SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant X
---
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
X Definitive Proxy Statement
---
Definitive Additional Materials
Soliciting Material Under Rule 14a-12
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
IEC Electronics Corp.
(Name of Registrant as Specified in Its Charter)
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required
---
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.
(3) Filing party:
(4) Date filed:
Page 1 of 24
IEC ELECTRONICS CORP.
105 NORTON STREET
NEWARK, NEW YORK 14513
(315)331-7742
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on
January 21, 2004
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
IEC Electronics Corp. The meeting will be held on Wednesday, January 21, 2004,
at 9:00 a.m. local time at our offices, 105 Norton Street, Newark, New York for
the following purposes:
1. To elect seven (7) directors to serve until the 2005 Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The record date for the annual meeting is December 24, 2003. Only
stockholders of record at the close of business on that date may vote at the
meeting or any adjournment thereof. Our transfer books will not be closed
By Order of the Board of Directors
Martin S. Weingarten,
Secretary
DATED: January 2, 2004
Newark, New York
You are cordially invited to attend the meeting in person. Whether or not
you expect to attend the meeting, please complete, date, sign and return the
enclosed proxy as promptly as possible in order to ensure your representation at
the meeting. A return envelope is enclosed for your convenience. Even if you
have voted by proxy, you may still vote in person if you attend the meeting.
Please note, however, that if your shares are held of record by a broker, bank
or other nominee and you wish to vote at the meeting, you must obtain a proxy
issued in your name from that record holder.
Page 2 of 24
IEC ELECTRONICS CORP.
105 NORTON STREET
NEWARK, NEW YORK 14513
(315)331-7742
PROXY STATEMENT
FOR 2004 ANNUAL MEETING OF STOCKHOLDERS
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
----------------------------------------------------------
WHY AM I RECEIVING THESE MATERIALS?
We are sending you this proxy statement and the enclosed proxy card because
the board of directors of IEC Electronics Corp. ("IEC", the "Company", "we",
"our", "us"). is soliciting your proxy to vote at the 2004 Annual Meeting of
Stockholders. We invite you to attend the annual meeting and request that you
vote on the proposal described in this proxy statement. The meeting will be held
on Wednesday, January 21, 2004 at 9 a.m. local time at our office, 105 Norton
Street, Newark, New York. However, you do not need to attend the meeting to vote
your shares. Instead, you may simply complete, date, sign and return the
enclosed proxy card.
We are mailing this proxy statement, the accompanying proxy card, and our
Annual Report to Stockholders for the fiscal year ending September 30, 2003
("Fiscal 2003") on or about January 2, 2004 to all stockholders of record
entitled to vote at the annual meeting.
WHO CAN VOTE AT THE ANNNUAL MEETING?
Only stockholders of record at the close of business on December 24, 2003
will be entitled to vote at the annual meeting. On this record date, there were
approximately 8,056,960 shares of common stock outstanding and entitled to vote.
Stockholder of Record: Shares Registered in Your Name
-----------------------------------------------------
If on December 24, 2003, your shares were registered directly in your name
with our transfer agent, Mellon Investor Services, LLC, then you are a
stockholder of record. As a stockholder of record, you may vote in person at the
meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge
you to fill out and return the enclosed proxy card to ensure your vote is
counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
-------------------------------------------------------------------
If on December 24, 2003, your shares were held in an account at a brokerage
firm, bank, dealer or other similar organization, then you are the beneficial
owner of shares held in "street name" and these proxy materials are being
forwarded to you by that organization. The organization holding your account is
considered the stockholder of record for purposes of voting at the annual
meeting. As a beneficial owner, you have the right to direct your broker or
other agent on how to vote the shares in your account. You are also invited to
attend the annual meeting. However, since you are not the stockholder of record,
you may not vote your shares in person at the meeting unless you request and
obtain a valid proxy from your broker or other agent.
WHAT AM I VOTING ON?
There is one matter scheduled for a vote: the election of seven directors
to serve until the 2005 Annual Meeting of Stockholders. Our board of directors
does not intend to bring any other matters before the meeting and is not aware
of anyone else who will submit any other matters to be voted on.. However, if
any other matters properly come before the meeting, the people named on the
proxy card, or their substitutes, will be authorized to vote on those matters in
their own judgment.
HOW DO I VOTE?
You may either vote "For" all the nominees to the board of directors or you
may abstain from voting for any nominee you specify. The procedures for voting
are set forth below:
Stockholder of Record: Shares Registered in Your Name
-----------------------------------------------------
If you are a stockholder of record, you may vote in person at the annual
meeting or vote by proxy using the enclosed proxy card. Whether or not you plan
to attend the meeting, we urge you to vote by proxy to ensure your vote is
counted. You may still attend the meeting and vote in person if you have already
voted by proxy.
Page 3 of 24
* To vote in person, come to the annual meeting and we will give you a
ballot when you arrive.
* To vote using the proxy card, simply complete, date and sign the enclosed
proxy card and return it promptly in the envelope provided. If you return
your signed proxy card to us before the annual meeting, we will vote your
shares as you direct.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
-----------------------------------------------------------------
If you are a beneficial owner of shares registered in the name of your
broker, bank or other agent, you should have received a proxy card and voting
instructions with these proxy materials from that organization rather than from
us. Simply complete and mail the proxy card to ensure that your vote is counted.
To vote in person at the annual meeting, you must obtain a valid proxy from your
broker, bank or other agent. Follow the instructions from your broker or bank
included with these proxy materials, or contact your broker or bank to request a
proxy form.
HOW MANY VOTES DO I HAVE?
On each matter to be voted upon, you have one vote for each share of common
stock you owned as of December 24, 2003.
WHAT IF I RETURN A PROXY CARD BUT DO NOT MAKE SPECIFIC CHOICES?
If you return a signed and dated proxy card without marking any voting
selections, your shares will be voted "For" the election of the seven nominees
for director. If any other matter is properly presented at the meeting, your
proxy (one of the individuals named on your proxy card) will vote your shares
using his best judgment.
WHO IS PAYING FOR THIS PROXY SOLICITATION?
We will pay for the entire cost of soliciting proxies. In addition to these
mailed proxy materials, our directors and employees may also solicit proxies in
person, by telephone, or by other means of communication. We will not pay our
directors and employees any additional compensation for soliciting proxies. We
may also reimburse brokerage firms, banks and other agents for the cost of
forwarding proxy materials to beneficial owners.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
If you receive more than one proxy card, your shares are registered in more
than one name or are registered in different accounts. Please complete, date,
sign and return each proxy card to ensure that all of your shares are voted.
CAN I CHANGE MY VOTE AFTER SUBMITTING MY PROXY?
Yes. You can revoke your proxy at any time before the final vote at the
meeting. You may revoke your proxy in any one of three ways:
* You may submit another properly completed proxy card with a later date.
* You may send a written notice that you are revoking your proxy to
Secretary, IEC Electronics Corp., 105 Norton Street, Newark, NY 14513.
* You may attend the annual meeting and vote in person. Simply attending
the meeting will not, by itself, revoke your proxy.
HOW ARE THESE VOTES COUNTED?
Votes will be counted by the inspector of election appointed for the
meeting, who will separately count "For" and "Withheld" votes, abstentions and
broker non-votes. "Broker non-votes" occur when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that proposal and has not
received instructions with respect to that proposal from the beneficial owner
(despite voting on at least one other proposal for which it does have
discretionary authority or for which it has received instructions). Abstentions
will have no effect on the election of directors. Abstentions or broker
non-votes will not be counted for or against any other matter that may be acted
on at the meeting.
HOW MANY VOTES ARE NEEDED TO APPROVE PROPOSAL NO. 1?
To be approved, Proposal No. 1, the election of directors, the seven
nominees receiving the most "For" votes (among votes properly cast in person or
by proxy) will be elected. Abstentions and broker non-votes will have no effect.
Page 4 of 24
WHAT IS THE QUORUM REQUIREMENT?
A quorum of stockholders is necessary to hold a valid meeting. A quorum
will be present if at least a majority of the outstanding shares entitled to
vote are represented at the meeting or by proxy. On the record date, there were
approximately 8,056,960 shares outstanding and entitled to vote.
Your shares will be counted towards the quorum only if you submit a valid
proxy vote or vote at the meeting. Abstentions and broker non-votes will be
counted towards the quorum requirement. If there is no quorum, a majority of the
votes present at the meeting may adjourn the meeting to another date.
HOW CAN I FIND OUT THE RESULTS OF THE VOTING AT THE ANNUAL MEETING?
Preliminary voting results will be announced at the annual meeting. Final
voting results will be published in our quarterly report on Form 10-Q for the
second quarter ending March 26, 2004.
WHEN ARE STOCKHOLDER PROPOSALS DUE FOR NEXT YEAR'S ANNUAL MEETING?
At our annual meeting each year, our board of directors submits to
stockholders its nominees for election as directors. In addition, the board of
directors may submit other matters to the stockholders for action at the annual
meeting.
Our stockholders also may submit proposals for inclusion in the proxy
material. These proposals must meet the stockholder eligibility and other
requirements of the Securities and Exchange Commission. To be considered for
inclusion in next year's proxy materials, you must submit your proposal in
writing by September 13, 2004 to our Secretary, IEC Electronics Corp., 105
Norton Street, Newark, NY 14513.
In addition, our by-laws also provide that in order for business to be
brought before an annual meeting of stockholders, you must deliver written
notice to our Secretary not less than 90 days prior to the date of the meeting.
The notice must set forth your name, address and number of shares of stock you
hold, a representation that you intend to appear in person or by proxy at the
meeting to make the proposal, a description of the business to be brought before
the meeting, the reasons for conducting such business at the annual meeting, any
material interest you have in the proposal, and such other information regarding
the proposal as would be required to be included in a proxy statement. We have
received no such notice for the 2004 annual meeting. For the 2005 Annual Meeting
of Stockholders, written notice must be delivered to our Secretary at our
principal office, 105 Norton Street, Newark, NY 14513, no later than October 24,
2004.
Our by-laws also provide that if you intend to nominate a candidate for
election as a director, you must deliver written notice of your intent to our
Secretary. The notice must be delivered not less than 90 days before the date of
a meeting of stockholders. The notice must set forth your name and address and
number of shares of stock you own, the name and address of the person to be
nominated, a representation that you intend to appear in person or by proxy at
the meeting to nominate the person specified in the notice, a description of all
arrangements or understandings between such stockholder and each nominee and any
other person (naming such person) pursuant to which the nomination is to be made
by such stockholder, the nominee's business address and experience during the
past five years, any other directorships held by the nominee, the nominee's
involvement in certain legal proceedings during the past five years and such
other information concerning the nominee as would be required to be included in
a proxy statement soliciting proxies for the election of the nominee. In
addition, the notice must include the consent of the nominee to serve as a
director if elected. We have received no such notice for the 2004 Annual
Meeting. For the 2005 Annual Meeting of Stockholders, written notice must be
delivered to our Secretary at our principal office, 105 Norton Street, Newark,
NY 14513, no later than October 24, 2004.
Page 5 of 24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information
regarding the beneficial ownership of our common stock as of December 1, 2003 by
(i) each person known by us to beneficially own more than 5% of our outstanding
shares, (ii) each director, (iii) each of the executive officers named in the
Summary Compensation Table who were serving as executive officers on September
30, 2003, and (iv) all our directors and officers as a group. The information as
to each person has been furnished by such person, and, except as noted, each
person named in the table has sole voting and investment power with respect to
the shares of common stock indicated as beneficially owned.
Name of Beneficial Shares Beneficially Percent of Shares
Owner Owned(1) Benefically Owned(1)
------------------ ------------------- --------------------
David J. Beaubien* 60,365(2) +
W. Barry Gilbert* 207,116(3) 2.54%
Robert P. B. Kidd* 81,521(2) 1.01%
Eben S. Moulton* 309,386(2) 3.84%
Dermott O'Flanagan* 201,814(4) 2.50%
James C. Rowe* 210,278(5) 2.61%
Justin L. Vigdor* 211,326(2) 2.62%
Bill R. Anderson 140,000(6) 1.71%
Brian H. Davis 10,000(7) +
All directors and executive
officers as a group
(9 persons) 1,431,806(8) 17.04%
*Member of Board of Directors of the Company
+Less than 1%
(1) Applicable percentages are based on 8,051,210 shares outstanding on
December 1, 2003, adjusted as required by rules promulgated by the SEC. In
computing the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of common stock issuable pursuant to options
held by that person that are currently exercisable or exercisable within 60 days
of December 1, 2003 ("options currently exercisable") are deemed to be
beneficially owned. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person.
(2) Includes 14,001 shares subject to options currently exercisable.
(3) Includes 84,544 shares held by Mr. Gilbert's wife and 112,334 shares
subject to options currently exercisable.
(4) Includes 15,501 shares subject to options currently exercisable.
(5) Includes 17,501 shares subject to options currently exercisable and
185,131 shares held by Mr. Rowe's 401(k) Plan.
(6) Includes 140,000 shares subject to options currently exercisable.
(7) Includes 10,000 shares subject to options currently exercisable.
(8) Includes 351,340 shares subject to options currently exercisable.
Page 6 of 24
ELECTION OF DIRECTORS
(Proposal 1)
The number of directors is established by the board and is currently set at
seven. At this annual meeting, seven persons will be nominated as directors. All
the nominees for director are incumbent directors and were elected at the last
annual meeting.
Nominations of persons for election to our board may be made at a meeting
of stockholders only (i) by or at the direction of the board or (ii) by any
stockholder who has complied with the notice procedures set forth in our bylaws.
Stockholders who wish to communicate with the board concerning potential
director candidates may do so by corresponding with our Secretary as set forth
in the section entitled "Questions and Answers About This Proxy Material and
Voting - When are stockholder proposals due for next year's annual meeting?"
It is intended that the accompanying proxy will be voted in favor of the
persons listed below to serve as directors unless the stockholder indicates to
the contrary on the proxy. All nominees have consented to serve if elected. We
expect that each of the nominees will be available for election, but if any of
them is not a candidate at the time the election occurs, it is intended that
such proxy will be voted for the election of another nominee to be designated by
the board to fill any such vacancy.
For the election of directors, only proxies and ballots marked "FOR all
nominees", "WITHHELD for all nominees" or specifying that votes be withheld for
one or more designated nominees are counted to determine the total number of
votes cast; votes that are withheld are excluded entirely from the vote and will
have no effect. Abstentions will have no effect on the vote for the election of
directors. Directors are elected by a plurality of the votes cast. This means
that the seven nominees will be elected if they receive more affirmative votes
than any other nominees.
The term of office of each person elected as a director will continue until
the next annual meeting or until his successor has been elected and qualified,
or until the director's death, resignation or removal.
The Board of Directors unanimously recommends a vote FOR the election as
directors the nominees listed below.
Nominees for Election as Directors
----------------------------------
The names of the nominees, their ages as of December 1, 2003, and certain
information about them are set forth below.
DAVID J. BEAUBIEN, 69, a director since October 1990, has been a director
and chairman of Yankee Environmental Systems, Inc., Turners Falls,
Massachusetts, a manufacturer of Solar Radiation Monitoring Instruments, since
1990. Prior thereto, he was Senior Vice President of EG & G, Inc., Wellesley,
Massachusetts, a manufacturer of Scientific Instruments and manager of U.S.
Government facilities from 1967 until his retirement in January 1991. He is also
an independent director of UBS Global Asset Management Funds, New York, New
York.
W. BARRY GILBERT, 57, has served as our Acting Chief Executive Officer
since June 2002. He has been a director of the Company since February 1993 and
Chairman of the Board since February 2001. He is also an adjunct faculty member
at the William E. Simon Graduate School of Management of the University of
Rochester. From 1991 until 1999, he was President of the Thermal Management
Group of Bowthorpe Plc. of Crawley, West Sussex, England. Prior to that time he
was corporate Vice President and President, Analytical Products Division of
Milton Roy Company, a manufacturer of analytical instrumentation. Mr. Gilbert is
also on the advisory boards of several privately-held companies.
ROBERT P.B. KIDD, 70, has served as a director since its formation in 1966
and has been an insurance agent since 1961. From September 1995 until August
1998, Mr. Kidd was President of Blue Water Insurance, Inc., Jupiter, Florida, a
marine insurance company. Prior thereto, he was a Vice President of Lawrence
United Corporation, an insurance agency and a division of the Lawrence Group.
EBEN S. MOULTON, 57, a director since November 1992, has served as
President of Seacoast Capital Corporation, Danvers, Massachusetts, an investment
firm, since 1994 and as President of Signal Capital Corporation, Danvers,
Massachusetts, a financial services corporation, since 1988. Mr. Moulton is a
director of Seacoast Capital Corporation and Unitil Corporation, Hampton, New
Hampshire, a utility company. He is also a director of several privately-held
companies.
Page 7 of 24
DERMOTT O'FLANAGAN, 51, a director since July 10, 2000, is a private
investor. From 1995 until April 2000, he was President of Dovatron
International, an electronics contract manufacturer based in Niwot, Colorado.
From 1992 to 1996, he was Managing Director of Dovatron Ireland Ltd., and from
1983 to 1991, he held various management positions with Western Digital
Corporation, an electronics manufacturer. Mr. O'Flanagan is also a director of
Manufacturers' Services, Ltd., a provider of advanced electronics manufacturing
services, headquartered in Concord, Massachusetts.
JAMES C. ROWE, 55, a director since January 7, 2000, has served as
President of Rowe & Company LLC, Milwaukee, Wisconsin, a merchant banking firm,
since April 1994. From April 1972 through March 1994, Mr. Rowe was a director
and Vice President of Lubar & Co., Incorporated, Milwaukee, Wisconsin, a
merchant banking firm. Mr. Rowe is a director of several privately held
companies.
JUSTIN L. VIGDOR, 74, is our Assistant Secretary and has served as a
director since 1968. He has been an attorney since 1951 and is senior counsel to
the law firm of Boylan, Brown, Code, Vigdor & Wilson, LLP, Rochester, New York,
our counsel.
Information Regarding the Board and its Committees
--------------------------------------------------
During Fiscal 2003, our board held two in-person regular meetings and five
telephonic meetings, and acted by unanimous written consent four times.
During Fiscal 2003, each director, except Mr. Kidd, attended more than 75%
of the meetings of the board and the committees upon which such director served.
Mr. Kidd attended 64% of such meetings
Our board has an audit committee, a compensation committee, a corporate
governance committee and an executive committee. We have no standing nominating
committee; its functions are the responsibility of the corporate governance
committee.
The audit committee oversees our corporate accounting and financial
reporting processes. On August 18, 2003, the audit committee approved and
recommended for adoption by the board an Amended and Restated Charter,
containing certain amendments and clarifications it deemed advisable in light of
current and proposed changes to applicable regulations of the Securities and
Exchange Commission. The Amended and Restated Charter, attached as Appendix A
hereto, was approved by the full board of directors on August 19, 2003. Pursuant
to the Amended and Restated Charter, the audit committee is responsible for the
appointment, dismissal, compensation and oversight of our independent auditors,
including the engagement of our auditors for the next fiscal year, the review
with the independent auditors and approval of the plan of the auditing
engagement, the review with the independent auditors of the results of their
audit, the review of the scope and results of the evaluation of our procedures
for internal auditing, t he inquiry as to the adequacy of our internal
accounting controls and our disclosure controls and procedures, the approval of
audit and non-audit services to be provided to us by the independent auditors,
and overseeing compliance matters for us. The audit committee also reviews with
financial management and the independent auditors our annual report on Form 10-K
and the interim financial statements prior to the filing of our quarterly
reports on Form 10-Q. The audit committee also monitors compliance with our Code
of Conduct, our conflict of interest policy and our policy concerning trading in
our securities. The minutes of audit committee meetings, as well as all of the
recommendations of the audit committee, are submitted to the full board. In
Fiscal 2003, the audit committee, whose current members are Messrs. Rowe
(Chairman), Kidd and Beaubien, held four meetings and acted by unanimous written
consent three times. The board of directors has determined that in its judgment
each member of the audit co mmittee meets the applicable laws and regulations
regarding "independence" and that Mr. Rowe qualifies as an audit committee
financial expert in accordance with the applicable rules and regulations of the
SEC.
The compensation committee reviews and approves our compensation philosophy
covering executive officers and other key management employees, reviews the
competitiveness of our total compensation practices, reviews and approves the
terms and conditions of proposed incentive plans applicable to executive
officers and other key employees, approves and administers our stock option
plans, reviews and makes recommendations with respect to management
compensation, including salaries and bonus awards, examines the impact and
effect of various benefits and incentive plans and reviews and recommends
changes or amendments to such programs to the board, and reviews and approves
hiring and severance arrangements with executive officers. In Fiscal 2003, the
compensation committee held several informal meetings and acted by unanimous
written consent three times. The members of the compensation committee are
Messrs. Beaubien (Chairman), O'Flanagan and Rowe.
Page 8 of 24
The corporate governance committee reviews and makes recommendations to the
board regarding board size, composition, compensation and structure and the
compensation and duties of board committees, develops policies relating to the
recruitment of directors and performs the functions of a nominating committee,
ensures that mechanisms exist for the evaluation of the Chief Executive Officer
and for a self-evaluation of the board's effectiveness, and receives
periodically from the Chief Executive Officer recommendations relating to the
development of executive talent, management succession and our executive
management needs. In Fiscal 2003, the corporate governance committee did not
meet; its functions were handled by the full board. Members of the corporate
governance committee are Messrs. Moulton (Chairman), O'Flanagan and Vigdor.
The executive committee exercises the powers of the board in the interval
between regular meetings of the full board. In Fiscal 2003, the executive
committee, whose current members are Messrs. Gilbert, Moulton and Rowe, held
several informal telephonic meetings.
Compensation of Directors
-------------------------
Each of our non-employee directors receives an annual retainer of $8,000,
payable in four equal quarterly installments. In addition, each non-employee
director is paid $1,000 for each in-person meeting of the board attended.
Directors are also reimbursed for their expenses in attending board meetings. No
fees are paid to non-employee directors for telephonic board meetings or for
attendance at committee meetings. The chairmen of the audit and compensation
committees each receive an additional $750 per quarter. Employee directors are
not compensated for their service on the board or on committees of the board.
For the last three quarters of Fiscal 2003 the non-employee directors received
an aggregate of $44,000, which was paid in both cash and shares of common stock.
No fees were paid to the non-employee directors for the first quarter of Fiscal
2003. The fees for that quarter together with the fees for Fiscal 2002, which
had not previously been paid to the non-employee directors, were deferred by th
e directors and are evidenced by our promissory notes dated in December 2002.
These deferred fees are payable in twenty-four equal monthly installments, which
commenced in January 17, 2003. In Fiscal 2003, the non-employee directors
received an aggregate of $31,570 pursuant to this payment arrangement.
Non-employee directors may also receive consulting fees for special
projects requested by management or by the board. No such fees were paid to the
non-employee directors in Fiscal 2003. In addition, pursuant to a resolution
adopted by the board on October 31, 2000, if a non-employee director retires
from the board after having served at least five years as a director, such
director is entitled to receive the equivalent of one year's annual retainer fee
($8,000) in the form of shares of common stock. No director retired in Fiscal
2003.
Our 2001 Stock Option and Incentive Plan (the "2001 Plan"), which was
approved by the stockholders at the 2002 annual meeting, authorizes the granting
of non-statutory stock options to the non-employee directors in such amounts and
at such times as may be determined by the board of directors. Pursuant to the
2001 Plan, a non-statutory stock option ("NSO") for 5,000 shares was granted to
each of the non-employee directors on March 12, 2003 at an exercise price of
$0.20 per share (the fair market value of our shares on the date of grant). Said
NSOs vest in three equal installments on September 12, 2003, March 12, 2004 and
March 12, 2005, respectively, and terminate on March 11, 2008.
All of our directors, except Mr. Gilbert, are non-employee directors.
Page 9 of 24
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
The following table shows for the fiscal years ended September 30, 2003,
2002 and 2001, compensation awarded or paid to, or earned by, our acting Chief
Executive Officer and our other two executive officers at September 30, 2003
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
All Other
Annual Long-Term Compensation
Compensation Compensation ($)(3)
-------------------------------------------------------------------------------- ------------ ------------
Awards
------
Securities
Name & Principal Salary Bonus Other Annual Underlying
Position Year ($) ($)(1) ($)(2) Options (#)
-------------------- ---- -------- -------- ------------ -----------
W. Barry Gilbert (4) 2003 $118,501 $57,500 - 375,000 -
Acting Chief Executive 2002 44,846 - - -
Officer & Chairman of
the Board
Bill R. Anderson (5) 2003 $144,399 $17,500 - 60,000 -
Vice President and 2002 145,385 - - 100,000 -
and Chief Operating Officer 2001 83,077 45,833 - 70,000 4,863
Brian H. Davis (6) 2003 $ 55,288 $ 4,000 - 40,000 -
Vice President, Chief
Financial Officer & Controller
(1) For Fiscal 2002, no bonuses were paid to any officer or employee. For
Fiscal 2001, $25,000 of the bonus received by Mr. Anderson was a hiring bonus
and $20,833 was an incentive award.
(2) None of the Named Executive Officers received personal benefits in
excess of the lesser of $50,000 or 10% of such individual's reported salary for
Fiscal 2003, 2002 and 2001.
(3) For Fiscal 2001, the amount in this column represents matching
contributions made in connection with our 401(k) Profit Sharing Plan.
(4) Mr. Gilbert was appointed Acting Chief Executive Officer on June 6,
2002.
(5) After leaving us in 1998, Mr. Anderson rejoined us in March 2001 as
Vice President, Supply Chain Management & Materials. He became Vice President
and General Manager, Newark Operations in September 2001, and on June 6, 2002,
he became Chief Operating Officer. In March 2003, he was also appointed Vice
President.
(6) Mr. Davis joined us in March 2003 as Vice President, Chief Financial
Officer and Controller.
Page 10 of 24
Options and Stock Appreciation Rights
-------------------------------------
We grant options to our officers and employees under our 2001 Stock Option
and Incentive Plan. The following tables show for the fiscal year ended
September 30, 2003, certain information regarding options granted to, exercised
by and held at year-end by the Named Executive Officers.
OPTION GRANTS IN FISCAL 2003
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
-------------------------------------------------------------------------- ----------------------------
Percent of Total
Number of Securities Options Granted to Exercise or
Underlying Options Employees in Fiscal Base Price Expiration
Name Granted (#) 2003(2) ($/Share)(3) Date(4) 5%($) 10%($)
---------------- -------------------- ------------------- ------------ ---------- ------- ---------
W. Barry Gilbert 275,000 44.847% $0.95 3/31/09 $85,250 $195,250
100,000 16.308% $0.09 1/09/08 $ 3,000 $ 6,000
Bill R. Anderson 60,000 9.785% $0.95 8/11/08 $16,200 $ 36,600
Brian H. Davis 40,000 6.523% $0.21 3/16/10 $ 3,600 $ 8,400
(1) The potential realizable value portion of the foregoing table
illustrates value that might be realized upon exercise of the options
immediately prior to the expiration of their term, assuming the specified
compounded rates of appreciation on our shares over the term of the options.
This hypothetical value is based entirely on assumed annual growth rates of 5%
and 10% in the value of our stock price over the term of the options granted in
Fiscal 2003. The assumed rates of growth were selected by the Securities and
Exchange Commission for illustration purposes only, and are not intended to
predict future stock prices, which will depend upon market conditions and the
our future performance and prospects. These numbers do not take into account
provisions of certain options providing for termination of the option following
termination of employment, nontransferability or vesting over various periods.
(2) Percentage indicated is based upon a total of 613,000 options granted
to employees, including the Named Executive Officers.
(3) The option exercise price per share is 100% of the fair market value of
our shares on the date of grant and may be paid in our shares which are owned by
the executive officer, in cash, or by a combination of these methods.
(4) Mr. Gilbert's option for 275,000 shares becomes vested and exercisable
in five equal installments at such times as the closing price of the shares
equals or exceeds $1.50, $2.00, $3.00, $4.00 and $5.00 per share for 30
consecutive days respectively, between August 12, 2003 and August 12, 2006. If
the closing price does not reach the specified performance targets prior to
August 12, 2006, the option will become fully vested and exercisable after
September 30, 2008 and maybe exercised from October 1, 2008 until March 31,
2009, at which time it expires. In addition, no portion of the option will vest
unless Mr. Gilbert is our Chief Executive Officer at the time of the vesting of
such portion. At September 30, 2003, no portion of the option had vested.
Mr. Gilbert's option for 100,000 shares vests in two equal installments on
January 10, 2003 and January 10, 2004.
Mr. Anderson's options for 60,000 shares vests in three equal installments
on August 12, 2004, August 12, 2005 and August 12, 2006.
Mr. Davis' options for 40,000 shares vests in four equal installments on
March 17, 2003, March 17, 2004, March 17, 2005 and March 17, 2006.
Page 11 of 24
AGGREGATED OPTION EXERCISES IN FISCAL 2003AND
FISCAL 2003 YEAR-END OPTION VALUES
Value of Unexercised
Number of Securities Underlying In-the-Money
Unexercised Options Options At
At September 30, 2003 (#) September 30, 2003($)(1)
-------------------------------- -------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------- ---------------- ------------ ----------- ------------- ----------- -------------
W. Barry Gilbert 0 0 62,334 326,666 53,934 93,466
Bill R. Anderson 0 0 115,000 115,000 80,150 37,650
Brian H. Davis 0 0 10,000 30,000 8,900 26,700
(1) The closing price for our shares as reported in the Over the Counter
Bulletin Board on September 30, 2003 was $1.10. Value is calculated on the basis
of the difference between the option price and $1.10 multiplied by the number of
shares underlying the option. An option is in-the-money if the market value of
the shares subject to the option exceeds the option price.
Securities Authorized for Issuance under Equity Compensation Plans
------------------------------------------------------------------
The following table sets forth information concerning the Company's equity
compensation plans as of September 30, 2003.
Number of Securities
remaining available for
future issuance under
Number of Securities to be Weighted-average exercise equity compensation plans
issued upon exercise of outstanding price of outstanding options, (excluding securities
Plan Category options, warrants and rights warrants and rights reflected in column (a))
------------- ----------------------------------- ----------------------------- ------------------------
(a) (b) (c)
Equity compensation
plans approved by
security holders 1,310,800 $1.25 242,916
Equity compensation
plans not approved
by security holders - N/A -
---------- ---------- ----------
Total 1,310,800 $1.25 242,916
Employment, Severance and Change in Control Arrangements
--------------------------------------------------------
On March 17, 2003, we entered into a letter agreement with Brian H. Davis
to serve as our Chief Financial Officer and Controller. We agreed to compensate
him at an annual salary of $115,000 and he will receive a hiring bonus of
$30,000 payable after January 1, 2004. Further, we agreed to grant to Mr. Davis
an option to purchase 40,000 shares of our common stock vesting in four equal
annual installments, with the first installment vesting on the date of grant
(March 17, 2003). The exercise price was $0.21 per share, the fair market value
of our shares on the date of grant. In the event we terminate Mr. Davis without
cause, Mr. Davis will receive his base salary and health benefits for a period
of six months.
Our 2001 Stock Option and Incentive Plan provides that upon a change in
control, unless the board otherwise determines, all outstanding options will
immediately become fully vested and exercisable.
Page 12 of 24
Certain Transactions
--------------------
On June 6, 2002, Thomas W. Lovelock resigned as President, Chief Executive
Officer and as a director. Pursuant to the terms of a Severance Agreement dated
June 6, 2002 between Mr. Lovelock and us, as modified by a supplemental
agreement dated December 6, 2002, we paid Mr. Lovelock his salary and benefits
through August 20, 2002, the expiration date of his employment agreement, and
agreed to pay him an aggregate amount equal to six months of his base salary,
said amount to be paid in installments, with the final installment to be paid on
September 27, 2003. Of said amount, $20,769 was paid in Fiscal 2002 and $140,192
was paid in Fiscal 2003. No further payments are owing to Mr. Lovelock. In
addition, we continued to provide Mr. Lovelock with health insurance coverage
through October 1, 2003 (Mr. Lovelock paid the standard "employee" portion of
the premium effective May 1, 2003) and with life and accident, death and
disability insurance through March 31, 2003. Certain obligations in Mr.
Lovelock's prior employment agreement relating to confidentiality remain in
effect in accordance with their terms, but we released Mr. Lovelock from the
non-competition provisions contained in his employment agreement.
As part of the new financing arrangements we entered into on January 14,
2003, our lenders required that our directors provide us with a cash infusion
aggregating $100,000. Three of our directors (Messrs. Moulton, Rowe and Vigdor)
purchased from us an aggregate of 249,999 shares of our common stock for an
aggregate consideration of $50,000 or $0.20 per share. The closing price of our
shares in the Over-the-Counter Bulletin Board on January 14, 2003, the date of
purchase, was $0.10 per share. Three of our directors (Messrs. Gilbert, Beaubien
and Kidd) loaned us an aggregate of $50,000. The loans were evidenced by our
subordinated promissory notes bearing interest at the rate of 7% per annum and
with principal to be repaid upon the sale of our plant located in Edinburg,
Texas. When the Texas facility was sold on February 28, 2003, the loans were
repaid. An aggregate of $437 was paid in interest.
Justin L. Vigdor, a director and our Assistant Secretary, is senior counsel
to Boylan, Brown, Code, Vigdor & Wilson, LLP, and Martin S. Weingarten, our
Corporate Secretary, is of counsel to that firm, which provided legal services
to us in Fiscal 2003.
We have entered into indemnity agreements with certain officers and
directors which provide, among other things, that we will indemnify such officer
or director, under the circumstances and to the extent provided for in those
agreements, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party by
reason of his position as one of our directors, officers or other agents, and
otherwise to the fullest extent permitted under Delaware law and our bylaws.
Any transactions we enter into with our officers, directors, affiliates or
controlling stockholders will be on terms no less favorable than could be
obtained from unaffiliated third parties, and must be approved by a majority of
our directors, including a majority of our independent disinterested directors.
CORPORATE PERFORMANCE GRAPH
The following graph and table show a comparison of cumulative total
stockholder return for our common stock, the NASDAQ Market Index and a Peer
Group Index for the year indicated as prescribed by SEC rules.
COMPARISON OF CUMULATIVE TOTAL RETURN (1)
AMONG IEC ELECTRONICS CORP.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX (2)
9/30/1998 9/30/1999 9/30/2000 9/30/2001 9/30/2002 9/30/2003
--------- --------- --------- --------- --------- ---------
IEC 100.00 52.50 41.87 14.20 2.00 22.00
NASDAQ 100.00 162.13 216.83 88.49 69.20 105.50
Peer Index 100.00 214.04 450.66 136.08 64.06
134.74
(1) Assumes $100 invested on September 30,1998, in our common stock, the
NASDAQ Market Index, and our constructed Peer Group Index.
(2) We constructed a Peer Group consisting of Solectron Corp., Sanmina-SCI
Corporation, Plexus Corp., and Benchmark Electronics Inc.
The information contained in the above Performance Graph and table shall
not be deemed "soliciting material" or "filed" with the SEC, or subject to the
liabilities of Section 18 of the Securities Exchange Act of 1934, except to the
extent that we specifically incorporate it by reference into such filings.
Page 13 of 24
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
The compensation committee is comprised of three non-employee directors of
our board, Messrs. Beaubien, Rowe and O'Flanagan. Mr. O'Flanagan became a member
of the committee in March 2003. The committee is responsible for setting and
administering policies governing compensation of executive officers.
The goals of our compensation policy are (i) to support the attainment of
our long and short-term strategic and financial objectives; (ii) to provide a
competitive total compensation program that enables us to attract, motivate and
retain the key executives needed to accomplish our goals; (iii) to provide
variable compensation opportunities that are directly related to our
performance; (iv) to align executive compensation with growth in stockholder
value; and (v) to recognize and reward executives for their contributions and
commitment to our growth and profitability. We believe this policy is generally
best accomplished by providing a competitive total compensation package, a
significant portion of which is variable and at risk and related to established
performance goals.
To assist us in developing and maintaining a competitive level of
compensation, in Fiscal 2003 we utilized the services of an independent
compensation consultant who provided us with an analysis of compensation
information for companies similar in size and in our industry.
Our compensation program for executive officers is comprised of the
following key elements: base salary, annual cash incentives and equity based
incentives. Salary and annual incentive payments are mainly designed to reward
current and past performances. Equity based incentives are primarily designed to
provide strong incentives for long-term future performance. The components of
the compensation program for executives are described below.
Base Salary
-----------
Base salaries and increases for executive officers, other than for the
Chief Executive Officer, are determined by the Chief Executive Officer within
the guidelines established by the committee and are based upon the officer's
current performance, experience, the scope and complexity of his position and
the external competitive marketplace for comparable positions at peer companies.
Base salaries are normally reviewed annually. In structuring the compensation
package, it has been our policy to emphasize bonuses based upon our performance
rather than increases in base salary. Accordingly, the base salaries of the
executive officers generally remain below the market median. As a result of our
economic and financial difficulties in Fiscal 2002 and in order to restore our
financial stability and economic viability, it was necessary for us to reduce
our costs, including, among other things, our payroll and compensation.
Accordingly, in Fiscal 2002, the salaries of all employees, including executive
officers, were reduced by 10%. Such salary reductions continued through all of
Fiscal 2003.
Annual Incentive
----------------
Recognizing that no salary adjustments were made in Fiscal 2003 and
believing that we had achieved a turnaround by the end of Fiscal 2003 so that we
were able to generate net income of $2.6 million as compared to a net loss of
($11.0) million in Fiscal 2002, the committee considered it appropriate to
reward those officers and employees who were key to this achievement. We
established a bonus pool of $196,500 which was distributed among 179 employees.
The bonuses for the Named Executive Officers are set forth in the Summary
Compensation Table.
Equity Based Incentives
-----------------------
The committee strongly believes that equity ownership by executive officers
provides incentives to build stockholder value and align the interests of
executive officers with the stockholders. Executive officers and other key
employees receive grants of stock options pursuant to our 2001 Stock Option and
Incentive Plan. Stock option grants are discretionary and reflect the current
performance and continuing contribution of the individual to our success. The
committee is responsible for determining, subject to the terms of the Plan, the
individuals to whom grants should be made, the time of grants and the number of
shares subject to each option. Stock options are granted with an exercise price
equal to the fair market value of our shares on the day of grant. Any value
received by the executive from an option grant depends completely upon increases
in the price of our shares. Consequently, the full value of an executive's
compensation package cannot be realized unless an appreciation in the price of
the shares occurs over a period of years.
There is no established grant cycle for executive officers; rather, grants
are made on an intermittent basis reflecting a discretionary assessment of
future contributions to our longer term growth and the need to provide a
competitive retention incentive. For the fiscal year ending September 30, 2003,
stock grants were made to the Named Executive Officers listed in the Summary
Compensation Table and to most other employees.
Page 14 of 24
Chief Executive Officer Compensation
------------------------------------
Effective upon Mr. Gilbert's appointment as Acting Chief Executive Officer
on June 6, 2002, the board established his salary at the rate of $2,500 per
week. In accordance with the salary reductions effective for all employees as of
July 12, 2002, Mr. Gilbert's salary was likewise reduced to $2278.89 per week
(or $118,501 on an annual basis). There was no change in Mr. Gilbert's base
salary in Fiscal 2003. Based upon the report from our outside compensation
consultant, Mr. Gilbert's salary is 43.4% less than the market median.
In Fiscal 2003, Mr. Gilbert received two bonuses aggregating $57,500. In
January 2003, the board awarded Mr. Gilbert a special bonus in the amount of
$30,000 and at the end of the fiscal year, at the same time bonuses were awarded
to other officers and employees, he received a bonus in the amount of $27,500.
When Mr. Gilbert's bonuses are added to his salary, his aggregate cash
compensation ($176,001) is approximately 56% below the market median for total
cash compensation.
We granted two stock options to Mr. Gilbert in Fiscal 2003. We issued these
options to Mr. Gilbert after a determination by our board that such options were
appropriate and advisable in order to retain his services and in view of the
fact that his salary is significantly below the mid-point of comparable data.
The vesting and exercisability of one of his stock options (275,000 shares) is
tied directly to the performance of our stock. For a description of his stock
options, see "EXECUTIVE OFFICER COMPENSATION - Options and Stock Appreciation
Rights."
Mr. Gilbert receives no extra remuneration as a director or as chairman of
the board.
Tax Considerations
------------------
Section 162(m) of the Internal Revenue Code generally limits the corporate
tax deduction for compensation paid to the Named Executive Officers to
$1,000,000 each. However, compensation is exempt from this limit if it qualifies
as "performance based compensation." The committee has carefully considered the
impact of this tax code provision and our normal practice is to take such action
as is necessary to preserve our tax deduction. Our 2001 Stock Option and
Incentive Plan complies with the provisions of Section 162(m). Accordingly, any
gains realized upon the exercise of stock options granted under the Plan will
qualify as "performance-based compensation" and will be fully deductible by us.
We believe that all of our compensation expense for Fiscal 2003 will be
deductible for federal income tax purposes.
Although we will continue to consider deductibility under Section 162(m)
with respect to future compensation arrangements with executive officers,
deductibility will not be the sole factor used in determining appropriate levels
or methods of compensation. Since our objectives may not always be consistent
with the requirements for full deductibility, we may enter into compensation
arrangements under which payments are not deductible under Section 162(m). It is
not expected that the compensation of any executive officer will exceed
$1,000,000 in Fiscal 2004.
Compensation Committee:
David J. Beaubien, Chairman
Dermott O'Flanagan
James C. Rowe
The information contained in the above Compensation Committee Report shall
not be deemed "soliciting material" or "filed" with the SEC, or subject to the
liabilities of Section 18 of the Securities Exchange Act of 1934, except to the
extent that we specifically incorporate it by reference into such filings.
Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------
The members of the compensation committee consist of Messrs. Beaubien
(Chairman), O'Flanagan and Rowe. Each member is a non-employee director and does
not have any direct or indirect material interest in or relationship with us
outside of his position as director.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own more than 10% of a registered class
of our equity securities, to file with the Securities and Exchange Commission
("SEC") reports of ownership and changes in ownership of common stock and our
other equity securities. Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish us with copies of all Section 16(a)
forms they file.
Page 15 of 24
SEC regulations require us to identify any one who filed a required report
late during the most recent fiscal year. Based solely on a review of the copies
of such reports furnished to us and written representations that no other
reports were required during the fiscal year ended September 30, 2003, we
believe that, during Fiscal 2003, all Section 16(a) filing requirements
applicable to our officers, directors and greater than 10% beneficial owners
were complied with, except that Mr. Gilbert filed a late Form 4 with respect to
his receipt of a stock option for 100,000 shares in January 2003 and Mr. Davis
filed a late Form 3 to reflect his initial beneficial ownership of shares when
he became an officer.
AUDIT COMMITTEE REPORT
Membership and Role of Audit Committee
--------------------------------------
The audit committee of our board is responsible for providing independent,
objective oversight and review of our accounting functions, internal controls
and financial reporting process. The audit committee is comprised of Messers.
Rowe, Beaubien and Kidd. Mr. Beaubien became a member of the committee in March
2003. Our board has adopted an amended and restated charter which is attached as
Appendix A. We believe that each of the members of the audit committee is
independent as defined by applicable laws and regulations.
Management has the primary responsibility for the financial statements and
the reporting process, including our system of internal controls, and for the
preparation of the consolidated financial statements in accordance with
generally accepted accounting principles. Our independent accountants are
responsible for performing an independent audit of those financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The audit committee's responsibility is to monitor and oversee these
processes on behalf of the board. The members of the audit committee are not
professional accountants or auditors and their functions are not intended to
duplicate or certify the activities of management and the independent auditors.
Review of our Audited Financial Statements
------------------------------------------
In fulfilling its oversight responsibilities, the audit committee reviewed
the audited financial statements in our Annual Report on Form 10-K with
management and discussed the quality and acceptability of our accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in our financial statements.
The audit committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality and acceptability of our accounting principles and
such other matters as are required to be discussed with the committee under
generally accepted auditing standards, including the Statement on Auditing
Standards No. 71 (Communications with Audit Committees). In addition, the audit
committee has discussed with the independent auditors the auditors' independence
from management and us, including the matters in the written disclosures
required by Independence Standards Board Standard No. 1 (Independent Discussions
with Audit Committees), which were submitted to us, and considered the
compatibility of non-audit services with the auditors' independence.
The audit committee discussed with our independent auditors the overall
scope and plans for their audit. The audit committee met with the independent
auditors, with and without management present, to discuss the results of their
examination, their evaluation of our internal controls, and the overall quality
of our financial reporting.
In reliance on the reviews and discussions referred to above, the audit
committee recommended to our board of directors (and our board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended September 30, 2003 for filing with the Securities and
Exchange Commission.
Audit Committee:
James C. Rowe, Chairman
David J. Beaubien
Robert P.B. Kidd
The information contained in the above Audit Committee Report shall not be
deemed "soliciting material" or "filed" with the SEC, or subject to the
liabilities of Section 18 of the Securities Exchange Act of 1934, except to the
extent that we specifically incorporate it by reference into such filings.
Page 16 of 24
INDEPENDENT PUBLIC ACCOUNTANTS
The board, based on the recommendation of the audit committee, appointed
Rotenberg & Co., LLP as our independent public accountants for Fiscal 2003.
Changes in Independent Auditors
-------------------------------
The independent public accounting firm of Arthur Andersen, LLP was
initially engaged as our auditors for the fiscal year ended September 30, 2002.
On May 20, 2002, the board terminated the engagement of Arthur Andersen LLP as
our independent auditors. Arthur Andersen's reports on our financial statements
for each of the two fiscal years ended September 30, 2001 and 2000
(collectively, the "Prior Fiscal Periods") were qualified in their reference to
the uncertainty of our ability to continue as a going concern. Except as set
forth in the preceding sentence, such reports did not contain an adverse opinion
or disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope, or accounting principles.
There were no disagreements between us and Arthur Andersen, LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures ("Disagreements") during either (i) the Prior
Fiscal Periods or (ii) the period from October 1, 2001 through May 20, 2002 (the
"Interim Period"), which Disagreements, if not resolved to the satisfaction of
Arthur Andersen, LLP would have caused Arthur Andersen, LLP to make reference to
the subject matter of the Disagreements in connection with its reports for the
Prior Fiscal Periods and there were no reportable events, as defined in Item
304(a)(1)(v) of Regulation S-K. Arthur Andersen, LLP furnished a letter to the
Securities and Exchange Commission stating that it agreed with the foregoing
statements.
Following a thorough evaluation process, the board appointed the firm of
Rotenberg & Co., LLP as our independent auditors for the fiscal year ending
September 30, 2002. We did not consult Rotenberg & Co., LLP with respect to
either the Prior Fiscal Periods or the Interim Period as regards (i) either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
our financial statements or (ii) any matter that was either the subject of any
Disagreements or Reportable Events or any reportable events, as defined in Item
304(a)(1)(v) of Regulation S-K.
Audit Fees
----------
Fees to Arthur Andersen LLP
---------------------------
The following fees were billed by Arthur Andersen LLP for professional
services rendered in Fiscal 2002.
Audit Fees $8,598
Financial Information Systems Design and Implementation Fees -0-
All Other Fees -0-
Total Arthur Andersen LLP Fees --------
$8,598
Audit Fees primarily represent amounts billed for the review of our
Quarterly Report on Form 10-Q for the first quarter of Fiscal 2002.
Fees to Rotenberg & Co., LLP
----------------------------
The following fees were billed by Rotenberg & Co., LLP for professional
services rendered in Fiscal 2002 and Fiscal 2003.
Fiscal 2002 Fiscal 2003
----------- -----------
Audit Fees $105,000 $ 70,000
Financial Information Systems
Design and Implementation Fees -0- -0-
All Other Fees 12,000 14,150
Total Rotenberg & Co., LLP Fees ----------- -----------
$117,000 $ 84,150
Audit Fees primarily represent amounts billed for the audit of our annual
consolidated financial statements for such fiscal years and the reviews of the
financial statements included in our Forms 10-Q for such fiscal years.
All Other Fees primarily include professional fees billed for tax services
for such fiscal years.
The audit committee has determined that the rendering of non-audit services
by Rotenberg and Co., LLP is compatible with maintaining the auditor's
independence.
A representative of Rotenberg & Co., LLP is expected to attend the annual
meeting, will have the opportunity to make a statement if he or she so desires,
and will be available to respond to appropriate questions from stockholders.
Page 17 of 24
OTHER MATTERS
The board of directors knows of no other matters that will be presented for
consideration at the annual meeting, but if other matters properly come before
the meeting, the persons named as proxies in the enclosed proxy will vote
according to their best judgment. Stockholders are requested to date and sign
the enclosed proxy and to mail it promptly in the enclosed postage-paid
envelope. If you attend the annual meeting, you may revoke your proxy at that
time and vote in person, if you wish. Otherwise your proxy will be voted for
you.
By Order of the Board of Directors
Martin S. Weingarten,
Secretary
DATED: January 2, 2004
Newark, New York
We will make available at no cost, upon your written request, a copy of our
annual report on Form 10-K for the Fiscal Year ended September 30, 2003 (without
exhibits) as filed with the Securities and Exchange Commission. Copies of
exhibits to our Form 10-K will be made available, upon your written request and
payment to us of the reasonable costs of reproduction and mailing. Written
requests should be made to: Brian H. Davis, Vice President and Chief Financial
Officer, IEC Electronics Corp., 105 Norton Street, Newark, NY 14513.
Page 18 of 24
APPENDIX A
IEC ELECTRONICS CORP.
AUDIT COMMITTEE CHARTER
(Amended and Restated August 19, 2003)
Purposes
--------
The purposes of the Audit Committee (the "Committee") of the Board of
Directors ("Board") of IEC Electronics Corp. (the "Company") are to (a) assist
the Board in fulfilling its oversight responsibilities with respect to (i) the
quality and integrity of the Company's financial statements and related
disclosures, (ii) the Company's compliance with legal and regulatory
requirements, including the Company's internal controls and procedures and the
Company's disclosure controls and procedures, and (iii) the independent
auditors' qualifications, independence and performance; and (b) prepare the
Committee's report for inclusion in the Company's proxy statement for the annual
meeting of stockholders in accordance with applicable rules and regulations.
Composition and Procedure
-------------------------
1. Membership and Appoinment. The Committee shall be composed of three or
more directors who shall be appointed by the Board in accordance with the
by-laws of the Company. The members of the Committee shall serve at the pleasure
of the Board for such term or terms as the Board may determine. The Board shall
designate one of the members as Chairperson of the Committee.
2. Independence and other Qualifications. Each Committee member must meet
all applicable independence, financial literacy, experience, and other
requirements of the primary trading market or securities exchange on which the
Company's securities are traded (the "Relevant Stock Market"), (b) Section
10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"), and (c)
Section 301 of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission ("SEC") and the
Relevant Stock Market, as such requirements are interpreted by the Board in its
business judgment. The Board shall endeavor to appoint at least one Committee
member who has the experience and expertise sufficient to qualify as an "audit
committee financial expert" within the meaning of Section 407 of the
Sarbanes-Oxley Act of 2002 and applicable rules and regulations, and the Company
will make the disclosure required by the rules and regulations of the SEC with
respect to such matter.
3. Committee Meetings. The Committee shall meet in person or telephonically
at least quarterly or more frequently as necessary to carry out its
responsibilities under this Charter. The Committee Chairperson will, in
consultation with the other members of the Committee, the Company's independent
auditors and the appropriate officers of the Company, call, establish the agenda
for, and supervise the conduct of, each Committee meeting. The Committee may
also take any action permitted under this Charter by unanimous written consent.
A majority of the number of Committee members selected by the Board will
constitute a quorum for conducting business at a Committee meeting. The act of
the majority of Committee members present at a Committee meeting at which a
quorum is in attendance will be the act of the Committee, unless a greater
number is required by law or the Company's certificate of incorporation or
by-laws. The Committee shall keep accurate minutes of its meetings and shall
present such minutes to the Board.
4. Authority; Retention of Advisors. The Committee is empowered by the
Board to take all appropriate action within the scope of its responsibilities as
set forth in this Charter. The Committee shall have full and unrestricted access
to all personnel, records, operations, properties and other informational
sources of the Company as required to properly discharge its responsibilities.
Further, the Committee is granted the authority to investigate any activity of
the Company, and all employees are directed to cooperate as requested by members
of the Committee. The Committee shall also be empowered to retain outside
counsel or persons having special competencies as necessary to assist the
Committee in fulfilling its responsibilities. The Committee shall have the sole
authority to determine and approve related fees and retention terms for any such
advisors, who will be compensated by the Company.
5. Meetings with Management and Advisors. The Committee may request any
officer or employee of the Company, or any representative of the Company's
outside legal counsel or independent auditors, to attend a meeting or to meet
with any members of, or advisors to, the Committee. The Committee shall meet
with the Company's management and the independent auditors periodically in
separate, private sessions to discuss any matter that the Committee, management,
the independent auditors or such other persons believe should be discussed
privately.
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6. Delegation. The Chairperson or any one or more members of the Committee,
as designated by the Committee, may act on behalf of the Committee. Such person
or persons, to the extent provided in the resolutions of the Committee and to
the extent not limited by applicable law or listing standard, shall have and may
exercise all the powers and authority of the Committee. Such person or persons
shall keep regular minutes of meetings and report the same to the Committee or
Board when requested.
Duties and Responsibilities
---------------------------
The following shall be the common recurring duties and responsibilities of
the Committee in carrying out its oversight responsibilities. These duties and
responsibilities are set forth below as a guide to the Committee with the
understanding that the Committee may alter or supplement them as appropriate
under the circumstances to the extent permitted by applicable law or listing
standards of the Relevant Stock Market.
7. Oversight of Relationship with Independent Auditors.
(a) Appointment and Oversight. The Committee shall be directly responsible
for the appointment, retention, termination, compensation and oversight
of the work of the independent auditors employed by the Company
(including resolution of any disagreements between management and the
independent auditors regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work or performing
other audit, review or other services for the Company. The independent
auditors shall report directly to the Committee.
(b) Pre-approval of Services. In accordance with the requirements of the
Relevant Stock Market and any other applicable legal and
regulatory requirements, the Committee shall pre-approve all
auditing services and permitted non-audit services to be provided by
the independent auditors and the related fees, and shall establish
policies and procedures for the pre-approval of such engagements. The
Committee shall consider whether the provision of any such non-audit
services is compatible with the independence of the independent
auditors. The Committee may delegate to subcommittees consisting of one
or more members the authority to grant preapprovals of permitted
non-audit services, provided that decisions of such subcommittee to
grant preapprovals shall be presented to the full Committee at its
next scheduled meeting. The Committee may consult with management
regarding these matters but may not delegate this authority to
management. The Committee shall review with the lead audit partner
whether any of the senior audit team members receive any
discretionary compensation from the audit firm with respect to
non-audit services performed by the independent auditors.
(c) Auditor Independence. In connection with the retention of the Company's
independent auditors and the evaluation by the Committee of the
qualifications, performance and independence of the independent
auditors, the Committee shall, at least annually, review and discuss
the information provided by management and the auditors relating to
the independence of the firm, including, among other things,
information related to the non-audit services provided and expected to
be provided by the firm to the Company. The Committee shall (i) ensure
that the independent auditors submit at least annually to the Committee
a formal written statement delineating all relationships between the
firm and the Company consistent with Independence Standards Board
Standard No. 1, (ii) actively engage in a dialogue with the auditors
regarding any disclosed relationship or services that may impact the
objectivity and independence of the auditors, and (iii) take
appropriate action in response to the auditors' report to satisfy
itself of the firm's independence. In connection with its evaluation
of the auditors' independence, the Committee shall also review and
evaluate the lead audit partner and shall ensure the regular rotation
of the lead audit partner and the reviewing audit partner of the
independent auditors in accordance with applicable law.
(d) Quality Control of Auditors. The Committee shall obtain and review with
the lead audit partner and, if the Committee deems it appropriate, a
more senior representative of the independent auditors, annually or
more frequently as the Committee considers appropriate, a report by
the independent auditors describing: the independent auditors' internal
quality-control procedures; any material issues raised by the most
recent internal quality-control review, or peer review, of the
independent auditors, or by any inquiry, review or investigation by
governmental or professional or other regulatory authorities, within
the preceding five years, respecting independent audits carried out by
the independent auditors, and any steps taken to deal with these
issues; and (to assess the independent auditors' independence) all
relationships between the independent auditors and the Company.
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(e) Hiring Employees of Auditors. The Committee shall establish policies
for the hiring by the Company of current or former partners,
principals, shareholders or professional employees of the independent
auditors, which policies shall meet the requirements of applicable law
and listing standards.
(f) Statement of Fees. The Committee shall ensure that the independent
auditors prepare and deliver annually a formal written statement of
the fees billed in each of the last two fiscal years in a manner
consistent with Item 9(e) of Regulation 14A (Proxy Rules) and the
applicable rules and regulations of the SEC.
8. Oversight of Financial Statements and Related Disclosures
(a) Audit Plan. The Committee shall meet with management and the
independent auditors prior to the commencement of each annual audit to
discuss the scope of the audit, the schedule, the procedures to be
followed and the staffing of the audit.
(b) Audited Financial Statements. The Committee shall review and discuss
with management and the independent auditors the annual audited
financial statements, including related footnotes, the Company's
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the certifications and
disclosures regarding internal controls and other matters required to
be reported to the Committee by Section 302 of the Sarbanes-Oxley Act
of 2002 and applicable rules and regulations prior to the filing with
the SEC of the related Form 10-K and the independent auditors'
report thereon.
(c) Communications with Auditors. Prior to filing a report of the
independent auditors with the SEC, the Committee shall also review and
discuss with the independent auditors and management the reports from
the independent auditors' covering:
(i) all critical accounting policies and practices to be used; (ii) all
material alternative treatments of financial information within
generally accepted accounting principles ("GAAP") that have been
discussed with management, including the ramifications of the
use of such alternative disclosures and treatments, and the
treatment preferred by the independent auditors; (iii) all other
material written communications between the independent auditors
and management, such as any engagement letter, independence letter,
"management" or "internal control" letter issued or proposed to be
issued, any management presentation letter, reports on observations
and recommendations on internal controls, schedule of unadjusted
audit differences and a listing of adjustments and reclassifications
not recorded, if any; (iv) all matters required to be discussed
with the Committee by the independent auditors pursuant to
Statement on Auditing Standards ("SAS") No. 61 relating to the
conduct of the audit, including any difficulties with management
encountered in performing the audit (such as restrictions on the
scope of the independent auditors' activities or on its access to
requested information) and any significant disagreements with
management over the application of accounting principles, the basis
for management's accounting estimates and the disclosures in the
financial statements; (v) all matters to be communicated to the
Committee under generally accepted auditing standards, including
the judgments of the independent auditors with respect to the
quality, not just the acceptability, of the Company's accounting
principles and underlying estimates in the financial statements;
(vi) the significant financial reporting issues and judgments made
in connection with the preparation of the Company's financial
statements, including any significant changes in the Company's
selection or application of accounting principles, any major issues
as to the adequacy of the Company's internal controls, and any
special steps adopted in light of material internal control
deficiencies or weaknesses; (vii) the effect of regulatory and
accounting initiatives on the financial statements of the Company;
and (viii) such other matters as the Committee deems appropriate.
The Committee shall discuss with the independent auditors any
disagreements between the independent auditors and management on
financial reporting and shall decide all such unresolved
disagreements.
(d) Recommendation to Include Financial Statements in Annual Report. The
Committee shall, based on the review and discussions in paragraphs (b)
and (c) above, and based on the disclosures received from the
independent auditors regarding its independence and discussions with
the auditors regarding such independence, determine whether to
recommend to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal
year subject to the audit.
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(e) Quarterly Financial Statements. The Committee, through its Chairperson
or the Committee as a whole, shall review and discuss with management
and the independent auditors the Company's quarterly financial results,
the disclosures under "Management's Discussion and Analysis of
Financial Condition and Results", all required management
certifications and any items required to be communicated by the
independent auditors under generally accepted auditing standards prior
to the filing with the SEC of the related Form 10-Q.
(f) Earnings Press Releases. The Committee, through its Chairperson or the
Committee as a whole, shall review and discuss with management all
press releases related to the Company's earnings, including the use of
"pro forma" or adjusted non-GAAP information, as well as financial
information and earnings guidance provided to financial analysts and
others.
9. Oversight of Controls and Procedures
(a) Internal Controls and Procedures. The Committee shall have
responsibility for overseeing that management has implemented an
effective system of internal controls and procedures that provide
reasonable assurance regarding the reliability of the Company's
financial reporting, the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles and the Company's compliance with applicable laws,
regulations and Company policies.
(i) The Committee shall review with management its evaluation of the
Company's internal control structure and procedures for financial
reporting and review periodically, but in no event less frequently
than quarterly, management's conclusions about the effectiveness
of such internal controls and procedures, including any significan
deficiencies in, or material non-compliance with, such controls and
procedures. (ii) The Committee shall review and may take appropriate
action with respect to any disclosures made to the Committee by the
Chief Executive Officer and the Chief Financial Officer during their
certification process for the Form 10-K and Form 10-Q with respect
to (x) any significant deficiencies in the design or operation of
internal controls or material weaknesses therein, (y) any fraud,
whether or not material, involving management or other employees
who have a significant role in the Company's internal controls,
and (z) whether or not there were significant changes in internal
controls or in other factors that could significantly affect
internal controls. (iii) The Committee shall discuss with the
independent auditors the adequacy and effectiveness of the Company's
internal controls and consider any recommendations for the
improvement of such controls. (iv) The Committee shall review
management's responses to the independent auditors' management
letter recommendations for improving internal controls.
(b) Disclosure Controls and Procedures. The Committee shall have
responsibility for overseeing that management has implemented an
effective system of disclosure controls and procedures that ensure that
material information regarding the Company is made known to the Chief
Executive Officer and the Chief Financial Officer by others.
(i) On a quarterly basis, the Committee shall discuss with management
the Company's disclosure controls and procedures. (ii) The Committee
shall review and may take appropriate action with respect to any
disclosures made to the Committee by the Chief Executive Officer and
the Chief Financial Officer during their certification process for
the Form 10-K and Form 10-Q regarding their conclusions about the
effectiveness of the Company's disclosure controls and procedures.
(iii) The Committee shall review with the independent auditors, and
any other outside professionals as the Committee considers
appropriate, the effectiveness of the Company's disclosure controls
and procedures and consider any recommendations for the improvements
of such controls. (iv) The Committee shall review management's
responses to the independent auditors' management letter
recommendations for improving disclosure controls.
10. Other Powers and Responsibilities
(a) Related Party Transactions. The Committee shall review related party
transactions on an ongoing basis and all such transactions must be
approved by the Committee.
(b) Risk Assessment and Management. The Committee shall periodically review
and discuss with management and the independent auditors the Company's
major financial risk exposures and the steps that management has taken
to monitor and control such exposures, including the Company's risk
assessment and risk management policies and guidelines.
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Page 22 of 24
(c) Correspondence with Regulators. The Committee shall discuss with
management and the independent auditors any correspondence from or
with regulators or governmental agencies, any employee complaints or
any published reports that raise material issues regarding the
Company's financial statements, financial reporting process,
accounting policies or internal audit function.
(d) Legal Matters. The Committee shall review with the Company's outside
counsel legal matters that may have a material impact on the Company's
financial statements or the Company's compliance policies or that may
otherwise warrant the Committee's attention.
(e) Complaints. The Committee shall establish procedures for the receipt,
retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters.
The Committee shall also establish procedures for the confidential and
anonymous submission by employees regarding questionable accounting or
auditing matters.
(f) Reports on Financial Statements. The Committee shall provide the
Company with the report of the Committee with respect to the audited
financial statements required by Item 306 of Reg. S-K, for inclusion
in each of the Company's annual proxy statements.
(g) Board Reports. The Committee, through its Chairperson, shall report
regularly to, and review with, the Board any issues that arise with
respect to the quality or integrity of the Company's financial
statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the Company's
independent auditor, the performance of the Company's internal audit
function or any other matter the Committee determines is necessary or
advisable to report to the Board.
(h) Code of Ethics. The Committee shall administer and oversee the
Company's code of ethics and similar compliance programs to the extent
delegated by the Board.
(i) Other Activities. The Committee shall perform such other activities
consistent with this Charter, the Company's by-laws, governing law,
the rules and regulations of the Relevant Stock Market and such
other requirements applicable to the Committee as the Committee or
the Board deems necessary or appropriate.
(j) Future Amendments to Charter. The Committee shall review and reassess
this Charter annually and submit any recommended changes to the Board
for its consideration. This Charter and any provision contained herein
may be amended or repealed by the Board.
Limitation of Audit Committee's Role
------------------------------------
While the Committee has the authority, responsibilities and powers set
forth in this Charter, its function is one of oversight and review. It is not
the duty of the Committee to plan or conduct audits or to determine that the
financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable legal,
accounting and other requirements. These are the responsibilities of management
and the independent auditors. In adopting this Charter, the Board acknowledges
that the Committee members are not employees of the Company and are not
providing any expert or special assurance as to the Company's financial
statements or any professional certification as to the independent auditors'
work or auditing standards. Each member of the Committee shall be entitled to
rely on the integrity of those persons and organizations within and outside the
Company that provide information to the Committee and the accuracy and
completeness of the financial and other information provided to the Committee by
such person or persons absent actual knowledge to the contrary.
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PROXY CARD PROXY CARD PROXY CARD PROXY CARD PROXY CARD PROXY CARD PROXY CARD PROXY CARD
IEC ELECTRONICS CORP.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, JANUARY 21, 2004
The undersigned, revoking all prior proxies, hereby appoints W. Barry
Gilbert and Justin L. Vigdor, and either one of them with full power of
substitution, as proxy or proxies to vote for the undersigned, in the name of
the undersigned, all of the Common Stock of IEC Electronics Corp. (the
"Company") of the undersigned, as if the undersigned were personally present and
voting at the Company's Annual Meeting of Stockholders to be held at the office
of the Company, 105 Norton Street, Newark, New York on January 21, 2004 at 9:00
a.m. (the "Annual Meeting"), and at any and all adjournments thereof, upon the
following matters:
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED Please Mark
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF THE NOMINEES FOR Here for Address _
DIRECTORS SPECIFIED IN THE PROXY STATEMENT. Change or [ ]
Comments -
1. Election of seven (7) directors 2. Transaction of such other business as may
properly come before the meeting or any
adjournment thereof.
01 David J. Beaubien FOR WITHHOLD
02 W. Barry Gilbert all nominees listed AUTHORITY
03 Robert P. B. Kidd to the left (except as to vote for all nominees
04 Eben S. Moulton marked to the contrary) listed to the left
05 Dermott O'Flanagan __ __
06 James C. Rowe [__] [__]
07 Justin L. Vigdor
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, PLEASE STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Dated: , 2004
-----------------
-----------------------
Signature
-----------------------
Signature
IMPORTANT: Sign the Proxy exactly as your name or names
appear on your Common Stock certificate; in the case of
Common Stock held in joint tenancy, each joint tenant must
sign. Fiduciaries should indicate their full titles and the
capacity in which they sign. Please complete, sign, date and
return this Proxy promptly in the enclosed envelope.
Page 24 of 24