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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only (as Permitted
by Rule 14a-6 (e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
IPC INFORMATION SYSTEMS, INC.
================================================
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE>
[LOGO]
IPC INFORMATION SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 14, 1997
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 Friday, February 14, 1997 at 10:00 a.m. local time at Chase Manhattan
Bank, 270 Park Avenue (at 47th Street), 11th Floor Conference Center, New York,
New York, for the following purposes:
1. To elect two (2) directors to fill vacancies within Class III of the
classification of directors and to serve until the annual meeting in the
year 2000 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, 1997.
3. 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 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 20, 1996
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
Daniel Utevsky
Vice President,
General Counsel and Corporate Secretary
New York, New York
January 24, 1997
<PAGE>
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, 1997
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 Friday, February 14, 1997 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 Chase Manhattan Bank, 270 Park Avenue (at 47th
Street), 11th Floor Conference Center, New York, New York.
The proxy solicitation materials were mailed on or about January 24, 1997
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 20, 1996
(the "Record Date") are entitled to notice of the Annual Meeting and to vote at
the Annual Meeting. At the Record Date, 10,650,838 shares of the Company's
Common Stock were issued and outstanding and held of record by approximately 94
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.
-1-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
By Management. The following table sets forth certain information, as of
December 20, 1996, with respect to the beneficial ownership of the Company's
Common Stock by: (i) each director and nominee; (ii) each of 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.
Amount & Nature of Approximate
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class(2)
------------------------ -------------------- ----------------
Richard P. Kleinknecht 2,899,405 (3) 27.22%
Peter J. Kleinknecht 2,899,205 (4) 27.22%
Terry Clontz 20,667 (5) *
Theodore J. Johnson 5,000 *
Robert J. McInerney 4,500 *
Peter M. Stein 1,000 *
Jeffrey M. Gill 96,714 (6) *
Russell G. Kleinknecht 67,906 (7) *
All executive officers and
directors as a group (14 persons) 6,089,925 (8) 56.91%
---------------------------------
* 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) Percentage of ownership is based on 10,650,838 shares of Common Stock
outstanding on December 20, 1996, except that the percentage
ownership of the group is based on 10,700,835 shares, including as
outstanding all shares issuable upon exercise of stock options which
may be exercised within 60 days of December 20, 1996.
(3) Includes 2,552,273 shares directly owned by Richard P. Kleinknecht
and 347,132 shares beneficially owned as follows: (i) 298,075 in a
trust for his minor child; (ii) 2,200 as custodian for his minor
child and (iii) 46,857 pursuant to an irrevocable proxy given by
Jeffrey M. Gill. Excludes 600,850 shares owned by Mr. Kleinknecht's
major children for which he disclaims beneficial ownership.
(4) Includes 1,952,273 shares directly owned by Peter J. Kleinknecht
and 946,932 shares beneficially owned as follows: (i) 300,000
shares in his Grantor Retained Annuity Trust; (ii) 300,000 shares
in his wife's Grantor Retained Annuity Trust; (iii) 300,075 as
custodian for his minor child; and (iv) 46,857 pursuant to an
irrevocable proxy given by Jeffrey M. Gill. Excludes 600,150
shares owned by Peter Kleinknecht's major children for which he
disclaims beneficial ownership.
(5) Includes options to purchase 16,667 shares exercisable within 60 days
of Dec. 20, 1996.
(6) Mr. Gill executed documents empowering Richard P. and Peter J.
Kleinknecht to control the voting of shares issued to him pursuant to
and for the term of his employment agreement.
(7) Includes options to purchase 21,332 shares exercisable within 60 days
of Dec. 20, 1996.
(8) Includes options to purchase 49,997 shares exercisable within 60 days
of Dec. 20, 1996.
-2-
<PAGE>
By Others. Except as set forth in the previous section and in the table
below, the Company is not aware of any beneficial owner of more than 5% of the
Company's Common Stock as of December 20, 1996.
Name and Address Amount and Nature of Approximate
of Beneficial Owner Beneficial Ownership Percent of Class(1)
------------------- -------------------- ----------------
FMR Corp. 1,090,400(2) 10.24%
82 Devonshire St.
Boston, MA 02109
State of Wisconsin
Investment Board 570,800(3) 5.36%
P. O. Box 7842
Madison, WI 53707
-----------------
(1) Percentage of ownership is based on 10,650,838 shares of Common Stock
outstanding on December 20, 1996.
(2) Based on information in a Schedule 13G, dated December 9, 1996.
Fidelity Management & Research Company is a wholly-owned subsidiary
of FMR Corp. and an investment adviser registered under Section 203
of the Investment Advisers Act of 1940, as amended, and is the
beneficial owner of 979,100 shares or 9.19% of the Common Stock as a
result of acting as investment adviser to various investment
companies registered under Section 8 of the Investment Company Act of
1940. The ownership of one investment company, Fidelity Low-Priced
Stock Fund, amounted to 831,100 shares or 7.80% of the Common Stock
outstanding. Fidelity Management Trust Company, a wholly-owned
subsidiary of FMR Corp. and a bank as defined in Section 3 (a) (6) of
the Securities Exchange Act of 1934, as amended, is the beneficial
owner of 111,300 shares or 1.04% of the Common Stock outstanding as a
result of its serving as investment manager of the institutional
accounts.
(3) Based on information in a Schedule 13G, dated February 1996. The
State of Wisconsin Investment Board is a government agency which
manages public pension funds subject to provisions comparable to
ERISA.
-3-
<PAGE>
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 and Terry Clontz), the term
expires in 1999; 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 1997, 1998 and 1999 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.
The nominees for election include the members of Class III who, if elected
at the Annual Meeting, would each serve until the annual meeting to be held in
2000 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. Stockholders
may not vote their shares cumulatively in the election of directors. 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.
Director
Name Age (1) Position Since Class
- ---- --- -------- ----- -----
Richard P. Kleinknecht 58 Chairman 1991 I
and Director
Peter J. Kleinknecht 51 Vice Chairman 1991 I
and Director
Terry Clontz 46 CEO and President 1995 II
and Director
Theodore J. Johnson (2) (3) 55 Director 1994 II
Robert J. McInerney (2) (3) 51 Director 1994 III
Peter M. Stein (2) (3) 46 Director 1994 III
- --------------------
(1) As of December 20, 1996.
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
-4-
<PAGE>
Nominees for Election to a Three-Year Term Expiring at the 2000 Annual
- ----------------------------------------------------------------------
Meeting - Class III
- -------------------
ROBERT J. McINERNEY
Robert J. McInerney has been 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, since 1995.
Prior to joining United Capital Corporation, Mr. McInerney was employed by Arrow
Electronics, Inc., the largest electronic component distributor in the world,
since 1981 and served as President of Arrow's Commercial Systems Group since
1988.
PETER M. STEIN
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE NAMED NOMINEES.
- ------------------------------------------------------------------------
Directors Continuing in Office until the 1998 Annual Meeting - Class I:
- ----------------------------------------------------------------------
RICHARD P. KLEINKNECHT
Richard P. Kleinknecht has served as Chairman, and a Director of the
Company since its acquisition from Contel Corporation in October 1991 (the
"Acquisition"). Prior to the appointment of Mr. Clontz on December 3, 1995, Mr.
Kleinknecht also served as Chief Executive Officer of the Company. His current
responsibilities include presiding at meetings of the Board of Directors and
Stockholders 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
Peter J. Kleinknecht has served as Vice Chairman of the Company since May
1994 and a Director of the Company since the Acquisition. Prior to the
appointment of Mr. Clontz on December 3, 1995, Mr. Kleinknecht also served as
President of the Company. His current responsibilities include presiding at
meetings of the Board of Directors and Stockholders (in the absence of the
Chairman) and the planning for the Company's long-term needs and objectives and
strategic 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.
Richard P. Kleinknecht and Peter J. Kleinknecht are brothers.
Directors Continuing in Office until the 1999 Annual Meeting - Class II:
- -----------------------------------------------------------------------
THEODORE J. JOHNSON
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
Terry Clontz joined the Company in December, 1995 as President and Chief
Executive Officer 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.
-5-
<PAGE>
Board Meetings and Committees
In fiscal 1996, the Company's Board of Directors met in person on six
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 executive 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 "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 Attract, retain, reward and motivate executive officers and employees
by aiming at compensation levels that are generally competitive with
comparable organizations in industry;
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.
-6-
<PAGE>
The Company intends to target its compensation programs to provide
compensation opportunities that are perceived to be generally comparable to
those provided by similar companies in its industry.
During the fiscal year ended September 30, 1996, the Company retained a
nationally prominent compensation consulting firm to assist in the creation of a
formal Management Compensation Plan (the "Plan"). The Plan was adopted by the
Committee and management compensation has been 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:
o 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 competitive norm but that individual salaries may vary from that
norm to reflect each executive's strategic value, experience,
proficiency and performance.
o 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.
o 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.
Executive Officer Compensation
In the fiscal year ended September 30, 1996, the Company underwent 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 for some of the
executive officer positions. Compensation decisions for the fiscal year ended
September 30, 1996 were based on the following considerations:
o Existing contractual compensation commitments for the four top
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.
Chairman and Vice Chairman Compensation
Pre-existing employment contracts for these two executive officers
stipulate that they receive equal amounts of salary and other compensation as
Chairman and Vice Chairman. For the fiscal year ended September 30, 1996, the
Committee approved an increase in the annual salary for each individual from
$380,000 to $420,000. Neither bonus payments nor grants of long-term incentive
compensation, in the form of option grants or otherwise, were made with respect
to said fiscal year.
-7-
<PAGE>
President and Chief Executive Officer Compensation
The employment agreement for the President and Chief Executive Officer
became effective December 3, 1995 (see "Executive Compensation - Employment
Agreements"). It provided for a minimum annual salary of $300,000, an annual
performance bonus to be determined by the Committee, a hiring (sign-on) bonus of
$100,000 and a grant of stock options totaling 200,000 shares of which 50,000
shares were contingent upon the attainment of specified share price of the
Company's stock. After evaluating the considerable achievements of the Company
under Mr. Clontz's leadership during the fiscal year ended September 30, 1996,
including the aforementioned enterprise-wide restructuring and the Company's
growth in revenues and earnings (exclusive of start-up costs and network
deployment expenses relating to the iXnet unit), the Committee awarded Mr.
Clontz a performance bonus of $150,000 for that year.
Other Executive Officers' Compensation
The Executive Vice President, Global Operations is compensated under an
employment agreement which established a minimum annual salary of $200,000 and
certain grants of the Company's Common Stock (see "Executive Compensation -
Employment Agreements"). For the fiscal year ended September 30, 1996, the
Committee approved an increase in annual salary to $250,000 and a bonus of
$100,000. No option grants were awarded due to the stock grants provided under
said agreement.
The Executive Vice President, Global Sales receives compensation as
specified by the Committee. For the fiscal year ended September 30, 1996, the
Committee approved an increase in his annual salary to $220,000, awarded a bonus
of $160,000 and a long-term incentive stock option grant of 100,000 shares.
With respect to all Executive Officers and other Company management, except
for the adoption of the aforementioned Plan, no new compensation plans were
adopted nor were any such plans discontinued during the fiscal year ended
September 30, 1996. The compensation actions for executive officers and other
executives during the fiscal year ended September 30, 1996 were based on the
considerations listed earlier in this report. Starting with the fiscal year
ending September 30, 1997, such compensation actions will be governed by the new
executive compensation plan which provides more formalized parameters and
guidelines for determining salaries and annual and long-term incentive awards.
Federal Tax Considerations Under Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986 (the "Code") disallows
tax deductions for certain compensation paid by a public company to any
executive officer named in its proxy statement compensation table 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 1996
and the Committee does not anticipate that such limitation will affect
deductibility of any compensation paid to the Company's executive officers in
1997. 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
Peter M. Stein, Chairman
Theodore J. Johnson
Robert J. McInerney
-8-
<PAGE>
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 graph
provides a comparison of 24-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.
9/26/94 9/94 12/94 3/95 6/95 9/95 12/95 3/96 6/96 9/96
IPC Information 100 100 75 90 83 113 110 157 117 138
Systems, Inc.
NASDAQ Stock 100 101 100 109 125 140 141 148 160 166
Market - US
NASDAQ 100 102 94 98 108 121 123 130 134 125
Telecommunications
[THERE FOLLOWS A GRAPHIC REPRESENTATION OF THE PRECEDING TABULAR
INFORMATION]
- ----------------
(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.
-9-
<PAGE>
MANAGEMENT
The Company's executive officers who are not also directors and their ages and
positions, as of December 20, 1996, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- ---------
<S> <C> <C>
Jeffrey M. Gill 48 Executive Vice President, Global Operations
Russell G. Kleinknecht 43 Executive Vice President, Global Sales
Daliah Amar 36 Vice President, Sales--Americas
Hamish Henderson 38 Vice President, Sales--Europe, Middle East, Africa
James Magruder 51 Vice President, Marketing
Gerald A. Starr 43 Vice President, Manufacturing & Engineering
Daniel Utevsky 46 Vice President, General Counsel/Corporate Secretary
Richard A. Wolff 43 Vice President, I.T.S.
</TABLE>
JEFFREY M. GILL has served as Executive Vice President, Global Operations
since August 1996 when the Company was restructured along functional lines. In
this position, he is responsible for the Company's direct and distributor-based
turret operations worldwide. Prior to that date he served as Chief Operating
Officer of the Company since April 1992 and was 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.
RUSSELL G. KLEINKNECHT has served as Executive Vice President, Global Sales
since August 1996 when the Company was restructured along functional lines. In
this position, he is responsible for turret-related and network sales worldwide.
From December 1995 he served as Executive Vice President of Global Business
Development where he built the Company's organization addressing global customer
needs. Mr. Kleinknecht also serves as Chairman of the Company's subsidiary,
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.
DALIAH AMAR has served as Vice President, Sales - Americas since September
1, 1996, responsible for the Company's sales activities in the Western
Hemisphere. With 16 years experience in the telecommunications industry, Ms.
Amar comes to IPC from BellSouth, where she was the founder and President of
BellSouth Network Solutions, a network integration company specializing in
consulting, design, product integration and implementation, management and
support services. Her background includes extensive experience in voice and data
networking, project management, sales, and in the start up of new organizations.
-10-
<PAGE>
HAMISH HENDERSON has served as Vice President Sales - Europe, Middle East,
Africa (EMEA) since September 1996. He is responsible for sales of the Company's
integrated service offerings to the EMEA region and for developing business with
the Company's global customers. From 1994 to 1996, Mr. Henderson was Business
Development Manager, Financial Services Sector for CSC Computer Sciences
Corporation, Ltd., a technology services company specializing in strategic
consulting, systems integration and outsourcing. From 1986 to 1994, Mr.
Henderson was employed by Dow Jones Telerate, a real-time financial information
services company, in a number of sales, marketing and product development
positions in the UK and Scandinavia.
JAMES L. MAGRUDER has served as Vice President, Marketing since September
1996. He is responsible for the traditional tactical marketing disciplines as
well as for positioning the Company to achieve and sustain the leadership
position in the industry. Prior to joining the company, from 1993 to 1996, Mr.
Magruder served as Vice President of Marketing and Business Development for
Orion Network Systems. From 1990 to 1993, Mr. Magruder served as Vice President
of Marketing for network services at MCI.
GERALD E. STARR has served as Vice President of Manufacturing and
Engineering since February 1996. He is responsible for the management of all
engineering and manufacturing of IPC Business Products. Since April 1995, he has
also served as President of IPC Bridge, Inc., which acquired Bridge Electronics,
Inc. Mr. Starr founded Bridge Electronics 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.
DANIEL UTEVSKY has been employed by the Company since July 1993 and has
served as General Counsel and Corporate Secretary since May 1994. He is
responsible for the Company's law department, coordination of legal policy in
its relationship with all customers, suppliers, distributors and outside legal
service providers. As Corporate Secretary he maintains the Company's and
subsidiaries' corporate books and records. With 18 years in the
telecommunications industry, including 13 years as an attorney, Mr. Utevsky was
previously employed in legal and non-legal related capacities for five years
with Northern Telecom Inc. and for six years with the City of New York Office of
Telecommunications Control.
RICHARD A. WOLFF has been employed by the Company since October 1991 when
it was acquired from Contel Corporation. Since August 1996, when the Company's
Information Transport Systems (I.T.S.) organization was established as a
separate division, he has served as President, I.T.S. Previously, since 1991,
under the Company's prior geographical organization, Mr. Wolff was VP, General
Manager of the New York Metropolitan region. He was responsible for both sales
and operations of turret and I.T.S. products and services within this region.
Prior to the Acquisition, Mr. Wolff was employed by Kleinknecht Electric
Company, a major electrical contractor in New York and an affiliate of the
Company. He also previously worked as Director of Operations for Micrognosis,
Inc., a developer of computer software for the financial industry.
-11-
<PAGE>
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, 1996 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(4)
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard P. Kleinknecht 1996 $420,000 -- -- $26,540
Chairman (5) 1995 380,000 $380,000 -- 33,254
1994 259,735 10,340 -- 22,090
Peter J. Kleinknecht 1996 420,000 -- -- 13,200
Vice Chairman (6) 1995 380,000 380,000 -- 17,800
1994 429,667 10,340 -- 10,200
Terry Clontz (7) 1996 255,006 150,000 $100,000(8) 12,871
President and Chief 1995 -- -- -- --
Executive Officer 1994 -- -- -- --
Jeffrey M. Gill 1996 250,000 100,000(9) 477,536(9) 45,198
Executive Vice President 1995 200,000 200,000(9) 380,000(9) 45,844
Global Operations 1994 200,192 326,006(9) 449,700(9) --
Russell G. Kleinknecht (10) 1996 220,000 160,000 -- 10,773
Executive Vice President 1995 133,461 200,000 -- 4,004
Global Sales 1994 53,846 -- -- --
</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
Exchange 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 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.
(4) 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 and (ii) amounts paid by
the Company as matching and/or profit sharing contributions to the 401(k)
Plan.
(5) Effective December 3, 1995, Richard P. Kleinknecht resigned as Chief
Executive Officer, a position he had held since the Acquisition.
(6) Effective December 3, 1995, Peter J. Kleinknecht resigned as President, a
position he had held since the Acquisition.
(7) Terry Clontz was employed by the Company as President and Chief Executive
Officer as of December 3, 1995.
(8) Hiring (sign-on) bonus paid December 3, 1995, in accordance with
Mr. Clontz's Employment Agreement.
(9) Consists of cash and stock bonuses paid in accordance with Mr. Gill's
employment agreement.
-12-
<PAGE>
(10) 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.
-13-
<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 of the Board of Directors (the "Committee"), in
its discretion. As of October 1, 1995, the Committee approved an increase in the
salary of each executive to $420,000 which, under the terms of the Employment
Agreements, becomes the minimum annual base salary for the remainder of the
term. 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 payments, 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 options, appreciation rights and
restricted stock issued and outstanding to him, a cash payment in lieu thereof.
If the aggregate amount of payments contingent on a change in control equals or
exceeds three times the 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 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 and the Company entered into an amendment to
his Agreement as of October 17, 1995, which provided for a modification to his
title and duties. Mr. Gill's Employment Agreement is for an initial term which
commenced on October 3, 1994 and will end September 30, 1997 and which converted
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 Committee. Effective October 1, 1995, the Committee modified Mr. Gill's
base salary to $250,000. 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 each of June 1, 1995 and October 1, 1996 and the following three additional
annual installments will be issued
Long-Term Incentive Plan
=======================================================================
Name Number of Shares Date of Payout
=======================================================================
Jeffrey M. Gill 31,857 September 30, 1997
-----------------------------------------------------------------------
Jeffrey M. Gill 31,857 September 30, 1998
-----------------------------------------------------------------------
Jeffrey M. Gill 31,857 September 30, 1999
=======================================================================
-14-
<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 and 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 a resolution of the Board of Directors (Mr. Clontz abstaining both from
discussion and voting thereupon) at a regular meeting held August 8, 1996, the
Company has extended the term of Mr. Clontz's Employment Agreement to December
2, 1998. 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:
===================================================================
Name Number of Options Date of Vesting
===================================================================
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
===================================================================
provided Mr. Clontz is then in the Company's employ. Additionally, Mr. Clontz
has received 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 and 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.
-15-
<PAGE>
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 stockholders' meeting held on May
9, 1994. An amendment to the Option Plan, providing for an increase in the
number of shares reserved for issuance, was approved by a vote of stockholders
at the Annual Meeting of Stockholders held on February 14, 1996.
The Compensation Committee administers the Option Plan. 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 Company has reserved 1,579,337 shares of Common Stock for current and
future issuance of stock options. Such Common Stock may be authorized and
unissued shares, treasury shares, or shares previously issued and reacquired by
the Company. Any shares of Common 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 SAR) without having been
exercised in full, shall again be available for purposes of the Option Plan.
The following table sets forth certain information with respect to options
granted under the Option Plan during the fiscal year ended September 30, 1996 to
the executive officers of the Company who are named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
Option/SAR Grants in Fiscal Year Ended September 30, 1996
- ---------------------------------------------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates
of Share Price
Appreciation for
Individual Grants Option Term
----------------- -------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
Number of SARs
Securities Granted to Exercise
Underlying Employees or Base
Options/SARs in Fiscal Price Expiration 5% 10%
Name Granted Year ($/Share) Date ($) ($)
---- ------- ---- --------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Terry Clontz 150,000 (1) 24% $14.50 10/17/05 $1,367,846 $3,466,390
25,000 (2) 4% 25.00 10/17/05 315,232
25,000 (3) 4% 40.00 10/17/05 0
0
0
Richard P. Kleinknecht 0 -- -- -- -- --
Peter J. Kleinknecht 0 -- -- -- -- --
Jeffrey M. Gill 0 -- -- -- -- --
Russell Kleinknecht 100,000 (4) 16% 14.50 10/17/05 911,897 2,310,927
</TABLE>
- -------------
(1) Consists of 150,000 options, exercisable at a share price of $14.50,
contingent upon continued employment of Mr. Clontz by the Company and
vesting as follows: 16,667 on December 2, 1996; 33,333 on December 2, 1997;
50,000 on December 2, 1998; 33,334 on December 2, 1999; and 16,666 on
December 2, 2000.
-16-
<PAGE>
(2) Consists of 25,000 vested options which, contingent upon continued
employment of Mr. Clontz by the Company, may be exercised 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.
(3) Consists of 25,000 vested options which, contingent upon continued
employment of Mr. Clontz by the Company, may be exercised 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.
(4) Consists of 100,000 options, exercisable at a share price of $14.50,
contingent upon continued employment of Mr. Kleinknecht by the Company and
vesting as follows: 16,666 on October 17, 1996; 33,333 on October 17, 1997;
33,334 on October 17, 1998; and 16,667 on October 17, 1999.
The following table sets forth certain information with respect to options
exercised under the Option Plan during the fiscal year ended September 30, 1996
by the executive officers of the Company who are named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises In Last Fiscal Year
and Fiscal Year-End Option/SAR Values
- -------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Value Options/SARs at Fiscal In-the-Money Options/SARs
Acquired Realized Year-End at Fiscal Year-End
on Exercise on Exercise (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --- --- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Terry Clontz 0 -- 0/200,000 $0/$900,000
Richard P. Kleinknecht 0 -- -- --
Peter J. Kleinknecht 0 -- -- --
Jeffrey M. Gill 0 -- -- --
Russell G. Kleinknecht 0 -- 2,333/104,667 $12,832/$625,669
</TABLE>
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 (495,487 shares are reserved for future issuance after
subtraction of 10,373 shares and 20,953 shares issued in respect of the 1995 and
1996 offering periods, respectively).
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
-17-
<PAGE>
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.
Fifty-one 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. Ninety-three employees participated in payroll deductions through the
end of the 1996 fiscal year which resulted in the issuance of 20,953 shares of
the Company's Common Stock after the conclusion of the offering period on
December 31, 1996.
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.
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.
Effective October 3, 1996, the parties agreed to amend this agreement to provide
for a flat administrative fee of $50,000 per month (to be apportioned between
KEC-NY and KEC-NJ for the period from October 1, 1996 through October 1, 1997.
The total amounts paid by the Company for compensation and benefits under these
arrangements in the fiscal years ended September 30, 1996, 1995 and 1994 were
$54.9, $40.7 and $38.1 million, respectively. In addition, the Company paid
$1.4, $1.0 and $0.9 million in the fiscal years ended September 30, 1996, 1995
and 1994, respectively, in related administrative fees.
The Company, on the one hand, and KEC-NY and KEC-NJ, on the other hand,
periodically subcontract certain work to one another. Amounts charged to these
companies under subcontracts with the Company for the years ended September 30,
1996, 1995 and 1994 were approximately $1.0, $2.2 and $0.1 million,
respectively, while amounts charged to the Company under subcontracts with these
companies were approximately $0.7, $0.6 and $1.0 million, 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.
-18-
<PAGE>
The Company has from time to time rented certain equipment from Humaco.
During the years ended September 30, 1996, 1995 and 1994, approximately $0.9,
$1.0 and $1.2 million, respectively, of equipment rentals were utilized. The
Company, under month to month arrangements, has rented three facilities from
entities controlled by Richard P. and Peter J. Kleinknecht. For the years ended
September 30, 1996, 1995 and 1994, approximately $0.5, $0.5 and $0.6 million,
respectively, of such lease expense was incurred.
In consideration of Jeffrey M. Gill's acceptance of employment with the
Company, Humaco lent 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, 1996, the total amount outstanding under
this loan (inclusive of accrued interest and net of repayments) was $34,396. In
addition, the Company has made employee advances to Mr. Gill totaling $340,481,
as of September 30, 1996.
The Company lent Russell G. Kleinknecht $98,371, with interest accruing at
6% per annum. As of September 30, 1996, the total amount outstanding under this
loan (inclusive of accrued interest) was $106,904. In addition, the Company has
made employee advances to Mr. Kleinknecht totaling $140,000, as of September 30,
1996.
Contel Litigation
Knight Ventures, Inc. ("KVI"), a company principally owned by Richard P.
Kleinknecht and Peter J. Kleinknecht (the "Principal Stockholders"), and the
former parent of the Company, agreed to settle its litigation with Contel
Corporation ("Contel") covering, inter alia, the parties' respective liabilities
for taxes, tax liens, tax assessments and tax warrants with respect to the
Company, for periods prior to its acquisition from Contel.
As of May 9, 1994, the Company, KVI and the Principal Stockholders entered
into a Tax Allocation and Indemnification Agreement (the "Tax Agreement")
relating to their respective income tax liabilities and certain related matters
as a consequence of the Company's termination of its S Corporation status and
initial public offering. In addition, the Company, KVI and the Principal
Stockholders agreed, to the extent that either KVI or the Principal Stockholders
receives any cash proceeds or other benefit in the form of a reduction in
amounts payable to Contel, as a consequence of a judgment in the aforementioned
action or the settlement thereof, they will pay to the Company the lesser of (i)
such benefit; or (ii) the amount paid by the Company for taxes and related
charges in connection with the action, plus the amount of any expenses incurred
by the Company following the consummation of the Company's initial public
offering for pursuing such litigation.
As of May 15, 1996, Contel, KVI, the Principal Stockholders and the Company
(although not a party to the litigation) entered into the aforementioned
settlement agreement and mutual releases. In connection with this settlement
agreement, KVI has executed, and the Principal Stockholders have guaranteed, a
one year note payable to the Company in the amount of $1,300,000, with interest
at 7% to fulfill obligations under the Tax Agreement.
-19-
<PAGE>
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, 1997, 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.
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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 1998 Annual Meeting of Stockholders must
have been received by the Company no later than September 22, 1997 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 Securities and
Exchange Commission 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 and Form 5s required to be filed during the fiscal
year ended September 30, 1996 were filed on a timely basis.
FINANCIAL STATEMENTS
A copy of the Annual Report to Stockholders for the year ended September
30, 1996, containing financial statements as of September 30, 1996 and September
30, 1995, 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, 1996 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, 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
Vice President
General Counsel and Corporate Secretary
New York, New York
January 24, 1997
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IPC INFORMATION SYSTEMS, INC.
Wall Street Plaza
88 Pine Street
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 24, 1997, hereby appoints Daniel
Utevsky and Kevin Esposito (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 10:00 a.m. on Friday, February
14, 1997 at The Chase Manhattan Bank, 270 Park Avenue (11th Floor Conference
Center), New York, New York and at any adjournment or adjournments thereof.
(continued, and to be signed, on the other side)
<PAGE>
<TABLE>
<CAPTION>
IPC INFORMATION SYSTEMS, INC.
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. Please mark
If no direction is made, this proxy will be voted FOR Proposals 1 and 2. _______________ [X]your votes
COMMON as shown.
<S> <C> <C>
1. Election of Directors.
FOR all nominees listed WITHHOLD AUTHORITY INSTRUCTION: To withhold authority
below (except as marked to vote for all nominees to vote for any named nominee strike a line
to the contrary): listed below: through the nominee's name in the list below:
__ __
| | | | Robert J. McInerney Peter M. Stein
|__| |__|
</TABLE>
2. Proposal to ratify the appointment of Coopers & Lybrand
as independent auditors:
FOR AGAINST ABSTAIN
__ __ __
| | | | | |
|__| |__| |__|
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
[LOGO]
IPC Information Systems, Inc., Wall Street Plaza,
88 Pine Street, New York, NY 10005
Tel: (212) 825-9060 Fax: (212) 344-5106
