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, GA 30303
January 27, 2003
Dear AirGate Shareowner:
It is my pleasure to invite you to AirGate PCS, Inc.'s 2003 Annual Meeting of
Shareowners. This year's meeting will be held at 303 Peachtree Street, Suite
5300, Atlanta, Georgia 30308 on Tuesday, March 4, 2003 at 1:00 p.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: Tuesday, March 4, 2003
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 January 13,2003.
VOTINGBY 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 January 31, 2003.
TABLE OF CONTENTS
Page
Questions and Answers........................................................ 1
Proposal 1: Election of Directors......................................... 3
Governance................................................................... 4
Meetings and Committees of the Board......................................... 6
Audit Committee Report....................................................... 7
Equity Compensation Plan Information......................................... 8
Executive Compensation....................................................... 9
Stock Performance Graph......................................................18
Security Ownership of Certain Beneficial Owners, Directors and Officers......19
Certain Related Transactions.................................................20
Other Information............................................................20
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 Tuesday, March 4,
2003. 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 January 13, 2003, 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 our shares are held 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 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. All other proposals require the affirmative "FOR"
votes of a majority of those shares present and entitled to vote. 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
2003.
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 D. Dougherty, our President and
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
January 13, 2003, 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
25,944,863 shares of common stock issued and outstanding.
Do I have cumulative voting rights or dissenters' rights of appraisal?
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. Thus, broker
non-votes will not affect the outcome of any of the matters being voted on at
the meeting. Generally, broker non-votes occur when shares held by a broker for
a beneficial owned 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.
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 5,
2003.
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.
PROPOSAL 1: ELECTION OF DIRECTORS
We have a staggered board of directors with four members. Currently there is one
vacancy, which will be filled by Mr. Stephen R. Stetz prior to the shareowners
meeting. Our board of directors 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.
The shareowners will elect two directors at the annual meeting. Each of these
director's terms lasts until the annual meeting in 2006 or until he is succeeded
by another qualified director. The board of directors has nominated Barry J.
Schiffman and Stephen R. Stetz for the two director positions.
The board unanimously recommends you vote FOR the election of the two nominees
for director.
Nominees for Director
The following information is given with respect to the nominees for election as
directors at the annual meeting, as of December 31, 2002.
Nominees to serve three years until Annual Meeting in 2006
Barry J. Schiffman, age 58, has served as one of our directors and our chairman
since October 1998. Mr. Schiffman is the president and executive managing
director of JAFCO America Ventures, Inc., a venture capital firm, and has held
such position since 1996. From 1994 until he joined JAFCO, he was a general
partner at Weiss, Peck & Greer Venture Partners. Mr. Schiffman is also a member
of the board of directors of Lightspan.com, a publicly held educational software
company, and of several other private companies.
Stephen R. Stetz, age 60, 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.
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 2004
Robert A. Ferchat, age 68, has served 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 and non-executive chairman of GST Telecommunications and a
director of Brookfield Properties Corp., as well as one other company that is
traded on the Toronto Exchange.
Directors Serving until Annual Meeting in 2005
Thomas M. Dougherty, age 58, 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.
GOVERNANCE
The board of directors is committed to good business practices, transparency in
financial reporting and the highest level of corporate governance. To that end,
over the course of the last several months, 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 proposed new
listing standards of Nasdaq. As a result of this review and in anticipation of
the final adoption of these rules, we have voluntarily implemented these rules
and a number of other best practices, including the following:
Adopted Governance Principles, which, among other things, provide for:
o A majority of independent directors
o An independent chair
o Audit and compensation and governance committees consisting solely of
independent directors
o Regular executive sessions of non-management directors
o An annual self-evaluation process for the board and its committees
o Open communication between the board and management other than the CEO
o Succession planning
o New director orientation and continuing director education
o Retirement of directors at particular events, such as a change in position
o The clear ability of the board and its committees to hire its own advisors
Revised our audit committee charter to, among other things:
o Give the committee the exclusive right to appoint, review and assess the
performance of our independent auditors
o Require audit committee approval of all audit and non-audit services to be
provided by our independent auditors
o Give the committee oversight of internal audit programs
o Limit the number of audit committees a member of our committee may serve on
o Provide for regular executive sessions with our independent auditors, our
controller, general counsel and other members of management
o Require committee review and approval of related party transactions
Combined our nominating and compensation committees into a compensation and
governance committee and assigned the committee the duties to:
o Establish and review governance principles and oversee board, committee and
director evaluations
o Represent the board in monitoring the Company's compliance with legal,
regulatory and contractual requirements
o Establish performance objectives for our CEO and evaluate his performance
o Review compensation and performance of other executives
o Review director compensation
Revised the AirGate Standards of Business Conduct to:
o Make clear that all directors, officers and employees are subject to the
Standards
o Require waivers or amendments to the Standards involving a director or
officer to be approved by our compensation and governance committee
and disclosed to our shareowners
o Provide procedures to report financial accounting and auditing concerns to
our audit committee
o Prohibit loans to our officers and directors
o Emphasize the prohibition on retaliating against whistleblowers
Under our new committee structure, which became effective December 17, 2002, we
have two standing committees, the audit committee and the compensation and
governance committee.
The audit committee is primarily responsible for:
o Selecting and evaluating our independent auditors and monitoring their
independence
o Monitoring internal financial controls and disclosure controls and the
financial reporting process
o Reviewing our financial statements and financial disclosures
The compensation and governance committee is responsible for:
o Identifying and recommending nominees for election to the board and
candidatesfor board committees
o Reviewing and monitoring corporate governance principles
o Establishing and administering processes to evaluate board, committee and
director effectiveness
o Overseeing the Company's compliance with laws
o Establishing annual goals for the CEO and evaluating performance in light of
these goals
o Reviewing and administering all programs for executive compensation
o Reviewing director compensation
These measures are embodied in our Governance Principles, Audit Committee
Charter, Compensation and Governance Committee Charter and Standards of Business
Conduct, all of which may be accessed on our website, www.airgatepcsa.com.
MEETINGS AND COMMITTEES OF THE BOARD
The board of directors held twelve meetings during the fiscal year ended
September 30, 2002. All of the directors attended at least 75% of the board
meetings held during the fiscal year while such person was a director. In
addition, all of the directors attended at least 75% of all meetings of the
board of directors' committees on which he served during the fiscal year.
Committees of the Board of Directors
During fiscal year 2002, our board of directors had three standing committees:
the Audit Committee, the Compensation Committee and the Nominating Committee. As
described above under Governance, in December 2002 we reduced the number of
Committees to two (Audit Committee and Compensation and Governance Committee)
and revised and enhanced their charters.
Audit Committee. The Audit Committee was composed of three directors who were
independent within the meaning of Nasdaq listing standards and who were
otherwise qualified to serve on our Audit Committee under those standards. These
members were Messrs. Ferchat (Chair) and Schiffman, and Mr. Sidney E. Harris.
Effective October 31, 2002, Mr. Harris resigned from the board of directors and
is therefore no longer a member of the Audit Committee. If Mr. Stetz becomes a
director, he will serve on the Audit Committee in the place of Mr. Harris. The
Audit Committee provided oversight regarding our accounting, auditing and
financial reporting practices. The Audit Committee met nine times during fiscal
year 2002. Our board of directors has adopted an Audit Committee Charter, which
we have filed with the Securities and Exchange Commission and attached to this
proxy statement as Appendix A.
Compensation Committee. The Compensation Committee consisted of three directors.
These members were Messrs. Harris (Chair), Bernard A. Bianchino and Michael S.
Chae. The Compensation Committee's basic responsibilities included approving the
compensation strategy for our executives, approving the compensation
arrangements in effect for our executives and administering our employee benefit
and stock incentive plans. The Compensation Committee met eight times during
fiscal year 2002. Mr. Bianchino resigned from the Board effective September 24,
2002 and Mr. Chae resigned from the Board effective December 12, 2002.
Consequently, Messrs. Ferchat and Schiffman were appointed to the Compensation
Committee.
Nominating Committee. Our Nominating Committee consisted of Messrs. Dougherty
(Chair), Bianchino and Harris. Mr. Dougherty resigned from the Nominating
Committee in July 2002 and Mr. Harris became Chair to allow the Nominating
Committee to consist solely of independent directors. The Nominating Committee
was responsible for considering and recommending nominees for directors and
reviewing and recommending corporate governance principles. The Nominating
Committee met two times during fiscal year 2002.
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 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 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 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 company's
development, 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.
AUDIT COMMITTEE REPORT
As of the date of this report, the Audit Committee is comprised of two
directors, each of whom meets the independence and experience requirements of
the Nasdaq Listing Standards. Mr. Stetz, who will become a member of the Audit
Committee if he becomes a director, also meets the independence and experience
requirements of the Nasdaq Listing Standards, and his appointment to the Audit
Committee will place the Company back into compliance with Nasdaq Marketplace
Rule 4350(d)(2), which requires at least three independent directors on the
Audit Committee. 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 December 17, 2002, 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 nine times during fiscal year 2002.
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
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, management of the
Company discovered inconsistencies between certain accounts receivable reports
provided to the Company by Sprint and reported these inconsistencies to the
Committee. Under our agreements with Sprint, Sprint provides us with billing,
collections, customer care and other back office services. As a result, Sprint
remits approximately 96% of our revenues to us. In addition, approximately 60%
of cost of service and roaming in our financial statements are charges from
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.
The Committee directed management to investigate this matter until the reasons
for the differences in these reports were ascertained. In early December, Sprint
informed management that certain of these reports could not be relied on for
financial reporting purposes. Sprint and the Company worked cooperatively to
confirm the correct accounts receivable balances and to reconcile
inconsistencies with reports previously relied on by the Company.
As a result of this issue, we determined that a reportable condition in internal
controls existed with respect to the Company during some period of fiscal year
2002. We have directed management to focus additional resources on reviewing and
analyzing information provided by Sprint and to work with Sprint to identify
other information and reports that would assist the Company in this review and
analysis, particularly as it relates to accounts receivable and the application
of cash. We have also directed management to continue to bring to the attention
of the Committee any unexplained material variances in accounts receivable or
other reports provided by Sprint and to provide the Committee quarterly
summaries of immaterial variances.
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 for the year ended
September 30, 2002 for filing with the Securities and Exchange Commission.
AirGate PCS, Inc. Audit Committee
Robert A. Ferchat, Chair
Barry J. Schiffman
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, 2002,
which include:
o the AirGate PCS, Inc. 1999 Stock Option Plan,
o the AirGate PCS, Inc. Amended and Restated 2000 Long-Term Incentive
Plan, which the Company assumed when it acquired iPCS in November 2001,
o the AirGate PCS, Inc. 2001 Non-Executive Stock Option Plan, and
o the AirGate PCS, Inc. 2002 Long-Term Incentive 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.
(c) Number of Securities
(a) Number of Remaining Available
Securities to be Issued (b) Weighted Average or 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................. 1,295,964(2) $37.66 --(1) 1,295,964
644,147(3) $34.41 --(1) 644,147
231,039(4) $7.79 1,268,961 1,500,000
Equity Compensation
Plans Not Approved
by Shareowners.............. 88,613(5) $44.52 --(1) 88,613
-------------- ------ ------ ------
TOTAL.................... 2,259,763 $33.95 1,268,961(6) 3,528,724
---------- ------ ------------ ----------
--------------
(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, 181,657 shares of AirGate's common stock remained for issuance
under the AirGate PCS, Inc. 2001 Employee Stock Purchase Plan.
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, 2002,
options to acquire 88,613 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 purpose of the plan is to promote our success by linking the personal
interests of our non-executive employees to those of our shareowners and by
providing participants with an incentive for outstanding performance. The plan
authorizes the granting of non-qualified stock options only. The exercise price
of an option may not be less than the fair market value of the underlying stock
on the date of grant and no option may 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. The board of directors or the compensation committee may amend or
terminate the plan without shareowner approval, but no amendment or termination
of the plan or any award agreement may adversely affect any award previously
granted under the plan without the written consent of the participant.
EXECUTIVE COMPENSATION
Compensation Committee Report
Compensation Committee Responsibilities
In fiscal year 2002, the Compensation Committee's basic responsibilities
included: (1) encouraging the attainment of our performance goals by providing
compensation that directly relates to the achievement of individual and
corporate objectives; (2) establishing compensation policies and guidelines to
attract and retain qualified personnel through an overall level of compensation
opportunity that is competitive; and (3) promoting a direct relationship between
employees' compensation and company performance through stock option and other
equity participation.
In particular, the Compensation Committee reviewed and recommended to the board
of directors our executive compensation philosophy; reviewed and recommended to
the board of directors compensation for the chief executive officer and other
senior executives; and administered stock option and other compensation and
benefit plans.
Compensation Philosophy
We operate in the extremely competitive and rapidly changing telecommunications
industry. The Compensation 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
Committee also believes that these programs should be determined within a
competitive framework and based on the achievement of designated financial and
other performance measures, individual contributions and financial and other
performance relative to that of its competitors. Within this overall philosophy,
the Committee's objectives were to:
o Offer a total compensation program that is 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
individual contributions.
o Align the financial interests of executive officers with those of
shareowners by providing significant equity-based, long-term
incentives.
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 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 determined at levels for
comparable positions at other companies. Our policy is to target base salaries
at the 50th percentile of market compensation practices.
Annual Incentive Awards. To reinforce the attainment of our goals, the
Compensation 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 2002, the Compensation Committee
established performance targets for our first quarter for AirGate on a
stand-alone basis, and on a combined basis with the company we acquired on
November 30, 2001, iPCS, Inc., for the remaining three quarters. The first
quarter objectives were based on customer growth. The objectives for the last
three quarters were based on EBITDA and net new customers. We exceeded these
performance targets for the first quarter, but did not achieve the targets for
the remainder of the fiscal year. Awards paid to executives reflected those
results, and no awards were made to executives with respect to the last three
quarters.
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 Committee made annual awards of long-term, equity-based
incentives. The Compensation Committee determined the size of these awards with
the target of providing such incentives at the 75th percentile of market
compensation practices. Each grant allows an executive to acquire shares of our
common stock at a fixed price per share over a specified period of time. These
grants generally vest ratably over a four-year period, 25% per year.
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.
CEO Compensation
The annual base salary for Mr. Dougherty was established by the Compensation
Committee. The Committee's decision was based on both Mr. Dougherty's personal
performance of his duties and the salary levels paid to chief executive officers
of other comparable companies. During the year, the Compensation Committee
assessed market data for chief executive officers of other comparable companies
to ensure that Mr. Dougherty's compensation was consistent with our stated
compensation objectives.
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 2002 fiscal
year incentive compensation was based on the performance of the Company, which
was adversely affected by slowing subscriber growth and higher than anticipated
customer turnover. Mr. Dougherty's incentive compensation was based on the same
company targets used for all executive officers and provided no dollar
guarantees. During fiscal year 2002, Mr. Dougherty also received a stock option
grant in the amount of 50,000 shares with an exercise price of $46.66, and a
stock option grant in the amount of 25,000 shares with an exercise price of
$60.00.
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
Robert A. Ferchat, Chair
Barry J. Schiffman
Our Executive Officers
The following table presents information with respect to our executive
officers:
Name Age Position
---- --- --------
Thomas M. Dougherty.......58 President and Chief Executive Officer & Director
J. Mark Allen.............43 Vice President of Marketing
Barbara L. Blackford......46 Vice President, General Counsel and Secretary
Daniel Decker.............49 Vice President, Information Technology
Charles S. Goldfarb.......38 Vice President of Sales--Southeast Region
Dennis D. Lee.............53 Vice President, Human Resources
Jonathan M. Pfohl.........36 Vice President, Finance
David C. Roberts..........40 Vice President of Engineering & Network Operations
William H. Seippel........46 Vice President and Chief Financial Officer
Thomas M. Dougherty 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.
J. Mark Allen has been our vice president of marketing since June 2000. From
January 2000 to June 2000, Mr. Allen served as vice president of marketing with
RetailExchange.com in Boston. From July 1999 to January 2000, Mr. Allen served
as a management consultant to several Internet start-up companies. During the
previous five years, Mr. Allen was vice president of marketing for Conxus
Communications a wireless email and voice mail start-up supported by Motorola,
Inc. and was responsible for a number of marketing leadership roles in the
launch of the first PCS service in the nation under the Sprint Spectrum brand
with Sprint PCS (American Personal Communications). Prior to that, Mr. Allen
held several management positions at SkyTel in marketing, international
operations and customer management. Mr. Allen has over 15 years of marketing and
operations management experience.
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
McKenna, Long & Aldridge 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.
Daniel Decker has been our Vice President, Information Technology, since June
1999. Prior to joining AirGate, Mr. Decker spent 15 years in the wireless
industry with Contel Cellular and several BellSouth companies as the senior IT
and billing executive. Additionally, he has served on several CTIA and GSM MOU
committees, establishing international roaming standards.
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 29 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,
2002 and who received compensation in excess of $100,000. We refer to each of
these persons as "Named Executive Officers" and set forth their compensation
information for the fiscal years ended September 30, 2002, 2001 and 2000.
Long Term Compensation Awards
Annual Compensation Restricted Securities
------------------- Stock Award(s) Underlying
Options/
Year Salary($) Bonus($) ($)(3) SARs(#)
---- -------- -------- ------ -------
Thomas M. Dougherty............................. 2002 $ 314,038 $ 785,800(1) $ 70,040 75,000
President and Chief Executive Officer
2001 272,789 1,020,000(1) -- 41,408
2000 231,250 1,432,125(1) -- --
Barbara L. Blackford............................ 2002 212,808 28,100 28,016 27,000
Vice President, General Counsel & Secretary
2001 201,126 148,500 -- 46,056
2000 3,912 -- -- 90,000
Alan B. Catherall............................... 2002 208,211 27,700(2) 31,518 27,000
Chief Financial Officer
2001 186,509 142,500 -- 13,944
2000 160,750 105,866 -- --
Jonathan M. Pfohl............................... 2002 183,000 24,000 38,522 27,000
Vice President, Finance
2001 164,769 123,600 -- 49,225
2000 115,773 94,080 -- --
David C. Roberts................................ 2002 196,199 25,500 28,016 27,000
Vice President of Engineering and Network
Operations 2001 179,231 135,000 -- 13,521
2000 154,250 103,819 -- --
--------------
(1) For fiscal year 2002, includes a $65,800 performance-based annual incentive
award and $720,000 earned under a retention bonus agreement. For fiscal
year 2001, includes a $300,000 performance-based annual incentive award and
$720,000 earned under a retention bonus agreement. For fiscal year 2000,
includes a $202,125 performance-based annual incentive award and $1,230,000
earned under a retention bonus agreement, $900,000 of which was paid during
fiscal 2000 and $330,000 of which was paid during fiscal 2001.
(2) This bonus amount will be paid to Mr. Catherall as provided in his
separation agreement which is described more fully below under "Employment
and Severance Agreements". In addition, Mr. Catherall is also entitled to
receive $300,000 in severance payments pursuant to his separation agreement
which are not included in the bonus amount above. Mr. Catherall resigned as
Chief Financial Officer effective October 21, 2002.
(3) Amounts included above represent the fair value of the restricted stock on
the date they were awarded, January 10, 2002, based upon the closing price
of our common stock on that date, which was $35.02. 50% of these restricted
stock awards vested on November 1, 2002 and the remaining 50% will vest on
November 30, 2003. Dividends will not be paid on the restricted stock. As
of September 30, 2002, Mr. Dougherty held 2000 shares of restricted stock
worth $880, Ms. Blackford held 800 shares of restricted stock worth $352,
Mr. Catherall held 900 shares of restricted stock worth $396, Mr. Pfohl
held 1,100 shares of restricted stock worth $484 and Mr. Roberts held 800
shares of restricted stock worth $352. These values are based on the
closing price of our common stock on September 30, 2002, which was $0.44.
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 under his employment agreement
to receive an annual bonus of at least 50% of his base salary. Mr. Dougherty's
base salary was set at $275,000 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. Upon a change in control, Mr. Dougherty's options will
become vested with respect to 50% of the underlying shares of common stock that
remain unvested at the time of the change in control. The exercise price of the
initial stock option granted to Mr. Dougherty is $14.00 per share. 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 (1) six months' base salary, plus one month's salary
for each year employed, (2) all stock options vested on the date of termination
and (3) 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 (1) disclose confidential information or
trade secrets during employment with us and for two years after termination, (2)
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 (3) 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.
Unless Mr. Dougherty voluntarily terminates employment or is terminated for
cause, he is entitled to periodic retention bonuses 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 2002, Mr. Dougherty earned
$720,000 under this agreement. 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.
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. If, however, Ms.
Blackford's employment is actually or constructively terminated upon a change of
control of us, the initial stock option will vest with respect to 50% of the
underlying shares of common stock that remain unvested at the time of the change
in control, and additional vesting may occur as provided in the agreement. The
exercise price of the initial stock option granted to Ms. Blackford is $66.94
per share. 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 (1) disclose confidential information or
trade secrets, (2) solicit certain of our employees to terminate their
employment with us or (3) 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. 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 (1) six months base
salary and (2) 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 (1) disclose
confidential information or trade secrets during employment with us and for two
years after termination, (2) 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
(3) 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, even if the Company terminates his employment prior to October 1,
2003. This award payment would be made on November 30, 2003. If Mr. Seippel
terminates his employment with the Company prior to October 1, 2003, he will not
be eligible for any portion of this award payment. 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
time 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 will pay
Mr. Seippel's relocation expenses to Atlanta, Georgia.
The offer letter provides that Mr. Seippel's employment may be terminated with
or without cause. If Mr. Seippel's employment is terminated prior to October 23,
2003, the Company is required to pay him an amount equal to his annual base
salary and target bonus until October 31, 2003, payable bi-weekly. If Mr.
Seippel continues to remain employed with the Company after May 1, 2003 and he
and the CEO agree that his employment will continue and that he will relocate to
Atlanta, 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 (1) 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 (2) 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 if Mr. Seippel continues to
remain employed with the Company after May 1, 2003 and he and the CEO agree that
his employment will continue and that he will relocate to Atlanta, 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 would provide that if such termination
occurs during the first year of the agreement, he would receive two times his
annual base salary and bonus at target, less the amounts already paid since
employment, and continuation of benefits for two years. If such termination
occurred after the first year of the agreement, he would receive his annual base
salary and bonus at target and continuation of benefits for one year. In either
case, Mr. Seippel would also receive unpaid salary and accrued and unpaid bonus
for the year in which termination occurs and outplacement services for up to one
year.
We have entered into a separation agreement and release with Alan B. Catherall,
who was employed by the Company as chief financial officer. Mr. Catherall
resigned as our chief financial officer effective October 21, 2002, and as our
employee effective October 31, 2002. Pursuant to the separation agreement, we
agreed to pay to Mr. Catherall a severance payment in the amount equal to
$300,000, half of which will be paid bi-weekly for six months. The remainder
will be paid in a lump sum payment at the end of the six-month period. Mr.
Catherall received a bonus for fiscal year 2002 in the same percentage of base
salary as paid on average to all senior management who report directly to our
chief executive officer. If Mr. Catherall elects the continuation of coverage
under our group health plans, we will pay the COBRA premium on his behalf for
twelve months following the separation date, provided that Mr. Catherall does
not obtain comparable health benefits from another source during the
twelve-month period.
The separation agreement provides that certain options granted to Mr. Catherall
will continue to be exercisable in accordance with their terms, but will
automatically convert to nonqualified stock options on January 30, 2003. Mr.
Catherall is entitled to any vested benefits he may have under the AirGate PCS
401(k) Retirement Plan. In addition, we agreed to provide Mr. Catherall with
certain career transition services until the earlier of acceptance of new
employment or a period of twelve months.
Mr. Catherall agreed to cooperate and provide assistance on transitional and
other matters until October 31, 2003 without additional compensation, other than
reimbursement of any out-of-pocket expenses. After October 31, 2003 the Company
agreed to pay Mr. Catherall an hourly rate of compensation commensurate with his
base salary as of the separation date for these services. It is a condition to
the receipt of these payments and benefits that Mr. Catherall agree not to
directly or indirectly (1) engage in a senior management capacity in the
business of wireless telecommunications in our territory for a period of one
year after the separation date, (2) disclose or use confidential information or
trade secrets for a period of two years after the separation date and (3)
solicit our employees to terminate their employment with us or solicit certain
of our customers to purchase competing products for a period of two years after
the separation date. The separation agreement provides that in consideration of
payments and promises in the agreement, Mr. Catherall releases the Company from
all claims, liabilities, contracts, contractual obligations, attorney's fees,
demands and causes of action, whether known or unknown, fixed or contingent.
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
Number of % of Potential realized Value at
Securities Total Assumed Annual Rates of
Underlying Options Exercise Expiration Stock Price Appreciation for
Options Granted Price Date Option Term (10 Years) (1)
--------- ------- -------- ---------- -----------------------------
Name 5% 10%
---- -- ---
Thomas M. Dougherty........................... 50,000 7.0% $ 46.66 12/2011 $ 1,467,211 $ 3,718,201
25,000 3.5% $ 60.00 12/2011 $ 400,106 $ 1,525,601
Barbara L. Blackford.......................... 18,000 2.5% $ 46.66 12/2011 $ 528,196 $ 1,338,552
9,000 1.3% $ 60.00 12/2011 $ 144,038 $ 549,216
Alan B. Catherall............................. 18,000 2.5% $ 46.66 12/2011 $ 528,196 $ 1,338,552
9,000 1.3% $ 60.00 12/2011 $ 144,038 $ 549,216
Jonathan M. Pfohl............................. 18,000 2.5% $ 46.66 12/2011 $ 528,196 $ 1,338,552
9,000 1.3% $ 60.00 12/2011 $ 144,038 $ 549,216
David C. Roberts.............................. 18,000 2.5% $ 46.66 12/2011 $ 528,196 $ 1,338,552
9,000 1.3% $ 60.00 12/2011 $ 144,038 $ 549,216
------------- ----------
183,000 25.6%
--------------
(1) 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 FY-End Option Value Table
The following table sets forth information concerning the value as of September
30, 2002 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...................... -- $ -- 131,066/181,056 $ --
Barbara L. Blackford..................... -- $ -- 52,014/111,042 $ --
Alan C. Catherall........................ -- $ -- 54,844/68,958 $ --
Jonathan M. Pfohl........................ -- $ -- 21,806/74,419 $ --
David C. Roberts......................... -- $ -- 22,131/55,891 $ --
--------------
(1) Based upon the closing market price of our common stock on September 30,
2002, which was $0.44, and the option exercise price, there were no
unexercised in-the-money options as of September 30, 2002.
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, 2002, 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 3 YEAR CUMULATIVE TOTAL RETURN*
AMONG AIRGATE PCS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[GRAPH APPEARS HERE]
*$100 INVESTED ON 9/28/99 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
Cumulative Total Return
-----------------------
9/28/99 9/99 9/00 9/01 9/02
Name of Company ------- ---- ---- ---- ----
AirGate PCS, Inc................................................ $ 100.00 $ 92.77 $ 167.37 $ 165.67 $ 1.64
NASDAQ Stock Market (U.S.)...................................... $ 100.00 $ 99.58 $ 132.21 $ 54.04 $ 42.58
NASDAQ Telecommunication........................................ $ 100.00 $ 100.14 $ 98.15 $ 37.97 $ 16.47
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND OFFICERS
On January 1, 2003, there were 25,836,520 shares of our common stock
outstanding. The following table presents certain information regarding the
beneficial ownership of our common stock, as of January 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)..................................................... 94,008 *
Alan B. Catherall........................................................... 95,487 *
Thomas M. Dougherty(4)...................................................... 272,003 1.05%
Robert A. Ferchat(5)........................................................ 16,250 *
Jonathan M. Pfohl(6)........................................................ 59,919 *
David C. Roberts(7)......................................................... 145,405 *
Barry Schiffman(8).......................................................... 31,803 *
William H. Seippel (9)...................................................... 30,000 *
Stephen R. Stetz............................................................ 0 *
Franklin Resources, Inc.(10)................................................ 1,435,500 5.56%
Geneseo Communications, Inc.(11)............................................ 2,115,253 8.19%
Cambridge Telcom, Inc.(12).................................................. 1,863,074 7.21%
The Blackstone Group (13)................................................... 2,578,379 9.98%
Prudential Financial Group (14)............................................. 2,645,435 10.24%
Cramer Rosenthal McGlynn, LLC (15).......................................... 2,828,437 10.95%
All executive officers and directors as a group (11 persons)(16)............ 806,280 3.12%
--------------
* 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 4,499 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 and 750
shares of common stock owned by Mr. Dougherty's children.
(5) Includes 6,250 shares of common stock subject to options which are
exercisable within 60 days of the date of this table.
(6) Includes 90 shares of common stock owned by Mr. Pfohl's children.
(7) Includes 676 shares of common stock subject to options which are
exercisable within 60 days of the date of this table.
(8) Includes 20,000 shares of common stock owned by Mr. Schiffman's wife and
522 shares of common stock Mr. Schiffman is deemed to beneficially own as
the Executive Managing Principal of JAV Management Associates III LLC.
(9) Mr. Seippel's address is 11388 Seneca Knoll Drive, Great Falls, Virginia
22066.
(10) Information presented is based on an Amended Schedule 13G dated February 1,
2002 by Franklin Resources, Inc., Charles B. Johnson, and Rupert H.
Johnson. The Amended Schedule 13G indicates that Franklin Resources, Inc.
beneficially owns and has sole voting and dispositive power over 1,184,800
shares of our common stock and that Fiduciary Trust Company International
has sole voting and dispositive power over 250,700 shares of our common
stock. According to the Amended Schedule 13G, both entities advise one or
more open or closed-end investment companies or other managed accounts
which beneficially own the shares. The Amended Schedule 13G further
indicates that each of Franklin Resources, Inc. ("FRI"), as the parent
holding company of the advisers, Charles B. Johnson, as a principal
shareholder of FRI, and Rupert H. Johnson, Jr., as a principal shareholder
of FRI, beneficially owns those 1,435,500 shares of our common stock. Each
of the reporting persons disclaim any economic interest or beneficial
ownership of these shares of our common stock. The business address of this
shareowner is One Franklin Parkway, San Mateo, CA, 94403-1906. Franklin
Resources, Inc., Charles B. Johnson, and Rupert H. Johnson recently filed
Amendment No. 2 to the Schedule 13G, dated January 15, 2003, in which they
reported that their beneficial ownership of our common stock had been
reduced to zero shares.
(11) 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. Cox 330,
Geneseo, Illinois, 61254.
(12) 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.
(13) 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.
(14) Information presented is based on a Schedule 13G dated September 10, 2002
by Prudential Financial, Inc ("Prudential"). Prudential reported that it
has sole voting power and sole dispositive power over 441,800 shares of our
common stock; and shared voting power and shared dispositive power over
2,203,635 shares of our common stock. The business address of this
shareowner is 751 Broad Street Newark, New Jersey, 07102-3777. Prudential
disclaims beneficial ownership of these shares of our common stock.
Jennison Associates LLC ("Jennison") a wholly-owned subsidiary of
Prudential, also reported that it has sole voting power and shared
dispositive power over 2,643,100 of the 2,645,435 shares reported by
Prudential. Prudential may be deemed to have the power to exercise or to
direct the exercise of such voting and/or dispositive power that Jennison
may have. Jennison does not file jointly with Prudential, as such, shares
of our common stock reported on Jennison's 13G may be included in the
shares reported on the 13G filed by Prudential. 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
September 10, 2002.
(15) Information presented is based on a Schedule 13G dated July 25, 2002 by
Cramer Rosenthal McGlynn, LLC. The business address of this shareowner is
707 Westchester Ave, White Plains, New York, 10604. The Schedule 13G
indicates that Cramer Rosenthal McGlynn, LLC has shared voting and shared
dispositive power over 2,828,437 shares of our common stock. Cramer
Rosenthal McGlynn, LLC recently filed Amendment No.1 to the Schedule 13G,
dated January 10, 2003, in which it reported that its beneficial ownership
of our common stock had been reduced to 2,121,319 shares.
(16) Includes 11,425 shares of common stock subject to options which are
exercisable within 60 days of the date of this table.
CERTAIN RELATED TRANSACTIONS
Pursuant to his employment agreement, iPCS purchases consulting services from
Tim Yager who served on our board of directors during the year ended September
30, 2002. For the year ended September 30, 2002, iPCS purchased $0.3 million of
consulting services from Mr. Yager. Mr. Yager has recently resigned from our
board of directors.
OTHER INFORMATION
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation 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.
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 2002, all directors, executive officers and greater than ten
percent beneficial owners complied with these requirements, except that James W.
Akerhielm, through an oversight, filed his initial statement on Form 3 late.
Independent Certified Public Accountants
KPMG LLP was our auditor during the fiscal year ended September 30, 2002. The
board of directors has not yet selected auditors 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 sets forth the aggregate
fees billed or expected to be billed by KPMG LLP for audit services rendered in
connection with the consolidated financial statements and reports for fiscal
year 2002 and for other services rendered during fiscal year 2002 on behalf of
the Company, as well as all out-of-pocket costs incurred in connection with
these services:
o Audit Fees, excluding audit related.............................$924,900
========
o Financial Information Systems Design
and Implementation Fees.........................................$ 0
========
o All Other Fees
Calendar year 2001 annual audit of
AirGate PCS, Inc. 401(k) Plan.................................$ 12,000
Fees associated with assistance provided
in responding to SEC comment letters..........................$ 12,800
Fees associated with acquisition of iPCS, Inc.,
including the filing of Form S-4 and the filing
of Form S-1 related to the secondary offering
and related comfort letter....................................$443,101
Tax planning and consulting, due diligence
and other.....................................................$ 90,840
--------
Total.................................................$558,741
========
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 the Annual Report, along with
copies of our Annual Report on Form 10-K for the fiscal year ended September 30,
2002 (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.
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 be financially literate and at least one member of the
Committee shall have accounting or related financial management expertise,
both 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
accounting, reporting and financial practices of the Company;
(b) The qualifications, independence and selection of the Company's
independent auditors; and
(c) 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; Internal Audit
(a) Be directly responsible, in its capacity as a committee of the Board,
for the appointment, compensation and oversight of the work of the
independent auditors. In this regard, the Committee shall have the
sole authority to 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 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) Evaluate the independent auditors' qualifications, performance and
independence at least annually;
(d) Pre-approve all engagement fees and the terms of all audit and
non-audit services to be provided by the independent auditors or
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;
(e) Establish policies with respect to the hiring of employees and former
employees of the independent accountants;
(f) 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;
(g) 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;
(h) Review and discuss a summary of findings from completed internal
audits and periodic progress reports on the proposed annual internal
audit plan;
(i) Discuss with the independent auditors the results of the annual audit
examination;
Financial Reporting; Internal Controls and Disclosure Controls and
Procedures
(j) Review and discuss with the independent auditors and management the
annual audited and quarterly financial statements of the Company and
its subsidiaries, including an analysis of the auditors' judgment as
to the quality of the Company's accounting principles, any significant
judgments made in connection with the preparation of the financial
statements, and disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations";
(k) 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;
(l) Review and discuss with management and the independent auditors: (A)
all critical accounting policies and practices used by the Company or
its subsidiaries and any significant changes in such policies and
practices; (B) 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; (C) other material written communications
between the independent auditors and management, such as any
management letter or schedule of unadjusted differences; and receive
from the independent auditors reports required by rules of the
Securities and Exchange Commission.
(m) 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;
(n) 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;
(o) 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;
(p) Review and discuss the adequacy and effectiveness of: (a) 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 (b) the
Company's disclosure controls and procedures and management reports
thereon;
Risk Assessment; Earnings
(q) Review and discuss with management and the independent auditors the
Company's guidelines and policies with respect to financial risk
assessment and risk management;
(r) Review and discuss with management and the independent auditors
contingent liabilities;
(s) Review and discuss with management earnings releases prior to
dissemination;
(t) Review and discuss with management financial information and earnings
guidance provided to analysts, lenders, noteholders and rating
agencies;
Complaints and Anonymous Information
(u) 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;
Miscellaneous
(v) Review and pre-approve related-party transactions in accordance with
Nasdaq listing standards;
(w) Prepare the annual report of the Committee required by SEC rules to be
included in the annual proxy statement;
(x) 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. 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
executive sessions.
7. 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.
APPENDIX B
------------------
FORM OF PROXY
------------------
AIRGATE PCS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREOWNERS
March 4, 2003
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 March 4, 2003 at 1:00 p.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 Barry J. Schiffman and Stephen R. Stetz as Directors |_| For All Nominees
of the Company with terms expiring in 2006. |_| Withhold Authority For All
Nominees
The Board of Directors Recommends a Vote FOR each of the nominees. |_| For All, Except
* Barry J. Schiffman
* Stephen R. Stetz
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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.