<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
IXNET, 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:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
DEAR STOCKHOLDER,
You are cordially invited to attend the Annual Meeting of Stockholders on
Thursday, March 2, 2000 at 2:00 p.m. at the Citicorp Center, 153 East 53rd
Street, 14th Floor, Room J, New York, New York.
At this year's Annual Meeting, you will be asked to vote for the election of
nine directors, each to hold office until the next annual meeting or until their
successors have been elected and qualified, the approval of an amendment to
increase by 2,000,000 the shares reserved for the IXnet, Inc. 1999 Stock Option
Plan and the ratification of the appointment of PricewaterhouseCoopers LLP as
independent auditors for the fiscal year ending September 30, 2000.
Please take the time to read carefully each of the proposals for stockholder
action described in the proxy materials.
Thank you for your support of our Company.
Very truly yours,
<TABLE>
<S> <C>
[/S/ RICHARD W. SMITH] [/S/ DAVID A. WALSH]
Richard W. Smith David A. Walsh
CHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER
</TABLE>
PLEASE VOTE BY USING THE INTERNET,
THE TELEPHONE OR BY SIGNING, DATING, AND RETURNING
THE ENCLOSED PROXY CARD
<PAGE>
IXNET, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 2, 2000
------------------------
TO THE STOCKHOLDERS OF
IXNET, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
IXnet, Inc. ("IXnet" or the "Company") will be held on Thursday, March 2, 2000
at 2:00 p.m., New York City time, at the Citicorp Center, 153 East 53rd Street,
14th Floor, Room J, New York, New York for the following purposes:
1. To elect nine directors, each to hold office until the next annual
meeting or until their successors have been elected and qualified.
2. To approve an amendment to increase by 2,000,000 the shares reserved for
the IXnet, Inc. 1999 Stock Option Plan.
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending September 30, 2000.
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof. Except with respect
to procedural matters incident to the conduct of the Annual Meeting,
management of the Company is not aware of any other matters which may
properly come before the Annual Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on January 28, 2000 are
entitled to notice of and to vote at the Annual Meeting and at any adjournment
or postponement thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. REGISTERED
STOCKHOLDERS (THOSE WHO HOLD SHARES DIRECTLY OR THROUGH COMPANY PLANS RATHER
THAN THROUGH A BANK OR BROKER) MAY VOTE THEIR SHARES VIA THE INTERNET OR BY
USING A TOLL-FREE TELEPHONE NUMBER. IN-
STRUCTIONS FOR USING THESE ELECTRONIC SERVICES ARE PROVIDED ON THE PROXY CARD.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE ANNUAL MEETING PLEASE VOTE VIA THE INTERNET, BY USING THE
TELEPHONE OR BY SIGNING, DATING AND RETURNING THE ENCLOSED PROXY IN THE
POSTAGE-PREPAID ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON AT THE ANNUAL MEETING. ANY PROXY
GIVEN MAY BE REVOKED BY YOU IN WRITING AT ANY TIME PRIOR TO OR AT THE ANNUAL
MEETING.
By Order of the Board of Directors,
[/S/ ALEXANDER RUSSO]
Alexander Russo
SENIOR VICE PRESIDENT--BUSINESS &
LEGAL AFFAIRS
New York, New York
February 4, 2000
<PAGE>
[LOGO]
IXNET, INC.
WALL STREET PLAZA
88 PINE STREET
6TH FLOOR
NEW YORK, NEW YORK 10005
212-412-6400
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 2, 2000
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
IXnet, Inc. ("IXnet" or the "Company") for use at the Annual Meeting of
Stockholders to be held on Thursday, March 2, 2000 at 2:00 p.m., New York City
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth therein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at the Citicorp Center, 153 East 53rd Street,
14th Floor, Room J, New York, New York.
IXnet, Inc. became the holding company for International Exchange Networks,
Ltd. on May 4, 1999. Accordingly, unless otherwise indicated, all references in
this Proxy Statement to "IXnet" or to the "Company" refer to International
Exchange Networks, Ltd. for periods through May 4, 1999 and to IXnet and its
subsidiaries, including International Exchange Networks, Ltd., for periods
thereafter.
The proxy solicitation materials were mailed on or about February 4, 2000 to
all stockholders entitled to vote at the Annual Meeting. All properly executed
proxies received in time for the Annual Meeting and not revoked will be voted as
specified. If no instructions are specified, a properly executed proxy will be
voted for each of the nominees for election as directors, for the approval of an
amendment to increase by 2,000,000 the shares reserved for the IXnet, Inc. 1999
Stock Option Plan and for the ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors of the Company for the fiscal
year ending September 30, 2000.
If any other matters are properly presented for consideration at the Annual
Meeting, the persons named in the enclosed proxy card and acting thereunder, or
their duly constituted substitutes acting at the Annual Meeting, will have
discretion to vote on such matters in accordance with their judgment.
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on January 28, 2000
(the "Record Date") are entitled to notice of the Annual Meeting and to vote at
the Annual Meeting. As of the Record Date, 51,103,160 shares of the Company's
Common Stock, par value one cent ($0.01) per share (the "Common Stock"), were
issued and outstanding. Each stockholder is entitled to one vote for each share
held. See "Security Ownership of Certain Beneficial Owners and Management" below
for information regarding beneficial owners of more than five percent of the
Company's Common Stock.
<PAGE>
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by taking one of the following three
actions: (i) by delivering written notice of the revocation to the Secretary of
the Company; (ii) by executing a later-voted proxy via the Internet, by the
telephone or by the mail; or (iii) by attending and voting at the Annual Meeting
or any adjournment or postponement thereof if a written revocation is filed with
the Secretary of the Annual Meeting prior to the voting of such proxies. Proxies
solicited hereby may be exercised only at the Annual Meeting and any adjournment
thereof and will not be used for any other meeting.
VOTING AND SOLICITATION
The required quorum for the Annual Meeting, which must be represented in
person or by proxy, is a majority of the outstanding shares of Common Stock on
the Record Date. All votes will be tabulated by the inspector of election
appointed by the Board of Directors of the Company for the Annual Meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes. Abstentions will be counted towards the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes, whereas broker non-votes are not counted for any purpose. The
vote required for each proposal is set forth in the discussion of such proposal.
IPC COMMUNICATIONS, INC., WHICH IN THE AGGREGATE BENEFICIALLY OWNS 84.3% OF
THE VOTING POWER OF THE COMPANY, INTENDS TO VOTE IN FAVOR OF PROPOSALS 1, 2 AND
3. ACCORDINGLY, APPROVAL OF PROPOSALS 1, 2 AND 3 IS ASSURED.
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders, as well as any
associated costs of voting via the Internet or telephone. Copies of solicitation
material will be furnished to banks, brokerage firms, fiduciaries and custodians
holding in their names shares of Common Stock beneficially owned by others to
forward to such beneficial owners. In addition, the Company may reimburse
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners.
ELECTRONIC VOTING
Registered stockholders (those who hold shares directly or through Company
plans rather than a bank or broker) can simplify their voting and save the
Company expense by calling 1-800-840-1208 or voting via the Internet at
http://www. eproxy.com/EXNT. Information pertaining to Internet voting and
telephone voting is provided on the proxy card. A Control Number is designed to
verify stockholders' identities and allow them to vote their shares and confirm
that their voting instructions have been properly recorded. The Control Number
is located in the box in the lower right hand corner of the proxy card.
Stockholders that do not choose to vote via the Internet or by using the
telephone may still return their proxy card, properly signed, and the shares
represented will be voted in accordance with the stockholder's directions.
Stockholders whose shares are held in the name of a bank or broker should follow
the voting instructions on the form you receive. Although most banks and brokers
now offer telephone and Internet voting, availability and specific processes
will depend on their voting arrangements.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Stockholders are being asked to approve an amendment to the IXnet, Inc. 1999
Stock Option Plan (the "Stock Option Plan") to authorize an increase in the
number of shares reserved for issuance upon exercise of stock options. If
approved, this amendment will increase the total number of stock options that
may be granted to officers, employees, consultants and directors. Accordingly
all of the directors and
2
<PAGE>
executive officers of the Company, each of whom is eligible for option grants
under the Stock Option Plan, may be deemed to have an interest in this proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BY MANAGEMENT
The following table sets forth certain information, as of October 31, 1999,
or as of a date specified in the footnotes below, as the case may be, with
respect to the beneficial ownership of Common Stock, the stock of IPC
Communications, Inc. ("IPC") and the stock of any of the Company's subsidiaries
by: (i) each director; (ii)(a) the Company's Chief Executive Officer and
(b) each of the other four most highly compensated executive officers of the
Company who were serving as executive officers at the end of the last completed
fiscal year and whose aggregate salary plus bonus for the fiscal year ended
September 30, 1999 was at least $100,000 (collectively, the "Named Executive
Officers"); and (iii) all executive officers and directors as a group.
Except as otherwise noted, the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable.
Unless otherwise indicated, the address for each stockholder listed below is c/o
IXnet, Inc., 88 Pine Street, 6th Floor, New York, New York 10005. All share
information is based on shares of Common Stock outstanding as of January 28,
2000.
<TABLE>
<CAPTION>
(C) (D)
AMOUNT AND EXERCISABLE (E)
(B) NATURE OF STOCK OPTIONS APPROXIMATE
(A) TITLE AND BENEFICIAL INCLUDED IN PERCENT OF
NAME OF BENEFICIAL OWNER CLASS OF SECURITY OWNERSHIP(1) COLUMN (C)(2) CLASS(3)
------------------------ -------------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Charles F. Auster.......... Company Common Stock 4,000(4) 0 *
IPC Common Stock 115,968(5)(6) 82,829 1.32%
Richard M. Cashin, Jr...... Company Common Stock 0 -- --
IPC Common Stock 119,055 0 1.36%
Douglas T. Hickey.......... Company Common Stock 0 -- --
IPC Common Stock 0 -- --
Douglas J. Mello........... Company Common Stock 0 -- --
IPC Common Stock 500 0 *
Paul Pluschkell, Jr........ Company Common Stock 0 -- --
IPC Common Stock 9,250 9,250 *
Anthony M. Servidio........ Company Common Stock 1,300(7) 0 *
IPC Common Stock 174,730(5)(8) 0 1.99%
John T. Sharkey............ Company Common Stock 40,000 0 *
IPC Common Stock 0 -- --
Richard W. Smith........... Company Common Stock 0 -- --
IPC Common Stock 381,904(9) 0 4.34%
Gerald E. Starr............ Company Common Stock 3,000(10) 0 *
IPC Common Stock 92,352 82,829 1.05%
David A. Walsh............. Company Common Stock 1,763,352 1,763,352 3.45%
IPC Common Stock 446,798(5)(11) 175,181 5.08%
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
(C) (D)
AMOUNT AND EXERCISABLE (E)
(B) NATURE OF STOCK OPTIONS APPROXIMATE
(A) TITLE AND BENEFICIAL INCLUDED IN PERCENT OF
NAME OF BENEFICIAL OWNER CLASS OF SECURITY OWNERSHIP(1) COLUMN (C)(2) CLASS(3)
------------------------ -------------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Peter A. Woog.............. Company Common Stock 500(12) 0 *
IPC Common Stock 47,489(5)(13) 0 *
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
All executive officers and
directors as a group
(20 persons)............... Company Common Stock 1,826,152 1,763,352 3.57%
IPC Common Stock 1,540,672 483,469 17.52%
</TABLE>
- ------------------------
(1) Based upon information supplied by officers and directors and filings under
Sections 13 and 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(2) The figures in this column represent the number of shares which the
individual and group could have acquired upon exercise of stock options
granted under the Company Stock Option Plan or the IPC Stock Incentive Plan
that, as of October 31, 1999, were exercisable or were expected to become
exercisable within 60 days.
(3) For the Company, ownership is based on 51,103,160 shares of Common Stock
outstanding on January 28, 2000. For IPC, ownership is based on 8,797,743
shares of IPC Common Stock outstanding on January 28, 2000. The percentages
also include, in the case of each individual and the group, the additional
number of shares listed in column (d).
(4) Includes 3,000 shares owned by spouse and 1,000 shares owned by minor
children.
(5) Cable Systems Holding, LLC, Cable Systems International, Inc., Allegra
Capital Partners III, L.P., Richard P. Kleinknecht, David A. Walsh,
Anthony M. Servidio and Charles F. Auster are parties to an Investors
Agreement (the "Investors Agreement"), which contains provisions concerning
the voting and transfer of shares of Common Stock of IPC Communications.
Under applicable SEC rules, this group of investors may be deemed to
beneficially own more than 5% of IPC's Common Stock. Mr. Smith, our
Chairman of the Board, is a general partner of Allegra. Mr. Kleinknecht is
the Vice Chairman and a director of IPC Communications. Peter D. Woog is a
member of Cable Systems Holdings, LLC.
(6) Includes 3,000 shares owned by Mr. Auster and his spouse and 300 shares
owned by his minor children. Does not include 6,413,216 shares owned, as of
August 12, 1999, by other signatories of the Investors Agreement.
(7) Includes 1,300 shares owned by his children.
(8) Does not include 6,258,802 shares owned, as of August 12, 1999, by other
signatories of the Investors Agreement.
(9) Includes 381,904 shares beneficially owned by Allegra Capital
Partners III, L.P., of which Mr. Smith is a general partner. Mr. Smith has
shared voting and investment power over all 381,904 shares. Does not
include 6,051,628 shares, as of August 12, 1999, owned by other signatories
of the Investors Agreement.
(10) Held in trust for the benefit of minor children. Mr. Starr has shared
voting and investment power with respect to all of these shares.
(11) Does not include 6,171,438 shares owned, as of August 12, 1999, by other
signatories to the Investors Agreement.
4
<PAGE>
(12) Mr. Woog has shared voting and investment power over all 500 shares owned
by his children.
(13) Includes 1,000 shares over which Mr. Woog has sole investment and voting
power and 46,489 shares over which Mr. Woog has shared investment and
voting power. The 46,489 shares over which Mr. Woog has shared investment
and voting power include 3,000 shares held jointly by Peter A. Woog and
Helene S. Woog and 43,489 shares held in the name of the Woog Family
Limited Partnership.
BY OTHERS
The following table sets forth certain information, as of January 28, 2000,
with respect to the beneficial ownership of Common Stock by each person known by
the Company to own beneficially more than 5% of its outstanding shares of Common
Stock. Unless indicated otherwise, each person listed has sole voting and
investment power over the shares beneficially owned.
<TABLE>
<CAPTION>
(A) (B) (C)
NAME AND ADDRESS OF AMOUNT & NATURE OF APPROXIMATE PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
- ------------------- -------------------- -------------------
<S> <C> <C>
IPC Communications, Inc. ................ 43,100,000 84.3%
Wall Street Plaza
88 Pine Street
15th Floor
New York, New York 10005
</TABLE>
- ------------------------
(1) Percentage of ownership is based on 51,103,160 shares of Common Stock
outstanding on January 28, 2000.
LEGAL PROCEEDINGS
There are no legal proceedings to which any director, officer or affiliate
of the Company, any owner of record or beneficially of more than five percent of
Common Stock, or any associate of any such director, officer, affiliate of the
Company or security holder is a party adverse to the Company or any of its
subsidiaries or has a material interest adverse to the Company or any of its
subsidiaries.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
The Company proposes to elect nine directors at the Annual Meeting, each to
hold office until the next annual meeting or until their successors have been
elected and qualified. It is the intention of the persons named in the enclosed
proxy, unless authorization to do so is withheld, to vote the proxies received
by them for the election of the nominees named below. If prior to the Annual
Meeting any of the nominees should become unavailable for election, an event
which is not now anticipated by the Board, the proxies would be voted for the
election of such substitute nominee as the Board of Directors may propose. Each
person nominated for election has agreed to serve if elected, and management has
no reason to believe that any nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Annual Meeting. Stockholders
may not vote their shares cumulatively in the election of directors.
5
<PAGE>
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE(4) POSITION SINCE
- ---- -------- ------------------------------------------- --------
<S> <C> <C> <C>
Richard W. Smith(1)(2)(3)......... 47 Chairman of the Board and Director 1999
David A. Walsh(3)................. 38 Chief Executive Officer and Director 1999
Gerald E. Starr................... 46 President and Director 1999
Charles F. Auster................. 48 Executive Vice President, Chief Operating 1999
Officer and Director
Richard M. Cashin, Jr.(2)(3)...... 46 Director 1999
Douglas T. Hickey(1)(2)........... 44 Director 1999
Douglas J. Mello.................. 57 Director 1999
John T. Sharkey................... 63 Director 1999
Peter A. Woog(1).................. 57 Director 1999
</TABLE>
- ------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of Executive Committee
(4) As of January 28, 2000.
Set forth below is biographical information for the persons nominated.
RICHARD W. SMITH has served as the Company's Chairman of the Board and a
director since May 1999. He has served as an individual general partner of the
general partners of Allegra Capital Partners III, L.P. since May 1995, of
Lawrence, Tyrrell, Ortale & Smith, L.P. since December 1985 and of Lawrence,
Tyrrell, Ortale & Smith II, L.P. since July 1990. He is also Chairman of the
Board and a director of IPC and several private companies. He has participated
in the private equity industry since 1979 and was formerly employed by Citicorp
Venture Capital, Ltd.
DAVID A. WALSH has served as the Company's Chief Executive Officer and a
director since May 1999. Mr. Walsh has also served as an Executive Vice
President and a director of IPC since May 1998. Mr. Walsh served as president of
International Exchange Networks, Ltd. from its founding in 1993 until May 1999.
In addition, Mr. Walsh has served as a technology consultant to the New York
Commodities Exchange and has been employed by Garban/Gavin Guybutler and Drexel
Burnham Lambert Trading Corporation.
GERALD E. STARR has served as the Company's President and a director since
May 1999. Mr. Starr has also served as Chief Executive Officer, President and a
director of IPC since December 1998. From January 1997 until December 1998, he
was IPC's Executive Vice President, Turret Systems and from February 1996 to
January 1997 he was IPC's Vice President of Manufacturing and Engineering. Since
April 1995, Mr. Starr has also served as President of IPC Bridge, Inc., a
wholly-owned subsidiary of IPC, which acquired the assets of Bridge
Electronics, Inc. in April 1995. Mr. Starr founded Bridge Electronics, Inc. in
1987 and built it into a leading provider of digital open line speaker systems
to the foreign exchange trading industry. Mr. Starr was the President and a
director of Bridge Electronics, Inc. from its founding until it ended its
operations in April 1995. Previously, Mr. Starr founded Turret Equipment
Corporation in 1980 and sold it to Tie Communications in 1984, where he remained
until 1990.
CHARLES F. AUSTER has served as the Company's Executive Vice President and
Chief Operating Officer and has been a director since May 1999. Mr. Auster was a
founding beneficial stockholder of International Exchange Networks, Ltd., and
from February 1994 to June 1995, Mr. Auster served as the
6
<PAGE>
International Exchange Networks, Ltd.'s Executive Vice President of Finance and
Operations and a director. From December 1995 until he negotiated the sale of
Voyager Networks, Inc. to GlobalCenter, in February 1998, he served as its
President and Chief Executive Officer and as one of its directors. From
September 1991 to March 1993, he served as Executive Vice President and a
director of Ameritrade, Inc., a Washington-based trade and investment banking
firm. Mr. Auster is a director of American Utilicraft, a design and
manufacturing aircraft company, Lucent Digital Video, an internal venture of
Lucent Corp., and several charitable organizations. Mr. Auster is a member of
the District of Columbia Bar and the Virginia Bar.
RICHARD M. CASHIN, JR. has served as a director of the Company since May
1999. Mr. Cashin has been employed by Citicorp Venture Capital, Ltd. since
September 1980 and has been its President since December 1994. Mr. Cashin is
also a director of IPC. In addition, Mr. Cashin is a director of Cable Systems
International, Inc., Delco Remy international, Levitz Furniture Incorporated,
Lifestyle Furnishings International, Ltd., Euromax International plc, Fairchild
Semiconductor, Freedom Forge, Gerber Children's Wear, Hoover Group, MSX
International, Inc., Thermal Engineering International Corporation, Delta
Terminal Services, Inc., FFC Holding, Inc. and Titan Wheel International.
DOUGLAS T. HICKEY has served as a director since May 1999. Mr. Hickey has
served as President and Chief Executive Officer and a director of Critical
Path Inc. since October 1998. From February 1998 to October 1998, Mr. Hickey
served as Executive Vice President of Frontier Corporation, a telecommunications
company, and as President of Frontier GlobalCenter. From July 1996 to February
1998, Mr. Hickey served as President and Chief Executive Officer of
GlobalCenter, Inc., a web hosting company. In February 1998, GlobalCenter was
acquired by Frontier. From December 1994 to July 1996, Mr. Hickey was President
of Internet services at MFS Communications, a provider of high-speed fiber-optic
services. From September 1990 to November 1994, Mr. Hickey was general manager
of North American sales and field operations at Ardis, a Motorola company.
DOUGLAS J. MELLO has served as a director since May 1999. Mr. Mello was
employed by Bell Atlantic, and its predecessor corporations, from 1965 to March
1999. He served as President, Large Business Sales--North of Bell Atlantic from
August 1997 to March 1999. From March 1996 to August 1997, he was NYNEX Vice
President--Business Marketing & Sales, responsible for all business customers in
the New York and New England areas. From January 1994 to March 1996, he served
as Vice President--Sales for NYNEX Corporation. Prior to 1994, Mr. Mello was the
Group Vice President--Manhattan Market Area for New York Telephone, where he was
responsible for the provisioning of telecommunications technology. From 1985 to
1991, Mr. Mello was President of Business Information Systems Corp. Mr. Mello is
a director of Telexis Co. and Netrix Corporation.
JOHN T. SHARKEY has served as a director since May 1999. Mr. Sharkey served
in various positions with MCI WorldCom, including Vice President, from
June 1986 to April 1999. He was responsible for assisting in the design and
implementation of their corporate large account program. From May 1984 to
June 1986, he was Regional Director of Major Accounts at Southern New England
Telephone. From December 1982 to March 1984, Mr. Sharkey was Vice President of
National Accounts with Optimum System, Inc., a Silicon Valley start up
voice-messaging company. Prior to December 1982, Mr. Sharkey held positions with
General Electric Company and ROLM Corporation. Mr. Sharkey is a director of
Mutual of America Institutional Funds and several charitable organizations.
PETER A. WOOG has served as a director since May 1999. Mr. Woog is also a
director of IPC and its former Chairman of the Board. Mr. Woog served as a
director, President and Chief Executive Officer of Cable Systems International
and Cable Systems Holding Company from October 1995 until June 1999. From
May 1989 to October 1995, Mr. Woog was AT&T's Copper Cable Products Vice
President, responsible for the copper cable products business unit. He is
currently the manager of Cable Systems Holding, LLC, a director of CreaMiser
Products Corporation, a director of gComData, Inc., a director of Banner Health
Systems--Arizona and a trustee of the Arizona Science Center.
7
<PAGE>
IPC COMMUNICATIONS, INC., WHICH IN THE AGGREGATE BENEFICIALLY OWNS 84.3% OF
THE VOTING POWER OF THE COMPANY, INTENDS TO VOTE IN FAVOR OF PROPOSAL 1.
ACCORDINGLY, APPROVAL OF PROPOSAL 1 IS ASSURED.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE NOMINEES FOR ELECTION AS DIRECTORS
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors maintains standing Audit, Compensation and
Executive Committees. The Company's Executive Committee was formed on
December 9, 1999. During fiscal 1999, the Company's Board of Directors met in
person or by teleconference on four occasions and the Company's Compensation
Committee met one time. Each director attended, in person or by telephone, not
less than 75% of the meetings of the Board of Directors and the committees of
which he was a member.
The Audit Committee reviews with the Company's management and independent
auditors the financial statements and internal financial reporting system and
controls of the Company, reports to the Board of Directors on the results of its
examination and makes recommendations to the Board of Directors regarding the
employment of accountants and independent auditors. As of the date of this Proxy
Statement, the members of the Company's Audit Committee are Richard W. Smith,
Douglas T. Hickey and Peter A. Woog.
The Compensation Committee oversees the development, implementation and
conduct of the Company's employment and personnel practices, including the
administration of the Company's compensation and benefit programs. The
Compensation Committee also makes recommendations to the Board of Directors
concerning executive officers' compensation and the granting of stock options.
As of the date of this Proxy Statement, the members of Compensation Committee
are Richard W. Smith, Richard M. Cashin, Jr. and Douglas T. Hickey.
The Executive Committee has the power and authority of the Board of
Directors to act in accordance with, and subject to, Section 141(c)(1) of the
Delaware General Corporation Law. As of the date of this Proxy Statement, the
members of the Executive Committee are Richard W. Smith, David A. Walsh and
Richard M. Cashin, Jr.
DIRECTORS' COMPENSATION
The Company pays each of its non-employee directors a retainer of $20,000
for each fiscal year in which they served as a director. The Company pays this
retainer only to its non-employee directors who attended at least 75% of the
total number of meetings of the Board of Directors held in that fiscal year. The
Company has also granted options to purchase 79,351 shares of Common Stock to
each of its non-employee directors under the Stock Option Plan. For additional
information about the Stock Option Plan, please refer to the discussion under
the caption "Stock Option Grants". For the purposes of director compensation,
Messrs. Douglas T. Hickey, Douglas J. Mello, John T. Sharkey, Richard W. Smith,
Richard M. Cashin, Jr. and Peter A. Woog, are considered non-employee directors.
Mr. Richard W. Smith and Mr. Richard M. Cashin, Jr. have elected not to receive
the cash retainer. The Company does not pay additional compensation for service
as a member or as the chairman of a board committee.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
During fiscal 1999, the Compensation Committee consisted of Richard W.
Smith, Richard M. Cashin, Jr. and Douglas T. Hickey. Richard W. Smith serves as
Chairman of the Board and a director of the Company and of IPC. Neither Richard
M. Cashin nor Douglas T. Hickey was an officer or employee of the Company or any
of its subsidiaries during fiscal 1999 or during any prior fiscal year.
Other than Richard W. Smith, David A. Walsh, Gerald E. Starr and James M.
Demitrieus, none of the Company's executive officers served as a director or
member of the compensation committee (or
8
<PAGE>
equivalent body) of another entity of which any director of the Company or a
member of the Company's Compensation Committee was an executive officer.
EXECUTIVE COMPENSATION
The following table provides information about the compensation earned by
the Company's Named Executive Officers, including compensation earned from IPC:
SUMMARY COMPENSATION TABLE*
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- --------------------------------
OTHER SECURITIES
ANNUAL UNDERLYING
SALARY COMPENSATION OPTIONS/SARS ALL OTHER
NAME AND ($) BONUS ($) (#) COMPENSATION
PRINCIPAL POSITION YEAR (1) ($) (2) (3) ($)
------------------ -------- -------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David A. Walsh...................... 1999 242,107 206,250(4) 7,000(5) 1,763,352 --
Chief Executive Officer 1998 199,423 281,250(4) 44,745(6) 184,704 195,000(7)
1997 190,000 -- -- --
Gerald E. Starr..................... 1999 277,473 354,083(4) 10,509(5) 337,976 4,800(7)
President 1998 238,269 484,750 11,319(5) 92,352 283,750(7)
1997 217,789 28,325 11,700(5) 40,000 3,200
Paul Pluschkell, Jr................. 1999 150,000 243,000(8) 91,250(9) 252,593 --
Senior Vice President and 1998 92,308 207,000(4) 16,250 -- --
Chief Strategic Technology Officer 1997 -- -- -- -- --
Charles F. Auster................... 1999 199,308 115,000 -- 290,953 --
Executive Vice President and Chief 1998 75,000(10) 48,750(2)(10) -- 92,352 37,687(7)
Operating Officer(10) 1997 -- -- -- -- --
Anthony M. Servidio................. 1999 190,000 76,500(4) 136,301(11) 103,450 4,800(7)
Senior Vice President, Sales 1998 190,000 195,833(4) 44,745(6) -- 136,252(7)
1997 -- -- -- -- --
Brian L. Reach...................... 1999 202,976 136,000(4) 7,700(5) 60,836(11) 4,800(7)
Former Senior Vice President, 1998 186,153 370,000(4) 8,400(5) 92,352 4,800(7)
Finance and Chief Financial 1997 58,462 23,100 2,000(5) -- 2,000(7)
Officer(12)
</TABLE>
- ------------------------------
* The Named Executive Officers listed are the four most highly compensated
executive officers of the Company who were serving as executive officers at
the end of this last completed fiscal year and, therefore, do not include
recently named executive officers whose annual compensation may have been
greater than the listed Named Executive Officers' compensation had these
recently named executive officers served as officers of the Company for
longer periods of time.
(1) Includes any pre-tax deferrals made under the IPC 401(k) plan with respect
to the year ended September 30, 1999.
(2) Column does not include certain perquisites and other personal benefits,
securities or property where the aggregate value does not exceed the lesser
of $50,000 or 10% of the officer's salary and bonus.
(3) Column reflects options granted under the Company's 1999 Stock Option Plan
with an exercise price of $13.96 per share to purchase shares of Common
Stock, unless otherwise noted.
(4) The cash bonus payments include, except for Mr. Servidio, cash bonus
payments awarded under the IPC Information Systems Management Performance
Plan. They also include portions of the cash payments made in connection
with the successful completion of IPC's recapitalization transaction to
Messrs. Walsh and Servidio of $150,000 each and Mr. Reach of $60,000. In
addition, in connection with IPC's recapitalization transaction, Mr. Reach
received a payment of $204,000 in lieu of a stock option grant by IPC. The
cash payments made to Mr. Servidio include the minimum guaranteed
commission payments required to be made to him under to his employment
agreement.
(5) Consists of payments for automobile allowance.
(6) Includes $44,745 paid by us on behalf of Messrs. Walsh and Servidio for
legal fees incurred by them in connection with the negotiation of their
employment agreements and with respect to other IXnet related matters.
These amounts also include a tax gross-up payment made by us to each
officer in respect of the payment of these legal fees.
(7) Includes cash payments made in connection with IPC's recapitalization
transaction to settle outstanding stock option grants made under the IPC
Information Systems, Inc. 1994 Stock Option Plan in the following amounts:
for Mr. Walsh, $195,000 and for Mr. Servidio, $130,000. Also includes
(a) amounts paid by IXnet as matching and/or profit sharing contributions
to the 401(k) Plan; (b) a $1,500 cash payment made to Mr. Servidio for a
successful employee referral; and (c) a consulting fee totaling $37,687
paid to Mr. Auster.
(8) Includes cash payments of $208,000 made in connection with the acquisition
of MXNet, Inc.
9
<PAGE>
(9) Guaranteed commission payments made in connection with the MXNet
acquisition.
(10) Mr. Auster became an executive officer in May 1998. His compensation for
fiscal 1998, including a proportionally-allocated bonus, reflects the
period from May until September 1998. For the year ended September 30,
1998, Mr. Auster's compensation, on an annualized basis, would have been
$210,000 plus a bonus equal to an additional 50% of his salary.
(11) Commission payments made during 1999, of which $110,000 are guaranteed
commission payments.
(12) Brian L. Reach resigned as an officer of the Company effective August 31,
1999. The compensation reported for Mr. Reach includes compensation for
services to IPC. For the years ended September 30, 1998 and 1997, 20% and
12% respectively, of Mr. Reach's compensation was allocated to us for
services he performed as our Chief Financial Officer. His compensation is
charged to us according to the allocation of indirect general and
administrative expenses by IPC and may not reflect the actual portion of
his time spent acting as our Chief Financial Officer. Mr. Reach's
compensation for the year ended September 30, 1997, reflects a partial
year because he joined IPC and IXnet during that year. All options granted
to Mr. Reach were cancelled upon his resignation on August 31, 1999.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The duties of the Compensation Committee (the "Committee") include approval
of salary and other compensation arrangements for the Company's executive
officers.
The Company has established a compensation philosophy around the principle
of having compensation reflect and reinforce the Company's strategic and
operational goals and enhance long-term stockholder value. The Company's
philosophy is to:
- Set compensation levels to attract, retain, reward and motivate executive
officers and employees;
- Align compensation with business objectives and performance;
- Position compensation to reflect the individual's performance as well as
the level of responsibility, skill and strategic value of the employee;
and
- Recognize the evolving organizational structure of the Company and
directly motivate executives to accomplish results within their spheres of
influence as well as foster a Company-wide team spirit.
The Company attempts to target its compensation programs to provide
compensation opportunities that are perceived by its executive officers to
justify continued service to the Company. The Compensation Committee believes
there are three major elements to its compensation plan: salary, bonus and
long-term incentives. Each of these elements of compensation serves a unique
role in meeting the Company's compensation objectives:
Salary forms the basic building block of the executive compensation program.
It is the assured element of compensation that permits income predictability. In
general, it is intended that salary levels be set at the midpoint of a
prescribed range but that individual salaries may vary from that midpoint to
reflect each executive's strategic value, experience, proficiency and
performance.
The annual bonus plan is designed to play a number of roles in implementing
the Company's compensation philosophy. Annual bonuses provide a direct
pay-for-performance vehicle. The bonus plan also serves to focus executives on
those activities that most directly affect shareholder value which are within
their control and for which they should be held accountable. Therefore, it is
intended that an annual bonus reflect performance of the respective operating
unit, as well as the entire Company.
The long-term incentive program is also intended to play important roles in
implementing the Company's compensation philosophy. It directly links
executives' financial interests to the interests of the stockholders by tying a
portion of their overall compensation to share price appreciation. It also acts
as a motivation and reward system and as a device to attract and retain superior
management talent.
The Company has not established a specific peer group to use as a benchmark
in setting compensation levels, ranges and midpoints.
EXECUTIVE OFFICER COMPENSATION
Compensation decisions for the fiscal year ended September 30, 1999 were
based on the following considerations:
- Existing contractual compensation commitments with certain executive
officers;
- Compensation opportunities perceived to be necessary to retain executive
officers;
- General industry compensation practices and levels where appropriate;
- The criticality of the executives to the Company's current and future
success;
- The significance of the executive's compensation cost relative to its
impact on the Company's financial success over the next few critical
years; and
11
<PAGE>
- The maintenance, where practical, of internal compensation relationships
that provide rationale and flexibility in organizational staffing.
CHIEF EXECUTIVE OFFICER COMPENSATION
During the fiscal year ended September 30, 1999, the Compensation Committee
based its compensation decisions for David A. Walsh, the Company's Chief
Executive Officer, on the following considerations:
- Existing contractual compensation commitments;
- His significant role in integrating the respective management and
operations of IPC and the Company; and
- His strong leadership which resulted in the Company's successful initial
public offering.
The compensation actions for executive officers and other executives during
the fiscal year ended September 30, 1999 were based on the considerations listed
earlier in this report.
The duties of the Compensation Committee include approval of salary and
other compensation arrangements for the Company's executive officers.
Respectfully Submitted,
COMPENSATION COMMITTEE
Richard W. Smith, Chairman
Richard M. Cashin, Jr.
Douglas T. Hickey
EMPLOYMENT AGREEMENTS
DAVID A. WALSH. David A. Walsh entered into an Amended and Restated
Employment Agreement with the Company, dated as of December 18, 1997, which was
amended on June 1 and June 9, 1999. Under the Agreement, Mr. Walsh serves as
Chief Executive Officer and a director of IXnet. Mr. Walsh receives a base
salary of $300,000 plus a discretionary bonus with a minimum bonus target of
$175,000 and benefits consistent with past practice. He also received options to
purchase approximately 2% of the fully diluted shares of the Company. He is
entitled to lump sum severance payments payable if he is terminated "without
cause" or if he resigns for "good reason," equal to his base salary, plus his
average bonus, for a period equal to the greater of three (3) years or the
number of years (and fractions thereof) in his then-remaining term of
employment. The Company shall pay Mr. Walsh any amounts imposed as excise tax
upon excess "parachute payments" (as defined in Section 280G(b)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code")) under Section 4999 of
the Code. Mr. Walsh's benefits under his Employment Agreement will continue
during any such severance period. During the term of the Agreement and for
2.5 years thereafter, Mr. Walsh is subject to restrictions on (i) competition
and (ii) the solicitation of customers and employees, and, for all periods
during and after the term, he is subject to nondisclosure and confidentiality
restrictions relating to confidential information and trade secrets of the
Company and its affiliates.
GERALD E. STARR. Mr. Starr and the Company entered into an Employment
Agreement, dated as of July 1, 1999, which superseded all prior employment
agreements with IPC and provides for an employment term of four years.
Mr. Starr's current base salary is $300,000 per year with a minimum bonus target
of $175,000. Mr. Starr is entitled to participate in all benefits plans and
programs maintained by the Company, including insurance, medical, retirement and
other fringe benefits. If Mr. Starr is terminated
12
<PAGE>
before the expiration of the term by reason of death, cause, or resignation
without good reason, the Company will have no further liabilities under the
contract. If Mr. Starr terminates the Agreement for good reason, or the
employment relationship terminates due to his disability, the Company will pay
him certain standard termination entitlements, including earned but unpaid
compensation, and certain severance benefits, including one year of base salary,
any pro-rated annual bonus earned for the fiscal year, any bonus earned but
payable to Mr. Starr contingent on remaining employed until a date after the
date of Mr. Starr's termination, and certain health care premiums for one year
after the date of termination. In addition, if the termination precedes a change
in control, all stock options granted to Mr. Starr under the Stock Incentive
Plan will vest to the extent that such options would have otherwise vested
within one-year of such termination. A change in control does not, however,
accelerate the exercisability of the stock options. The contract also contains
certain non-disclosure, non-competition and non-solicitation clauses.
PAUL PLUSCHKELL, JR. The Company is a party to an Employment Agreement
dated as of June 1, 1999 with Paul Pluschkell under which he serves as an
executive officer. Mr. Pluschkell's Agreement has a rolling four year term that
converts to a fixed four year term if either party notifies the other of an
election to discontinue the extensions, or upon the termination of
Mr. Pluschkell's employment. Mr. Pluschkell is entitled to receive an annual
base salary of $200,000 and an annual bonus amount to be determined by the
Board, but in no event shall his base salary and annual bonus for any calendar
year be less than $240,000. In addition, If he is employed by the company as of
February 13, 2000, the company is obligated to make an additional one-time bonus
payment to Mr. Pluschkell of $208,000. In the event that Mr. Pluschkell
terminates his employment with the Company prior to the expiration of the term
for good reason, or if the Company terminates his employment other than for just
cause, the Company would be required to pay him an amount equal to the lesser of
one year's salary or his salary for the remainder of the employment term and any
remaining one-time bonus payments under the Agreement.
CHARLES F. AUSTER. The Company is a party to an Amended Employment
Agreement, dated as of May 1, 1998, and further amended on June 1, 1999 with
Charles F. Auster under which he serves as Executive Vice President, Chief
Operating Officer and a director. This agreement has a rolling four-year term
that converts to a fixed four-year term if either party notifies the other of an
election to discontinue the extensions, or upon the termination of Mr. Auster's
employment. Mr. Auster is paid a base salary of $230,000 and an annual bonus
with a target of 50% of his base salary. In the event that Mr. Auster terminates
his employment with the Company prior to the expiration of the term for good
reason, or if the Company terminates his employment other than for cause, the
Company would be required to pay him an amount equal to one year's salary and a
bonus in an amount equal to 50% of his then-current base salary.
ANTHONY M. SERVIDIO. The Company is a party to an Amended and Restated
Employment Agreement, dated as of December 18, 1997, with Anthony M. Servidio
under which he serves as Senior Vice President, Sales. Mr. Servidio's Employment
Agreement has a five-year term which is automatically renewable for successive
one-year terms. Mr. Servidio is entitled to receive a minimum annual base salary
of $190,000 and a commission-based bonus with a guaranteed minimum draw of
$110,000 annually. In the event that Mr. Servidio terminates his employment with
the Company prior to the expiration of the term for good reason, or if the
Company terminates his employment other than for cause, the Company would be
required to pay him an amount equal to the product of the greater of three or
the number of years (including fractions thereof) remaining in the term and the
sum of Mr. Servidio's then-current base salary and bonus. The Company shall pay
Mr. Servidio any amounts imposed as an excise tax upon excess "parachute
payments" under Section 4999 of the Code.
The Company's employment agreements with each of its Named Executive
Officers also provide each of them with continued benefit coverage in the event
that the Company terminates their employment without cause during the term of
the agreement, or if one of them terminates his employment for good reason. The
agreements also contain provisions preventing such officer from competing with
the Company or soliciting the Company's employees during and, for specific
periods, after the term of employment.
13
<PAGE>
STOCK OPTION GRANTS
The following table sets forth certain information with respect to options
granted during the fiscal year ended September 30, 1999 to the Named Executive
Officers of the Company:
OPTION/SAR GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 1999(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
SHARE PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
------------------------------------------------------ --------------------------
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED FISCAL YEAR ($/SHARE) DATE ($) ($)
- ---- ------------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David A. Walsh.................... 1,763,352 26% 13.96 5/04/09 15,481,118 39,232,192
Gerald E. Starr................... 337,976 5% 13.96 5/04/09 2,967,216 7,519,508
Charles F. Auster................. 290,953 4% 13.96 5/04/09 2,554,384 6,473,310
Paul Pluschkell, Jr............... 243,343 4% 13.96 5/04/09 2,136,398 5,414,052
Anthony M. Servidio............... 103,450 2% 13.96 5/04/09 908,226 2,301,622
Brian L. Reach.................... 60,836(2) 1% 13.96 5/04/09 0 0
</TABLE>
- ------------------------------
(1) All options granted during the fiscal year ended September 30, 1999 were
granted under the 1999 Stock Option Plan. All of these options are incentive
stock options for federal income tax purposes up to applicable limits, have
a term of 10 years and are subject to earlier expiration upon the option
holder's termination of employment. The options have an exercise price of
$13.96 per share. Mr. Walsh's options were 100% vested when granted. All
other options vest at the rate of 25% on the first anniversary of the grant
date and an additional 2 1/12% per month for the next 36 months. However, in
the event of a change in control, 50% of those options not yet vested shall
become vested immediately. Options may not be exercised until November, 4,
2001, unless prior to that date, the Company stops filing consolidated
income tax returns with IPC or the Company's Board of Directors allows the
exercise.
(2) All of Mr. Reach's options were cancelled upon his resignation.
(3) Represents the potential value of options granted at assumed 5% and 10%
rates of compounded annual stock appreciation for ten years from the date of
grant of each such option.
14
<PAGE>
The following table sets forth certain information with respect to options
granted during the fiscal year ended September 30, 1999 to the Named Executive
Officers of the Company under the Stock Option Plan:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(D)
NUMBER OF SECURITIES (E)
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN
(B) (C) OPTIONS/SARS AT FISCAL THE MONEY OPTIONS/SARS
SHARES ACQUIRED VALUE YEAR END AT FISCAL YEAR END
(A) ON EXERCISE REALIZED (#) ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
David A. Walsh............... 0 0 1,763,352/0 2,054,305/0
Gerald E. Starr.............. 0 0 0/337,976 0/393,742
Charles F. Auster............ 0 0 0/290,953 0/338,960
Paul Pluschkell, Jr.......... 0 0 0/243,343 0/283,495
Anthony M. Servidio.......... 0 0 0/103,450 0/120,519
Brian L. Reach............... 0 0 0/0(1) 0/0
</TABLE>
- ------------------------
(1) All of Mr. Reach's options were cancelled upon his resignation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS WITH IPC
Pursuant to the Company's August 1999 initial public offering, the Company
became subject to the following agreements with IPC: an inter-company agreement,
a registration rights agreement, a tax-sharing agreement, a maintenance
agreement, and a services agreement.
The inter-company agreement contains provisions relating to the separation
of the Company's business operations from IPC, as well as provisions governing
the various interim and ongoing relationships between the Company and IPC. The
registration rights agreement provides IPC with certain registration rights
relating to the shares of the Company's common stock which it holds. The
tax-sharing agreement contains provisions relating to the allocation of tax
liability and tax benefits between the Company and the Company's domestic
subsidiaries and IPC and its other domestic subsidiaries. The maintenance
agreement provides for the continuation by IPC of its performance of
installation, maintenance and staging and integration services. Under the
services agreement, the Company will continue to provide IPC with dedicated
voice service and its frame relay network.
Set forth below is a summary description of the agreements between the
Company and IPC. The descriptions of these agreements do not purport to be
complete and are qualified in their entirety by reference to the full text of
the agreements.
INTER-COMPANY AGREEMENT
CORPORATE SUPPORT SERVICES. The inter-company agreement describes certain
corporate support services that IPC will provide to the Company. These include
cash management, accounting, executive management, legal, administrative, human
resources, information systems and insurance. IPC will allocate to the Company
any direct cost associated with providing these services on the Company's
behalf. The Company shall reimburse IPC for all indirect costs, other than
insurance, incurred by IPC in providing these services on a quarterly basis,
based on the number of employees employed by the Company in relation to the
number of employees employed by both IPC and the Company. Based on a similar
allocation, $0.9 million, $1.5 million and $1.8 million, for the years ended
September 30, 1997, 1998
15
<PAGE>
and 1999, respectively, were allocated to the Company as general and
administrative expenses by IPC. With respect to insurance, the Company will
reimburse IPC for the insurance premiums paid or incurred by IPC and covering
risks applicable to the Company and the Company's subsidiaries, and, if such
cost cannot be determined by IPC, as determined by the underwriter of the
relevant insurance policy.
FINANCING ARRANGEMENTS. Subject to the terms and conditions of the
inter-company agreement, IPC has agreed to continue to provide the Company with
ongoing financing and to obtain letters of credit on the Company's behalf. The
amount available under the inter-company agreement will start at $6.25 million
and increase by that amount quarterly thereafter, up to an aggregate of
$50 million during the period beginning July 1, 1999 through June 30, 2001. On
June 30, 2001, all amounts loaned and outstanding under the inter-company
agreement will become immediately due and payable.
INDENTURE OBLIGATIONS. In connection with its recapitalization transaction
on April 30, 1998, IPC issued and sold $247.4 million in principal amount of
10 7/8% senior discount notes due 2008 under an indenture. The indenture
contains certain restrictive financial and operating covenants that limit the
discretion of the management of IPC and its restricted subsidiaries, which
include all of IPC's material subsidiaries, including IXnet. Under the
inter-company agreement, the Company will be bound by the covenants and other
restrictions, limitations and other obligations of the indenture.
CREDIT AGREEMENT OBLIGATIONS. In connection with its recapitalization
transaction, entered into April 30, 1998, IPC entered into a five-year credit
agreement with a syndicate of lenders, with General Electric Capital Corporation
as administrative agent and collateral agent to such lenders. The credit
agreement, as amended on June 21, 1999, provides IPC with access to a working
capital facility of up to $45 million, based on borrowing base availability, and
a $20 million term loan. The obligations under the credit agreement are secured
senior obligations of IPC and its material subsidiaries. The Company is a
guarantor under the credit agreement and has agreed to be bound by its covenants
and other restrictions, limitations and obligations.
REAL ESTATE. Under the inter-company agreement, the Company has agreed with
IPC regarding assignments or subleases of certain leases and the allocation of
costs incurred for the Company's occupancy of portions of IPC-leased office
facilities.
With respect to the Company's largest occupied space, 88 Pine Street, New
York, NY, where the Company's executive and sales offices are located, IPC has
agreed, subject to the consent of its landlord, to use reasonable efforts to
assign the lease, currently in the name of an IPC subsidiary and covering the
6th floor and certain other space in that building that the Company occupies, to
the Company.
The Company's London, England, executive, sales and network operations
center occupies two floors of a building under a long-term lease to IPC. The
Company will, in the future, explore a formal sub-lease arrangement. Until such
time, and also with respect to the Company's occupancy of portions of IPC-leased
branch office facilities, all costs incurred by IPC for such space, for its
maintenance and electric and other utility costs, telephone system usage, etc.,
will be charged to the Company as incurred for actual discernable costs and
otherwise allocated between the companies based upon the square footage occupied
by each of IPC and the Company.
TRANSFER OF INTERNET ADDRESS. The Company uses the Internet for both its
internal needs and to provide service to its customers. Currently, the Company
uses Internet address space previously assigned to IPC. Under the inter-company
agreement, the Company and IPC will request that the American Registry for
Internet Numbers, the entity which assigns Internet address space to end-users,
transfer to the Company the block of Internet addresses previously assigned to
IPC. This will allow the Company to more fully utilize these resources, because
it anticipates using the additional Internet addresses that are not being used
by IPC but are registered to IPC. American Registry for Internet Numbers'
guidelines provide for the transfer of Internet protocol address space as a
result of mergers, acquisitions, reorganizations and other corporate
organizational changes.
16
<PAGE>
PRODUCT DISTRIBUTION. IPC has granted to the Company distribution rights
for sales by the Company of some of its products in connection with sales of the
Company's services.
DECONSOLIDATION. Under the inter-company agreement, the Company has agreed
that, prior to the later to occur of November 2001 and the termination of IPC's
credit agreement, the Company would not take any action or permit the Company's
subsidiaries to take any action, including the issuance of the Common Stock,
that would result in the deconsolidation for United States federal income tax
purposes of the Company and IPC.
SERVICES AGREEMENT. The Company provides IPC with the IXPrime dedicated
voice service and its frame relay network at rates specified in the services
agreement. The Company also provides domestic and international long distance
telecommunications services to IPC as well as private line services between
IPC's domestic locations.
MAINTENANCE AGREEMENT. Under the maintenance agreement, IPC will continue
to provide the Company with installation services, which include circuit testing
and acceptance, line installations and digital line interface card installations
at the rates specified therein. IPC will also continue to provide the Company
with maintenance services, which include circuit transmission testing, equipment
replacement and digital line interface card support, at the response times and
at the rates specified in the maintenance agreement. IPC will also continue to
provide the Company with staging and integration services, which are utilized
for large scale projects requiring customer premises equipment, and include,
staging facilities, engineers and technicians to order, accept and assemble
customer configurations at the rates specified in the maintenance agreement. The
maintenance agreement also provides for the Company to purchase from IPC new,
used and refurbished turret systems at the purchase prices specified therein.
REGISTRATION RIGHTS AGREEMENT
IPC owns 84.3% of the Company's Common Stock. IPC is prohibited from freely
selling such shares to the public without registration under the Securities Act.
The registration rights agreement with IPC provides it with certain registration
rights relating to the shares of the Company's Common Stock which it holds.
These registration rights became effective 180 days after the closing of the
Company's initial public offering.
Under the registration rights agreement, the Company is only obligated to
register shares if the anticipated aggregate public offering price is at least
$25 million.
COMPENSATION FOR USE OF TAX LOSSES AND TAX-SHARING AGREEMENT
The Company and IPC Communications and their respective United States
subsidiaries continue to be members of an affiliated group of corporations that
file United States federal income tax returns on a consolidated basis. The
Company and its domestic subsidiaries and IPC Communications and its other
domestic subsidiaries have entered into a tax-sharing agreement under which the
tax liability will be allocated between the Company and IPC Communications in
accordance with their respective tax liability computed as though the Company
and its domestic subsidiaries, on the one hand, and IPC Communications and its
other domestic subsidiaries, on the other hand, filed separate returns. Under
the tax-sharing agreement, the Company or IPC Communications may be required to
pay compensation to the other for the Company's or IPC Communication's tax
losses which reduced the combined tax liability. The tax-sharing agreement will
provide for similar arrangements with respect to state, local and foreign
taxation.
17
<PAGE>
EMPLOYMENT AGREEMENTS AND COMPENSATION
The Company is party to employment agreements with a number of the Company's
executive officers that provide for, among other terms, specified salaries and
severance arrangements. See "Employment Agreements."
OWNERSHIP OF IPC STOCK BY THE COMPANY'S DIRECTORS AND SOME OF THE COMPANY'S
EXECUTIVE OFFICERS
The Company's directors and some of its executive officers own substantial
amounts of IPC stock and options to purchase IPC stock. The stock options were
granted to certain executive officers as compensation under the IPC 1998 Stock
Option Plan or the IPC Communications 1999 Stock Incentive Plan. Such ownership
could create, or appear to create, potential conflicts of interest when
directors and officers are faced with decisions that could have different
implications for the Company and IPC.
GUARANTEES
IPC provides various forms of credit enhancement to the Company. These
include letters of credit, unconditional guarantees of equipment acquisitions
and financings and trade payables. The Company has guaranteed IPC borrowings
under its credit agreement and the Company has pledged its assets to secure such
guarantee.
IPC'S CONTRIBUTION OF CAPITAL TO IXNET
Since 1995, IPC has provided the Company with approximately $100 million to
fund the Company's operations. Following the $73 million capital contribution
from IPC in March 1999, the Company remained indebted to IPC in the amount of
approximately $25 million.
IPC'S CONTRIBUTION OF MXNET TO IXNET
On February 13, 1998, IPC acquired all of the issued and outstanding common
stock of MXNet, Inc. and paid $6.7 million in the form of a promissory note. IPC
contributed the shares of MXNet, Inc. to the Company on May 4, 1999.
18
<PAGE>
PERFORMANCE GRAPH(1)
The Company's Common Stock began trading on the Nasdaq Stock Market
effective with the start of business on August 12, 1999. The following graph
provides a comparison of 4 Month Cumulative Total Return among IXnet, Inc., the
Nasdaq Stock Market--US Index and the Nasdaq Telecommunications Index, assuming
$100 invested on August 12, 1999 in Common Stock or the respective indices
(including reinvestment of dividends). These indices are provided for
comparative purposes only and do not necessarily reflect management's opinion
that such indices are an appropriate measure of the relative performance of the
stock involved and are not intended to forecast or be indicative of possible
future performance of the Common Stock.
COMPARISON OF 4 MONTH CUMULATIVE TOTAL RETURN*
AMONG IXNET, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS 8/12/99 8/31/99 9/30/99 10/31/99 11/30/99 12/31/99
<S> <C> <C> <C> <C> <C> <C>
IXNET, INC. 100.00 125.00 100.83 94.58 141.25 200.83
NASDAQ STOCK MARKET
(U.S.) 100.00 107.00 106.83 114.59 126.82 154.17
NASDAQ TELECOMMUNICATIONS 100.00 104.30 103.55 122.61 127.84 147.26
</TABLE>
- ------------------------
* $100 INVESTED ON AUGUST 12, 1999 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS, YEAR ENDING DECEMBER 31.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------
08/12/99 8/31/99 9/30/99 10/31/99 11/30/99 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
IXNET, INC.................................... 100.00 125.00 100.83 94.58 141.25 200.83
NASDAQ STOCK MARKET(U.S.)..................... 100.00 107.00 106.83 114.59 126.82 154.17
NASDAQ TELECOMMUNICATIONS..................... 100.00 104.30 103.55 122.61 127.84 147.26
</TABLE>
- ------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act or the
Exchange Act.
19
<PAGE>
PROPOSAL NUMBER TWO
APPROVAL OF AMENDMENT TO THE IXNET, INC. 1999 STOCK OPTION PLAN
GENERAL PLAN INFORMATION
Effective December 9, 1999, the IXnet, Inc. 1999 Stock Option Plan will,
subject to obtaining approval from stockholders at the Annual Meeting, be
amended to increase its share reserve from 7,053,409 to 9,053,409. The Stock
Option Plan provides for the grant of options to purchase Common Stock
("Options") to certain officers, employees, consultants and directors of the
Company and its subsidiaries. The Stock Option Plan is not subject to ERISA and
is not a tax-qualified plan under the Code.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to approve the Stock Option Plan.
DESCRIPTION OF THE STOCK OPTION PLAN
ADMINISTRATION. The members of the Compensation Committee (the "Option
Committee") administer the Stock Option Plan and determine, within the
limitations of the Stock Option Plan, the employees, directors and consultants
(of the Company, its subsidiaries or its Parent) to whom Options will be
granted, the number of shares subject to each Option, the terms of such Options
(including provisions regarding exercisability and acceleration of
exercisability) and the procedures by which the Options may be exercised.
Subject to certain specific limitations and restrictions set forth in the Stock
Option Plan, the Option Committee has full and final authority to interpret the
Stock Option Plan, to prescribe, amend and rescind rules and regulations, if
any, relating to the Stock Option Plan and to make all determinations necessary
or advisable for the administration of the Stock Option Plan.
STOCK SUBJECT TO THE STOCK OPTION PLAN. Option Shares may be authorized and
unissued shares or shares previously issued and reacquired by the Company. Any
Option Shares subject to grants under the Stock Option Plan which expire or are
terminated, forfeited or canceled without having been exercised or vested in
full, shall again be available for purposes of the Stock Option Plan.
TERMS AND CONDITIONS OF OPTIONS. The Stock Option Plan provides for the
grant of Options which qualify for favorable federal income tax treatment as
"incentive stock options" ("ISOs") and non-qualified stock options which do not
so qualify ("NQSOs"). All Options granted under the Stock Option Plan will have
an exercise price that is no less than the "fair market value" of a share of
common stock on the grant date. ISOs are subject to certain restrictions under
the Code. Options granted under the Stock Option Plan will be ISOs to the
maximum extent permitted by section 422(d) of the Code and will be exercisable
for a period of ten years after the date of grant (or for a shorter period
ending (i) 90 days after the option holder's termination of employment or the
date such option becomes exercisable for reasons other than death, disability or
discharge for cause (but immediately as to unvested options); (ii) one year
after the option holder's termination of employment or the date such option
becomes exercisable due to death or disability; (iii) immediately upon
termination for Cause, as defined in the Agreement, or upon the consummation of
a transaction in which the Company becomes the wholly-owned subsidiary of any
other corporation, unless such other corporation assumes or continues the Stock
Option Plan with respect to the Options then outstanding under the Plan).
All Options granted under the Stock Option Plan have a term of 10 years and
are subject to earlier expiration upon the option holder's termination of
employment. Mr. David A. Walsh's options were 100% vested when granted. All
other options vest at the rate of 25% on the first anniversary of the grant date
and an additional 2 1/12% per month for the next 36 months. In the event of a
change in control, 50% of those options not yet vested shall become vested
immediately. Options may not be exercised until November, 4, 2001, unless prior
to that date, the Company stops filing consolidated income tax returns with IPC
or the Company's Board of Directors allows the exercise.
20
<PAGE>
Upon the exercise of an Option, the exercise price must be paid in full.
Payment may be made in cash or in such other consideration as the Option
Committee deems appropriate, including, but not limited to, Common Stock already
owned by the option holder or Option Shares to be acquired by the option holder
upon the exercise of the Option. Options may be transferred prior to exercise
only upon the death of the option holder unless the Option Committee permits
otherwise.
MERGERS AND REORGANIZATIONS; ADJUSTMENTS FOR EXTRAORDINARY DIVIDENDS. The
exercise price and the number of shares available under the Stock Option Plan
and the outstanding Options will be adjusted to reflect any merger,
consolidation or business reorganization and to reflect any stock split, stock
dividend or other event generally affecting the number of shares of Common Stock
outstanding.
TERMINATION OR AMENDMENT OF THE STOCK OPTION PLAN. Unless sooner
terminated, the Stock Option Plan will terminate automatically ten years after
its effective date. The Board may suspend or terminate the Stock Option Plan in
whole or in part at any time prior to the tenth anniversary of its effective
date by giving written notice of such suspension or termination to the Option
Committee. In the event of any suspension or termination of the Stock Option
Plan, all Options theretofore granted under the Stock Option Plan that are
outstanding on the date of such suspension or termination of the Stock Option
Plan will remain outstanding under the terms of the agreements granting such
Options.
The Board may amend or revise the Stock Option Plan in whole or in part at
any time, but the Company's policy is that if the amendment or revision amends a
material term of the Stock Option Plan, such amendment or revision will be
subject to approval by the stockholders of the Company to the extent required to
comply with Section 162(m) of the Code.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion is intended only
as a summary and does not purport to be a comprehensive description of the
federal tax laws, regulations and policies affecting the Company and recipients
of ISOs and NQSOs that may be granted under the Stock Option Plan. Any change in
applicable law or regulation or in the policies of various taxing authorities
may have a material effect on the discussion contained herein.
There are no federal income tax consequences for the Company or the option
holder at the time an ISO is granted or upon the exercise of an ISO. If there is
no sale or other disposition of the shares acquired upon the exercise of an ISO
within two years after the date the ISO was granted, or within one year after
the exercise of the ISO, then at no time will any amount be deductible by the
Company with respect to the ISO. If the option holder exercises an ISO and sells
or otherwise disposes of the shares so acquired after satisfying the foregoing
holding period requirements, then he will realize a capital gain or loss on the
sale or disposition. If the option holder exercises his ISO and sells or
disposes of his shares prior to satisfying the foregoing holding period
requirements, then an amount equal to the difference between the amount realized
upon the sale or other disposition of such shares and the price paid for such
shares upon the exercise of the ISO will be includible in the ordinary income of
such person, and such amount will ordinarily be deductible by the Company at the
time it is includible in such person's income.
With respect to the grant of NQSOs, there are no federal income tax
consequences for the Company or the option holder at the date of the grant. Upon
the exercise of a NQSO, an amount equal to the difference between the fair
market value of the shares to be purchased on the date of exercise and the
aggregate purchase price of such shares is generally includible in the ordinary
income of the person exercising such NQSO, although such inclusion may be at a
later date in the case of an option holder whose disposition of such shares
could result in liability under Section 16(b) of the Exchange Act. The Company
will ordinarily be entitled to a deduction for federal income tax purposes at
the time the option holder is taxed on the exercise of the NQSO equal to the
amount which the option holder is required to include as ordinary income.
21
<PAGE>
Section 162(m) of the Code limits the Company's deductions of compensation
in excess of $1,000,000 per year for the chief executive officer and the four
other most highly paid executives named in its proxy statement, but provides for
certain exceptions for performance based compensation. The Company intends the
Stock Option Plan to comply with the requirements for an exception to
Section 162(m) applicable to stock option plans so that the Company's deduction
for compensation related to the exercise of stock options would not be subject
to the $1,000,000 limitation. No executive of the Company currently receives
compensation that exceeds this limitation.
The foregoing statements are intended to summarize the general principles of
current federal income tax law applicable to Options that may be granted under
the Stock Option Plan. State and local tax consequences may also be significant.
STOCK OPTION PLAN BENEFITS TABLE. Due to the discretionary nature of awards
under the Stock Option Plan, the amount of stock options or other awards that
may be granted in the future under the Stock Option Plan to any individual is
not determinable.
IPC COMMUNICATIONS, INC., WHICH IN THE AGGREGATE BENEFICIALLY OWNS 84.3% OF
THE VOTING POWER OF THE COMPANY, INTENDS TO VOTE IN FAVOR OF PROPOSAL 2.
ACCORDINGLY, APPROVAL OF PROPOSAL 2 IS ASSURED.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF PROPOSAL 2
PROPOSAL NUMBER THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as the
Company's independent auditors for the year ending September 30, 2000 and has
further directed that management submit the appointment of independent auditors
for ratification by the stockholders at the Annual Meeting.
PricewaterhouseCoopers LLP has audited the Company's financial statements since
1999.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting, will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions. In the event
the stockholders fail to ratify the appointment, the Board will reconsider
whether or not to retain that firm.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the appointment of PricewaterhouseCoopers LLP.
IPC COMMUNICATIONS, INC., WHICH IN THE AGGREGATE BENEFICIALLY OWNS 84.3% OF
THE VOTING POWER OF THE COMPANY, INTENDS TO VOTE IN FAVOR OF PROPOSAL 3.
ACCORDINGLY, APPROVAL OF PROPOSAL 3 IS ASSURED.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS
AUDITOR FOR THE COMPANY
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not know
of any other matters to be presented for action by the stockholders at the
Annual Meeting. If, however, any other matters not now known are properly
brought before the Annual Meeting, the persons named in the accompanying proxy
have the discretion to vote the shares represented by all properly executed
proxies on such matters in accordance with their judgment.
22
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
executive officers and any person holding more than ten percent of the Company's
Common Stock are required to file initial reports of ownership of the Company's
Common Stock and reports of changes in that ownership at the Securities and
Exchange Commission and the with the Nasdaq Stock Market. Specific due dates for
these reports have been established, and the Company is required to disclose in
this Proxy Statement any failure to file by these dates.
Form 3s are required to be filed within ten days after the event by which an
individual becomes a reporting person. Form 4s are required to be filed within
ten days after the end of the reporting month. Form 5s are required to be filed
on or before the forty-fifth day after the end of the issuer's fiscal year.
Based solely upon information available to it, the Company believes that, except
for an inadvertent delay with respect to the filing of a Form 4 for John
Sharkey, all Form 3s, Form 4s and Form 5s required to be filed during the fiscal
year ended September 30, 1999 were filed on a timely basis.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR
THE 2001 ANNUAL MEETING
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting of Stockholders must
have been received by the Company at its principal executive offices no later
than October 7, 2000 in order to be included in the proxy statement and proxy
relating to that meeting. If a stockholder does not notify the Company by
December 21, 2000 of a proposal, then the persons named as proxies in the proxy
accompanying the 2001 Annual Meeting Proxy Statement may use their discretionary
voting authority if the proposal is raised at the 2001 Annual Meeting.
FINANCIAL STATEMENTS
THE COMPANY IS REQUIRED TO FILE AN ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL
YEAR ENDED SEPTEMBER 30, 1999 WITH THE SEC. THE ANNUAL REPORT CONTAINS FINANCIAL
STATEMENTS, AS OF SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998, PREPARED IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCI-
PLES. THE CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN AUDITED BY
PRICEWATERHOUSECOOPERS LLP WHOSE REPORT THEREON APPEARS IN THE ANNUAL REPORT. A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 1999 ACCOMPANIES
THIS PROXY STATEMENT. STOCKHOLDERS MAY OBTAIN AN ADDITIONAL COPY OF SUCH ANNUAL
REPORT BY WRITING TO INVESTOR RELATIONS DEPARTMENT, IXNET, INC., WALL STREET
PLAZA, 88 PINE STREET, NEW YORK, NEW YORK 10005.
23
<PAGE>
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING PLEASE VOTE VIA
THE INTERNET, BY USING THE TELEPHONE OR BY SIGNING, DATING AND RETURNING THE
ENCLOSED PROXY IN THE POSTAGE-PREPAID ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.
By Order of the Board of Directors,
[/S/ ALEXANDER RUSSO]
Alexander Russo
SENIOR VICE PRESIDENT--BUSINESS &
LEGAL AFFAIRS
NEW YORK, NEW YORK
FEBRUARY 4, 2000
24
<PAGE>
- --------------------------------------------------------------------------------
IXNET, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, having duly received the Notice of Annual Meeting of
Stockholders and Proxy Statement, dated February 4, 2000, hereby appoints Gerald
E. Starr, James M. Demitrieus and Alexander Russo (each with full power to act
alone and with power of substitution and revocation) to represent the
undersigned and to vote, as designated on the reverse side, all shares of Common
Stock of IXnet, Inc. which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of IXnet, Inc. to be held at 2:00 p.m. on Thursday,
March 2, 2000 at the Citicorp Center, 153 East 53rd Street, 14th Floor, Room J,
New York, New York and at any adjournment or adjournments thereof.
This Proxy, when properly executed, will be voted in the manner directed herein
by the under-signed stockholder.
IPC COMMUNICATIONS, INC., WHICH IN THE AGGREGATE BENEFICIALLY OWNS
84.3% OF THE VOTING POWER OF THE COMPANY, INTENDS TO VOTE IN FAVOR OF PROPOSALS
1, 2 AND 3. ACCORDINGLY, APPROVAL OF PROPOSALS 1, 2 AND 3 IS ASSURED.
UNLESS YOU INDICATE OTHERWISE, THIS PROXY WILL BE VOTED FOR PROPOSALS
1, 2 AND 3 AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. Vote by internet at our Internet Address: http://www.eproxy.com/EXNT
OR
2. Call toll free 1-800-840-1208 on a Touch-Tone Telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this
call.
OR
3. Mark, sign and date your proxy card and return it promptly in the
enclosed envelope.
If you wish to view future IXnet, Inc. Annual Reports and Proxy Statements
on-line instead of receiving the printed documents, which will assist the
Corporation in reducing future printing and mailing costs, please
o visit ChaseMellon's web site registration page at
http://www.eproxy.com/EXNT
OR
o call toll free 1-800-840-1208 on a Touch-Tone Telephone and follow the
instructions on the reverse side
OR
o check the box on the signature side of the enclosed proxy card and
return in the postage paid envelope provided.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your votes as /X/
indicated in
this example
1. To elect nine directors, each to hold office until the next annual meeting
or until their successors have been elected and qualified.
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right
/ / / /
INSTRUCTION: To withhold authority to vote for any named nominees strike a line
through the nominee's name in the list below:
01 Richard W. Smith 02 Charles F. Auster 03 Douglas J. Mello
04 David A. Walsh 05 Richard M. Cashin, Jr. 06 John T. Sharkey
07 Gerald E. Starr 08 Douglas T. Hickey 09 Peter A. Woog
2. To approve an amendment to increase by 2,000,000 the shares reserved for the
IXnet, Inc. 1999 Stock Option Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of IXnet, Inc. for the fiscal year ending September 30, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion upon such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
I consent to future access to the Annual Reports and Proxy Statements
electronically via the Internet. I understand that the Corporation may
no longer distribute printed materials to me for any future shareowner
meetings until my consent is revoked. I understand that I may revoke my
consent at any time by giving written notice to the Corporation. / /
The undersigned acknowledges receipt of the
Notice of the 2000 Annual Meeting of
Stockholders and the Proxy Statement dated
February 4, 2000 for the Annual Meeting.
Shares held as of January 28, 2000:
--------------------------------------------
IMPORTANT: PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. THANK YOU.
Signature____________________ Signature____________________ Date_______________
NOTE: Please sign exactly as your name appears hereon. If acting as attorney,
executor, trustee or in other representative capacity, please include your full
title. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person. If held jointly, both parties must sign personally.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
VOTE BY INTERNET OR TELEPHONE
QUICK * * * EASY * * * IMMEDIATE
- --------------------------------------------------------------------------------
** IF YOU WISH TO VOTE YOUR SHARES BY INTERNET OR TELEPHONE, PLEASE FOLLOW
THE INSTRUCTIONS BELOW **
- --------------------------------------------------------------------------------
YOUR INTERNET OR TELEPHONE INSTRUCTION WILL AUTHORIZE THE NAMED PROXIES TO VOTE
YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY
CARD
o You will be asked to enter a Control Number which is located in the box
in the lower right hand corner of this form.
VOTE BY INTERNET: PLEASE VISIT OUR INTERNET VOTING WEBSITE AT:
http: //www.eproxy.com/EXNT AND FOLLOW THE INSTRUCTIONS ON
THE SCREEN.
VOTE BY PHONE: THIS METHOD IS AVAILABLE FOR STOCKHOLDERS, PLEASE CALL
TOLL-FREE ON A TOUCH-TONE TELEPHONE 1-800-840-1208 ANYTIME.
THERE IS NO CHARGE TO YOU FOR THIS CALL.
After entering your Control Number you will hear these instructions.
--------------------------------------------------------------------
OPTION #1: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL
ITEMS: PRESS 1
--------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
--------------------------------------------------------------------
OPTION #2: If you choose to vote on each item separately, press 0.
You will hear these instructions:
--------------------------------------------------------------------
Item (1): To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, Press 0 and
listen for instructions
Items (2) and (3): To vote FOR, press 1; AGAINST, press 9;
ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
--------------------------------------------------------------------
Consent to view Annual Reports and Proxy Statement on-line.
--------------------------------------------------------------------
Press 1 to consent to view future Annual Reports and Proxy
Statements for this account via the internet. You may revoke this
consent at any time by giving written notice to the Corporation.
WHEN ASKED, PLEASE CONFIRM YOUR CONSENT BY PRESSING 1.
- --------------------------------------------------------------
If you vote by internet or telephone, there is no need for you
to mail in your proxy card.
THANK YOU FOR VOTING.
- --------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
IXNET, INC.
1999 STOCK OPTION PLAN
ADOPTED ON MAY 4, 1999
EFFECTIVE ON MAY 4, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. Purpose...................................................................1
2. Definitions...............................................................1
3. Shares of Common Stock Subject to the Plan................................4
4. Administration of the Plan................................................4
5. Option Terms..............................................................6
6. Exercise of Options.......................................................8
7. Adjustment Upon Changes in Capitalization.................................8
8. Restrictions on Issuance of Shares........................................9
9. General Provisions........................................................9
10. Amendment or Termination.................................................10
11. Effective Date of Plan...................................................10
-2-
<PAGE>
IXNET, INC.
STOCK OPTION PLAN
1. PURPOSE
The Plan authorizes the Compensation Committee of the Board to provide
employees, consultants or directors of the Corporation or its Subsidiaries or
Parent who are in a position to contribute to the long-term success of the
Corporation and its Subsidiaries, with Options to acquire Common Stock of the
Corporation. The Corporation believes that this incentive program will cause
those persons to increase their interest in the welfare of the Corporation and
its Subsidiaries, and aid in attracting and retaining employees, directors and
consultants of outstanding ability.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms,
when used in the Plan, shall have the meanings set forth in this section:
(a) "Board" means the Board of Directors of IXnet, Inc., a Delaware
corporation, or of any entity which succeeds to the rights and obligations of
IXnet, Inc. under the Plan.
(b) "Cause" means, with respect to any person, any of the following:
(i) such person's material dishonesty (including, without limitation, theft,
fraud, embezzlement, financial misrepresentation or other similar action or
behavior) in his dealings with or with respect to the Corporation or its
Subsidiaries or Parent or any other entity which the Corporation or its
Subsidiaries or Parent shall be engaged in or be attempting to engage in
commerce, or (ii) such person's conviction of, or entry of a plea of NOLO
CONTENDERE to, the commission of a felony, or (iii) any act or omission by such
person which actually has, and which either such person intends to have or such
person or a reasonable person would expect to have, a material adverse effect on
the Corporation or its Parent or any Subsidiary or their respective businesses
or operations.
(c) "Change in Control" shall mean any one of the following:
(i) the acquisition by any person or entity, excluding, for
this purpose, International Exchange Networks, Ltd., a Delaware
corporation ("International Exchange Networks"), the Corporation, IPC
Information Systems, Inc., a Delaware corporation ("IPC"), IPC
Communications, Inc., a Delaware corporation ("IPCC") and Permitted
Holders (International Exchange Networks, the Corporation, IPC, IPCC
and any Permitted Holder, each a "Group Member") and any employee
benefit plan of International Exchange Networks, of Beneficial
Ownership of 40% or more of the combined voting power of the then
outstanding securities entitled to vote generally in the election of
directors ("Voting Securities"), of International Exchange Networks;
-1-
<PAGE>
(ii) the acquisition by any person or entity, excluding, for
this purpose, any Group Member and any employee benefit plan of the
Corporation, of Beneficial Ownership of 40% or more of the combined
voting power of the then outstanding Voting Securities of the
Corporation;
(iii) the acquisition by any person or entity, excluding, for
this purpose, any Group Member and any employee benefit plan of IPC, of
Beneficial Ownership of 40% or more of the combined voting power of the
then outstanding Voting Securities of IPC;
(iv) the acquisition by any person or entity, excluding, for
this purpose, any Group Member and any employee benefit plan of IPCC,
of Beneficial Ownership of 40% or more of the combined voting power of
the then outstanding Voting Securities of IPCC; and
(v) the approval by the stockholder or stockholders of any of
International Exchange Networks, the Corporation, IPC or IPCC of (a) a
reorganization, merger, consolidation or other business combination
(other than any reorganization, merger, consolidation or other business
combination with an Affiliate of the entity to be reorganized, merged,
consolidated or otherwise combined) of International Exchange Networks,
the Corporation, IPC or IPCC, respectively, in each case with respect
to which the stockholder or stockholders of such entity immediately
prior to consummation of such reorganization, merger, consolidation or
other business combination do not, immediately thereafter, own more
than 40% of the combined voting power of the outstanding Voting
Securities of the surviving corporation, or (b) the sale, to a person
or entity other than a Group Member, of all or substantially all of the
assets of International Exchange Networks, the Corporation, IPC or
IPCC, respectively.
For purposes of this section 2(c):
"Affiliate" means a person or entity that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person or entity specified.
"Beneficial Ownership" shall be determined within the meaning of Rule
13d-3 promulgated under the Exchange Act.
"Permitted Holder" means Citicorp Venture Capital, Ltd. ("CVC"), its
Permitted Transferees and any direct or indirect wholly-owned subsidiary of CVC.
"Permitted Transferee" means with respect to CVC (i) Citicorp and any
direct or indirect wholly owned subsidiary of Citicorp and any officer, director
or employee of CVC, Citicorp or any wholly owned subsidiary of Citicorp, (ii)
any spouse or lineal descent (including by adoption and stepchildren) of the
officers, directors and employees referred to in clause (i) above and (iii) any
trust, corporation or partnership of which all of the beneficiaries, beneficial
(within the meaning of
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Rule 13d-3 promulgated under the Exchange Act) stockholders or partners,
respectively, are persons or entities described in clauses (i) or (ii) above.
"person" shall include persons as that term is understood under
Sections 13(d)(3) and 14(d)(2) of the Exchange Act.
"Voting Securities" shall be deemed to include all outstanding
securities of a corporation that are then exchangable or convertible into
securities of that corporation entitled to vote generally in the election of
directors, as if same shall have been exchanged or converted into such voting
securities.
(d) "Committee" means the Compensation Committee of the Board.
(e) "Common Stock" means the common stock par value $.01 per share, of
the Corporation.
(f) "Consultant" means any person who is engaged to perform services
for the Corporation or its Parent or any of its Subsidiaries, or has agreed to
perform services for the Corporation or its Parent or any of its Subsidiaries,
other than as an Employee or Director.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Corporation" means IXNET, Inc. a Delaware corporation.
(i) "Director" means any member of the Board.
(j) "Disability" means a physical or mental impairment that causes the
Grantee to be unable to engage in any substantial gainful activity and that is
expected to result in death or has lasted or is expected to last for a
continuous period of at least 12 months. Notwithstanding the foregoing, if any
Grantee is party to an employment or consulting agreement governing the terms of
his employment or consultancy with the Corporation or its Parent or its
Subsidiaries, and such agreement includes a definition of disability, then for
purposes hereof, disability shall have the meaning ascribed thereto in such
agreement.
(k) "Employee" means any common-law employee of the Corporation or its
Parent or any of its Subsidiaries, or any person who has agreed to become a
common-law employee of the Corporation or its Parent or any of its Subsidiaries.
The term Employee shall include members of the Board who are common-law
employees of the Corporation or its Parent or any of its Subsidiaries.
(l) "Exchange Act" means the Securities Exchange Act of 1934 as
amended, and the rules and regulations thereunder as presently in effect or
thereafter amended.
(m) "Fair Market Value" means, with respect to a share of Common Stock
on a specified date:
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(i) the final reported sales price on the date in question (or
if there is no reported sale on such date, on the last preceding date
on which any reported sale occurred) as reported in the principal
consolidated reporting system with respect to securities listed or
admitted to trading on the principal United States securities exchange
(including but not limited to the Nasdaq Stock Market) on which the
Common Stock is listed or admitted to trading; or
(ii) if the Common Stock is not listed or admitted to trading
on any such exchange, the closing bid quotation with respect to a Share
on such date on the National Association of Securities Dealers
Automated Quotations System, or, if no such quotation is provided, on
another similar system, selected by the Committee, then in use; or
(iii) if paragraphs (i) and (ii) are not applicable, the fair
market value of a share of Common Stock as the Committee may determine.
(n) "Incentive Stock Option" means an Option designated by the
Committee as an Option that is intended to be an incentive stock option within
the meaning of section 422(b) of the Code.
(o) "Grantee" means a person granted an Option under the Plan.
(p) "Nonqualified Stock Option" means an Option that is not an
Incentive Stock Option, or an Incentive Stock Option that, subsequent to the
date of grant thereof, fails to satisfy the requirements of section 422(b) or
(d) of the Code.
(q) "Option" means an option granted pursuant to the Plan to purchase
shares of the Common Stock.
(r) "Parent" means any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation which owns stock,
possessing 50% or more of the voting power of all classes of stock of one of the
other corporations (including the Corporation) in the chain. A corporation's
status as a Parent shall be determined in accordance with section 424(e) of the
Code.
(s) "Plan" means this Stock Option Plan as set forth herein and as
amended from time to time. The Plan may be referred to as the "IXnet, Inc. 1999
Stock Option Plan."
(t) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder as presently in effect or hereafter
amended.
(u) "Stock Option Agreement" shall mean a written agreement between the
Corporation and the Grantee, or a certificate accepted by the Grantee,
evidencing the grant of an Option hereunder and containing such terms and
conditions, not inconsistent with the Plan, as the Committee shall approve.
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(v) "Subsidiary" shall mean (i) any corporation with respect to which
the Corporation owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock of such corporation, or (i) any entity
which the Committee reasonably expects to become a Subsidiary within the meaning
of clause (i).
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in section 7, the Common Stock which
may be issued pursuant to Options granted under the Plan shall not exceed
163.6522 shares in the aggregate. Common Stock issuable under the Plan may be
authorized but unissued shares or reacquired shares of Common Stock. Common
Stock subject to Options that are forfeited, lapse or terminate in whole or in
part for any reason, shall be available for issuance pursuant to other Options.
Notwithstanding any other provision of the Plan, and notwithstanding any
discretion conferred upon any person or entity to determine the terms and
conditions of any Option, no Employee, Director or Consultant shall be granted
Options to purchase more than the number of shares of Common Stock specified in
the first sentence of this section 3, subject to adjustment as provided in
section 7.
4. ADMINISTRATION OF THE PLAN
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select the Employees, Directors and Consultants to whom
Options may be granted;
(ii) to determine the number of shares of Common Stock subject
to each such Option;
(iii) to determine whether an Option shall be an Incentive
Stock Option or a Nonqualified Stock Option;
(iv) to determine the terms and conditions of any Option
granted under the Plan (including, but not limited to, the exercise
price, the period, if any, over which Options shall vest and become
exercisable (which period may be accelerated at any time in the
discretion of the Committee), and performance conditions relating to an
Option, based in each case on such considerations as the Committee
shall determine), and all other matters to be determined in connection
with an Option;
(v) to determine whether, to what extent and under what
circumstances an the exercise price of an Option may be paid, in cash,
Common Stock, or other property, or an Option may expire or be
canceled, forfeited, or surrendered;
(vi) to determine the restrictions or conditions related to
the delivery, holding and disposition of shares of Common Stock
received upon exercise of an Option;
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(vii) to prescribe the form of each Stock Option Agreement,
which need not be identical for each Grantee;
(viii) to adopt, amend, suspend, waive and rescind such rules
and regulations and appoint such agents as the Committee may deem
necessary or advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret the Plan
and any Option, Stock Option Agreement or other instrument hereunder;
and
(x) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
The Committee may, at any time, grant new or additional options to any eligible
Employee, Director or Consultant who has previously received Options under the
Plan, or options under other plans, whether such prior Options or other options
are still outstanding, have been exercised previously in whole or in part, or
have been canceled. The exercise price of such new or additional Options may be
established by the Committee, without regard to such previously granted Options
or other options.
Other provisions of the Plan notwithstanding, the Board may perform any function
of the Committee under the Plan, including without limitation for the purpose of
ensuring that transactions under the Plan by grantees who are then subject to
Section 16 of the Securities Exchange Act of 1934 in respect of the Corporation
are exempt under Rule 16b-3 thereunder. In any case in which the Board is
performing a function of the Committee under the Plan, each reference to the
Committee herein shall be deemed to refer to the Board.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. Any action of the
Committee with respect to the Plan shall be final, conclusive and binding on all
persons, including the Corporation, Parents, Subsidiaries, Grantees, any person
claiming any rights under the Plan from or through any Grantee and stockholders,
except to the extent the Committee may subsequently modify, or take further
action not consistent with, its prior action. If not specified in the Plan, the
time at which the Committee must or may make any determination shall be
determined by the Committee, and any such determination may thereafter by
modified by the Committee (subject to Section 10). The express grant of any
specific power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the Corporation or any
subsidiary of the Corporation the authority, subject to such terms as the
Committee shall determine, to perform such functions as the Committee may
determine, to the extent permitted under applicable law.
(c) LIMITATION OF LIABILITY. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Corporation or any
subsidiary, the Corporation's independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained
by the Corporation to assist in the administration of the Plan. To the fullest
extent permitted by
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applicable law, no member of the committee, nor any officer or employee of the
Corporation acting on behalf of the Committee, shall be personally liable for
any action, determination or interpretation or, in the case of any Grantee who
is granted Options on account of his performance of services as an Employee,
Director or Consultant of the Parent, the occurrence of any event which results
in such entity ceasing to be a Parent, taken or made in good faith with respect
to the Plan, and all members of the Committee and any officer or employee of the
Corporation acting on its behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Corporation with respect to any such action,
determination or interpretation or, in the case of any Grantee who is granted
Options on account of his performance of services as an Employee, Director or
Consultant of the Parent, the occurrence of any event which results in such
entity ceasing to be a Parent.
5. OPTION TERMS
Unless otherwise determined by the Committee and set forth in a Stock
Option Agreement, Options granted under the Plan shall contain the following
terms and conditions:
(a) TYPE OF OPTION. Each Option granted to an Employee shall be an
Incentive Stock Option to the maximum extent permitted by Section 422(d) of the
Code, and any excess over such maximum shall be a Nonqualified Stock Option.
Each Option granted to non-Employee Grantees shall be a Nonqualified Stock
Option.
(b) EXERCISE PRICE. The exercise price per share of Common Stock
subject to each Option shall equal the Fair Market Value on the date the Option
is granted.
(c) VESTING. Each Option shall vest as to 25% of the number of shares
subject thereto on the first anniversary of the date the Option is granted and
the remaining portion of the Option shall vest in 36 equal installments as of
the end of each calendar month, starting with the calendar month next following
such first anniversary; PROVIDED, HOWEVER, that immediately prior to a Change in
Control, 50% of the number of shares subject to the Option not then vested shall
become immediately vested. Vesting shall occur whether or not the Options are
otherwise exercisable as of the vesting date.
(d) EXERCISABILITY. Options granted hereunder, to the extent vested,
shall become exercisable upon the earliest of (i) the date that is 2 1/2 years
from the date the Plan is adopted by the Compensation Committee, (ii) the date
that the Corporation otherwise ceases to be a member of an "affiliated group"
(within the meaning of section 1504 of the Code) that includes IPC Information
Systems, Inc., or (iii) the date determined by the Board.
(e) TERMINATION. Options held by any Grantee shall terminate upon the
earliest of:
(i) as to any unvested Options, immediately upon the
termination of all of the Grantee's employment, directorship and
consultancy relationships with the Corporation, its Parent and its
Subsidiaries, and if such termination is for Cause, as to all Options
outstanding and unexercised, whether or not vested;
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(ii) the later of (x) 90 days after the Grantee's termination
of all of his employment, directorship and consultancy with the
Corporation and its Parent and its Subsidiaries (which shall be deemed
to include the sale of any Subsidiary of the Corporation that employs
such Grantee or, in the case of any Grantee who is granted Options on
account of his performance of service as an Employee, Director or
Consultant of the Parent, the occurrence of any event which results in
such entity ceasing to be a Parent) for any reason other than Cause,
death or Disability, or (y) 90 days following the date any such Option
becomes exercisable pursuant to Section 5(d);
(iii) the later of (x) one year after the Grantee's
termination of all of his employment, directorship and consultancy
relationships with the Corporation, its Parent and its Subsidiaries by
reason of death or Disability, or (y) one year following the date any
such Option becomes exercisable pursuant to section 5(d); PROVIDED,
HOWEVER, that during any such one year period, the Options shall be
exercisable to the extent such Options would have been vested pursuant
to section 5(c) (but without regard to the first proviso contained
therein) as of the anniversary of the date of grant next following such
termination, assuming such termination had not occurred;
(iv) the tenth anniversary of the date of grant; and
(v) upon the consummation of any transaction whereby the
Corporation (or any successor to the Corporation or all or
substantially all of its business) becomes a wholly-owned subsidiary of
any other corporation, (but after giving effect to section 5(c)),
unless such other corporation shall continue or assume the Plan as it
relates to Options then outstanding (in which case such other
corporation shall be treated as the Corporation for all purposes
hereunder, and, pursuant to section 7, the Committee of such other
corporation shall make appropriate adjustment in the number and kind of
shares of Common Stock subject thereto and the exercise price per share
thereof to reflect consummation of such transaction). If the Plan is
not to be so assumed, the Corporation shall notify the Grantee of
consummation of such transaction at least ten days in advance thereof
and the Grantee shall have the right, during such ten day period,
notwithstanding any other provision of this Plan, to exercise any and
all Options outstanding to him under the Plan and for such purpose
shall be deemed to be fully vested with respect to and shall be
entitled to exercise all such Options.
6. EXERCISE OF OPTIONS
A Grantee shall exercise an Option by delivery of written notice to the
Corporation setting forth the number of shares with respect to which the Option
is to be exercised, together with cash, certified check, bank draft, wire
transfer, or postal or express money order payable to the order of the
Corporation for an amount equal to the exercise price of such shares and any
income tax required to be withheld. The Committee may, in its sole discretion,
permit a Grantee to pay all or a portion of the exercise price or the minimum
tax withholding obligation required by law by delivery of Common Stock or other
property (including notes or other contractual obligations of the Grantee to
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make payment on a deferred basis, such as through "cashless exercise"
arrangements, to the extent permitted by applicable law), and determine the
methods by which Common Stock will be delivered or deemed to be delivered by the
Grantee. Notwithstanding anything in this section 6 to the contrary, (i) the
Committee will cooperate with each Grantee and his designated broker to
facilitate the exercise of the Grantee's Options using a "cashless exercise"
procedure in which the broker will advance funds to the Grantee to pay the
option exercise price and effect an immediate resale of all or part of the
option stock to obtain funds for repayment of the advance; PROVIDED, HOWEVER,
the Grantee shall bear the brokerage and other costs associated with the use of
such a procedure; and (ii) the Committee will not unreasonably exercise its
discretion to prevent the payment of the exercise price of Options using Common
Stock already owned by the Grantee.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
exchange of Common Stock or other securities, Common Stock dividend or other
special and nonrecurring dividend or distribution (whether in the form of cash,
securities or other property), liquidation, dissolution, or other similar
corporate transaction or event, affects the Common Stock such that an adjustment
is appropriate in order to prevent dilution or enlargement of the rights of
Grantees under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and kind of shares of Common
Stock deemed to be available thereafter for grants of Options under Section 3 in
the aggregate to all eligible individuals and individually to any one eligible
individual, (ii) the number and kind of shares of Common Stock that may be
delivered or deliverable in respect of outstanding Options, and (iii) the
exercise price. In addition, the Committee is authorized to make adjustments in
the terms and conditions of, and the criteria included in, Options (including,
without limitation, cancellation of Options in exchange for the in-the-money
value, if any, of the vested portion thereof, or substitution of Options using
stock of a successor or other entity) in recognition of unusual or nonrecurring
events (including, without limitation, events described in the preceding
sentence) affecting the Corporation or any Subsidiary or the financial
statements of the Corporation or any Subsidiary, or in response to changes in
applicable laws, regulations, or account principles; PROVIDED, HOWEVER, that any
such adjustment to an Option granted to a Grantee who is a "covered employee"
(within the meaning of section 162(m) of the Code) with respect to the
Corporation or its Parent or Subsidiaries shall conform to the requirements of
section 162(m) of the Code and the regulations thereunder then in effect.
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8. RESTRICTIONS ON ISSUANCE OF SHARES
The Corporation shall not be obligated to deliver Common Stock upon the
exercise or settlement of any Option or take any other action under the Plan
until the Corporation shall have determined that applicable federal and state
laws, rules, and regulations have been complied with and such approvals of any
regulatory or governmental agency have been obtained and contractual obligations
to which the Option may be subject have been satisfied. The Corporation, in its
discretion, may postpone the issuance or delivery of Common Stock under any
Option until completion of such stock exchange listing or registration or
qualification of Common Stock or other required action under any federal or
state law, rule, or regulation as the Corporation may consider appropriate, and
may require any grantee to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Common Stock under the Plan.
9. GENERAL PROVISIONS
(a) Each Option grant shall be evidenced by a Stock Option Agreement.
(b) The grant of an Option in any year shall not give the Grantee any
right to similar grants in future years or any right to continue such Grantee's
employment, directorship or consultancy relationship with the Corporation or its
Parent or Subsidiary. All Grantees shall remain subject to termination of their
services to the same extent as if the Plan were not in effect.
(c) No Grantee, and no beneficiary or other persons claiming under or
through the Grantee shall have any right, title or interest by reason of any
Option to any particular assets of the Corporation, or any shares of Common
Stock allocated or reserved for the purposes of the Plan or subject to any
Option except as set forth herein. Neither the Corporation nor any Parent or
Subsidiary shall be required to establish any fund or make any other segregation
of assets to assure the payment of any Option.
(d) Unless otherwise permitted in the discretion of the Committee with
respect to Nonqualified Stock Options, no Option or other right under the Plan
may be sold, transferred, assigned, pledged or otherwise encumbered, except by
will or the laws of descent and distribution, and an Option shall be
excercisable during the Grantee's lifetime only by the Grantee. Notwithstanding
the foregoing, the Committee shall not exercise its discretion to unreasonably
refuse to permit a Grantee to transfer all or any portion of his Nonqualified
Stock Options, whether or not vested or exercisable, to such Grantee's spouse,
and the lineal ascendents and lineal descendants of such Grantee or his spouse,
or any one or more of them, or to any entity wholly owned by (including but not
limited to a trust the exclusive beneficiaries of which are) one or more of them
or wholly owned jointly by one or more of them and the Grantee.
(e) The Corporation, its Parent and Subsidiaries, as applicable, shall
have the right to require that the Grantee make such provision, or furnish to it
such authorization, necessary or desirable so that it may satisfy its
obligation, under applicable laws, to withhold or otherwise pay for income or
other taxes of the Grantee attributable to the grant, exercise or cancellation
of Options granted under the Plan or the sale of Common Stock issued with
respect to Options. This authority
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shall include authority to withhold or receive Common Stock or other property
and to make cash payments in respect thereof in satisfaction of a Grantee's tax
obligations.
10. AMENDMENT OR TERMINATION
The Board may alter, amend, suspend, discontinue or terminate the Plan
at any time; PROVIDED, HOWEVER, that no such action shall adversely affect the
rights of Grantees of Options previously granted hereunder and, PROVIDED
FURTHER, HOWEVER, that any stockholder approval necessary or desirable in order
to comply with applicable law, regulation or listing requirement shall be
obtained in the manner required therein.
11. EFFECTIVE DATE OF PLAN
The Plan shall be effective immediately upon its adoption by the Board,
subject to the approval of the Plan by the Corporation's shareholders either
before or within one year after such effective date. Options granted prior to
the date on which such approval is obtained shall be conditioned upon the
receipt of such approval; no such Options may be exercised, nor shall any shares
of Common Stock be issued, under the Plan prior to the date on which such
approval is obtained.
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IXNET, INC.
STOCK OPTION PLAN
INCENTIVE STOCK OPTION GRANT CERTIFICATE
This Grant Certificate evidences the grant of an incentive stock option pursuant
to the provisions of the Stock Option Plan (the "Plan") of IXNET, Inc. (the
"Company") to the individual whose name appears below (the "Grantee"), covering
the specific number of shares of Common Stock of the Company ("Stock") set forth
below, pursuant to the provisions of the Plan and on the following express terms
and conditions:
1. Name of Grantee:
2 Number of shares of Stock of the Company which are subject to this
option:
___________ shares
3. Exercise price of shares subject to this option:
$____ per share
4. Date of grant of this option:
5. Vesting:
See Section 5(c) of the Plan.
6. Exercisability:
See Section 5(d) of the Plan.
7. Termination date of this option:
See Section 5(e) of the Plan.
8. Type of Option:
Incentive Stock Option
The Grantee hereby acknowledges receipt of a copy of the Plan as presently in
effect. The text and all of the terms and provisions of the Plan are
incorporated herein by reference, and this option is subject to these terms and
provisions in all respects. At any time when the Grantee wishes to exercise this
option, in whole or in part, the Grantee shall submit to the Company a written
notice of exercise, specifying the exercise date and the number of shares to be
exercised. Upon exercise, the Grantee shall remit to the Company the exercise
price, plus an amount sufficient to satisfy any withholding tax obligation of
the Company that arises in connection with such exercise.
IXNET, INC. AGREED TO AND ACCEPTED BY:
By:____________________________ ____________________________
Grantee
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IXNET, INC.
STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION GRANT CERTIFICATE
This Grant Certificate evidences the grant of a nonqualified option pursuant to
the provisions of the Stock Option Plan (the "Plan") of IXNET, Inc. (the
"Company") to the individual whose name appears below (the "Grantee"), covering
the specific number of shares of Common Stock of the Company ("Stock") set forth
below, pursuant to the provisions of the Plan and on the following express terms
and conditions:
1 Name of Grantee:
2 Number of shares of Stock of the Company which are subject to this
option:
___________ shares
3 Exercise price of shares subject to this option:
$____ per share
4 Date of grant of this option:
5 Vesting:
See Section 5(c) of the Plan.
6 Exercisability:
See Section 5(d) of the Plan.
7 Termination date of this option:
See Section 5(e) of the Plan.
8 Type of Option:
Nonqualified Stock Option
The Grantee hereby acknowledges receipt of a copy of the Plan as presently in
effect. The text and all of the terms and provisions of the Plan are
incorporated herein by reference, and this option is subject to these terms and
provisions in all respects. At any time when the Grantee wishes to exercise this
option, in whole or in part, the Grantee shall submit to the Company a written
notice of exercise, specifying the exercise date and the number of shares to be
exercised. Upon exercise, the Grantee shall remit to the Company the exercise
price, plus an amount sufficient to satisfy any withholding tax obligation of
the Company that arises in connection with such exercise.
IXNET, INC. AGREED TO AND ACCEPTED BY:
By:____________________________ ____________________________
Grantee
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