SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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AIRGATE PCS, INC.
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AIRGATE PCS, INC.
233 Peachtree Street, N.E.
Harris Tower, Suite 1700
Atlanta, Georgia 30303
March 1, 2004
Dear AirGate Shareowner:
It is my pleasure to invite you to AirGate PCS, Inc.'s 2004 Annual Meeting of
Shareowners. This year's meeting will be held at 303 Peachtree Street, Suite
5300, Atlanta, Georgia 30308 on Thursday, April 8, 2004 at 9:00 a.m., Eastern
Standard Time.
At this meeting, you will be asked to vote, in person or by proxy, to elect two
directors and to consider any other business that may properly come before the
meeting. Details regarding the meeting and the business to be conducted are
described in the accompanying Notice of Annual Meeting and Proxy Statement.
Your vote is important. Whether or not you plan to attend the meeting, I hope
you will vote as soon as possible by indicating your vote, and signing, dating
and promptly returning the enclosed proxy card in the envelope provided. Voting
by written proxy will ensure your representation at the annual meeting if you do
not attend in person.
Thank you for your ongoing support of and continued interest in AirGate PCS.
Sincerely,
/s/ Thomas M. Dougherty
Thomas M. Dougherty
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
DATE: 9:00 a.m., Thursday, April 8, 2004
PLACE: 303 Peachtree Street
Suite 5300
Atlanta, Georgia 30308
ITEMS OF BUSINESS: 1. To elect two directors; and
2. To consider any other business that may properly
come before the meeting.
RECORD DATE: You are entitled to receive this notice of annual
meeting and to vote at the annual meeting if you
were a shareowner at the close of business on
February 27, 2004.
VOTING BY PROXY: Please submit a proxy by mailing it in the enclosed
envelope as soon as possible so that your shares
can be voted at the annual meeting in accordance
with your instructions. For specific instructions,
please refer to the Questions and Answers beginning
on page 1 of this proxy statement and the
instructions on the proxy card.
By Order of the Board of Directors,
/s/ Barbara L. Blackford
Barbara L. Blackford
Vice President, General Counsel and
Corporate Secretary
This notice of annual meeting and proxy statement and accompanying proxy card
are being first sent to shareholders on or about March 1, 2004.
TABLE OF CONTENTS
Page
Questions and Answers.................................................. 1
Proposal 1: Election of Directors................................... 4
Corporate Governance and Board Matters................................. 5
Directors' Compensation ............................................... 9
Audit Committee Report................................................. 10
Equity Compensation Plan Information................................... 12
Executive Compensation................................................. 13
Stock Performance Graph................................................ 22
Security Ownership of Certain Beneficial Owners,
Directors and Officers................................................. 23
Certain Related Transactions............................................ 24
Other Information....................................................... 24
Appendix A: Audit Committee Charter.................................... A-1
QUESTIONS AND ANSWERS ABOUT THE PROXY INFORMATION AND THE ANNUAL MEETING
Why am I receiving these materials?
Our board of directors is providing these materials to you in connection with
our annual meeting of shareowners, which will take place on Thursday, April 8,
2004. SEC regulations require us to provide this proxy statement when we ask you
to sign a proxy card appointing proxies to vote on your behalf.
What proposals will be voted on at the meeting?
The election of two directors is the only proposal scheduled to be voted on at
the meeting.
Who is entitled to vote?
All shareowners as of the close of business on February 27, 2004, which we refer
to as the record date, will be entitled to vote in person or by proxy at the
meeting.
What shares may I vote?
You may vote all shares you owned as of the record date. These include (1)
shares owned directly in your name as shareowner of record, including shares
purchased through our employee stock purchase plan and (2) shares held for you
as the beneficial owner through a stockbroker or bank or shares purchased
through our 401(k) plan.
What is the difference between holding shares as a shareowner of record and as a
beneficial owner?
Most of our shareowners hold their shares through a stockbroker, bank or other
nominee rather than directly in their own name. As summarized below, there are
some differences between shares held of record and those beneficially owned.
Shareowners of Record. If our shares are registered directly in your name with
our transfer agent, American Stock Transfer & Trust Company, you are considered
the shareowner of record with regard to those shares. As the shareowner of
record, you have the right to grant your proxy directly to us to vote your
shares on your behalf at the meeting or the right to vote in person at the
meeting. We have enclosed or sent a proxy card for you to use.
Beneficial Owner. If you hold our shares in a stock brokerage account or by a
bank or other nominee, you are considered the beneficial owner of shares held in
street name, and these materials are being forwarded to you by your broker or
nominee, which is considered the shareowner of record with respect to those
shares. As the beneficial owner, you have the right to direct your broker or
nominee how to vote and are also invited to attend the annual meeting. However,
since you are not the shareowner of record, you may not vote these shares in
person at the meeting unless you obtain a signed proxy from the shareowner of
record giving you the right to vote the shares. Your broker or nominee has
enclosed or provided a voting instruction card for you to use to direct your
broker or nominee how to vote these shares.
How do I vote?
(1) By Mail--You may vote by mail by signing your proxy card and returning
it in the enclosed envelope, or for shares beneficially owned, by
signing the voting instruction card provided by your broker or nominee
and returning it as instructed by your broker or nominee. If you
provide specific voting instructions, your shares will be voted as you
instruct. If you sign your proxy card or voting instruction card, but
do not provide instructions, your shares will be voted as described
below in "How are votes counted?"
(2) In Person--If you are a shareowner of record, you may vote in person
at the meeting. Even if you currently plan to attend the annual
meeting, we recommend that you also submit your proxy by mail as
1
described above so that your vote will be counted if you later decide
not to attend the meeting. Shares beneficially owned may be voted in
person only if you obtain a signed proxy from the shareowner of record
giving you the right to vote the shares.
Can I change my vote?
You may change your proxy instructions at any time prior to the vote at the
annual meeting. For shares held directly in your name, you may accomplish this
by granting a new proxy bearing a later date (which automatically revokes the
earlier proxy) or by attending the annual meeting and voting in person.
Attending the meeting will not cause your previously granted proxy to be revoked
unless you specifically so request. For shares you beneficially own, you may
accomplish this by submitting new voting instructions to your broker or nominee.
How are votes counted?
In the election of directors, you may vote "FOR" all of the nominees or your
vote may be "WITHHELD" with respect to one or more nominees. If you are a
shareowner of record and you sign your proxy card with no further instructions,
your shares will be voted in accordance with the recommendations of our board of
directors (FOR all of the nominees to our board of directors). If you are a
beneficial owner and you sign the voting instruction card sent to you by your
broker with no further instruction, your shares will be voted in the discretion
of your broker with respect to the election of directors.
What is the voting requirement to approve the proposal?
In the election of directors, the two persons receiving the highest number of
"FOR" votes will be elected. If you are a beneficial owner and do not provide
your shareowner of record with voting instructions, your shares may constitute
broker non-votes, as described below under "What is the quorum requirement for
the meeting?" In tabulating the voting results for any particular proposal,
shares that constitute broker non-votes are not considered entitled to vote on
that proposal.
What does it mean if I receive more than one proxy card?
It means your shares are registered differently or are in more than one account.
Please provide voting instructions for all proxy and voting instruction cards
you receive.
Who will count the votes?
Corporate Communications, Inc. will tabulate the votes and act as inspector of
elections.
Is my vote confidential?
Proxy instructions, ballots and voting tabulations that identify individual
shareowners are handled in a manner that protects your voting privacy. Your vote
will not be disclosed either within AirGate or to third parties except (1) as
necessary to meet applicable legal requirements, (2) to allow for the tabulation
of votes and certification of the vote or (3) to facilitate a successful proxy
solicitation by our board of directors. Occasionally, shareowners provide
comments on their proxy card, which are then forwarded to AirGate management.
Where can I find the voting results of the meeting?
We will announce the preliminary voting results at the meeting and publish final
results in our quarterly report on Form 10-Q for our second fiscal quarter of
2004.
What happens if additional proposals are presented at the meeting?
Other than the one proposal described in this proxy statement, we do not expect
any matters to be presented for a vote at the annual meeting. If you grant a
proxy, the people named as proxy holders, Thomas M. Dougherty, our President and
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Chief Executive Officer, and Barbara L. Blackford, our Vice President, General
Counsel and Secretary, will have the discretion to vote your shares on any
additional matters properly presented for a vote at the meeting. If for any
unforeseen reason any of our nominees is not available as a candidate for
director, the people named as proxy holders will vote your proxy for such other
candidate or candidates as may be nominated by our board of directors.
What shares are entitled to be voted?
Each share of our common stock outstanding as of the close of business on
February 27, 2004, the record date, is entitled to one vote on all items being
voted on at the annual meeting. On the record date, we had approximately
11,760,942 shares of common stock issued and outstanding.
Do I have cumulative voting rights or dissenters' rights of appraisal?
No, you do not have the right to vote cumulatively in the election of directors
and, under Delaware law, you do not have dissenters' rights of appraisal in
connection with the matters to be voted upon at the meeting.
What is the quorum requirement for the meeting?
The quorum requirement for holding the meeting and transacting business is a
majority of the outstanding shares present in person or represented by proxy and
entitled to be voted. Both abstentions and broker non-votes are counted as
present for the purpose of determining the presence of a quorum. Abstentions are
also counted as shares present and entitled to be voted. Broker non-votes,
however, are not counted as shares present and entitled to be voted with respect
to the matter on which the broker has expressly not voted. Generally, broker
non-votes occur when shares held by a broker for a beneficial owner are not
voted with respect to a particular proposal because (1) the broker has not
received voting instructions from the beneficial owner and (2) the broker lacks
discretionary voting power to vote such shares. Brokers have discretionary
voting power with respect to the election of directors.
Who will bear the costs of soliciting votes for the meeting?
We are making the solicitation and will pay the entire cost of preparing,
assembling, printing, mailing and distributing these proxy materials. In
addition to mailing and distributing of these proxy materials, the solicitation
of proxies or votes may be made in person, by telephone or by electronic
communications by our directors, officers and employees, who will not receive
any additional compensation for such solicitation activities. We will also
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and solicitation
materials to shareowners.
May I propose actions for consideration at next year's annual meeting of
shareowners or nominate individuals to serve as directors?
You may submit proposals for consideration at future shareowners meetings,
including director nominations. For business to be considered at next year's
annual meeting, a shareowner must submit timely notice in writing to Barbara L.
Blackford, Corporate Secretary, 233 Peachtree St., N.E., Suite 1700, Harris
Tower, Atlanta, GA 30303. For shareowner proposals, such written notice must be
received by our Corporate Secretary by the close of business on December 16,
2004.
Our by-laws, which are publicly available through our reports filed with the SEC
or may be obtained from our corporate secretary upon request, state the specific
requirements that must be included in any notice of business to be brought
before the next annual meeting.
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PROPOSAL 1: ELECTION OF DIRECTORS
We have a staggered board of directors with six members. Our board is divided
into three classes of directors, as nearly equal in number as possible, with one
class elected each year at the annual meeting of shareowners. Two directors, Mr.
Max D. Hopper and Dr. Gail S. Schoettler, have been nominated by the board and
will become members prior to the annual meeting of shareowners.
The shareowners will elect two directors at the annual meeting. The terms for
Messrs. Robert A. Ferchat and Max D. Hopper are scheduled to expire at the 2004
annual meeting of shareowners and they are nominees for re-election at this
year's annual meeting. Their term will last until the annual shareowner's
meeting in 2007, or until they retire, resign or are removed and are succeeded
by another qualified director.
The board unanimously recommends you vote FOR the election of the two nominees
for director.
Nominees for Director
The following information is provided with respect to the nominees for election
as directors at the annual meeting.
Nominees to serve three years until Annual Meeting in 2007
Robert A. Ferchat, age 69, has served as the chairman of our board of directors
since June 2003 and as one of our directors since October 1999. From November
1994 to January 1999, Mr. Ferchat served as the chairman of the board of
directors, president and chief executive officer of BCE Mobile Communications, a
wireless telecommunications company. From January 1999 until May 1999, Mr.
Ferchat was chairman of BCE Mobile Communications. Mr. Ferchat is also a
director of Brookfield Homes Corp., 01 Communique, ATS Automation Tooling
Systems, Inc. and CellBucks Payments Networks Inc.
Max D. Hopper, age 69, will become a member of our board of directors prior to
the annual meeting of shareowners. Mr. Hopper founded the firm, Max D. Hopper
Associates, Inc., in 1995 after retiring from AMR Corporation. During Mr.
Hopper's 20-year tenure at AMR, he served as chief executive officer, chief
information officer, chairman of The SABRE Group and senior vice president.
Previously, Mr. Hopper was executive vice president for Bank of America from
1982 through 1985, where he was the chief information officer. Mr. Hopper
launched his professional systems career at Shell Oil in 1960 and served with
EDS and United Airlines prior to joining American Airlines in 1972. Mr. Hopper
is on the board of Gartner Group, United Stationers, Inc. and Perficient.
Incumbent Directors
The following information is provided with respect to the directors who are not
nominees for election as directors at the annual meeting.
Directors serving until Annual Meeting in 2005
Thomas M. Dougherty, age 59, has served as one of our directors since April 1999
and has been our president and chief executive officer since April 1999. From
March 1997 to April 1999, Mr. Dougherty was a senior executive of Sprint PCS.
From June 1996 to March 1997, Mr. Dougherty served as executive vice president
and chief operating officer of Chase Telecommunications, a personal
communications services company. Mr. Dougherty served as president and chief
operating officer of Cook Inlet BellSouth PCS, L.P., a start-up wireless
communications company, from November 1995 to June 1996. Prior to October 1995,
Mr. Dougherty was vice president and chief operating officer of BellSouth
Mobility DCS Corporation, a PCS company.
John W. Risner, C.F.A., age 44, has served as one of our directors since
February 20, 2004 and is currently the treasurer of the National
Neurofibromatosis Foundation, which he joined in 2002. From 1997 to 2002, he
served as senior vice president-senior portfolio manager-high yield bonds for
AIG Global Investment Management. Prior to that, Mr. Risner was vice
president-senior portfolio manager-high yield and convertible bonds at Value
Line Asset Management, a money management firm, where he worked from 1991 to
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1997. Mr. Risner is also a director of NII Holdings, Inc., which provides
digital wireless communication services targeted at business customers outside
of the United States. (As of November 30, 2003, Nextel Communications, Inc.,
beneficially owned approximately 18.2% of the common stock of NII Holdings,
Inc.) Mr. Risner has a Bachelor of Science in Business from the University of
Maryland and a Masters in Business Administration from Fordham University. Mr.
Risner is a Chartered Financial Analyst.
Directors serving until Annual Meeting in 2006
Stephen R. Stetz, age 61, has served as one of our directors since February
2003. Mr. Stetz is president and managing director of Matterhorn Strategic
Partners, LLC, a strategic and financial advisory firm co-founded by Mr. Stetz
that specializes in mergers and acquisitions, and has held such position since
May 2002. From July 2000 to April 2002, Mr. Stetz consulted on strategic and
financial issues with a number of companies. From 1965 until June 2000, Mr.
Stetz served in various positions at Monsanto Company. From September 1999 until
June 2000, Mr. Stetz served as corporate vice president, strategic initiatives.
From November 1998 until August 1999, Mr. Stetz served as vice president and
chief financial officer of Monsanto's $5 billion Agriculture Company and from
October 1996 until September 1998, Mr. Stetz served as corporate vice president,
mergers & acquisitions/licensing. During his tenure, he was responsible for more
than fifty transactions with an aggregate value of over $75 billion and numerous
corporate restructurings. He has a Bachelor of Science in Chemical Engineering
from the University of Notre Dame and a Masters in Business Administration from
the University of West Florida. Mr. Stetz is on the board of directors of
Evolutionary Genomics.
Gail S. Schoettler, age 60, will become a member of our board of directors prior
to the annual meeting of shareowners. From 1999 to 2001, Dr. Schoettler served
as the United States Ambassador to the World Radiocommunication Conference,
where she was responsible for negotiating a key telecommunications treaty and
was head of the United States Department of Defense's presidential transition
for global communications, security and intelligence. From 1995 to 1999, Dr.
Schoettler was Lt. Governor of Colorado and from 1987 to 1995 was State
Treasurer of Colorado. She has started several banks and helps manage her
family's cattle ranch, vineyard and real estate interests. She is chair of the
board and chair of the corporate governance committee of Fischer Imaging Corp.,
chair of the corporate governance committee of CancerVax Corp., and a director
and chair of the corporate governance and compensation committee of Aspen Bio,
Inc. Dr. Schoettler received a B.A. in economics from Stanford University and
M.A. and Ph.D. degrees in history from the University of California, Santa
Barbara.
CORPORATE GOVERNANCE AND BOARD MATTERS
The board of directors is committed to good business practices, transparency in
financial reporting and the highest level of corporate governance. The board has
reviewed the Company's governance policies and practices against those suggested
by various groups or authorities active in corporate governance and practices of
other companies, as well as the requirements of the Sarbanes-Oxley Act of 2002
and the new listing standards of both Nasdaq and the New York Stock Exchange.
The board has adopted Governance Principles, which are reviewed annually by the
compensation and governance committee and revised as necessary by the full
board. Among other matters, the Governance Principles include the following:
o The board is responsible for determining that each independent
director has no relationship with the Company, its affiliates or
executives, which would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. The board
has determined that each of its directors, except the chief executive
officer, is independent within the meaning of the Company's
independence standards contained in its Governance Principles. The
Company's Governance Principles reflect more stringent standards than
those of the Nasdaq and New York Stock Exchange and satisfy the
requirements of The Nasdaq Stock Market, Inc. Corporate Governance
Rules. (Those independence standards can be found in the Company's
Governance Principles available at www.airgatepcsa.com.) The board
based these determinations on a review of the responses of directors
5
and officers to questions regarding employment and compensation,
affiliations and family and other relationships, and on discussions
with the directors.
o Members of our board must comply with the Standards of Business
Conduct, our code of conduct regulating ethical behavior for employees
and directors. The Standards of Business Conduct require our board
members to adhere to policies concerning matters such as conflicts of
interest, confidentiality, and the prohibition of loans by the
Company. The Standards of Business Conduct also emphasize the
prohibition on retaliating against whistleblowers. The board will not
permit any waiver of the requirements of the Standards of Business
Conduct for any director or executive officer.
o Directors may not stand for election for any term which begins after
their 70th birthday and will offer to retire upon particular events,
such as a change in position. Directors may not serve on the boards of
more than four other public companies. A director who is the chief
executive officer of another company may not serve on the boards of
more than two other public companies. Members of our audit committee
may not serve on the audit committees of more than two other public
companies unless our board of directors determines that such
simultaneous service would not impair the ability of the director to
effectively serve on our audit committee.
o The board has the responsibility to review and approve the Company's
long-range plans and annual operating and capital budgets, and monitor
the Company's performance against its plans and budgets.
o The board reviews the recommendations of the compensation and
governance committee and takes appropriate action with respect to the
performance and compensation of the chief executive officer and other
senior management personnel.
o The board holds executive sessions of independent directors at least
two times per year and has complete access to the management of the
Company and the Company's outside advisors, including counsel and
auditors. The board and its committees may also hire their own
advisors.
o The board and its committees conduct an annual self-evaluation to
determine whether they are functioning effectively.
o The board has the responsibility to review recommendations and actions
of the compensation and governance committee related to succession
planning and management development programs for senior management.
o New directors receive an orientation to familiarize them with the
Company, its operations and governance and their responsibilities as
directors. Directors are required to periodically attend educational
programs on the duties and responsibilities of directors.
These measures are embodied in our Governance Principles and Standards of
Business Conduct, which may be accessed on our website, www.airgatepcsa.com.
Meetings and Committees of the Board
The board of directors held nineteen meetings during fiscal year 2003, twelve of
which were via teleconference. Our board members are expected to attend all
board meetings and meetings of committees. Each director attended all board
meetings and meetings of committees on which they served. Directors are
encouraged to attend annual meetings of our shareholders, and all of our current
directors attended the last annual shareholder meeting.
Since December, 2002, our board of directors has had two standing committees:
the audit committee and the compensation and governance committee. Both of these
committees operate under a written charter adopted by the board, which can be
accessed on our website at www.airgatepcsa.com. The audit committee charter is
also attached as Appendix A.
6
Audit Committee
The audit committee was established in accordance with Section 3(a)(58)(A) of
the Securities Exchange Act of 1934, as amended, and represents the board in
discharging its responsibilities relating to the integrity of the Company's
financial statements, and the oversight of the accounting, financial reporting
and financial practices of the Company; the qualifications, independence,
selection, engagement, compensation and oversight of the Company's independent
auditors; the Company's compliance with legal and regulatory requirements; and
the performance of the Company's independent auditors and the internal audit
function. Among other things, the audit committee reviews and approves the scope
of the annual audit; reviews the Company's quarterly financial statements and
recommends to the board of directors whether they should be included in the
Company's Quarterly Reports on Form 10-Q; reviews the Company's annual audited
financial statements and recommends to the board of directors whether they
should be included in the Company's Annual Report on 10-K; and reviews the
Company's disclosure controls and procedures, as well as internal controls. The
audit committee works closely with our independent auditors and management of
the Company. Specific activities of the audit committee during fiscal 2003 are
described in the Audit Committee Report, included in this Proxy Statement.
The three members of our audit committee are Messrs. Ferchat (Chair), Stetz and
Risner, all of whom are independent as defined in Nasdaq Marketplace Rule
4200(a)(15). Mr. Risner joined our board and audit committee on February 20,
2004. Messrs. Schiffman and Harris served on the audit committee until their
resignations from the board during fiscal 2003. The audit committee met eight
times during fiscal 2003.
Compensation and Governance Committee
The compensation and governance committee evaluates, identifies and recommends
nominees for election and re-election to the board and recommends candidates for
appointment to committees of the board; reviews and makes recommendations to the
board regarding principles of corporate governance; establishes and administers
processes to evaluate the effectiveness of our board, board committees,
directors and management; establishes compensation policies, programs and
guidelines designed to attract and retain qualified executive officers; and
retains compensation consultants to advise them on these matters. As part of
these responsibilities, the compensation and governance committee reviews and
approves objectives for our chief executive officer and senior executives,
subject to ratification by the full board of directors, and evaluates the
performance and compensation of our chief executive officer and senior
executives in accordance with those objectives. Additional duties and
responsibilities of the compensation and governance committee are included in
the "Report of the Compensation and Governance Committee" in this Proxy
Statement.
The compensation and governance committee, which met six times during fiscal
2003, consists of two independent directors, as defined in Nasdaq Marketplace
Rule 4200(a)(15). These members are Messrs. Stetz (Chair) and Ferchat. Mr.
Schiffman served on the compensation and governance committee until his
resignation from the board in early 2003.
Consideration of Director Nominees
Director Qualifications
The compensation and governance committee has the responsibility and authority
to develop and recommend qualifications and criteria for nominees to the board.
The compensation and governance committee has recommended, and the board has
approved, a Policy Regarding Director Qualifications and Criteria for Evaluation
of Director Candidates. Pursuant to this policy, director candidates should
possess the highest ethics, integrity and values and an outstanding personal and
professional reputation. They should have demonstrated leadership skills, the
ability to exercise independent business judgment and professional experience
that adds to the mix of the board as a whole.
In evaluating director candidates, the compensation and governance committee
considers an appropriate balance of experience, skills and background, and
ensures that at least a majority of the directors are independent. The committee
also considers the extent to which the candidate contributes to the diversity of
7
the board of directors in terms of background, specialized experience, age, race
and gender, as well as the candidate's management experience in complex
organizations and dealing with complex business problems. Other important
factors in assessing qualifications of director nominees are the candidate's
other commitments, such as employment and other board positions, and whether the
candidate would qualify under the Company's guidelines for membership on the
audit committee or the compensation and governance committee.
Identifying Nominees for Directors
In the event that there are vacancies among our board, or vacancies are
anticipated, the compensation and governance committee will consider various
candidates for director positions. Candidates may come to the attention of the
compensation and governance committee through current board members,
shareowners, management or, when appropriate, retained search firms. Shareowners
may submit written proposals to the compensation and governance committee for
director candidates. Any such proposal must be submitted to the committee in a
manner that complies with the provisions of the Company's bylaws for submission
of shareowner proposals. In evaluating any candidates that are proposed by
shareowners, the compensation and governance committee will follow the same
process and apply the same criteria as it does for candidates identified from
any other source. Although the Company has not paid any third party a fee to
assist in the identification or evaluation of director candidates in the past
year, the Company may retain qualified advisors for this purpose in the future,
as circumstances may warrant.
Mr. Hopper, who is a nominee for election to our board this year at the annual
meeting, was recommended to us by a senior executive of the Company. Dr.
Schoettler, who will join our board prior to the annual meeting of shareowners,
was identified by a board member. Mr. Risner, who joined our board on February
20, 2004, was recommended for consideration by noteholders who beneficially
owned more than 5% of our stock. Aside from Mr. Risner, there have been no
director candidates recommended by any shareholders or group of shareholders
beneficially owning more than 5% of our stock.
Board Composition After Consummation of the Recapitalization Plan
The support agreement with certain noteholders related to our restructuring
requires that our board of directors have seven members (nine members if certain
former holders of iPCS, Inc. stock exercise their nomination right under the
Agreement and Plan of Merger dated August 28, 2001 by and between us and iPCS
pursuant to which we acquired iPCS). Three members (or four if such iPCS
stockholders exercise their nomination right) must be approved by a majority of
the holders of our old notes that are signatories to the support agreement from
a proposed list of candidates jointly developed by us and such holders of the
old notes. These holders of the old notes have no further or ongoing designation
or approval rights with respect to the composition of our board of directors.
Messrs. Hopper and Risner and Dr. Schoettler were approved pursuant to this
process. The support agreement, therefore, requires the addition of at least one
more board member within 90 days after the completion of the restructuring on
February 20, 2004.
Communications with the Board
All of our current board members attended last year's shareholder meeting. In
addition, the board adopted a policy encouraging directors to attend all annual
shareholder meetings, which is contained in the board's Governance Principles.
The Governance Principles provide that the board will establish procedures for
shareholders to communicate with the board, independent directors and the audit
committee. The board recently adopted a Policy Regarding Communication with
Board of Directors. Pursuant to this policy, shareholders may communicate with
the board, the independent directors, and the audit committee through e-mail, a
toll-free telephone number or by mail. The contact information may be accessed
on our website at www.airgatepcsa.com.
8
DIRECTORS' COMPENSATION
In 2001, our board adopted the AirGate PCS, Inc. 2001 Non-Employee Director
Compensation Plan (the "Director Plan"). Under the Director Plan, non-employee
directors received an annual retainer for each plan year, which was comprised of
cash, restricted stock or options to purchase shares of our common stock. A
director could elect to receive 50% or more of such amount in the form of
restricted stock or options to purchase shares of our common stock.
In addition, under the Director Plan, each non-employee director that joined our
board of directors received an initial grant of options to acquire shares of our
common stock. The options vested in three equal annual installments beginning on
the first day of the plan year following the year of grant. Each participant
also received an annual grant of options to acquire our common stock, which
vested on the first day of the plan year following the year of grant. In lieu of
this annual grant, the recipient could elect to receive three years of annual
option grants in a single upfront grant of options to acquire our common stock
vesting in three equal annual installments on the first day of each of the three
succeeding plan years. All options had an exercise price equal to the fair
market value of our common stock on the date of grant. We also reimbursed each
of our non-employee directors for reasonable travel expenses to board and
committee meetings and for approved continuing director education. We do not pay
retirement, charitable contributions or other benefits to our directors.
A combination of factors, including the loss of three independent directors
during 2002, led us to engage an outside compensation consulting firm to review
the adequacy of the compensation to be paid under our Director Plan. Some of the
factors that led to this review are the same as those facing every public
company, including the increased demand on directors' time required to satisfy
increasing requirements for process and oversight of management of public
companies, and the greater demand for independent directors and directors with
financial and accounting expertise. In addition to these general conditions were
factors specific to our industry and company, including the turmoil in the
telecommunications industry in general and the challenges facing partners or
affiliates of wireless carriers in particular.
The consulting firm reviewed, among other things, director compensation
practices of similarly sized companies within and outside our industry and
factors specific to our company. Based on this review and the recommendations of
management and the consulting firm, we amended the Director Plan on January 22,
2003 to increase compensation for non-employees directors. As amended, for each
plan year (beginning on the day of an annual meeting of our shareowners and
ending on the day before our next annual meeting) each non-employee director
that chairs one or more committees of our board of directors receives an annual
retainer of $15,000, up from $12,000, and all other non-employee directors
receive $10,000. The amendment also added meeting fees for board and committee
meetings as follows: (i) full-day (more than 4 hours) meetings, $3,000; half-day
meetings, $1,500; full-day telephonic meetings, $1,500 and half-day telephonic
meetings, $750. In addition, as an inducement for and recognition of board
service during this difficult period in our company's development, directors who
continued to serve were to be paid an additional retainer every six months of
$12,500 until December 1, 2004. Finally, the initial option grant to
non-employee directors was increased to 2,000 from 1,000 and the annual option
grant to 1,500 from 1,000. (These share amounts are adjusted to reflect our
1-for-5 reverse stock split on February 13, 2004.)
The following table shows the cash compensation paid by us to our non-employee
directors during the fiscal year ended September 30, 2003.
Cash Compensation
----------------------------------------------------------------------------------------------------
Annual Consulting Fees/
Retainer Fees ($) Meeting Fees ($) Other Fees ($) Total
----------------- ---------------- ---------------- ---------
Robert A. Ferchat $ 26,250 $ 32,250 $ -- $ 58,500
Stephen R. Stetz $ 22,500 $ 30,750 $ -- $ 53,250
In December, 2003, the compensation and governance committee engaged a
consulting firm to review compensation for independent directors. The factors
which led to this review included the need to attract four new qualified
9
independent directors following the completion of our debt restructuring. The
consulting firm reviewed, among other things, the director compensation plans of
companies in our peer group, as well as director compensation among public
telecommunications companies generating similar revenues. Based upon this
review, the consulting firm recommended that the Company amend its Director Plan
to provide for higher retainers but lower per meeting fees. In addition, the
consulting firm recommended that, for equity compensation, the Company offer
restricted stock units rather than stock options. As a result of these
recommendations, the Company amended the Director Plan effective April 7, 2004.
The new Director Plan increased the annual retainers and reduced meeting fees.
For each plan year (beginning on the day of an annual meeting of our shareowners
and ending on the day before our next annual meeting), the chair of the board
("lead director") will receive an annual retainer of $30,000, the chair of the
audit committee will receive an annual retainer of $26,000, and the chair of the
compensation and governance committee will receive an annual retainer of
$25,000. All other non-employee directors will receive a $20,000 annual retainer
fee. If the lead director also serves as chair of either the audit or
compensation and governance committee, he or she will receive the additional
retainer amount associated with chairing that committee. Annual retainers will
be paid in monthly installments. Meeting fees for board and committee meetings
will be as follows: (i) full-day (more than 4 hours) meetings, $1,500;
telephonic meetings, $750; committee meetings, $1,000; telephonic committee
meetings, $500. Board members will not receive additional fees for committee
meetings held the same day as board meetings. Finally, the amended Director Plan
replaces the option grants to non-employee directors with an annual award of
1,000 restricted stock units. The special retainer provided to Messrs. Ferchat
and Stetz under the old plan will terminate on April 8, 2004.
AUDIT COMMITTEE REPORT
Until February, 2004, the audit committee was comprised of two directors, each
of whom meets the independence and experience requirements of the Nasdaq Listing
Standards. Mr. Risner, who became a member of the audit committee in February,
2004, also meets the independence and experience requirements of the Nasdaq
Listing Standards, and his appointment to the audit committee allowed the
Company to comply with Nasdaq Marketplace Rule 4350(d)(2), which requires at
least three independent directors on the audit committee. Both the chair of the
committee (Mr. Ferchat) and Mr. Stetz have extensive experience with financial
and accounting matters, and have served in senior financial roles in large
organizations, including the role of chief financial officer. Both Messrs.
Ferchat and Stetz have been designated financial experts as that term is defined
by SEC regulations. The committee acts under a written charter adopted by the
board of directors, which is reviewed annually and revised as appropriate. The
board most recently amended the charter on January 14, 2004, a copy of which is
included as Appendix A to this Proxy Statement.
Management is primarily responsible for the Company's financial statements and
the reporting process, including the systems of internal controls. KPMG LLP, the
Company's independent accountant, is responsible for performing an independent
audit of the Company's consolidated financial statements in accordance with
generally accepted accounting principles (GAAP) and generally accepted auditing
standards (GAAS) and for issuing a report on those statements. The committee
oversees the financial reporting process and internal control system on behalf
of the board of directors. The committee met eight times during fiscal year
2003. The committee also met regularly with KPMG with and without management
present.
In the course of fulfilling its oversight responsibilities, the Committee
reviewed and discussed the audited financial statements with management and
KPMG. This review included a discussion of:
o the reasonableness of significant financial reporting issues and
judgments made in connection with the preparation of the Company's
financial statements, including the quality (and not just the
acceptability) of the Company's accounting principles;
o the clarity and completeness of financial disclosures;
o the adequacy of internal controls that could significantly affect the
Company's financial statements;
o items that could be accounted for using alternate GAAP methods; and
10
o the potential effects of regulatory and accounting initiatives, as
well as off-balance-sheet structures, on the Company's financial
statements.
The committee discussed with KPMG other matters required to be discussed with
the auditors under Statement on Auditing Standards No. 61, as amended by
Statement on Auditing Standards No. 90 (communication with audit committees).
The committee also received, reviewed and discussed with KPMG their written
disclosures required by Independence Standards Board Standard No. 1
(independence discussions with audit committees). In this regard, among other
things, the committee reviewed KPMG's independence from the Company and its
management. The committee has adopted policies regarding the provision of
non-audit services by the independent auditor and the hiring of employees of the
independent auditing firm.
The committee recommended to the board of directors the selection of KPMG as the
Company's independent auditors. In addition, the committee:
o reviewed the scope of and overall plans for the annual audit and the
internal audit process;
o reviewed fees for all services provided by KPMG;
o reviewed the adequacy of certain financial policies;
o considered KPMG's quality control procedures;
o on a quarterly basis, reviewed the Company's financial results prior
to their public issuance; and
o reviewed significant legal developments.
As described in the Company's annual report on Form 10-K, under our agreements
with Sprint, Sprint provides us with billing, collections, customer care and
other back office services. As a result, Sprint remits approximately 95% of our
revenues to us. In addition, approximately 64% of cost of service and roaming in
our financial statements relate to charges from or through Sprint. Because of
the nature of this relationship, we rely on Sprint to provide accurate, timely
and sufficient data and information to properly record the revenues, expenses
and accounts receivable which underlie a substantial portion of our periodic
financial statements and other financial disclosures.
In 2002, management of the Company discovered inconsistencies between certain
accounts receivable reports provided to the Company by Sprint and reported these
inconsistencies to the committee. As a result, in 2002, we determined that there
was a significant deficiency in internal controls which could adversely affect
the Company's ability to record, process, summarize and report financial data
consistent with the consolidated financial statements. This significant
deficiency continued into fiscal 2003. During 2003, the Company took a number of
measures to enhance its ability to more timely and better monitor, verify and
analyze information provided by Sprint, which are described in Amendment No. 2
to the Company's Annual Report on Form 10-K/A for the year ended September 30,
2003. The committee continues to work with management to monitor and evaluate
the effectiveness of management's improvements in controls related to
information provided by Sprint.
Based on the reviews and discussions referred to above, the committee
recommended to the board of directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K and 10-KA for the year
ended September 30, 2003 for filing with the Securities and Exchange Commission.
AirGate PCS, Inc. Audit Committee
Robert A. Ferchat, Chair
Stephen R. Stetz
11
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about our common stock that may be issued
under all of our existing equity compensation plans as of September 30, 2003.
All numbers are adjusted to retroactively reflect our 1-for-5 reverse stock
split on February 13, 2004.
(c) Number of Securities
(a) Number of Remaining Available
Securities to be Issued (b) Weighted Average for Future Issuance Under
Upon Exercise of Exercise Price of Equity Compensation Plans (d) Total of Securities
Outstanding Options, Outstanding Options, (Excluding Securities Reflected in
Plan Category Warrants and Rights Warrants and Rights Reflected in Column (a)) Columns (a) and (c)
-------------- ----------------------- -------------------- ---------------------------- -----------------------
Equity Compensation
Plans Approved by
Shareowners........ 54,840(2) $173.35 --(1) 54,840
67,210(3) $155.95 --(1) 67,210
123,472(4) $ 14.65 176,527 299,999
-------- ------- ------- -------
TOTAL.......... 245,522 176,527 422,049
======== ======= =======
Equity Compensation
Plans Not Approved
by Shareowners........ 9,890(5) $224.65 --(1) 9,890
-------- ------- ------- -------
TOTAL.......... 255,412 $94.05 176,527(6) 431,939
======== ======= ======= =======
--------------
(1) The right to issue options under this plan terminated upon shareholder
approval of the 2002 Long-Term Incentive Plan in 2002.
(2) Issued under the AirGate PCS, Inc. 1999 Stock Option Plan.
(3) Issued under the AirGate PCS, Inc. Amended and Restated 2000 Long-Term
Incentive Plan.
(4) Issued under the AirGate PCS, Inc. 2002 Amended and Restated Long-Term
Incentive Plan.
(5) Issued under the AirGate PCS, Inc. 2001 Non-Executive Stock Option Plan.
(6) In addition, 14,662 post-split shares of AirGate's common stock remained
for issuance under the AirGate PCS, Inc. 2001 Employee Stock Purchase
Plan.
Grants made under the AirGate PCS, Inc. 2001 Non-Employee Director Compensation
Plan are issued under either the AirGate PCS, Inc. 1999 Stock Option Plan or the
AirGate PCS, Inc. 2002 Amended and Restated Long-Term Incentive Plan and thus
are not separately stated in the table.
AirGate PCS, Inc. 2001 Non-Executive Stock Option Plan
On January 31, 2001, our board of directors approved the AirGate PCS, Inc. 2001
Non-Executive Stock Option Plan, pursuant to which non-qualified stock options
could be granted to our employees who are not officers or directors. This plan
was not submitted to our shareowners for approval. As of September 30, 2003,
options to acquire 9,890 shares, on a post-reverse stock split basis, were
outstanding under this plan, out of the 30,000 post-reverse split shares
originally reserved for issuance. No further grants may be made under the 2001
Non-Executive Stock Option Plan.
The plan authorized the granting of non-qualified stock options only. The
exercise price of an option could not be less than the fair market value of the
underlying stock on the date of grant and no option could have a term of more
than ten years. All of the options that are currently outstanding under the plan
vest ratably over a four-year period beginning at the grant date and expire ten
years from the date of grant.
Amendment to AirGate PCS, Inc. 2002 Long-Term Incentive Plan
On February 12, 2004, at a special meeting of shareholders, the shareholders
approved an amendment and restatement of the AirGate PCS, Inc. 2002 Long-Term
12
Incentive Plan, which increased the number of shares reserved and available for
issuance, added additional forms of stock-based compensation that may be issued
under the plan, and made certain other changes to the plan.
EXECUTIVE COMPENSATION
Compensation and Governance Committee Report
Compensation and Governance Committee Responsibilities
In fiscal year 2003, the compensation and governance committee's basic
responsibilities with respect to executive compensation included: (1) review and
recommend an executive compensation strategy designed (i) to reward management
appropriately for their contributions to Company growth and profitability, (ii)
to align the interest of the executive officers with those of shareowners, and
(iii) to motivate the executive officers to achieve the Company's business
objectives; (2) review and administer executive compensation plans, programs and
arrangements subject to any required approval by shareowners; and (3) review,
approve and monitor the administration of broad-based equity incentive plans
subject to any required approval by shareowners.
In particular, the compensation and governance committee reviewed our executive
compensation philosophy; reviewed and recommended to the board of directors
corporate performance objectives for the executive bonus plan, reviewed and
recommended to the board of directors compensation for the chief executive
officer and other senior executives; and administered other compensation and
benefit plans.
Compensation Philosophy
We operate in the extremely competitive and rapidly changing wireless
telecommunications industry. The compensation and governance committee believes
that compensation programs for executive officers should be designed to attract,
motivate and retain talented executives responsible for the success of the
Company. The compensation and governance committee also believes that these
programs should be determined within a competitive framework and based on the
achievement of predetermined financial and other performance measures, and
individual contributions linked to strategic business objectives. Within this
overall philosophy, the committee's objectives were to:
o Offer a total compensation program that is market competitive, taking
into consideration the compensation practices of other companies.
o Provide annual incentive compensation awards that take into account
our overall performance against corporate objectives, as well as the
achievement of individual performance objectives.
o Align the financial interests of executive officers with those of
shareowners by providing meaningful equity-based, long-term
incentives.
The committee has independently engaged the services of an executive
compensation consulting firm to conduct a comprehensive assessment of the
current compensation philosophy and the existing executive compensation plans,
programs and arrangements.
Compensation Components and Process
Our compensation program for executives consisted of three key elements: (1)
base salary, (2) performance based annual incentive awards and (3) long term,
equity-based incentive awards.
The compensation and governance committee determined these three key elements
for executives with the assistance of our human resources staff and an
independent consulting firm.
Base Salary. The base salary for each executive was derived through a comparison
of pay levels for comparable positions at other comparable companies. Our policy
is to target base salaries at the 50th percentile of market compensation
practices. At the request of management, no base salary increases were awarded
to executives during fiscal year 2003.
13
Annual Incentive Awards. To reinforce the attainment of our goals, the
compensation and governance committee believes that a substantial portion of the
annual compensation of each executive should be in the form of variable
incentive pay with the target of providing such incentives at the 60th
percentile of market compensation practices. For fiscal year 2003, the
compensation and governance committee determined that retention of executives,
EBITDA growth, cash conservation and the debt restructuring were the most
important and critical performance objectives. Therefore, the committee
established enhanced target bonus award levels at 175% of historical bonus
targets and bifurcated the enhanced target bonus award levels into two
components of equal weighting; a Retention Bonus Award component, designed to
retain the services of executives during a very uncertain, turbulent and
unpredictable business cycle and a Performance Bonus Award component, designed
to focus the attention, energy and effort of executives on EBITDA growth, cash
conservation, the financial restructuring and refinement of our long-range
business plan following completion of the restructuring. The Retention Bonus
Award component, which represented 50% of the enhanced target bonus award, has
been paid to executives in quarterly installments, with the final installment of
40% of the Retention Bonus Award component paid in November, 2003 to executives
who remained actively employed October 1, 2003. With respect to the Performance
Bonus Award component, which represents 50% of the enhanced target bonus award,
the Company achieved or exceeded the established performance objectives for
EBITDA growth and cash conservation. Accordingly, the committee approved payment
of 50% of the Performance Bonus Award component. Payment of the remaining 50% of
the Performance Bonus Award for the named executive officers was deferred until
successful completion of the restructuring in fiscal 2004. The bonus amounts
disclosed for named executive officers in the Summary Compensation Table do not
include that portion of the Performance Bonus Award that has been deferred and
for which payment was contingent upon successful completion of the
debt-restructuring.
Long-Term, Equity-Based Incentive Awards. The goal of our long-term,
equity-based incentive awards are to align the interests of executives with
shareowners and to provide each executive with a significant incentive to manage
the company from the perspective of an owner with an equity stake in the
business.
The compensation and governance committee made annual awards of long-term,
equity-based incentives during the first fiscal quarter of 2003. The committee
considered two factors in determining the size of these awards: their desire to
benchmark the awards at the 75th percentile of market competitive compensation
practices, consistent with our stated philosophy, and their recognition that the
market value of a substantial majority of the outstanding shares underlying
previous stock option grants was significantly below the strike price which
significantly diminished their value as a strategic element of our executive
compensation program. Accordingly, the committee granted stock option awards to
executives at levels that were approximately twice the size of previous annual
grants. The number of shares granted to each named executive officer is
disclosed in the Summary Compensation Table. Each grant allows an executive to
acquire shares of our common stock at a fixed price per share, equal to the
closing price of our common stock on the date of grant, over a specified period
of time not to exceed ten years. These grants generally vest ratably over a
four-year period, 25% per year.
On September 4, 2003, certain executives, including all named executive officers
except Mr. Seippel, surrendered shares underlying stock option awards previously
granted to them that had an option price equal to or greater than $70.00 per
share on a post-split basis. These executives voluntarily and unconditionally
surrendered the shares to reduce stock option "overhang" and mitigate the
dilutive effect of the outstanding stock option shares. The total number of
shares surrendered by these executives was 150,351 post-split shares.
Employment Agreements
We have employment agreements with certain of our executives as described below
under "Employment and Severance Agreements." We have examined, and continue to
examine, our employment agreement practices in light of competitive practices
and market conditions, including whether enhanced payments are appropriate if an
executive's employment is terminated (voluntarily or involuntarily) for
specified reasons following a change of control or otherwise.
14
CEO Compensation
The annual base salary for Mr. Dougherty was established by the compensation and
governance committee. Under Mr. Dougherty's employment agreement, he is entitled
to annual increases in his base salary of not less than $20,000. At the request
of Mr. Dougherty, the compensation and governance committee did not award Mr.
Dougherty an increase in his base salary for fiscal year 2003.
On May 4, 2000, we entered into a retention bonus agreement with Mr. Dougherty.
Unless Mr. Dougherty voluntarily terminates employment or is terminated for
cause, he is entitled to periodic retention bonus payments totaling $3.6
million, payable on specified payment dates from April 15, 2000 to January 15,
2004, which are generally quarterly. Under the terms of the retention bonus
agreement, 50% of unpaid retention bonus payments would be accelerated upon a
change of control of the company.
Payments under the retention bonus agreement are not a part of, or considered
in, the variable annual incentive program awards. Mr. Dougherty's 2003 fiscal
year incentive compensation was based on his continued employment and the
performance of the Company. Mr. Dougherty's incentive compensation was based on
the same retention objectives and established company performance goals used for
all executive officers. During fiscal year 2003, Mr. Dougherty also received a
stock option grant in the amount of 20,000 post-split shares with an exercise
price of $4.10 per post-split share.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code limits our ability to deduct annual
compensation in excess of $1 million paid to any of our top executive officers.
This limitation generally does not apply to compensation based on performance
goals if certain requirements are met. Generally, cash compensation paid to our
executives does not equal or exceed $1 million. However, amounts paid under Mr.
Dougherty's retention bonus agreement are subject to the Section 162(m)
limitation on deductibility. Stock option grants under our long-term incentive
plans have been designed so that any compensation deemed to be paid in
connection with the exercise of option grants will qualify as performance-based
compensation which is not subject to the $1 million deduction limitation. It is
the Committee's intent to maximize the deductibility of executive compensation
while retaining the discretion necessary to compensate executive officers in a
manner commensurate with performance and the competitive market for executive
talent.
Submitted by the Compensation and Governance Committee
Stephen R. Stetz, Chair
Robert A. Ferchat
Our Executive Officers
The following table presents information with respect to our executive
officers:
Name Age Position
---- --- --------
Thomas M. Dougherty....................................... 59 President and Chief Executive Officer and Director
Barbara L. Blackford...................................... 47 Vice President, General Counsel and Secretary
Charles S. Goldfarb....................................... 39 Vice President of Sales--Southeast Region
Dennis D. Lee............................................. 53 Vice President, Human Resources
Jonathan M. Pfohl......................................... 37 Vice President, Finance
David C. Roberts.......................................... 41 Vice President of Engineering and Network Operations
William H. Seippel........................................ 47 Vice President and Chief Financial Officer
Thomas M. Dougherty has been our president and chief executive officer and a
director since April 1999. From March 1997 to April 1999, Mr. Dougherty was a
senior executive of Sprint PCS. From June 1996 to March 1997, Mr. Dougherty
served as executive vice president and chief operating officer of Chase
Telecommunications, a personal communications services company. Mr. Dougherty
served as president and chief operating officer of Cook Inlet BellSouth PCS,
L.P., a start-up wireless communications company, from November 1995 to June
1996. Prior to October 1995, Mr. Dougherty was vice president and chief
operating officer of BellSouth Mobility DCS Corporation, a PCS company.
15
Barbara L. Blackford has been our vice president, general counsel and secretary
since September 2000. From October 1997 to September 2000, Ms. Blackford was
associate general counsel and assistant secretary with Monsanto Company, serving
in a variety of roles, including head of the corporate securities and mergers
and acquisitions law groups and general counsel of Cereon Genomics. Prior to
joining Monsanto Company, Ms. Blackford was a partner with the private law firm
Long Aldridge & Norman LLP (now known as McKenna Long & Aldridge LLP) in
Atlanta, Georgia. Ms. Blackford spent twelve years with the law firm Kutak Rock
LLP, which is consistently ranked among the top ten public finance firms
nationally.
Charles S. Goldfarb has been our vice president of sales, southeast region,
since January 2000. From September 1991 to January 2000, Mr. Goldfarb worked at
Paging Network Inc., most recently as its area vice president and general
manager for the Virginia, North Carolina and South Carolina region. Mr. Goldfarb
has over 10 years of wireless experience and has been successful in numerous
start-up markets. Prior to his wireless experience, Mr. Goldfarb worked at ITT
Financial Services as its assistant vice president of operations in the
Washington, D.C. area.
Dennis D. Lee has been our vice president of human resources since September
2002. Prior to joining AirGate, from May 2000 to August 2002, Mr. Lee was senior
vice president of compensation and executive benefits at SunTrust Banks, Inc.,
where he was responsible for the design, development and administration of all
broad-based employee compensation and executive benefits programs. From May 1978
to May 2000, Mr. Lee served in a number of leadership roles at Wachovia
Corporation, including manager of direct compensation, director of compensation
and benefits, human resources manager for the Corporate Financial Services
Division and senior consultant in the Executive Services Group. From 1973 to
1978 Mr. Lee held various positions at John Harland Company in the Printing
Operations Division and the Personnel Department. Mr. Lee has 30 years of
diversified human resources experience. SunTrust Banks, Inc. and Wachovia
Corporation are both parent companies. Mr. Lee holds a B.B.A. (1973) from the
University of Georgia.
Jonathan M. Pfohl has been our vice president, finance, since December 2002 and
was vice president sales and operations from January 2001 to December 2002. Mr.
Pfohl joined us in June 1999 as our vice president, financial operations. Prior
to joining AirGate, Mr. Pfohl was responsible for oversight of regional
financial and planning activities at Sprint PCS. He has over 13 years of
wireless telecommunications industry experience, including financial and
strategic planning roles at Frontier Corporation.
David C. Roberts has been our vice president of engineering and network
operations since July 1998. From July 1995 to July 1998, Mr. Roberts served as
director of engineering for AirLink II LLC, an affiliate of our predecessor
company.
William H. Seippel joined the Company as its vice president and chief financial
officer in October 2002. From 2000 until joining the Company, Mr. Seippel
provided merger and acquisition and strategic business and financial planning
consulting services to various boards of directors and senior executives. From
1999 to 2000, Mr. Seippel served as chief financial officer and chief operating
officer of Digital Commerce Corporation, where he recruited and led a core team
of six upper-level management executives in finance, marketing and sales and
managed a staff of over 350 individuals in supporting roles. Beginning in 1996,
Mr. Seippel was employed with Global Telesystems as executive vice president and
director of strategic planning and marketing, moving on to become Global's
executive vice president and chief financial officer from 1997 to 1999. From
1992 to 1996, Mr. Seippel served as vice president of finance and chief
financial officer of Landmark Graphics Corporation. Early in his career, Mr.
Seippel held a number of senior management positions with Midcon Corporation,
Digital Equipment Corporation and Covia Partnerships-United Airlines,
respectively.
Summary Compensation Table
The following table shows the cash compensation paid by us, as well as certain
other compensation paid or accrued, to the chief executive officer and our four
other highest paid executive officers who were serving as such on September 30,
2003 and who received compensation in excess of $100,000. We refer to each of
16
these persons as "Named Executive Officers" and set forth their compensation
information for the fiscal years ended September 30, 2003, 2002 and 2001. All
share numbers in the table are adjusted to retroactively reflect a 1-for-5
reverse stock split on February 13, 2004.
Restricted Securities
Other Annual Stock Underlying All Other
Bonus Compensation Award(s) Options/ Compensation
Year Salary ($) ($)(1) ($) ($)(2) SARs(#) ($)(3)
---- ---------- ----------- ------------ ----------- ---------- ------------
Thomas M. Dougherty(4)...... 2003 $ 340,000 $ 1,048,000 $ -- $ -- 20,000 $ 8,527
President and Chief 2002 314,038 785,800 -- 70,040 15,000 8,484
Executive Officer 2001 272,789 1,020,000 -- -- 8,281 7,218
William H. Seippel.......... 2003 232,164 162,800 -- 19,200 14,000 252,180
Chief Financial Officer 2002 -- -- -- -- -- --
2001 -- -- -- -- -- --
Barbara L. Blackford........ 2003 218,000 153,400 -- -- 7,200 657
Vice President, General 2002 212,808 28,100 -- 28,016 5,400 8,329
Counsel and Secretary 2001 201,126 148,500 -- -- 9,211 7,110
David C. Roberts............ 2003 199,000 136,600 -- -- 7,200 10,402
Vice President, 2002 196,199 25,500 -- 28,016 5,400 9,445
Engineering and 2001 179,231 135,000 -- -- 2,704 6,615
Network Operations
Jonathan M. Pfohl........... 2003 188,000 120,600 -- -- 7,200 8,808
Vice President, Sales 2002 183,000 24,000 -- 38,522 5,400 8,640
Operations 2001 164,769 123,600 -- -- 9,845 7,051
--------------
(1) For fiscal year 2003, the amounts disclosed do not include that portion of
each named executive officer's annual bonus award that was not earned
during the fiscal year. This bonus award was payable only upon the
successful completion of the financial restructuring, which occurred in
February, 2004. Such amount for each of the named executive officers is as
follows: for Mr. Dougherty $115,000; for Mr. Seippel $60,700; for Ms.
Blackford $61,900; for Mr. Roberts $53,400 and for Mr. Pfohl $42,300.
(2) With respect to all named executive officers excluding Mr. Seippel,
amounts included above represent the fair market value of the shares
underlying the restricted stock awards on the date they were awarded,
January 10, 2002, based on the closing price of our common stock on that
date, which was $175.10, adjusted to reflect the 1-for-5 stock split. 50%
of the shares underlying the restricted stock awards vested on November 1,
2002 and the remaining 50% of the shares vested on November 1, 2003.
Dividends were not paid on the restricted stock. As of September 30, 2003,
Mr. Dougherty held 400 shares of restricted stock worth $4,840, Ms.
Blackford held 160 shares of restricted stock worth $1,936, Mr. Roberts
held 160 shares of restricted stock worth $1,936 and Mr. Pfohl held 220
shares of restricted stock worth $2,662. All share amounts are
retroactively adjusted to reflect the 1-for-5 reverse stock split. These
values are based on the closing price of our common stock on September 30,
2003, which was $12.10 on a post-split basis. With respect to Mr. Seippel,
amounts included above represent the fair market value of the shares
underlying the restricted stock award on the date they were awarded,
October 24, 2002, which was $3.20 on a post-split basis. 25% of this
restricted stock award vested on the first anniversary date of the award
and the remaining shares will vest ratably in 25% installments on each
anniversary date thereafter. Dividends will not be paid on the restricted
stock. As of September 30, 2003, Mr. Seippel held 6,000 shares on a
post-split basis of restricted stock worth $72,600. This value is based on
the closing price of our common stock on September 30, 2003, which was
$12.10 on a post-split basis.
(3) Amounts contributed by us on behalf of each executive to the AirGate PCS,
Inc. 401(k) Retirement Plan and premiums paid on behalf of each executive
for group term life insurance. Amounts contributed by the Company on
behalf of each executive to the AirGate PCS, Inc. 401(k) Retirement Plan
are as follows: $8,000 for Mr. Dougherty, $8,000 for Mr. Seippel, $320 for
Ms. Blackford, $10,096 for Mr. Roberts and $8,000 for Mr. Pfohl. For Mr.
Seippel, also includes $223,837 paid by us for expenses incurred for his
relocation to Atlanta.
(4) For fiscal year 2003, includes a $328,000 award pursuant to the AirGate
PCS, Inc. 2003 Executive Bonus Plan and $720,000 earned under a retention
bonus agreement entered into on May 4, 2000, as described below. For
fiscal year 2002, includes a $65,800 annual incentive award and $720,000
earned under the agreement. For fiscal year 2001, includes a $300,000
annual incentive award and $720,000 earned under the agreement.
17
Employment and Severance Agreements
We have entered into an employment agreement with Thomas M. Dougherty, our chief
executive officer. Mr. Dougherty's employment agreement is for a five-year term
ending April 15, 2004. Mr. Dougherty is eligible to receive an annual bonus of
at least 50% of his base salary. Mr. Dougherty's base salary was set at $325,000
by the compensation committee of our board of directors. Under his employment
agreement, Mr. Dougherty has a minimum guaranteed annual increase in his base
salary of at least $20,000. Mr. Dougherty may participate in any executive
benefit/perquisite we establish at a minimum aggregate payment of $15,000 per
year. Pursuant to his employment agreement, Mr. Dougherty initially was awarded
a stock option exercisable for 60,000 post-split shares of common stock. Under
the agreement, the initial stock option vested with respect to 25% of the
underlying shares of common stock on the date Mr. Dougherty commenced his
employment with us, April 15, 1999, and such vested options became exercisable
on April 15, 2000. The remaining 75% of the shares of common stock subject to
the initial stock option vest in 15 equal quarterly installments beginning June
30, 2000. The exercise price of the initial stock option granted to Mr.
Dougherty is $70.00 per post-split share. As of September 4, 2003, Mr. Dougherty
surrendered (returned to AirGate) outstanding and unexercised options for 37,142
post-split shares that were part of the initial April 15, 1999 stock option
grant. In addition, Mr. Dougherty is eligible to participate in all employee
benefit plans and policies.
The employment agreement provides that Mr. Dougherty's employment may be
terminated with or without cause, as defined in the agreement, at any time upon
four weeks prior written notice. If Mr. Dougherty is terminated without cause,
he is entitled to receive
o six months' base salary, plus one month's salary for each year employed,
o vesting of stock options on the date of termination and
o six months of health and dental benefits.
In the event of Mr. Dougherty's death, Mr. Dougherty's legal representative is
entitled to twelve months' base pay, plus a bonus of 20% of base pay. Under the
employment agreement, Mr. Dougherty agreed to a restriction on his present and
future employment. Mr. Dougherty agreed not to
o disclose confidential information or trade secrets during employment with
us and for two years after termination,
o compete in the business of wireless telecommunications services either
directly or indirectly in our territory during his employment and for a
period of 18 months after his employment is terminated and
o solicit our employees to terminate their employment with us or solicit
certain of our customers to purchase competing products during his
employment with us and for a period of 18 months after termination of his
employment.
On May 4, 2000, we entered into a retention bonus agreement with Mr. Dougherty.
This agreement was intended to pay Mr. Dougherty the difference between the
initial 60,000 post-split option grant at $10.00 a post-split share and the
actual grant price of $70.00 post-split. The timing of the payments matches the
vesting of the initial 60,000 post-split option grant. As a result, unless Mr.
Dougherty voluntarily terminates employment or is terminated for cause, he is
entitled to periodic payments totaling $3.6 million, payable on specified
payment dates from April 15, 2000 to January 15, 2004, which are generally paid
quarterly. In fiscal year 2003, Mr. Dougherty earned $720,000 under this
agreement. Under the terms of the agreement, 50% of unpaid payments would be
accelerated upon a change of control of the company.
We have also entered into an employment agreement with Barbara L. Blackford, our
vice president, general counsel and secretary. Ms. Blackford is eligible under
her employment agreement to receive an annual bonus based upon our incentive
plans and policies, but at a target of not less than 35% of her then current
base pay. Ms. Blackford may participate in any executive benefit/perquisite
program we establish on the same terms as other executives, at a minimum
18
aggregate benefit of $10,000 per year. Ms. Blackford's base salary pursuant to
the agreement is currently $208,500 per year. Such amount is subject to review
for an increase at least annually. Pursuant to her employment agreement, Ms.
Blackford initially was awarded a stock option exercisable for 18,000 post-split
shares of our common stock, which option became vested with respect to 25% of
the underlying shares of common stock at the end of Ms. Blackford's first year
with us and the remainder of the shares vest in 5% increments for each three
month period after the initial year that she remains employed by us. The
exercise price of the initial stock option granted to Ms. Blackford is $334.70
per post-split share. As of September 4, 2003, Ms. Blackford surrendered
(returned to AirGate) outstanding options for the 18,000 shares granted under
the initial August 30, 2000 stock option grant. In addition, Ms. Blackford is
eligible to participate in all employee benefit plans and policies.
The employment agreement provides that Ms. Blackford's employment may be
terminated with or without cause, as defined in the agreement, at any time upon
four weeks prior written notice. If Ms. Blackford is terminated without cause,
she is entitled to receive six months' base salary, plus one month's salary for
each year employed by us. Under the employment agreement, Ms. Blackford agreed,
during her employment with us and for a period of two years after the
termination of her employment, not to
o disclose confidential information or trade secrets,
o solicit certain of our employees to terminate their employment with us or
o solicit certain of our customers to purchase competing products during her
employment with us and for a period of two years after the termination of
her employment.
Ms. Blackford's agreement further provides that if we enter into an agreement
with any member of our senior management other than our chief executive officer
which agreement contains change of control provisions more favorable than those
given to Ms. Blackford pursuant to her agreement, then such provisions (other
than with respect to salary, bonus, and other dollar amounts) will be made
available to Ms. Blackford.
We have also entered into an employment agreement with David C. Roberts, our
vice president of engineering and network operations. Mr. Roberts is eligible
under his employment agreement to receive an annual bonus based upon our
incentive plans and policies but at a target of not less than 35% of his then
current base salary. Mr. Roberts may participate in any executive
benefit/perquisite program that we establish for a minimum aggregate benefit
equal to $10,000 per year. Mr. Roberts' base salary pursuant to the agreement is
currently $189,000 per year. Such amount shall be adjusted annually to increase
it by the greater of the consumer price index for all urban consumers, U.S. City
Average, All Items or 5%. Pursuant to his employment agreement, Mr. Roberts
initially was awarded a stock option exercisable for 15,000 post-split shares of
our common stock, which option became vested with respect to 25% of the
underlying shares of common stock after the first two years Mr. Roberts was
employed by us and the remainder of the underlying shares vest in 6 1/4%
quarterly increments thereafter. The exercise price of the initial stock option
granted to Mr. Roberts is $70.00 per post-split share. As of September 4, 2003,
Mr. Roberts surrendered (returned to AirGate) outstanding and unexercised
options for 7,500 post-split shares that were part of the initial July 28, 1999
stock option grant. In addition, Mr. Roberts is eligible to participate in all
employee benefit plans and policies.
Mr. Roberts' employment may be terminated with or without cause at any time by
Mr. Roberts or us upon four weeks prior written notice, except that if
termination is for cause, no notice by us is required. If we terminate Mr.
Roberts' employment without cause, he is entitled to receive
o six months base salary and
o six months of health, disability, life and dental benefits.
Any unvested options granted to Mr. Roberts fully vest and become exercisable
upon Mr. Roberts' involuntary termination other than for cause. Cause is limited
to breach of the noncompete obligations described below. In the event of Mr.
Roberts' death, Mr. Roberts' legal representative is entitled to twelve months'
base pay, plus a bonus of 20% of base pay.
19
Under the employment agreement, Mr. Roberts agreed to a restriction on his
present and future employment. Mr. Roberts agreed not to
o disclose confidential information or trade secrets during employment with
us and for two years after termination,
o compete in the business of wireless telecommunications either directly or
indirectly in our territory during his employment and for a period of 18
months after his employment is terminated and
o solicit our employees to terminate their employment with us or solicit
certain of our customers to purchase competing products during his
employment with us and for a period of 18 months after termination of his
employment.
Effective October 24, 2002, the Company hired William H. Seippel as vice
president and chief financial officer, pursuant to the terms of an offer letter.
Mr. Seippel's initial base salary pursuant to the offer letter was $250,000 per
year. The offer letter guaranteed Mr. Seippel an annual incentive award payment
for the 2003 plan year equal to 50% of his base earnings during the 2003 plan
year. Pursuant to his offer letter, Mr. Seippel initially received a grant of
14,000 non-qualified stock option post-split shares and an award of 6,000
post-split shares of time-based restricted stock. Mr. Seippel's stock options
and restricted shares vest in four equal annual installments with the initial
25% annual installment vesting on October 24, 2003 and each remaining 25% annual
installment vesting on each anniversary thereafter. The exercise price of the
initial stock option granted to Mr. Seippel is $3.20 per post-split share. In
addition, Mr. Seippel is eligible to participate in all employee benefit plans
and policies. Pursuant to the offer letter, the Company paid Mr. Seippel's
relocation expenses to Atlanta, Georgia, and such amounts are disclosed in the
Summary Compensation Table.
Pursuant to the terms of the offer letter, Mr. Seippel's performance was to be
evaluated after a six-month period of time. The compensation and governance
committee has conducted such an evaluation and, based upon Mr. Seippel's
performance of agreed upon objectives and expectations, the compensation and
governance committee has recommended and the board has approved entering into an
employment and change of control agreement with Mr. Seippel as required by the
offer letter. The following is a description of the terms of the proposed
employment and change of control agreement. Mr. Seippel's annual base salary
would be $275,000 and he would be eligible to receive an annual bonus based on
our incentive plans and policies, with a target bonus opportunity of not less
than 50% of his base salary. Mr. Seippel's employment may be terminated with or
without cause. If he is terminated without cause, or resigns for good reason,
before or more than two years after a change of control of the Company, Mr.
Seippel would be entitled to a prorated salary and target annual bonus for the
year in which the termination occurs and a severance payment equal to six
months' base salary, plus six months of continued health insurance coverage and
outplacement assistance. If he is terminated without cause, or resigns for good
reason, within two years after a change of control of the Company, Mr. Seippel
would be entitled to a prorated salary and target annual bonus for the year in
which the termination occurs and a severance payment in an amount equal to one
times his base salary and target bonus, plus six months of continued health
insurance coverage and outplacement assistance. It would be a condition to the
payment of this severance that Mr. Seippel agree, for a period of six months
after his employment is terminated (or twelve months if his termination of
employment occurs within two year after a change of control of the Company), not
to directly or indirectly:
o engage in a senior management capacity with a competitor in the business of
wireless telecommunications in our territory, or
o solicit a relationship with Sprint for the provision of wireless
telecommunication services within our territory on behalf of any person
other than the Company, or
o solicit our employees to terminate their employment with us or solicit
certain of our customers to purchase competing products or services.
Mr. Seippel and the Company have not executed an employment agreement containing
the terms described above.
20
Option/SAR Grants During the Last Fiscal Year
The following table sets forth information regarding option grants to the Named
Executive Officers during the last fiscal year. Such amounts have been adjusted
to reflect our 1-for-5 reverse stock split on February 13, 2004.
Option/SAR Grants in Last Fiscal Year(1)
Potential Realized Value at
Assumed Annual Rates of
Number of % of Stock Price Appreciation for
Securities Total Option Term (10 Years) (2)
Underlying Options Exercise Expiration ----------------------------
Options Granted Price Date 5% 10%
------- ------- -------- ---------- -- ---
Thomas M. Dougherty................... 20,000 21.2% $ 4.10 12/2012 $ 51,569 $ 130,687
William H. Seippel.................... 14,000 14.8% $ 3.20 12/2012 $ 28,174 $ 71,400
Barbara L. Blackford.................. 7,200 7.6% $ 4.10 12/2012 $ 18,565 $ 47,047
Jonathan M. Pfohl..................... 7,200 7.6% $ 4.10 12/2012 $ 18,565 $ 47,047
David C. Roberts...................... 7,200 7.6% $ 4.10 12/2012 $ 18,565 $ 47,047
------- ----
55,600 59.0%
-------------
(1) These options vest in four equal annual installments. Vesting may be
accelerated upon the occurrence of both of the following: (i) a change of
control, which would include the recently completed recapitalization plan
and (ii) termination of employment by the Company without cause, or by the
executive with "good reason," within two years of the change of control.
(2) Assumes stock price appreciation from the value on the date of grant, which
is the exercise price.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Value Table
The following table sets forth information concerning the value as of September
30, 2003 of options held by the Named Executive Officers.
Aggregated Option Exercises in Last Fiscal Year
Number of Securities
Underlying
Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options at
Year-End Fiscal Year-End
Shares Acquired Value (exercisable/ (exercisable/
Name on Exercise Realized unexercisable) unexercisable)(1)
---- --------------- -------- ------------------- -----------------------
Thomas M. Dougherty...................... -- $ -- --/20,000 $ --/160,000
Willian H. Seippel....................... -- $ -- --/14,000 $ --/124,600
Barbara L. Blackford..................... -- $ -- --/7,200 $ --/57,600
Jonathan M. Pfohl........................ -- $ -- --/7,200 $ --/57,600
David C. Roberts......................... -- $ -- --/7,200 $ --/57,600
--------------
(1) The value of the unexercised in-the-money option was calculated by
multiplying the number of shares of common stock underlying the options by
the difference between $12.10, which was the closing market price of our
common stock on September 30, 2003, on a post-split basis, and the
post-split adjusted option exercise price.
21
STOCK PERFORMANCE GRAPH
The chart below compares the cumulative total shareowner return on our common
stock with the cumulative total return on the Nasdaq Stock Market (U.S.) and the
Nasdaq Telecommunications Index for the period commencing September 28, 1999
(the first day of trading of our common stock after our initial public offering)
and ending September 30, 2003, assuming an investment of $100 and the
reinvestment of any dividends.
The base price for our common stock is the initial public offering price of
$17.00 per share. The comparisons in the graph below are based upon historical
data and are not indicative of, nor intended to forecast, future performance of
the common stock.
COMPARISON OF 4 YEAR CUMULATIVE TOTAL RETURN*
AMONG AIRGATE PCS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[GRAPHIC OMITTED - PERFORMANCE GRAPH DATA IN TABLE BELOW]
Cumulative Total Return
Name of Company 9/28/99 9/99 9/00 9/01 9/02 9/03
--------------- ------- ---- ---- ---- ---- ----
AirGate PCS, Inc.................................$ 100 $ 92.77 $ 167.37 $ 165.67 $ 1.64 $ 9.03
NASDAQ Stock Market (U.S.).......................$ 100 $ 99.58 $ 132.49 $ 54.17 $ 42.67 $ 65.01
NASDAQ Telecommunications........................$ 100 $ 100.22 $ 98.32 $ 38.04 $ 16.53 $ 27.69
22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND OFFICERS
On February 20, 2004, there were approximately 11,760,942 shares of our common
stock outstanding. The following table presents certain information regarding
the beneficial ownership of our common stock, as of February 20, 2004 with
respect to:
o each person who, to our knowledge, is the beneficial owner of 5% or more of
our outstanding common stock;
o each of our directors and nominees for directors;
o each of the Named Executive Officers; and
o all of our executive officers and directors as a group.
Number of Percentage of
Shares Outstanding
Beneficially Common
Name of Beneficial Owner(1) Owned(2) Stock
--------------------------- ----------- -------------
Barbara A. Blackford................................. 4,745 *
Thomas M. Dougherty(3)............................... 24,583 *
Robert A. Ferchat(4)................................. 5,750 *
Jonathan M. Pfohl(5)................................. 5,204 *
John W. Risner....................................... 2,000 *
David C. Roberts..................................... 23,584 *
William H. Seippel................................... 9,500 *
Stephen R. Stetz(6).................................. 2,166 *
Glenview Capital Management, LLC(7).................. 1,092,229 9.29%
Capital Research and Management Company.............. 1,561,210 13.27%
AIG Global Investment Corp........................... 886,058 7.53%
All executive officers and directors as a group
(10 persons)(8)..................................... 83,691 *
------------
* Less than one percent.
(1) Except as indicated, the address for each executive officer and director
is 233 Peachtree Street, N.E., Harris Tower, Suite 1700, Atlanta, Georgia
30303.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Securities Exchange Act. A person is deemed to be the beneficial owner of
shares of common stock if such person has or shares voting or investment
power with respect to such common stock, or has the right to acquire
beneficial ownership at any time within 60 days of the date of the table.
As used herein, "voting power" is the power to vote or direct the voting
of shares and "investment power" is the power to dispose or direct the
disposition of shares.
(3) Includes 820 shares of common stock owned by Mr. Dougherty's wife and 150
shares of common stock owned by Mr. Dougherty's children.
(4) Includes 2,500 shares of common stock subject to options which are
exercisable within 60 days of the date of this table.
(5) Includes 18 shares of common stock owned by Mr. Pfohl's children.
(6) Includes 2,166 shares of common stock subject to options which are
exercisable within 60 days of the date of this table.
(7) Information presented is based on a Schedule 13G/A dated February 13, 2004
by Glenview Capital Management, LLC ("Management"), Glenview Capital GP,
LLC ("GP"), Glenview Capital Partners, L.P. ("Partners"), Glenview
23
Institutional Partners, L.P. ("Institutional") and Glenview Capital Master
Fund, Ltd. ("Master Fund", and together with Management, GP, Partners and
Institutional, the "Glenview Filing Parties"). The Schedule 13G/A
indicates that Partners beneficially owns 274,100 shares, Institutional
beneficially owns 683,900 shares, and Master Fund beneficially owns
1,350,000 shares, for a total of 2,308,000 shares. This share information
is based on pre-reverse stock split numbers. On a post-reverse stock split
basis, the beneficial ownership is 54,820, 136,780, and 270,000,
respectively, for a total of 461,600 shares. The Schedule 13G/A also
indicates that each of the beneficial owners has delegated sole voting and
dispositive power to Management. In addition, GP serves as the general
partner of Partners and Institutional. As a result of these shareholdings,
ownership structure and delegation, the Schedule 13G/A indicates that each
of the Glenview Filing Parties has shared voting and dispositive power
over the full 2,308,000 pre-split (or 461,600 post-split) shares. The
business address for each of Management, GP, Partners and Institutional is
399 Park Avenue, Floor 39, New York, New York 10022. The business address
of Master Fund is c/o Goldman Sachs (Cayman) Trust, Limited, Harbour
Centre, North Church Street, P.O. Box 896GT, George Town, Grand Cayman,
Cayman Islands, British West Indies, Cayman Island exempted company.
(8) Includes 4,666 shares of common stock subject to options which
are exercisable within 60 days of the date of this table.
CERTAIN RELATED TRANSACTIONS
Timothy M. Yager was a member of the AirGate board of directors until December
16, 2002. Prior to joining the AirGate board, Mr. Yager was the chief executive
officer of iPCS. Pursuant to his employment agreement with iPCS, iPCS purchased
consulting services from Mr. Yager during the year ended September 30, 2003. On
January 27, 2003, Mr. Yager was appointed chief restructuring officer to oversee
the restructuring of iPCS and his company, YMS Management, LLC, entered into a
management services agreement to manage the day-to-day operations of iPCS. In
connection with his appointment as chief restructuring officer, Mr. Yager and
iPCS agreed to terminate the provisions of his employment agreement providing
for consulting services to iPCS and payments thereunder to Mr. Yager. The
management services agreement provides weekly payments of $15,000, plus certain
expenses. The agreement also provides that upon confirmation of a plan of
reorganization or a sale of iPCS, Mr. Yager is entitled to a fixed fee equal to
$500,000 less 50% of the aggregate weekly payments previously paid to Mr. Yager
under the management services agreement. If the sale of iPCS results in proceeds
in excess of $190 million, Mr. Yager is entitled to a fee equal to the lesser of
1.25% of such proceeds or $3.5 million. In addition, upon the closing of any
equity investment in iPCS, Mr. Yager is entitled to a fee equal to 2% of the
amount invested. During the year ended September 30, 2003, iPCS purchased $0.3
million of consulting services from Mr. Yager, which represents payments under
his employment agreement prior to January 27, 2003 and payments as chief
restructuring officer and to YMS after that time and prior to February 23, 2003,
when iPCS filed a Chapter 11 bankruptcy case for the purpose of effecting a
court administered reorganization.
OTHER INFORMATION
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation and governance committee was an officer
or employee of the company or had any relationship with us that requires
disclosure under SEC regulations.
Compliance With Section 16(a) Beneficial Ownership Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers and persons who own more than ten percent of a registered
class of our equity securities to file with the SEC reports of ownership and
changes in ownership of our common stock. Directors, executive officers and
greater than ten percent shareowners are required by SEC regulations to furnish
us with a copy of all Section 16(a) forms they file.
24
Based solely on a review of the copies of these reports furnished to us or
written representations that no other reports were required, we believe that
during fiscal year 2003, all directors, executive officers and greater than ten
percent beneficial owners complied with these requirements.
Independent Certified Public Accountants
KPMG LLP was our auditor during the fiscal year ended September 30, 2003. The
board of directors has not yet selected auditors for our annual financial
statements for the current fiscal year. A representative of KPMG LLP will be
present at the annual meeting, will have the opportunity to make a statement if
he or she so desires and will be available to respond to appropriate questions.
The following table shows the fees that the Company paid or accrued for the
audit and other services provided by KPMG LLP for the fiscal years ended
September 30, 2003 and 2002:
Year Ended Year Ended
September 30, 2003 September 30, 2002
------------------ ------------------
Audit Fees $ 558,063 $ 924,900
Audit-Related Fees 610,850 445,901
Tax Fees 391,820 90,840
All Other Fees 38,891 12,000
------------------------ ---------------------
Total $1,599,624 $ 1,473,641
Audit Fees. This category includes the aggregate fees billed for professional
services rendered by KPMG LLP for the audit of our annual consolidated financial
statements and the limited reviews of our quarterly condensed consolidated
financial statements for the years ended September 30, 2003 and 2002.
Audit-Related Fees. This category includes the aggregate fees billed for
non-audit services, exclusive of the fees disclosed relating to audit fees,
rendered by KPMG LLP during the fiscal years ended September 30, 2003 and 2002.
These services principally include the assistance and issuance of consents for
various filings with the SEC.
Tax Fees. This category includes the aggregate fees billed for tax services
rendered by KPMG LLP during the fiscal years ended September 30, 2003 and 2002.
These services consisted primarily of tax compliance and tax consultation
services. Services for the year ended September 30, 2003 include tax advice in
connection with the Company's financial restructuring and tax advice in
connection with the opinion letter to the Board of Directors addressing the tax
consequences to the Company of Section 382 of the Internal Revenue Code, and
related issues. In addition, for fiscal years ended September 30, 2003 and 2002,
these services include preparation of state and federal tax returns for the
Company and its subsidiaries.
All Other Fees. This category includes the aggregate fees billed for all other
services, exclusive of the fees disclosed above, rendered by KPMG LLP during the
fiscal years ended September 30, 2003 and September 30, 2002. These other
services in fiscal 2003 consisted primarily of assistance with AirGate's
initiative to document key internal controls over financial reporting pursuant
to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and also
included audits of our 401(k) plans.
The audit committee has concluded that the non-audit services provided by KPMG
LLP are compatible with maintaining the independence of KPMG LLP.
Oversight of Accountants; Approval of Accounting Fees
Under the provisions of its charter, the audit committee is responsible for the
appointment, compensation, retention and oversight of the work of the
independent auditors. The audit committee has adopted the Audit Committee Policy
For Pre-Approval of Services, which provides that the audit committee must
pre-approve all audit and non-audit services provided by the independent
auditors. These services may include audit services, audit-related services, tax
25
services and other services, and the audit committee pre-approves the fees for
each specific category of service. The audit committee has delegated
pre-approval authority to the Chair for external audit services not exceeding
$75,000 per engagement, and the Chair must report any pre-approval decisions to
the audit committee at its next meeting. The policy specifically prohibits
certain non-audit services that are prohibited by securities laws from being
provided by an independent auditor.
All of the principal accounting services and fees reflected in the table in this
Item 14 were reviewed and approved by the audit committee, and none of the
services were performed by individuals who were not employees of the independent
auditor.
Delivery of this Proxy Statement
SEC rules permit companies and intermediaries (e.g., brokers) to satisfy the
delivery requirements for proxy statements with respect to two or more security
holders sharing the same address by delivering a single proxy statement
addressed to those security holders. This process, which is commonly referred to
as "householding," potentially means extra convenience for securityholders and
cost savings for companies.
This year, a number of brokers with accountholders who are AirGate PCS, Inc.
shareowners will be "householding" our proxy materials. A single proxy statement
will be delivered to multiple shareowners sharing an address unless contrary
instructions have been received from the affected shareowner. Once you have
received notice from your broker or us that they will be "householding"
communications to your address, "householding" will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in "householding" and would prefer to receive a
separate proxy statement, please notify your broker, direct your written request
to AirGate PCS, Inc., Barbara L. Blackford, Corporate Secretary, 233 Peachtree
Street, N.E., Suite 1700, Atlanta, Georgia 30303 or contact Ms. Blackford at
(404) 525-7272.
Shareowners who currently receive multiple copies of the proxy statement at
their address and would like to request "householding" of their communications
should contact their broker or, if a shareowner is a shareowner of record of our
shares, they should submit a written request to American Stock Transfer & Trust
Company, our transfer agent, at 6201 15th Avenue, 3rd Floor, Brooklyn, New York,
11219, Attention: Donna Ansbro.
Availability of AirGate PCS's 10-K and Annual Report
SEC rules require us to provide an Annual Report to shareowners who receive this
proxy statement. We will also provide copies of the Annual Report to brokers,
dealers, banks, voting trustees and their nominees for the benefit of their
beneficial owners of record. Additional copies of our Annual Report on Form 10-K
for the fiscal year ended September 30, 2003 (not including documents
incorporated by reference) are available to any shareowner without charge upon
written request to AirGate PCS, Inc. to the attention of our Corporate
Secretary, Barbara L. Blackford, 233 Peachtree St. N.E., Suite 1700, Harris
Tower, Atlanta, GA 30303. You may also obtain our Annual Report on Form 10-K
over the Internet at the SEC's website, www.sec.gov.
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APPENDIX A
AIRGATE PCS, INC.
Audit Committee Charter
1. MEMBERS
Election and Term
The members of the Audit Committee shall be appointed by the full Board
annually based on recommendations from the Compensation and Governance
Committee. Unless a chair is appointed by the Board, the members of the
Committee shall designate a chair by majority vote.
Qualifications
The Committee shall consist of three or more Independent Directors, as
defined in the Company's Governance Principles. All members of the
Committee shall have the ability to read and understand fundamental
financial statements, and at least one member of the Committee shall
have employment experience in finance or accounting, requisite
professional certification in accounting or other comparable experience
or background which results in financial sophistication, all as
provided in the listing standards of the Nasdaq Stock Market, Inc.
("Nasdaq").
No director may serve as a member of the Committee if the director
serves on the audit committees of more than two other public companies
unless the Board determines that such simultaneous service would not
impair the ability of the director to effectively serve on the
Committee.
2. PURPOSE
The purpose of the Committee is to represent the Board in discharging
its responsibilities relating to:
(a) The integrity of the Company's financial statements and the
oversight of the accounting, financial reporting and financial
practices of the Company;
(b) The qualifications, independence, selection, engagement,
compensation and oversight of the Company's independent
auditors;
(c) The Company's compliance with legal and regulatory
requirements; and
(d) The performance of the Company's independent auditors and the
internal audit function.
3. ADMINISTRATION AND OPERATIONS
The Committee shall conduct its meetings in accordance with the
Company's Bylaws. Except as provided in the Bylaws or the Board's
Governance Principles, the Committee may fix its own rules of
procedure. The Secretary of the Company shall serve as the Secretary of
the Committee. The Secretary of the Company shall prepare the minutes
of each meeting of the Committee and, following approval by the
Committee, shall send them to all members of the Board.
4. RIGHTS, AUTHORITY, DUTIES AND RESPONSIBILITIES
The Committee shall have the right, authority, duty and responsibility
to:
Independent Auditors; Registered Public Accounting Firms; Internal
Audit
(a) Be directly responsible, in its capacity as a committee of the
Board, for the appointment, compensation, retention and
oversight of the work of the independent auditors, including
the resolution of any disagreements between management and the
independent auditors regarding financial reporting. In this
regard, the Committee shall have the sole authority to
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appoint, determine funding for, evaluate, and, as necessary,
replace the independent auditors, which shall report directly
to the Committee;
(b) Obtain and review at least annually a written report from the
independent auditors describing all relationships between the
independent auditors and the Company, and any other
relationships that may adversely affect the independence of
the auditors, and assess the independence of the auditors,
including whether the auditors' performance of permissible
non-audit services is compatible with the auditors'
independence;
(c) Actively engage in a dialogue with the independent auditors
with respect to any relationships or services disclosed by the
auditors that may impact the auditors' objectivity and
independence, and recommend to the Board that it take any
action that the Committee believes is appropriate to oversee
the independence of the auditors;
(d) Obtain and review at least annually a report from the
independent auditors describing (i) the independent auditors'
internal quality control procedures, and (ii) any material
issues raised by the most recent internal quality control
review, or peer review, of the independent auditors or by any
inquiry or investigation by governmental or professional
authorities within the preceding five years with respect to
any independent audits carried out by the independent
auditors, and any steps taken to deal with such issues;
(e) Evaluate the independent auditors' qualifications, performance
and independence at least annually;
(f) Be directly responsible, in its capacity as a committee of the
Board, for (i) the appointment, compensation, retention and
oversight of the work of any registered public accounting firm
engaged for the purpose of performing other audit, review or
attest services for the Company, and (ii) the approval of all
engagements and the fees and terms with respect thereto for
all non-audit services to be provided by the independent
auditors, except that the Committee may delegate to one or
more Committee members authority to pre-approve such services
between regular meetings, and establish policies and
procedures for the engagement of the independent auditors to
provide permissible non-audit services;
(g) Establish policies with respect to the hiring of employees and
former employees of the Company's independent auditors;
(h) Approve and engage any outside firm providing internal audit
services and review and approve the scope and terms of, and
the fees relating to, that engagement, or, if internal staff
is to be used, approve the appointment and replacement of the
director of the internal auditing department;
(i) Review and discuss with management, the Company's independent
auditors and the head of the internal audit function or the
lead partner of the firm engaged to provide internal audit
services, the functions and effectiveness of the Company's
internal audit function, including its budget, staffing,
organization, independence and proposed audit plans for each
year, and review and approve the plan for the annual audit;
(j) Review and discuss a summary of findings from completed
internal audits and periodic progress reports on the proposed
annual internal audit plan;
(k) Discuss with the independent auditors the results of the
annual audit examination;
Financial Reporting; Internal Controls and Disclosure Controls and
Procedures
(l) Review and discuss with the independent auditors and
management the annual audited and quarterly financial
statements of the Company and its subsidiaries, including (i)
an analysis of the auditors' judgment as to the quality of the
Company's accounting principles, (ii) any significant
financial reporting issues and judgments made in connection
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with the preparation of the financial statements, including
the development, selection and disclosure of critical
accounting estimates and analyses of the effects of
alternative GAAP methods on the financial statements, and
(iii) disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations";
(m) Recommend to the Board whether the financial statements should
be approved for inclusion in the Company's and its
subsidiaries' Annual Reports on Form 10-K and approve
financial statements for inclusion in the Company's and its
subsidiaries' Quarterly Reports on Form 10-Q;
(n) Review and discuss with management and the independent
auditors at least quarterly (i) all critical accounting
policies and practices used by the Company or its subsidiaries
and any significant changes in such policies and practices;
(ii) all alternative treatments of financial information
within generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments and the treatment
preferred by the independent auditors; (iii) other material
written communications issued or proposed to be issued between
the independent auditors and management, such as any
management or internal control letter or schedule of
unadjusted differences, and any communications between the
audit team and the independent auditors' national office with
respect to auditing or accounting issues raised by the
engagement; and (iv) any problems or difficulties encountered
in the course of the audit work, including any restriction on
the scope of activities or access to requested information,
and any disagreements with management and management's
response thereto; and receive from the independent auditors
reports required by rules of the Securities and Exchange
Commission.
(o) Review and discuss with management and the independent
auditors any material financial or non-financial arrangements
of the Company which do not appear on the financial statements
of the Company or its subsidiaries;
(p) Review and discuss with management and the independent
auditors whether there are any accounting or financial
reporting proposals that may have a significant impact on the
financial reports of the Company or its subsidiaries;
(q) Review and discuss with the independent auditors, the head of
the internal auditing function and management the extent to
which changes or improvements in financial or accounting
practices, as approved by the Committee, have been
implemented;
(r) Review and discuss with management and the independent
auditors the adequacy and effectiveness of (i) the Company's
internal controls, including any significant deficiencies in
internal controls and significant changes in such controls
reported to the Committee by the independent auditors or
management; and (ii) the Company's disclosure controls and
procedures and management reports thereon, including reports
made by the Company's Chief Executive Officer and Chief
Financial Officer relating to any deficiencies or weaknesses
in the design or operation of internal control over financial
reporting and any fraud involving management or other
employees who have a significant role in the Company's
internal control over financial reporting;
Risk Assessment; Earnings Releases and Guidance
(s) Review and discuss with management and the independent
auditors the Company's major financial risk exposures and the
Company's guidelines and policies with respect to financial
risk assessment and risk management;
(t) Review and discuss with management and the independent
auditors contingent liabilities;
(u) Review and discuss with management earnings releases prior to
dissemination, including the use of non-GAAP information;
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(v) Review and discuss with management financial information and
earnings guidance provided to analysts, lenders, noteholders
and rating agencies;
Complaints and Anonymous Information
(w) Establish and administer procedures for the receipt,
retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls, or
auditing matters, including procedures for the confidential,
anonymous submission by employees of the Company of concerns
regarding accounting or auditing matters;
Compliance
(x) Review and discuss with the General Counsel significant legal,
compliance and regulatory matters involving the Company and
its subsidiaries;
(y) Review, approve and monitor compliance with the Company's
Standards of Business Conduct;
Miscellaneous
(z) Review and pre-approve related-party transactions in
accordance with Nasdaq listing standards;
(aa) Prepare the annual report of the Committee required by SEC
rules to be included in the annual proxy statement; and
(bb) Perform such other duties and responsibilities as may be
assigned to the Committee by the Board.
5. OUTSIDE ADVISORS
The Committee shall have the authority to retain, and determine the
fees and other retention terms for, such legal, accounting and other
advisors to the Committee as it determines appropriate to assist it in
the performance of its functions, without deliberation or approval by
the Board or management.
6. COMPANY FUNDING
The Company shall provide for appropriate funding, as determined by the
Committee in its capacity as a committee of the Board, for payment of
(i) compensation to the independent auditors for the provision of audit
services and any approved non-audit services and to any registered
public accounting firm engaged to perform other audit, review or attest
services for the Company, (ii) compensation to any advisors engaged by
the Committee, and (iii) administrative expenses of the Committee.
7. MEETINGS
The Committee shall meet at least four times per year, or more
frequently as circumstances dictate, either in person or
telephonically, and at such times and places as the Committee
determines. The Committee shall meet at least once every fiscal quarter
prior to the release of annual and quarterly Company or subsidiary
financial statements. The Committee shall report to the Board regularly
with respect to its activities. The Committee shall separately meet at
least quarterly with management, the internal auditor or the firm
engaged to perform internal audit services, the Chief Financial
Officer, the General Counsel and the independent auditors in separate
executive sessions.
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8. COMMITTEE EVALUATION
The Committee shall annually evaluate its effectiveness and the
adequacy of its charter, in accordance with processes recommended by
the Compensation and Governance Committee and shall report the results
of the evaluation to the Compensation and Governance Committee.
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APPENDIX B
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FORM OF PROXY
------------------
AIRGATE PCS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREOWNERS
April 8, 2004
The undersigned shareowner(s) of AirGate PCS, Inc., a Delaware corporation
(the "Company"), hereby revoking any proxy heretofore given, does hereby appoint
Thomas M. Dougherty and Barbara L. Blackford, and each of them, with full power
to act alone, the true and lawful attorneys-in-fact and proxies of the
undersigned, with full powers of substitution, and hereby authorize(s) each of
them, to represent the undersigned and to vote all shares of common stock of the
Company that the undersigned is entitled to vote at the Annual Meeting of
Shareowners of the Company to be held at 303 Peachtree Street, N.W., Suite 5300,
Atlanta, Georgia, on April 8, 2004 at 9:00 a.m., Eastern Standard Time, and any
and all adjournments and postponements thereof, with all powers the undersigned
would possess if personally present, on the following proposals, as described
more fully in the accompanying proxy statement, and any other matters coming
before said meeting.
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1. To elect Robert A. Ferchat and |_| For All Nominees
Max D. Hopper as Directors of
the Company with terms |_| Withhold Authority For
expiring in 2007. All Nominees
|_| For All, Except
|_| Robert A. Ferchat
|_| Max D. Hopper
The Board of Directors Recommends a Vote FOR each of the nominees.
--------------------------------------------------------------------------------
2. To transact such other business as
may properly come before the
Meeting or any adjournment(s) or
postponement(s) thereof, including
an adjournment to solicit
additional proxies in the event
that a quorum is not present at the
meeting or in the event sufficient
proxies voted in favor of the
approval of the proposals have not
been received.
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YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT
YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREOWNER(S). IF NO DIRECTION IS
GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS LISTED ABOVE.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE OF SHAREOWNER ___________________ DATE: _____________
SIGNATURE OF SHAREOWNER____________________ DATE: _____________
Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
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