Common Stock to be issued in accordance with the provisions of
this Agreement.
4.7 Registration and Listing of AWS Capital Stock.
(a) AWS will use all reasonable efforts to register the shares of AWS
Common Stock to be issued pursuant to this Agreement, and upon exercise of stock
options granted to employees of TeleCorp and its Subsidiaries, under the
applicable provisions of the Securities Act and, if required, under any
applicable state securities laws.
(b) AWS will use all reasonable efforts to cause the shares of AWS Common
Stock to be issued pursuant to this Agreement and upon the exercise of stock
options granted to employees of TeleCorp and its Subsidiaries, to be listed for
trading on the New York Stock Exchange.
4.8 Further Actions.
(a) Subject to the terms and conditions hereof, TeleCorp and AWS 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 efforts: (i) to
obtain prior to the Closing Date, and satisfy any conditions precedent to the
grant of, 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 or AWS or any of its Subsidiaries as are necessary for
the consummation of the transactions contemplated hereby or thereby, including,
without limitation, the Required Governmental Approvals and 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 and AWS shall cooperate fully with each other to the extent
reasonably required to obtain such consents. The Parties agree to respond
promptly to requests received from any Governmental Authority for additional
information in connection with the Merger.
(b) TeleCorp and AWS shall use all reasonable efforts promptly to 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.
(c) TeleCorp and AWS 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 Authority and to obtain any approval or authorization required to
be obtained from the FCC pursuant to the Communications Act and/or the rules and
regulations of the FCC, in each case, in connection with the transactions
contemplated by this Agreement and the Related Agreements. If offers to resolve
any issues are not accepted by such Governmental Authority on FCC, TeleCorp
(with AWS's cooperation) shall promptly pursue all litigation resulting from
such issues. The parties hereto will
A-33
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
or the Communications Act or any FCC Regulations. In the event of a challenge to
the transaction contemplated by this Agreement pursuant to the HSR Act or the
Communications Act or any FCC Regulations, 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 Merger.
(d) Notwithstanding any other provision of this Agreement to the contrary,
(i) except as set forth in Section 4.8(f), neither TeleCorp nor any of its
Subsidiaries shall, without AWS's prior written consent, commit to any
divestiture or hold separate or similar transaction, and (ii) each of TeleCorp
and its Subsidiaries shall commit to, and shall use all their reasonable efforts
to effect, such transactions or divestitures (which may, at TeleCorp's option,
be conditioned upon the Closing and be effective as of the Effective Time) as
AWS shall request; provided that, with respect to any of TeleCorp's FCC Licenses
for which divestiture may be required to ensure compliance with the spectrum cap
(47 C.F.R. sec. 20.6), AWS agrees to make any such request to the extent
required pursuant to FCC Regulations to enable receipt of any approvals or
authorizations of the FCC required in connection with or to permit consummation
of the Merger unless such request could lead to an action or result that AWS
would not be required take or accept pursuant to the next following sentence.
Notwithstanding any other provision of this Agreement to the contrary, nothing
herein shall require AWS to agree to divest or hold separate any portion of, or
restrict or limit the operations of, any of its business or TeleCorp's business
or otherwise take action that could reasonably be expected to (A) impair the
ability of (1) AWS, directly or through its Subsidiaries, to own and operate the
respective businesses of AWS and its Subsidiaries after the Closing, or (2) AWS
to own the shares of the Surviving Corporation after the Closing, or (3) AWS to
own and operate its business if the transactions contemplated hereby are not
consummated, in each case, in substantially the same manner as operated
immediately prior to the date hereof or (B) materially impair the ability of
AWS, directly or through its Subsidiaries, to own and operate the business of
TeleCorp and its Subsidiaries after the Closing or result in a TeleCorp Material
Adverse Effect.
(e) TeleCorp shall use its reasonable best efforts to consummate, on or
prior to the Closing, the transactions contemplated by the Transfer Agreement.
(f) TeleCorp shall or shall cause its appropriate subsidiaries to divest
itself or themselves of the FCC Licenses set forth on Section 2.25 of the
TeleCorp Disclosure Schedule as and to the extent required pursuant to FCC
Regulations to enable receipt of any approvals or authorizations of the FCC
required in connection with or to permit consummation of the Merger.
(g) AWS agrees that, at any time prior to the earlier of (x) termination of
this Agreement, (y) receipt of the Required Stockholder Approval or (z) the
withdrawal or modification of the Directors' Recommendation in a manner adverse
to AWS or the recommendation of the TeleCorp Board of any transaction that is
inconsistent with the transactions contemplated by this Agreement, it shall vote
any shares of TeleCorp Capital Stock owned by AWS and entitled to vote thereon
(i) in favor of adoption of this Agreement and the transactions contemplated
hereby and (ii) against any other matters that would be inconsistent with
consummation of this Agreement or the transactions contemplated hereby.
(h) TeleCorp shall cause that certain Management Agreement between TeleCorp
Management Corp. and TeleCorp PCS, Inc., dated as of July 17, 1998, as amended
May 25, 1999, October 18, 1999, and November 13, 2000 ("Management Agreement")
to be terminated effective on the Closing Date, no later than simultaneously
with the Closing, with no further obligation on the part of TeleCorp or any of
its Subsidiaries, provided that, Sections 8(b), 8(c), 8(d) and Section 13 of the
Management Agreement shall survive upon termination of the Management Agreement,
and Section 4(a) of the Management Agreement shall survive with respect to any
reimbursable expenses under Section 4(a) of the Management Agreement incurred by
Management prior to the date of termination of the Management Agreement.
A-34
4.9 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 notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement or the
Stockholders Agreement Amendment; 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 Agreement.
4.10 Notice of Breaches; Updates.
(a) TeleCorp shall promptly deliver to AWS 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. No such disclosure shall be deemed to avoid
or cure any such misrepresentation or breach.
(b) AWS shall promptly deliver to TeleCorp written notice of any event or
development that would (i) render any statement, representation or warranty of
AWS in this Agreement (including the AWS Disclosure Schedule) or the
Stockholders Agreement Amendment inaccurate or incomplete in any material
respect or (ii) constitute or result in a breach by AWS of, or a failure by AWS
or any Subsidiary to comply with, any agreement or covenant in this Agreement or
the Stockholders Agreement Amendment applicable to it. No such disclosure shall
be deemed to avoid or cure any such misrepresentation or breach.
4.11 Affiliates. TeleCorp (i) has disclosed to AWS in Section 4.11 of the
TeleCorp Disclosure Schedule 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 its reasonable efforts to cause each person who is
identified as its "affiliate" in Section 4.11 of the TeleCorp Disclosure
Schedule to deliver to AWS as promptly as practicable but in no event later than
10 days prior to the Closing Date, a signed agreement substantially in the form
attached hereto as Exhibit C. TeleCorp shall notify AWS from time to time of any
other persons who then are, or may be, such an "affiliate" and use all its
reasonable efforts to cause each additional person who is identified as an
"affiliate" to execute a signed agreement as set forth in this Section 4.11.
4.12 Employee Benefit Matters. Following the Effective Time for a period
of at least one year, AWS shall provide to officers and employees of TeleCorp
and its Subsidiaries who continue employment employee benefits under employee
benefit plans on terms and conditions which are substantially similar in the
aggregate to those provided by TeleCorp and its Subsidiaries to their officers
and employees prior to the Effective Time; provided, that in its discretion AWS
may provide to such officers and employees the employee benefits provided to
similarly situated AWS officers and employees. With respect to any benefits
plans of AWS or its Subsidiaries in which the officers and employees of TeleCorp
and its Subsidiaries participate after the Effective Time, AWS 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
TeleCorp 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 TeleCorp and its Subsidiaries (and their respective
predecessors) as an employee or officer of AWS to the extent that such service
was
A-35
credited under similar TeleCorp Employee Plans for purposes of eligibility to
participate and vesting credit 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, and with respect to newly adopted AWS plans, to the extent that
similarly situated AWS employees are not provided with recognition of service.
Nothing herein shall be construed as conferring upon any employee any legal
rights with respect to a continuation of employment or other relationship with
AWS or its Subsidiaries.
4.13 Indemnification and Insurance.
(a) The Surviving Corporation and AWS shall indemnify, defend and hold
harmless, to the fullest extent permitted under applicable Law (in the case of
AWS, only to the extent that would be permitted by applicable Law if the
Indemnitee were an officer, director or employee of AWS rather than TeleCorp or
its Subsidiaries at the relevant time), the individuals who on or prior to the
Effective Time were officers, directors and employees of TeleCorp or its
Subsidiaries (collectively, the "Indemnitees") with respect to all acts or
omissions by them in their capacities as such or taken at the request of
TeleCorp or any of its Subsidiaries at any time on or prior to the Effective
Time. Following the Effective Time, the Surviving Corporation shall honor all
indemnification obligations presently provided under TeleCorp's Certificate of
Incorporation and By-Laws in effect on the date hereof. The Surviving
Corporation shall honor all indemnification agreements with Indemnitees
(including under TeleCorp's By-Laws) in effect as of the date of this Agreement
in accordance with the terms thereof. TeleCorp has disclosed to AWS all such
indemnification agreements prior to the date of this Agreement.
(b) For six years after the Effective Time, AWS shall or shall cause the
Surviving Corporation to procure the provision of officers' and directors'
liability insurance in respect of acts or omissions occurring prior to the
Effective Time covering each such Person currently covered by TeleCorp's
officers' and directors' liability insurance policy on terms with respect to
coverage and in amounts no less favorable than those of such policy in effect on
the date hereof; provided, that if the aggregate annual premiums for such
insurance at any time during such period shall exceed 250% of the per annum rate
of premium paid by TeleCorp and its Subsidiaries as of the date hereof for such
insurance, then AWS shall, or shall cause the Surviving Corporation to, purchase
only such coverage as shall then be available at an annual premium equal to 250%
of such rate.
(c) The certificate of incorporation of the Surviving Corporation shall,
from and after the Effective Time, contain provisions no less favorable with
respect to limitation of certain liabilities of directors and indemnification
than are set forth as of the date of this Agreement in the Certificate of
Incorporation of TeleCorp, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in a manner
that would adversely affect the rights thereunder of individuals who at the
Effective Time were directors or officers of TeleCorp.
(d) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not 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, or otherwise dissolves the Surviving Corporation, then, and in
each such case, AWS shall cause proper provision to be made so that the
successors and assigns of the Surviving Corporation assume the obligations of
the Surviving Corporation set forth in this Section 4.13.
4.14 Plan of Reorganization. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Treasury Regulations Section
1.368-2(g).
4.15 Tax-Free Exchange. The parties intend the Merger or the combination
of the Merger and the Follow-On Merger, as applicable, to qualify as a
reorganization under Section 368(a) of the Code. Each of the Parties will use
all reasonable efforts, and each agrees to cooperate with the other and provide
each other with such documentation, information and materials, as may be
reasonably necessary, proper or advisable, to cause the Merger or the
combination of the Merger and the Follow-On Merger, as applicable, to so qualify
and to obtain, as of the Effective Time and, to the extent necessary, as of the
date
A-36
the Form S-4 shall become effective, the opinions required pursuant to Section
5.2(b) and Section 5.3(b) hereof. No party hereto will knowingly take any
action, fail to take any action, or cause any action to be taken if such action
or failure to take such action would cause the Merger or the combination of the
Merger and the Follow-On Merger, as applicable, not to qualify as a
reorganization under Section 368(a) of the Code. Except as required pursuant to
a determination (as defined in Section 1313 of the Code), no party hereto will
take any Tax reporting position (whether on a Tax Return or otherwise) that is
inconsistent with the treatment of the Merger, or the combination of the Merger
and the Follow-On Merger, as the case may be, as a reorganization within the
meaning of Section 368(a) of the Code.
4.16 Extension of Birmingham/Tuscaloosa Put Right. TeleCorp and AWS hereby
agree that, in the event that this Agreement is terminated pursuant to Article
VI hereof, the Put Right of TeleCorp, as such term is defined in that certain
letter to AWS from TeleCorp, dated October 20, 2000, with respect to a 10MHz PCS
license in each of the Birmingham, AL BTA and the Tuscasloosa, AL BTA, shall be
exercisable through the fifth day following such termination.
ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to Obligations of TeleCorp and AWS to Effect the
Merger. The respective obligations of TeleCorp and AWS to effect the Merger
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 Required Stockholder
Approval shall have been received.
(b) Registration Statement Effective; Proxy Statement. The SEC shall
have declared the Registration Statement effective. 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 with respect of the Proxy Statement,
shall have been initiated or threatened in writing by the SEC and not
concluded or withdrawn.
(c) No Order. No Governmental Authority 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 prohibiting
consummation of the Merger.
(d) HSR Act. Any waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated.
(e) NYSE Listing. The shares of AWS Common Stock issuable to the
stockholders of TeleCorp in the Merger shall have been authorized for
listing on the New York Stock Exchange upon official notice of issuance.
5.2 Additional Conditions to Obligations of TeleCorp. The obligation of
TeleCorp to consummate the 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; Agreements and Covenants. (i) AWS
shall have performed or complied with in all material respects its
covenants and agreements under this Agreement that are required to be
performed or complied with prior to the Closing, (ii) the representations
and warranties of AWS contained in this Agreement (other than those
referred to in clause (iii) below) shall have been true and correct as of
the date of this Agreement and as of the Closing (except for those
representations and warranties which expressly address matters only as of
the date of this Agreement or any other particular date, which shall be
true and correct in all respects only as of such date), except to the
extent that any failures of such representations and warranties to be true
and correct, individually or when aggregated with any other such failures,
does not constitute an AWS
A-37
Material Adverse Effect (it being understood that, for purposes of
determining the truth and correctness of such representations and
warranties, all "AWS Material Adverse Effect" qualifications and other
qualifications based on the word "material" or similar phrases contained in
such representations and warranties shall be disregarded); (iii) the
representations and warranties of AWS contained in Sections 3.3, 3.4 and
3.5(a)(i) shall have been true and correct in all material respects as of
the date of this Agreement and as of the Closing (except for those
representations and warranties which expressly address matters only as of
the date of this Agreement or any other particular date, which shall be
true and correct in all material respects only as of such date); and (iv)
and TeleCorp shall have received a certificate of a duly authorized officer
of AWS to the effects set forth in clauses (i), (ii) and (iii) above.
(b) Tax Opinion. TeleCorp shall have received an opinion of
Cadwalader, Wickersham & Taft, dated as of the date of the Effective Time
and, if necessary, dated as of the date the Form S-4 shall become
effective, in form and substance reasonably satisfactory to TeleCorp based
upon facts, representations and assumptions set forth in such opinion,
substantially to the effect that for federal income tax purposes the Merger
or the combination of the Merger and the Follow-On Merger, as applicable,
will qualify as a reorganization within the meaning of Section 368(a) of
the Code. In rendering such opinion or opinions, as the case may be,
Cadwalader, Wickersham & Taft may require and shall be entitled to rely
upon customary representations contained in certificates of officers of
AWS, Merger Sub and TeleCorp substantially in the form of Exhibits D and E
hereto, allowing for such amendments to the representations of AWS and
TeleCorp as counsel to AWS or TeleCorp, respectively, deems reasonably
necessary.
(c) Regulatory Approvals. All Required Governmental Approvals
(including all required consents of the FCC to all matters contemplated by
the Merger) shall have been obtained.
5.3 Additional Conditions to the Obligations of AWS. The obligations of
AWS to consummate the 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 AWS:
(a) Representations and Warranties; Agreements and Covenants. (i)
TeleCorp shall have performed or complied with in all material respects its
covenants and agreements under this Agreement that are required to be
performed or complied with prior to the Closing, (ii) the representations
and warranties of TeleCorp contained in this Agreement (other than those
referred to in clause (iii) below) shall have been true and correct as of
the date of this Agreement and as of the Closing (except for those
representations and warranties which expressly address matters only as of
the date of this Agreement or any other particular date, which shall be
true and correct in all respects only as of such date), except to the
extent that any failures of such representations and warranties to be true
and correct, individually or when aggregated with any other such failures,
does not constitute a TeleCorp Material Adverse Effect (it being understood
that, for purposes of determining the truth and correctness 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); (iii) the representations and warranties of TeleCorp
contained in Sections 2.3, 2.4, 2.5, 2.6(a)(i) and 2.23 shall have been
true and correct in all material respects as of the date of this Agreement
and as of the Closing (except for those representations and warranties
which expressly address matters only as of the date of this Agreement or
any other particular date, which shall be true and correct in all material
respects only as of such date ); and (iv) and AWS shall have received a
certificate of a duly authorized officer of TeleCorp to the effects set
forth in clauses (i), (ii) and (iii) above.
(b) Tax Opinion. AWS shall have received an opinion of Wachtell,
Lipton, Rosen & Katz, dated as of the date of the Effective Time and, if
necessary, dated as of the date the Form S-4 shall become effective, in
form and substance reasonably satisfactory to AWS based upon facts,
representations and assumptions set forth in such opinion, substantially to
the effect that that for federal income tax purposes the Merger or the
combination of the Merger and the Follow-On Merger,
A-38
as applicable, will qualify as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion or opinions, as the
case may be, Wachtell, Lipton, Rosen & Katz may require and shall be
entitled to rely upon customary representations contained in certificates
of officers of AWS, Merger Sub and TeleCorp substantially in the form of
Exhibits D and E hereto, allowing for such amendments to the
representations of AWS and TeleCorp as counsel to AWS or TeleCorp,
respectively, deems reasonably necessary.
(c) Consents. AWS and TeleCorp shall have obtained the consent or
approval of any Person (excluding any 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 except
those which the failure to obtain would not, individually or in the
aggregate, have a TeleCorp Material Adverse Effect or an AWS Material
Adverse Effect.
(d) Regulatory Approvals. All Required Governmental Approvals
(including all required consents of the FCC to all matters contemplated by
the Merger) shall have been obtained pursuant to Final Orders, free of any
conditions that AWS would not be required to accept pursuant to Section
4.8, and all other consents, approval, authorizations or filings the
absence of which could reasonably be expected to have a TeleCorp Material
Adverse Effect or AWS Material Adverse Effect if the Closing were to occur
shall have been obtained or made. For the purposes of this Agreement,
"Final Order" means an action or decision that has been granted by the
relevant Governmental Authority 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 relevant Governmental Authority
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.
(e) Dissenting Shares. The Dissenting Shares shall not represent more
than 5% of the voting power of the outstanding TeleCorp Capital Stock.
(f) Management Agreement. The Management Agreement shall have been
terminated as contemplated by Section 4.8(h).
(g) Unfunded Commitment. The unfunded commitment of certain cash
equity investors of TeleCorp under the TeleCorp Stock Purchase Agreement,
dated January 23, 1998, as amended, shall have been called by TeleCorp on
or before January 15, 2002.
ARTICLE VI
TERMINATION
6.1 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:
(a) by mutual written consent duly authorized by the Boards of
TeleCorp and AWS;
(b) by TeleCorp or AWS if the Closing shall not have occurred on or
before August 7, 2002 (the "Outside Date"); provided, however, that if the
Merger shall not have been consummated by such date 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 7, 2003; and provided,
further, that the right to terminate this Agreement under this Section
6.1(b) shall not be available to any party whose failure to fulfill any
material
A-39
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, if AWS shall have breached in any material respect
any of its representations or warranties or failed to perform in any
material respect any of its covenants or other agreements contained in this
Agreement, which breach or failure to perform (1) is incapable of being
cured by AWS prior to the Outside Date and (2) renders any condition under
Sections 5.1 or 5.2 incapable of being satisfied prior to the Outside Date;
(d) by AWS, if TeleCorp shall have breached in any material respect
any of its representations or warranties or failed to perform in any
material respect any of its 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 5.1 or 5.3 incapable of being satisfied prior to the Outside
Date;
(e) by TeleCorp or AWS, upon written notice to the other party, if a
Governmental Authority of competent jurisdiction shall have issued an Order
or taken any other action (which Order or other action the party seeking to
terminate shall have used all of its reasonable efforts to resist, resolve
or lift, as applicable, subject to the provisions of Section 4.8) enjoining
or otherwise prohibiting the consummation of the transactions contemplated
by this Agreement, and such Order shall have become final and
non-appealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause (e) has fulfilled its obligations under
Section 4.8;
(f) by AWS if (i) the Board of Directors of TeleCorp shall have
withdrawn or changed or modified the Directors' Recommendation in a manner
adverse to AWS; (ii) the Board of Directors of TeleCorp or the
Disinterested Directors thereof shall have approved, or determined to
recommend to the shareholders of TeleCorp that they approve an Acquisition
Proposal other than that contemplated by this Agreement; (iii) for any
reason TeleCorp fails to call or hold the TeleCorp Shareholders Meeting
within six months of the date hereof (provided that if the Registration
Statement shall not have become effective for purposes of the Federal
securities laws by the date that is 20 business days prior to the date that
is five months from the date hereof, then such six month period shall be
extended by the number of days from that elapse from the end of the
five-month period until the effective date of the Registration Statement);
and
(g) by TeleCorp or AWS, if the Required Stockholder Approval shall not
have been received at a duly held meeting of the stockholders of TeleCorp
called for such purpose (including any adjournment or postponement
thereof).
6.2 Obligations in Event of Termination. In the event of any termination
of this Agreement as provided in Section 6.1, 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 or AWS, except that the obligations of the
parties, the last sentence of Section 4.1, Section 6.3, Section 8.2 and this
Section 6.2 shall remain in full force and effect, and except that termination
shall not preclude any party from suing the other party for willful breach of
this Agreement.
6.3 Termination Fees.
(a) If:
(i) AWS shall terminate this Agreement pursuant to Section
6.1(f)(iii); or
(ii) either AWS or TeleCorp shall terminate this Agreement pursuant to
Section 6.1(g); or
(iii) AWS shall terminate this Agreement pursuant to Section 6.1(d)
and prior to such termination any offer or proposal (or intent to make any
offer or proposal) that would be an Acquisition Proposal shall have been
announced or otherwise publicly disclosed and not withdrawn;
then, (1) in the case of a termination by AWS under clause (i) or clause (ii),
TeleCorp shall pay to AWS, not later than the close of business on the Business
Day following such termination an amount
A-40
equal to $65,000,000 (the "Termination Fee"); (2) in the case of a termination
by TeleCorp under clause (ii) TeleCorp shall pay to AWS, not later than, and as
a condition precedent to, termination of this Agreement, an amount equal to the
Termination Fee; and (3) in the case of a termination by AWS under clause (iii),
if within 12 months after the termination of this Agreement TeleCorp enters into
an agreement with respect of an Acquisition Proposal with any Person (other than
AWS or its Subsidiaries) or an Acquisition Proposal is consummated (it being
understood that in the event the Board of Directors of TeleCorp recommends the
acceptance by the TeleCorp stockholders of a tender offer or exchange offer with
respect to an Acquisition Proposal, such recommendation shall be treated as
though an agreement with respect to an Acquisition Proposal had been entered
into on such date), TeleCorp shall pay to AWS, not later than the date such
agreement is entered into, an amount equal to the Termination Fee. For purposes
of this Section 6.3, a proposal or offer will be deemed to have been publicly
disclosed, without limitation, if it becomes known to holders of a majority of
the voting power of the TeleCorp Capital Stock.
(b) All payments and reimbursements made under this Section 6.3 shall be
made by wire transfer of immediately available funds to an account specified by
AWS.
ARTICLE VII
NO SURVIVAL
7.1 No Survival of Representations and Warranties. All representations and
warranties of the Parties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
ARTICLE VIII
MISCELLANEOUS
8.1 Public Announcements. TeleCorp and AWS shall use all reasonable
efforts to develop a joint communications plan and each party shall use all
reasonable efforts to ensure that, all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan. Unless otherwise required by
applicable law or by obligations pursuant to any listing agreement with or rules
of any securities exchange, TeleCorp shall consult with, and use all reasonable
efforts to accommodate the comments of, before issuing any press release or
otherwise making any public statement with respect to this Agreement or the
transactions contemplated hereby.
8.2 Fees and Expenses. Except as set forth in this Section 8.2, 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 Merger is consummated; provided, however, that
TeleCorp and AWS 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 Registration Statement and Proxy
Statement and any amendments or supplements thereto.
8.3 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, sent via facsimile or
mailed, first class mail, postage prepaid, return receipt requested, or by
overnight courier as follows:
If to TeleCorp:
TeleCorp PCS, Inc.
1010 North Glebe Road
Suite 800
Arlington, VA 22201
Attention: Tom Sullivan, Executive Vice President
Fax: 703-236-1376
A-41
with a copy to:
Cadwalader Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Brian Hoffmann, Esq.
Fax: (212) 504-6666
and a copy to:
Richards, Layton & Finger
One Rodney Square
Wilmington, Delaware 19801
Attention: C. Stephen Bigler, Esq.
Fax: (302) 784-7017
If to AWS:
AT&T Wireless Services, Inc.
Building 1
7277 164th Avenue, N.E.
Redmond, WA 98052
Attention: Gregory P. Landis, Esq.
Fax (425) 580-8333
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Steven A. Rosenblum, Esq.
Fax: (212) 403-2000
and a copy to:
Friedman Kaplan Seidler & Adelman LLP
875 Third Avenue
New York, NY 10022
Attention: Gregg S. Lerner, Esq.
Fax: (212) 355-6401
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, upon the transmission and confirmation of the facsimile, on the third
business day after the mailing thereof or on the first day after delivery by
overnight courier.
8.4 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
A-42
Material; (v) zoning; or (vi) 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. sec.sec. 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
taxing authority, 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) "Order" means any judgment, order, writ, injunction, ruling or decree
of, or any settlement under the jurisdiction of any Court or Governmental
Authority;
(k) "Parties" shall mean the signatories to this Agreement;
(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, regulation, order or binding
interpretation of any Governmental Authority; 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 economic interests in, or voting rights with
respect to the election of the board of directors or other governing body of,
such corporation or other legal entity.
A-43
(o) "3G" shall mean third generation mobile communications systems that
are, or are based on technology that is, defined as IMT-2000 by the
International Telecommunications Union.
8.5 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.
8.6 Entire Agreement. This Agreement, the Confidentiality Agreement and
the Related Agreements, including the Exhibits and Schedules hereto, constitute
the entire agreement between the parties hereto and supersedes all prior
agreements and understanding, oral and written, between the parties hereto with
respect to the subject matter hereof.
8.7 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 4.14, 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.
8.8 Assignability. This Agreement shall not be assignable by any Party
without the prior written consent of the other Parties (except that AWS may
designate by written notice another wholly owned Subsidiary in lieu of Merger
Sub).
8.9 Amendment; Waiver. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed by all the Parties. No
waiver by any 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.
8.10 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.
8.11 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.
8.12 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.
8.13 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 SHALL BE BROUGHT
AND DETER-
A-44
MINED 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.
8.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
A-45
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
TELECORP PCS, INC.
By: /s/ THOMAS H. SULLIVAN
--------------------------------------
Name: Thomas H. Sullivan
Title: Chief Financial Officer &
Executive Vice President
AT&T WIRELESS SERVICES, INC.
By: /s/ JOHN D. ZEGLIS
--------------------------------------
Name: John D. Zeglis
Title: Chairman and Chief Executive
Officer
TL ACQUISITION CORP.
By: /s/ WILLIAM W. HAGUE
--------------------------------------
Name: William W. Hague
Title: President
A-46
GLOSSARY OF TERMS
DEFINED TERM SECTION
------------ -----------
3G.......................................................... 8.4(o)
Acquisition Proposal........................................ 4.5(d)
Additional Debt............................................. 4.2(c)
Advanced Services........................................... 4.2(d)(i)
Affiliate................................................... 8.4(a)
Agreement................................................... Preamble
AWS......................................................... Preamble
AWS Authorizations.......................................... 3.8
AWS Capital Stock........................................... 1.6(b)(v)
AWS Common Stock............................................ 1.6(a)(i)
AWS Disclosure Schedule..................................... Article III
AWS Material Adverse Effect................................. Article III
AWS Preferred Stock......................................... 1.6(b)(v)
AWS Representatives......................................... 4.1
AWS Restricted Shares....................................... 1.8(c)
AWS SEC Reports............................................. 3.7(a)
AWS Series C Preferred Stock................................ 1.6(b)(iii)
AWS Series E Preferred Stock................................ 1.6(b)(iii)
Certificate of Merger....................................... 1.2
Certificates................................................ 1.11(c)
Closing..................................................... 1.13
Closing Date................................................ 1.13
COBRA Coverage.............................................. 2.15(e)
Code........................................................ Recitals
Communications Act.......................................... 2.6(b)
Confidentiality Agreement................................... 4.1
Court....................................................... 8.4(b)
Defined Benefit Plan........................................ 2.15(d)
DGCL........................................................ 1.1
Directors' Recommendation................................... 2.5
Disinterested Directors..................................... Recitals
Dissenting Shares........................................... 1.16(a)
Effective Time.............................................. 1.2
Environmental Laws.......................................... 8.4(c)
ERISA....................................................... 2.15(a)
Excess Shares............................................... 1.10
Exchange Act................................................ 2.6(b)
Exchange Agent.............................................. 1.11(a)
Exchange Ratio.............................................. 1.6(c)
FCC......................................................... 2.6(b)
FCC License(s).............................................. 2.10(d)
Final Order................................................. 5.3(d)
Follow-On Merger............................................ 1.15
Foreign Competition Laws.................................... 8.4(d)
GAAP........................................................ 2.9(b)
Governmental Authority...................................... 8.4(e)
i
DEFINED TERM SECTION
------------ -----------
HSR Act..................................................... 2.6(b)
Hazardous Material.......................................... 8.4(f)
Indemnitees................................................. 4.13(a)
Indirect TeleCorp Authorizations............................ 2.10(b)
Interim Period.............................................. 4.1
Law......................................................... 8.4(g)
Lien........................................................ 8.4(h)
Litigation.................................................. 8.4(i)
Management Agreement........................................ 4.8(h)
Merger...................................................... Recitals
Merger Consideration........................................ 1.6(c)
Merger Sub.................................................. Preamble
Order....................................................... 8.4(j)
Ordinary Course of Business................................. 2.12(a)
Other Filings............................................... 4.3(a)
Outside Date................................................ 6.1(b)
Outstanding Employee Options................................ 1.8(a)
Parties..................................................... 8.4(k)
Person...................................................... 8.4(l)
Proxy Statement............................................. 2.17
Registration Statement...................................... 2.17
Regulation.................................................. 8.4(m)
Related Agreements.......................................... 2.4
Required AWS Governmental Approvals......................... 3.5(b)
Required Governmental Approvals............................. 3.5(b)
Required Stockholder Approval............................... 2.5
Required TeleCorp Governmental Approvals.................... 2.6(b)
Restricted Shares........................................... 1.8(c)
SEC......................................................... 2.7(a)
Securities Act.............................................. 2.3(e)
Stockholders Agreement...................................... 2.3(f)
Stockholders Agreement Amendment............................ 2.4
Subsidiaries................................................ 8.4(n)
Subsidiary.................................................. 8.4(n)
Superior Proposal........................................... 4.5(d)
Surviving Corporation....................................... 1.1
Tax......................................................... 2.20(a)
Taxes....................................................... 2.20(a)
Tax Returns................................................. 2.20(a)
Termination Fee............................................. 6.2
TeleCorp.................................................... Preamble
TeleCorp Authorizations..................................... 2.10(a)
TeleCorp Capital Stock...................................... 1.6(b)
TeleCorp Common Stock....................................... 1.6(a)
TeleCorp Disclosure Schedule................................ Article II
TeleCorp Employee Plans..................................... 2.15(a)
TeleCorp ERISA Affiliate.................................... 2.15(a)
TeleCorp FCC Applications................................... 2.10(b)
ii
DEFINED TERM SECTION
------------ -----------
TeleCorp Intellectual Property Rights....................... 2.22(a)
TeleCorp Licensee........................................... 2.10(d)
TeleCorp Material Adverse Effect............................ Article II
TeleCorp Material Contracts................................. 2.7(a)
TeleCorp Option Plans....................................... 1.8(a)
TeleCorp Options............................................ 2.3(b)
TeleCorp Preferred Stock.................................... 1.6(b)
TeleCorp SEC Agreements..................................... 2.7(a)
TeleCorp SEC Reports........................................ 2.9(a)
TeleCorp State Authorizations............................... 2.10(b)
TeleCorp Stockholders' Meeting.............................. 2.17
TeleCorp Subsidiary SEC Reports............................. 2.9(a)
Transfer Agreement.......................................... 2.25
USDT........................................................ 2.10(d)
Voting Agreements........................................... Recitals
iii
APPENDIX B
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF OF
SERIES C PREFERRED STOCK OF
AT&T WIRELESS SERVICES, INC.
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
AT&T Wireless Services, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority conferred upon the Board of Directors
of the Corporation pursuant to its Amended and Restated Certificate of
Incorporation, and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation, at a meeting duly called and held on October 7, 2001, duly approved
and adopted the following resolution which resolution remains in full force and
effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
by the Amended and Restated Certificate of Incorporation of the Corporation, the
Board of Directors does hereby designate, create, authorize and provide for the
issue of preferred stock having a par value of $0.01 per share which shall be
designated Series C Preferred Stock (the "Series C Preferred Stock") consisting
of up to 215,000 shares, which shall be issued pursuant to that certain
Agreement and Plan of Merger, dated as of October 7, 2001, between the
Corporation and TeleCorp PCS, Inc., and shall have the powers, preferences and
relative, optional and other special rights, and qualifications, limitations and
restrictions thereon as follows:
1. Powers, Preferences and Rights of Series C Preferred Stock
The powers, preferences and rights of the Series C Preferred Stock and
the qualifications, limitations and restrictions thereof are as follows:
(a) Ranking
The Series C Preferred Stock shall rank senior to the Common Stock
and any series or class of the Corporation's common or preferred stock,
now or hereafter authorized, with respect to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding
up.
(b) Dividends
Holders of Series C Preferred Stock shall be entitled to dividends
in cash or property when, as and if, declared by the Board of Directors
of the Corporation; provided that, in no event shall dividends in excess
of the Liquidation Preference be declared or paid. So long as shares of
Series C Preferred Stock are outstanding and dividends payable on shares
of Series C Preferred Stock have not been paid in full in cash, the
Corporation shall not declare or pay cash dividends on, or redeem,
purchase or otherwise acquire for consideration, any shares of any class
of common stock or series of preferred stock ranking junior to or on a
parity with the Series C Preferred Stock, except that the Corporation
may acquire, in accordance with the terms of any agreement between the
Corporation and its employees, shares of Common Stock or Preferred Stock
at a price not greater than the Market Price as of such date.
(c) Liquidation Preference
(i) In the event of any liquidation, dissolution or winding up
of the Corporation, the holders of Series C Preferred Stock shall be
entitled to receive out of the assets of the Corporation, whether
such assets are capital or surplus of any nature, after payment is
made
B-1
to holders of all series of preferred stock ranking senior to the
Series C Preferred Stock with respect to rights on liquidation,
dissolution or winding up, but before any payment shall be made or
any assets distributed to the holders of Common Stock or any series
of preferred stock ranking junior to the Series C Preferred Stock
with respect to rights on liquidation, dissolution or winding up, an
amount equal to the Liquidation Preference and no more.
(ii) If upon any liquidation, dissolution or winding up of the
Corporation the assets of the Corporation to be distributed are
insufficient to permit the payment to all holders of Series C
Preferred Stock and any other series of preferred stock ranking on a
parity with Series C Preferred Stock with respect to rights on
liquidation, dissolution or winding up, to receive their full
preferential amounts, the entire assets of the Corporation shall be
distributed among the holders of Series C Preferred Stock and all
such other series ratably in accordance with their respective
Liquidation Preference.
(iii) Neither the consolidation or merger of the Corporation
with or into any other Person nor the sale or other distribution to
another Person of all or substantially all the assets, property or
business of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this
Section 1(c).
(d) Voting Rights
(i) The holders of shares of Series C Preferred Stock shall be
entitled to such voting rights as hereinafter provided, and shall be
entitled to notice of any stockholders' meeting and to vote upon such
matters as provided herein and in the Bylaws of the Corporation, and
as may be provided by law. Holders of Series C Preferred Stock shall
not be entitled to cumulate their votes for any purpose. Except as
otherwise required by law or provided herein, regardless of the
number of shares of Series C Preferred Stock then outstanding, the
holders of the Series C Preferred Stock shall be entitled in the
aggregate to 1,926,069 votes, voting as a class with the Common Stock
of the Corporation, and the number of votes or fractional votes to
which each share of Series C Preferred Stock shall be entitled shall
be the quotient determined by dividing 1,926,069 by the number of
shares of such Series C Preferred Stock then outstanding.
(ii) In any matter requiring a separate class vote of holders of
Series C Preferred Stock or a separate vote of two or more series of
preferred stock voting together as a single class, for the purposes
of such a class vote, each share of Series C Preferred Stock shall be
entitled to one vote per share.
(iii) The affirmative vote of holders of not less than a
majority of Series C Preferred Stock shall be required to (A)
authorize, increase the authorized number of shares of or issue
(including on conversion or exchange of any convertible or
exchangeable securities or by reclassification) any shares of any
class or classes of stock ranking senior to or pari passu with the
Series C Preferred Stock or any additional shares of Series C
Preferred Stock, (B) authorize, adopt or approve each amendment to
the Amended and Restated Certificate of Incorporation of the
Corporation that would increase or decrease the par value of the
shares of Series C Preferred Stock, alter or change the powers,
preferences or rights of the shares of Series C Preferred Stock or
alter or change the powers, preferences or rights of any other
capital stock of the Corporation if such alteration or change results
in such capital stock ranking senior to or pari passu with the Series
C Preferred Stock, (C) amend, alter or repeal any provision of the
Amended and Restated Certificate of Incorporation of the Corporation
so as to affect the shares of Series C Preferred Stock adversely, or
(D) authorize or issue any security convertible into, exchangeable
for or evidencing the right to purchase or otherwise receive any
shares of any class or classes of stock senior to or pari passu with
the Series C Preferred Stock.
B-2
(e) Redemption at Option of the Corporation
The Corporation shall have the right to redeem shares of Series C
Preferred Stock pursuant to the following provisions:
(i) Subject to the restrictions set forth in Section 1(g)(i),
the Corporation shall have the right, at its sole option and
election, to redeem the shares of the Series C Preferred Stock, in
whole but not in part, at any time at a redemption price per share
(the "Series C Redemption Price") equal to the Liquidation Preference
thereof as of the redemption date; provided, that if the funds
legally available to the Corporation are insufficient to effect the
redemption of the Series C Preferred Stock in full, such funds shall
be allocated among the shares of Series C Preferred Stock ratably in
accordance with the number of shares of such Series outstanding as of
the redemption date;
(ii) Notice of any redemption of the Series C Preferred Stock
shall be mailed at least ten but not more than 60 days prior to the
date fixed for redemption to each holder of Series C Preferred Stock
to be redeemed, at such holder's address as it appears on the books
of the Corporation. In order to facilitate the redemption of the
Series C Preferred Stock, the Board of Directors of the Corporation
may fix a record date for the determination of holders of Series C
Preferred Stock to be redeemed, or may cause the transfer books of
the Corporation to be closed for the transfer of the Series C
Preferred Stock, not more than 60 days prior to the date fixed for
such redemption;
(iii) Within two Business Days after the redemption date
specified in the notice given pursuant to paragraph (ii) above and
the surrender of the certificate(s) representing shares of Series C
Preferred Stock, the Corporation shall pay to the holder of the
shares being redeemed the Series C Redemption Price therefor. Such
payment shall be made by wire transfer of immediately available funds
to an account designated by such holder or by overnight delivery (by
a nationally recognized courier) of a bank check to such holder's
address as it appears on the books of the Corporation; and
(iv) Effective upon the date of the notice given pursuant to
paragraph (ii) above, notwithstanding that any certificate for such
shares shall not have been surrendered for cancellation, the shares
represented thereby shall no longer be deemed outstanding, the rights
to receive dividends thereon shall cease to accrue from and after the
date of redemption designated in the notice of redemption and all
rights of the holders of the shares of the Series C Preferred Stock
called for redemption shall cease and terminate, excepting only the
right to receive the Series C Redemption Price therefor in accordance
with paragraph (iii) above.
(f) Redemption at Option of Holder
(i) No holder of shares of Series C Preferred Stock shall have
any right to require the Corporation to redeem any shares of Series C
Preferred Stock prior to, with respect to any shares of the Series C
Preferred Stock, December 13, 2020. Thereafter, subject to the
restrictions set forth in Section 1(g)(i), each holder of shares of
Series C Preferred Stock shall have the right, at the sole option and
election of such holder, to require the Corporation to redeem all
(but not less than all) of the shares of Series C Preferred Stock
owned by such holder at a price per share equal to the Series C
Redemption Price;
(ii) The holder of any shares of the Series C Preferred Stock
may exercise such holder's right to require the Corporation to redeem
such shares by surrendering for such purpose to the Corporation, at
its principal office or at such other office or agency maintained by
the Corporation for that purpose, certificates representing the
shares of Series C Preferred Stock to be redeemed, accompanied by a
written notice stating that such holder elects to require the
Corporation to redeem all (but not less than all) of such shares
B-3
in accordance with the provisions of this Section 1(f), which notice
may specify an account for delivery of the Series C Redemption Price;
(iii) Within two Business Days after the surrender of such
certificates, the Corporation shall pay to the holder of the shares
being redeemed the Series C Redemption Price therefor. Such payment
shall be made by wire transfer of immediately available funds to an
account designated by such holder or by overnight delivery (by a
nationally recognized courier) of a bank check to such holder's
address as it appears on the books of the Corporation; and
(iv) Such redemptions shall be deemed to have been made at the
close of business on the date of the receipt of such notice and of
such surrender of the certificates representing the shares of the
Series C Preferred Stock to be redeemed and the rights of the holder
thereof, except for the right to receive the Series C Redemption
Price therefor in accordance herewith, shall cease on such date of
receipt and surrender.
(g) Certain Restrictions
(i) Notwithstanding the provisions of Section 1(b) or Section
1(f), cash dividends on the Series C Preferred Stock may not be
declared, paid or set apart for payment, nor may the Corporation
redeem, purchase or otherwise acquire any shares of Series C
Preferred Stock, if (A) the Corporation is not solvent or would be
rendered insolvent thereby or (B) at such time the terms and
provisions of any law or agreement of the Corporation, including any
agreement relating to its indebtedness, specifically prohibit such
declaration, payment or setting apart for payment or such redemption,
purchase or other acquisition, or provide that such declaration,
payment or setting apart for payment or such redemption, purchase or
other acquisition would constitute a violation or breach thereof or a
default thereunder.
(ii) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to make any distribution with
respect to, or purchase or otherwise acquire for consideration, any
shares of Common Stock or other shares of capital stock of the
Corporation ranking junior to or on a parity basis with the Series C
Preferred Stock unless the Corporation could, pursuant to paragraph
(i) above, make such distribution or purchase or otherwise acquire
such shares at such time and in such manner.
2. Share Certificates
(a) Each certificate representing the shares of Series C Preferred
Stock or delivered in substitution or exchange for any of the foregoing
certificates shall be stamped with a legend in substantially the following
form, to the extent that such legend is applicable pursuant to the
provisions hereof:
"The securities represented by this Certificate have been acquired
for investment and have not been registered under the Securities Act
of 1933, as amended (the "Act"), or under any state securities or
'Blue Sky' laws. Said securities may not be sold, transferred,
assigned, pledged, hypothecated or otherwise disposed of, unless and
until registered under the Act and the rules and regulations
thereunder and all applicable state securities or 'Blue Sky' laws or
exempted therefrom under the Act and all applicable state securities
or 'Blue Sky' laws."
(b) Upon receipt of evidence reasonably satisfactory to the
Corporation of the loss, theft, destruction or mutilation of any
certificate representing shares of Series C Preferred Stock subject to this
Agreement and of a bond or other indemnity reasonably satisfactory to the
Corporation, and upon reimbursement to the Corporation of all reasonable
expenses incident thereto, and upon surrender of such certificate, if
mutilated, the Corporation will make and deliver a new certificate of like
tenor in lieu of such lost, stolen, destroyed or mutilated certificate.
B-4
3. Definitions
For the purposes of this Certificate of Designations, the following
terms shall have the meanings indicated:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Closing Price" shall mean, with respect to each share of any class
or series of capital stock for any day, (i) the last reported sale price
regular way or, in case no such sale takes place on such day, the
average of the closing bid and asked prices regular way, in either case
as reported on the principal national securities exchange on which such
class or series of capital stock is listed or admitted for trading or
(ii) if such class or series of capital stock is not listed or admitted
for trading on any national securities exchange, the last reported sale
price or, in case no such sale takes place on such day, the average of
the highest reported bid and the lowest reported asked quotation for
such class or series of capital stock, in either case as reported on
NASDAQ or a similar service if NASDAQ is no longer reporting such
information.
"Common Stock" shall mean the Common Stock, $.01 par value per
share, of the Corporation.
"Invested Amount" means, as of any date with respect to each share
of Series C Preferred Stock held by any stockholder, an amount equal to
the quotient of (i) the aggregate paid-in capital actually paid with
respect to all shares of Series C Preferred Stock held by such
stockholder as of such date, and all shares of capital stock of TeleCorp
PCS, Inc. or its predecessors-in-interest, TeleCorp Wireless, Inc. and
Tritel, Inc., divided by (ii) the total number of shares of Series C
Preferred Stock held by such stockholder as of such date.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, right of first refusal or right of
others therein or encumbrance of any nature whatsoever in respect of
such asset.
"Liquidation Preference" shall mean, as of any date, and subject to
adjustment for subdivisions or combinations affecting the number of
shares of Series C Preferred Stock, with respect to each share of Series
C Preferred Stock, the Invested Amount plus accrued and unpaid dividends
on such share (if any), plus an amount equal to interest on the Invested
Amount, at the rate of six percent (6%) per annum, compounded quarterly,
less the amount of dividends (if any) theretofore declared and paid in
respect of such share.
"Market Price" shall mean, with respect to each share of any class
or series of capital stock for any day, (i) the average of the daily
Closing Prices for the ten consecutive trading days commencing 15 days
before the day in question or (ii) if on such date the shares of such
class or series of capital stock are not listed or admitted for trading
on any national securities exchange and are not quoted on NASDAQ or any
similar service, the cash amount that a willing buyer would pay a
willing seller (neither acting under compulsion) in an arm's-length
transaction without time constraints per share of such class or series
of capital stock as of such date, viewing the Corporation on a going
concern basis, as determined in good faith by the Board of Directors of
the Corporation, whose determination shall be conclusive; provided that,
in determining such cash amount, the following shall be ignored: (i) any
contract or legal limitation in respect of shares of common stock or
preferred stock of the Corporation, including transfer, voting and other
rights, and (ii) any illiquidity arising by contract in respect of the
shares of common stock and any voting rights or control rights amongst
the stockholders.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
B-5
"Person" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint
stock company, governmental agency or political subdivision thereof or
other entity of any kind, and shall include any successor (by merger or
otherwise) of such entity.
"Series C Preferred Stock" has the meaning specified in Section
4.1.
"Series C Redemption Price" has the meaning specified in Section
1.5(a)(i).
"Subsidiary" shall mean, with respect to any Person, a corporation
or other entity of which 50% or more of the voting power of the voting
equity securities or equity interest is owned, directly or indirectly,
by such Person.
"Transfer" shall mean any direct or indirect transfer, sale,
assignment, pledge, encumbrance, tender, or otherwise grant, creation or
sufferage of a Lien in or upon, giving, placement in trust or otherwise
(including transfers by testamentary or intestate succession) disposing
of by operation of law or any short sale, collar, or hedging transaction
or other derivative transaction that has the effect of materially
changing the economic benefits and risks of ownership.
B-6
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed by the Secretary of the Corporation as of October , 2001.
AT&T WIRELESS SERVICES, INC.
By
------------------------------------
Name:
Title:
B-7
APPENDIX C
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF OF
SERIES E PREFERRED STOCK OF
AT&T WIRELESS SERVICES, INC.
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
AT&T Wireless Services, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority conferred upon the Board of Directors
of the Corporation pursuant to its Amended and Restated Certificate of
Incorporation, and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation, at a meeting duly called and held on October 7, 2001, duly approved
and adopted the following resolution which resolution remains in full force and
effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
by the Amended and Restated Certificate of Incorporation of the Corporation, the
Board of Directors does hereby designate, create, authorize and provide for the
issue of preferred stock having a par value of $0.01 per share which shall be
designated Series E Preferred Stock (the "Series E Preferred Stock") consisting
of up to 30,000 shares, which shall be issued pursuant to that certain Agreement
and Plan of Merger, dated as of October 7, 2001, between the Corporation and
TeleCorp PCS, Inc., and shall have the powers, preferences and relative,
optional and other special rights, and qualifications, limitations and
restrictions thereon as follows:
1. Powers, Preferences and Rights of Series E Preferred Stock
The powers, preferences and rights of the Series E Preferred Stock and
the qualifications, limitations and restrictions thereof are as follows:
(a) Ranking
The Series E Preferred Stock shall rank (i) junior to the Series C
Preferred Stock, par value $.01 per share (the "Series C Preferred
Stock"), of the Corporation, with respect to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up
and (ii) senior to the Common Stock and any series or class of the
Corporation's common or preferred stock, now or hereafter authorized
(other than the Series C Preferred Stock), with respect to the payment
of dividends and the distribution of assets on liquidation, dissolution
or winding up.
(b) Dividends
Holders of Series E Preferred Stock shall be entitled to dividends
in cash or property when, as and if, declared by the Board of Directors
of the Corporation; provided that, in no event shall dividends in excess
of the Liquidation Preference be declared or paid. So long as shares of
Series E Preferred Stock are outstanding and dividends payable on shares
of Series E Preferred Stock have not been paid in full in cash, the
Corporation shall not declare or pay cash dividends on, or redeem,
purchase or otherwise acquire for consideration, any shares of any class
of common stock or series of preferred stock ranking junior to or on a
parity with the Series E Preferred Stock, except that the Corporation
may acquire, in accordance with the terms of any agreement between the
Corporation and its employees, shares of Common Stock or Preferred Stock
at a price not greater than the Market Price as of such date.
C-1
(c) Liquidation Preference
(i) In the event of any liquidation, dissolution or winding up
of the Corporation, the holders of Series E Preferred Stock shall be
entitled to receive out of the assets of the Corporation, whether
such assets are capital or surplus of any nature, after payment is
made to holders of all series of preferred stock ranking senior to
the Series E Preferred Stock with respect to rights on liquidation,
dissolution or winding up, but before any payment shall be made or
any assets distributed to the holders of Common Stock or any series
of preferred stock ranking junior to the Series E Preferred Stock
with respect to rights on liquidation, dissolution or winding up, an
amount equal to the Liquidation Preference and no more.
(ii) If upon any liquidation, dissolution or winding up of the
Corporation the assets of the Corporation to be distributed are
insufficient to permit the payment to all holders of Series E
Preferred Stock and any other series of preferred stock ranking on a
parity with Series E Preferred Stock with respect to rights on
liquidation, dissolution or winding up, to receive their full
preferential amounts, the entire assets of the Corporation shall be
distributed among the holders of Series E Preferred Stock and all
such other series ratably in accordance with their respective
Liquidation Preference.
(iii) Neither the consolidation or merger of the Corporation
with or into any other Person nor the sale or other distribution to
another Person of all or substantially all the assets, property or
business of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this
Section 1(c).
(d) Voting Rights
(i) The holders of shares of Series E Preferred Stock shall be
entitled to such voting rights as hereinafter provided, and shall be
entitled to notice of any stockholders' meeting and to vote upon such
matters as provided herein and in the Bylaws of the Corporation, and
as may be provided by law. Holders of Series E Preferred Stock shall
not be entitled to cumulate their votes for any purpose. Except as
otherwise required by law or provided herein, regardless of the
number of shares of Series E Preferred Stock then outstanding, the
holders of the Series E Preferred Stock shall be entitled in the
aggregate to 251,189 votes, voting as a class with the Common Stock
of the Corporation, and the number of votes or fractional votes to
which each share of Series E Preferred Stock shall be entitled shall
be the quotient determined by dividing 251,189 by the number of
shares of such Series E Preferred Stock then outstanding.
(ii) In any matter requiring a separate class vote of holders of
Series E Preferred Stock or a separate vote of two or more series of
preferred stock voting together as a single class, for the purposes
of such a class vote, each share of Series E Preferred Stock shall be
entitled to one vote per share.
(iii) The affirmative vote of holders of not less than a
majority of Series E Preferred Stock shall be required to (A)
authorize, increase the authorized number of shares of or issue
(including on conversion or exchange of any convertible or
exchangeable securities or by reclassification) any shares of any
class or classes of stock ranking senior to or pari passu with the
Series E Preferred Stock or any additional shares of Series E
Preferred Stock, (B) authorize, adopt or approve each amendment to
the Amended and Restated Certificate of Incorporation of the
Corporation that would increase or decrease the par value of the
shares of Series E Preferred Stock, alter or change the powers,
preferences or rights of the shares of Series E Preferred Stock or
alter or change the powers, preferences or rights of any other
capital stock of the Corporation if such alteration or change results
in such capital stock ranking senior to or pari passu with the Series
E Preferred Stock, (C) amend, alter or repeal any provision of the
Amended and Restated Certificate of Incorporation of the Corporation
so as to affect the shares of Series E Preferred Stock adversely, or
C-2
(D) authorize or issue any security convertible into, exchangeable
for or evidencing the right to purchase or otherwise receive any
shares of any class or classes of stock senior to or pari passu with
the Series E Preferred Stock.
(e) Redemption at Option of the Corporation
The Corporation shall have the right to redeem shares of Series E
Preferred Stock pursuant to the following provisions:
(i) Subject to the restrictions set forth in Section 1(g)(i),
the Corporation shall have the right, at its sole option and
election, to redeem the shares of the Series E Preferred Stock, in
whole but not in part, at any time at a redemption price per share
(the "Series E Redemption Price") equal to the Liquidation Preference
thereof as of the redemption date; provided, that if the funds
legally available to the Corporation are insufficient to effect the
redemption of the Series E Preferred Stock in full, such funds shall
be allocated among the shares of Series E Preferred Stock ratably in
accordance with the number of shares of such Series outstanding as of
the redemption date;
(ii) Notice of any redemption of the Series E Preferred Stock
shall be mailed at least ten but not more than 60 days prior to the
date fixed for redemption to each holder of Series E Preferred Stock
to be redeemed, at such holder's address as it appears on the books
of the Corporation. In order to facilitate the redemption of the
Series E Preferred Stock, the Board of Directors of the Corporation
may fix a record date for the determination of holders of Series E
Preferred Stock to be redeemed, or may cause the transfer books of
the Corporation to be closed for the transfer of the Series E
Preferred Stock, not more than 60 days prior to the date fixed for
such redemption;
(iii) Within two Business Days after the redemption date
specified in the notice given pursuant to paragraph (ii) above and
the surrender of the certificate(s) representing shares of Series E
Preferred Stock, the Corporation shall pay to the holder of the
shares being redeemed the Series E Redemption Price therefor. Such
payment shall be made by wire transfer of immediately available funds
to an account designated by such holder or by overnight delivery (by
a nationally recognized courier) of a bank check to such holder's
address as it appears on the books of the Corporation; and
(iv) Effective upon the date of the notice given pursuant to
paragraph (ii) above, notwithstanding that any certificate for such
shares shall not have been surrendered for cancellation, the shares
represented thereby shall no longer be deemed outstanding, the rights
to receive dividends thereon shall cease to accrue from and after the
date of redemption designated in the notice of redemption and all
rights of the holders of the shares of the Series E Preferred Stock
called for redemption shall cease and terminate, excepting only the
right to receive the Series E Redemption Price therefor in accordance
with paragraph (iii) above.
(f) Redemption at Option of Holder
(i) No holder of shares of Series E Preferred Stock shall have
any right to require the Corporation to redeem any shares of Series E
Preferred Stock prior to, with respect to any shares of the Series E
Preferred Stock, December 13, 2020. Thereafter, subject to the
restrictions set forth in Section 1(g)(i), each holder of shares of
Series E Preferred Stock shall have the right, at the sole option and
election of such holder, to require the Corporation to redeem all
(but not less than all) of the shares of Series E Preferred Stock
owned by such holder at a price per share equal to the Series E
Redemption Price;
(ii) The holder of any shares of the Series E Preferred Stock
may exercise such holder's right to require the Corporation to redeem
such shares by surrendering for such purpose to the Corporation, at
its principal office or at such other office or agency
C-3
maintained by the Corporation for that purpose, certificates
representing the shares of Series E Preferred Stock to be redeemed,
accompanied by a written notice stating that such holder elects to
require the Corporation to redeem all (but not less than all) of such
shares in accordance with the provisions of this Section 1(f), which
notice may specify an account for delivery of the Series E Redemption
Price;
(iii) Within two Business Days after the surrender of such
certificates, the Corporation shall pay to the holder of the shares
being redeemed the Series E Redemption Price therefor. Such payment
shall be made by wire transfer of immediately available funds to an
account designated by such holder or by overnight delivery (by a
nationally recognized courier) of a bank check to such holder's
address as it appears on the books of the Corporation; and
(iv) Such redemptions shall be deemed to have been made at the
close of business on the date of the receipt of such notice and of
such surrender of the certificates representing the shares of the
Series E Preferred Stock to be redeemed and the rights of the holder
thereof, except for the right to receive the Series E Redemption
Price therefor in accordance herewith, shall cease on such date of
receipt and surrender.
(g) Certain Restrictions
(i) Notwithstanding the provisions of Section 1(b) or Section
1(f), cash dividends on the Series E Preferred Stock may not be
declared, paid or set apart for payment, nor may the Corporation
redeem, purchase or otherwise acquire any shares of Series E
Preferred Stock, if (A) the Corporation is not solvent or would be
rendered insolvent thereby or (B) at such time as the terms and
provisions of any law or agreement of the Corporation, including any
agreement relating to its indebtedness, specifically prohibit such
declaration, payment or setting apart for payment or such redemption,
purchase or other acquisition, or provide that such declaration,
payment or setting apart for payment or such redemption, purchase or
other acquisition would constitute a violation or breach thereof or a
default thereunder.
(ii) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any other Person, to make any distribution with
respect to, or purchase or otherwise acquire for consideration, any
shares of Common Stock or other shares of capital stock of the
Corporation ranking junior to or on a parity basis with the Series E
Preferred Stock unless the Corporation could, pursuant to paragraph
(i) above, make such distribution or purchase or otherwise acquire
such shares at such time and in such manner.
2. Share Certificates
(a) Each certificate representing the shares of Series E Preferred
Stock or delivered in substitution or exchange for any of the foregoing
certificates shall be stamped with a legend in substantially the following
form, to the extent that such legend is applicable pursuant to the
provisions hereof:
"The securities represented by this Certificate have been acquired
for investment and have not been registered under the Securities Act
of 1933, as amended (the "Act"), or under any state securities or
'Blue Sky' laws. Said securities may not be sold, transferred,
assigned, pledged, hypothecated or otherwise disposed of, unless and
until registered under the Act and the rules and regulations
thereunder and all applicable state securities or 'Blue Sky' laws or
exempted therefrom under the Act and all applicable state securities
or 'Blue Sky' laws."
(b) Upon receipt of evidence reasonably satisfactory to the
Corporation of the loss, theft, destruction or mutilation of any
certificate representing shares of Series E Preferred Stock subject to this
Agreement and of a bond or other indemnity reasonably satisfactory to the
Corporation, and upon reimbursement to the Corporation of all reasonable
expenses incident thereto, and upon surrender of
C-4
such certificate, if mutilated, the Corporation will make and deliver a new
certificate of like tenor in lieu of such lost, stolen, destroyed or
mutilated certificate.
3. Definitions
For the purposes of this Certificate of Designations, the following
terms shall have the meanings indicated:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Closing Price" shall mean, with respect to each share of any class
or series of capital stock for any day, (i) the last reported sale price
regular way or, in case no such sale takes place on such day, the
average of the closing bid and asked prices regular way, in either case
as reported on the principal national securities exchange on which such
class or series of capital stock is listed or admitted for trading or
(ii) if such class or series of capital stock is not listed or admitted
for trading on any national securities exchange, the last reported sale
price or, in case no such sale takes place on such day, the average of
the highest reported bid and the lowest reported asked quotation for
such class or series of capital stock, in either case as reported on
NASDAQ or a similar service if NASDAQ is no longer reporting such
information.
"Common Stock" shall mean the Common Stock, $.01 par value per
share, of the Corporation.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, right of first refusal or right of
others therein or encumbrance of any nature whatsoever in respect of
such asset.
"Liquidation Preference" shall mean, as of any date, and subject to
adjustment for subdivisions or combinations affecting the number of
shares of Series E Preferred Stock, with respect to each share of Series
E Preferred Stock, accrued and unpaid dividends thereon (if any), plus
an amount equal to interest on $1,000 at the rate of six percent (6%)
per annum, compounded quarterly, from the date of issuance of such share
and, with respect to shares of Series E Preferred Stock received in
exchange for any share of capital stock of any predecessor-in-interest
to TeleCorp PCS, Inc. or its Subsidiaries, the date when such capital
stock was issued, to and including the date of the calculation, less the
amount of dividends (if any) theretofore declared and paid in respect of
such share.
"Market Price" shall mean, with respect to each share of any class or
series of capital stock for any day, (i) the average of the daily Closing Prices
for the ten consecutive trading days commencing 15 days before the day in
question or (ii) if on such date the shares of such class or series of capital
stock are not listed or admitted for trading on any national securities exchange
and are not quoted on NASDAQ or any similar service, the cash amount that a
willing buyer would pay a willing seller (neither acting under compulsion) in an
arm's-length transaction without time constraints per share of such class or
series of capital stock as of such date, viewing the Corporation on a going
concern basis, as determined in good faith by the Board of Directors of the
Corporation, whose determination shall be conclusive; provided that, in
determining such cash amount, the following shall be ignored: (i) any contract
or legal limitation in respect of shares of common stock or preferred stock of
the Corporation, including transfer, voting and other rights, and (ii) any
illiquidity arising by contract in respect of the shares of common stock and any
voting rights or control rights amongst the stockholders.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Person" shall mean any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
governmental agency or political subdivision thereof or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
C-5
"Series C Preferred Stock" has the meaning specified in Section 1(a).
"Series E Preferred Stock" has the meaning specified in the preamble
hereto.
"Series E Redemption Price" has the meaning specified in Section 1(e).
"Subsidiary" shall mean, with respect to any Person, a corporation or other
entity of which 50% or more of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
"Transfer" shall mean any direct or indirect transfer, sale, assignment,
pledge, encumbrance, tender, or otherwise grant, creation or sufferage of a Lien
in or upon, giving, placement in trust or otherwise (including transfers by
testamentary or intestate succession) disposing of by operation of law or any
short sale, collar, or hedging transaction or other derivative transaction that
has the effect of materially changing the economic benefits and risks of
ownership.
C-6
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed by the Secretary of the Corporation as of October , 2001.
AT&T WIRELESS SERVICES, INC.
By
------------------------------------
Name:
Title:
C-7
APPENDIX D
LEHMAN BROTHERS
October 7, 2001
Board of Directors
TeleCorp PCS, Inc.
1010 North Glebe Road
Suite 800
Arlington, Virginia 22201
Members of the Board:
We understand that TeleCorp PCS, Inc., a Delaware corporation ("TeleCorp"
or the "Company"), and AT&T Wireless Services, Inc., a Delaware corporation
("AT&T Wireless"), are proposing to enter into an agreement pursuant to which a
newly formed subsidiary of AT&T Wireless ("Acquisition Sub") will merge with and
into TeleCorp (the "Proposed Merger"), and upon the effectiveness of the
Proposed Merger, except for shares held in treasury, shares owned by AT&T
Wireless and Dissenting Shares (as defined in the Agreement referred to below),
(i) each outstanding share of Class A Voting Common Stock, par value $0.01 per
share, of the Company (the "Class A Common Stock") will be converted into the
right to receive 0.9 shares of common stock, par value $0.01 per share, of AT&T
Wireless (the "Wireless Common Stock"), (ii) each outstanding share of Class C
Common Stock, par value $0.01 per share, of the Company (the "Class C Common
Stock") will be converted into the right to receive 0.9 shares of Wireless
Common Stock, (iii) each outstanding share of Class D Common Stock, par value
$0.01 per share, of the Company (the "Class D Common Stock") will be converted
into the right to receive 0.9 shares of Wireless Common Stock, (iv) each
outstanding share of Class E Common Stock, par value $0.01 per share, of the
Company (the "Class E Common Stock") will be converted into the right to receive
0.9 shares of Wireless Common Stock, and (v) each outstanding share of Class F
Common Stock, par value $0.01 per share, of the Company (the "Class F Common
Stock", and together with the Class A Common Stock, the Class C Common Stock,
the Class D Common Stock and the Class E Common Stock, the "Common Stock") will
be converted into the right to receive 0.9 shares of Wireless Common Stock. For
purposes of this opinion, the number of shares of Wireless Common Stock into
which shares of each class of Common Stock will be converted in the Proposed
Merger is referred to herein as the "Exchange Ratio." We understand that AT&T
Wireless beneficially owns approximately 23% of the Common Stock prior to the
Proposed Merger. The terms and conditions of the Proposed Merger are set forth
in more detail in the Agreement and Plan of Merger, dated as of the date hereof
(the "Agreement"), by and among TeleCorp, AT&T Wireless and Acquisition Sub.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
holders of the Common Stock, other than AT&T Wireless, of the Exchange Ratio to
be received by such holders in the Proposed Merger. We have not been requested
to opine as to, and our opinion does not in any manner address, the Company's
underlying business decision to proceed with or effect the Proposed Merger.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Merger, (2) publicly available information
concerning the Company and AT&T Wireless that we believe to be relevant to our
analysis, including, without limitation, their respective Forms 10-K for the
year ended December 31, 2000 and Forms 10-Q for the quarters ended March 31,
2001 and June 30, 2001, (3) financial and operating information with respect to
the businesses, operations and prospects of the Company and AT&T Wireless
furnished to us by the Company and AT&T Wireless, (4) trading histories of the
Class A Common Stock and Wireless Common Stock and a comparison of those trading
histories with each other and with those of other companies that we deemed
relevant, (5) a comparison of the historical financial results and present
financial condition of the Company and AT&T Wireless with
D-1
those of other companies we deemed relevant, (6) a comparison of the financial
terms of the Proposed Merger with the financial terms of certain other
transactions that we deemed relevant, (7) published earnings estimates,
valuation analyses and target price estimates of third party research analysts
with respect to the Company and AT&T Wireless, (8) certain agreements with
respect to the outstanding indebtedness or obligations of the Company, (9)
information provided to us by the Company and its legal advisor regarding
contractual rights of AT&T Wireless with respect to the sale of the Company and
(10) the relative contribution of TeleCorp, on a pro forma basis, to AT&T
Wireless following consummation of the Proposed Merger. In addition, we have had
discussions with the managements of the Company and AT&T Wireless concerning
their respective businesses, operations, assets, financial condition and
prospects and have undertaken such other studies, analyses and investigations as
we have deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of managements of the Company and AT&T
Wireless that they are not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the financial
projections of the Company, upon advice of the Company, we have assumed that
such projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company, and we have reviewed such
projections in performing our analysis. Upon advice of the Company, however, we
have assumed that the published earnings estimates of third party research
analysts are a more reasonable basis upon which to evaluate the future
performance of the Company and that the Company will perform substantially in
accordance with such estimates. We have not been provided with, and did not have
access to, financial projections of AT&T Wireless prepared by the management of
AT&T Wireless.
Accordingly, upon advice of AT&T Wireless, we have assumed that the
published earnings estimates of third party research analysts are a reasonable
basis upon which to evaluate the future financial performance of AT&T Wireless
and that AT&T Wireless will perform substantially in accordance with such
estimates. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of the Company or AT&T Wireless and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of the Company or AT&T Wireless. In addition, you have not
authorized us to solicit, and we have not solicited, any indications of interest
from any third party with respect to a purchase of the Company. Upon advice of
the Company and its legal and accounting advisors, we have assumed that the
Proposed Merger will qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and therefore
as a tax-free transaction to the holders of the Common Stock. We have further
assumed (i) that the representations and warranties of each party contained in
the Agreement and the other agreements executed in connection therewith are true
and correct, that each party will perform all of the covenants and agreements
required to be performed by it thereunder and that all conditions to the
consummation of the Proposed Merger will be satisfied without waiver thereof and
(ii) that the Proposed Merger and other transactions contemplated by the
Agreement will be consummated as described in the Agreement. We have further
assumed that all material governmental, regulatory or other consents and
approvals necessary for the consummation of the Proposed Merger will be obtained
without any adverse effect on the Company or AT&T Wireless or on the
contemplated benefits of the Proposed Merger. Our opinion necessarily is based
upon market, economic and other conditions as they exist, and can be evaluated
as of, the date of this letter.
In addition, with your consent, we have assumed that each of the Class C
Common Stock, Class D Common Stock, Class E Common Stock and Class F Common
Stock are equivalent in value to the Class A Common Stock for purposes of
rendering this opinion. We also express no opinion as to the prices at which
shares of Common Stock or Wireless Common Stock may trade at any time prior to
or following the consummation of the Proposed Merger.
D-2
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio to be
received by the holders of the Common Stock, other than AT&T Wireless, in the
Proposed Merger is fair to such holders.
We have acted as financial advisor to the Company in connection with the
Proposed Merger and we will receive a fee for our services, a significant
portion of which is contingent upon its consummation. In addition, the Company
has agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past and have received customary fees for such
services. In the ordinary course of our business, we actively trade in the debt
and equity securities of the Company and AT&T Wireless for our own account and
for the accounts of our customers and, accordingly, may at any time hold a long
or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Merger. This opinion is not intended to be and
does not constitute a recommendation to any stockholder of the Company as to how
such stockholder should vote with respect to the Proposed Merger.
Very truly yours,
LEHMAN BROTHERS
D-3
LEHMAN BROTHERS
October 7, 2001
Board of Directors
TeleCorp PCS, Inc.
1010 North Glebe Road
Suite 800
Arlington, Virginia 22201
Members of the Board:
We understand that TeleCorp PCS, Inc., a Delaware corporation ("TeleCorp"
or the "Company"), and AT&T Wireless Services, Inc., a Delaware corporation
("AT&T Wireless"), are proposing to enter into an agreement pursuant to which a
newly formed subsidiary of AT&T Wireless ("Acquisition Sub") will merge with and
into TeleCorp (the "Proposed Merger"), and upon the effectiveness of the
Proposed Merger, except for shares held in treasury, shares owned by AT&T
Wireless and Dissenting Shares (as defined in the Agreement referred to below),
(i) each outstanding share of TeleCorp Common Stock (as defined in the Agreement
referred to below) will be converted into the right to receive 0.9 shares of
common stock, par value $0.01 per share, of AT&T Wireless (the "Wireless Common
Stock"), (ii) each outstanding share of Series C Preferred Stock, par value
$0.01 per share, of the Company (the "Series C Preferred Stock") will be
converted into one share of Series C Preferred Stock of AT&T Wireless (the
"Series C Preferred Exchange Ratio"), and (iii) each outstanding share of Series
E Preferred Stock, par value $0.01 per share, of the Company (the "Series E
Preferred Stock") will be converted into one share of Series E Preferred Stock
of AT&T Wireless (the "Series E Preferred Exchange Ratio"). We understand that
AT&T Wireless beneficially owns approximately 23% of the TeleCorp Common Stock
prior to the Proposed Merger. The terms and conditions of the Proposed Merger
are set forth in more detail in the Agreement and Plan of Merger, dated as of
the date hereof (the "Agreement"), by and among TeleCorp, AT&T Wireless and
Acquisition Sub.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, (i) to
the holders of the Series C Preferred Stock, other than AT&T Wireless, of the
Series C Preferred Exchange Ratio to be received by such holders in the Proposed
Merger and (ii) to the holders of the Series E Preferred Stock, other than AT&T
Wireless, of the Series E Preferred Exchange Ratio to be received by such
holders in the Proposed Merger. We have not been requested to opine as to, and
our opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Merger.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Merger, (2) the terms of the Series C
Preferred Stock and the Series E Preferred Stock, (3) publicly available
information concerning the Company and AT&T Wireless that we believe to be
relevant to our analysis, including, without limitation, their respective Forms
10-K for the year ended December 31, 2000 and Forms 10-Q for the quarters ended
March 31, 2001 and June 30, 2001, (4) financial and operating information with
respect to the businesses, operations and prospects of the Company and AT&T
Wireless furnished to us by the Company and AT&T Wireless, (5) a comparison of
the historical financial results and present financial condition of the Company
and AT&T Wireless with those of other companies we deemed relevant, (6)
published earnings estimates, valuation analyses and target price estimates of
third party research analysts with respect to the Company and AT&T Wireless, (7)
certain agreements with respect to the outstanding indebtedness or obligations
of the Company, (8) information provided by the Company and its legal advisor
regarding contractual rights of AT&T Wireless with respect to the sale of the
Company and (9) published reports of certain internationally recognized credit
rating agencies relating to the Company and AT&T Wireless. In addition, we have
had discussions with the managements of the Company and AT&T Wireless concerning
their respective
D-4
businesses, operations, assets, financial condition and prospects and have
undertaken such other studies, analyses and investigations as we have deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of managements of the Company and AT&T
Wireless that they are not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the financial
projections of the Company, upon advice of the Company, we have assumed that
such projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company and we have reviewed such
projections in performing our analysis. Upon advice of the Company, however, we
have assumed that the published earnings estimates of third party research
analysts are a more reasonable basis on which to evaluate the future performance
of the Company and that the Company will perform substantially in accordance
with such estimates. We have not been provided with, and did not have access to,
financial projections of AT&T Wireless prepared by the management of AT&T
Wireless. Accordingly, upon advice of AT&T Wireless, we have assumed that the
published earnings estimates of third party research analysts are a reasonable
basis upon which to evaluate the future financial performance of AT&T Wireless
and that AT&T Wireless will perform substantially in accordance with such
estimates. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of the Company or AT&T Wireless and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of the Company or AT&T Wireless. Upon advice of the Company and its
legal and accounting advisors, we have assumed that the Proposed Merger will
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and as a tax-free transaction to the
holders of the Series C Preferred Stock and the Series E Preferred Stock. We
have further assumed (i) that the representations and warranties of each party
contained in the Agreement and the other agreements executed in connection
therewith are true and correct, that each party will perform all of the
covenants and agreements required to be performed by it thereunder and that all
conditions to the consummation of the Proposed Merger will be satisfied without
waiver thereof, (ii) that the terms of the preferred stock of AT&T Wireless to
be issued in the Proposed Merger upon conversion of Series C Preferred Stock and
Series E Preferred Stock will be substantially identical to the terms of the
Series C Preferred Stock and Series E Preferred Stock respectively, and (iii)
the Proposed Merger and other transactions contemplated by the Agreement will be
consummated as described in the Agreement. We have further assumed that all
material governmental, regulatory or other consents and approvals necessary for
the consummation of the Proposed Merger will be obtained without any adverse
effect on the Company or AT&T Wireless or on the contemplated benefits of the
Proposed Merger. Our opinion necessarily is based upon market, economic and
other conditions as they exist, and can be evaluated as of, the date of this
letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, (i) the Series C Preferred
Exchange Ratio to be received by the holders of the Series C Preferred Stock,
other than AT&T Wireless, in the Proposed Merger is fair to such holders and
(ii) the Series E Preferred Exchange Ratio to be received by the holders of the
Series E Preferred Stock, other than AT&T Wireless, in the Proposed Merger is
fair to such holders.
We have acted as financial advisor to the Company in connection with the
Proposed Merger and we will receive a fee for our services, a significant
portion of which is contingent upon its consummation. In addition, the Company
has agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past and have received customary fees for such
services. In the ordinary course of our business, we actively trade in the debt
and equity securities of the Company and AT&T Wireless for our own account and
for the accounts of our customers and, accordingly, may at any time hold a long
or short position in such securities.
This opinion is solely for the use and benefit of the Board of Directors of
the Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Merger is not
D-5
intended to be and does not constitute a recommendation to any stockholder of
the Company as to how such stockholder should vote with respect to the Proposed
Merger.
Very truly yours,
LEHMAN BROTHERS
D-6
APPENDIX E
October 7, 2001
The Board of Directors
TeleCorp PCS, Inc.
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the Common Stock (as defined below), other than the
Merger Partner referred to below, of the Exchange Ratio (as defined below) of
TeleCorp PCS, Inc. (the "Company") in the proposed merger (the "Proposed
Merger") of the Company with a wholly-owned subsidiary of AT&T Wireless
Services, Inc. (the "Merger Partner"). Pursuant to the Agreement and Plan of
Merger, dated as of October 7, 2001 (the "Agreement"), among the Company, the
Merger Partner and a wholly owned subsidiary of the Merger Partner ("Merger
Sub"), the Company will merge with Merger Sub and become a wholly-owned
subsidiary of the Merger Partner, and, among other things, except for shares
held in treasury, shares owned by the Merger Partner and Dissenting Shares (as
defined in the Agreement), (i) each outstanding share of Class A Voting Common
Stock, par value $0.01 per share, of the Company (the "Class A Common Stock")
will be converted into the right to receive 0.9 shares of the common stock, par
value $0.01 per share, of the Merger Partner (the "Merger Partner Common
Stock"), (ii) each outstanding share of Class C Common Stock, par value $0.01
per share, of the Company (the "Class C Common Stock") will be converted into
the right to receive 0.9 shares of the Merger Partner Common Stock, (iii) each
outstanding share of Class D Common Stock, par value $0.01 per share, of the
Company (the "Class D Common Stock") will be converted into the right to receive
0.9 shares of the Merger Partner Common Stock, (iv) each outstanding share of
Class E Common Stock, par value $0.01 per share, of the Company (the "Class E
Common Stock") will be converted into the right to receive 0.9 shares of the
Merger Partner Common Stock, and (v) each outstanding share of Class F Common
Stock, par value $0.01 per share, of the Company (the "Class F Common Stock",
and together with the Class A Common Stock, the Class C Common Stock, the Class
D Common Stock and the Class E Common Stock, the "Common Stock") will be
converted into the right to receive 0.9 shares of the Merger Partner Common
Stock. For purposes of this opinion, the number of shares of Merger Partner
Common Stock into which shares of each class of Common Stock will be converted
in the Proposed Merger is referred to herein as the "Exchange Ratio." We
understand that the Merger Partner beneficially owns approximately 23% of the
Common Stock prior to the Proposed Merger.
In arriving at our opinion, we have (i) reviewed the Agreement; (ii)
reviewed certain publicly available business and financial information we deemed
relevant concerning the Company and the Merger Partner and the industries in
which they operate; (iii) compared the proposed financial terms of the Proposed
Merger with the publicly available financial terms of certain transactions
involving companies we deemed relevant and the consideration received for such
companies; (iv) compared the financial and operating performance of the Company
and the Merger Partner with publicly available information concerning certain
other companies we deemed relevant; (v) reviewed the current and historical
market prices of the Common Stock and the Merger Partner Common Stock and
certain publicly traded securities of such other companies; (vi) reviewed
certain internal financial analyses and forecasts prepared by the management of
the Company relating to its business; (vii) reviewed published earnings
estimates, valuation analyses and target price estimates of third party research
analysts with respect to the future financial performance of the Company and the
Merger Partner; (viii) reviewed certain agreements with respect to the
outstanding indebtedness or obligations of the Company and information provided
to us by the Company and its legal advisor regarding contractual rights of the
Merger Partner with respect to the sale of the Company; and (ix) performed such
other financial studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
E-1
In addition, we have held discussions with certain members of the
management of the Company and the Merger Partner with respect to certain aspects
of the Proposed Merger, the past and current business operations of the Company
and the Merger Partner, the financial condition and future prospects and
operations of the Company and the Merger Partner, the effects of the Proposed
Merger on the financial condition and future prospects of the Company and the
Merger Partner, and certain other matters we believed necessary or appropriate
to our inquiry.
In giving our opinion, we have relied upon and assumed, without assuming
any responsibility for independent verification, the accuracy and completeness
of all information that was publicly available or was furnished to or discussed
with us by the Company and the Merger Partner or otherwise reviewed by us, and
we have not assumed any responsibility or liability therefor. We have not
conducted any valuation or appraisal of any assets or liabilities, nor have any
such valuations or appraisals been provided to us. In relying on financial
analyses and forecasts provided to us, we have assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future results of
operations and financial condition of the Company to which such analyses or
forecasts relate. We have, however, also considered published earnings estimates
of third party research analysts and, with your consent, have assumed that the
combination of management guidance, such estimates and our own analysis provides
a more reasonable basis to evaluate the future performance of the Company than
do the financial projections prepared by the Company alone. We have not been
provided with, and did not have access to, financial projections of the Merger
Partner prepared by the management of the Merger Partner. Accordingly, upon
advice of the Merger Partner and with the consent of the Company, we have
assumed that the published earnings estimates of third party research analysts
are a reasonable basis upon which to evaluate the future financial performance
of the Merger Partner. With your consent, we have assumed that each of the Class
C Common Stock, Class D Common Stock, Class E Common Stock and Class F Common
Stock are equivalent in value to the Class A Common Stock for purposes of
rendering this opinion. Upon advice of the Company and its legal and accounting
advisors, we have assumed that the Proposed Merger will qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, and as a tax-free transaction to the holders of the Common
Stock. For purposes of rendering our opinion we have also assumed, in all
respects material to our analysis, (i) that the representations and warranties
of each party contained in the Agreement and the other agreements executed in
connection therewith are true and correct, that each party will perform all of
the covenants and agreements required to be performed by it thereunder and that
all conditions to the consummation of the Proposed Merger will be satisfied
without waiver thereof and (ii) that the Proposed Merger and other transactions
contemplated by the Agreement will be consummated as described in the Agreement.
We have further assumed that all material governmental, regulatory or other
consents and approvals necessary for the consummation of the Proposed Merger
will be obtained without any adverse effect on the Company or the Merger Partner
or on the contemplated benefits of the Proposed Merger. We have relied as to all
legal matters relevant to rendering our opinion upon the advice of counsel. Our
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise or reaffirm
this opinion. Our opinion is limited to the fairness, from a financial point of
view, to the holders of the Common Stock, other than the Merger Partner, of the
Exchange Ratio in the Proposed Merger, and we express no opinion as to the
underlying decision by the Company to engage in the Proposed Merger. We are
expressing no opinion herein as to the price at which any shares of Common Stock
or the Merger Partner Common Stock may trade at any time prior to or following
the consummation of the Proposed Merger.
We note that we were not authorized to and did not solicit any expressions
of interest from any other parties with respect to the sale of all or any part
of the Company or any other alternative transaction. Consequently, no opinion is
expressed as to whether any alternative transaction might produce
E-2
consideration for the Company's shareholders in an amount in excess of that
contemplated in the Proposed Merger.
We have acted as financial advisor to the Company with respect to the
Proposed Merger and will receive a fee from the Company for our services, a
significant portion of which is contingent upon its consummation. We note that,
in connection with such services, we are also rendering fairness opinions to the
Company with respect to (i) the respective exchange ratios applicable to certain
series of the Company's Preferred Stock in the Proposed Merger and (ii) the
effects of the Proposed Merger on the Company's 11% Senior Subordinated Discount
Notes due 2011. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. As we have previously advised you,
JPMorgan Partners, our affiliate, owns approximately 7.3% of the capital stock
of the Company. In addition, Michael R. Hannon, a partner of JPMorgan Partners,
is a member of the Board of Directors of the Company. As we have also previously
advised you, we and our affiliates, in the ordinary course of business, have
from time to time provided and in the future may continue to provide, for
customary compensation, commercial and investment banking services to the
Company, the Merger Partner and their respective affiliates, and in that regard
our affiliate, The Chase Manhattan Bank, currently acts as agent and bank under
the respective bank credit facilities of the Company and the Merger Partner. In
the ordinary course of our businesses, we and our affiliates may actively trade
the debt and equity securities or senior loans of the Company or the Merger
Partner for our own account or for the accounts of customers and, accordingly,
we may at any time hold long or short positions in such securities or loans.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Exchange Ratio in the Proposed Merger is fair, from a
financial point of view, to the holders of the Common Stock, other than the
Merger Partner.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Proposed Merger.
This opinion does not constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Proposed
Merger or any other matter. This opinion may not be disclosed, referred to, or
communicated (in whole or in part) to any third party for any purpose whatsoever
except with our prior written approval. This opinion may be reproduced in full
in any proxy or information statement mailed to shareholders of the Company but
may not otherwise be disclosed publicly in any manner without our prior written
approval.
Very truly yours,
J.P. MORGAN SECURITIES INC.
E-3
October 7, 2001
The Board of Directors
TeleCorp PCS, Inc.
1010 N. Glebe Road, Suite 800
Arlington, VA 22201
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point
of view, (i) to the holders of the Series C Preferred Stock (as defined below),
other than the Merger Partner (as defined below), of the Series C Preferred
Exchange Ratio (as defined below) and (ii) to the holders of the Series E
Preferred Stock (as defined below), other than the Merger Partner, of the Series
E Preferred Exchange Ratio (as defined below) in each case of TeleCorp PCS, Inc.
(the "Company") in the proposed merger (the "Proposed Merger") of the Company
with a wholly-owned subsidiary (the "Merger Sub") of AT&T Wireless Services,
Inc. (the "Merger Partner"). Pursuant to the Agreement and Plan of Merger, dated
as of October 7, 2001 (the "Agreement"), among the Company, the Merger Partner
and the Merger Sub, the Company will merge with Merger Sub and become a
wholly-owned subsidiary of the Merger Partner, and, among other things, except
for shares held in treasury, shares held by the Merger Partner and Dissenting
Shares (as defined in the Agreement), (i) each outstanding share of TeleCorp
Common Stock (as defined in the Agreement) will be converted into the right to
receive 0.9 shares of the common stock, par value $0.01 per share, of the Merger
Partner (the "Merger Partner Common Stock"), (ii) each outstanding share of
Series C Preferred Stock, par value $0.01 per share, of the Company (the "Series
C Preferred Stock") will be converted into one share of Series C Preferred Stock
of the Merger Partner (the "Series C Preferred Exchange Ratio"), and (iii) each
outstanding share of Series E Preferred Stock, par value $0.01 per share, of the
Company (the "Series E Preferred Stock") will be converted into one share of
Series E Preferred Stock of the Merger Partner (the "Series E Preferred Exchange
Ratio"). We understand that the Merger Partner beneficially owns approximately
23% of the TeleCorp Common Stock prior to the Proposed Merger.
In arriving at our opinion, we have (i) reviewed the Agreement; (ii)
reviewed the terms of the Series C Preferred Stock and the Series E Preferred
Stock; (iii) reviewed certain publicly available business and financial
information we deemed relevant concerning the Company and the Merger Partner and
the industries in which they operate; (iv) compared the financial and operating
performance of the Company and the Merger Partner with publicly available
information concerning certain other companies we deemed relevant; (v) reviewed
certain internal financial analyses and forecasts prepared by the management of
the Company relating to its business; (vi) reviewed published earnings
estimates, valuation analyses and target price estimates of third party research
analysts with respect to the future financial performance of the Company and the
Merger Partner; (vii) reviewed certain agreements with respect to the
outstanding indebtedness or obligations of the Company and information provided
to us by the Company and its legal advisor regarding contractual rights of the
Merger Partner with respect to the sale of the Company; (viii) reviewed
published reports of certain internationally recognized credit rating agencies
relating to the Company and the Merger Partner; and (ix) performed such other
financial studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the
management of the Company and the Merger Partner with respect to certain aspects
of the Proposed Merger, the past and current business operations of the Company
and the Merger Partner, the financial condition and future prospects and
operations of the Company and the Merger Partner, the effects of the Proposed
Merger on the financial condition and future prospects of the Company and the
Merger Partner, and certain other matters we believed necessary or appropriate
to our inquiry.
In giving our opinion, we have relied upon and assumed, without assuming
any responsibility for independent verification, the accuracy and completeness
of all information that was publicly available or was furnished to or discussed
with us by the Company and the Merger Partner or otherwise reviewed by
E-4
us, and we have not assumed any responsibility or liability therefor. We have
not conducted any valuation or appraisal of any assets or liabilities, nor have
any such valuations or appraisals been provided to us. In relying on financial
analyses and forecasts provided to us, we have assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future results of
operations and financial condition of the Company to which such analyses or
forecasts relate. We have, however, also considered published earnings estimates
of third party research analysts and, with your consent, have assumed that the
combination of management guidance, such estimates and our own analysis provides
a more reasonable basis to evaluate the future performance of the Company than
do the financial projections prepared by the Company alone. We have not been
provided with and did not have access to, financial projections of the Merger
Partner prepared by the management of the Merger Partner. Accordingly, upon
advice of the Merger Partner and with the consent of the Company, we have
assumed that the published earnings estimates of third party research analysts
are a reasonable basis upon which to evaluate the future financial performance
of the Merger Partner. Upon advice of the Company and its legal and accounting
advisors, we have assumed that the Proposed Merger will qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, and as a tax-free transaction to the holders of the Series
C Preferred Stock and Series E Preferred Stock. For purposes of rendering our
opinion we have also assumed, in all respects material to our analysis, (i) that
the representations and warranties of each party contained in the Agreement and
the other agreements executed in connection therewith are true and correct, that
each party will perform all of the covenants and agreements required to be
performed by it thereunder and that all conditions to the consummation of the
Proposed Merger will be satisfied without waiver thereof, (ii) that the terms of
the respective classes of preferred stock of the Merger Partner to be issued in
the Proposed Merger upon conversion of the Series C Preferred Stock and Series E
Preferred Stock will be substantially identical to the terms of the Series C
Preferred Stock and Series E Preferred Stock respectively, and (iii) that the
Proposed Merger and other transactions contemplated by the Agreement will be
consummated as described in the Agreement. We have further assumed that all
material governmental, regulatory or other consents and approvals necessary for
the consummation of the Proposed Merger will be obtained without any adverse
effect on the Company or the Merger Partner or on the contemplated benefits of
the Proposed Merger. We have relied as to all legal matters relevant to
rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise or reaffirm
this opinion. Our opinion is limited to the fairness, from a financial point of
view, (i) to the holders of the Series C Preferred Stock, other than the Merger
Partner, of the Series C Preferred Exchange Ratio and (ii) to the holders of the
Series E Preferred Stock, other than the Merger Partner, of the Series E
Preferred Exchange Ratio, in the Proposed Merger, and we express no opinion as
to the underlying decision by the Company to engage in the Proposed Merger. We
are expressing no opinion herein as to the price at which any shares of Series C
Preferred Stock, the Series E Preferred Stock or the Series C or Series E
Preferred Stock of the Merger Partner may trade at any time prior to or
following the consummation of the Proposed Merger.
We note that we were not authorized to and did not solicit any expressions
of interest from any other parties with respect to the sale of all or any part
of the Company or any other alternative transaction. Consequently, no opinion is
expressed as to whether any alternative transaction might produce consideration
for the Company's shareholders in an amount in excess of that contemplated in
the Proposed Merger.
We have acted as financial advisor to the Company with respect to the
Proposed Merger and will receive a fee from the Company for our services, a
significant portion of which is contingent upon the consummation of the Proposed
Merger. We note that, in connection with such services, we are also rendering
fairness opinions to the Company with respect to (i) the exchange ratio
applicable to the Telecorp Common Stock in the Proposed Merger and (ii) the
effects of the Proposed Merger on the
E-5
Company's 11% Senior Subordinated Discount Notes due 2011. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of our
engagement. As we have previously advised you, JPMorgan Partners, our affiliate,
owns approximately 7.3% of the capital stock of the Company. In addition,
Michael R. Hannon, a partner of JPMorgan Partners, is a member of the Board of
Directors of the Company. As we have also previously advised you, we and our
affiliates, in the ordinary course of business, have from time to time provided
and in the future may continue to provide, for customary compensation,
commercial and investment banking services to the Company, the Merger Partner
and their respective affiliates, and in that regard our affiliate, The Chase
Manhattan Bank, currently acts as agent and bank under the respective bank
credit facilities of the Company and the Merger Partner. In the ordinary course
of our businesses, we and our affiliates may actively trade the debt and equity
securities or senior loans of the Company or the Merger Partner for our own
account or for the accounts of customers and, accordingly, we may at any time
hold long or short positions in such securities or loans.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that (i) the Series C Preferred Exchange Ratio in the Proposed
Merger is fair, from a financial point of view, to the holders of the Series C
Preferred Stock, other than the Merger Partner, and (ii) the Series E Preferred
Exchange Ratio in the Proposed Merger is fair, from a financial point of view,
to the holders of the Series E Preferred Stock, other than the Merger Partner.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Proposed Merger.
This opinion does not constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Proposed
Merger or any other matter. This opinion may not be disclosed, referred to, or
communicated (in whole or in part) to any third party for any purpose whatsoever
except with our prior written approval. This opinion may be reproduced in full
in any proxy or information statement mailed to shareholders of the Company but
may not otherwise be disclosed publicly in any manner without our prior written
approval.
Very truly yours,
J.P. MORGAN SECURITIES INC.
E-6
APPENDIX F
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
sec. 262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger
or consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
F-1
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, then, either a constituent corporation before
the effective date of the merger or consolidation, or the surviving or
resulting corporation within ten days thereafter, shall notify each of the
holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall,
also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given,
F-2
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If
no record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may
F-3
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
F-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses including attorneys' fees, judgments, fines and
amounts paid in settlement in connection with various actions, suits or
proceedings, whether civil, criminal, administrative or investigative other than
an action by or in the right of the corporation, a derivative action, if they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, if they had no reasonable cause to believe their
conduct was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses including
attorneys' fees incurred in connection with the defense or settlement of such
actions, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's by-laws, disinterested
director vote, stockholder vote, agreement or otherwise.
AT&T Wireless's amended and restated certificate of incorporation provides
that each person who was or is made a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director or
officer of AT&T Wireless, or is or was serving at its request as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is the alleged action of
such person in an official capacity as a director, officer, employee or agent or
in any other capacity while serving as a director, officer, employee or agent,
will be indemnified and held harmless by AT&T Wireless to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, against all expense, liability and loss reasonably
incurred or suffered by such person in connection therewith; provided, however,
that, except when such person is bringing action against AT&T Wireless to
recover an unpaid claim of indemnification, AT&T Wireless shall indemnify any
such person seeking indemnification in connection with a proceeding, or part
thereof, initiated by such person only if such proceeding, or part thereof, was
authorized by AT&T Wireless's board of directors. AT&T Wireless's amended and
restated certificate of incorporation also provides that it shall pay the
expenses incurred in defending any such proceeding in advance of its final
disposition, subject to the provisions of the Delaware General Corporation Law.
Such rights are not exclusive of any other right which any person may have or
thereafter acquire under any statute, provision of the certificate, by-law,
agreement, vote of stockholders or disinterested directors or otherwise. No
repeal or modification of such provision will in any way diminish or adversely
affect the rights of any director, officer, employee or agent of AT&T Wireless
thereunder in respect of any occurrence or matter arising before any such repeal
or modification. AT&T Wireless's amended and restated certificate of
incorporation also specifically authorizes it to maintain insurance and to grant
similar indemnification rights to its employees or agents.
The Delaware General Corporation Law permits a corporation to provide in
its certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for:
-- any breach of the director's duty of loyalty to the corporation or its
stockholders,
-- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
-- payments of unlawful dividends or unlawful stock repurchases or
redemptions, or
-- any transaction from which the director derived an improper personal
benefit.
II-1
AT&T Wireless's amended and restated certificate of incorporation provides
that none of its directors will be personally liable to it or its stockholders
for monetary damages for breach of fiduciary duty as a director, except, if
required by the Delaware General Corporation Law as amended from time to time,
for liability:
-- for any breach of the director's duty of loyalty to AT&T Wireless or its
stockholders,
-- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
-- under Section 174 of the Delaware General Corporation Law, which
concerns unlawful payments of dividends, stock purchases or redemptions,
or
-- for any transaction from which the director derived an improper personal
benefit.
Neither the amendment nor repeal of such provision will eliminate or reduce
the effect of such provision in respect of any matter occurring, or any cause of
action, suit or claim that, but for such provision, would accrue or arise before
such amendment or repeal.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NO.
-------
2.1 -- Agreement and Plan of Merger, dated as of October 7, 2001,
among AT&T Wireless, TL Acquisition Corp. and TeleCorp
(included as Appendix A to the proxy statement/prospectus).
4.1 -- Certificate of Designation of Series C Preferred Stock of
AT&T Wireless (included in Appendix B to the proxy
statement/prospectus).
4.2 -- Certificate of Designation of Series E Preferred Stock of
AT&T Wireless (included in Appendix C to the proxy
statement/prospectus).
5.1 -- Opinion of Gregory P. Landis, Senior Vice President and
General Counsel of AT&T Wireless, as to the legality of the
securities being registered.*
8.1 -- Opinion of Wachtell, Lipton, Rosen & Katz as to certain U.S.
federal income tax matters.*
12.1 -- Computation of ratio of earnings to combined fixed charges
and preferred stock dividends.
23.1 -- Consent of Gregory P. Landis, Senior Vice President and
General Counsel of AT&T Wireless (included in Exhibit 5.1).
23.2 -- Consent of PricewaterhouseCoopers LLP with respect to
financial statements of AT&T Wireless.
23.3 -- Consent of Arthur Andersen LLP with respect to financial
statements of Vanguard Cellular Systems, Inc.
23.4 -- Consent of PricewaterhouseCoopers LLP with respect to
financial statements of TeleCorp.
23.5 -- Consent of KPMG LLP with respect to the financial statements
of Tritel, Inc. and its subsidiaries.
23.6 -- Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8.1).
24.1 -- Powers of attorney (included on page II-4).
99.1 -- Cash Equity Investor Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless, Hoak
Communications Partners, and HCP Capital Fund (included as
an exhibit to TeleCorp's Current Report on Form 8-K filed
October 10, 2001 and incorporated herein by reference).
99.2 -- Cash Equity Investor Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless, and CB Capital
Investors (included as an exhibit to TeleCorp's Current
Report on Form 8-K filed October 10, 2001 and incorporated
herein by reference).
II-2
EXHIBIT
NO.
-------
99.3 -- Cash Equity Investor Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless and CTIHC (included
as an exhibit to TeleCorp's Current Report on Form 8-K filed
October 10, 2001 and incorporated herein by reference).
99.4 -- Management Stockholder Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless, and Thomas H.
Sullivan (included as an exhibit to TeleCorp's Current
Report on Form 8-K filed October 10, 2001 and incorporated
herein by reference).
99.5 -- Management Stockholder Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless, and Gerald T.
Vento (included as an exhibit to TeleCorp's Current Report
on Form 8-K filed October 10, 2001 and incorporated herein
by reference).
99.6 -- Opinions of Lehman Brothers (included as Appendix D to the
proxy statement/prospectus).
99.7 -- Opinions of JPMorgan (included as Appendix E to the proxy
statement/prospectus).
99.8 -- Consent of Lehman Brothers.
99.9 -- Consent of JPMorgan.
99.10 -- Form of TeleCorp Proxy Card.*
---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934, as amended) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(c) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1993, as amended,
and is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1993, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
II-3
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all required information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Redmond, State of Washington, on the 28th day of
November, 2001.
AT&T WIRELESS SERVICES, INC.
By: /s/ JOHN D. ZEGLIS
------------------------------------
Name: John D. Zeglis
Title: Chairman, President and
Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints
John D. Zeglis and Joseph McCabe, Jr. and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments), any registration
statement relating to the same offering as this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b), and any and all additions
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on November 28, 2001.
SIGNATURE TITLE
--------- -----
/s/ JOHN D. ZEGLIS Chairman of the Board and
------------------------------------------------ Chief Executive Officer and President
John D. Zeglis (Principal Executive Officer)
/s/ JOSEPH MCCABE, JR. Executive Vice President, Chief Financial Officer
------------------------------------------------ (Principal Financial and Accounting Officer)
Joseph McCabe, Jr.
/s/ WALTER Y. ELISHA Director
------------------------------------------------
Walter Y. Elisha
/s/ DONALD V. FITES Director
------------------------------------------------
Donald V. Fites
/s/ RALPH S. LARSEN Director
------------------------------------------------
Ralph S. Larsen
/s/ JOHN W. MADIGAN Director
------------------------------------------------
John W. Madigan
II-5
SIGNATURE TITLE
--------- -----
/s/ NOBUHARU ONO Director
------------------------------------------------
Nobuharu Ono
/s/ WAYNE PERRY Director
------------------------------------------------
Wayne Perry
/s/ A. BARRY RAND Director
------------------------------------------------
A. Barry Rand
/s/ CAROLYN M. TICKNOR Director
------------------------------------------------
Carolyn M. Ticknor
II-6
EXHIBIT LIST
EXHIBIT
NO.
-------
2.1 -- Agreement and Plan of Merger, dated as of October 7, 2001,
among AT&T Wireless, TL Acquisition Corp. and TeleCorp
(included as Appendix A to the proxy statement/prospectus).
4.1 -- Certificate of Designation of Series C Preferred Stock of
AT&T Wireless (included in Appendix B to the proxy
statement/prospectus).
4.2 -- Certificate of Designation of Series E Preferred Stock of
AT&T Wireless (included in Appendix C to the proxy
statement/prospectus).
5.1 -- Opinion of Gregory P. Landis, Senior Vice President and
General Counsel of AT&T Wireless, as to the legality of the
securities being registered.*
8.1 -- Opinion of Wachtell, Lipton, Rosen & Katz as to certain U.S.
federal income tax matters.*
12.1 -- Computation of ratio of earnings to combined fixed charges
and preferred stock dividends.
23.1 -- Consent of Gregory P. Landis, Senior Vice President and
General Counsel of AT&T Wireless (included in Exhibit 5.1).
23.2 -- Consent of PricewaterhouseCoopers LLP with respect to
financial statements of AT&T Wireless.
23.3 -- Consent of Arthur Andersen LLP with respect to financial
statements of Vanguard Cellular Systems, Inc.
23.4 -- Consent of PricewaterhouseCoopers LLP with respect to
financial statements of TeleCorp.
23.5 -- Consent of KPMG LLP with respect to the financial statements
of Tritel, Inc. and its subsidiaries.
23.6 -- Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8.1).
24.1 -- Powers of attorney (included on page II-4).
99.1 -- Cash Equity Investor Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless, Hoak
Communications Partners, and HCP Capital Fund (included as
an exhibit to TeleCorp's Current Report on Form 8-K filed
October 10, 2001 and incorporated herein by reference).
99.2 -- Cash Equity Investor Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless, and CB Capital
Investors (included as an exhibit to TeleCorp's Current
Report on Form 8-K filed October 10, 2001 and incorporated
herein by reference).
99.3 -- Cash Equity Investor Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless and CTIHC (included
as an exhibit to TeleCorp's Current Report on Form 8-K filed
October 10, 2001 and incorporated herein by reference).
99.4 -- Management Stockholder Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless, and Thomas H.
Sullivan (included as an exhibit to TeleCorp's Current
Report on Form 8-K filed October 10, 2001 and incorporated
herein by reference).
99.5 -- Management Stockholder Voting Agreement, dated as of October
7, 2001, between TeleCorp, AT&T Wireless, and Gerald T.
Vento (included as an exhibit to TeleCorp's Current Report
on Form 8-K filed October 10, 2001 and incorporated herein
by reference).
99.6 -- Opinions of Lehman Brothers (included as Appendix D to the
proxy statement/prospectus).
99.7 -- Opinions of JPMorgan (included as Appendix E to the proxy
statement/prospectus).
99.8 -- Consent of Lehman Brothers.
99.9 -- Consent of JPMorgan.
99.10 -- Form of TeleCorp Proxy Card.*
---------------
* To be filed by amendment.