U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required)
For the fiscal year ended March 28, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)
For the transition period from to
Commission file number 0-5278
IEH CORPORATION
(Name of Small Business Issuer in Its Charter)
New York 13-5549348
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
140 58th Street, Suite 8E, Brooklyn, New York 11220
(Address of Principal Executive Offices) (Zip Code)
(718) 492-4440
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange on Which
Title of Each Class Registered
None None
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None None
- --------------------------------------------------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.50 Par Value
- --------------------------------------------------------------------------------
(Title of Class)
- -------------------------------------------------------------------------------
(Title of Class)
Indicated by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports),and (2) has been subject to such filing
requirements for past 90 days.
Yes [X] No [ ]
<PAGE>
Indicate by check mark if disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The Registrant's revenues for its most recent fiscal year ended March
28, 1997 were $4,085,177.
On June 18, 1997, the aggregate market value of the voting stock of
Registrant held by non-affiliates of Registrant (consisting of Common Stock,
$.50 par value) computed by reference to the closing-bid price at which the
stock was sold on such date ($.3125) was $297,474.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
On June 23, 1997, there were 2,303,502 shares of Common Stock, $.50 par
value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART I
Item 1. Business
IEH Corporation (hereinafter referred to as the "Company") was
organized under the laws of the State of New York on March 22, 1943 under the
name Industrial Heat Treating Company, Inc. On March 15, 1989, the Company
changed its name to its current name. The Company's executive offices and
manufacturing facilities are located at 140 58th Street, Suite 8E, Brooklyn, New
York 11220. The Company's telephone number is (718) 492-4440.
The Industry in Which the Company is Engaged
The Company is engaged in the design, development, manufacture and
distribution of high performance electronic printed circuit connectors and
specialized interconnection devices. Electronic connectors and interconnection
devices are used to provide connections between electronic component assemblies.
The Company develops and manufactures connectors which are designed for a
variety of high technological and high performance applications. These
connectors are primarily utilized by those users who require highly efficient
and dense (the space between connection pins within the connector) electrical
connections.
Printed circuit boards in computers contain the components necessary to
perform specific system sub-functions. These functions require connections which
relay information between electronic components and circuit boards, enabling the
commands that are input by the user to be performed. Electronic connectors, in
essence, enable circuit boards and electronic components to communicate with
each other, via direct electrical connection. Connectors also are fundamental to
modular construction of electronic assemblies enabling the disconnection and
removal of circuit boards and other electronic components for testing, repair,
and replacement.
Connectors may be designed and manufactured in various shapes, sizes
and specifications to meet specific customer requirements and applications. High
performance connectors are designed to meet various density and pin count (the
number of individual connection points within each connector) criteria and to
provide low forces (the amount of pressure needed to make the connection) and
electrically efficient connections.
Constant advances in the design of solid state devices have resulted in
significantly denser component packaging configurations on circuit boards.
Historically, a 5" X 8" circuit board may have consisted of thousands of
circuits with 10 to 30 lines of communication. Under those conditions, an
insertion force of one pound per contact for each of the communication lines
formed a common and acceptable standard in connection devices. As a result of
technological developments in recent years, the same 5" X 8" circuit board may
contain hundreds of thousands of circuits with hundreds of communication lines,
and an insertion force of one (1) ounce per contact as the standard in the
industry.
<PAGE>
The Company's Product Line
The Company primarily manufactures printed circuit board connectors
that meet military or individual customer specifications. Certain of the
Company's manufacturing and sales involve the competitive bidding process
because of the military and/or government status of customers. The Company also
manufactures a line of standard universal connectors which have common usage in
the high technology and commercial electronics industries. The Company serves
both the commercial and military marketplace, manufacturing connectors for
avionics, electronics, satellite, radar systems, test equipment, medical
electronics and related industries.
The Company is continuously redesigning and adapting its connectors to
keep pace with developments in the electronics industry, and has, for example,
developed connectors for use with flex-circuits which are used in aerospace
programs, computers, air-borne communication systems, testing systems and other
areas. The Company also provides engineering services to its customers to assist
in the development and design of connectors to meet specific product
requirements.
The Company's electronic printed circuit connectors are sold to
original equipment manufacturers and distributors. The Company supplies its
connectors to manufacturers who principally produce and distribute finished
products as well as to distributors who resell the Company's products. Prior to
the decrease in military and government spending over the last five (5) years,
the Company's sales were made primarily to the government, military defense
contractors and aerospace companies. However, since the decrease in military and
government spending the Company has modified its product line so as to
concentrate its sales efforts to commercial electronics companies. The Company
still continues to market its connectors for use in government and military
computers; military defense equipment and information systems; terrestrial,
airborne and aerospace communications products; avionics and guidance systems
and instrumentation and electronic testing equipment.
With the continuing downturn in government contracts over the last few
years, the Company has been striving the past several years to develop
commercial accounts.
Management has instituted several steps to increase productivity and
increase sales such as downsizing the labor force, implementing material changes
to make the Company's products more competitive and developing machinery and
equipment to increase production rates. Management believes these initiatives
have decreased costs and will continue to do so in the near future.
For the fiscal year ended March 28, 1997, the Company's principal
customers included manufacturers of commercial electronics products, military
defense contractors and distributors who service these markets. Sales to the
commercial electronics and military defense markets comprised 27 % and 72%,
respectively, of the Company's net sales for the year ended March 28, 1997.
Approximately 1% of the Company's net sales for the year ended March 28, 1997,
were made directly to the federal government.
<PAGE>
New Product Development
The Company maintains a program to increase the efficiency and
performance of its connectors to meet anticipated and specific market needs.
Computer and electronics technology is continuously changing and requires the
redesign and development of connectors to adapt to these changes. Primarily, new
technology has dictated a decrease in the size of solid state electronic
components and smaller and denser high performance connectors. Management
believes that a key ingredient to the Company's success is its ability to assist
customer with a new design effort and prepare necessary drawing packages in a
short period of time. After the customer approves the design, prototypes are
built, approved by the customer and production is released. As an example, six
new connectors have been introduced to a major commercial account. The Company's
design effort on this product line began mid-year 1994 and was recently
completed. The new development process with this commercial client has lead to
substantial repeat business in the past fiscal year. The Company now has the
ability to introduce this line to other commercial accounts.
The Company has also recently commenced production of two new
connectors for the aerospace industry. To date early orders for pre-production
units have been completed and the Company is awaiting commencement of
production.
One of the nation's leading radar system manufacturers has contracted
with the Company for six new designs. The design work is complete, approvals
have been obtained, and the Company is now in small scale production. The
Company anticipates full scale production when the radar system is released for
sale by the customer. During fiscal year 1996, the company's business with this
customer doubled from the previous fiscal year.
Several years ago, the Company has recently designed and developed a
form of compliant termination connector, which is named, "COMTAC". This product,
which utilizes technology known as "Solderless Pin Technology", does not require
the soldering of connector pins, but instead utilizes a spring type locking
system in attaching the connector to the printed circuit board. This technology
was patented in the United States under patent No. 4,720,268 and assigned to the
Company on January 19,1988. During fiscal year ended March 28, 1997 sales of
COMTAC connectors accounted for over 10 % of the Company's total sales. The
Company has sent to certain of its customers and potential customers
pre-production units for evaluation. Although there can be no assurance of
future sales, the Company is optimistic that this new technology will lead to an
increase in sales.
In connection with relocation of the Company's facilities in August
1991, the City of New York granted the Company utility and tax incentives.
Additionally, in July 1992, the New York State Urban Development Corp. ("UDC")
loaned the Company $435,000. The loan is repayable over a ten (10) year period,
with interest rates progressively increasing from 4% to 7% over the term of the
loan. The loan proceeds were used to finance construction and renovation of the
new facility. As of March 28, 1997, principal due under this loan equaled
$285,916. As of its fiscal year ended April 1, 1994, the Company failed to meet
the tangible net worth covenant as well as other financial covenants contained
in this loan agreement and to date remains in default of this loan agreement as
a result thereof. The Company has previously obtained waivers from the UDC for
this breach of loan covenant. The Company has requested an additional waiver of
this covenant from the UDC for additional periods of time. To date, the Company
has not obtained such a waiver nor has the UDC declared a default. There can be
no assurance that the Company will be able to obtain a waiver of the loan
covenant or that the UDC will not declare a default of the loan.
<PAGE>
As of March 28, 1997, the Company was in arrears with respect to the
Health & Welfare Fund and Pension Funds (together, the "Union Funds") which it
is required to maintain under its labor agreements with the United Automobile
Workers Local 259 (the "Union"). In December 1993, the Company reached a verbal
understanding with the Union pursuant to which the Company agreed to a payment
schedule to make current its obligations under the Union Funds. At December 1,
1993, the Company owed $388,777 to the Health & Welfare Funds and $129,286 to
the Pension Fund. Pursuant to the understanding the Company had agreed to pay
$10,000 per month until the total debt in arrears has been paid
in full. As of March 28, 1997, the amount in arrears with respect to the Union
Funds was $314,491. There can be no assurance that the Company will be able to
meet its obligations, in full or in part, in accordance with this understanding.
On June 30, 1995, the Company applied to the Pension Benefit Guaranty
Corporation ("PBGC") to have the PBGC assume all of the Company's
responsibilities and liabilities under its Salaried Pension Plan. On April 26,
1996, the Company was notified that the PBGC had granted the Company's request
and agreed to assume the Company's obligations under the Salaried Pension Plan.
The PBGC has not issued a final accounting and order with respect to the
Salaried Pension Plan. It is possible that the PBGC will require that the
Company make future payments to PBGC.
Marketing and Sales
The market for connectors and interconnect devices, domestic and
worldwide, is highly fragmented as a result of the manufacture by many companies
of a multitude of different types and varieties of connectors. For example,
connectors include: printed circuit, rectangular I/O, circular, planar (IOC) RF
coax, IC socket and fiber optic. The Company has been servicing a niche in the
market by manufacturing HYPERTAC(TM) connectors and innovative Company-designed
printed circuit connectors such as the Comtac connectors. Previously, the
Company was one of only three licensed manufacturers of the HYPERTAC(TM) design
in the United States. In fiscal year 1996, the Company learned that the other
two licensees had merged. Moreover, the Company, based upon advice of counsel,
determined that the HYPERTAC technology was no longer protected by a patent, and
therefore was in the public domain. As a result, the Company notified the
licensor that it would no longer be bound by the terms of its license agreement
and the Company ceased making license payments. See Financial Statements and
Notes thereto. The Company has received a brief notice from the licensor that it
disputed the Company's interpretations and demanded return of certain equipment.
No legal proceedings have been instituted by the licensor and the Company has
not received any further notices. The Company does not anticipate manufacturing
other types of connectors in the immediate future. The Company is continuously
experimenting with innovative connection designs, which may cause it to alter
its marketing plans in the future if a market should develop for any of its
current or future innovative designs.
The Company's products are marketed to original equipment manufacturers
directly and through distributors serving primarily the government, military,
aerospace and commercial electronics markets. The Company is also involved in
developing new connectors for specific uses which result from changes in
technology. This includes the COMTAC connectors. The Company assists customers
in the development and design of connectors for specific customer applications.
This service is marketed to customers who require the development of connectors
and interconnect devices specially designed to accommodate the customers own
products.
<PAGE>
The Company is primarily a manufacturer and its products are
essentially basic components of larger assemblies of finished goods.
Approximately 95% of the Company's net sales for the years ended March 28, 1997
and March 29, 1996, respectively, were made directly to manufacturers of
finished products with the balance of the Company's products sold to
distributors. Distributors often purchase connectors for customers who do not
require large quantities of connectors over a short period of time but rather
require small allotments of connectors over an extended period of time.
Three (3) of the Company's customers accounted for 33% and 23% of the
Company's net sales for the years ended March 28, 1997 and March 29, 1996,
respectively. One of the Company's customers accounted for 13% and 8% of the
Company's sales for the years ended March 28, 1997 and March 29, 1996
respectively.
The Company currently employs 16 independent sales representatives to
market its products in all regions in the United States. These independent sales
representatives also promote the product lines of other electronics
manufacturers; however, they do not promote the product lines of competitors
which compete directly with the Company's products. These sales representatives
accounted for approximately 94% of Company sales (with the balance of Company
sales being generated via direct customer contact) for the year ended March 28,
1997.
International sales accounted for less than l% of sales for the years
ended March 29, 1997 and March 28, 1996.
Backlog Of Orders/Capital Requirements
The backlog of orders for the Company's products amounted to
approximately $1,300,000 at March 28, 1997, as compared to $1,200,000 at March
29, 1996. At June 18, 1997, the backlog had increased to approximately
$1,400,000. A significant portion of these orders are subject to cancellation or
postponement of delivery dates and, therefore, no assurance can be given that
actual sales will result from these orders. The estimated funds required to
manufacture the current backlog of orders is estimated at $450,000. The Company
does not foresee any problems which would prevent it from fulfilling its orders.
Competition
The design, development, manufacture and distribution of electrical
connectors and interconnection devices is a highly competitive field. The
Company principally competes with companies who produce high performance
connectors in printed circuits and wireboards for high technology application
which includes Hypertronics Corporation and Si-Tac Connectors, Inc. The Company
competes with respect to their abilities to adapt certain technologies to meet
specific product applications; in producing connectors cost-effectively; and in
production capabilities. In addition, there are many companies who offer
connectors with designs similar to those utilized by the Company and are direct
competitors of the Company.
The Company also competes with those companies who provide standard
universal printed circuit connectors. These companies include: Airborne, Inc.,
Texas Instrument, Inc., and Winchester Electronics, Inc.
<PAGE>
The primary basis upon which the Company competes is product
performance and production capabilities. The Company usually receives job orders
after submitting bids pursuant to customer-issued specifications. The Company
also offers engineering services to its customers in designing and developing
connectors for specialized products and specific customer applications. This
enables the Company to receive a competitive advantage over those companies who
basically manufacture connectors based solely or primarily on cataloged
specifications. Many of the Company's competitors have greater financial
resources, market penetration and experience than the Company and no assurances
can be given that the Company will be able to compete effectively with these
companies in the future.
Suppliers of Raw Materials and Component Parts
The Company utilizes a variety of raw materials and manufactured
component parts which it purchases from various suppliers. These materials and
components are available from numerous sources and the Company does not believe
that it will have a problem obtaining such materials in the future. However, any
delay in the Company's ability to obtain necessary raw materials and component
parts may affect its ability to meet customer production needs. In anticipation
of such delays, the Company carries an inventory of raw materials and components
parts to avoid shortages and to insure continued production.
Engineering/Research & Development
The Company provides personalized engineering services to its customers
by designing connectors for specific customer applications. The employment of
electromechanical engineers is the anticipated cornerstone of the Company's
future growth. The Company maintains a testing laboratory where its engineers
experiment with new connector designs based on changes in technology and in an
attempt to create innovative, more efficient connector designs.
The Company expended an estimated $69,500 and $57,600 for the years
ended March 28, 1997 and March 29, 1996, respectively, on Company sponsored
research and development activities relating to the development of new designs,
techniques and the improvement of existing designs. In addition, the Company
received revenues of $103,800 and $129,000 for the years ended March 28, 1997
and March 29, 1996, respectively, pursuant to customer sponsored research
activities.
Employees
The Company presently employs approximately 65 people, four (4) of whom
are executive officers; three (3) are engaged in management activities; three
(3) provide general administrative services and approximately 55 are employed in
manufacturing and testing activities. The employees engaged in manufacturing and
testing activities are covered by a collective bargaining agreement with the
United Auto Workers of America, Local 259 (the "Union") which expired on July
31, 1995 and was extended until March 31, 1996. On April 1, 1996, the Union and
the Company negotiated a new contract which expires on March 31, 1999. The
Company believes that it has a good relationship with its employees and the
Union.
<PAGE>
Patents and Licenses
Electrical connectors and interconnection devices are usually the
subject of standard designs, therefore, only innovations of standard designs or
the discovery of a new form of connector are patentable. The Company is
continuously attempting to develop new forms of connector or adaptations of
current connector designs in an attempt to increase performance and decrease per
unit costs. The Company has developed and designed the COMTAC connector which
was patented on January 19, 1988, at which time the patent was assigned to the
Company.
Governmental Regulations
The Company is subject to federal regulations under the Occupational
Safety and Health Act ("OSHA") and the Defense Electric Supply Command ("DESC").
OSHA provides federal guidelines and specifications to companies in order to
insure the health and safety of employees. DESC oversees the quality and
specifications of products and components manufactured and sold to the
government and the defense industry. Although DESC continuously requires
suppliers to meet changing specifications, the Company has not encountered any
significant problems meeting such specifications and its products have, in the
past, been approved. The Company is unaware of any changes in the government's
regulations which are expected to materially affect the Company's business.
Item 2. Properties
In August 1991, the Company relocated its offices and manufacturing
facilities to the Brooklyn Army Terminal at 140 58th Street, Brooklyn, New York
pursuant to a lease agreement with the New York City Economic Development
Corporation. This facility occupies one floor of an eight (8) story concrete
building and includes the Company's executive and administrative offices as well
as its manufacturing facilities. The manufacturing facilities include a tooling
and machine shop, a plating operation and a testing laboratory. The Company
leases approximately 40,000 feet of space, of which it estimates; 10,000 square
feet are used as executive, sales and administrative offices; 22,000 square feet
are used for its manufacturing and plating facilities; 4,000 square feet are
used for its laboratory facilities; and 4,000 square feet are used as warehouse
space. The premises are occupied by the Company under a ten (10) year lease
agreement dated August 23, 1991. The Company's net rent expense for the year
ended March 28, 1997 was $189,952. The basic rent under the lease agreement is
approximately $194,236 per year for the balance of the term of the lease except
for the last year, in which the rent increases to $274,630. In addition to the
base rent, the Company pays real estate taxes, insurance premiums and utility
charges relating to the use of the premises. The Company considers its present
facilities to be adequate for its present and anticipated future needs.
Item 3. Legal Proceedings
The Company is not a party to or aware of any pending or threatened
legal proceedings which would result in any material adverse effect on its
operations or its financial condition.
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted to shareholders during the fourth quarter for
the fiscal year ended March 28, 1997.
<PAGE>
PART II
Item 5. Market For Common Equity and
Related Stockholder Matters
Principal Market
The Common Stock of the Registrant (the "Common Stock") is traded in
the Over-The-Counter Market and is quoted on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System Bulletin Board under
the symbol "IEHC". On January 11, 1993, the Company's Common Stock was deleted
from listing on the NASDAQ SmallCap Market System because of the Company's
failure to maintain the minimum asset and shareholders equity requirements. On
January 12, 1993, the Company's Common Stock was first quoted on the NASDAQ
Bulletin Board.
Market Information
The range of high and low bid prices for the Company's Common Stock,
for the periods indicated as set forth below. For the period prior to October
29, 1991, the Company was listed on the NASDAQ National Market System. On
October 29, 1991, the Company's Common Stock was delisted from the NASDAQ
National Market System and from October 29, 1991 to January 11, 1993, the
Company's Common Stock was listed on the NASDAQ SmallCap Market System. On
January 11, 1993, the Company's Common Stock was delisted from the NASDAQ Small
Cap Market System and on January 13, 1993, the Company's Common Stock was first
quoted on the NASDAQ Bulletin Board. Set forth below is a table indicating the
high and low bid prices of the Common Stock during the periods indicated.
<TABLE>
<CAPTION>
Year High Bid Low Bid
---- -------- -------
<S> <C> <C>
Fiscal Year ended March 28, 1997(1)
1st Quarter .1565 .15625
2nd Quarter .25 .15625
3rd Quarter .25 .25
4th Quarter .3125 .25
Fiscal Year ended March 29, 1996(1)
1st Quarter .135 1/16
2nd Quarter 3/16 1/16
3rd Quarter 1/16 1/32
4th Quarter 1/8 1/32
(1) As reported by the NASDAQ Bulletin Board.
</TABLE>
The above quotations, as reported, represent prices between dealers and
do not include retail mark-up, mark-down or commissions. Such quotations do not
necessarily represent actual transactions.
<PAGE>
Dividends
The Company has not paid any cash dividends on its Common Stock during
the last five (5) fiscal years. At present, the Company does not anticipate
issuing any cash dividends on its Common Stock in the foreseeable future by
reason of its contemplated future financial requirements and business plans. The
Company will retain earnings, to the extent that there are any, to finance the
development of its business.
Approximated Number of Equity Security Holders
The number of record holders of the Company's Common Stock as of June
23, 1997 was approximately 1,268. Such number of record owners was determined
from the Company's stockholder records, and does not include the beneficial
owners of the Company's Common Stock whose shares are held in the names of
various security holders, dealers and clearing agencies.
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth for the periods indicated, percentages
for certain items reflected in the financial data as such items bear to the
revenues of the Company:
<TABLE>
Relationship to Total Revenues
March 28, March 29,
1997 1996
--------- ---------
<S> <C> <C>
Operating Revenues (in thousands) .............. $ 4,729 $ 4,085
Operating Expenses:
(As a percentage of Operating Revenues)
Cost of Products Sold ................. 72.6% 75.2%
Selling, General and Administrative ... 16.1% 18.2%
Interest Expense ...................... 3.2% 3.8%
Depreciation and amortization ......... 5.7% 7.1%
TOTAL COSTS AND EXPENSES ..... 97.6% 103.4%
Operating Income (loss) ........................ 2.4% (4.3%)
Other income ................................... .0% 2.6%
Income (loss) before Income Taxes .............. 2.4% (1.7%)
Income Taxes ................................... (.2%) (.6%)
Net Income (loss) .............................. 2.2% (2.3%)
</TABLE>
<PAGE>
Year End Results: March 28, 1997 vs. March 29, 1996
Operating revenues for the year ended March 28, 1997 amounted to
$4,729,277, reflecting a 15.8% increase versus prior year 1996 revenues of
$4,085,177. The increase in revenues is a direct result of the Company's efforts
to redirect its sales efforts to the commercial electronic market and away from
the governmental and military procurement sector.
Cost of products sold amounted to $3,433,704 for the fiscal year ended
March 28, 1997, or 72.6% of operating revenues. This reflected an increase of
11.8% in the cost of products sold from $3,070,264 or 75.2% of operating
revenues for the fiscal year ended March 29, 1996. This increase is primarily
due to increased manufacturing costs reflective of an increase in sales over the
previous year.
Selling, general and administrative expenses were $760,432 and $746,049
or 16.1% and 18.2% of operating revenues for the fiscal years ended March 28,
1997 and March 29, 1996, respectively. This category of expense increased 1.9%
from the prior year. The increase can be attributed to increased variable
expenses which are reflective of increased sales.
Interest expense was $149,735 for the fiscal year ended March 28, 1997
or 3.2% of operating revenues. For the fiscal year ended March 29, 1996,
interest expense was $156,989 or 3.8% of operating revenues. The decrease of
4.6% reflects decreased interest rates in fiscal 1997 as compared to the prior
year.
Depreciation and amortization of $272,894 or 5.7% of operating revenues
was reported for the fiscal year ended March 28, 1997. This reflects an decrease
of 5.7% from the prior year ended March 29, 1996 of $289,236 or 7.1% of
operating revenues. The decrease is a result of reduced levels of acquisitions
of new plant and equipment.
The Company reported net income of $105,709 for the year ended March
28, 1997 representing income of $.05 per share as compared to a loss of $95,518
or $(.04) per share for the year ended March 29, 1996. The net income for the
current year can in part be attributed to an increase of 15.8% in operating
revenues over the prior year.
Liquidity and Capital Resources
The Company reported a working capital deficit of $61,543 as compared
to a working capital deficit of $98,012 at March 29, 1996. The increase in
working capital of $36,469 was attributable to the following items:
Net income (loss) (excluding depreciation
and amortization) $ 378,603
Capital expenditures (219,178)
Other transactions (122,956)
As a result of the above, the current ratio (current assets to current
liabilities) was .97 to 1 at March 28, 1997 as compared to .95 to 1 at March 29,
1996. Current liabilities at March 28, 1997 were $1,918,911 compared to
$2,094,213 at March 29, 1996. This decrease is primarily reflective of an
decrease in the level of accounts receivable financing as well as a decrease in
accounts payable.
The Company expended $219,178 in capital expenditures as against
depreciation of $272,894 for the year ended March 28, 1997.
<PAGE>
The net income of $105,709 for the year ended March 28, 1997 increased
stockholders' equity to $559,382 as compared to stockholders' equity of $453,673
at March 29, 1996.
The Company has an accounts receivable financing agreement with a
factor which bears interest at 2.5% above prime. At March 28, 1997 the amount
outstanding was $536,457 as compared to $643,380 at March 29, 1996.
As of March 28, 1997 and as of March 29, 1996, the Company failed to
meet the tangible net worth covenant contained in its loan agreement with the
UDC. The Company has not been in compliance with this ratio since fiscal year
1994. The Company received a waiver of this covenant from the UDC for the period
ending March 31, 1994. The Company has requested a continued waiver from the
UDC. To date, the UDC has not declared an event of default. The Company has been
notified that the loan was recently sold by UDC to a third party. There are no
assurances that the Company will receive any additional waivers of this covenant
and therefor, the Company may be deemed to be in noncompliance with its loan
obligation to the UDC.
Effects of Inflation
The Company does not view the effects of inflation to have a material
effect upon its business. Increases in costs of raw materials and labor costs
have been offset by increases in the price of the Company's products, as well as
reductions in costs of production, reflecting management's efforts in this area.
While the Company has in the past increased its prices to customers, it has
maintained its relative competitive price position. However, significant
decreases in government, military and military subcontractor spending has
provided excess production capacity in the industry which in turn has tightened
pricing margins.
Item 7. Financial Statements
See Index to Financial Statements attached hereto.
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
The Company had no disagreements with its accountants during the last
two fiscal years.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
The executive officers and directors of the Company are as follows:
Name Age Office
---- --- ------
Michael Offerman 56 Chairman of the Board of
Directors and President
Ralph Acello 60 Vice-President - Production
and Director
Robert Knoth 55 Secretary and Treasurer
Murray Sennet 74 Director
Allen Gottlieb 56 Director
Robert Pittman 72 Director
Joan Prideaux 64 Vice President - Sales and Marketing
- -------------------
All Directors serve for a term of two years and until their successors are
duly elected. All officers serve at the discretion of the Board of Directors.
Executive Officers and Directors
Michael Offerman has been a member of the Board of Directors since
1973. In May, 1987, Mr. Offerman was elected President of the Company and has
held that position since that date. Prior to his becoming President, Mr.
Offerman served as Executive Vice-President of the Company.
Ralph Acello has been a member of the Board of Directors since 1988. In
August, 1984, Mr. Acello was elected the Company's Vice-President of Production
and has held the position since that date.
Robert Knoth joined the Company as Controller in January, 1990 and was
elected Treasurer of the Company in March, 1990. Mr. Knoth was elected as
Secretary of the Company in September 1992 and Mr. Knoth has held these
positions since said dates. From 1986 to January, 1990, Mr. Knoth was employed
as controller by G&R Preuss, Inc., a company engaged in the business of
manufacturing truck bodies and accessories.
Murray Sennet has been a member of the Company's Board of Directors
since 1970. Mr. Sennet was the Secretary and Treasurer of the Company at the
time of his retirement in April, 1986.
Allen Gottlieb has been a member of the Company's Board of Directors
since 1992. Mr. Gottlieb has been an attorney in private practice for over five
(5) years.
<PAGE>
Robert Pittman has been a member of the Board of Directors since 1987.
Mr. Pittman retired in October 1992, at which time he had held the position of
Vice-President of Engineering and Secretary of the Company.
Joan Prideaux joined the Company in July, 1995 as National Sales
Manager. Prior to such time Ms. Prideaux was employed as an account executive of
Viking Connectors for the previous five years.
Significant Employees
Thomas Hunt is the director of Quality Control, a position he has held
since October, 1992. Mr. Hunt joined the Company in 1987 as the laboratory
director and senior inspector and held such positions until his promotion in
October, 1992.
Stephen Reich is the Director of Purchasing, a position he has held
since July 1995. Prior to joining the Company, Mr. Reich owned and operated a
retail business.
Certain Reports
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers and persons who own, directly or indirectly,
more than 10% of a registered class of the Corporation's equity securities, to
file with the Securities and Exchange Commission ("SEC") reports of ownership
and reports of changes in ownership of Common Stock of the Corporation.
Officers, directors and greater than 10% shareholders are required to furnish
the Company with copies of all Section 16(a) reports that they file. Based
solely on review of the copies of such reports received by the Company, the
Company believes that filing requirements applicable to officers, directors and
10% shareholders were complied with during the fiscal year.
Item 10. Executive Compensation
The following table sets forth below the summary compensation paid or
accrued by the Corporation during the fiscal years ended March 28, 1997, March
29, 1996 and March 31, 1995 for the Corporation's Chief Executive Officer:
<TABLE>
<CAPTION>
Other Annual
Name and Principal Position Year Salary Bonus Compensation
- --------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Michael Offerman, Chief March 28,1997 $100,000 - 0
Executive Officer, President1 March 29, 1996 92,404 - 0
March 31, 1995 86,875 - 0
- -------------
(1) During the years ended March 28, 1997, March 29, 1996 and March 31,
1995, and the Corporation provided automobile allowances to Mr.
Offerman. This does not include the aggregate incremental cost to the
Corporation of such automobile or automobile allowances. The
Corporation is unable to determine without unreasonable effort and
expense the specific amount of such benefit, however, the Corporation
has concluded that the aggregate amounts of such personal benefit for
Mr. Offerman does not exceed $25,000 or 10% of the compensation
<PAGE>
reported as total salary and bonus reported. Effective January 1, 1995,
Mr. Offerman entered into an employment agreement with the Company to
increase his salary to $100,000 per annum. Mr. Offerman agreed that,
not withstanding the terms of his new employment agreement, he was paid
at the rate of $92,404 for fiscal 1996. Commencing September 1996, Mr.
Offerman began receiving his salary at the rate of $100,000 per year.
See "Employment Agreements".
</TABLE>
No other officer of the Corporation received compensation (salary and bonus) in
excess of $100,000 during the fiscal years ended March 28, 1997 or March 29,
1996 or March 31, 1995.
Pension/Benefit Incentive Plan
In 1964, the Corporation's Shareholders and Board of Directors adopted
a contributory pension plan (the "Salaried Pension Plan") effective April 1,
1964, for salaried employees of the Corporation. The Salaried Pension Plan as
revised on April 1, 1987, provides for retirement benefits for qualified
employees upon or prior to retirement. For early retirement, employees are
eligible to receive a portion of their retirement benefits, starting 10 years
prior to the employees anticipated normal retirement date (age 65), if the
employee has completed l5 years of service to the Corporation. The employee is
eligible to receive reduced retirement benefits based on an actuarial table for
a period not exceeding ten (l0) years or his lifetime. In no event would
benefits exceed $12,000 per year.
For normal retirement at the age of sixty-five (65) the employee is
entitled to receive full retirement benefits for a period not exceeding ten (10)
years or his lifetime. If the employee should die prior to the ten year period,
his beneficiaries will continue to receive the full benefit for the remainder of
the ten year term. In no event will benefits exceed $12,000 per year.
If payment is made on the "joint and survivor basis" as elected by the
employee, benefits will be provided to both the employee and spouse on a reduced
basis over the life of both the employee and his spouse. If the employee should
die prior to the guaranteed ten year period, the spouse will receive the
employee benefit for the remainder of the term, after which, the spouse will
receive the reduced spousal benefit for the life of the spouse. In no event will
the benefits pursuant to the joint and survivor basis exceed $12,000 per year.
In June, 1995, the Company applied to the Pension Benefit Guarantee
Corporation for a distress termination of the Salaried Pension Plan. The PBGC
has notified the Company that it has agreed to take over the Salaried Pension
Plan. The PBGC has not issued its final order and may require that the Company
enter into an agreement to make future payments to the PBGC.
Under an agreement dated June 16, 1978, the Corporation entered into a
retirement compensation agreement with Michael Offerman, which provides that
upon reaching the age of 65, or the earlier of death, total disability, or
employment termination by mutual consent, Michael Offerman or his beneficiary
would be entitled to retirement payments of $30,000 per year for a period of
five years.
<PAGE>
Employment Agreements
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Michael Offerman, its President and Chairman of the
Board. Effective as of January 1, 1995, the terms of the Employment Agreement
provide that Mr. Offerman's salary will be $100,000 per year and that he will be
employed as President of the Company until a term expiring on December 31, 1999.
Mr. Offerman agreed to defer the increase in his salary from the previous year's
rate of compensation ($86,875) until October 20, 1995 and further agreed to
receive only $92,404 in salary for the fiscal year ended March 29, 1996.
Commencing in September 1996, Mr. Offerman began receiving compensation at the
rate of $100,000 per year in accordance with his employment agreement. As
further provided under the terms of the Employment Agreement, the Company will
provide certain benefits such as health benefits and the use of a full size
automobile during the term. The Company also agreed to pay the premium for a
$150,000 term life insurance policy payable to Mr. Offerman's beneficiary. In
the event the Company declines to enter into a new employment agreement with Mr.
Offerman at the expiration of his term, the Company has agreed to pay Mr.
Offerman the sum of $75,000. Additionally, in the event there occurs a "change
of control" of the Company, and within the one (1) year period thereafter Mr.
Offerman's employment is terminated or he resigns, then Mr. Offerman will be
entitled to receive a sum equal to the balance of his base salary for the
remainder of the term plus $75,000. A "change of control" is defined to mean (i)
a person becomes the holder of 30% or more of the combined voting power of the
Company's outstanding securities (ii) the stockholders of the Company approve a
merger or consolidation whereby the Company's voting securities fail to
represent, after such merger or consolidation, at least 50.1% of the voting
securities of the surviving entity. Additionally, in the event the Company
relocates outside of the New York City Metropolitan area, it has agreed to pay
Mr. Offerman the sum of $75,000.
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Ralph Acello, its Vice President-Production. Effective
as of January 1, 1995, the terms of the Employment Agreement provide that Mr.
Acello's salary will be $61,300 per year and that he will be employed as Vice
President-Production of the Company until a term expiring on December 31, 1999.
As further provided under the terms of the Employment Agreement, the Company
will provide certain benefits such as health benefits and the use of a full size
automobile during the term. The Company also agreed to pay the premium of a
$150,000 term life insurance policy payable to Mr. Acello's beneficiary. In the
event the Company declines to enter into a new employment agreement with Mr.
Acello at the expiration of his term, the Company has agreed to pay Mr. Acello
the sum of $45,975. Additionally, in the event there occurs a "change of
control" of the Company, and within the one (1) year period thereafter Mr.
Acello's employment is terminated or he resigns, then Mr. Acello will be
entitled to receive a sum equal to the balance of his base salary for the
remainder of the term plus $45,975. A "change of control" is defined to mean (i)
a person becomes the holder of 30% or more of the combined voting power of the
Company's outstanding securities (ii) the stockholders of the Company approve a
merger or consolidation whereby the Company's voting securities fail to
represent, after such merger or consolidation, at least 50.1% of the voting
securities of the surviving entity. Additionally, in the event the Company
relocates outside of the New York City Metropolitan area, it has agreed to pay
Mr. Acello the sum of $45,975.
<PAGE>
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Robert Knoth. Effective as of January 1, 1995, the
terms of the Employment Agreement provide that Mr. Knoth's salary will be
$59,500 per year and that he will be employed as Secretary and Treasurer until a
term expiring on December 31, 1999. As further provided under the terms of the
Employment Agreement, the Company will provide certain benefits such as health
benefits. The Company also agreed to pay the premium of a $150,000 term life
insurance policy payable to Mr. Knoth's beneficiary. In the event the Company
declines to enter into a new employment agreement with Mr. Knoth at the
expiration of his term, the Company has agreed to pay Mr. Knoth the sum of
$44,625. Additionally, in the event there occurs a "change of control" of the
Company, and within the one (1) year period thereafter Mr. Knoth's employment is
terminated or he resigns, then Mr. Knoth will be entitled to receive a sum equal
to the balance of his base salary for the remainder of the term plus $44,625. A
"change of control" is defined to mean (i) a person becomes the holder of 30% or
more of the combined voting power of the Company's outstanding securities (ii)
the stockholders of the Company approve a merger or consolidation whereby the
Company's voting securities fail to represent, after such merger or
consolidation, at least 50.1% of the voting securities of the surviving entity.
Additionally, in the event the Company relocates outside of the New York City
Metropolitan area, it has agreed to pay Mr. Knoth the sum of $44,625.
In December 1996, the Board of Directors approved the terms of an
employment agreement with Joan Prideaux. The terms of the employment agreement
provide that Ms. Prideaux's salary will be $57,000 per year and that she will be
employed as Vice President-Sales and Marketing. The agreement is for a period of
five years. As further provided under the terms of the employment agreement, the
Company will provide certain benefits such as health benefits. The Company also
agreed to pay the premium of a $150,000 term life insurance policy payable to
Ms. Prideaux's beneficiary. In the event the Company declines to enter into a
new employment agreement with Ms. Prideaux at the expiration of the term, the
Company has agreed to pay Ms.Prideaux the sum of $42,750. Additionally, in the
event there occurs a "change of control" of the Company, and within the one (1)
year period thereafter Ms. Prideaux's employment is terminated or he resigns,
then she will be entitled to receive a sum equal to the balance of her base
salary for the remainder of the term plus $42,750. A "change of control" is
defined to mean (i) a person becomes the holder of 30% or more of the combined
voting power of the Company's outstanding securities (ii) the stockholders of
the Company approve a merger or consolidation whereby the Company's voting
securities fail to represent, after such merger or consolidation, at least 50.1%
of the voting securities of the surviving entity. Additionally, in the event the
Company relocates outside of the New York City Metropolitan area, it has agreed
to pay Ms. Prideaux the sum of $42,750.
Cash Bonus Plan
In 1987, the Company adopted a cash bonus plan ("Cash Bonus Plan") for
Executive Officers. Contributions to the Bonus Plan are made by the Company only
after pre-tax operating profits exceed $150,000 for a fiscal year, and then to
the extent of 10% of the excess of the greater of $150,000 or 25% of pre-tax
operating profits. There were no contributions to the Bonus Plan for the fiscal
years ended March 28, 1997, March 29, 1996 or March 31, 1995.
<PAGE>
Item 11. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information as of June 23, 1997
with respect to (i) the persons (including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934), known by the Company
to be the beneficial owner of more than five percent (5%) of any class of the
Company's voting securities; (ii) each Executive Officer and Director who owns
Common Stock in the Company; and (iii) all Executive Officers and Directors as a
group. As of June 23, 1997, there were 2,303,502 shares of Common Stock issued
and outstanding.
<TABLE>
<CAPTION>
Amount of and Nature
Name and Address of of Beneficial
Title of Class Beneficial Owner Ownership Percentage of Class
-------------- ---------------- --------- -------------------
<S> <C>
Common Stock $.50 Michael Offerman 399,784(1) 17.4%
Par Value 140 58th Street
Brooklyn, NY 11220
Murray Sennet 24,500 1.1%
1900 Manor Lane
Plano, TX 75093
Allen Gottlieb 82,300 3.6%
325 Coral Way
Ft. Lauderdale. FL 33301
Robert Pittman 20,000 *
45 Ocean Avenue
Monmouth Beach, NJ 07750
Gerard Deiss
16 Rue De La Mart 547,000(2) 23.7%
Chartreuil
6-68 490
Mere Par Montfort
L'Amaury, France
David Lopez and 278,000 12.1%
Nancy Lopez
Edge of Woods
P.O. Box 323
Southhampton, NY 11968
All Officers & 526,584 22.9%
Directors as a Group
(4 in number)
* Less than 1%.
(1) 43,600 shares of Common Stock are jointly owned by Mr. Offerman and his
wife, Gail Offerman.
(2) These shares are beneficially owned by Mr. Deiss through a Liechtenstein
trust.
</TABLE>
All shares set forth above are directly by the named individual unless otherwise
stated.
<PAGE>
Item 12. Certain Relationships and Related Transactions
See "Executive Compensation-Employment Agreements" for a discussion of
the employment agreements between the Company and management.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits filed with Form 10-KSB:
See annexed Exhibit index.
(b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the last
quarter of the period covered by this Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IEH CORPORATION
By: /s/ Michael Offerman
---------------------
Michael Offerman, President
Dated: June 25, 1997
Pursuant to the requirements of the Securities Exchange Act of l934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/Michael Offerman June 25, 1997
- -------------------
Michael Offerman, Chairman of the
Board and President
/s/Ralph Acello June 25, 1997
- ---------------
Ralph Acello
Vice President and Director
/s/Robert Knoth June 25, 1997
- ---------------
Robert Knoth, Secretary and
Treasurer
/s/Murray Sennet June 25, 1997
- ----------------
Murray Sennet, Director
/s/Robert Pittman June 25, 1997
- -----------------
Robert Pittman, Director
<PAGE>
EXHIBIT INDEX
The following Exhibits have previously been filed with the Securities
and Exchange Commission and, pursuant to 17 C.F.R. Secs. 201.24 and 240.12b-32,
are incorporated by reference to the document referenced in brackets following
the descriptions of such Exhibits. Those Exhibits designated by an asterisk (*)
are filed herewith.
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Certificate of
Incorporation of the Company [Exhibit C-4 to
Current Report filed on Form 8-K, dated
February 27, 1991]
3.2 By-Laws of the Company Filed as Exhibit
3.2 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
4.1 Form of Common Stock Certificate of
Company. Filed as Exhibit 4.1 on Report
on Form 10-KSB for the fiscal year ended
March 27, 1994.
4.2 Form of Secured Promissory Note payable,
New York State Urban Development
Corporation [Exhibit 10B to Current
Report on Form 8-K, dated July 22, 1992].
10.1 License Agreement between the Company
and Brevetron, S.A., Lugano,
Switzerland, dated January 1, 1979.
Filed as Exhibit 10.1 on Report on Form
10-KSB for the fiscal year ended March
27, 1994.
10.2 Amendment to License Agreement between
the Company and Brevetron, S.A. dated
September 28, 1982. Filed as Exhibit
10.2 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
10.3 Amendment to License Agreement between
the Company and Brevetron, S.A. dated
September 20, 1991. Filed as Exhibit
10.3 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
10.4 Lease for premises 140 58th Street,
Brooklyn, New York 11220 [Exhibit A to
Current Report filed on Form 8-K, dated
August 23, 1991].
<PAGE>
Exhibit No. Description
- ----------- -----------
10.5 Form of Loan Agreement between the
Company and the New York State Urban
Development Corporation [Exhibit 10A to
Current Report filed on Form 8-K, dated
July 22, 1992].
10.6 Form of Security Agreement between the
Registrant and New York State Urban
Development Corporation [Exhibit 10C to
Current Report filed on Form 8-K, dated
July 22, 1992].
10.7 Form of financing agreement between the
Company and Milberg Factors, Inc.
[Exhibit C-1 to the Current Report filed
on Form 8-K, dated March 1, 1990]. 10.8
Form of Collective Bargaining Agreement
between Company and Local 259 of the
United Auto Workers Union, dated October
1, 1991.
10.9 Form of Employment Agreement between
Company and Michael Offerman together
with Amendment No. 1 dated November 27,
1996.
10.10* Form of Employment Agreement between the
Company and Ralph Acello together with
Amendment No. 1 dated November 27, 1996.
10.11* Form of Employment Agreement between the
Company and Robert Knoth together with
Amendment No. 1 dated November 27, 1996.
10.12* Form of Employment Agreement between the
Company and Joan Prideaux
11 Statement re:Computation of per share
earnings
21 Subsidiaries: None
23.1* Consent of Jerome Rosenberg CPA,
independent auditor of the Company
27 EDGAR Financial Date Schedule
<PAGE>
ITEM 7- FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA:
IEH CORPORATION
CONTENTS
INDEPENDENT AUDITOR'S REPORT FOR
THE YEARS ENDED MARCH 28, 1997
AND MARCH 29, 1996
BALANCE SHEETS AT MARCH 28, 1997
AND MARCH 29, 1996
STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED MARCH 28, 1997
AND MARCH 29, 1996
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED
MARCH 28, 1997 AND MARCH 29, 1996
STATEMENTS OF CASH FLOWS FOR
THE YEARS ENDED MARCH 28, 1997
AND MARCH 29, 1996
NOTES TO FINANCIAL STATEMENTS
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the stockholders and Board of Directors of
IEH Corporation
I have audited the accompanying balance sheets of IEH Corporation as of March
28, 1997 and March 29, 1996 and the related statements of operations,
stockholders equity and cash flows for each of the years ended March 28, 1997
and March 29, 1996. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based upon my audit.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of IEH Corporation as of March 28,
1997 and March 29, 1996 and the results of its operations and its cash flows for
the years ended March 28, 1997 and March 29, 1996 in conformity with generally
accepted accounting principles.
Syosset, New York
May 23, 1997 /s/ Jerome Rosenberg CPA
------------------------
Jerome Rosenberg CPA
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of March 28, 1997 and March 29, 1996
ASSETS
March 28 March 29
1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash ............................................... $ 15,274 $ 3,416
Accounts receivable,less allowance for
doubtful accounts of $10,062 at March 28, 1997,
and March 29, 1996 ................................ 651,873 861,103
Inventories ( Note 2 ) ............................. 1,107,100 1,016,272
Prepaid expenses and other current assets ( Note 3 ) 52,629 54,000
Other receivables .................................. 30,492 61,410
---------- ----------
Total current assets ............................. 1,857,368 1,996,201
---------- ----------
PROPERTY, PLANT AND EQUIPMENT,less
accumulated depreciation and amortization of
$4,238,093 at March 28, 1997 and $3,967,889
at March 29, 1996 ................................. 1,480,841 1,537,973
---------- ----------
OTHER ASSETS:
Prepaid pension cost ............................... 43,949 43,949
Other assets ....................................... 47,798 48,510
---------- ----------
91,747 92,459
---------- ----------
Total assets ...................................... $3,429,956 $3,626,633
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of March 28, 1997 and March 29, 1996
March 28, March 29,
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts receivable financing ............................. $ 536,457 $ 643,380
Notes payable, current portion ............................ 1,789 4,542
Loan payable, current portion (Note 7) .................... 45,710 43,528
Accrued corporate income taxes ............................ 8,217 29,064
Union pension, health and welfare,current portion (Note 11) 120,000 120,000
Accounts payable ........................................... 1,074,903 1,097,924
Other current liabilities (Note 9) ........................ 131,835 155,775
----------- -----------
Total current liabilities ............................... 1,918,911 2,094,213
----------- -----------
LONG-TERM LIABILITIES:
Pension plan payable ...................................... 516,966 516,966
Notes payable, less current portion ....................... -- --
Loan payable, less current portion (Note 7) ............... 240,206 278,680
Union pension, health and welfare,long-term ( Note 11) .... 194,491 283,101
----------- -----------
Total long-term liabilities ............................. 951,663 1,078,747
----------- -----------
Total liabilities ....................................... 2,870,574 3,172,960
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value;
10,000,000 shares authorized,
2,303,502 shares issued and outstanding .................. 1,151,751 1,151,751
Capital in excess of par value ............................ 1,615,874 1,615,874
Retained earnings, (Deficit) .............................. (2,208,243) (2,313,952)
----------- -----------
Total stockholders' equity .............................. 559,382 453,673
----------- -----------
Total liabilities and stockholders' equity .............. $ 3,429,956 $ 3,626,633
=========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENTS OF OPERATIONS
Year Ended
March 28, March 29,
1997 1996
----------- -----------
<S> <C> <C>
REVENUES:
Net sales (Note 13) ............... $ 4,729,277 $ 4,085,177
----------- -----------
COSTS AND EXPENSES:
Cost of products sold ............. $ 3,433,704 3,070,264
Selling, general and administrative 760,432 746,049
Interest .......................... 149,735 156,989
Depreciation and amortization ..... 272,894 289,236
----------- -----------
4,616,765 4,262,538
----------- -----------
OPERATING INCOME (LOSS) ............. 112,512 (177,361)
----------- -----------
OTHER INCOME ........................ 1,414 107,049
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ... 113,926 (70,312)
----------- -----------
PROVISION FOR INCOME TAXES .......... 8,217 25,206
----------- -----------
NET INCOME (LOSS) ................... $ 105,709 $ (95,518)
=========== ===========
INCOME (LOSS) PER COMMON SHARE
BEFORE INCOME TAXES ................ $ .05 $ ( .03)
=========== ===========
NET INCOME (LOSS) PER
COMMON SHARE(Note 1) .............. $ .05 $ (. 04)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ................ 2,303,502 2,303,502
=========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended March 28, 1997 and March 29, 1996
Capital in Retained
Common Stock Excess of Earnings
Shares Amount Par Value (Deficit)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balances restated, April 1, 1995 ... 2,303,502 $ 1,151,751 $ 1,615,874 $(2,218,434)
Net loss -Year ended March 29, 1996 (181,598)
----------- ----------- ----------- -----------
Balances, March 29, 1996 ........... 2,303,502 1,151,751 1,615,874 (2,313,952)
Net income-Year ended March 28, 1997 105,709
----------- ----------- ----------- -----------
Balances, March 28, 1997 ........... $ 2,303,502 $ 1,151,751 $ 1,615,874 ($2,208,243)
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
Year Ended
March 28, March 29,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................... $ 105,709 $ (95,518)
--------- ---------
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization ................... 272,894 289,236
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ...... 209,230 (68,020)
(Increase) decrease in inventories .............. (90,828) 4,037
(Increase) decrease in prepaid expenses
and other current assets ...................... 1,371 35,001
(Increase) decrease in other receivables ........ 30,918 (25,639)
(Increase) decrease in prepaid pension costs .... -- (27,562)
Decrease in other assets ........................ 712 497
Increase (decrease) in accounts payable ......... (23,021) 144,392
(Decrease) in other current liabilities ......... (23,940) (107,117)
Increase (decrease) in accrued
corporate income taxes payable ................ (20,847) 15,270
(Decrease) in union pension and
health and welfare ........................... (88,610) (42,846)
Increase (decrease) in pension plan payable ..... -- 78,315
--------- ---------
Total adjustments ........................ 267,879 295,564
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES ............ 373,588 200,046
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ...... (215,762) (196,847)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES ............ (215,762) (196,847)
--------- ---------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS (CONTINUED)
Increase (Decrease) in Cash
Year Ended
March 28, March 29,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ............... (2,753) ( 15,914 )
Proceeds from accounts receivable financing ....... -- 57,760
Principal payments on accounts receivable financing (106,923) --
Principal payments on loan payable ................ (36,292) (41,929)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES .............................. (145,968) (83)
--------- ---------
INCREASE (DECREASE) IN CASH ........................ 11,858 3,116
CASH, beginning of year ............................ 3,416 300
--------- ---------
CASH, end of year .................................. $ 15,274 $ 3,416
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest expense .................................. $ 149,735 $ 156,989
========= =========
Income taxes ...................................... $ 8,217 $ 25,206
========= =========
See accompanying notes to financial statements
</TABLE>
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business:
The Company is engaged in the design, development, manufacture and distribution
of high performance electronic printed circuit connectors and specialized
interconnection devices. Electronic connectors and interconnection devices are
used to provide electrical connections between electronic component assemblies.
The Company develops and manufactures connectors which are designed for a
variety of high technology and high performance applications, and are primarily
utilized by those users who require highly efficient and dense(the space between
connection pins within the connector) electrical connections.
The Company is continuously redesigning and adapting its connectors to meet and
keep pace with developments in the electronics industry, and has, for example,
developed connectors for use with flex-circuits now being used in aerospace
programs, computers, air-borne communication systems, testing systems and other
areas. The Company also services its customers, by working directly with the
customers in the development and design ofconnectors to meet specific product
requirements.
Accounting Period:
The Company maintains an accounting period based upon a 52-53 week year which
ends on the nearest Friday in business days to March 31. The years ended March
28, 1997 and March 29, 1996 were comprised of 52 weeks.
Inventories:
Inventories are stated at cost, on a first-in, first-out basis, which does not
exceed market value.
Property, Plant and Equipment:
Property, plant and equipment is stated at cost less accumulated depreciation
and amortization. The Company provides for depreciation and amortization on the
straight-line method over estimated useful lives of four to ten years.
Maintenance and repair expenditures are charged to operations, and renewals and
betterments are capitalized. Items of property, plant and equipment which are
sold, retired or otherwise disposed of are removed from the asset and
accumulated depreciation or amortization account and any gain or loss thereon is
credited or charged to operations.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED): (continued)
Income Taxes:
The Company follows the policy of treating investment tax credits as a
reduction in the provision for Federal income tax in the year in which the
credit arises or may be utilized. Deferred income taxes arise from temporary
differences resulting from different depreciation methods used for financial and
income tax purposes. The Company has adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" effective for the year ended
March 26, 1993.
Net Income (Loss) per Common Share:
Net income ( loss) per common share is based upon the weighted average
number of common shares outstanding during each year.
NOTE 2- INVENTORIES:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 28, March 29,
1997 1996
--------- --------
<S> <C> <C>
Raw materials $ 791,452 $ 607,593
Work in process 37,476 113,309
Finished goods 278,172 295,370
--------- --------
$1,107,100 $1,016,272
========== ==========
</TABLE>
NOTE 3- PREPAID AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets are comprised of the
following:
<TABLE>
<CAPTION>
March 28, March 29,
1997 1996
--------- --------
<S> <C> <C>
Prepaid insurance $ 48,054 $ 54,000
Other 4,575 -
-------- --------
$ 52,629 $ 54,000
======== ========
</TABLE>
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 4- PROPERTY, PLANT AND EQUIPMENT:
Details of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
March 28, March 29,
1997 1996
---------- ----------
<S> <C> <C>
Leasehold improvements ........................... $ 568,006 $ 568,006
Machinery and equipment .......................... 3,714,312 3,561,995
Tools and dies ................................... 1,276,600 1,215,855
Furniture and fixtures ........................... 148,770 148,770
Transportation equipment ......................... 11,246 11,246
---------- ----------
5,718,934 5,505,872
Less: accumulated depreciation and amortization .. 4,238,093 3,967,899
---------- ----------
$1,480,841 $1,537,973
========== ==========
</TABLE>
NOTE 5- ACCOUNTS RECEIVABLE FINANCING:
The Company entered into an accounts receivable financing agreement
whereby it can borrow up to eighty percent of its eligible receivables (as
defined in the agreement) at an interest rate of 2 1/2% above The Chase
Manhattan Bank's publicly announced rate (8.50% at March 28, 1997) with a
minimum of 12% per annum. The agreement has an initial term of one year and will
automatically renew for successive one year terms, unless terminated by the
Company or Lender upon providing sixty days prior written notice. The loan is
secured by the Company's accounts receivable and inventories.
NOTE 6- NOTES PAYABLE:
The following is a summary of notes payable:
<TABLE>
<CAPTION>
Interest March 28, March 29,
Rate 1997 1996
---- ---- ----
<S> <C> <C> <C>
Note payable in monthly installments
of $297 through August, 1997 and
collateralized by transportation equipment 9.75% $1,789 $5,048
Less: unamortized discount ............... -- 506
------ ------
1,789 4,542
Less: current portion .................... 1,789 4,542
------ ------
Long-term portion ........................ $ 0 $ 0
====== ======
</TABLE>
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 7- LOAN PAYABLE
On July 22, 1992, the Company obtained a loan of $435,000 from the New
York State Urban Development Corporation (UDC), collateralized by machinery and
equipment. The loan is payable over ten years, with interest rates progressively
increasing from 4% to7%. The terms of the loan required only monthly interest
payments from September 1, 1992 until August 1, 1993. Payment of principal and
interest began on September 1, 1993. The balance remaining at March 28, 1997
amounted to $285,916.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
1998 $ 45,710
1999 48,529
2000 50,694
2001 54,289
Thereafter 86,694
--------
$285,916
In April, 1997, the Company was informed by the UDC that the loan was sold and
conveyed to WAMCO XXIV, Ltd. All the terms and conditions of the loan will
remain in effect.
As of March 28, 1997 and as of March 29, 1996, the Company had failed
to meet two of the financial covenants; namely that the "Company" shall be
obligated to maintain a tangible net worth of not less than $1,300,000 and that
the Company shall be obligated to maintain a ratio of current assets to current
liabilities of 1.1 to 1.0. The Company reported tangible net worth of $559,382
at March 28, 1997 and $453,673 at March 29, 1996. The ratio of current assets to
current liabilities at March 28, 1997 was .97 to 1.0, and at March 29, 1996, the
ratio was .95 to 1.0.
The Company had previously received a waiver of this covenant from the
UDC through the period ended March 31, 1994 and has applied for additional
waivers in subsequent periods. The UDC has not acted on these requests. There
are no assurances that the Company will receive any additional waivers of this
covenant. Should the Company not receive any additional waivers, then it will be
deemed to be in default of this loan obligation to the UDC and the entire loan
plus interest will become due and payable.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 8- INCOME TAXES:
The Company has available at March 28, 1997, for federal income tax
purposes, a net operating loss of approximately $2,130,000 of which
approximately 1,300,000 will expire in 2007 with the balance expiring in 2010.
In addition, the Company has unused investment tax credits of approximately
$86,000 which expire between 1997 and 2002.
NOTE 9- OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
<TABLE>
<CAPTION>
March 28, March 29,
1997 1996
-------- --------
<S> <C> <C>
Payroll and vacation pay accruals ............ $ 12,817 $ 5,590
Sales commissions ............................ 9,591 6,074
Pension plan payable ......................... 65,389 65,389
Other ........................................ 44,038 78,722
-------- --------
$131,835 $155,775
======== ========
</TABLE>
NOTE 10- PENSION PLAN-SALARIED PERSONNEL:
On June 30, 1995, the Company applied to the Pension Benefit Guaranty
Corporation ("PBGC") to have the PBGC assume all of the Company's
responsibilities and liabilities under its Salaried Pension Plan. On April 26,
1996, the PBGC determined that the Salaried Pension Plan did not have sufficient
assets available to pay benefits which were and are currently due under the
terms of the Plan. The PBGC further determined that pursuant to the provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
that the Plan must be terminated in order to protect the interests of the Plan's
participants. Accordingly, the PBGC pursuant to ERISA terminated the Plan and
established itself the statutory trustee of the Plan.
Pension plan expense for the period April 1, 1995 through July 31, 1995
( the Plan's termination date) and the year ended March 31, 1995 included the
following components:
The PBGC has advised the Company that since the assets of the Plan are
combined with the assets of other plans and invested by the Financial Operations
Department of the PBGC, it does not invest or track the assets separately by
plan. Accordingly, the PBGC was unable to provide any financial data relative to
the Plan, including the return on investments, unrecognized gain or loss, or
other information regarding the Plan assets at March 28, 1997.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 10 (CONTINUED)
At March 28, 1997 and March 29, 1996, $65,389 of the pension liability
is included in other current liabilities, with the balance of $516,966 shown as
a long-term liability. At March 28, 1997 and March 29, 1996, the long-term
portion includes $226,041, which represents the recognition of the additional
minimum liability to comply with the requirements of Statement of Financial
Accounting Standards No. 87.
NOTE 11- COMMITMENTS:
The Company had entered into employment agreements with certain of its
officers. The agreements provide for retirement compensation of $30,000 per
annum for a period of five years upon reaching either age 65, death, total
disability or employment termination by mutual consent between the Company and
the respective officer. Prior to March 26, 1993, all but one of these agreements
had expired. The remaining agreement is with the President of the Company.
In 1979, the Company entered into an agreement with Brevetron S.A., for
the manufacture and sale of certain electrical connectors. The agreement was a
so-called "hybrid" agreement involving a license under both patent rights and
know-how. The license was non-exclusive, and in fact the Company encountered
licensed competition in the United States in the sale of these products known as
the "Hypertac" socket. The last of these patents expired in 1992. The Company,
however, had continued to pay licensing fees to Brevetron S.A. and for the year
ended March 31, 1995 had recorded a licensing fee liability of $75,417. For the
six months ended September 30, 1995, the Company had initially recorded an
additional $31,783 in license fees.
Upon having outside counsel conduct a review of the agreement, the
Company had advised Brevetron S.A. that it believes that there is no legal
obligation on the part of the Company to pay any further licensing fees.
It is the opinion of the Company's outside counsel that the agreement
had been unenforceable since January 7, 1992, the date of expiration of the
latest patent.
Accordingly, the Company reversed the licensing fees of $31,783 that
were recorded as an expense in the fiscal year ended March 29, 1996. The
remaining liability of $75,417 representing the amount of licensing fees accrued
for the year ended March 31, 1995 was reversed and recorded as an item of income
in the fiscal year ended March 29, 1996.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 11 (CONTINUED)
On August 23, 1991, the Company entered into a lease with the New York
City Economic Development Corporation for its office and manufacturing facility.
The Company is obligated under this lease through September 1, 2001, at minimum
annual rentals as follows:
Fiscal Year Ending:
1998 $194,236
1999 194,236
2000 194,236
2001 274,630
-------
$ 857,338
=========
Net rental expense for the year ended March 28, 1997 for this lease was
$189,952.
The Company has, with the United Auto Workers of America, Local 259, a
collective bargaining multi-employer pension plan. Contributions are made in
accordance with a negotiated labor contract and are based on the number of
covered employees employed per month. With the passage of the Multi-Employer
Pension Plan Amendments Act of 1980 ("The Act"), the Company may become subject
to liabilities in excess of contributions made under the collective bargaining
agreement. Generally, these liabilities are contingent upon the termination,
withdrawal, or partial withdrawal from the Plan. The Company has not taken any
action to terminate, withdraw or partially withdraw from the Plan nor does it
intend to do so in the future. Under the Act, liabilities would be based upon
the Company's proportional share of the Plan's unfunded vested benefits which is
not currently available. The amount of accumulated benefits and net assets of
such plan also is not currently available to the Company. Total contributions
charged to expense under this pension plan were $39,533 and $42,140 for the
fiscal years ending March 28, 1997 and March 29, 1996.
As of March 28, 1997, the Company was in arrears with respect to its
contributions to the union's health and welfare and pension plans. The amount
due the health and welfare plan was $144,889 and the amount due the pension plan
was $169,602, for a total amount due of $314,491.
In December, 1993, the Company and Local 259 entered into a verbal
agreement whereby the Company would satisfy this debt by the following payment
schedule:
The sum of $10,000 will be paid by the Company each month in
satisfaction of the current arrears until this total debt has been paid. Under
this agreement, the projected payment schedule for arrears will satisfy the
total debt in 52 months. Additionally, both parties have agreed that current
obligatory funding by the Company will be made on a timely current basis.
The total amount due of $314,491 is reported on the accompanying
balance sheet in two components; $120,000 reported as a current liability and
$194,491 as a long-term liability.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 12- STOCK OPTION PLAN:
On December 4, 1986 and as supplemented on January 6, 1987 and March
11, 1987, the Company's Board of Directors proposed the establishment of a
non-qualified stock option plan for key employees, which was ratified on
September 11, 1987 by a majority vote of the Company's stockholders at the
Company' annual meeting. The plan provided for the granting of options to
purchase an aggregate of 125,000 shares of the Company's common stock. The Plan
lapsed in September 1992. There are currently no options outstanding nor
exercisable at March 28, 1997.
NOTE 13- REVENUES FROM MAJOR CUSTOMERS:
In the fiscal year ended March 28, 1997, more than 33% of the Company's
total revenues were earned from three customers. Total sales to these customers
were approximately $1,567,000. Individually, sales to these three customers were
$593,000, $552,000 and $422,000.
In the fiscal year ended March 29, 1996 more than 10% of the Company's
total revenues were earned from three customers. Total sales to these customers
were approximately $924,000. Individually, sales to these customers were
$319,000, $307,000 and $298,000.
NOTE 14- PRIOR PERIOD ADJUSTMENT:
In connection with the termination of the Salaried Pension Plan, it was
determined that the Pension Plan's assets were overstated in the fiscal year
ended March 31, 1995. Accordingly, at March 29, 1996, an adjustment of $144,625,
representing the writedown of pension plan assets to net realizable value was
made as a charge to opening retained earnings (deficit) at April 1, 1995.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1995, by and between IEH CORPORATION,
a New York corporation maintaining its principal place of business at 140 58th
Street, Brooklyn, New York 11220 (the "Company"), and Michael Offerman residing
at 2984 Wynsum Avenue, Merrick, New York 11566 (the "Employee").
WHEREAS, the Company is engaged in the design, development, manufacture
and distribution of high performance electronic printed circuit connectors and
specialized interconnection devices.
WHEREAS, the Company desires to employ the Employee, and the Employee
desires to accept such employment on the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter stated, the parties hereto hereby agree as follows:
1. Employment. The Company agrees to employ the Employee, and
the Employee hereby agrees to work for the Company, as a full- time employee
during the Term (as hereinafter defined). The Employee shall be employed as the
President of the Company. Additionally, the Company shall use its best efforts
to cause the Employee to be elected to the Board of Directors of the Company
during the term hereof. "Best efforts" shall mean the Company causing its Board
of Directors to nominate the Employee to the shareholders of the Company for
election to the Board of Directors of the Company.
The Employee agrees to serve the Company faithfully and to the
best of his ability and to perform such services and duties of an executive
nature in connection with the business, affairs and operations of the Company as
may be reasonably and in good faith assigned or delegated to him from time to
time by or under the authority of the Board of Directors of the Company and
consistent with the position of President, and to use his best efforts in the
promotion and advancement of the Company and its welfare and business. Subject
to Section 3(g) herein, Employee shall be based in Brooklyn, New York.
2. Salary and Other Compensation.
(a) Base Salary. The Employee's annual base salary during the
Term will be $100,000. Said salary shall be payable in accordance with the
employment practices of the Company generally, which currently calls for such
salary to be paid in equal semi-monthly payments during each year of the Term.
(b) Benefits. The Employee will be entitled to vacation,
holiday, sick time and health insurance benefits according to the standard
benefit policies applicable to other employees of the Company. The Company shall
also obtain for the benefit of the Employee a term life insurance policy
providing for a death benefit of $150,000 payable to a beneficiary named and
designated by the Employee provided that the Employee is insurable at standard
rates.
(c) Automobile Allowance. The Company shall, at its option,
provide the Employee with the use of, or, in the alternative an automobile
allowance for a full size sedan during the Term. The Company shall reimburse the
Employee for the expenses incurred and paid by him for the insurance, repair,
gas, maintenance and mobile telephone expenses.
<PAGE>
(d) Travel and Entertainment Expenses. The Company shall
reimburse the Employee for reasonable travel and entertainment expenses incurred
and paid by him in connection with and during the Term and in furtherance of the
interests of the Company.
(e) Withholding. All references herein to compensation to be
paid to the Employee are to the gross amounts thereof which are due hereunder.
The Company shall have the right to deduct therefrom: (i) all taxes which may be
required to be deducted or withheld under any provisions of the law now in
effect or which may become effective any time during the term of this Agreement;
and (ii) all benefits costs payable by the Company's similarly situated salaried
employees.
3. Term and Termination.
(a) Term. The term of this Agreement shall be for a period of
five (5) years commencing as of January 1, 1995 and continuing through December
31, 1999 (the "Term") unless sooner terminated in accordance with the provisions
of this Section 3.
(b) Mutual Consent. This Agreement and the Employee's
employment hereunder may be terminated at any time by the mutual consent of the
parties hereto.
(c) For Cause. The Employee's employment hereunder may be
terminated at any time by the majority vote of the Board of Directors of the
Company taken at any regular or special meeting at which the Employee has been
afforded the opportunity to participate (without considering the vote of the
Employee for any purpose other than for purposes of establishing a quorum), and
shall be effective upon written notice of actual termination for "cause" to the
Employee which, for the purposes of the foregoing, shall solely be made upon a
determination made in good faith by the Company's Board of Directors, and upon
written notice from the Company that Employee has committed an act of personal
dishonesty intended to result in a substantial personal benefit or enrichment of
the Employee at the expense of the Company. For purposes of this agreement
"Cause" shall mean (i) willful disobedience by the Employee of a material and
lawful instruction of the Board of Directors or any senior executive of the
Company; or (ii) conviction of the Employee of any felony or any misdemeanor
involving fraud or embezzlement or similar crime; or (iii) breach by the
Employee of any material provision of this Agreement; or (iv) conduct amounting
to fraud, dishonesty, gross negligence, willful misconduct; provided that the
Company shall not have the right to terminate the employment of Employee
pursuant to the foregoing clause (i), (iii) or (iv) unless written notice
specifying such breach shall have been given to the Employee and, in the case of
breach which is capable of being cured, the Employee shall have failed to cure
such breach within twenty (20) days after his receipt of such notice.
Upon termination for cause as provided in this subsection (c), the Employee
shall not be entitled to receive any compensation or other benefits pursuant to
this Agreement except for any compensation or benefits accrued under the terms
of this Agreement that remains unpaid as of the termination date specified in
the above-mentioned notice of actual termination for cause.
<PAGE>
(d) Without Cause. The Company may, at its option, terminate
this Agreement at any time without cause upon written notice to the Employee,
subject to payment to Employee of a severance payment as hereinafter provided.
For purposes hereof, "without cause" shall include, without limitation, any
substantial diminution by the Company of the Employee's duties without the
consent of the Employee and not resulting from (i) any act or omission by the
Employee which would otherwise constitue grounds for dismissal for "cause" or
(ii) any disability of the Employee. Except as provided in sub-paragraph (h)
hereof, in the event of termination without cause pursuant to this subsection
(d) during the Term of this Agreement, the Employee shall be entitled to receive
a severance payment equal to the sum of the amount of base salary that would
otherwise be payable to the Employee for the unexpired portion of the Term plus
the sum of $50,000. Such severance payments shall be paid by the Company to the
Employee in a single lump sum payment within 30 days following termination.
(e) Death of Employee. The Employee's employment under this
Agreement will terminate immediately upon his death, in which event there shall
be paid to Employee's estate, as a death benefit, the remaining amount of
Employee's base salary for the remainder of the Term following the date of
death.
(f) Disability of Employee. In the event that the Employee
shall suffer (i) permanent and total physical or mental disability or incapacity
or (ii) any illness, disability or incapacity which prevents him from performing
his duties for a period of three (3) consecutive months or 90 days in any 12
month period, this Agreement may be terminated by the Company, and the Employee
will be paid his accrued but unpaid salary to the date of such disability or
incapacity.
(g) Failure to Renew. If the initial five year Term of this
Agreement expires and Employee and the Company fail to agree upon mutually
acceptable terms for renewal within 30 days after the date of expiration of the
Term, then in such case, the Employee shall be paid the sum of $50,000 payable
in equal semi-monthly installments during the six (6) month period following the
expiration of the initial five year Term. Nothing contained in this clause (g)
shall require the Employee to relocate in the event the Board of Directors
determines to relocate the Company and the Employee shall be entitled to the
payment set forth in clause (i) hereof in such event
(h) Change of Control. Upon the occurrence of a Change of
Control Transaction (as hereinafter defined) during the Term, beginning on the
date of such occurrence and continuing for a period of one (1) year thereafter
(the "Change of Control Period"), in the event of the first to occur of the
termination of the Employee's employment for any reason other than for cause (as
defined in subsection (c) hereof) or the resignation of the Employee (for any
reason) during the Change of Control Period, the Employee shall be entitled to a
sum equal to the balance of the base salary for the unexpired portion of the
Term plus $50,000 payable in a single lump sum payment within 30 days following
the date of termination or resignation as the case may be. For purposes hereof,
a "Change of Control Transaction" shall mean any one of the following events:
(i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act")) becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the Act)
(other than the Employee, the Company, any trustee or other
<PAGE>
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or
other entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50.1% of
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove
defined) acquires more than 30% of the combined voting power
of the Company's then outstanding securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
(i) Company Relocation. In the event the Board of Directors
determines to relocate the Company to a location outside of the New York City
Metropolitan area and the Employee determines, at his option, not to relocate
with the Company, then the Company shall pay the Employee a severance payment
equal to the amounts set forth in Section 3(d) hereof as if the Employee were
terminated without cause.
4. Noncompetition Agreement.
(a) The Employee will be a full-time employee of the Company
and shall devote all of his business time to the performance of his duties
hereunder.
Employee acknowledges that in the course of the performance of
his duties and as a necessary incident thereof, the Company may make available
or impart to Employee certain financial and business information concerning the
business, affairs, plans, and programs of the Company which is proprietary to
the Company and was not obtained by the Employee from sources other than the
Company (the "Proprietary Information").
<PAGE>
(b) For the Term hereof and for a period of one (1) year after
the earlier of expiration of such Term or the termination of Employee's
employment for cause (as defined in Section 3(c) hereof), Employee shall not (i)
in business or otherwise use for himself or disclose to any other person any
Proprietary Information concerning the Company or any information with respect
to the business of the Company, for any purpose whatsoever; (ii) directly or
indirectly, individually or with others, solicit or attempt to solicit any
employees, or any representatives or agents of the Company, in connection with
any business which is the same as or similar to or competitive with the Business
of the Company, which representative or agent is known by Employee to be a
representative or agent of the Company and engaged in the Business of the
Company.
(c) During the Term hereof Employee shall not in the States of
New York or New Jersey serve as or become an officer, director, shareholder,
consultant, partner, owner, principal, or otherwise, directly or indirectly,
enter into any business which is the same as or similar to or competitive with
the business of the Company or service customers of the Company within the
geographic areas indicated in this subsection.
(d) Employee further agrees that he will not use any of the
Proprietary Information in connection with the purchase or sale of any
securities of the Company. The provisions of this Section 4 shall survive the
termination of this Agreement.
(e) Notwithstanding the aforementioned one (1) year period
expressed in clauses (b) and (c) above, in the event the Employee is terminated
by the Company without "Cause" (as defined in Section 3(c) hereof) then the
period of non-competition shall be void and of no effect.
(f) Notwithstanding the foregoing, however, nothing contained
in this Agreement shall prohibit Employee from purchasing and holding as an
investment not more than 5% of any class of the issued and outstanding and
publicly traded (on a recognized national or regional securities exchange or in
the over-the-counter market) security of any corporation, partnership or other
business entity that conducts a business in competition with the Company and of
which he is not an employee or director.
5. Dispute Resolution. If the parties should disagree as to any
matter at law under this Agreement, the dispute shall be arbitrated in the City
of New York under the auspices of the American Arbitration Association. The
party desiring arbitration shall serve upon the other party by certified mail,
return receipt requested, a written demand that the dispute by submitted to
arbitration. Each party shall pay one-half the fees and expenses of the
arbitrator appointed pursuant to the procedures of the American Arbitration
Association. The decision or the arbitrator shall be binding upon the parties.
Judgment upon the award rendered may be entered and enforced in any court of
competent jurisdiction. Refusal of either party to participate in binding
arbitration concerning any disagreement of the provisions hereunder shall be
considered a breach of this Agreement.
6. Survival. The covenants and agreements contained in Section 4
hereof shall survive the term of this Agreement notwithstanding termination of
the Employee's employment.
<PAGE>
7. Restriction or Alienation. The payments which shall become due
and payable to the Employee or his estate under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void. Such
payments shall not in any manner be liable or subject to the Employee's debts,
contracts, liabilities, engagements or torts.
8. Agreement Binding on Successors. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their legal
representatives, heirs, successors, and assigns. Nothing in this Agreement,
express or implied, is intended to confer on any person other than the parties
and their respective assigns any rights or remedies under or by this Agreement.
9. Notices. All notices, requests, waivers, demands, and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if mailed, exclusive of the date of
deposit in the U.S. mail, postage prepaid by certified or registered mail,
return receipt requested, as follows:
(a) To the Employee: Michael Offerman
2984 Wynsum Avenue
Merrick New York 11566
(b) To the Company: IEH Corporation
150 58th Street
Brooklyn, New York 11220
Any such written notice shall be effective upon receipt, but not later than four
(4) days after the deposit with the U.S. Postal Service. Either party may change
such address by notice to the other party. Any other written notice shall be
effective upon receipt by the respective party.
10. Entire Agreement; Modification. This Agreement represents the
entire agreement between the parties, and no other prior written or oral
representation or understanding shall have any further force or effect. This
Agreement may be modified only by a subsequent writing signed by all parties
hereto.
<PAGE>
11. Separability. The invalidity of any paragraph or subparagraph
hereof shall not affect the validity of any other paragraph or subparagraph
hereof.
12. Waivers. The failure of any of the parties to this Agreement
to require the performance of a term or obligation or to exercise any right
under this Agreement or the waiver by any of the parties to this Agreement of
any breach hereunder shall not prevent subsequent enforcement of such term or
obligation or exercise of such right or the enforcement at any time of any other
right hereunder or be deemed a waiver of any subsequent breach of the provision
so breached, or of any other breach, hereunder.
13. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York, and shall not be modified or
discharged in whole or in part except by an agreement in writing signed by the
parties hereto.
14. Counterparts. This Agreement may be executed in counterparts,
each of which shall be considered to be an original, and all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first set forth above.
IEH CORPORATION
By________________________
Name:
Title:
__________________________
Michael Offerman
<PAGE>
Amendment No. 1
to
Employment Agreement
This Amendment No. 1 to Employment Agreement, dated as of November 27,
1996, amends that certain Employment Agreement by and between IEH CORPORATION, a
New York corporation maintaining its principal place of business at 140 58th
Street, Brooklyn, New York 11220 (the "Company"), and Michael Offerman residing
at 2984 Wynsum Avenue, Merrick, New York 11566 (the "Employee") dated as of
January 1, 1995 ("Employment Agreement").
1. The Employment Agreement is hereby amended as follows:
A. Sections 3(d),(f),(g), (h) and (i) are hereby amended and
restated to read as follows:
(d) Without Cause. The Company may, at its option, terminate
this Agreement at any time without cause upon written notice to the Employee,
subject to payment to Employee of a severance payment as hereinafter provided.
For purposes hereof, "without cause" shall include, without limitation, any
substantial diminution by the Company of the Employee's duties without the
consent of the Employee and not resulting from (i) any act or omission by the
Employee which would otherwise constitue grounds for dismissal for "cause" or
(ii) any disability of the Employee. Except as provided in sub-paragraph (h)
hereof, in the event of termination without cause pursuant to this subsection
(d) during the Term of this Agreement, the Employee shall be entitled to receive
a severance payment equal to the sum of the amount of base salary that would
otherwise be payable to the Employee for the unexpired portion of the Term plus
the sum of $75,000. Such severance payments shall be paid by the Company to the
Employee in a single lump sum payment within 30 days following termination.
(f) Disability of Employee. In the event that the Employee
shall suffer (i) permanent and total physical or mental disability or incapacity
or (ii) any illness, disability or incapacity which prevents him from performing
his duties for a period of three (3) consecutive months or 90 days in any 12
month period, this Agreement may be terminated by the Company, and the Employee
will be paid (i) his accrued but unpaid salary to the date of such disability or
incapacity and (ii) a severance payment equal to the sum of the amount of base
salary that would otherwise be payable to the Employee for the unexpired portion
of the Term plus the sum of $75,000. Such severance payments shall be paid by
the Company to the Employee in a single lump sum payment within 30 days
following termination.
(g) Failure to Renew. If the initial five year Term of this
Agreement expires and Employee and the Company fail to agree upon mutually
acceptable terms for renewal within 30 days after the date of expiration of the
Term, then in such case, the Employee shall be paid the sum of $75,000 payable
in equal semi-monthly installments during the six (6) month period following the
expiration of the initial five year Term. Nothing contained in this clause (g)
shall require the Employee to relocate in the event the Board of Directors
determines to relocate the Company and the Employee shall be entitled to the
payment set forth in clause (i) hereof in such event.
<PAGE>
(h) Change of Control. Upon the occurrence of a Change of
Control Transaction (as hereinafter defined) during the Term, beginning on the
date of such occurrence and continuing for a period of one (1) year thereafter
(the "Change of Control Period"), in the event of the first to occur of the
termination of the Employee's employment for any reason other than for cause (as
defined in subsection (c) hereof) or the resignation of the Employee (for any
reason) during the Change of Control Period, the Employee shall be entitled to a
sum equal to the balance of the base salary for the unexpired portion of the
Term plus $75,000 payable in a single lump sum payment within 30 days following
the date of termination or resignation as the case may be. For purposes hereof,
a "Change of Control Transaction" shall mean any one of the following events:
(i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act")) becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the Act)
(other than the Employee, the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or
other entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50.1% of
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove
defined) acquires more than 30% of the combined voting power
of the Company's then outstanding securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
(i) Company Relocation. In the event the Board of Directors
determines to relocate the Company to a location outside of the New York City
Metropolitan area and the Employee determines, at his option, not to relocate
with the Company, then the Company shall pay the Employee a severance payment
equal to the amounts set forth in Section 3(d) hereof as if the Employee were
terminated without cause.
2. Counterparts. This Amendment No.1 may be executed in
counterparts, each of which shall be considered to be an original, and all of
which together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Employment Agreement as of the date first set forth above.
IEH CORPORATION
By:
Name:
Title:
Michael Offerman
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1995, by and between IEH CORPORATION,
a New York corporation maintaining its principal place of business at 140 58th
Street, Brooklyn, New York 11220 (the "Company"), and Ralph Acello residing at
97 Davenport Avenue, Cresskill, New Jersey 07626 (the "Employee").
WHEREAS, the Company is engaged in the design, development, manufacture
and distribution of high performance electronic printed circuit connectors and
specialized interconnection devices.
WHEREAS, the Company desires to employ the Employee, and the Employee
desires to accept such employment on the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter stated, the parties hereto hereby agree as follows:
1. Employment. The Company agrees to employ the Employee, and the
Employee hereby agrees to work for the Company, as a full-time employee during
the Term (as hereinafter defined). The Employee shall be employed as the Vice
President-Production of the Company. Additionally, the Company shall use its
best efforts to cause the Employee to be elected to the Board of Directors of
the Company during the Term hereof. "Best efforts" shall mean the Company
causing its Board of Directors to nominate the Employee to the shareholders of
the Company for election to the Board of Directors of the Company.
The Employee agrees to serve the Company faithfully and to the
best of his ability and to perform such services and duties of an executive
nature in connection with the business, affairs and operations of the Company as
may be reasonably and in good faith assigned or delegated to him from time to
time by or under the authority of the Board of Directors of the Company and
consistent with the position of Vice President-Production, and to use his best
efforts in the promotion and advancement of the Company and its welfare and
business. Such duties shall include, (i) general oversight of all manufacture
and production, (ii) responsibility for job estimates and (iii) customer
relations and interface. Subject to Section 3(g) herein, Employee shall be based
in Brooklyn, New York.
2. Salary and Other Compensation.
(a) Base Salary. The Employee's annual base salary during the
Term will be $58,300. Said salary shall be payable in accordance with the
employment practices of the Company generally, which currently calls for such
salary to be paid in equal semi-monthly payments during each year of the Term.
(b) Benefits. The Employee will be entitled to vacation,
holiday, sick time and health insurance benefits according to the standard
benefit policies applicable to other employees of the Company. The Company shall
also obtain for the benefit of the Employee a term life insurance policy
providing for a death benefit of $150,000 payable to a beneficiary named and
designated by the Employee provided that the Employee is insurable at standard
rates.
(c) Automobile Allowance. The Company shall, at its option,
provide the Employee with the use of, or, in the alternative an automobile
allowance for a full size sedan during the Term. The Company shall reimburse the
Employee for the expenses incurred and paid by him for the insurance, repair,
gas and maintenance.
<PAGE>
(d) Travel and Entertainment Expenses. The Company shall
reimburse the Employee for reasonable travel and entertainment expenses incurred
and paid by him in connection with and during the Term and in furtherance of the
interests of the Company.
(e) Withholding. All references herein to compensation to be
paid to the Employee are to the gross amounts thereof which are due hereunder.
The Company shall have the right to deduct therefrom: (i) all taxes which may be
required to be deducted or withheld under any provisions of the law now in
effect or which may become effective any time during the term of this Agreement;
and (ii) all benefits costs payable by the Company's similarly situated salaried
employees.
3. Term and Termination.
(a) Term. The term of this Agreement shall be for a period of
five (5) years commencing as of January 1, 1995 and continuing through December
31, 1999 (the "Term") unless sooner terminated in accordance with the provisions
of this Section 3.
(b) Mutual Consent. This Agreement and the Employee's
employment hereunder may be terminated at any time by the mutual consent of the
parties hereto.
(c) For Cause. The Employee's employment hereunder may be
terminated at any time by the majority vote of the Board of Directors of the
Company taken at any regular or special meeting at which the Employee has been
afforded the opportunity to participate (without considering the vote of the
Employee for any purpose other than for purposes of establishing a quorum), and
shall be effective upon written notice of actual termination for "cause" to the
Employee which, for the purposes of the foregoing, shall solely be made upon a
determination made in good faith by the Company's Board of Directors, and upon
written notice from the Company that Employee has committed an act of personal
dishonesty intended to result in a substantial personal benefit or enrichment of
the Employee at the expense of the Company. For purposes of this agreement
"Cause" shall mean (i) willful disobedience by the Employee of a material and
lawful instruction of the Board of Directors or any senior executive of the
Company; or (ii) conviction of the Employee of any felony or any misdemeanor
involving fraud or embezzlement or similar crime; or (iii) breach by the
Employee of any material provision of this Agreement; or (iv) conduct amounting
to fraud, dishonesty, gross negligence, willful misconduct; provided that the
Company shall not have the right to terminate the employment of Employee
pursuant to the foregoing clause (i), (iii) or (iv) unless written notice
specifying such breach shall have been given to the Employee and, in the case of
breach which is capable of being cured, the Employee shall have failed to cure
such breach within twenty (20) days after his receipt of such notice.
Upon termination for cause as provided in this subsection (c), the Employee
shall not be entitled to receive any compensation or other benefits pursuant to
this Agreement except for any compensation or benefits accrued under the terms
of this Agreement that remains unpaid as of the termination date specified in
the above-mentioned notice of actual termination for cause.
<PAGE>
(d) Without Cause. The Company may, at its option, terminate
this Agreement at any time without cause upon written notice to the Employee,
subject to payment to Employee of a severance payment as hereinafter provided.
For purposes herein, "without cause" shall include, without limitation, any
substantial diminution by the Company of the Employee's duties without the
consent of the Employee and not resulting from (i) any act or omission by the
Employee which would otherwise constitue grounds for dismissal for "cause" or
(ii) any disability of the Employee. Except as provided in sub-paragraph (h)
hereof, in the event of termination without cause pursuant to this subsection
(d) during the Term of this Agreement, the Employee shall be entitled to receive
a severance payment equal to the sum of the amount of base salary that would
otherwise be payable to the Employee for the unexpired portion of the Term plus
the sum of $29,150. Such severance payments shall be paid by the Company to the
Employee in a single lump sum payment within 30 days following termination.
(e) Death of Employee. The Employee's employment under this
Agreement will terminate immediately upon his death, in which event there shall
be paid to Employee's estate, as a death benefit, the remaining amount of
Employee's base salary for the remainder of the Term following the date of
death.
(f) Disability of Employee. In the event that the Employee
shall suffer (i) permanent and total physical or mental disability or incapacity
or (ii) any illness, disability or incapacity which prevents him from performing
his duties for a period of three (3) consecutive months or 90 days in any 12
month period, this Agreement may be terminated by the Company, and the Employee
will be paid his accrued but unpaid salary to the date of such disability or
incapacity.
(g) Failure to Renew. If the initial five year Term of this
Agreement expires and Employee and the Company fail to agree upon mutually
acceptable terms for renewal within 30 days after the date of expiration of the
Term, then in such case, the Employee shall be paid the sum of $29,150 payable
in equal semi-monthly installments during the six (6) month period following the
expiration of the initial five year Term. Nothing contained in this clause (g)
shall require the Employee to relocate in the event the Board of Directors
determines to relocate the Company and the Employee shall be entitled to the
payment set forth in clause (i) hereof in such event
(h) Change of Control. Upon the occurrence of a Change of
Control Transaction (as hereinafter defined) during the Term, beginning on the
date of such occurrence and continuing for a period of one (1) year thereafter
(the "Change of Control Period"), in the event of the first to occur of the
termination of the Employee's employment for any reason other than for cause (as
defined in subsection (c) hereof) or the resignation of the Employee (for any
reason) during the Change of Control Period, the Employee shall be entitled to a
sum equal to the balance of the base salary for the unexpired portion of the
Term plus $29,150 payable in a single lump sum payment within 30 days following
the date of termination or resignation as the case may be. For purposes hereof,
a "Change of Control Transaction" shall mean any one of the following events:
(i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act")) becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the Act)
(other than the Employee, the Company, any trustee or other
<PAGE>
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or
other entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving
entity) more than 50.1% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or
(b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than
30% of the combined voting power of the Company's then
outstanding securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
(i) Company Relocation. In the event the Board of Directors
determines to relocate the Company to a location outside of the New York City
Metropolitan area and the Employee determines, at his option, not to relocate
with the Company, then the Company shall pay the Employee a severance payment
equal to the amounts set forth in Section 3(d) hereof as if the Employee were
terminated without cause.
4. Noncompetition Agreement.
(a) The Employee will be a full-time employee of the Company
and shall devote all of his business time to the performance of his duties
hereunder.
Employee acknowledges that in the course of the performance of
his duties and as a necessary incident thereof, the Company may make available
or impart to Employee certain financial and business information concerning the
business, affairs, plans, and programs of the Company which is proprietary to
the Company and was not obtained by the Employee from sources other than the
Company (the "Proprietary Information").
<PAGE>
(b) For the Term hereof and for a period of one (1) year after
the earlier of expiration of such Term or the termination of Employee's
employment for cause (as defined in Section 3(c) hereof), Employee shall not (i)
in business or otherwise use for himself or disclose to any other person any
Proprietary Information concerning the Company or any information with respect
to the business of the Company, for any purpose whatsoever; (ii) directly or
indirectly, individually or with others, solicit or attempt to solicit any
employees, or any representatives or agents of the Company, in connection with
any business which is the same as or similar to or competitive with the Business
of the Company, which representative or agent is known by Employee to be a
representative or agent of the Company and engaged in the Business of the
Company.
(c) During the Term hereof Employee shall not in the States of
New York or New Jersey serve as or become an officer, director, shareholder,
consultant, partner, owner, principal, or otherwise, directly or indirectly,
enter into any business which is the same as or similar to or competitive with
the business of the Company or service customers of the Company within the
geographic areas indicated in this subsection.
(d) Employee further agrees that he will not use any of the
Proprietary Information in connection with the purchase or sale of any
securities of the Company. The provisions of this Section 4 shall survive the
termination of this Agreement.
(e) Notwithstanding the aforementioned one (1) year period
expressed in clauses (b) and (c) above, in the event the Employee is terminated
by the Company without "Cause" (as defined in Section 3(c) hereof) then the
period of non-competition shall be void and of no effect.
(f) Notwithstanding the foregoing, however, nothing contained
in this Agreement shall prohibit Employee from purchasing and holding as an
investment not more than 5% of any class of the issued and outstanding and
publicly traded (on a recognized national or regional securities exchange or in
the over-the-counter market) security of any corporation, partnership or other
business entity that conducts a business in competition with the Company and of
which he is not an employee or director.
5. Dispute Resolution. If the parties should disagree as to any
matter at law under this Agreement, the dispute shall be arbitrated in the City
of New York under the auspices of the American Arbitration Association. The
party desiring arbitration shall serve upon the other party by certified mail,
return receipt requested, a written demand that the dispute by submitted to
arbitration. Each party shall pay one-half the fees and expenses of the
arbitrator appointed pursuant to the procedures of the American Arbitration
Association. The decision or the arbitrator shall be binding upon the parties.
Judgment upon the award rendered may be entered and enforced in any court of
competent jurisdiction. Refusal of either party to participate in binding
arbitration concerning any disagreement of the provisions hereunder shall be
considered a breach of this Agreement.
6. Survival. The covenants and agreements contained in Section 4
hereof shall survive the term of this Agreement notwithstanding termination of
the Employee's employment.
<PAGE>
7. Restriction or Alienation. The payments which shall become due
and payable to the Employee or his estate under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void. Such
payments shall not in any manner be liable or subject to the Employee's debts,
contracts, liabilities, engagements or torts.
8. Agreement Binding on Successors. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their legal
representatives, heirs, successors, and assigns. Nothing in this Agreement,
express or implied, is intended to confer on any person other than the parties
and their respective assigns any rights or remedies under or by this Agreement.
9. Notices. All notices, requests, waivers, demands, and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if mailed, exclusive of the date of
deposit in the U.S. mail, postage prepaid by certified or registered mail,
return receipt requested, as follows:
(a) To the Employee: Ralph Acello
97 Davenport Avenue
Cresskill New Jersey 07626
(b) To the Company: IEH Corporation
150 58th Street
Brooklyn, New York 11220
Any such written notice shall be effective upon receipt, but not later than four
(4) days after the deposit with the U.S. Postal Service. Either party may change
such address by notice to the other party. Any other written notice shall be
effective upon receipt by the respective party.
10. Entire Agreement; Modification. This Agreement represents the
entire agreement between the parties, and no other prior written or oral
representation or understanding shall have any further force or effect. This
Agreement may be modified only by a subsequent writing signed by all parties
hereto.
11. Separability. The invalidity of any paragraph or subparagraph
hereof shall not affect the validity of any other paragraph or subparagraph
hereof.
12. Waivers. The failure of any of the parties to this Agreement
to require the performance of a term or obligation or to exercise any right
under this Agreement or the waiver by any of the parties to this Agreement of
any breach hereunder shall not prevent subsequent enforcement of such term or
obligation or exercise of such right or the enforcement at any time of any other
right hereunder or be deemed a waiver of any subsequent breach of the provision
so breached, or of any other breach, hereunder.
13. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York, and shall not be modified or
discharged in whole or in part except by an agreement in writing signed by the
parties hereto.
<PAGE>
14. Counterparts. This Agreement may be executed in counterparts,
each of which shall be considered to be an original, and all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first set forth above.
IEH CORPORATION
By:________________
Name:
Title:
___________________
Ralph Acello
<PAGE>
Amendment No. 1
to
Employment Agreement
This Amendment No. 1 to Employment Agreement, dated as of November 27,
1996, amends that certain Employment Agreement by and between IEH CORPORATION, a
New York corporation maintaining its principal place of business at 140 58th
Street, Brooklyn, New York 11220 (the "Company"), and Ralph Acello residing at
97 Davenport Avenue, Cresskill, New Jersey 07626 (the "Employee") dated as of
January 1, 1995 ("Employment Agreement").
1. The Employment Agreement is hereby amended as follows:
A. Section 2(a) is hereby amended and restated to read as
follows:
(a) Base Salary. The Employee's annual base salary commencing
August 10, 1996 will be $61,300 per annum. Said salary shall be payable in
accordance with the employment practices of the Company generally, which
currently calls for such salary to be paid in equal semi-monthly payments during
each year of the Term.
B. Sections 3(d),(f),(g), (h) and (i) are hereby amended and
restated to read as follows:
(d) Without Cause. The Company may, at its option, terminate
this Agreement at any time without cause upon written notice to the Employee,
subject to payment to Employee of a severance payment as hereinafter provided.
For purposes hereof, "without cause" shall include, without limitation, any
substantial diminution by the Company of the Employee's duties without the
consent of the Employee and not resulting from (i) any act or omission by the
Employee which would otherwise constitue grounds for dismissal for "cause" or
(ii) any disability of the Employee. Except as provided in sub-paragraph (h)
hereof, in the event of termination without cause pursuant to this subsection
(d) during the Term of this Agreement, the Employee shall be entitled to receive
a severance payment equal to the sum of the amount of base salary that would
otherwise be payable to the Employee for the unexpired portion of the Term plus
the sum of $45,975. Such severance payments shall be paid by the Company to the
Employee in a single lump sum payment within 30 days following termination.
(f) Disability of Employee. In the event that the Employee
shall suffer (i) permanent and total physical or mental disability or incapacity
or (ii) any illness, disability or incapacity which prevents him from performing
his duties for a period of three (3) consecutive months or 90 days in any 12
month period, this Agreement may be terminated by the Company, and the Employee
will be paid (i) his accrued but unpaid salary to the date of such disability or
incapacity and (ii) a severance payment equal to the sum of the amount of base
salary that would otherwise be payable to the Employee for the unexpired portion
of the Term plus the sum of $45,975. Such severance payments shall be paid by
the Company to the Employee in a single lump sum payment within 30 days
following termination.
<PAGE>
(g) Failure to Renew. If the initial five year Term of this
Agreement expires and Employee and the Company fail to agree upon mutually
acceptable terms for renewal within 30 days after the date of expiration of the
Term, then in such case, the Employee shall be paid the sum of $45,975 payable
in equal semi-monthly installments during the six (6) month period following the
expiration of the initial five year Term. Nothing contained in this clause (g)
shall require the Employee to relocate in the event the Board of Directors
determines to relocate the Company and the Employee shall be entitled to the
payment set forth in clause (i) hereof in such event.
(h) Change of Control. Upon the occurrence of a Change of
Control Transaction (as hereinafter defined) during the Term, beginning on the
date of such occurrence and continuing for a period of one (1) year thereafter
(the "Change of Control Period"), in the event of the first to occur of the
termination of the Employee's employment for any reason other than for cause (as
defined in subsection (c) hereof) or the resignation of the Employee (for any
reason) during the Change of Control Period, the Employee shall be entitled to a
sum equal to the balance of the base salary for the unexpired portion of the
Term plus $45,975 payable in a single lump sum payment within 30 days following
the date of termination or resignation as the case may be. For purposes hereof,
a "Change of Control Transaction" shall mean any one of the following events:
(i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act")) becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the Act)
(other than the Employee, the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or
other entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding
or by being converted into voting securities of the surviving
entity) more than 50.1% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or
(b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than
30% of the combined voting power of the Company's then
outstanding securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
<PAGE>
(i) Company Relocation. In the event the Board of Directors
determines to relocate the Company to a location outside of the New York City
Metropolitan area and the Employee determines, at his option, not to relocate
with the Company, then the Company shall pay the Employee a severance payment
equal to the amounts set forth in Section 3(d) hereof as if the Employee were
terminated without cause.
2. Counterparts. This Amendment No.1 may be executed in
counterparts, each of which shall be considered to be an original, and all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Employment Agreement as of the date first set forth above.
IEH CORPORATION
By
Name:
Title:
Ralph Acello
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1995, by and between IEH CORPORATION,
a New York corporation maintaining its principal place of business at 140 58th
Street, Brooklyn, New York 11220 (the "Company"), and Robert Knoth residing at
26 Buckingham Road, Merrick, New York 11566 (the "Employee").
WHEREAS, the Company is engaged in the design, development, manufacture
and distribution of high performance electronic printed circuit connectors and
specialized interconnection devices.
WHEREAS, the Company desires to employ the Employee, and the Employee
desires to accept such employment on the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter stated, the parties hereto hereby agree as follows:
1. Employment. The Company agrees to employ the Employee, and the
Employee hereby agrees to work for the Company, as a full- time employee during
the Term (as hereinafter defined). The Employee shall be employed as the
Secretary and Treasurer of the Company.
The Employee agrees to serve the Company faithfully and to the
best of his ability and to perform such services and duties of an executive
nature in connection with the business, affairs and operations of the Company as
may be reasonably and in good faith assigned or delegated to him from time to
time by or under the authority of the Board of Directors of the Company and
consistent with the positions of Secretary and Treasurer, and to use his best
efforts in the promotion and advancement of the Company and its welfare and
business. Subject to Section 3(g) herein, Employee shall be based in Brooklyn,
New York.
2. Salary and Other Compensation.
(a) Base Salary. The Employee's annual base salary during the
Term will be $56,000. Said salary shall be payable in accordance with the
employment practices of the Company generally, which currently calls for such
salary to be paid in equal semi-monthly payments during each year of the Term.
(b) Benefits. The Employee will be entitled to vacation,
holiday, sick time and health insurance benefits according to the standard
benefit policies applicable to other employees of the Company. The Company shall
also obtain for the benefit of the Employee a term life insurance policy
providing for a death benefit of $150,000 payable to a beneficiary named and
designated by the Employee provided that the Employee is insurable at standard
rates.
(c) Automobile Allowance. The Company shall reimburse the
Employee for the expenses incurred and paid by him for gas used in commutation
to and from his place of work.
(d) Travel and Entertainment Expenses. The Company shall
reimburse the Employee for reasonable travel and entertainment expenses incurred
and paid by him in connection with and during the Term and in furtherance of the
interests of the Company.
<PAGE>
(e) Withholding. All references herein to compensation to be
paid to the Employee are to the gross amounts thereof which are due hereunder.
The Company shall have the right to deduct therefrom: (i) all taxes which may be
required to be deducted or withheld under any provisions of the law now in
effect or which may become effective any time during the term of this Agreement;
and (ii) all benefits costs payable by the Company's similarly situated salaried
employees.
3. Term and Termination.
(a) Term. The term of this Agreement shall be for a period of
five (5) years commencing as of January 1, 1995 and continuing through December
31, 1999 (the "Term") unless sooner terminated in accordance with the provisions
of this Section 3.
(b) Mutual Consent. This Agreement and the Employee's
employment hereunder may be terminated at any time by the mutual consent of the
parties hereto.
(c) For Cause. The Employee's employment hereunder may be
terminated at any time by the majority vote of the Board of Directors of the
Company taken at any regular or special meeting at which the Employee has been
afforded the opportunity to participate (without considering the vote of the
Employee for any purpose other than for purposes of establishing a quorum), and
shall be effective upon written notice of actual termination for "cause" to the
Employee which, for the purposes of the foregoing, shall solely be made upon a
determination made in good faith by the Company's Board of Directors, and upon
written notice from the Company that Employee has committed an act of personal
dishonesty intended to result in a substantial personal benefit or enrichment of
the Employee at the expense of the Company. For purposes of this agreement
"Cause" shall mean (i) willful disobedience by the Employee of a material and
lawful instruction of the Board of Directors or any senior executive of the
Company; or (ii) conviction of the Employee of any felony or any misdemeanor
involving fraud or embezzlement or similar crime; or (iii) breach by the
Employee of any material provision of this Agreement; or (iv) conduct amounting
to fraud, dishonesty, gross negligence, willful misconduct; provided that the
Company shall not have the right to terminate the employment of Employee
pursuant to the foregoing clause (i), (iii) or (iv) unless written notice
specifying such breach shall have been given to the Employee and, in the case of
breach which is capable of being cured, the Employee shall have failed to cure
such breach within twenty (20) days after his receipt of such notice.
Upon termination for cause as provided in this subsection (c), the Employee
shall not be entitled to receive any compensation or other benefits pursuant to
this Agreement except for any compensation or benefits accrued under the terms
of this Agreement that remains unpaid as of the termination date specified in
the above-mentioned notice of actual termination for cause.
(d) Without Cause. The Company may, at its option, terminate
this Agreement at any time without cause upon written notice to the Employee,
subject to payment to Employee of a severance payment as hereinafter provided.
For purposes herein, "without cause" shall include, without limitation, any
substantial diminution by the Company of the Employee's duties without the
consent of the Employee and not resulting from (i) any act or omission by the
<PAGE>
Employee which would otherwise constitute grounds for dismissal for "cause" or
(ii) any disability of the Employee. Except as provided in sub-paragraph (h)
hereof, in the event of termination without cause pursuant to this subsection
(d) during the Term of this Agreement, the Employee shall be entitled to receive
a severance payment equal to the sum of the amount of base salary that would
otherwise be payable to the Employee for the unexpired portion of the Term plus
the sum of $28,250. Such severance payment shall be paid by the Company to the
Employee in a single lump sum payment within 30 days following termination.
(e) Death of Employee. The Employee's employment under this
Agreement will terminate immediately upon his death, in which event there shall
be paid to Employee's estate, as a death benefit, the remaining amount of
Employee's base salary for the remainder of the Term following the date of
death.
(f) Disability of Employee. In the event that the Employee
shall suffer (i) permanent and total physical or mental disability or incapacity
or (ii) any illness, disability or incapacity which prevents him from performing
his duties for a period of three (3) consecutive months or 90 days in any 12
month period, this Agreement may be terminated by the Company, and the Employee
will be paid his accrued but unpaid salary to the date of such disability or
incapacity.
(g) Failure to Renew. If the initial five year Term of this
Agreement expires and Employee and the Company fail to agree upon mutually
acceptable terms for renewal within 30 days after the date of expiration of the
Term, then in such case, the Employee shall be paid the sum of $28,250 payable
in equal semi-monthly installments during the six (6) month period following the
expiration of the initial five year Term. Nothing contained in this clause (g)
shall require the Employee to relocate in the event the Board of Directors
determines to relocate the Company and the Employee shall be entitled to the
payment set forth in clause (i) hereof in such event
(h) Change of Control. Upon the occurrence of a Change of
Control Transaction (as hereinafter defined) during the Term, beginning on the
date of such occurrence and continuing for a period of one (1) year thereafter
(the "Change of Control Period"), in the event of the first to occur of the
termination of the Employee's employment for any reason other than for cause (as
defined in subsection (c) hereof) or the resignation of the Employee (for any
reason) during the Change of Control Period, the Employee shall be entitled to a
sum equal to the balance of the base salary for the unexpired portion of the
Term plus $28,250 payable in a single lump sum payment within 30 days following
the date of termination or resignation as the case may be. For purposes hereof,
a "Change of Control Transaction" shall mean any one of the following events:
(i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act")) becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the Act)
(other than the Employee, the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
<PAGE>
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or
other entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50.1% of
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove
defined) acquires more than 30% of the combined voting power
of the Company's then outstanding securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
(i) Company Relocation. In the event the Board of Directors
determines to relocate the Company to a location outside of the New York City
Metropolitan area and the Employee determines, at his option, not to relocate
with the Company, then the Company shall pay the Employee a severance payment
equal to the amounts set forth in Section 3(d) hereof as if the Employee were
terminated without cause.
4. Noncompetition Agreement.
(a) The Employee will be a full-time employee of the Company
and shall devote all of his business time to the performance of his duties
hereunder.
Employee acknowledges that in the course of the performance of
his duties and as a necessary incident thereof, the Company may make available
or impart to Employee certain financial and business information concerning the
business, affairs, plans, and programs of the Company which is proprietary to
the Company and was not obtained by the Employee from sources other than the
Company (the "Proprietary Information").
(b) For the Term hereof and for a period of one (1) year after
the earlier of expiration of such Term or the termination of Employee's
employment for cause (as defined in Section 3(c) hereof), Employee shall not (i)
in business or otherwise use for himself or disclose to any other person any
Proprietary Information concerning the Company or any information with respect
to the business of the Company, for any purpose whatsoever; (ii) directly or
indirectly, individually or with others, solicit or attempt to solicit any
employees, or any representatives or agents of the Company, in connection with
any business which is the same as or similar to or competitive with the Business
of the Company, which representative or agent is known by Employee to be a
representative or agent of the Company and engaged in the Business of the
Company.
(c) During the Term hereof Employee shall not in the States of
New York or New Jersey serve as or become an officer, director, shareholder,
consultant, partner, owner, principal, or otherwise, directly or indirectly,
enter into any business which is the same as or similar to or competitive with
the business of the Company or service customers of the Company within the
geographic areas indicated in this subsection.
<PAGE>
(d) Employee further agrees that he will not use any of the
Proprietary Information in connection with the purchase or sale of any
securities of the Company. The provisions of this Section 4 shall survive the
termination of this Agreement.
(e) Notwithstanding the aforementioned one (1) year period
expressed in clauses (b) and (c) above, in the event the Employee is terminated
by the Company without "Cause" (as defined in Section 3(c) hereof) then the
period of non-competition shall be void and of no effect.
(f) Notwithstanding the foregoing, however, nothing contained
in this Agreement shall prohibit Employee from purchasing and holding as an
investment not more than 5% of any class of the issued and outstanding and
publicly traded (on a recognized national or regional securities exchange or in
the over-the-counter market) security of any corporation, partnership or other
business entity that conducts a business in competition with the Company and of
which he is not an employee or director.
5. Dispute Resolution. If the parties should disagree as to any
matter at law under this Agreement, the dispute shall be arbitrated in the City
of New York under the auspices of the American Arbitration Association. The
party desiring arbitration shall serve upon the other party by certified mail,
return receipt requested, a written demand that the dispute by submitted to
arbitration. Each party shall pay one-half the fees and expenses of the
arbitrator appointed pursuant to the procedures of the American Arbitration
Association. The decision or the arbitrator shall be binding upon the parties.
Judgment upon the award rendered may be entered and enforced in any court of
competent jurisdiction. Refusal of either party to participate in binding
arbitration concerning any disagreement of the provisions hereunder shall be
considered a breach of this Agreement.
6. Survival. The covenants and agreements contained in Section 4
hereof shall survive the term of this Agreement notwithstanding termination of
the Employee's employment.
7. Restriction or Alienation. The payments which shall become due
and payable to the Employee or his estate under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void. Such
payments shall not in any manner be liable or subject to the Employee's debts,
contracts, liabilities, engagements or torts.
8. Agreement Binding on Successors. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their legal
representatives, heirs, successors, and assigns. Nothing in this Agreement,
express or implied, is intended to confer on any person other than the parties
and their respective assigns any rights or remedies under or by this Agreement.
9. Notices. All notices, requests, waivers, demands, and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if mailed, exclusive of the date of
deposit in the U.S. mail, postage prepaid by certified or registered mail,
return receipt requested, as follows:
<PAGE>
(a) To the Employee: Robert Knoth
26 Buckingham Road
Merrick, New York 11566
(b) To the Company: IEH Corporation
150 58th Street
Brooklyn, New York 11220
Any such written notice shall be effective upon receipt, but not later than four
(4) days after the deposit with the U.S. Postal Service. Either party may change
such address by notice to the other party. Any other written notice shall be
effective upon receipt by the respective party.
10. Entire Agreement; Modification. This Agreement represents the
entire agreement between the parties, and no other prior written or oral
representation or understanding shall have any further force or effect. This
Agreement may be modified only by a subsequent writing signed by all parties
hereto.
11. Separability. The invalidity of any paragraph or subparagraph
hereof shall not affect the validity of any other paragraph or subparagraph
hereof.
12. Waivers. The failure of any of the parties to this Agreement
to require the performance of a term or obligation or to exercise any right
under this Agreement or the waiver by any of the parties to this Agreement of
any breach hereunder shall not prevent subsequent enforcement of such term or
obligation or exercise of such right or the enforcement at any time of any other
right hereunder or be deemed a waiver of any subsequent breach of the provision
so breached, or of any other breach, hereunder.
13. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York, and shall not be modified or
discharged in whole or in part except by an agreement in writing signed by the
parties hereto.
14. Counterparts. This Agreement may be executed in counterparts,
each of which shall be considered to be an original, and all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first set forth above.
IEH CORPORATION
By:_________________
Name:
Title:
____________________
Robert Knoth
<PAGE>
Amendment No. 1
to
Employment Agreement
This Amendment No. 1 to Employment Agreement, dated as of November 27,
1996, amends that certain Employment Agreement by and between IEH CORPORATION, a
New York corporation maintaining its principal place of business at 140 58th
Street, Brooklyn, New York 11220 (the "Company"), and Robert Knoth residing at
26 Buckingham Road, Merrick, New York 11566 (the "Employee") dated as of January
1, 1995 ("Employment Agreement").
1. The Employment Agreement is hereby amended as follows:
A. Section 2(a) is hereby amended and restated to read as
follows:
(a) Base Salary. The Employee's annual base salary commencing
August 10, 1996 will be $59,500 per annum. Said salary shall be payable in
accordance with the employment practices of the Company generally, which
currently calls for such salary to be paid in equal semi-monthly payments during
each year of the Term.
B. Sections 3(d),(f),(g), (h) and (i) are hereby amended and
restated to read as follows:
(d) Without Cause. The Company may, at its option, terminate
this Agreement at any time without cause upon written notice to the Employee,
subject to payment to Employee of a severance payment as hereinafter provided.
For purposes hereof, "without cause" shall include, without limitation, any
substantial diminution by the Company of the Employee's duties without the
consent of the Employee and not resulting from (i) any act or omission by the
Employee which would otherwise constitue grounds for dismissal for "cause" or
(ii) any disability of the Employee. Except as provided in sub-paragraph (h)
hereof, in the event of termination without cause pursuant to this subsection
(d) during the Term of this Agreement, the Employee shall be entitled to receive
a severance payment equal to the sum of the amount of base salary that would
otherwise be payable to the Employee for the unexpired portion of the Term plus
the sum of $44,625. Such severance payments shall be paid by the Company to the
Employee in a single lump sum payment within 30 days following termination.
(f) Disability of Employee. In the event that the Employee
shall suffer (i) permanent and total physical or mental disability or incapacity
or (ii) any illness, disability or incapacity which prevents him from performing
his duties for a period of three (3) consecutive months or 90 days in any 12
month period, this Agreement may be terminated by the Company, and the Employee
will be paid (i) his accrued but unpaid salary to the date of such disability or
incapacity and (ii) a severance payment equal to the sum of the amount of base
salary that would otherwise be payable to the Employee for the unexpired portion
of the Term plus the sum of $44,625. Such severance payments shall be paid by
the Company to the Employee in a single lump sum payment within 30 days
following termination.
(g) Failure to Renew. If the initial five year Term of this
Agreement expires and Employee and the Company fail to agree upon mutually
acceptable terms for renewal within 30 days after the date of expiration of the
Term, then in such case, the Employee shall be paid the sum of $44,625 payable
in equal semi-monthly installments during the six (6) month period following the
<PAGE>
expiration of the initial five year Term. Nothing contained in this clause (g)
shall require the Employee to relocate in the event the Board of Directors
determines to relocate the Company and the Employee shall be entitled to the
payment set forth in clause (i) hereof in such event.
(h) Change of Control. Upon the occurrence of a Change of
Control Transaction (as hereinafter defined) during the Term, beginning on the
date of such occurrence and continuing for a period of one (1) year thereafter
(the "Change of Control Period"), in the event of the first to occur of the
termination of the Employee's employment for any reason other than for cause (as
defined in subsection (c) hereof) or the resignation of the Employee (for any
reason) during the Change of Control Period, the Employee shall be entitled to a
sum equal to the balance of the base salary for the unexpired portion of the
Term plus $44,625 payable in a single lump sum payment within 30 days following
the date of termination or resignation as the case may be. For purposes hereof,
a "Change of Control Transaction" shall mean any one of the following events:
(i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act")) becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the Act)
(other than the Employee, the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or
other entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50.1% of
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove
defined) acquires more than 30% of the combined voting power
of the Company's then outstanding securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
(i) Company Relocation. In the event the Board of Directors
determines to relocate the Company to a location outside of the New York City
Metropolitan area and the Employee determines, at his option, not to relocate
with the Company, then the Company shall pay the Employee a severance payment
equal to the amounts set forth in Section 3(d) hereof as if the Employee were
terminated without cause.
<PAGE>
2. Counterparts. This Amendment No.1 may be executed in
counterparts, each of which shall be considered to be an original, and all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Employment Agreement as of the date first set forth above.
IEH CORPORATION
By
Name:
Title:
Robert Knoth
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of December 1, 1996, by and between IEH
CORPORATION, a New York corporation maintaining its principal place of business
at 140 58th Street, Brooklyn, New York 11220 (the "Company"), and Joan Prideaux
residing at 95 Jones Drive, Sayville, New York 11782 (the "Employee").
WHEREAS, the Company is engaged in the design, development, manufacture
and distribution of high performance electronic printed circuit connectors and
specialized interconnection devices.
WHEREAS, the Company desires to employ the Employee, and the Employee
desires to accept such employment on the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter stated, the parties hereto hereby agree as follows:
1. Employment. The Company agrees to employ the Employee, and the
Employee hereby agrees to work for the Company, as a full- time employee during
the Term (as hereinafter defined). The Employee shall be employed as Vice
President-Sales and Marketing of the Company.
The Employee agrees to serve the Company faithfully and to the
best of her ability and to perform such services and duties of an executive
nature in connection with the business, affairs and operations of the Company as
may be reasonably and in good faith assigned or delegated to her from time to
time by or under the authority of the President of the Company and consistent
with the position of Vice President-Sales, and to use her best efforts in the
promotion and advancement of the Company and its welfare and business. Such
duties shall include, (i) sales and marketing efforts, including advertising and
recruitment and hiring of sales personnel and distribution, (ii) budgeting for
orders, (iii) customer relations and interface. Subject to Section 3(g) herein,
Employee shall be based in Brooklyn, New York.
2. Salary and Other Compensation.
(a) Base Salary. The Employee's annual base salary during the
Term will be $57,000. Said salary shall be payable in accordance with the
employment practices of the Company generally, which currently calls for such
salary to be paid in equal semi-monthly payments during each year of the Term.
(b) Benefits. The Employee will be entitled to vacation,
holiday, sick time and health insurance benefits according to the standard
benefit policies applicable to other employees of the Company. The Company shall
also obtain for the benefit of the Employee a term life insurance policy
providing for a death benefit of $150,000 payable to a beneficiary named and
designated by the Employee provided that the Employee is insurable at standard
rates.
(c) Automobile Allowance. The Company shall, at its option,
provide the Employee with the use of, or, in the alternative an automobile
allowance for a full size sedan during the Term. The Company shall reimburse the
Employee for the expenses incurred and paid by her for the insurance, repair,
gas and maintenance.
(d) Travel and Entertainment Expenses. The Company shall
reimburse the Employee for reasonable travel and entertainment expenses incurred
and paid by her in connection with and during the Term and in furtherance of the
interests of the Company.
<PAGE>
(e) Withholding. All references herein to compensation to be
paid to the Employee are to the gross amounts thereof which are due hereunder.
The Company shall have the right to deduct therefrom: (i) all taxes which may be
required to be deducted or withheld under any provisions of the law now in
effect or which may become effective any time during the term of this Agreement;
and (ii) all benefits costs payable by the Company's similarly situated salaried
employees.
3. Term and Termination.
(a) Term. The term of this Agreement shall be for a period of
five (5) years commencing as of December 1, 1996 and continuing through November
30, 2001 (the "Term") unless sooner terminated in accordance with the provisions
of this Section 3.
(b) Mutual Consent. This Agreement and the Employee's
employment hereunder may be terminated at any time by the mutual consent of the
parties hereto.
(c) For Cause. The Employee's employment hereunder may be
terminated at any time (i) by the President of the Company or (ii) by the
majority vote of the Board of Directors of the Company taken at any regular or
special meeting, upon determination by either of "cause". For purposes of this
agreement "Cause" shall mean (i) willful disobedience by the Employee of a
material and lawful instruction of the Board of Directors or any senior
executive of the Company; or (ii) conviction of the Employee of any felony or
any misdemeanor involving fraud or embezzlement or similar crime; or (iii)
breach by the Employee of any material provision of this Agreement; or (iv)
conduct amounting to fraud, dishonesty, gross negligence, willful misconduct;
provided that the Company shall not have the right to terminate the employment
of Employee pursuant to the foregoing clause (i), (iii) or (iv) unless written
notice specifying such breach shall have been given to the Employee and, in the
case of breach which is capable of being cured, the Employee shall have failed
to cure such breach within ten (10) days after her receipt of such notice.
Upon termination for cause as provided in this subsection (c), the Employee
shall not be entitled to receive any compensation or other benefits pursuant to
this Agreement except for any compensation or benefits accrued under the terms
of this Agreement that remains unpaid as of the termination date specified in
the above-mentioned notice of actual termination for cause.
(d) Without Cause. The Company may, at its option, terminate
this Agreement at any time without cause upon written notice to the Employee,
subject to payment to Employee of a severance payment as hereinafter provided.
For purposes herein, "without cause" shall include, without limitation, any
substantial diminution by the Company of the Employee's duties without the
consent of the Employee and not resulting from (i) any act or omission by the
Employee which would otherwise constitute grounds for dismissal for "cause" or
(ii) any disability of the Employee. Except as provided in sub-paragraph (s)
hereof, in the event of termination without cause pursuant to this subsection
(d) during the Term of this Agreement, the Employee shall be entitled to receive
a severance payment equal to the sum of the amount of base salary that would
otherwise be payable to the Employee for the unexpired portion of the Term plus
the sum of $42,750. Such severance payments shall be paid by the Company to the
Employee in a single lump sum payment within 45 days following termination.
<PAGE>
(e) Death of Employee. The Employee's employment under this
Agreement will terminate immediately upon her death, in which event there shall
be paid to Employee's estate, as a death benefit, the remaining amount of
Employee's base salary for the remainder of the Term following the date of
death.
(f) Disability of Employee. In the event that the Employee
shall suffer (i) permanent and total physical or mental disability or incapacity
or (ii) any illness, disability or incapacity which prevents her from performing
her duties for a period of three (3) consecutive months or 120 days in any 12
month period, this Agreement may be terminated by the Company, and the Employee
will be paid her accrued but unpaid salary to the date of such disability or
incapacity.
(g) Failure to Renew. If the initial five year Term of this
Agreement expires and Employee and the Company fail to agree upon mutually
acceptable terms for renewal within 30 days after the date of expiration of the
Term, then in such case, the Employee shall be paid the sum of $42,750 payable
in equal semi-monthly installments during the six (6) month period following the
expiration of the initial five year Term. Nothing contained in this clause (f)
shall require the Employee to relocate in the event the Board of Directors
determines to relocate the Company and the Employee shall be entitled to the
payment set forth in clause (h) hereof in such event.
(h) Change of Control. Upon the occurrence of a Change of
Control Transaction (as hereinafter defined) during the Term, beginning on the
date of such occurrence and continuing for a period of one (1) year thereafter
(the "Change of Control Period"), in the event of the first to occur of the
termination of the Employee's employment for any reason other than for cause (as
defined in subsection (c) hereof) or the resignation of the Employee (for any
reason) during the Change of Control Period, the Employee shall be entitled to a
sum equal to the balance of the base salary for the unexpired portion of the
Term plus $29,150 payable in a single lump sum payment within 30 days following
the date of termination or resignation as the case may be. For purposes hereof,
a "Change of Control Transaction" shall mean any one of the following events:
(i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act")) becomes a "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the Act)
(other than the Employee, the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or
other entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50.1% of
<PAGE>
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove
defined) acquires more than 30% of the combined voting power
of the Company's then outstanding securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
(i) Company Relocation. In the event the Board of Directors
determines to relocate the Company to a location outside of the New York City
Metropolitan area and the Employee determines, at her option, not to relocate
with the Company, then the Company shall pay the Employee a severance payment
equal to the amounts set forth in Section 3(d) hereof as if the Employee were
terminated without cause.
4. Noncompetition Agreement.
(a) The Employee will be a full-time employee of the Company
and shall devote all of her business time to the performance of her duties
hereunder.
Employee acknowledges that in the course of the performance of
her duties and as a necessary incident thereof, the Company may make available
or impart to Employee certain financial and business information concerning the
business, affairs, plans, and programs of the Company which is proprietary to
the Company and was not obtained by the Employee from sources other than the
Company (the "Proprietary Information").
(b) For the Term hereof and for a period of one (1) year after
the earlier of expiration of such Term or the termination of Employee's
employment for cause (as defined in Section 3(c) hereof), Employee shall not (i)
in business or otherwise use for herself or disclose to any other person any
Proprietary Information concerning the Company or any information with respect
to the business of the Company, for any purpose whatsoever; (ii) directly or
indirectly, individually or with others, solicit or attempt to solicit any
employees, or any representatives or agents of the Company, in connection with
any business which is the same as or similar to or competitive with the Business
of the Company, which representative or agent is known by Employee to be a
representative or agent of the Company and engaged in the Business of the
Company.
(c) During the Term hereof Employee shall not, in the States
of New York or New Jersey, serve as or become an officer, director, shareholder,
consultant, partner, owner, principal, or otherwise, directly or indirectly,
enter into any business which is the same as or similar to or competitive with
the business of the Company or service customers of the Company within the
geographic areas indicated in this subsection.
(d) Employee further agrees that she will not use any of the
Proprietary Information in connection with the purchase or sale of any
securities of the Company. The provisions of this Section 4 shall survive the
termination of this Agreement.
<PAGE>
(e) Notwithstanding the aforementioned one (1) year period
expressed in clauses (b) and (c) above, in the event the Employee is terminated
by the Company without "Cause" (as defined in Section 3(c) hereof) then the
period of non-competition shall be void and of no effect.
(f) Notwithstanding the foregoing, however, nothing contained
in this Agreement shall prohibit Employee from purchasing and holding as an
investment not more than 5% of any class of the issued and outstanding and
publicly traded (on a recognized national or regional securities exchange or in
the over-the-counter market) security of any corporation, partnership or other
business entity that conducts a business in competition with the Company and of
which she is not an employee or director.
5. Dispute Resolution. If the parties should disagree as to any matter
at law under this Agreement, the dispute shall be arbitrated in the City of New
York under the auspices of the American Arbitration Association. The party
desiring arbitration shall serve upon the other party by certified mail, return
receipt requested, a written demand that the dispute by submitted to
arbitration. Each party shall pay one-half the fees and expenses of the
arbitrator appointed pursuant to the procedures of the American Arbitration
Association. The decision or the arbitrator shall be binding upon the parties.
Punitive awards shall not be granted. Judgment upon the award rendered may be
entered and enforced in any court of competent jurisdiction. Refusal of either
party to participate in binding arbitration concerning any disagreement of the
provisions hereunder shall be considered a breach of this Agreement.
6. Survival. The covenants and agreements contained in Section 4 hereof
shall survive the term of this Agreement notwithstanding termination of the
Employee's employment.
7. Restriction or Alienation. The payments which shall become due and
payable to the Employee or her estate under this Agreement shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void. Such
payments shall not in any manner be liable or subject to the Employee's debts,
contracts, liabilities, engagements or torts.
8. Agreement Binding on Successors. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, their legal
representatives, heirs, successors, and assigns. Nothing in this Agreement,
express or implied, is intended to confer on any person other than the parties
and their respective assigns any rights or remedies under or by this Agreement.
9. Notices. All notices, requests, waivers, demands, and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if mailed, exclusive of the date of
deposit in the U.S. mail, postage prepaid by certified or registered mail,
return receipt requested, as follows:
(a) To the Employee: Joan Prideaux
95 Jones Drive
Sayville, NY 11782
(b) To the Company: IEH Corporation
150 58th Street
Brooklyn, New York 11220
<PAGE>
Any such written notice shall be effective upon receipt, but in no event later
than four (4) days after the deposit with the U.S. Postal Service. Either party
may change such address by notice to the other party. Any other written notice
shall be effective upon receipt by the respective party.
10. Entire Agreement; Modification. This Agreement represents the
entire agreement between the parties, and no other prior written or oral
representation or understanding shall have any further force or effect. This
Agreement may be modified only by a subsequent writing signed by all parties
hereto.
11. Separability. The invalidity of any paragraph or subparagraph
hereof shall not affect the validity of any other paragraph or subparagraph
hereof.
12. Waivers. The failure of any of the parties to this Agreement to
require the performance of a term or obligation or to exercise any right under
this Agreement or the waiver by any of the parties to this Agreement of any
breach hereunder shall not prevent subsequent enforcement of such term or
obligation or exercise of such right or the enforcement at any time of any other
right hereunder or be deemed a waiver of any subsequent breach of the provision
so breached, or of any other breach, hereunder.
13. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York, and shall not be modified or discharged
in whole or in part except by an agreement in writing signed by the parties
hereto.
14. Counterparts. This Agreement may be executed in counterparts, each
of which shall be considered to be an original, and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date first set forth above.
IEH CORPORATION
By
Name:
Title:
Joan Prideaux
IEH CORPORATION
EXHIBIT 11
Statement re: Computation of Net Income (Loss) Per Common Share
Net income or (loss) per common share is computed by dividing the net income or
(loss) by the weighted average number of common shares outstanding during each
year as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
March 28, March 29,
1997 1996
---------- ----------
<S> <C> <C>
Income (Loss) before income taxes ... $ 113,926 $ (70,312)
Net Income (Loss) ................... $ 105,709 $ ( 95,518)
Weighted Average Number of
Common Shares Outstanding ......... 2,303,502 2,303,502
Income (Loss) per common share before
income taxes ...................... $ .05 $ (.03)
Net Income (Loss) per
Common Share ...................... $ .05 $ (.04)
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITOR
I consent to the reference to my firm under the caption "Experts", and to the
use of my report dated May 23, 1997 in the form 10-KSB for the year ended March
28, 1997.
Syosset, New York
June 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-28-1997
<PERIOD-END> MAR-28-1997
<CASH> 15,274
<SECURITIES> 0
<RECEIVABLES> 661,935
<ALLOWANCES> 10,062
<INVENTORY> 1,107,100
<CURRENT-ASSETS> 1,857,368
<PP&E> 5,718,934
<DEPRECIATION> 4,238,093
<TOTAL-ASSETS> 3,429,956
<CURRENT-LIABILITIES> 1,918,911
<BONDS> 0
0
0
<COMMON> 1,151,751
<OTHER-SE> (592,369)
<TOTAL-LIABILITY-AND-EQUITY> 3,429,956
<SALES> 4,729,277
<TOTAL-REVENUES> 4,730,691
<CGS> 3,433,704
<TOTAL-COSTS> 3,433,704
<OTHER-EXPENSES> 1,033,326
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,735
<INCOME-PRETAX> 113,926
<INCOME-TAX> 0
<INCOME-CONTINUING> 113,926
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105,709
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
