UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Filed by a Party other than the Registrant       o

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þ		Definitive Proxy Statement

o		Definitive Additional Materials

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SUNCOM WIRELESS HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:
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	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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	(1)		Amount Previously Paid:
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	(3)		Filing Party: Suncom Wireless Holdings, Inc.
	(4)		Date Filed:

 

March 20, 2007

 

To the Stockholders of SunCom Wireless Holdings, Inc.:

 

You are cordially invited to attend a special meeting of stockholders of SunCom Wireless Holdings, Inc. (“SunCom”, “we”, “us” or the “Company”) to be held on Friday, April 20, 2007 at 10:00 a.m., local time, at the Company’s headquarters, 1100 Cassatt Road, Berwyn, Pennsylvania 19312. The attached proxy statement provides information regarding the matters to be acted on at the special meeting, including at any adjournment or postponement thereof.

 

At the special meeting, you will be asked to consider and vote upon a proposal to approve the exchange of an aggregate of 50,572,539 new shares of our Class A common stock, par value $0.01 per share, for $321,015,000 outstanding principal amount of 93/8% Senior Subordinated Notes due 2011 and $390,133,000 outstanding principal amount of 83/4% Senior Subordinated Notes due 2011 of our indirect wholly-owned subsidiary, SunCom Wireless, Inc., as well as the transactions contemplated by such exchange. The holders of approximately 95% of the total outstanding principal amount of the subordinated notes are participating in the exchange. A copy of the exchange agreement setting forth the terms and conditions of the exchange is attached to this proxy statement as Annex A. The total number of shares of Class A common stock that will be issued in the exchange could be increased if additional subordinated notes become subject to the exchange agreement pursuant to the terms thereof.

 

We are taking this action because our Company has a debt balance that is not sustainable. We currently have more than $1.7 billion of debt, as well as related annual interest expense of more than $140 million. The reduction of our heavy debt load and the corresponding increased financial flexibility SunCom will gain through the exchange will give us greater ability to execute our business plans and maximize value for our stockholders. Moreover, the Company views a sale transaction to be a favorable strategic alternative, and this exchange will make the Company more attractive to a potential purchaser.

 

The exchange will be effected by our direct, wholly-owned subsidiary, SunCom Wireless Investment Company LLC. Immediately prior to the exchange, the Company will contribute the new shares of Class A common stock to SunCom Wireless Investment Company LLC, which will use such Class A common stock to consummate the exchange.

 

Additionally, at the special meeting you will be asked to consider and vote upon a proposal to adopt an agreement and plan of merger between the Company and SunCom Merger Corp., a Delaware corporation and newly formed wholly-owned subsidiary of the Company. In the merger, which will be effective prior to the exchange described above, each issued and outstanding share of our Class A common stock will be converted into 0.1 share of Class A common stock of the Company, as surviving corporation in the merger, plus the contingent right to receive additional shares of Class A common stock, totaling up to a maximum of 3% of the fully diluted Class A common stock of the Company (after giving effect to the exchange, assuming full participation by the SunCom Wireless subordinated notes) in the aggregate for all such holders immediately prior to the merger, in the event the Company fails to undertake certain actions related to a potential sale of the Company following the exchange and the merger. Additionally, as a result of the merger, the certificate of incorporation of the Company will be amended to (1) eliminate the Class B common stock of the Company and all designations of the Company’s preferred stock, none of which Class B common stock or preferred stock is currently outstanding, and (2) eliminate certain other references to series of preferred stock that are no longer outstanding. The merger is being effected, among other reasons, to implement a 1 for 10 reverse stock split and to ensure that we have sufficient authorized shares of Class A common stock to complete the exchange. A copy of the merger agreement is attached as Annex B to the attached proxy statement.

 

As a result of the exchange, the holders of the outstanding subordinated notes of SunCom Wireless, Inc. participating in the exchange will own approximately 87.5% of our outstanding Class A common stock on a fully-diluted basis in respect of their subordinated notes delivered in the exchange. The existing holders of our Class A common stock will own approximately 12.5% of our Class A common stock on a fully-diluted basis following the exchange.

 

After considering all available options our board of directors has unanimously determined that the merger, the merger agreement, the exchange and the transactions contemplated thereby are fair to, advisable to and in the best interests of the existing stockholders of the Company and has approved the terms of the merger agreement, the merger and the exchange and unanimously recommends that you vote FOR (1) the adoption of the merger agreement and (2) the exchange and the transactions contemplated thereby, including the issuance to SunCom Wireless Investment Company LLC of the new shares of Class A common stock necessary to complete the exchange. In making such determination, the board of directors considered a number of factors which are described in the accompanying proxy statement, including the opinion of Lazard Freres & Co. LLC that, as of the date of its opinion, the exchange ratio used in the exchange was fair, from a financial point of view, to the Company. Lazard’s opinion is subject to the assumptions, limitations and qualifications set forth in such opinion, which is included as Annex C to the attached proxy statement.

 

The attached proxy statement provides you with detailed information about the merger, the merger agreement and the exchange. You are urged to read the entire document carefully.

 

In connection with the exchange, the Company’s largest stockholders, J.P. Morgan (23A SBIC), L.P., J.P. Morgan Capital, L.P. and Sixty Wall Street Fund, L.P., which collectively hold 23.9% of our outstanding Class A common stock, have agreed with certain holders of the SumCom Wireless subordinated notes participating in the exchange to vote their shares of Class A common stock in favor of the adoption of the merger agreement and the approval of the exchange. In addition, certain holders of SumCom Wireless subordinated notes that are participating in the exchange hold collectively approximately 16% of additional shares of our Class A common stock and are required by the terms of the exchange agreement to vote those shares in favor of the adoption of the merger agreement and the approval of the exchange.

 

Regardless of the number of shares you own, your vote is very important.  The affirmative vote of the holders of a majority of the outstanding shares of the Class A common stock is required to adopt the merger agreement and to approve the exchange and the transactions contemplated thereby, including the issuance to SunCom Wireless Investment Company LLC of the new shares of Class A common stock necessary to complete the exchange. If you fail to vote to adopt the merger agreement or to approve the exchange and the transactions contemplated thereby, including the issuance to SunCom Wireless Investment Company LLC of the new shares of Class A common stock necessary to complete the exchange, the effect will be the same as a vote against the adoption of the merger agreement and approval of the exchange. The approval of both the merger agreement proposal and the exchange proposal is necessary for the Company and SunCom Wireless Investment Company LLC to consummate the exchange, and neither the merger nor the exchange will be consummated without approval of both proposals by our stockholders. Once you have read the accompanying materials, please take the time to submit a proxy to have your shares voted on the proposals submitted to stockholders at the special meeting. Whether or not you plan to attend the meeting, please sign, date and mail the enclosed proxy card, or you can submit your proxy by telephone or Internet, as per the instructions on your proxy card. If you receive more than one proxy card because you hold shares in multiple accounts, please submit a proxy for each individual account held.

 

Submitting a proxy will not prevent you from voting your shares in person in the manner described in the attached proxy statement if you subsequently choose to attend the special meeting.

 

If you have any questions or need assistance submitting a proxy, please call D.F. King & Co., which is assisting us, toll-free at (888) 567-1626.

 

Sincerely,

 

/s/ Michael E. Kalogris

Michael E. Kalogris

Chairman and Chief Executive Officer

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, the merger agreement, exchange or the transactions contemplated thereby or passed upon the fairness or merits of the merger, the merger agreement, the exchange or the transactions contemplated thereby, or the adequacy or accuracy of the information contained in the enclosed proxy statement. Any contrary representation is a criminal offense.

SUNCOM WIRELESS HOLDINGS, INC.
1100 Cassatt Road
Berwyn, Pennsylvania 19312
(610) 651-5900

 

NOTICE OF SPECIAL MEETING

March 20, 2007

 

Dear Stockholder:

 

On Friday, April 20, 2007, SunCom Wireless Holdings, Inc. will hold a special meeting of stockholders at the Company’s headquarters, 1100 Cassatt Road, Berwyn, Pennsylvania 19312. The meeting will begin at 10:00 a.m., local time.

 

Only holders of shares of Class A common stock, par value $0.01 per share, of record at the close of business on March 9, 2007 may vote at this meeting or any adjournments or postponements that may take place. At the meeting we propose to:

 

 

Your board of directors has unanimously determined that the merger, the merger agreement, the exchange and the transactions contemplated thereby are fair to, advisable to and in the best interests of the existing stockholders of the Company and has approved the terms of the merger agreement, the merger and the exchange and unanimously recommends that you vote FOR the adoption of the merger agreement, FOR the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Wireless Investment Company LLC of the new shares of Class A common stock necessary to complete the exchange, and FOR the adjournment proposal, each of which is discussed in more detail in the attached proxy statement.

 

Regardless of the number of shares you own, your vote is very important. The affirmative vote of the holders of at least a majority of the outstanding shares of the Class A common stock is required to adopt the merger agreement and to approve the exchange and the transactions contemplated thereby, including the issuance to SunCom Wireless Investment Company LLC of the new shares of Class A common stock necessary to complete the exchange. If you fail to vote to adopt the merger agreement or to approve the exchange and the transactions contemplated thereby, including the issuance to SunCom Wireless Investment Company, LLC of the new shares of Class A common stock necessary to complete the exchange, the effect will be the same as a vote against the adoption of the merger agreement and the approval of the exchange. The approval of both the merger agreement proposal and the exchange proposal is necessary for the Company to and SunCom Wireless Investment Company LLC to consummate the exchange, and neither the merger nor the exchange will be consummated without approval of both proposals by our stockholders. We hope you will be able to attend the meeting, but whether or not you plan to attend, please submit a proxy by (1) signing and returning the enclosed proxy card as soon as possible, (2) calling the toll-free number listed on the proxy card or (3) accessing the Internet as instructed on the proxy card. If your shares are held in registered form, submitting a proxy will not prevent you from voting your shares in person in the manner described in the attached proxy statement if you subsequently choose to attend the special meeting.

 

This proxy statement is dated March 20, 2007, and it and the proxy card are first being mailed to stockholders on or about March 21, 2007.

 

By Order of the Board of Directors,

 

/s/ Eric Haskell

Eric Haskell

Corporate Secretary

 

TABLE OF CONTENTS

 

 

SUMMARY TERM SHEET

	•	The Company.  SunCom Wireless Holdings, Inc., which we sometimes refer to in this proxy statement as “we”, “our” or the “Company”, provides digital wireless communications services in the southeastern United States, Puerto Rico and the U.S. Virgin Islands. The Company’s wireless communications network covers customers in a contiguous geographic area primarily encompassing portions of North Carolina, South Carolina, Tennessee and Georgia. In addition, the Company operates a wireless communications network covering customers in Puerto Rico and the U.S. Virgin Islands. The Company’s principal offices are located at 1100 Cassatt Road, Berwyn, Pennsylvania 19312, and its telephone number at that address is (610) 651-5900. See “Important Information Regarding The Company — The Company” beginning on page 51.
	•	The Exchange.  Pursuant to an exchange agreement entered into among the Company, SunCom Wireless, Inc. (which we refer to in this proxy statement as “SunCom Wireless”), SunCom Wireless Investment Company LLC (which we refer to in this proxy statement as “SunCom Investment”) and the holders of $321,015,000 outstanding aggregate principal amount of 93/8% Senior Subordinated Notes due 2011 and $390,133,000 outstanding principal amount of 83/4% Senior Subordinated Notes due 2011 of our indirect, wholly-owned subsidiary, SunCom Wireless, such holders have agreed to exchange all outstanding subordinated notes of SunCom Wireless held by them for an aggregate of 50,572,539 new shares of our Class A common stock, par value $0.01 per share (“Class A common stock”). The number of shares of Class A common stock issued in the exchange may be increased if additional SunCom Wireless subordinated notes become party to the exchange agreement pursuant to the terms thereof. The exchange will be effected by SunCom Investment. Immediately prior to the exchange, the Company will issue and contribute the new shares of Class A common stock to SunCom Investment, which will use such Class A common stock to consummate the exchange. See “The Recapitalization Transactions — Effects of the Recapitalization Transactions — The Exchange” beginning on page 21.
	•	The Merger.  Pursuant to a merger agreement entered into between the Company and SunCom Merger Corp., a Delaware corporation and wholly owned subsidiary of the Company (which we refer to in this proxy statement as “Merger Sub”), Merger Sub will be merged with and into the Company. In the merger, each issued and outstanding share of Class A common stock of the Company will be converted into 0.1 share of Class A common stock of the Company, as surviving corporation in the merger, plus the contingent right to receive additional shares of Class A common stock of the Company, as the surviving corporation in the merger, totaling up to a maximum of 3% of the fully-diluted Class A common stock of the Company (after giving effect to the exchange, assuming full participation by the SunCom Wireless subordinated notes) in the aggregate to all holders immediately prior to the merger, in the event the Company fails to undertake certain actions related to a potential sale of the Company following the exchange and the merger. Each issued and outstanding share of common stock of Merger Sub will be cancelled in exchange for no consideration. The merger will take place prior to the exchange described above. The merger is being effected, among other reasons, to implement a 1 for 10 reverse stock split and to ensure that we have sufficient authorized shares of Class A common stock to complete the exchange. See “The Recapitalization Transactions — Effects of the Recapitalization Transactions — The Merger” beginning on page 22.
	•	Effects on our Capitalization.  As a result of the exchange and merger, the holders of outstanding subordinated notes of SunCom Wireless participating in the exchange will own approximately 87.5% of our outstanding Class A common stock on a fully diluted basis in respect of their SunCom Wireless subordinated noes delivered in the exchange. The existing holders of our Class A common stock will

		own approximately 12.5% of our Class A common stock on a fully diluted basis following the exchange and merger. The number of shares of Class A common stock issued in the exchange may be increased if additional shares of our Class A common stock become party to the exchange agreement pursuant to the terms thereof. See “The Recapitalization Transactions — Effects of the Recapitalization Transactions — Effects on our Capitalization” beginning on page 22.

	•	Amendments to the Terms of the Remaining SunCom Wireless Subordinated Notes.  As a condition to their participation in the exchange, the holders of the SunCom Wireless subordinated notes have executed, as part of the exchange agreement, “exit consents” that become effective on the consummation of the exchange and that will remove substantially all of the restrictive covenants from such subordinated notes remaining after the exchange. Certain restrictive covenants that may not be amended without the consent of each holder of SunCom Wireless subordinated notes affected, such as those relating to the payment of principal and accrued interest on the SunCom Wireless subordinated notes, will not be modified by these exit consents. See “The Recapitalization Transactions — Effects of the Recapitalization Transactions — Amendment of the Terms of the Remaining SunCom Wireless Subordinated Notes” beginning on page 23.
	•	Amendment of Certificate of Incorporation of the Company.  In connection with the merger agreement, and as a result of the consummation of the merger, the Company’s certificate of incorporation will be amended to (1) eliminate the Class B common stock of the Company and all designations of the Company’s preferred stock, none of which Class B common stock or preferred stock is currently outstanding, and (2) eliminate certain other references to series of preferred stock that are no longer outstanding. See “The Recapitalization Transactions — Effects of the Recapitalization Transactions — Amendment of the Certificate of Incorporation of the Company” beginning on page 24.
	•	Effects on the Board of Directors of the Company.  Following the exchange, the size of the board of directors of the Company will be increased to ten members, and the board will be reconstituted to include Michael E. Kalgoris, the Company’s Chairman and Chief Executive Officer and Scott I. Anderson, both of whom are current directors of the Company, as well as eight new directors who will be designated by certain of the current holders of SunCom Wireless subordinated notes participating in the exchange or their affiliates. See “The Recapitalization Transactions — Effects of the Recapitalization Transactions — Composition of Board of Directors” beginning on page 25.
	•	Potential Sale Transaction.  The Company has determined, and the exchange agreement contemplates, that the Company will pursue strategic alternatives, including a potential sale transaction. In furtherance of the foregoing and in accordance with the terms of the exchange agreement, the Company has engaged Goldman, Sachs & Co. (who we refer to as “Goldman Sachs”) as its financial advisor. The Company has agreed in the exchange agreement not to initiate or solicit any potential sale transaction or other acquisition proposal (as defined in “The Recapitalization Transactions — Description of the Exchange Agreement — Non-Solicitation”), or to provide any information to potential purchasers of the Company, prior to the closing of the exchange and the merger, except that it and its advisors may take certain identified actions, such as the preparation of sales materials and the negotiation of confidentiality agreements with potential purchasers, during such period. Additionally, the Company has the right to respond to unsolicited acquisition proposals (including proposals for a sale transaction) and to terminate the exchange agreement to accept any acquisition proposal that it determines to be a superior proposal (as defined in “The Recapitalization Transactions — Effects of the Recapitalization Transactions — Potential Sale Transaction”), subject to the Company’s obligation to pay each holder of SunCom Wireless subordinated notes party to the exchange agreement a break up fee of 2% of the total outstanding principal amount of the SunCom Wireless subordinated notes held by such holder and subject to the exchange agreement as of the date of the exchange agreement, or approximately $14.2 million in the aggregate, in such event. See “The Recapitalization Transactions — Effects of the Recapitalization Transactions — Potential Sale Transaction” beginning on page 25.  Certain information detailing the effects of a potential sale transaction on the amounts to be distributed to the current holders of our Class A common stock at potential valuations for the Company in such sale transaction, assuming both the current capital structure of the Company and the capital structure of the Company

		following the recapitalization transactions, are set forth under “Important Information Regarding the Company — Valuation Information” beginning on page 62.

	•	Recommendations.  The Company’s board of directors has unanimously determined that the merger, the merger agreement, the exchange and the transactions contemplated thereby are fair to, advisable to and in the best interests of the existing stockholders of the Company and has approved the terms of the merger agreement, the merger and the exchange. Accordingly, the board of directors has unanimously recommended that you vote FOR (1) the adoption of the merger agreement and (2) the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange. The recommendation of the board of directors was based on several factors, including the opinion of Lazard Freres & Co. LLC, which we refer to in this proxy statement as “Lazard,” that, as of the date of its opinion, the exchange ratio used in the exchange was fair, from a financial point of view, to the Company. See “The Recapitalization Transactions — Recommendation of the Board of Directors; Reasons for Recommending Approval of the Exchange and the Merger” beginning on page 14.
	•	Opinions of Financial Advisor.  The board of directors received an opinion from Lazard to the effect that, as of the date of its opinion, the exchange ratio used in the exchange was fair, from a financial point of view, to the Company. Lazard’s opinion is subject to the assumptions, limitations and qualifications set forth in such opinion, which is attached as Annex C to this proxy statement. Lazard’s analysis and fairness opinion, dated as of January 29, 2007, were based solely on the information in the section entitled “The Recapitalization Transactions — Opinion of Financial Advisor” and did not take into account the Company’s later-created March 2007 projections. We encourage you to read carefully this opinion in its entirety and the section entitled “The Recapitalization Transactions — Opinion of Financial Advisor” beginning on page 16 for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken. The opinion of Lazard was provided to the Company’s board of directors in connection with their evaluation of the exchange, does not address any other aspect of the exchange and does not constitute a recommendation to any stockholder as to how you should vote on any matter at the special meeting.
	•	Required Vote.  The affirmative vote of the holders of a majority of the outstanding shares of the Class A common stock is required to adopt the merger agreement and to approve the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange. Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of the Class A common stock present in person or by proxy and entitled to vote at the special meeting on that matter. See “The Special Meeting — Quorum; Vote Required” beginning on page 9.
	•	What We Need to Do to Complete the Exchange.  We will complete the exchange only if the conditions set forth in the exchange agreement are satisfied or waived by the applicable parties. These conditions include, among others:

	•	the exchange and the merger agreement proposals having been approved by the holders of a majority of the outstanding Class A common stock at the special meeting, and the merger having been consummated;
	•	the receipt of the approval of the Federal Communications Commission to consummate the exchange;
	•	all other required filings and approvals having been obtained, except for those as would not cause a material adverse effect on the Company and its consolidated subsidiaries, taken as a whole (as defined in “The Recapitalization Transactions — Description of the Exchange Agreement — Representations and Warranties”);

	•	the absence of any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary or permanent) or any other legal restraint that prohibits, restrains or enjoins the consummation of the exchange or the merger;
	•	at least 91.25% of the outstanding SunCom Wireless subordinated notes being delivered in the exchange;
	•	each of J.P. Morgan Capital, L.P. and Sixty Wall Street Fund, L.P. having converted all of their Class B common stock into Class A common stock prior to the record date for the special meeting and having entered into a lockup and voting agreement whereby such entities agree to vote all of their Class A common stock (including the Class A common stock received upon conversion of their Class B Common stock) in favor of the merger and the exchange proposals (both of which have already occurred);
	•	the accuracy of the representations and warranties of the respective parties to the exchange agreement, and the compliance by such parties of all material obligations required to be performed prior to the closing of the exchange agreement;
	•	the receipt by the holders of the SunCom Wireless subordinated notes participating in the exchange of all accrued but unpaid interest on their subordinated notes through the date of the exchange;
	•	there not having occurred since September 30, 2006, a material adverse effect on the Company and its consolidated subsidiaries, taken as a whole (as defined in “The Recapitalization Transactions — Description of the Exchange Agreement — Representations and Warranties”); and
	•	supplemental indentures effecting the contemplated amendments to the indentures governing the SunCom Wireless subordinated notes having been executed and delivered.

	•	Termination of the Exchange.  The exchange agreement may be terminated and the exchange may be abandoned at any time prior to the consummation of the exchange, whether prior to or after the Company’s stockholders approve the exchange and the transactions contemplated thereby:

	•	by mutual written consent of the holders of at least 85% of the SunCom Wireless subordinated notes subject to the exchange agreement (whom we refer to as the “requisite noteholders”) and the Company, SunCom Investment, and SunCom Wireless;
	•	by either the requisite noteholders or the Company, SunCom Investment and SunCom Wireless if the delivery of the proxy statement to the Company’s stockholders does not take place prior to April 30, 2007;
	•	by either the requisite noteholders or the Company, SunCom Investment and SunCom Wireless if the recapitalization is not substantially consummated by May 31, 2007;
	•	by either the requisite noteholders or the Company, SunCom Investment and SunCom Wireless if there is issued an order, decree or injunction having the effect of making the exchange or the merger illegal or permanently prohibiting the consummation of the exchange or the merger, and such order, decree or injunction shall have become final and nonappealable;
	•	by the requisite noteholders, if either the Company, SunCom Investment or SunCom Wireless has breached any material provision of the exchange agreement, and such breach remains uncured for a period of five days after written notice of such breach, specifically identifying the nature of such breach and the intent of the requisite noteholders to terminate the exchange agreement, is delivered by the requisite noteholders to the Company, SunCom Investment and SunCom Wireless;
	•	by the Company, SunCom Investment and SunCom Wireless, if any of the holders of SunCom Wireless subordinated notes party to the exchange agreement has breached any material provision of the exchange agreement, and such breach remains uncured for a period of five days after written

		notice of such breach, specifically identifying the nature of such breach and the intent of the Company, SunCom Investment and SunCom Wireless to terminate the exchange agreement, is delivered by the Company, SunCom Investment and SunCom Wireless to the holders of SunCom Wireless subordinated notes party to the exchange agreement;

	•	the Company, if the board of directors elects to terminate the exchange agreement to accept a superior proposal;
	•	by the requisite noteholders, if the board of directors of the Company fails to recommend the exchange agreement and/or the merger agreement to its stockholders or withdraws such recommendation; or
	•	by either the requisite noteholders or the Company, SunCom Investment and SunCom Wireless, if the stockholder vote for approval of the exchange and/or the merger agreement is not obtained.

	•	Break-Up Fee and Expenses.  In the event that the exchange agreement is terminated in certain circumstances, the Company is required to pay to each holder of the SunCom Wireless subordinated notes that is a party to the exchange agreement a break-up fee equal to 2% of the total outstanding principal amount of the SunCom Wireless subordinated notes held by such holder and subject to the exchange agreement as of the date of the agreement, or approximately $14.2 million in the aggregate. Whether or not the exchange is consummated, the Company is obligated to pay the reasonable fees and expenses of counsel to the holders of the SunCom Wireless subordinated notes participating in the exchange, up to $1,000,000 in the aggregate. See “The Recapitalization Transactions — Description of the Exchange Agreement — Break-Up Fee and Expenses” beginning on page 37.
	•	Lock-up and Voting Agreement.  In connection with the exchange, each of J.P. Morgan (23A SBIC), L.P., J.P. Morgan Capital, L.P. and Sixty Wall Street Fund, L.P., which collectively hold 23.9% of our outstanding Class A common stock, have entered into a lock-up and voting agreement with certain holders of the SunCom Wireless subordinated notes whereby such entities have agreed to vote all of their shares of Class A common in favor of the adoption of the merger agreement and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange. See “The Recapitalization Transactions — Lock-up and Voting Agreement” beginning on page 38. Additionally, as described under “The Recapitalization Transactions — Description of Exchange Agreement — Lockup of Consenting Noteholders” beginning on page 27, the holders of the SunCom Wireless subordinated notes party to the exchange agreement have agreed to vote all shares of Class A common stock held by them, which includes the Class A common stock owned by Pardus European Special Opportunities Master Fund L.P. and Goldman, Sachs & Co., who collectively hold approximately 16% of our Class A common stock, in favor of the adoption of the merger agreement and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the shares of Class A common stock necessary to complete the exchange.
	•	Registration Rights.  In connection with the exchange, the Company and the holders of the SunCom Wireless subordinated notes participating in the exchange will execute a registration rights agreement that gives the holders of the SunCom Wireless subordinated notes participating in the exchange certain rights with respect to their shares of Class A common stock. Specifically, the Company has agreed to put into place a “shelf” registration statement covering such Class A common stock and to keep such shelf registration statement in effect until the earlier of three years following the exchange or the date upon which all securities received by the participating holders of SunCom Wireless subordinated notes in the exchange may be resold without restriction under Rule 144(k) promulgated under the Securities Act of 1933, as amended. Additionally, the holders of at least 15% of the Class A common stock received by the holders of the SunCom Wireless subordinated notes in the exchange may require the

		Company to amend the shelf registration statement or to file a prospectus supplement and certain other actions necessary to permit an underwritten offering of the Class A common stock held by such holders. See “The Recapitalization Transactions — Registration Rights Agreement” beginning on page 38.

	•	Material U.S. Federal Income Tax Consequences.  In general, a holder of Class A common stock of the Company should not recognize gain or loss upon the merger (other than in respect of any cash received in lieu of fractional shares) or as a result of the exchange. For a discussion of certain material U.S. federal income tax consequences of to stockholders and the Company, see “The Recapitalization Transactions — Certain United States Federal Income Tax Consequences of the Merger and Exchange” beginning on page 42.
	•	Accounting Treatment of the Exchange.  A gain or loss will be recognized on the exchange transaction based upon the difference between the carrying value of the SunCom Wireless subordinated notes exchanged and the market value of the Class A common stock at the date the shares are issued to the holders of the SunCom Wireless subordinated notes participating in the exchange. The gain will be offset by, or the loss increased, by direct costs of the exchange transaction. See “The Recapitalization Transactions — Accounting Treatment of the Transaction” beginning on page 45.

 

This proxy statement contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “should”, “will” and “would” or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control. The risk factors listed in our Annual Report on Form 10-K for the year ended December 31, 2006, as well as any other cautionary language contained or incorporated by reference in this proxy statement, provide examples of risks, uncertainties and events that may cause our actual results or matters related to the exchange to differ materially from the expectations we describe in forward-looking statements. You should be aware that the occurrence of the events described in those risk factors and any other cautionary language in this proxy statement could have a material adverse effect on our business, operating results and financial condition or the merger, the merger agreement, exchange or the transactions contemplated thereby.

 

The risks reflected in our documents incorporated by reference in this proxy statement should not be construed to be exhaustive. We believe the forward-looking statements in this proxy statement are reasonable; however, there is no assurance that the actions, events or results of the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations or financial condition or on the exchange. In view of these uncertainties, you should not place undue reliance on any forward-looking statements, which are based on our current expectations. Further, forward-looking statements speak only as of the date they are made, and, other than as required by applicable law, we undertake no obligation to update publicly any of them in light of new information or future events.

 

Date, Time and Place

 

The special meeting of the Company’s stockholders will be held at 10:00 a.m., local time, on Friday, April 20, 2007, at the Company’s headquarters, 1100 Cassatt Road, Berwyn, Pennsylvania 19312. We are sending this proxy statement to you in connection with the solicitation of proxies by the Company’s board of directors for use at the special meeting and any adjournments or postponements of the special meeting.

 

Purpose

 

At the special meeting, you will be asked to:

 

 

The Company’s stockholders also may be asked to transact such other business as may properly come before the special meeting or any adjournments or postponements of the special meeting.

 

Board Recommendation

 

The Company’s board of directors has unanimously determined that the merger, the merger agreement, the exchange and the transactions contemplated thereby are fair to, advisable to and in the best interests of the existing stockholders of the Company and has approved the terms of the merger agreement, the merger and the exchange. Accordingly, the Company’s board of directors unanimously recommends that you vote FOR the adoption of the merger agreement, FOR the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange, and FOR the adjournment proposal.

 

Record Date, Outstanding Shares and Voting Rights

 

The Company’s board of directors has fixed the close of business on March 9, 2007 as the record date for the special meeting. Only holders of record of shares of Class A common stock on the record date are entitled to notice of and to vote at the special meeting or any adjournment or postponement of the special meeting. As of the record date, there were 71,252,459 outstanding shares of Class A common stock held by approximately 6,958 holders of record. At the special meeting, each share of Class A common stock will be entitled to one vote on all matters. Votes may be cast at the special meeting in person or by proxy.

 

Quorum; Vote Required

 

The presence, in person or by proxy, of the holders of a majority of the shares of Class A common stock issued and outstanding and entitled to vote at the special meeting is necessary to constitute a quorum at the special meeting. Shares of Class A common stock represented in person or by proxy will be counted for the purposes of determining whether a quorum is present at the special meeting. Shares that abstain from voting with respect to the adoption of the merger agreement and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange, will be treated as shares that are present and entitled to vote at the special meeting for purposes of determining whether a quorum exists, but will have the same effect as a vote against the adoption of the merger agreement and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange.

 

If a broker or nominee holding shares of record for a customer indicates that it does not have discretionary authority to vote as to a particular matter, those shares, which are referred to as broker non-votes, will be treated as present and entitled to vote at the special meeting for purposes of determining whether a quorum exists. Brokers or nominees holding shares of record for customers who do not have discretionary authority to vote on a particular proposal will not be entitled to vote on the adoption of the merger agreement or the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange, unless they receive voting instructions from their customers. Accordingly, broker non-votes will not be voted in favor of the adoption of the merger agreement or the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange, meaning that shares constituting broker non-votes will have the same effect as shares voted against the adoption of the merger agreement and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the shares of Class A common stock necessary to complete the exchange.

 

Adoption of the merger agreement and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange, requires the affirmative vote of the holders of a majority of all of the outstanding shares of Class A common stock. If a quorum is present, approval of an adjournment of the special meeting would require only the affirmative vote of the holders of a majority of the shares of Class A common stock present and entitled to vote on this proposal at the special meeting and broker non-votes would have no effect on the outcome of voting on this proposal.

 

In order for your shares of Class A common stock to be included in the vote, you must submit your proxy by returning the enclosed proxy, signed and dated, in the postage prepaid envelope provided, or you can submit a proxy by telephone or through the Internet, as per the instructions on the proxy card. If you plan to vote in person at the meeting and your shares are held in the name of a bank or broker, it will be necessary to request a legal proxy in order for your shares to be counted. If your shares are held in registered form, you may vote in person at the special meeting.

 

In connection with the exchange, each of J.P. Morgan (23A SBIC), L.P., J.P. Morgan Capital, L.P. and Sixty Wall Street Fund, L.P., who collectively hold 23.9% of our outstanding Class A common stock, have entered into a lock-up and voting agreement with certain holders of the SunCom Wireless subordinated notes whereby such entities have agreed to vote all of their shares of Class A common in favor of the adoption of the merger agreement, and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange. Additionally, as described under “The Recapitalization Transactions — Description of the Exchange Agreement — Lockup of Consenting Noteholders” the holders of the SunCom Wireless subordinated notes party to the exchange agreement have agreed to vote all shares of Class A common stock held by them, which includes the Class A common stock owned by Pardus European Special Opportunities Master Fund L.P. and

Goldman, Sachs & Co., who collectively hold approximately 16% of our Class A common stock, in favor of the adoption of the merger agreement and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the shares of Class A common stock necessary to complete the exchange.

 

Voting of Proxies

 

All shares of Class A common stock that are entitled to vote and are represented at the special meeting by properly-executed proxies received prior to or at the meeting, and not revoked, will be voted in accordance with the instructions indicated on the proxies. If no instructions are indicated on your properly-executed and returned proxy, such proxy will be voted FOR the adoption of the merger agreement and FOR the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the shares of Class A common stock necessary to complete the exchange. You may also submit your proxy by telephone or Internet by following the instructions on the enclosed proxy card.

 

If your shares are held in “street name” through a broker or bank, you may vote by completing and returning the voting form provided by your broker or bank. If you plan to attend the special meeting, you will need a legal proxy from your broker or bank in order to vote your shares in person. You may also submit a proxy by telephone or Internet by following the instructions on the enclosed voting form.

 

The Company’s board of directors does not know of any matters other than those described in the notice of the special meeting that are expected to come before the special meeting. However, if any other matters are properly presented at the special meeting for consideration, the persons named in the proxy card and acting thereunder generally will have discretion to vote on such matters in accordance with their best judgment unless authority is specifically withheld.

 

Revocation of Proxies

 

You may revoke any proxy given pursuant to this solicitation at any time before it is voted, subject to the limitation described below. Proxies may be revoked by:

 

 

You should send any written notice of revocation or subsequent proxy to SunCom Wireless Holdings, Inc., 1100 Cassatt Road, Berwyn, Pennsylvania 19312, 610-651-5900, Attention: Corporate Secretary, or hand deliver it to the secretary of the Company at or before the taking of the vote at the special meeting.

 

If your shares of Class A common stock are held through a broker or other nominee, you should follow the instructions of your broker or nominee regarding the revocation of proxies. If your broker or nominee allows you to submit a proxy by telephone or the Internet, you may be able to change your vote by submitting a proxy again by the telephone or the Internet.

 

Solicitation of Proxies; Expenses

 

IN CONNECTION WITH THE SPECIAL MEETING, PROXIES ARE BEING SOLICITED BY, AND ON BEHALF OF, THE COMPANY’S BOARD OF DIRECTORS. THE COMPANY WILL BEAR THE COST OF SOLICITING PROXIES FROM ITS STOCKHOLDERS. IN ADDITION TO SOLICITATION BY MAIL, PROXIES MAY BE SOLICITED FROM THE COMPANY’S STOCKHOLDERS BY DIRECTORS, OFFICERS AND EMPLOYEES OF THE COMPANY IN PERSON OR BY TELEPHONE, FACSIMILE OR OTHER MEANS OF COMMUNICATION. THESE DIRECTORS, OFFICERS AND EMPLOYEES WILL NOT BE ADDITIONALLY COMPENSATED, BUT MAY BE REIMBURSED FOR REASONABLE OUT-OF-POCKET EXPENSES IN CONNECTION WITH THE SOLICITATION. IN ADDITION, THE COMPANY HAS RETAINED D.F. KING AND CO., INC., A PROXY SOLICITATION FIRM, TO ASSIST THE COMPANY IN THE SOLICITATION OF PROXIES FROM STOCKHOLDERS FOR THE SPECIAL MEETING FOR A FEE OF UP TO $15,000 PLUS REIMBURSEMENT OF REASONABLE OUT-OF-POCKET EXPENSES. ARRANGEMENTS WILL BE MADE WITH BROKERAGE HOUSES, CUSTODIANS, NOMINEES AND FIDUCIARIES FOR THE FORWARDING OF PROXY SOLICITATION MATERIALS TO BENEFICIAL OWNERS OF CLASS A COMMON STOCK, AND THE COMPANY WILL REIMBURSE THEM FOR THEIR REASONABLE EXPENSES INCURRED IN FORWARDING THESE MATERIALS.

 

Background of the Recapitalization Transactions

 

During a period ranging from 2001 to 2005, SunCom Wireless incurred substantial indebtedness in order to finance capital expenditures consistent with the Company’s business strategy, including the construction of a new wireless network using global system for mobile technology, or GSM, technology. In June 2005, following the termination of the Company’s strategic partnership with AT&T Wireless (now Cingular Wireless), the Company, faced with significant interest expense on the existing debt at SunCom Wireless, significant required capital expenditures to maintain its current network, as well as the likelihood that the Company would be required to significantly increase its capital expenditures in coming years to upgrade its network to implement new technologies, decided to review restructuring alternatives to improve its financial position and maximize value for its stockholders. In June 2005, the Company retained Lazard as a financial advisor for this purpose.

 

The Company at the time was forecasting earnings growth in 2006 and 2007, driven in part by the addition of T-Mobile USA as a strategic partner for the Company (offsetting in part the revenue lost by the termination of the Company’s relationship with AT&T Wireless), and this forecast indicated that the Company could pursue a “stay the course” strategy despite its significant interest and capital expenditure requirements. The Company was also advised, however, that deleveraging, through either repurchasing debt at a discount or completing a debt-for-equity exchange, could significantly mitigate downside risk for its stockholders were the Company to underperform on its business plan. The Company’s board of directors met with Lazard on several occasions in July and August 2005 to discuss proposed restructuring alternatives further. Additionally, during such time, Lazard held informal conversations with key bondholders to explore their interest in pursuing a debt for equity exchange transaction. At the conclusion of these meetings and discussions, the Company’s board concluded that, given the Company’s liquidity and expected improvement in its 2006 and 2007 operating results, it would only authorize the Company to repurchase the SunCom Wireless subordinated notes at a discount but not to pursue an exchange offer.

 

In January 2006, the Company made a significant downward revision to its expected 2005 financial results and, at that time, reassessed its future growth expectations. Based on this reassessment, the Company’s board decided to renew its consideration of restructuring alternatives. On March 2, 2006, at a regularly scheduled meeting of the Company’s board of directors, Lazard presented an analysis of the Company’s strategic alternatives and financial condition. At such meeting, the board focused primarily on exchange alternatives whereby SunCom Investment would agree to contribute approximately $189 million in unrestricted cash to SunCom Wireless, the obligor under the SunCom Wireless subordinated notes, as part of a recapitalization in which the Company’s stockholders would maintain a meaningful ownership stake in the Company following a complete exchange of the subordinated notes for common equity. The Company and SunCom Investment, with the assistance of Lazard, began a formal dialogue with the financial advisor for the subordinated noteholders in March 2006. Such negotiations were initially unproductive, as the subordinated noteholders took the position that the unrestricted cash was the property of a restricted subsidiary of the Company and was removed by way of a distribution in violation of the restricted payment covenants in the indentures governing the subordinated notes. As a result, the subordinated noteholders argued that, in a debt for equity exchange of the subordinated notes, the Company’s stockholders should receive only a very small pro forma ownership interest.

 

In April 2006, legal counsel for certain holders of the 81/2% senior notes of SunCom Wireless delivered a letter to SunCom Wireless alleging that the approximately $189 million of unrestricted cash held by SunCom Investment was the result of a distribution in violation of the restricted payment covenant in the indenture governing the SunCom Wireless senior notes. SunCom Wireless and these senior noteholders had discussions regarding the dividend and purported default throughout April 2006. In May 2006, after reviewing the totality of the facts and circumstances concerning the dividend, the Company determined that facts existed that supported the noteholders’ arguments that the dividend was not properly paid. Accordingly, SunCom Investment contributed the dividend plus an additional $5.4 million to the capital of SunCom Wireless on May 2, 2006.

 

Following such contribution, the Company and SunCom Investment, unable to pursue the exchange alternatives originally pursued with the holders of the SunCom Wireless subordinated notes, discussed with the holders of the subordinated notes and their advisors a variety of other recapitalization alternatives using preferred securities, warrants or other securities designed to preserve more upside for the Company’s stockholders in exchange for providing the subordinated noteholders with downside protection. Throughout such discussions, the subordinated noteholders continued to insist on a debt for equity exchange that would provide the Company’s existing stockholders with no more than an approximately 10% pro forma ownership interest, plus an indeterminate amount of additional upside that would be available under certain of the proposed transaction structures.

 

Throughout the board’s and SunCom Investment’s discussions with the holders of the SunCom Wireless subordinated notes, the board also evaluated whether other alternatives would result in greater value for the Company’s existing stockholders. While no formal sales or strategic alternatives process was initiated, the Company had preliminary discussions with several potential strategic and financial purchasers or investors throughout 2006 and early 2007 to gauge their interest in pursuing an acquisition, investment or other strategic alliance with the Company. Such discussions indicated that attempting to undertake a sale, investment or other strategic transaction prior to a recapitalization of the Company’s subordinated debt would likely result in little to no value for the Company’s current stockholders with the Company’s current debt structure in place.

 

On June 2, 2006, at a special meeting of the Company’s board of directors, the board received an update as to the status of negotiations with certain holders of the subordinated notes regarding a potential debt-for-equity exchange. The board of directors determined that the terms suggested by certain holders of the subordinated notes were not acceptable, particularly the insistence of the holders of the subordinated notes that the Company’s existing stockholders receive no more than an approximately 10% pro forma ownership interest in any post-exchange Company (plus an indeterminate amount of additional upside that would be available under certain of the proposed transaction structures), and concluded that it would not be productive to continue negotiations until such terms were improved. On June 14, 2006, at a special meeting of the Company’s board of directors, the Company’s advisors informed the board that negotiations with certain holders of the subordinated notes with respect to a potential debt-for-equity exchange were at a standstill.

 

In September 2006, members of management of the Company and SunCom Investment contacted certain holders of the subordinated notes to discuss the circumstances under which it might be productive to resume negotiations with respect to a potential debt-for-equity exchange with SunCom Investment. On September 11, 2006, the Company and SunCom Investment received a proposal from these noteholders summarizing proposed terms for the debt-for-equity exchange. On September 20, 2006 and September 27, 2006, at special meetings of the Company’s board of directors, the board discussed the terms of a debt-for-equity exchange proposed by certain holders of the subordinated notes. After considering the revised terms proposed by the noteholders, the board instructed the Company’s management to continue the negotiations.

 

On or about September 29, 2006, the management of the Company and SunCom Investment and their legal counsel met with legal counsel for certain holders of the subordinated notes to negotiate the terms of the proposed debt-for-equity exchange with SunCom Investment.

 

On October 3, 2006 and October 4, 2006, special telephonic meetings of the Company’s board of directors were held where the board considered the revised terms proposed by certain holders of the subordinated notes with respect to the proposed debt-for-equity exchange with SunCom Investment. Lazard made a presentation to the board of directors regarding certain financial aspects of the revised terms. The Company’s legal counsel made a presentation to the board of directors regarding the legal aspects of the revised terms. After discussing the presentations and revised terms, the board instructed the Company’s management to continue negotiations with the noteholders.

 

On or about October 12, 2006, the management of the Company and SunCom Investment and their legal counsel met with certain holders of the SunCom Wireless subordinated notes and their legal counsel to continue negotiating the terms of a potential debt-for-equity exchange with SunCom Investment, and the Company and SunCom Investment, together with their legal and financial advisors, and certain holders of the

SunCom Wireless subordinated notes, together with their legal counsel, continued to negotiate the terms of the exchange throughout October 2006 and November 2006.

 

On October 25, 2006 and November 2, 2006, at special meetings of the Company’s board of directors, the board further considered the terms of a potential debt-for-equity exchange with respect to the subordinated notes and received a report on the progress of the negotiations. The directors discussed the primary terms of the proposed exchange and the significant issues which remained unresolved in the negotiations. The Company’s advisors provided updates regarding the negotiations.

 

On November 20, 2006, the Company’s board of directors met again to receive an update on the status of the negotiations of the terms of the proposed subordinated notes exchange and consider the proposed summary of terms that had been negotiated. At this meeting, the Company’s board of directors unanimously authorized the Company’s management to execute a non-binding summary of terms with respect to a debt-for-equity exchange.

 

On November 21, 2006, the Company, SunCom Investment and certain holders of the subordinated notes executed a non-binding summary of terms with respect to a debt-for-equity exchange with SunCom Investment.

 

From November 2006 to January 2007, the parties and their respective legal counsel negotiated the transaction documents, including the exchange agreement, for the proposed debt-for-equity exchange.

 

On December 14, 2006, the New York Stock Exchange (“NYSE”) informed the Company that it would be delisting the Company’s Class A common stock from the exchange, which delisting occurred on December 19, 2006.

 

On January 17, 2007, at a special meeting of the Company’s board of directors, the board considered the proposed debt-for-equity exchange. The Company’s management presented a detailed analysis of the financial terms of the proposed exchange and Lazard rendered its oral opinion (later confirmed in writing) that the exchange ratio used in the exchange was fair, from a financial point of view, to the Company. The board also received a report from the Company’s legal counsel on the terms of the definitive documentation and an opinion from special Delaware counsel regarding certain Delaware corporate matters. After discussion, the Company’s board of directors unanimously approved the debt-for-equity exchange, the exchange agreement, the merger, the merger agreement and the related agreements and transactions.

 

Definitive agreements were signed on January 31, 2007. On February 5, 2007 and February 6, 2007, two additional holders of SunCom Wireless subordinated notes became party to the exchange agreement. On January 31, 2007, the exchange was announced to the public.

 

Recommendation of the Board of Directors; Reasons for Recommending Approval of the Exchange and the Merger

 

The board of directors of the Company has unanimously approved the exchange and merger proposals and recommends that the stockholders approve both the exchange proposal and merger proposal. The board of directors of the Company believes that the exchange and merger transactions are in the best interest of the Company and its stockholders. In making such determination, the board of directors considered the following factors as being positive factors and potential benefits of the merger, the exchange and transactions contemplated thereby, each of which it believed supported its decision:

 

 

 

In the course of reaching its determinations and decisions, and making the recommendation described above, the board of directors considered the following risks and potentially negative factors relating to the exchange, the merger and the transactions contemplated thereby:

 

 

In light of the number of factors considered by the board of directors of the Company, the board did not assign relative weights to the factors considered by it in reaching its conclusions. Rather, it viewed its conclusions and recommendations as being based on the totality of information being presented to and considered by it. In addition, it may be the case that individual directors assigned different weights to the various factors considered by them in voting to approve and recommend the exchange and the merger to the Company’s stockholders.

 

Opinion of Financial Advisor

 

In June 2005, the Company retained Lazard to assist the Company in evaluating restructuring alternatives. As part of this engagement, the board of directors subsequently requested Lazard to evaluate the fairness to the Company, from a financial point of view, of the exchange ratio used in the exchange.

 

The full text of the Lazard opinion is attached as Annex C to this proxy statement and is incorporated into this proxy statement by reference. The description of the Lazard opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the Lazard opinion set forth in Annex C. Stockholders are urged to read the Lazard opinion in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Lazard in connection with the opinion. Lazard’s opinion is directed to the board of directors and only addresses the fairness to the Company, from a financial point of view, of the exchange ratio in the exchange. Lazard’s opinion does not address the merits of the underlying decision by the Company to engage in the exchange and the merger or any other aspect of the exchange and the merger and does not constitute a recommendation to any stockholder as to how the stockholder should vote on any matter relating to the merger. Lazard’s opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Lazard as of, the date of the Lazard opinion. Lazard assumes no responsibility for updating or revising its opinion based on circumstances or events occurring after the date of the opinion. The following is only a summary of the Lazard opinion. You are urged to read the entire opinion.

 

In connection with its opinion, Lazard:

 

 

Lazard relied upon the accuracy and completeness of the foregoing information and did not assume any responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets or liabilities of the Company, or concerning the solvency or fair value of the Company. With respect to financial forecasts, the Company informed Lazard and Lazard assumed that the forecasts contained in the Company’s August 2006 business plan had been reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the future financial performance of the Company at that point in time. At the Company’s direction, in rendering its opinion, Lazard relied on such forecasts and did not take into account certain potential improvements to such future financial performance that were identified by the Company’s management and discussed with the Company’s board of directors (which improvements the Company’s management informed Lazard have certain risks and uncertainties attached thereto). Lazard has not reviewed the March 2007 projections described under the caption “Important Information Regarding the Company — Projected Financial Information” and has not updated its analysis based on such projections. Lazard’s analysis and fairness opinion, dated as of January 29, 2007, were based solely on the information described in this section and did not take into account the Company’s later-created March 2007 projections. Lazard assumed no responsibility for and expressed no view as to such forecasts or other information or data or the assumptions on which they were based.

 

Lazard noted that its opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to them as of, the date of the opinion. Lazard did not express any opinion as to the price at which shares of Class A common stock or the SunCom Wireless subordinated notes may trade at any time subsequent to the announcement of the exchange.

 

In rendering its opinion, Lazard assumed that (i) not less than 90% of the aggregate principal amount of SunCom Wireless subordinated notes would be exchanged for Class A common stock in the exchange, (ii) the exchange and the merger would be consummated on the terms described in the exchange agreement, without any waiver of any material terms or conditions by the Company and (iii) obtaining the regulatory approvals necessary for the consummation of the exchange and the merger, and the tax consequences of the exchange and the merger, will not have an adverse effect on the Company. Lazard assumed that the final terms of the exchange agreement and merger agreement would not differ materially from those set forth in the last drafts reviewed by Lazard.

 

Lazard was not requested to, and did not, solicit third party indications of interest in the possible acquisition of all or a part of the Company. Lazard noted that the Company agreed, in the exchange agreement, to pursue a possible sale of all or a part of the Company immediately following the exchange and that completion of such a sale after the exchange could result in former holders of SunCom Wireless subordinated notes receiving more consideration than they would have received if the sale had been completed prior to the exchange (and therefore holders of Class A common stock immediately prior to the exchange receiving less consideration than they would have received had the sale been completed prior to the exchange).

 

The following is a brief summary of the material financial and comparative analyses that Lazard deemed to be appropriate for this type of transaction and that were performed by Lazard in connection with rendering its opinion. The following summaries of financial analyses include information included in tabular format. You should read these tables together with the text of each summary.

 

Introduction

 

In connection with its fairness analysis, Lazard calculated the implied hypothetical value per share of Company Class A common stock as of December 31, 2006, using various hypothetical enterprise values and assuming each of the following alternatives: (i) that the exchange was consummated as of December 31, 2006, with 90% of the holders of the SunCom Wireless subordinated notes participating in the exchange, (ii) that the exchange was consummated as of December 31, 2006, with 100% of the holders of the SunCom Wireless subordinated notes participating in the exchange and (iii) the exchange was not consummated. “Enterprise value” was defined as book value of the Company’s secured debt and senior notes plus the market value of the Company’s subordinated notes and Class A common stock, less net cash as of December 31, 2006 (i.e., cash

less accrued interest and, in cases that assumed completion of the exchange, estimated transaction fees and applicable taxes).

 

Lazard’s analyses indicated that, assuming 100% of the holders of the SunCom Wireless subordinated notes accepted the exchange, the Company’s Class A common stock outstanding prior to the exchange could be more valuable after the exchange (i.e., 12% of the Company’s post-exchange Class A common stock could be more valuable than 100% of the Company’s pre-exchange Class A common stock) if the enterprise value of the Company was not more than approximately $1.6 billion (the “value inflection point”). Lazard noted that the value inflection point did not vary materially assuming acceptance of the offer by the holders of 90% (instead of 100%) of the SunCom Wireless subordinated notes. Lazard then estimated a range of hypothetical enterprise values using the valuation methodologies described below and compared those values to this value inflection point.

 

To ascertain the hypothetical range of enterprise values of the Company, Lazard performed the following valuation analyses:

 

Comparable Companies Analysis

 

Lazard reviewed selected publicly available financial and other data of other regional wireless telecommunications companies. In performing these analyses, Lazard reviewed and analyzed certain financial information (including enterprise value, EBITDA (income from operations before depreciation and amortization), revenues, current subscribers and various valuation multiples) and compared such information to the corresponding information of the comparable companies. Lazard reviewed valuation multiples both on an EBITDA and a per-subscriber basis, in addition to enterprise value per subscriber as a multiple of estimated lifetime EBITDA per subscriber. Enterprise value was calculated based on market value of debt, where applicable, and reflected equity market value, less cash and cash equivalents. The selected comparable companies considered by Lazard were:

 

 

Based on the foregoing, Lazard determined a range of selected valuation parameters for the comparable companies:

 

 

Based on its review of comparable company information, Lazard applied a range of EBITDA multiples and subscriber statistics to the comparable amounts forecasted by the Company in its August 2006 business plan to estimate the Company’s implied enterprise value. Specifically, Lazard applied a range of 7.5x to 8.5x

2007 estimated EBITDA to estimate enterprise value as a multiple of EBITDA and a range of $1,200 to $1,700 per current subscriber to estimate the per subscriber enterprise value range. Lazard used the 2007 estimated EBITDA amounts because the Company indicated that 2006 results included a number of transition-related costs, which the Company believed were extraordinary in nature. The resulting enterprise value ranges are summarized below.

 

Implied Company Valuation Reference Range

 

Lazard noted that these values, other than the high end of the subscriber multiple range, were below the value inflection point. Lazard gave less weight to the subscriber multiples since the Company’s EBITDA per subscriber was significantly lower than that of the other companies reviewed (approximately one-third that of the mean and one-half that of the lowest company reviewed), even taking into account the Company’s substantial projected EBITDA growth.

 

Precedent Transactions Analysis.

 

Lazard reviewed selected publicly available financial information for precedent merger and acquisition transactions in the wireless industry. The forecasted financial information used by Lazard for the most recent transactions in the course of this analysis was based on projections from various equity research reports as well as projections published by Institutional Brokers Estimate System (IBES). The historical financial information used by Lazard in the course of this analysis was based on information from Company SEC filings and press releases, as well as other publicly available sources. Lazard reviewed financial information from the following transactions:

 

 

Three of these transactions, Alltel/Western Wireless, Alltel/Midwest/Wireless and Alamosa/AirGate, appeared to be more comparable based on the companies’ limited geographic focus and other considerations. For Alltel/Western Wireless Lazard calculated the transaction value paid as a multiple of 2006 estimated EBITDA, for Alltel/Midwest/Wireless as a multiple of 2005 estimated EBITDA and for Alamosa/AirGate as a multiple of actual 2004 EBITDA. The median multiple for the three transactions was 8.3x (and 9.7x for all transactions reviewed). Based on this and other observed ranges, Lazard applied a range of 7.5x to 9.5x to the Company’s 2007 estimated EBITDA as set forth in the Company’s August 2006 business plan. (As discussed above, Lazard applied these multiples to 2007 forecasted results because the Company indicated that historical

results reflected transition-related costs that the Company believed were extraordinary in nature.) The resulting range of enterprise values was $985 million to $1,245 million, less than the value inflection point. Lazard also reviewed per subscriber transaction multiples, with a median of $2,084 for the three transactions and $2,597 for all transactions reviewed. Based on this, Lazard estimated a range of $1,500 to $2,000, per Company subscriber, which it applied to the Company’s subscriber numbers for a resulting enterprise value range of $1,570 million to $2,094 million. As described above, Lazard gave less weight to subscriber multiples because of the Company’s lower profitability per subscriber.

 

Discounted Cash Flow Analysis.

 

Lazard also performed a discounted cash flow analysis. Lazard calculated the present value at December 31, 2006 of the Company’s estimated future unlevered free cash flow from 2007 to 2011 (as set forth in the Company’s August 2006 business plan through 2009 and based on management guidance through 2011) and adding to this amount the present value of the estimated terminal value at the end of the forecast period. In each case, present values were calculated using discount rates ranging from 10% to 12%, based on the estimated weighted average cost of capital (WACC) of the Company. Lazard calculated the terminal value using a range of terminal year EBITDA exit multiples of 7x to 8x. The terminal multiples reflected a slight discount to the comparable company multiple range, as the Company has forecasted EBITDA growth to slow over the long term. The resulting implied enterprise values based on the discounting of these cash flows and the terminal value ranged from $1,075 million to $1,280 million, in each case below the value inflection point.

 

Asset Valuation Analysis

 

Lazard performed a sum of the parts analysis to assess the hypothetical value that the Company could realize from the sale of the following parts of its business:

 

 

Lazard noted that the above analysis was subject to several limitations, including that the spectrum valuation reflected a limited market sample which might not be relevant to the current environment; the Company’s fixed assets had not been appraised and might deliver a different value to the range estimated; peers might not be willing to pay the full cost of the Company’s customers, who might have different characteristics from their desired customer base; and the Company’s existing customers might exhibit different characteristics than forecast.

 

Lazard’s analysis indicated that the hypothetical value of the Company’s assets could range from $950 million to $1,545 million.

 

*  *  *

 

The summary set forth above does not purport to be a complete description of the analyses performed by Lazard, although it is a summary of the material financial and comparative analyses presented by Lazard to the Company’s board of directors. The preparation of financial analyses is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and, therefore, is not necessarily susceptible to partial analysis or summary description. Selecting the portions of the analyses or the

summary set forth above without considering the analyses as a whole could create an incomplete or misleading view of the process underlying Lazard’s presentation to the board of directors. In formulating its presentation to the board of directors, Lazard considered the results of all of its analyses and did not attribute any particular weight to any factor or analyses considered by it; rather, Lazard formulated its presentation on the basis of its experience and professional judgment after considering the results of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or the transactions contemplated by the exchange agreement or the merger. The analyses were prepared solely for the purpose of Lazard rendering advice to the Company’s board of directors in connection with its consideration of the exchange and the merger, and those analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold, which may be significantly more or less favorable than set forth in the analyses. You should understand that estimates of values and forecasts of future results contained in the analyses, whether publicly available or provided by the management of the Company, were based upon numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company, and are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. Lazard made no recommendation to the board of directors, and makes no recommendation to any stockholder of the Company, as to how the board of directors or such stockholder should vote with respect to the transactions contemplated by the exchange agreement or the merger.

 

In performing its analyses, Lazard made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters. Because those analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the Company or its advisors, neither the Company, Lazard nor any other person assumes responsibility if future results or actual values are materially different from those forecasts or estimates contained in the analyses.

 

Lazard is an internationally recognized investment banking firm providing a full range of financial advisory and securities services. Lazard was selected to act as investment banker to the Company because of its qualifications, expertise and reputation in investment banking and mergers and acquisitions.

 

Lazard is acting as investment banker to the Company in connection with the exchange and is entitled to receive a fee of $6.7 million for its services, a portion of which became payable upon rendering of its opinion and the balance of which became payable on announcement of the exchange and is refundable to the Company if the exchange is not completed. The Company has also agreed to reimburse Lazard for its reasonable out-of-pocket expenses (including attorneys’ fees) and to indemnify Lazard and certain related parties against certain liabilities under certain circumstances that may arise out of the rendering of the advice, including certain liabilities under U.S. federal securities laws. Lazard has in the past provided investment banking services to the Company for which Lazard has received a customary fee. Lazard, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, leveraged buyouts, and valuations for estate, corporate and other purposes. In addition, in the ordinary course of their respective businesses, affiliates of Lazard and LFCM Holdings LLC (an entity indirectly owned in large part by managing directors of Lazard) may actively trade securities of the Company for their own accounts and for the accounts of their customers and, accordingly, may at any time hold a long or short position in such securities.

 

Effects of the Recapitalization Transactions

 

The Exchange

 

Pursuant to an exchange agreement entered into among the Company, SunCom Investment, SunCom Wireless and the holders of $321,015,000 outstanding principal amount of 93/8% Senior Subordinated Notes due 2011 and $390,133,000 outstanding principal amount of 83/4% Senior Subordinated Notes due 2011 of SunCom Wireless, such holders have agreed to exchange all outstanding subordinated notes of SunCom Wireless held by them in exchange for an aggregate of 50,572,539 shares of our Class A common stock. The number of shares of Class A common stock issued in the exchange may be increased if additional SunCom

Wireless subordinated notes become party to the exchange agreement pursuant to the terms thereof. The exchange will be effected by Suncom Investment. Immediately prior to the exchange, the Company will issue and contribute the necessary shares of Class A common stock to SunCom Investment, which will use such Class A common stock to consummate the exchange. See “The Recapitalization Transactions — Description of the Exchange Agreement — The Exchange.”

 

The Merger

 

In the merger, each issued and outstanding share of Class A common stock of the Company will be converted into 0.1 share of Class A common stock of the Company, as surviving corporation in the merger, plus the contingent right to receive additional shares of Class A common stock of the Company, as the surviving corporation in the merger, totaling up to a maximum of 3% of the fully diluted Class A common stock of the Company (after giving effect to the exchange, assuming full participation by the SunCom Wireless subordinated notes) in the aggregate for all such holders immediately prior to the merger, in the event the Company fails to undertake certain actions related to a potential sale of the Company following the exchange and the merger. Each issued and outstanding share of common stock of Merger Sub will be cancelled in exchange for no consideration. See “The Recapitalization Transactions — Description of the Merger Agreement.” The merger will be consummated immediately prior to the exchange described above. The merger is being effected, among other reasons, to implement a 1 for 10 reverse stock split and to ensure that we have sufficient authorized shares of Class A common stock to complete the exchange.

 

Effects on our Capitalization

 

If the exchange is consummated, the holders of the SunCom Wireless subordinated notes participating in the exchange will own approximately 87.5% of our outstanding Class A common stock on a fully diluted basis in respect of their SunCom Wireless subordinated notes delivered in the exchange. The existing holders of our existing Class A common stock will own approximately 12.5% of our Class A common stock on a fully diluted basis following the exchange. Each of the holders of outstanding SunCom Wireless subordinated notes participating in the exchange has agreed, subject to the terms and conditions of the exchange agreement, to transfer all of the SunCom Wireless subordinated notes held by such holder (subject to certain contractual constraints) to SunCom Investment at the closing of the transactions contemplated by the exchange agreement in exchange for the delivery to such holders of new shares of Class A common stock of the Company by SunCom Investment. Immediately prior to the closing of the transactions contemplated by the exchange agreement, the Company will deliver to SunCom Investment the new shares of Class A Common stock necessary to effect the exchange. In total, approximately $321,015,000 outstanding principal amount of 93/8% Senior Subordinated Notes due 2011 and $390,133,000 outstanding principal amount of 83/4% Senior Subordinated Notes due 2011 of SunCom Wireless will be exchanged for approximately 50,572,539 new shares of Class A common stock (after giving effect to the 1 for 10 reverse stock split to be effected prior to the exchange). The table below sets forth the capitalization of the Company, taken on a consolidated basis with its subsidiaries, as of December 31, 2006, on an actual basis, and on an as adjusted basis to give effect to the exchange, the merger and the transactions contemplated thereby:

 

 

 

 

The number of shares of Class A common stock issued in the exchange may be increased if additional SunCom Wireless subordinated notes become party to the exchange agreement pursuant to the terms thereof. Additionally, pursuant to the merger agreement, each current holder of our Class A common stock will also receive the contingent right to receive additional shares of Class A common stock of the Company, as the surviving corporation in the merger, in the event the Company fails to undertake certain actions related to a potential sale of the Company following the exchange and the merger as described in more detail below under the “The Recapitalization Transactions — Description of the Merger Agreement — Effect on Capital Stock of Merger Sub and the Company.” The Company believes that it is unlikely that such contingent merger consideration will be issued.

 

Amendment of the Terms of the Remaining SunCom Wireless Subordinated Notes

 

As a result of the exchange, the indentures governing the SunCom Wireless subordinated notes will be amended to remove substantially all of the restrictive covenants and certain events of default contained in such indentures. As part of the exchange agreement, the holders of the SunCom Wireless subordinated notes have entered into “exit consents” that become effective upon the closing of the transactions contemplated by the exchange agreement with respect to such amendments. Specifically, the supplemental indentures that will be executed concurrently with the closing of the exchange to effect such amendments will amend the indentures governing the SunCom Wireless subordinated notes as follows:

 

 

 

 

Certain restrictive covenants that may not be amended without the consent of each holder of SunCom Wireless subordinated notes affected, such as those relating to the payment of principal and accrued interest on the SunCom Wireless subordinated notes, will not be modified by the supplemental indentures. Following the execution and delivery of the supplemental indentures in respect of the SunCom Wireless subordinated notes as described above, SunCom Wireless will continue to be subject to substantially equivalent restrictive covenants and events of default pursuant to the terms of the indenture governing its 81/2% senior notes.

 

Amendment of Certificate of Incorporation of the Company

 

In connection with the merger agreement, and as a result of the consummation of the merger, the Company’s certificate of incorporation will be amended. The certificate of incorporation of the Company as the surviving corporation will be identical the Company’s existing certificate of incorporation, except that (1) the Class B common stock of the Company and all designations of the Company’s preferred stock, none of which Class B common stock or preferred stock is currently outstanding, will be eliminated and (2) certain other references to series of preferred stock no longer outstanding will be eliminated. A copy of the proposed certificate of incorporation of the Company as the surviving corporation is attached as Exhibit A to the merger agreement, which is attached to this proxy statement as Annex B.

 

Composition of Board of Directors

 

The exchange agreement contemplates that, following the exchange, the size of the board of directors of the Company will be increased to ten members, and will be reconstituted to include Michael E. Kalogris, the Company’s Chairman and Chief Executive Officer and Scott I. Anderson, both of whom are current directors of the Company, as well as eight new directors who will be designated by certain of the current holders of SunCom Wireless subordinated notes participating the exchange. Effective immediately prior to the exchange, each of our current directors other than Mr. Kalorgris and Mr. Anderson will resign from the board. Immediately prior to such resignations, the board of directors (including the outgoing members of the board) will vote to increase the size of the board of directors to ten members and vote to appoint, effective immediately upon the effectiveness of the resignation of the outgoing members of the board of directors, the designees to the board of directors designated by certain of the holders of the SunCom Wireless subordinated notes participating in the exchange or their affiliates, which shall consist of:

 

 

In the event that either Mr. Kalogris or Mr. Anderson cease to serve as director prior to the first to occur of the consummation of the possible sale transaction referred to below under “— Potential Sale Transaction” and the termination of such sale transaction process by the board of directors, either Mr. Kalogris or Mr. Anderson, as applicable, shall be entitled to designate his replacement on the board of directors, subject to the reasonable approval of the board, and the Company has agreed to use its commercially reasonable efforts to cause such replacement to be appointed to the board. In the event that any director designated by the subordinated noteholders ceases to serve as such prior to the 2008 annual meeting of stockholders of the Company, the vacancy shall be filled by a designee of the person entitled to designate the person who has ceased to serve.

 

Potential Sale Transaction

 

The Company has determined, and the exchange agreement contemplates, that following the consummation of the transactions contemplated by the exchange agreement the Company will pursue strategic alternatives, including a potential sale transaction. In furtherance of the foregoing, and in accordance with the terms of the exchange agreement, the Company has retained Goldman Sachs as its financial advisor for the purpose of advising the Company, and such advisor will promptly begin to identify interested parties and prepare customary offering materials for a potential sale transaction. The Company has agreed in the exchange agreement not to initiate or solicit such sale transaction or any other acquisition proposal (as defined below under “The Recapitalization Transactions — Description of the Exchange Agreement — Non-Solicitation”), or distribute any offering or other materials to potential purchasers in such transaction, prior to the consummation of the exchange, except that the Company may respond to unsolicited proposals in accordance with the terms of the exchange agreement and terminate the exchange agreement to accept an acquisition proposal (including a potential sale transaction) that the board determines in good faith, in consultation with Goldman Sachs, and in light of all relevant circumstances, including the terms and conditions of such proposal and the exchange, to be more favorable to the Company’s existing holders of Class A common stock than consummating the exchange (which we refer to as a “superior proposal”), subject to the Company’s obligation to pay each holder of SunCom Wireless subordinated notes party to the exchange agreement a break up fee of 2% of the total outstanding principal amount of the SunCom Wireless subordinated notes held by such holder and subject to the exchange agreement as of the date of the exchange agreement, or approximately $14.2 million in the aggregate, in such event.

 

Certain Management Arrangements

 

In connection with the recapitalization transactions, each of Michael Kalogris, our Chairman and Chief Executive Officer, Eric Haskell, our Executive Vice President and Chief Financial Officer, and William A. Robinson, our Executive Vice President of Operations, have entered into amendments to their existing employment agreements. Such amendments will increase the severance payable to such individuals following the recapitalization (or the earlier departure of 2 of the 3 current outside directors on the Company’s board of directors) in the event of their subsequent termination of employment for any reason other than cause. In the case of Mr. Kalogris and Mr. Robinson, such severance will be increased to two years of their base salary at the time and the bonus to which they would have been entitled during such two year period had they achieved 100% of their bonus-related goals for such years. In the case of Mr. Haskell, such severance will be increased to one year of his base salary at the time and the bonus to which he would have been entitled during such year had he achieved 100% of his bonus-related goals for such year. Additionally, such amendments will entitle Messrs. Kalogris, Haskell and Robinson to a potential cash bonus in the event of a sale transaction involving the Company. The collective aggregate amount of such bonus, which shall be payable only in the event a sale transaction for the Company is consummated, will be an amount equal to 0.5% of the Sale Proceeds (as defined in their employment agreement), if any, between $1.7 and $2.0 billion as a result of any such sale transaction, plus 1.0% of the Sale Proceeds, if any, in excess of $2.0 billion resulting from such sale transaction. Such aggregate bonus will be allocated 50% to Mr. Kalogris and 25% to each of Messrs. Haskell and Robinson.

 

Description of the Exchange Agreement

 

To effectuate the exchange, the holders of the SunCom Wireless subordinated notes have entered into an exchange agreement with the Company, SunCom Wireless, and SunCom Investment. The following is a summary of the material terms and conditions of the exchange agreement. A copy of the exchange agreement is attached as Annex A to this proxy statement.

 

The Exchange

 

At the closing of the exchange, each holder of SunCom Wireless subordinated notes will deliver its subordinated notes to SunCom Investment in exchange for 71.113944 shares of Class A common stock for each $1,000 in principal amount of SunCom Wireless subordinated notes exchanged. The Class A common stock to be delivered in the exchange will be contributed by the Company to SunCom Investment immediately prior to the closing. It is expected that $321,015,000 outstanding principal amount of 93/8% Senior Subordinated Notes due 2011 and $390,133,000 outstanding principal amount of 83/4% Senior Subordinated Notes due 2011 of SunCom Wireless will be exchanged pursuant to the exchange agreement for an aggregate of 50,572,539 new shares of Class A common stock. The number of shares of Class A common stock issued in the exchange may be increased if additional SunCom Wireless subordinated notes become party to the exchange agreement pursuant to the terms thereof. The closing of the exchange will occur as promptly as practicable, but in no event later than the third business day after the satisfaction or (to the extent permitted by applicable law) waiver of all of the conditions (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions) to the closing of the exchange agreement. The certificates for the shares of Class A common stock delivered in the exchange will bear an appropriate legend to indicate that such Class A common stock was issued in a transaction that was not registered under the Securities Act of 1933, as amended, which we refer to as the “Securities Act”, or under the securities laws of any state, and that such Class A common stock may not be resold except pursuant to an effective registration statement or an exemption from registration under the Securities Act and applicable state securities laws. The Company will be responsible for all sales and similar transfer taxes that may be due by the holders of the SunCom Wireless subordinated notes as result of the exchange, except to the extent that such taxes are imposed because the subordinated notes are held other than in the name of the registered holder.

 

Exit Consents

 

The exchange agreement provides that each holder of the SunCom Wireless subordinated notes party thereto, by delivering its subordinated notes in the exchange, will have delivered, effective upon the closing of the exchange, a consent to the adoption of the supplemental indentures effecting the amendments to the SunCom Wireless subordinated notes as described above under “The Recapitalization Transactions — Effects of the Recapitalization Transactions — Amendment of the Terms of the Remaining SunCom Wireless Subordinated Notes.”

 

Lockup of Consenting Noteholders

 

The exchange agreement provides that each holder of the SunCom Wireless subordinated notes party thereto, so long as such holder remains the legal owner and/or the duly authorized investment advisor or manager with respect to any SunCom Wireless subordinated notes and or Class A common stock, agrees that it will, so long as the exchange agreement is in full force and effect and has not been terminated:

 

 

Additionally, each of the Company, SunCom Investment, SunCom Wireless and each holder of SunCom Wireless subordinated notes party to the exchange agreement agrees that it will not, so long as the exchange agreement is in full force and effect:

 

 

 

Transfer of Claims, Interests and Securities; Further Acquisition of Notes and Equity Interests

 

Each holder of SunCom Wireless subordinated notes party to the exchange agreement agrees that it will not transfer any of its SunCom Wireless subordinated notes or Class A common stock, including any voting or consent rights associated with such SunCom Wireless subordinated notes or Class A common stock, unless the transferee agrees in writing to be bound by the terms of the exchange agreement. The exchange agreement permits each holder of SunCom Wireless subordinated notes party thereto to engage in acquisitions of any SunCom Wireless subordinated notes or Class A common stock, provided that such SunCom Wireless subordinated notes and Class A common stock will automatically become subject to the terms and conditions of the exchange agreement.

 

Representations and Warranties

 

The exchange agreement contains representations and warranties of each of the parties thereto as to, among other things:

 

 

The exchange agreement also contains representations and warranties of the holders of the SunCom Wireless subordinated notes party thereto, which are made on a several and not joint basis, as to, among other things:

 

 

The exchange agreement also contains representations and warranties of the Company, SunCom Investment and SunCom Wireless as to, among other things:

 

 

 

Some of the representations and warranties in the exchange agreement are qualified by materiality qualifications or a “material adverse effect” clause. For purposes of the exchange agreement, a “material adverse effect” means, with respect to the Company, an event or condition that has had or reasonably could have a material adverse effect on the business, assets or financial performance of the Company and its consolidated subsidiaries, taken as a whole, other than any effect resulting from (i) conditions, developments or circumstances (including, without limitation, economic, political or regulatory conditions, federal or state governmental actions, proposed or enacted legislation or proposed or enacted regulations) that are applicable to the wireless communications industry in general or that adversely affect the markets in which the Company and its subsidiaries operate generally or affect industries related to the telecommunications business generally (including, without limitation, the introduction of any technological changes in the telecommunications industry), (ii) any change in the United States or foreign economies or securities or financial markets in general, (iii) any action taken by the Company, SunCom Investment, SunCom Wireless, or the holders of the SunCom Wireless subordinated notes party to the exchange agreement in furtherance of the transactions contemplated by the exchange agreement and consistent with the terms of the exchange agreement, (iv) the public announcement of the exchange, the consummation of the transactions contemplated by the exchange agreement, or the public announcement of the intention of the new board of directors of the Company to pursue strategic alternatives, including a sale transaction or (v) changes in the nature of competition affecting the business of the Company and its subsidiaries, taken as a whole (including, without limitation, competition resulting from the introduction of any new technological changes in the telecommunications industry).

 

Agreements Related to the Conduct of Business

 

The exchange agreement provides that, subject to certain exceptions and except as consented to in writing, such consent not to be unreasonably withheld, conditioned or delayed, by the holders of the SunCom Wireless subordinated notes party to the exchange agreement, each of the Company, SunCom Wireless and SunCom Investment will, and will cause its subsidiaries to, operate its business and maintain its assets in the ordinary course of business, consistent with past practice, and use its commercially reasonable efforts to (i) preserve intact its business and goodwill, (ii) maintain and renew its permits and licenses, (iii) keep available the service of its officers and employees, (iv) preserve its relationships with suppliers and other constituencies, (v) maintain its books and records and (vi) pay its obligations as they come due, in each case in the ordinary course of business, consistent with past practice.

 

Additionally, subject to certain exceptions and except as consented to in writing, not to be unreasonably withheld, conditioned or delayed, by the holders of the SunCom Wireless subordinated notes party to the exchange agreement, each of the Company, SunCom Wireless and SunCom Investment has agreed that it will not, and will not permit its subsidiaries to:

 

 

 

Non-Solicitation

 

The Company, SunCom Wireless, and SunCom Investment have agreed that they and their subsidiaries will not, and will not authorize or permit, directly or indirectly, any officer, director, employee, agent, investment banker, financial advisors, attorney, broker, finder or other agent or representative to, initiate or solicit (including by way of furnishing non-public information or assistance) any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, an acquisition proposal; provided, that the taking of any of the actions described below under “— Sale Transaction” and any actions of the Company, SunCom Wireless and SunCom Investment or any of their subsidiaries prior to the date of the exchange agreement will not be deemed to be a violation of such covenant.

 

An “acquisition proposal” means any proposal, offer or inquiry from a third party for or with respect to the acquisition, directly or indirectly, of beneficial ownership (as defined under Rule 13(d) of the exchange act) of assets, securities or ownership interests of or in the Company, SunCom Wireless, SunCom Investment or any of their subsidiaries representing 50% or more of the consolidated assets of the Company and its subsidiaries taken as a whole, or of an equity interest representing a 50% or greater economic interest in the Company and its subsidiaries taken as whole, pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, sale of assets, share exchange, liquidation, dissolution, recapitalization, tender offer, exchange offer or similar transaction with respect to either the Company, SunCom Wireless, SunCom Investment or any of their subsidiaries, including without limitation, a sale transaction.

 

Notwithstanding the foregoing, the board of directors of the Company has the right to review unsolicited proposals from third parties for any acquisition proposal, including any unsolicited proposals resulting from the actions of the Company and its subsidiaries described below under “— Sale Transaction,” and respond in good faith to any such proposals, including negotiating and executing any appropriate confidentiality agreements with such third parties, providing financial, legal and other information to such third parties, and negotiating the terms with respect to such proposal, or taking such other actions as the board of directors deems appropriate in exercising its fiduciary duties. The Company has the right to terminate the merger agreement as described below under “— Termination of the Exchange Agreement” to accept such a proposal if it deems such a proposal to constitute a superior proposal (as defined in “The Recapitalization Transactions — Effects of the Recapitalization Transactions — Potential Sale Transaction”), subject to the Company’s obligation to pay each holder of SunCom Wireless subordinated notes party to the exchange agreement a break up fee of 2% of the total outstanding principal amount of the SunCom Wireless subordinated notes held by such holder and subject to the exchange agreement as of the date of the exchange agreement, or approximately $14.2 million in the aggregate, in the event that it terminates the exchange agreement in such circumstances.

 

Additional Covenants of the Company

 

The Company will use its commercially reasonable efforts to hold the special meeting within thirty days of the mailing of the proxy statement to the Company’s stockholders. Subject to the rights of the Company to terminate the exchange agreement to accept a superior proposal (and the right of the holders of the SunCom Wireless subordinated notes party to the exchange agreement to receive the break up fee described below under “— Break-Up Fee and Expenses” in such event), the Company will not withdraw, qualify or modify in a manner adverse to the holders of the SunCom Wireless subordinated notes party to the exchange agreement, or publicly propose to withdraw, qualify or modify in a manner adverse to the holders of the SunCom Wireless subordinated notes party to the exchange agreement, its recommendation of the exchange, the merger and the transactions contemplated thereby, provided that in the event that prior to obtaining the stockholder vote the board of directors of the Company determines in good faith, after consultation with outside counsel, that failure to withdraw or modify its recommendation would be inconsistent with its fiduciary duties, it may withdraw its recommendation.

 

The Company has agreed to use its reasonable best efforts to contest and/or appeal the delisting of the Class A common stock on the New York Stock Exchange.

 

Efforts to Consummate; Timing of the Exchange

 

The exchange agreement provides that the parties shall use their commercially reasonable efforts to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate the and make effective the recapitalization, merger and exchange, including:

 

 

Each of the Company and the holders of the SunCom Wireless subordinated notes party to the exchange agreement agree to promptly make all necessary filings under the HSR Act and seek all other consents and approvals required from any governmental authority, including any approvals required by the FCC.

 

If any administrative or judicial action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging the transactions contemplated by the exchange, the merger or any other transaction contemplated by the exchange agreement, each of the Company, SunCom Wireless, and SunCom Investment will use its commercially reasonable efforts, and the holders of the SunCom Wireless subordinated notes party to the exchange agreement will cooperate in all respects with the Company, SunCom Wireless, and SunCom Investment, to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the exchange, the merger or any of the transactions contemplated by the exchange agreement.

 

D&O Insurance, Indemnification

 

All rights to exculpation and indemnification for acts or omissions occurring at or prior to the closing of the exchange, whether asserted or claimed prior to, at or after the closing of the exchange (including any matters arising in connection with the transactions contemplated by the exchange agreement), now existing in favor of the respective current or former directors, officers or employees, as the case may be, of the Company or its subsidiaries, as provided in their respective charter documents and bylaws or in any agreement, shall survive the closing of the transactions contemplated by the exchange agreement and shall continue in full force and effect for a period of not less than six years following the closing of the exchange. The Company and its subsidiaries have agreed to indemnify, defend and hold harmless, and advance expenses to such current or former directors, officers or employees, as the case may be, of the Company or its subsidiaries with respect to all acts or omissions by them in their capacities as such at any time prior to the closing, to the fullest extent permitted by the charter documents and bylaws of the Company or any of its subsidiaries (including SunCom Wireless) as in effect on November 21, 2006 and in any indemnification agreements of the Company or its subsidiaries or other applicable contract, in each case as in effect on November 21, 2006. The Company and the holders of the SunCom Wireless subordinated notes party to the exchange agreement have agreed, for a period of six years following the closing of the exchange, not to amend, modify or terminate any such charter documents, bylaws or agreements in any manner adverse to such current or former directors, officers or employees, as the case may be, of the Company or its subsidiaries, with respect to such rights to indemnification and advancement of expenses.

 

For a period of six years following the closing of the exchange, the Company shall (at the election of the board of directors of the Company) either (A) maintain an insurance policy that provides coverage for the current or former directors, officers or employees, as the case may be, of the Company or its subsidiaries for events occurring at or prior to the closing that is no less favorable, taken as a whole, than the existing policy of the Company and its subsidiaries or, if substantially equivalent insurance coverage is unavailable, the best

available coverage, or (B) purchase or cause to be purchased a “tail policy” for such current or former directors, officers or employees, as the case may be, of the Company or its subsidiaries with a claims period of at least six years from the closing with respect to directors’ and officers’ liability insurance in amount and scope no less favorable than the existing policy or policies of the Company and its subsidiaries for claims arising from facts or events that occurred on or prior to the closing of the exchange.

 

Releases

 

Effective as of and subject to the occurrence of the closing of the exchange, each of the holders of the SunCom Wireless subordinated notes party to the exchange agreement, will release and forever discharge all of the Company and its subsidiaries and each current or former director, officer or employee, as the case may be, of the Company or its subsidiaries, who we collectively refer to as the “SunCom release parties” and each of J.P. Morgan Partners (23A SBIC), L.P., J.P. Morgan SBIC LLC, Sixty Wall Street SBIC Fund, L.P, J.P. Morgan Capital, L.P., Sixty Wall Street Fund, L.P., their respective current and former directors, officers, partners and employees, and Arnold L. Chavkin, who we collectively refer to as the “Chase release parties”, from any and all claims, counterclaims, causes of action, demands, obligations, sums of money, contract, agreements, or damages, whether in law or in equity, that they had, now have, may have, or may have had against them, whether liquidated or unliquidated, known or unknown, matured or unmatured, relating to or arising out of acts or omissions of the SunCom release parties or Chase release parties occurring prior to the closing of the exchange in their capacity, with respect to the SunCom release parties, as obligors to the holders of the SunCom Wireless subordinated notes party to the exchange agreement or as stockholders, directors, officers and employees of the Company and/or any of its subsidiaries, and with respect to the Chase release parties, as stockholders of the Company or directors, officers, partners and employees of such Chase release parties, respectively; provided, that such release does not extend to acts of theft or fraud committed by any of the SunCom release parties or the Chase release parties against any holder of SunCom Wireless subordinated notes party to the exchange agreement.

 

Effective as of and subject to the occurrence of the closing of the exchange, each of the SunCom release parties will release and forever discharge (and prior to the closing, each of the Chase release parties will release and forever discharge) each of the holders of the SunCom Wireless subordinated notes party to the exchange agreement from any and all claims, counterclaims, causes of action, demands, obligations, sums of money, contract, agreements, or damages, whether in law or in equity, that they had, now have, may have, or may have had against them, whether liquidated or unliquidated, known or unknown, matured or unmatured, relating to or arising out of acts or omissions by such holders of SunCom Wireless subordinated notes party to the exchange agreement related to the Company and its subsidiaries and the transactions contemplated by the exchange agreement, including the exchange and the merger; provided that such release does not and will not extend to acts of theft or fraud committed by any holder of SunCom Wireless subordinated notes party to the exchange agreement against the SunCom release parties or Chase release parties.

 

Effective as of and subject to the occurrence of the closing of the exchange, each of the Company and its subsidiaries will release and forever discharge each of the Chase release parties from any and all claims, counterclaims, causes of action, demands, obligations, sums of money, contract, agreements, or damages, whether in law or in equity, that they had, now have, may have, or may have had against them, whether liquidated or unliquidated, known or unknown, matured or unmatured, relating to or arising out of acts or omissions by such Chase release parties related to the Company and its subsidiaries and the transactions contemplated by the exchange agreement, including the exchange and the merger; provided that such release does not extend to acts of theft or fraud committed by any Chase release party against the Company or any of its subsidiaries.

 

Board Composition

 

Effective immediately upon consummation of the exchange, the board of directors of the Company will be reconstituted as follows: (i) Michael E. Kalogris, the Chairman and Chief Executive Officer of the Company, and Scott I. Anderson, Chairman of the Audit Committee of the board of directors of the Company, will remain on the Board and (ii) the remaining three current directors will resign from the board of directors

of the Company. Immediately prior to the effectiveness of the resignations of any of the existing board members, the board of directors of the Company will act to (A) increase the size of the board of directors of the Company to ten members and (B) approve the appointment, effective immediately following the resignation of the three current directors other than the Mr. Kalogris and Mr. Anderson, of (i) three (3) new directors designated by Highland Capital Management, L.P., at least one (1) of which will be independent (as determined by the new board of directors of the Company) under NYSE Rules, (ii) three (3) new directors designated by Pardus Capital Management L.P., a number (not less than one (1)) to be determined of which will be independent (as determined by the new board of directors of the Company) under NYSE Rules and (iii) two (2) new directors designated by DiMaio Ahmad Capital LLC, which will be independent (as determined by the new board of directors of the Company) under NYSE Rules, to fill the vacancies created by the resignation of such directors and the expansion of the board of directors of the Company. If either of Mr. Kalogris or Mr. Anderson ceases to serve as a director for any reason, until the earlier of the consummation of the sale transaction process described under “— Sale Transaction” below and the termination of such sale transaction process by the new board of directors of the Company, Mr. Anderson or Mr. Kalogris, as applicable, will be entitled to select a replacement with relevant qualifications and experience, and the parties shall use their commercially reasonable efforts to cause such selected replacement to be appointed by the board of directors of the Company to fill the vacancy, provided that any such replacement must be reasonably acceptable to and consented to by the board, which consent shall not be unreasonably withheld or delayed. Notwithstanding the designation rights of particular holders of SunCom Wireless subordinated notes set forth above, each of the newly appointed directors appointed to the new board of directors of the Company will have relevant background and experience and shall otherwise be reasonably acceptable to the Company. In the event that a director designated by any of the holders of the SunCom Wireless subordinated notes party to the exchange agreement ceases to serve as director for any reason prior to the 2008 annual meeting of stockholders of the Company, the vacancy resulting thereby will be filled by an individual designated by the person that designated the director who has ceased to serve, provided that the individual so designated shall have relevant background and experience and shall otherwise be reasonably acceptable to and consented to by the remainder of the board, which consent shall not be unreasonably withheld or delayed, and each of the parties to the exchange agreement will take all action necessary to promptly elect, if necessary, such successor or replacement director to the board as soon as possible after the date of such vacancy. Each director appointed to the board shall execute a confidentiality agreement in form and substance reasonably satisfactory to the Company prior to assuming his or her position on the board.

 

Sale Transaction

 

Each of the parties to the exchange agreement agrees that a sale transaction or transactions (whether by way of merger(s), consolidation(s), stock purchase(s) or sale(s) of substantially all of the business of the Company as currently conducted, which we refer to as a “sale transaction”) should be pursued by the board of directors of the Company. Specifically, the Company and the holders of SunCom Wireless subordinated notes party to the exchange agreement agree that: (i) the Company will retain an investment bank of nationally recognized standing mutually acceptable to the Company and the holders of SunCom Wireless subordinated notes party to the exchange agreement for the purpose of advising the Company and its subsidiaries and the board of directors of the Company on a sale transaction and other strategic alternatives (Goldman Sachs has already been engaged by the Company for such purpose); (ii) such new investment bank will be instructed to begin as soon as practicable to prepare customary sales brochures, information memoranda and other marketing materials necessary to market the Company and its subsidiaries and/or their respective assets; (iii) such new investment bank will be instructed to work with the Company on the preparation of a data room for purposes of facilitating a sale transaction; and (iv) such new investment bank will be instructed to identify potential strategic and financial purchasers that it reasonably believes may be interested in participating in a sale transaction (and have the financial wherewithal to successfully consummate a sale transaction) and as such new investment bank may reasonably determine to be desirable, enter into customary and appropriate confidentiality agreements with one or more of such potential purchasers, provided that in no event shall the Company, SunCom Investment or SunCom Wireless, or their respective agents (including such new investment bank) distribute any materials or otherwise initiate any discussions or negotiations with potential purchasers in

a sale transaction prior to the effective date of the exchange (except that such new investment bank and counsel to the Company, SunCom Investment and SunCom Wireless may negotiate the terms of the confidentiality agreements referred to above). Notwithstanding the foregoing, the board of directors of the Company has the right to review unsolicited proposals from third parties for any acquisition proposal, and respond in good faith to any such proposals, including negotiating and executing any appropriate confidentiality agreements with such third parties, providing financial, legal and other information to such third parties, and negotiating the terms with respect to such proposal, or taking such other actions as the board of directors deems appropriate in exercising its fiduciary duties. Upon receipt of any unsolicited proposal, the Company agrees that it will use Goldman Sachs in connection with the evaluation and negotiation of such proposal; provided, that such new investment bank will agree in writing not to disclose the existence or terms of any unsolicited proposal, including the identity of the parties thereto, to any of the holders of the SunCom Wireless subordinated notes participating in the exchange or their representatives.

 

Conditions to the Exchange Agreement

 

The obligations of the Company, SunCom Wireless, SunCom Investment and each of the holders of the SunCom Wireless subordinated notes party to the exchange agreement are subject to the satisfaction at or prior to the closing of the following conditions:

 

 

The obligations of the holders of the SunCom Wireless subordinated notes party to the exchange agreement to effect the exchange are subject to the satisfaction at or prior to the closing of the following additional conditions:

 

 

 

The obligations of the Company, SunCom Wireless and SunCom Investment to effect the exchange are subject to the satisfaction at or prior to the closing of the following additional conditions:

 

 

Termination of the Exchange Agreement

 

The exchange agreement may be terminated at any time before the closing, whether before or after obtaining the stockholder vote approving the exchange and adopting the merger agreement, by written notice from the holders of 85% of the outstanding principal amount of the SunCom Wireless subordinated notes party to the exchange agreement, whom we refer to as the “requisite noteholders” to the Company, SunCom Investment and SunCom Wireless, or by the Company, SunCom Investment and SunCom Wireless to the requisite noteholders:

 

 

 

Break-Up Fee and Expenses

 

The Company will be required to pay a termination fee of 2% of the outstanding principal amount of the SunCom Wireless subordinated notes held by each of the holders party to the exchange agreement and subject to the exchange agreement as of the date of the exchange agreement, or approximately $14.2 million in the aggregate, if the exchange agreement is terminated in the following situations:

 

 

Any payment required pursuant to the first bullet above will be made within two business days following the consummation of the applicable acquisition proposal, and any payment required pursuant to the second two bullets above will be made within two business days after termination of the exchange agreement.

 

Whether or not the exchange is consummated, the Company has agreed that it shall cause SunCom Wireless to pay, on a monthly basis, the reasonable fees and expenses of counsel to the holders of the SunCom Wireless subordinated notes party to the exchange agreement, incurred, whether before or after the date of the exchange agreement, in connection with the transactions contemplated by the exchange agreement, provided that the aggregate amount of such fees and expenses will not exceed $1,000,000. Except as otherwise provided above, all expenses incurred in connection with the transactions contemplated by the exchange agreement will be paid by the party incurring such expenses.

 

Amendments and Waivers

 

The exchange agreement may only be modified, altered or supplemented by an agreement in writing signed by the Company, SunCom Investment, and the requisite noteholders; provided that any modification or amendment that adversely impacts the economic treatment of rights of any holder of SunCom Wireless

subordinated notes party to the exchange agreement shall require the agreement in writing of such holder. At any time prior to the closing of the exchange, any party may extend the time for the performance of any of the obligations or other acts of the other parties to the exchange agreement, waive any inaccuracies in the representations and warranties of the other parties contained the exchange agreement or in any document delivered pursuant to the exchange agreement and waive compliance by any other party with any of the agreements or conditions contained in the exchange agreement if set forth in an instrument in writing signed by the party or parties to be bound thereby.

 

Registration Rights Agreement

 

In connection with the exchange, the Company and each of the holders of the SunCom Wireless subordinated notes participating in the exchange will execute a registration rights agreement that gives the holders of the SunCom Wireless subordinated notes participating in the exchange certain rights with respect to their shares of Class A common stock. Specifically, the Company has agreed to put into place a “shelf” registration statement covering such Class A common stock and to keep such shelf registration statement in effect until the earlier of three years following the exchange or the date upon which all securities received by the participating holders of SunCom Wireless subordinated notes in the exchange may be resold without restriction under Rule 144(k) promulgated under the Securities Act of 1933, as amended. Additionally, the holders of at least 15% of the Class A common stock received by the holders of the SunCom Wireless subordinated notes in the exchange may require the Company to amend the shelf registration statement or to file a prospectus supplement to permit an underwritten offering of the Class A common stock held by such holders.

 

Lock-up and Voting Agreement

 

In connection with the exchange, each of J.P. Morgan (23A SBIC), L.P., J.P. Morgan Capital, L.P. and Sixty Wall Street Fund, L.P., who collectively hold 23.9% of our outstanding Class A common stock, have entered into a lock-up and voting agreement with certain holders of the SunCom Wireless subordinated notes whereby such entities have agreed to vote all of their shares of Class A common in favor of the adoption of the merger agreement, and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange. Additionally, as described under “The Recapitalization Transactions — Description of Exchange Agreement — Lockup of Consenting Noteholders” the holders of the SunCom Wireless subordinated notes party to the exchange agreement have agreed to vote all shares of Class A common stock held by them, which includes the Class A common stock held by Pardus European Special Opportunities Master Fund L.P. and Goldman, Sachs & Co., who collectively hold approximately 16% of our Class A common stock, in favor of the adoption of the merger agreement and the approval of the exchange and the transactions contemplated thereby, including the issuance to SunCom Investment of the shares of Class A common stock necessary to complete the exchange.

 

Description of the Merger Agreement

 

The following is a summary of the material terms of the merger agreement, a copy of which is attached as Annex B to this proxy statement. We urge you to read the merger agreement in its entirety, because it, and not this summary or this proxy statement, is the legal document that governs the merger.

 

Structure of the Merger

 

At the closing of the merger, Merger Sub will merge with and into the Company, and the separate corporate existence of Merger Sub will cease. The Company will be the surviving corporation in the merger. The certificate of incorporation of the Company will be amended to read in its entirety as described under “— The Recapitalization Transactions — Effects of the Recapitalization Transactions — Amendment of the Certificate of Incorporation of the Company” until changed or amended as provided therein or by applicable law. The bylaws of the Company in effect immediately prior to the effective time of the merger will be the bylaws of the surviving corporation until thereafter changed or amended as provided therein or by applicable

law. The directors of the Company immediately prior to the effective time of the merger will be the directors of the surviving corporation and will hold office until their successors are duly elected, appointed and qualified or their earlier death, resignation or removal in accordance with the certificate of incorporation or bylaws of the surviving corporation or as otherwise provided under Delaware corporate law. The officers of the Company immediately prior to the effective time of the merger will be the officers of the surviving corporation and will hold office until their successors are duly elected, appointed and qualified or their earlier death, resignation or removal in accordance with the certificate of incorporation or bylaws of the surviving corporation or as otherwise provided under Delaware corporate law.

 

When the Merger Becomes Effective

 

The closing of the merger will take place immediately upon the satisfaction or waiver of the conditions to closing stated in the merger agreement unless another date or time is agreed to by the parties thereto. The merger will become effective upon the filing of a certificate of merger with Secretary of State of Delaware or at such later date and time as the parties agree and specify in the certificate of merger.

 

Effect on Capital Stock of Merger Sub and the Company.

 

At the effective time of the merger, each issued and outstanding share of common stock of Merger Sub will automatically be cancelled, will no longer be outstanding and will cease to exist, and no consideration will be delivered in exchange for such cancellation.

 

At the effective time, each share of outstanding Class A common stock, which we refer to as “Company Class A common stock,” will be converted into 0.1 validly issued, fully paid and nonassessable share of Class A common stock, par value $0.01 per share, of the surviving corporation, which we refer to as “surviving corporation Class A common stock,” plus the right to receive the contingent merger consideration described below.

 

The contingent merger consideration will be payable, if at all, as follows:

 

 

 

The right to receive the contingent merger consideration described above will be uncertificated and personal to each holder of record (on their own behalf and on behalf of the beneficial owners for which they are the record holder) of Company Class A common stock outstanding immediately prior to the merger. Such right will not be transferable by such holders. A certificate representing the whole number of shares required to be issued to any holder of record of Company Class A common stock outstanding immediately prior to the effective time of the merger will be mailed to such holders promptly (and in no event more than five (5) business days) after the occurrence of the event requiring the payment of such contingent merger consideration. Cash in lieu of any fractional shares will be paid to each holder of record of Company Class A common stock outstanding immediately prior to the merger as described below under “— Fractional Shares.” The right of the holders of Company Class A common stock outstanding at the effective time of the merger to receive any contingent merger consideration will automatically terminate and be extinguished on the first date, if any, that the circumstances that would require the issuance of such surviving corporation Class A common stock as described above are no longer applicable. The Company believes that it is unlikely that such contingent merger consideration will be issued.

 

Exchange of Certificates

 

On or promptly following the closing date, the surviving corporation will deposit with Computershare, or such bank or trust company as may be designated by the surviving corporation, as exchange agent, shares representing the certificates of surviving corporation Class A common stock issuable to the holders of record of Company Class A common stock immediately prior to the merger other than those shares that would be issuable as contingent merger consideration. The exchange agent is required to mail each holder of record of Company Class A common stock immediately prior to the effective time of the merger a letter of transmittal and instructions for use in effecting the surrender of certificates of Company Class A common stock for certificates of surviving corporation common stock. Upon surrender of a certificate for Company Class A common stock and a duly executed letter of transmittal, a holder of shares of Company Class A common stock will be entitled to receive the applicable number of shares of surviving corporation Class A common stock plus cash in lieu of any fractional shares as described below under “— Fractional Shares.” In the event of a transfer of ownership of Company Class A common stock that is not registered in the transfer or stock records of the Company, the applicable number of shares of surviving corporation common stock may be issued to the transferee if the certificate is presented to the exchange agent with all documents required to evidence and effect the transfer of the shares and to evidence that any applicable stock transfer taxes have been paid or are not payable. Issuance of any shares of surviving corporation Class A common stock as contingent merger consideration will not be issued by the exchange agent pursuant to these provisions, but will be issued, if at all, as described above under “— Effect on Capital Stock of Merger Sub and the Company.” Notwithstanding the failure of a holder of Company Class A common stock to effect the exchange of certificates, after the effective time, such holder will have all rights as a holder of surviving corporation Class A common stock issuable pursuant to the merger.

 

Fractional Shares

 

No certificates or scrip representing factional shares of surviving corporation Class A common stock will be issued in the merger, no dividends or other distributions of the surviving corporation will relate to such fractional share interests and such fractional share interests will not entitle the owner thereof to vote or to any rights as a stockholder of the surviving corporation. In lieu of such fractional shares, a holder of Company Class A common stock will be entitled to receive a cash payment equal to product obtained by multiplying (A) the fractional share interest to which such holder (after taking into account all shares of Company Class A common stock held at the effective time of the merger by such holder) would otherwise be entitled by (B) the per share closing price of the surviving corporation Class A common stock on, in the case of shares of any

surviving corporation Class A common stock issuable at the effective time of the merger, the closing date of the merger, and in the case of any shares of surviving corporation Class A common stock issued as contingent merger consideration, on the date such contingent merger consideration is paid, in each case as listed on the NYSE or any over-the-counter bulletin board or other exchange or quotation system on which the Company Class A common stock is traded at such time.

 

Representations and Warranties

 

The merger agreement contains representations and warranties of the Company and Merger Sub as to, among other things:

 

 

Conditions to Completion of Merger

 

The obligations of each party to effect the merger are subject to the satisfaction or waiver, at or prior to the effective time of the merger, of the following mutual conditions:

 

 

Amendments, Waivers and Termination

 

To the fullest extent permitted by law, the merger agreement may be amended, supplemented or changed, whether before or after approval of the Company’s stockholders is obtained, and any provision thereof may be waived, only by written instrument making specific reference to the merger agreement signed by the party against whom enforcement of any amendment, supplement, modification or waiver is sought, provided that after approval of the Company’s stockholders is obtained, the sections of the merger agreement providing for the conversion of the Class A common stock and the issuance of the contingent merger consideration will not be amended without the consent of the holders of the Class A common stock. The Agreement may be terminated at any time prior to the effective time, whether before or after approval of the Company’s stockholders is obtained, by mutual written consent of the parties.

 

Appraisal Rights

 

The holders of our Class A common stock will have no appraisal rights under Delaware law with respect to the merger, as the consideration to be received by stockholders in the merger will consist solely of shares of stock of the surviving corporation and held of record by more than 2,000 holders, and cash in lieu of fractional shares.

 

Certain United States Federal Income Tax Consequences of the Merger and Exchange

 

The following discussion summarizes certain U.S. federal income tax consequences to the existing holders of our Class A common stock of the merger and the exchange. The following summary is based on the Internal Revenue Code of 1986, as amended (the “Tax Code”), Treasury Regulations promulgated thereunder, judicial decisions, and published administrative rules and pronouncements of the Internal Revenue Service (the “IRS”), all as in effect on the date hereof. Changes in such rules or new interpretations thereof may have retroactive effect and could significantly affect the U.S. federal income tax consequences described below.

 

The U.S. federal income tax consequences of the merger and exchange are complex and are subject to significant uncertainties. No rulings or determinations of the IRS or any other tax authorities have been sought or obtained with respect to the tax consequences of the merger or exchange. Further, not only has no opinion of counsel been sought or obtained with respect to the tax consequences of the merger or exchange, but no representations or legal opinions are being made (or rendered) regarding the particular tax consequences of the merger or exchange. Accordingly, no assurance can be given that the IRS would not assert, or that a court would not sustain, a different position from any discussed herein.

 

In addition, this summary generally does not address foreign, state or local tax consequences of the merger or exchange, nor does it address the U.S. federal income tax consequences of the merger or exchange to special classes of taxpayers (such as foreign persons; broker-dealers; banks; mutual funds; insurance companies; certain other financial institutions; small business investment companies; regulated investment companies; tax-exempt organizations; holders that are, or hold our Class A common stock through, pass-through entities; persons whose functional currency is not the U.S. dollar; dealers in securities or foreign currency; and persons holding our Class A common stock as a hedge against, or that are hedged against, currency risk or as part of a straddle, constructive sale or conversion transaction). If a partnership holds our Class A common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. Moreover, the following discussion does not address U.S. federal taxes other than income taxes.

 

This discussion assumes that all shares of Class A common stock of the Company are held as “capital assets” (generally, property held for investment) within the meaning of section 1221 of the Tax Code.

 

Accordingly, the following summary of certain U.S. federal income tax consequences is for informational purposes only and is not a substitute for careful tax planning and advice based upon individual circumstances.

 

Consequences of the Merger

 

Pursuant to the merger, each share of Class A common stock of the Company outstanding immediately prior to the merger will be converted into 0.1 shares of Class A common stock of the Company (effecting a 1 for 10 reverse stock split, subject to the receipt of cash in lieu of fractional shares) and the contingent right to receive additional shares of Class A common stock. In connection therewith, certain changes will be made to the certificate of incorporation of the Company. See “The Recapitalization Transactions — Description of the Merger Agreement.”

 

For federal income tax purposes:

 

 

 

Stockholders are urged to consult their tax advisors with respect to the tax consequences of the merger (including the contingent right) to them.

 

Consequences of the Exchange to the Group

 

The Company, SunCom Investment and SunCom Wireless are members of an affiliated group of corporations for U.S. federal income tax purposes (“the Group”), of which the Company is the common parent, and file a single consolidated U.S. federal income tax return. The Group expects to report consolidated net operating loss (“NOL”) carryforwards as of December 31, 2006 for U.S. federal income tax purposes of approximately $1.2 billion, a portion of which is subject to existing limitations. The amount of the Group’s NOL carryforwards and the application of any existing limitations remain subject to audit and adjustment by the IRS.

 

1.  Cancellation of Debt

 

The Group generally will recognize cancellation of debt (“COD”) income as a result of the exchange if, and to the extent, the outstanding balance of the existing SunCom Wireless subordinated notes exceeds the fair market value of the Class A common stock transferred in exchange therefor. Although certain statutory and judicial exceptions can apply to limit the amount of COD (such as where the taxpayer is insolvent prior to the debt cancellation), the Group does not anticipate that any such exceptions will apply. Accordingly, the Group anticipates that it will be required to include the full amount of any COD in its gross income for U.S. federal income tax purposes.

 

The Company believes that the Group will have sufficient NOL carryforwards available to offset such COD income for U.S. federal income tax purposes, based on the trading price of the SunCom Wireless subordinated notes as of date prior to the date of this proxy statement (although there may be some liability for U.S. federal alternative minimum tax and state income tax). If it were determined that the Group’s available NOL carryforwards were significantly less than the amount of COD income recognized, the Group could incur a material tax liability as a result of the exchange.

 

In addition, it is possible that the IRS may attempt to characterize the exchange in a manner that would result in the additional recognition of gain to the Company in an amount equal to the excess, if any, between

the fair market value of the Class A common stock transferred in the exchange and the exchanging noteholders’ adjusted tax basis in the SunCom Wireless subordinated notes surrendered. Although the Company does not believe that such a result is likely, the Company would incur additional federal and state income tax liabilities if successfully recharacterized.

 

2.  Limitations on NOL Carryforwards and Other Tax Attributes

 

The Company anticipates that, as a result of the exchange, any then-existing tax loss or credit carryforwards and certain other tax attributes of the Group, including a portion of any current year NOLs and net capital losses (referred to herein as “pre-change losses”), will become subject to limitation under section 382 of the Tax Code. This limitation will be in addition to any existing limitations to which the pre-change losses are subject.

 

Generally under section 382 of the Tax Code, if a corporation (or consolidated group) undergoes an “ownership change,” the amount of its pre-change losses that may be utilized to offset future taxable income will become subject to an annual limitation. Such limitation also may apply to certain losses or deductions which are “built-in” (i.e., economically accrued but unrecognized) as of the date of the ownership change that are subsequently recognized. A loss corporation generally undergoes an ownership change if the percentage of stock of the corporation owned by one or more 5% stockholders has increased by more than 50 percentage points over a three-year period (with certain groups of less-than-5% stockholders treated as a single stockholder for this purpose).

 

In general, the section 382 annual limitation to which a corporation (or consolidated group) that undergoes an ownership change is subject is equal to the product of (i) the fair market value of the stock of the corporation (or, in the case of a consolidated group, generally the common parent) immediately before the ownership change (with certain adjustments) multiplied by (ii) the “long-term tax-exempt rate” in effect for the month in which the ownership change occurs (4.18% for ownership changes occurring in March 2007). Any portion of the section 382 annual limitation that is not used in a given year may be carried forward, thereby adding to the annual limitation for the subsequent taxable year. However, if the corporation (or the consolidated group) does not continue its historic business or use a significant portion of its historic assets in a new business for at least two years after the ownership change, the annual limitation resulting from the ownership change is reduced to zero, thereby precluding any utilization of the corporation’s pre-change losses.

 

As indicated above, section 382 can operate to limit the deduction of built-in losses recognized subsequent to the date of the ownership change. If a loss corporation (or consolidated group) has a net unrealized built-in gain at the time of an ownership change, any built-in gains recognized during the following five years (up to the amount of the original net unrealized built-in gain) generally will increase the section 382 annual limitation in the year recognized, such that the loss corporation (or consolidated group) would be permitted to use its pre-change losses against such built-in gain income in addition to its regular annual allowance. Conversely, if a loss corporation (or consolidated group) has a net unrealized built-in loss at the time of an ownership change (taking into account most assets and items of “built-in” income and deductions), then generally built-in losses recognized during the following five years (up to the amount of the original net unrealized built-in loss) will be treated as part of the pre-change losses subject to the section 382 annual limitation. Although the rule applicable to net unrealized built-in losses generally applies to consolidated groups on a consolidated basis, certain corporations that join the consolidated group within the preceding five years may not be able to be taken into account in the group computation of net unrealized built-in loss. In general, a loss corporation’s (or consolidated group’s) net unrealized built-in gain or loss will be deemed to be zero unless it is greater than the lesser of (i) $10,000,000 or (ii) 15% of the fair market value of its assets (with certain adjustments) before the ownership change. The Company anticipates that the Group will have a significant net unrealized built-in gain on the exchange date.

 

3.  Alternative Minimum Tax

 

In general, a U.S. federal alternative minimum tax (“AMT”) is imposed on a corporation’s U.S. federal alternative minimum taxable year income at a 20% tax rate to the extent such tax exceeds the corporation’s regular U.S. federal income tax liability. For purposes of computing a corporation’s regular U.S. federal

income tax liability, all of the taxable income recognized in a taxable year generally may be offset by the carryover of NOLs (to the extent permitted under, among other provisions, section 382 of the Tax Code). Even though all of a corporation’s regular tax liability for a given year may be reduced to zero by virtue of its NOLs, the corporation in any given year may still be subject to the AMT. For purposes of computing taxable income for AMT purposes, certain tax deductions and other beneficial allowances are modified or eliminated. In particular, only 90% of a corporation’s taxable income for AMT purposes may be offset by available NOL carryforwards (as computed for AMT purposes).

 

Accordingly, notwithstanding that the Group expects to have sufficient consolidated NOLs for regular U.S. federal tax purposes to offset any COD income generated in the exchange, it may incur an AMT due to the 90% limitation on AMT NOL carryforwards. In addition, if a corporation (or consolidated group) has a net unrealized built in loss at the time of an “ownership change” within the meaning of section 382 of the Tax Code, the corporation’s (or group’s) aggregate tax basis in its assets (if higher than fair market value) may have to be reduced for certain AMT purposes to reflect the fair market value of such assets as of the change date.

 

Any AMT that a U.S. corporation pays generally will be allowed as a nonrefundable credit against its regular U.S. federal income tax liability in any future taxable year when the corporation is no longer subject to AMT and otherwise becomes subject to regular tax.

 

The foregoing summary has been provided for informational purposes only and is not a substitute for careful tax planning and advice based upon individual circumstances. All holders of our Class A common stock are urged to consult their tax advisors concerning the federal, state, local and foreign tax consequences applicable as a result of the merger and exchange.

 

Accounting Treatment of the Exchange

 

A gain or loss will be recognized on the exchange transaction based upon the difference between the carrying value of the SunCom Wireless subordinated notes exchanged and the market value of the Class A common stock at the date the shares are issued to the holders of the SunCom Wireless subordinated notes participating in the exchange. The gain will be offset by, or the loss increased, by direct costs of the exchange transaction.

 

Estimated Fees and Expenses

 

The Company expects to incur fees and expenses of approximately $13.7 million in the aggregate in connection with the transactions contemplated by the exchange and the merger. Of this amount up to $15,000 will be paid to D.F. King & Co., Inc. in connection with its service as proxy solicitation agent.

 

Additionally, whether or not the exchange is consummated, the Company has agreed that it shall cause SunCom Wireless to pay the reasonable fees and expenses of counsel to the holders of the SunCom Wireless subordinated notes party to the exchange agreement, incurred, whether before or after the date of the exchange agreement, in connection with the transactions contemplated by the exchange agreement, provided that the aggregate amount of such fees and expenses will not exceed $1,000,000.

 

In addition, if the exchange agreement is terminated under certain circumstances described under “The Recapitalization Transactions — Description of the Exchange Agreement — Break-Up Fee and Expenses”, the Company will be obligated to pay to each holder of the SunCom Wireless subordinated notes party to the exchange agreement a break up fee equal to 2% of the total outstanding principal amount of the SunCom Wireless subordinated notes held by such holder and subject to the exchange agreement as of the date of the exchange agreement, or approximately $14.2 million in the aggregate.

 

Regulatory Approvals

 

The following discussion summarizes the material regulatory requirements that we believe relate to the merger, the merger agreement, the exchange and the transactions contemplated thereby, although we may determine that additional consents from or notifications to governmental agencies are necessary or appropriate.

 

In the exchange agreement, the parties have agreed to cooperate with each other to make all filings with governmental authorities and to obtain all governmental approvals and consents necessary to consummate the merger, the merger agreement, the exchange and the transactions contemplated thereby, subject to certain exceptions and limitations. It is a condition to the consummation of the exchange that required governmental consents and approvals shall have been obtained before the exchange.

 

FCC Approval.  We will require approval from the FCC in order to consummate the exchange and the related transactions. We made the appropriate filing with the FCC for approval of the exchange on March 9, 2007. We expect to obtain approval from the FCC, but there can no guarantee of such approval or when it will be obtained, although we currently expect that such approval will be obtained after the date of the special meeting.

 

The Proposal

 

You are being asked to approve the exchange, by SunCom Investment, of 50,572,539 new shares of our Class A common stock, par value $0.01 per share, for $321,015,000 aggregate principal amount of 93/8% Senior Subordinated Notes due 2011 and $390,133,000 aggregate principal amount of 83/4% Senior Subordinated Notes due 2011 of SunCom Wireless, as well as the transactions contemplated by such exchange, including the issuance to SunCom Investment of the new shares of Class A common stock necessary to complete the exchange. The number of shares of Class A common stock issued in the exchange may be increased if additional SunCom Wireless subordinated notes become party to the exchange agreement pursuant to the terms thereof. A copy of the exchange agreement effecting the exchange is attached hereto as Annex A.

 

Why the Company needs you to approve the exchange

 

The Company’s board of directors has required, as a condition to the consummation of the exchange and the merger, the approval the exchange and the merger proposals by stockholders of record owning a majority of the outstanding Company Class A common stock. Additionally, although the Class A common stock has currently been delisted from the NYSE, the Company is appealing that ruling. If the Class A common stock is reinstated on the NYSE, the stockholder approval policy of the NYSE set forth in Rule 312.03 of the NYSE’s Listed Company Manual (the “Listed Company Manual”) would require stockholder approval of the issuance of the Class A common stock contemplated by the exchange.

 

Under Rule 312.03(c) in the Listed Company Manual, the Company is required to obtain stockholder approval prior to issuing common stock or securities that are convertible into, or exercisable for, common stock in one transaction or a series of related transactions if:

 

 

The issuance of the Class A common stock in the exchange will constitute an issuance of common stock representing approximately 87.5% of the number of shares of fully-diluted common stock outstanding before the recapitalization transactions.

 

Vote required to approve the exchange

 

The affirmative vote of stockholders of record owning a majority of the outstanding Company Class A common stock as of the record date is required to approve the exchange, including the issuance of an aggregate of 50,572,539 new shares of Class A common stock (which number may be increased if additional SunCom Wireless subordinated notes become party to the exchange agreement pursuant to the terms thereof) to SunCom Investment for purposes of consummating the exchange.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL 1

 

 

The Proposal

 

You are being asked to adopt the Agreement and Plan of Merger among SunCom Wireless Holdings, Inc. and SunCom Merger Corp., a newly formed wholly-owned subsidiary of the Company, as it may be amended from time to time, which is described under “The Recapitalization Transactions — Description of the Merger Agreement” in this proxy statement and attached to this proxy statement as Annex B.

 

Vote required to approve and adopt the merger agreement.

 

The affirmative vote of stockholders of record owning a majority of the outstanding Company Class A common stock as of the record date is required by Delaware law to adopt the merger agreement.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL 2

 

We may ask our stockholders to vote on a proposal to adjourn the special meeting to a later date to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement and approve the exchange. We currently do not intend to propose adjournment at our special meeting if there are sufficient votes to approve the exchange and adopt the merger agreement. If the proposal to adjourn our special meeting for the purpose of soliciting additional proxies is submitted to our stockholders for approval, and if there is a quorum present, such approval requires the affirmative vote of the holders of a majority of the shares of Class A common stock present or represented by proxy and entitled to vote on the matter.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL 3

 

Other Matters for Action at the Special Meeting

 

As of the date of this proxy statement, our board of directors knows of no matters that will be presented for consideration at the special meeting other than as described in this proxy statement.

 

Future Stockholder Proposals

 

The deadline for submitting stockholder proposals to be considered timely for inclusion in the proxy statement for the 2007 annual meeting of stockholders expired on December 1, 2006. If the date of the 2007 annual meeting is moved to more than 30 days from the date of the previous annual meeting, or if the Company does not hold a 2007 annual meeting, the deadline for submitting proposals at the next annual meeting of stockholders, determined in accordance with Rule 14a-8(e) promulgated under the exchange act, will be a reasonable time before the Company begins to print and mail its proxy materials for such annual meeting.

 

Householding of Special Meeting Materials

 

Some banks, brokers and other nominees recordholders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this notice and proxy statement may have been sent to multiple stockholders in your household. If you would prefer to receive separate copies of a proxy statement or annual report either now or in the future, please contact your bank, broker or other nominee. Upon written or oral request to the Executive Director of Investor Relations at SunCom Wireless Holdings, Inc., 1100 Cassatt Road, Berwyn, Pennsylvania 19312, 610-651-5900, we will provide a separate copy of the annual reports and proxy statements. In addition, stockholders sharing an address can request delivery of a single copy of annual reports or proxy statements if you are receiving multiple copies upon written or oral request to the Executive Director of Investor Relations at the address and telephone number stated above.

 

The Company

 

The Company provides digital wireless communications services in the southeastern United States, Puerto Rico and the U.S. Virgin Islands. The Company’s wireless communications network covers customers in a contiguous geographic area primarily encompassing portions of North Carolina, South Carolina, Tennessee and Georgia. In addition, the Company operates a wireless communications network covering customers in Puerto Rico and the U.S. Virgin Islands. The Company’s principal offices are located at 1100 Cassatt Road, Berwyn, Pennsylvania 19312, and its telephone number at that address is (610) 651-5900.

Selected Historical Consolidated Financial Data

 

The following table sets forth our historical selected financial data as of and for the fiscal years ended December 31, 2002, 2003, 2004, 2005 and 2006. In addition, unaudited subscriber data for the same periods is presented. This financial data has been derived from, and should be read in conjunction with, our audited consolidated financial statements, the related notes and selected financial information filed as part of our 2006 Annual Report on Form 10-K (which is incorporated by reference herein).

 

 

 

 

 

Pro Forma Financial Information

 

The following unaudited pro forma financial statements sets forth our historical selected financial data on a pro forma basis, after giving effect to the merger and exchange, for the fiscal year ended December 31, 2006. This financial data has been derived from, and should be read in conjunction with, our audited consolidated financial statements, the related notes and selected financial information filed as part of our 2006 Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (which is incorporated by reference herein).

 

The unaudited pro forma combined financial statements give effect to the following transactions contemplated by the merger and the exchange, as if each such transaction occurred on the date or at the beginning of the periods indicated:

 

 

The unaudited pro forma combined financial statements are for informational purposes only, are not indications of future performance, and should not be considered indicative of actual results that would have been achieved had the merger and the exchange actually been consummated on the dates or at the beginning of the periods presented.

SUNCOM WIRELESS HOLDINGS, INC.

 

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

 

SUNCOM WIRELESS HOLDINGS, INC.

 

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

 

SUNCOM WIRELESS HOLDINGS, INC.

 

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

The unaudited pro forma financial data presented herein is not necessarily indicative of the operating results or financial position of SunCom had the exchange transactions been completed at the dates indicated, nor are they necessarily indicative of the future results of operations or financial position of SunCom. The pro forma financial statements were prepared based upon the assumption that 92.5% of the 93/8% subordinated notes and 98.3% of the 83/4% subordinated notes will be delivered in the exchange.

 

(A) Reflects the net decrease in cash and cash equivalents resulting from the payment of incremental assumed transaction expenses estimated at $8.0 million.

 

(B) Reflects the write-off of direct costs capitalized in connection with the exchange agreement.

 

(C) Reflects the write-off of deferred financing costs associated with 91.7% of the outstanding 93/8% notes and 98.3% of the 83/4% notes.

 

(D) Reflects the retirement of 92.5% of the outstanding 93/8% notes and 98.3% of 83/4% notes in exchange for the equity issued in item (H) below.

 

(E) Reflects the one for ten reverse stock split.

 

(F) Reflects the issuance of 50,572,539 shares of Class A common stock to the bondholders in exchange for the retirement of 92.5% of the outstanding 93/8% notes and 98.3% of the 83/4% notes.

 

(G) Reflects the conversion of Class B Common Stock into Class A Common Stock.

 

(H) Reflects the issuance of 50,572,539 shares of Class A common stock, with a market value of $12.00 per share, to the bondholders in exchange for the retirement of 92.5% of the 93/8% notes and 98.3% of the 83/4% notes. The market price was based upon the stock’s closing price on March 7, 2007, adjusted for the one for ten reverse stock split. If the Company’s split adjusted stock price changed by $0.01, the gain or loss recorded on the exchange transaction would be adjusted by approximately $0.5 million.

 

(I) Reflects the assumed fair value of the common stock issued to the bondholders in excess of par, thereby decreasing the accumulated deficit as a result of the exchange transaction.

 

(J) Reflects interest expense reduction as the result of retiring 92.5% of the 93/8% notes and 98.3% of the 83/4% notes. For each additional 1% of additional bondholders that participate in the exchange, approximately $0.7 million of interest expense would be saved annually.

Projected Financial Information

 

The Company’s senior management does not as a matter of course make public projections as to future performance or earnings beyond the current fiscal year and is especially wary of making projections for extended earnings periods due to the unpredictability of the underlying assumptions and estimates. However, financial forecasts prepared by senior management in August 2006 (the “August 2006 Projections”) were made available to the financial advisors for the Company and the holders of the SunCom Wireless subordinated notes participating in the exchange in connection with their respective considerations of the exchange and the merger. We have included the August 2006 Projections herein to give our stockholders access to certain nonpublic information considered by the financial advisors for the Company and the holders of the SunCom Wireless subordinated notes participating in the exchange for purposes of evaluating the Company’s prospects as a stand alone business in the absence of the exchange. The inclusion of this information should not be regarded as an indication that our board of directors or any other recipient of this information considered, or now considers, it to be a reliable prediction of future results.

 

In connection with the August 2006 Projections and the March 2007 Projections discussed below, note that the Company’s internal financial forecasts, upon which the projections were based, are subjective in many respects. The projections reflect numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, all of which are difficult to predict and beyond the Company’s control. The projections also reflect estimates and assumptions related to the business of the Company that are inherently subject to significant economic, political, and competitive uncertainties, all of which are difficult to predict and many of which are beyond the Company’s control. As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. The financial projections were prepared for internal use and not with a view toward public disclosure or toward complying with GAAP, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The prospective financial information included in this document has been prepared by, and is the responsibility of, the Company’s management. Neither PricewaterhouseCoopers LLP nor the Company’s financial advisor has examined or compiled the accompanying prospective financial information and, accordingly, neither PricewaterhouseCoopers LLP nor the Company’s financial advisor express any opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this document relates to the Company’s historical financial information. It does not extend to the projected financial information and should not be read to do so.

 

Projections of this type are based on estimates and assumptions that are inherently subject to factors such as industry performance, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of operations of the Company, including the factors described under “Cautionary Statement Regarding Forward-Looking Information,” which factors may cause the financial projections or the underlying assumptions to be inaccurate. Since the projections cover multiple years, such information by its nature becomes less reliable with each successive year. The financial projections do not take into account any circumstances or events occurring after the date they were prepared.

 

Since the date the August 2006 Projections were prepared, the Company has made publicly available its actual results of operations for the year ended December 31, 2006. You should review the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 to obtain this information. Readers of this proxy statement are cautioned not to place undue reliance on the specific portions of the financial projections set forth below. No one has made or makes any representation to any stockholder regarding the information included in these projections.

 

For the foregoing reasons, as well as the bases and assumptions on which the financial projections were compiled, the inclusion of specific portions of the financial projections in this proxy statement should not be regarded as an indication that such projections will be an accurate prediction of future events, and they should not be relied on as such. Except as set forth herein or as required by applicable securities laws, the Company does not intend to update, or otherwise revise the financial projections or the specific portions presented to

reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. The projected financial information set forth below was prepared in August 2006, on a basis that is consistent with the accounting principles used in the historical financial statements, except that for each of the years presented below, equipment revenue is presented net of total equipment costs within selling and marketing expenses. In addition, this projected financial information does not give effect to the proposed exchange transactions.

 

SUNCOM WIRELESS HOLDINGS, INC.

 

 

 

 

SunCom Wireless management developed the projected financial information based on the following significant assumptions:

 

 

 

 

 

The financial projections exclude capital expenditures of approximately $250-$300 million over the forecast period related to a universal mobile telecommunications system, or UMTS, upgrade that could be required to remain competitive. Additionally, the financial projections do not address the competitive effects of the purchase of spectrum in the Company’s domestic markets by T-Mobile USA, one of the Company’s strategic partners, potentially resulting in a loss of revenue, increased churn and reduced customer additions.

 

Subsequent to the preparation of the August 2006 Projections provided above, the Company reported its fiscal year ended December 31, 2006 results of operations. The Company reported fiscal year ended December 31, 2006 Adjusted EBITDA of $92.8 million, compared to $89.0 million of projected Adjusted EBITDA that was contained in the August 2006 Projections provided to the Company’s financial advisors and the holders of the SunCom Wireless subordinated notes participating in the exchange. In addition, subsequent to the preparation of the August 2006 Projections, the Company’s management prepared additional projected financial information in March 2007 (the “March 2007 Projections”) based on its current outlook for the business which differs from the August 2006 Projections. The March 2007 Projections were prepared on a basis that is consistent with the accounting principles used in the historical financial statements, except that for each of the years presented below, equipment revenue is presented net of total equipment costs within selling and marketing expense. In addition, this projected financial information does not give effect to the proposed exchange transactions. The March 2007 Projections are set forth below, together with a comparison of projected Adjusted EBITDA for 2007, 2008 and 2009 from each of the March 2007 Projections and the August 2006 Projections.

 

SUNCOM WIRELESS HOLDINGS, INC.

 

 

 

Comparative Projections

 

 

The Company’s management developed the March 2007 Projections based on similar assumptions described above under the August 2006 Projections, with the following significant additions or changes:

 

 

As discussed above, the August 2006 Projections, as well as the March 2007 Projections, do not address the competitive effects of the purchase of spectrum in the Company’s domestic markets by T-Mobile USA, one of the Company’s strategic partners, which could potentially result in a loss of revenue, increased churn and reduced customer additions, which the Company believes could occur beginning in 2009. The Company’s March 2007 Projections includes approximately $60 million of 2009 Adjusted EBITDA attributable to roaming revenue derived from T-Mobile USA, and any percentage reduction in the amount of such revenue earned by the Company for that period would reduce the 2009 Adjusted EBITDA by the same percentage of the $60 million attributable thereto.

 

Similar to the August 2006 Projections, the March 2007 Projections excludes capital expenditures of approximately $250-$300 million over the forecast period related to a UMTS upgrade that could be required to remain competitive.

 

In addition to the March 2007 Projections set forth above, the Company’s management prepared an enhanced case which included a projected $1.00 increase in ARPU over the periods presented as a result of the favorable ARPU trends that the Company has experienced in the past quarter. However, there can be no assurance that the Company will continue to experience a positive ARPU trend over the periods presented incrementally to those used in the March 2007 Projections, and accordingly the information presented above does not include the enhanced case scenarios because management does not believe that it has a sufficient measuring period of the recent ARPU trends for such information to be reliable at this time.

 

The Company’s Board of Directors has reviewed the new March 2007 Projections that were prepared subsequent to its initial approval and recommendation of the exchange, the merger, the merger agreement and the transactions contemplated thereby to be considered and voted upon by the stockholders at the special meeting. The Board of Directors has determined that the additional information contained in the March 2007 Projections does not change its view that the exchange and merger and transactions contemplated thereby are fair to, advisable to and in the best interest of the existing stockholders of the Company due to the following factors:

 

 

 

The Company’s financial advisor, Lazard, has not reviewed the March 2007 Projections, has not updated its analysis based on such projections and did not assist with or review the analysis in the factors listed above. Lazard’s analysis and fairness opinion, dated as of January 29, 2007, were based solely on the information described under the caption “The Recapitalization Transactions — Opinion of Financial Advisor,” and did not take into account the Company’s later-created March 2007 Projections.

 

Valuation Information

 

In connection with the exchange, the Company’s management prepared an analysis of the amounts that would be distributable to the current holders of the Company’s Class A common stock, and to the holders of the senior subordinated notes that have agreed to participate in the exchange, assuming a sale transaction were consummated at various valuation ranges. In connection with the following information, it should be noted that the ranges of potential value are provided for illustrative purposes only, and that the Company may be unable to consummate a sale transaction within the ranges provided, or at all. The Company’s financial advisor has not examined or compiled this analysis, or expressed any conclusion or provided any form of assurance with respect thereto and, accordingly, assumes no responsibility for it. In addition, the following analysis makes certain assumptions regarding the Company’s expected cash expenditures over the periods presented, as well as estimated tax effects of a potential sale transaction, each of which may vary substantially from the assumptions used. Management believes the assumptions used to prepare this analysis are reasonable, but projections of this type are inherently subject to economic and industry uncertainties and contingencies, all of which are difficult to predict and many of which are beyond SunCom’s control. Suncom does not intend to update or otherwise revise this analysis.