<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
IXC COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
IXC COMMUNICATIONS, INC.
1122 CAPITAL OF TEXAS HIGHWAY SOUTH
AUSTIN, TEXAS 78746
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1999
TO THE STOCKHOLDERS OF IXC COMMUNICATIONS, INC.:
The 1999 Annual Meeting of Stockholders (the "1999 Annual Meeting") of IXC
Communications, Inc. (the "Company") will be held at 9:00 a.m., local time, on
Friday, May 28, 1999 at Barton Creek Conference Center, 8212 Barton Club Drive,
Austin, Texas 78735, for the following purposes:
1. To elect seven Directors of the Company to serve during the ensuing
year and/or until their successors are elected and qualified.
2. To ratify the decision of the Board of Directors of the Company
(the "Board of Directors") to not implement the amendment of the Company's
Restated Certificate of Incorporation, as amended (the "Restated
Certificate") previously approved by a majority of the Company's
stockholders which included, among other things, a two-for-one stock split
of the Company's Common Stock, $.01 par value (the "Common Stock").
3. To amend the Company's Restated Certificate to: (i) provide for an
increase in the authorized number of shares of the Common Stock; (ii)
create a new class of preferred stock; and (iii) eliminate all matters set
forth in the Restated Certificate regarding two series of preferred stock
which are no longer outstanding: the 10% Senior Series 1 Cumulative
Redeemable Preferred Stock and the 10% Junior Series 3 Redeemable Preferred
Stock.
4. To amend the Restated Certificate to effect a two-for-one stock
split of the Company's issued and outstanding shares of Common Stock, such
amendment to take place at the discretion of the Board of Directors within
one year of stockholder approval.
5. To amend the IXC Communications, Inc. 1998 Stock Plan (the "1998
Stock Plan") to increase the number of shares of Common Stock available for
option grants.
6. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only the stockholders of record at the close
of business on April 12, 1999 will be entitled to notice of and to vote at the
1999 Annual Meeting or any adjournment or postponement thereof.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1998 is being mailed with this Notice but is not to be
considered part of the proxy soliciting material.
By Order of the Board of Directors
/s/ Jeffrey C. Smith
Jeffrey C. Smith
Secretary
April , 1999
Austin, Texas
YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR
YOU TO BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE AT ANY TIME AND THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING.
------------------------
REQUESTS FOR ADDITIONAL COPIES OF PROXY MATERIALS SHOULD BE ADDRESSED TO
JEFFREY C. SMITH, CORPORATE SECRETARY, AT THE OFFICES OF THE COMPANY, 1122
CAPITAL OF TEXAS HIGHWAY SOUTH, AUSTIN, TEXAS 78746.
(PRELIMINARY)
<PAGE> 3
IXC COMMUNICATIONS, INC.
1122 CAPITAL OF TEXAS HIGHWAY SOUTH
AUSTIN, TEXAS 78746
------------------------
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1999
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board of Directors" or the "Board") of
IXC Communications, Inc., a Delaware corporation (the "Company" or "IXC
Communications"). This Proxy Statement will be used at the 1999 Annual Meeting
of Stockholders (the "1999 Annual Meeting") to be held on Friday, May 28, 1999
at 9:00 a.m., local time, at Barton Creek Conference Center, 8212 Barton Club
Drive, Austin, Texas 78735, and any adjournment or postponement thereof. This
Proxy Statement and the form of proxy to be utilized at the 1999 Annual Meeting
were mailed or delivered to the stockholders of the Company on or about [April
27, 1999].
MATTERS TO BE CONSIDERED
The 1999 Annual Meeting has been called to:
(1) elect seven Directors of the Company to serve during the ensuing
year and/or until their successors are elected and qualified;
(2) ratify the decision of the Board of Directors to not implement the
amendment of the Company's Restated Certificate of Incorporation, as
amended (the "Restated Certificate") previously approved by a majority of
the Company's stockholders, which included, among other things, a
two-for-one stock split of the Company's Common Stock, $.01 par value (the
"Common Stock");
(3) amend the Restated Certificate to provide for an increase in the
authorized number of shares of the Common Stock, create a new class of
preferred stock, and eliminate all matters set forth in the Restated
Certificate regarding two series of preferred stock which are no longer
outstanding: the 10% Senior Series 1 Cumulative Redeemable Preferred Stock
(the "Series 1 Stock") and the 10% Junior Series 3 Redeemable Preferred
Stock (the "Series 3 Stock");
(4) amend the Restated Certificate to effect a two-for-one stock split
of the Company's issued and outstanding shares of Common Stock, such
amendment to take place at the discretion of the Board within one year of
stockholder approval;
(5) adopt an amendment to the IXC Communications, Inc. 1998 Stock Plan
(the "1998 Stock Plan") to increase the number of shares of Common Stock
available for option grants; and
(6) transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
RECORD DATE AND VOTING
The Board has fixed the close of business on April 12, 1999 as the record
date (the "Record Date") for the determination of stockholders entitled to vote
at the 1999 Annual Meeting and any adjournment or postponement thereof. As of
the Record Date, the outstanding voting securities of the Company were
36,652,306 shares of the Common Stock.
(PRELIMINARY)
1
<PAGE> 4
QUORUM AND VOTING REQUIREMENTS
Quorum. The holders of record of a majority of the outstanding shares of
Common Stock will constitute a quorum for the transaction of business at the
1999 Annual Meeting. A properly executed proxy marked "ABSTAIN" will not be
voted. However, it will be counted for purposes of determining whether there is
a quorum and for determining the aggregate voting power and number of shares
represented and entitled to vote at the 1999 Annual Meeting. Shares represented
by "broker non-votes" will be counted in determining whether there is a quorum
at the 1999 Annual Meeting. A "broker non-vote" occurs when a broker or nominee
is empowered to vote on certain proposals but not others. The shares voted are
those the broker or nominee holds for the benefit of the underlying stock
holder. As to all matters, each stockholder is entitled to one vote for each
share of Common Stock held. Stockholders are not entitled to cumulate votes.
Proposal 1. Proposal Number One -- Election of Directors ("Proposal 1")
sets forth seven nominees for election to the Board of Directors. The Director
nominees who receive the greatest number of votes at the 1999 Annual Meeting
will be elected to the Board of Directors. Votes against a candidate,
abstentions and broker non-votes will have no legal effect.
Proposal 2 and Proposal 5. Proposal Number Two -- Ratification of Decision
Not to Amend the Restated Certificate or Effect Stock Split ("Proposal 2") and
Proposal Number Five -- Amendment of the 1998 Stock Plan ("Proposal 5") require
the affirmative vote of a majority of the votes cast at the 1999 Annual Meeting
before becoming effective. Abstentions on Proposal 2 or Proposal 5 have the
effect of a vote against Proposal 2 and Proposal 5, respectively. Broker
non-votes will not be counted as a vote cast on either Proposal 2 or Proposal 5.
Proposal 3 and Proposal 4. Proposal Number Three -- Amendment of the
Restated Certificate to Increase the Authorized Common Stock, Create a New Class
of Preferred Stock and Eliminate Article Eleventh Relating to Preferred Stock
Not Outstanding ("Proposal 3") and Proposal Number Four -- Amendment of the
Restated Certificate to Effect a Stock Split at the Board's Discretion
("Proposal 4") requires the affirmative vote of a majority of the shares
entitled to vote at the 1999 Annual Meeting. Abstentions and broker non-votes on
Proposal 3 or Proposal 4 have the effect of a vote against Proposal 3 and
Proposal 4, respectively.
Proxies. All proxies which are properly completed and delivered prior to
the 1999 Annual Meeting will be voted. Any proxy given by a stockholder may be
revoked at any time before it is exercised. A proxy may be revoked by: (i)
filing with the Secretary of the Company an instrument revoking it; (ii)
delivering a proxy bearing a later date; or (iii) the stockholder attending the
1999 Annual Meeting and voting his or her shares in person.
(PRELIMINARY)
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 1, 1999,
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 and executive
officer 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.
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
BENEFICIALLY COMMON
NAME AND ADDRESS OWNED(1)(2) STOCK
---------------- ------------ ----------
<S> <C> <C>
Benjamin L. Scott(3)....................... 100,000(4) *
John R. Fleming(3)......................... 1,163,739 3.2%
James F. Guthrie(3)........................ 309,568(5) *
Dominick DeAngelo(3)....................... 20,000(4) *
*David L. Hughart(3)....................... -- --
Jeffrey C. Smith(3)........................ 37,000(6) *
Gregory A. Tolander(3)..................... 12,900(7) *
Michael W. Vent(3)......................... 104,748(4) *
Valerie Walden(3).......................... 12,500(4) *
Leo V. Welsh, Jr.(3)....................... 39,500(8) *
Ralph J. Swett(3).......................... 2,757,122(9) 7.5%
Richard D. Irwin........................... 3,064,085(10) 8.4%
c/o Grumman Hill
Associates, Inc.
191 Elm Street
New Canaan, CT 06840
Carl W. McKinzie........................... 212,292(11) *
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........................ 147,137(12) *
633 West Fifth Street,
Suite 4000
Los Angeles, CA 90071-2007
Joe C. Culp................................ 38,609(13) *
#5 Hedge Lane
Austin, TX 78746
FMR Corp................................... 2,935,894(14) 7.7%
Edwin C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
Richard L. Grubman......................... 1,832,290(15) 5.0%
Jonathon S. Jacobson
200 Clarendon Street
51st Floor
Boston, MA 02117
Trustees of General Electric Pension
Trust.................................... 9,998,553(16) 26.3%
3003 Summer Street
Stamford, CT 06905
</TABLE>
(PRELIMINARY)
3
<PAGE> 6
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
BENEFICIALLY COMMON
NAME AND ADDRESS OWNED(1)(2) STOCK
---------------- ------------ ----------
<S> <C> <C>
All directors and executive officers of IXC
Communications as a group (16 persons)... 8,002,200 21.5%
</TABLE>
- ---------------
* 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 April 1, 1999, 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 the Company's 7 1/4% Junior Convertible Preferred Stock Due
2007 (the "Convertible Preferred Stock"), the Company's 12 1/2% Series B
Junior Exchangeable Preferred Stock Due 2009 (the "Exchangeable Preferred
Stock") and the Company's 6 3/4% Cumulative Convertible Preferred Stock
(the "Cumulative Preferred Stock") are nonvoting except upon the occurrence
of certain events described in the applicable Certificate of Designation.
The Company has only limited information concerning the beneficial
ownership of the Convertible Preferred Stock, the Exchangeable Preferred
Stock and the Cumulative Preferred Stock because substantially all of such
stock is registered in the names of nominees.
(3) The address of such person is c/o IXC Communications, Inc., 1122 Capital of
Texas Highway South, Austin, Texas 78746.
(4) Represents shares of Common Stock issuable with respect to the exercise of
options.
(5) Includes 304,990 shares of Common Stock issuable with respect to the
exercise of options. Also includes 4,578 shares of Common Stock issuable
upon conversion of the Convertible Preferred Stock.
(6) Includes 35,000 shares of Common Stock issuable with respect to the
exercise of options.
(7) Includes 12,500 shares of Common Stock issuable with respect to the
exercise of options.
(8) Includes 37,500 shares of Common Stock issuable with respect to the
exercise of options.
(9) Includes 472,480 shares held by Ralph J. Swett, Trustee of the EMS 1994
Trust and 472,480 shares held by Ralph J. Swett, Trustee of the RJS 1994
Trust. Also includes 16,031 shares of Common Stock issuable to Mr. Swett
upon conversion of the Convertible Preferred Stock, 375 shares of Common
Stock issuable with respect to the exercise of options and 409 shares
issuable under the Company's Outside Directors' Phantom Stock Plan 1999
Restatement (the "Directors' Plan").
(10) Includes 636,990 shares held by Grumman Hill Investments, L.P., a Delaware
limited partnership ("GHI"). The sole general partner of GHI is Grumman
Hill Company, L.L.C., a Delaware limited liability company, of which Mr.
Irwin is the general manager and a beneficial owner of a membership
interest. Mr. Irwin may be deemed to have shared voting and investment
power with respect to such shares, which include 16,023 shares of Common
Stock issuable upon conversion of Convertible Preferred Stock. Also
includes 1,628,216 shares held by The Irwin Family Limited Partnership
dated January 4, 1995 ("IFLP#1"), 341,341 shares held by The Irwin Family
Limited Partnership #2 ("IFLP#2") and 350,444 shares held by The Irwin
Family Limited Partnership #3 ("IFLP#3"). Mr. Irwin is the sole general
partner of IFLP#1, IFLP#2 and IFLP#3 and has sole voting and investment
power with respect to such shares, including 11,439 shares of Common Stock
issuable upon conversion of Convertible Preferred Stock. Also includes
107,094 shares held by Grumman Hill Associates, Inc. ("GHA"). Mr. Irwin is
the President of GHA and has shared voting and dispositive power with
respect to such shares. Also includes 375 shares of Common Stock issuable
with respect to the exercise of options.
(PRELIMINARY)
4
<PAGE> 7
(11) 211,917 shares are held by Trust for the Riordan & McKinzie Profit Sharing
and Savings Plan for the benefit of Carl W. McKinzie. Includes 375 shares
of Common Stock issuable with respect to the exercise of options.
(12) 146,353 shares are held by Phillip L. Williams, as Trustee of the Phillip
and Jane Williams Living Trust, UDT August 20, 1985. Includes 375 shares of
Common Stock issuable with respect to the exercise of options and 409
shares issuable under the Directors' Plan.
(13) Includes 35,997 shares of Common Stock issuable with respect to the
exercise of options and 409 shares issuable under the Directors' Plan.
(14) Based solely upon, and qualified in its entirety with reference to,
Amendment No. 1 to Schedule 13G filed with the Commission on February 12,
1999 (the "FMR Schedule 13G"), and reflecting beneficial ownership of
Common Stock as of December 31, 1998. The FMR Schedule 13G was filed by FMR
Corp. ("FMR"), as a joint filing on behalf of FMR, Edward C. Johnson 3d and
Abigail P. Johnson. FMR, Edward C. Johnson 3d and Abigail P. Johnson report
beneficial ownership of the same 2,935,894 shares of Common Stock. FMR,
Edward C. Johnson 3d and Abigail P. Johnson reported sole voting power over
138,598 shares, including 112,327 shares of Common Stock issuable upon
conversion of Cumulative Preferred Stock. FMR, Edward C. Johnson 3d and
Abigail P. Johnson reported sole dispositive power over 2,935,894 shares
including 848,306 shares of Common Stock issuable upon conversion of
Convertible Preferred Stock and 905,579 shares of Common Stock issuable
upon conversion of Cumulative Preferred Stock.
(15) Based solely upon, and qualified in its entirety with reference to, a
Schedule 13G filed with the Commission on March 15, 1999, and reflecting
ownership of Common Stock as of March 4, 1999. The following information is
taken from that filing. In that filing, Richard L. Grubman and Jonathon S.
Jacobson report the beneficial ownership with shared voting and shared
dispositive power over 1,832,290 shares of Common Stock. Mr. Grubman and
Mr. Jacbobson are designated as beneficial owners because of their
association with certain limited liability companies. Mr. Grubman is a
Managing Member of Highfields Associates LLC, a Delaware limited liability
company ("Highfields Associates") and of Highfields GP LLC, a Delaware
limited liability company ("Highfields GP"). Mr. Jacobson is also a
Managing Member of Highfields Associates and Highfields GP. Highfields
Associates reports the beneficial ownership with shared voting and
dispositive power over 518,706 shares of Common Stock. Highfields Capital
Management L.P., a Delaware limited partnership ("Highfields Capital")
reports the beneficial ownership with shared voting and dispositive power
over 1,313,584 shares of Common Stock. Highfields GP is the general partner
of Highfields Capital.
(16) Includes 1,374,036 shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Seven directors are to be elected and qualified at the 1999 Annual Meeting
to serve until the next Annual Meeting of Stockholders and/or until their
respective successors have been duly elected and qualified. In the absence of
instructions to the contrary, proxies covering shares of Common Stock will be
voted in favor of the election of the persons listed below as Directors of the
Company for a term commencing on the date of the 1999 Annual Meeting and
continuing until the next Annual Meeting of Stockholders and/or until their
successors have been duly elected and qualified. In the event that any nominee
for Director should become unavailable to serve, it is intended that votes will
be cast, pursuant to the enclosed proxy, for such substitute nominee as may be
nominated by the Company. Management has no present knowledge that any of the
persons named will be unavailable to serve.
No arrangement or understanding exists between any nominee and any other
person or persons pursuant to which any nominee was or is to be selected as a
Director or nominee. None of the nominees has any family relationship to any
other nominee or to any executive officer of the Company.
(PRELIMINARY)
5
<PAGE> 8
INFORMATION CONCERNING INCUMBENT DIRECTORS AND NOMINEES TO BOARD OF DIRECTORS
Information is set forth below concerning the incumbent Directors, all of
whom are also nominees for election as Directors, and the year in which each
incumbent Director was first elected as a Director of the Company. Each nominee
has furnished the information as to his beneficial ownership of Common Stock as
of April 1, 1999 and, if not employed by the Company, the nominee's principal
occupation. Each nominee has consented to being named in this Proxy Statement as
a nominee for Director and has agreed to serve as a Director if elected. Ages
are shown as of April 1, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY DIRECTOR SINCE
---- --- ------------------------- --------------
<S> <C> <C> <C>
Benjamin L. Scott.................... 49 President, Chief Executive Officer 1997
and Chairman of the Board
Ralph J. Swett*...................... 64 Director 1992
Richard D. Irwin*.................... 63 Director 1992
Wolfe H. Bragin*++................... 54 Director 1993
Carl W. McKinzie+.................... 59 Director 1993
Phillip L. Williams+++............... 76 Director 1996
Joe C. Culp+......................... 65 Director 1996
</TABLE>
- ---------------
* Member of the Compensation Committee.
+ Member of the Audit Committee.
++ Member of the Administrative Committee.
Mr. Scott has served as the President and Chief Executive Officer of IXC
Communications and a member of the Board of Directors since October 1997. In May
of 1998, Mr. Scott became Chairman of the Board of Directors. Prior to that, Mr.
Scott served as President and Chief Executive Officer of PrimeCo Personal
Communications, L.P., a joint venture among Bell Atlantic Corporation ("Bell
Atlantic"), US 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.
Mr. Swett has served as a Director of IXC Communications since its
formation in July 1992 and until May of 1998 acted as the Company's Chairman. In
addition, Mr. Swett served as Chief Executive Officer and President of IXC
Communications from July 1992 to October 1997. 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 as a Vice President of Times Mirror from 1981 to
1986. Mr. Swett managed communications businesses for 28 years prior to his
retirement. Mr. Swett is a member of the Board of PSINet Inc.
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 Company,
L.L.C. or its predecessor ("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
13 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") (which was acquired by Frontier Corporation in 1995, 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 ("GEIC"), a subsidiary of General Electric Company that
acts as an investment advisor to Trustees of General Electric Pension Trust
(PRELIMINARY)
6
<PAGE> 9
("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 Communication Services 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 has served as a director of IXC Communications since 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 the Board of Times
Mirror from 1987 to May 1993. Mr. Williams is a member of the Board of Directors
of a number of private companies including non-profit organizations and is a
partner in various private partnerships.
Mr. Culp has served as a director of IXC Communications since 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 Corp.'s Telecommunications Group from 1982 until 1988.
Mr. Culp has over 40 years of experience in the communications industry. Mr.
Culp is a director of Crosskeys System Corporation and FastLane Technologies
Corp.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES SET FORTH ABOVE.
COMMITTEES
The standing committees of the Board are the Audit Committee (the "Audit
Committee"), the Compensation Committee (the "Compensation Committee") and the
Administrative Committee (the "Administrative Committee"). The Audit Committee
met five times during the fiscal year ended December 31, 1998 ("fiscal 1998").
The Compensation Committee met four times during fiscal 1998. The Administrative
Committee did not meet during fiscal 1998 but took various actions by written
consent.
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. Currently and in 1998, the Compensation Committee
consisted of Mr. Irwin, Mr. Bragin and Mr. Swett. Mr. Irwin and Mr. Bragin have
never been employees of the Company. Mr. Swett was an employee of the Company
until his retirement in October 1997. The Compensation Committee determines the
compensation for the Company's executive officers and administers the 1998 Stock
Plan, the 1996 Stock Plan of IXC Commissions, Inc. (the "1996 Stock Plan"), the
Amended and Restated 1994 Stock Plan of IXC Communications, Inc. (the "1994
Stock Plan") and the Special Stock Plan of IXC Communications, Inc. (the
"Special Stock Plan and, together with the 1998 Stock Plan, the 1996 Stock Plan
and the 1994 Stock Plan, the "Employee Stock Plans"). Although the Compensation
Committee administers the Employee Stock Plans, in 1998, all grants of
stock-based awards were made by the Administrative Committee or the Chief
Executive Officer. The Board of Directors delegated to the Chief Executive
Officer and the Administrative Committee the authority to grant stock options
under the Employee Stock Plans as follows. Subject to certain limitations, in
January 1997, the Board of Directors 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 Securities Exchange Act of 1934, as amended (the "Exchange
(PRELIMINARY)
7
<PAGE> 10
Act") and to the Administrative Committee with respect to grants of stock
options to senior executive officers of the Corporation and other individuals
who may be subject to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). In July 1998, the Board of Directors delegated to the
Chief Executive Officer authority under the 1998 Stock Plan to grant stock
options to individuals not subject to Section 16 of the Exchange Act and to
individuals subject to Section 16 of the Exchange Act provided the Board
subsequently ratified the grant. In addition, the Board delegated to the
Administrative Committee the Board's authority under the 1998 Stock Plan to
grant stock options to individuals who 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 or have ever been employees of the Company. The
Administrative Committee administers (i) the 1997 Stock Plan in all respects;
(ii) the grants of stock options under the 1996 Stock Plan and the 1994 Stock
Plan to senior executive officers of the Company and (iii) the grants of stock
options under the 1998 Stock Plan, the 1996 Stock Plan and the 1994 Stock Plan
to other individuals who may be subject to Section 162(m) of the Code.
MEETINGS AND REMUNERATION
During fiscal 1998, the Board held 18 meetings and took various actions by
written consent. Each incumbent Director attended at least 75% of the aggregate
of (i) the total number of meetings held by the Board during the period within
which he was a Director and (ii) the total number of meetings held by all
committees of the Board during the period within which he was a member of such
committee of the Board.
Each Director is elected to hold office until the next annual meeting of
stockholders and/or until his respective successor is elected and qualified.
Non-employee directors currently receive annual compensation of $15,000, $1,000
for participating in each regular Board meeting and $300 for participating in
each telephonic meeting. 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. Each non-employee director also receives an annual option
grant of 1,500 shares of common stock under the 1998 Stock Plan. The initial
annual grant was made on October 19, 1998, subsequent grants will be made on the
date of the Annual Meeting of Stockholders. Mr. Scott does not receive
compensation for services rendered as a director.
The Company adopted the Directors' Plan in May 1996 for certain of its
non-employee directors (that is, Messrs. Bragin, Culp and Williams), pursuant to
which $20,000 per participating director per year was automatically treated as
if it were contributed to the participant's account in the Directors' Plan and
invested in Common Stock. Beginning in 1999, all non-employee directors may
participate in the Directors' Plan. No stock will be actually purchased under
the Directors' Plan and the participants will generally receive cash benefits
equal to the value of the shares that they are deemed to have purchased under
the Directors' Plan, with such value to be determined when the benefits become
payable. Participants earn a nonforfeitable ("vested") right to the amount
deemed to have been contributed to his account on a pro-rata basis over 12
months. However, for amounts credited to participants' accounts beginning in
1999 and for all subsequent years, participants may elect that some or all of
such benefits be paid in the form of Common Stock. Also, participants who had
benefits under the Directors' Plan as of July 31, 1998 are entitled to make a
one-time election that some or all of their existing benefits be paid in the
form of Common Stock. The distribution of benefits in the form of cash will
generally be paid following the third Annual Meeting of Stockholders that occurs
after the amounts are credited to the individual's account in the Directors'
Plan. The distribution of benefits in the form of Common Stock will generally
occur after the amounts that are credited to the participant's account for that
particular year become vested. The Directors' Plan is currently administered by
Mr. Scott.
(PRELIMINARY)
8
<PAGE> 11
PROPOSAL 2 -- RATIFICATION OF DECISION
NOT TO AMEND RESTATED CERTIFICATE OR EFFECT STOCK SPLIT
In August 1998, the Company's stockholders approved an amendment to the
Restated Certificate (the "1998 Charter Amendment"). The 1998 Charter Amendment
provided for (i) an increase in the authorized number of shares of the Company's
Common Stock from 100 million to 300 million; (ii) a two-for-one stock split of
the Company's issued and outstanding shares of Common Stock; (iii) the creation
of a new class of preferred stock to be designated as Class B Preferred shares
of Common Stock; and (iv) an elimination of all matters set forth in the
Restated Certificate with respect to the Series 1 Stock and the Series 3 Stock.
These actions were to become effective upon the filing of the 1998 Charter
Amendment. Prior to the filing of the 1998 Charter Amendment, the Board of
Directors unanimously agreed to postpone the stock split and the filing of the
1998 Charter Amendment. The 1998 Charter Amendment was never filed with the
Delaware Secretary of State and none of the previously approved actions took
place. The Directors determined that under the then-current market conditions, a
stock split would not be in the best interests of the stockholders and as a
consequence the 1998 Charter Amendment was not filed. The Board of Directors
recommends that the stockholders ratify and approve the Board of Directors'
decision to not file the 1998 Charter Amendment including not effecting a
two-for-one stock split of the Company's Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
PROPOSAL TO RATIFY THE BOARD'S DECISION NOT TO FILE THE 1998 CHARTER AMENDMENT.
Although the Board determined that it was not in the best interests of the
stockholders to effect a stock split in 1998, it may be beneficial to the
stockholders to do so in the future. In addition, the Board has determined that
regardless of whether a stock split is effectuated it would be in the best
interest of the Company and its stockholders to amend the Restated Certificate
to carry out the other provisions previously approved by the stockholders.
Previously, the Company was unable to effectuate the other provisions without
also effectuating the stock split because all of the proposed changes were
approved together in one amendment. Therefore, the Board of Directors recommends
for stockholder approval two Charter Amendments substantially similar to the
1998 Charter Amendment. Separate proposals for the stock split and the other
actions are set forth below.
PROPOSAL 3 -- AMENDMENT OF THE RESTATED CERTIFICATE TO INCREASE THE AUTHORIZED
COMMON STOCK, CREATE A NEW CLASS OF PREFERRED STOCK AND ELIMINATE ARTICLE
ELEVENTH RELATING TO PREFERRED STOCK NOT OUTSTANDING
CHARTER AMENDMENT
Proposal 3 includes an amendment to the Restated Certificate ("Amendment
I"). Amendment I provides that upon the filing with the Delaware Secretary of
State, the Company will: (i) increase the aggregate number of shares of Common
Stock that the Company is authorized to issue from 100 million to 300 million;
(ii) create a new class of preferred stock; and (iii) eliminate from the
Restated Certificate all matters set forth in the Restated Certificate with
respect to the Series 1 Stock and to the Series 3 Stock. A form of Amendment I
is set forth in Appendix A to this Proxy Statement.
INCREASE IN AUTHORIZED COMMON STOCK AND CREATION OF CLASS B PREFERRED STOCK
Purposes of Increase and Creation of New Class. Amendment I would increase
the number of shares of the Common Stock that the Company is authorized to issue
from 100 million to 300 million and would also create a new class of preferred
stock to be designated as "Class B Preferred Stock." The increase will enable
the Company to effectuate the stock split. The increase in the Common Stock and
the creation of Class B Preferred Stock will also ensure that the Company
continues to have additional shares available for future issuance from time to
time as approved by the Board for any proper corporate purpose, including
financings,
(PRELIMINARY)
9
<PAGE> 12
mergers, acquisitions of other businesses, future stock dividends or splits and
issuances under stock option and other incentive programs. No further action or
authorization by the stockholders would be necessary prior to the issuance of
additional shares of the Common Stock or the issuance or authorization of
additional shares of the Class B Preferred Stock unless required by the Restated
Certificate, by law or Nasdaq National Market (the "NNM") rules.
The total number of shares of Class B Preferred Stock that the Board shall
have authority to issue is 17,000,000 shares, par value $.01 per share. The
Class B Preferred Stock may be issued from time to time in one or more series
pursuant to a resolution duly adopted by the Board that sets forth the voting
powers of each such series and fixes the number of shares constituting such
series and the designations, preferences and relative participating optional or
other special rights and qualifications, limitations or restrictions of each
such series of Class B Preferred Stock.
Effects of Increase and Creation of Class B Preferred Stock. Stockholders
should note that certain disadvantages may result from the adoption of Amendment
I. Amendment I will increase the total number of authorized shares of the Common
Stock by an amount substantially greater than that necessary to effect the stock
split and will also substantially increase the total number of authorized shares
of Preferred Stock. As a result, stockholders could experience a greater
reduction in their interest in the Company with respect to earnings per share,
voting, liquidation value and book and market value per share if the additional
authorized shares of Common Stock and/or Class B Preferred Stock are issued.
Unless required by law or the NNM rules, the Board may issue the Class B
Preferred Stock without stockholder approval (subject to certain limitations in
the Certificates of Designation with respect to the Convertible Preferred Stock,
the Exchangeable Preferred Stock and the Cumulative Preferred Stock). The
issuance of Class B Preferred Stock may have an adverse effect on the Common
Stock. Based on the number of shares outstanding as of the Record Date, if
Amendment I is adopted, there will be approximately [ ] shares of
Common Stock remaining available for issuance by the Company after the stock
split discussed below [and after taking into account the shares of Common Stock
reserved for issuance under the Stock Plans (as defined below)], upon conversion
of the Convertible Preferred Stock and the Cumulative Preferred Stock
convertible into Common Stock as opposed to approximately [ ]
shares that would remain available for issuance if the stock split and the
increase in the number of shares of Common Stock contemplated by Amendment I
were not adopted.
Each additional share of the Common Stock authorized by Amendment I would
have the same rights and privileges as each share of the Common Stock currently
authorized or outstanding. Each share of the Class B Preferred Stock would have
the rights, privileges and preferences as designated by the Board subject to the
limitations of the Certificates of Designation with respect to the Convertible
Preferred Stock, the Exchangeable Preferred Stock and the Cumulative Preferred
Stock.
ELIMINATE THE SERIES 1 STOCK AND THE SERIES 3 STOCK FROM THE RESTATED
CERTIFICATE
Article ELEVENTH of the Restated Certificate currently provides for the
preferred stock designated as Series 1 Stock and Series 3 Stock. All of the
outstanding Series 1 Stock has previously been redeemed. All of the outstanding
Series 3 Stock has been either (i) exchanged for shares of the Company's Common
Stock pursuant to an exchange offer or (ii) redeemed by the Company. Pursuant to
this Proposal, Article ELEVENTH would be deleted in its entirety from the
Restated Certificate and, accordingly, all such shares would resume the status
of authorized and unissued shares of preferred stock of the Company.
IN ACCORDANCE WITH DELAWARE GENERAL CORPORATION LAW, NOTWITHSTANDING
STOCKHOLDER APPROVAL OF AMENDMENT I, AT ANY TIME PRIOR TO THE EFFECTIVENESS OF
THE FILING OF AMENDMENT I WITH THE DELAWARE SECRETARY OF STATE, THE BOARD MAY
ABANDON AMENDMENT I WITHOUT FURTHER ACTION BY THE STOCKHOLDERS.
(PRELIMINARY)
10
<PAGE> 13
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF AMENDING
THE RESTATED CERTIFICATE IN ORDER TO:
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK;
CREATE A NEW CLASS OF PREFERRED STOCK; AND
ELIMINATE THE REFERENCES TO THE SERIES 1 STOCK AND THE SERIES 3 STOCK
FROM THE RESTATED CERTIFICATE.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE PROPOSAL UNLESS
STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
PROPOSAL 4 -- AMENDMENT OF THE RESTATED CERTIFICATE
TO EFFECT A STOCK SPLIT AT THE BOARD'S DISCRETION
CHARTER AMENDMENT
Proposal 4 includes an amendment to the Restated Certificate ("Amendment
II"). Amendment II provides that upon filing it with the Delaware Secretary of
State, the Company will effect a two-for-one stock split of the Company's issued
and outstanding Common Stock. A form of Amendment II is set forth in Appendix B
to this Proxy Statement.
STOCK SPLIT
Purposes and Effects of the Stock Split. The Board believes that a stock
split would result in a decrease in the market price of the Common Stock to a
level at which the Common Stock would be more readily tradeable and accessible
to a broader base of investors, thereby obtaining wider distribution and
improved marketability of the Common Stock. In order for a stock split to
benefit stockholders, certain market conditions must exist. Due to the
volatility of the market, it is difficult to time the approval of a stock split
by the stockholders with favorable market conditions. Therefore, the Board seeks
stockholder approval of an amendment to the Restated Certificate providing for a
stock split and for the authority to effectuate such an amendment at the
discretion of the Board. The Board would have the authority to effectuate a
stock split by amending the Restated Certificate within one year following
stockholder approval or to determine not to effectuate the stock split. Although
the impact on the market price of shares of the Common Stock cannot be predicted
with certainty, it is likely that the stock split would initially result in the
market price of each share of the Common Stock being approximately one-half of
the price previously prevailing and that the aggregate market price of all
shares of the Common Stock held by a particular stockholder should remain
approximately the same.
Stockholders should be aware, however, that brokerage charges and any
applicable transfer taxes on sales and transfers of shares of the Common Stock
could be higher after the stock split on the same relative interest in the
Company because that interest would be represented by a greater number of
shares.
A stock split could only be effectuated if the stockholders approved an
increase in the authorized number of shares of the Common Stock. Therefore, the
effects of an increase in the Common Stock should also be considered in
approving the stock split.
The Common Stock is traded on the NNM. On April 12, 1999, the reported
closing price of the Common Stock on the NNM was $49.1875 per share.
Voting rights and other rights of stockholders will not be altered by the
stock split. In addition, the number of shares of Common Stock subject to
outstanding options granted pursuant to the IXC Communications, Inc. 1997
Special Executive Stock Plan (the "1997 Stock Plan"), the 1998 Stock Plan, the
1996 Stock Plan, the 1994 Stock Plan and the Special Stock Plan, (collectively,
the "Stock Plans"), and the number of shares of Common Stock reserved for
issuance under the Stock Plans would be increased by a factor of two
(PRELIMINARY)
11
<PAGE> 14
and the exercise price of outstanding options would be divided by two. In
addition, the number of shares reserved for issuance upon conversion of the
Convertible Preferred Stock and the Cumulative Preferred Stock which are
convertible into Common Stock would be increased by a factor of two and the
conversion price associated with such stock would be divided by two.
Upon the effectiveness of Amendment II, the Company will transfer from its
surplus account to its capital account an amount equal to the aggregate par
value of the shares of Common Stock issued by virtue of the two-for-one stock
split. Accordingly, the par value of the shares of Common Stock of $.01 will
remain unchanged after the stock split.
Following the effectiveness of Amendment II, the number of shares of Common
Stock outstanding immediately prior to the stock split (36,652,306 shares as of
the Record Date) would be split into 73,304,612 shares, assuming no additional
shares of Common Stock are issued by the Company after the Record Date.
Effective Date of the Stock Split. The Board in its discretion would
determine the date to effect the stock split. Stockholders of record as of the
close of business on the date Amendment II is effective would receive, as soon
as practicable thereafter, an additional stock certificate representing one
share of the Common Stock for each share held immediately prior to the stock
split. Stockholders would retain certificates issued prior to the date,
Amendment II is effective, and those certificates would continue to represent
the number of shares of the Common Stock evidenced thereby. IN THE EVENT OF A
STOCK SPLIT CERTIFICATES SHOULD NOT BE RETURNED TO THE COMPANY OR ITS TRANSFER
AGENT.
Tax Consequences of the Stock Split. Under existing United States federal
income tax laws, holders of Common Stock should not be required to recognize
taxable gain or loss as a result of the stock split. The tax basis of each new
share and each retained share of Common Stock would be equal to one-half of the
tax basis of the corresponding share immediately preceding the stock split. In
addition, the holding period for the additional shares issued pursuant to the
stock split would be the same as the holding period for the original shares of
the Common Stock. The laws of jurisdictions other than the United States may
impose income taxes on the issuance of the additional shares, and stockholders
subject to such laws are urged to consult their tax advisors.
IN ACCORDANCE WITH DELAWARE GENERAL CORPORATION LAW, NOTWITHSTANDING
STOCKHOLDER APPROVAL OF AMENDMENT II, AT ANY TIME PRIOR TO THE EFFECTIVENESS OF
THE FILING OF AMENDMENT II WITH THE DELAWARE SECRETARY OF STATE, THE BOARD MAY
ABANDON AMENDMENT II WITHOUT FURTHER ACTION BY THE STOCKHOLDERS.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF A CHARTER
AMENDMENT TO EFFECT A STOCK SPLIT AT THE DISCRETION OF THE BOARD. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED FOR THE PROPOSAL UNLESS STOCKHOLDERS
SPECIFY OTHERWISE IN THEIR PROXIES.
PROPOSAL 5 -- AMENDMENT OF 1998 STOCK PLAN
REASON FOR AMENDMENT
The purpose of the Amendment to the 1998 Stock Plan (the "Plan Amendment")
is to increase the number of shares of Common Stock available for option grants.
In 1999 the Board of Directors adopted an amendment to the 1998 Stock
Plan, subject to shareholder approval as described herein, increasing the number
of shares of Common Stock available for issuance upon the exercise of options
granted under the 1998 Plan from 3,150,000 to [ ]. The 1998 Stock Plan
including the Plan Amendment and information regarding options granted
thereunder is summarized below, but these descriptions are subject to and are
qualified in their entirety by the full text of the 1998 Stock Plan, as amended
by the proposed Plan Amendment, which is attached as Appendix C to this Proxy
Statement. Option grants serve as an incentive to officers and key employees of
Company and its subsidiaries as well as attracting new employees. At April 1,
(PRELIMINARY)
12
<PAGE> 15
1999, options to purchase [ ] shares of Common Stock were outstanding
but not exercised under the 1998 Stock Plan, options to purchase [ ]
shares of Common Stock had been exercised, leaving a balance of [ ]
shares of Common Stock which could be subject to options granted under the 1998
Stock Plan. If the number of shares of Common Stock available for option grants
under the 1998 Stock Plan is increased to [ ], as set forth in the Plan
Amendment, there would be a balance of [ ] shares of Common Stock
available for option grants under the 1998 Stock Plan. The Board believes that
increasing the number of stock options available for grant under the 1998 Stock
Plan is advisable because such awards promote interest in the welfare of the
Company by allowing its employees to share in the success of the Company and
encouraging them to remain in the service of the Company. It also continues to
give the Company a means to attract qualified new employees.
SUMMARY OF THE 1998 STOCK PLAN
Purposes. The purposes of the 1998 Stock Plan, as amended by the proposed
Amendment (the "Amended 1998 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 its employees, directors, and other persons
providing services to it and, (2) to strengthen the mutuality of interests
between those executives and the Company's stockholders by providing those
persons with a proprietary interest in pursuing the Company's long-term growth
and financial success.
Grants. Under the Amended 1998 Stock Plan, employees, directors and other
persons providing services to the Company may be granted options to purchase
Common Stock ("Options"). The Amended 1998 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"). The Common Stock is traded on the NNM. On
April 12, 1999, the reported closing price of the Common Stock on the NNM was
$49.1875 per share.
Maximum Number of Shares. The maximum number of shares that can be issued
to all employees under the Amended 1998 Stock Plan is [ ]. The maximum
number of shares that may be issued to a single employee is 200,000. 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. In general, the Amended 1998 Stock Plan will be
administered by the Compensation Committee. However, with respect to certain
classes of individuals and under certain circumstances, the grants may be made
by the entire Board of Directors, the Administrative Committee, or by the Chief
Executive Officer. The Amended 1998 Stock Plan will be administered by the
Compensation Committee or by the Board in certain instances subject to the
authority delegated by the Board to the Chief Executive Officer of the Company
and the Administrative Committee. See "Proposal 1 -- Election of Directors --
Committees." To the extent possible and advisable, the members of the committee
administering the Amended 1998 Stock Plan shall be composed of (1) "outside
directors" under Section 162(m) of the Code (imposing a $1,000,000 deduction
limitation on compensation paid to certain executives) and as (2) "non-employee
directors" under Rule 16-3 under Section 16 of the Exchange Act (relating to
"short-swing" profits) with respect to grants to individuals subject to those
statutory provisions.
The Compensation Committee is authorized to interpret the Amended 1998
Stock Plan and to adopt rules and procedures relating to the administration of
the Amended 1998 Stock Plan. All actions of the Compensation Committee in
connection with the interpretation and administration of the Amended 1998 Stock
Plan will be binding upon all parties.
(PRELIMINARY)
13
<PAGE> 16
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 (as defined in the Amended 1998 Stock Plan) 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.
Unless otherwise specified in the option grant, Options vest (i.e., become
exercisable) in four equal annual installments beginning in most instances with
the date an individual's employment with the Company commences and be subject to
such other terms and conditions as may be set forth in the Option.
Options granted under the Amended 1998 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
Amended 1998 Stock Plan will terminate on [ ]. The Board may at any
time modify the Amended 1998 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 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 Amended 1998 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 Amended 1998 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 Amended 1998 Stock Plan.
The Amended 1998 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
(PRELIMINARY)
14
<PAGE> 17
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 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 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 federal tax rate for long-term capital gains
is 20%. The current marginal rate for ordinary federal income tax can be as much
as 39.6%. Short-term capital gains are generally taxed as ordinary income.
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
(PRELIMINARY)
15
<PAGE> 18
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 Amended 1998
Stock Plan by reason of the exercise of stock options will be exempt from
Section 162(m). However, this exemption will not apply with respect to income
related to Restricted Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF AMENDING
THE 1998 STOCK PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE
FOR OPTION GRANTS.
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Set forth in the table below are the names, ages (as of April 1, 1999) and
current offices held by all executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY EXECUTIVE OFFICER SINCE
---- --- ------------------------- -----------------------
<S> <C> <C> <C>
Benjamin L. Scott.... 49 President, Chief Executive Officer and Chairman of 1997
the Board
John R. Fleming...... 45 President of Emerging Markets 1992
David L. Hughart..... 53 President, U.S. Sales & Marketing 1998
Michael W. Vent...... 46 President, Network Service 1997
Leo V. Welsh, Jr..... 52 President, Wholesale 1998
James F. Guthrie..... 54 Executive Vice President and Chief Financial Officer 1995
Dominick De Angelo... 55 Senior Vice President, Product Management 1998
Jeffrey C. Smith..... 47 Senior Vice President, General Counsel and Secretary 1997
Gregory A. 47 Senior Vice President, Chief Information Officer 1998
Tolander...........
Valerie Walden....... 42 Senior Vice President, Customer Operations and 1998
Corporate Communications
</TABLE>
Executive officers of the Company are elected by and serve at the
discretion of the Board. None of the executive officers has any family
relationship to any nominee for Director or to any other executive officer of
the Company. Set forth below is a brief description of the business experience
for the previous five years of all non-director executive officers.
Mr. Fleming has served as President of Emerging Markets of IXC
Communications since December 1997, as Executive Vice President of IXC
Communications from March 1996 through November 1997 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 17
years of experience in the telecommunications industry.
Mr. Hughart became President, U.S. Sales & Marketing in April 1999.
Immediately prior to this he served as President, Retail Business Division of
IXC Communications since July 1998. Prior to that, Mr. Hughart was employed by
AT&T Corp. ("AT&T") since 1984 with his most recent positions being Vice
President of Marketing for AT&T's Business Markets Division from December 1996
through June 1998, Vice President of Marketing of AT&T Network Commerce Services
from September 1994 to December 1996 and Director of AT&T EasyLink Services from
August 1992 to September 1994. Mr. Hughart has over 34 years of experience in
the telecommunications industry.
(PRELIMINARY)
16
<PAGE> 19
Mr. Vent was elected President, Network Services in 1999. Prior
to that he served as an Executive Vice President from April 1, 1997 and as
Senior Vice President, Network Planning and Implementation of IXC Communications
from December 1996 through March 1997. 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 Communications Corporation from 1979 through July 1992, serving
as Director of Network and Computer Operations from January 1990 through July
1992. Mr. Vent has over 23 years of experience in the telecommunications
industry.
Mr. Welsh has served as President, Wholesale since April 1998. Prior to
that, Mr. Welsh served as Vice President and General Manager of the Wholesale
Services Division of Sprint Corporation ("Sprint") from January 1995 through
March 1998. Mr. Welsh served as Vice President and General Manager of the
Northern Division of Sprint's Business Services Group from 1991 to 1994. Mr.
Welsh has over 12 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. DeAngelo became Senior Vice President, Product Management in April
1999. Immediately prior to this he served as Senior Vice President, Marketing,
Data Products and Services of the Company since July 1998. Prior to that Mr.
DeAngelo was employed by Sprint as Vice President, Internet Services from
January 1997 to May 1998, as Vice President, Data Voice Product Management from
December 1995 to January 1997 and as Assistant Vice President, Data Service from
January 1993 to December 1995.
Mr. Smith has served as Senior Vice President of IXC Communications since
September 1997 and as General Counsel and Secretary of IXC Communications since
January 1997. He served as Vice President of IXC Communications from January
1997 until September 1997. Prior to that, Mr. Smith served as Vice President
Planning and Development for Times Mirror Training, a subsidiary of Times
Mirror, from August 1994 to December 1996. Prior to that, Mr. Smith was employed
by Times Mirror from 1985 through August 1994, and served in a variety of legal
capacities, including five years as General Counsel to the Baltimore Sun
newspaper, with his last position being Associate General Counsel and Assistant
Secretary. Prior to 1985, Mr. Smith was employed for seven years in private law
practice as a trial and business attorney.
Mr. Tolander has served as Senior Vice President and Chief Information
Officer since April 1998. Prior to that, Mr. Tolander served as Chief
Information Officer for Sprint PCS from January 1996 through March 1998. Mr.
Tolander held various senior information technology positions with Holiday Inn
Worldwide, Inc. from 1991 to 1995 and was with Federal Express Corporation from
1989 to 1991.
Ms. Walden became Senior Vice President, Customer Operations and Corporate
Communications in April 1999. Prior to this she served as Senior Vice President,
Switched and Private Line of IXC Communications since December 1997. Prior to
that, Ms. Walden served as Vice President, Sales and Marketing for AT&T Wireless
(a subsidiary of AT&T Corp.), and its predecessors, including McCaw
Communications, Inc. since September 1989. She has over 15 years of
telecommunications and management experience in marketing, sales, product
development and customer care management.
(PRELIMINARY)
17
<PAGE> 20
COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to: (i) the Chief Executive Officer in fiscal 1998 and (ii) the four most
highly compensated executive officers in fiscal 1998 other than the Chief
Executive Officer (collectively, the "Named Executive Officers") for their
services to the Company for the years ended December 31, 1998, December 31, 1997
and December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ---------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS(#) COMPENSATION
--------------------------- ---- -------- -------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Benjamin L. Scott.............. 1998 $358,852 $225,000 $147,007(1) 94,800 $[74,124](3)
President and Chief Executive 1997 69,000 350,000 3,000(2) 500,000 $ 3,234(4)
Officer 1996 -- -- -- -- --
John R. Fleming................ 1998 222,115 105,628 8,000(2) 22,000 [2,115](5)
President of Emerging Markets 1997 198,911 150,000 8,000(2) -- 14,350(6)
1996 165,519 100,000 7,500(2) -- 14,322(6)
Michael W. Vent................ 1998 225,000 105,000 8,000(2) 197,000 [](6)
President, Network Service 1997 192,377 80,000 8,000(2) 50,000 14,350(6)
1996 137,500 -- 7,200(2) 100,000 12,375(6)
James F. Guthrie............... 1998 250,000 120,000 8,000(2) 37,000 [](6)
Executive Vice President 1997 222,404 125,000 8,000(2) 50,000 182,062(7)
1996 200,000 -- 8,000(2) 342,490 17,842(6)
Leo V. Welsh, Jr. ............. 1998 160,748 100,000 6,000(2) [26,180](8)
President Wholesale 1997 -- -- -- -- --
1996 -- -- -- -- --
</TABLE>
- ---------------
(1) Includes an automobile allowance of $12,000 and $135,000 in connection with
the partial forgiveness of a loan including interest made to Mr. Scott
pursuant to his employment agreement.
(2) These amounts represent automobile allowances paid to the Named Executive
Officers in 1998, 1997 and 1996.
(3) Includes an employer contribution of $[ ] under the 401(k) Plan (as
defined below) and reimbursed relocation expenses of $74,124.
(4) Represents reimbursed relocation expenses.
(5) Includes an employer contribution of $[ ] under the 401(k) Plan and
reimbursed relocation expenses of $2,115.
(6) Represents an employer contribution under the 401(k) Plan.
(7) Includes an employer contribution of $14,350 under the 401(k) Plan and
$167,712 in reimbursed relocation expenses.
(8) Includes an employer contribution of [ ] under the 401(k) Plan and
$26,180 in reimbursed relocation expenses.
EMPLOYMENT AGREEMENTS
IXC Communications entered into an employment agreement with Benjamin L.
Scott for a term of five years beginning October 9, 1997 (the "Commencement
Date") pursuant to which Mr. Scott serves as President and Chief Executive
Officer of IXC Communications. Mr. Scott also became a member of the Board of
Directors on the Commencement Date and in May of 1998 he became the Chairman of
the Board. Pursuant to the terms of his employment agreement, Mr. Scott is
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
(PRELIMINARY)
18
<PAGE> 21
performance goals. Mr. Scott's employment agreement provided for a signing bonus
of $650,000, $350,000 of which was paid to Mr. Scott on the Commencement Date
and $300,000 of which was paid on January 1, 1999. Mr. Scott received a $500,000
loan with a 7% annual interest rate which is due six months after his employment
with the Company terminates. However, 20% of the outstanding balance of the loan
(including any accrued interest) is forgiven on each anniversary of the date of
the employment agreement if Mr. Scott is employed by the Company on such date.
In addition, the loan and any accrued interest is forgiven in its entirety if
Mr. Scott's employment is terminated under certain circumstances or upon a
change of control in the Company's ownership. Mr. Scott was also granted an
option to purchase 500,000 shares of Common Stock at a price of $27.50 per share
(the fair market value of the Common Stock on the date of grant), vesting over a
five-year period in connection with his employment agreement under the Company's
1997 Special Executive Stock Plan which was adopted in September 1997. See
" -- Fiscal Year-End Option Values." Mr. Scott is also entitled to receive
certain severance and relocation benefits as described in his employment
agreement.
Mr. Vent entered into an employment agreement with IXC Communications in
December 1998 for a term of two years. Mr. Vent's employment agreement provides
for an annual base salary of $270,000, subject to adjustment in accordance with
the Company's policies and procedures and an annual bonus based on a percentage
(comparable to other senior executives of the Company) of his base salary. Mr.
Vent's annual bonus is conditioned on Mr. Vent achieving certain performance
goals set by the Board and the Chief Executive Officer of the Company. Mr. Vent
also received a $200,000 loan with a 7% annual interest rate which is due six
months after his employment with the Company terminates. However, 25% of the
outstanding balance of this loan (including any accrued interest) is forgiven on
each anniversary of the date of employment agreement if Mr. Vent is employed by
the Company on such date. In addition, the loan and any accrued interest is
forgiven in its entirety if Mr. Vent's employment is terminated under certain
circumstances or upon a change of control in the Company's ownership. See
" -- Option Grants in Last Fiscal Year" for the number of options granted to Mr.
Vent in 1998 and " -- Fiscal Year-End Option Values" for the total number of
options held by Mr. Vent.
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, the amount of which, if any, is determined by the Board of Directors. Mr.
Guthrie was also granted an option to purchase 242,490 shares of Common Stock at
a price of $3.01 per share vesting over a three-year period which, subject to
certain conditions, vest immediately upon a change of control of IXC
Communications as set forth in his employment agreement and stock option
agreement. Additionally, Mr. Guthrie receives an annual automobile allowance of
$8,000 and received reimbursement of certain relocation costs. Since this
initial grant, Mr. Guthrie was granted additional stock options. See " -- Fiscal
Year-End Option Values" for the total number of options held by Mr. Guthrie. A
renewal of Mr. Guthrie's employment agreement, which expired in December 1998 is
currently being negotiated.
(PRELIMINARY)
19
<PAGE> 22
STOCK OPTIONS
The following table sets forth information concerning each grant of stock
options made during 1998 to each of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SHARES APPRECIATION FOR
UNDERLYING PERCENT OF TOTAL EXERCISE OPTION TERM(1)
OPTIONS OPTIONS GRANTED TO PRICE PER EXPIRATION -----------------------
NAME GRANTED(2) EMPLOYEES IN PERIOD SHARE DATE 5% 10%
---- ---------- ------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Benjamin L. Scott............. 94,800(3) 3.0% $22.000 10/06/08 $1,311,623 $3,323,909
John R. Fleming............... 22,000(3) 0.7% 22.000 10/06/08 304,385 771,371
Michael W. Vent............... 75,000(4) 2.3% 33.000 01/14/08 1,556,514 3,944,513
22,000(3) 0.7% 22.000 10/06/08 304,385 771,371
100,000(5) 3.1% 26.000 12/16/08 1,635,126 4,143,730
James F. Guthrie.............. 37,000(3) 1.2% 22.000 10/06/08 511,920 1,297,306
Leo V. Welsh, Jr. ............ 15,000(6) 4.7% 55.063 03/04/08 5,194,277 13,163,317
22,000(3) 0.7% 22.000 10/06/08 304,385 771,371
</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 the options become immediately exercisable upon the sale of
substantially all of the Company's assets, a successful tender offer for
greater than fifty percent 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 four equal installments beginning on
October 7, 1999, and on the three successive annual anniversary dates
thereafter.
(4) One-fourth of the options became exercisable on January 15, 1999, and
one-fourth of the options will become exercisable on each of the three
successive annual anniversary dates thereafter.
(5) The options become exercisable in four equal installments beginning on
December 17, 1999, and on the three successive annual anniversary dates
thereafter.
(6) One-fourth of the options became exercisable on March 5, 1999, and
one-fourth of the options will become exercisable on each of the three
successive annual anniversary dates thereafter.
(PRELIMINARY)
20
<PAGE> 23
The following table sets forth the number and value as of December 31, 1998
of shares underlying unexercised options held by each of the Named Executive
Officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AS OF OPTIONS AS OF
DECEMBER 31, 1998 DECEMBER 31, 1998(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Benjamin L. Scott............................... 100,000 494,800 $ 612,500 $3,552,050
John R. Fleming................................. -- 22,000 -- 255,750
Michael W. Vent................................. 85,998 284,500 1,845,704 1,863,563
James F. Guthrie................................ 224,160 205,330 5,594,534 3,703,173
Leo V. Welsh, Jr. .............................. -- 22,000 -- 255,750
</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, 1998,
($33 5/8 per share)), less the exercise price payable upon exercise of such
options.
1998 STOCK PLAN
In July 1998, IXC Communications adopted the 1998 Stock Plan covering
3,150,000 shares of Common Stock 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 1998 Stock Plan, subject to
the authority delegated to the Chief Executive Officer and the Administrative
Committee. Subject to certain limitations, in July 1998 the Board of Directors
delegated its authority under the 1998 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 IXC
Communications and other individuals who may be subject to Section 162(m) of the
Code. All grants of stock-based awards in 1998 were made by the Chief Executive
Officer or by the Administrative Committee. See "Proposal 1 -- Election of
Directors -- Committees -- Administrative Committee." Any employee, director or
other person providing services to the Company is eligible to receive awards
under the 1998 Stock Plan, at the discretion of the Board of Directors. Awards
available under the 1998 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.
1996 STOCK PLAN
In May 1996, IXC Communications adopted the 1996 Stock Plan covering
2,121,787 shares of Common Stock 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 made to individuals who are subject to Section 162(m)
of the Code are made by the Administrative Committee. All grants of stock-based
awards in 1997 were made by the Chief Executive Officer or by the Administrative
Committee. See "Proposal 1 -- Election of
Directors -- Committees -- 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, in January 1997 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 Exchange 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
(PRELIMINARY)
21
<PAGE> 24
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.
1994 STOCK PLAN
In November 1994, IXC Communications adopted the 1994 Stock Plan covering
1,212,450 shares of Common Stock 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 made
to individuals who are subject to Section 162(m) of the Code are made by the
Administrative Committee. See "Proposal 1 -- Election of
Directors -- Committees -- Administrative Committee." Subject to certain
limitations, in January 1997 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 Exchange 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 with exercise
prices at least equal to the fair market value of the Common Stock on the date
of grant.
SPECIAL STOCK PLAN
In October 1996, IXC Communications adopted the Special Stock Plan covering
67,900 shares of Common Stock 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 covering
500,000 shares of Common Stock that may be awarded in order to attract, retain
and reward certain key executives. Grants under the Plan are made by the
Administrative Committee. See "Proposal 1 -- Election of Directors --
Committee -- Administrative Committee." Awards available under the 1997 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.
Scott was the only Named Executive Officer granted an option pursuant to the
1997 Stock Plan to acquire stock of IXC Communications in 1997.
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 20 1/2 and
completed six months 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 not
to exceed $9,500 per year for 1999. 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
(PRELIMINARY)
22
<PAGE> 25
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. Furthermore, the Company and another company agreed to
indemnify an individual who serves on the Board of Directors of both entities.
Such indemnification would be for liability relating to a transaction between
the two entities.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee, which was established in June 1996, consisted
of Messrs. Irwin, Bragin and Swett for fiscal 1998. Messrs. Irwin and Bragin
have never been at any time an officer or employee of the Company. Mr. Swett was
an employee of the Company until October 1997. In September 1997 the Board
established the Administrative Committee. In 1998 the Administrative Committee
administers the 1997 Stock Plan and had the authority to make certain grants
under the 1998 Stock Plan, 1996 Stock Plan and the 1994 Stock Plan to
individuals who are subject to Section 162(m) of the Code. See "Proposal
1 -- Election of Directors -- Committees." 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. See the first
paragraph of "Certain Transactions" for more information regarding Mr. McKinzie.
REPORT OF THE COMPENSATION COMMITTEE
REGARDING COMPENSATION
The Compensation Committee is, and was in 1998, comprised of Messrs. Swett,
Irwin and Bragin. Mr. Irwin and Mr. Bragin have never been officers or employees
of the Company. Mr. Swett was an officer of the Company until his retirement in
October 1997. During 1998 the Compensation Committee oversaw the general
compensation policies of the Company and reviewed and approved the
recommendations of the Chief Executive Officer as to the compensation levels for
the other executive officers.
COMPENSATION POLICY
The goal of the Company's executive compensation policy is to provide a
strong and direct link among stockholder values, Company performance and
executive compensation through the design and implementation of sound
compensation programs that will attract and retain highly qualified personnel.
Compensation programs are intended to complement the Company's short- and
long-term business objectives and to focus executive efforts on the fulfillment
of these objectives. The Company's executive compensation policy is (i) designed
to establish an appropriate relationship between executive pay and the Company's
annual performance, its long-term growth objectives and its ability to attract
and retain qualified executive officers and (ii) based on the belief that the
interests of the executives should be closely aligned with those of the
Company's stockholders. The Compensation Committee attempts to achieve these
goals by integrating competitive annual base salaries with (i) annual incentive
bonuses based on individual and corporate performance for such fiscal year and
(ii) stock options issued under the 1994 Stock Plan, 1996 Stock Plan, the 1997
Stock Plan and the 1998 Stock Plan. The Board believes that cash compensation in
the form of salary and performance-based bonuses provides Company executives
with short-term rewards for success in operations, and that long-term
compensation through existing stock ownership and/or the award of stock options
provides Company executives with a stake in the long-term performance and
success of the Company. It should be noted that at April 1, 1999, Mr. Fleming
owned approximately 3.2% of the Common Stock.
Base Salary. In establishing 1998 base salary levels for executive officer
positions in January 1998 (other than for Mr. Scott) the Compensation Committee
approved the base salaries of the executive officers based on: (i) salaries paid
to executive officers with comparable responsibilities employed by companies
with comparable businesses; (ii) individual achievement and accomplishments for
each executive officer for the year ending December 31, 1997 ("fiscal 1997");
(iii) the stockholder value created by each executive officer;
(PRELIMINARY)
23
<PAGE> 26
and (iv) the recommendations of Mr. Scott, which were based on each executive
officer's performance and achievements in 1997 and the responsibilities for each
executive officer in 1998.
Bonuses. The Company's executive officers other than Mr. Scott were
eligible for annual bonuses which were approved by the Compensation Committee
and were based upon recommendations made by Mr. Scott. Mr. Scott's $225,000
bonus in 1998 was determined by the terms of his employment agreement with the
Company. The bonuses paid in early 1998 for performance in 1997 were based on
individual performance and the Company's achievement of certain operating
objectives in 1997. In 1998, bonuses ranging from $50,000 to $120,000 were paid
to the Named Executive Officers other than Mr. Scott for their 1997 performance.
The amounts awarded to the Named Executive Officers (other than Mr. Scott)
in January 1998 were determined principally by the Compensation Committee's and
Mr. Scott's subjective assessment of the individual's contribution to the
Company's overall performance for 1997. Among the objectives achieved in 1997
were the successful completion of the Company's sale of its Convertible
Preferred Stock raising gross proceeds of $100 million, the sale of its
Exchangeable Preferred Stock raising gross proceeds of $300 million, the
successful continuation of the Company's coast-to-coast fiber expansion and
entrance into the data/ Internet business. Consideration also was given to
factors such as the individual's successful completion of special projects,
significant increases or decreases in the level of the executive's
responsibilities and the Compensation Committee's as well as Mr. Scott's
subjective evaluation of the individual's overall efforts and ability to
discharge the responsibilities of his or her position.
Stock Options. The Board of Directors, the Compensation Committee and the
Administrative Committee believe that stock options encourage and reward
effective management, which results in long-term corporate financial success, as
measured by stock-price appreciation. During 1998, stock options under the
Company's 1998 Stock Plan, 1996 Stock Plan and 1997 Stock Plan were granted to
ten persons who were executive officers of the Company. The number of shares of
Common Stock underlying options that each executive officer or employee was
granted in 1998 was based primarily on the executive's or employee's
responsibilities and ability to influence the Company's long-term growth and
profitability. The Board of Directors, the Compensation Committee and the
Administrative Committee believe that stock ownership and/or option grants
afford a desirable long-term compensation method because they closely ally the
interests of management with those of the stockholders. Ownership of the Common
Stock or potential ownership through grants of stock options are believed to be
the best way to motivate executive officers to improve long-term stock market
performance. The vesting provisions of options granted under the stock plans are
designed to encourage longevity of employment with the Company and generally
extend over a four- to five-year period.
COMPENSATION OF CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
The compensation paid to Mr. Scott is determined by his employment
agreement with the Company which was recommended by the Compensation Committee
and approved by the Board of Directors. Mr. Scott was unaffiliated with the
Company prior to the commencement of his employment with the Company on the
Commencement Date. Pursuant to the terms of his employment agreement, Mr. Scott
received $350,000 in annual base salary and a $225,000 bonus in 1998. Mr.
Scott's employment agreement also provided for a signing bonus of $650,000,
$350,000 of which was paid in 1997 and $300,000 of which was paid in January
1999. Mr. Scott was also granted an option to purchase 500,000 shares of Common
Stock at a price of $27.50 per share (the fair market value of the Common Stock
at the date of grant) vesting in equal annual installments over a five-year
period in connection with his employment agreement under the 1997 Stock Plan.
Mr. Scott also received a loan of $500,000 pursuant to his employment agreement.
The loan is forgiven at a rate of 20% per year of employment. Therefore, Mr.
Scott's compensation for 1998 included $135,000 in connection with the partial
forgiveness of his loan. The Compensation Committee and the Board determined
that the compensation payable to Mr. Scott pursuant to the terms of his
employment agreement reflects similar compensation paid to comparable chief
executive officers of comparable business where such chief executive officers
were hired from a former employer. See "Executive Officers, Compensation and
Other Matters -- Employment Agreements" for further details about Mr. Scott's
employment agreement.
(PRELIMINARY)
24
<PAGE> 27
INTERNAL REVENUE CODE SECTION 162(m)
Under Section 162(m) of the Code, the amount of compensation paid to
certain executives that is deductible with respect to the Company's federal
income taxes is limited to $1,000,000 annually unless certain conditions are
satisfied. It is the current policy of the Board to maximize, to the extent
reasonably possible, the Company's ability to obtain a corporate tax deduction
for compensation paid to executive officers of the Company to the extent
consistent with the best interests of the Company and its stockholders. To
facilitate compliance with Section 162(m) of the Code, the Administrative
Committee administers the 1997 Stock Plan in all respects and administers the
grants of stock options under the 1998 Stock Plan, the 1996 Stock Plan and the
1994 Stock Plan to senior executive officers of the Company and other employees
who may be subject to Section 162(m) of the Code. See "Proposal 1 -- Election of
Directors -- Committees -- Administrative Committee."
COMPENSATION COMMITTEE
Wolfe H. Bragin
Richard D. Irwin
Ralph J. Swett
(PRELIMINARY)
25
<PAGE> 28
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns for the
Company, the NASDAQ Stock Market -- U.S. Index and the NASDAQ Telecommunications
Index for the period during which the Company's Common Stock has been registered
under Section 12 of the Exchange Act. The comparison assumes $100 invested on
July 3, 1996 in the Common Stock with the reinvestment of all dividends, if any.
Total stockholder returns for the prior period is not an indication of future
returns.
COMPARISON OF 18 MONTH CUMULATIVE TOTAL RETURN*
AMONG IXC COMMUNICATIONS, INC., THE NASDAQ STOCK MARKET -- U.S. INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
<TABLE>
<CAPTION>
'7/3/96' '12/96' '12/97' '12/98'
-------- ------- ------- -------
<S> <C> <C> <C> <C>
IXC COMMUNICATIONS, INC. 100 192 196 210
NASDAQ STOCK MARKET (U.S.) 100 109 133 188
NASDAQ TELECOMMUNICATIONS 100 94 140 228
</TABLE>
CERTAIN TRANSACTIONS
For the year ended December 31, 1998, the law firm of Riordan & McKinzie,
of which Mr. McKinzie, a director and stockholder of IXC Communications, is a
principal, provided certain legal services to IXC Communications in the amount
of approximately $3.3 million.
GHA, a company whose president is Mr. Irwin, receives an annual fee of
$100,000 from the Company for performing certain advisory services with respect
to the management, operation and business development activities of IXC
Communications.
Culp Communications Associates, of which Mr. Culp is President, received
approximately $32,000 in connection with Mr. Culp's consulting services provided
to the Company in 1998.
In connection with the redemption in April 1998 of substantially all of the
Company's 12 1/2% Senior Notes Due 2005 ("Senior Notes"), Mr. Swett, Mr. Fleming
and GEPT received approximately $299,702, $59,940 and $23,976,620, respectively,
in consideration for their Senior Notes, which amounts included consent
payments.
(PRELIMINARY)
26
<PAGE> 29
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and certain of its officers, and persons who own more than 10% of the
Common Stock (collectively, "Insiders"), to file reports of ownership and
changes in their ownership of Common Stock with the Commission. Insiders are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5s were
required for those persons, the Company believes that its Insiders complied with
all applicable Section 16(a) filing requirements for fiscal 1998, with the
exception of Mr. Tolander, who reported one transaction on his Form 5 for fiscal
1998 which should have been reported on his earlier Form 3.
AUDITORS
The Company has appointed Ernst & Young LLP to continue as the Company's
auditors and to audit the books of account and other records of the Company for
the fiscal year ending December 31, 1998. Ernst & Young LLP served as the
Company's independent public accountants for fiscal 1997. A member of that firm
is expected to be present at the 1999 Annual Meeting, will have an opportunity
to make a statement if so desired, and will be available to respond to
appropriate questions.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the 1999
Annual Meeting. All shares represented by Company proxies will be voted in favor
of the proposals of the Company described herein unless otherwise indicated on
the form of proxy. If any other matters properly come before the meeting,
Company proxy holders will vote thereon according to their best judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the 2000
Annual Meeting and who wishes to have it set forth in the corresponding proxy
statement and identified in the corresponding form of proxy prepared by
management must notify the Company no later than December 10, 1999 in such form
as required under the rules and regulations promulgated by the Commission.
ANNUAL REPORTS
A COPY OF THE 1998 ANNUAL REPORT TO STOCKHOLDERS IS BEING MAILED TO EACH
STOCKHOLDER OF RECORD TOGETHER WITH THIS PROXY STATEMENT. THE 1998 ANNUAL REPORT
TO STOCKHOLDERS INCLUDES THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1998 (THE "1998 FORM 10-K"). THE COMPANY HAS ALSO FILED
ITS 1998 FORM 10-K WITH THE COMMISSION. THIS REPORT CONTAINS INFORMATION
CONCERNING THE COMPANY AND ITS OPERATIONS. A COPY OF THIS REPORT WILL BE
FURNISHED TO STOCKHOLDERS WITHOUT CHARGE UPON REQUEST IN WRITING TO JEFFREY C.
SMITH AT 1122 CAPITAL OF TEXAS HIGHWAY SOUTH, AUSTIN, TEXAS 78746. SUCH REPORTS
ARE NOT A PART OF THE COMPANY'S SOLICITING MATERIAL.
(PRELIMINARY)
27
<PAGE> 30
PROXIES AND SOLICITATION
Proxies for the 1999 Annual Meeting are being solicited by mail directly
and through brokerage and banking institutions. The Company will pay all
expenses in connection with the solicitation of proxies. In addition to the use
of mails, proxies may be solicited by Directors, officers and regular employees
of the Company personally or by telephone. The Company will reimburse banks,
brokers custodians, nominees and fiduciaries for any reasonable expenses in
forwarding proxy materials to beneficial owners.
All stockholders are urged to complete, sign and promptly return the
enclosed proxy card.
By Order of the Board of Directors
[/s/ JEFFREY C. SMITH]
JEFFREY C. SMITH
Secretary
Austin, Texas
April , 1999
(PRELIMINARY)
28
<PAGE> 31
APPENDIX A
FORM OF
FIFTH AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware does hereby certify:
1. That James F. Guthrie is the duly elected and acting Executive Vice
President and Chief Financial Officer of IXC Communications, Inc., a
Delaware corporation (the "Corporation").
2. Article FOURTH of the Restated Certificate of Incorporation of the
Corporation is amended to read in full as follows:
"FOURTH:
A. Classes of Stock.
The Corporation is authorized to issue three classes of stock to be
designated "Common Stock," "Preferred Stock" and "Class B Preferred Stock."
The total number of shares of stock that the Corporation shall have
authority to issue is 320,000,000 consisting of: (i) 300,000,000 shares of
Common Stock, par value $.01 per share; (ii) 3,000,000 shares of Preferred
Stock, par value $.01 per share; and (iii) 17,000,000 shares of Class B
Preferred Stock, par value $.01 per share.
B. Rights, Preferences, Privileges and Restrictions of Preferred
Stock.
The Preferred Stock may be issued at any time, and from time to time,
in one or more series pursuant hereto or to a resolution or resolutions
providing for such issue duly adopted by the board of directors (the
"Board") of the Corporation (authority to do so being hereby expressly
vested in the Board), and such resolution or resolutions shall also set
forth the voting powers, full or limited, or none, of each such series of
Preferred Stock and shall fix the designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of each such series of Preferred Stock.
C. Rights, Preferences, Privileges and Restrictions of Class B
Preferred Stock.
The Class B Preferred Stock may be issued at any time, and from time
to time, in one or more series pursuant hereto or to a resolution or
resolutions providing for such issue duly adopted by the Board. Such
resolution or resolutions shall set forth the voting powers, full or
limited, or none, of each such series of Class B Preferred Stock and shall
fix the number of shares constituting any such series and the designations,
preferences and relative, participating, optional or other special rights
and qualifications, limitations or restrictions of each such series of
Class B Preferred Stock. Subject to the rights of the holders of any series
of Class B Preferred Stock pursuant to the terms of this Restated
Certificate of Incorporation or any resolution or resolutions providing for
the issuance of such series of stock adopted by the Board, the number of
authorized shares of Class B Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote generally in the election of directors
irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware.
3. Article ELEVENTH of the Restated Certificate of Incorporation is
deleted in its entirety.
(PRELIMINARY)
A-1
<PAGE> 32
4. This Fifth Amendment to the Restated Certificate of Incorporation
has been duly adopted and approved in accordance with the applicable
provisions of Sections 228 and 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by James F. Guthrie, its Executive Vice President and Chief Financial
Officer this day of , 1999.
(PRELIMINARY)
A-2
<PAGE> 33
APPENDIX B
FORM OF
SIXTH AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware does hereby certify:
1. That James F. Guthrie is the duly elected and acting Executive Vice
President and Chief Financial Officer of IXC Communications, Inc., a
Delaware corporation (the "Corporation").
2. Article FOURTH of the Restated Certificate of Incorporation of the
Corporation is amended to read in full as follows:
"FOURTH:
A. Classes of Stock.
The Corporation is authorized to issue three classes of stock to be
designated "Common Stock," "Preferred Stock" and "Class B Preferred Stock."
The total number of shares of stock that the Corporation shall have
authority to issue is 320,000,000 consisting of: (i) 300,000,000 shares of
Common Stock, par value $.01 per share; (ii) 3,000,000 shares of Preferred
Stock, par value $.01 per share; and (iii) 17,000,000 shares of Class B
Preferred Stock, par value $.01 per share.
B. Rights, Preferences, Privileges and Restrictions of Preferred
Stock.
The Preferred Stock may be issued at any time, and from time to time,
in one or more series pursuant hereto or to a resolution or resolutions
providing for such issue duly adopted by the board of directors (the
"Board") of the Corporation (authority to do so being hereby expressly
vested in the Board), and such resolution or resolutions shall also set
forth the voting powers, full or limited, or none, of each such series of
Preferred Stock and shall fix the designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of each such series of Preferred Stock.
C. Rights, Preferences, Privileges and Restrictions of Class B
Preferred Stock.
The Class B Preferred Stock may be issued at any time, and from time
to time, in one or more series pursuant hereto or to a resolution or
resolutions providing for such issue duly adopted by the Board. Such
resolution or resolutions shall set forth the voting powers, full or
limited, or none, of each such series of Class B Preferred Stock and shall
fix the number of shares constituting any such series and the designations,
preferences and relative, participating, optional or other special rights
and qualifications, limitations or restrictions of each such series of
Class B Preferred Stock. Subject to the rights of the holders of any series
of Class B Preferred Stock pursuant to the terms of this Restated
Certificate of Incorporation or any resolution or resolutions providing for
the issuance of such series of stock adopted by the Board, the number of
authorized shares of Class B Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote generally in the election of directors
irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware.
Upon the effectiveness of this Sixth Amendment to Restated Certificate
of Incorporation which amends Article FOURTH to read as set forth above,
and without any further action on the part of the
(PRELIMINARY)
B-1
<PAGE> 34
holders thereof, each issued and outstanding share of common stock, par
value $.01 per share, will be reclassified and changed into two shares of
common stock.
3. Article ELEVENTH of the Restated Certificate of Incorporation is
deleted in its entirety.
4. This Sixth Amendment to the Restated Certificate of Incorporation
has been duly adopted and approved in accordance with the applicable
provisions of Sections 228 and 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by James F. Guthrie, its Executive Vice President and Chief Financial
Officer this day of , 1999.
(PRELIMINARY)
B-2
<PAGE> 35
APPENDIX C
1998 STOCK PLAN
1. Purpose. The purpose of the IXC Communications, Inc. 1998 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 its employees, directors, and other persons providing
services to it and, accordingly, to strengthen the mutuality of interests
between those persons and the Company's shareholders by providing those persons
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. 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 of this Plan.
(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 for any day 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 last reported sale price on that day
regular way, or if no such reported sale takes place on that day, the
average of the last reported bid and ask prices on that day 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 regular way on that day
reported on the Nasdaq National Market ("Nasdaq National Market") of the
Nasdaq Stock Market ("NSM") or, if no such reported sale takes place on
that day, the average of the closing bid and ask prices regular way on
that day.
(iii) If not traded or listed on a national securities exchange or
included in the Nasdaq National Market, the last reported sale price on
that day regular way, or if no such reported sale takes place on that
day, the average of the closing bid and ask prices regular way on that
day reported by the NSM, or any comparable system on that day.
(iv) If the Common Stock is not included in (i), (ii) or (iii)
above, the last reported sale price on that day regular way, or if no
such reported sale takes place on that day, the closing bid and ask
prices regular way on that day as furnished by any member of the
National Association of Securities Dealers, Inc. ("NASD") selected from
time to time by the Company for that purpose.
If the national securities exchange, Nasdaq National Market, NSM, or
NASD as applicable, are closed on such date, the "Fair Market Value"
shall be determined as of the last preceding day on which the Common
Stock was traded or for which bid and ask prices are available. In the
case of an
(PRELIMINARY)
C-1
<PAGE> 36
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.
(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 IXC
Communications, Inc.) in an unbroken chain of corporations ending with IXC
Communications, Inc. if each of the corporations (other than IXC
Communications, Inc.) 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 under the Plan.
(o) "Plan" means this IXC Communications, Inc. 1998 Stock Plan, as it
may be amended from time to time.
(p) "Restricted Stock" means shares of Common Stock issued under
Section of this Plan 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,
director, or independent contractor, whether by reason of death,
disability, or any other reason. 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. However, 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 IXC
Communications, Inc., 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 Code Section 424(d)) 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; provided, however, that the Board may administer the Plan for any
grants to Participants who are not subject to Code Section 162(m). 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.
(PRELIMINARY)
C-2
<PAGE> 37
(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 conducted in
accordance with the Company's bylaws; 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 and of this Plan, 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, the
Company and the Plan.
(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 if that would cause such grants to
fail to satisfy Rule 16b-3 under the Exchange Act or Code Section 162(m).
4. Duration of Plan.
(a) This Plan shall be effective as of July 30, 1998, 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.
(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 July 29, 2008, except with respect to
Options then outstanding.
5. Number of Shares.
(a) The aggregate number of shares of Common Stock which may be issued
pursuant to this Plan shall be Three Million One Hundred Fifty Thousand
(3,150,000). Effective [ ], 1999, this amount is increased to
[ ]. The maximum number of shares that may be issued to a single
Participant is Two Hundred Thousand (200,000).
(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.
6. Eligibility.
(a) Persons eligible for Options under this Plan shall consist of
employees, directors, and other persons providing services to the Company.
However, Incentive Stock Options may only be granted to employees.
(b) Notwithstanding anything in this Plan to the contrary, in the
event that the Company acquires another entity, the Committee may authorize
the issuance of Options ("Substitute Options") to individuals or entities
in substitution of stock options previously granted to those individuals or
entities in connection with their performance of services for such acquired
entity upon such terms and conditions as the Committee shall determine but
which shall not be contrary to applicable law, taking into account the
(PRELIMINARY)
C-3
<PAGE> 38
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; provided, however, that in the event a grant of
any Options by the Committee would not be exempt under Section 16b-3 of the
Exchange Act, the Board may grant such Options under this Plan on such
terms and in such form as the Board may approve, which shall not be
otherwise inconsistent with the provisions of this Plan.
(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.
8. Exercise of Options.
(a) Unless otherwise determined by the Board or the Committee, each
Option shall be exercisable in four equal annual installments to begin in
most instances with the start date of a Participant's employment with the
Company and be subject to such other terms and conditions as may be set
forth in the Option. Any Option shall be exercisable following the date of
the Participant's Severance only to the extent (if at all) such Option was
exercisable on the date of Severance.
(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 Section 422 of the
Code. To the extent this limit is exceeded, the surplus shares shall be
treated as acquired upon the exercise of a Non-Qualified Stock Option. For
this purpose, the shares will be taken into account in the order in which
the underlying Options were granted.
(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
(that have been held a sufficient period of time (if any) to avoid
adverse accounting treatment) 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 to 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 the
exercise price of the Option.
9. Restricted Stock.
(PRELIMINARY)
C-4
<PAGE> 39
(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. Similar modifications can be made to grants of Restricted Stock.
(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 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 three (3) months following the Participant's
Severance.
(iv) In the case of any Severance other than one described in
Subparagraphs (ii) or (iii) above, the date that is three (3) months
from the date of the Participant's Severance.
(PRELIMINARY)
C-5
<PAGE> 40
12. Non-transferability of Grants.
(a) No Option under this Plan shall be assignable or transferable
except by will or 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 maximum 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;
(iii) The exercise price per share in respect of each outstanding
Option; and
(iv) The maximum number of shares that may be issued to a single
individual.
(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 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 maximum number of shares of Common Stock that may be
issued under the Plan, except as provided in Section of this Plan.
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 disposition.
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
(PRELIMINARY)
C-6
<PAGE> 41
(ii) Confer upon any Participant the right to continue performing
services for the Company, nor shall it interfere in any way with the
right of the Company to terminate the services 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.
IXC Communications, Inc.,
a Delaware Corporation
By:
Its:
Date:
(PRELIMINARY)
C-7
<PAGE> 42
PROXY ANNEX 1 -- FORM OF PROXY
IXC COMMUNICATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders of IXC Communications, Inc. (the "Company") and the accompanying
Proxy Statement. The undersigned appoints Benjamin L. Scott and James F.
Guthrie, and each of them, proxies with full power of substitution, to vote all
shares of Common Stock of the Company held of record by the undersigned as of
April 12, 1999, the record date with respect to this solicitation, at the Annual
Meeting of Stockholders of the Company to be held at Barton Creek Conference
Center, 8212 Barton Club Drive, Austin, Texas 78735, beginning at 9:00 a.m.,
local time, on Friday, May 28, 1999, and at any adjournments or postponements
thereof, upon the following matters:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. Election of Directors
FOR all nominees listed below WITHHOLD AUTHORITY to vote for all nominees
(except as noted below) listed below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, LINE THROUGH OR
OTHERWISE STRIKE OUT THE NOMINEE'S NAME BELOW.)
<TABLE>
<S> <C> <C> <C>
Benjamin L. Scott Ralph J. Swett Richard D. Irwin Wolfe H. Bragin
Joe C. Culp Carl W. McKinzie Phillip L. Williams
</TABLE>
2. Ratify Board's Decision not to Amend Restated Certificate of Incorporation
and Effect Stock Split in 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Amendment of Restated Certificate of Incorporation for Increase in Common
Stock, New Class of Preferred Stock and Deletion of References to Preferred
Stock no Longer Outstanding
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Amendment of Restated Certificate of Incorporation to Approve Stock Split at
Board's Discretion
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(PRELIMINARY)
<PAGE> 43
5. Amendment of 1998 Stock Plan to Increase the Number of Shares of Common Stock
Available for Option Grants
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Other Matters
In their discretion, Benjamin L. Scott and James F. Guthrie are authorized to
vote upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
THE NOMINEES NAMED IN PROPOSAL 1 ABOVE AND IN FAVOR OF PROPOSALS 2, 3 AND 4. IF
ANY NOMINEE DECLINES OR IS UNABLE TO SERVE AS A DIRECTOR, THEN THE PERSONS NAMED
AS PROXIES SHALL HAVE FULL DISCRETION TO VOTE FOR ANY OTHER PERSON DESIGNATED BY
THE BOARD OF DIRECTORS.
Dated , 1999
-------------------------
(Signature)
-------------------------
(Signature)
Please sign exactly as
your name appears hereon.
Joint owners should each
sign. When signing as
attorney, executor,
administrator, trustee,
guardian or corporate
officer, please give full
title as such.
The signer hereby revokes
all prior proxies given
by the signer to vote at
the 1999 Annual Meeting
or any adjournments
thereof.
(PRELIMINARY)
