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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 appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11 (c) or Rule 14a-12
IPC INFORMATION SYSTEMS, INC.
---------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
IPC INFORMATION SYSTEMS, INC.
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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IPC INFORMATION SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 14, 1996
TO THE STOCKHOLDERS OF
IPC INFORMATION SYSTEMS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of IPC
Information Systems, Inc. (the "Company" or "IPC"), a Delaware corporation, will
be held on Wednesday, February 14, 1996 at 1:30 p.m. local time at The Bank of
New York, 48 Wall Street - 11th. floor, New York, New York, for the following
purposes:
1. To elect two (2) directors to fill vacancies within Class II
of the classification of directors and to serve until the
annual meeting in 1999 and until their successors shall be
duly elected and qualified.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the fiscal year ending
September 30, 1996.
3. To approve an amendment to the Company's 1994 Stock Option
and Incentive Plan.
4. To transact such other business as may properly come before
the Annual Meeting and any adjournment thereof. Except with
respect to procedural matters incident to the conduct of the
Annual Meeting, management of IPC 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 December 22,
1995 are entitled to notice of and to vote at the Annual Meeting and at any
adjournment 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 IF
YOU ATTEND THE ANNUAL MEETING. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE ANNUAL MEETING.
By Order of the Board of Directors
Daniel Utevsky
General Counsel and Corporate Secretary
New York, New York
January 16, 1996
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IPC Information Systems, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
212-825-9060
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD FEBRUARY 14, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
IPC Information Systems, Inc. (the "Company" or "IPC") for use at the Annual
Meeting of Stockholders to be held on Wednesday, February 14, 1996 at 1:30 p.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 Bank of New York, 48 Wall
Street - 11th. floor, New York, New York.
The proxy solicitation materials were mailed on or about January 16,
1996 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, the proxy will be voted
FOR each of the 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 December 22,
1995 (the "Record Date") are entitled to notice of the Annual Meeting and to
vote at the Annual Meeting. At the Record Date, 10,521,555 shares of the
Company's Common Stock were issued and outstanding and held of record by
approximately 59 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 the Annual Meeting and voting in person. 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 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 houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to
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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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of December 22,
1995, with respect to the beneficial ownership of the Company's Common Stock by:
(i) each shareholder known by the Company to be the beneficial owner of more
than five percent of the Company's Common Stock; (ii) each director and nominee;
(iii) each of the named executive officers; and (iv) 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. Other than those
persons listed below, management of the Company is not aware of any person who
is beneficial owner of more than 5% of the Company's Common Stock as of December
22, 1995.
<TABLE>
<CAPTION>
Amount & Nature of Approximate
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class(2)
------------------------ ----------------------- -------------------
<S> <C> <C>
Richard P. Kleinknecht 3,181,551 (3) 30.2
Peter J. Kleinknecht 2,885,276 (4) 27.4
Terry Clontz 0 0
Theodore J. Johnson 5,000 *
Robert J. McInerney 4,500 *
Peter M. Stein 1,000 *
Jeffrey M. Gill 64,857 (5) *
Gregory Riedel 4,333 (6) *
Russell G. Kleinknecht 48,907 (6) *
Richard C. Bozzuto, Jr. 2,433 (6) *
All executive officers and
directors as a group (10 persons) 6,197,857 58.9
</TABLE>
-------------------------------------
* 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" or the "1934 Act").
(2) Percentage of ownership is based on 10,521,555 shares of Common
Stock outstanding on December 22, 1995, except that the
percentage ownership of the group is based on 10,528,555 shares,
including as outstanding all shares issuable upon exercise of
stock options which may be exercised within 60 days after
December 22, 1995.
(3) Includes 2,552,273 shares directly owned by Richard P.
Kleinknecht and 629,278 shares beneficially owned as follows: (i)
596,150 as custodian for two of Peter Kleinknecht's children;
(ii) 2,200 as custodian for his minor child and (iii) 30,928
pursuant to an irrevocable proxy given by Jeffrey M. Gill.
Excludes 600,850 shares owned by Richard Kleinknecht's major
children for which Mr. Kleinknecht disclaims beneficial
ownership.
(4) Includes 2,552,273 shares directly owned by Peter J. Kleinknecht
and 333,003 shares beneficially owned as follows: (i) 298,075 as
custodian for one of Richard Kleinknecht's children; (ii) 2,000
as custodian for his minor child; (iii) 2,000 owned by his major
child and (iv) 30,928 pursuant to an irrevocable proxy given by
Jeffrey M. Gill. Excludes 300,075 shares owned by Peter
Kleinknecht's major child for which Mr. Kleinknecht disclaims
beneficial ownership.
(5) Mr. Gill has executed documents empowering Richard P. and Peter
J. Kleinknecht to control the voting of Mr. Gill's shares issued
to him pursuant to his employment agreement for the term of Mr.
Gill's employment agreement.
(6) Includes options to purchase 2,333 shares exercisable within 60
days of December 22, 1995.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the
Board of Directors is divided into three classes, each class consisting, as near
as may be possible, of one-third of the total number of directors. The term of
directors serving in Class I (Richard P. Kleinknecht and Peter J. Kleinknecht)
expires in 1998; in Class II (Theodore J. Johnson), the term expires in 1996;
and in Class III (Robert J. McInerney and Peter M. Stein), the term expires in
1997. Each director serves for an initial term ending on the date of the annual
meeting of stockholders occurring in the aforementioned years, or his earlier
death, resignation or removal. Directors elected at the annual meetings of
stockholders in 1996, 1997 and 1998 and thereafter, shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which the director is elected, or his earlier death, resignation or removal.
In the event of a vacancy on the Board of Directors, the Restated
Certificate of Incorporation permits the remaining members of the Board of
Directors to fill such vacancy, and the director selected shall hold office
until the next annual election and until such director's successor is elected
and qualified, or until his earlier death, resignation or removal.
Effective December 3, 1995, the Board of Directors was expanded from
five to six members and the vacancy was filled by the Company's newly appointed
Chief Executive Office and President, Terry Clontz. The nominees for election
include the sole member of Class II and the director appointed to fill the
vacancy who, if elected at the Annual Meeting, would each serve until the 1999
annual meeting and until their successors are elected and qualified, or until
their earlier death, resignation or removal. 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 either of the nominees should become unavailable for
election, an event which is not now anticipated by the Board, the proxies will
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. Set forth below
is biographical information for the persons nominated and each person whose term
of office as a director will continue after the Annual Meeting.
<TABLE>
<CAPTION>
Director
Name Age Position Since Class
- ---- --- -------- ----- -----
<S> <C> <C> <C> <C>
Richard P. Kleinknecht 57 Chairman 1991 I
and Director
Peter J. Kleinknecht 50 Vice Chairman 1991 I
and Director
Terry Clontz 45 CEO and President 1995 II
and Director
Theodore J. Johnson (1) (2) 54 Director 1994 II
Robert J. McInerney (1) (2) 50 Director 1994 III
Peter M. Stein (1) (2) 45 Director 1994 III
</TABLE>
- ------------------------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
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Nominees for Election to a Three-Year Term Expiring at the 1999 Annual
Meeting - Class II
THEODORE J. JOHNSON - Director since October 1994
Theodore J. Johnson has been employed by Morgan Stanley & Co.,
Incorporated since March 1995, as Managing Director, National Institutional
Equity Research Sales Manager. Prior to this date, Mr. Johnson was employed by
Kidder, Peabody & Co. Incorporated and served as its Director of Equity Research
from 1991 to 1995. Mr. Johnson also served as Kidder, Peabody's National
Institutional Equity Sales Manager and a branch manager of Institutional Equity
Sales.
TERRY CLONTZ - Director since December 1995
Terry Clontz joined IPC Information Systems, Inc. in December, 1995 as
Chief Executive Officer and President and Director. From 1992 through December,
1995, Mr. Clontz served as President of BellSouth International's Asia/Pacific
Region, chairman of BellSouth New Zealand and a director of BellSouth's ventures
in Australia, Singapore and the People's Republic of China. Mr. Clontz was
employed by BellSouth and its affiliates for a total of 23 years, including 1987
to 1990 as Vice President of International Business Development and 1990 to 1992
as Vice President, Europe Region.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE NAMED NOMINEES.
Directors Continuing in Office until the 1997 Annual Meeting - Class III:
ROBERT J. MCINERNEY - Director since October 1994
Robert J. McInerney has been employed as Chief Executive Officer of
Dorne & Margolin, a manufacturer of commercial and military antennas, since
August 1994. Prior to joining Dorne & Margolin, Mr. McInerney was employed by
Arrow Electronics, Inc., one of the largest electronics distributors in the
world, since 1981 and served as President of Arrow's Commercial Systems Group
since 1988.
PETER M. STEIN - Director since October 1994
Peter M. Stein has been a partner with the law firm of Epstein Becker &
Green since July 1986, having joined the firm in January 1984. Mr. Stein is
presently the Managing Partner of the firm's Stamford, Connecticut office. Prior
to joining Epstein Becker & Green, Mr. Stein was employed as Manager of Labor
Relations for U.S. Industries, Inc. from 1981 to 1984 and Associate General
Counsel for Health Industries, Inc. from 1975 to 1981.
Director Continuing in Office until the 1998 Annual Meeting - Class I:
RICHARD P. KLEINKNECHT - Director since October 1991
Richard P. Kleinknecht has served as Chairman, Chief Executive Officer
(resigning upon the appointment of Mr. Clontz on December 3, 1995) and a
Director of the Company since its acquisition from Contel Corporation in October
1991 (the "Acquisition"). His responsibilities include presiding at meetings of
the Board of Directors and the planning for the Company's long-term needs and
objectives and strategic business development. Mr. Kleinknecht has also served
as Chairman of various companies which he and his brother, Peter, jointly own or
control (collectively, the "Kleinknecht Organization") since 1968 and has worked
for the Kleinknecht Organization since 1960.
PETER J. KLEINKNECHT - Director since October 1991
Peter J. Kleinknecht has served as Vice Chairman of the Company since
May 1994 and President (resigning upon the appointment of Mr. Clontz on December
3, 1995) and a Director of the Company since the Acquisition. His
responsibilities include presiding at meetings of the Board of Directors (in the
absence of the Chairman) and the planning for the Company's long-term needs and
objectives and strategic
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business development. Mr. Kleinknecht has also served as President of various
companies within the Kleinknecht Organization since 1972 and has been employed
by the Kleinknecht Organization since 1969.
Mr. Richard P. Kleinknecht and Mr. Peter J. Kleinknecht are brothers.
Board Meetings and Committees
In fiscal 1995, the Company's Board of Directors met in person on five
occasions, the Audit Committee met twice and the Compensation Committee met
once. Each director attended at least 75% of the aggregate number of 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 officers' compensation and the granting of stock options. See "Report
of the Compensation Committee on Executive Compensation."
Directors Compensation
Each member of the Board of Directors who is not an employee of the
Company receives 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 such director is a member. Additionally, each non-employee director
will receive a fee of $2,500 for each Board meeting or committee meeting
attended. However, if such director attends more than one meeting in a single
day, he will receive a fee of $2,500 for the first meeting attended and a fee of
$1,250 for each additional meeting. There are no provisions in the Company's
Restated 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.
Compensation Committee Interlock and Insider Participation
The Compensation Committee of the Board of Directors consists of
Messrs. Johnson, McInerney and Stein. There is no insider participation on the
Compensation Committee.
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 nor shall such information
be incorporated by reference into any future filing of the Company under the
Securities Act of 1933, as amended (the "1933 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 the Company's strategic and operational
goals and enhance long-term stockholder value. The Company's philosophy is to:
Attract, retain, reward and motivate executive officers and
employees by aiming at compensation levels that are generally
competitive with comparable organizations in industry;
Align compensation with business objectives and performance; and
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Position compensation to reflect the individual's performance as
well as the level of responsibility, skill and strategic value of
the employee.
The Committee has engaged a nationally prominent compensation
consulting firm to provide advice and guidance in translating this philosophy
into appropriate new compensation programs and guidelines and to assess, as far
as possible, the competitiveness of the pertinent executive officer compensation
arrangements and actions described below.
Executive Officer Compensation
In the fiscal year ended September 30, 1995, the Company underwent a
rapid transition from an entrepreneurial private company to a more structured
public company. It also undertook an enterprise-wide restructuring involving
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.
This placed the Company in a unique position as a "high-tech" company
serving a particular niche in the financial industry where compensation
opportunities often exceed those in general industry. That has made precise
competitive compensation comparisons difficult to establish at this stage for
some of the executive officer positions. However, in the absence of formal
compensation programs or guidelines, the Committee took the following into
consideration in developing a rationale for determining compensation actions for
its executive officers.
Existing contractual compensation commitments for the three top 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.
The maintenance, where practical, of internal compensation relationships
that provide rationale and flexibility in organizational staffing.
Chairman/CEO and Vice Chairman/President Compensation
Pre-existing employment contracts for these two top executive officers
stipulate that they: (i) receive equal amounts of salary ($380,000) as Chairman
and Vice Chairman without receiving additional compensation for serving as CEO
and President, respectively; and (ii) are eligible to receive an equal annual
bonus, the amount to be determined at the discretion of the Committee based on
the performance of the Company.
For successfully guiding the Company through this critical year of
rapid growth, major restructuring, and financial success, as measured against
certain profitability and growth objectives, the Committee awarded a
discretionary bonus representing 100% of their salary, recognizing their
exclusion from stock option awards because of their substantial equity position.
Other Executive Officers' Compensation
A salary of $200,000 was established for the Chief Operating Officer by
a pre-existing employment contract and for the Executive Vice President, Global
Business Development on the basis of his unique skill and importance in
obtaining major business contracts and alliances. The rationale for awarding
both of these key executives a discretionary bonus representing 100% of their
salary was similar to that described above for the Chairman/CEO and Vice
Chairman/President. The salary and bonus levels for the Chief Financial Officer
and EVP Manufacturing/Engineering are generally in line with competitive
industry practice for those positions and reflect their criticality and
contribution to the success of the Company. Executive Officers, other than the
Chairman and Vice Chairman, are eligible to and do participate in the Company's
1994 Stock Option and Incentive Plan and its Employee Stock Purchase Plan,
providing additional equity participation as incentive compensation.
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Compliance with Section 162(m)
Section 162(m) of the Internal Revenue Code (the "Code") disallows tax
deductions for certain compensation paid by a public company to any executive
officer named in its proxy statement compensation tables to the extent such
compensation exceeds $1 million in any year. None of those Company officers
received taxable compensation from the Company in excess of $1 million in 1995
and the Committee does not anticipate that such limitation will affect
deductibility of any compensation paid to the Company's executive officers in
1996. The Committee has adopted a policy under which any executive officer whose
compensation subject to Section 162(m) would exceed $1 million in any year
shall, if possible, defer all or a portion of his or her incentive compensation
for such year to the extent necessary to avoid loss of the Company's tax
deduction for such executive's compensation.
No member of the committee is a current or former officer or employee
of the Company.
Respectfully submitted,
Compensation Committee Members
Peter M. Stein, Chairman
Theodore J. Johnson
Robert J. McInerney
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. The following table
and line graph compares quarterly cumulative shareholder returns, assuming a
$100 investment at the Company's Initial Public Offering, (including
reinvestment of dividends) on an indexed basis with the Center for Research in
Security Prices ("CRSP") Index for the Nasdaq Stock Market (US Companies) and
the CRSP Index for Nasdaq Telecommunications Stocks (US and Foreign Companies).
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.
<TABLE>
<CAPTION>
9/30/94 12/31/94 3/31/95 6/30/95 9/30/95
<S> <C> <C> <C> <C> <C>
IPC Information Systems $100.00 $75.00 $90.00 $83.33 $113.33
Nasdaq US Index $100.00 $98.84 $107.71 $123.18 $138.01
Nasdaq Telecom Index $100.00 $91.67 $95.39 $100.87 $115.19
</TABLE>
[A Graphic Representation Appears Here]
(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 1933 Act or the 1934 Act.
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MANAGEMENT
The Company's executive officers who are not also directors and their ages and
positions, as of December 22, 1995 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jeffrey M. Gill 47 Chief Operating Officer
Gregory Riedel 37 Chief Financial Officer
Chief Accounting Officer
Russell G. Kleinknecht 42 Executive Vice President, Global
Business Development
Richard C. Bozzuto, Jr. 41 Executive Vice President, Technology
and Applications
</TABLE>
JEFFREY M. GILL has served as Chief Operating Officer of the Company since
April 1992 and is responsible for all day-to-day operations of the Company
worldwide. From April 1991 to April 1992 Mr. Gill was a consultant for
developing and start-up companies. From January 1987 to March 1991 Mr. Gill
served as President and Chief Operating Officer and was responsible for sales,
marketing and field operations for trading systems products at the New York City
office of British Telecom (CBP) Inc., a direct competitor of the Company and a
United States subsidiary of British Telecommunications plc.
GREGORY RIEDEL has served as Chief Financial Officer of the Company since
August 1994 and as Controller and Chief Accounting Officer since May 1994. He is
responsible for financial planning and reporting, management information systems
and personnel. From 1989 to April 1994, Mr. Riedel was Assistant Corporate
Controller for Symbol Technologies, Inc., a manufacturer of bar code based data
capture systems, where he was responsible for corporate accounting, reporting
and financial control. From 1980 to 1988, Mr. Riedel was employed by Price
Waterhouse, holding positions from staff accountant through audit manager,
working in Price Waterhouse's New York and London (UK) offices.
RUSSELL G. KLEINKNECHT has served as Executive Vice President of Global
Business Development since December 1995. Mr. Kleinknecht also serves as
Chairman of the Company's subsidiary, IPC iXnet, helping to formulate this
developing subsidiary's strategic direction and operational plans. From April
1994, he served as Vice President responsible for major account development.
Prior to joining the Company, Mr. Kleinknecht was Executive Vice President of
Kleinknecht Electric Company, an affiliated company. Mr. Kleinknecht is the
cousin of Richard P. and Peter J. Kleinknecht.
RICHARD C. BOZZUTO, JR. has served since April 1995 as Executive Vice
President responsible for technology applications for the Company's products. In
this position he is responsible for integrating desktop computing technology
into the IPC's communications products. From December 1991 through April 1995 he
served as Executive Vice President responsible for engineering, manufacturing
and quality assurance. From 1988 to 1991, Mr. Bozzuto was Manager for North
American Engineering for Micrognosis, Inc., a developer of computer software for
the financial services industry.
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EXECUTIVE COMPENSATION
The following table provides certain summary information concerning all
compensation earned by the Company's Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers") whose annual salary and bonus for
the fiscal year ended September 30, 1995 exceeded $100,000 in the aggregate.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
Fiscal Other Annual All Other
Name and Principal Position Year (1) Salary (2) Bonus Compensation (3) Compensation
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard P. Kleinknecht 1995 $380,000 $380,000 $7,600 $25,654 (5)
Chairman and Chief 1994 259,735 10,340 -- 22,090 (5)
Executive Officer (4) 1993 38,585 -- -- 18,640 (5)
Peter J. Kleinknecht 1995 380,000 380,000 7,600 10,200 (5)
Vice Chairman and 1994 429,667 10,340 -- 10,200 (5)
President (6) 1993 487,856 -- -- 10,200 (5)
Jeffrey M. Gill 1995 200,000 200,000 (7) 380,000 (7) 45,844 (5)
Chief Operating Officer 1994 200,192 326,006 (7) 449,700 (7) --
1993 150,000 25,000 -- --
Russell G. Kleinknecht (8) 1995 133,461 200,000 4,004 --
Exec. Vice President 1994 53,846 -- -- --
1993 -- -- -- --
Gregory Riedel (9) 1995 127,500 40,000 3,825 --
Chief Financial Officer 1994 45,769 51,373 -- --
1993 -- -- -- --
</TABLE>
(1) The Company became a reporting Company as of September 26, 1994. The Company
was not a reporting company pursuant to Section 13(a) or 15(d) of the 1934
Act at any time during fiscal years prior to fiscal year 1994.
(2) Includes amounts, if any, deferred by the named individual for the period in
question pursuant to Section 401(k) of the Internal Revenue Code (the
"Code") under the IPC Information Systems, Inc. Retirement Savings Plan and
Trust (the "401(k) Plan").
(3) 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. Includes amounts paid by the
Company as matching and profit sharing contributions to the 401 (k) Plan.
(4) Effective December 3, 1995, Richard P. Kleinknecht resigned as Chief
Executive Officer, a position he had held since the Acquisition.
(5) Consists of premiums paid by the Company for term life insurance coverage
under contracts affording the named individual dispositive control over the
death benefit proceeds.
(6) Effective December 3, 1995, Peter J. Kleinknecht resigned as President, a
position he had held since the Acquisition.
(7) Consists of cash and stock bonuses paid in accordance with Mr. Gill's
employment agreement.
(8) Russell G. Kleinknecht was employed on a full time basis by the Company in
April 1994. Prior to this date, he was employed by Kleinknecht Electric
Company, an affiliate company. No compensation was earned for fiscal year
1993.
(9) Gregory Riedel was employed by the Company on May 2, 1994. No compensation
was earned for fiscal year 1993.
-9-
<PAGE>
<PAGE>
Employment Agreements
The Company has entered into separate Employment Agreements with each
of Richard P. Kleinknecht and Peter J. Kleinknecht setting forth the terms and
conditions of their service to the Company as its Chairman and Chief Executive
Officer, and Vice Chairman and President, respectively. (The Employment
Agreements were amended, as of October 17, 1995 and effective December 3, 1995,
whereby Richard P. Kleinknecht resigned as Chief Executive Officer and Peter J.
Kleinknecht resigned as President and each consented to the appointment of Terry
Clontz to the formerly held positions.) Each Employment Agreement is for an
initial term of five years commencing on October 3, 1994 and converts to a
rolling two-year term after the first three years. Pursuant to his Employment
Agreement, each executive receives a base salary at the minimum annual rate of
$380,000 and is eligible for an annual performance bonus in an amount determined
by the Compensation Committee, in its discretion. In addition to standard
benefits under the terms of the Company's generally applicable benefit plans,
each executive's Employment Agreement provides for other fringe benefits
including vacation, vehicle, and life insurance.
Each executive's Employment Agreement provides that he may be
discharged for cause, as defined, without liability to the Company other than
for accrued and unpaid compensation and benefits. If, however, the executive is
discharged under other circumstances or resigns following certain acts or
failures to act by the Company, the Company is liable for additional amounts, as
contract damages, as follows: a lump sum payment equal to the present value of
base salary and bonus payments that would have been made if his employment had
continued for the remaining contract term; continued health, disability and life
insurance coverage (or the monetary equivalent) for the remaining contract term;
a lump sum payment equal to the value of additional benefits that would have
accrued under the Company's qualified and non-qualified retirement plans if his
employment had continued for the remaining contract term; and, at the
executive's election upon surrender of all option, appreciation rights and
restricted stock issued and outstanding to him, a cash payment in lieu of
thereof. If the aggregate amount of payments contingent on a change in control
equals or exceeds three times average compensation for the prior five years (the
"Base Amount"), so called "golden parachute" taxes under Section 4999 of the
Code (a nondeductible excise tax at the rate of 20% of the amount by which
payments contingent on a change in control exceed the Base Amount) may be
assessed. If termination occurs following a change in control of the Company
under circumstances giving rise to a liability for so-called "golden parachute"
taxes, each executive would be entitled to an additional cash payment to
indemnify him against the expense of such taxes.
The Company has entered into an Employment Agreement with Jeffrey M.
Gill, setting forth the terms and conditions of his service to the Company as
its Chief Operating Officer. Mr. Gill's Employment Agreement is for an initial
term which commenced on October 3, 1994 and will end September 30, 1997 and
which converts to a rolling one-year term on September 30, 1996. Pursuant to his
Employment Agreement, Mr. Gill will receive a base salary at the minimum annual
rate of $200,000 and is eligible for an annual performance bonus in an amount
determined by the Compensation Committee. Also pursuant to this Agreement, the
Company has issued and will issue to Mr. Gill a total of 189,285 shares of
Common Stock (30,000 shares were issued upon consummation of the offering,
31,857 shares were issued on June 1, 1995 and the following four additional
annual installments will be issued
<TABLE>
<CAPTION>
Long-Term Incentive Plan
======================== =========================== ============================
Name Number of Shares Date of Payout
======================== =========================== ============================
<S> <C> <C>
Jeffrey M. Gill 31,857 September 30, 1996
------------------------ --------------------------- ----------------------------
Jeffrey M. Gill 31,857 September 30, 1997
------------------------ --------------------------- ----------------------------
Jeffrey M. Gill 31,857 September 30, 1998
------------------------ --------------------------- ----------------------------
Jeffrey M. Gill 31,857 September 30, 1999
======================== =========================== ============================
</TABLE>
-10-
<PAGE>
<PAGE>
provided Mr. Gill is then in the Company's employ and makes payment to the
Company of the par value of such shares). Mr. Gill's Employment Agreement
provides that he may be discharged for cause, as defined, without liability to
the Company other than for accrued and unpaid compensation benefits. If,
however, Mr. Gill is discharged under other circumstances, the Company is liable
for additional amounts, as contract damages, as follows: one year's base salary;
the continuation of future installments of Common Stock if, as and when such
Common Stock would have been issued had Mr. Gill's employment been continued for
the remaining contract term; and the benefits, if any, to which he is entitled
as a former employee under the employee benefit plans and programs and
compensation plans and programs maintained for the benefit of the Company's
officers and employees.
The Company has also entered into an employment agreement with Terry Clontz, as
of October 17, 1995, setting forth the terms and conditions of his service to
the Company as its Chief Executive Officer and President. Mr. Clontz's
Employment Agreement is for an initial term which commenced on December 3, 1995
and will end December 2, 1997 and which automatically renews for subsequent
one-year terms unless notice of non-renewal is given by either party. Pursuant
to his Employment Agreement, Mr. Clontz will receive a base salary at the
minimum annual rate of $300,000 and is eligible for an annual performance bonus
in an amount determined by the Compensation Committee. Mr. Clontz received a
hiring bonus of $100,000 and is eligible for a residential loan in the amount of
$150,000 upon contracting for the purchase of a primary residence in the New
York area. Also pursuant to this Agreement, the Company issued to Mr. Clontz
150,000 Options to Purchase shares of the Company's Common Stock, exercisable at
fair market value as of the date of grant (October 17, 1995), vesting in the
following installments:
<TABLE>
<CAPTION>
======================== =========================== ============================
Name Number of Options Date of Vesting
======================== =========================== ============================
<S> <C> <C>
Terry Clontz 16,667 December 2, 1996
------------------------ --------------------------- ----------------------------
Terry Clontz 33,333 December 2, 1997
------------------------ --------------------------- ----------------------------
Terry Clontz 50,000 December 2, 1998
------------------------ --------------------------- ----------------------------
Terry Clontz 33,334 December 2, 1999
------------------------ --------------------------- ----------------------------
Terry Clontz 16,666 December 2, 2000
======================== =========================== ============================
</TABLE>
provided Mr. Clontz is then in the Company's employ. Additionally, Mr. Clontz
will receive, contingent upon approval by the Stockholders of an increase to the
number of shares available under the Company's 1994 Stock Option and Incentive
Plan, additional Options to Purchase shares of the Company's Common Stock which,
contingent upon continued employment of Mr. Clontz by the Company, may be
exercised as follows: (i) 25,000 shares at a share price of $25.00 upon the
occurrence of ninety consecutive trading days during which the closing price
averages at least $40.00; and (ii) 25,000 shares at a share price of $40.00 upon
the occurrence of ninety consecutive trading days during which the closing price
averages at least $60.00. Mr. Clontz's Employment Agreement provides that he may
be discharged for cause, as defined, without liability to the Company other than
for accrued and unpaid compensation benefits. If, however, Mr. Clontz is
discharged under other circumstances, the Company is liable for payment of base
salary through the end of the then-current term of employment, but not less than
twelve months of base salary.
-11-
<PAGE>
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Richard P. Kleinknecht, the Company's Chairman, and Peter J.
Kleinknecht, the Company's Vice Chairman, are controlling stockholders and
executive officers of several other entities that do 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.
The Company had borrowed and issued non-interest bearing notes for
approximately $1 and $0.4 million from Peter J. and Richard P. Kleinknecht,
respectively. These amounts were repaid in full on October 5, 1994, using funds
from the proceeds of the initial public offering.
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. The Company, KEC-NY and KEC-NJ have benefited 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.
The total amounts paid by the Company for compensation and benefits under these
arrangements in the fiscal years ending September 30, 1994 and 1995 were $38.1
and $40.8 million, respectively. In addition, the Company paid $0.9 and $1.0
million in the fiscal years ending September 30, 1993 and 1994, respectively, in
related administrative fees. Outside of these pooling arrangements, the Company
subcontracted labor of approximately $0.9 and $0.5 million from these related
entities in the fiscal years ending September 30, 1994 and 1995, respectively.
The Company, KEC-NY and KEC-NJ entered into a 20-year agreement dated
as of May 9, 1994 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 and will continue to rent
certain equipment from Humaco. During the years ending September 30, 1994 and
1995, approximately $1.2 and $1.1 million, respectively, of equipment rentals
were utilized.
The Company rents three facilities from entities controlled by Richard
P. and Peter J. Kleinknecht for an aggregate of $38,340 per month, under month
to month arrangements.
In consideration of Jeffrey M. Gill's acceptance of employment with the
Company, Humaco loaned him $100,000, with interest accruing at 8% per annum. IPC
acquired the note from Humaco, on October 31, 1994, for $117,504, including
accrued interest. As of September 30, 1995, the total amount outstanding under
this loan (inclusive of accrued interest) was $122,988. The Company has loaned
Russell G. Kleinknecht $98,371, with interest accruing at 6% per annum. As of
September 30, 1995, the total amount outstanding under this loan (inclusive of
accrued interest) was $106,904.
-12-
<PAGE>
<PAGE>
Tax Agreement The Company is party to a Tax Allocation and Indemnification
Agreement (the "Tax Agreement"), dated as of May 9, 1994, with (i) Knight
Ventures, Inc. ("KVI"), the company formed to acquire Contel IPC (the
"Predecessor Company"), (ii) HNG Corp. and RIE Corp., two former affiliate
companies and now subsidiary companies, which were formed to hold the ownership
of IPC-UK and (iii) the pre-offering stockholders (the "Pre-offering
Stockholders") relating to their respective tax liabilities and certain related
matters. The Tax Agreement generally provides that the Pre-offering Stockholders
will be indemnified by the Company, HNG Corp. and RIE Corp. with respect to
federal and state income taxes (and interest and penalties) arising due to
taxable income shifted from a C corporation taxable year to an S corporation
taxable year. Additionally, the Company, HNG Corp. and RIE Corp. are indemnified
by the Pre-offering Stockholders to the extent of any tax benefit derived by the
Pre-offering Stockholders with respect to federal and state income taxes (and
interest and penalties) arising due to taxable income shifted from an S
corporation taxable year to a C corporation taxable year. Pursuant to the Tax
Agreement, approximately $18.5 million was distributed after the Company's
initial public offering to the Pre-offering Stockholders with respect to the
Company's period as an S corporation.
Contel Litigation The Predecessor Company was acquired in 1991 by KVI, which was
and is controlled by Richard P. and Peter J. Kleinknecht (the "Principal
Stockholders"), from Contel Inc. for consideration that included a $4.5 million
note payable by KVI to Contel Inc. The note was guaranteed by KEC-NY and the
Principal Stockholders, was originally due on January 31, 1992 and bears
interest of 9% per annum and 12% per annum in default. KVI is currently in
litigation with Contel Inc. with respect to approximately $3.3 million of taxes
and related charges owed by the Company for periods prior to the acquisition by
KVI and additional counterclaims based on misrepresentations. As a result of the
dispute, KVI has withheld payment on the note to Contel Inc.
Under the Tax Agreement, KVI has assigned to the Company certain
benefits and rights with respect to Contel's obligation not to compete and the
Company has agreed to pay the expenses incurred in connection with the foregoing
litigation. In addition, to the extent that KVI or the Principal Stockholders
receive any cash proceeds or other benefit in the form of a reduction in amounts
payable on the note by KVI, the Principal Stockholders will pay to the Company
the lesser of (i) such benefit or (ii) amounts paid by the Company for taxes and
related charges relating to said prior periods and recoverable from Contel Inc.
plus the amount of expenses of such litigation incurred by the Company following
the consummation of its initial public offering.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as the
Company's independent auditors for the year ending September 30, 1996, and has
further directed that management submit the appointment of independent auditors
for ratification by the stockholders at the Annual Meeting. Coopers & Lybrand
has audited the Company's financial statements since 1991. Representatives of
Coopers & Lybrand 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 Coopers & Lybrand L.L.P.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
-13-
<PAGE>
<PAGE>
PROPOSAL 3
AMENDMENT TO 1994 STOCK OPTION AND INCENTIVE PLAN
The Company has adopted the IPC Information Systems, Inc. 1994 Stock
Option and Incentive Plan ("Option Plan") as a means to provide
performance-based equity compensation to selected officers and employees. The
Board of Directors proposes to amend the Option Plan to provide for an increase
from 790,220 to 1,579,337 in the number of shares of Common Stock available for
issuance upon exercise of options or the grant of restricted stock awards under
the Option Plan. Specifically, it is proposed that Article 1.05 (a) of the
Option Plan be amended to read in its entirety as follows:
(a) The total number of Shares of Stock available for
awards under the Plan shall be 790,220 shares until February
14, 1996 and 1,579,337 shares thereafter subject in each case
to adjustment as set forth in Article 7. Such Stock may be
authorized but unissued shares, treasury shares, or shares
previously issued and reacquired by the Company.
The proposed amendment, if approved, would provide the Company with
additional flexibility in awarding performance-based equity compensation in
future years and would help the Company honor its commitments to provide equity
compensation to Mr. Clontz pursuant to his Employment Agreement.
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
Stock Option Plan
General Plan Information
The Option Plan provides for the grant to certain officers and
employees of options, stock appreciation rights ("SARs") and restricted stock.
The Option Plan has been approved by holders of a majority of the shares of the
Company's Common Stock present and entitled to vote at a shareholders' meeting
held on May 9, 1994. The Option Plan is not subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Options have already been
granted in accordance with the Option Plan. Although the Option Plan has
provisions for SARs and restricted stock grants, none have been granted. If the
proposed amendment is not approved, the Option Plan will continue in effect
according to its existing provisions.
Description of the Option Plan, As Amended
Administration. The Compensation Committee of the Board, consisting of
at least the minimum number of members required under Section 16(b) of the 1934
Act and the rules and regulations promulgated thereunder, will administer the
Option Plan and will determine, within the limitations of the Option Plan, the
officers and employees to whom options or SARs will be granted, the number of
shares subject to each option or SAR, the terms of such options (including
provisions regarding exercisability and acceleration of exercisability) and the
procedures by which the options shall be exercised. Subject to certain specific
limitations and restrictions set forth in the Option Plan, the Committee has
full and final authority to interpret the Option Plan, to prescribe, amend and
rescind rules and regulations, if any, relating to the Option Plan and to make
all determinations necessary or advisable for the administration of the Option
Plan. The costs and expenses of administering the Option Plan will be borne by
the Company and not charged to any grant of an Option nor to any participating
director.
-14-
<PAGE>
<PAGE>
Stock Subject to the Option Plan. The Company has reserved 790,220
shares of Stock for current and future issuance of stock options. As of December
22, 1995, the fair market value of the Stock was $16.625 per share, (as reported
by the National Association of Securities Dealers Automated Quotation System
("NASDAQ"). Such Stock may be authorized and unissued shares, treasury shares,
or shares previously issued and reacquired by the Company. Any shares of Stock
subject to awards under the Plan which are terminated, expire, forfeited or are
canceled (for any reason other than the surrender of any such award upon
exercise of a related Stock Appreciation Right) without having been exercised in
full, shall again be available for purposes of the Option Plan. Under the Option
Plan as it is proposed to be amended, an additional 789,117 shares of Common
Stock would be reserved for issuance upon exercise of options. If the proposed
amendment is approved, an aggregate total of 1,579,337 shares of stock would be
reserved under the Option Plan, with an aggregate fair market value of
$26,256,477 (based on closing sale price reported by NASDAQ on December 22,
19995). The options and rights which may be granted to any individual under the
Option Plan are subject to the future discretion of the Compensation Committee
and not ascertainable at this time, except that approval of the proposed
amendment would result in the grant of options to Mr. Clontz pursuant to his
Employment Agreement. See "Executive Compensation - Employment Agreements."
Eligibility. Officers and other key employees of the Company and its
affiliates who perform services for the Company or its Subsidiaries and are
selected by the Committee shall be eligible to participate in the Option Plan;
provided, however, that in the case of any grant made in connection with a
public offering of stock of the Company in 1994, the officers and other key
employees of the Company and its affiliates who receive such grant shall be
determined by the Board. As of December 22, 1995, the number of eligible
employees was approximately 68.
Terms and Conditions of Options. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant but shall be not less than 100% of the Fair Market Value (as
defined in the Option Plan) of the Stock at grant. The term of each Stock Option
shall be fixed by the Committee, but no Stock Option shall be exercisable more
than ten years after the date the Option is granted. Stock Options shall be
exercisable at such time or times and subject to terms and conditions as shall
be determined by the Committee. If any Stock Option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time at or after grant in whole or in part, based on such factors as the
Committee shall determine, in its sole discretion.
All or part of a Stock Option granted under the Option Plan to an
employee of the Company or its Subsidiaries may, at the election of the
Committee, be designated as an Incentive Stock Option. In the event that any
portion of an Option cannot be exercised as an Incentive Stock Option by reason
of the $100,000 limitation contained in Section 422 of the Code, such portion
shall be treated as a Non-Qualified Stock Option. If an Incentive Stock Option
is granted to an employee who on the date of grant is the owner of stock
(determined with application of the ownership attribution rules of Section
424(d) of the Code) possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any Subsidiary, the Incentive Stock
Option price shall not be less than 110% of the Fair Market Value (as defined in
the Plan) of the Stock on the date of grant and the Incentive Stock Option shall
not have a term in excess of five years from the date of grant.
Stock Options may be exercised by a Participant in accordance with the
procedures established by the Committee. The purchase price of Stock issued upon
exercise of Options shall be paid in full on the date of purchase. Payment shall
be made in cash or in such other consideration as the Committee deems
appropriate, including, but not limited to, Stock already owned by the
Participant or Stock to be acquired by the Participant upon exercise of the
Option; provided, however, that the delivery of Stock concurrently with the
exercise of an Option does not violate Section 16(b) of the 1934 Act, or any
rules or regulations promulgated thereunder.
Stock Appreciation Rights. Stock Appreciation Rights may be granted
either (a) as a separate award or (b) in conjunction with all or part of any
Stock Option granted under the Option Plan. In the case of a Non-Qualified Stock
Option, Stock Appreciation Rights may be granted either at or after the time of
the grant of such Option. In the case of an Incentive Stock Option, Stock
Appreciation Rights may be granted only at the time of the grant of such Option.
A Stock Appreciation Right issued in tandem with a Stock
-15-
<PAGE>
<PAGE>
Option shall become exercisable in accordance with the terms of the related
Option. All other Stock Appreciation Rights shall become exercisable as the
Committee may designate at the time of the grant. A Stock Appreciation Right
granted in tandem with a Stock Option shall expire in accordance with the terms
of the underlying Option. A Stock Appreciation Right granted separate from a
Stock Option shall expire on the day after the period specified in the award.
Stock Appreciation Rights shall contain such conditions upon exercise
(including, without limitation, conditions limiting the time of exercise to be
specified periods) as may be required to satisfy applicable regulatory
requirements, including without limitation, Section 16(b) of the 1934 Act and
the rules and regulations promulgated thereunder.
Upon exercise, the Participant shall be entitled to receive an amount
equal to (i) the excess of the Fair Market Value, at the time of exercise of
such Stock Appreciation Right, of one share of Stock over the exercise price per
share specified in the Stock Appreciation Right (ii) multiplied by the number of
shares exercised under the Stock Appreciation Right.
Restricted Stock. Restricted Stock may be awarded alone, or in
connection with the exercise of Stock Options or Stock Appreciation Rights or
other awards granted under the Option Plan and/or cash or other awards made
outside of the Option Plan. The award of Restricted Stock may be conditioned
upon the attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such award.
The purchase price for shares of Restricted Stock shall be equal to or
less than their par value and may be zero. Awards of Restricted Stock must be
accepted within a period of 60 days (or such shorter period as the Committee may
specify at grant) after the award date, by executing a Restricted Stock award
agreement and paying the purchase price (if any) for such Stock. Each
Participant receiving a Restricted Stock award shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such participant, and, if the Committee
determines in its sole discretion, shall bear an appropriate legend referring to
the terms, conditions, and restrictions, applicable to such award.
Subject to the provisions of the Option Plan and the award agreement,
during a period set by the Committee commencing with the date of such award (the
"Restricted Period"), the Participant may not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock awarded under the Option Plan. The
Committee may provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part, based on service,
performance and/or such other factors or criteria as the Committee may
determine, in its sole discretion.
Subject to the provisions of the Option Plan and the award agreement,
the holder of Restricted Stock, shall have all of the rights of a shareholder of
the Company, including the right to vote the shares, and the right to receive
any cash dividends. The Committee, in its sole discretion, as determined at the
time of award, may permit or require the payment of cash dividends to be
deferred and, if the Committee so determines, reinvested in additional
Restricted Stock to the extent shares are available under the Option Plan, or
otherwise reinvested. Stock dividends issued with respect to Restricted Stock
shall be treated as additional shares of Restricted Stock that are subject to
the same restrictions and other terms and conditions that apply to the shares
with respect to which such dividends are issued. If and when the Restricted
Period expires without a prior forfeiture of the Restricted Stock subject to
such Restricted Period, the holder of Restricted Stock shall be entitled to
receive the Restricted Stock free of restrictions.
Additional Awards. With the consent of the Committee, the Company may
make, or arrange for a loan to an employee with respect to the exercise of Stock
Options or the purchase of Restricted Stock. The Committee shall have full
authority to decide whether to make a loan hereunder and to determine the
amount, term and provisions of any such loan, including the interest rate to be
charged in respect of any such loan, whether the loan is to be with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which it may be forgiven. In no event shall any
loan have a term (including extensions) exceeding ten years in duration or be in
an amount exceeding 95% of the total purchase price to be paid by the borrower.
-16-
<PAGE>
<PAGE>
With the consent of the Committee, the Company may award additional
cash or Stock to any Participant to enable the Participant to pay, as and when
they become due, any Federal, state or local income taxes payable as a result of
the grant, receipt, exercise, award, lack of restriction or forgiveness of
indebtedness in connection with any Stock Option or Restricted Stock awarded
under this Option Plan. The Committee shall have full authority to decide
whether to make such awards and to determine the amount of any such award.
Change in Control Provisions
In the event of a "Change in Control" (as defined in the Option Plan),
the following acceleration and valuation provisions shall apply. Any Stock
Appreciation Rights outstanding for at least 6 months and any Stock Options
awarded under the Option Plan not previously exercisable and vested shall become
fully exercisable and vested. The restrictions applicable to any Restricted
Stock award and other awards made under the Option Plan, in each case to the
extent not already lapsed or still applicable under the Option Plan, shall lapse
and no longer be applicable and such shares and awards shall be deemed fully
vested and owned by the Participant. The value of outstanding Stock Options,
Stock Appreciation Rights, Restricted Stock, and other awards made under the
Option Plan, in each case to the extent vested, shall, unless otherwise
determined by the Committee in its sole discretion at or after grant but prior
to any Change in Control, be cashed out on the basis of the "Change in Control
Price" (as defined in the Option Plan) as of the date of such Change in Control
is determined to have occurred or such other date as the Committee may determine
prior to the Change in Control.
Termination or Amendment of the Option Plan
The Board may amend, alter, or discontinue the Option Plan, and the
Committee may amend or alter the Option Plan, but no amendment, alteration, or
discontinuation shall be made which would impair the rights of an optionee or
participant under a Stock Option, Stock Appreciation Right, Restricted Stock
award, or other benefit previously granted, without the Participant's consent,
or which, without the approval of the Company's stockholders, would (a) increase
the total number of shares reserved for the purposes of the Option Plan, (b)
decrease the option price of any Stock Option to less than 100% of the Fair
Market Value on the date of grant, (c) change the employees or class of
employees eligible to participate in the Plan or (d) extend the maximum option
period under the Option Plan.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, no such amendment
shall impair the rights of any holder without the holder's consent. The
Committee may also substitute new Stock Options for previously granted Stock
Options (on a one-for-one or other basis), including previously granted Stock
Options having higher option exercise prices. Subject to the above provisions,
the Board and/or Committee shall also have broad authority to amend the Option
Plan to take into account changes in applicable securities and tax laws and
accounting rules, as well as other developments.
Federal Income Tax Consequences
With respect to the Options which may be granted under the Option Plan,
no gain or loss is recognized by the option holder at the time such an Option is
granted, provided that the Option is not considered to have an ascertainable
fair market value. Options granted under the Option Plan would not be considered
to have an ascertainable fair market value. Upon exercise of a Non-Qualified
Stock Option, the difference between the fair market value of the Common Stock
on the date of exercise and the option price will be taxable as compensation
income to the option holder under sections 61 and 83 of the Code, and the
Company would be entitled to a deduction for federal income tax purposes of the
same amount. Upon a subsequent sale or exchange of stock acquired pursuant to
the exercise of an Option, the option holder would have taxable gain or loss,
measured by the difference between the amount realized on the disposition and
the tax basis of such shares.
Upon the exercise of an Incentive Stock Option, there is federal tax
consequence to either the option holder or the Company. If the option holder
retains the Stock acquired on exercise for a minimum period of
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one year after exercise and two years after receipt of the option grant, any
subsequent gain on disposition of the Stock will be taxable as capital gain, and
the Company will at no time be eligible for a deduction for federal income tax
purposes in respect thereof. As a general rule, if the option holder disposes of
the Stock prior to the expiration of the prescribed holding period, then the
difference between the Fair Market Value of the Stock on the date of exercise
and the option price will be taxable as compensation income to the option holder
under sections 61 and 83 of the Code for the taxable year in which the
disposition occurs, and a like amount will be deductible by the Company as a
compensation expense for federal income tax purposes in the same taxable year.
In the case of SARs, upon exercise of a SAR, the option holder would
have to include the amount paid to him upon exercise in his gross income for
federal income tax purposes in the year in which payment is made, and the
Company would be entitled to a deduction for federal income tax purposes of the
amount paid.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to Options and SARs that
may be granted under the Option Plan. State and local tax consequences may also
be significant.
Stock Purchase Plan
General Plan Information
The Company adopted the IPC Information Systems, Inc. Employee Stock
Purchase Plan ("Stock Purchase Plan"), effective October 3, 1994. The Stock
Purchase Plan is intended to enable eligible employees of the Company and its
participating subsidiaries to purchase Common Stock of the Company and is
intended to qualify as an "employee stock purchase plan under Section 423 of the
Code. The Stock Purchase Plan is administered by the Company's Compensation
Committee (the "Committee") which has full power to interpret the terms and
adopt, amend and repeal the rules for implementing and administering the Stock
Purchase Plan. The Company has reserved 526,813 shares for issuance under the
Stock Purchase Plan.
Common Stock will be offered for sale pursuant to the Stock Purchase
Plan during offering periods established by the Committee. The purchase price
will be the lesser of 90% of the Fair Market Value on the last business day or
100% of the Fair Market Value on the first business day of the offering period,
but not less than 85% of the lesser of the Fair Market Value on the date of
grant or exercise of the purchase right. Employees participate in the Stock
Purchase Plan through payroll deductions in an amount ranging from 1% to 10% of
base pay. Otherwise eligible employees will not be granted a purchase right
under the Stock Purchase Plan if, after grant of such purchase right, the
employee would own shares, options or other rights to purchase 5% or more of the
stock of the Company, or if the employee's rights to purchase under this and any
other employee stock purchase plan would exceed $25,000 of stock in any calendar
year. Unless a participant elects to withdraw from the Stock Purchase Plan, the
participant will be deemed to have automatically exercised a purchase right on
the last day of the offering period.
Certificates issued under the Stock Purchase Plan may be subject to
such transfer or other restrictions as the Committee may designate.
Additionally, "affiliates" of the Company may be subject to restrictions on
resale and executive officers, directors and 10% shareholders are subject to
certain reporting requirements under section 16 of the Exchange Act.
No employees purchased stock during the 1995 fiscal year through the
Stock Purchase Plan. However, 51 employees participated in payroll deductions
through the end of the 1995 fiscal year which resulted in the issuance of 10,373
shares of the Company's Common Stock after the conclusion of the offering period
on December 29, 1995.
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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 1997 Annual Meeting of
Stockholders must have been received by the Company no later than September 15,
1996 in order to be included in the proxy statement and proxy relating to that
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 SEC
and the National Association of Securities Dealers, Inc. 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's management believes
that all Form 3s, Form 4s (except for Form 4s required to be filed for the month
of October 1994 by two directors [Robert J. McInerney, reporting one
transaction, and Peter M. Stein, reporting one transaction] which were filed on
November 11, 1994) and Form 5s required to be filed were filed on a timely
basis.
FINANCIAL STATEMENTS
A copy of the Annual Report to Stockholders for the year ended
September 30, 1995, containing financial statements as of September 30, 1995 and
September 30, 1994, prepared in conformity with generally accepted accounting
principles, accompanies this Proxy Statement. The consolidated financial
statements have been audited by Coopers & Lybrand L.L.P. 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, 1995 with the SEC. Stockholders may obtain a
copy of such annual report (excluding exhibits) by writing to Investor Relations
Dept., IPC Information Systems, Inc., Wall Street Plaza, 88 Pine Street-15th
Floor, 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
Daniel Utevsky
General Counsel and Corporate Secretary
New York, New York
January 16, 1996
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APPENDIX I
IPC INFORMATION SYSTEMS, INC.
Wall Street Plaza
88 Pine Street - 15th. Fl.
New York, New York 10005
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 January 16, 1996, hereby appoints Gregory
Riedel and Daniel Utevsky (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 Information Systems, Inc.
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of IPC Information Systems, Inc. to be held at 1:30 p.m. on Wednesday, February
14, 1996 at The Bank of New York, 48 Wall Street - 11th. floor, New York, New
York 10005 and at any adjournment or adjournments thereof.
(continued, and to be signed, on the other side)
FOLD AND DETACH HERE
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<TABLE>
<S> <C>
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. Please mark [X]
If no direction is made, this proxy will be voted FOR Proposals 1, 2 and 3. your votes as
indicated in
this example
</TABLE>
1. Election of Directors.
<TABLE>
<S> <C> <C>
FOR all nominees WITHHOLD INSTRUCTION: To withhold authority to vote for any named nominee strike
listed at right AUTHORITY a line through the nominee's name in the list below:
(except as marked to vote for all
to the contrary). nominees listed at right
Theodore J. Johnson, Terry Clontz
</TABLE>
<TABLE>
<S> <C> <C>
2. Proposal to ratify the appointment of Coopers & 3. Proposal to amend the IPC Information Systems, 4. In their discretion,
Lybrand as independent auditors. Inc. 1994 Stock Option and Incentive Plan. the proxies are authorized
as independent auditors. to vote upon such other
business as may properly
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN come before the meeting.
[ ] [ ] [ ] [ ] [ ] [ ]
Dated:______________________________________, 1996
__________________________________________________
SIGNATURE
__________________________________________________
SIGNATURE (if held jointly)
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please sign
in full corporate name by the President or other
authorized officer separately stating full name
and title. If a partnership, please sign in
partnership name by authorized person.
</TABLE>
FOLD AND DETACH HERE
