EXHIBIT 10.5.2
AMENDMENT NO. 1 TO
MANAGEMENT AGREEMENT
Between
TELECORP MANAGEMENT CORP.
and
TELECORP PCS, INC.
Dated as of May 25, 1999
AMENDMENT NO. 1 TO
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MANAGEMENT AGREEMENT
--------------------
This Amendment No. 1 to Management Agreement (the "Amendment") is entered
into as of May 25, 1999 by and between TELECORP MANAGEMENT CORP., a Delaware
corporation ("Manager"), and TELECORP PCS, INC., a Delaware corporation (the
"Company").
WITNESSETH:
WHEREAS, the Company and Manager entered into that certain Management
Agreement dated as of July 17, 1998 (the "Management Agreement");
WHEREAS, the Company and Manager wish to amend the Management Agreement in
order to impose certain restrictions on the additional securities of the Company
issued to the stockholders of Manager in conjunction with the expansion of the
Company's Territory from the continental United States (the "Domestic Market")
into the San Juan MTA (the "Puerto Rico Market");
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:
Amendment 1. The Third "WHEREAS" clause n the recitals of the Management
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Agreement is hereby amended and restated as follows:
"WHEREAS, Gerald Vento ("Vento") and Thomas Sullivan ("Sullivan") are
the owners of all of the ownership interests in Manager and are each the of
record and beneficial owner of the shares of the Common Stock and Preferred
Stock described on Schedule A attached hereto (hereafter referred to
collectively as the "Shares") which were issued in conjunction with the
closings under the Securities Purchase Agreement (the "Domestic Market
Closing") and the Puerto Rico Stock Purchase Agreement (the "Puerto Rico
Market Closing"), respectively;"
Amendment 2. Section 2 of the Management Agreement is hereby amended and
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restated in its entirety as follows:
"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 as the same have been or may be amended from time
to time 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."
Amendment 3. Section 5(f)(ii) of the Management Agreement is hereby
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amended and restated in its entirety as follows:
"(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 the Class C Common Stock set forth on
Schedule A (the "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 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
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Sullivan of a Successor Control Group within five (5) business days after
the nomination by the Board of Directors of a successor New Provider."
Amendment 4. Sections 7(a) and 7(b) of the Management Agreement are
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hereby amended and restated in their entirety as follows:
"Section 7. Vesting and Repurchase of Restricted Shares, Etc.
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(a) General. Each of Vento and Sullivan hereby agrees that the
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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:
(i) "Base Shares" means 18,655.65 shares of Class A Voting
Common Stock and 18,219.13 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 (exclusive of any
previously existing ownership interest in any entity party to the Company
Merger other than the Company), (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 Shares
equal to 4,663.92 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
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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
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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) "Restricted Holder" means each of Vento and Sullivan.
(b) Repurchase of Shares.
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(i) Repurchase Upon Termination. Following the termination of
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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 the occurrence of an Extraordinary
Event, such Restricted Holder's Extraordinary Event Shares, (w) second, 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 B; (x) third, such Restricted Holder's Base Shares
that have not theretofore vested pursuant to Schedule B, and (y) fourth, 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 Upon Extraordinary Event. Upon the occurrence
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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
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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
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the date of the calculation, plus the aggregate 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.
(iii) The Management Shares repurchased pursuant to this Section
7(b) are sometimes referred to, collectively, as the "Repurchased Shares."
Amendment 5. All references to "Management Shares" in the Management
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Agreement are hereby amended to say "Shares".
Amendment 6. Section 12(a) and Section 12(b) of the Management Agreement
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are hereby amended and restated in their entirety as follows:
"(a) Organization and Standing of Parties. Each party is a corporation
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and is duly organized, validly existing and in good standing under the laws
of the State of its incorporation referenced in the first paragraph of this
Agreement. Each party has full corporate power and authority to own its
assets and carry on its business as now conducted by it.
(c) Execution, Delivery, Performance and Binding Effect. The
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execution, delivery and performance by each party of this Agreement have
been duly authorized by all necessary corporate action, including by each
party's board of directors. 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 certificate of incorporation or by-laws, (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."
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Amendment 7. Section 14(j) of the Management Agreement is hereby amended
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and restated in its entirety as follows:
"Notices. All notices and communications hereunder shall be in
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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:
If to Manager:
TeleCorp Management Corp.
1010 N. Glebe Road - Suite 800
Arlington, Virginia 22201
Attn: Chief Executive Officer
Telephone: (703) 236-1100
Facsimile: (703) 236-1376
With a copy to:
TeleCorp Management Corp.
1010 N. Glebe Road - Suite 800
Arlington, Virginia 22201
Attention: General Counsel
Telephone: (703) 236-1100
Facsimile: (703) 236-1376
If to the Company:
TeleCorp PCS, Inc.
1010 N. Glebe Road - Suite 800
Arlington, Virginia 22201
Attn: Chief Executive Officer
Telephone: (703) 236-1100
Facsimile: (703) 236-1376
With copies to:
TeleCorp Management Corp.
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1010 N. Glebe Road - Suite 800
Arlington, Virginia 22201
Attention: General Counsel
Telephone: (703) 236-1100
Facsimile: (703) 236-1376
AT&T Wireless Services, Inc.
5000 Carillon Point
Kirkland, Washington 98033
Attention: William W. Hague
Telephone: (425) 828-8461
Facsimile: (425) 828-8451
and
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
To each Cash Equity Investor, to its address set forth on Schedule I to the
Stockholders Agreement.
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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."
Amendment 8. Schedule II to the Management Agreement is hereby amended
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and restated in its entirety as set forth in Schedule B hereto.
All other terms and conditions of the Management Agreement shall remain in
full force and effect.
Capitalized terms used herein, but not otherwise defined herein, shall have
the meaning set forth in the Management Agreement.
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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
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Name:
Title: Executive Vice President
MANAGER:
TELECORP MANAGEMENT CORP.
By: /s/ Thomas H. Sullivan
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Name:
Title: President
In order to induce the Company to execute and deliver the foregoing Amendment
No. 1 to Management Agreement, by their execution in the spaces provided below
each of the undersigned hereby agrees to be bound by the provisions of
Amendments 2, 3 and 7 of this Amendment.
/s/ Gerald Vento
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Gerald Vento
/s/ Thomas Sullivan
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Thomas Sullivan
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SCHEDULE A
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Domestic Market Closing
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Series E Preferred Class A Common Class C Common Voting Preference
------------------- ------------------- ------------------- -------------------
Gerald Vento 8,729.40 10,779.82 339.83 5
Thomas Sullivan 5,426.38 6,700.97 211.25 5
Puerto Rico Market Closing
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Series E Preferred Class A Common Class C Common Voting Preference
------------------- ------------------- ------------------- -------------------
Gerald Vento 2,505.73 3,260.75 NA NA
Thomas Sullivan 1,557.62 2,026.95 NA NA
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SCHEDULE B
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Vesting Schedule
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Vesting of Vento's and Sullivan's Non-Extraordinary Event Shares.
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Vento's and Sullivan's Shares (other than his Extraordinary Event Shares)
shall vest on the Effective Date, the completion of the Minimum Build-Out Plan
for each of the Domestic and Puerto Rico and on the specified anniversaries of
the Effective Date as follows:
Vesting Date Percent of Shares
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Effective Date 20%
Second Anniversary 15%
Third Anniversary 15%
Fourth Anniversary 15%
Fifth Anniversary 15%
Completion of Year I and Year 2 of 10% of the Shares issued at the
Minimum Build-Out Plan of the Domestic Market Domestic Market Closing
Completion of Year 3 of Minimum 10% of the Shares issued at the
Build-Out Plan of the Domestic Market Domestic Market Closing
plus aggregate POP coverage of 60% of
total POPs in the Domestic Market
(based on 1995 POPs, as defined in the
Stockholder's Agreement)
Completion of Year I and Year 2 of 10% of the Shares issued at the
Minimum Build-Out Plan of the Puerto Puerto Rico Market Closing
Rico Market
Completion of Year 3 of Minimum 10% of the Shares issued at the
Build-Out Plan of the Puerto Rico Puerto Rico Market Closing
Market plus aggregate POP coverage of
60% of total POPs in the Puerto Rico
Market (based on 1995 POPs, as defined
in the Stockholder's Agreement)
Total 100%
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Accelerated Vesting of Vento's and Sullivan's Non-Extraordinary Event Shares.
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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 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 Effective Date or no more than six months after the most recent
Anniversary Date, a pro rata portion (based upon the actual number of days since
the Effective 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.
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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
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IPO Date 50%
First Anniversary 16-2/3%
Second Anniversary 16-2/3%
Third Anniversary 16-2/3%
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Total 100.00
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