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:
X Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
---- 14a-6(e)(2))
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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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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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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<PAGE>
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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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.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.
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3) Filing party:
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4) Date filed:
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<PAGE>
PRELIMINARY
IEC ELECTRONICS CORP.
105 NORTON STREET
NEWARK, NEW YORK 14513
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held
February 25, 1998
TO THE STOCKHOLDERS OF IEC ELECTRONICS CORP.:
The annual meeting of stockholders of IEC Electronics Corp. (the"Company")
will be held on Wednesday, February 25, 1998, at 10:30 a.m. at Marine
Midland Bank, N.A., One Marine Midland Plaza, Rochester, New York (the "Annual
Meeting") for the following purposes:
1. To elect seven (7) directors to serve until the 1999 Annual Meeting and
until their successors are duly elected and qualified.
2. To consider and act upon a proposal to amend the Company's Certificate
of Incorporation to increase the number of authorized shares of Common Stock
from 15,000,000 shares to 50,000,000 shares.
3. To consider and act upon a proposal to amend the Company's 1993 Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 900,000 shares to 1,400,000 shares.
4. To consider and act upon a proposal to adopt a Compensation Plan for
Non-Employee Directors.
5. 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 9, 1998
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
Bill R. Anderson, Secretary
DATED: January 16, 1998
Newark, New York
<PAGE>
IEC ELECTRONICS CORP.
PROXY STATEMENT
GENERAL INFORMATION
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 25, 1998 at Marine
Midland Bank, N.A., One Marine Midland Plaza, Rochester, New York at 10:30 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 16, 1998.
Voting Information
- ------------------
Only stockholders of record at the close of business on January 9, 1998
will be entitled to notice of and to vote at the Annual Meeting. As of that date
7,557,701 shares of common stock, par value $.01 per share, of the Company
("Common Stock") were outstanding and entitled to vote at the Annual Meeting.
Stockholders are entitled to cast one vote for each share held of record at the
close of business on January 9, 1998 on each matter submitted to a vote at the
Annual Meeting. 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.
When proxies are properly dated, executed and returned, the shares they
represent will be voted at the Annual Meeting in accordance with the instruction
of the stockholder. If no specific instructions are given, the shares will be
voted FOR the election of the seven nominees as directors, FOR the proposal to
amend the Company's Certificate of Incorporation to increase the Company's
authorized Common Stock, FOR the proposal to amend the Company's 1993 Stock
Option Plan and FOR the proposal to approve the Compensation Plan for
Non-Employee Directors.
<PAGE>
The Board knows of no other matters to be presented at the Annual Meeting.
If any other matter should be presented at the Annual Meeting upon which a vote
properly may be taken, shares represented by all proxies received by the Board
will be voted with respect thereto in accordance with the judgment of the
persons named in the proxies.
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
meeting.
Under the law of Delaware, the Company's state of incorporation,
abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Broker
non-votes occur where a broker holding stock in street name votes the shares on
some matters but not others. Usually, this occurs where brokers have not
received instructions from clients, in which case brokers are permitted to vote
on "routine" matters but not on non-routine matters. The missing votes on
non-routine matters are broker non-votes.
Proxy 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 or cable. The Company may
also request brokers, banks, nominees, custodians, fiduciaries, and others to
forward soliciting material to the beneficial owners of the Company's shares of
Common Stock and will reimburse such persons for reasonable expenses incurred in
forwarding such materials. In addition, the Company has retained Corporate
Investor Communications, Inc. to assist in distribution of proxy solicitation
materials and solicitation and collection of proxies for an anticipated fee of
not more than $4,500 plus out-of-pocket expenses.
Proxy Statement 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.
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 1999 proxy material, a stockholder's proposal must be received
not later than September 21, 1998 at the principal office of the Company, 105
Norton Street, Newark, NY 14513, Attention: Secretary.
<PAGE>
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.
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.
<PAGE>
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 9,
1998 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
Name and Address of Beneficially Beneficially
Beneficial Owner Owned Owned
------------------------------- ------------- ------------
Heartland Advisors, Inc. (1)
790 North Milwaukee Street 1,953,600 25.85%
Milwaukee, WI 53202
Russell E. Stingel*
105 Norton Street 177,638(2) 2.34%
Newark, NY 14513
David J. Beaubien*
12 North Taylor Hill Road 17,000(3) +
Montague, MA 01351
Thomas W. Folger*
Glenpointe Centre East-5th 81,036(4) 1.07%
Floor
300 Frank W. Burr Blvd.
Teaneck, NJ 07666
W. Barry Gilbert* 16,500(3) +
130 Runnymede Road
Rochester, NY 14618
Robert P. B. Kidd*
Suite E-201 46,805(4) +
725 AIA North
Jupiter, FL 33477
<PAGE>
Eben S. Moulton*
55 Ferncroft Road 10,000(4) +
Danvers, MA 01923
Justin L. Vigdor*
2400 Chase Square 33,200(4) +
Rochester, NY 14604
Timothy J. Kennedy
105 Norton Street 108,750(5) 1.44%
Newark, NY 14513
Edward Butka
105 Norton Street 77,215(6) 1.02%
Newark, NY 14513
Bill R. Anderson
105 Norton Street 7,500(7) +
Newark, NY 14513
Joseph Schadeberg
105 Norton Street 8,750(8) +
Newark, NY 14513
All directors and officers as 585,194(9) 7.57%
a group
(13 persons)
*Member of Board of Directors of the Company
+Less than 1%
(1) Heartland Advisors, Inc. ("HA") is an Investment Adviser registered under
Section 203 of the Investment Advisers Act of 1940. HA has advised the
Company that, as of November 30, 1997, it has the sole voting power with
respect to 1,776,400 shares and the sole dispositive power with respect to
all of such shares. HA has also advised the Company that all of such
shares are held in advisory accounts of HA. 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. The interests of
one such account, Heartland Value Fund, a series of Heartland Group, Inc.,
a registered investment company, relates to more than 5% of the class.
<PAGE>
(2) Includes 44,375 shares of Common Stock subject to options currently
exercisable.
(3) Includes 15,000 shares of Common Stock subject to options currently
exercisable.
(4) Includes 10,000 shares of Common Stock subject to options currently
exercisable.
(5) Includes 20,000 shares of Common Stock subject to options currently
exercisable.
(6) Includes 18,750 shares of Common Stock subject to options currently
exercisable.
(7) Includes 7,500 shares of Common Stock subject to options currently
exercisable.
(8) Includes 8,750 shares of Common Stock subject to options currently
exercisable.
(9) Includes 169,375 shares of Common Stock subject to options currently
exercisable.
ELECTION OF DIRECTORS
(Proxy Item 1)
Seven directors are to be elected at the Annual Meeting, to hold office
until the next annual meeting of stockholders and until their successors are
elected and qualified. Each of the nominees for directors are incumbent
directors and were elected at the last annual meeting.
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 of Directors 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.
<PAGE>
The Board of Directors recommends a vote FOR the election as directors the
nominees listed above.
Nominees for Election as Directors
The following is a brief description of the nominees for election as
directors.
Russell E. Stingel, 67, has served as Chairman of the Board since February
1997, as Chief Executive Officer since July 1996, and as a director since
October 1996. Prior thereto, he had been the President of the Company (February
1996 - June 1997) and Executive Vice President, Secretary and General Manager of
the Company (1977-February 1996). He was previously employed as President of the
Ward Hydraulics Division of Figgee International Holdings, Inc. and in various
management positions by General Dynamics Corporation.
David J. Beaubien, 63, a director of the Company since October 1990, has
been a director and chairman of Yankee Environmental Systems, Inc., 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.
Thomas W. Folger, 70, a director of the Company since September 1988, has
been a general partner of the sole general partner of DeMuth, Folger &
Wetherill, a venture capital investment firm, since its formation in 1983. Prior
to 1983, Mr. Folger was Vice President of, and held various management positions
with, Kidder, Peabody & Co. Incorporated. Mr. Folger is also a director of
Micrion Corp.
W. Barry Gilbert, 51, a director of the Company since February 1993, has
been the President of the Thermal Management Group of Bowthorpe Plc. of Crawley,
West Sussex, England since 1991. Prior to that time he was corporate Vice
President and President, Analytical Products Division of Milton Roy Company, a
manufacturer of analytical instrumentation.
Robert P.B. Kidd, 64, has served as a director of the Company since its
formation in 1966 and has been an insurance agent since 1961. He is President of
Blue Water Insurance, Inc. Prior thereto, he was a Vice President of Lawrence
United Corporation, an insurance agency and a division of the Lawrence Group.
Eben S. Moulton, 51, a director of the Company since November 1992, has
served as President of Seacoast Capital Corporation (formerly Signal Capital
Corporation), a financial services corporation, of Danvers, Massachusetts since
1988. Prior thereto, he was a Vice President thereof. Mr. Moulton is also a
director of Seacoast Capital Corporation.
<PAGE>
Justin L. Vigdor, 68, is Assistant Secretary of the Company and has served
as a director of the Company since 1967. He has been an attorney since 1951 and
is a partner in the law firm of Boylan, Brown, Code, Fowler, Vigdor & Wilson,
LLP, Rochester, New York, counsel to the Company. Mr. Vigdor is also a director
of PSC Inc.
Information Regarding the Board and its Committees
- --------------------------------------------------
The Board of Directors has an Audit Committee, a Compensation Committee, a
Corporate Development Committee and an Executive Committee. There is no standing
nominating committee.
The Audit Committee has the responsibility for recommending the
appointment of the Company's independent accountants, reviewing the scope and
results of audits, reviewing internal accounting controls and systems and
reviewing 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. The Audit Committee, whose
members are Messrs. Folger, Kidd and Vigdor, held one meeting in fiscal 1997.
The Compensation Committee has the responsibility for recommending to the
Board of Directors the remuneration arrangements for the executive officers of
the Company, administering the Company's stock option plans, adopting and
reviewing compensation plans and reviewing bonus plan allocations. In fiscal
1997 the Compensation Committee held four meetings and took action by unanimous
written consent in lieu of a special meeting eleven times. The members of the
Compensation Committee are Messrs. Gilbert, Folger and Beaubien.
The Corporate Development Committee has the responsibility for
investigating and evaluating potential acquisition candidates or other
opportunities for corporate growth. In fiscal 1997, the Corporate Development
Committee held several informal meetings with the Company's financial advisors
to review and discuss various alternatives to enhance shareholder value. Members
of the Corporate Development Committee are Messrs. Gilbert, Moulten, Stingel and
Vigdor.
The Executive Committee is authorized to exercise the powers of the Board
of Directors in the interval between regular meetings of the full Board of
Directors. In fiscal 1997, the Executive Committee did not meet. The members of
the Executive Committee are Messrs. Folger, Moulten and Stingel.
<PAGE>
In fiscal 1997, the Board of Directors met seven times and took action by
unanimous written consent in lieu of a meeting twice. Each director attended at
least 75% of the total number of meetings of the Board of Directors and the
Committees of the Board on which he served.
Compensation of Directors
- -------------------------
In fiscal 1997, each non-employee director received compensation of up to
$2,500 per quarter for services as a director; the exact amount paid to a
director is based upon his meeting attendance. For fiscal 1997, an aggregate of
$60,000 was paid to the six non-employee directors. In addition, each
non-employee director is reimbursed for out-of-pocket expenses incurred in
connection with attendance at meetings. For fiscal 1998, non-employee directors
will receive $3,000 per quarter for services as a director.
On November 20, 1997 the Board of Directors approved the IEC Electronics
Corp. Compensation Plan for Non-Employee Directors, subject to the approval of
the stockholders at this Annual Meeting. According to the provisions of the
proposed Plan, non-employee directors will have the opportunity to receive
payment of their compensation either in cash or in shares of Common Stock and
either currently or on a deferred basis. A description of the provisons of the
Plan is contained in the section entitled "Proposal to Adopt the Director
Compensation Plan."
The Company's 1993 Stock Option Plan (the "1993 SOP") provides for
automatic grants of stock options to each member of the Board of Directors who
is not also an employee of the Company. All directors, except Mr. Stingel, are
non-employee directors.
Pursuant to the 1993 SOP, a Non-Employee Director Stock Option ("NEDSO")
for 6,000 shares is granted to each non-employee director automatically every
three years on the date of the Annual Meeting of stockholders. Grants were made
on the date of the 1997 Annual Meeting of Stockholders (February 26, 1997), and
each non-employee director received a NEDSO for 6,000 shares at an exercise
price of $7.625 per share, the fair market value of the Company's Common Stock
on the date of grant. As amended in November 1997, the tri-annual grant of
NEDSOs to directors will be increased from 6,000 to 9,000 shares commencing on
the date of this Annual Meeting.
<PAGE>
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
The following table sets forth individual compensation information for all
services rendered to the Company and its subsidiaries in all capacities during
the periods described below for the individuals who served as Chief Executive
Officer during fiscal 1997 and the four most highly compensated executive
officers (other than the Chief Executive Officer) who were serving as executive
officers at September 30, 1997 (collectively, the "Named Executive Officers").
The following table sets forth compensation information for each of those
individuals for the years ended September 30, 1997, 1996 and 1995.
Summary Compensation Table
--------------------------
Long Term
Annual Compensation Compensation
Awards
Securities All Other
Name and Fiscal Bonus Underlying Compensation
Principal Position Year Salary($) ($) (1) Options (#) ($) (2)
- ------------------ ----- --------- ------- ----------- -------
Russell E. 1997 $153,462 $249,038 45,000 $3,135
Stingel (3) 1996 125,327 700 --- 3,135
Chief Executive 1995 105,000 22,417 --- 3,049
Officer and
Chairman of the
Board
Timothy J. 1997 $109,231 $4,639 15,000 $3,135
Kennedy (4) 1996 114,423 625 --- 3,135
Vice President, 1995 100,000 22,302 --- 3,049
Treasurer, Chief
Financial Officer
and Secretary
Edward Butka 1997 $115,000 $26,833 15,000 $3,135
Vice President 1996 106,481 39,575 --- 3,135
1995 95,000 41,187 --- 3,205
Bill R.
Anderson(5) 1997 $103,904 $39,000 20,000 $1,714
Executive Vice 1996 85,273 15,000 15,000 ---
President and
General Manager
<PAGE>
Joseph
Schadeberg(6) 1997 $100,052 $33,623 5,000 $3,302
Vice President, 1996 91,227 700 --- 1,636
Human Resources 1995 4,046 10,000 15,000 ---
(1) The bonus amounts are payable pursuant to the Company's incentive bonus
plans which are described below under the caption "Report of the
Compensation Committee of the Board of Directors on Executive
Compensation," except for the bonuses to Mr. Anderson in 1996 and Mr.
Schadeberg in 1995 which represent hiring bonuses. In addition, in each of
fiscal 1996 and 1995 Mr. Butka received a special bonus.
(2) The compensation reported represents the Company's matching contributions
made in connection with the Company's 401(k) Profit Sharing Plan.
(3) Mr. Stingel became Chairman of the Board in February 1997, Chief Executive
Officer in July 1996 and a director in October 1996. From February 1996 to
June 1997, he was also President. Prior thereto, he was the Executive Vice
President, Secretary and General Manager of the Company.
(4) Mr. Kennedy assumed the additional position of Secretary in February 1996.
Mr. Kennedy retired as an employee in July 1997 and as an officer in
September 1997.
(5) Mr. Anderson became Executive Vice President and General Manager in June
1997. He joined the Company in November 1995 as Vice President, Materials.
(6) Mr. Schadeberg became Vice President, Human Resources in July 1995.
<PAGE>
Options and Stock Appreciation Rights
The following tables summarize option grants and exercises during fiscal
1997 to or by the Named Executive Officers, and the value of the options held by
such person at the end of fiscal 1997. No stock appreciation rights ("SARs")
have ever been granted by the Company.
OPTION GRANTS IN FISCAL 1997
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grant for Option Term (1)
---------------- -------------------
Number of Percent of
Securities Total Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (#) Fiscal 1997 ($/Share)(2)Date 5%($) 10%($)
Russell E. 25,000(3) 6.6% $6.25 10/31/2003 $63,609 $148,237
Stingel 20,000(4) 5.3% 9.75 5/16/2004 79,385 184,998
Timothy J. 15,000(3) 4.0% $6.25 10/31/2003 $38,166 $88,942
Kennedy
Edward Butka 15,000(3) 4.0% $6.25 10/31/2003 $38,166 $88,942
Bill R. 5,000(3) 1.3% $6.25 10/31/2003 $12,722 $29,647
Anderson 15,000(5) 4.0% $10.825 6/13/2004 $66,103 $154,048
Joseph 5,000(3) 1.3% $6.25 10/31/2003 $12,722 $29,647
Schadeberg
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior to
the expiration of their term, assuming the specified compounded rates of
appreciation on the Company's Common Stock over the term of the options. This
hypothetical value is based entirely on assumed annual growth rates of 5% and
10% in the value of the Company's stock price over the term of the options
granted in 1997. The assumed rates of growth were selected by the Securities and
Exchange Commission for illustration purposes only, and are not intended to
predict future stock prices, which will depend upon market conditions and the
Company's future performance and prospects. These numbers do not take into
account provisions of certain options providing for termination of the option
following termination of employment, nontransferability or vesting over various
periods.
(2) The option exercise price may be paid in Common Stock of the Company owned
by the executive officer, in cash, or by a combination of these methods.
<PAGE>
(3) These options were granted pursuant to the Company's 1993 SOP and vest in
four equal installments on October 31, 1997, October 31, 1998, October 31, 1999
and October 31, 2000.
(4) The option was granted pursuant to the Company's 1993 SOP and vests in four
equal installments on May 16, 1998, May 16, 1999, May 16, 2000 and May 16, 2001.
(5) This option was granted pursuant to the Company's 1993 SOP and vests in four
equal installments on June 13, 1998, June 13, 1999, June 13, 2000 and June 13,
2001.
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND
FISCAL 1997 YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options At
Options At September 30, 1997
September 30, 1997 (#) ($) (2)
----------------------- ----------------------
Shares
Acquired Value
on Realized ExercisableUnexercisableExercisableUnexercisable
Exercise(#) ($)(1)
- ---------- ----------- -------- ---------- ----------- --------- ------------
Russell E. -- -- 38,125 50,000 $519,491 $566,250
Stingel
Timothy J. 15,000 114,375 20,000 0 235,000 0
Kennedy
Edward Butka -- -- 15,000 20,000 103,125 235,000
Bill R. -- -- 3,750 31,250 39,141 316,297
Anderson
Joseph -- -- 7,500 12,500 82,500 149,375
Schadeberg
(1) An individual, upon exercise of an option, does not receive cash equal to
the amount contained in the Value Realized column of this table. Instead, the
amounts contained in the Value Realized column reflect the increase in the price
of the Company's Common Stock from the option grant date to the option exercise
date. Value is calculated based on the difference between the option price and
closing market price of the Common Stock on the date of exercise multiplied by
the number of shares to which the exercise relates. No cash is realized until
the shares received upon exercise of an option are sold.
(2) The closing price for the Company's Common Stock as reported by the Nasdaq
National Market on September 30, 1997 was $19.625. Value is calculated on the
basis of the difference between the option price and $19.625 multiplied by the
number of shares of Common Stock underlying the option. These values have not
been, and may never be, realized. The options have not been, and may not be,
exercised; and actual gains, if any, on exercise will depend on the value of the
Company's Common Stock on the date of exercise.
Certain Transactions
On February 23, 1994, Edward Butka, Vice President of the Company,
exercised an option granted under the Company's 1989 Stock Option Plan (the
"1989 Plan") to purchase 46,250 shares of the Company's Common Stock at a price
of $1.62 per share. Pursuant to the financing provisions of the 1989 Plan, the
Company loaned Mr. Butka $355,519, at an interest rate of prime plus 1-1/4%, to
enable him to pay the income taxes incurred upon the exercise of said option. On
December 31, 1996, that loan was repaid. On that date he also received a loan
from the Company in the amount of $393,463.71. Said loan was evidenced by a
promissory note given by Mr. Butka bearing interest at a rate equal to the rate
offered by the Company's bank to its best customers, as in effect from time to
time, with the interest payable annually and the entire principal due on
December 31, 2006. On August 16, 1997, that loan, together with accrued interest
in the amount of $17,996.29, was repaid by the surrender to the Company of
20,573 shares of the Company's Common Stock held by Mr. Butka.
<PAGE>
Justin L. Vigdor, a director and assistant secretary of the Company, is a
member of Boylan, Brown, Code, Fowler, Vigdor & Wilson, LLP, which provided
legal services to the Company in fiscal 1997.
During the fiscal year ended September 30, 1997, Don Allen Agency of which
Robert P. B. Kidd, a director of the Company, is a broker, was paid
approximately $1,501,293 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 then 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>
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 of the Board of Directors on Executive
Compensation shall not be incorporated by reference into any such filings.
CORPORATE PERFORMANCE GRAPH
2/11/93 1993 1994 1995 1996 1997
-------- ------- ------ ------ ------ ------
COMPANY................. 100 92.31 107.69 69.23 54.81 150.96
NASDAQ.................. 100 106.44 104.28 133.50 167.40 172.74
PEER INDEX.............. 100 106.19 85.76 142.38 180.32 230.00
- ----------
(1) Assumes $100 invested on February 11, 1993, the date on which the Company's
became publicly traded, in the Common Stock, the NASDAQ Market Index and a
Company contructed peer group index.
(2) The Company constructed peer group consist of Solectron Corp., SCI Systems
Inc., Plexus Corp., and Brenchmark Electronics Inc.
<PAGE>
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, Thomas W.
Folger and David Beaubien), approves all of the policies under which
compensation is paid or awarded to the Company's executive officers.
The Company's policy on executive compensation is to provide competitive
compensation that will attract, motivate, and retain executives with superior
abilities.
The Company's compensation program for executive officers currently
consists 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 policies with respect to each of these elements, as well as the
basis for determining the compensation of the Chairman of the Board Chief
Executive Officer, Mr. Stingel, are described below.
Base Salary
- -----------
Base salaries for executive officers are determined by evaluating the
responsibilities of the position and comparing it with other executive officer
positions in comparable companies. Companies considered comparable for this
purpose are the same companies included in the peer group listed in the
performance graph which immediately precedes this report. The base salary is
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 May 1997, the base salaries of Messrs. Stingel and
Kennedy were increased to $175,000 and $140,000, respectively, and in June 1997
Mr. Anderson's base salary was increased to $120,000 to reflect his new position
and responsibilities as Executive Vice President. 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 remain relatively low
compared to the base salaries of their peers in comparable companies.
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 President's Bonus Plan (the
"PBP"). 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.
<PAGE>
Under the GICP, a bonus pool is established each year for the benefit of
all employees, including executive officers, who have been employed by the
Company for more than two years. Distributions from the pool are based on the
proportion which each participant's current year's compensation bears to the
total compensation of all eligible employees. The amount of the Company's
contribution to the pool is based on earnings defined to be before taxes,
goodwill and bonuses ("Earnings"). Contributions are wholly within the
discretion of the Committee but the objective is to make an annual contribution
based on Earnings in accordance with the following formula:
Earnings Contribution to
(In Millions) Pool Percentage
$0 - 2 0%
2 - 4 5%
4 - 8 7%
8 - 12 14%
For fiscal 1997, the Company contributed $1,157,892 to the GICP which was
distributed to 1,266 employees.
The Key Employee Incentive Plan ("KEIP") is designed to reward all
officers, managers and other key employees (both hourly and salaried) other than
the Chairman of the Board and Chief Executive Officer. Approximately 198 people
participated in the KEIP in the 1997 fiscal year. Awards from the KEIP are made
in the discretion of the Compensation Committee based upon recommendations of
the Chairman of the Board and Chief Executive Officer.
Contributions to the KEIP consist of two components. Component 1 is a
contribution in accordance with the following formula based on Earnings:
Earnings Contribution to
(In Millions) Pool Percentage
$0 - 4 0%
4 - 6 5%
6 - 10 4%
10 - 14 6%
<PAGE>
Component 2 is a contribution based upon the Company's return on average
assets ("RAA"). Average assets are determined by adding monthly assets and
dividing by 12. There is no Component 2 contribution until the RAA exceeds 15%
(the "Base"). The Base for the 1997 fiscal year was $15,719,000. The Component 2
contribution to the KEIP is 6% of the excess in Earnings over the Base.
The total of both Components of the KEIP for fiscal 1997 was $459,150.
Equity Based Incentives
- -----------------------
Officers and other key employees also receive grants of stock options
pursuant to the Company's 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.
In October 1996, options for an aggregate of 119,000 shares of Common
Stock were granted by the Committee to officers and key employees, including the
Named Executive Officers. In addition, an option for 15,000 shares of Common
Stock was granted to Mr. Anderson in June 1997 to reflect his new position and
responsibilities as Executive Vice President.
CEO Compensation
- ----------------
During fiscal 1997, the Company's most highly compensated officer was
Russell E. Stingel, Chairman of the Board and CEO. In May 1997, the Committee
approved an increase in Mr. Stingel's base salary from $140,000 to $175,000.
The President's Bonus Plan consists of contributions having the same two
components as the KEIP.
Component 1 is a contribution based on Earnings in accordance with the
following table:
<PAGE>
Earnings Contribution to
(In Millions) Pool Percentage
$0 - 5 0%
5 - 10 2%
10 - up 4%
Component 2 is a contribution based on RAA utilizing the same formula as
in the KEIP.
After the bonus has been calculated in the foregoing manner, the payment
of a portion of that sum is dependent on the subjective judgment of the
Committee based upon progress made in such areas as organizational development
and overall Company performance. Of the $249,038 received by Mr. Stingel as a
bonus for fiscal 1997, $7,354 represented his award from the GICP and was
calculated in the same manner as that for all other employees, and $241,684
represented 100% of the calculated bonus.
As shown in the Option Grants Table, Mr. Stingel was granted two stock
options in fiscal 1997 - one for 25,000 shares in October 1997 at the time
grants were made to all executive officers and key employees and one for 20,000
shares in May 1997 to reflect his new position and responsibilities as Chairman
of the Board.
Tax Considerations
- ------------------
Section 162(m) of the Internal Revenue Code limits deductibility of annual
compensation in excess of $1 million paid to the Company's Chief Executive
Officer and any of the four other highest paid officers. However, compensation
is exempt from this limit if it qualifies as "performance based compensation."
The Company is submitting the amendment of the Company's 1993 Stock Option Plan
to stockholders to allow options thereunder to qualify under the
"performance-based compensation" requirements. 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
<PAGE>
under which payments are not deductible under Section 162(m). It is not expected
that the compensation of any executive officer will exceed $1 million in fiscal
1998.
Compensation Committee
W. Barry Gilbert, Chairman
Thomas W. Folger
David J. Beaubien
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. All three members are
non-employee directors and do 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% shareholders 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, 1997, the Company believes that, during the 1997 fiscal year, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with except as follows: Edward
Butka filed two days late a Form 4 showing a disposition of 20,573 shares; each
of David Fradin and Bill Anderson, upon their becoming President and Executive
Vice President, respectively, on June 13, 1997 filed a late Form 3 (on August
12, 1997); and Seacoast Capital, formerly known as Signal Capital Corporation,
who was a 10% beneficial owner during fiscal 1997, filed 30 days late a Form 4
showing a disposition of 150,500 shares.
<PAGE>
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Proxy Item 2)
The Company's Certificate of Incorporation, as currently in effect (the
"Certificate"), provides that the Company is authorized to issue two classes of
stock consisting of 15,000,000 shares of Common Stock and 500,000 shares of
Preferred Stock. In November 1997, the Board of Directors authorized an
amendment to the Certificate to increase the authorized number of shares of
Common Stock to 50,000,000 shares (the "Amendment"). The stockholders are being
asked to approve the Amendment at the Annual Meeting.
As of January 9, 1998, there were 7,557,701 shares of Common Stock issued
and outstanding. Additionally, 718,415 shares were reserved for issuance under
the Company's stock option plan, warrant agreements and Director Compensation
Plan. Thus, an aggregate of 8,276,116 shares of Common Stock are issued and
outstanding or reserved for issuance, representing 55.17% of the Company's
authorized Common Stock. No shares of Preferred Stock are issued and outstanding
or reserved for issuance.
The additional shares of Common Stock which would be authorized by the
proposed Amendment would have the same rights and privileges as the Common Stock
currently authorized and outstanding.
In the opinion of the Board of Directors of the Company, the additional
authorized shares of Common Stock will benefit the Company by providing
flexibility to the Board of Directors, without requiring further action or
authorization by the Company's stockholders (except as may be required by law or
the rules of any stock exchange on which the Company's securities may then be
listed), to issue additional Common Stock from time to time in responding to
business needs and opportunities as they arise, or for other proper corporate
purposes. These opportunities, needs and purposes might include, for example,
the obtaining of capital funds through public and private offerings of Common
Stock or of securities convertible into Common Stock and the use of Common Stock
in connection with structuring possible acquisitions of businesses and assets.
Additionally, the Board, in its discretion, could in the future declare stock
splits or stock dividends or, subject to stockholder approval, increase,
establish or extend stock option and other stock award plans. The Company
evaluates potential acquisitions from time to time. However, the Company has no
present plans, arrangements or understandings with respect to possible
acquisitions and has no present plans for financings. No stock splits, dividends
or other actions requiring the availability of the additional authorized shares
of Common Stock are currently planned.
<PAGE>
There are no preemptive rights with respect to the Company's Common Stock
and, accordingly, existing stockholders would not have any preferential right to
purchase any of the additional shares of Common Stock when issued.
Although the Board of Directors would only authorize the issuance of
additional shares of Common Stock based on its judgment as to the best interests
of the Company and its stockholders, the issuance of additional authorized
shares could have the effect of diluting the voting power or book value per
share of the outstanding Common Stock. The Board of Directors (if consistent
with its fiduciary responsibilities) could also attempt to deter future takeover
attempts by using additional shares of Common Stock to dilute the ownership of
persons seeking to gain control of the Company. The Company, however, is aware
of no such attempt and has no plans or arrangements with respect to the same.
The issuance of any additional shares will be on terms deemed to be in the best
interests of the Company and its shareholders.
If the Amendment is approved by the stockholders at the Annual Meeting,
the increase in the number of shares of Common Stock would become effective upon
the filing of the Certificate of Amendment to the Certificate of Incorporation
with the Delaware Secretary of State, which filing would take place shortly
after the Annual Meeting.
Approval of the proposal to increase the number of authorized shares of
Common Stock requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting.
Abstentions and broker non-votes will have the same effect as a vote against
this proposal.
The Board of Directors recommends that stockholders vote FOR the proposed
Amendment to the Certificate of Incorporation.
<PAGE>
PROPOSAL TO AMEND 1993 STOCK OPTION PLAN
(Proxy Item 3)
General
- -------
The Board of Directors has adopted, subject to stockholder approval, an
amendment (the "Amendment") to the Company's 1993 Stock Option Plan (the "1993
SOP") to increase from 900,000 to 1,400,000 the maximum number of shares of
Common Stock for which options may be granted pursuant to the 1993 SOP.
The 1993 SOP was adopted and approved by the stockholders on February 16,
1994. An amendment to the 1993 SOP increasing the number of shares of Common
Stock reserved for issuance from 600,000 to 900,000 was approved by the
stockholders on February 28, 1996.
<PAGE>
General Description of 1993 Stock Option Plan, as Amended
- ---------------------------------------------------------
The following is a brief summary of the material provisions of the 1993
SOP as proposed to be amended. This summary is qualified in its entirety by
reference to the complete text of the 1993 SOP, as amended.
Purpose. The Company's Board of Directors believes that awards under the
1993 SOP serve to attract, retain and motivate key employees and enhance the
incentive of employees to perform at the highest level. Options under the 1993
SOP contribute significantly to the Company's success by tying employees'
compensation to performance and by aligning employees' interests closely to the
long-term interests of the Company and its stockholders. The availability of
options under the 1993 SOP also serves to encourage qualified persons to seek
and accept employment with the Company. The Company's Board of Directors
believes that the proposed Amendment, by ensuring that a sufficient number of
shares are available to be granted or issued upon the exercise of options to
eligible present and future participants, furthers these objectives.
Shares. Prior to the approval of the Amendment by the Company's Board of
Directors, the 1993 SOP provided for up to 900,000 shares of Common Stock to be
available for issuance. Of this amount, the Company has issued options to
purchase shares of Common Stock in an aggregate amount of 892,246 shares (after
giving effect to options that have been forfeited by employees who leave before
their options vest). A total of 7,754 shares remain available for issuance.
Assuming approval of the Amendment by the Company stockholders, a total of
507,754 shares of Common Stock will remain available for future grants.
Eligibility. All officers and key employees and non-employee directors of
the Company and its affiliates are eligible to participate in the 1993 SOP. An
eligible employee may receive an option under the 1993 SOP, however, only if
selected by the Compensation Committee. Certain consultants, if selected by the
Compensation Committee, are also eligible to receive options. Non-employee
directors are eligible for automatic awards, as described below.
Administration. The 1993 SOP is administered by the Compensation
Committee, none of the members of which may be an employee of the Company. The
Compensation Committee has the authority to select employees to whom options are
granted, to determine the types of options and the number of shares subject
thereto, and to set the terms, conditions and provisions of such options.
Certain specified options that apply to non-employee directors of the Company
are not subject to the discretion of the Compensation Committee. The
Compensation Committee is authorized to interpret the 1993 SOP, to establish,
amend and rescind any rules and regulations relating to the 1993 SOP , to
determine the terms and provisions of any agreements entered into under the 1993
SOP, and to make all other determinations which may be necessary or advisable
for the administration of the 1993 SOP.
<PAGE>
Stock Option Terms. The 1993 SOP authorizes the Committee to grant
incentive stock options (within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code")) and nonstatutory stock options. In addition,
the 1993 SOP also provides for automatic grants of stock options to directors
who are not employees of the Company.
Any officer or key employee of the Company or any subsidiary of the
Company is eligible to receive an incentive stock option ("ISO") or a
nonstatutory stock option ("NSO") under the 1993 SOP. In addition, any
consultant to the Company, who, in the opinion of the Compensation Committee, is
in a position to have a significant effect upon the Company's business, is
eligible to receive a NOS under the 1993 SOP. The Compensation Committee, in its
sole discretion, selects the participants from among those eligible to receive
options and determines the form, amount, term, vesting and timing of the
options, except, however, that no individual may be granted options for more
than 200,000 shares in any fiscal year of the Company. The exercise price for
the purchase of shares subject to an ISO or NSO may not be less than 100% of the
fair market value of the Common Stock at the time the ISO or NSO is granted,
except that the exercise price of ISOs granted to holders of more than 10% of
the Common Stock must be at least 110% of the fair market value on the date of
grant, and the term of these options cannot exceed five years. The duration of
all other ISOs and NSOs may not exceed ten years. All terms and conditions
relating to options are the subject of separate stock option agreements between
the Company and the optionees.
Options may be exercised by payment of the purchase price in cash, in
shares of Common Stock (valued at fair market value at date of exercise), or by
delivery of an exercise note together with instructions to a broker to deliver
promptly to the Company the total exercise price in cash.
Any optionee who ceases to be employed by the Company for any reason other
than death, disability, or termination for cause may exercise his or her ISOs or
NSOs, to the extent exercisable, within three months after such termination. In
the event of an optionee's death or disability, ISOs and NSOs generally will be
exercisable for one year after such death or disability. The Committee may vary
these provisions at or after the time of grant, but in no event may an ISO or
NSO be exercised after the expiration of the option exercise period established
at the time of grant.
<PAGE>
Non-Employee Director Stock Options. The 1993 SOP provides for automatic
grants of stock options to each member of the Board of Directors who is not also
an employee of the Company. All directors, except Mr. Stingel, are non-employee
directors.
As amended by the Board of Directors in November 1997, a Non-Employee
Director Stock Option ("NEDSO") for 9,000 shares will be granted to each
non-employee director automatically every three years, on the date of the Annual
Meeting of Stockholders commencing with this Annual Meeting. Non-employee
directors elected by the Board to fill vacancies and newly created directorships
in the interim between grant dates will receive a pro-rated NEDSO based upon the
number of full months such non-employee director will serve between his or her
election and the next grant date. The exercise price of each NEDSO is the fair
market value of such shares on the date the NEDSO is granted.
Each NEDSO is exercisable as follows: 33-1/3% six months from the date of
grant; 66-2/3% one year from the date of grant; and 100% two years from the date
of grant. Each NEDSO terminates upon the expiration of five years from the date
upon which such NEDSO was granted. A NEDSO is not transferable other than by
will or by the laws of descent and distribution.
In the event a non-employee director voluntarily terminates service on the
Board other than by reason of death or disability, such person's NEDSOs (to the
extent exercisable upon such termination) will expire three months from the date
of termination of service, provided that in no event may a NEDSO be exercised
beyond its original expiration date.
In the event of death or disability of a non-employee director, any
outstanding NEDSOs will expire one year from the date of death or disability,
provided that in no event may a NEDSO be exercised beyond its original
expiration date.
Nonassignability of Awards. The 1993 SOP provides that no option granted
under the 1993 SOP may be sold, assigned, transferred, pledged or otherwise
encumbered by a participant, otherwise than by will or by the laws of descent
and distribution. Each option is exercisable during the participant's lifetime,
only by the participant.
Option Adjustments. In the event of a merger, reorganization, tender
offer, sale of substantially of the Company's assets, dissolution or liquidation
of the Company, or similar transaction affecting the Company's Common Stock, the
Compensation Committee, in its sole discretion, may, as to any outstanding
options, make such substitution or adjustment in the aggregate number of shares
reserved for issuance under the 1993 SOP and in the number and purchase price of
shares subject to such options as it may determine, make outstanding options
fully exercisable, or amend or terminate such options upon such terms and
conditions as it shall provide (which, in the case of the termination of the
vested portion of any option, shall require payment or other consideration which
the Compensation Committee deems equitable in the circumstances).
<PAGE>
Financing. The 1993 SOP permits the Company, in the discretion of the
Compensation Committee, to make a loan to any person holding an ISO, NSO or
NEDSO (a "Participant") or to guarantee the payment of a loan from a bank or
others in an amount sufficient to enable a Participant to exercise a stock
option and to pay the income taxes incurred upon the exercise of an option.
Each loan or guaranty (a) may extend for a period of not more than five
(5) years, (b) will be evidenced by a promissory note given by the Participant
and for which the Participant will have full personal liability, will bear
interest at such rate per annum as determined by the Compensation Committee
which interest will not be less than the rate in effect for the Company's senior
indebtedness to a financial institution and will be payable at such times as
determined by the Compensation Committee but at least no less frequently than
annually, (c) will be secured by a pledge of the shares purchased with the
proceeds of the loan which shall be deposited with the Company and (d) may
contain such further terms and conditions consistent with the 1993 SOP,
including provisions for additional collateral security, as may be determined by
the Compensation Committee from time to time.
Amendment of Plan. The Board may amend or terminate the 1993 SOP at any
time. However, it may not amend the 1993 SOP without stockholder approval where
the absence of such approval would cause the 1993 SOP to fail to comply with
Rule 16b-3 under the Exchange Act, the performance-based compensation
requirements under Section 162(m) of the Code, section 422 of the Code, the
requirements of any securities exchange on which the shares of Common Stock of
the Company are then listed, or any other requirements of applicable law or
regulation. The Board may not amend the section of the 1993 SOP relating to
NEDSOs more than once every six months other than to conform with changes in the
Code or the rules and regulations thereunder. The Committee may make
non-material amendments to the 1993 SOP.
Federal Income Tax Consequences.
- --------------------------------
The following is a summary of the principal federal income tax
consequences associated with options granted under the 1993 SOP. It does not
describe all federal tax consequences under the 1993 SOP nor does it describe
foreign, state or local tax consequences. Optionees should consult their own tax
advisors since a taxpayer's particular situation may be such that a variation of
the rules described below will apply.
<PAGE>
(a) ISOs: The grant of an ISO has no tax consequences to the Company or to
the participant. In addition, the participant recognizes no taxable income at
the time of exercise of an ISO. However, upon exercise, the difference between
the fair market value of the underlying share of Common Stock and the exercise
price of the ISO is includable in the participant's income for alternative
minimum tax purposes. If the participant holds the shares acquired upon exercise
of an ISO for at least two years from the date of the grant of the ISO and at
least one year from the date of exercise, the participant will recognize taxable
capital gain or capital loss, mid-term (12 to 18 months) or long-term (more than
18 months), upon a subsequent sale of the shares at a price different from the
option exercise price. In either of these events, no deduction would be allowed
to the Company for federal income tax purposes.
If the participant disposes of the shares acquired upon exercise of an ISO
within either of the holding periods described above (i) the participant will
recognize taxable ordinary income in the year of such disposition in an amount
equal to the fair market value of the shares on the exercise date minus the
exercise price of the ISO; provided that if the disposition is a sale or
exchange with an unrelated party, then the ordinary income will be limited to
the excess of the amount realized upon the sale or exchange of the shares over
the exercise price; (ii) the Company will be entitled to a deduction for such
year equal to the amount of taxable ordinary income recognized by the
participant; and (iii) the participant will recognize capital gain or loss in an
amount equal to the difference between (a) the amount realized by the
participant upon such sale or exchange of the shares and (b) the option exercise
price paid by the participant increased by the amount of ordinary income, if
any, recognized by the participant upon such disposition.
In general, if an optionee in exercising an ISO, tenders shares of Common
Stock in partial or full payment of the exercise price, no gain or loss will be
recognized on the tender. However, if the tendered shares were previously
acquired upon the exercise of another ISO and the tender is within two years
from the date of grant or one year after the date of exercise of the other ISO,
the tender will be a disqualifying disposition of the shares acquired upon
exercise of the ISO.
The exercise of an ISO could subject the optionee to the alternative
minimum tax. The application of the alternative maximum tax to any particular
optionee depends upon the particular facts and circumstances which exist with
respect to the optionee in the year of exercise. However, as a general rule, the
amount by which the fair market value of the shares of common stock on the date
of exercise of an option exceeds the exercise price of the option will
constitute an adjustment to "alternative minimum taxable income" for purposes of
the alternative minimum tax. As such, this item will enter into the tax base on
which the alternative minimum tax is computed, and may therefore cause the
alternative minimum tax to become applicable in a given year.
<PAGE>
(b) NSOs and NEDSOs: In case of NSOs and NEDSOs granted under the 1993
SOP, no tax consequences result to the Company or the optionee upon granting of
the option. Upon exercise of an option, an optionee will have ordinary income at
the time the shares are transferred to the optionee in a amount equal to the
excess of the fair market value at the time over the option price of the stock.
The income realized by the optionee will be subject to income tax withholding if
the optionee is an employee. The Company will have a deductible expense in an
amount equal to the income reported by the optionee. The optionee's basis in
such shares will be the fair market value on the date exercised, and when the
optionee disposes of the shares the optionee will recognize capital gain or
loss, either long-term, mid-term or short-term, depending on the holding period
of the shares. If an optionee tenders shares of Common Stock in partial or full
payment of the exercise price, no gain or loss will be recognized on the tender.
The closing price of the Company's Common Stock on the Nasdaq National
Market on January 9, 1998 was $______.
Vote Required
Approval of the Amendment requires the affirmative vote of the holders of
a majority of the shares present in person or represented by proxy at the Annual
Meeting. If a proxy card is specifically marked as abstaining from voting on the
proposal, the shares represented thereby will have the same effect as having
been voted for or against the proposal. Broker non-votes will be treated as
shares not present, or represented, will not be counted as votes against,
and will not be included in calculating the number of votes necessary for
approval of the Amendment.
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
Amendment.
The Board of Directors unanimously recommends that the stockholders vote
FOR the approval of the Amendment.
<PAGE>
PROPOSAL TO ADOPT THE DIRECTOR COMPENSATION PLAN
(Proxy Item 4)
Introduction
The Board of Directors adopted the IEC Electronics Corp. Compensation Plan
for Non-Employee Directors (the "Plan") on November 20, 1997, subject to its
approval by the Company's stockholders at their 1998 Annual Meeting. The Plan
provides to members of the Board of Directors who are not employees of the
Company or any of its subsidiaries ("Non-Employee Directors") the opportunity to
receive payment of their meeting fees either in cash or in shares of the
Company's Common Stock. It also permits a director to elect to defer the payment
of all or a portion of the compensation for his or her service as a director.
The Plan is intended to provide outside directors with the opportunity to
acquire a larger equity interest in the Company, to enhance the identity of
interests between Non-Employee Directors and the stockholders of the Company and
to assist the Company in attracting and retaining well-qualified individuals to
serve as Non-Employee Directors. The Board believes it is in the Company's best
interest to adopt the Plan.
Material Features of the Plan
The material features of the Plan are summarized below. The summary is
qualified in its entirety by reference to the specific provisions of the Plan,
the full text of which is set forth as Appendix A to this proxy statement.
Participation. Only Non-Employee Directors are eligible to participate in
the Plan. There are presently six Non-Employee Directors of the Company eligible
to participate in the Plan. No current executive officers or employees of the
Company or its subsidiaries are eligible to participate in the Plan.
Director Compensation. Under the Plan, Non-Employee Directors may elect to
have their meeting fees and/or any other compensation paid to them for services
as a director (collectively "Compensation") paid in cash or in shares of the
Company's Common Stock. Directors may also elect to defer receipt of such
Compensation. If the amount to be deferred would have been payable in cash, the
Company will credit a Deferral Account maintained for the Non-Employee Director
with an amount that would otherwise have been payable to the Non-Employee in
cash. If the amount to be deferred would have been payable in Stock, the Company
will credit units ("Stock Units") to a Unit Account maintained for the
Non-Employee 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 Non-Employee 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.
<PAGE>
Shares of Common Stock Issuable under the Plan. The aggregate number of
shares of Common Stock that may be issued under the Plan may not exceed 50,000
shares, provided that such aggregate number may be adjusted upon certain changes
in the Company's capitalization. No fractional shares of Common Stock may be
issued under the Plan.
Administration of the Plan. The Plan is administered by the Compensation
Committee of the Company's Board of Directors, which has full power and
authority to supervise administration of the Plan and to interpret the
provisions of the Plan and of any award, issuance or payment of Stock or Stock
Units. The Committee may delegate any of its responsibilities to one or more
agents. No participant may participate in the decision made with respect to any
question relating to any Stock or Stock Unit issued under the Plan exclusively
to that participant.
Unfunded Plan. The Plan is unfunded. A participant's right to receive any
payment of any Stock Unit or any amount in a Deferral Account is not greater
than the rights of an unsecured general creditor of the Company.
Non-Alienation. Stock Units and amounts in a Deferral Account are not
assignable or transferable and are not subject in any manner to alienation, sale
or any encumbrances, liens, liens, levies, attachments, pledges or charges of
the participant or his or her creditors.
Termination or Amendment of the Plan. The Plan is to remain in effect
until all shares of Common Stock authorized for issuance under the Plan have
been issued, provided that the Board of Directors may at any time terminate,
suspend or amend the Plan. Upon termination of the Plan, Stock Units credited to
a participant's account will be paid in whole shares of Common Stock.
Federal Income Tax Consequences.
- --------------------------------
Under current Federal tax laws and regulations, the award of a Stock Unit
under the Plan or the crediting of an amount to a Deferral Account will not
result in taxable income for the participant or in a deduction for the Company.
Upon payment of Stock Units, the receipt of full shares of Common Stock will
generally result in taxable income for the participant and a deduction for the
Company, in each case based on the fair market value of the shares of Common
Stock on the date of such payment.
<PAGE>
Effective Date.
- ---------------
The Plan shall be effective immediately on the date of its approval by the
stockholders of the Company.
Vote Required.
- --------------
Approval of the Plan requires the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the Annual
Meeting. If a proxy card is specifically marked as abstaining from voting on the
proposal, the shares represented thereby will have the same effect as having
been voted for or against the proposal. Broker non-votes will be treated as
shares not present, or represented, will not be counted as votes against,
and will not be included in calculating the number of votes necessary for
approval of the Plan.
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
Plan.
The Board of Directors unanimously recommends that the stockholders vote
FOR the approval of the Plan.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP have been the Company's independent public accountants
since June 1979, and have 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, 1997 (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
Bill R. Anderson, Secretary
DATED: January 16, 1998
Newark, New York
<PAGE>
PROXY PROXY PROXY
IEC ELECTRONICS CORP.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, FEBRUARY 25, 1998
The undersigned, revoking all prior proxies, hereby appoints Russell E. Stingel
and Justin L. Vigdor, and either one of them with full power of substitution, as
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 Marine Midland Bank, One Marine Midland
Plaza, Rochester, New York on February 25, 1998 at 10:30 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>
1. Election of seven (7) directors (INSTRUCTION: TO WITHHOLDAUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME
IN THE LIST BELOW)
--
FOR all nominees listed to the right [__] David J. Beaubien
(except as marked to the contrary) Thomas W. Folger
__ W. Barry Gilbert
WITHHOLD AUTHORITY to vote [__] Robert P. B. Kidd
for all nominees listed to the right Eben S. Moulton
Russell E. Stingel
Justin L.Vigdor
2. Proposal to amend Certificate of Incorporation to increase the number of
authorized shares of Common Stock
-- -- --
[__] FOR [__] AGAINST [__] ABSTAIN
3. Proposal to approve the amendment to the 1993 Stock Option Plan.
-- -- --
[__] FOR [__] AGAINST [__] ABSTAIN
4. Proposal to approve the Director Compensation Plan.
-- -- --
[__] FOR [__] AGAINST [__] ABSTAIN
5. Transaction of such other business as may property come before the meeting or
any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTOR IS MADE, THIS PROXY
WILL BE VOTED FOR ELECTION OF THE NOMINEES FOR
DIRECTORS SPECIFIED IN THE PROXY STATEMENT AND
FOR PROPOSALS 2,3 AND 4.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS.
Dated: , 1998
-----------------------
------------------------------------------------
Signature
------------------------------------------------
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.
