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SCHEDULE 14C
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
CHECK THE APPROPRIATE BOX:
[X] Preliminary Information Statement Confidential, for Use of the
Commission Only
Definitive Information Statement (as permitted by Rule 14c-5(d)(2))
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:
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Preliminary Copy
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 approve an amendment (the "Charter Amendment") of the Company's
Restated Certificate of Incorporation, as amended (the "Restated Certificate")
to permit payment of dividends on the Company's 12 1/2% Junior Exchangeable
Preferred Stock Due 2009 (the "Initial Exchangeable Preferred Stock") and 12
1/2% Series B Junior Exchangeable Preferred Stock Due 2009 (the "Series B Stock"
and together with the Initial Exchangeable Preferred Stock, the "Exchangeable
Preferred Stock") with additional shares of Exchangeable Preferred Stock. The
Charter Amendment is more fully described in the attached Information Statement.
A total of five stockholders holding an aggregate of approximately 63%
of the issued and outstanding shares of the Company's Common Stock, $.01 par
value (the "Common Stock"), have approved in writing the Charter Amendment. As
required by the Restated Certificate, approximately _____% (at least
three-fourths) of the holders of 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"), have also approved in writing the
Charter Amendment. 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 authorization of the Charter Amendment by the Board of Directors and
stockholders of the Company shall not become effective until at least twenty
(20) days after the mailing of the enclosed Information Statement. The Charter
Amendment has been approved by written consent without the need for any action
to be taken by you.
Your consent 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
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 INFORMATION IS BEING SENT TO YOU FOR INFORMATION PURPOSES
ONLY.
By Order of the Board of Directors
JEFFREY C. SMITH
Secretary
Austin, Texas
__________, 1997
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IXC COMMUNICATIONS, INC.
5000 PLAZA ON THE LAKE, SUITE 200
AUSTIN, TEXAS 78746
INFORMATION STATEMENT
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
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 Company's 10% Junior Series 3 Cumulative Redeemable Preferred Stock, $.01
par value (the "Series 3 Preferred Stock"), in connection with the approval of
an amendment (the "Charter Amendment") of the Company's Restated Certificate of
Incorporation, as amended (the "Restated Certificate") to permit payment of
dividends on the Company's 12 1/2% Junior Exchangeable Preferred Stock Due 2009
(the "Initial Exchangeable Preferred Stock") and the Company's 12 1/2% Series B
Junior Exchangeable Preferred Stock Due 2009 (the "Series B Stock" and together
with the Initial Exchangeable Preferred Stock, the "Exchangeable Preferred
Stock") with additional shares of Exchangeable Preferred Stock.
The Board of Directors of the Company has taken action to approve the
Charter Amendment which requires the approval by the affirmative vote of a
majority of the outstanding shares of Common Stock and Series 3 Preferred Stock,
voting as a class, and three-fourths (3/4ths) of the outstanding shares of
Series 3 Preferred Stock, voting as a class. A total of five stockholders
holding approximately 63% of the issued and outstanding shares of the Company's
Common Stock have consented in writing to the Charter Amendment. As required by
the Restated Certificate, approximately _____% (at least three-fourths) of the
holders of the issued and outstanding shares of the Company's Series 3 Preferred
Stock have also consented in writing to the Charter Amendment. 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 authorization of the
Charter Amendment by the Board of Directors and stockholders of the Company
shall not become effective until at least twenty (20) days after the mailing of
this Information Statement.
Accordingly, all corporate actions necessary to authorize the Charter
Amendment have been taken. Pursuant to the regulations promulgated under the
1934 Act, the authorization of the Charter Amendment by the Board of Directors
and stockholders of the Company shall not become effective until at least twenty
(20) days after the Company has mailed this Information Statement to the
stockholders of the Company. Promptly following the expiration of this twenty
(20) day period, the Company intends to file a Certificate of Amendment to its
Restated Certificate to effectuate the Charter Amendment with the Delaware
Secretary of State. The Charter Amendment will become effective on the date of
such filing.
The Company has asked brokers and other custodians and fiduciaries to
forward this Information Statement to the beneficial owners of the Common Stock
and 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 AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION HAS BEEN
APPROVED BY THE STOCKHOLDERS WHO HOLD SUFFICIENT VOTING SECURITIES TO APPROVE
THE ACTION. THIS
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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 Common Stock and Series 3
Preferred Stock of record at the close of business on __________, 1997 will
receive this Information Statement.
VOTING SECURITIES
The Board of Directors has fixed the close of business on ____________,
1997 as the record date (the "Record Date") for the determination of
stockholders entitled to vote with respect to stockholder authorization of the
Charter Amendment. As of the Record Date, the outstanding voting securities of
the Company were 30,898,841 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 shares 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, and
three quarters (3/4ths) of the outstanding shares of Series 3 Preferred Stock,
voting as a class, was necessary to authorize the Charter Amendment.
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Preliminary Copy
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of August 20,
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 Company's named executive officers, and
(c) all directors and executive officers of the Company as a group. Although the
Company is not aware of any holders of over five percent of the outstanding
shares of 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
John J. Willingham(4)(6) -- -- -- -- 1,272,568 4.1
James F. Guthrie(4)(7) -- -- 1,018 * 85,169 *
David J. Thomas(4)(8) -- -- -- * 162,236 *
Michael W. Vent(4)(9) -- -- -- -- 24,249 *
Richard D. Irwin(10) 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(11) -- -- -- -- 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(12) -- -- -- -- 144,150 *
633 West Fifth Street,
Suite 4000
Los Angeles, CA 90071-2007
Joe C. Culp(13) -- -- -- -- 60,622 *
#5 Hedge Lane
Austin, TX 78746
Grumman Hill Investments, L.P.(14) -- -- -- -- 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 6,725.00 53.6 305,438 30.0% 9,591,210(15) 31.0
Electric Pension Trust
3003 Summer Street
Stamford, CT 06905
Putnam Investments, Inc.(16) -- -- -- -- 2,532,799 8.2
One Post Office Square
Boston, MA 02109
All directors and executive 1,020.58 8.1 10,689 1.1 13,275,811 42.5
officers of IXC Communications
as a group (11 persons)
</TABLE>
* Less than 1%
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(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 August 20, 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, and
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 as described in the Convertible
Preferred Certificate of Designation (as defined below). Although the
Company is not aware of any holders of over 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 persons 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 upon
conversion of the Convertible Preferred Stock.
(6) Includes 121,915 shares held by John McC. Witherspoon, Trustee of trust
for the benefit of Jonica Lynn Willingham and 121,915 shares held by
John McC. Witherspoon, Trustee of trust for the benefit of Russell
Dennis Willingham.
(7) 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.
(8) Represents shares issuable with respect to the exercise of options.
(9) Represents shares issuable with respect to the exercise of options.
(10) 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.
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Preliminary Copy
(11) Such shares are held by Trust for the Riordan & McKinzie Profit Sharing
and Savings Plan for the benefit of Carl W. McKinzie.
(12) Such shares are held by Phillip L. Williams, as Trustee of the Phillip
and Jane Williams Living Trust, UDT August 20, 1985.
(13) Represents shares issuable with respect to the exercise of options.
(14) 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 interest.
Mr. Irwin may be deemed to have voting and investment power with
respect to the shares held of record by GHI.
(15) Includes 1,301,952 shares of Common Stock issuable upon conversion of
the Convertible Preferred Stock.
(16) 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 shareholder's holdings
change (except on an annual basis), and there can be no assurance that
the actual holdings of PIM and PAC do not vary materially from those
shown in the table.
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AMENDMENT OF THE RESTATED CERTIFICATE TO PERMIT
PAYMENT OF DIVIDENDS ON THE EXCHANGEABLE PREFERRED STOCK
WITH ADDITIONAL SHARES OF EXCHANGEABLE PREFERRED STOCK
The Board of Directors and the holders of a majority of the outstanding
shares of the Common Stock and the Series 3 Preferred Stock, voting as a class,
and of at least three-fourths (3/4ths) of the outstanding shares of the Series
3 Preferred Stock, voting as a class, approved the Charter Amendment. The
complete text of the Charter Amendment is set forth in Appendix A to this
Information Statement; however, such text is subject to change as may be
required by the Delaware Secretary of State. The Charter Amendment provides that
the Company may pay dividends on its Exchangeable Preferred Stock with
additional shares of Exchangeable Preferred Stock. Upon filing of the Charter
Amendment with the Delaware Secretary of State, the Charter Amendment will be
effective (the "Effective Date").
The Company's authorized capital stock consists of 100,000,000 shares
of Common Stock, par value $.01 per share, and 3,000,000 shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock") of which 12,550 shares
have been designated as Series 3 Preferred Stock, 2,000 shares have been
designated as Series 1 Preferred Stock, 1,400,000 shares have been designated as
Convertible Preferred Stock and 900,000 shares have been designated as
Exchangeable Preferred Stock. As of August 20, 1997, all of the 12,550 shares of
Series 3 Preferred Stock are issued and outstanding, all of the previously
outstanding shares of Series 1 Preferred Stock have been redeemed, 1,018,123
shares of the Convertible Preferred Stock are issued and outstanding and 300,000
shares of the Initial Exchangeable Preferred Stock are issued and outstanding.
The Company has reserved up to 150,000 shares of Initial Exchangeable Preferred
Stock for payment of dividends on the Initial Exchangeable Preferred Stock and
up to 150,000 shares of Series B Stock for payment of dividends on the Series B
Stock. The Series B Stock will be issued by the Company only in connection with
an exchange offer, on a share for share basis, for the Initial Exchangeable
Preferred Stock as required pursuant to the terms of a registration rights
agreement entered into in connection with the sale of the Exchangeable Preferred
Stock. Each share of Series B Stock issued in exchange for a share of Initial
Exchangeable Preferred Stock will be deemed to have the same liquidation
preference and accrued and unpaid dividends as the share of Initial Exchangeable
Preferred Stock so exchanged. Upon the exchange of each share of Initial
Exchangeable Preferred Stock for each share of Series B Stock, each share of
Initial Exchangeable Preferred Stock received by the Company shall have the
status of an authorized and unissued share of Preferred Stock available for
redesignation and reissuance by the Company.
The rights, privileges and preferences of the Series 3 Preferred Stock,
the Convertible Preferred Stock and the Exchangeable Preferred Stock are set
forth in the Restated Certificate, the Company's Certificate of Designation of
the Powers, Preferences and Relative Participating, Optional and Other Special
Rights of 7 1/4% Junior Convertible Preferred Stock Due 2007 and Qualifications,
Limitations and Restrictions Thereof (the "Convertible Preferred Certificate of
Designation") and the Company's Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special Rights of 12
1/2% Junior Exchangeable Preferred Stock Due 2009 and 12 1/2% Series B Junior
Exchangeable Preferred Stock Due 2009 and Qualifications, Limitations and
Restrictions Thereof (the "Exchangeable Preferred Certificate of Designation").
Descriptions of the Series 3 Preferred Stock, the Convertible Preferred Stock
and the Exchangeable Preferred Stock herein do not purport to be complete and
are subject to, and qualified by reference to, the Restated Certificate, the
Bylaws of the Company, the Convertible Preferred Certificate of Designation and
the Exchangeable Preferred Certificate of Designation.
The holders of Series 3 Preferred Stock are entitled to receive annual
dividends, subject to the limitations of the Restated Certificate and in the
Indenture (the "Indenture") for the Company's 12 1/2% Senior Notes due 2005 (the
"Senior Notes"), in an amount equal to $100 per share, plus an amount determined
by applying a 10% annual rate compounded annually, to any accrued but unpaid
dividend amount from the last day of the period when such dividend accrues to
the actual date of payment. Cumulative dividends, including accrued but unpaid
interest, with respect to the Series 3 Preferred Stock, as of June 30, 1997,
were approximately $7.5 million. The holders of
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Series 3 Preferred Stock, subject to the terms of the Restated Certificate, are
entitled to receive a liquidation preference of $1,000 per share, plus an amount
equal to all accrued and unpaid dividends and the Company may voluntarily redeem
the Series 3 Preferred Stock for $1,000 per share, plus an amount equal to all
accrued and unpaid dividends. The holders of the Series 3 Preferred Stock,
voting as a separate class, have the right to elect one member of the Board of
Directors.
The Convertible Preferred Stock is convertible at the option of the
holders, unless previously redeemed, at any time into shares of Common Stock at
a rate (subject to adjustment in certain events) of 4.263 shares of Common Stock
for each share of Convertible Preferred Stock, equivalent to a conversion price
of $23.46 for each share of Common Stock. Each share of Convertible Preferred
Stock has a liquidation preference of $100 plus accrued and unpaid dividends.
Each share of Series 3 Preferred Stock has a liquidation preference of $1,000
per share plus accrued and unpaid dividends. At June 30, 1997, the aggregate
liquidation preference of the Series 3 Preferred Stock, including accrued and
unpaid dividends, was $20.0 million. Dividends on the Convertible Preferred
Stock accrue at a rate per annum of 7 1/4% per share on the liquidation
preference thereof of $100 per share ($7.25 per annum per share). Dividends
payable prior to or on March 31, 1999, are, at the option of the Company,
payable (i) in cash or (ii) through the issuance of additional shares of
Convertible Preferred Stock equal to the dividend amount divided by the
liquidation preference of such additional shares. After March 31, 1999, to the
extent and for so long as the Company is not permitted to pay cash dividends on
the Convertible Preferred Stock by the terms of any then outstanding
indebtedness or any other agreement or instrument to which the Company is
subject, the Company will be required to pay dividends, which shall accrue at
the rate per annum of 8 3/4%, through the issuance of additional shares of
Convertible Preferred Stock. On June 30, 1997 the Company paid a dividend on the
Convertible Preferred Stock with additional shares of Convertible Preferred
Stock.
On August 20, 1997, the Company issued and sold 300,000 shares of
Exchangeable Preferred Stock in a private placement to two initial purchasers
(the "Initial Purchasers"), which shares were thereafter sold by the Initial
Purchasers from time to time in a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act") to
persons reasonably believed by the Initial Purchasers to be "qualified
institutional buyers" (as defined in the Securities Act). The Exchangeable
Preferred Stock will be, under certain terms and conditions, exchangeable into
the Company's 12 1/2% Subordinated Exchange Debentures Due 2009 (the "Exchange
Debentures") as set forth in the Exchangeable Preferred Certificate of
Designation. Dividends on the Exchangeable Preferred Stock accrue at a rate per
annum of 12 1/2% of the liquidation preference thereof of $1,000 per share.
Dividends are payable quarterly in cash, except that on or prior to February 15,
2001, dividends may be paid, at the Company's option, by the issuance of
additional shares of Exchangeable Preferred Stock (including fractional shares)
having an aggregate liquidation preference equal to the amount of such
dividends. The Exchangeable Preferred Stock is not redeemable prior to August
15, 2002, except that, on or prior to August 15, 2000, the Company may redeem,
at its option, up to 35% of the outstanding Exchangeable Preferred Stock with
the net proceeds of one or more public equity offerings if at least $195 million
aggregate liquidation preference of the Exchangeable Preferred Stock remains
outstanding after each such redemption. On or after August 15, 2002, the
Exchangeable Preferred Stock is redeemable at the option of the Company. The
Company is required to redeem the Exchangeable Preferred Stock on August 15,
2009 out of any funds legally available therefor.
The Exchangeable Preferred Stock is nonvoting except (i) as otherwise
required by law and (ii) that holders of the Exchangeable Preferred Stock,
voting together as a class with the holders of any other series of Preferred
Stock with similar exercisable voting rights (including the Convertible
Preferred Stock), (a) upon the failure of the Company (1) to pay dividends for
six or more dividend periods, (2) to satisfy any mandatory redemption obligation
with respect to the Exchangeable Preferred Stock, (3) to comply with the
covenants set forth in the Exchangeable Preferred Certificate of Designation or
(4) to comply with certain covenants or make certain payments on certain
indebtedness, will be entitled to elect two members to the Board of Directors of
the Company; and (b) have the right, in most instances, to approve each issuance
by the Company of preferred stock that ranks senior to the Exchangeable
Preferred Stock with such approval requiring consent of the holders of
two-thirds of the shares of Exchangeable
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Preferred Stock. The Exchangeable Preferred Stock ranks on a parity with the
Convertible Preferred Stock and junior to the Series 3 Preferred Stock with
respect to payment of dividends, and amounts upon liquidation, dissolution and
winding up. On any scheduled dividend payment date, the Company may, at its
option, exchange all but not less than all of the shares of Exchangeable
Preferred Stock then outstanding for the Exchange Debentures. If the Company
exchanges the Exchangeable Preferred Stock for the Exchange Debentures, the
payment of principal, premium, if any, and interest or any other amounts owing
in respect of the Exchange Debentures will rank senior to payment of dividends
and any other amounts owing in respect of the Convertible Preferred Stock and
the Series 3 Preferred Stock.
The ability of the Company to pay any dividends is subject to
applicable provisions of state law and to pay cash dividends on the Exchangeable
Preferred Stock (and the Convertible Preferred Stock), is subject to the terms
of the Series 3 Preferred Stock, the Indenture and any other indebtedness of the
Company then outstanding. The provisions of the Indenture currently prohibit the
payment of cash dividends on any of the Company's Preferred Stock until the
Company meets certain financial conditions. Under the Indenture, the Company is
generally prohibited from paying dividends on the Exchangeable Preferred Stock
(and the Convertible Preferred Stock) if (i) the Company is in default under the
Indenture, (ii) the Company's Consolidated Net Worth (as defined in the
Indenture), after giving effect to such dividend would be less than $50.00
million, (iii) the Company's ratio of Indebtedness to Operating Cash Flow (as
defined in the Indenture) at the time was greater than or equal to 5 to 1, or
(iv) the sum of such dividend, together with all other dividends (and other
restricted payments) made since the initial issuance of the Senior Notes, would
exceed the sum of net proceeds to the Company from time to time from the sale of
Equity Interests plus the Company's Cumulative Operating Cash Flow (as defined
in the Indenture) (from January 1, 1996 to the end of the fiscal quarter
immediately preceding the date of such dividend) less 1.75 times the Company's
Cumulative Total Interest Expense (as defined in the Indenture) over the same
period. As of December 31, 1996, the Company had a Consolidated Net Worth of
$40.6 million, and its ratio of Indebtedness to Operating Cash Flow for the year
ended December 31, 1996 was 10.9 to 1.0. Moreover, for the period from January
1, 1996 through December 31, 1996, the Company had Cumulative Operating Cash
Flow of $27.8 million and Cumulative Total Interest Expense of $40.0 million.
As an alternative to paying cash dividends or having any unpaid
dividends accrue on the Exchangeable Preferred Stock, the Company negotiated
with the Initial Purchasers the option of paying dividends in additional shares
of Exchangeable Preferred Stock through February 15, 2001. Accordingly, through
February 15, 2001, this option permits the Company to pay dividends in
additional shares of Exchangeable Preferred Stock until the payment of cash
dividends is permitted and the Company determines that the payment of such cash
dividends is preferable to payment of dividends in additional shares of
Exchangeable Preferred Stock. In order to avail itself of the flexibility
provided by this option, the Company approved the Charter Amendment. The Charter
Amendment is not expected to have a material effect on the capital stock of the
Company other than the Exchangeable Preferred Stock for the following reasons.
Other than as required by law and with respect to certain issuances of Preferred
Stock, the Exchangeable Preferred Stock is nonvoting, except if payment of
dividends is in arrears on the Exchangeable Preferred Stock for an aggregate of
six quarters (and in certain other limited instances as described above), and
even upon such occurrence, only with respect to the election of two directors
until such time as the accumulated dividends are paid in full. The Exchangeable
Preferred Stock is not convertible into Common Stock and will not have a
dilutive effect on the ownership of the Common Stock by the holders thereof. The
Charter Amendment is expected to result in the issuance of additional Preferred
Stock which would result in a larger number of outstanding shares of Preferred
Stock having a liquidation and dividend preference senior to the Common Stock.
However, the holders of the Common Stock are already subject to these
consequences since the Company is authorized by the Restated Certificate to
issue additional shares of Preferred Stock without the consent of the holders of
the Common Stock whether or not the Charter Amendment is approved. The Charter
Amendment is not otherwise expected to have a direct economic effect (a) on the
rights of the holders of Common Stock to receive dividend payments because the
Common Stock is junior with respect to dividend payments to each of the
Exchangeable Preferred Stock, the Convertible Preferred Stock and the Series 3
Preferred Stock; or (b) on the rights of the holders of Series 3 Preferred
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Stock to receive cash dividends because no cash dividends may be paid on the
Exchangeable Preferred Stock (or the Convertible Preferred Stock) until all
accrued and unpaid dividends have been paid in cash to the holders of the Series
3 Preferred Stock. The Exchangeable Preferred Certificate of Designation
prohibits the declaration or payment of dividends on the Convertible Preferred
Stock unless cumulative dividends on the Exchangeable Preferred Stock have been
or are contemporaneously declared and paid in full. The Charter Amendment will
have a direct beneficial effect on the holders of Convertible Preferred Stock
because it will permit the Company to declare dividends payable on the
Exchangeable Preferred Stock through the issuance of additional shares of
Exchangeable Preferred Stock and thereby permit the Company to declare and pay
dividends on the Convertible Preferred Stock. The Exchangeable Preferred Stock
ranks junior to the outstanding Series 3 Preferred Stock and on a parity with
the outstanding Convertible Preferred Stock with respect to the payment of
dividends and amounts upon liquidation, dissolution and winding up. If the
Company exchanges the Exchangeable Preferred Stock for the Exchange Debentures,
the payment of principal, premium, if any, and interest or any other amounts
owing with respect to Exchange Debentures exchanged for Exchangeable Preferred
Stock, (including shares of Exchangeable Preferred Stock issued as payment of
dividends-in-kind) will rank senior to payment of dividends and any other
amounts owning in respect of the Convertible Preferred Stock and the Series 3
Preferred Stock.
The Restated Certificate, as in effect immediately prior to the
Effective Date, prohibits the payment of dividends on the Exchangeable Preferred
Stock with cash or with additional shares of Exchangeable Preferred Stock until
all accrued and unpaid dividends on the Series 3 Preferred Stock (approximately
$7.5 million at June 30, 1997) have been paid in cash. After the Effective Date,
the Company may pay dividends on its Exchangeable Preferred Stock with
additional shares of Exchangeable Preferred Stock. A major advantage of the
Charter Amendment is to allow the Company to have the option to pay dividends
which accrue on the Exchangeable Preferred Stock with additional shares of
Exchangeable Preferred Stock in order to satisfy its obligations under the terms
of the Exchangeable Preferred Stock. Another advantage of the Charter Amendment
is that holders of the Common Stock, the Convertible Preferred Stock and the
Series 3 Preferred Stock benefit by payment of dividends in additional shares of
Exchangeable Preferred Stock because it prevents such dividends from
accumulating on the Exchangeable Preferred Stock (and on the Convertible
Preferred Stock), the accumulation of which could ultimately result in the
Company being required to elect two additional directors designated by the
holders of Exchangeable Preferred Stock (and the Convertible Preferred Stock) to
its Board of Directors. The major disadvantage of the Charter Amendment is that
to the extent the Company pays dividends on the Exchangeable Preferred Stock
with additional shares of Exchangeable Preferred Stock, (i) the Company will
have fewer authorized shares of Preferred Stock for sale in the future, (ii)
there will be additional amounts owed as dividends and payable upon liquidation
with respect to such additional shares of Exchangeable Preferred Stock which
will be payable prior to payment of any amounts to the holders of Common Stock,
and (iii) if the Exchangeable Preferred Stock is exchanged for Exchange
Debentures, there will be more Exchange Debentures which will rank senior to the
Convertible Preferred Stock and the Series 3 Preferred Stock. Payment of cash
dividends on the Exchangeable Preferred Stock (and the Convertible Preferred
Stock) will still require that the Company pay in full cash dividends on the
Series 3 Preferred Stock. In the event payments of dividends on the Exchangeable
Preferred Stock are in arrears for an aggregate of six quarterly dividend
payments (and in certain other limited instances), the holders of a majority of
the outstanding shares of Exchangeable Preferred Stock (together with holders of
other series of preferred stock having similar rights including the Convertible
Preferred Stock) will be entitled to elect two directors to the Board of
Directors until such time as all dividend arrearages have been paid.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission are hereby
incorporated by reference in this Information Statement:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, and
(b) The Company's Quarterly Reports on Form 10-Q for the three
months ended March 31, 1997 and for the three and six months
ended June 30, 1997, as amended.
The Company will provide without charge to each person to whom a copy
of this Information Statement is delivered, upon the written or oral request of
such person by first class mail or other equally prompt means within one
business day of receipt of such request, a copy of any and all information that
has been incorporated by reference in this Information Statement (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Information Statement incorporates). Requests for such copies should be
directed to: Kelli McGlynn, Investor Relations Coordinator, IXC Communications,
Inc., 5000 Plaza on the Lake, Suite 200, Austin, Texas 78746, telephone number
(512) 328-1112.
By Order of the Board of Directors
JEFFREY C. SMITH
Secretary
Austin, Texas
___________, 1997
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APPENDIX A
Form of Amended Section D.1(a) of Article ELEVENTH of the Restated
Certificate of Incorporation, as amended (with amended language in bold).
1. Dividends.
(a) The holders of shares of Series 1 Preferred Stock then
outstanding shall be entitled to receive, prior to the payment of any
dividend on any other Preferred Stock of the Corporation or the Common
Stock of the Corporation, when, as and if declared by the Board, out of
funds legally available for the payment of dividends, cumulative
dividends in an annual amount equal to $100 per share, plus an amount
determined by applying a 10% annual rate, compounded annually, to any
accrued but unpaid dividend amount from the last day of the period when
such dividend accrues to the actual date of payment of such dividend,
and no more. The holders of shares of Series 3 Preferred Stock then
outstanding shall be entitled to receive, prior to the payment of any
dividend on any other Preferred Stock of the Corporation (other than
the Series 1 Preferred Stock) or the Common Stock of the Corporation,
when as and if declared by the Board, out of funds legally available
for the payment of dividends, cumulative dividends in an annual amount
equal to $100 per share, plus an amount determined by applying a 10%
annual rate, compounded annually, to any accrued but unpaid dividend
amount from the last day of the period when such dividend accrues to
the actual date of payment of such dividend, and no more; provided,
however, that (i) the Corporation may pay dividends on the
Corporation's 7 1/4% Junior Convertible Preferred Stock due 2007
("Convertible Preferred Stock") with additional shares of Convertible
Preferred Stock and (ii) THE CORPORATION MAY PAY DIVIDENDS ON THE
CORPORATION'S 12 1/2% JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009 (THE
"INITIAL EXCHANGEABLE PREFERRED STOCK") AND 12 1/2% SERIES B JUNIOR
EXCHANGEABLE PREFERRED STOCK DUE 2009 (THE "SERIES B STOCK") WITH
ADDITIONAL SHARES OF INITIAL EXCHANGEABLE PREFERRED STOCK AND SERIES B
STOCK, RESPECTIVELY. Such dividends on the outstanding shares of Series
Preferred Stock shall be payable on such date as the Board may from
time to time determine (each such date being a "dividend payment
date"). The Board may fix a record date for the determination of
holders of shares of Series Preferred Stock entitled to receive payment
of a dividend declared thereon, which record date shall not be more
than sixty (60) days prior to the date fixed for the payment thereof.
Each such annual dividend shall be fully cumulative and shall accrue
from day to day (whether or not declared) from the first day of each
period in which such dividend may be payable as herein provided, except
that the first annual dividend with respect to each share of Series
Preferred Stock shall accrue from the Original Issue Date of such share
or such other date as determined by the Board, except that dividends
with respect to each share of Series 3 Preferred Stock shall accrue
from August 14, 1992. Dividends, when, as and if declared, shall be
payable in cash.
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