SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant X
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Filed by a Party other than the Registrant
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Check the appropriate box:
Preliminary Proxy Statement
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X Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
IEC Electronics Corp.
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(Name of Registrant as Specified in its Charter)
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(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(Set forth the amount on which the
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act
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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.
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Page 1 of 36
IEC ELECTRONICS CORP.
105 NORTON STREET
NEWARK, NEW YORK 14513
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held
February 28, 2001
TO THE STOCKHOLDERS OF IEC ELECTRONICS CORP.:
The annual meeting of stockholders of IEC Electronics Corp. (the "Company")
will be held on Wednesday, February 28, 2001, at 9:00 a.m. at HSBC, One HSBC
Plaza, Rochester, New York (the "Annual Meeting") for the following purposes:
1. To elect nine (9) directors to serve until the 2002 Annual Meeting
and until their successors are duly elected and qualified.
2. To consider and act upon a proposal to approve the Company's 2001
Employee Stock Purchase Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 10, 2001
as the record date for the determination of stockholders entitled to vote at the
Annual Meeting and to receive notice thereof. The transfer books of the Company
will not be closed.
STOCKHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND TO
MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Martin S. Weingarten, Secretary
DATED: January 30, 2001
Newark, New York
Page 2 of 36
IEC ELECTRONICS CORP.
105 NORTON STREET
NEWARK, NEW YORK 14513
PROXY STATEMENT
FOR 2001 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to stockholders of IEC Electronics Corp.
(the "Company") by the Board of Directors (the "Board") of the Company in
connection with the solicitation of the enclosed proxy for use at the annual
meeting of the stockholders to be held on Wednesday, February 28, 2001, at HSBC,
One HSBC Plaza, Rochester, New York at 9:00 a.m., and at any adjournments
thereof (the "Annual Meeting").
The principal executive offices of the Company are located at 105 Norton
Street, Newark, New York 14513, and its telephone number is (315) 331-7742. The
approximate date on which this Proxy Statement and the enclosed proxy are first
being sent to stockholders is January 30, 2001. A copy of the Company's Annual
Report to Stockholders for the fiscal year ending September 30, 2000 ("Fiscal
2000"), including financial statements, is being sent to the stockholders
concurrently with this Proxy Statement.
GENERAL INFORMATION
Voting at the Annual Meeting; Record Date
Only stockholders of record at the close of business on January 10, 2001
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. At the close of business on the Record Date, there were issued and
outstanding and entitled to vote at the Annual Meeting 7,628,848 shares of
common stock of the Company, par value $.01 per share (the "Common Stock"). Each
holder of Common Stock is entitled to cast one vote for each share held of
record at the close of business on the Record Date on each matter submitted to a
vote at the Annual Meeting.
Solicitation and Revocation
Proxies in the form enclosed are solicited by and on behalf of the Board.
The persons named in the proxy have been designated as proxies by the Board. Any
proxy given pursuant to such solicitation and received in time for the Annual
Meeting will be voted as specified in such proxy.
Unless contrary instructions are indicated on the proxy, all Common Stock
represented by valid proxies received pursuant to this solicitation (and not
revoked before they are voted) will be voted FOR the election of the nominees
listed below under Proxy Item 1, FOR the proposal to approve the Company's
Employee Stock Purchase Plan under Proxy Item 2, and, in the discretion of the
proxies named on the proxy card, with respect to any other matters properly
brought before the meeting and any adjournments thereof. The Board knows of no
other matters to be presented at the Annual Meeting. If any other matters are
presented at the Annual Meeting upon which a vote properly may be taken, the
persons named in the proxy will vote the proxies in accordance with their best
judgment.
Any stockholder may revoke a proxy at any time prior to its exercise by
filing a later-dated proxy or a written notice of revocation with the Secretary
of the Company, 105 Norton Street, Newark, New York 14513, or by voting in
person at the Annual Meeting. If a stockholder is not attending the Annual
Meeting, any proxy or notice should be returned in time for receipt no later
than the close of business on the day preceding the Annual Meeting. Attendance
by a stockholder at the Annual Meeting does not alone serve to revoke his or her
proxy.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "ABSTAIN" are treated as being present at the meeting for purposes
of establishing a quorum and are also treated as shares entitled to vote at the
Annual Meeting (the "Votes Cast") with respect to such matter.
Page 3 of 36
While there is no definitive statutory or case law authority in Delaware,
the Company's state of incorporation, as to the proper treatment of abstentions,
the Company believes that abstentions should be counted for purposes of
determining both (i) the presence or absence of a quorum for the transaction of
business and (ii) the total number of Votes Cast with respect to a proposal
(other than the election of directors). In the absence of a controlling
precedent to the contrary, the Company intends to treat abstentions in this
manner. Accordingly, abstentions will have the same effect as a vote against the
proposal.
Under the law of Delaware, broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but are not counted for purposes of determining the number of Votes Cast with
respect to the particular proposal on which the broker has expressly not voted.
Thus, a broker non-vote will not have any effect on the outcome of the voting on
a proposal. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner.
Expenses of Solicitation
The entire cost of the solicitation of proxies will be paid by the Company.
In addition to the solicitation of proxies by mail, some of the officers and
regular employees of the Company, without extra remuneration, may solicit
proxies, personally or by telephone, telegram, letter, facsimile or other means
of communication. The Company may also request brokers, banks, nominees,
custodians, fiduciaries and others to forward soliciting material to the
beneficial owners of the Company's Common Stock and will reimburse such persons
for reasonable expenses incurred in forwarding such materials.
Procedure for Submitting Stockholder Proposals
At the Annual Meeting each year, the Board of Directors submits to
stockholders its nominees for election as directors. In addition, the Board of
Directors may submit other matters to the stockholders for action at the annual
meeting. It is anticipated that the 2002 Annual Meeting of Stockholders will be
held on February 27, 2002.
Stockholders of the Company also may submit proposals for inclusion in the
proxy material. These proposals must meet the stockholder eligibility and other
requirements of the Securities and Exchange Commission. In order to be included
in the Company's 2002 proxy material, a stockholder's proposal must be received
not later than September 30, 2001 at the principal office of the Company, 105
Norton Street, Newark, NY 14513, Attention: Secretary.
In addition, the Company's By-Laws provide that in order for business to be
brought before an annual meeting of stockholders, a stockholder must deliver
written notice to the Secretary of the Company not less than 90 days prior to
the date of the meeting. The notice must set forth the stockholder's name,
address and number of shares of Company stock held, a representation that the
stockholder intends to appear in person or by proxy at the meeting to make the
proposal, a description of the business to be brought before the meeting, the
reasons for conducting such business at the annual meeting, any material
interest of the stockholder in the proposal, and such other information
regarding the proposal as would be required to be included in a proxy statement.
No such notice has been received by the Company for the 2001 Annual Meeting. For
the 2002 Annual Meeting of Stockholders, written notice must be delivered to the
Secretary of the Company at the principal office of the Company, 105 Norton
Street, Newark, NY 14513, no later than November 30, 2001.
The By-Laws also provide that if a stockholder intends to nominate a
candidate for election as a director, the stockholder must deliver written
notice of his or her intention to the Secretary of the Company. The notice must
be delivered not less than 90 days before the date of a meeting of stockholders.
The notice must set forth the name and address of and number of shares of
Company stock owned by stockholder, the name and address of the person to be
nominated, a representation that the stockholder intends to appear in person or
by proxy at the meeting to nominate the person specified in the notice, a
description of all arrangements or understandings between such stockholder and
each nominee and any other person (naming such person) pursuant to which the
nomination is to be made by such stockholder, business address and experience
during the past five years, any other directorships held by the nominee, the
nominee's involvement in certain legal proceedings during the past five years
and such other information concerning the nominee as would be required to be
included in a proxy statement soliciting proxies for the election of the
nominee. In addition, the notice must include the consent of the nominee to
serve as a director of the Company if elected. No such notice has been received
by the Company for the 2001 Annual Meeting. For the 2002 Annual Meeting of
Stockholders, written notice must be delivered to the Secretary of the Company
at the principal office of the Company, 105 Norton Street, Newark, NY 14513, no
later than November 30, 2001.
Page 4 of 36
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information
regarding beneficial ownership of the Company's Common Stock as of January 10,
2001 (except as otherwise noted below) by (i) each person known by the Company
to beneficially own more than 5% of the outstanding shares of the Company's
Common Stock, (ii) each of the Company's directors, (iii) each of the Executive
Officers named in the Summary Compensation Table, and (iv) all directors and
officers of the Company as a group. The information as to each person has been
furnished by such person, and, except as noted, each person named in the table
has sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
Shares Percent of Shares
Name and Address of Beneficially Beneficially
Beneficial Owner Owned(1) Owned(1)
-------------------------------- -------------------- --------------------
Heartland Advisors, Inc. (2) 866,700 11.36%
789 North Water Street
Milwaukee, WI 53202
Grace & White, Inc. (3) 760,100 9.96%
515 Madison Avenue, Suite 1700
New York, NY 10022
Dimensional Fund Advisors Inc.(4) 565,500 7.41%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Russell E. Stingel* 237,388(5) 3.08%
102 Grand View Drive
Fairport, NY 14450
Thomas W. Lovelock* 55,487(6) +
105 Norton Street
Newark, NY 14513
David J. Beaubien* 52,126(7) +
84 Doane Road
Ware, MA 01082
Thomas W. Folger* 87,670(7) 1.15%
Glenpointe Centre East-5th Floor
300 Frank W. Burr Blvd.
Teaneck, NJ 07666
W. Barry Gilbert* 73,044(7)(8) +
130 Runnymede Road
Rochester, NY 14618
Robert P. B. Kidd* 73,393(7) +
1560 Sweetbay Circle
Palm City, FL 34990
Page 5 of 36
Eben S. Moulton* 309,175(7) 4.04%
55 Ferncroft Road
Danvers. MA 01923
Dermott O'Flanagan* 228,675(9) 2.98%
6529 Daylily Court
Niwot, CO 80503
James C. Rowe* 104,131(10) 1.36%
3510 North Lake Drive
Milwaukee, WI 53211
Justin L. Vigdor* 114,547(7) 1.50%
2400 Chase Square
Rochester, NY 14604
Lawrence W. Swol 21,750(11) +
105 Norton Street
Newark, NY 14513
Richard L. Weiss 67,752(12) +
105 Norton Street
Newark, NY 14513
All directors and officers as 1,647,227(13) 20.85%
a group (15 persons)
*Member of Board of Directors of the Company
+Less than 1%
Page 6 of 36
(1) The number of shares of Common Stock deemed outstanding includes
(a)7,628,848 shares of Common Stock outstanding as of January 10, 2001 and
(b)shares issuable pursuant to options held by the respective person or
group which may be exercised within 60 days after January 10, 2001
("options currently exercisable"), as set forth below.
(2) On January 9, 2001, a Schedule 13G/A was filed with the Securities and
Exchange Commission for the year ending December 31, 2000 by Heartland
Advisors, Inc. ("Heartland") and William J. Nasgovitz. Heartland is an
Investment Adviser registered under Section 203 of the Investment Advisers
Act of 1940, and Mr. Nasgovitz is the President and principal shareholder
of Heartland. Pursuant to the Schedule 13G/A, as of December 31, 2000,
866,700 shares may be deemed beneficially owned within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934 by (1) Heartland by virtue of
its investment discretion and in some cases voting power over client
securities, which may be revoked; and (2) William J. Nasgovitz, as a result
of his position with and stock ownership of Heartland which could be deemed
to confer upon him voting and/or investment power over the shares Heartland
beneficially owns. Of these 866,700 shares, none of the shares may be
deemed beneficially owned within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934 by Mr. Nasgovitz as a result of his
position as an officer and director of Heartland Group, Inc. which could be
deemed to confer upon him voting power over the shares Heartland Group
beneficially owns. As set forth in the Schedule 13G/A, Heartland has the
sole voting power with respect to 771,700 shares and the sole dispositive
power with respect to 866,700 shares. All of such shares are held in
investment advisory accounts of Heartland. As a result, various persons
have the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, the securities. No such account is
known to have such an interest relating to more than 5% of the class.
(3) Grace & White, Inc. ("G&W") is an investment advisor registered under
Section 203 of the Investment Advisers Act of 1940. G&W has advised
the Company that, as of December 22, 2000, it had sole voting power with
respect to 78,000 shares and sole dispositive power with respect to 760,100
shares.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), an investment
advisor registered under Section 203 of the Investment Advisers Act of
1940, furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and serves as investment manager
to certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the "Portfolios".)
Dimensional has advised the Company that in its role as investment advisor
and investment manager, it possessed both voting and investment power over
565,500 shares of the Company's Common Stock as of September 30, 2000. The
Portfolios own all of such shares, and Dimensional disclaims beneficial
ownership of such shares.
(5) Includes 69,500 shares of Common Stock subject to options
currently exercisable.
(6) Includes 20,000 shares of Common Stock subject to options
currently exercisable.
(7) Includes 15,000 shares of Common Stock subject to options
currently exercisable.
(8) Includes 54,544 shares of Common Stock held by Mr. Gilbert's wife
and 1,500 shares of Common Stock held jointly by Mr. Gilbert and his wife.
(9) Includes 34,500 shares of Common Stock subject to options
currently exercisable.
(10) Includes 2,333 shares of Common Stock subject to options currently
exercisable and includes 101,798 shares of Common Stock held by
Mr. Rowe's 401(k) Plan.
(11) Includes 20,750 shares of Common Stock subject to options currently
exercisable.
(12) Includes 7,500 shares of Common Stock subject to options currently
exercisable.
(13) Includes 270,333 shares of Common Stock subject to options currently
exercisable.
Page 7 of 36
ELECTION OF DIRECTORS
(Proxy Item 1)
The Company's Board of Directors (the "Board") currently consists of ten
persons. Thomas W. Folger, whose term as a director expires at this Annual
Meeting, will retire from the Board effective as of February 28, 2001. Mr.
Folger has served on the Board since September 1988, and the Company is indebted
to him for his guidance and support. As a result of Mr. Folger's retirement, the
Board has reduced its size to nine persons.
All nine positions on the Board are to be elected at this Annual Meeting.
All of the nominees for director are incumbent directors and all nominees,
except Thomas W. Lovelock and Dermott O'Flanagan, were elected at the last
Annual Meeting. The Board appointed Mr. O'Flanagan to the Board on July 10, 2000
and appointed Mr. Lovelock to the Board at the time of his selection as
President and Chief Executive Officer on August 21, 2000.
Nominations of persons for election to the Board may be made at a meeting
of stockholders only (i) by or at the direction of the Board or (ii) by any
stockholder of the Company entitled to vote for the election of directors at a
meeting who complies with the notice procedures set forth in the Company's
Bylaws. See "GENERAL INFORMATION - Procedure for Submitting Stockholder
Proposals."
It is intended that the accompanying proxy will be voted in favor of the
persons listed below to serve as directors unless the stockholder indicates to
the contrary on the proxy. Management expects that each of the nominees will be
available for election, but if any of them is not a candidate at the time the
election occurs, it is intended that such proxy will be voted for the election
of another nominee to be designated by the Board to fill any such vacancy.
For the election of directors, only proxies and ballots marked "FOR all
nominees", "WITHHELD for all nominees" or specifying that votes be withheld for
one or more designated nominees are counted to determine the total number of
votes cast; votes that are withheld are excluded entirely from the vote and will
have no effect. Abstentions will have no effect on the vote for the election of
directors. Directors are elected by a plurality of the votes cast. This means
that the nine nominees will be elected if they receive more affirmative votes
than any other nominees.
The term of office of each person elected as a director will continue until
the next Annual Meeting of Stockholders or until his successor has been elected
and qualified.
The Board of Directors unanimously recommends a vote FOR the election as
directors the nominees listed below.
Nominees for Election as Directors
The following is a brief description of the nominees for election as
directors.
Russell E. Stingel, 70, has served as Chairman of the Board since February
1997 and as a director since October 1996. From July 1996 until his retirement
on September 30, 1999, he was Chief Executive Officer of the Company and, from
December 12, 1999 until August 21, 2000, he was interim Chief Executive Officer.
Mr. Stingel also served as the President of the Company (February 1996-June
1997) and Executive Vice President, Secretary and General Manager of the Company
(1977-February 1996).
Thomas W. Lovelock, 57, has served as IEC's President and Chief Executive
Officer and as a Director since August 21, 2000. He was previously employed as
President and Chief Executive Officer of Group Technologies, a contract
electronics manufacturing company and subsidiary of Sypris Solutions in Tampa,
Florida. Mr. Lovelock has also held the positions of President and Chief
Executive Officer (1992-1997) at Bell Technologies, Inc., Vice President of
Operations in the Communications Manufacturing Division of E-Systems, and
various management positions at Analog Devices and Motorola.
David J. Beaubien, 66, a director of the Company since October 1990, has
been a director and chairman of Yankee Environmental Systems, Inc., Turners
Falls, Massachusetts, a manufacturer of Solar Radiation Monitoring Instruments,
since 1990. Prior thereto, he was Senior Vice President of EG & G, Inc.,
Wellesley, Massachusetts, a manufacturer of Scientific Instruments and manager
of U.S. Government facilities from 1967 until his retirement in January 1991. He
is also a director of the Paine Webber Mitchell Hutchins (PACE) Mutual Funds,
New York, New York.
W. Barry Gilbert, 54, a director of the Company since February 1993, is a
private investor and an adjunct faculty member at the William E. Simon Graduate
School of Management of the University of Rochester. From 1991 until 1999, he
was President of the Thermal Management Group of Bowthorpe Plc. of Crawley, West
Sussex, England. Prior to that time he was corporate Vice President and
President, Analytical Products Division of Milton Roy Company, a manufacturer of
analytical instrumentation.
Page 8 of 36
Robert P.B. Kidd, 67, has served as a director of the Company since its
formation in 1966 and has been an insurance agent since 1961. From September
1995 until August 1998, Mr. Kidd was President of Blue Water Insurance, Inc.,
Jupiter, Florida, a marine insurance company. Prior thereto, he was a Vice
President of Lawrence United Corporation, an insurance agency and a division of
the Lawrence Group.
Eben S. Moulton, 54, a director of the Company since November 1992, has
served as President of Seacoast Capital Corporation, Danvers, Massachusetts, an
investment firm, since 1994 and as President of Signal Capital Corporation,
Danvers, Massachusetts, a financial services corporation, since 1988. Mr.
Moulton is also a director of Seacoast Capital Corporation.
Dermott O'Flanagan, 49, a director of the Company since July 10, 2000, is a
private investor. From 1995 until April 2000, he was President of Dovatron
International, Boulder, Colorado, a contract manufacturer. From 1992-1996, he
was Managing Director of Dovatron Ireland Ltd and from 1983 to 1992, he held
various management positions with Western Digital, an electronics corporation.
James C. Rowe, 52, a director of the Company since January 7, 2000, has
served as President of Rowe & Company LLC, Milwaukee, Wisconsin, a merchant
banking firm, since April 1994. From April 1972 through March 1994, Mr. Rowe was
a director and Vice President of Lubar & Co., Incorporated, Milwaukee,
Wisconsin, a merchant banking firm. Mr. Rowe is the director of several
privately held companies.
Justin L. Vigdor, 71, is Assistant Secretary of the Company and has served
as a director of the Company since 1968. He has been an attorney since 1951 and
is a partner in the law firm of Boylan, Brown, Code, Vigdor & Wilson, LLP,
Rochester, New York, counsel to the Company.
Information Regarding the Board and its Committees
The Board held a total of eight regular meetings and eight special meetings
during Fiscal 2000.
During Fiscal 2000, each director attended more than 75% of the meetings of
the Board and meetings of committees upon which such director served.
The Board has an Audit Committee, a Compensation Committee, a Corporate
Development Committee and an Executive Committee. There is no standing
nominating committee.
The Audit Committee recommends the appointment of the Company's independent
accountants, reviews the scope and results of audits, reviews internal
accounting controls and systems and reviews accounting, auditing, and financial
reporting matters. These reviews include meetings with the independent auditors
and representatives of management as well as separate and private meetings with
the independent auditors to insure that the scope of their activities has not
been restricted and that adequate responses to their recommendations had been
received. In addition, the Audit Committee reviews the estimated fees and types
of non-audit services to be rendered to the Company by the independent
accountants for the coming year. The Audit Committee also monitors compliance
with the Company's Code of Conduct, its conflict of interest policy and its
policy concerning trading in the Company's securities. The minutes of Audit
Committee meetings, as well as all of the recommendations of the Audit
Committee, are submitted to the full Board of Directors. The Audit Committee,
whose current members are Messrs. Folger (Chairman), Kidd and Rowe, held two
meetings in Fiscal 2000.
Page 9 of 36
The Compensation Committee reviews and approves the Company's compensation
philosophy covering executive officers and other key management employees,
reviews the competitiveness of the Company's total compensation practices,
reviews and approves the terms and conditions of proposed incentive plans
applicable to executive officers and other key employees, approves and
administers the Company's Stock Option Plans, reviews and makes recommendations
with respect to management compensation, including salaries and bonus awards,
examines the impact and effect of various benefits and incentive plans and
reviews and recommends changes or amendments to such programs to the Board, and
reviews and approves special hiring and severance arrangements with executive
officers. In Fiscal 2000, the Compensation Committee held two meetings and took
action by unanimous written consent in lieu of a special meeting seven times.
The members of the Compensation Committee are Messrs. Gilbert (Chairman),
Beaubien and Folger.
The Corporate Development Committee investigates and evaluates potential
acquisition candidates or other opportunities for corporate growth. In Fiscal
2000, the Corporate Development Committee did not meet. Members of the Corporate
Development Committee are Messrs. Stingel (Chairman), Gilbert, Moulton,
O'Flanagan and Vigdor.
The Executive Committee exercises the powers of the Board in the interval
between regular meetings of the full Board. In Fiscal 2000, the Executive
Committee did not meet. The members of the Executive Committee are Messrs.
Stingel (Chairman), Folger and Moulton.
Compensation of Directors
In Fiscal 2000, each non-employee director received $2,000 per quarter for
services as a director and $1,000 for each in-person Board meeting attended.
Also, commencing January 1, 2000, in recognition of their additional
responsibilities, the Chairman of the Audit Committee and the Chairman of the
Compensation Committee each received an additional $750 per quarter. For Fiscal
2000, an aggregate of $107,500 was paid in cash or in stock to the non-employee
directors. In addition, each non-employee director is reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings. In
Fiscal 2000, all directors, except Mr. Stingel and Mr. Lovelock, were
non-employee directors.
Pursuant to the IEC Electronics Corp. Compensation Plan for Non-Employee
Directors, non-employee directors have the opportunity to receive payment of
their compensation either in cash or in shares of Common Stock. During Fiscal
2000, Messrs. Kidd and Vigdor received a portion of their compensation in shares
of Common Stock. The directors also may elect to receive their compensation
either currently or on a deferred basis. During Fiscal 2000, no director chose
to defer his compensation. If the amount to be deferred would have been payable
in cash, the Company will credit a Deferral Account maintained for the director
with an amount that would otherwise have been payable to the director in cash.
If the amount to be deferred would have been payable in stock, the Company would
credit units ("Stock Units") to a Unit Account maintained for the director.
Directors will make separate elections with respect to the manner of the payment
of the compensation and the time of the payment of the compensation. The number
of shares of stock issued or the number of Stock Units credited to a director's
account will equal the cash amount of the compensation divided by the fair
market value of one share of stock on the date on which such cash amount
would otherwise have been paid. Stock Units and amounts in a Deferral Account
are fully vested at all times. Payment of Stock Units (in full shares of
Common Stock) and the amounts in a Deferral Account must be deferred at least
one year. The director chooses the date of the payment, which may be upon
termination of service as a director. The maximum number of shares of Common
Stock that may be issued under the Plan is 50,000 shares.
The Company's 1993 Stock Option Plan (the "1993 SOP") provides for
automatic, non-discretionary grants of stock options to non-employee directors.
Pursuant to the 1993 SOP, as amended, a Non-Employee Director Stock Option
("NEDSO") for 9,000 shares is granted to each non-employee director
automatically every three years on the date of the Annual Meeting of
Stockholders. The last such grants were made on the date of the 1998 Annual
Meeting, and the next such grants will be made on the date of this Annual
Meeting. Non-employee directors elected by the Board to fill vacancies and newly
created directorships in the interim between Annual Meetings are entitled to
receive a prorated NEDSO based upon the number of months such non-employee
director will serve between his election and the next grant date. Accordingly,
Mr. Rowe received a NEDSO for 3,500 shares upon his election to the Board on
January 7, 2000, and Mr. O'Flanagan received a NEDSO for 1,500 shares upon his
election to the Board on July 10, 2000. In addition, on July 10, 2000, Mr.
O'Flanagan received as payment for past and future consulting services a fully
vested, non-statutory stock option for 34,000 shares at an exercise price of
$1.688 (the fair market value of the Company's Common Stock on the date of
grant).
Page 10 of 36
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
The following table sets forth individual compensation information for all
services rendered to the Company and its subsidiaries in all capacities during
the periods described below for the individuals who served as Chief Executive
Officer during Fiscal 2000 and the other most highly compensated executive
officers (other than the Chief Executive Officer) who were serving as executive
officers at September 30, 2000 and whose total annual salary and bonus exceeded
$100,000 (collectively, the "Named Executive Officers"). The following table
sets forth compensation information for each of those individuals for the years
ended September 30, 2000, 1999 and 1998.
SUMMARY COMPENSATION TABLE
Long-Term Compensation All Other
Annual Compensation Awards Compensation($)(4)
------------------------- --------------------- ------------------
Restricted Securities
Other Annual Stock Underlying
Name & Principal Position Year Salary($) Bonus($)(1) ($)(2) Awards($)(3) Options(#)
------------------------- ---- -------- ----------- ------------- ----------- -----------
Thomas W. Lovelock (5) 2000 $ 28,846 --- --- $18,750 190,000 $ 1,010
President & Chief Executive
Officer
Russell E. Stingel (6) 2000 $184,423 --- --- --- 4,500 $ 50,144
Interim Chief Executive 1999 175,000 --- --- --- --- 3,029
Officer and Chairman of 1998 175,000 --- --- --- 45,000 3,133
Board
David W. Fradin (7) 2000 $ 52,885 --- --- --- 5,000 $ 104,717
President and Chief 1999 175,000 --- --- --- 4,500 7,524
Executive Officer 1998 175,000 --- --- --- 3,616
Richard L. Weiss (8) 2000 $130,308 $ 8,000 --- --- 30,000 $ 4,531
Vice President & Chief 1999 12,385 --- --- --- 5,000 478
Financial Officer
Lawrence W. Swol (9) 2000 $135,013 --- --- 25,000 $ 6,076
Vice President, 1999 135,013 $10,517 --- --- 4,000 5,874
Supply Chain Management 1998 99,422 20,000 --- --- 20,000 956
Page 11 of 36
(1) Bonuses for Mr. Weiss in Fiscal 2000 and Mr. Swol in Fiscal 1998 represent
hiring bonuses and the bonus for Mr. Swol in Fiscal 1999 represents a
special performance bonus.
(2) None of the Named Executive Officers received personal benefits in
excess of the lesser of $50,000 or 10% of such individual's reported
salary for Fiscal 2000, 1999 and 1998.
(3) The restricted stock award in the table above is valued at its fair
market value based on the closing price for the Company's Common Stock
as reported by The Nasdaq Stock Market on the date of award. On August
21, 2000, Mr. Lovelock was awarded 10,000 restricted shares as a hiring
bonus. The closing price of the Company's Common Stock on that date
was $1.875. At the end of Fiscal 2000, the fair market value of Mr.
Lovelock's restricted stock holdings was $20,940, based upon the
closing price of the Company's Common Stock on September 29, 2000 of
$2.094. The restrictions will lapse on August 29, 2001.
(4) The amounts in this column for Fiscal 2000 consist of the following:
The Company's matching contributions to the 401(k) Profit Sharing Plan as
follows: Mr. Lovelock - $1,010; Mr. Stingel - $3,029;
Dr. Fradin - $1,765; Mr. Weiss - $4,531; Mr. Swol - $6,076. In
addition, Mr. Stingel received $47,115 pursuant to his Retirement and
Deferred Compensation Agreement and Dr. Fradin's Estate received $102,952
as salary continuation. See "Executive Officer Compensation - Retirement
and Deferred Compensation Agreement - Russell Stingel and Employment
Agreement/Death Benefit - David Fradin."
The amounts in this column for Fiscal 1999 and 1998 represent the
Company's matching contributions made in connection with its 401(k) Profit
Sharing Plan.
(5) Mr. Lovelock joined the Company on August 21, 2000 when he was elected
President and Chief Executive Officer.
(6) Mr. Stingel has served as Chairman of the Board since February 1997 and
as a director since October 1996. From July 1996 until his retirement
on September 30, 1999, he was Chief Executive Officer. As a result of
Dr. Fradin's death, he was named Interim Chief Executive Officer on
December 12, 1999 and served as such until the appointment of a new
Chief Executive Officer on August 21, 2000.
(7) Dr. Fradin joined the Company in June 1997 when he became President and
Chief Operating Officer. He was appointed Chief Executive Officer and
a director of the Company on October 1, 1999 and served in these
positions until his death on December 11, 1999.
(8) Mr. Weiss became Vice President and Chief Financial Officer on October
1, 1999. He joined the Company on August 2, 1999 as Director of
Finance.
(9) Mr. Swol became Vice President, Supply Chain Management on October
1, 2000. Prior thereto, he was Vice President and General Manager -
International Operations (April 1999-September, 2000). He joined the
Company in November 1997 as Vice President/General Manager - Texas.
Page 12 of 36
Options and Stock Appreciation Rights
The following tables summarize option grants and exercises during Fiscal
2000 to or by the Named Executive Officers, and the value of the options held by
such person at the end of Fiscal 2000. No stock appreciation rights ("SARs")
have ever been granted by the Company.
OPTION GRANTS IN FISCAL 2000
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(1)
--------------------------------------------------- ---------------------------
Percent of Total
Number of Securities Options Granted to Exercise or
Underlying Options Employees in Base Price Expiration
Name Granted(#) Fiscal 2000(2) ($/Share)(3) Date(4) 5%($) 10%($)
---- ------------ ----------- ------------ ---------- -------- ---------
Thomas W. Lovelock 190,000(6) 50.27% $1.875 8/20/07 $145,029 $ 337,981
Russell E. Stingel --- --- --- --- --- ---
David W. Fradin 5,000(5) 1.32% $2.375 12/11/00 $ 4,834 $ 11,266
Richard L. Weiss 5,000(5) 1.32% $1.875 10/27/06 $ 3,817 $ 8,894
20,000(5) 5.29% 2.50 1/06/07 20,355 47,436
5,000(5) 1.32% 2.063 4/30/07 4,199 9,786
Lawrence W. Swol 25,000(5) 6.61% $2.50 1/06/07 $ 25,444 $ 59,295
(1) The potential realizable value portion of the foregoing table
illustrates value that might be realized upon exercise of the options
immediately prior to the expiration of their term, assuming the
specified compounded rates of appreciation on the Company's Common
Stock over the term of the options. This hypothetical value is based
entirely on assumed annual growth rates of 5% and 10% in the value of
the Company's stock price over the term of the options granted in
2000. The assumed rates of growth were selected by the Securities and
Exchange Commission for illustration purposes only, and are not
intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects. These
numbers do not take into account provisions of certain options
providing for termination of the option following termination of
employment, nontransferability or vesting over various periods.
(2) Percentage indicated is based upon a total of 378,000 options granted
to employees in Fiscal 2000.
(3) The option exercise price per share is 100% of the fair market value of
the Company's Common Stock on the date of grant and may be paid in
Common Stock of the Company owned by the executive officer, in cash, or
by a combination of these methods.
(4) All stock options expire seven years from the date of grant, except
those granted to Dr. Fradin, which expired one year from the date of
his death.
(5) Options are exercisable in four equal annual installments commencing
one year from the date of grant. Upon the death of Dr. Fradin, the
vesting of his options was accelerated and the options could have been
exercised in their entirety by his Estate until December 11, 2000. They
were not so exercised and thereby expired as of such date.
(6) See "Employment Agreement - Thomas Lovelock".
Page 13 of 36
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND
FISCAL 2000 YEAR-END OPTION VALUES
Number of Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options Options At
At September 30, 2000(#) September 30, 2000 ($)(1)
------------------------ -----------------------------
Shares Acquired Value
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------- --------- -------------- ----------- ------------- ------------ --------------
Thomas W. Lovelock -- -- 20,000 170,000 $4,380 $37,230
Russell E. Stingel -- -- 69,500 -- -- --
David W. Fradin -- -- 34,500 -- -- --
Richard L. Weiss -- -- 1,250 33,750 -- 1,250
Lawrence W. Swol -- -- 11,000 38,000 -- --
(1) The closing price for the Company's Common Stock as reported by The
Nasdaq Stock Market on September 29, 2000 was $2.094. Value is
calculated on the basis of the difference between the option price and
$2.094 multiplied by the number of shares of Common Stock underlying
the option. An option is in-the-money if the market value of the
Common Stock subject to the option exceeds the option price.
Executive Employment Contracts; Retirement Agreements; Termination of Employment
and Change-in-Control Agreements
Employment Agreement - Thomas Lovelock
On August 11, 2000, the Company entered into an Employment Agreement with
Thomas W. Lovelock pursuant to which Mr. Lovelock was employed by the Company as
President and Chief Executive Officer effective as of August 21, 2000. The
Employment Agreement expires on August 20, 2002, but will be automatically
extended for additional one-year terms unless either party gives written notice
to the other at least 90 days prior to the expiration of a term that it shall
not be so extended.
Under the Employment Agreement, Mr. Lovelock receives an annual base salary
of $300,000 or such increased amount as the Board may determine from time to
time. Upon the commencement of his employment, Mr. Lovelock received as a hiring
bonus an award of 10,000 restricted shares of Common Stock that cannot be sold,
transferred or otherwise disposed of until the expiration of one year (August
21, 2001). See Footnote (3) to the Summary Compensation Table for further
details with respect to the restricted shares.
On August 21, 2000, Mr. Lovelock was granted a stock option for 190,000
shares of Common Stock at an exercise price of $1.875 per share (the Fair Market
Value of the Company's Common Stock on the date of grant). Of the 190,000 stock
options granted, options for 20,000 shares vested immediately and options for
170,000 shares will vest in four equal annual installments commencing one year
from the date of grant. Notwithstanding the foregoing, options for up to 170,000
shares may vest two years from the date of grant if certain performance goals
relating to the earnings per share and stock price have been attained. All of
the options expire on August 20, 2007.
Under the Employment Agreement, Mr. Lovelock will receive a performance
bonus for the fiscal year ending September 30, 2001 ("Fiscal 2001") computed in
the following manner: (i) a guaranteed minimum bonus of 20% of base salary
($60,000) and (ii) a bonus of up to an additional 80% of base salary ($240,000)
if and to the extent the Company achieves certain pre-established performance
goals for Fiscal 2001. In subsequent years, Mr. Lovelock will be entitled to a
performance bonus, if any, based upon performance goals established by the Board
for such year.
The Employment Agreement also includes provisions relating to participation
in the Company's benefit plans, reimbursement of certain relocation expenses,
the payment of premiums on term life insurance in the face amount of $600,000,
the use of a Company automobile and the reimbursement for related expenses, a
severance payment upon termination of employment by the Company for any reason
other than cause or change-in-control in an amount equal to his annual base
salary, and a severance payment upon termination of employment under certain
circumstances in the event of a change-in-control of the Company (see
"Change-in-Control Agreements"). The Employment Agreement also contains
provisions relating to confidentiality and non-competition.
Page 14 of 36
Retirement and Deferred Compensation Agreement - Russell Stingel
Mr. Stingel retired from the Company on September 30, 1999. Pursuant to the
terms of an agreement between Mr. Stingel and the Company regarding Mr.
Stingel's retirement, and in appreciation for his dedication during his 22 years
of service with the Company, the Company agreed to pay Mr. Stingel a bonus for
past services in the amount of $131,250, payable in installments from October 1,
1999 through September 30, 2000 on the normal payroll dates for the Company. In
addition, pursuant to the agreement, the vesting of all of Mr. Stingel's
outstanding unvested options was accelerated as of September 30, 1999, and such
options are exercisable by Mr. Stingel at any time prior to the expiration of
any such options in accordance with their terms. Under the terms of the
agreement, the Company also agreed to (i) provide Mr. Stingel with continued
health benefits until October 1, 2002, (ii) forgive a loan made to Mr. Stingel
on August 21, 1998 in the amount of $37,462.40 and forgive all interest accrued
thereon, (iii) transfer to Mr. Stingel a certain life insurance policy which the
Company owned on his life after a one-time prepayment of premium by the Company
in the sum of $50,000, thereby providing Mr. Stingel with a paid-up life
insurance policy in the amount of $250,000, and (iv) transfer to Mr. Stingel the
ownership of a Company-owned automobile currently used by Mr. Stingel and
continue to pay all operating costs associated with the automobile until October
1, 2000. The agreement also contains provisions relating to confidentiality and
non-competition and the providing of advisory services by Mr. Stingel for a
one-year period.
As a result of Dr. Fradin's death, Mr. Stingel was named Interim Chief
Executive Officer on December 12, 1999 and served as such until August 20, 2000.
During the period he served as Interim Chief Executive Officer, he received a
salary at his prior annual rate of $175,000 and payments under the Retirement
and Deferred Compensation Agreement were deferred until such time as he ceased
to be Interim Chief Executive Officer. During Fiscal 2000, he received $47,115
under the Retirement and Deferred Compensation Agreement.
Employment Agreement/Death Benefit - David Fradin
The Company entered into a letter of agreement of employment with David W.
Fradin, dated June 10, 1997 and amended as of May 1, 1998, pursuant to which Dr.
Fradin was employed by the Company as President and Chief Operating Officer at
an annual base salary of $175,000 or such increased amount as the Board may
determine from time to time. Upon the commencement of his employment, Dr. Fradin
received a hiring bonus of $25,000. The agreement included: confidentiality and
non-compete provisions; participation in the Company's bonus and benefit plans;
reimbursement of certain relocation expenses; an option grant of 50,000 shares;
the payment of premiums of term life insurance in the face amount of $525,000; a
severance payment upon termination of employment (i) by the Company for any
reason other than cause or change-in-control or (ii) by Dr. Fradin for "good
reason", in an amount equal to his annual base salary; and a severance payment
upon termination of employment under certain circumstances in the event of a
change-in-control of the Company (see "Change-in-Control Agreements"). On
October 1, 1999, Dr. Fradin was appointed Chief Executive Officer, and his base
salary was increased to $200,000. As of that date, he also received an option
for 5,000 shares at an exercise price of $2.375 per share, the fair market value
of the Company's Common Stock on the Date of Grant. Following Dr. Fradin's death
on December 11, 1999, the Board approved the payment of six months of salary
continuation from the date of his death, for an aggregate of $102,952, and
accelerated the vesting of options for 34,500 shares, which options could be
exercised by his Estate up to one year from the date of his death (December 11,
2000).
Change-in-Control Agreements
The Company has entered into Change-in-Control Agreements with Mr. Swol,
Mr. Weiss and certain other vice presidents to assure the Company of the
continued services of those executives to the Company in an effective manner
without distraction by reason of a change-in-control of the Company. The
agreements provide that in the event of the termination of the executive's
employment within the two-year period following a Change-in-Control (as defined
below) of the Company, and such termination is (i) by the Company for any reason
other than Termination for Cause (as defined below) or (ii) by the executive if
the executive terminates such employment for Good Reason (as defined below), the
Company will pay the executive each month for a period of 18 months an amount
equal to the sum of (x) the executive's monthly salary at the annual rate then
in effect and (y) the monthly average of the annual bonus paid to the executive
Page 15 of 36
under the Company's current Incentive Plan or any successor plan in the three
full fiscal years preceding termination. In addition, the executive will be
immediately vested in any retirement, incentive or option plans then in effect
and the Company will continue to provide the executive with executive's then
current health, dental, life and accidental death and dismemberment insurance
benefits for a period of 18 months. Similar provisions are contained in Mr.
Lovelock's Employment Agreement, except that the amount of the severance
payments computed under the foregoing formula will be paid for a period of three
years. Continuation of benefits will likewise be for a period of three years
rather than 18 months.
If any payments to the executive are considered "excess parachute payments"
as defined in Section 280G of the Internal Revenue Code, the payments will be
reduced to avoid such a characterization.
Certain Definitions. As used in the foregoing agreements and
arrangements:
(a) Change-in-Control generally means (i) the acquisition of 15% of the
Company's voting securities by any person other than Heartland Advisors, Inc. or
other than any other person who has reported or is required to report ownership
on Schedule 13G under the Securities Exchange Act of 1934, or (ii) a change of
1/3 of the incumbent Board of Directors without the prior approval of the
members of the incumbent Board of Directors, or (iii) the merger or
consolidation of the Company with another corporation where the stockholders of
the Company would not, immediately after the merger or consolidation, own at
least 50% of the voting securities of the corporation issuing the cash or
securities in the merger or consolidation, or (iv) the sale of substantially all
of the assets of the Company.
(b) Termination for Cause generally means the termination of the employment
of the executive because the executive has failed or refused to perform such
services as may reasonably be delegated to the executive consistent with the
executive's position, or has been grossly negligent in connection with the
performance of the executive's duties, or has committed acts involving
dishonesty, willful misconduct, breach of fiduciary duty, fraud, or any similar
offense which materially affects the executive's ability to perform the
executive's duties for the Company or may materially adversely affect the
Company or has been convicted of a felony or has violated or breached any
material term, covenant or condition contained in any employment,
confidentiality and/or non-competition agreement between the Company and the
executive.
(c) Good Reason generally means an executive's annual rate of salary is
reduced from the annual rate then currently in effect or the executive's other
benefits are in the aggregate materially reduced from those then currently in
effect (unless such reduction of employee benefits applies generally to all
employees of the Company), or the executive's place of employment is moved from
its then current locations or the executive is assigned duties that are
demeaning or are otherwise materially inconsistent with the duties then
currently performed by the executive.
Certain Transactions
Justin L. Vigdor, a director and Assistant Secretary of the Company, is a
member of Boylan, Brown, Code, Vigdor & Wilson, LLP, and Martin S. Weingarten,
Secretary of the Company, is of counsel to that firm, which provided legal
services to the Company in Fiscal 2000.
During the fiscal year ended September 30, 2000, Don Allen Agency, of which
Robert P. B. Kidd, a director of the Company, is a broker, was paid
approximately $1,188,209 in insurance premiums. All of said premiums are
believed by the Company to be comparable to those which would have been paid to
an unaffiliated third party.
Any future transactions with the Company's officers, directors, affiliates
or controlling stockholders will be on terms no less favorable than could be
obtained from unaffiliated third parties, and must be approved by a majority of
the directors of the Company, including a majority of the independent
disinterested directors of the Company.
Page 16 of 36
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934 that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Performance Graph and the Report
of the Compensation Committee on Executive Compensation shall not be
incorporated by reference into any such filings.
CORPORATE PERFORMANCE GRAPH
1995 1996 1997 1998 1999 2000
------- ------- ------ ------ ------ ------
COMPANY................. 100.00 54.81 150.96 38.46 20.19 16.11
NASDAQ.................. 100.00 167.40 230.00 231.11 374.69 501.13
PEER INDEX.............. 100.00 180.32 172.74 128.93 196.21 186.23
----------
(1) Assumes $100 invested on September 30, 1995, in the Common Stock, The Nasdaq
Stock Market Index and a Company constructed peer group index.
(2) The Company constructed peer group consists of Solectron Corp., SCI Systems
Inc., Plexus Corp., and Benchmark Electronics Inc.
Page 17 of 36
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
consisting entirely of non-employee directors (W. Barry Gilbert, David Beaubien
and Thomas W. Folger), approves all of the policies under which compensation is
paid or awarded to the Company's executive officers, presently comprising the
Named Executive Officers and two additional individuals.
The Company's executive compensation policy is intended (i) to support the
attainment of the Company's long and short-term strategic and financial
objectives; (ii) to provide a competitive total compensation program that
enables the Company to attract, motivate and retain the key executives needed to
accomplish the Company's goals; (iii) to provide variable compensation
opportunities that are directly related to the performance of the Company; (iv)
to align executive compensation with growth in stockholder value; and (v) to
recognize and reward executives for their contributions and commitment to the
growth and profitability of the Company. The Compensation Committee believes
this policy is generally best accomplished by providing a competitive total
compensation package, a significant portion of which is variable and at risk and
related to established performance goals.
The Company's compensation program for executive officers is comprised of
the following key elements: base salary, annual cash incentives and equity based
incentives. Salary and annual incentive payments are mainly designed to reward
current and past performances. Equity based incentives are primarily designed to
provide strong incentives for long-term future performance. The components of
the compensation program for executives are described below.
Base Salary
Base salaries for executive officers are determined by evaluating the
responsibilities of the position and the experience of the individual and
comparing it with other executive officer positions in comparable companies.
Base salaries are normally reviewed annually. Salary adjustments, if any, are
then made by the Committee based upon the Company's performance and the
individual's contribution to that performance. In structuring the compensation
package, it has been the Committee's policy to emphasize bonuses based upon
Company performance rather than increases in base salary. Accordingly, the base
salaries of the executive officers generally remain below the market median. In
Fiscal 2000, salary adjustments were made for certain executive officers in
order to reflect changes in job responsibilities and to bring their salaries
closer to market median.
Annual Incentive
A substantial portion of each executive officer's compensation is variable
and tied to Company performance. The annual incentive program normally consists
of three bonus plans: the General Incentive Compensation Plan (the "GICP"), the
Key Employee Incentive Plan (the "KEIP"), and the Top Executive Bonus Plan (the
"TEBP"). The amount of the Company's contribution to each plan is generally made
in accordance with certain formulae based upon earnings and return on average
assets. No bonus pools were established under any of the Company's bonus plans
during Fiscal 2000, and no bonuses were paid under any of the bonus plans based
upon to the Company's performance. The only bonus paid in Fiscal 2000 to an
executive officer was a hiring bonus of $8,000 to Mr. Weiss following the
successful completion of 90 days of employment. The Board has adopted a new
Incentive Compensation Bonus Plan ("2001 Bonus Plan") for Fiscal 2001 which is
applicable to all key employees of the Company. Awards under the 2001 Plan will
be based upon the attainment of specific Company objectives as well as the
attainment of specific individual objectives.
Equity Based Incentives
Executive officers and other key employees also receive grants of stock
options pursuant to the Company's 1993 Stock Option Plan. Stock option grants
are discretionary and reflect the current performance and continuing
contribution of the individual to the success of the Company. The Committee is
responsible for determining, subject to the terms of the Plan, the individuals
to whom grants should be made, the time of grants and the number of shares
subject to each option. Stock options are granted with an exercise price equal
to the fair market value of the Company's Common Stock on the day of grant. Any
value received by the executive from an option grant depends completely upon
increases in the price of the Company's Common Stock. Consequently, the full
value of an executive's compensation package cannot be realized unless an
appreciation in the price of the Company's Common Stock occurs over a period of
years.
There is no established grant cycle for executive officers; rather, grants
are made on an intermittent basis reflecting a discretionary assessment of
future contributions to the longer term growth of the Company and the need to
provide a competitive retention incentive. For the fiscal year ending September
30, 2000, stock grants were made to those executive officers listed in the
Summary Compensation Table and to certain other executive officers.
Page 18 of 36
Chief Executive Officer Compensation
The Company had three Chief Executive Officers in Fiscal 2000 - Dr. Fradin
from October 1, 1999 until his death on December 11, 1999; Mr. Stingel, who
served as Interim Chief Executive Officer from December 12, 1999 until August
20, 2000; and Mr. Lovelock, who was elected President and Chief Executive
Officer effective as of August 21, 2000.
When Dr. Fradin became President and Chief Executive Officer on October 1,
1999, his base salary was increased from $175,000 to $200,000, and he received a
stock option for 5,000 shares of the Company's Common Stock at an exercise price
of $2.375, the fair market value of the Company's Common Stock on the date of
grant.
When Mr. Stingel became Interim Chief Executive Officer on December 12,
1999, he received a salary at his prior annual rate of $175,000, and payments
under his Retirement and Deferred Compensation Agreement were deferred until
such time as he ceased to be Interim Chief Executive Officer.
When Mr. Lovelock was elected President and Chief Executive Officer as of
August 21, 2000, the Committee established his base salary, incentive bonus and
stock option grant by assessing comparative compensation information and
reviewing recommendations from an external consulting firm. Mr. Lovelock's base
salary, which is at the rate of $300,000 per annum, ranges at the 50th
percentile of relevant market data. Mr. Lovelock's employment contract is
described in detail in "Executive Officer Compensation - Employment Agreement -
Thomas Lovelock".
Tax Considerations
Section 162(m) of the Internal Revenue Code generally limits the corporate
tax deduction for compensation paid to the Named Executive Officers to
$1,000,000 each. However, compensation is exempt from this limit if it qualifies
as "performance based compensation." The Compensation Committee has carefully
considered the impact of this tax code provision and its normal practice is to
take such action as is necessary to preserve the Company's tax deduction. The
Company's 1993 Stock Option Plan complies with the provisions of Section 162(m).
Accordingly, any gains realized upon the exercise of stock options granted under
said Plan will qualify as "performance-based compensation" and will be fully
deductible by the Company.
Although the Compensation Committee will continue to consider deductibility
under Section 162(m) with respect to future compensation arrangements with
executive officers, deductibility will not be the sole factor used in
determining appropriate levels or methods of compensation. Since Company
objectives may not always be consistent with the requirements for full
deductibility, the Company may enter into compensation arrangements under which
payments are not deductible under Section 162(m). It is not expected that the
compensation of any executive officer will exceed $1,000,000 in Fiscal 2001.
Compensation Committee:
W. Barry Gilbert, Chairman
David J. Beaubien
Thomas W. Folger
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee consist of Messrs. W. Barry
Gilbert (Chairman), Thomas W. Folger and David Beaubien. Each member is a
non-employee director and does not have any direct or indirect material interest
in or relationship with the Company outside of his position as director.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") reports of ownership and changes in ownership of
common stock and other equity securities of the Company. Officers, directors and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
SEC regulations require the Company to identify any one who filed a
required report late during the most recent fiscal year. Based solely on review
of the copies of such reports furnished to the Company and written
representations that no other reports were required during the fiscal year ended
September 30, 2000, the Company believes that, during Fiscal 2000, all Section
16(a) filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with, except for late initial reports on
Form 3 by James C. Rowe, who became a director on January 7, 2000, William
Nabors, who became a Vice President on June 5, 2000, and Kevin J. Monacelli, who
became Director of Finance on May 31, 2000, and except for late reports on Form
4 by W. Barry Gilbert and Russell Stingel, directors, with respect to purchases
of stock on August 23, 2000 and August 31, 2000, respectively.
Page 19 of 36
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is responsible for providing independent,
objective oversight and review of the Company's accounting functions, internal
controls and financial reporting process. The Audit Committee is comprised of
three independent directors, and is governed by an amended written charter
adopted and approved by the Board. Each of the members of the Audit Committee is
independent as defined by the Company policy and the National Association of
Securities Dealers, Inc. ("NASD") listing standards. A copy of the Audit
Committee Charter is attached to this Proxy Statement as Appendix A.
Management has the primary responsibility for the financial statements and
the reporting process, including the Company's system of internal controls. The
independent accountants are responsible for performing an independent audit of
the Company's consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes. The Audit Committee
also recommends to the Board the selection of the Company's independent
auditors.
The Audit Committee is responsible for recommending to the Board that the
Company's financial statements be included in the Company's Annual Report on
Form 10-K. In order to fulfill its responsibilities, the Audit Committee (a)
discussed with Arthur Andersen LLP ("AA"), the Company's independent auditors
for Fiscal 2000, the overall scope and plans for its audit, (b) reviewed and
discussed with management and AA the Company's audited consolidated financial
statements for Fiscal 2000, (c) discussed with AA their judgments as to the
quality and acceptability of the Company's accounting principles as applied in
its financial reporting and such other matters as are required to be discussed
by Statement on Auditing Standards No. 61 (Communication with Audit Committees),
and (d) received and reviewed the written disclosures and the letter from AA
required by Independence Standard No. 1 (Independence Discussions with Audit
Committees) and have discussed with AA their independence.
Based upon the discussions with AA concerning the audit, the independence
discussions, and the financial statement review, and additional matters deemed
relevant and appropriate by the Audit Committee, the Audit Committee recommended
to the Board that the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 2000 include these financial statements.
Audit Committee:
Thomas W. Folger, Chairman
Robert P.B. Kidd
James C. Rowe
Page 20 of 36
2001 EMPLOYEE STOCK PURCHASE PLAN
(Proxy Item 2)
On December 7, 2000, the Board unanimously adopted the IEC Electronics
Corp. 2001 Employee Stock Purchase Plan (the "ESPP"), subject to the approval of
the stockholders at the Annual Meeting. The ESPP provides a means for employees
of the Company to authorize payroll deductions on a voluntary basis to be used
for the periodic purchase of the Company's Common Stock at a discount, without
being subject to tax until they sell the stock and without having to pay any
brokerage commissions with respect to the purchases.
The Board believes that the ESPP will be an important employee recruitment
and retention tool and will provide an incentive to a broad-based group of the
Company's employees to acquire a proprietary interest in the Company. The Board
believes that employees' continuing economic interest, as stockholders, in the
performance and success of the Company will motivate and encourage them to
increase their efforts in meeting the Company's business goals and objectives.
The material features of the ESPP are summarized below. The summary is
qualified in its entirety by reference to the specific provisions of the ESPP,
the full text of which is set forth as Appendix B to this Proxy Statement.
Shares Available Under the ESPP
The Company has reserved for issuance under the ESPP 250,000 shares of
Common Stock, subject to adjustment in the event of any merger,
recapitalization, stock split, stock dividend, stock distribution, or other
similar action. Such shares may be either authorized but unissued shares or
shares reacquired by the Company.
Administration
The ESPP will be administered by a committee appointed by the Board. The
Compensation Committee (the "Committee") has been appointed to serve as such
administrator. The Committee may make such rules and regulations and establish
such procedures for the administration of the ESPP as it deems appropriate. The
Committee has authority to interpret the ESPP, with such interpretations to be
conclusive and binding on all persons and otherwise accorded the maximum
deference permitted by law. The Committee shall take any other actions and make
any other determinations or decisions that it deems necessary or appropriate in
connection with the ESPP or the administration or interpretation thereof.
Eligibility
In general, all regularly employed employees of the Company and its
subsidiaries are eligible to participate in the ESPP. In addition, in general
terms, employees who own, directly or indirectly, 5% or more of the Common Stock
of the Company are not eligible to participate. The Company may also provide for
other exclusions permitted by Section 423 of the Internal Revenue Code.
As of January 1, 2001, approximately 1,400 employees were eligible to
participate in the ESPP.
Participation
Participation in the ESPP is completely voluntary. Eligible employees will
enroll in the ESPP by completing a payroll deduction form and selecting a rate
at which he or she will make payroll contributions for the purchase of Common
Stock. A participant may elect to make contributions in an amount not less than
1% and not more than 10% of such participant's pay. The Committee in its
discretion may establish limits other than those set forth in the preceding
sentence for any Purchase Period (as hereinafter defined). Pay is an employee's
base cash pay (including commissions and overtime, but not including bonuses,
profit-sharing contributions, value of fringe benefits, reimbursement for
expenses, and incentive compensation). No employee is allowed to buy more than
$25,000 of Common Stock in any calendar year, based on the Fair Market Value (as
hereinafter defined) at the beginning of the Purchase Period (as hereinafter
defined) in which the shares are purchased. An employee may discontinue
participation in the ESPP at any time. An employee's eligibility to participate
in the ESPP ends at termination of employment.
Offering
The ESPP will be implemented by establishing successive purchase periods
("Purchase Periods"). It is anticipated that the initial Purchase Period will
begin April 1, 2001 and end on September 30, 2001. The Committee in its
discretion may change the duration and start dates of the Purchase Periods. It
is the Committee's current intention not to commence a Purchase Period unless
the Company's closing stock price on The Nasdaq Stock Market has been at least
$2.00 for 30 consecutive days prior to the commencement of a Purchase Period.
The ESPP will terminate on February 28, 2006.
Page 21 of 36
Purchase Price
Employees who choose to participate in the ESPP will receive an option to
acquire Common Stock at a discount. Under the option, the purchase price
("Purchase Price") of Common Stock will be the lower of (i) 85% of the Fair
Market Value of the Common Stock on the first day of a Purchase Period, or (ii)
85% of the Fair Market Value on the last day of the Purchase Period. The Fair
Market Value will be the closing price on The Nasdaq Stock Market on the
relevant date.
Purchase of Stock
At the end of a Purchase Period, a participant's option will be exercised
automatically to purchase the number of shares of Common Stock that the
employee's accumulated payroll deductions will buy at the Purchase Price. No
fractional shares will be purchased. Any cash remaining in a participant's
account after the purchase of whole shares will be credited to the participant's
account for the next succeeding offering or, at the participant's election, will
be returned to the employee, without interest.
Delivery
On the exercise of an option on the last day of the Purchase Period (the
"Offering Termination Date"), the Company will deliver as soon as practicable
thereafter to the participant a stock certificate for the Common Stock purchased
or, at the participant's request, will deposit such shares directly with a
broker designated by the participant.
Recapitalization
In the event any change is made in the Company's capitalization, such as a
stock split or stock dividend, which results in an increase or decrease in the
number of outstanding Common Shares without the Company's receipt of
consideration, appropriate adjustments will be made to the shares available in
the ESPP, the maximum number of shares and the price of the option.
Transferability
Options under the ESPP cannot be voluntarily or involuntarily assigned. The
Common Stock acquired under the ESPP will be freely transferable, except as
otherwise determined by the Committee.
Amendment, Suspension and Termination
The Board of Directors may amend, suspend, or terminate at any time the
ESPP, except that no amendment may, without the approval of stockholders; (i)
increase the number of shares authorized under the ESPP, (ii) materially modify
the eligibility requirements for participation in the ESPP, or (iii) extend the
term of the ESPP beyond February 28, 2006.
Federal Income Tax Consequences
The ESPP is intended to qualify for favorable income tax treatment under
Sections 421 and 423 of the Internal Revenue Code. Payroll deductions will be
made on an after-tax basis. Thus, participants will have to pay income tax on
the dollars withheld from their paychecks under the ESPP.
No income will be recognized when payroll deductions are used to buy Common
Stock at a discount. The discount at the time of purchase will not be taken into
account for income tax purposes until the Common Stock is sold. The income tax
consequences associated with the sale of Common Stock purchased under the ESPP
depend upon when the sale occurs and the length of the participant's holding
period for his or her Common Stock.
When the shares are disposed of by a participant two years or more after
the beginning of a Purchase Period in which the shares were purchased (or if the
participant dies while owning the shares), he or she will recognize ordinary
income equal to the lesser of (i) the excess of the Fair Market Value of the
shares at the beginning of the Purchase Period over 85% of the Fair Market Value
of the shares at that time or (ii) the excess of the Fair Market Value of the
shares at disposition over the Purchase Price. When shares are disposed of
after less than two years (in what is known as a "disqualifying disposition"),
the participant must recognize the difference between the Fair Market Value of
the shares on the Offering Termination Date and the Purchase Price as ordinary
income, even if the disposition is a gift or is at a loss. In the event of a
participant's death while owning shares acquired under the ESPP, ordinary income
must be recognized in the year of death as though the shares had been sold.
In the cases discussed above (other than death), the amount of ordinary
income recognized by a participant is added to the Purchase Price paid by the
participant, and this amount becomes the tax basis for determining the amount of
the capital gain or loss from the disposition of the shares. Additional gain, if
any, will be short-term, long-term, or qualified five-year capital gain
depending on whether the holding period is one year or less, more than one year
but five years or less, or more than five years.
In general, capital gain from the disposition of capital stock acquired
after December 31, 2000 and held more than five years is currently taxed at a
maximum federal income tax rate of 18%; capital gain from the disposition of
stock held more than one year but five years or less is currently taxed at a
maximum federal income tax rate of 20%, and capital gain from the disposition of
stock held one year or less is currently taxed at a maximum federal income tax
rate of 39.6%.
Page 22 of 36
The Company is entitled to tax deductions for shares issued under the ESPP
only in the event of disqualifying dispositions. For disqualifying dispositions,
the Company is allowed a deduction to the extent of the amount of ordinary
income includable in gross income by such participant for the taxable year as a
result of the premature disposition of the shares.
The foregoing tax discussion is a general description of certain expected
federal income tax results under current law. No attempt has been made to
address any state and local, foreign or estate and gift tax consequences that
may arise in connection with participation in the ESPP. All affected individuals
should consult their own advisers if they wish any further details or have
special questions.
The closing price of the Company's Common Stock on The Nasdaq Stock Market
on January 23, 2001 was $1.44.
Vote Required
Approval of the ESPP requires the affirmative vote of a majority of the
Votes Cast at the Annual Meeting. Broker non-votes are not considered as Votes
Cast. Abstentions are considered as Votes Cast; accordingly, an abstention from
voting by a stockholder present in person or by proxy at the Annual Meeting has
the same legal effect as a vote "against" the matter.
Unless authority to so vote is withheld, the persons named in the proxy
card intend to vote shares as to which proxies are received in favor of the
ESPP.
The Board of Directors unanimously recommends that the stockholders vote
FOR the approval of the ESPP.
Page 23 of 36
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been the Company's independent public accountants
since June 1979, and has been retained by the Board of Directors for the current
year.
It is anticipated that representatives of Arthur Andersen LLP will be
present at the Annual Meeting and they will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented at the
Annual Meeting, but if other matters properly come before the meeting, the
persons named as Proxies in the enclosed Proxy will vote according to their best
judgment. Stockholders are requested to date and sign the enclosed Proxy and to
mail it promptly in the enclosed postage-paid envelope. If you attend the Annual
Meeting, you may revoke your Proxy at that time and vote in person, if you wish.
Otherwise your Proxy will be voted for you.
THE COMPANY WILL MAKE AVAILABLE AT NO COST, UPON THE WRITTEN REQUEST OF A
STOCKHOLDER, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 2000 (WITHOUT EXHIBITS) AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. COPIES OF EXHIBITS TO THE COMPANY'S FORM 10-K WILL BE
MADE AVAILABLE, UPON WRITTEN REQUEST OF A STOCKHOLDER AND THE PAYMENT TO THE
COMPANY OF THE REASONABLE COSTS OF REPRODUCTION AND MAILING.
By Order of the Board of Directors
Martin S. Weingarten, Secretary
DATED: January 30, 2001
Newark, New York
Page 24 of 36
APPENDIX A
IEC ELECTRONICS CORP.
AUDIT COMMITTEE CHARTER
I. Purpose.
The purpose of the Audit Committee of IEC Electronics Corp. ("IEC" or the
"Company) is to assist the Board of Directors ("Board") in fulfilling its
oversight responsibilities with respect to the Company's financial accounting
and reporting process, its system of internal accounting and financial controls,
the internal audit process and the annual independent audit process of the
Company's annual financial statements.
II. Authority.
The Audit Committee is empowered by the Board to take the appropriate
action within the scope of its responsibilities as set forth in this Charter.
The Audit Committee shall be given the resources and assistance necessary to
discharge its responsibilities, including unrestricted access to Company
personnel and documents and the Company's outside auditors. The Audit Committee
shall also have authority to engage outside advisors, as it deems necessary.
III. Membership.
- The Audit Committee shall consist of at least three directors, all of
whom shall be independent and have no relationship to the Company that
may interfere with the exercise of their independence from management and
the Company.
- The Board shall make determinations of independence with respect to
possible appointees and shall appoint the members of the Audit Committee
and its Chairman. The Board shall apply the rules and restrictions of
the National Association of Securities Dealers ("NASD") relating to
independence and consider employment, officer, business, family and other
relationships in making such determinations and appointments.
- Each member of the Audit Committee shall be financially literate, as such
qualification is interpreted by the Board in its business judgment, or
must become financially literate within a reasonable period of time after
his or her appointment to the Audit Committee.
- At least one member of the Audit Committee must have accounting or
related financial management expertise, as the Board interprets such
qualification in its business judgment.
IV. Meetings and Reports.
- The Audit Committee shall hold at least four regular meetings annually,
and shall meet more frequently as deemed necessary to fulfill the
responsibilities prescribed in this Charter or by the Board. A special
meeting of the Audit Committee may be called by the Chairman of the Audit
Committee at any time he or she believes is necessary or appropriate.
- To the extent practicable, the meeting agenda, draft minutes from the
prior meeting and supporting materials shall be provided to Audit
Committee members prior to each meeting to allow time for review.
- At least a majority of the members of the Audit Committee are to be
present at all meetings. As necessary or desirable, the Chairman may
request that members of management and/or representatives of the outside
auditors be present at meetings.
- The Audit Committee shall periodically report on its meetings and other
activities to the Board, shall keep accurate minutes of its meetings and
shall present such minutes to the Board for approval.
V. Responsibilities.
The Company's executive management bears primary responsibility for the
Company's financial and other reporting, for establishing the system of internal
controls and for ensuring compliance with laws, regulations and Company
policies. The Audit Committee's responsibilities and related key processes are
described below. From time to time, the Audit Committee may take on additional
responsibilities, at the request of the Board.
A. Financial Reporting. The Audit Committee shall monitor the preparation
by management of the Company's quarterly and annual external financial
reports. In carrying out this responsibility, the Audit Committee shall:
- Review with management the significant judgments and estimates used in
developing the financial reports and the major issues addressed;
- Review the accounting and reporting treatment of significant
transactions outside the Company's ordinary operations;
- Review with management and the Company's outside auditors significant
changes to the Company's accounting principles or their application as
reflected in the financial reports;
Page A-1
Page 25 of 36
- Meet with the Company's outside auditors (in private, as appropriate)
to:
(a) review their reasoning in accepting or questioning significant
decisions made by management in preparing the financial reports;
(b) review any outstanding disagreements with management that would
cause them to issue a non-standard report on the Company's
financial statements;
(c) examine the appropriateness of the Company's accounting
principles (including the quality, not just the acceptability, of
accounting principles) and the clarity of disclosure practices
used or proposed;
(d) determine if any restrictions have been placed by management on
the scope of their audit;
(e) review and consider the matters required to be discussed by
Statement of Auditing Standards ("SAS") No. 61, if necessary; and
(f) discuss any other matters the Audit Committee deems appropriate;
- Review the draft annual financial statements and discuss their
appropriateness with management and the Company's outside auditors;
- Review with management and the outside auditors the financial
statements to be included in the Company's Annual Report on Form 10-K
and annually report to the Board whether the Audit Committee
recommends the inclusion of the financial statements in the Company's
Annual Report on Form 10-K; and
- Review the Company's quarterly financial results with management and
the Company's outside auditors, with a particular emphasis on
understanding any new or unusual transactions. For purposes of this
review, the Committee Chairperson may represent the Audit Committee.
B. Relationship with Outside Auditors. The outside auditors are accountable
and responsible primarily to the Board and the Audit Committee, which
have the ultimate authority to select, evaluate and replace the outside
auditors, if necessary. In carrying out this responsibility, the Audit
Committee shall:
- Recommend to the Board the appointment or removal of the outside
auditors;
- Review and approve the scope and extent of audit services to be
provided and related fees;
- Review and approve the overall audit plan, including the risk factors
considered in determining the audit scope;
- Review the outside auditors' annual written statement pursuant to
Independence Standards Board Standard No. 1, as such Standard may be
modified or supplemented from time to time, outlining all
relationships that may impact its objectivity and independence;
- Review with outside auditors, and approve, the extent of non-audit
services provided and related fees;
- Determine whether the Audit Committee believes the outside auditors
are independent and recommend to the Board any appropriate action in
response to the outside auditor's report regarding independence; and
- Review the responsiveness of the outside auditors to the Company's
needs.
Page A-2
Page 26 of 36
C. Internal Control. The Audit Committee shall have responsibility for
overseeing that management has implemented an effective system of
internal control that helps promote the reliability of financial and
operating information and compliance with applicable laws, regulations
and Company policies, including those related to ethics and conflicts
of interest. In carrying out this responsibility, the Committee shall:
- Inquire of management and the Company's outside auditors concerning
any deficiencies in the Company's policies and procedures that could
adversely affect the adequacy of internal controls and the financial
reporting process and review the timeliness and reasonableness of
proposed corrective actions;
- Review management's responses to the outside auditors' management
letter recommendations for improving internal controls;
- Review the Company's policies and practices related to compliance
with laws, ethical conduct and conflicts of interest;
- Review significant cases of conflicts of interest, misconduct or
fraud;
- Review significant issues between the Company and regulatory
agencies; and
- Review, as appropriate, material litigation involving the Company.
D. Other Committee Activities and Reporting. The Audit Committee shall:
- Annually review the Audit Committee's discharge of its
responsibilities under this Charter;
- Review this Charter annually and propose any recommended changes for
the Board's approval; and
- Prepare the Audit Committee's annual report for inclusion in the
Company's proxy statement.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, its function is one of oversight and review. It is not the duty of
the Audit Committee to plan or conduct audits or to determine that the financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of management and the
outside auditors. The Audit Committee recognizes that the Company's management,
as well as the outside auditors, have more time, knowledge and information
concerning the Company than do the Audit Committee members. Consequently, in
carrying out its oversight responsibilities, the Audit Committee is not
providing any special assurance as to the Company's financial statements or any
professional certification as to the outside auditor's work.
Page A-3
Page 27 of 36
APPENDIX B
IEC Electronics Corp.
2001 Employee Stock Purchase Plan
Section 1. Purpose.
The IEC Electronics Corp. 2001 Employee Stock Purchase Plan (the "Plan") is
designed to provide an opportunity for the employees of IEC Electronics Corp.
and its subsidiaries (hereinafter referred to, unless the context otherwise
requires, as the "Company") to purchase Common Stock (the "Stock") of the
Company through voluntary systematic payroll deductions. It is the purpose and
policy of the Plan to provide employees with an opportunity to acquire a
proprietary interest in the economic progress of the Company and thereby to have
an additional incentive to promote its best interests. It is the intention of
the Company to have the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that Section
of the Code.
Section 2. Certain Definitions.
(a) "Compensation" means the base salary or wage paid to an
Employee, including commissions and overtime payments. "Compensation" shall not
include bonuses, profit sharing contributions, Company contributions to Social
Security, contributions to the Company's 401(k) Profit Sharing Plan or any other
retirement plan or program, or the value of any other fringe benefits provided
at the expense of the Company.
(b) "Employee" means any person, including an officer, who is
employed by (i) the Company or (ii) any subsidiary company, 50% or more of
whose voting shares are owned directly or indirectly by the Company. A
director of the Company who is not also a full time officer is not deemed to be
an employee.
(c) "Fair Market Value" means the value of one share of Stock on
the relevant date, determined as follows:
(i) If the shares are traded on an exchange (including The
Nasdaq Stock Market), the reported "closing price" on the relevant date (e.g.,
the Offering Commencement Date or Offering Termination Date) assuming it is a
trading day; otherwise on the next trading day.
(ii) If the shares are traded over-the-counter with no
reported closing price, the mean between the lowest bid and the highest asked
prices on said system on the relevant date assuming it is a trading day;
otherwise on the next trading day; and
(iii)If neither (i)nor(ii) applies, the fair market value a
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.
Section 3. Offerings under the Plan.
The Plan will be implemented by a series of offerings of the Company's
Stock (the "Offerings") that will terminate on the termination date of the Plan.
As used in the Plan, "Offering Commencement Date" means the date on which a
particular Offering begins, "Offering Termination Date" means the date on which
a particular Offering terminates, and "Purchase Period" means the period
beginning on the Offering Commencement Date and ending on the Offering
Termination Date.
Each Purchase Period shall be determined by the Committee. Unless
otherwise determined by the Committee, the Plan will operate with successive
semi-annual Purchase Periods commencing as soon as administratively practicable
after the Effective Date, although the Committee may pilot the program with a
shorter initial Purchase Period. The Committee shall have the power to specify
and change the commencement and duration of Purchase Periods, without
stockholder approval, and without regard to the expectations of any
Participants.
Participation in any Offering under the Plan shall neither limit, nor
require, participation in any other Offering except that no Employee may have
more than one authorization for payroll deduction in effect simultaneously.
Except as provided in Section 4 of the Plan, all Employees participating in an
Offering shall have the same rights and privileges to purchase Stock in the
Plan.
Page B-1
Page 28 of 36
Section 4. Eligibility.
(a) Initial Eligibility. Any Employee regularly employed on a full-time or
part-time basis by the Company on an Offering Commencement Date shall be
eligible to participate in the Plan with respect to the Purchase Period
commencing on such Offering Commencement Date, provided that the Company may
establish administrative rules requiring that employment commence some minimum
period (e.g.,one month's employment) prior to an Offering Commencement Date for
the Employee to be eligible to participate with respect to the Purchase Period
beginning on that Offering Commencement Date and provided further that (1) the
Committee may exclude part-time Employees from participation pursuant to
criteria and procedures established by the Committee and (2) the Committee may
impose an eligibility period on participation of up to two years employment with
the Company with respect to participation on any prospective Offering
Commencement Date. The Board also may determine that a designated group of
highly compensated Employees is ineligible to participate in the Plan so long as
the excluded category fits within the definition of "highly compensated
employee" in Section 414(q) of the Code. An Employee shall be considered
employed on a full-time basis unless his or her customary employment is less
than 20 hours per week or five months per year. All Employees who participate in
the Plan shall have the same rights and privileges under the Plan, except for
differences which are consistent with Section 423(b)(5) of the Code. The
Committee may impose restrictions on eligibility and participation of Employees
who are officers and directors to facilitate compliance with federal or state
securities laws.
(b) Restrictions on Participation. Notwithstanding any provisions of the
Plan to the contrary, no Employee shall be eligible to participate in the Plan
or be granted an option to purchase Stock in the Plan if:
(i) Immediately after the grant, such Employee would own, or be
considered to own, 5% or more of the total combined voting power or value of all
classes of stock of the Company (for purposes of this paragraph, the rules of
Section 424(d) of the Code shall apply in determining stock ownership of any
Employee, and stock that the Employee may purchase under outstanding options
shall be treated as stock owned by the Employee); or
(ii) Such option would permit such Employee's rights to purchase
stock under all employee stock purchase plans of the Company which meet the
requirements of Section 423(b) of the Code to accrue at a rate which exceeds
$25,000 in fair market value (as determined pursuant to Section 423(b)(8) of the
Code)for each calendar year in which such option is outstanding.
Section 5. Participation and Payroll Deductions.
(a) Payment for Stock. Shares of Stock purchased under the Plan will be
paid for by payroll deductions during the Purchase Period.
(b) Participation.
(i) An Employee who is eligible to participate in the Plan in
accordance with Section 4 may become a participant ("Participant") in the Plan
by completing an authorization for a payroll deduction on the form provided by
the Company ("Employee Authorization Card")and filing it with the Human
Resources Department of the Company during the enrollment period ("Enrollment
Period") prior to an Offering Commencement Date. Upon becoming a Participant,
the Employee shall be bound by the terms of this Plan, including any amendments
hereto.
(ii) The Enrollment Period for each of the Offerings is the
thirty (30)days prior to each Offering Commencement Date or such other period of
time as may be prescribed by the Committee.
(iii)An Employee Authorization Card shall become effective on
the Offering Commencement Date of the first applicable Offering and shall remain
in effect for all subsequent Offerings so long as the Employee remains eligible
under the Plan and has not withdrawn from the Plan as set forth in Section 8.
Page B-2
Page 29 of 36
(c) Payroll Deductions.
(i) At the time an Employee files an Employee Authorization
Card, the Employee shall elect to have deductions made from his or her pay on
each payday during the time the Employee is a Participant in an Offering at the
rate of not less than one percent (1%) and not greater than ten percent (10%) of
the Compensation which the Employee is entitled to receive on such payday
("Payroll Deduction Rate"); provided, however, that the Committee from time to
time before an Offering may establish limits other than those herein described
for all purchases to occur during the relevant Purchase Period.
(ii) Payroll deductions for a Participant shall begin as of the
first pay period after an Employee Authorization Card has become effective.
(iii) All payroll deductions made for a Participant shall be
credited to the Participant's account under the Plan. Amounts credited to such
accounts may be used by the Company for any corporate purpose. A Participant
may not make any separate cash payment into such account.
(d) Changes in Payroll Deduction Rate; Discontinuance of Payroll Deductions.
(i) A Participant may discontinue his or her participation in
the Plan as provided in Section 8(a) of the Plan, but no other change can be
made during an Offering, including, but not limited to, changes in the Payroll
Deduction Rate for such Offering. A Participant may change the Payroll
Deduction Rate for subsequent Offerings by giving written notice of such change
to the Company during the Enrollment Period immediately preceding the Offering
Commencement Date for the Offering for which such change is effective.
(ii) At any time during an Offering, a Participant may
discontinue his or her participation in the Plan by notifying the Company that
the Participant wishes to discontinue his or her payroll deductions. This
notice shall be in writing and on such forms as provided by the Company and
shall become effective as of a date not more than thirty (30) days following its
receipt by the Company.
(e) No Interest.
No interest shall be paid or credited to the Participant with respect to
payroll deductions or any amounts held in the Participant's account.
Section 6. Granting of Options.
(a) Number of Option Shares. With respect to each Offering, each eligible
Employee who has elected to participate as provided in Section 5(b) above shall
be deemed to have been granted on the Offering Commencement Date an option to
purchase the number of full shares of Stock which may be purchased with the
payroll deductions accumulated in an account maintained on behalf of each
Participant during each Purchase Period at the option price specified in Section
6(b) below, subject to the limitations contained in Section 4(b) above.
(b) Option Price. The option price under each option shall be the lower of:
(i) 85% of the Fair Market Value of the Stock on the Offering
Commencement Date; or
(ii) 85% of the Fair Market Value of the Stock on the Offering
Termination Date.
Section 7. Exercise of Options.
(a) Automatic Exercise. Unless a Participant gives written notice to the
Company as provided in Section 8(a) below, the Participant's option for the
purchase of Stock with payroll deductions made during any Offering will be
deemed to have been exercised automatically on the Offering Termination Date
applicable to such Offering.
(b) Fractional Shares. Fractional shares will not be issued under the Plan
and any accumulated payroll deductions which would have been used to purchase
fractional shares will be credited to the Participant's account for the next
succeeding Offering, or, at the Participant's election, returned to the
Participant as soon as practicable following the Offering Termination Date,
without interest.
(c) Transferability of Option. No option granted to a Participant pursuant to
the Plan shall be transferable other than by will or by the laws of descent
and distribution, and no such option shall be exercisable during the
Participant's lifetime other than by the Participant.
(d) Delivery of Shares. The Company shall deliver to the Participant
certificates for shares of Stock acquired on the exercise of options during an
Offering as soon as practicable following the Offering Termination Date of such
Offering or, at the Participant's request, the Company shall deposit such shares
directly with a broker designated by the Participant. The Company may utilize
electronic or automated methods of share transfer. The Company may require
that shares be retained for a designated period of time and/or may establish
other procedures to permit tracking of disqualifying dispositions of such shares
or to restrict transfer of such shares.
Page B-3
Page 30 of 36
Section 8. Withdrawals.
(a) Withdrawal of Account. A Participant may elect to withdraw payroll
deductions credited to the Participant's account under the Plan at any time
before the Offering Termination Date of any Offering by giving written notice to
the Company. All of the Participant's payroll deductions credited to the
Participant's account will be paid to the Participant promptly after receipt of
the notice of withdrawal, and no further payroll deductions will be made from
the Participant's pay during such Offering.
(b) Effect on Subsequent Participation. A Participant's withdrawal from any
Offering will not have any effect upon the Participant's eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company.
(c) Termination of Employment. Upon termination of the Participant's
employment for any reason, including retirement (but excluding death while in
the employ of the Company), the payroll deductions credited to the Participant's
account will be returned to the Participant or, in the case of the Participant's
death subsequent to the termination of the Participant's employment, to the
person or persons entitled thereunder under Section 11(a).
(d) Termination of Employment Due to Death. Upon termination of the
Participant's employment because of the Participant's death, the Participant's
beneficiary (as defined in Section 11) shall have the right to elect, by written
notice given to the Company prior to the earlier of the Offering Termination
Date or the expiration of a period of sixty (60) days commencing with the date
of the death of the Participant, either:
(i) to withdraw all of the payroll deductions credited to the
Participant's account under the Plan, or
(ii) to exercise the Participant's option for the purchase of
Stock on the Offering Termination Date next following the date of the
Participant's death for the purchase of the number of full shares of Stock which
the accumulated payroll deductions in the Participant's account at the date of
the Participant's death will purchase at the applicable option price, and any
excess in such account will be returned to said beneficiary, without interest.
In the event that no such written notice of election shall be duly
received by the Company, the beneficiary shall automatically be deemed to have
elected, pursuant to paragraph (ii), to exercise the Participant's option.
Section 9. Stock.
(a) Maximum Number of Shares. The maximum number of shares which shall be
issued under the Plan, subject to adjustment upon changes in capitalization of
the Company as provided in Section 11(d), shall be 250,000 shares. If the total
number of shares for which options are exercised on any Offering Termination
Date in accordance with Section 6 exceeds the number of shares then available
under the Plan, the Company shall make a pro rata allocation of the shares
available for delivery and distribution in as nearly a uniform manner as shall
be practicable and as it shall determine to be equitable, and the balance of
payroll deductions credited to the account of each Participant under the Plan
shall be returned to the Participant as promptly as possible.
(b) Participant's Interest in Option Stock. The Participant will have no
interest in Stock covered by the Participant's option until such option has been
exercised.
(c) Registration of Stock. Stock to be delivered to a Participant under
the Plan will be registered in the name of the Participant, or, if the
Participant so directs by written notice to the Company prior to the Offering
Termination Date applicable thereto, in the names of the Participant and one
such other person as may be designated by the Participant, as joint tenants with
rights of survivorship or as tenants by the entireties, to the extent permitted
by applicable law.
(d) Restrictions on Exercise. The Committee may, in its discretion,
require as conditions to the exercise of any option that the shares of Stock
reserved for issuance upon the exercise of the option shall have been duly
listed, upon official notice of issuance, upon a stock exchange, and that
either:
(i) a Registration Statement under the Securities Act of 1933,
as amended, with respect to said shares shall be effective, or
(ii) the Participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is the
Participant's intention to purchase the shares for investment and not for resale
or distribution.
Page B-4
Page 31 of 36
Section 10. Administration.
(a) Committee. The Compensation Committee (the "Committee") of the Board
of Directors shall administer the Plan. The Committee shall consist of no fewer
than three members of the Board of Directors. No member of the Committee shall
be eligible to purchase Stock under the Plan.
(b) Authority of Committee. Subject to the express provisions of the
Plan, the Committee shall have plenary authority in its discretion to interpret
and construe any and all provisions of the Plan, to adopt rules and regulations
for administering the Plan, and to make all other determinations deemed
necessary or advisable for administering the Plan. The Committee may delegate to
one or more individuals the day-to-day administration of the Plan. Decisions of
the Committee shall be conclusive and binding upon all persons in interest.
(c) Rules Governing the Administration of the Committee. The Board of
Directors may from time to time appoint members of the Committee in substitution
for or in addition to members previously appointed and may fill vacancies,
however caused, in the Committee. The Committee may select one of its members
as its Chairman and shall hold its meetings at such times and places as it shall
deem advisable and may hold telephonic meetings. A majority of its members
shall constitute a quorum. All determinations of the Committee shall be made
by a majority of its members. The Committee may correct any defect or omission
or reconcile any inconsistency in the Plan, in the manner and to the extent it
shall deem desirable. Any decision or determination reduced to writing and
signed by a majority of the members of the Committee shall be as fully effective
as if it had been made by a majority vote at a meeting duly called and held.
The Committee may appoint a secretary and shall make such rules and regulations
for the conduct of its business as it shall deem advisable.
(d) Indemnification of Committee. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
under the Company's Certificate of Incorporation, Bylaws, or pursuant to law or
contract, the members of the Committee shall be indemnified by the Company
against reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with any action or appeal therein, to which they or any
of them may be party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding except in
relation to matters as to which it shall be adjudged in such action, suit,
proceeding that such Committee member is liable for misconduct in the
performance of his duties; provided that within sixty (60) days after
institution of any such action, suit or proceeding a Committee member shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend the same.
Page B-5
Page 32 of 36
Section 11. Miscellaneous.
(a) Designation of Beneficiary. A Participant may file a written
designation of a beneficiary who is to receive any shares and cash to the
Participant's credit under the Plan in the event of such Participant's death
prior to delivery to the Participant of such shares and cash. Such designation
of beneficiary may be changed by the Participant at any time by written notice
to the Company. Upon the death of a Participant and upon receipt by the Company
of proof of the identity and existence at the Participant's death of a
beneficiary validly designated by the Participant under the Plan, the Company
shall deliver such shares and cash to such beneficiary. In the event of the
death of a Participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such Participant's death, the
Company shall deliver such shares and cash to the executor or administrator of
the estate of the Participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company) the Company, in its discretion, may
deliver such shares and cash to the spouse or to any one or more dependents or
relatives of the Participant or if no spouse, dependent, or relative is known to
the Company then to such other person as the Company may designate. No
designated beneficiary shall prior to the death of the Participant by whom the
beneficiary has been designated, acquire any interest in the shares or cash
credited to the Participant under the Plan.
(b) Transferability. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option or
to receive Stock under the Plan may be assigned, transferred, pledged, or
otherwise encumbered or disposed of in any way by the Participant other than by
will or the laws of descent and distribution. Any such attempted assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
Section 8(a).
(c) Use of Funds. All payroll deductions received or held by the Company
under this Plan may be used by the Company for any corporate purpose and the
Company shall not be obligated to segregate such payroll deductions.
(d) Recapitalization. If, while any options are outstanding, the
outstanding shares of Stock of the Company have increased, decreased, changed
into, or been exchanged for a different number or kind of shares or securities
of the Company through reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split or similar transaction,
appropriate and proportionate adjustments may be made by the Committee in the
number and/or kind of shares which are subject to purchase under outstanding
options and on the option exercise price or prices applicable to such
outstanding options. In addition, in any such event, the number and/or kind of
shares which may be offered in the Offerings described in Section 3 hereof shall
also be proportionately adjusted.
(e) Merger, Liquidation, Other Corporate Transactions.
(i) In the event of the proposed liquidation or dissolution of
the Company, the Offering then in progress will terminate immediately prior to
the consummation of such proposed liquidation or dissolution, unless otherwise
provided by the Board in its sole discretion, and all outstanding options shall
automatically terminate and the amounts of all payroll deductions will be
refunded without interest to the Participants.
(ii) In the event of a proposed sale of all or substantially all
of the assets of the Company, or the merger or consolidation of the Company with
or into another corporation, then in the sole discretion of the Board, (1) each
option shall be assumed or an equivalent option shall be substituted by the
successor corporation or parent or subsidiary of such successor corporation, or
(2) a date established by the Board on or before the date of consummation of
such merger, consolidation or sale shall be treated as an Exercise Date, and all
outstanding options shall be deemed exercisable on such date, or (3) all
outstanding options shall terminate and the accumulated payroll deductions shall
be returned to the Participants, without interest.
Page B-6
Page 33 of 36
(f) Amendment and Termination. The Board of Directors shall have complete
power and authority to terminate, suspend or amend the Plan; provided, however,
that the Board of Directors shall not, without the approval of the stockholders
of the Company (i) increase the maximum number of shares which may be issued
under the Plan, (ii) amend the requirements as to the class of employees
eligible to purchase Stock under the Plan or permit the members of the Committee
to purchase Stock under the Plan, or (iii) extend the term of the Plan beyond
the date specified in Section 11(j). No termination, modification or amendment
of the Plan may, without the consent of an Employee then having an option under
the Plan to purchase Stock, adversely affect the rights of such Employee under
such option.
(g) No Rights as a Stockholder. No right as a stockholder shall exist
with respect to any shares of Stock covered by options until the shares subject
to the option have been purchased and delivered as provided in Section 7(d). No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such shares have been purchased and delivered.
(h) No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any Employee or class of employees to
purchase any shares under the Plan, or create in any Employee or class of
employees any right with respect to continuation of employment by the Company,
and it shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an Employee's employment at any time.
(i) Effective Date. The Plan shall become effective as of March 1, 2001,
subject to approval by the stockholders of the Company within twelve (12) months
after its adoption by the Board of Directors. If the Plan is not approved, the
Plan shall not become effective.
(j) Termination Date. This Plan shall terminate, and no further shares of
Stock shall be sold or issued hereunder, on February 28, 2006, or such earlier
date as may be determined by the Board of Directors or Committee. The
termination of this Plan, however, shall not affect any restrictions previously
imposed on the shares issued pursuant to this Plan or rights of the Company
granted pursuant to this Plan.
(k) Effect of Plan. The provisions of the Plan shall, in accordance with
its terms, be binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without limitation, such
Employee's estate and the executors, administrator or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Employee.
(l) Governing Law. The law of the State of New York will govern all
matters relating to this Plan except to the extent it is superseded by the laws
of the United States.
Date Plan adopted by Board of Directors: December 7, 2000
Date Plan approved by Stockholders:
Page B-7
Page 34 of 36
PROXY PROXY PROXY
IEC ELECTRONICS CORP.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, FEBRUARY 28, 2001
The undersigned, revoking all prior proxies, hereby appoints Thomas W.
Lovelock, Russell E.Stingel and Justin L. Vigdor, and any one of them with full
power of substitution, as proxy or proxies to vote for the undersigned, in the
name of the undersigned, all of the Common Stock of IEC Electronics Corp. (the
"Company") of the undersigned, as if the undersigned were personally present and
voting at the Company's Annual Meeting of Stockholders to be held at HSBC, One
HSBC Plaza, Rochester, New York on February 28, 2001 at 9:00 a.m. (the "Annual
Meeting"), and at any and all adjournments thereof, upon the following matters:
(Continued and to be signed on reverse side)
Page 35 of 36
- ----------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ELECTION OF THE NOMINEES FOR DIRECTORS SPECIFIED IN THE PROXY
STATEMENT.
1. Election of nine (9) directors (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to the to vote for all nominees David J. Beaubien, W. Barry Gilbert, Robert P. B. Kidd, Thomas W. Lovelock,
contrary) listed to the right Eben S. Moulton, Dermott O'Flanagan, James C. Rowe, Russell E. Stingel,
Justin L. Vigdor
__ __
[__] [__]
2. Proposal to approve the 2001 Employee
Stock Purchase Plan
THIS PROXY IS SOLICITED ON BEHALF OF THE
FOR AGAINST ABSTAIN BOARD OF DIRECTORS.
__ __ __
[__] [__] [__] Dated: , 2001
----------------------------
---------------------------------------
3. Transaction of such other business as may Signature
properly come before the meeting or any
adjournment thereof.
---------------------------------------
Signature
IMPORTANT: Sign the Proxy exactly as
your name or names appear on your
Common Stock certificate; in the case
of Common Stock held in joint tenancy,
each joint tenant must sign.
Fiduciaries should indicate their full
titles and the capacity in which they
sign. Please complete, sign, date and
return this Proxy promptly in the
enclosed envelope.
Page 36 of 36