-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QIUR35zkjjH/wYg5UNlIrfC4cWXRUKNng/qn6M+cC7XPjWxWO/Xut+FwqysIXkGY +0icZJ3MnT/cut9c9tTzyQ== /in/edgar/work/20000814/0001086844-00-000018/0001086844-00-000018.txt : 20000921 0001086844-00-000018.hdr.sgml : 20000921 ACCESSION NUMBER: 0001086844-00-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRGATE PCS INC /DE/ CENTRAL INDEX KEY: 0001086844 STANDARD INDUSTRIAL CLASSIFICATION: [4813 ] IRS NUMBER: 582422929 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27455 FILM NUMBER: 698469 BUSINESS ADDRESS: STREET 1: 233 PEACHTREE ST NE STREET 2: SUITE 1700 CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4045257272 MAIL ADDRESS: STREET 1: 233 PEACHTREE ST STREET 2: SUITE 1700 CITY: ATLANTA STATE: GA ZIP: 30303 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2000. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 027455 AIRGATE PCS, INC. Harris Tower 233 Peachtree St. NE Suite 1700 Atlanta, Georgia 30303 (404) 525-7272 DELAWARE 58-2422929 - -------------------- --------------------------- _ (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 12,682,971 shares of Common Stock, $0.01 par value per share, were outstanding as of August 8, 2000. Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes __X___ No ____ AIRGATE PCS, INC. THIRD QUARTER REPORT Table of Contents PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets (unaudited) at June 30, 2000 and September 30, 1999 Consolidated Statements of Operations (unaudited) for the three and nine months ended June 30, 2000 and 1999 Consolidated Statements of Cash Flows (unaudited) for the nine months ended June 30, 2000 and 1999 Notes to the Consolidated Financial Statements (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K PART I. FINANCIAL INFORMATION ITEM I - FINANCIAL STATEMENTS AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS CONSOLIDATED BALANCE SHEETS (unaudited) (dollars in thousands, except share and per share amounts)
June 30, September 30, 2000 1999 ---- ---- ASSETS Current assets: Cash and cash equivalents $ 92,221 $258,900 Trade receivables, net 3,659 - Due from AirGate Wireless, LLC - 751 Other current assets 6,593 2,819 -------- --------- Total current assets 102,473 262,470 Property and equipment, net 160,830 44,206 Financing costs 9,502 10,399 Other assets 290 245 -------- --------- $273,095 $317,320 ======== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,230 $ 2,216 Accrued expenses 12,311 20,178 Accrued interest 392 1,413 Current maturities of long-term debt - 7,700 -------- --------- Total current liabilities 20,933 31,507 Long-term debt, excluding current maturities 174,861 157,967 -------- --------- Total liabilities 195,794 189,474 -------- --------- Stockholders' equity: Preferred stock, par value, $.01 per share; 5,000,000 shares authorized; no shares issued and outstanding - - Common stock, par value, $.01 per share; 150,000,000 shares authorized; 12,473,802 and 11,957,201 shares issued and outstanding at June 30, 2000 and September 30, 1999, respectively 125 120 Additional paid-in capital 160,622 157,880 Accumulated deficit (79,382) (27,254) Unearned stock option compensation (4,064) (2,900) --------- --------- Total stockholders' equity 77,301 127,846 Commitments and contingencies - - --------- -------- $273,095 $317,320 ======= ======= See accompanying notes to consolidated financial statements AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (dollars in thousands, except share and per share amounts)
Three Months Nine Months Ended Ended June 30, June 30, 2000 1999 2000 1999 ------------ ----------- ------------ ----------- Revenues: Service revenue $ 2,034 $ - $ 2,494 $ - Roaming revenue 3,771 - 4,717 - Equipment revenue 737 - 1,041 - ------------ ----------- ------------ ----------- Total revenues $ 6,542 $ - $ 8,252 $ - Operating expenses: Cost of service and roaming (7,382) - (15,786) - Cost of equipment (1,363) - (1,974) - Selling and marketing (8,685) - (13,723) - General and administrative (4,823) (1,201) (9,525) (2,844) Noncash stock option compensation (354) - (1,067) - Depreciation and amortization (4,235) (171) (6,795) (585) ------------ ----------- ------------ ----------- Operating loss (20,300) (1,372) (40,618) (3,429) Interest income 2,005 - 8,083 - Interest expense (6,901) (4,813) (19,593) (5,934) ------------ ----------- ------------ ----------- Net loss $ (25,196) $ (6,185) $ (52,128) $ (9,363) ============ =========== ============ =========== Basic and diluted net loss per share of common stock $ (2.03) $ (1.83) $ (4.27) $ (2.77) ============ =========== ============ =========== Weighted-average outstanding common shares 12,435,644 3,382,518 12,212,480 3,382,518 ============ =========== ============ ===========
See accompanying notes to consolidated financial statements AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (dollars in thousands)
Nine Months ended June 30, 2000 1999 ---------- -------- Cash flows from operating activities: Net loss $ (52,128) $(9,363) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 6,795 585 Provision for doubtful accounts 162 - Accretion of original issue discounts on long-term debt 17,091 5,037 Amortization of financing costs 897 - Noncash stock option compensation 1,067 - (Increase) decrease in: Due from AirGate Wireless, LLC 751 (751) Trade receivables (3,821) - Other current assets (3,773) (313) Other assets (45) (131) Increase (decrease) in: Accounts payable 1,238 354 Accrued expenses 7,107 - Accrued interest (919) 1,213 ---------- -------- Net cash used in operating activities (25,578) (3,369) ---------- -------- Cash flows from investing activities: Capital expenditures (133,506) (7,140) ---------- -------- Net cash used in investing activities (133,506) (7,140) ---------- -------- Cash flows from financing activities: Proceeds from notes payable - 12,530 Payment on notes payable (7,700) - Proceeds from exercise of stock purchase warrants 5 - Proceeds from exercise of common stock options 100 - Offering costs - (337) Payments on notes payable to stockholders - (700) ---------- ---------- Net cash (used in) provided by financing activities (7,595) 11,493 ---------- -------- Net (decrease) increase in cash and cash equivalents (166,679) 984 Cash and cash equivalents at beginning of period 258,900 1,926 ---------- -------- Cash and cash equivalents at end of period $ 92,221 $ 2,910 ========== ======== Supplemental disclosure of cash flow information - cash paid for interest $ 2,094 $ 852 ========== ======== Supplemental disclosure of noncash investing and financing activities: Capitalized interest 4,733 - Grant of warrants related to Lucent Financing 198 - Notes payable and accrued interest converted to equity 102 - Grant of compensatory stock options 2,231 - Network assets acquired and not yet paid for 6,149 -
See accompanying notes to consolidated financial statements AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 (unaudited) (1) Basis of Presentation The accompanying consolidated financial statements are unaudited and have been prepared by management. The consolidated financial statements included herein include the accounts of AirGate PCS, Inc. and its wholly-owned subsidiary, AGW Leasing Company, Inc., and their predecessor entities (AirGate, LLC, AirGate Wireless, LLC, and AirLink II, LLC) for all periods presented. In the opinion of management, these consolidated financial statements contain all of the adjustments, consisting of normal recurring adjustments, necessary to present fairly, in summarized form, the financial position and the results of operations of AirGate PCS, Inc. ("AirGate" or the "Company") and subsidiary and predecessors. The results of operations for the three and nine months ended June 30, 2000 are not indicative of the results that may be expected for the full fiscal year of 2000. The financial information presented herein should be read in conjunction with the Company's Form 10-K for the year ended September 30, 1999 which includes information and disclosures not included herein. All significant intercompany accounts or balances have been eliminated in consolidation. Certain amounts have been reclassified to conform to the current year presentation. (2) Net Loss Per Share Basic and diluted net loss per share of common stock is computed by dividing net loss for each period by the weighted-average outstanding common shares. No conversion of common stock equivalents has been assumed in the calculations since the effect would be antidilutive. As a result, the net loss per share is the same for both the basic and diluted net loss per share calculations for all periods presented. The reconciliation of weighted-average outstanding common shares to weighted-average outstanding shares including potentially dilutive common stock equivalents is set forth below:
Three Months Nine Months Ended Ended June 30, June 30, 2000 1999 2000 1999 ---------- --------- ---------- --------- Weighted-average outstanding common shares 12,435,644 3,382,518 12,212,480 3,382,518 Weighted-average potentially dilutive common stock equivalents: Common stock options 907,416 - 884,135 - Stock purchase warrants 411,035 - 407,787 - ---------- ---------- --------- --------- Weighted-average outstanding shares including potentially dilutive common stock equivalents 13,754,095 3,382,518 13,504,402 3,382,518 ========== ========= ========== =========
(3) Revenue Recognition The accounting policy for the recognition of activation fee revenue is to record the revenue over the periods such revenue is earned in accordance with the current interpretations of Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." Accordingly, a like amount of direct customer activation and acquisition expense has been deferred and will be recorded over the same period. As of June 30, 2000, the Company has recognized $20,000 of activation fee revenue and expense and has deferred $437,000 of activation fee revenue and expense to future periods. (4) Due from AirGate Wireless, LLC On January 27, 2000, the Company collected all principal and accrued interest relating to the receivable from AirGate Wireless, LLC. (5) Trade Receivables, net Trade receivables represent amounts due from Sprint PCS related to roaming revenues and amounts due from customers for services provided including monthly airtime charges. Trade receivables are recorded net of the allowance for doubtful accounts of $162,000. (6) Other Current Assets Inventories consist of handsets and related accessories. Inventories are carried at the lower of cost (determined using the weighted average method) or market. Other current assets consists of the following at June 30, 2000 and September 30, 1999 (dollars in thousands):
June 30, September 30, 2000 1999 ------ ------ Prepaid expenses $3,127 $1,596 Inventories 1,378 - Current portion of financing costs 1,223 1,223 Interest receivable and other 865 - ------ ------ Other current assets $6,593 $2,819 ====== ======
(7) Property and Equipment, net Property and equipment consists of the following at June 30, 2000 and September 30, 1999 (dollars in thousands):
June 30, September 30, 2000 1999 --------- -------- Network assets $140,880 $ 7,700 Computer equipment 1,795 89 Furniture, fixtures, and office equipment 4,754 87 --------- -------- 147,429 7,876 Less accumulated depreciation and amortization (7,765) (971) --------- -------- 139,664 6,905 Construction in progress (network build-out) 21,166 37,301 --------- -------- Property and equipment, net $160,830 $44,206 ========= ========
(8) Common Stock Purchase Warrants Senior Subordinated Discount Notes On January 3, 2000, the Company's registration statement on Form S-1, relating to warrants to purchase 644,400 shares of common stock issued together, as units, with the Company's $300 million of 13.5% senior subordinated discount notes due 2009, was declared effective by the Securities and Exchange Commission. On September 30, 1999, the Company received gross proceeds of $156.1 million from the issuance of 300,000 units, each unit consisting of a $1,000 principal amount at maturity 13.5% senior subordinated discount note due 2009 and one warrant to purchase 2.148 shares of common stock at a price of $0.01 per share. The warrants are exercisable beginning upon the effective date of the registration statement registering such warrants, for an aggregate of 644,400 shares of common stock and expire October 1, 2009. As of June 30, 2000, warrants representing 496,921 shares of common stock had been exercised and warrants representing 147,479 shares of common stock remain outstanding. Lucent Financing On June 1, 2000, the Company issued stock purchase warrants to Lucent Technologies in consideration of the Lucent Financing (as defined below). The exercise price of the warrants equals $20.40 per share, and the warrants are exercisable for an aggregate of 10,175 shares of the Company's common stock at any time. The warrants expire on the earlier of August 15, 2004 or August 15, 2001, if, as of such date, the Company has paid in full all outstanding amounts under the Lucent Financing and has terminated the remaining unused portion of the commitments under the Lucent Financing. The Company has recorded a discount on the associated credit facility of $198,000 which represents the fair value of the warrants on the date of grant using a Black-Schoales valuation. The discount will be recognized as interest expense over the period from the date of issuance to maturity using the effective interest method. All of these warrants remain outstanding at June 30, 2000. (9) Common Stock On May 26, 2000, at a Special Meeting of the stockholders of AirGate PCS, Inc., the stockholders voted to amend our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our common stock, par value $0.01 per share, from 25,000,000 shares to 150,000,000 shares. (10) Commitment and Contingencies On May 4, 2000, the Company entered into a retention bonus agreement with Thomas M. Dougherty, its Chief Executive Officer. Provided Mr. Dougherty is employed by the Company on specified payment dates, generally quarterly, extending to January 15, 2004, periodic retention bonuses totaling $3.6 million will be earned and paid to Mr. Dougherty by the Company. Compensation expense of $1.1 million was recorded in the three months ended June 30, 2000 related to amounts earned under the retention bonus agreement. Under the terms of the agreement, partial acceleration of the future payments would occur upon a change in control of the Company. (11) Subsequent Events (a) On July 11, 2000, warrants held by Weiss, Peck and Greer Venture Partners Affiliated Funds to acquire 214,413 shares of common stock at a price of $12.75 per share were exercised. Net of shares surrendered in payment of the exercise price, 173,457 shares of common stock were issued. (b) On August 9, 2000, our Vice President of Law and Secretary terminated employment with the Company. Pursuant to the 1999 stock option plan, the vesting of previously unvested stock options will result in the company recording non-cash stock option compensation expense of $259,000 in the three months ended September 30, 2000. (12) AGW Leasing Company, Inc. - Wholly-Owned Subsidiary AGW Leasing Company, Inc. ("AGW") is a wholly-owned subsidiary of AirGate. AGW has fully and unconditionally guaranteed the Company's senior subordinated discount notes and Lucent Financing. AGW was formed to hold the leasehold interests for the Company's PCS network. AGW also was a registrant under the Company's registration statement (Registration File Number 333-78189-01) declared effective by the Securities and Exchange Commission on September 27, 1999. The unaudited condensed consolidating financial statements as of and for the nine months ended June 30, 2000 are as follows (dollars in thousands):
AirGate PCS, Inc. AGW Leasing and Predecessors Company, Inc. Eliminations Consolidated ------------------ --------------- -------------- -------------- Cash and cash equivalents $ 92,221 $ - $ - $ 92,221 Trade receivables and other current assets 18,238 - (7,986) 10,252 Property and equipment, net 160,830 - - 160,830 Other assets 9,792 - - 9,792 ------------------ --------------- -------------- -------------- Total assets $ 281,081 $ - $ (7,986) $ 273,095 ================== =============== ============== ============== Accounts payable $ 8,230 $ - $ - $ 8,230 Accrued expenses 12,703 7,986 (7,986) 12,703 Long-term debt 174,861 - - 174,861 ------------------ --------------- -------------- -------------- Total liabilities 195,794 7,986 (7,986) 195,794 Common stock 125 - - 125 Additional paid-in capital 160,622 - - 160,622 Accumulated deficit (71,396) (7,986) - (79,382) Unearned stock option compensation (4,064) - - (4,064) ------------------ --------------- -------------- -------------- Total liabilities and stockholders' equity(deficit) $ 281,081 $ - $ (7,986) $ 273,095 ================== =============== ============== ============== Total revenues $ 8,252 $ - $ - $ 8,252 Total expenses (53,773) (6,607) - (60,380) ------------------ --------------- -------------- -------------- Net loss $ (45,521) $ (6,607) $ - $ (52,128) ================== =============== ============== ==============
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Statements contained herein regarding expected financial results and other planned events are forward-looking statements that involve risk and uncertainties. Actual future events or results may differ materially from these statements. Readers are referred to the documents filed by AirGate PCS, Inc. with the Securities and Exchange Commission, specifically the most recent filings which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including potential fluctuations in quarterly results, our dependence on our affiliation with Sprint PCS, an adequate supply of infrastructure and subscriber equipment, dependence on new product development, rapid technological and market change, risks related to future growth and expansion, our significant level of indebtedness and volatility of stock prices. Certain of these risks are summarized under the caption "Risk Factors" included under Item 5 - Other Information of this quarterly report. OVERVIEW On July 22, 1998, we entered into a management agreement with Sprint PCS whereby we became the Sprint PCS affiliate with the exclusive right to provide 100% digital, 100% PCS services under the Sprint and Sprint PCS brand names in our territory in the southeastern United States. We completed our radio frequency design, network design and substantial site acquisition and cell site engineering, and commenced construction of our PCS network in November 1998. In January 2000 we began commercial operations with the launch of two markets covering 1.5 million residents in our territory. Sprint PCS has invested $44.6 million to purchase the PCS licenses in our territory and incurred additional expenses for microwave clearing. Under our long-term agreements with Sprint PCS, we manage the network on Sprint PCS' licensed spectrum as well as use the Sprint and Sprint PCS brand names royalty-free during our affiliation with Sprint PCS. We also have access to Sprint PCS' national marketing support and distribution programs and are entitled to buy network and subscriber equipment and handsets at the same discounted rates offered by vendors to Sprint PCS based on its large volume purchases. In exchange for these benefits, we are entitled to receive 92%, and Sprint PCS is entitled to retain 8% of collected service revenues from customers in our territory. We are entitled to 100% of revenues collected from the sale of handsets and accessories, on roaming revenues received when Sprint PCS customers from a different territory make a wireless call on our PCS network, and on roaming revenues from non-Sprint PCS customers. Through June 30, 2000, we have incurred $162.0 million of capital expenditures related to the build-out of our PCS network. As a result of the progress made on our PCS network build-out, we were able to open the network for a portion of our territory for roaming coverage along Interstate 85 between Atlanta, Georgia and Charlotte, North Carolina in November 1999. In the three months ended March 31, 2000, we launched commercial PCS operations in the Greenville-Spartanburg, Anderson and Myrtle Beach, South Carolina markets and the Hickory, Asheville, Wilmington and Rocky Mount, North Carolina markets. In the three months ended June 30, 2000, we launched commercial PCS operations in the Charleston, Columbia and Florence, South Carolina markets, the Augusta and Savannah, Georgia markets and the Goldsboro, Jacksonville, New Bern, Orangeburg, Roanoke Rapids and Greenville-Washington, North Carolina markets. At June 30, 2000, we offered personal communication services to 5.0 million residents in our territory of 7.1 million residents based on 1998 population data. We expect to extend our commercial operations during the next three months and anticipate substantially completing the build-out of our PCS network by the end of our fiscal year 2000 covering approximately 75% of the resident population in our territory of 7.1 million. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1999: Customer Additions As of June 30, 2000, the Company provided personal communication services to 23,482 customers, a net increase of 17,105 during the three months then ended, resulting from the commercial launch of eleven markets in the third fiscal quarter. Average Revenue Per User (ARPU) An important operating metric in the wireless industry is Average Revenue Per User (ARPU) which summarizes the average monthly service revenue per customer, net of an allowance for doubtful accounts. For the three months ended June 30, 2000, ARPU was $54. Revenues Service revenue and equipment revenue were $2.0 million and $737,000, respectively, for the three months ended June 30, 2000. These revenues were the result of launching commercial operations in eleven markets during the quarter. Service revenue consists of monthly recurring access and feature charges and monthly non-recurring charges for local, long distance, travel and roaming airtime usage in excess of the pre-subscribed usage plan. Equipment revenue is derived from the sale of handsets and accessories, net of an allowance for returns. Our handset return policy allows customers to return their handsets for a full refund within 14 days of purchase. When handsets are returned to us, we may be able to reissue the handsets to customers at little additional cost to us. However, when handsets are returned to Sprint PCS for refurbishing, we receive a credit from Sprint PCS, which is less than the amount we originally paid for the handset. Roaming revenue of $3.8 million was recorded during the three months ended June 30, 2000. We receive Sprint PCS roaming revenue at a per-minute rate from Sprint PCS or another Sprint PCS affiliate when Sprint PCS subscribers outside of our territory use our network. We also receive non-Sprint PCS roaming revenue when subscribers of other wireless service providers roam on our network. Cost of Service and Roaming and Cost of Equipment The cost of service and roaming and the cost of equipment was $7.4 million and $1.4 million, respectively, for the three months ended June 30, 2000. Cost of service represents network operating costs (including salaries, cell site lease payments, fees related to data transfer via T-1 and other transport lines, inter-connect fees and other expenses related to network operations), roaming expense when AirGate customers place calls on Sprint PCS's network or other third party networks, back office services provided by Sprint PCS such as customer care and billing, long distance expense relating to inbound roaming revenue and the 8% of collected service revenue representing the Sprint PCS affiliation fee. The Sprint PCS affiliation fee totaled $173,000 in the three month period ended June 30, 2000. There were approximately 45 employees performing network operations functions at June 30, 2000. Cost of equipment includes the cost of handsets and accessories sold to customers during the three months ended June 30, 2000. The cost of handsets exceeds the retail price because we subsidize the price of handsets to remain competitive in the marketplace. Selling and Marketing We incurred expenses of $8.7 million during the three month period ended June 30, 2000 for selling and marketing costs associated with our market launches in 2000. These amounts include retail store costs such as salaries and rent in addition to promotion, advertising, commission costs, and handset subsidies on units sold by third parties for which the Company does not record revenue. At June 30, 2000, there were approximately 189 employees performing sales and marketing functions compared to one employee as of June 30, 1999. General and Administrative For the three months ended June 30, 2000, we incurred expenses of $4.8 million compared to $1.2 million for the three months ended June 30, 1999, an increase of $3.6 million. The increase is primarily comprised of additional rent, professional and consulting fees and compensation, recruiting and relocation costs relating to growth in the number of employees. Increased professional fees accounted for approximately $1.0 million of the increase. Compensation expense of $1.1 million was recorded in the three months ended June 30, 2000 related to the retention bonus agreement with our Chief Executive Officer. Of the approximately 272 employees at June 30, 2000, approximately 38 employees were performing corporate support functions compared to 10 employees as of June 30, 1999. Noncash Stock Option Compensation Noncash stock option compensation expense was $354,000 for the three months ended June 30, 2000. The Company applies the provisions of APB Opinion No. 25 and related interpretations in accounting for its stock option plan. Unearned stock option compensation is recorded for the difference between the exercise price and the fair market value of the Company's common stock at the date of grant and is recognized as noncash stock option compensation expense in the period in which the related services are rendered. Depreciation and Amortization For the three months ended June 30, 2000, depreciation and amortization expense increased $4.0 million to $4.2 million compared to $171,000 for the same period in 1999. The increase in depreciation and amortization expense relates primarily to network assets placed in service to support our commercial launch. Depreciation and amortization will continue to increase as additional portions of our network are placed into service. We incurred capital expenditures of $31.2 million in the three months ended June 30, 2000 related to the continued build-out of our PCS network which included approximately $1.2 million of capitalized interest. Interest Income For the three months ended June 30, 2000, interest income was $2.0 million. Interest income is generated from cash proceeds originating from our initial public equity and units offering completed on September 30, 1999. As capital expenditures are made to complete the build-out of our PCS network, decreasing cash balances will result in lower interest income for the remainder of fiscal 2000. No significant interest income was recorded in the three month period ended June 30, 1999. Interest Expense For the three months ended June 30, 2000, interest expense was $6.9 million, an increase of $2.1 million over the same period in 1999. The increase is primarily attributable to the $5.9 million accretion of original issue discount on the senior subordinated discount notes and $1.7 million associated with the Lucent Financing partially offset by $1.2 million of capitalized interest. The Company had borrowings of $174.9 million as of June 30, 2000 compared to $165.7 million at September 30, 1999 and $20.8 million at June 30, 1999. Net Loss For the three months ended June 30, 2000, the net loss was $25.2 million, an increase of $19.0 million compared to the net loss of $6.2 million for the same period in 1999. FOR THE NINE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1999: Customer Additions In the nine months ended June 30, 2000, the Company added a net 23,482 customers since the launch of commercial operations in January 2000. Average Revenue Per User (ARPU) Average Revenue Per User (ARPU) which summarizes the average monthly service revenue per customer, net of an allowance for doubtful accounts was $54 for the period since commercial operations were launched in January 2000. Revenues Service revenue and equipment revenue were $2.5 million and $1.0 million for the nine months ended June 30, 2000, respectively, as a result of launching commercial operations in eighteen markets during the nine months ended June 30, 2000. Roaming revenue of $4.7 million was recorded during the nine months ended June 30, 2000. Cost of Service and Roaming and Cost of Equipment The cost of service and roaming and the cost of equipment was $15.8 million and $2.0 million, respectively, for the nine months ended June 30, 2000, related directly to the launch of commercial operations in January 2000. The Sprint PCS affiliation fee totaled $213,000 in the nine month period ended June 30, 2000. Selling and Marketing We incurred expenses of $13.7 million during the nine month period ended June 30, 2000 for marketing costs associated with our eighteen market launches in 2000. Handset subsidies on units sold for which we did not record revenue totaled $1.6 million for the nine months ended June 30, 2000. General and Administrative For the nine months ended June 30, 2000, we incurred expenses of $9.5 million compared to $2.8 million for the nine months ended June 30, 1999, an increase of $6.7 million. The increase is primarily comprised of additional rent, professional fees, consulting fees for outsourced labor and salaries and compensation, recruiting and relocation costs relating to growth in the number of employees. Compensation expense of $1.1 million was recorded in the nine months ended June 30, 2000 related to the retention bonus agreement with our Chief Executive Officer. Noncash Stock Option Compensation Noncash stock option compensation expense was $1.1 million for the nine months ended June 30, 2000. Depreciation and Amortization For the nine months ended June 30, 2000, depreciation and amortization expense was $6.8 million compared to $585,000 for the same period in 1999. The increase in depreciation and amortization expense relates primarily to network equipment placed in service to support our commercial launch. Depreciation and amortization will continue to increase as additional portions of our network are placed into service. We incurred capital expenditures of $123.4 million in the nine months ended June 30, 2000 primarily related to the continued build-out of our PCS network which included approximately $4.7 million of capitalized interest. Interest Income For the nine months ended June 30, 2000, interest income was $8.1 million. Interest income is generated from cash proceeds originating from our initial public equity and units offering completed on September 30, 1999. As capital expenditures are made to complete the build-out of our PCS network, decreasing cash balances will result in lower interest income for the remainder of fiscal 2000. Interest Expense For the nine months ended June 30, 2000, interest expense was $19.6 million, an increase of $13.7 million over the same period in 1999. The increase is primarily attributable to the $16.4 million accretion of original issue discount on the senior subordinated discount notes and $5.6 million associated with the Lucent Financing partially offset by $4.7 million of capitalized interest. The Company had borrowings of $174.9 million as of June 30, 2000 compared to $165.7 million at September 30, 1999 and $20.8 million at June 30, 1999. Net Loss For the nine months ended June 30, 2000, the net loss was $52.1 million, an increase of $42.7 million compared to a net loss of $9.4 million for the nine months ended June 30, 1999. The Company expects that its net losses will continue to increase throughout fiscal 2000 and into fiscal 2001. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2000, the Company had $92.2 million in cash and cash equivalents, as compared to $258.9 million in cash and cash equivalents at September 30, 1999. Working capital was $82.9 million at June 30, 2000 as compared to working capital of $231.0 million at September 30, 1999. Net Cash Used In Operating Activities The $25.6 million of cash used in operating activities in the nine months ended June 30, 2000 was the result of the Company's $52.1 million net loss being partially offset by a net $538,000 in cash provided by changes in working capital and $26.0 million of depreciation, amortization of note discounts, amortization of financing costs and noncash stock option compensation. Net Cash Used in Investing Activities The $133.5 million of cash used in investing activities represents cash outlays for capital expenditures during the nine months ended June 30, 2000. We incurred a total of $123.4 million of capital expenditures in the nine months ended June 30, 2000. Further, cash payments of $16.2 million were made for equipment purchases made through accrued expenses at September 30, 1999 partially offset by equipment purchases of $6.1 million made through accounts payable and accrued expenses at June 30, 2000. Net Cash Used In Financing Activities The $7.7 million in cash used in financing activities consisted of the repayment of the $7.7 million unsecured promissory note. We closed our offerings of equity and debt funding on September 30, 1999. The total equity amount raised was $131.0 million, or $120.5 million in net proceeds. Concurrently, we closed our units offering consisting of $300 million principal amount at maturity 13.5% senior subordinated discount notes due 2009 and warrants to purchase 644,400 shares of our common stock at $0.01 per share. The gross proceeds from the units offering were $156.1 million, or $149.4 million in net proceeds. The senior subordinated discount notes will require cash payments of interest beginning on April 1, 2005. The Company's $153.5 million Credit Agreement with Lucent (the "Lucent Financing") provides for a $13.5 million senior secured term loan which matures on June 6, 2007, which is the first installment of the loan, or Tranche 1. The second installment, or Tranche 2, under the Lucent Financing is for a $140.0 million senior secured term loan which becomes available for borrowing on October 1, 2000 and which matures on September 30, 2008. Mandatory quarterly payments of principal are required beginning December 31, 2002 for Tranche 1 and June 30, 2004 for Tranche 2 initially in the amount of 3.75% of the loan balance then outstanding and increasing thereafter. We expect that cash and cash equivalents together with future advances under the Lucent Financing will fund the Company's capital expenditures including the completion of our network build-out and the Company's working capital requirements through 2002 in the absence of any corporate development activities. If any corporate development event such as an acquisition are effected, additional debt and/or equity capital may be needed. SEASONALITY Our business is subject to seasonality because the wireless industry is heavily dependent on fourth calendar quarter results. Among other things, the industry relies on significantly higher customer additions and handset sales in the fourth calendar quarter as compared to the other three calendar quarters. A number of factors contribute to this trend, including: the increasing use of retail distribution, which is heavily dependent upon the year-end holiday shopping season; the timing of new product and service announcements and introductions; competitive pricing pressures; and aggressive marketing and promotions. The increased level of activity requires a greater use of the Company's available financial resources during this period. INFLATION Management believes that inflation has not had, and does not expect inflation to have, a material adverse effect on our results of operations. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, our operations are exposed to interest rate risk on our financing from Lucent and any future financing requirements. Our fixed rate debt consists primarily of the accreted carrying value of the senior subordinated discount notes ($172.2 million at June 30, 2000). Our variable rate debt consists of borrowings made under the Lucent Financing ($13.5 million at June 30, 2000). The Company's primary interest rate risk exposures relate to (i) the interest rate on the Company's long-term borrowings; (ii) the Company's ability to refinance its senior subordinated discount notes at maturity at market rates; and (iii) the impact of interest rate movements on the Company's ability to meet interest expense requirements and financial covenants under the Company's debt instruments. We manage the interest rate risk on our outstanding long-term debt through the use of fixed and variable rate debt and expect in the future to use interest rate swaps. While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our interest rate risk on an ongoing basis. The following table presents the estimated future balances of outstanding long-term debt at the end of each period and future required annual principal payments for each period then ended associated with the senior subordinated discount notes and the Lucent Financing based on our projected level of long-term indebtedness:
TWELVE MONTHS ENDED JUNE 30, ------------------------------------------------------- ------------ 2001 2002 2003 2004 2005 THEREAFTER (DOLLARS IN THOUSANDS) Senior subordinated discount notes $189,865 $216,379 $246,593 $281,023 $300,000 - Fixed interest rate 13.5% 13.5% 13.5% 13.5% 13.5% 13.5% Principal payments - - - - - $300,000 Lucent Financing $ 55,500 $133,325 $151,002 $142,325 $120,005 - Variable interest rate (1) . 10.49% 10.49% 10.49% 10.49% 10.49% 10.49% Principal payments . - - $ 1,519 $2,025 $ 2,025 $120,005 ___________________ (1) Interest rate on the Lucent Financing equals the London Interbank Offered Rate (''LIBOR'') +3.75%. LIBOR is assumed to equal 6.74% for all periods presented.
PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On September 30, 1999, we completed the concurrent offerings of equity and debt funding with total net proceeds of approximately $269.9 million. In the nine months ended June 30, 2000, we have utilized $105.6 million to fund capital expenditures relating to the build-out of our PCS network and $7.7 million to repay indebtedness. On May 26, 2000 our Amended and Restated Certificate of Incorporation was amended to increase the number of authorized shares of common stock, par value $.01 per share, from 25,000,000 to 150,000,000. The future issuance of additional shares of common stock on other than a pro rata basis may dilute the ownership of current stockholders. Such additional shares could be used to block an unsolicited acquisition through the issuance of large blocks of stock to persons or entities considered by our officers and directors to be opposed to such acquisitions, which might be deemed to have an anti-takeover effect (i.e., might impede the completion of a merger, tender offer or other takeover attempt). In fact, the mere existence of such a block of authorized but unissued shares, and our Board of Directors' ability to issue such shares without stockholder approval, might deter a bidder from seeking to acquire shares of our common stock on an unfriendly basis. See Item 4 for additional discussion of the adoption of the amendment to our Amended and Restated Certificate of Incorporation. On July 11, 2000, warrants held by Weiss, Peck and Greer Venture Partners Affiliated Funds to acquire 214,413 shares of common stock of the Company, par value $.01 per share, at a price of $12.75 per share were exercised. The exercise was a cashless exercise, with 40,956 of the 214,413 shares being surrendered in payment of the exercise price. Net of shares surrendered in payment of the exercise price, 173,457 shares of common stock were issued. The exemption claimed for the issuance is Section 4(2) of the Securities Act of 1933, as amended. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The company submitted to a vote of its stockholders of record as of April 24, 2000, through a solicitation by proxy, an amendment to its Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our common stock, par value $0.01 per share, from 25,000,000 to 150,000,000 shares. The matter was submitted for a vote at a Special Meeting on May 26, 2000. A total of 11,473,833 shares were represented by proxy at the meeting, representing 92.4% of the 12,421,802 shares eligible to vote. Of the shares represented, 8,220,239 were voted in favor of the amendment to the Company's Amended and Restated Certificate of Incorporation, 2,841,489 were voted against the proposal and 412,105 votes were withheld. ITEM 5. OTHER INFORMATION SPRINT MANAGEMENT AGREEMENT On May 12, 2000, the Company signed an amendment to its management agreement with SprintCom, Inc. The amendment incorporates several clarifications and amendments to our management agreement: (1) The amendment specifies that we will purchase long distance services for our customers and connect our network to Sprint PCS services from Sprint through Sprint PCS rather than purchasing those services directly from Sprint as was previously the case in the management agreement. Sprint PCS will bill us for the long distance at the rate paid by Sprint PCS plus an administrative fee to cover Sprint PCS' processing costs. The amendment also specifies that we can not resell the long distance services we purchase from Sprint under the management agreement. (2) The amendment modifies Sprint PCS' right of last offer to provide backhaul and transport services to exclude from this right backhaul services relating to national platform and IT application connections. Prior to the amendment, these services were not excluded. (3) The amendment also eliminates, as no longer applicable, the reference in the management agreement to the restructuring of ownership in Sprint Spectrum L.P., Sprint Com, Inc. PhillieCo Partners I, L.P. and Cox Communications PCS, L.P. (4) The amendment modifies our representation of delivery of existing contracts that affect the right of Sprint PCS under our agreement to include contracts disclosed by us verbally or in writing copies of which are delivered to Sprint PCS at its request. (5) The amendment amends our services agreement with Sprint PCS to provide that our monthly charge for fees for services (other than billing-related services) provided by Sprint PCS will be determined based on the number of subscribers as of the 15th of each month. Sprint PCS will bill us for billing related services based on our subscribers at the end of the prior month and gross activations on the last day of the current calendar month. Previously all charges were determined as of the 15th of each month including charges for billing related services. In addition, the amendment removes prohibitions on the transfer or assignment of ownership interests by certain individuals identified in the management agreement for a period of five years from the date of the management agreement as follows: (1) As of May 12, 2000, the amendment allows the pledge of stock by certain individuals identified in the management agreement that was previously prohibited for a period of five years from the date of the management agreement. (2) The amendment removes prohibitions on any transfer or assignment of ownership interests by certain individuals identified in the management agreement for a period of five years from the date of the management agreement. The restrictions will be eliminated on June 30, 2000 if our network is declared network ready by Sprint PCS and meets our network coverage requirements under our agreement with Sprint PCS for all of our markets except the Greenwood, S.C. BTA, Sumter, S.C. BTA, New Bern, N.C. BTA, Camden County, N.C., Currituck County, N.C., Dare County, N.C. and Pasquotank, N.C. If our network was not declared network ready in these markets by June 30, 2000 or the coverage requirements for these markets were not met, the restrictions would have remained in place until we achieved network ready status and provided the coverage. AirGate did meet the network coverage requirements, by June 30, 2000, necessary to eliminate the restrictions noted above so the possible event of termination for prohibitions on transfer or assignment of ownership interests by certain identified individuals no longer exists. As a result, 1,041,227 shares of our common stock became eligible for sale, subject to compliance with Rule 144 of the Securities Act (including Rule 144(k) for persons who are not affiliates or whose affiliate status is terminated). In July 1998, the certain identified individuals executed five year employment agreements not impacted by the amendment to the Company's management agreement with SprintCom, Inc. noted herein. RISK FACTORS The following risk factors update the risk factors contained in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000. RISKS PARTICULAR TO AIRGATE The termination of our affiliation with Sprint PCS or Sprint PCS' failure to perform its obligations under our agreements would severely restrict our ability to conduct our business Our ability to offer Sprint PCS products and services and our PCS network's operation are dependent on our agreements with Sprint PCS being renewed and not terminated. Each of these agreements can be terminated for breach of any material terms. We are dependent on Sprint PCS' ability to perform its obligations under the Sprint PCS agreements. The non-renewal or termination of any Sprint PCS agreement or the failure of Sprint PCS to perform its obligations under the Sprint PCS agreements would severely restrict our ability to conduct our business. We may not receive as much Sprint PCS roaming revenue as we anticipate because Sprint PCS can change the rate we receive or fewer people may travel in our network area We are paid a fee from Sprint PCS for every minute that a Sprint PCS subscriber based outside of our markets uses our network, which we refer to as roaming revenue. Similarly, we pay a fee to Sprint PCS for every minute that our customers use the Sprint PCS network outside of our markets, which we refer to as travel fees. Roaming revenue will continue to represent a substantial portion of our revenue in the future. Under our agreements with Sprint PCS, Sprint PCS can change the current fee we receive for each Sprint PCS roaming minute or pay for each roaming minute. The change by Sprint PCS in the roaming revenue we are paid could substantially decrease our revenues and net income. In addition, our customers may spend more time in other Sprint PCS coverage areas than we anticipate and Sprint PCS customers from outside our markets may spend less time in our markets or may use our services less than we anticipate, which will reduce our roaming revenue. As a result, we may receive less Sprint PCS roaming revenue than we anticipate or we may have to pay more Sprint PCS roaming fees than the roaming revenue we collect. If Sprint PCS does not complete the construction of its nationwide PCS network, we may not be able to attract and retain customers Sprint PCS' network may not provide nationwide coverage to the same extent as its competitors, which could adversely affect our ability to attract and retain customers. Sprint PCS is creating a nationwide PCS network through its own construction efforts and those of its affiliates. Today, Sprint PCS is still constructing its nationwide network and does not offer PCS services, either on its own network or through its roaming agreements, in every city in the United States. Sprint PCS has entered into, and anticipates entering into, affiliation agreements similar to ours with companies in other territories pursuant to its nationwide PCS build-out strategy. Our results of operations are dependent on Sprint PCS' national network and, to a lesser extent, on the networks of its other affiliates. Sprint PCS and its affiliate program are subject, to varying degrees, to the economic, administrative, logistical, regulatory and other risks described in other risk factors contained below. Sprint PCS' and its other affiliates' PCS operations may not be successful. We have a limited operating history and if we do not successfully manage our anticipated rapid growth, our operating performance may be adversely impacted We launched commercial operations in January 2000 and have grown our employee base to 272 employees as of June 30, 2000. Our performance as a PCS provider depends on our ability to implement operational and administrative systems, including the training and management of our engineering, marketing and sales personnel. These activities are expected to place demands on our managerial, operational and financial resources. The inability to use Sprint PCS' back office services and third party vendors' back office systems could disrupt our business Our operations could be disrupted if Sprint PCS is unable to maintain and expand its back office services such as customer activation, billing and customer care, or to efficiently outsource those services and systems through third party vendors. The rapid expansion of Sprint PCS' business is expected to continue to pose a significant challenge to its internal support systems. Additionally, Sprint PCS has relied on third-party vendors for a significant number of important functions and components of its internal support systems and may continue to rely on these vendors in the future. We depend on Sprint PCS' willingness to continue to offer such services to us and to provide these services at competitive costs. Our services agreement with Sprint PCS provides that, upon nine months' prior written notice, Sprint PCS may elect to terminate any such service beginning January 1, 2002. If Sprint PCS terminates a service for which we have not developed a cost-effective alternative, our operating costs may increase beyond our expectations and restrict our ability to operate successfully. If we fail to complete the build-out of our PCS network, Sprint PCS may terminate our management agreement, and we would no longer be able to offer Sprint PCS services As of June 30, 2000, we have completed the network build-out in 18 of the 21 markets which make up our territory. We expect to complete out network build-out in all 21 markets by August 31, 2000. A failure to meet our build-out requirements for any one of the individual markets in our territory, or to meet Sprint PCS' technical requirements, would constitute a breach of our management agreement with Sprint PCS that could lead to its termination. If the management agreement is terminated, we will no longer be able to offer Sprint PCS products and services. Our agreements with Sprint PCS require us to build our PCS network in accordance with Sprint PCS' technical and coverage requirements. These agreements also require that we provide network coverage to a specified percentage, ranging from 39% to 86%, of the population within each of the 21 markets which make up our territory by specified dates. We have substantial debt which we may not be able to service and which may result in our lenders controlling our assets in an event of default Our substantial debt will have a number of important consequences for our operations and our investors, including the following: - - we will have to dedicate a substantial portion of any cash flow from operations to the payment of interest on, and principal of, our debt, which will reduce funds available for other purposes; - - we may not have sufficient funds to pay interest on, and principal of, our debt; - - we may not be able to obtain additional financing for currently unanticipated capital requirements, capital expenditures, working capital requirements and other corporate purposes; - - some of our debt, including borrowings under the Lucent Financing, will be at variable rates of interest, which could result in higher interest expense in the event of increases in market interest rates; and - - due to the liens on substantially all of our assets and the pledges of stock of our subsidiary and future subsidiaries that secure our senior debt and our senior subordinated discount notes, lenders or holders of our senior subordinated discount notes may control our assets or our subsidiaries' assets upon a default. As of June 30, 2000, our outstanding long-term debt totaled $174.9 million. Under our current business plan, we expect to incur substantial additional debt before achieving break-even operating cash flow. Accordingly, we may utilize some portion, if not all, of the $140.0 million of additional available borrowings under our financing from Lucent. If we do not meet all of the conditions required under our Lucent financing documents, we may not be able to draw down all of the funds we anticipate receiving from Lucent and may not be able to complete the build-out of our network We have borrowed $13.5 million to date from Lucent. The remaining $140.0 million which we expect to borrow in the future is subject to our meeting all of the conditions specified in the financing documents and, in addition, is subject at each funding date to the following conditions: - - that the representations and warranties in the loan documents are true and correct; and - - the absence of a default under our loan documents. If we do not meet these conditions at each funding date, the lenders may not lend any or all of the remaining amounts, and if other sources of funds are not available, we may not be in a position to complete the build-out of our PCS network. If we do not have sufficient funds to complete our network build-out, we may be in breach of our management agreement with Sprint PCS and in default under our financing from Lucent and under our senior subordinated discount notes. If we lose the right to install our equipment on wireless towers owned by other carriers or fail to obtain zoning approval for our cell sites, we may have to rebuild our network More than 95% of our cell sites are collocated on facilities shared with one or more wireless providers. We collocate over 150 of these sites on facilities owned by one tower company. If our master collocation agreement with that tower company were to terminate, we would have to find new sites, and if the equipment had already been installed we might have to rebuild that portion of our network. Some of the cell sites are likely to require us to obtain zoning variances or other local governmental or third party approvals or permits. We may also have to make changes to our radio frequency design as a result of difficulties in the site acquisition process. We may have difficulty in obtaining subscriber equipment required in order to attract customers We depend on equipment vendors for an adequate supply of subscriber equipment, including handsets. If the supply or subscriber equipment is inadequate or delayed, we may have difficulty in attracting customers. Conflicts with Sprint PCS may not be resolved in our favor which could restrict our ability to manage our business and provide Sprint PCS products and services Conflicts between us and Sprint PCS may arise and as Sprint PCS owes us no duties except as set forth in the management agreement, these conflicts may not be resolved in our favor. The conflicts and their resolution may harm our business. For example, Sprint PCS prices its national plans based on its own objectives and could set price levels that may not be economically sufficient for our business. In addition, upon expiration, Sprint PCS could decide to not renew the management agreement which would not be in our best interest or the interest of our stockholders. There may be other conflicts such as the setting of the price we pay for back office services and the focus of Sprint PCS' management and resources. If we fail to pay our debt, our lenders may sell our loans to Sprint PCS giving Sprint PCS certain rights of a creditor to foreclose on our assets Sprint PCS has contractual rights, triggered by an acceleration of the maturity of the Lucent Financing, pursuant to which Sprint PCS may purchase our obligations under the Lucent Financing and obtain the rights of a senior lender. To the extent Sprint PCS purchases these obligations, Sprint PCS' interests as a creditor could conflict with ours. Sprint PCS' rights as a senior lender would enable it to exercise rights with respect to our assets and continuing relationship with Sprint PCS in a manner not otherwise permitted under our agreements with Sprint PCS. Certain provisions of our agreements with Sprint PCS may diminish the valuation of our company Provisions of our agreements with Sprint PCS could affect the valuation of our company, thereby, among other things reducing the market prices of our securities and decreasing our ability to raise additional capital necessary to complete our network build-out. Under our agreements with Sprint PCS, subject to the requirements of applicable law, there are circumstances under which Sprint PCS may purchase our operating assets or capital stock for 72% or 80% of the "entire business value" of our company, as defined in our management agreement with Sprint PCS. In addition, Sprint PCS must approve any change of control of our ownership and consent to any assignment of our agreements with Sprint PCS. Sprint PCS also has been granted a right of first refusal if we decide to sell our operating assets. We are also subject to a number of restrictions on the transfer of our business including the prohibition on selling our company or our operating assets to a number of identified and as yet to be identified competitors of Sprint PCS or Sprint. These and other restrictions in our agreements with Sprint PCS may limit the saleability and/or reduce the value a buyer may be willing to pay for our business and may operate to reduce the "entire business value" of our company. We may not be able to compete with larger, more established businesses offering similar products and services Our ability to compete will depend, in part, on our ability to anticipate and respond to various competitive factors affecting the telecommunications industry, including new services that may be introduced, changes in consumer preferences, demographic trends, economic conditions and discount pricing strategies by competitors. We will compete in our territory with two cellular providers, both of which have an infrastructure in place and have been operational for a number of years. They have significantly greater financial and technical resources than we do, could offer attractive pricing options and may have a wider variety of handset options. We expect that existing cellular providers will upgrade their systems and provide expanded, digital services to compete with the Sprint PCS products and services that we intend to offer. These wireless providers require their customers to enter into long-term contracts, which may make it more difficult for us to attract customers away from them. Sprint PCS generally does not require its customers to enter into long-term contracts, which may make it easier for other wireless providers to attract Sprint PCS customers away from Sprint PCS. We will also compete with several PCS providers and other existing communications companies in our territory. A number of our cellular and PCS competitors will have access to more licensed spectrum than the 10 MHz licensed to Sprint PCS in our territory. In addition, any competitive difficulties that Sprint PCS may experience could also harm our competitive position and success. Our services may not be broadly used and accepted by consumers PCS systems have a limited operating history in the United States. The extent of potential demand for PCS in our markets cannot be estimated with any degree of certainty. If we are unable to establish and successfully market PCS services we may not be able to attract customers in sufficient numbers to operate our business successfully. The technology we use has limitations and could become obsolete We intend to employ digital wireless communications technology selected by Sprint PCS for its network. Code division multiple access, known as CDMA, technology is a relatively new technology. CDMA may not provide the advantages expected by Sprint PCS. If another technology becomes the preferred industry standard, we may be at a competitive disadvantage and competitive pressures may require Sprint PCS to change its digital technology which, in turn, may require us to make changes at substantially increased costs. We may not be able to respond to such pressures and implement new technology on a timely basis, or at an acceptable cost. If Sprint PCS customers are not able to roam instantaneously or efficiently onto other wireless networks, prospective customers could be deterred from subscribing for our Sprint PCS services The Sprint PCS network operates at a different frequency and uses or may use a different technology than many analog cellular and other digital systems. To access another provider's analog cellular or digital system outside of the Sprint PCS network, a Sprint PCS customer is required to utilize a dual- band/dual-mode handset compatible with that provider's system. Generally, because dual-band/dual-mode handsets incorporate two radios rather than one, they are more expensive and are larger and heavier than single-band/single-mode handsets. The Sprint PCS network does not allow for call hand-off between the Sprint PCS network and another wireless network, thus requiring a customer to end a call in progress and initiate a new call when leaving the Sprint PCS network and entering another wireless network. In addition, the quality of the service provided by a network provider during a roaming call may not approximate the quality of the service provided by Sprint PCS. The price of a roaming call may not be competitive with prices of other wireless companies for roaming calls, and Sprint PCS customers may not be able to use Sprint PCS advanced features, such as voicemail notification, while roaming. Non-renewal or revocation by the Federal Communications Commission of the Sprint PCS licenses would significantly harm our business PCS licenses are subject to renewal and revocation. Sprint PCS' licenses in our territory will expire in 2007 but may be renewed for additional ten year terms. There may be opposition to renewal of Sprint PCS' licenses upon their expiration and the Sprint PCS licenses may not be renewed. The Federal Communications Commission, generally referred to as the FCC, has adopted specific standards to apply to PCS license renewals. Failure by Sprint PCS to comply with these standards in our territory could cause revocation or forfeiture of the Sprint PCS licenses for our territory or the imposition of fines on Sprint PCS by the FCC. The loss of our officers and skilled employees that we depend upon to operate our business could reduce our ability to offer Sprint PCS products and services The loss of one or more key officers could impair our ability to offer Sprint PCS products and services. Our business is managed by a small number of executive officers. We believe that our future success will also depend in large part on our continued ability to attract and retain highly qualified technical and management personnel. We believe that there is and will continue to be intense competition for qualified personnel in the PCS equipment and services industry as the PCS market continues to develop. We may not be successful in retaining our key personnel or in attracting and retaining other highly qualified technical and management personnel. We currently have "key man" life insurance for our chief executive officer. We may not achieve or sustain operating profitability or positive cash flow from operating activities We expect to incur significant operating losses and to generate significant negative cash flow from operating activities until 2002 while we develop and construct our PCS network and build our customer base. Our operating profitability will depend upon many factors, including, among others, our ability to market our services, achieve our projected market penetration and manage customer turnover rates. If we do not achieve and maintain operating profitability and positive cash flow from operating activities on a timely basis, we may not be able to meet our debt service requirements. Unauthorized use of our PCS network could disrupt our business We will likely incur costs associated with the unauthorized use of our PCS network, including administrative and capital costs associated with detecting, monitoring and reducing the incidence of fraud. Fraud impacts interconnection costs, capacity costs, administrative costs, fraud prevention costs and payments to other carriers for unbillable fraudulent roaming. Our agreements with Sprint PCS, our certificate of incorporation and our bylaws include provisions that may discourage, delay and/or restrict any sale of our operating assets or common stock to the possible detriment of our stockholders Our agreements with Sprint PCS restrict our ability to sell our operating assets and common stock. Generally, Sprint PCS must approve a change of control of our ownership and consent to any assignment of our agreements with Sprint PCS. The agreements also give Sprint PCS a right of first refusal if we decide to sell our operating assets to a third party. These restrictions, among other things, could discourage, delay or make more difficult any sale of our operating assets or common stock. This could have a material adverse effect on the value of our common stock and could reduce the price of our company in the event of a sale. Provisions of our certificate of incorporation and bylaws could also operate to discourage, delay or make more difficult a change in control of our company. Our certificate of incorporation, which contains a provision acknowledging the terms under the management agreement and a consent and agreement pursuant to which Sprint PCS may buy our operating assets, has been duly authorized and approved by our board of directors and our stockholders. This provision is intended to permit the sale of our operating assets pursuant to the terms of the management agreement or a consent and agreement with our lenders without further stockholder approval. Our relationship with Sprint PCS or any possible successor may be adversely affected by any acquisition or merger of Sprint Sprint or Sprint PCS may experience a change of control, sale or merger that could adversely affect our relationships with them. On July 13, 2000, Sprint and WorldCom announced the termination of their definitive merger agreement. There is widespread speculation with respect to Sprint's future intentions, including the possibility of Sprint seeking a new merger partner. If any sale or merger of Sprint is completed, we expect that our affiliation agreements with the merged company would be on the same terms as our current affiliation agreements with Sprint PCS. The results of any such transaction may alter the nature of our relationship with Sprint PCS, which could restrict our ability to operate successfully. Any negative impact on Sprint as a result of such a transaction could have a negative impact on us as a Sprint PCS affiliate. INDUSTRY RISKS We may experience a high rate of customer turnover which would increase our costs of operations and reduce our revenue Our strategy to reduce customer turnover may not be successful. The PCS industry has experienced a higher rate of customer turnover as compared to cellular industry averages. The rate of customer turnover may be the result of several factors, including network coverage; reliability issues such as blocked calls, dropped calls and handset problems; non-use of phones; change of employment; non-use of customer contracts, affordability; customer care concerns and other competitive factors. Price competition and other competitive factors could also cause increased customer turnover. Wireless providers offering services based on alternative technologies may reduce demand for PCS The wireless telecommunications industry is experiencing significant technological change, as evidenced by the increasing pace of digital upgrades in existing analog wireless systems, evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products and enhancements and changes in end-user requirements and preferences. There is also uncertainty as to the extent of customer demand as well as the extent to which airtime and monthly recurring charges may continue to decline. As a result, our future prospects and those of the industry, and the success of PCS and other competitive services, remain uncertain. Regulation by government agencies may increase our costs of providing service or require us to change our services The licensing, construction, use, operation, sale and interconnection arrangements of wireless telecommunications systems are regulated to varying degrees by the FCC, the Federal Aviation Administration and, depending on the jurisdiction, state and local regulatory agencies and legislative bodies. Adverse decisions regarding these regulatory requirements could negatively impact our operations and our cost of doing business. The Sprint PCS agreements reflect an affiliation that the parties believe meets the FCC requirements for licensee control of licensed spectrum. If the FCC were to determine that our agreements with Sprint PCS need to be modified to increase the level of licensee control, we have agreed with Sprint PCS to use our best efforts to modify the agreements as necessary to cause the agreements to comply with applicable law and to preserve to the extent possible the economic arrangements set forth in the agreements. If the agreements cannot be modified, the agreements may be terminated pursuant to their terms. Use of hand-held phones may pose health risks Media reports have suggested that certain radio frequency emissions from wireless handsets may be linked to various health problems, including cancer, and may interfere with various electronic medical devices, including hearing aids and pacemakers. Concerns over radio frequency emissions may discourage use of wireless handsets or expose us to potential litigation. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Amended and Restated Certificate of Incorporation of AirGate PCS, Inc. 3.2 Amended and Restated Bylaws of AirGate PCS, Inc. (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01) 4.1 Specimen of common stock certificate of AirGate PCS, Inc. (Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.2 Form of warrant issued in units offering (included in Exhibit 10.15) 4.3.1 Form of Weiss, Peck and Greer warrants (Incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1/A filed by the Company with the Commission on August 9, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.3.2 Form of Lucent Warrants (Incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-1/A filed by the Company with the Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.3.3 Form of Indenture for senior subordinated discount notes (including form of pledge agreement) (Incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-1/A filed by the Company with the Commission on September 23, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 4.4 Form of unit (included in Exhibit 10.15) 10.1.1 Sprint PCS Management Agreement between SprintCom, Inc. and AirGate Wireless, L.L.C. (Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.1.2 Addendum V to Sprint PCS Management Agreement dated May 12, 2000 by and among SprintCom, Inc., Sprint Communications Company, L.P. and AirGate PCS, Inc. 10.2 Sprint PCS Services Agreement between Sprint Spectrum L.P. and AirGate Wireless, L.L.C. (Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.3 Sprint Spectrum Trademark and Service Mark License Agreement (Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.4 Sprint Trademark and Service Mark License Agreement (Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.5 Master Site Agreement dated August 6, 1998 between AirGate and BellSouth Carolinas PCS, L.P., BellSouth Personal Communications, Inc. and BellSouth Mobility DCS (Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.6.1 Compass Telecom, L.L.C. Construction Management Agreement (Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.6.2* First Amendment to Services Agreement between AirGate PCS, Inc. and COMPASS Telecom Services, L.L.C. dated May 30, 2000 10.7 Commercial Real Estate Lease dated August 7, 1998 between AirGate and Perry Company of Columbia, Inc. to lease a warehouse facility (Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1/A filed by the Company with the Commission on July 12, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.8.1 Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.9 Employment Agreement dated April 9, 1999 by and between AirGate PCS, Inc. and Thomas M. Dougherty (Incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-1/A filed by the Company with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.10.1 Form of Executive Employment Agreement (Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1/A filed by the Company with the Commission on July 12, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.11 AirGate PCS, Inc. 1999 Stock Option Plan (Incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed by the Company with the Commission on April 10, 2000 (SEC File No. 333-34416)) 10.11.1 Form of AirGate PCS, Inc. Option Agreement 10.12 Credit Agreement with Lucent (including form of pledge agreement and form of intercreditor agreement) (Incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1/A filed by the Company with the Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.13 Consent and Agreement (Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1/A filed by the Company with the Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.14 Assignment of Sprint PCS Management Agreement, Sprint Spectrum Services Agreement and Trademark and Service Mark Agreement from AirGate Wireless, L.L.C. to AirGate Wireless, Inc. dated November 20, 1998 (Incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1/A filed by the Company with the Commission on August 9, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.15 Form of Warrant for units offering (including from of warrant in units offering and form of unit) (Incorporated by reference to Exhibit 10.15 to the Registration Statement on Form S-1/A filed by the Company with the Commission on September 23, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01)) 10.16 First Amendment to Employment Agreement dated December 20, 1999 between AirGate PCS, Inc. and Thomas M. Dougherty (Incorporated by reference to Exhibit 10.16 to the quarterly report on Form 10-Q filed by the Company with the Commission on May 15, 2000 for the quarter ended March 31, 2000 (SEC File No.000-27455)) 10.17 Retention Bonus Agreement dated May 4, 2000 between AirGate PCS, Inc. and Thomas M. Dougherty (Incorporated by reference to Exhibit 10.17 to the quarterly report on Form 10-Q filed by the Company with the Commission on May 15, 2000 for the quarter ended March 31, 2000 (SEC File No.000-27455)) 27 Financial Data Schedule *Confidential Treatment Requested (b) Reports on Form 8-K None. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned officer thereunto duly authorized. AirGate PCS, Inc. By: /s/ Alan B. Catherall --------------------------------- Name: Alan B. Catherall Title: Chief Financial Officer (Duly Authorized Officer) Date: August 14, 2000 /s/ Alan B. Catherall ----------------------------- Alan B. Catherall Chief Financial Officer (Principal Financial and Chief Accounting Officer) EX-3.1 2 0002.txt AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF AIRGATE PCS, INC. AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF AIRGATE PCS, INC. (ORIGINALLY INCORPORATED OCTOBER 14, 1998 UNDER THE NAME AIRGATE WIRELESS, INC.) FIRST: The name of the Corporation is AirGate PCS, Inc. (hereinafter sometimes referred to as the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware. FOURTH: A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is one-hundred fifty-five million (155,000,000) of stock consisting of: 1. One hundred fifty million (150,000,000) shares of Common Stock, par value one cent ($.01) per share. 2. Five million (5,000,000) shares of Preferred Stock, par value one cent ($.01) per share. B. The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate being hereinafter referred to as a "Preferred Stock Designation"), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation. FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its Directors and stockholders: A. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, the Directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. B. The Directors of the Corporation need not be elected by written ballot unless the Bylaws so provide. C. So long as there is more than one shareholder of the Corporation, no action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. D. Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board or as otherwise provided in the Bylaws. The term "Whole Board" shall mean the total number of authorized directorships (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). E. The holders of the Common Stock shall have no preemptive rights to subscribe for any shares of any class of stock of the Corporation whether now or hereafter authorized. F. The Corporation and the holders of its Common Stock shall be bound to (i) any and all provisions of Section 11 of the Sprint PCS Management Agreement dated July 22, 1998 (the "Agreement") between AirGate Wireless, LLC, Sprint Spectrum L.P., Sprint Communications Company, L.P. and SprintCom, Inc. assigned to the Corporation in November of 1998, which provide for the sale of the operating assets of the Corporation to SprintCom, Inc. upon non-renewal (as defined under the Agreement) and/or an event of termination (as set forth under Section 11 of the Agreement), said Agreement (including Section 11) having been duly approved and ratified by the Board of Directors of the Corporation and ratified by the sole stockholder of the Corporation; and (ii) the sale of the Operating Assets of the Corporation pursuant to the consent and agreement to be entered into by Sprint Spectrum L.P., Sprint Communications Company, L.P., SprintCom, Inc., and the Corporation's Senior Lenders, said sale of the Operating Assets having been duly approved and ratified by the Board of Directors of the Corporation and ratified by the sole stockholder of the Corporation. The purchase price for such Operating Assets will be based on a formula set forth in Section 11 of the Agreement as modified by the consent and agreement with the Corporation's Senior Lenders. SIXTH: A. The number of Directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board. The Directors shall be divided into three classes, as nearly equal in numbers as the then total number of directors constituting the entire Board permits with the term of office of one class expiring each year. At the annual meeting of stockholders in 1999 directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting, and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of stockholders. At each annual meeting of stockholders following such initial classification and election, Directors elected to succeed those Directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election with each Director to hold office until his or her successor shall have been duly elected and qualified. B. Subject to the rights of holders of any series of Preferred Stock outstanding, the newly created directorships resulting from any increase in the authorized number of Directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the Directors then in office, though less than a quorum, and Directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been chosen expires. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. C. Advance notice of stockholder nominations for the election of Directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. D. Notwithstanding any other provisions of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, any Director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of section D of this Article shall not apply with respect to the Director or Directors elected by such holders of Preferred Stock. SEVENTH: The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the Whole Board. The term "Whole Board" shall mean the total number of authorized directorships (whether or not there exist any vacancies in previously authorized directorships at the time such resolution is presented to the Board of Directors for adoption). The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation provided, however, that, in addition to any vote of the holders of any class or series of stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class, shall be required to adopt, amend or repeal any provisions of the Bylaws of the Corporation. EIGHTH: A. In addition to any affirmative vote required by law or this Certificate of Incorporation, and except as otherwise expressly provided in this Article EIGHTH: 1. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with: (i) any Interested Stockholder (as hereinafter defined); or (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or 2. any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder, or any Affiliate of any Interested Stockholder, of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) equaling or exceeding 25% or more of the combined assets of the Corporation and its Subsidiaries; or 3. the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value (as hereinafter defined) equaling or exceeding 25% of the combined Fair Market Value of the outstanding common stock of the Corporation and its Subsidiaries, except for any issuance or transfer pursuant to an employee benefit plan of the Corporation or any Subsidiary thereof; or 4. the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or 5. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder; shall require the affirmative vote of the holders of at least 80% of the voting power of the then-outstanding shares of stock of the Corporation entitled to vote in the election of Directors (the "Voting Stock") (after giving effect to the provisions of Article FOURTH), voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or by any other provisions of this Certificate of Incorporation or any Preferred Stock Designation or in any agreement with any national securities exchange or otherwise. The term "Business Combination" as used in this Article EIGHTH shall mean any transaction which is referred to in any one or more of paragraphs 1 through 5 of Section A of this Article EIGHTH. B. The provisions of Section A of this Article EIGHTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only the affirmative vote of the majority of the outstanding shares of capital stock entitled to vote after giving effect to the provisions of Article FOURTH, or such vote (if any), as is required by law or by this Certificate of Incorporation, if, in the case of any Business Combination that does not involve any cash or other consideration being received by the stockholders of the Corporation solely in their capacity as stockholders of the Corporation, the condition specified in the following paragraph 1 is met or, in the case of any other Business Combination, all of the conditions specified in either of the following paragraphs 1 or 2 are met: 1. The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined). 2. All of the following conditions shall have been met: a. The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by the holders of Common Stock in such Business Combination shall at least be equal to the higher of the following: (1) (if applicable) the Highest Per Share Price (as hereinafter defined), including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Stockholder or any of its Affiliates for any shares of Common Stock acquired by it: (i) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date"); or (ii) in the transaction in which it became an Interested Stockholder, whichever is higher; or (2) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (such latter date is referred to in this Article EIGHTH as the "Determination Date"), whichever is higher. b. The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any class of outstanding Voting Stock other than Common Stock shall be at least equal to the highest of the following (it being intended that the requirements of this subparagraph (b) shall be required to be met with respect to every such class of outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock): (1) (if applicable) the Highest Per Share Price (as hereinafter defined), including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it: (i) within the two-year period immediately prior to the Announcement Date; or (ii) in the transaction in which it became an Interested Stockholder, whichever is higher; or (2) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or (3) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. c. The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class of Voting Stock. If the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration to be received per share by holders of shares of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by the Interested Stockholder. The price determined in accordance with subparagraph B.2 of this Article EIGHTH shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. d. After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (1) except as approved by a majority of the Disinterested Directors (as hereinafter defined), there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding stock having preference over the Common Stock as to dividends or liquidation; (2) there shall have been: (i) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors; and (ii) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure to so increase such annual rate is approved by a majority of the Disinterested Directors, and (3) neither such Interested Stockholder or any of its Affiliates shall have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder. e. After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided, directly or indirectly, by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. f. A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, and the rules or regulations thereunder) shall be mailed to stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). C. For the purposes of this Article EIGHTH: 1. A "Person" shall include an individual, a firm, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities or any other entity. 2. "Interested Stockholder" shall mean any person (other than the Corporation or any Holding Company or Subsidiary thereof) who or which: a. is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the outstanding Voting Stock; or b. is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding Voting Stock; or c. is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. 3. For purposes of this Article EIGHTH, "beneficial ownership" shall be determined in the manner provided in Section C of Article FOURTH hereof. 4. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the date of filing of this Certificate of Incorporation. 5. "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 2 of this Section C, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. 6. "Disinterested Director" means any member of the Board of Directors who is unaffiliated with the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any Director who is thereafter chosen to fill any vacancy of the Board of Directors or who is elected and who, in either event, is unaffiliated with the Interested Stockholder and in connection with his or her initial assumption of office is recommended for appointment or election by a majority of Disinterested Directors then on the Board of Directors. 7. "Fair Market Value" means: a. in the case of stock, the highest closing sales price of the stock during the 30-day period immediately preceding the date in question of a share of such stock on the National Association of Securities Dealers Automated Quotation System or any system then in use, or, if such stock is admitted to trading on a principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, Fair Market Value shall be the highest sale price reported during the 30-day period preceding the date in question, or, if no such quotations are available, the Fair Market Value on the date in question of a share of such stock as determined by the Board of Directors in good faith, in each case with respect to any class of stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and b. in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined by the Board of Directors in good faith. 8. Reference to "Highest Per Share Price" shall in each case with respect to any class of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock. 9. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Subparagraphs (a) and (b) of Paragraph 2 of Section B of this Article EIGHTH shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. D. A majority of the Disinterested Directors of the Corporation shall have the power and duty to determine for the purposes of this Article EIGHTH, on the basis of information known to them after reasonable inquiry: (a) whether a person is an Interested Stockholder; (b) the number of shares of Voting Stock beneficially owned by any person; (c) whether a person is an Affiliate or Associate of another; and (d) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has an aggregate Fair Market Value equaling or exceeding 25% of the combined Fair Market Value of the Common Stock of the Corporation and its Subsidiaries. A majority of the Disinterested Directors shall have the further power to interpret all of the terms and provisions of this Article EIGHTH. E. Nothing contained in this Article EIGHTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. F. Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, this Certificate of Incorporation or any Preferred Stock Designation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares of the Voting Stock (after giving effect to the provisions of Article FOURTH), voting together as a single class, shall be required to alter, amend or repeal this Article EIGHTH. NINTH: The Board of Directors of the Corporation, when evaluating any offer of another person to (A) make a tender or exchange offer for any equity security of the Corporation, (B) merge or consolidate the Corporation with another corporation or entity or (C) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, may, in connection with the exercise of its judgment in determining what is in the best interest of the Corporation and its stockholders, give due consideration to all relevant factors, including, without limitation, those factors that Directors of any subsidiary of the Corporation may consider in evaluating any action that may result in a change or potential change in the control of the subsidiary, and the social and economic effect of acceptance of such offer on the Corporation's present and future customers and employees and on the communities in which the Corporation operates or is located and the ability of the Corporation to fulfill its corporate objective under applicable laws and regulations. TENTH: A. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a Director or an Officer of the Corporation or is or was serving at the request of the Corporation as a Director, Officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a Director, Officer, employee or agent or in any other capacity while serving as a Director, Officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section C hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. B. The right to indemnification conferred in Section A of this Article TENTH shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a Director or Officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, services to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise. The rights to indemnification and to the advancement of expenses conferred in Sections A and B of this Article TENTH shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a Director, Officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators. C. If a claim under Section A or B of this Article TENTH is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expenses of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article TENTH or otherwise shall be on the Corporation. D. The rights to indemnification and to the advancement of expenses conferred in this Article TENTH shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation's Certificate of Incorporation, Bylaws, agreement, vote of stockholders or Directors or otherwise. E. The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer, employee or agent of the Corporation or subsidiary or Affiliate or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. F. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article TENTH with respect to the indemnification and advancement of expenses of Directors and Officers of the Corporation. ELEVENTH: A Director of this Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the Director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification. TWELFTH: The provisions set forth in this Article and in Articles 5(C), 5(D), 5(E), 5(F), 6, 7, 8, 10 and 11 herein may not be repealed or amended in any respect, and no article imposing cumulative voting in the election of directors may be added, unless such action is approved by the affirmative vote of the holders of not less than eighty percent (80%) of the outstanding shares of Common Stock of this Corporation, subject to the provisions of any series of Preferred Stock which may at the time be outstanding; provided, however, that if there is a related person (as defined in Article 8) such amendment shall also require the affirmative vote of at least 50% of the outstanding shares of Common Stock held by stockholders other than the related person. IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation, which restates and integrates and does further amend the provisions of the Corporation's Certificate of Incorporation and having been duly adopted by the Board of Directors of the Corporation and approved by the stockholders of the Corporation in accordance with the provisions of Sections 242 and 245 of the General Corporation Laws of the State of Delaware, has been executed this 26th day of May, 2000 by Shelley Spencer, its authorized officer. AirGate PCS, Inc. By: /s/ Shelley Spencer ----------------------- Shelley Spencer Title: Vice President and Secretary EX-10.1.2 3 0003.txt ADDENDUM TO SPRINT PCS MANAGEMENT AGREEMENT 2 ADDENDUM V TO SPRINT PCS MANAGEMENT AGREEMENT Manager: AirGate PCS, Inc. Service Area: Anderson, SC BTA Asheville-Henderson, NC BTA Augusta, GA BTA Charleston, SC BTA Columbia, SC BTA Florence, SC BTA Goldsboro-Kinston, NC BTA Greenville-Washington, NC BTA Greenville-Spartanburg, SC BTA Greenwood, SC BTA Hickory-Lenoir-Morgantown, NC BTA Jacksonville, NC BTA Myrtle Beach, SC BTA New Bern, NC BTA Orangeburg, SC BTA Roanoke Rapids, NC BTA Rocky Mount-Wilson, NC BTA Savannah, GA BTA Sumter, SC BTA Wilmington, NC BTA Camden County, NC Currituck County, NC Dare County, NC Pasquotank County, NC This Addendum V (this "Addendum") dated as of May 12, 2000, contains certain additional and supplemental terms and provisions to that certain Sprint PCS Management Agreement entered into as of July 22, 1998 by the same parties as this Addendum, which Management Agreement was further amended by Addendum I entered into as of July 22, 1998, and further amended by Addendum II entered into as of May 24, 1999, Addendum III entered into as of August 2, 1999 and Addendum IV entered into as of August 26, 1999 (the Management Agreement as amended by Addenda I, II, III and IV being the "Management Agreement"). The terms and provisions of this Addendum control, supersede and amend any conflicting terms and provisions contained in the Management Agreement. Except for express modification made by this Addendum the Management Agreement continues in full force and effect. Capitalized terms used and not otherwise defined in this Addendum have the meanings ascribed to them in the Management Agreement. Section and Exhibit references are to Sections of, and Exhibits to, the Management Agreement, unless otherwise noted. 1. EXPEDITE FEES. If Sprint PCS and Manager agree to pay additional fees to a third party for any efforts associated with expediting completion of any portion of Manager's Build Out Plan or Switch Integration to meet a Network Ready Date (the "NRD") including, but not limited to, payment of expedited fees for microwave relocation, and the NRD is later extended due to Manager action or lack of action, then Manager will have full responsibility for the payment of such fees. 2. LONG-DISTANCE PRICING. (a) The first sentence of Section 3.4 is deleted in its entirety and replaced by the following language: Manager must purchase long-distance telephony services from Sprint through Sprint PCS both (i) to provide long-distance telephony service to users of the Sprint PCS Network and (ii) to connect the Service Area Network with the national platforms used by Sprint PCS to provide services to Manager under the agreement and/or the Services Agreement. Sprint will bill Sprint PCS for such services rendered to Sprint PCS, Manager and all Other Managers, and in turn, Sprint PCS will bill Manager for the services used by Manager. Manager will be charged the same price for such long-distance service as Sprint PCS is charged by Sprint (excluding interservice area long-distance travel rates) plus an additional administrative fee to cover Sprint PCS' processing costs. (b) The following sentence is added as a second paragraph in Section 3.4: "Manager may not resell the long-distance telephony services acquired from Sprint under this Section 3.4." 3. RIGHT OF LAST OFFER. Section 3.7 is modified by adding the following language: "(other than backhaul services relating to national platform and IT application connections, which Manager must purchase from Sprint)" both between (i) "Service Area Network" and "if Manager decides to use" in the first sentence of the first paragraph and (ii) "for these services" and "and the agreement was not made" in the first sentence of the second paragraph. 4. NON-TERMINATION OF AGREEMENT. The following language is added at the end of Section 11.5.3 and Section 11.6.4: "but such action does not terminate this agreement." 5. AMENDMENTS TO SECTIONS 13 THROUGH 16 OF MANAGEMENT AGREEMENT. If, on or before June 30, 2000, Manager achieves network ready status of the Service Area Network and meets the covered pops requirement, as stated in Exhibit 2.1 to ----------- the Management Agreement, in all of the markets in the Service Area other than the markets listed below and the New Service Area (such markets targeted for June 30, 2000 network ready status being referred to as the "June 30 Markets"), then Sections 13, 14, 15 and 16 of Addendum I to the Management Agreement and any references thereto in subsequent Addenda shall be deemed terminated and deleted from all Addenda to the Management Agreement and of no further force or effect. For purposes of this section, the Service Area Network shall be as set forth in the original Management Agreement and the covered pops requirements shall be as set forth in Exhibit 2.1 to Addendum II. ------------ Greenwood, SC BTA New Bern, NC BTA Camden County, NC Currituck County, NC Dare County, NC Pasquotank County, NC If Manager does not achieve network ready status and meet covered pops requirements in all of the June 30 Markets by June 30, 2000, then Sections 13, 14, 15 and 16 of Addenda I to the Management Agreement and any references thereto in subsequent Addenda will remain in full force and effect until the date on which all of the June 30 Markets have achieved network ready status and met the covered pops requirements, at which time each of such sections shall be deemed terminated and deleted from all Addenda to the Management Agreement and of no further force or effect. 6. STOCK AS COLLATERAL. The restrictions in the Management Agreement against the Principals pledging their shares of AirGate PCS, Inc. common stock as collateral terminate on the date of this Addendum. 7. ANNOUNCED TRANSACTIONS. Section 17.23 of the Management Agreement is deleted in its entirety. 8. ADDITIONAL TERMS AND PROVISIONS. The phrase "the Addendum also describes" is deleted from the second sentence of Section 17.24 of the Management Agreement, and the following language is inserted at the end of that second sentence: "have been disclosed verbally or in writing to Sprint PCS, and photocopies of any such written agreements will be delivered to Sprint PCS upon its request". 9. PAYMENT OF FEES UNDER SERVICES AGREEMENT. The second sentence of Section 3.1 of the Services Agreement is deleted in its entirety and replaced by the following two sentences: Except with respect to fees paid for billing-related services, the monthly charge for any fees based on the number of subscribers of the Service Area Network will be determined based on the number of subscribers as of the 15th day of the month for which the charge is being calculated. With respect to fees paid for billing-related services, the monthly charge for any fees based on the number of subscribers will be based on the number of gross activations in the month for which the charge is being calculated plus the number of subscribers of the Service Area Network on the last day of the prior calendar month. IN WITNESS WHEREOF, the parties hereto have caused this Addendum V to be executed by their respective authorized officers as of the date and year first above written. SPRINTCOM, INC. By: /s/ Bernard A. Bianchino ------------------------ Bernard A. Bianchino, Senior Vice President and Chief Business Development Officer - Sprint PCS SPRINT COMMUNICATIONS COMPANY, L.P. By: /s/ Don A. Jensen ------------------ Don A. Jensen Vice President - Law AIRGATE PCS, INC. By: /s/ Thomas M. Dougherty ----------------------- Thomas M. Dougherty President and CEO EX-10.6.2 4 0004.txt FIRST AMENDMENT TO COMPASS SERVICES AGREEMENT Proprietary and Confidential 08/10/00 FIRST AMENDMENT TO SERVICES AGREEMENT between AIRGATE PCS, INC. AND COMPASS TELECOM SERVICES, L.L.C. THIS FIRST AMENDMENT TO SERVICES AGREEMENT ("Amendment") is made and entered into this 30 day of May, 2000 by and between AIRGATE PCS, INC. ("AIRGATE") and COMPASS TELECOM SERVICES, L.L.C. ("COMPASS" OR "SERVICE PROVIDER"). W I T N E S S E T H WHEREAS, on August 1, 1998, AirGate Wireless, L.L.C. and Compass entered into a Services Agreement, that was subsequently assigned to AirGate, for Compass to provide construction and project management services for construction of AirGate's PCS network (the "Agreement"); and WHEREAS, AirGate and Compass now wish to amend, modify and supplement the terms of the Agreement Lease as more particularly described in this Amendment. NOW, THEREFORE, for and in consideration of the foregoing premises, and other consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto hereby amend, modify and supplement the Agreement as follows: 1. DEFINITIONS. Except as amended in this Amendment, the terms as defined in the Agreement shall have the same definition for purposes of this Amendment. 2. 3.1 CONTRACT PRICE. Section 3.1 of the Agreement is hereby deleted and replaced in its entirety by the following: " Company shall pay Service Provider for the Services a fixed price of * All of the Service prices set forth in Exhibit A (revised March 20, 2000), including the prices for Additional Services shall be fixed for the term of the Agreement." 3. 3.6 BILLING ADDRESS. Section 3.1 of the Agreement is hereby deleted and replaced in its entirety by the following: "Service Provider will submit invoices to Company at the following address: AirGate PCS, Inc. 233 Peachtree Street, NE, Suite 1700 Atlanta, GA 30303 Attn: David Roberts, Vice President of Engineering and Operations" * Confidential portion omitted pursuant to a request for confidential treatment and filed separately with the Commission. 4. 3.7 PAYMENT ADDRESS. Section 3.7 of the Agreement is hereby deleted and replaced in its entirety by the following: "Payment will be made to Service Provider at the following address, unless otherwise requested by Service Provider: COMPASS Telecom Services, L.L.C. 2110 Newmarket Parkway, Suite 200 Marietta, GA 30067 Attn: Accounts Receivable" 5. EXHIBIT A. Exhibit A is hereby deleted and replaced in its entirety by Exhibit A-2 attached hereto. 6. AGREEMENT REMAINS IN EFFECT. Except as otherwise amended, modified or supplemented by the terms of this Amendment, the parties hereto expressly acknowledge and agree that the terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF the parties execute this Amendment and bind themselves to its terms as of the date of execution of this Amendment. AIRGATE PCS, INC. COMPASS TELECOM SERVICES, L.L.C. /s/ Thomas M. Dougherty /s/ Matthew Prather - ----------------------- --------------------- (Signature) (Signature) Title: President and CEO Title: Vice President Date: May 26, 2000 Date: May 30, 2000 EXHIBIT A-2 Fixed Contract Prices (Revised March 20, 2000) The following sets forth the agreed to revised prices under the terms and scopes of the services included in this contract. The prices outlined are fixed for the duration of this contract as referenced in Section 4.1. All services are fixed price per site. Description Original Revised -------- --------- Program Management * * Construction Management * * Fixed Network Design * * Material Management * * ------- ------- Subtotal * * Fixed Overhead Expenses * * ------- ------- Total * * X * Sites * * ------- ------- (X * Site) * Confidential portion omitted pursuant to a request for confidential treatment treatment and filed separately with the Commission. EX-10.11.1 5 0005.txt FORM OF AIRGATE PCS, INC. OPTION AGREEMENT AIRGATE PCS, INC. OPTION AGREEMENT THIS OPTION AGREEMENT is entered into by and between AIRGATE PCS, INC. (the "Company") and _____ (the "Optionee") in accordance with the terms and conditions of the 1999 Stock Option Plan adopted by the Company (the "Plan"), a copy of which is on file at the principal office of the Company. The Company and the Optionee hereby agree as follows: 1. OPTION OF SHARES. The Optionee shall have the right from the date hereof ---------------- through the term hereof to purchase ___ shares of the $.01 par value common stock of the Company (such ___ shares, as may be adjusted in accordance with this Option Agreement, hereinafter referred to as the "Optioned Shares" and this option hereinafter referred to as the "Option"). 2. OPTION PRICE. The price per share for each of the Optioned Shares to be ------------- paid by the Optionee shall be ____ per share (hereinafter referred to as the "Option Price"), such Option Price having been determined in accordance with the Plan. 3. EXERCISE AND TERM OF OPTION. This Option may be exercised only by ------------------------------- delivery by the Optionee to the Company or the Company's delegate of written notice of exercise executed by the Optionee on the exercise form set forth as Exhibit A attached hereto and made a part hereof, which exercise form shall -------- identify this Option, together with the number of shares with respect to which -- the Optionee is exercising the Option. The Optionee may exercise this Option for less than the full number of the Optioned Shares, but such exercise shall not be made for less than twenty-five percent (25%) of the then-exercisable number of Optioned Shares. Subject to the other restrictions on exercisability set forth herein and in the Plan, the unexercised portion of the Optioned Shares may be exercised at a later date by the Optionee; the twenty-five percent (25%) requirement set forth above shall not apply to any exercise of this Option in which all of the remaining Optioned Shares which are then-exercisable are exercised. Notwithstanding any provisions herein to the contrary, this Option shall not be exercisable either in whole or in part after whichever of the following first occurs: (i) Month ___, 20__; (10 years minus one day from date of Board Resolution - if resolution list of Optionees is adopted on January 21, 2000, then this date is January 20, 2010.) (ii) if the Optionee was not, at all times during the period beginning on the date hereof and ending on the date three (3) months before the proposed date of exercise of this Option, in Continuous Status as an Employee, except if such cessation of Continuous Status as an Employee was caused by the death of the Optionee or occurred before the Option otherwise expired, in which case such period shall end on the date six (6) months following the date of death, and except if such cessation of Continuous Status as an Employee was as a result of the total and permanent disability of the Optionee as defined in the Plan, in which case, such period shall end on the date twelve (12) months from the date of Optionee's cessation in Continuous Status as an Employee be reason of such disability; (iii) the date upon which the stockholders of the Company have voted to liquidate or dissolve the Company; or (iv) to the extent exercisability of the Option is limited in accordance with the conditions set forth in Exhibit B attached hereto and made a part --------- hereof. 4. OPTION NON-TRANSFERABLE. During the lifetime of the Optionee, this ------------------------ Option shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee and, subject to Paragraph 5 below, no other person shall acquire any rights in this Option. 5. DEATH OF OPTIONEE AND TRANSFER OF OPTION. In the event of the death of ------------------------------------------ the Optionee, the unexercised portion of this Option owned by the deceased Optionee shall be exercisable to the extent provided in Paragraph 3 by the executors or administrators of the estate of the Optionee or by any person or persons who shall have acquired the Option directly from the Optionee by bequest or inheritance. Such exercise shall be effected in accordance with the terms set forth in Paragraph 3 as if such executor, administrator or legatee was the Optionee herein. For purposes of Paragraph 3(iv), above, the determination of the vested percentage shall be made on the earlier of the date of cessation of Continuous Status as an Employee or the date of death, as applicable. This Option shall not be transferable by the Optionee otherwise than by will or by the laws of descent and distribution. 6. MEDIUM AND TIME OF PAYMENT. The Option Price shall be payable by the ------------------------------ Optionee (or his successors in accordance with Paragraph 5 above) upon exercise of this Option in cash. Without limiting the foregoing, if the Optionee is an officer or director of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, he may in addition be allowed to pay all or part of the purchase price with Shares. Shares used by officers or directors to pay the exercise price shall be valued at their fair market value on the exercise date. 7. DELIVERY OF STOCK CERTIFICATES. Except as provided in Exhibit B or --------------------------------- --------- Exhibit C, as promptly as practicable after the date of exercise of this Option ----- and the receipt by the Company of full payment therefor, the Company shall deliver to the Optionee a stock certificate representing the stock of the Company so purchased. 8. STATUS OF OPTION. This Option is intended to be an Incentive Stock ------------------ Option. 9. OTHER TERMS AND CONDITIONS. In addition to the terms and conditions set --------------------------- forth herein, this Option is subject to and governed by the other terms and conditions set forth in the Plan, which other terms and conditions are hereby incorporated by reference. In the case of express conflict, the provisions of this Option Agreement shall govern. IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement as of this __st day of Month, 20__. (Date of this Option Agreement determined by date created after Board Resolution approves Optionee.) COMPANY: AIRGATE PCS, INC. By:_____________________________________ Title: President and CEO [CORPORATE SEAL] OPTIONEE: _______________________________________ Name: ___________ (Type in full name of Optionee here as it appears in first paragraph of agreement.) EXHIBIT A --------- NOTICE OF EXERCISE The undersigned Optionee hereby exercises his option to purchase __________ shares subject to the Option Agreement between AIRGATE PCS, INC. and the undersigned Optionee dated ____________________. The undersigned Optionee hereby delivers, together with this written statement of exercise, payment of the full Option Price for the exercised shares. This _____ day of _______________, _____. OPTIONEE: ____________________________________ AIRGATE PCS, INC. hereby acknowledges receipt of the above notice of exercise and payment of the Option Price, this _____ day of _______________, _____. AIRGATE PCS, INC. By:_________________________________ Title:________________________________ [CORPORATE SEAL] EXHIBIT B --------- "EXHIBIT 2" ----------- CONDITIONS TO EXERCISE OF STOCK OPTIONS NUMBER OF FULL MONTHS OF PERCENTAGE OF OPTIONED CONTINUOUS STATUS AS AN SHARES WHICH OPTIONEE EMPLOYEE BY OPTIONEE HAS A VESTED RIGHT TO ACQUIRE SINCE DATE OF HIRE: ------------------- ------------------------------- Less than 12 25% ----------- --- 12 - 14 25% ------- --- 15 - 17 30% ------- --- 18 - 20 35% ------- --- 21 - 23 40% ------- --- 24 - 26 45% ------- --- 27 - 29 50% ------- --- 30 - 32 55% ------- --- 33 - 35 60% ------- --- 36 - 38 65% ------- --- 39 - 41 70% ------- --- 42 - 44 75% ------- --- 45 - 47 80% ------- --- 48 - 50 85% ------- --- 51 - 53 90% ------- --- 54 - 56 95% ------- --- 57 or more 100% ---------- ---- 1. For purposes of computing the number of Optioned Shares which Optionee has a right to acquire by exercise of this Option in accordance with the vesting schedule set forth above, fractional shares shall be disregarded and the next lower whole number of shares shall be used, rounding all fractions downward. 2. Notwithstanding the foregoing vesting schedule, if Optionee's Continuous Status as an Employee has not terminated at the time of a Change of Control (as defined below), the exercise of the Option shall be vested to the same extent as if Optionee were credited with additional full months of Continuous Status as an Employee equal to one-half (rounded to the next lowest integer) of the number of months remaining until Optionee is 100% vested. For example, if a Change of Control occurs after the Offering at a time Optionee has 24 such months of such Continuous Status, then he will be deemed to have 40 months of such Continuous Status [i.e., 24 + 1/2 (57 - 24) = 40.5, or 40]. For purposes of this paragraph, a "Change of Control" shall be deemed to have occurred if, after the Offering, there is a Control Transaction (as defined below) and any entity, person or Group (as defined below) other than the Company or its Parent or Subsidiary or their officers, directors or shareholders as of the date hereof acquires shares of the Company or its Parent in a transaction (or series of transactions within a consecutive twelve (12) month period) that result in such entity, person or Group directly or indirectly owning beneficially fifty-one percent (51%) or more of the total number of outstanding shares entitled to vote to elect members of the Board of Directors (without distinction as to class) of the Company or its Parent. As used herein, "Control Transaction" shall mean (i) any tender offer for or acquisition of capital stock of the Company or and its Parent or (ii) any merger, consolidation, or sale of all or substantially all of the assets of the Company or its Parent which has been approved by the shareholders thereof, but expressly excludes any public offering of capital stock by the Company or its Parent. As used herein, "Group" shall mean persons who act in concert as described in Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended. 3. Notwithstanding the foregoing, Optionee may not exercise this Option as to any Optioned Shares prior to April 15, 2000 (unless Optionee's employment is terminated involuntarily by the Company). EXHIBIT B --------- "EXHIBIT 3" CONDITIONS TO EXERCISE OF STOCK OPTIONS NUMBER OF FULL MONTHS OF PERCENTAGE OF OPTIONED CONTINUOUS STATUS AS AN SHARES WHICH OPTIONEE EMPLOYEE BY OPTIONEE HAS A VESTED RIGHT TO ACQUIRE SINCE DATE OF HIRE: ------------------- ------------------------------- Less than 12 25% ----------- --- 12 - 14 25% ------- --- 15 - 17 30% ------- --- 18 - 20 35% ------- --- 21 - 23 40% ------- --- 24 - 26 45% ------- --- 27 - 29 50% ------- --- 30 - 32 55% ------- --- 33 - 35 60% ------- --- 36 - 38 65% ------- --- 39 - 41 70% ------- --- 42 - 44 75% ------- --- 45 - 47 80% ------- --- 48 - 50 85% ------- --- 51 - 53 90% ------- --- 54 - 56 95% ------- --- 57 or more 100% ---------- ---- 1. For purposes of computing the number of Optioned Shares which Optionee has a right to acquire by exercise of this Option in accordance with the vesting schedule set forth above, fractional shares shall be disregarded and the next lower whole number of shares shall be used, rounding all fractions downward. 2. Notwithstanding the foregoing vesting schedule, if Optionee's Continuous Status as an Employee has not terminated at the time of a Change of Control (as defined below), the exercise of the Option shall be vested to the same extent as if Optionee were credited with additional full months of Continuous Status as an Employee equal to one-half (rounded to the next lowest integer) of the number of months remaining until Optionee is 100% vested. For example, if a Change of Control occurs after the Offering at a time Optionee has 24 such months of such Continuous Status, then he will be deemed to have 40 months of such Continuous Status [i.e., 24 + 1/2 (57 - 24) = 40.5, or 40]. For purposes of this paragraph, a "Change of Control" shall be deemed to have occurred if, after the Offering, there is a Control Transaction (as defined below) and any entity, person or Group (as defined below) other than the Company or its Parent or Subsidiary or their officers, directors or shareholders as of the date hereof acquires shares of the Company or its Parent in a transaction (or series of transactions within a consecutive twelve (12) month period) that result in such entity, person or Group directly or indirectly owning beneficially fifty-one percent (51%) or more of the total number of outstanding shares entitled to vote to elect members of the Board of Directors (without distinction as to class) of the Company or its Parent. As used herein, "Control Transaction" shall mean (i) any tender offer for or acquisition of capital stock of the Company or and its Parent or (ii) any merger, consolidation, or sale of all or substantially all of the assets of the Company or its Parent which has been approved by the shareholders thereof, but expressly excludes any public offering of capital stock by the Company or its Parent. As used herein, "Group" shall mean persons who act in concert as described in Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended. EXHIBIT B --------- "EXHIBIT 4" CONDITIONS TO EXERCISE OF STOCK OPTIONS NUMBER OF FULL MONTHS OF PERCENTAGE OF OPTIONED CONTINUOUS STATUS AS AN SHARES WHICH OPTIONEE EMPLOYEE BY OPTIONEE HAS A VESTED RIGHT TO ACQUIRE SINCE DATE OF HIRE: ------------------- ------------------------------- Less than 24* 0% ------------- -- 24 - 26 25.00% ------- ------ 27 - 29 31.25% ------- ------ 30 - 32 37.50% ------- ------ 33 - 35 43.75% ------- ------ 36 - 38 50.00% ------- ------ 39 - 41 56.25% ------- ------ 42 - 44 62.50% ------- ------ 45 - 47 68.75% ------- ------ 48 - 50 75.00% ------- ------ 51 - 53 81.25% ------- ------ 54 - 56 87.50% ------- ------ 57 - 59 93.75% ------- ------ 60 or more 100.00% ---------- ------- * Before July 22, 2000 1. The individuals governed by this "Exhibit 4" were hired for purposes hereof on July 22, 1998. 2. For purposes of computing the number of Optioned Shares which Optionee has a right to acquire by exercise of this Option in accordance with the vesting schedule set forth above, fractional shares shall be disregarded and the next lower whole number of shares shall be used, rounding all fractions downward. 3. Notwithstanding the foregoing vesting schedule, if Optionee's Continuous Status as an Employee has not terminated at the time of a Change of Control (as defined below), the exercise of the Option shall be vested to the same extent as if Optionee were credited with additional full months of Continuous Status as an Employee equal to one-half (rounded to the next lowest integer) of the number of months remaining until Optionee is 100% vested. For example, if a Change of Control occurs after the Offering at a time Optionee has 24 such months of such Continuous Status, then he will be deemed to have 42 months of such Continuous Status [i.e., 24 + 1/2 (60 - 24) = 42]. For purposes of this paragraph, a "Change of Control" shall be deemed to have occurred if, after the Offering, there is a Control Transaction (as defined below) and any entity, person or Group (as defined below) other than the Company or its Parent or Subsidiary or their officers, directors or shareholders as of the date hereof acquires shares of the Company or its Parent in a transaction (or series of transactions within a consecutive twelve (12) month period) that result in such entity, person or Group directly or indirectly owning beneficially fifty-one percent (51%) or more of the total number of outstanding shares entitled to vote to elect members of the Board of Directors (without distinction as to class) of the Company or its Parent. As used herein, "Control Transaction" shall mean (i) any tender offer for or acquisition of capital stock of the Company or and its Parent or (ii) any merger, consolidation, or sale of all or substantially all of the assets of the Company or its Parent which has been approved by the shareholders thereof, but expressly excludes any public offering of capital stock by the Company or its Parent. As used herein, "Group" shall mean persons who act in concert as described in Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended. 4. Notwithstanding the foregoing vesting schedule, if Optionee is involuntarily terminated by the Company without Cause, Optionee shall be 100% vested in all Optioned Shares effective as of date of such termination. For purposes of this paragraph 4, "Cause" shall mean (i) breach of the stock transfer restrictions set forth in Section 13 of Addendum II and Addendum III to the Management Agreement between the Company and SprintCom, Inc. dated July 22, 1998 (the "Management Agreement"), (ii) breach of the primary business restriction set forth in Section 14(a) of Addendum II of the Management Agreement, or (iii) breach of any covenant not to compete contained in the Management Agreement or any employment agreement now or hereafter entered into between Optionee and the Company. EXHIBIT C --------- NONCOMPETITION AGREEMENT AGREEMENT entered into as of the ____ day of __________, _____, between AIRGATE PCS, INC., a Delaware corporation ("Employer"), and ________________________ ("Employee"). Employer is in the business of _________________________________________ (the "Business"). Employee currently is, or at the time of his termination was, employed by Employer as ________________________________ of Employer (the "Capacity"). To protect Employer"s legitimate interests, Employer and Employee find it necessary and appropriate to restrict competition and certain other activities by Employee, on the terms and conditions hereinafter set forth. NOW, THEREFORE, for and in consideration of the issuance of AirGate PCS, Inc. stock to Employee as compensation, the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted by Employee, Employee agrees with Employer as follows: 1. USE AND DISCLOSURE OF CONFIDENTIAL INFORMATION. During the period ------------------------------------------------ of two (2) years after Employee's employment has terminated for any reason whatsoever (or, in the case of trade secrets, for so long as the information in question remains a trade secret) and during any period Employee is employed by Employer hereafter, Employee shall not, without the prior written consent of Employer, directly or indirectly, divulge, disclose or publish to any person or entity, or reproduce or use in any way, except only as required for the benefit of Employer, any Confidential Information (as defined herein). Upon Employer's request and, in any event, upon the termination of Employee's employment with Employer for any reason whatsoever, Employee shall immediately return any reproductions of Confidential Information to Employer. For purposes of this Agreement, "Confidential Information" means any trade secrets and any information relating to Employer's business that is competitively sensitive and not generally known by the public, including processes, policies, procedures, techniques, designs, drawings, know-how, show-how, technical information, technology, specifications, products, computer programs (including computer programs developed, improved or modified by Employee for or on behalf of Employer for use in Employer's business), algorithms, systems, methods of operation, order entry forms, price lists, customer lists, customer information, solicitation leads, marketing research data, marketing and advertising materials and methods and manuals and forms, all of which pertain to the Business. Confidential Information does not include any information which (i) is available in published print or otherwise known to the public, unless published or made known as a result of acts or omissions of Employee, or (ii) is lawfully obtained by Employee in writing from a third party who did not acquire such confidential information or trade secret, directly or indirectly, from Employee or Employer. 2. COMPETITION. During the period of eighteen (18) months after ----------- Employee's employment has terminated for any reason whatsoever and during any period Employee is employed by Employer hereafter, Employee shall not, directly or indirectly, for himself or on behalf of or in conjunction with any other person, firm or entity -- (a) Engage in the Business, in the same or a similar capacity as Employee has been employed by Employer, anywhere within ______________________________________________________________________ _ __________ (the "Territory"), provided that, if Employee's employment with Employer is ended, the prohibition of this Section 2(a) applies only to the locations within such Territory where Employee actually was working during the six months immediately preceding the time Employee's employment with Employer ended; (b) Initiate any action to solicit in competition with the Business of Employer or to divert or attempt to divert from Employer the Business of any person, firm or entity for which Employer provided services in connection with the Business at any time during the period of twenty-four (24) months immediately preceding the time of such solicitation, diversion or attempt to divert and with whom Employee had material contact in the course of Employee's employment with Employer; or (c) Initiate any action to hire for any other employer any employee of the Employer or directly or indirectly cause any employee of the Employer to leave his employment in order to work for another. Employee acknowledges that Employer has conducted and expects to conduct its business throughout the Territory and that Employer expects that during the aforesaid period, Employer will continue to expand its business throughout the Territory and that this expectation is realistic; that Employee shall be engaged in Employer's business, in the Capacity, with respect to Employer's activities throughout the Territory; and that because of Employee's association with Employer, Employer's business would be seriously and irreparably harmed if Employee were to compete with Employer in the manner prohibited above. 3. REPURCHASE OPTIONS. ------------------- (a) If Employee breaches his obligations under Section 1 or Section 2 hereof, Employer or AirGate PCS, Inc. shall have the option to repurchase any and all shares then owned by Employee and acquired by Employee pursuant to the AIRGATE PCS, INC. 1999 Stock Option Plan (the "Plan") at a purchase price equal to Employee's Option Price thereunder. Employer or AirGate PCS, Inc. shall exercise its option by notifying Employee of such exercise in writing, within ten (10) days of which Employee shall deliver certificates for such shares, duly endorsed in blank, free and clear of all liens and encumbrances, and Employer or AirGate PCS, Inc. shall concurrently deliver payment therefor. If Employee fails to so deliver such certificates, AirGate PCS, Inc. may cancel such shares of record and deposit payment into escrow, for release to Employee pending delivery of the endorsed share certificates. Following full satisfaction by Employee of his obligations pursuant to this Section 3, Employer agrees to release Employee from his covenants in Section 2(a). (b) If, after termination of employment, Employee disparages Employer or any officer, director, shareholder, employee or representative of Employer, then without regard to whether Employee has breached his obligations under Section 2 hereof, Employer or AirGate PCS, Inc. shall have the option to repurchase any and all shares then owned by Employee and acquired by Employee pursuant to the Plan at the option price and in the same manner as is provided in Section 3(a); provided, however, the last sentence of Section 3(a) shall not apply. 4. INJUNCTION. As any breach by Employee of any of the covenants ---------- contained in this Agreement would result in irreparable injury to Employer, and as the damages arising out of any such breach would be difficult to ascertain, Employee agrees that, in addition to all other remedies provided by law or in equity, Employer shall be entitled to an injunction against any such breach, whether actual or contemplated. 5. SETOFF. Employer or AirGate PCS, Inc. shall be entitled to set off ------ against any compensation, commissions and other payments of any kind owed to Employee any amounts owing to Employer or AirGate PCS, Inc. as a result of a breach of this Agreement or otherwise. 6. MODIFICATION. Should any provision of this Agreement be declared ------------ unenforceable by a court of competent jurisdiction, the parties request that such court modify such provision in a manner consistent with the intent of this Agreement so that it shall be enforceable as modified to the greatest extent, in the largest territory, and for the longest duration as may be permitted by law. 7. SEVERABILITY. If any provision of this Agreement shall for any reason ------------ be held illegal or unenforceable, such provision shall be deemed severable from the remaining provisions of this Agreement and shall in no way affect or impair the validity or enforceability of the remaining provisions of this Agreement. 8. CUMULATIVE RIGHTS. Any rights and remedies of Employer or AirGate ------------------ PCS, Inc. pursuant to this Agreement shall be in addition to and cumulative of, and shall in no way limit or supersede, any other rights and remedies Employer or AirGate PCS, Inc. may have under law or in equity or pursuant to any other agreement with Employee. 9. MISCELLANEOUS. As to the subject matter hereof, this Agreement ------------- supersedes any and all other agreements, either oral or in writing, between the parties hereto and constitutes the entire agreement between the parties. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged. Failure or delay of either party to insist upon compliance with any provision hereof will not operate and is not to be construed as a waiver or amendment of the provision or the right of the aggrieved party to insist upon compliance with such provision or to take remedial steps to recover damages or other relief for noncompliance. Any express waiver of any provision of this Agreement will not operate and is not to be construed as a waiver of any subsequent breach, whether occurring under similar or dissimilar circumstances. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, assigns, heirs, executors and personal representatives, but neither this Agreement nor any rights hereunder shall be assignable by Employee. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. The captions set forth herein are for convenience of reference only and shall not be used in interpreting this Agreement. "Including" means including without limitation. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. EXECUTED as of the date first above written. EMPLOYEE: Name: Address: EMPLOYER: AIRGATE PCS, INC. By: Name: Title: EX-27 6 0006.txt ARTICLE 5 FDS FOR 3RD QUARTER 10-Q WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1000 [LEGEND] THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF AIRGATE PCS, INC. FOR THE QUARTER ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS [/LEGEND] AIRGATE PCS, INC. 9-MOS SEP-30-2000 OCT-01-1999 JUN-30-2000 92,221 0 3,659 0 1,378 102,473 168,595 (7,765) 273,095 20,933 174,861 0 0 125 77,176 273,095 1,041 8,252 1,974 17,760 31,110 0 (19,593) (52,128) 0 (52,128) 0 0 0 (52,128) (4.27) (4.27)
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