<PAGE> 1
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Information Statement [ ] Confidential, for Use of the Commission
Only
[ ] Definitive Information Statement (as permitted by Rule 14c-5(d)(2))
</TABLE>
IXC COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
IXC COMMUNICATIONS, INC.
5000 PLAZA ON THE LAKE, SUITE 200
AUSTIN, TEXAS 78746
NOTICE OF ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
To the Stockholders of IXC Communications, Inc.:
The Board of Directors of IXC Communications, Inc. (the "Company") has
taken action to adopt and approve the Company's 1997 Special Executive Stock
Plan (the "1997 Stock Plan"). The 1997 Stock Plan is more fully described in the
attached Information Statement.
A total of four stockholders holding an aggregate of approximately 58% of
the issued and outstanding shares of the Company's Common Stock, $.01 par value
(the "Common Stock") and the issued and outstanding shares of the Company's 10%
Junior Series 3 Cumulative Redeemable Preferred Stock, $.01 par value (the
"Series 3 Preferred Stock"), voting as a class, have also approved in writing
the 1997 Stock Plan. The Series 3 Preferred Stock is not registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "1934 Act").
The adoption and approval by the stockholders of the Company shall not become
effective until , 1997, which date is at least twenty (20) days
after the mailing of the enclosed Information Statement.
Your consent to the adoption of the 1997 Stock Plan is not required and is
not being solicited in connection with this action. Pursuant to Section 228 of
the Delaware General Corporation Law, you are hereby being provided with notice
of the approval by less than the unanimous written consent of the stockholders
of the Company. Pursuant to the Securities Exchange Act of 1934 (the "1934 Act")
with this letter you are being furnished with an Information Statement relating
to this action.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ATTACHED MATERIAL IS BEING SENT TO YOU FOR INFORMATION PURPOSES ONLY.
By Order of the Board of Directors
[SIG]
Jeffrey C. Smith
Secretary
Austin, Texas
, 1997
<PAGE> 3
IXC COMMUNICATIONS, INC.
5000 PLAZA ON THE LAKE, SUITE 200
AUSTIN, TEXAS 78746
INFORMATION STATEMENT RELATING TO THE
APPROVAL OF 1997 SPECIAL EXECUTIVE STOCK PLAN
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
THE APPROXIMATE DATE OF MAILING OF THIS
INFORMATION STATEMENT IS , 1997
This Information Statement is being furnished by IXC Communications, Inc.,
a Delaware corporation (the "Company" or "IXC Communications"), to the holders
of the Company's Common Stock, $.01 par value (the "Common Stock") and the
holders of the Company's 10% Junior Series 3 Cumulative Redeemable Preferred
Stock, $.01 par value (the "Series 3 Preferred Stock"), in connection with the
approval and adoption of the Company's 1997 Special Executive Stock Plan (the
"1997 Stock Plan").
The Board of Directors of the Company has taken action to approve and adopt
the 1997 Stock Plan which requires the approval by the affirmative vote of a
majority of the outstanding shares of the Common Stock and of the Series 3
Preferred Stock, voting as a class, for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") (which imposes a $1
million compensation deduction limitation). A total of four stockholders holding
approximately 58% of the issued and outstanding shares of the Company's Common
Stock and of the Series 3 Preferred Stock consented in writing to the approval
and adoption of the 1997 Stock Plan. The Series 3 Preferred Stock is not
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "1934 Act").
Accordingly, all corporate actions necessary to approve and adopt the 1997
Stock Plan have already been taken. Pursuant to the regulations promulgated
under the 1934 Act, the approval and adoption of the 1997 Stock Plan by the
stockholders of the Company will not become effective until , 1997,
which date is at least twenty (20) days after the Company has mailed this
Information Statement to the stockholders of the Company.
The Company has asked brokers and other custodians as well as fiduciaries
to forward this Information Statement to the beneficial owners of the Common
Stock and of the Series 3 Preferred Stock held of record by such persons and
will reimburse such persons for out-of-pocket expenses incurred in forwarding
such materials.
THE 1997 STOCK PLAN HAS BEEN APPROVED AND ADOPTED BY STOCKHOLDERS WHO HOLD
SUFFICIENT VOTING SECURITIES TO APPROVE THE ACTION. THIS INFORMATION STATEMENT
IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION. WE ARE NOT ASKING YOU FOR
A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The executive offices of the Company are located at 5000 Plaza on the Lake,
Suite 200, Austin, Texas 78746. All holders of the Common Stock and of the
Series 3 Preferred Stock of record at the close of business on September 19,
1997 will receive this Information Statement.
VOTING SECURITIES
The Board of Directors has fixed the close of business on September 19,
1997 as the record date (the "Record Date") for the determination of
stockholders entitled to vote with respect to stockholder authorization of the
1997 Stock Plan. As of the Record Date, the outstanding voting securities of the
Company were 30,922,440 shares of Common Stock and 12,550 shares of Series 3
Preferred Stock. Each stockholder was entitled to one vote for each share of
Common Stock and one vote for each share of Series 3 Preferred Stock held on the
Record Date. The consent of the holders of a majority of the outstanding shares
of Common Stock and Series 3 Preferred Stock, voting as a class, was necessary
to approve and adopt the 1997 Stock Plan.
2
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 1, 1997
regarding the beneficial ownership of: (i) each class of the Company's voting
securities by each person who is known by the Company to be the beneficial owner
of more than 5% of any class of the Company's voting securities, and (ii) each
class of equity securities of the Company by (a) each director of the Company,
(b) each of the Named Executive Officers (as defined below), and (c) all
directors and executive officers of the Company as a group. Although the Company
is not aware of any holders of more than five percent of the outstanding shares
of the Company's 12 1/2% Junior Exchangeable Preferred Stock Due 2009 (the
"Exchangeable Preferred Stock") the Company has only limited information
concerning the beneficial ownership of the Exchangeable Preferred Stock because
substantially all of the Exchangeable Preferred Stock is registered in the names
of nominees. It is possible that one or more persons or groups owns more than
five percent of the outstanding Exchangeable Preferred Stock.
<TABLE>
<CAPTION>
CONVERTIBLE
SERIES 3 PERCENT OF PREFERRED PERCENT OF
PREFERRED STOCK SERIES 3 STOCK CONVERTIBLE COMMON STOCK PERCENT OF
BENEFICIALLY PREFERRED BENEFICIALLY PREFERRED BENEFICIALLY COMMON
NAME AND ADDRESS OWNED(1)(2) STOCK OWNED(3) STOCK OWNED OWNED(1) STOCK
- -------------------------------- --------------- ---------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Ralph J. Swett(4)(5)............ 25.00 * 3,563 * 3,022,248 9.8%
John R. Fleming(4).............. -- -- -- -- 1,353,739 4.4
James F. Guthrie(4)(6).......... -- -- 1,018 * 110,169 *
David J. Thomas(4)(7)........... -- -- -- * 187,236 *
Michael W. Vent(4)(8)........... -- -- -- -- 49,249 *
Richard D. Irwin(9)............. 995.58 7.9% 6,108 * 6,914,913 22.4
c/o Grumman Hill Associates,
Inc.
191 Elm Street
New Canaan, CT 06840
Carl W. McKinzie(10)............ -- -- -- -- 231,917 *
300 S. Grand Avenue,
29th Floor
Los Angeles, CA 90071
Wolfe H. Bragin................. -- -- -- -- 4,000 *
2029 Century Park East
Suite 1230
Los Angeles, CA 90067
Phillip L. Williams(11)......... -- -- -- -- 144,150 *
633 West Fifth Street,
Suite 4000
Los Angeles, CA 90071-2007
Joe C. Culp(12)................. -- -- -- -- 60,622 *
#5 Hedge Lane
Austin, TX 78746
Grumman Hill Investments,
L.P.(13)...................... -- -- -- -- 4,636,990 15.0
191 Elm Street
New Canaan, CT 06840
Grumman Hill Associates, Inc.... 915.42 7.3 -- -- -- --
191 Elm Street
New Canaan, CT 06840
Trustees of General Electric
Pension Trust................. 6,725.00 53.6 305,438 30.0% 9,591,210(14) 31.0
3003 Summer Street
Stamford, CT 06905
Putnam Investments, Inc.(15).... -- -- -- -- 2,532,799 8.2
One Post Office Square
Boston, MA 02109
All directors and executive
officers of IXC Communications
as a group (11 persons)....... 1,020.58 8.1 10,689 1.1 12,078,243 38.7
</TABLE>
3
<PAGE> 5
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Shares of
Common Stock relating to options currently exercisable or exercisable
within 60 days of September 1, 1997, are deemed outstanding for computing
the percentage of the person holding such securities but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares shown as beneficially owned by
them.
(2) The shares of Series 3 Preferred Stock vote together with the shares of
Common Stock as a class, except where otherwise required by law. The
holders of Series 3 Preferred Stock have the right to elect one member of
the Board of Directors.
(3) The shares of the Company's 7 1/4% Junior Convertible Preferred Stock Due
2007 (the "Convertible Preferred Stock") are nonvoting except upon the
occurrence of certain events described in the Certificate of Designation of
the Convertible Preferred Stock. Although the Company is not aware of any
holders of more than five percent of the outstanding shares of Convertible
Preferred Stock other than as set forth in the above table, the Company has
only limited information concerning the beneficial ownership of the
Convertible Preferred Stock because substantially all of the Convertible
Preferred Stock is registered in the names of nominees. It is possible that
one or more persons or groups (other than as set forth in the above table)
owns more than five percent of the outstanding Convertible Preferred Stock.
(4) The address of such person is c/o IXC Communications, Inc. 5000 Plaza on
the Lake, Suite 200, Austin, Texas 78746.
(5) Includes 484,980 shares held by Ralph J. Swett, Trustee of the EMS 1994
Trust and 484,980 shares held by Ralph J. Swett, Trustee of the RJS 1994
Trust. Also includes 15,187 shares of Common Stock issuable to Mr. Swett
upon conversion of the Convertible Preferred Stock.
(6) Represents 80,830 shares issuable with respect to the exercise of options.
Also includes 4,339 shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock.
(7) Represents shares issuable with respect to the exercise of options.
(8) Represents shares issuable with respect to the exercise of options.
(9) Includes 1,628,216 shares held by The Irwin Family Limited Partnership
dated January 4, 1995, 341,341 shares held by The Irwin Family Limited
Partnership #2, 150,148 shares held by The Irwin Family Limited Partnership
#3 and 26,035 shares of Common Stock issuable upon conversion of 2,545
shares of the Convertible Preferred Stock held by an Individual Retirement
Account established by Mr. Irwin and 3,563 shares of Convertible Preferred
Stock held by the Virginia Irwin Charitable Remainder Unitrust Dtd 1/4/95.
Also includes 21.16 shares of Series 3 Preferred Stock held by Richard D.
Irwin Revocable Living Trust dated January 4, 1995, 915.42 shares of Series
3 Preferred Stock held by Grumman Hill Company, L.L.C. or its predecessor
("Grumman Hill") and 4,636,990 shares of Common Stock held by Grumman Hill
Investments, L.P. ("GHI"). Mr. Irwin is President of Grumman Hill, and Mr.
Irwin may be deemed a beneficial owner of the shares owned by such entity.
(10) Such shares are held by Trust for the Riordan & McKinzie Profit Sharing and
Savings Plan for the benefit of Carl W. McKinzie.
(11) Such shares are held by Phillip L. Williams, as Trustee of the Phillip and
Jane Williams Living Trust, UDT August 20, 1985.
(12) Represents shares issuable with respect to the exercise of options.
(13) The sole general partner of GHI is Grumman Hill, a Delaware limited
liability company, of which Mr. Irwin, a director of the Company, is the
general manager and a beneficial owner of a membership
4
<PAGE> 6
interest. Mr. Irwin may be deemed to have voting and investment power with
respect to the shares held of record by GHI.
(14) Includes 1,301,952 shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock.
(15) Represents 2,451,599 shares held by Putnam Investment Management, Inc.
("PIM") and 81,200 shares held by Putnam Advisory Company, Inc. ("PAC").
PIM and PAC are each registered investment advisors that are wholly owned
by Putnam Investments, Inc. The share amounts for PIM and PAC are based
upon information contained in a Schedule 13G filed with the Commission on
January 30, 1997. The Commission's rules do not require a Schedule 13G to
be updated if the stockholder's holdings change (except on an annual
basis), so that there can be no assurance that the current holdings of PIM
and PAC do not vary materially from those shown in the above table.
5
<PAGE> 7
EXECUTIVE COMPENSATION
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of IXC Communications and their ages
as of September 1, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------------- --- ---------------------------------------------
<S> <C> <C>
Ralph J. Swett............... 63 Chairman, President, Chief Executive Officer
and Director
Richard D. Irwin............. 62 Director
Wolfe H. Bragin.............. 53 Director
Carl W. McKinzie............. 57 Director
Phillip L. Williams.......... 75 Director
Joe C. Culp.................. 64 Director
John R. Fleming.............. 43 Executive Vice President
James F. Guthrie............. 53 Chief Financial Officer and Executive Vice
President
David J. Thomas.............. 46 Executive Vice President
Michael W. Vent.............. 45 Executive Vice President
</TABLE>
Each director holds office until his successor has been elected and qualified.
Officers serve at the pleasure of the Board of Directors.
Mr. Swett has served as Chairman, Chief Executive Officer and President of
IXC Communications since its formation in July 1992. Prior to that, Mr. Swett
served as Chairman of the Board and Chief Executive Officer of Communications
Transmission, Inc. ("CTI") from 1986 to 1992. From 1969 to 1986, Mr. Swett
served in increasingly senior positions (Vice President, President and Chairman)
of Times Mirror Cable Television ("TMCT"), a subsidiary of The Times Mirror
Company ("Times Mirror") and a previous owner of IXC Carrier, Inc., a subsidiary
of the Company ("IXC Carrier"), and as a Vice President of Times Mirror from
1981 to 1986. Mr. Swett has served as Chairman of IXC Carrier since 1979, its
Chief Executive Officer since 1986 and its President since 1991. Mr. Swett has
managed communications businesses for the past 26 years. As described below, Mr.
Swett will cease to serve as the President and Chief Executive Officer of IXC
Communications during October 1997 upon the beginning of the employment of
Benjamin L. Scott. Mr. Swett will continue to serve as the Chairman of IXC
Communications through its next annual meeting of stockholders.
Mr. Irwin has served as a director of IXC Communications since its
formation in July 1992. He has served as the President of Grumman Hill, a
merchant banking firm, and the general partner of GHI, since 1985. Prior to the
formation of Grumman Hill, Mr. Irwin was a Managing Director of Dillon, Read &
Co. Inc., from 1983 to 1985. Prior to that, he served as Chief Executive Officer
of Fotomat Corporation for 12 years. Mr. Irwin is also a member of the Board of
Directors of PharmChem Laboratories, Inc. and was the Chairman of ALC
Communications Corporation ("ALC") from August 1988 through August 1995.
Mr. Bragin has served as a director of IXC Communications since May 1993.
Mr. Bragin has served since 1985 as Vice President of General Electric
Investment Corporation, a subsidiary of General Electric Company ("GEIC"), that
acts as an investment advisor to General Electric Pension Trust ("GEPT"). Prior
to joining GEIC in 1984, Mr. Bragin served in numerous equipment leasing,
investment and portfolio management positions for GE Credit Corporation, now
known as GE Capital Corporation. Mr. Bragin is a member of the Board of
Directors of a number of private companies.
Mr. McKinzie has served as a director of IXC Communications since May 1993.
Mr. McKinzie has been a principal of Riordan & McKinzie, a Professional Law
Corporation ("Riordan & McKinzie"), since 1980.
Mr. Williams was elected a director of IXC Communications in June 1996. Mr.
Williams has been a private investor and business advisor since May 1993. Prior
to that, Mr. Williams served as Vice Chairman of
6
<PAGE> 8
the Board of Times Mirror from 1987 to May 1993. Mr. Williams is a member of the
Board of Directors of Tejon Ranch Company.
Mr. Culp was elected a director of IXC Communications in June 1996. Mr.
Culp has been President of Culp Communications Associates, a management and
marketing consulting firm, since 1990. From 1989 to 1990, Mr. Culp served as
Executive Vice President of CTI. Prior to that, Mr. Culp served as President and
Chief Executive Officer of Lightnet, Inc. from 1988 to 1989 and as President of
Rockwell International's Telecommunications Group from 1982 until 1988. Mr. Culp
has over 40 years of experience in the communications industry.
Mr. Fleming has served as Executive Vice President of IXC Communications
since March 1996 and as Senior Vice President of IXC Communications from October
1994 through March 1996. He served as Vice President of Sales and Marketing of
IXC Communications from its formation in July 1992 until October 1994. Prior to
that, Mr. Fleming served as Director of Business Development and Director of
Carrier Sales of CTI from 1986 to March 1990 and as Vice President -- Marketing
and Sales of CTI from March 1990 to July 1992. Mr. Fleming was a Branch Manager
for Satellite Business Systems from 1983 to 1986. Mr. Fleming has been employed
with IXC Carrier since 1986 and a Vice President of IXC Carrier since 1990. Mr.
Fleming has over 16 years of experience in the telecommunications industry.
Mr. Guthrie has served as Chief Financial Officer of IXC Communications
since July 1997, as Executive Vice President of IXC Communications since March
1996 and as Senior Vice President, Strategic Planning of IXC Communications from
December 1995 through March 1996. Prior to that, Mr. Guthrie served as Vice
President and Chief Financial Officer of Times Mirror from 1993 to 1995 and as
the Chief Financial Officer of TMCT from 1982 to 1993.
Mr. Thomas has served as Executive Vice President of IXC Communications
since March 1996 and as Senior Vice President of IXC Communications from August
1995 through March 1996. He was employed with ALC from 1983 to 1995, serving as
Vice President from 1991 to 1995 and as Treasurer from 1989 to 1995. Mr. Thomas
has over 14 years of experience in the telecommunications industry.
Mr. Vent was elected Executive Vice President of IXC Communications
effective April 1, 1997 and has served as Senior Vice President -- Network
Planning and Implementation from December 1996 through March 1997. Prior to
that, Mr. Vent served as Vice President and General Manager of Broadband
Services of IXC Communications from October 1995 through November 1996 and Vice
President and General Manager of Switch Services of IXC Communications from
October 1994 through September 1995. Mr. Vent served as Vice President of
Management Information Systems and Network Services of WCT Communications, Inc.
from September 1993 through August 1994, and Vice President and Chief
Information Officer of Advanced Technologies of Progressive Communications
Technology, Inc. from August 1992 through August 1993. He was employed by MCI
from 1979 through July 1992, serving as Director of Network and Computer
Operations from January 1990 through July 1992. Mr. Vent has over 22 years of
experience in the telecommunications industry.
NEW PRESIDENT AND CHIEF EXECUTIVE OFFICER
IXC Communications recently entered into an employment agreement with
Benjamin L. Scott, 47, for a term of five years pursuant to which Mr. Scott will
serve as President and Chief Executive Officer of IXC Communications and become
a member of the Board of Directors upon the commencement of his employment with
IXC Communications which is expected to occur on October 9, 1997 (the
"Commencement Date"). It is anticipated that Mr. Scott will also become the
Chairman of the Board of IXC Communications within 30 days following IXC
Communications' 1998 annual meeting of stockholders. Mr. Scott served as
President and Chief Executive Officer of PrimeCo Personal Communications L.P., a
joint venture among Bell Atlantic Corporation ("Bell Atlantic"), U S WEST Media
Group and Airtouch Communications, Inc., from 1995 until September 30, 1997.
Prior to that, Mr. Scott served as an officer of Bell Atlantic from 1991 to
1995, including as President and Chief Executive Officer of Bell Atlantic
International Wireless. Prior to that, Mr. Scott was employed by AT&T from 1971
through 1991, with his last position being President and Chief Executive Officer
of AT&T Canada.
7
<PAGE> 9
Pursuant to the terms of his employment agreement, Mr. Scott will be
entitled to an annual base salary of $350,000, subject to adjustment in
accordance with IXC Communications' policies and procedures, and an annual bonus
of $225,000 for his first year of service. Thereafter, annual bonuses, if
approved by the Board of Directors, are anticipated to be one-half or more of
his base salary if Mr. Scott achieves or exceeds certain performance goals. Mr.
Scott also will receive a signing bonus of $650,000, $350,000 of which will be
paid on the Commencement Date and $300,000 of which will be paid on January 1,
1999. Mr. Scott was also granted an option to purchase 500,000 shares of Common
Stock at a price of $27.50 per share vesting over a five-year period in
connection with his employment agreement under 1997 Stock Plan. Mr. Scott's
option will become fully vested if Mr. Scott is terminated without cause or if a
change in control (as defined in his employment agreement) occurs pursuant to
the terms of his employment agreement. Mr. Scott is also entitled to receive
certain severance and relocation benefits as described in his employment
agreement.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the four most highly compensated
executive officers other than the Chief Executive Officer (the "Named Executive
Officers") for their services to the Company for the years ended December 31,
1995 and December 31, 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------- UNDERLYING
OTHER ANNUAL OPTION/- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) SARS(#) COMPENSATION(2)
- ------------------------------- ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Ralph J. Swett................. 1996 $299,712 $175,000 $10,000 -- $ 21,986(3)
Chairman, President and Chief 1995 285,000 -- 10,000 -- 883,813(3)
Executive Officer
Kenneth F. Hinther+............ 1996 165,519 100,000 7,500 -- 14,207
Executive Vice President 1995 212,083(4) -- 7,500 -- 444,739(5)
John R. Fleming................ 1996 165,519 100,000 7,500 -- 14,322
Executive Vice President 1995 212,083(4) -- 7,500 -- 444,739(5)
John J. Willingham*............ 1996 143,519 100,000 7,500 -- 12,415
Senior Vice President 1995 183,417(6) -- 7,500 -- 442,871(5)
James F. Guthrie............... 1996 200,000 -- 8,000 342,490 17,842
Executive Vice President 1995 -- -- -- -- --
</TABLE>
- ---------------
+ Mr. Hinther retired as Executive Vice President of the Company effective
April 1, 1997.
* Mr. Willingham retired as Senior Vice President of the Company effective
August 29, 1997.
(1) These amounts represent automobile allowances paid to the Named Executive
Officers in 1996 and 1995.
(2) Includes payments in 1995 of $862,027 (with respect to Mr. Swett) and
$431,014 (with respect to each of Mr. Hinther, Mr. Fleming and Mr.
Willingham) made in connection with a prior incentive arrangement. The
incentive payments were earned in 1993 but did not become payable until
1995.
(3) Includes an employer contribution of $13,500 and $13,700 under the 401(k)
Plan (as defined below) in 1995 and 1996, respectively, and payments of
$8,286 for term life insurance premiums in 1995 and 1996.
(4) Represents $153,750 in salary and an additional amount of $58,333 in
compensation earned and deferred in prior years but paid in 1995.
(5) Includes employer contributions of $13,725 and $14,207 for Mr. Hinther,
$13,725 and $14,322 for Mr. Fleming and $11,858 and $12,415 for Mr.
Willingham under the 401(k) Plan in 1995 and 1996, respectively.
(6) Represents $131,750 in salary and an additional amount of $51,667 in
compensation earned and deferred in prior years but paid in 1995.
8
<PAGE> 10
EMPLOYMENT AGREEMENT
Mr. Guthrie entered into an employment agreement with IXC Communications in
December 1995 for a term of three years pursuant to which Mr. Guthrie is
entitled to an annual base salary of $200,000, subject to adjustment in
accordance with IXC Communications' policies and procedures, and an annual bonus
of up to $75,000 if approved by the Board of Directors. Mr. Guthrie was also
granted an option to purchase 242,490 shares of Common Stock pursuant to the
terms of his employment agreement. Other than Mr. Guthrie, none of the Named
Executive Officers have entered into employment agreements with the Company. See
"-- New President and Chief Executive Officer."
STOCK OPTIONS
The following table sets forth information concerning each grant of stock
options made during 1996 to each of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
SHARES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(1)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -------------------------
NAME GRANTED IN PERIOD SHARE DATE 5% 10%
- ------------------------------ ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ralph J. Swett................ -- -- -- --
Kenneth F. Hinther............ -- -- -- --
John R. Fleming............... -- -- -- --
John J. Willingham............ -- -- -- --
James F. Guthrie(2)........... 242,490(3) 21.4% $ 3.01 1/08/06 $ 459,027 $1,163,265
100,000(4) 8.8% $ 22.25 10/28/06 $1,399,291 $3,546,077
</TABLE>
- ---------------
(1) The potential realizable value is calculated based on the term of the option
(ten years) at its time of grant. It is calculated by assuming that the
stock price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option.
(2) All of Mr. Guthrie's options become immediately exercisable upon the sale of
substantially all of the Company's assets, a successful tender offer for
greater than fifty percent (50%) of the outstanding capital stock of the
Company or a merger or consolidation in which the stockholders of the
Company immediately preceding such merger or consolidation will not hold a
majority of the outstanding capital stock of the surviving corporation
immediately after such merger or consolidation.
(3) The options become exercisable in three equal installments beginning on
January 19, 1997 and, on the two successive annual anniversary dates
thereafter.
(4) The options become exercisable in four equal installments beginning on
October 29, 1997, and on the three successive annual anniversary dates
thereafter.
9
<PAGE> 11
The following table sets forth the number and value as of December 31, 1996
of shares underlying unexercised options held by each of the Named Executive
Officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AS OF OPTIONS AS OF
DECEMBER 31, 1996 DECEMBER 31, 1996(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ralph J. Swett............................... -- -- -- --
Kenneth F. Hinther........................... -- -- -- --
John R. Fleming.............................. -- -- -- --
John J. Willingham........................... -- -- -- --
James F. Guthrie............................. 0 342,490 $ 0 $ 7,576,673
</TABLE>
- ------------------------
(1) Based on the fair market value (the closing price for the Company's Common
Stock as reported on the Nasdaq National Market as of December 31, 1996,
($30.75 per share)), less the exercise price payable upon exercise of such
options.
1996 STOCK PLAN
In May 1996, IXC Communications adopted a stock incentive plan (the "1996
Stock Plan"), covering 2,121,787 shares of Common Stock of IXC Communications
that may be awarded in order to attract, retain and reward employees, directors
and other persons providing services to the Company. The Compensation Committee
administers the 1996 Stock Plan subject to the authority delegated to the Chief
Executive Officer as described below, except that certain grants in connection
with Section 162(m) of the Code are made by the Administrative Committee and all
grants of stock-based awards in 1996 were made by the entire Board of Directors.
See "-- Director Compensation and Committees of the Board -- Administrative
Committee." Any employee, director or other person providing services to the
Company is eligible to receive awards under the 1996 Stock Plan, at the
discretion of the Board of Directors. Subject to certain limitations, the Board
of Directors, delegated its authority under the 1996 Stock Plan to the Chief
Executive Officer of the Company with respect to grants of stock options to
individuals not subject to Section 16 of the 1934 Act and to the Administrative
Committee with respect to grants of stock options to senior executive officers
of IXC Communications and other individuals who may be subject to Section 162(m)
of the Code. Awards available under the 1996 Stock Plan include options to
purchase Common Stock with exercise prices at least equal to the fair market
value of the Common Stock on the date of grant. Mr. Guthrie was the only Named
Executive Officer granted an option pursuant to the 1996 Stock Plan to acquire
stock of IXC Communications in 1996.
1994 STOCK PLAN
In November 1994, IXC Communications adopted a stock incentive plan (the
"1994 Stock Plan") covering 1,212,450 shares of Common Stock of IXC
Communications to attract, retain and reward employees, directors and other
persons providing services to the Company. The Compensation Committee
administers the 1994 Stock Plan subject to the authority delegated to the Chief
Executive Officer as described below, except that certain grants in connection
with Section 162(m) of the Code are made by the Administrative Committee and all
grants of stock-based awards in 1996 were made by the entire Board of Directors.
See "-- Director Compensation and Committees of the Board -- Administrative
Committee." Subject to certain limitations, the Board of Directors delegated its
authority under the 1994 Stock Plan to the Chief Executive Officer of the
Company with respect to grants of stock options to individuals not subject to
Section 16 of the 1934 Act and to the Administrative Committee with respect to
grants of stock options to senior executive officers of IXC Communications and
other individuals who may be subject to Section 162(m) of the Code. Awards
available under the 1994 Stock Plan include options to purchase Common Stock.
Mr. Culp is the only director who holds options to acquire stock. No options
granted under the 1994 Stock Plan were granted in
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<PAGE> 12
1996 to Named Executive Officers under the 1994 Stock Plan.
SPECIAL STOCK PLAN
In October 1996, IXC Communications adopted a stock incentive plan (the
"Special Stock Plan") covering 67,900 shares of Common Stock of IXC
Communications to induce certain individuals to become employees of the Company
and/or its subsidiaries. The Compensation Committee administers the Special
Stock Plan. Awards available under the Special Stock Plan include options to
purchase Common Stock. All available options to acquire stock under the Special
Stock Plan were granted in 1996, none of which were granted to a Named Executive
Officer of the Company.
1997 SPECIAL EXECUTIVE STOCK PLAN
In September 1997, IXC Communications adopted the 1997 Stock Plan, a stock
incentive plan covering 500,000 shares of Common Stock of IXC Communications to
attract, retain and reward key executives. See "Approval of 1997 Special
Executive Stock Plan" for a description of the 1997 Stock Plan.
401(k) PLAN
The Company's 401(k) Plan (the "401(k) Plan") is a tax-qualified retirement
plan. In general, all employees of the Company who have attained age 18 and
completed one year of service are eligible to participate in the 401(k) Plan.
Participants may make pre-tax contributions to the 401(k) Plan, in an amount
currently not to exceed $9,500 per year. The Company may elect to make matching
contributions each year, which are allocated among participants depending on the
amount that they contribute to the 401(k) Plan. The Company may also elect to
make profit-sharing contributions to the 401(k) Plan, which are allocated among
participants as a percentage of compensation.
INDEMNIFICATION AND EXCULPATION ARRANGEMENTS
The Company's Restated Certificate of Incorporation, as amended, limits the
liability of directors to IXC Communications or its stockholders to the fullest
extent permitted by the Delaware General Corporation Law (the "DGCL").
Accordingly, pursuant to the provisions of the DGCL presently in effect,
directors of IXC Communications will not be personally liable for monetary
damages for breach of a director's fiduciary duty as a director, except for
liability: (i) for any breach of the director's duty of loyalty to the Company
or its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the DGCL; or (iv) for any transaction from which the director
derived an improper personal benefit. In addition, the bylaws of IXC
Communications require IXC Communications to indemnify its directors and
officers to the fullest extent permitted by the laws of the State of Delaware.
DIRECTOR COMPENSATION AND COMMITTEES OF THE BOARD
Non-employee directors currently receive annual compensation of $10,000 in
cash and certain non-employee directors (Messrs. Bragin, Culp and Williams)
receive an annual allocation under the Company's phantom stock plan (described
below) for service to the Company as members of the Board of Directors. All
compensation which would otherwise be payable to Mr. Bragin as a director of the
Company is paid to GEPT. All directors receive reimbursement of reasonable
out-of-pocket expenses incurred in connection with meetings of the Board. Mr.
Culp was granted an option in 1994 in connection with consulting services
provided for the Company which is fully exercisable to purchase 60,622 shares of
Common Stock at a purchase price of $3.01 per share. Mr. Swett receives no
compensation for his services as a director.
The Company adopted a phantom stock plan (the "Directors' Plan") in May
1996 for certain of its outside directors, pursuant to which $20,000 per
director per year of their director's fees will be automatically deferred and
treated as if it were invested in Common Stock. No stock will be actually
purchased under the plan, and the participants will receive cash benefits equal
to the value of the shares that they are deemed to have purchased under the
plan, with such value to be determined on the date of distribution. The
distribution
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<PAGE> 13
of the benefits generally will occur following the third annual meeting of the
Company's stockholders that occurs after the deferral. The Directors' Plan is
administered by Messrs. Swett, Irwin and McKinzie, none of whom are participants
in the plan.
Audit Committee. The Board of Directors established the Audit Committee in
June 1996 to: (i) make recommendations concerning the engagement of independent
public accountants; (ii) review with the independent public accountants the
plans for, and scope of, the audit procedures to be utilized and results of the
audit; (iii) approve the professional services provided by the independent
public accountants; (iv) review the independence of the independent public
accountants; and (v) review the adequacy and effectiveness of the Company's
internal accounting controls. Mr. Williams, Mr. Culp and Mr. McKinzie are the
members of the Audit Committee.
Compensation Committee. The Board of Directors established the
Compensation Committee in June 1996 consisting of Mr. Irwin, Mr. Bragin and Mr.
McKinzie, none of whom are employees of the Company. The Compensation Committee
will determine the compensation for the Company's executive officers and
administer the 1996 Stock Plan, the 1994 Stock Plan and the Special Stock Plan,
except that all grants of stock-based awards in 1996 were made by the entire
Board of Directors. Subject to certain limitation, the Board of Directors
recently delegated its authority under the 1996 Stock Plan and the 1994 Stock
Plan to the Chief Executive Officer of the Company with respect to grants of
stock options to individuals not subject to Section 16 of the Exchange Act and
to the Administrative Committee with respect to grants of stock options to
senior executive officers of the Corporation and other employees that may be
subject to Section 162(m) of the Code.
Administrative Committee. The Board of Directors established the
Administrative Committee in September 1997 consisting of Mr. Bragin and Mr.
Williams, none of whom are employees of the Company. The Administrative
Committee administers the 1997 Stock Plan in all respects and administers the
grants of stock options under the 1996 Stock Plan and the 1994 Stock Plan to
senior executive officers of IXC Communications and other employees who may be
subject to Section 162(m) of the Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to June 1996, the Company did not have a compensation committee or
any other committee of the Board of Directors performing equivalent functions.
All decisions regarding executive compensation were made by the Board of
Directors of the Company prior to that date, none of whom, other than Mr. Swett,
was an executive officer of the Company. Decisions with respect to Mr. Swett's
compensation were approved by all members of the Board other than Mr. Swett. The
Company's Compensation Committee, which was established in June 1996, consists
of Messrs. Irwin, Bragin and McKinzie, none of whom was at any time during
fiscal 1996 or at any other time an officer or employee of the Company. In
September 1997 the Board established the Administrative Committee to administer
the 1997 Stock Plan and certain grants under the 1996 Stock Plan and the 1994
Stock Plan in connection with Section 162(m) of the Code. See "-- Director
Compensation and Committees of the Board -- Administrative Committee." There are
no Compensation Committee (or Administrative Committee) interlocks between the
Company and other entities involving the Company's executive officers and Board
members who serve as executive officers or Board members of such other entities.
APPROVAL OF 1997 SPECIAL EXECUTIVE STOCK PLAN
On September 9, 1997, the Board adopted the 1997 Stock Plan. The holders of
a majority of the outstanding shares of Common Stock and of the Series 3
Preferred Stock, voting as a class, approved the 1997 Stock Plan by means of
written consent. Thus, the other stockholders are not required to vote on the
approval of the 1997 Stock Plan. Rather, the following description of the 1997
Stock Plan is being provided for informational purposes only. This description
is subject to and is qualified in its entirety by the full text of the 1997
Stock Plan, which is attached as Appendix A to this Information Statement.
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<PAGE> 14
SUMMARY OF THE 1997 STOCK PLAN
Purposes. The purposes of the 1997 Stock Plan are (1) to promote the
interests of the Company and its stockholders by enabling it to offer grants of
stock to better attract, retain, and reward certain key executives and, (2) to
strengthen the mutuality of interests between those executives and the Company's
stockholders by providing those executives with a proprietary interest in
pursuing the Company's long-term growth and financial success.
Grants. Under the 1997 Stock Plan, employees of (or individuals who have
accepted offers of employment with) the Company may be granted options to
purchase Common Stock ("Options"). The 1997 Stock Plan permits the granting of
Options that qualify for treatment as incentive stock options under Code Section
422 ("Incentive Stock Options") and Options that do not qualify as Incentive
Stock Options ("Non-Qualified Stock Options"). Employees may also be granted
rights to purchase Common Stock that are subject to repurchase rights on behalf
of the Company ("Restricted Stock").
Maximum Number of Shares. The maximum number of shares that can be issued
to all employees under the 1997 Stock Plan is 500,000. The maximum number of
shares that may be issued to a single employee is also 500,000. In the event of
certain changes in the Company's capitalization or structure, an appropriate
adjustment will be made to the number, kind or exercise price of shares as to
which Options and Restricted Stock may thereafter be granted and as to the
number of shares covered by unexercised outstanding Options and rights to
purchase Restricted Stock.
Administration. The 1997 Stock Plan will be administered by the
Administrative Committee. To the extent possible and advisable, the members of
the Administrative Committee will qualify both as (1) "outside directors" under
Code Section 162(m) (imposing a $1,000,000 deduction limitation on compensation
paid to certain executives) and as (2) "non-employee directors" under Rule 16-3
adopted by the Commission (relating to "short-swing" profits) with respect to
grants to individuals subject to those statutory provisions.
The Administrative Committee is authorized to interpret the 1997 Stock Plan
and to adopt rules and procedures relating to the administration of the 1997
Stock Plan. All actions of the Administrative Committee in connection with the
interpretation and administration of the 1997 Stock Plan will be binding upon
all parties.
Terms of Options. The purchase price of shares of Common Stock subject to
each Option which is intended to qualify as an Incentive Stock Option will be
equal to the Fair Market Value of such shares (110% of Fair Market Value in the
case of an owner of more than 10% of the Common Stock) on the date of the grant
of such Incentive Stock Option. The purchase price of any Option which does not
qualify as an Incentive Stock Option will be determined by the Administrative
Committee, but will not be less than 100% of the Fair Market Value of the Common
Stock on the date of the grant. The Fair Market Value of such shares for this
purpose is the closing price of the Common Stock on the date of the grant.
Options vest (i.e., become exercisable) as provided in the stock option
agreement between the employee and the Company. In the case of certain events
(e.g., the sale of the Company), the Options will automatically fully vest.
Options granted under the 1997 Stock Plan may be exercised, to the extent
that they are vested, by the payment of the full purchase price therefor in
cash, by check, or by the surrender of outstanding shares of Common Stock.
Options are not transferable during the individual's lifetime, and may be
transferred in the event of death only by will or by the laws of descent and
distribution. Restricted Stock may not be transferred until the restrictions
lapse.
Each Option will terminate no later than 10 years (five years in the case
of an Incentive Stock Option issued to an owner of more than 10% of the Common
Stock) from the date the Option is granted.
Amendment and Termination. Unless earlier terminated by the Board, the
1997 Stock Plan will terminate on September 8, 2007. The Board may at any time
amend the 1997 Stock Plan. However, no amendment or modification to the plan may
be adopted without approval of an employee holding an Option or Restricted Stock
that would diminish the employee's rights. Furthermore, without stockholder
approval, no
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<PAGE> 15
amendment may be adopted that would (1) change the class of employees eligible
to receive Incentive Stock Options, or (2) increase the maximum number of shares
that may be issued under the 1997 Stock Plan.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code and of the regulations issued
thereunder, the anticipated federal income tax consequences with respect to
Options and Restricted Stock granted under the 1997 Stock Plan are as described
below. However, employees should consult with their own tax advisors with
respect to the tax consequences (both state and federal) of participation in the
1997 Stock Plan.
The 1997 Stock Plan is not a tax-qualified retirement plan under Code
Section 401(a) nor is it subject to the Employee Retirement Income Security Act
of 1974 ("ERISA").
Incentive Stock Options. No taxable income is recognized by an employee
upon the grant or exercise of the Incentive Stock Option. Correspondingly, the
Company is not entitled to an income tax deduction as the result of the grant or
exercise of an Incentive Stock Option. Any gain or loss resulting from the sale
of shares of Common Stock acquired upon exercise of an Incentive Stock Option
will be long-term capital gain or loss if the sale is made after the later of
(1) two years from the date of its grant or (2) one year from the date of its
exercise ("Exercise Date").
If the Common Stock is sold to another person prior to the expiration of
the holding periods described in the above sentence ("Disqualifying
Disposition"), the employee will generally recognize ordinary income in the year
of the sale in an amount equal to the difference between (1) the exercise price
of the option (the "Option Price"), and (2) the lesser of the fair market value
of the shares of Common Stock on (a) the Exercise Date or (b) the date of the
Disqualifying Disposition. The Company will be entitled to an income tax
deduction equal to the amount taxable to the employee. Any excess gain
recognized by the employee upon the Disqualifying Disposition would be taxable
as a capital gain, either as long-term or short-term depending upon whether the
shares of Common Stock have been held for more than one year prior to the
Disqualifying Disposition.
The amount by which the Fair Market Value of the Common Stock on the
Exercise Date exceeds the Option Price constitutes an item of tax preference
that may be subject to alternative minimum tax in the year that the Incentive
Stock Option is exercised, depending on the facts and circumstances.
Non-Qualified Stock Options. No taxable income will be recognized by the
employee and the Company will not be entitled to a deduction at the time of the
grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified
Stock Option, the employee generally will recognize ordinary income and the
Company will be entitled to an income tax deduction in the amount by which the
fair market value of the shares of Common Stock issued to the employee at the
time of the exercise exceeds the Option Price. This income constitutes "wages"
with respect to which the Company is required to deduct and withhold federal
income tax.
Upon the subsequent disposition of shares of Common Stock acquired upon the
exercise of a Non-Qualified Stock Option, the employee will recognize capital
gain or loss in an amount equal to the difference between the proceeds received
upon disposition and the fair market value of the shares on the Exercise Date.
If the shares have been held for more than one year at the time of the
disposition, the capital gain or loss will be long-term.
Restricted Stock. An employee receiving Restricted Stock generally will
recognize ordinary income equal to the fair market value of the Restricted Stock
when it is no longer subject to forfeiture ("Vesting Date") over the amount (if
any) the employee paid for the Common Stock. The Company is entitled to deduct
the amount that is taxable to the employee. With respect to the sale of the
shares, the holding period for determining whether the employee has long-term or
short-term capital gain or loss generally begins on the Vesting Date and the
employee's tax basis for the shares will generally be the fair market value of
the shares on the Vesting Date.
However, an employee may make an election under Code Section 83(b)
("Section 83(b) Election") within 30 days of the grant of the Restricted Stock
to recognize ordinary income on the date of grant equal to
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<PAGE> 16
the excess of the fair market value of the shares of Restricted Stock
(determined without regard to the restrictions) over the amount paid (if any) by
the employee for the stock. If the employee makes a Section 83(b) Election, his
or her holding period commences on the date of grant, and his or her tax basis
in the stock is the fair market value of shares on the date of the grant. The
Company will be entitled to deduct the amount that is taxable to the employee.
However, if the Restricted Stock is forfeited, the employee will not be entitled
to a deduction, refund, or loss for the amount previously included in income by
reason of the Section 83(b) Election.
Tax Rates. The current maximum tax rate for long-term capital gains is 28%
(if the stock has been held for more than 12 months) or 20% (if the stock has
been held for more than 18 months). The current marginal rate for ordinary
income tax can be as much as 39.6%.
Golden Parachute Payments. To the extent that the exercisability of an
Option is accelerated because there is a change of control of the Company, it
will be treated as a "parachute payment." To the extent that certain key
executives receive payments in connection with the change in control that equal
or exceed 300% of their average annual compensation, the amounts they receive in
excess of 100% of their average annual compensation are "excess parachute
payments." Excess parachute payments are not deductible by the Company, and the
executives are subject to a 20% excise tax on their receipt of them.
Million Dollar Compensation Deduction Limitation. Code Section 162(m)
generally precludes a publicly held employer from deducting compensation in
excess of $1,000,000 per year payable to a person who is one of its top five
executives. This limitation generally does not apply, however, to income
recognized by reason of the exercise of a stock option if (1) the option price
is at least equal to the fair market value of the Common Stock on the date the
Option was granted, (2) the option was granted by a committee exclusively
composed of individuals who constitute "outside directors" under Code Section
162(m), and (3) the plan states the maximum number of shares that can be issued
to a single individual. It is anticipated that the income that may be recognized
under the 1997 Stock Plan will be exempt from Section 162(m).
OPTIONS GRANTED UNDER THE 1997 STOCK PLAN
A stock option covering 500,000 shares of Common Stock has been issued to
Benjamin Scott in connection with the commencement of his employment as
President and Chief Executive Officer of the Company. The exercise price under
the option is $27.50 per share, the fair market value of the Common Stock on the
date the option was granted. The option generally vests at the rate of 20
percent per year of service.
By Order of the Board of Directors
[SIG]
JEFFREY C. SMITH
Secretary
Austin, Texas
, 1997
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<PAGE> 17
APPENDIX A
IXC COMMUNICATIONS, INC.
1997 SPECIAL EXECUTIVE STOCK PLAN
1. Purpose. The purpose of this IXC Communications, Inc. 1997 Special
Executive Stock Plan ("Plan") is to promote the interests of IXC Communications,
Inc. ("Company") and its shareholders by enabling it to offer grants of stock to
better attract, retain, and reward certain key executives and, accordingly, to
strengthen the mutuality of interests between those executives and the Company's
shareholders by providing those executives with a proprietary interest in
pursuing the Company's long-term growth and financial success.
2. Definitions. For purposes of this Plan, the following terms shall have
the meanings set forth below.
(a) "Board" means the Board of Directors of IXC Communications, Inc.
(b) "Code" means the Internal Revenue Code of 1986, as amended. Reference
to any specific section of the Code shall be deemed to be a reference to any
successor provision.
(c) "Committee" means the administrative Committee of this Plan that is
provided in Section 3 below.
(d) "Common Stock" means the common stock of the Company or any security
issued in substitution, exchange, or in lieu thereof.
(e) "Company" means IXC Communications, Inc., a Delaware corporation, or
any successor corporation. Except where the context indicates otherwise, the
term "Company" shall include its Parent and Subsidiaries.
(f) "Disabled" means permanent and total disability, as defined in Code
Section 22(e)(3).
(g) "Exchange Act" means the Securities Exchange Act of 1934.
(h) "Fair Market Value" of Common Stock shall be determined in accordance
with the following rules.
(i) If the Common Stock is admitted to trading or listed on a national
securities exchange, the closing price for any day shall be the last
reported sale price regular way, or if no such reported sale takes place on
that day, the average of the last reported bid and ask prices regular way,
in either case on the principal national securities exchange on which the
Common Stock is admitted to trading or listed.
(ii) If not listed or admitted to trading on any national securities
exchange, the last sale price on that day of the Common Stock reported on
the Nasdaq National Market of the Nasdaq Stock Market ("Nasdaq National
Market") or, if no such reported sale takes place on that day, the average
of the closing bid and ask prices on that day.
(iii) If not included in the Nasdaq National Market, the average of
the closing bid and ask prices of the Common Stock on that day reported by
the Nasdaq Stock Market, or any comparable system on that day.
(iv) If the Common Stock is not included in the Nasdaq Stock Market or
any comparable system, the closing bid and ask prices on that day as
furnished by any member of the National Association of Securities Dealers,
Inc. selected from time to time by the Company for that purpose.
In the case of a day on which the stock markets are not open, Fair Market Value
shall be determined as of the last preceding day on which the stock markets were
open. In the case of an Incentive Stock Option, Fair Market Value shall be
determined without reference to any restriction other than one that, by its
terms, will never lapse.
(i) "Incentive Stock Option" means an option to purchase Common Stock that
is an incentive stock option within the meaning of Code Section 422.
(j) "Insider" means a person who is subject to Section 16 of the Exchange
Act.
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(k) "Non-Qualified Stock Option" means any option to purchase Common Stock
that is not an Incentive Stock Option.
(l) "Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(m) "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company) owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in the chain, as determined in accordance with the rules of
Code Section 424(e).
(n) "Participant" means a person who was been granted an Option or
Restricted Stock.
(o) "Plan" means this IXC Communications, Inc. 1997 Special Executive Stock
Plan, as it may be amended from time to time.
(p) "Restricted Stock" means shares of Common Stock issued under Section 9
below that are subject to restrictions upon assignment or alienation prior to
vesting.
(q) "Severance" means, with respect to a Participant, the termination of
the Participant's provision of services to the Company as an employee, whether
by reason of death, disability, or any other reason.
(i) For purposes of determining the exercisability of an Incentive
Stock Option, a Participant who is on a leave of absence that exceeds
ninety (90) days will be considered to have incurred a Severance on the
ninety-first (91st) day of the leave of absence, unless the Participant's
rights to reemployment are guaranteed by statute or contract.
(ii) A Participant will not be considered to have incurred a Severance
because of a transfer of employment between the Company and a Subsidiary or
Parent (or vice versa).
(r) "Subsidiary" means any corporation or entity in which the Company,
directly or indirectly, controls fifty percent (50%) or more of the total voting
power of all classes of its stock having voting power, as determined in
accordance with the rules of Code Section 424(f).
(s) "Ten Percent Shareholder" means any person who owns (after taking into
account the constructive ownership rules of Section 424(d) of the Code) more
than ten percent (10%) of the stock of the IXC Communications, Inc. or of any of
its Parents or Subsidiaries.
3. Administration.
(a) This Plan shall be administered by a Committee appointed by the Board.
The Board may remove members from, or add members to, the Committee at any time.
To the extent possible and advisable, the Committee shall be composed of
individuals that satisfy Rule 16b-3 under the Exchange Act and Code Section
162(m). Notwithstanding anything herein to the contrary, any action which may be
taken by the Committee may also be taken by the Board.
(b) The Committee may conduct its meetings in person or by telephone. A
majority of the members of the Committee shall constitute a quorum, and any
action shall constitute the action of the Committee if it is authorized by:
(i) A majority of the members present at any meeting; or
(ii) The unanimous consent of all of the members in writing without a
meeting.
(c) The Committee is authorized to interpret this Plan and to adopt rules
and procedures relating to the administration of this Plan. All actions of the
Committee in connection with the interpretation and administration of this Plan
shall be binding upon all parties.
(d) Subject to the limitations of Sections 10 and 14 below, the Committee
is expressly authorized to make such modifications to this Plan, and to the
grants of Options and Restricted Stock hereunder as are necessary to effectuate
the intent of this Plan as a result of any changes in the tax, accounting, or
securities laws treatment of Participants and of the Plan.
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(e) The Committee may delegate its responsibilities to others under such
conditions and limitations as it may prescribe, except that the Committee may
not delegate its authority with regard to the granting of Options or Restricted
Stock to Insiders.
4. Duration of Plan.
(a) This Plan shall be effective as of September 9, 1997, provided it is
approved by the majority of the Company's shareholders, in accordance with the
provisions of Code Section 422, within twelve (12) months before or after the
date of its adoption by the Board of Directors.
(b) In the event that this Plan is not so approved, this Plan shall
terminate and any Options granted under this Plan shall be void.
(c) This Plan shall terminate on September 8, 2007, except with respect to
Options then outstanding.
5. Number of Shares.
(a) The maximum number of shares of Common Stock which may be issued under
this Plan shall be five hundred thousand (500,000). This number may be adjusted
from time to time as set forth in Section 13 below. The maximum number of shares
that may be issued to a single Participant is five hundred thousand (500,000).
(b) Upon the expiration or termination of an outstanding Option which shall
not have been exercised in full, the shares of Common Stock remaining unissued
under the Option shall again become available for use under the Plan.
(c) Upon the forfeiture of shares of Restricted Stock, the forfeited shares
of Common Stock shall again become available for use under the Plan.
(d) The payment of part or all of the exercise price of an Option in the
form of surrendering Common Stock owned by the Participant shall reduce the
number of shares considered to have been issued upon the exercise of the Option
(by the number of shares that were surrendered) for purposes of determining the
maximum number of shares that may be issued under the Plan.
6. Eligibility.
(a) Persons eligible for Options under this Plan shall consist of employees
and individuals who have accepted offers of employment with the Company.
(b) In the event that the Company acquires another entity, the Committee
may authorize the issuance of Options ("Substitute Options") to the individuals
performing services for the acquired entity in substitution of stock options
previously granted to those individuals in connection with their performance of
services for such entity upon such terms and conditions as the Committee shall
determine, taking into account the limitations of Code Section 424(a) in the
case of a Substitute Option that is intended to be an Incentive Stock Option.
7. Form of Options.
(a) Options shall be granted under this Plan on such terms and in such form
as the Committee may approve, which shall not be inconsistent with the
provisions of this Plan. However, if a grant of an Option or of Restricted Stock
would not be exempt under Rule 16b-3 of the Exchange Act if effected by the
Committee, the Board may make such a grant.
(b) The exercise price per share of Common Stock purchasable under an
Option shall be set forth in the Option, which in all cases shall be at least
equal to the Fair Market Value of the Common Stock on the date of the grant.
(c) The exercise price of an Incentive Stock Option granted to a Ten
Percent Shareholder shall be no less than one hundred ten percent (110%) of the
Fair Market Value of the Common Stock on the date of the grant.
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8. Exercise of Options.
(a) An Option shall be exercisable at such time or times and be subject to
such terms and conditions as may be set forth in the Option.
(b) The aggregate Fair Market Value (determined as of the date of grant) of
the number of shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year shall not exceed one hundred thousand dollars ($100,000) or such other
limit as may be required by Code Section 422.
(c) Options shall only be exercisable for whole numbers of shares.
(d) Options are exercised by payment of the full amount of the purchase
price to the Company.
(i) The payment shall be in the form of cash or such other forms of
consideration as the Committee shall deem acceptable, such as the surrender
of outstanding shares of Common Stock owned by the Participant or by
withholding shares that would otherwise be issued upon the exercise of the
Option.
(ii) If the payment is made by means of the surrender of Restricted
Stock, a number of shares issued upon the exercise of the Option equal to
the number of shares of Restricted Stock surrendered shall be subject to
the same restrictions as the Restricted Stock that was surrendered.
(iii) After giving due considerations of the consequences under Rule
16b-3 under the Exchange Act and under the Code, the Committee may also
authorize the exercise of Options by the delivery to the Company or its
designated agent of an irrevocable written notice of exercise form together
with irrevocable instructions to a broker-dealer to sell or margin a
sufficient portion of the shares of Common Stock and to deliver the sale or
margin loan proceeds directly to the Company to pay all or a portion of the
exercise price of the Option.
9. Restricted Stock.
(a) The Committee may issue grants of Restricted Stock upon such terms and
conditions as it may deem appropriate, which need not be the same for each such
grant.
(b) Restricted Stock may not be sold to Participants for less than Fair
Market Value.
(c) A Participant shall not have a vested right to the shares subject to
the grant of Restricted Stock until satisfaction of the vesting requirements
specified in the grant. The Participant may not assign or alienate the
Participant's interest in the shares of Restricted Stock prior to vesting.
(d) The following rules apply with respect to events that occur prior to
the date on which the Participant obtains a vested right to the Restricted
Stock.
(i) Stock dividends, shares resulting from stock splits, etc. that are
issued with respect to the shares covered by a grant of Restricted Stock
shall be treated as additional shares received under the grant of
Restricted Stock.
(ii) Cash dividends constitute taxable compensation to the Participant
that is deductible by the Company.
10. Modification of Grants.
(a) The Committee may modify an existing Option, including the right to:
(i) Accelerate the right to exercise it;
(ii) Extend or renew it; or
(iii) Cancel it and issue a new Option.
However, no modification may be made to an Option that would impair the rights
of the Participant holding the Option without the Participant's consent.
Modifications to grants of Restricted Stock are also subject to this
restriction.
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(b) Whether a modification of an existing Incentive Stock Option will be
treated as the issuance of a new Incentive Stock Option will be determined in
accordance with the rules of Code Section 424(h).
(c) Whether a modification of an existing grant of Restricted Stock or of
an Option previously granted to an Insider will be treated as a new grant will
be determined in accordance with Rule 16b-3 under the Exchange Act.
11. Termination of Options.
(a) Except to the extent the terms of an Option require its prior
termination, each Option shall terminate on the earliest of the following dates.
(i) The date which is ten (10) years from the date on which the Option
is granted or five (5) years in the case of an Incentive Stock Option
granted to a Ten Percent Shareholder.
(ii) The date which is one (1) year from the date of the Severance of
the Participant to whom the Option was granted, if the Participant was
Disabled at the time of Severance.
(iii) The date which is one (1) year from the date of the Severance of
the Participant to whom the Option was granted, if the Participant's death
occurs:
(A) While the Participant is employed by the Company; or
(B) Within ninety (90) days following the Participant's Severance.
(iv) In the case of any Severance other than those described in
Subparagraphs (ii) or (iii) above, the date that is ninety (90) days from
the date of the Participant's Severance.
12. Non-transferability of Grants.
(a) No Option under this Plan shall be assignable or transferable except by
will or by the laws of descent and distribution.
(b) Grants of Restricted Stock shall be subject to such restrictions on
transferability as may be imposed in such grants.
13. Adjustments
(a) In the event of any change in the capitalization of the Company
affecting its Common Stock (e.g., a stock split, reverse stock split, stock
dividend, recapitalization, combination, or reclassification), the Committee
shall authorize such adjustments as it may deem appropriate with respect to:
(i) The aggregate number of shares of Common Stock that may be issued
under this Plan;
(ii) The number of shares of Common Stock covered by each outstanding
Option; and
(iii) The exercise price per share in respect of each outstanding
Option.
(b) The Committee may also make such adjustments in the event of a spin-off
or other distribution of Company assets to shareholders, other than normal cash
dividends.
14. Amendment and Termination.
(a) The Board may at any time amend or terminate this Plan. However, no
modification may be made to the Plan that would impair the rights of the
Participant holding an Option or Restricted Stock without the Participant's
consent.
(b) Without the approval of the majority of the shareholders of the
Company, the Board may not amend the provisions of this Plan regarding:
(i) The class of individuals entitled to receive Incentive Stock
Options; or
(ii) The aggregate number of shares of Common Stock that may be issued
under the Plan, except as adjusted pursuant to Section 13 above.
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15. Notice of Disqualifying Disposition. A Participant must notify the
Company if the Participant disposes of stock acquired pursuant to the exercise
of an Incentive Stock Option issued under the Plan prior to the expiration of
the holding periods required to qualify for long-term capital gains treatment on
the sale.
16. Tax Withholding.
(a) The Company shall have the right to take such actions as may be
necessary to satisfy its tax withholding obligations relating to the operation
of this Plan.
(b) If Common Stock that was surrendered by the Participant is used to
satisfy the Company's tax withholding obligations, the stock shall be valued
based on its Fair Market Value when the tax withholding is required to be made.
17. No Additional Rights.
(a) Neither the adoption of this Plan nor the granting (or exercise) of any
Option or Restricted Stock shall:
(i) Affect or restrict in any way the power of the Company to
undertake any corporate action otherwise permitted under applicable law; or
(ii) Confer upon any Participant the right to continued employment
with the Company, nor shall it interfere in any way with the right of the
Company to terminate the employment of any Participant at any time, with or
without cause.
(b) No Participant shall have any rights as a shareholder with respect to
any shares covered by an Option granted to the Participant or subject to a grant
of Restricted Stock until the date a certificate for such shares has been issued
to the Participant.
18. Securities Law Restrictions.
(a) No shares of Common Stock shall be issued under this Plan unless the
Committee shall be satisfied that the issuance will be in compliance with
applicable federal and state securities laws.
(b) The Committee may require certain investment (or other) representations
and undertakings by the Participant (or other person exercising an Option or
purchasing Restricted Stock by reason of the death of the Participant) in order
to comply with applicable law.
(c) Certificates for shares of Common Stock delivered under this Plan may
be subject to such restrictions as the Committee may deem advisable. The
Committee may cause a legend to be placed on the certificates to refer to these
restrictions.
19. Indemnification. To the maximum extent permitted by law, the Company
shall indemnify each member of the Board, as well as any other employee of the
Company with duties under this Plan, against expenses (including any amount paid
in settlement) reasonably incurred by the individual in connection with any
claims against him or her by reason of the performance of the individual's
duties under this Plan, unless the losses are due to the individual's gross
negligence or lack of good faith.
20. Governing Law. This Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
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