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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 2
For Annual and Transition Reports Pursuant to
Section 13 or 15(d) of the Securities Act of 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended September 30, 2003.
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File Number: 027455
AirGate PCS, Inc.
(Exact name of registrant as specified in its charter)
Delaware 58-2422929
(State other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Harris Tower, 233
Peachtree St. NE, Suite 1700,
Atlanta, Georgia 30303
(Address of principal executive offices) (Zip code)
(404) 525-7272
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes |_| No |X|
The aggregate market value of the voting stock held by non-affiliates of
the registrant computed by reference to the closing sale price on the OTC
Bulletin Board on March 31, 2003, the last business day of the registrant's most
recently completed second fiscal quarter, was approximately $6,484,959. (For
purposes of determination of the foregoing amount, only our directors and
executive officers have been deemed affiliates).
As of December 8, 2003, there were 25,961,191 shares of common stock, $0.01
par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part II, Item 7 of Amendment No. 1 to the Company's Annual Report on Form 10-K
is incorporated into Part III of this Amendment No. 2.
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EXPLANATORY NOTE
This Amendment No. 2 to the Company's Annual Report on Form 10-K (the "Annual
Report") is solely for the purpose of supplementing the Annual Report by
including Part III disclosure instead of incorporation by reference to the
definitive proxy statement for AirGate's annual shareholder meeting, to update
the signature page, to file Exhibit 24.1 and refile Exhibits 31.1 and 31.2. This
Amendment No. 2 does not reflect events occurring after the filing of the
original Form 10-K, or modify or update the disclosures therein in any way other
than as described above.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
Our Executive Officers and Directors
The following table presents information with respect to our executive
officers and directors:
Name Age Position
-------------------- --- ----------
Thomas M. Dougherty 59 President and Chief Executive Officer and Director
Robert A. Ferchat 69 Chairman
Stephen R. Stetz 61 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.
Robert A. Ferchat 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.
Stephen R. Stetz has been a director since February 2003. Mr. Stetz also 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 Vice President, Strategic Initiatives. From November 1998 until
August 1999, Mr. Stetz served as Vice President and Chief Financial Officer of
Monsanto's Agriculture Company and from October 1996 until September 1998, Mr.
Stetz served as Vice President, Mergers & Acquisitions/ Licensing. During this
time, Monsanto announced more than fifty transactions with an aggregate value of
over $75 billion. Prior to 1996, Mr. Stetz held various positions at Monsanto
Company in Corporate Finance and Budgeting, Treasury, International, Strategic
Planning, Research and Development and Manufacturing. 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.
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,
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.
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.
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.
Code of Ethics
AirGate has adopted a written Code of Ethics that applies to all of its
directors, officers, including its President and Chief Executive Officer (as the
chief executive officer) and its Chief Financial Officer (as its chief
accounting and financial officer), and employees. The Code of Ethics is entitled
Standards of Business Conduct and is available on AirGate's website,
www.airgatepcsa.com, under the "Corporate Governance" caption. Any amendments or
waivers to the Standards of Business Conduct will be disclosed on AirGate's
website promptly following the date of such amendment or waiver. Information on
AirGate's website, however, does not form a part of this Form 10-K.
Audit Committee Financial Expert
Both members of AirGate's Audit Committee are independent directors who have
extensive experience with accounting and financial matters. Both members have
served in senior financial roles in large organizations, including the role of
chief financial officer. Both of the members of our Audit Committee qualify as
financial experts as that term is defined by SEC regulations.
ITEM 11. 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 profitably, (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.
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 for executives 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
represents 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 and is
contingent on completing 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 is 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 $14.00 per
share. 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 751,756 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.
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 100,000 shares with an exercise price of
$.82 per 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 Committee
Stephen R. Stetz, Chair
Robert A. Ferchat
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 receive an annual retainer for each plan year, which may be comprised
of cash, restricted stock or options to purchase shares of our common stock. A
director may 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 joins our
board of directors receives an initial grant of options to acquire shares of our
common stock. The options vest in three equal annual installments beginning on
the first day of the plan year following the year of grant. Each participant
also receives an annual grant of options to acquire our common stock, which vest
on the first day of the plan year following the year of grant. In lieu of this
annual grant, the recipient may elect to receive three year's worth of annual
option grants in a single upfront grant of options to acquire our common stock
exercisable in three equal annual installments on the first day of each of the
three succeeding plan years. All options have an exercise price equal to the
fair market value of our common stock on the date of grant. We also reimburse
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 fiscal year 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
are 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 us. 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-employee 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 will receive an
annual retainer of $15,000, up from $12,000, and all other non-employee
directors will 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 development,
current directors who continue to serve will be paid an additional retainer
every six months of $12,500 until December 1, 2004. Finally, the initial option
grant to non-employee directors has been increased to 10,000 from 5,000 and the
annual option grant to 7,500 from 5,000.
In connection with the financial restructuring, we will add additional directors
to our board. As a result, our board is re-examining director compensation.
Director Compensation for Last Fiscal Year
The following table shows the cash compensation paid by us to our non-employee
directors during the fiscal year ended September 30, 2003.
Cash Compensation
---------------------------------------------------------------
Annual Meeting Consulting Fees/
Name Retainer Fees($) Fees($) Other Fees($) Total
Robert A. Ferchat........................................... $ 26,250 $ 32,250 $ -- $ 58,500
Stephen R. Stetz............................................. $ 22,500 $ 30,750 $ -- $ 53,250
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 $100,000. We refer to each of
these persons as "Named Executive Officers" and set forth their compensation
information for the fiscal years ended September 30, 2003, 2002 and 2001.
Restricted Securities
Other Annual Stock Underlying All Other
Bonus Compensation Award(s) Options/ Compensation
Year Salary ($) ($)(1) ($) ($)(2) SARs(#) ($)(3)
---- ---------- ------ ------------ ------------ ---------- -------------
Thomas M. Dougherty(4) 2003 $ 340,000 $ 1,048,000 $ -- $ -- 100,000 $ 8,527
President and Chief 2002 314,038 785,800 -- 70,040 75,000 8,484
Executive Officer 2001 272,789 1,020,000 -- -- 41,408 7,218
William H. Seippel 2003 232,164 162,800 -- 18,600 70,000 252,180
Chief Financial Officer 2002 -- -- -- -- --
2001 -- -- -- -- --
Barbara L. Blackford 2003 218,000 153,400 -- -- 36,000 657
Vice President, General 2002 212,808 28,100 -- 28,016 27,000 8,329
Counsel and Secretary 2001 201,126 148,500 -- -- 46,056 7,110
David C. Roberts 2003 199,000 136,600 -- -- 36,000 10,402
Vice President, 2002 196,199 25,500 -- 28,016 27,000 9,445
Engineering and 2001 179,231 135,000 -- -- 13,521 6,615
Network Operations
Jonathan M. Pfohl 2003 188,000 120,600 -- -- 36,000 8,808
Vice President, Sales 2002 183,000 24,000 -- 38,522 27,000 8,640
Operations 2001 164,769 123,600 -- -- 49,225 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 is payable only upon the
successful completion of the financial restructuring prior to the end of
fiscal year 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
$35.02. 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 will not be paid on the restricted stock. As of September
30, 2003, Mr. Dougherty held 2,000 shares of restricted stock worth $4,840,
Ms. Blackford held 800 shares of restricted stock worth $1,936, Mr. Roberts
held 800 shares of restricted stock worth $1,936 and Mr. Pfohl held 1,100
shares of restricted stock worth $2,662. These values are based on the
closing price of our common stock on September 30, 2003, which was $2.42.
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 $0.62. 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 30,000 shares of
restricted stock worth $72,600. This value is based on the closing price of
our common stock on September 30, 2003, which was $2.42.
(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.
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 300,000 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
$14.00 per share. As of September 4, 2003, Mr. Dougherty surrendered (returned
to AirGate) outstanding and unexercised options for 185,714 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 300,000 option grant at $2.00 a share and the actual grant price of
$14.00 a share. The timing of the payments matches the vesting of the initial
300,000 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
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 90,000 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 $66.94 per share.
As of September 4, 2003, Ms. Blackford surrendered (returned to AirGate)
outstanding options for the 90,000 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 75,000 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 $14.00 per share. As of September 4, 2003, Mr. Roberts surrendered
(returned to AirGate) outstanding and unexercised options for 37,500 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.
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 is $250,000 per
year. Mr. Seippel's performance will be evaluated during the first six months of
his employment and if he has successfully achieved or made satisfactory progress
towards the achievement of agreed upon performance objectives and expectations
during this period, his annual base salary will be increased to $275,000. Mr.
Seippel is eligible under his offer letter to receive an annual bonus based on
our incentive plans and policies, but at a target of not less than 50% of his
base salary. The offer letter guarantees 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 70,000 non-qualified stock option shares and an award of 30,000 shares of
time-based restricted stock. Mr. Seippel's stock option shares will 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 restrictions on Mr. Seippel's restricted stock award
will lapse over a four-year period such that 25% of the shares will vest on
October 24, 2003 and the remaining shares will vest in 25% annual installments
on each anniversary. The exercise price of the initial stock option granted to
Mr. Seippel is $0.64 per 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.
The offer letter provides that Mr. Seippel's employment may be terminated with
or without cause. Mr. Seippel is entitled to severance payments if he is
terminated without cause in an amount equal to six months' base salary and a
pro-rated bonus at target. It is a condition to the payment of this severance
that Mr. Seippel agree not to directly or indirectly:
o engage in a senior management capacity in the business of wireless
telecommunications in our territory for a period of six months after his
employment is terminated or
o solicit our employees to terminate their employment with us or solicit
certain of our customers to purchase competing products for a period of one
year after termination of his employment.
Mr. Seippel's offer letter further provides that the Company will enter into an
agreement with him entitling him to receive certain payments if his employment
is terminated (voluntarily or involuntarily) for specified reasons, other than
for cause, as a result of a change of control of the Company. The change of
control agreement is to provide that he would receive his annual base salary and
bonus at target and continuation of benefits for one year. Mr. Seippel would
also receive unpaid salary and accrued and unpaid bonus and certain outplacement
services for up to one year.
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.
Option/SAR Grants in Last Fiscal Year(1)
Number of Potential Realized Value at
Securities % of Total Assumed Annual Rates of
Underlying Options Exercise Expiration Stock Price Appreciation for
Options Granted Price Date Option Term (10 Years)(2)
------- ------- -------- ----------- -----------------------------
Name 5% 10%
---- -- ---
Thomas M. Dougherty..................... 100,000 21.2% $ 0.82 12/2012 $ 51,569 $ 130,687
William H. Seippel...................... 70,000 14.8% $ 0.64 12/2012 $ 28,174 $ 71,400
Barbara L. Blackford.................... 36,000 7.6% $ 0.82 12/2012 $ 18,565 $ 47,047
Jonathan M. Pfohl....................... 36,000 7.6% $ 0.82 12/2012 $ 18,565 $ 47,047
David C. Roberts........................ 36,000 7.6% $ 0.82 12/2012 $ 18,565 $ 47,047
--------- --------
278,000 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 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/
on Exercise Realized unexercisable) unexercisable)(1)
----------- ---------- ------------------- ------------------------
Name
----
Thomas M. Dougherty...................... -- $ -- --/100,000 $ --/160,000
Willian H. Seippel....................... -- $ -- --/70,000 $ --/124,600
Barbara L. Blackford..................... -- $ -- --/36,000 $ --/57,600
Jonathan M. Pfohl........................ -- $ -- --/36,000 $ --/57,600
David C. Roberts......................... -- $ -- --/36,000 $ --/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 $2.42, which was the closing market price of our
common stock on September 30, 2003, and the option exercise price.
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]
* $100 INVESTED ON 9/28/99 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
Cumulative Total Return
Name of Company 9/28/99 9/99 9/00 9/01 9/02 9/03
------- ---- ---- ---- ---- ----
AirGate PCS, Inc....................................................$.100 $ 92.77 $ 167.3 $165.67 $ 1.64 $ 9.03
NASDAQ Stock Market (U.S.)..........................................$.100 $ 99.58 $ 132.4 $ 54.17 $ 42.67 $ 65.01
NASDAQ Telecommunication............................................$.100 $100.22 $ 98.3 $ 38.04 $ 16.53 $ 27.69
Compensation and Governance Committee Interlocks and Insider Participation
None of the members of the Compensation and Governance Committee was an officer
or employee of AirGate or had any relationship with us that requires disclosure
under SEC regulations.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about AirGate common stock that may be
issued under all of AirGate's existing equity compensation plans as of September
30, 2003.
(c) Number of Securities
Remaining Available for
(a) Number of Future Issuance Under
Securities to be Issued (b) Weighted Average Equity Compensation
Upon Exercise of Exercise Price of Plans (Excluding (d) Total of Securities
Outstanding Options, Outstanding Options, Securities Reflected Reflected in
Plan Category Warrants and Rights Warrants and Rights in Column (a)) Columns (a) and (c)
------------- ---------------------------------------------------------------------------------------------------
Equity Compensation
Plans Approved by
Shareowners.............. 274,203(2) $ 34.67 --(1) 274,203
336,053(3) $ 31.19 --(1) 336,053
617,364(4) $ 2.93 882,636 1,500,000
------- ------- ---------
TOTAL.................... 1,227,620 882,636 2,110,256
========= ======= =========
Equity Compensation
Plans Not Approved by
Shareowners.............. 49,450(5) $ 44.93 --(1) 49,450
---------- -------- -------- ----------
TOTAL.................... 1,277,070 $ 18.81 82,636(6) 2,159,706
========== ======== ======== ==========
----------
(1) The right to issue options under this plan terminated upon shareholder
approval of the 2002 Long-Term Incentive Plan.
(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 Long-Term Incentive Plan.
(5) Issued under the AirGate PCS, Inc. 2001 Non-Executive Stock Option Plan.
(6) In addition, 73,314 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 were issued under either the AirGate PCS, Inc. 1999 Stock Option Plan or
the AirGate PCS, Inc. 2002 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 49,450 shares were outstanding under this plan, out of the
150,000 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND OFFICERS
On November 1, there were approximately 25,961,191 shares of our common stock
outstanding. The following table presents certain information regarding the
beneficial ownership of our common stock, as of November 1, 2003 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
Shares of
Beneficially Outstanding
Name of Beneficial Owner(1) Owned(2) Common Stock
--------------------------- ----------- ------------
Barbara A. Blackford(3)............................................ 23,729 *
Thomas M. Dougherty(4)............................................. 122,919 *
Robert A. Ferchat.................................................. 21,250 *
Jonathan M. Pfohl(5)............................................... 26,021 *
David C. Roberts(6)................................................ 117,921 *
William H. Seippel................................................. 47,500 *
Stephen R. Stetz................................................... 0 *
Geneseo Communications, Inc.(7).................................... 2,115,253 8.15%
Cambridge Telcom, Inc.(8).......................................... 1,863,074 7.18%
The Blackstone Group (9)........................................... 2,578,379 9.93%
Jennison Associates LLC (10)....................................... 2,618,600 10.09%
Glenview Capital Management, LLC (11).............................. 1,400,000 5.39%
HMC Investors, L.L.C. (12)......................................... 1,481,000 5.70%
All executive officers and directors as a group (9 persons)(13).... 385,124 1.48%
--------------
* 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 9,000 shares of common stock subject to options which are
exercisable within 60 days of the date of this table.
(4) Includes 4,100 shares of common stock owned by Mr. Dougherty's wife, 750
shares of common stock owned by Mr. Dougherty's children and 25,000 shares
of common stock subject to options which are exercisable within 60 days of
the date of this table.
(5) Includes 90 shares of common stock owned by Mr. Pfohl's children and 9,000
shares of common stock subject to options which are exercisable within 60
days of the date of this table.
(6) Includes 9,000 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 dated November 30, 2001 by
Geneseo Communications, Inc. ("Geneseo"). Geneseo reported that it has sole
voting power and sole dispositive power over 2,115,253 of our common stock.
The business address of this shareowner is 111 E. 1st Street, P.O. Box 330,
Geneseo, Illinois, 61254.
(8) Information presented is based on a Schedule 13G dated November 30, 2001 by
Cambridge Telcom, Inc. ("Cambridge"). Cambridge reported that it has sole
voting power and sole dispositive power over 1,863,074 of our common stock.
The business address of this shareowner is 111 E. 1st Street, P.O. Box 330,
Geneseo, Illinois, 61254.
(9) Information presented is based on a Schedule 13G dated December 31, 2001 by
certain members of The Blackstone Group. Of the 2,578,379 shares, 1,153,648
are held by Blackstone Communications Partners I L.P. ("BCOM"), 992,328 are
held by Blackstone iPCS Capital Partners L.P. ("BICP"), 348,398 are held by
Blackstone/iPCS L.L.C. ("BLLC"), 4,780 are shares issuable to Blackstone
Management Partners III pursuant to currently vested options, 71,302 are
shares issuable upon exercise of warrants by Blackstone Mezzanine Partners
L.P. ("BMP") and 7,923 are shares issuable upon exercise of warrants by
Blackstone Mezzanine Holdings L.P. ("BMH"). Blackstone Communications
Management Associates I L.L.C. is the general partner of BCOM. Blackstone
Media Management Associates III, L.L.C. is the general partner of BICP.
Blackstone Media Management Associates III, L.L.C. is the manager of BLLC.
Blackstone Mezzanine Associates L.P. is the general partner of BMP and BMH.
Messrs. Peter G. Peterson and Stephen A. Schwarzman are the founding
members of Blackstone, and as such may also be deemed to share beneficial
ownership of the shares held by each of these entities. The address of The
Blackstone Group is 345 Park Avenue, New York, New York, 10154.
(10) Information presented is based on a Schedule 13G/A dated February 14, 2003
by Jennison Associates LLC ("Jennison"). The Schedule 13G indicates that
Jennison has sole voting power and shared dispositive power over 2,618,600
shares. The business address of Jennison Associates LLC is 466 Lexington
Avenue, New York, New York, 10017. Jennison disclaims beneficial ownership
of these shares of our common stock. Information with regard to Jennison is
based on a Schedule 13G dated February 14, 2003.
(11) Information presented is based on a Schedule 13G dated October 10, 2003 by
Glenview Capital Management, LLC ("Management"), Glenview Capital GP, LLC
("GP"), Glenview Capital Partners, L.P. ("Partners"), Glenview
Institutional Partners, L.P. ("Institutional") and Glenview Capital
Partners (Cayman), Ltd. ("Cayman", and together with Management, GP,
Partners and Institutional, the "Glenview Filing Parties"). The Schedule
13G indicates that Partners, Institutional and Cayman each beneficially
owns 163,400, 413,300 and 823,300 shares, respectively. The Schedule 13G
also indicates that each of the three 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
indicates that each of the Glenview Filing Parties has shared voting and
dispositive power over the full 1,400,000 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 Cayman 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.
(12) Information presented is based on a Schedule 13G dated October 6, 2003 by
HMC Investors, L.L.C. ("Investors"), Harbert Distressed Investment Offshore
Manager, L.L.C. ("Offshore"), Harbert Distressed Investment Master Fund,
Ltd. ("Master Fund"), Raymond J. Harbert ("Harbert"), Michael D. Luce
("Luce") and Philip Falcone ("Falcone", together with Investors, Offshore,
Master Fund, Harbert and Luce, the "HMC Filing Parties"). The Schedule 13G
indicates that Investors, Harbert, Luce and Falcone each beneficially owns
and has shared voting and dispositive power over 1,481,000 shares. It also
indicates that, of such shares, Offshore and Master Fund each beneficially
owns and has shared voting and dispositive power over 1,429,760 shares. The
Schedule 13G indicates that the HMC Filing Parties disclaim beneficial
ownership of the shares reported except to the extent of their pecuniary
interest therein. The business address of Investors, Offshore, Harbert,
Luce and Falcone is 555 Madison Avenue, Suite 2800, New York, New York
10022. The business address of Master Fund is c/o International Fund
Services (Ireland) Limited, Third Floor, Bishop's Square, Redmond's Hill,
Dublin 2, Ireland.
(13) Includes 58,250 shares of common stock subject to options which are
exercisable within 60 days of the date of this table.
ITEM 13. Certain Relationships and Related Transactions.
The disclosure required by this Item 13 is set forth in Part II, Item 7 of
Amendment No. 1 to AirGate's Annual Report on Form 10-K under "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Related Party Transactions and Transactions Between AirGate and iPCS."
ITEM 14. Principal Accounting Fees and Services.
Fees Paid to KPMG
The following table shows the fees that AirGate 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 opinion letter made a part of the S-4 filing addressing tax
consequences in connection with the 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 benefit 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
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.
ITEM 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(c) Exhibits
Exhibit
Number Description
------ -----------------------------------------------------------------------
3.1 Restated Certificate of Incorporation of AirGate PCS, Inc. ("AirGate"),
dated December 17, 2002 (incorporated by reference to Exhibit 3.1 to the
annual report on Form 10-K/ A filed by AirGate with the Commission on
January 17, 2003 for the year ended September 30, 2002 (SEC File No.
000-27455)).
3.2 Amended and Restated Bylaws of AirGate, dated December 17, 2002
(incorporated by reference to Exhibit 3.2 to the annual report on Form
10-K/ A filed by AirGate with the Commission on January 17, 2003 for the
year ended September 30, 2002 (SEC File No. 000-27455)).
4.1 Specimen of common stock certificate of AirGate (incorporated by reference
to Exhibit 4.1 to the Registration Statement on Form S-1/ A filed by the
registrant with the SEC on June 15, 1999 (File Nos. 333-79189-02 and
333-79189-01)).
4.2 Form of Warrant Agreement for warrants issued in units offering
(incorporated by reference to Exhibit 10.15 to the Registration Statement
on Form S-1/ A filed by AirGate with the SEC on September 23, 1999 (File
Nos. 333-79189-02 and 333-79189-01)).
4.3 Form of Warrant issued in units offering (included in Exhibit 4.2).
4.4 Form of unit (included in Exhibit 4.2).
4.5 Form of Lucent Warrants (incorporated by reference to Exhibit 4.4 to the
Registration Statement on Form S-1/ A filed by the registrant with the SEC
on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)).
4.6 Form of Indenture for senior subordinated discount notes (including form of
pledge agreement) (incorporated by reference to Exhibit 4.5 to the
Registration Statement on Form S-1/ A filed by AirGate with the SEC on
September 23, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)).
4.7 Form of 13.5% senior subordinated discount note due 2009 (included in
Exhibit 4.6).
10.1 Support Agreement, dated as of September 24, 2003, by and among AirGate and
each of the noteholders signatory thereto (incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-4 filed by AirGate
with the SEC on September 26, 2003 (SEC File No. 333-109165).
10.2 Form of Registration Rights Agreement, dated as of November 30, 2001, by
and among AirGate and Blackstone/iPCS, L.L.C., Blackstone iPCS Capital
Partners L.P., Blackstone Communications Partners I L.P. TCW/ Crescent
Mezzanine Partners II, L.P., TCW/ Crescent Mezzanine Trust II, TCW
Leveraged Income Trust., L.P., TCW Leveraged Income Trust II, L.P., TWC
Leveraged Income Trust IV, TCW Shared Opportunity Fund II, Shared
Opportunity Fund IIB, L.L.C., TCW Shared Opportunity Fund III, L.P.,
Geneseo Communications, Inc., Cambridge Telcom, Inc., Cass Communications,
Inc., Technology Group, LLC, Montrose Mutual PCS, Inc., Gridley
Enterprises, Inc., Timothy M. Yager and Kelly M. Yager (incorporated by
reference to Exhibit 10.2 to the current report on Form 8-K filed by
AirGate with the Commission on August 31, 2001 (SEC File No. 000-27455)).
10.3 Sprint PCS Management Agreement and Addenda I-III thereto between
SprintCom, Inc. and AirGate Wireless, L.L.C. (incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-1/ A filed by AirGate
with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and
333-79189-01)).
Exhibit
Number Description
--------- --------------------------------------------------------------------
10.4 Assignment of Sprint PCS Management Agreement, Sprint Spectrum Services
Agreement and Trademark and Service Mark Agreement from AirGate Wireless,
L.L.C. to AirGate Wireless, Inc. dated November 20, 1998 (incorporated by
reference to Exhibit 10.14 to the Registration Statement on Form S-1/ A
filed by AirGate with the Commission on August 9, 1999 (SEC File Nos.
333-79189-02 and 333-79189-01)).
10.5 Addendum IV to Sprint PCS Management Agreement dated August 26, 1999 by and
among SprintCom, Inc., Sprint Communications Company, L.P., Sprint Spectrum
L.P. and AirGate (incorporated by reference to Exhibit 10.1.2 to the annual
report on Form 10-K filed by AirGate with the Commission on December 18,
2000 for the year ended September 30, 2000 (SEC File No. 000-27455))
10.6 Addendum V to Sprint PCS Management Agreement dated May 12, 2000 by and
among SprintCom, Inc., Sprint Communications Company, L.P. and AirGate
(incorporated by reference to Exhibit 10.1.3 to the annual report on Form
10-K filed by AirGate with the Commission on December 18, 2000 for the year
ended September 30, 2000 (SEC File No. 000-27455)).
10.7 Addendum VI to Sprint PCS Management Agreement dated December 8, 2000 by
and among SprintCom, Inc., Sprint Communications Company, L.P., Sprint
Spectrum L.P. and AirGate (incorporated by reference to Exhibit 10.1.4 to
the quarterly report on Form 10-Q filed by AirGate with the Commission on
February 14, 2001 for the quarter ended December 31, 2000 (SEC File No.
000-27455)).
10.8 Schedule of Definitions to Sprint PCS Management Agreement by and among
SprintCom, Inc. and AirGate Wireless, L.L.C. (incorporated by reference to
Exhibit 10.33 to the quarterly report on Form 10-Q filed by AirGate with
the Commission on May 15, 2002 for the quarter ended March 31, 2002 (SEC
File No. 000-27455)).
10.9 Sprint PCS Services Agreement between Sprint Spectrum L.P. and AirGate
Wireless, L.L.C. (incorporated by reference to Exhibit 10.2 to the
Registration Statement on Form S-1/ A filed by AirGate with the Commission
on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)).
10.10Sprint Spectrum Trademark and Service Mark License Agreement (incorporated
by reference to Exhibit 10.3 to the Registration Statement on Form S-1/ A
filed by AirGate with the Commission on June 15, 1999 (SEC File Nos.
333-79189-02 and 333-79189-01)).
10.11Sprint Trademark and Service Mark License Agreement (incorporated by
reference to Exhibit 10.4 to the Registration Statement on Form S-1/ A
filed by AirGate with the Commission on June 15, 1999 (SEC File Nos.
333-79189-02 and 333-79189-01)).
10.12Sales Agency Agreement made as of May 1, 2001 between Sprint
Communications Company L.P. and AirGate (incorporated by reference to
Exhibit 10.10 to the annual report on Form 10-K/ A filed by AirGate with
the Commission on January 17, 2003 for the year ended September 30, 2002
(SEC File No. 000-27455)).
10.13Consent and Agreement (incorporated by reference to Exhibit 10.13 to the
Registration Statement on Form S-1/ A filed by AirGate with the Commission
on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)).
10.14Master Site Agreement dated August 6, 1998 between AirGate and BellSouth
Carolinas PCS, L.P. and BellSouth Personal Communications, Inc.
(incorporated by reference to Exhibit 10.5 to the Registration Statement on
Form S-1/ A filed by AirGate with the Commission on June 15, 1999 (SEC File
Nos. 333-79189-02 and 333-79189-01)).
10.15Notice to AirGate of an assignment of sublease dated September 20, 1999
between BellSouth Cellular Corp. and Crown Castle South Inc., given
pursuant to Section 16(b) of the Master Site Agreement (incorporated by
reference to Exhibit 10.5.1 to the annual report on Form 10-K filed by
AirGate with the Commission on December 18, 2000 for the year ended
September 30, 2000 (SEC File No. 000-27455)). [GRAPHIC OMITTED]
Exhibit
Number Description
--------- -------------------------------------------------------------------
10.16Master Tower Space Reservation and License Agreement dated February 19,
1999 between AGW Leasing Company, Inc. and American Tower, L.P.
(incorporated by reference to Exhibit 10.5.2 to the annual report on Form
10-K filed by AirGate with the Commission on December 18, 2000 for the year
ended September 30, 2000 (SEC File No. 000-27455)).
10.17Master Antenna Site Lease No. J50 dated July 20, 1999 between Pinnacle
Towers Inc. and AGW Leasing Company (incorporated by reference to Exhibit
10.5.3 to the annual report on Form 10-K filed by AirGate with the
Commission on December 18, 2000 for the year ended September 30, 2000 (SEC
File No. 000-27455)).
10.18Commercial Real Estate Lease dated August 7, 1998 between AirGate and
Perry Company of Columbia, Inc. to lease a warehouse facility (incorporated
by reference to Exhibit 10.7 to the Registration Statement on Form S-1/ A
filed by AirGate with the Commission on July 12, 1999 (SEC File Nos.
333-79189-02 and 333-79189-01)).
10.19Lease Agreement dated August 25, 1999 between Robert W. Bruce, Camperdown
Company, Inc. and AGW Leasing Company, Inc. to lease office/warehouse space
in Greenville, South Carolina (incorporated by reference to Exhibit 10.7.1
to the annual report on Form 10-K filed by AirGate with the Commission on
December 18, 2000 for the year ended September 30, 2000 (SEC File No.
000-27455)).
10.20Form of Indemnification Agreement (incorporated by reference to Exhibit
10.8 to the Registration Statement on Form S-1/ A filed by AirGate with the
Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)).
10.21Credit Agreement with Lucent, including form of pledge agreement and form
of intercreditor agreement (incorporated by reference to Exhibit 10.12 to
the Registration Statement on Form S-1/ A filed by AirGate with the
Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and
333-79189-01)).
10.22* First Amendment to Credit Agreement dated October 21, 2001 by and between
AirGate PCS, Inc., State Street Bank and Trust Company and Lehman
Commercial Paper, Inc.
10.23* Amendment No. 2 to the Credit Agreement dated November 30, 2003 by and
among AirGate PCS, Inc., State Street Bank and Trust Company and Lehman
Commercial Paper, Inc.
10.24Employment Agreement dated April 9, 1999 by and between AirGate and Thomas
M. Dougherty (incorporated by reference to Exhibit 10.9 to the Registration
Statement on Form S-1/ A filed by AirGate with the Commission on June 15,
1999 (SEC File Nos. 333-79189-02 and 333-79189-01)).
10.25First Amendment to Employment Agreement dated December 20, 1999 between
AirGate and Thomas M. Dougherty (incorporated by reference to Exhibit 10.16
to the quarterly report on Form 10-Q filed by AirGate with the Commission
on May 15, 2000 for the quarter ended March 31, 2000 (SEC File No.
000-27455)).
10.26Retention Bonus Agreement dated May 4, 2000 between AirGate and Thomas M.
Dougherty (incorporated by reference to Exhibit 10.17 to the quarterly
report on Form 10-Q filed by AirGate with the Commission on May 15, 2000
for the quarter ended March 31, 2000 (SEC File No. 000-27455)).
10.27Employment Agreement dated as of September 27, 1999 by and between AirGate
and David C. Roberts (incorporated by reference to Exhibit 10.22 to the
annual report on Form 10-K filed by AirGate with the Commission on November
30, 2001 for the year ended September 30, 2001 (SEC File No. 000-27455)).
10.28Employment Agreement dated as of August 30, 2000 by and between AirGate
and Barbara L. Blackford (incorporated by reference to Exhibit 10.23 to the
annual report on Form 10-K filed by AirGate with the Commission on November
30, 2001 for the year ended September 30, 2001 (SEC File No. 000-27455)).
10.29Separation Agreement and Release dated October 31, 2002, by and between
AirGate and Alan Catherall (incorporated by reference to Exhibit 10.26 to
the annual report on Form 10-K/ A filed by AirGate with the Commission on
January 17, 2003 for the year ended September 30, 2002 (SEC File No.
000-27455)).
10.30Offer Letter, effective October 24, 2002, by and between AirGate and
William H. Seippel (incorporated by reference to Exhibit 10.27 to the
annual report on Form 10-K/ A filed by AirGate with the Commission on
January 17, 2003 for the year ended September 30, 2002 (SEC File No.
000-27455)).
Exhibit
Number Description
------- ---------------------------------------------------------------------
10.31AirGate PCS, Inc. 1999 Stock Option Plan (incorporated by reference to
Exhibit 99.1 to the Registration Statement on Form S-8 filed by AirGate
with the Commission on April 10, 2000 (SEC File No. 333-34416)).
10.32Form of AirGate PCS, Inc. Option Agreement (incorporated by reference to
Exhibit 10.25 to the annual report on Form 10-K filed by AirGate with the
Commission on November 30, 2001 for the year ended September 30, 2001 (SEC
File No. 000-27455)).
10.33AirGate PCS, Inc. 2001 Non-Executive Stock Option Plan (incorporated by
reference to Exhibit 10.11.2 to the quarterly report on Form 10-Q filed by
AirGate with the Commission on February 14, 2001 for the quarter ended
December 31, 2000 (SEC File No. 000-27455)).
10.34AirGate PCS, Inc. 2001 Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.11.3 to the quarterly report on Form 10-Q filed by
AirGate with the Commission on February 14, 2001 for the quarter ended
December 31, 2000 (SEC File No. 000-27455)).
10.352002 AirGate PCS, Inc. Long-Term Incentive Plan (incorporated by reference
to Exhibit 99.1 to the Registration Statement on Form S-8 filed by AirGate
with the Commission on March 29, 2002 (SEC File No. 333-85250).
10.36AirGate PCS, Inc. Amended and Restated Non-Employee Director Compensation
Plan dated January 22, 2003 (incorporated by reference to Exhibit 10.2 to
the quarterly report on Form 10-Q filed by AirGate with the Commission on
May 15, 2003 for the quarter ended March 31, 2003 (SEC File No.
000-27455)).
10.37Agreement and Plan of Merger, dated as of August 28, 2001, by and between
AirGate and iPCS, Inc. (incorporated by reference to Exhibit 10.1 to the
current report on Form 8-K filed by AirGate with the Commission on August
31, 2001 (SEC File No. 000-27455)).
10.38Services Agreement dated as of January 1, 2002 by and among AirGate,
AirGate Service Company, Inc., iPCS, Inc. and iPCS Wireless, Inc.
(incorporated by reference to Exhibit 10.34 to the quarterly report on Form
10-Q filed by AirGate with the Commission on May 15, 2002 for the quarter
ended March 31, 2002 (SEC File No. 000-27455)).
10.39First Amendment to Services Agreement dated February 21, 2003 by and among
AirGate Service Company, Inc., AirGate, iPCS Wireless, Inc. and iPCS, Inc
(incorporated by reference to Exhibit 10.1 to the quarterly report on Form
10-Q filed by AirGate with the Commission on May 15, 2003 for the quarter
ended March 31, 2003 (SEC File No. 000-27455)).
10.40Technology License Agreement dated as of January 1, 2002 by and among
AirGate, AGW Leasing Company, Inc., AirGate Service Company, Inc., AirGate
Network Services, Inc., iPCS, Inc., iPCS Wireless, Inc. and iPCS Equipment,
Inc. (incorporated by reference to Exhibit 10.35 to the quarterly report on
Form 10-Q filed by AirGate with the Commission on May 15, 2002 for the
quarter ended March 31, 2002 (SEC File No. 000-27455)).
12.1* Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of AirGate PCS, Inc (incorporated by reference to Exhibit 21
to the annual report on Form 10-K/ A filed by AirGate with the Commission
on January 17, 2003 for the year ended September 30, 2002 (SEC File No.
000-27455)).
23.1* Consent of KPMG LLP.
24.1 Powers of Attorney.
31.1 Rule 13a-14(a) certification of Chief Executive Officer of AirGate filed in
accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Rule 13a-14(a) certification of Chief Financial Officer of AirGate filed in
accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*Section 1350 certification of Chief Executive Officer of AirGate furnished
in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*Section 1350 certification of Chief Financial Officer of AirGate furnished
in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
--------------------------
* Previously filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on January 28,
2004.
AIRGATE PCS, INC.
By: /s/ William H. Seippel
---------------------------------
William H. Seippel
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
Name Title Date
/s/ Thomas M. Dougherty Chief Executive Officer and Director January 28, 2004
----------------------- (Principal Executive Officer)
Thomas M. Dougherty
/s/ William H. Seippel Chief Financial Officer January 28, 2004
---------------------- (Principal Financial and
William H. Seippel Accounting Officer)
* Chairman of the Board of Directors January 28, 2004
----------------------
Robert A. Ferchat
* Member, Board of Directors January 28, 2004
----------------------
Stephen R. Stetz
Vice President,
By:/s/Barbara L. Blackford General Counsel and January 28, 2004
----------------------- Corporate Secretary
Barbara L. Blackford
Attorney-in-fact
* Barbara L. Blackford, by signing her name hereto, does sign this document
on behalf of the above noted individuals pursuant to powers of attorney
duly executed by such individuals, which have been filed as an exhibit to
this Report.