EXHIBIT 10.5.1
EXECUTION COPY
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MANAGEMENT AGREEMENT
between
TELECORP MANAGEMENT CORP.
and
TELECORP PCS, INC.
Dated as of July 17, 1998
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TABLE OF CONTENTS
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Page
SECTION 1. ENGAGEMENT........................................................................................... 2
SECTION 2. MANAGEMENT STANDARDS................................................................................. 2
SECTION 3. SERVICES TO BE PROVIDED.............................................................................. 2
(a) Scope of Services.............................................................................. 2
(b) Accounts....................................................................................... 3
(c) Senior Executives of Manager................................................................... 4
(d) Restrictions on Manager's Authority............................................................ 4
SECTION 4. COMPENSATION......................................................................................... 6
(a) Reimbursement.................................................................................. 6
(b) Management Fees................................................................................ 6
(c) Disputes, etc.................................................................................. 6
(d) Directors and Officers Liability Insurance..................................................... 7
(e) Benefits....................................................................................... 7
(f) Relocation Expenses............................................................................ 7
SECTION 5. TERM AND TERMINATION................................................................................. 7
(a) Term........................................................................................... 7
(b) Termination.................................................................................... 7
(c) Benefits Payable Upon Termination.............................................................. 8
(d) Remedies....................................................................................... 9
(e) Continuing Obligations......................................................................... 9
(f) Transition Arrangements........................................................................ 9
(g) Return of Information.......................................................................... 11
SECTION 6. NONCOMPETITION AND CONFIDENTIALITY................................................................... 11
(a) Noncompetition................................................................................. 11
(b) Confidentiality................................................................................ 11
(c) Company Property............................................................................... 12
(d) Non-Solicitation of Employees.................................................................. 12
(e) Injunctive Relief with Respect to Covenants.................................................... 12
SECTION 7. VESTING AND REPURCHASE OF RESTRICTED SHARES, ETC..................................................... 12
(a) General........................................................................................ 12
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TABLE OF CONTENTS
(continued)
Page
(b) Repurchase of Shares.......................................................................... 14
(c) Closing of Repurchase; Assignment of Repurchase Right......................................... 15
(d) Escrow of Shares.............................................................................. 15
(e) Legends....................................................................................... 16
SECTION 8. LIMITATIONS OF LIABILITY............................................................................ 16
(a) Force Majeure................................................................................. 16
(b) Exculpation of Manager........................................................................ 16
(c) No Consequential or Special Damages........................................................... 16
(d) Vento and Sullivan............................................................................ 17
SECTION 9. BOOKS AND RECORDS................................................................................... 17
SECTION 10. DISPUTE RESOLUTION................................................................................. 17
(a) Dispute Resolution............................................................................ 17
(b) Mediation..................................................................................... 17
(c) Arbitration................................................................................... 18
(d) Confidentiality............................................................................... 18
(e) Fees and Expenses............................................................................. 18
SECTION 11. INSPECTION RIGHTS; DELIVERY OF INFORMATION......................................................... 19
(a) Company's Right to Inspect.................................................................... 19
(b) Notice of Certain Events...................................................................... 19
(c) Other Information............................................................................. 19
SECTION 12. REPRESENTATIONS AND WARRANTIES..................................................................... 19
(a) Organization and Standing of Parties.......................................................... 19
(b) Execution, Delivery, Performance and Binding Effect........................................... 20
(c) Consents...................................................................................... 20
(d) Litigation; Claims............................................................................ 20
(e) Court Orders, Decrees, Judgments, Etc......................................................... 20
SECTION 13. INDEMNIFICATION; EXPENSES.......................................................................... 20
(a) Indemnification............................................................................... 20
(b) Advancement of Expenses....................................................................... 21
SECTION 14. MISCELLANEOUS...................................................................................... 21
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TABLE OF CONTENTS
(continued)
Page
(a) Counterparts.................................................................................. 21
(b) Construction.................................................................................. 21
(c) Benefit; Assignment........................................................................... 21
(d) Complete Agreement............................................................................ 21
(e) Amendment..................................................................................... 22
(f) Governing Law................................................................................. 22
(g) Severability.................................................................................. 22
(h) Further Assurances............................................................................ 22
(i) Waiver........................................................................................ 22
(j) Notices....................................................................................... 22
SCHEDULE I...................................................................................................... I-1
SCHEDULE II..................................................................................................... II-1
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MANAGEMENT AGREEMENT
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This Management Agreement (the "Agreement") is entered into as of July 17,
1998 (the "Effective Date") by and between TELECORP MANAGEMENT CORP., a Delaware
corporation ("Manager"), and TELECORP PCS, INC., a Delaware corporation (the
"Company"). Capitalized terms used but not defined in this Agreement shall have
the meanings given to such terms in the Stockholders Agreement of the Company,
dated as of the date hereof (the "Stockholders Agreement").
WITNESSETH:
WHEREAS, the operation of the Business, including, without limitation, the
determination of policy, the preparation and filing of any and all applications
and other filings with the FCC, the hiring, supervision and dismissal of
personnel, day-to-day system operations, and the payment of financial
obligations and operating expenses, shall be controlled by the Company, and
Manager shall assist the Company in connection therewith and any action
undertaken by Manager shall be under the Company's continuing oversight, review,
control and approval, and the Company shall retain unfettered control of, access
to, and use of the Business, including its facilities and equipment and shall be
entitled to receive all profits from the operation of the Business;
WHEREAS, Manager is willing to provide management services for the Company
and its Subsidiaries on the terms and subject to the conditions contained in
this Agreement;
WHEREAS, Gerald Vento ("Vento") and Thomas Sullivan ("Sullivan") are the
owners of all of the ownership interests in Manager and are each the record and
beneficial owner of the shares of the Common Stock and Preferred Stock described
on Schedule V to the Securities Purchase Agreement, dated January 23, 1998 (the
shares of Class A Voting Common Stock and Series E Preferred Stock listed on
such Schedule are hereafter referred to collectively as the "Shares");
WHEREAS, in order to induce the Purchasers referred to in such Securities
Purchase Agreement to purchase the securities issued by the Company thereunder,
and to induce the Company to enter into this Agreement with Manager, Sullivan
and Vento have agreed to grant to the Company the repurchase rights with respect
to the Shares set forth in this Agreement; and
WHEREAS, the parties desire to execute this Agreement to specify the terms
upon which Manager will perform services to the Company hereunder and to
evidence the Company's acceptance of the grant by Sullivan and Vento of such
repurchase rights.
NOW, THEREFORE, for and in consideration of the premises, the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged by the execution and delivery
hereof, the parties agree as follows:
Section 1. Engagement. The Company hereby engages Manager to oversee,
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manage and supervise the Company and the development and operation of the
Business, and Manager hereby accepts such engagement, subject to and upon the
terms and conditions hereof.
Section 2. Management Standards. Manager shall discharge its duties
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hereunder in compliance with the Stockholders Agreement, the Network Membership
License Agreement, the Resale Agreement and the Roaming Agreement (collectively
the "Operating Agreements") and all applicable Law. In performing its
obligations hereunder, Manager shall act in a manner that it reasonably believes
to be in or not opposed to the best interests of the Company consistent with the
standards set forth herein. Nothing in this Agreement shall be construed as
constituting Manager an agent of the Company beyond the extent expressly
provided in, and as limited by, this Agreement.
Section 3. Services to be Provided.
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(a) Scope of Services. Subject to the Company's oversight, review and
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ultimate control and approval and the limitations of Section 3(d) below, Manager
shall be responsible for the design, construction and operation of the Company
and the Business in accordance with the Operating Agreements, which shall be
carried out by the Company's employees under the supervision and control of
Manager's senior management. To this end Manager shall provide generally, on the
terms and subject to the conditions set forth herein and in a manner consistent
with the standards set forth herein and in the Operating Agreements, supervisory
services with respect to (I) all administrative, accounting, billing, credit,
collection, insurance, purchasing, clerical and such other general services as
may be necessary to the administration of the Business, (II) operational,
engineering, maintenance, construction, repair and such other technical services
as may be necessary to the construction and operation of the Business, and (III)
marketing, sales, advertising and such other promotional services as may be
necessary to the marketing of the Business. The services for which Manager shall
be responsible, subject in each case to the Operating Agreements, the Company's
oversight, review and ultimate control and approval and to the limitations of
Section 3(d) below, shall include but shall not be limited to the following:
(i) the marketing of Company Communications Services to be offered
and provided by the Company;
(ii) the management, tax compliance, accounting and financial
reporting for the Company including, but not limited to, the preparation
and presentation of reports and reviews of the business, financial results
and condition, regulatory status, competitive position and strategic
prospects of the Company as requested by the Board of Directors;
(iii) the regulatory processing for the Company, including without
limitation the preparation and filing of all appropriate regulatory
filings, certificates, tariffs and reports that are required by, and
participation in any hearings or other proceedings before, local, state and
federal governmental regulatory bodies;
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(iv) the engineering, design, planning, construction and installation,
maintenance and repair (both emergency and routine) and operation of, and
equipment purchases for, the Company;
(v) assisting the Company in the development and preparation of
budgets, including, without limitation, preparing and presenting, not later
than 90 days before the beginning of each fiscal year, a proposed draft of
an annual operating budget for the Company's review, evaluation and
approval setting forth in reasonable detail the anticipated capital
expenditures and other projected costs and expenses of constructing and
operating the Business during the period covered by the budget, as well as
projected revenues for that period, and generally describing all contracts
and commitments which Manager expects to enter into on behalf of the
Company during the period covered thereby;
(vi) services relating to sales of the products and services offered
by the Company, including without limitation processing orders for service,
customer support, billing for services provided by the Company and
collection of receivables for the Company;
(vii) management information services for the Company;
(viii) monitoring and controlling the Business and its PCS and Cellular
Systems;
(ix) negotiating contracts, issuing purchase orders and otherwise
entering into agreements on behalf of the Company for the purchase, lease,
license or use of such properties, services and rights as may be necessary
or desirable in the judgment of Manager for the operation of the Company;
(x) supervising, recruiting and training all necessary personnel to
be employed by the Company, and determining salaries, wages and benefits
for the Company's employees;
(xi) administering the Company's employee benefit programs and the
Company's programs for compliance with applicable laws governing the
administration and operation of such plans and programs;
(xii) administering the Company's risk management programs, including
negotiating the terms of property and casualty insurance and preparing a
comprehensive disaster recovery program; and
(xiii) in furtherance of the foregoing, making or committing to make
expenditures (including capital expenditures) on behalf of the Company.
(b) Accounts. Subject to the foregoing, the Company shall be
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responsible for payment of all costs and expenses necessary to fund the ongoing
business and operations of the Business and for the provision of all services of
Manager hereunder, which shall include, but not be limited to, expenses arising
under Article 3, payments to independent contractors, payments to vendors and
suppliers of the Business, and interest payments to creditors who have financed
the
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construction or operation of the Business. To the extent provided herein,
Manager shall make such payments on the Company's behalf from one or more
accounts maintained in the name of the Company at one or more banks acceptable
to the Board of Directors, into which all Company revenues shall be deposited
(the "Accounts"). All funds of the Company shall be promptly deposited in such
bank accounts. All disbursements made by the Company as permitted under this
Agreement shall be made by checks drawn on the Accounts, and all funds on
deposit in the Accounts shall at all times be the property of the Company.
Manager will have the right and authority to make deposits to and disbursements
and withdrawals from the Accounts as required in connection with the performance
of its services hereunder, provided that all signatories on the Accounts shall
he subject to the approval of the Board of Directors.
(c) Senior Executives of Manager. During the term of this Agreement,
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Manager shall cause the services of Vento and Sullivan to be provided to the
Company in connection with Manager's performance of its obligations hereunder.
Such individuals shall devote their entire business time and attention to the
services required to be provided by Manager pursuant to this Agreement. Except
for certain employee benefits provided to officers of the Company, they shall
receive all compensation and other benefits for such services directly from
Manager. In addition, Vento shall serve as Chief Executive Officer of the
Company and Sullivan shall serve as Executive Vice President of the Company. In
the event that either of such individuals shall cease for any reason to be
employed by Manager, Manager shall immediately notify the Company. Subject to
the Company's rights under Section 5(b)(ii)(C), any individual hired by Manager
to replace either of such individuals shall be acceptable to the Board of
Directors (excluding Vento and Sullivan) in its sole discretion. Nothing
contained herein shall preclude (i) Vento or Sullivan from devoting reasonable
periods of time to the management (including serving on the board of directors)
of the businesses in which THC of Tampa, Inc., THC of Orlando, Inc., THC of
Melbourne, Inc., THC of Houston, Inc., TeleCorp Management Co., Inc., TeleCorp
WCS, Inc., TeleCorp LMDS, Inc. and Entel Technologies, Inc. are currently
engaged; (ii) Sullivan from serving on the board of directors of Sullivan & Son
Contracting; (iii) Vento or Sullivan serving on a board of directors of a
charitable organization; or (iv) Vento or Sullivan serving on other boards of
directors or advisory groups (in each case, with the consent of the Board of
Directors excluding Vento and Sullivan), in each such case, so long as such
activities do not interfere with the performance of Vento's or Sullivan's duties
hereunder.
(d) Restrictions on Manager's Authority. Any provision to the contrary
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in this Agreement notwithstanding, unless such action is within (or on terms
more favorable to the Company than) parameters set forth in a budget or business
plan approved by the Board of Directors, Manager shall not do, or cause or
permit to be done, any of the following for or on behalf of the Company without
the prior written consent of the Board of Directors (excluding Vento and
Sullivan):
(i) settle any claim or litigation by or against the Company if the
settlement involves a payment of $100,000 or more, or any regulatory
proceedings involving the Company, unless such action is consistent with
the Company's regulatory strategy as set forth in a budget approved by the
Board of Directors;
(ii) lend money or guarantee debts of others on behalf of the Company,
or assign, transfer, or pledge any debts due the Company, or release or
discharge any debt
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due or compromise any claim of the Company, other than trade credit and
advances to employees in the ordinary course of business;
(iii) invest in or otherwise acquire any debt or equity securities of
any other Person, enter into any binding agreement for the acquisition of
any interest in any business entity or other Person (whether by purchase of
assets, purchase of stock or other securities, merger, loan or otherwise),
or enter into any joint venture or partnership with any other Person;
(iv) take any tax reporting position or make any related election on
behalf of the Company which is inconsistent with the directions given by
the Board of Directors;
(v) formally assert a strategic position with respect to a material
matter before the Federal Communications Commission or any Governmental
Authority on behalf of the Company with respect to any such matter;
(vi) knowingly take or fail to take any action that violates (A) any
Law relating to the Business, (B) any agreement, arrangement or
understanding to which the Company is a party, including an Operating
Agreement, (C) any License or other governmental authorization granted to
the Company in connection with its ownership and operation of the Business,
or (D) any judicial or administrative order or decree to which the Company
is subject, in each case unless such violation would not be reasonably
expected (so far as can be foreseen at the time) to have a material adverse
effect on the Company or the Business;
(vii) sell, assign, transfer, or otherwise dispose of, or hypothecate
or grant a Lien on any assets belonging to the Company (other than the
disposal of assets or equipment in the ordinary course of business);
(viii) take any action amending or agreeing to amend any License granted
to the Company in connection with its ownership and operation of the
Business;
(ix) borrow money on behalf of the Company or negotiate or enter into
other forms of financing for the Business, including any capital lease;
(x) commingle any funds of the Company with funds of any other entity
or Person;
(xi) hire or fire the independent certified public accountants of the
Company;
(xii) pay to a ny employee or agent of, or consultant or advisor to,
the Company, compensation in any form in excess of $100,000 in any fiscal
year,
(xiii) establish any reserves; or
(xiv) enter into any contract, agreement or other commitment or issue
any purchase order, which contract or other agreement or purchase order (i)
is not in the ordinary course of business, (ii) obligates the Company to
make payments of $100,000 or
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more or (iii) will create a material variance (greater than 15%) relative
to (x) in the case of a capital expenditure, the total budget for capital
expenditures contained in any budget approved by the Board of Directors and
(y) in the case of an operating expense, the total operating expense budget
contained in any budget approved by the Board of Directors, in each case
for the year-to-date period in which the expenditure is made or incurred
and taking into account all previous expenditures and commitments in such
year-to-date period, provided, that the approval of the Board of Directors
shall not be required for any contract, purchase order or agreement the
material terms of which are within (or on terms more favorable to the
Company than) the parameters set forth in any budget approved by the Board
of Directors; or terminate or amend in any material respect any contract,
agreement or other commitment or purchase order, in each case if the
execution and delivery or issuance thereof requires approval pursuant to
this Section 3(d).
Section 4. Compensation.
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(a) Reimbursement. The Company shall reimburse Manager for all
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out-of-pocket expenses ("Out-of-Pocket Expenses") reasonably incurred by Manager
for goods and services provided by third parties to, for or on behalf of the
Company (including those out-of-pocket expenses incurred by Messrs. Vento and
Sullivan in traveling to and from and visiting the Business in connection with
providing services under this Agreement). Manager shall provide the Company with
a statement setting forth in reasonable detail (and with copies of invoices or
other supporting documentation) the Out-of-Pocket Expenses claimed and the
Company shall pay to Manager each such amount within thirty (30) days of receipt
of the statement. Notwithstanding anything to the contrary contained in this
Agreement, (i) no portion of the salaries of Messrs. Vento or Sullivan or the
general overhead expenses of Manager shall be subject to reimbursement as
Out-of-Pocket Expenses and (ii) in no event will Manager be responsible for the
payment from its own funds of any expenses, obligations or liabilities of the
Company.
(b) Management Fees. In consideration of Manager's performance of its
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responsibilities with respect to the Business, the Company shall pay Manager,
commencing on the date hereof, a management fee per annum equal to $550,000,
payable monthly in arrears on the last day of each calendar month. Upon the
first anniversary hereof, and annually thereafter, the Compensation Committee of
the Board of Directors shall review the management fee in light of the
performance of Manager and the Company, and may, in its discretion, increase
(but not decrease) the management fee by an amount it determines to be
appropriate. Manager's annual management fee payable hereunder, as it may be
increased from time to time, is referred to herein as the "Management Fee." For
each calendar year or part thereof during the term of this Agreement, Manager
shall be eligible to receive an annual bonus equal to up to 50% of the
Management Fee based upon the achievement of certain objectives determined by
the Compensation Committee of the Board of Directors for such calendar year (the
"Annual Bonus") payable within 30 days after the certification of the Company's
financial statements for such year.
(c) Disputes, etc. If the Company disputes the amount of expenses or fees
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claimed by Manager, the Company shall notify Manager in writing before payment
is due, and if the matter cannot be resolved informally between the parties,
either the Company or Manager may request
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resolution of the dispute pursuant to Section 10. The Company shall pay when due
the portion of any such amounts that is not in dispute.
(d) Directors and Officers Liability Insurance. The Company shall use its
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reasonable efforts to obtain and maintain directors and officers liability
insurance coverage in amounts customary for similarly situated companies in the
telecommunications industry.
(e) Benefits. During the Term of this Agreement, Vento and Sullivan
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shall be entitled to participate in any welfare benefit plan sponsored or
maintained by the Company to the extent Vento or Sullivan, as applicable, is
eligible to participate in any such plan under the generally applicable
provisions thereof, such welfare plans to include life, health and disability
insurance.
(f) Relocation Expenses. The Company shall pay or reimburse Sullivan
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for all reasonable expenses incurred or paid by Sullivan in relocating to a
residence in the Arlington, Virginia vicinity, including brokerage commission
payable in connection with the sale of Sullivan's current residence. Sullivan
shall provide the Company with a statement setting forth in reasonable detail
(with copies of invoices and the supporting documentation) the expenses claimed
under this Section 4(f) and the Company shall pay to Sullivan each such amount
promptly after receipt of such statement.
Section 5. Term and Termination.
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(a) Term. This Agreement shall commence on the Effective Date and, unless
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earlier terminated in accordance herewith, shall terminate on the fifth (5th)
anniversary of the Effective Date (the "Term").
(b) Termination.
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(i) By Either Party. Either party may terminate this Agreement in the
event that a Governmental Authority shall enter an order appointing a
custodian, receiver, trustee, intervenor or other officer with similar
powers with respect to the other party or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition in bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding up or liquidation of such party; or if a party
files a petition seeking any such order; or if any such petition shall be
filed against such party and shall not be dismissed within sixty (60) days
thereafter; or an order shall have been issued granting such party a
suspension of payments under applicable law and any such order is not
dismissed within sixty (60) days thereafter.
(ii) By Company. The Company may terminate this Agreement:
(A) immediately in the event of the indictment or conviction of
Manager, Vento or Sullivan of any felony; or any act constituting fraud,
embezzlement, willful misconduct or gross negligence by Manager that materially
adversely affects the Company or the Business monetarily or otherwise (as
determined by a majority vote of the Board of Directors (excluding Messrs. Vento
and Sullivan));
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(B) immediately in the event of a material breach of this Agreement
by Manager (as determined by a majority vote of the Board of Directors
(excluding Messrs. Vento and Sullivan)), which has not been cured within thirty
(30) days following notice thereof from the Company, including, without
limitation, the failure of the Company to meet any of the objectives set forth
on Schedule I hereto;
(C) immediately in the event of the failure by Manager to cause to be
provided to the Company the services of both Messrs. Vento and Sullivan as
contemplated by Section 3(c) hereof;
(D) immediately in the event that the Company shall fail to comply
with the terms of any representation, warranty, covenant or agreement contained
in the Credit Documents or in any other agreement or instrument pursuant to
which the Company has incurred indebtedness for borrowed money in the principal
amount of $25,000,000 or more, which failure to comply results in, or with
notice or the passage of time would result in, an event of default thereunder;
or
(E) immediately in the event that the indebtedness incurred pursuant
to the Credit Documents or any other indebtedness for borrowed money of the
Company in the principal amount of $25,000,000 or more shall have been
accelerated by the holder thereof.
(iii) By Manager. Manager may terminate this Agreement:
(A) if the Company has failed to make any payment pursuant to Section
4 within thirty (30) business days following Manager's written notice to the
Company of such failure;
(B) in the event of a material breach of this Agreement by the
Company (other than a payment default) which has not been cured within thirty
(30) days following notice thereof from the Company;
(C) in the event that (i) Vento and Sullivan are removed as directors
of the Company or are demoted or removed from their respective offices or there
is a material diminishment of Vento's and Sullivan's responsibilities, duties or
status which diminishment is not rescinded within 30 days after the date of
receipt by the Board of Directors of the Company from Vento and Sullivan of
their respective written notice referring to this provision and describing such
diminishment, or (ii) the Company relocates its principal offices without
Manager's consent to a location more than 50 miles from the principal offices of
the Company in Arlington, Virginia; or
(D) voluntarily upon thirty (30) days prior written notice to the
Company.
(c) Benefits Payable Upon Termination.
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(i) Following the termination of this Agreement pursuant to any
manner described in Section 5(b), the Company shall pay to Manager any
Management Fee earned, but unpaid, for services rendered to the Company on
or prior to the date of such termination.
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(ii) Following the termination of this Agreement by Manager pursuant
to Sections 5(b)(iii)(A), (B) or (C) or a termination by the Company
pursuant to Sections 5(b)(ii)(B), (C) or (D), Manager shall be entitled to
receive payment of (x) the Management Fee, and (y) the Annual Bonus. The
amount of the Annual Bonus shall be determined as follows: (I) In the event
that the date of termination is on or prior to June 30 of any applicable
calendar year, the amount of the Annual Bonus shall be equal to a pro rata
portion (based upon the actual number of days during such calendar year
that this Agreement shall have been in effect) of the Annual Bonus payable
in respect of such year (determined based upon the achievement by the
Company of the objectives for all of such calendar year). (II) In the event
that the date of termination is after June 30 of any applicable calendar
year, the amount of the Annual Bonus shall be equal to the Annual Bonus
payable in respect of such year (determined based upon the achievement by
the Company of the objectives for all of such calendar year), in either
instance payable on the later to occur of (x) 30 days after the
certification of the Company's financial statements for such year, and (y)
the last day of the month after which (a) a New Provider (as hereinafter
defined) shall be retained by the Company in accordance with Section
5(f)(i), and (b) the Manager shall have nominated a Successor Control Group
(as hereinafter defined) acceptable to the Board of Directors in its sole
discretion (excluding Vento and Sullivan) in accordance with Section
5(f)(ii). The Management Fee shall be payable monthly in arrears commencing
on the last day of the month after which (I) a New Provider shall be
retained by the Company in accordance with Section 5(f))(i) and (II) the
Manager shall have nominated a Successor Control Group reasonably
acceptable to the Board of Directors in its sole discretion (excluding
Vento and Sullivan) in accordance with Section 5(f)(ii).
(iii) The Company shall be entitled to set off against the Management
Fee payable to the Manager following the termination of this Agreement
pursuant to Section 5(c)(ii), any amounts earned by either Vento or
Sullivan in other employment after the termination of this Agreement;
provided, however, that neither Vento nor Sullivan shall be required, as a
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condition to the receipt of such payment pursuant to Section 5(c)(ii), to
seek such other employment.
(d) Remedies. The remedies set forth herein are not intended to be
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exclusive, and all remedies shall be cumulative and may be exercised
concurrently with any other remedy available to Manager or the Company at law or
in equity.
(e) Continuing Obligations. After receipt of written notice of
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termination, but prior to the effective date of such termination, Manager shall
continue to perform under this Agreement unless specifically instructed to
discontinue such performance. In the event of termination, Manager and the
Company shall remain liable for their respective obligations accrued under this
Agreement prior to the effective date of termination.
(f) Transition Arrangements.
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(i) In the event of termination of this Agreement for any reason,
Manager shall at the Company's expense cooperate with the Company in order
to facilitate the transition to a new management service provider (the "New
Provider"). Upon such
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termination, the Board of Directors (excluding Vento and Sullivan) shall
nominate a New Provider that would not cause a significant detrimental
effect on the eligibility of the Company to realize the benefits, if any,
that the Company derives from its status as a "very small business," as
defined in 47 CFR Section 24.720(b)(2), which New Provider shall be
acceptable to the Manager. In the event that the Manager does not approve
such New Provider within five (5) business days of notice of such
nomination by the Board of Directors, then for each successive thirty (30)
day period or portion thereof following such five (5) business day period
that a New Provider shall not have been approved by Vento and Sullivan,
each of Vento and Sullivan shall sell to the Company, in addition to the
other Repurchased Shares required to be sold to the Company pursuant to
Section 7, an additional 50% of the Shares then owned by each of them at a
price per share equal to $.01 per Share. Manager shall at the Company's
expense take whatever steps are commercially reasonable to assist the New
Provider in assuming the management of the Company and the operation of the
Business including, without limitation, transferring to the New Provider
all historical financial, tax, accounting and other data in the possession
of Manager, and giving such consents, assigning such permits and executing
such instruments as may be necessary to vest in the New Provider those
rights that were necessary for Manager to perform its services hereunder.
(ii) Within five (5) business days after the nomination by the Board
of Directors of a New Provider, each of Vento and Sullivan agrees to
nominate a successor Person or group of Persons (collectively, a "Successor
Control Group") that would not cause a significant detrimental effect on
the eligibility of the Company to hold a Block F PCS license and to realize
the benefits, if any, that the Company derives from its status as a "very
small business," as defined in 47 CFR Section 24.720(b)(2), to whom the
Voting Preference Common Stock and Class C Common Stock shall be
transferred by Vento and Sullivan, which Successor Control Group shall be
reasonably acceptable to the Board of Directors in its sole discretion
(excluding Vento and Sullivan); it being understood that the New Provider
shall be deemed to be a Successor Control Group reasonably acceptable to
the Board of Directors. In the event that Vento and Sullivan do not
nominate a Successor Control Group reasonably acceptable to the Board of
Directors in its sole discretion (excluding Vento and Sullivan) within such
five (5) business day period, then for each successive 30 day period or
portion thereof that Vento and Sullivan shall not have nominated a
Successor Control Group reasonably acceptable to the Board of Directors in
its sole discretion (excluding Vento and Sullivan), each of Vento and
Sullivan shall sell to the Company after the expiration of each 30 day
period, in addition to any other Repurchased Shares, and after giving
effect to the repurchase by the Company of Shares pursuant to Section
5(f)(i), an additional 50% of the Shares then owned by each of them at a
price per share equal to $.01 per Share. Immediately after a Successor
Control Group reasonably acceptable to the Board of Directors is nominated,
the Company, Vento and Sullivan shall take, or cause to be taken, all
actions necessary or required, including, without limitation, filing of all
applications with the FCC, to obtain all requisite consents and
authorizations to permit the transfer of the Voting Preference Common Stock
and Class C Common Stock to the Successor Control Group. On the first
business day after all such consents and authorizations shall have been
obtained, Vento and Sullivan agree to resign as directors and officers of
the Company and to sell to the Successor Control Group all of the shares of
Voting Preference Common Stock and Class
-10-
C Common Stock owned by them for the per share price paid by them for such
shares. If at any time, whether by reason of the inability of the Company
to obtain all requisite consents and authorizations to permit the transfer
of the Voting Preference Common Stock and Class C Common Stock to the
Successor Control Group or otherwise, the Board of Directors withdraws its
consent to the nomination of a Successor Control Group, the procedure
outlined in Sections 5(f)(i) and (ii) shall be repeated commencing with the
nomination by Vento and Sullivan of a Successor Control Group within five
(5) business days after the nomination by the Board of Directors of a
successor New Provider.
(g) Return of Information. Upon termination of this Agreement, all books
---------------------
and records in the possession of Manager relating to the maintenance and
operation of and accounting for the Company, together with all supplies and
other items of property owned by the Company and in Manager's possession, shall
be delivered to the Company.
Section 6. Noncompetition and Confidentiality.
----------------------------------
(a) Noncompetition. During the Term and (x) for one year thereafter if
--------------
after the expiration of the Term on the fifth (5th) anniversary of the Effective
Date the Company offers to extend this Agreement for at least one (1) year on
terms and conditions no less favorable than those contained herein and the
Manager rejects such offer, and (y) for so long as the Company is paying to the
Manager the Management Fee pursuant to Section 5(c)(ii) following the
termination of this Agreement pursuant to Sections 5(b)(ii)(B), (C) or (D) or
Sections 5(b)(iii)(A), (B) or (C), none of Manager, Vento, Sullivan or any of
their respective Affiliates shall, without the consent of the Company, assist or
become associated with any person or entity, whether as a principal, partner,
employee, consultant or shareholder (other than as a holder of not in excess of
5% of the outstanding voting shares of any publicly traded company) that is
actively engaged in the business of providing mobile wireless telecommunications
services in the Territory.
(b) Confidentiality. Without the prior written consent of the Company,
---------------
except to the extent required by an order of a court having competent
jurisdiction or under subpoena from a governmental body or agency, none of
Manager, Vento, Sullivan or any of their respective Affiliates shall disclose
any trade secrets, customer lists, drawings, designs, information regarding
product development, marketing plans, sales plans, manufacturing plans,
financial records, packaging design or other financial, commercial, business or
technical information relating to the Company or any of its subsidiaries or
affiliates (collectively, "Confidential Information"), to any third person,
unless such Confidential Information has been previously disclosed to the public
by the Company or is in the public domain (other than by reason of Manager's,
Vento's, Sullivan's or any of their respective Affiliates' breach of this
Section 6(b)), except that Manager, Vento, Sullivan and their respective
Affiliates may disclose Confidential Information to the extent advisable in
their sole discretion in connection with (i) the performance of Manager's duties
hereunder, or (ii) the issuance of Company securities, or (iii) obtaining
financing for the Company, or (iv) the enforcement of Manager's fights under
this Agreement, or (v) any disclosures that may be required by law, including
securities laws.
-11-
(c) Company Property. Promptly following the termination of this
----------------
Agreement, Manager, Vento and Sullivan shall return to the Company all property
of the Company, and all copies thereof in its possession or under its control,
and all tangible embodiments of Confidential Information in its possession in
whatever media such Confidential Information is maintained.
(d) Non-Solicitation of Employees. During the Term and for one year
-----------------------------
thereafter, none of Manager, Vento, Sullivan or any of their respective
Affiliates will directly or indirectly induce any employee of the Company or any
of its subsidiaries or affiliates to terminate employment with such entity, and
will not directly or indirectly, either individually or as owner, agent,
employee, consultant or otherwise, employ or offer employment to any person who
is or was employed by the Company or a subsidiary thereof, unless such person
shall have ceased to be employed by such entity for a period of at least six
months.
(e) Injunctive Relief with Respect to Covenants. Manager, Vento and
-------------------------------------------
Sullivan acknowledge and agree that the covenants and obligations with respect
to noncompetition, inventions, confidentiality and Company property contained in
this Section 6 relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company irreparable injury for which adequate remedies are not available at law.
Therefore, Manager, Vento and Sullivan agree that the Company shall be entitled
to an injunction, restraining order, or such other equitable relief as a court
of competent jurisdiction may deem necessary or appropriate to restrain Manager,
Vento and Sullivan from committing any violation of the covenants and
obligations contained in this Section 6. These injunctive remedies are
cumulative and are in addition to any other fights and remedies the Company may
have at law or in equity. Notwithstanding the foregoing, in the event that this
Agreement is terminated by the Company pursuant to Section 5(b)(ii)(A) by reason
of the indictment or conviction of Vento, Sullivan or the Manager of any felony
or any act constituting fraud, misappropriation or embezzlement due to the
wrongful acts of either Vento or Sullivan, that materially adversely effects the
Company or the Business monetarily or otherwise (as determined by a majority
vote of the Board of Directors (excluding Vento and Sullivan), Sullivan or
Vento, as applicable, shall sell to the Company, and the Company shall purchase
from Vento or Sullivan, as applicable, all of the Shares (whether or not vested)
at a price per share equal to $.01 per Share, it being understood that in the
event that the Company shall have terminated this Agreement by reason of any
such event, and either Vento or Sullivan shall not have been indicted for or
been convicted of any felony or act constituting fraud, misappropriation or
embezzlement that materially adversely effects the Company or the Business
monetarily or otherwise (as determined by a majority vote of the Board of
Directors (excluding Vento and Sullivan), such individual shall not be obligated
to sell his vested Shares to the Company.
Section 7. Vesting and Repurchase of Restricted Shares, Etc.
------------------------------------------------
(a) General. Each of Vento and Sullivan hereby agrees that the Management
-------
Shares shall be subject to repurchase by the Company at a repurchase price of
$.01 per share in accordance with the terms of this Section 7. As used in this
Section 7, the following terms have the following meanings:
-12-
(i) "Base Shares" means 14,425.49 shares of Class A Voting Common Stock
and 14,155.78 shares of Series E Preferred Stock or, if the Supplemental Shares
have theretofore been repurchased pursuant to Section 7(b)(i)(v) or 7(b)(ii),
13,816.91 shares of Class A Voting Common Stock and 13,569.18 shares of Series E
Preferred Stock.
(ii) "Deemed Per Share Value" means (A) in the case of an Extraordinary
Event specified in clause (x) or (y) of the definition thereof, (1) the fair
market value of all of the assets of the Company and its Subsidiaries at the
time of any calculation of such value, less (x) any expenses which would be
incurred solely in connection with the disposition of such assets, (y) the
aggregate amount of all liabilities of the Company and (z) the aggregate
redemption price of all outstanding shares of all series of Preferred Stock of
the Company that are not then convertible into Common Stock at the option of the
holder thereof (or, if any such series is not then redeemable, the aggregate
liquidation preference thereof), all as determined in good faith by the Board of
Directors (excluding Vento and Sullivan), divided by (2) the number of shares of
Common Stock outstanding on a Fully Diluted Basis, and (B) in the case of an
Extraordinary Event specified in clause (z) of the definition thereof, the per
share offering price of the Common Stock issued in connection with the public
offering occurring on the IPO Date.
(iii) "Extraordinary Event" means (x) the consummation of a Company
Merger (as defined in the Stockholders Agreement) after giving effect to which
the Cash Equity Investors in the aggregate shall beneficially own on a Fully
Diluted Basis less than 33% of the capital stock or other equity interests in
the surviving entity, (y) the consummation of a Company Sale (as defined in the
Stockholders Agreement) or (z) the occurrence of the IPO Date.
(iv) "Extraordinary Event Shares" means a number of Management Shares
equal to 3,606.38 shares of Class A Voting Common Stock, or, if the Supplemental
Shares have theretofore been repurchased pursuant to Section 7(b)(i)(v) or
7(b)(ii), 3,454.22 shares of Class A Voting Common Stock.
(v) "Fully Diluted Basis" means, with respect to the shares of Common
Stock outstanding, all of the shares of all classes of Common Stock then
outstanding (regardless of whether subject to repurchase), plus all the shares
of Common Stock issuable upon the exercise of outstanding options or convertible
securities that are then convertible into Common Stock at the option of the
holder thereof, provided that for the purpose of calculating the number of
--------
shares the number of shares of Common Stock outstanding on a Fully Diluted Basis
in order to determine whether the Internal Rate of Return pursuant to Section
7(b) (iii) equals (A) more than 30% but less than 35%, none of the Extraordinary
Event Shares shall be deemed to be outstanding, and (B) 35% or more, one-half of
the Extraordinary Event Shares shall be deemed to be outstanding.
(vi) "Management Shares" means collectively, the shares of Series E
Preferred Stock and Class A Voting Common Stock issued to each of Vento and
Sullivan pursuant to Section 2.5 of the Securities Purchase Agreement.
(vii) "Restricted Holder" means each of Vento and Sullivan.
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(viii) "Supplemental Shares" means 586.60 shares of Series E Preferred
Stock and 760.74 shares of Class A Voting Common Stock.
(b) Repurchase of Shares.
--------------------
(i) Repurchase Upon Termination. Following the termination of this
---------------------------
Agreement for any reason, each Restricted Holder shall sell to the Company, and
the Company shall purchase from each Restricted Holder: (v) first, if and only
if the termination occurs prior to January 23, 2000 and the Supplemental Closing
shall not have theretofore occurred, such Restricted Holder's Supplemental
Shares, (w) second, if and only if the termination occurs prior to the
occurrence of an Extraordinary Event, such Restricted Holder's Extraordinary
Event Shares; (x) third, if and only if the termination occurs after the
occurrence of an Extraordinary Event, such Restricted Holder's Extraordinary
Event Shares that have not theretofore vested pursuant to Schedule II: (y)
fourth, such Restricted Holder's Base Shares that have not theretofore vested
pursuant to Schedule II; and (z) fifth, the number of shares of Series E
Preferred Stock and Class A Common Stock subject to repurchase pursuant to
Sections 5(f) and 6(e).
(ii) Repurchase In Absence of Supplemental Closing. If and only if
---------------------------------------------
the Supplemental Closing shall not have occurred on or before January 23, 2000,
each Restricted Holder shall sell to the Company, and the Company shall purchase
from each Restricted Holder, his Supplemental Shares.
(iii) Repurchase Upon Extraordinary Event. Upon the occurrence of an
-----------------------------------
Extraordinary Event, each Restricted Holder shall sell to the Company, and the
Company shall purchase from each Restricted Holder, the percentage of his
Extraordinary Event Shares set forth opposite the Internal Rate of Return
realized by the Cash Equity Investors as set forth on the chart below in
connection with the applicable Extraordinary Event:
Internal Rate of
Return Realized by Percentage of Extraordinary
Cash Equity Investors Event Shares to be Repurchased
--------------------- ------------------------------
less than 30% 100%
30% or more but less 50%
than 35%
35% or more 0%
For the purpose of this paragraph, the Cash Equity Investors will be deemed to
have "realized an Internal Rate of Return" of any percentage specified, as of
any date, when (i) the aggregate amount of all distributions actually made in
respect of the Cash Equity Investors' Series C Preferred Stock and Common Stock,
plus an amount equal to interest thereon at the rate of 10% per annum,
compounded annually, from the date each such distribution is made to and
including the date of the calculation, plus the aggregate
-14-
redemption price of all outstanding shares of Series C Preferred Stock then
Beneficially Owned by the Cash Equity Investors, plus the product of the
Deemed Per Share Value multiplied by the number of shares of all classes of
Common Stock then owned by the Cash Equity Investors, is equal to (ii) the
aggregate amount of all capital contributions made by the Cash Equity
Investors, plus an amount equal to interest thereon at such percentage per
annum, compounded annually, from the date each such capital contribution is
made to and including such date of calculation.
(iv) The Management Shares repurchased pursuant to this Section 7(b)
are sometimes referred to, collectively, as the "Repurchased Shares."
(c) Closing of Repurchase; Assignment of Repurchase Right. The closing of
-----------------------------------------------------
a purchase and sale of Repurchased Shares shall take place on a date mutually
agreed by the applicable Restricted Holder and the Company, but in no event
later than 30 days after (i) in the case of Section 7(b)(i), the date that this
Agreement terminated or, in the case of Section 7(b)(i)(z), the end of any 30-
day period referred to in Section 5(f) or (ii) in the case of Section 7(b)(ii),
January 23, 2000, or (iii) in the case of Section 7(b)(iii), the occurrence of
the Extraordinary Event. At such closing, the Company shall deliver to the
applicable Restricted Holder a check in the amount of the aggregate repurchase
price and, upon delivery thereof, the Company shall become the legal and
beneficial owner of the Repurchased Shares and all rights and interests therein
or relating thereto, and the Company shall have the right to retain and transfer
to its own name the shares of Preferred Stock and/or Common Stock being
repurchased by the Company. Whenever the Company shall have the right to
repurchase Preferred Stock and/or Common Stock hereunder, the Company may
designate and assign one or more employees, officers, directors or shareholders
of the Company or other persons or organizations to exercise all or a party of
the Company's repurchase rights under this Agreement and purchase all or a part
of such Preferred Stock and/or Common Stock.
(d) Escrow of Shares. The Certificate(s) representing all shares, subject
----------------
to repurchase pursuant to Section 7 (b) shall be held by the Secretary of the
Company as escrow holder (the "Escrow Holder"), along with a stock power
executed by the applicable Restricted Holder in blank. The Escrow Holder is
hereby directed to permit transfer of such shares only in accordance with this
Agreement and the Stockholders Agreement. In the event further instructions are
desired by the Escrow Holder, he shall be entitled to rely upon written
directions of the Board of Directors (excluding Vento and Sullivan). The Escrow
Holder shall have no liability for any act or omission hereunder while acting in
good faith in the exercise of his own judgment. If the Company or any assignee
repurchases any of the Management Shares pursuant to this Section 7, the Escrow
Holder, upon receipt of written notice of such repurchase from the proposed
transferee, shall take all steps necessary to accomplish such repurchase. From
time to time, upon a Restricted Holder's request, the Escrow Holder shall: (i)
cancel the certificate(s) held by the Escrow Holder and representing Management
Shares, (ii) cause new certificate(s) to be issued representing the number of
Management Shares no longer subject to repurchase pursuant to this Section 7,
which certificate(s) the Escrow Holder shall deliver to such Restricted Holder,
and (iii) cause new certificate(s) to be issued representing the balance of the
Management Shares, which certificate(s) shall be held in escrow by the Escrow
Holder in accordance with the provisions of this Section 7(d). Subject to the
terms hereof, a Restricted Holder shall have all the rights of stockholder with
respect to the Management Shares while they are held in escrow,
-15-
including without limitation, the right to vote the Management Shares and
receive any cash dividends declared thereon. If, from time to time during the
term of the Company's repurchase right, there is (i) any stock dividend, stock
split or other change in the Management Shares, or (ii) any merger or sale of
all or substantially all of the assets or other acquisition of the Company, any
and all new, substituted or additional securities to which such Restricted
Holder is entitled by reason of his ownership of the Management Shares shall be
immediately subject to this escrow, deposited with the Escrow Holder and
included thereafter as "Management Shares" for purposes of this Agreement and
the Company's repurchase right.
(e) Legends. The share certificates evidencing the Management Shares
-------
shall be endorsed with the following legend (in addition to any legend required
to be placed thereon by applicable federal or state securities laws or the
Stockholders Agreement):
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF A MANAGEMENT AGREEMENT
BETWEEN THE COMPANY AND AN AFFILIATE OF THE STOCKHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, WHICH
PROVIDES, AMONG OTHER THINGS FOR THE REPURCHASE BY THE COMPANY OF
THE SHARES REPRESENTED BY THIS CERTIFICATE.
After the IPO Date, each of Vento and Sullivan shall have the right to
exchange certificates evidencing the number of Management Shares no longer
subject to repurchase pursuant to this Section 7, for certificates that do not
contain the legend set forth above.
Section 8. Limitations of Liability.
------------------------
(a) Force Majeure. Neither of the parties will be liable for
-------------
nonperformance or defective or late performance of any of its obligations
hereunder to the extent and for such periods of time as such nonperformance,
defective performance or late performance is due to reasons outside such party's
control, including acts of God, war (declared or undeclared), acts (including
failure to act) of any governmental authority, riots, revolutions, fire, floods,
explosions, sabotage, nuclear incidents, lightning, weather, earthquakes,
storms, sinkholes, epidemics, strikes, or delays of suppliers or subcontractors
for the same causes. Neither party shall be required to settle any labor dispute
in any manner which is deemed by that party to be less than totally
advantageous, in that party's sole discretion.
(b) Exculpation of Manager. Notwithstanding any other provision of this
----------------------
Agreement, Manager shall not be liable for any failure or delay in its
performance hereunder (except with respect to its performance of its obligations
under Section 5(f)) or for any performance which is substandard, except where
such failure, delay or substandard performance is the result of willful
misconduct or gross negligence on the part of Manager.
(c) No Consequential or Special Damages. Manager shall not be
-----------------------------------
responsible to the Company for any indirect, incidental, consequential or
special damages to the Company, the Business or any subscriber or customer of
any Business or any other person, including any
-16-
damage to or loss of revenues, business or goodwill, suffered by any person or
entity for any failure of any system or failure of performance hereunder.
Manager's liability to the Company in respect of any such failure shall be
limited (in addition to the limits set forth in paragraphs (a) and (b) above) to
the amounts paid by the Company to Manager pursuant to this Agreement for the
period of any such failure.
(d) Vento and Sullivan. The limitations of liabilities set forth in
------------------
paragraphs (a), (b) and (c) above shall apply to Vento's and Sullivan's
obligation to use good faith efforts to cause the Manager to perform all of its
obligations pursuant to this Agreement.
Section 9. Books and Records. Manager shall keep or cause to be kept
-----------------
accounts and complete books and records with respect to its management of the
operation of the Business, showing all costs, expenditures, allocations,
receipts, revenues, assets, and liabilities; any and all other records
necessary, convenient or incidental to recording the financial aspects of the
operation of the Business and sufficient to record the profits and losses
generated by the operation of the Business. Within 15 days after the end of
each month Manager shall prepare or cause to be prepared and transmit to the
Company unaudited statements, which shall include a general ledger and a trail
balance. Manager shall also provide at the Company's request any and all such
additional statements or reports as may be reasonably necessary to the Company's
oversight and control of the Business. The Company shall have control over and
access, at all reasonable times during normal business hours, to the books and
records maintained by Manager pursuant to this Section 9.
Section 10. Dispute Resolution.
------------------
(a) Dispute Resolution. The parties desire to resolve disputes arising
------------------
out of this Agreement without litigation. Accordingly, except for action seeking
a temporary restraining order injunction related to the purposes of this
Agreement, or suit to compel compliance with this dispute resolution process,
the parties agree to use the dispute resolution procedures set forth in Section
10 as their sole remedy with respect to any controversy or claim arising out of
or relating to this Agreement or its breach.
At the written request of any party, the parties to the dispute will
appoint knowledgeable, responsible representatives to meet and negotiate in good
faith to resolve any dispute arising under this Agreement. The parties intend
that these negotiations be conducted by business representatives, including at
least one senior executive of each party to the dispute. The location, format,
frequency, duration and conclusion of these discussions shall be left to the
discretion of the representatives. Discussion and correspondence among the
representatives for purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement, exempt from
discovery and production, which shall not be admissible in the arbitration
described below. Documents identified in or provided with such communications,
which are not prepared for purposes of the negotiations, are not so exempted and
may, if otherwise admissible, be admitted in evidence in the arbitration or
lawsuit.
(b) Mediation. If the negotiations set forth in Section 10(a) do not
---------
resolve the dispute within thirty (30) days of the initial written request, the
parties agree to work in good faith to settle the dispute by mediation under the
commercial mediation rules of the American
-17-
Arbitration Association. The parties will attempt to agree on a mediator. If
they are unable to do so, the mediation will be referred to the New York, New
York office of the American Arbitration Association for mediation which will
appoint a qualified mediator to serve. The mediation shall take place in New
York, New York or such other location as mutually agreed upon by the parties.
Unless the parties agree otherwise, the first mediation session shall take place
no later than ten (10) days after the initial written request to negotiate. The
mediation shall continue until the dispute is resolved or until such time as the
mediator makes a good faith determination that the likelihood of resolution is
sufficiently remote that continuation of the mediation is not warranted.
(c) Arbitration. If the mediation conducted pursuant to Section 10(b)
-----------
does not resolve the dispute within thirty (30) days of the commencement of
mediation, or if prior to the expiration of such thirty (30) day period the
mediator determines that continuation of the mediation process is not warranted,
the dispute shall be submitted to binding arbitration by a panel of three
arbitrators pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Any party may demand such arbitration in accordance
with the procedures set out in those rules. Each party shall have the right to
take the deposition of up to five individuals (or a larger number of individuals
with the consent of two of the three arbitrators), and any expert witness
designated by the other party. Each party shall also have the right to request
production of relevant documents, the scope and enforcement of which shall be
governed by the arbitrator. Additional discovery may be only by order of the
arbitrator, and only upon a showing of substantial need. The arbitrator shall be
authorized to issue subpoenas for the purpose of requiring attendance of
witnesses at depositions. The arbitration hearing shall be commenced within ten
(10) days of the determination that mediation is not going to be successful. The
arbitration shall be held in New York, New York or such other location as
mutually agreed upon by the parties. The arbitrator shall control the scheduling
so as to process the matter expeditiously. The parties may submit written
briefs. The arbitrator shall rule on the dispute by issuing a written opinion
within thirty (30) days after the close of hearings. The times specified in this
section may be extended upon mutual agreement of the parties or by the
arbitrator upon a showing of good cause. The award rendered by arbitration shall
be final, binding and nonappealable judgment and the aware may be entered in any
court of competent jurisdiction in the United States. Special, consequential or
punitive damages shall not be awarded by the arbitrator.
(d) Confidentiality. The parties agree that all communications and
---------------
negotiations between the parties during the dispute resolution process, any
settlements agreed upon during the dispute resolution process and any
information regarding the other party obtained during the dispute resolution
process (that are not already public knowledge) are confidential and may be
disclosed only to employees and agents of the parties who shall have a "need to
know" the information and who shall have been made aware of the confidentiality
obligations set forth in this Section, unless the party is required by law to
disclose such information.
(e) Fees and Expenses. The parties shall equally split the fees of the
-----------------
mediator and the arbitrator. Any party found by the arbitrator to have breached
this Agreement shall pay all other out-of-pocket costs and expenses, including
reasonable attorneys' fees and expenses, of the other party incurred in
connection with the dispute resolution process. If the arbitrator does not find
-18-
that any party has breached this Agreement, then each party shall bear its own
costs and expenses, including attorneys' fees and expenses.
Section 11. Inspection Rights; Delivery of Information.
------------------------------------------
(a) Company's Right to Inspect. Manager will permit representatives of
--------------------------
the Company, at the Company's cost, during normal business hours and upon not
less than five business days' advanced written request, to (i) visit and inspect
during normal business hours Manager's properties and facilities which are
utilized in connection with Manager's provision of services to the Company
pursuant to this Agreement, including without limitation access to, and the
right to make copies of, books and records of the Company located at such
properties and facilities, and (ii) discuss with Manager's officers and
employees such properties and facilities and Manager's provision of services to
the Company pursuant to this Agreement. All such information shall be held in
confidence by the Company, except for disclosures made to the Company's
advisors, lenders and investors, or as required to be disclosed by process of
law or other applicable law.
(b) Notice of Certain Events. Promptly and in any event within three (3)
------------------------
business days after Manager has received notice or has otherwise become aware
thereof, Manager shall give the Company notice of (i) the commencement of any
material proceeding or investigation against the Company or Manager by or before
any governmental body or in any court or before any arbitrator which would be
likely to have a material adverse effect on Manager, the Business or the
Company, or on Manager's ability to perform its obligations hereunder, and (ii)
the occurrence or nonoccurrence of any event (x) which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
by the Company or Manager under this Agreement or under any other material
agreement to which the Company or Manager is a party or by which its properties
may be bound, and (y) would be likely to have a material adverse effect on
Manager, the Business or the Company, or on Manager's ability to perform its
obligations hereunder, giving in each case the details thereof and specifying
the action being taken or proposed to be taken with respect thereto. Promptly
upon receipt thereof, Manager shall deliver to the Company copies of any
material notice or report regarding any License from the grantor of such license
or from any Governmental authority regarding the Business or the Company.
(c) Other Information. From time to time and promptly upon each request,
-----------------
Manager shall provide the Company with such data, certificates, reports,
statements, financial projections, documents or further information regarding
the business, equity owners, assets, liabilities, financial position or results
of operations of Manager, as may be reasonably requested by the Company.
Section 12. Representations and Warranties. Each party makes the
------------------------------
following representations and warranties to the other party, as a material
inducement to the other party to enter into this Agreement.
(a) Organization and Standing of Parties. Each party is a limited
------------------------------------
liability company and is duly organized, validly existing and in good standing
under the laws of the State of its formation referenced in the first paragraph
of this Agreement. Each party has full limited
-19-
liability company power and authority to own its assets and carry on its
business as now conducted by it.
(b) Execution, Delivery, Performance and Binding Effect. The execution,
---------------------------------------------------
delivery and performance by each party of this Agreement have been duly
authorized by all necessary limited liability company or corporate action, as
appropriate, including by each party's members or managers, as appropriate. Each
party has full power and authority to enter into and perform its obligations
under this Agreement. The execution, delivery and performance by such party of
this Agreement will not (with the passage of time or giving of notice or both)
conflict with, violate any provision of, result in the breach of, or constitute
a default under (i) such party's articles of organization, certificate of
incorporation, regulations, or other constituent, organizational or governing
documents, as applicable, (ii) any License held by such party, (iii) any Law,
(iv) any order, writ, injunction, decree, judgment or regulation of any
Governmental Agency or (v) any contract, agreement, arrangement or
understanding, (A) to which such party is a party, (B) to which or by which such
party is subject or bound, or (C) to which or by which such party's assets are
subject or bound. The execution, delivery and performance of this Agreement will
not (with the passage of time or giving of notice or both) (i) create or impose
any Lien upon the assets of such party, (ii) result in the termination,
suspension, modification or impairment of any contract, agreement, arrangement
or understanding (A) to which such party is a party, (B) to which, or by which,
such party is subject or bound, or (C) to which or by which such party's assets
are subject or bound, or (iii) result in the termination, suspension,
modification or impairment of any governmental license, permit, authorization or
certificate held by such party or relating to its assets or businesses. This
Agreement constitutes the legal, valid and binding obligation of such party
enforceable against it in accordance with its terms.
(c) Consents. No consent, approval, order or authorization of, or
--------
registration, qualification, designation, declaration or filing with, any
Governmental Authority or other Person is required on the part of each party in
connection with the execution, delivery and performance of this Agreement.
(d) Litigation; Claims. With respect to each party, there is no claim,
------------------
action, audit, arbitration, dispute, investigation, suit, litigation or legal
proceeding pending, or to the best of such party's knowledge threatened, against
such party (i) relating to or otherwise affecting such party's ability to
execute and deliver this Agreement or to perform such party's obligations
hereunder, or (ii) which would materially adversely affect the Company or the
Company's contemplated business.
(e) Court Orders, Decrees, Judgments, Etc. There is outstanding no order,
-------------------------------------
writ, injunction, decree or judgment of any court, governmental agency or
arbitration tribunal against a party (i) relating to or otherwise affecting such
party's ability to execute and deliver this Agreement or to perform such party's
obligations hereunder or (ii) which would materially adversely affect the
Company or the Company's contemplated business.
Section 13. Indemnification; Expenses.
-------------------------
(a) Indemnification. In the event Vento or Sullivan (each, an
---------------
"Indemnified Party") is threatened to be made a party to any threatened,
pending, or completed action, suit, or
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proceeding (a "Proceeding"), whether civil, criminal, administrative, or
investigative (whether or not by or in the right of the Company), by reason of
the fact that such person is or was a director, officer, incorporator, employee,
or agent of the Company, or is or was serving at the request of the Company as a
director, officer, incorporator, employee, partner, trustee, or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise (including the Manager) (an "Other Entity"), shall be entitled to be
indemnified by the Company to the full extent then permitted by law against
expenses (including counsel fees and disbursements), judgments, fines (including
excise taxes assessed on a person with respect to an employee benefit plan), and
amounts paid in settlement incurred by him in connection with such Proceeding.
(b) Advancement of Expenses. The Company shall, from time to time,
-----------------------
reimburse or advance to any Indemnified Party the funds necessary for payment of
expenses, including attorneys' fees and disbursements, incurred in connection
with any Proceeding, in advance of the final disposition of such Proceeding;
provided, however, that, if (and only if) required by the Delaware General
Corporation Law, such expenses incurred by or on behalf of any such Indemnified
Party may be paid in advance of the final disposition of a Proceeding only upon
receipt by the Company of an undertaking, by or on behalf of such Indemnified
Party, to repay any such amount so advanced if it shall ultimately be determined
by final judicial decision from which there is no further right of appeal that
such Indemnified Party is not entitled to be indemnified for such expenses.
Section 14. Miscellaneous.
-------------
(a) Counterparts. This Agreement may be executed by one or more of the
------------
parties hereto in any number of counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
(b) Construction. Each of the parties hereto acknowledge that it has
------------
reviewed this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments hereto.
(c) Benefit; Assignment. This Agreement shall be binding upon and inure
-------------------
to the benefit of all parties hereto and their respective successors and
permitted assigns; provided, however, that Manager shall not assign or otherwise
transfer its rights and obligations under this Agreement without the Company's
prior written consent. Any sale, assignment, sublease or other transfer in
violation of this Section 14(c) shall be null and void. Each of the Stockholders
(as such term is defined in the Stockholders Agreement) shall be deemed a third
party beneficiary of the Company's rights under this Agreement and shall be
permitted to exercise any rights pursuant to this provision with the consent of
AT&T and two-thirds in interest of the Cash Equity Investors.
(d) Complete Agreement. This document and the exhibits attached hereto
------------------
and each of the documents referred to herein embody the complete agreement and
understanding among the parties and supersede and preempt any prior
understandings, agreements, or representations
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by or among the parties written or oral, which may have related to the subject
matter hereof in any way.
(e) Amendment. This Agreement may not be amended except by a writing
---------
signed by each of the parties.
(f) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws, and not the laws of conflict, of the State of
New York.
(g) Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstance shall for any reason or to any extent be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall not be affected thereby,
but, rather, shall be enforced to the extent permitted by law. Furthermore, in
lieu of such an illegal, invalid or unenforceable provision, there shall be
added automatically as part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid or enforceable.
(h) Further Assurances. The parties agree that they will take all such
------------------
further actions and execute and deliver all such further instruments and
documents as may be required in order to effectuate the agreements set forth In
this Agreement.
(i) Waiver. No failure or delay on the part of the parties or any of
------
them in exercising any right, power or privilege hereunder, nor any course of
dealing among the parties or any of them shall operate as a waiver of any such
right, power or privilege nor shall any single or partial exercise of any such
right, power or privilege preclude the simultaneous or later exercise of any
other right, power or privilege. The rights and remedies herein expressly
provided are cumulative and are not exclusive of any rights or remedies which
the parties or any of them would otherwise have.
(j) Notices. All notices and communications hereunder shall be in
-------
writing and shall be deemed to have been duly given to a party when delivered in
person (including delivery by an express delivery service or by facsimile
transmission during the recipient's regular business hours) to an officer of the
Company or Manager, respectively, or three business days after such notice is
enclosed in a properly sealed envelope, certified or registered, and deposited
(postage and certification or registration prepaid) in a post office or
collection facility regularly maintained by the United States Postal Service and
addressed as follows:
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If to Manager:
TeleCorp Management Corp.
1101 17th Street, NW - Suite 900
Washington, D.C. 20036
Attn: Chief Executive Officer
Telephone: (202) 721-0230
Facsimile: (202) 833-4888
with a copy to:
TeleCorp Management Corp.
1101 17th Street, NW- Suite 900
Washington, D.C. 20036
Attention: General Counsel
Telephone: (202) 721-0230
Facsimile: (202) 833-4888
If to the Company:
TeleCorp PCS, Inc.
1101 17th Street, NW - Suite 900
Washington, D.C. 20036
Attn: Chief Executive Officer
Telephone: (202) 721-0230
Facsimile: (202) 833-4888
With copies to:
TeleCorp Management Corp.
1101 17th Street, NW - Suite 900
Washington, D.C. 20036
Attention: General Counsel
Telephone: (202) 721-0230
Facsimile: (202) 833-4888
AT&T Wireless Services, Inc.
5000 Carillon Point
Kirkland, Washington 98033
Attention: William W. Hague
Telephone: (425) 828-8461
Facsimile: (425) 828-8451
And
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AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Attention: Corporate Secretary
Telephone:
Facsimile: (908) 953-4657
and
Friedman Kaplan & Seiler LLP
875 Third Avenue, 8th Floor
New York, New York 10022
Attention: Daniel M. Taitz
Telephone: (212) 833-1109
Facsimile: (212) 355-6401
and
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Gregg S. Lerner, Esq.
Telephone: (212) 698-7705
Facsimile: (212) 698-7825
and
To each Cash Equity Investor, to its address set forth on Schedule I to the
Stockholders Agreement.
and
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Mark S. Wojciechowski, Esq.
Telephone: (212) 506-2525
Facsimile: (212) 262-1910
or to such other addresses as either party may designate in a written notice
served upon the other party in the manner provided herein.
***
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IN WITNESS WHEREOF, the parties have set their hands effective as of the date
first written above.
COMPANY:
TELECORP PCS, INC.
By: /s/ Thomas H. Sullivan
---------------------------------------
Name:
Title: Executive Vice President
MANAGER:
TELECORP MANAGEMENT CORP.
By: /s/ Thomas H. Sullivan
---------------------------------------
Name:
Title: President
In order to induce the Company to execute and deliver the foregoing Management
Agreement, by their execution in the spaces provided below each of the
undersigned hereby agrees to be bound by the provisions of Sections 5(f), 6 and
7 of this Agreement and (subject to the limitations on liability set forth in
Section 8(d)) to use good faith efforts to cause the Manager to perform all of
its obligations pursuant to this Agreement.
/s/ Gerald Vento
- --------------------------
Gerald Vento
/s/ Thomas Sullivan
- --------------------------
Thomas Sullivan
-25-
I-1
SCHEDULE II
Vesting Schedule
----------------
Vesting of Vento's and Sullivan's Non-Extraordinary Event Shares.
- ----------------------------------------------------------------
Vento's and Sullivan's Management Shares (other than his Extraordinary
Event Shares) shall vest on the Effective Date, the completion of the Minimum
Build-Out Plan (as defined in the Stockholder Agreement) and on the specified
anniversaries of the Effective Date as follows:
Vesting Date Percent of Shares
------------ -----------------
Commencement Date 20%
Second Anniversary 15%
Third Anniversary 15%
Fourth Anniversary 15%
Fifth Anniversary 15%
Completion of Year 1 and Year 2 of Minimum Build-Out
Plan 10%
Completion of Year 3 of Minimum Build-Out Plan plus
aggregate POP coverage of 60% of total POPs
(based on 1995 POPs, as defined in the Stockholder's
Agreement) 10%
--
Total 100%
Accelerated Vesting of Vento's and Sullivan's Non-Extraordinary Event Shares.
- ----------------------------------------------------------------------------
In the event of a termination of the Management Agreement by Manager
pursuant to Section 5(b)(iii)(A), (B) or (C) or a termination by the Company
pursuant to Section 5(b)(ii)(B), (C) or (D), in addition to any of Vento's and
Sullivan's Management Shares that shall have theretofore vested in accordance
with the above "Vesting of Vento's and Sullivan's Non-Extraordinary event
Shares" schedule, a number of each of Vento's and Sullivan's unvested Base
Shares determined as set forth below shall immediately vest (and shall not be
subject to repurchase by the Company):
(a) in the event that the date of termination is no more than six months
after the Commencement Date or no more than six months after the most recent
Anniversary Date, a pro
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rata portion (based upon the actual number of days since the Commencement Date
or the Anniversary Date) of the number of shares (if any) that would have vested
on the immediately following Anniversary Date; and
(b) in the event that the date of termination is more than six months after
the Effective Date or more than six months after the most recent Anniversary
Date, all of the shares (if any) that would have vested on the immediately
following Anniversary Date.
Vesting of Vento's and Sullivan's Extraordinary Event Shares.
- ------------------------------------------------------------
Vento's and Sullivan's Extraordinary Event Shares, to the extent not repurchased
in connection with an Extraordinary Event, shall vest (A) in the case of an
Extraordinary Event described in Section 7(a)(iii)(x) or (y), on the date of
consummation of the Extraordinary Event, and (B) in the case of an Extraordinary
Event described in Section 7(a)(iii)(z), on the IPO Date and the specified
anniversaries of such date as follows:
Vesting Date Percent of Shares
- ------------ -----------------
IPO Date 50%
First Anniversary 16-2/3%
Second Anniversary 16-2/3%
Third Anniversary 16-2/3%
------
Total 100.00
II-2