[IPC LOGO]
IPC COMMUNICATIONS, INC.
(HOLDING COMPANY FOR IPC INFORMATION SYSTEMS, INC.)
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 15, 1999
TO THE STOCKHOLDERS OF
IPC COMMUNICATIONS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of IPC
Communications, Inc. (the "Company" or "IPC Communications"), the recently
formed holding company for IPC Information Systems, Inc., will be held on
Tuesday, June 15, 1999 at 10:00 a.m., local time, at the offices of Thacher
Proffitt & Wood, Two World Trade Center, 40th Floor, New York, New York 10048,
for the following purposes:
1. To elect nine (9) directors, each to hold office for a one
year term.
2. To amend the Amended and Restated Certificate of Incorporation
of IPC Information Systems, Inc. to eliminate the provision
relating to Section 251(g) of the General Corporation Law of
the State of Delaware ("DGCL").
3. To approve an amendment to the IPC Communications, Inc. 1999
Stock Incentive Plan to increase its share reserve.
4. To ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors of the Company for the fiscal year ending
September 30, 1999.
5. 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 IPC
Communications 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 May 21, 1999
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. WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE ANNUAL MEETING. A POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR
THAT PURPOSE. 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
New York, New York Gerald E. Starr
June 3, 1999 President and Chief Executive Officer
<PAGE>
[IPC LOGO]
IPC Communications, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
212-825-9060
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 15, 1999
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
IPC Communications, Inc. ("IPC Communications" or the "Company"), the recently
formed holding company for IPC Information Systems, Inc. ("IPC Information
Systems"), for use at the Annual Meeting of Stockholders to be held on Tuesday,
June 15, 1999 at 10:00 a.m., local 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 offices of Thacher Proffitt & Wood, Two World Trade Center, 40th Floor, New
York, New York 10048.
Effective May 21, 1999, IPC Information Systems completed a
reorganization, whereby IPC Communications, a Delaware corporation, became the
holding company (the "Reorganization") for IPC Information Systems. The
Reorganization was effected by a merger conducted pursuant to Section 251(g) of
the General Corporation Law of the State of Delaware ("DGCL"), which permits the
formation of a holding company structure without a vote of the stockholders. By
virtue of the Reorganization, IPC Information Systems became a direct, wholly
owned subsidiary of IPC Communications, and all of IPC Information Systems'
outstanding capital stock was converted, on a share-for-share basis, into
capital stock of IPC Communications. As a result of the Reorganization, all
outstanding shares of common stock of IPC Information Systems were converted
into shares of common stock of IPC Communications. Immediately following the
Reorganization, IPC Communications represented the same consolidated financial
position and total enterprise value as IPC Information Systems prior to the
Reorganization. References to the "Company" or "IPC" in this Proxy Statement
refer to IPC Communications, as successor to IPC Information Systems, as of May
21, 1999, and to IPC Information Systems through May 20, 1999. Unless the
context otherwise requires, references to the "Stock Incentive Plan" refer to
the IPC Communications, Inc. 1999 Stock Incentive Plan as of May 21, 1999 and to
the IPC Information Systems, Inc. 1998 Stock Incentive Plan through May 20,
1999.
The proxy solicitation materials were mailed on or about June 3, 1999
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 and each of the
other proposals set forth in the accompanying Notice of Annual Meeting.
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on May 21, 1999
(the "Record Date") are entitled to notice of the Annual Meeting and to vote at
the Annual Meeting. As of the Record Date, 8,076,188 shares of the Company's
Common Stock were issued and outstanding and held of record by approximately 15
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<PAGE>
stockholders. Each stockholder is entitled to one vote for each share held. No
shares of the Company's preferred stock were outstanding. 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.
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 delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or 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 inspectors of election
appointed 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.
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. 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.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Stockholders are being asked to approve an amendment to the IPC
Communications, Inc. 1999 Stock Incentive Plan (the "Stock Incentive 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. All of the directors and executive officers of IPC
Communications, each of whom is eligible for option grants under the Stock
Incentive Plan, may be deemed to have an interest in this proposal.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
BY MANAGEMENT. The following table sets forth certain information, as
of April 30, 1999 or as of a date specified in the footnotes below, as the case
may be, with respect to the beneficial ownership of the Company's Common Stock
by: (i) each director; (ii) (a) the Company's chief executive officer, (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,
1998 was at least $100,000 and (c) one additional former executive officer for
whom disclosure would have been provided but for the fact that such individual
was not serving as an executive officer for the full 1998 fiscal year
(collectively, the "Named Executive Officers"); and (iii) all executive officers
and directors as a group. Unless indicated otherwise, each person listed has
sole voting and investment power over the shares beneficially owned.
All share amounts reflect the stock split by way of a stock dividend
distributed to shareholders on June 24, 1998.
<TABLE>
<CAPTION>
(b) (c) (d)
(a) Amount & Nature of Exercisable Stock Options Approximate
Name of Beneficial Owner Beneficial Ownership(1) Included in Column (b)(2) Percent of Class (3)
- ------------------------------- --------------------------- ----------------------------- ----------------------------
<S> <C> <C> <C>
Peter A. Woog 4,000(4) -- *
Richard M. Cashin, Jr 0 -- --
David Y. Howe 0 -- --
Richard P. Kleinknecht 848,484(5) 86,580 10.4%
Richard W. Smith 381,904(6) -- 4.7%
David A. Walsh 400,622(7) 138,528 4.9%
S. Terry Clontz 6,000 0 *
Brian L. Reach 73,264(8) 69,264 *
Robert J. McInerney 0 -- --
Gerald E. Starr 69,264(9) 69,264 *
Russell G. Kleinknecht 0 0 --
All executive officers and
directors as a group (11 1,783,538 363,636 21.1%
persons)
</TABLE>
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* Less than 1%
(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 Stock Incentive Plan that, as of April 30, 1999, were
exercisable or were expected to become exercisable within 60 days.
(3) Percentage of ownership is based on 8,076,188 shares of Common Stock
outstanding on April 30, 1999, plus, in the case of each individual and the
group, the additional number of shares listed in column (b).
(4) Based on Amendment No. 4 to Schedule 13D, filed April 14, 1999.
(5) Includes 761,904 shares directly owned by Richard P. Kleinknecht and 86,580
shares that could be acquired upon exercise of stock options. Does not
include 5,671,628 shares owned by other signatories of the Amended and
Restated Investors Agreement, dated as of April 9, 1998 (the "Investors
Agreement"), among the Company, Cable Systems Holding, LLC ("CSH LLC"),
Cable Systems International, Inc ("CSI"), Lawrence, Smith & Horey III, L.P.
(now known as Allegra Capital Partners III, L.P. and hereinafter
"Allegra"), Richard P. Kleinknecht, David A. Walsh and Anthony Servidio.
Charles F. Auster became a party to the Investors Agreement on May 1, 1998.
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On April 8, 1999, CSI entered into Securities Purchase Agreements with each
of CSH LLC and Allegra, pursuant to which CSI sold 1,420,000 shares to CSH
LLC and CSI sold 96,190 shares to Allegra.
(6) Includes 381,904 shares beneficially owned by Allegra. Does not include
6,051,628 shares owned by other signatories of the Investors Agreement.
(7) Includes 262,094 shares directly owned by David A. Walsh and 138,528 shares
that could be acquired upon exercise of stock options. Does not include
6,171,438 shares owned by other signatories of the Investors Agreement.
(8) Includes 4,000 shares directly owned by Brian L. Reach and 69,264 shares
that could be acquired upon exercise of stock options.
(9) Includes 0 shares directly owned by Gerald E. Starr and 69,264 shares that
could be acquired upon exercise of stock options.
BY OTHERS. The following table sets forth certain information, as of the
dates indicated in the footnotes below, with respect to the beneficial ownership
of the Company's 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.
All share amounts reflect the stock split by way of a stock dividend
distributed to shareholders on June 24, 1998.
<TABLE>
<CAPTION>
(b) (c)
(a) Amount & Nature of Approximate Percent of
Name of Beneficial Owner Beneficial Ownership Class(1)
- ------------------------------------------ ----------------------------------- ------------------------------------
<S> <C> <C>
Cable Systems Holding, LLC 4,829,584(2) 59.8%
505 North 51st Avenue
Phoenix, Arizona 85043-2701
Chesapeake Partners Management Co., 939,400(3) 11.6%
Inc. ("CPMC")
Chesapeake Partners Limited 896,000(4) 11.1%
Partnership ("CPLP")
Chesapeake Institutional Fund LP 31,400(5) 0.4%
("CPIFLP")
1829 Reisterstown Road
Suite 220
Baltimore, Maryland 21208
</TABLE>
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(1) Percentage of ownership is based on 8,076,188 shares of Common Stock
outstanding on April 30, 1999.
(2) Based on Amendment No. 4 to Schedule 13D, filed April 14, 1999.
(3) Based on Amendment No. 1 to Schedule 13G, filed on May 7, 1999. CPMC has
shared voting and dispositive power with respect to these shares.
(4) Based on Amendment No. 1 to Schedule 13G, filed on May 7, 1999. CPLP has
shared voting and dispositive power with respect to these shares.
(5) Based on Amendment No. 1 to Schedule 13G, filed on May 7, 1999. CPIFLP has
shared voting and dispositive power with respect to these shares.
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<PAGE>
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 the Company's 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 Meting, each
to hold office for a term of one year and until his successor has been duly
elected and shall qualify. 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.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE(1) POSITION SINCE
- ------------------------------------ --------------- ----------------------------------------- ------------------------
<S> <C> <C> <C>
Peter A. Woog(3)(4) 56 Chairman and Director 1998
Richard P. Kleinknecht(5) 61 Vice Chairman and Director 1991
Richard M. Cashin, Jr.(3)(4) 46 Director 1998
David Y. Howe(2)(5) 34 Director 1998
Richard W. Smith(2)(3)(4) 46 Director 1998
Robert J. McInerney(2) 53 Director 1994
David A. Walsh(4) 37 Executive Vice President - IXnet, and 1998
Director
Gerald E. Starr(4) 46 CEO, President and Assistant Secretary 1998
and Director
Vice President, Chief Financial Officer 1998
Brian L. Reach 44 and Assistant Secretary and Director
</TABLE>
- ------------------------------
(1) As of April 30, 1998.
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Executive Committee
(5) Member of the Nominating Committee
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Set forth below is biographical information for the persons nominated.
PETER A. WOOG has been the Chairman and a Director of the Company since
April 30, 1998. Mr. Woog is President and Chief Executive Officer of Cable
Systems Holding Company ("CSHC") where he has been employed since 1995. He also
serves on the Board of Directors of CSHC, CSI, LoDan Electronics, Inc.
("LoDan"), the Arizona Association of Industries and the Samaritan Health
System. He is also a trustee and chairman for the Arizona Science Center.
RICHARD P. KLEINKNECHT has been the Vice Chairman of the Company since
April 30, 1998 and, until that date, served as Chairman and a Director of the
Company since its acquisition from Contel Corporation in October 1991. Prior to
December, 1995, Mr. Kleinknecht also served as Chief Executive Officer of the
Company. Mr. Kleinknecht has also served as Chairman of various companies
(collectively, the "Kleinknecht Organization") since 1968 and has worked for the
Kleinknecht Organization since 1960.
RICHARD M. CASHIN, JR. has been employed by Citicorp Venture Capital, Ltd.
("CVC") since September 1980 and has been President since December 1994. Mr.
Cashin is a director of CSI, 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.
DAVID Y. HOWE is a Vice President of CVC where he has been employed since
1993. He is also a director of American-Italian Pasta Company, Aetna Industries,
Inc., Bob's Stores, Inc., C&H Sugar Company, CSI, CSHC, Formica Corp., Insilco
Holding Co., Pen-Tab Industries, Inc., and several private companies.
RICHARD W. SMITH is an individual general partner of the general
partner of Allegra, Lawrence, Tyrrell, Ortale & Smith, L.P. and Lawrence,
Tyrrell, Ortale & Smith II, L.P. He is also a director of many private
companies. He has participated in the private equity industry since 1979 and was
formerly employed by CVC.
ROBERT J. McINERNEY has served as the President and Chief Operating
Officer of Kleinknecht Organization, Inc. since March 1999. From February 1997
through February 1999, he was employed by Merisel, Inc., a leading distributor
of computer hardware, networking equipment and software, where he was
responsible for U.S. and Canadian operations. He was previously employed as
Executive Vice President of United Capital Corporation, a multi-national holding
corporation and parent to Dorne & Margolin, Ancom Corporation, Metex Corporation
and AFP Corporation from 1995. Prior to joining United Capital Corporation, from
1981 Mr. McInerney was employed by Arrow Electronics, Inc., the largest
electronic component distributor in the world, and served as President of
Arrow's Commercial Systems Group from 1987 to 1994.
DAVID A. WALSH has served as Chief Executive Officer of International
Exchange Networks, Ltd. ("IXnet") and a Director of the Company since April 30,
1998. From April 30, 1998 through May 11, 1999, he also served as President of
IXnet. Prior to April 30, 1998, he was President of IXnet since its founding in
1993. Mr. Walsh served as a technology consultant to the New York Commodities
Exchange and had been employed by Garban, Garvin Guybutler and Drexel Burnham
Lambert Trading.
GERALD E. STARR has served as President and Chief Executive Officer and
Director of the Company since December 3, 1998, and, effective on May 12, and
May 20, 1999, Mr. Starr became the President and a director, respectively, of
IXnet. Prior to December 3, 1998, he was Executive Vice President, Turret
Systems from January of 1997 and had been Vice President of Manufacturing and
Engineering from February 1996. Since April 1995, he has also served as
President of IPC Bridge, Inc., a wholly owned subsidiary which acquired the
assets of Bridge Electronics, Inc. Mr. Starr founded Bridge
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Electronics, Inc. in 1987 and built it into the leading provider of digital open
line speaker systems to the foreign exchange trading industry. Previously, Mr.
Starr founded Turret Equipment Corporation ("TEC") in 1980 and sold TEC to Tie
Communications in 1984, where he remained until 1990.
BRIAN L. REACH joined the Company in May 1997 as Chief Financial
Officer and in November 1997 was named a Vice President. Effective December 3,
1998, Mr. Reach was appointed to fill a vacancy on the Company's Board. Mr.
Reach has served as Chief Financial Officer of IXnet since May 1997. Prior to
joining IPC, from 1993 through April 1997, Mr. Reach was employed by the Celadon
Group Inc., an international transportation company, as its Chief Financial
Officer through April 1996 and Vice President Special Projects through April
1997. From 1990 through 1993, he was employed by Cantel Industries, Inc., an
international distributor of medical and scientific products and ergonomic
seating as the Chief Financial Officer. Mr. Reach is a Certified Public
Accountant.
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, Executive and Nominating Committees. During fiscal 1998, the
Company's Board of Directors met in person or by teleconference on nine
occasions, the Audit Committee and the Compensation Committee each met twice,
the Executive Committee and the Nominating Committee did not meet during this
period. 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.
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.
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.
The Nominating Committee reviews and considers nominations to fill
Board and Committee vacancies and to recommend nominees for consideration by the
Board of Directors.
DIRECTORS' COMPENSATION
Mr. McInerney receives compensation for his services as a director and
attendance at board and committee meetings. Each other member of the Board of
Directors is either an employee of the Company or a principal of a signatory of
the Investors Agreement and has forgone director's compensation. Payment to Mr.
McInerney consists of an annual retainer of $5,000, contingent upon attending at
least 75% of the aggregate total number of meetings of the Board and of each
committee of which he is a member. Additionally, he receives a fee of $3,000 for
each day in which he attends a Board or committee meeting. There are no
provisions in the Company's Certificate of Incorporation or Bylaws that have the
effect of, nor has the Board adopted any policy that has the effect of, imposing
a maximum limitation on the total compensation payable in any year to any
director. Directors are eligible to receive grants of stock options
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under the Stock Incentive Plan. To date, no stock options have been granted to a
director who is not also an executive officer of the Company.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
During fiscal 1998, the Compensation Committee consisted of Peter A.
Woog, Richard M. Cashin, Jr. and Richard W. Smith. None of these individuals was
an officer or employee of the Company or any of its subsidiaries during fiscal
1998, and none is a former officer of the Company or any of its subsidiaries.
During fiscal 1998, none of the Company's executive officers served as a
director or member of the compensation committee (or 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 certain summary information concerning all
compensation earned by the Named Executive Officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
NAME AND FISCAL OTHER ANNUAL OPTIONS/SARS ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) GRANTED COMPENSATION(3)
- ----------------------------- --------- ----------- ----------- -------------- ------------- ----------------
EXECUTIVE OFFICERS AT
SEPTEMBER 30, 1998
<S> <C> <C> <C> <C> <C> <C>
Richard P. Kleinknecht 1998 $420,000 -- -- 115,440 $ 94,814
Vice Chairman 1997 420,000 -- -- -- 87,250
1996 420,000 -- -- -- 26,540
Terry Clontz (4) 1998 330,000 $568,630 $ 8,400(5) 92,352 17,357
President and Chief 1997 324,692 60,000 82,529(5) 25,000 15,756
Executive Officer 1996 255,006 150,000 133,300(5) 200,000 12,871
Gerald E. Starr 1998 225,000 484,750 -- 92,352 4,800
Exec. Vice President 1997 217,789 28,325 -- 40,000 3,200
Turret Systems 1996 183,077 25,000 -- -- --
David A. Walsh 1998 199,423 281,250 -- 184,704 44,746
Executive Vice President - 1997 190,000 -- -- -- --
IXnet and Director 1996 190,000 128,938 -- -- --
Brian L. Reach 1998 186,153 370,000 8,400(5) 92,352 4,800
V.P. and Chief Financial 1997 58,462 23,100 2,000(5) -- 2,000
Officer 1996 -- -- -- -- --
FORMER EXECUTIVE OFFICER
AT SEPTEMBER 30, 1998
Russell G. Kleinknecht 1998 168,269 468,000 -- 46,176 --
Former Executive 1997 250,000 31,250 -- 40,000 7,670
Vice President, I.T.S. 1996 220,000 160,000 -- 100,000 10,773
</TABLE>
(1) Includes amounts, if any, deferred by the named individual for the period
in question pursuant to Section 401(k) of the Internal Revenue Code of
1986, as amended (the "Code"), under the IPC Information Systems, Inc.
Retirement Savings Plan and Trust (the "401(k) Plan").
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(2) Does not include certain perquisites and other personal benefits,
securities or property received by the Named Executive Officers when the
aggregate value does not exceed the lesser of $50,000 or 10% of any such
officer's salary and bonus disclosed in this table.
(3) Consists of (i) premiums paid by the Company for term or other life
insurance coverage under contracts affording the named individual
dispositive control over the death benefit proceeds in the following
amounts for 1998: Mr. Clontz, $12,557; and Mr. Richard P. Kleinknecht,
$90,014; and (ii) amounts paid by the Company as matching and/or profit
sharing contributions to the 401(k) Plan in the following amounts for 1998:
Mr. Clontz, $4,800; Mr. Starr, $4,800; Mr. Reach, $4,800; and Mr. Richard
P. Kleinknecht, $4,800.
(4) Mr. Clontz was employed by the Company as President and Chief Executive
Officer as of December 3, 1995. Mr. Clontz resigned from the Company as of
December 3, 1998.
(5) With respect to Mr. Clontz: for fiscal year 1998, consists of payments for
automobile allowance; for fiscal year 1997, consists of $71,429 ($40,000
for moving expenses and $31,429 tax gross-up on said payment) and $11,400
related to housing costs; for fiscal year 1996, consists of $100,000 hiring
bonus, in accordance with Mr. Clontz's Employment Agreement and $33,300
related to housing costs. With respect to Mr. Reach, consists of payments
for automobile allowance.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
THE FOLLOWING SHALL NOT BE DEEMED TO BE "SOLICITING MATERIAL" OR TO BE
"FILED" WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION" FUTURE
FILING OF THE COMPANY UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE EXCHANGE ACT.
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:
o Set compensation levels to attract, retain, reward and motivate
executive officers and employees;
o Align compensation with business objectives and performance;
o Position compensation to reflect the individual's performance as
well as the level of responsibility, skill and strategic value of
the employee; and
o 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.
During the fiscal year ended September 30, 1996, the Company adopted a
formal Management Compensation Plan (the "Plan") and management compensation
continues to be recast in accordance therewith. This Plan addresses three major
elements: salary, bonus and long-term incentives. Each of these elements of
compensation serves a unique role in meeting the Company's compensation
objectives:
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<PAGE>
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 stockholder 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. Instead, it
relies on recommendations of an independent compensation expert.
EXECUTIVE OFFICER COMPENSATION
During the fiscal year ended September 30, 1998, the Company continued
to address an enterprise- wide restructuring involving the redirection and
expansion of its market and its product orientation from a limited product and
service provider to a broad-based global technology integrator meeting the needs
of the global financial community.
Compensation decisions for the fiscal year ended September 30, 1998
were based on the following considerations:
o Existing contractual compensation commitments with certain
executive officers;
o Compensation opportunities perceived to be necessary to retain
executive officers;
o General industry compensation practices and levels where
appropriate;
o The criticality of the executives to the Company's current and
future success;
o 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
o The maintenance, where practical, of internal compensation
relationships that provide rationale and flexibility in
organizational staffing.
PRESIDENT AND CHIEF EXECUTIVE OFFICER COMPENSATION
During the fiscal year ended September 30, 1998, the Compensation
Committee based its compensation decisions for S. Terry Clontz, the Company's
President and Chief Executive Officer, on the following considerations:
o Existing contractual compensation commitments;
o His significant role during the Company's recapitalization
transaction; and
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<PAGE>
o His strong leadership which resulted in the Company's strong
financial results for the fiscal year.
The Compensation Committee's decisions with respect to Mr. Clontz's
bonus were based on the utilization of a formula which took into account the
Company's earnings and financial performance and Mr. Clontz's performance as
President and Chief Executive Officer.
The compensation actions for executive officers and other executives
during the fiscal year ended September 30, 1998 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
Peter A. Woog
Richard M. Cashin, Jr.
EMPLOYMENT AGREEMENTS
RICHARD P. KLEINKNECHT. As of December 18, 1997, Richard P. Kleinknecht
entered into an Amended and Restated Employment Agreement, which became
effective as of April 30, 1998 upon the closing of the Merger and which
superseded Mr. Kleinknecht's pre-existing Employment Agreement. The Amended and
Restated Employment Agreement provides for an initial term of two (2) years of
employment, which shall be automatically extended for successive one year terms
unless either party gives the other 90 days' prior notice of non-extension.
Under this Agreement, Mr. Kleinknecht serves as Vice-Chairman of the Board of
Directors, reporting to the Board and the Chairman, devotes his full working
time and his best efforts to the performance of his duties and receives a
minimum base salary of $420,000 per annum. He may also receive, at the
discretion of the Board, a bonus based upon his performance and the performance
of the Company. Mr. Kleinknecht was also granted 57,720 stock options (adjusted
to 115,440 stock options as a result of the stock split by way of a stock
dividend, distributed June 24, 1998), pursuant to the Stock Incentive Plan. The
Agreement will terminate if Mr. Kleinknecht's employment terminates by reason of
resignation, death, disability or his discharge for Cause, as defined therein.
TERRY CLONTZ. Effective as of December 3, 1998, the Company and Mr.
Clontz entered into a Separation Agreement and Release whereby Mr. Clontz
terminated his employment with the Company as of said date and providing (i) a
lump sum payment of $164,333 (representing the unpaid balance of a previously
earned incentive bonus) less the outstanding balance on his residential loan and
(ii) a lump sum payment of $800,000, payable upon the occurrence of certain
specified events but not later than December 31, 2001. The Separation Agreement
also provides certain indemnities, mutual releases and covenants relating to
Company confidential information and trade secrets, non-solicitation and
non-competition. The Separation Agreement is currently being renegotiated.
GERALD E. STARR. As of April 20, 1995 and coincident with the
acquisition of assets of Bridge Electronics, Inc., IPC Bridge, Inc., a wholly
owned subsidiary of the Company, entered into an Employment Agreement with
Gerald E. Starr, providing an employment term of five years, a minimum base
salary of $150,000 and other benefits. The Agreement provided for its
termination, with no further liability to the Company in the event of Mr.
Starr's death, disability or his termination for Cause (as defined therein). The
Agreement also contains provisions regarding the Company's ownership of
inventions which he may make during its term and certain confidentiality and
non-competition provisions. Effective as of May 21, 1996, the parties entered
into a First Amendment to the Employment Agreement, providing an increase in the
base salary to $200,000. As of August 1, 1997, the parties entered into a Second
Amendment to the Employment
-12-
<PAGE>
Agreement, providing: (i) documentation of an increase in Mr. Starr's base
salary to $225,000 (effective as of January 13, 1997); (ii) an additional
provision providing, upon the occurrence prior to July 31, 1998 of a change of
control transaction involving the Company, payment to Mr. Starr of incentive
payments (ranging from $137,200 to $392,000, depending upon the price realized
by the Company and/or its stockholders in said transaction); and (iii) a
termination at will clause which provides that in the event of his termination
without Cause, at or following a change of control (as defined therein) of the
Company prior to July 31, 1998, the Company would make severance payments to Mr.
Starr in an amount equal to 225% of his then current base salary. Effective as
of December 1, 1998, Mr. Starr's base salary was increased to $275,000.
Effective, May 12, and 20, 1999, Mr. Starr became President and a director,
respectively, of IXnet.
DAVID A. WALSH. David Walsh entered into an Amended and Restated
Employment Agreement with IXnet, dated as of December 18, 1997 and which became
effective as of April 30, 1998 upon the consummation of the Merger, under which
he was employed on a full time basis for a five-year term as President and Chief
Executive Officer of IXnet and Chairman of the IXnet Board of Directors
reporting only to the full IXnet Board or the IPC Board. Under the Employment
Agreement, Walsh will receive $225,000 in base salary plus a discretionary bonus
with a minimum bonus target of $175,000 and benefits consistent with past
practice. He will also receive options to purchase 2% of the fully diluted
shares of the Company and a "springing" option grant equal to 3% of the shares
of IXnet (with an additional 2% reserved for grants to other employees) in the
event of a public offering or spin-off of IXnet stock within 2 years. 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 in his then-remaining term of employment. Walsh's benefits under
his Employment Agreement will continue during such severance period. During the
term of the Agreement and for 2.5 years thereafter, 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 the confidential
information and trade secrets of the Company and its affiliates. The Company has
proposed a new agreement which, if agreed to by Mr. Walsh would, among other
things, confirm that he would serve only in the capacity of Chief Executive
Officer and he would waive rights to the "springing" option for himself and
other employees of IXnet.
BRIAN L. REACH entered into a letter agreement dated April 24, 1997,
which provides that, if Mr. Reach's employment is terminated for reasons other
than a material violation of law or Company policy, the Company will pay him a
severance payment equal to six months of his then current base salary provided
he executes the Company's standard form of release agreement with respect to
claims which he may have against the Company relating to his period of
employment.
OTHER. As of August 1, 1997, the Company entered into Employee
Retention and Incentive Agreements with eight senior officers, including one
Executive Officer, Daniel Utevsky, who was not a Named Executive Officer. In the
event that any of these individuals' employment with the Company were to be
terminated without cause prior to April 30, 1999, the Company would make
severance payments equal to such employee's target bonus plus base salary
through April 30, 1999 but not less than six months plus one week for each year
of service. Mr. Utevsky relinquished his position as an executive officer of the
Company effective April 23, 1999. In settlement of the relative rights and
obligations of the parties under his Employee Retention and Incentive Agreement,
Mr. Utevsky and the Company have agreed that Mr. Utevsky's salary and insurance
benefits will be continued through January 22, 2000 and that he will provide
services to the Company as a consultant for a period of six months for
additional compensation at the rate of $200 per hour.
STOCK OPTION GRANTS
The following table sets forth certain information with respect to
options granted during the fiscal year ended September 30, 1998 to the Named
Executive Officers of the Company:
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<PAGE>
OPTION/SAR GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 1998(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF SHARE PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (2)
------------------------------------------------------------ -----------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration 5% 10%
Name Granted Fiscal Year ($/Share) Date ($) ($)
- ----------------------------- ---------------- -------------- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard P. Kleinknecht 115,440 10.4% $10.50 4/30/08 761,904 1,931,311
S. Terry Clontz 92,352 7.6 10.50 4/30/08 609,523 1,545,049
Gerald E. Starr 92,352 7.6 10.50 4/30/08 609,523 1,545,049
Russell G. Kleinknecht 46,176 3.8 10.50 4/30/08 304,762 772,524
100,000 8.3 25.00 10/01/07 1,572,237 3,984,356
David A. Walsh 184,704 15.3 10.50 4/30/08 1,219,046 3,090,098
Brian L. Reach 92,352 7.6 10.50 4/30/08 609,523 1,545,049
</TABLE>
(1) All Options granted during the fiscal year ended September 30, 1998 were
granted under the Stock Incentive Plan, except for a grant of 100,000
options to Russell G. Kleinknecht under the IPC Information Systems, Inc.
1994 Stock Option and Incentive Plan (the "Former Option Plan"). Options
granted under the Stock Incentive Plan provided a ten-year term, vest in
equal amounts on the first five anniversaries of their grant date (with
earlier vesting for 75% of the options if and when the average closing
price for the Company's Common Stock over any period of 30 consecutive
trading days equals or exceeds 300% of the exercise price and 100% of the
options if and when the average closing price for the Company's Common
Stock over any period of 30 consecutive trading days equals or exceeds 450%
of the exercise price) and are exercisable at the fair market value of the
Company's Common Stock on the date of grant. The 100,000 option grant to
Russell G. Kleinknecht was canceled without payment as of April 30, 1998.
(2) 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.
As of April 30, 1998, upon consummation of the Merger, all options
previously granted under and in accordance with the Former Option Plan and which
had not previously been either exercised or canceled vested upon the change in
control and were canceled and the holders thereof received, with respect to each
option, a cash payment which, prior to deduction for applicable withholding
taxes, was an amount equal to the product of (i) the excess, if any, of $21.00
over the per share exercise price of such option and (ii) the number of shares
of IPC Information Systems' common stock subject to such option. During the
fiscal year ended September 30, 1998, no options granted under the Stock
Incentive Plan vested or otherwise became exercisable, and, therefore, none were
exercised.
The following table sets forth certain information with respect to
options granted during the fiscal year ended September 30, 1998 to the Named
Executive Officers of the Company under (i) the Former Option Plan, which were
cancelled and for which cash payments, as described in the immediately prior
paragraph, were made and (ii) the Stock Incentive Plan:
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
FORMER OPTION PLAN STOCK INCENTIVE PLAN
----------------------- -----------------------------------------------------------------
Options Number of Securities Value of Unexercised
Cancelled Underlying Unexercised In the
under Value Options/SARs at Fiscal Money Options/SARs at
Former Realized on Year End Fiscal Year End
Option Plan Cancellation (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------------- --------------- ------------- --------------------------- --------------------------------
<S> <C> <C> <C> <C>
Richard P. Kleinknecht 0 0 0/115,440 0/0
Peter J. Kleinknecht 0 0 0/115,440 0/0
S. Terry Clontz 175,000 $1,193,750 0/92,352(1) 0/0
Gerald E. Starr 40,000 283,750 0/92,352 0/0
Russell G. Kleinknecht 247,000 989,500 0/0(2) 0/0
David A. Walsh 30,000 195,000 0/184,704 0/0
Brian L. Reach 0 0 0/92,352 0/0
</TABLE>
Except for such deemed exercises resulting in cash-out payments, no Named
Executive Officer exercised any stock options or SARs during the fiscal year
ended September 30, 1998.
(1) Options granted under the Stock Incentive Plan to S. Terry Clontz during
the fiscal year ended September 30, 1998 were canceled upon grantee's
termination of employment as of December 3, 1998.
(2) 100,000 of the 247,000 options granted under the Former Option Plan to
Russell G. Kleinknecht were out-of-the-money upon cancellation, and,
therefore, no payment was made with respect thereto. Options granted under
the Stock Incentive Plan to Russell G. Kleinknecht during the fiscal year
ended September 30, 1998 were canceled upon grantee's termination of
employment as of June 1, 1998.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Richard P. Kleinknecht, the Company's Vice Chairman and his brother,
Peter J. Kleinknecht, the Company's former Vice Chairman, are or were
controlling stockholders and executive officers of several other entities that
do or have done business from time to time with the Company and certain of its
customers. These entities include Kleinknecht Electric Company, Inc., a New York
company ("KEC-NY"), Kleinknecht Electric Company, Inc., a New Jersey company
("KEC-NJ"), both electrical services companies, and Humaco Leasing & Holding
Corporation ("Humaco"), a tool and vehicle leasing company.
As of October 1, 1993, the Company and KEC-NY entered into a 20-year
contract with respect to a pool of field technicians and administrative
employees, who are members of the International Brotherhood of Electrical
Workers ("IBEW"), Local 3 and are utilized by either the Company or KEC-NY on an
ongoing or per project basis. The Company and KEC-NJ also entered into a
comparable 20-year agreement with respect to a similar pool of employees who are
members of IBEW, Local 164T. Effective April 30, 1998, the Company and KEC-NY
and KEC-NJ entered into amended and restated agreements with respect to these
labor pools. The Company, KEC-NY and KEC-NJ have benefitted from these
arrangements by allowing each company to draw from a larger pool of field
technicians and retaining the more highly trained and skilled technicians for a
broader range of projects. KEC-NY and KEC-NJ are responsible for administering
the payroll and related services for Company employees in these pools. The
Company pays all such compensation and benefits by reimbursement to KEC-NY or
KEC-NJ, as appropriate, plus an administration fee equal to 2.5% of such costs.
Effective October 3, 1996, the parties agreed to amend this agreement to
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<PAGE>
provide for a flat administrative fee of $50,000 per month (apportioned between
KEC-NY and KEC-NJ). The total amounts paid by the Company for compensation and
benefits under these arrangements in the fiscal years ended September 30, 1998,
1997 and 1996 were $53.7, $54.9 and $54.9 million, respectively. In addition,
the Company paid $0.6, $0.6 and $1.4 million in the fiscal years ended September
30, 1998, 1997 and 1996, respectively, in related administrative fees.
The Company periodically subcontracts certain work to KEC-NY or KEC-NJ.
Amounts charged to these companies under subcontracts with the Company for the
years ended September 30, 1998, 1997 and 1996 were approximately $2.9, $0.1 and
$1.0 million, respectively, while amounts charged to the Company under
subcontracts with these companies were approximately $0.2, $0.3 and $0.7
million, respectively.
The Company, KEC-NY and KEC-NJ entered into a 20-year agreement dated
as of May 9, 1994, and amended and restated as of April 30, 1998, with respect
to corporate opportunities regarding electrical and communications cable
infrastructures. KEC-NY and KEC-NJ have agreed not to bid for or accept any
communications cabling jobs in competition with the Company, if the Company
intends to bid or accept such work. The Company, which is not a licensed
electrical contractor, has agreed to refrain from bidding for or accepting,
without the consent of KEC-NY or KEC-NJ, opportunities that combine both
electrical and communications cabling work. IPC has also agreed to continue to
refer to KEC-NY and KEC-NJ certain electrical contracting bid opportunities
which may arise.
The Company has from time to time rented certain equipment from Humaco.
There were no equipment rentals from affiliated companies during fiscal 1998 or
1997. During the year ended September 30, 1996, approximately $0.9 million of
equipment rentals were utilized. The Company, under month to month arrangements,
has, in prior fiscal years, rented facilities from entities controlled by
Richard P. Kleinknecht and Peter J. Kleinknecht. For the years ended September
30, 1997 and 1996, approximately $0.2 and $0.5 million, respectively, of such
lease expense was incurred.
Effective as of June 1, 1998, the Company entered into a Consulting
Agreement with Little Knight Music, Inc., a corporation controlled by Russell G.
Kleinknecht (a former Named Executive Officer of the Company), for a term of
eighteen (18) months under which Mr. Kleinknecht may be required to perform
certain consulting services. In consideration of such consulting services, the
Company has and will make monthly payments equaling $37,324 and totaling
$707,832. As of the effective date of the Consulting Agreement, Mr. Kleinknecht
owed the Company a total of $267,893 (consisting of employee loans, advances and
accrued interest thereon). Payments under the Consulting Agreement were offset
by the Company against such outstanding loans, which loans were paid in full
prior to December 31, 1998. In addition to the foregoing, the Company agreed to
reimburse Mr. Kleinknecht for a portion of the costs incurred by him for
continuation of medical, dental and hospitalization benefits during the term of
such Consulting Agreement.
PERFORMANCE GRAPH(1)
The Company's Common Stock began trading on the Nasdaq Stock Market
effective with the start of business on September 27, 1994. Beginning June 7,
1998, the Company's Common Stock began trading on the American Stock Exchange,
Inc. (the "AMEX"). The following graph provides a comparison of 48- Month
Cumulative Total Return among IPC Information Systems, Inc., the Nasdaq Stock
Market - US Index and the Nasdaq Telecommunications Index, assuming $100
invested on September 26, 1994 in the Company's 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.
- --------
(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.
-16-
<PAGE>
COMPARISON OF 48 MONTH CUMULATIVE TOTAL RETURN*
AMONG IPC INFORMATION SYSTEMS, INC.
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[GRAPHIC OMITTED]
* $100 INVESTED ON 9/26/94 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
<TABLE>
<CAPTION>
9/26/94 9/94 9/95 9/96 9/97 9/98
- --------------------------------------- ------------- ------------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
IPC Information Systems, Inc........... 100.00 100.42 113.30 138.33 136.67 91.67
NASDAQ Stock Market - US............... 100.00 101.11 147.96 165.73 227.51 231.96
NASDAQ Telecommunications.............. 100.00 102.71 129.64 125.85 170.67 224.19
</TABLE>
PROPOSAL NUMBER TWO
TO AMEND THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF IPC INFORMATION SYSTEMS, INC., TO ELIMINATE THE
PROVISION RELATING TO SECTION 251(G) OF THE DELAWARE GENERAL
CORPORATION LAW
Effective May 21, 1999, the Company completed a holding company
reorganization in which IPC Information Systems became a wholly owned subsidiary
of the Company. This reorganization was conducted in accordance with Section
251(g) of the DGCL and did not require a vote of IPC Information
-17-
<PAGE>
Systems' stockholders. In connection with the reorganization and pursuant to the
requirements of Section 251(g), IPC Information Systems' Certificate of
Incorporation was amended to add the following
language:
"8. VOTE OF STOCKHOLDERS OF IPC COMMUNICATIONS, INC. REQUIRED TO
APPROVE CERTAIN ACTIONS
Any act or transaction by or involving the Corporation that requires
for its adoption under the General Corporation Law of the State of
Delaware or this Amended and Restated Certificate of Incorporation the
approval of the stockholders of the Corporation shall, pursuant to
Section 251(g) of the General Corporation Law of the State of Delaware,
require, in addition, the approval of the stockholders of IPC
Communications, Inc., a Delaware corporation, or any successor thereto
by merger, by the same vote that is required by the General Corporation
Law of the State of Delaware or this Amended and Restated Certificate
of Incorporation, as the case may be."
This provision requires IPC Information Systems, in addition to
obtaining the vote of its sole stockholder, the Company, to obtain a vote of the
stockholders of the Company in connection with certain actions taken by IPC
Information Systems requiring stockholder approval, such as mergers, sale of all
or substantially all of its assets, charter amendments and corporate
dissolutions. Absent such a provision, there is no general requirement under
Delaware law that stockholders of a parent entity, such as the Company, be
entitled to vote on these types of transactions involving its wholly owned
subsidiaries, such as IPC Information Systems. This provision would have no
effect on the right of stockholders of the Company to vote on transactions
occurring at the holding company level. In order to provide maximum flexibility
and efficiency under the holding company structure that has been established,
the Company proposes to eliminate this Article 8 from IPC Information Systems'
Amended and Restated Certificate of Incorporation. If the proposed Amendment is
adopted by the Company stockholders, following such approval only a vote of IPC
Information Systems' stockholder, the Company, would be required in connection
with a merger involving IPC Information Systems, a sale of all or substantially
all of its assets, amendments to its certificate of incorporation and its
dissolution.
The Board of Directors believes that the deletion of Article 8 of IPC
Information Systems' Amended and Restated Certificate of Incorporation will
allow the Company to manage its entire organization more
effectively and broaden the alternatives for future financing.
The affirmative votes of a majority of the outstanding shares of Common
Stock are required for approval of this amendment to IPC Information Systems'
Amended and Restated Certificate of Incorporation. If this proposed amendment is
approved by the stockholders, the Company intends to promptly effect such change
by filing or causing to be filed an appropriate amendment to IPC Information
Systems' Amended and Restated Certificate of Incorporation with the State of
Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE AMENDMENT TO IPC INFORMATION
SYSTEMS' AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
-18-
<PAGE>
PROPOSAL NUMBER THREE
APPROVAL OF AN AMENDMENT TO THE IPC COMMUNICATIONS, INC.
1999 STOCK INCENTIVE PLAN
GENERAL PLAN INFORMATION
In connection with the Reorganization, IPC Information Systems
assigned, and IPC Communications assumed, the obligations for the performance of
the IPC Information Systems, Inc. 1998 Stock Incentive Plan, which, effective as
of December 3, 1998 and subject to stockholder approval, had been amended to
increase its share reserve from 1,108,224 to 1,538,322 shares of the Company's
Common Stock and which was renamed the "IPC Communications, Inc. 1999 Stock
Incentive Plan." The Stock Incentive Plan provides for the grant of options to
purchase Common Stock of the Company ("Options") to certain officers, employees,
consultants and directors of the Company and its subsidiaries. The Stock
Incentive Plan is not subject to ERISA and is not a tax-qualified plan under the
Code. The amendment to the Plan's share reserve, if approved by the Company's
stockholders, would allow the Company to provide to 156 employees who are
neither directors nor executive officers performance-based equity compensation.
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 amendment to the Stock Incentive Plan increasing
its share reserve.
DESCRIPTION OF THE STOCK INCENTIVE PLAN
ADMINISTRATION. The members of the Compensation Committee (the "Option
Committee") administer the Stock Incentive Plan and determine, within the
limitations of the Stock Incentive Plan, the employees, directors and
consultants 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 Incentive Plan, the Option Committee has
full and final authority to interpret the Stock Incentive Plan, to prescribe,
amend and rescind rules and regulations, if any, relating to the Stock Incentive
Plan and to make all determinations necessary or advisable for the
administration of the Stock Incentive Plan.
STOCK SUBJECT TO THE STOCK INCENTIVE PLAN. The Company initially
reserved 554,112 shares of Common Stock ("Option Shares") for issuance upon the
exercise of Options. The Company adjusted the Stock Incentive Plan's share
reserve in August, 1998. This adjustment was necessary to reflect a stock split.
Following the stock split, a total of 1,108,224 shares of Common Stock were
reserved for the grant of awards under the Stock Incentive 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 Incentive
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
Incentive Plan. As of May 10, 1999, the aggregate fair market value of the
1,538,322 Option Shares reserved for issuance was $74,608,617 based on the
closing sales price per share of Common Stock of $48.50 on the AMEX on such
date.
TERMS AND CONDITIONS OF OPTIONS. The Stock Incentive 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 Incentive 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 Incentive 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) 180 days after the option holder's termination of employment,
directorship or consultancy for reasons other than death, disability or
discharge for Cause; (ii) one year after the option holder's termination of
employment, directorship or consultancy due
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<PAGE>
to death or disability; (iii) immediately upon termination for Cause 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 Incentive Plan with respect to the Options then outstanding
under the Plan). An Option will generally become vested in five equal
installments, with 20% of the shares subject to the Option becoming exercisable
on each of the first five anniversaries of the date the Option is granted. At
the end of any period of 30 consecutive trading days, however, during which the
"fair market value" (as defined in the Stock Incentive Plan) of the Common Stock
subject to the Option (i) averages at least 300% of the fair market value on the
date the Option was granted, no less than 75% of the shares subject to the
Option will become vested and exercisable and (ii) averages at least 450% of the
fair market value on the date the Option was granted, no less than 100% of the
shares subject to the Option will become vested and exercisable. Each Option
will become fully vested and exercisable immediately prior to a Change in
Control (as defined in the Stock Incentive Plan).
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 number of shares available under the Stock Incentive 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 INCENTIVE PLAN
Unless sooner terminated, the Stock Incentive Plan will terminate
automatically ten years after its effective date. The Board may suspend or
terminate the Stock Incentive 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 Incentive Plan, all Options theretofore
granted under the Stock Incentive Plan that are outstanding on the date of such
suspension or termination of the Stock Incentive Plan will remain outstanding
under the terms of the agreements granting such Options.
The Board may amend or revise the Stock Incentive Plan in whole or in
part at any time, but if the amendment or revision amends a material term of the
Stock Incentive 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 Incentive 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
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<PAGE>
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.
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 Incentive 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 $1,000,000 limitation. No executive of the Company currently receives
compensation subject to this limitation.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to Options that may be
granted under the Stock Incentive Plan. State and local tax
consequences may also be significant.
STOCK INCENTIVE PLAN BENEFITS TABLE
Due to the discretionary nature of awards under the Stock Incentive
Plan, the amount of stock options or other awards that may be granted in the
future under the Stock Incentive Plan, as it would be amended, to any individual
is not determinable. The following table sets forth information with respect to
the stock option awards actually made under the Stock Incentive Plan subsequent
to the adoption of the amendment on December 3, 1998 that are contingent on
stockholder approval of the increase in the number of shares authorized for
issuance.
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<PAGE>
NEW PLAN BENEFITS
STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
STOCK OPTIONS
--------------------------------------
DOLLAR NUMBER
NAME AND POSITION VALUE ($) OF SHARES
- --------------------------------------------------------------------- ---------------------- --------------
<S> <C> <C>
Peter A. Woog, Chairman, Director and Nominee N/A 0
Richard P. Kleinknecht, Vice Chairman, Director and Nominee N/A 0
Gerald E. Starr, President, CEO, Assistant Secretary Director and
Nominee N/A 0
David A. Walsh, Executive Vice President - IXnet, Director and
Nominee N/A 0
Brian L. Reach, Vice President, Chief Financial Officer, Assistant
Secretary, Director and Nominee N/A 0
Richard M. Cashin, Jr., Director and Nominee N/A 0
David Y. Howe, Director and Nominee N/A 0
Richard W. Smith, Director and Nominee N/A 0
Robert J. McInerney, Director and Nominee N/A 0
All current executive officers as a group (9 persons) N/A 0
All current directors who are not executive officers (including
nominees) as a group (4 persons) N/A 0
All employees who are not executive officers as a group (156
persons) N/A 464,717
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
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<PAGE>
PROPOSAL NUMBER FOUR
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, 1999 and has
further directed that management submit the appointment of independent auditors
for ratification by the stockholders at the Annual Meeting.
PricewaterhouseCoopers LLP (or its predecessor, Coopers & Lybrand) have audited
the Company's financial statements since 1991. 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.
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, management does not know of any
other matters to be brought before 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 will vote the shares
represented by all properly executed proxies on such matters in such manner as
shall be determined by a majority of the Board of Directors.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 2000 Annual Meeting of
Stockholders must have been received by the Company no later than February 8,
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 April 19, 2000 of a
proposal, then the persons named as proxies in the accompanying proxy may use
their discretionary voting authority if the proposal is raised at the meeting.
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 AMEX. 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 upon information available to it, the Company believes that, except
with respect to Form 3s of Messrs. Woog, Cashin, Howe, Smith and To, all Form
3s, Form 4s and Form 5s required to be filed during the fiscal year ended
September 30, 1998 were filed on a timely basis.
-23-
<PAGE>
FINANCIAL STATEMENTS
A copy of the Annual Report to Stockholders, which is included in the
Company's Form 10-K for the year ended September 30, 1998, contains financial
statements as of September 30, 1998 and September 30, 1997, prepared in
conformity with generally accepted accounting principles, and accompanies this
Proxy Statement. The consolidated financial statements have been audited by
PricewaterhouseCoopers LLP whose report thereon appears in the Annual Report. An
additional copy of the Annual Report will be promptly furnished without charge
to stockholders upon request.
THE COMPANY IS REQUIRED TO FILE AN ANNUAL REPORT ON FORM 10-K FOR ITS
FISCAL YEAR ENDED SEPTEMBER 30, 1998 WITH THE SEC. STOCKHOLDERS MAY OBTAIN AN
ADDITIONAL COPY OF SUCH ANNUAL REPORT (EXCLUDING EXHIBITS) BY WRITING TO
INVESTOR RELATIONS DEPARTMENT, IPC COMMUNICATIONS, INC., WALL
STREET PLAZA, 88 PINE STREET, NEW YORK, NEW YORK 10005.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING, PLEASE SIGN, DATE AND PROMPTLY RETURN
THE ACCOMPANYING PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
By Order of the Board of Directors
Gerald E. Starr
New York, New York President and Chief Executive Officer
June 3, 1999
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
[GRAPHIC OMITTED]
IPC Communications, Inc., Wall Street Plaza, 88 Pine Street, New York, NY 10005
Tel: (212) 825-9060 Fax: (212) 344-5106
-26-
<PAGE>
REVOCABLE PROXY
IPC COMMUNICATIONS, INC.
(HOLDING COMPANY FOR IPC INFORMATION SYSTEMS, 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 June 3, 1999, hereby appoints Gerald E.
Starr and Brian L. Reach (each with full power to act alone and with power of
substitution and revocation), to represent the undersigned and to vote, as
designated below, all shares of Common Stock of IPC Communications, Inc. which
the undersigned is entitled to vote at the Annual Meeting of Stockholders of IPC
Communications, Inc. to be held at 10:00 a.m. on Tuesday, June 15, 1998 at the
offices of Thacher Proffitt & Wood, Two World Trade Center, 40th Floor, New
York, New York 10048 and at any adjournment or adjournments thereof.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder.
If no direction is made, this proxy Please your votes as /X/
will be vote FOR the Proposals in Items . indicated in this example
1, 2 3 and 4
1. Election of Directors.
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary): to vote for all nominees listed
below:
|_| |_|
INSTRUCTION: To withhold authority to vote for any named nominees strike a line
through the nominee's name in the list below:
Peter A. Woog Richard P. Kleinknecht Richard M. Cashin, Jr.
David Y. Howe Richard W. Smith Robert J. McInerney
David A. Walsh Gerald E. Starr Brian L. Reach
- --------------------------------------------------------------------------------
2. To amend the Amended and Restated Certificate of Incorporation of IPC
Information Systems, Inc. to eliminate the provision relating to Section
251(g) of the General Corporation Law of the State of Delaware.
FOR AGAINST ABSTAIN
|_| |_| |_|
- ------------------------- ------------------------- -------------------------
3. To approve an amendment to the IPC Communications, Inc. 1999 Stock Incentive
Plan to increase its share reserve.
FOR AGAINST ABSTAIN
|_| |_| |_|
- --------------------------------------------------------------------------------
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors for the fiscal year ending September 30, 1999.
FOR AGAINST ABSTAIN
|_| |_| |_|
- --------------------------------------------------------------------------------
5. To authorize the proxies to vote, in their discretion, upon such other
business as may properly come before the meeting.
FOR AGAINST ABSTAIN
|_| |_| |_|
<PAGE>
IMPORTANT: PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. THANK YOU.
The undersigned acknowledges receipt of the Notice of the 1999 Annual Meeting of
Stockholders and the Proxy Statement dated June 3, 1999 for the Annual Meeting.
Shares held as of May 21, 1999:
____________________
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.
