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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended September 30, 1998 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission file number 0-6508
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IEC ELECTRONICS CORP.
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Exact name of registrant as specified in its charter
Delaware 13-3458955
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State or other jurisdiction of IRS Employer ID No.
incorporation or organization
105 Norton Street, Newark, New York 14513
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: 315-331-7742
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Securities registered pursuant to Section 12(b) of the Act:
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None
Securities registered pursuant to Section 12(g) of the Act:
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Common Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 the past 90 days.
Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, 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-K or any amendment to this
Form 10-K [ ].
Page 1 of 112
As of December 22, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $4,542,789.
(Assumes officers, directors, and any stockholder holding 5% of the outstanding
shares are affiliates.)
As of December 21, 1998, there were outstanding 7,583,076 shares of Common
Stock.
Documents incorporated by reference:
Portions of IEC Electronics Corp.'s Proxy Statement for the Annual Meeting
of Stockholders to be held on February 24, 1999 are incorporated into Part
III of this Form 10-K
Page 2 of 112
TABLE OF CONTENTS
PART I
PAGE
Item 1: Business..................................................... 4
Item 2: Properties................................................... 11
Item 3: Legal Proceedings............................................ 11
Item 4: Submission of Matters to a Vote of Security Holders.......... 12
Executive Officers of Registrant............................. 12
PART II
Item 5: Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 13
Item 6: Selected Consolidated Financial Data......................... 14
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 15
Item 8: Financial Statements and Supplementary Data.................. 20
Item 9: Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...................... 20
PART III
Item 10: Directors and Executive Officers of the Registrant......... 21
Item 11: Executive Compensation..................................... 21
Item 12: Security Ownership of Certain Beneficial Owners and
Management................................................ 21
Item 13: Certain Relationships and Related Transactions............. 21
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.............................................. 22
Page 3 of 112
PART I
ITEM 1. BUSINESS
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IEC Electronics Corp. is an independent contract manufacturer of complex
printed circuit board assemblies and electronic products and systems. The
Company believes that it is a leader in the contract electronics manufacturing
industry based upon its state-of-the-art manufacturing facilities, volume of
production and quality of its services. Utilizing computer controlled
manufacturing and test machinery and equipment, the Company provides
manufacturing services employing surface mount technology ("SMT") and
pin-through-hole ("PTH") interconnection technologies. The Company believes
that, based upon its volume of production, it is one of the largest independent
SMT contract manufacturers in the United States. As a full-service contract
manufacturer, the Company offers it customers a wide range of manufacturing and
management services, on either a turnkey or consignment basis, including design,
material procurement and control, manufacturing and test engineering support,
statistical quality assurance, complete resource management and distribution.
The Company's strategy is to cultivate strong manufacturing relationships with
established and emerging original equipment manufacturers ("OEMs").
IEC Electronics Corp., a Delaware corporation, is the successor by merger
in 1990 to IEC Electronics Corp., a New York corporation which was organized in
1966. In June 1992, the Company acquired all of the then outstanding common
stock of Calidad Electronics, Inc. ("Calidad"), located in Edinburg, Texas.
In September 1997, Calidad's name was changed to IEC - Edinburg Texas, Inc. In
November 1994, the Company acquired all of the then outstanding common stock of
Accutek, Inc. ("Accutek"), located in Arab, Alabama. In October 1997, Accutek's
name was changed to IEC Arab Alabama Inc. In August 1998, the Company through
its newly created Irish subsidary, IEC Electronics - Ireland Limited, acquired
certain assets of Ohshima Manufacturing Limited located in Longford,
Ireland. As used herein, "Company" or "IEC" includes IEC Electronics Corp. and
its subsidiaries, unless the context otherwise requires.
The Company annouced in August 1998 that it would close its Arab, Alabama
facility and record a restructuring charge of 4.7 million (Pre-tax) in the
fourth quarter of fiscal 1998. The majority of the facility's larger customers
have since been transferred to the Company's other facilities, the equipment
has been moved to the Company's other locations and the buildings in Alabama
are currrently marketed for sale.
The Company has completed negotiations and signed operational contracts
to lease a newly constructed 50,000 square foot facility in Reynosa, Mexico.
This Maquiladora facility will manufacture printed circuit boards,
wire harnesses and box build assemblies. The facility's shipments are expected
to begin in February 1999.
The Company completed a public offering of its Common Stock in February
1993, the net proceeds from which, amounting to $29,744,573, were utilized to
reduce debt and increase working capital.
The Company has achieved world-class ISO 9002 certification and IEC
Electronics is ISO 9001 certified. This certification is an international
quality assurance standard that most OEMs consider crucial in qualifying their
contract manufacturers.
The Company has received approval from the British Approvals Board for
Telecommunication allowing it to provide manufacturing and test services to
manufacturers producing telecommunication equipment destined for shipment to the
European Common Market.
During 1998 the Company opened a state-of-the-art 8,000 square foot
Technology center at its Newark, New York manufacturing facility uniting the
Protoype Lab, Design Engineering Group and Advanced Materials Technology
Labaratory.
The Company's executive offices are located at 105 Norton Street, Newark,
New York 14513. The telephone number is (315) 331-7742 and its internet address
is www.iec-electronics.com.
Page 4 of 112
Contract Electronics Manufacturing: The Industry
The contract electronics manufacturing industry specializes in providing
the program management, technical and administrative support and manufacturing
expertise required to take a product from the early design and prototype stages
through volume production and distribution. It provides quality product,
delivered on time and at the lowest cost, to the OEM. This full range of
services gives the OEM an opportunity to avoid large capital investments in
plant, equipment and staff and allows the OEM to concentrate instead on the
areas of its greatest strength: innovation, design and marketing. Utilizing
contract electronics manufacturing services such as those provided by IEC gives
the customer an opportunity to improve return on investment with greater
flexibility in responding to market demands and exploiting new market
opportunities.
In recent years, primarily as a response to rapid technological change and
increased competition in the electronics industry, OEMs have recognized that by
utilizing domestic contract manufacturers they can improve their competitive
position, realize an improved return on investment and concentrate on areas of
their greatest expertise such as research, product design and development and
marketing. In addition, contract manufacturing allows OEMs to bring new products
to market rapidly and adjust more quickly to fluctuations in product demand;
avoid additional investment in plant, equipment and personnel; reduce inventory
and other overhead costs; and establish known unit costs over the life of a
contract. Many OEMs now consider contract manufacturers an integral part of
their business and manufacturing strategy. Accordingly, the contract electronics
manufacturing industry has experienced significant growth as OEMs have
established long-term working arrangements with contract manufacturers such as
IEC.
Two important trends have developed recently in the contract electronics
manufacturing industry. First, OEMs increasingly require contract manufacturers
to provide complete turnkey manufacturing and material handling services, rather
than working on a consignment basis in which the OEM supplies all materials and
the contract manufacturer supplies labor. Turnkey contracts involve design,
manufacturing and engineering support, the procurement of all materials, and
sophisticated in-circuit and functional testing and distribution. The
manufacturing partnership between OEMs and contract manufacturers involves an
increased use of "just-in-time" inventory management techniques which minimize
the OEM's investment in component inventories, personnel and related facilities,
thereby reducing costs.
A second trend in the industry has been the increasing shift from PTH to
SMT interconnection technologies. PTH technology involves the attachment of
electronic components to printed circuit boards with leads or pins which are
inserted into pre-drilled holes in the boards. The pins are then soldered to the
electronic circuits. The drive for increasingly greater functional density has
resulted in the emergence of SMT, which eliminates the need for holes and allows
components to be placed on both sides of a printed circuit, contributing to size
reductions of up to 50%. SMT requires expensive, highly automated assembly
equipment and significantly more expertise than PTH technology. To achieve high
yields, contract manufacturers must have extensive knowledge and experience in
solder paste, solder reflow, thermal management, metal fatigue, adhesives,
solvents, flux chemistry, surface analysis, intermetallic bonding and testing.
The shift to SMT from PTH technology has increased the use of contract
manufacturers by OEMs seeking to avoid the significant capital investment
required for development and maintenance of SMT expertise.
The Company continually evaluates emerging technology and makes these
processes available to its customers when commercial and design factors so
indicate. The next generation of interconnection technologies will include chip
scale packaging and ball grid array (BGA) assembly techniques. These techniques
achieve greater density on printed circuit assemblies. Last year the Company
mounted nearly five million BGAs. The Company's Technology Center has been
employing real time x-ray imaging to enhance process development.
Page 5 of 112
The Company's Strategy
The Company's strategy is to cultivate strong manufacturing partnerships
with established and emerging OEMs in the electronics industry. These long-term
business partnerships involve the joint development of manufacturing and support
strategies with OEM customers and promote customer satisfaction. In implementing
this strategy, the Company offers its customers a full range of manufacturing
solutions through flexibility in production, high quality and fast-turnaround
manufacturing services and computer-aided testing.
As part of its strategy, the Company recognizes the need to offer advanced
manufacturing technologies to its customers and, as a consequence, has been
actively involved with SMT since the early 1980's. During fiscal 1998, the
Company invested approximately $8.1 million in capital equipment.
The vast majority of this amount was invested to significantly upgrade equipment
and process automation projects. The Company believes that it operates one of
the largest SMT facilities in the United States. IEC believes that the high cost
of SMT assembly equipment and the increased technical capability necessary to
achieve an efficient, high yield SMT operation are significant competitive
factors in the market for electronic assembly. The Company also believes that
OEMs will increasingly contract for manufacturing on a turnkey basis as they
seek to reduce their capital and inventory costs, as manufacturing technologies
become more complex and as product life cycles shorten. Generally, turnkey
contracts result in stable, close and long-term working relationships with
customers. Since major OEMs require that contract manufacturers demonstrate the
ability to offer SMT assembly services and to manage and support large turnkey
contracts, there are significant barriers to entry in the contract manufacturing
industry.
Assembly Process
The Company generally enters into formal agreements with its significant
customers. These agreements generally provide for fixed prices for one year,
absent any customer changes which impact cost of labor or material, and rolling
forecasts of customer requirements. After establishing an OEM relationship,
the Company offers its consultation services with respect to the
manufacturability and testability of the product design. IEC often recommends
design changes to reduce manufacturing costs and to improve the quality of the
finished assemblies, and in some instances will produce original designs to the
customer's specifications.
Upon receipt, a customer's order is entered into the Company's computer
system by customer service personnel and is reviewed by all departments. The
Production Control Department generates a detailed manufacturing schedule. Bills
of material and approved vendor lists are reviewed by the Engineering
Department, which creates a detailed process to direct the flow of product
through the plant. The Material Control Department utilizes a material
requirement planning (MRP) program to generate the requisitions used by the
Purchasing Department to procure all material and components from approved
vendors in the quantities and at the time required by the production schedule.
All incoming material is inspected to ensure compliance with customer
specifications and delivered to the production floor on a "just-in-time" basis.
Material and product movement are carefully and continuously computer-monitored
throughout the assembly process to meet customer requirements. The placement and
insertion of components on circuit board assemblies are accomplished by
high-speed, vision and computer-controlled PTH or SMT machines. Any manual
operations are performed prior to passage of the assemblies through various
soldering processes. Statistical process control ("SPC") is used to provide
consistent results in all steps of the manufacturing process.
The manufactured assembly then moves into the test phase. IEC's
computer-aided testing ensures delivery of high quality products on a consistent
basis. Computer-driven in-circuit tests verify that all components have been
properly placed or inserted and that the electrical circuits are complete.
Functional tests determine if the board or system assembly is performing to
customer specifications.
Page 6 of 112
IEC assigns a program manager to each customer. The program manager
maintains regular contact with the customer to assure timely and complete flow
of information between the customer and the Company. Many products manufactured
by the Company are in the early stages of their product cycle and therefore
undergo numerous engineering changes. In addition, production quantities and
schedules of certain products must be varied to respond to changes in customers'
marketing opportunities. The Company assesses the impact of such changes on the
production process and takes the appropriate action, such as restructuring bills
of material, expediting procurement of new components and adjusting its
manufacturing and testing plans. IEC believes that its ability to provide
flexible and rapid response to customer needs is critical to its success.
Products and Services
The Company manufactures a wide range of assemblies which are incorporated
into hundreds of different products. The Company provides contract manufacturing
services primarily for micro, mini and mainframe computers; computer peripheral
equipment; industrial photography and imaging equipment; office equipment;
telecommunications equipment; measuring devices; and medical instrumentation.
During the fiscal year ended September 30, 1998 the Company provided contract
manufacturing services to approximately 100 different customers, including
Compaq Computer Corporation ("Compaq"), Matrox Graphics, Inc. ("Matrox"),
Symbol Techologies, Inc.("Symbol"), Stratus Corporation ("Stratus"),
and Seagate Techologies,Inc ("Seagate"). The Company provides its services to
multiple divisions and product lines of many of its customers and typically
manufactures for a number of each customer's successive product generations.
Materials Management
In fiscal 1998, 1997, and 1996, turnkey contracts, under which the Company
provided materials in addition to a value-added labor component, represented
98 percent, 95 percent and 85 percent of sales, respectively. Materials and the
associated material handling expense often represent a very substantial portion
of the total manufacturing cost of turnkey products. The Company generally
procures material only to meet specific contract requirements. In addition, the
Company's agreements with its significant customers generally provide for
cancellation charges equal to the costs which are incurred by the Company as a
result of a customer's cancellation of contracted quantities. The Company's
internal systems provide effective controls for all materials, whether purchased
by the Company or provided by the customer, through all stages of the
manufacturing process, from receiving to final shipment.
Suppliers
Materials and components used in contract manufacturing, whether supplied by
the OEM or by the Company, are available generally from a number of suppliers at
negotiated prices which are firm for the life of the purchase order. However, at
various times in the electronics industry there have been industry-wide
shortages of components which have temporarily delayed the Company's manufacture
and shipment of products. The Company's business is not dependent upon any one
supplier.
In 1997, Master distribution programs were put in place with Arrow/Schweber
Electronics and Pioneer-Standard Electronics. These alliances have the
benefit of reducing lead time on program parts, reducing the quotation process
timetable, providing competitive pricing, providing some protection during
allocation, providing better payment terms, reducing overhead cost and providing
access to global resources.
Marketing and Sales
The Company markets its services through a direct sales force of 5
individuals, 20 program managers and 10 independent manufacturers'
representatives, who currently employ approximately 40 sales people. In addition
to the sales and marketing staff, the Company's executives are closely involved
with marketing efforts. The Company conducts extensive market research to
identify industries and to target companies where the opportunity exists to
provide contract manufacturing services across a number of product lines and
product generations.
Page 7 of 112
The Company's sales effort is supported by advertising in numerous trade
media, sales literature, Internet website, video presentations, participation in
trade shows and direct mail promotions. Inquiries resulting from these
advertising and public relations activities are assigned to the manufacturers'
representative covering the customer's location. IEC's direct sales force
coordinates all such activity and monitors the performance of the manufacturers'
representatives. In addition, referrals by existing customers are an important
source of new opportunities. The Company's objective is to further diversify the
customers and industries which it serves.
Backlog
The Company's backlog as of December 16, 1998 and December 22, 1997 was
approximately $107 million and $129 million, respectively. Backlog consists of
contracts or purchase orders with delivery dates scheduled within the next 18
months. Substantially all of the current backlog is expected to be shipped
within the Company's current fiscal year. Variations in the magnitude and
duration of contracts received by the Company and customer delivery requirements
may result in substantial fluctuations in backlog from period to period. Because
customers may cancel or reschedule deliveries, backlog is not a meaningful
indicator of future financial results.
Governmental Regulation
The Company's operations are subject to certain federal, state and local
regulatory requirements relating to environmental, waste management, health and
safety matters. Management believes that the Company's business is operated in
compliance with applicable regulations promulgated by the Occupational Safety
and Health Administration and the Environmental Protection Agency and
corresponding state agencies which, respectively, pertain to health and safety
in the workplace and the use, discharge, and storage of chemicals employed in
the manufacturing process. Current costs of compliance are not material to the
Company. However, new or modified requirements, not presently anticipated, could
be adopted creating additional expense for the Company.
Co-workers
The Company's co-workers numbered approximately 1,536 at December 17,
1998, including 96 employees engaged in engineering, 1,266 in manufacturing and
174 in administrative and marketing functions. None of the Company's U.S.
employees are covered by a collective bargaining agreement and the Company has
experienced no work stoppages. Management believes that its employee relations
are good. The Company has access to a large work force by virtue of its
northeast location midway between Rochester and Syracuse, two upstate New York
industrial cities, by virtue of its Texas location in the Rio Grande valley,
and by virtue of its Irish location, centrally located amoung the techology
centers of Dublin, Galway and Limerick.
Patents and Trademarks
The Company holds patents unrelated to contract manufacturing and also
employs various registered trademarks. The Company does not believe that either
patent or trademark protection is material to the operation of its business.
Page 8 of 112
Safe Harbor for Forward-looking Statements under Securities Litigation
Reform act of 1995: Certain Cautionary Statements
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filing made by the Company with the Securities and Exchange commission.
The words or phrases "will likely result," "are expected to," "will continue,"
"is anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the Reform Act). The Company wishes to
ensure that such statements are accompanied by meaningful cautionary statements,
so as to maximize to the fullest extent possible the protections of the safe
harbor established in the Reform Act. Accordingly, such statements are qualified
in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from such forward looking statements.
The risks included here are not exhaustive. Futhermore, reference is also
made to other sections of this report which include additional factors which
could adversely impact the Company's business and financial preformance.
Moreover, the Company operates in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible
for management to predict all of such risk factors, nor can it assess the
impact of all such risk factors on the Company's business or the extent to
which any factor, or a combination of factors may cause actual results to
differ materially from those contained in any forward-looking statements.
Accordingly, forward-looking statements should not be relied upon as a
prediction of actual results.
Stockholders should be aware that while the Company does, from time to
time, communicate with securities analysts, it is against the Company's policy
to disclose to such analysts any material non-public information or other
confidential commercial information. Accordingly, stockholders should not assume
that the Company agrees with any statement or report issued by any analyst
regardless of the content of such statement or report. Accordingly, to the
extent that reports issued by a securities analyst contain any projections,
forecasts, or opinions, such reports are not the responsibility of the
Company.
Customer Concentration; Dependence On the Electronics Industry
A small number of customers are currently responsible for a significant portion
of the Company's net sales. During fiscal 1998, the Company's ten largest
customers accounted for 72.0% of consolidated net sales, and in the fiscal years
1997 and 1996, the Company's ten largest customers accounted for 73.2% and
74.8%, respectively, of consolidated net sales. Compaq Computer Corporation
("Compaq"), historically the Company's largest customer accounted for 37.9%,
26.24% and 21.8%, respectively, of consolidated net sales for fiscal years 1998,
1997, and 1996. In fiscal years 1998, 1997 and 1996, respectively, Matrox
Graphics Inc. ("Matrox") accounted for 14.6%, 20.1% and 13% of the Company's
consolidated net sales. The Company is dependent upon continued revenues
from its top customers. The percentage of the Company's sales to its major
customers may fluctuate from period to period. Significant reductions in sales
to any of these customers could have a material adverse effect on the Company's
results of operations. The Company has no firm long-term volume purchase
commitments from its customers, and over the past few years has experienced
reduced lead-times in customer orders. In addition, customer contracts can be
canceled and volume levels can be changed or delayed. The timely replacement of
canceled, delayed or reduced contracts with new business cannot be assured.
These risks are increased because a majority of the Company's sales are to
customers in the electronics industry, which is subject to rapid technological
change and product obsolescence. The factors affecting the electronics industry,
in general, or any of the Company's major customers in particular, could have a
material adverse effect on the Company's results of operations.
Page 9 of 112
Management of Growth; Geographic Expansion
The Company has experienced substantial revenue growth over the last six fiscal
years, with net sales increasing from $43.2 million in fiscal 1992 to $248.2
million in fiscal 1998, although 1998 sales decreased slightly from fiscal 1997
sales. In fiscal 1998, the Company acquired a facility in Ireland.
There can be no assurance that the Company's rate of revenue growth
will continue. There can also be no assurance that the Company will
successfully manage the integration of the Irish acquisition, or
any other business it may acquire in the future. As the Company manages its
existing operations and expands geographically, it may experience certain
inefficiencies as it integrates new operations and manages geographically
dispersed operations. In addition, the Company's results of operations could be
adversely affected if any new facilities do not achieve growth sufficient to
offset increased expenditures associated with geographic expansion. Should the
Company increase its expenditures in anticipation of a future level of sales
which does not materialize, its profitability would be adversely affected. On
occasion, customers may require rapid increases in production which can place an
excessive burden on the Company's resources.
Potential Fluctuations in Operating Results
The Company's margins and operating results are affected by a number of factors,
including product mix, additional costs associated with new projects, price
erosion within the electronics industry, capacity utilization, price
competition, the degree of automation that can be used in the assembly process,
the efficiencies that can be achieved by the Company in managing inventories and
fixed assets, the timing of orders from major customers, fluctuations in demand
for customer products, the timing of expenditures in anticipation of increased
sales, customer product delivery requirements, and increased costs and shortages
of components or labor. The Company's turnkey manufacturing, which typically
results in higher net sales and gross profits but lower gross profit margins
than consignment assembly and testing services, represents a substantial
percentage of net sales. All of these factors can cause fluctuations in the
Company's operating results over time. Because of these factors, there can be no
assurance that the Company's margins or results of operations will not fluctuate
or decrease in the future.
Competition
The electronics assembly and manufacturing industry is comprised of a large
number of domestic and off-shore companies, several of which have achieved
substantial market share. The Company also faces competition from current and
prospective customers which evaluate its capacities against the merits of
manufacturing products internally. The Company competes with different companies
depending on the type of service or geographic area. Certain of the Company's
competitors have broader geographic breadth. They also may have greater
manufacturing, financial, research and development, and marketing resources than
the Company. The Company believes that the primary basis of competition in its
targeted markets is manufacturing technology, quality, responsiveness, the
provision of value-added services, and price. To be competitive, the Company
must provide technologically advanced manufacturing services, high product
quality levels, flexible delivery schedules, and reliable delivery of finished
products on a timely and price-competitive basis. The Company currently may be
at a competitive disadvantage as to price when compared to manufacturers with
lower cost structures, particularly with respect to manufacturers with
facilities established where labor costs are lower.
Availability of Components
A substantial portion of the Company's net sales are derived from turnkey
manufacturing in which the Company provides both materials procurement and
assembly services. In turnkey manufacturing, the Company potentially bears the
risk of component price increases, which could adversely affect the Company's
Page 10 of 112
gross profit margins. At various times there have been shortages of components
in the electronics industry. If significant shortages of components should
occur, the Company may be forced to delay manufacturing and shipments, which
could have a material adverse effect on the Company's results of operations.
Availability of customer-consigned parts and unforeseen shortages of components
on the world market are beyond the Company's control and could adversely affect
revenue levels and operating efficiencies.
Year 2000
While the Company has developed and is implementing a plan to address Year 2000
issues, as discussed in "Management's Discussion of Operations", there may be
risk connected with the ability of the Company to identify and address
sucessfully the Year 2000 issues in a timely manner and at costs that are
reasonably in line with projections and with the ability of the Company's
vendors to indentify and address sucessfully their own Year 2000 issues in a
timely manner.
Environment Compliance
The Company is subject to a variety of environmental regulations relating to the
use, storage, discharge and disposal of hazardous chemicals used during its
manufacturing process. Any failure by the Company to comply with present or
future regulations could subject it to future liabilities or the suspension of
production which could have a material adverse effect on the Company's business.
In addition, such regulations could restrict the Company's ability to expand its
facilities or could require the Company to acquire costly equipment or to incur
other expenses to comply with environmental regulations.
Dependence on Key Personnel and Skilled Co-workers
The Company's continued success depends to a large extent upon the efforts and
abilities of key managerial and technical co-workers. The loss of services of
certain key personnel could have a material adverse effect on the Company. The
Company's business also depends upon its ability to continue to attract and
retain senior managers and skilled co-workers. Failure to do so could adversely
affect the Company's operations.
ITEM 2. PROPERTIES
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The Company's administrative and principal manufacturing facility, acquired
with the aid of industrial revenue bond financing (see Note 5 of Notes to
Consolidated Financial Statements), is located in Newark, New York and contains
an aggregate of approximately 250,000 square feet. The IEC Edinburg, Texas
manufacturing facility consists of approximately 87,000 square feet.
The IEC Electronics - Ireland facility consists of approximately 37,000 square
feet, which is leased under an agreement expiring in 2004.
ITEM 3. LEGAL PROCEEDINGS
- - - --------------------------
There are no material legal proceedings pending to which the Company or any of
its subsidiaries is a party or to which any of the Company's or subsidiaries'
property is subject. To the Company's knowledge, there are no material legal
proceedings to which any director, officer or affiliate of the Company, or any
beneficial owner of more than 5 percent (5%) of Common Stock, or any associate
of any of the foregoing, is a party adverse to the Company or any of its
subsidiaries.
Page 11 of 112
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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During the fourth quarter of fiscal 1998, no matters were submitted to a
vote of security holders.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's executive officers as of September 30, 1998, were as follows:
Name Age Position
Russell E. Stingel 67 Chairman of the Board, and Chief
Executive Officer
David W. Fradin 52 President and Chief Operating Officer
Diana R. Kurty 45 Vice President of Finance, Treasurer
and Chief Financial Officer
Bill R. Anderson 53 Executive Vice President and General
Manager IEC Newark NY Operations
Lawrence W. Swol 43 Vice President and General Manager
IEC Edinburg Texas Operations
Joseph B. Schadeberg 58 Vice President, Human Resources
Bruce C. Barton 52 Vice President, Techology
Stephen H. Hotchkiss 47 Vice President, Sales and Marketing
Patricia A. Bird 38 Corporate Controller
Russell E. Stingel has served as Chairman of the Board of Directors since
February 1997, as Chief Executive Officer since July 1996 and as a director
since October 1996. Prior thereto, he had been the President of the Company
(February 1996 -June 1997)and Executive Vice President, Secretary and General
Manager of the Company (1977 - February 1996). He was previously employed as
President of the Ward Hydraulics Division of Figgee International Holdings, Inc.
and in various management positions by General Dynamics Corporation.
David W. Fradin has served as President and Chief Operating Officer since
June 1997. He was previously employed as President and Chief Operating Officer
of Harvard Custom Manufacturing LLC (July 1996 - June 1997)and by EMD Associates
Inc. as President and Chief Executive Officer (1993 - July 1996).
Diana R. Kurty has served as Vice President, Chief Financial Officer and
Treasurer of the Company since October 1997. She was previously employed
as Vice President and Corporate Controller as well as other management roles at
Goulds Pumps, Inc. from 1990 - 1997 and prior to that by Coopers & Lybrand
as a Senior Audit Manager and various other positions (1975-1990).
Bill R. Anderson served as Executive Vice President and as General
Manager of IEC Newark Operations from June 1997 until November 1998. Prior
thereto he had been Vice President of Materials since 1995. He was previously
employed as Director of Procurement and Reliability at C-Cor Electronics
(1991 - 1995) and Manager of Materials at F.L Smithe Machine Co. (1986 - 1991).
Mr. Anderson resigned from the Company in November 1998.
Lawrence W. Swol has served as Vice President nd General Manager- IEC
Edinburg Texas Operations since November 1997. He was previously employed as
General Manager of Ogden Atlantic Design - Mexico Operations (October 1995 -
November 1997.) and by Miltope Corporation as Vice President, Operations
(1992 - 1995).
Joseph B. Schadeberg served as Vice President, Human Resources from
July 1995 until November 1998. He was previously employed as Director, Human
Resources Operations of Mattel/Fisher Price Inc. (1992-1995). Mr. Schadeberg
left the Company in November 1998.
Bruce C. Barton has served as Vice President Techology since Novenber
1997. Prior thereto he had been Director, Advanced Engineering (May 1995 -
November 1997) and Electronics Manufacturing Engineering Manager (January 1991
- - - - May 1995)
Stephen H. Hotchkiss has served as Vice President, Sales and Marketing
since November 1997. Prior thereto he had been Director of Sales and Marketing
(November 1996 - November 1997), Sales Manager (March 1996 - November 1996),
and Sales Representative (1977 - 1996).
Patricia A. Bird has served as Corporate Controller since September 1987.
She was previously employed by Arthur Andersen LLP (1982 - 1987).
Page 12 of 112
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
- - - --------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
(a) Market Information.
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol IECE.
The following table sets forth, for the period stated, the high and
low closing sales prices for the Common Stock as reported on the Nasdaq National
Market.
Closing Sales Price
Period High Low
October 1, 1996 - December 31, 1996 $ 8.375 $ 6.375
January 1, 1997 - March 30, 1997 $ 8.875 $ 7.625
April 1, 1997 - June 30, 1997 $14.250 $ 8.625
July 1, 1997 - September 30, 1997 $22.250 $13.750
October 1, 1997 - December 31, 1997 $21.750 $12.750
January 1, 1998 - March 30, 1998 $13.875 $ 7.438
April 1, 1998 - June 30, 1998 $ 9.188 $ 6.875
July 1, 1998 - September 30, 1998 $ 7.750 $ 4.250
The closing price of the Company's Common Stock on the Nasdaq National
Market on December 21, 1998 was $3.813.
(b) Holders.
As of December 21, 1998, there were approximately 126 holders of
record of the Company's Common Stock.
(c) Dividends.
The Company did not pay any dividends on its Common Stock during the
fiscal years ended September 30, 1998 and September 30, 1997. It is the current
policy of the Board of Directors of the Company to retain earnings for use in
the business of the Company. Certain financial covenants set forth in the
Company's current loan agreement prohibit the Company from paying cash
dividends. The Company does not plan to pay cash dividends on its Common Stock
in the foreseeable future.
Page 13 of 112
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
- - - -----------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
Years Ended September 30
Income Statement Data 1998(1) 1997 1996 1995(2) 1994
- - - ---------------------- ------------------------------------------------
Net Sales $248,159 $260,686 $179,707 $127,610 $130,296
------------------------------------------------
Gross Profit $13,640 $28,094 $15,219 $18,327 $27,281
------------------------------------------------
Operating Income (Loss) $(7,554) $12,321 $2,333 $7,603 $17,565
------------------------------------------------
Net Income (Loss) $(6,160) $6,958 $2,498 $4,688 $10,960
------------------------------------------------
Net Income (Loss) per Common
and common equivalent share:
Basic $(0.82) $0.93 $0.34 $0.64 $1.53
Diluted $(0.82) $0.91 $0.33 $0.64 $1.51
------------------------------------------------
Common and Common
equivalent shares
Basic 7,542 7,442 7,412 7,359 7,168
Diluted 7,542 7,617 7,496 7,389 7,287
------------------------------------------------
Balance Sheet Data:
Working Capital $31,764 $34,622 $25,959 $23,074 $20,796
-----------------------------------------------
Total Assets $98,665 $152,070 $109,521 $103,014 $84,954
-----------------------------------------------
Long-term debt, less current
maturities $7,138 $6,988 $7,409 $6,857 $3,733
-----------------------------------------------
Shareholders' equity $69,568 $75,461 $67,457 $64,899 $58,455
-----------------------------------------------
(1) The results of operations and financial position as of and for the years
ended September 30, 1998, include the operations of IEC Electronics - Ireland
Limited, as of the acquisition date, August 31, 1998.
(2) The results of operations and financial position as of and for the years
ended September 30, 1995, include the operations of IEC Electronics Arab
Alabama, Inc. as of the acquisition date, November 21, 1994.
Page 14 of 112
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
--------------------------
MANAGEMENT'S DISCUSSION OF OPERATIONS
The information in this Management's Discussion & Analysis should be read in
conjunction with the accompanying consolidated financial statements, the related
Notes to Financial Statements and the Five-Year Summary of Financial Data.
Forward-looking statements in this Management's Discussion and Analysis are
qualified by the cautionary statement in Item 1 of this Form 10K.
Overview
- - - --------
IEC had a challenging year in fiscal 1998 as it transitioned from heavy
reliance on customers in the personal computer industry to establishing a more
diverse portfolio of customers. The Company took a number of important steps in
1998 including a strong emphasis on new business development for new and
existing customers, the re-financing of its credit facility which lowered
interest rates and increased borrowing capacity by over $30 million, the
acquisition of its first non-U.S. facility in Ireland, the reduction of its
workforce by nearly 1,200 people or 38%, and the closure of its Alabama
facility, resulting in the recording of a restructuring charge of $4.7 million
(pre-tax) in the fourth quarter of fiscal 1998.
Analysis of Operations
----------------------
(dollars in millions)
% %
For Year Ended September 30, 1998 1997 Change 1996 Change
---- ---- ------ ---- ------
Net Sales $248.2 $260.7 (4.8%) $179.7 45.1%
The 4.8% decrease in fiscal 1998 sales compared to fiscal year 1997 resulted
from shifts in certain customers' demands. Additionally, the Company is
experiencing a shift from long-run, lower complexity customer contracts to
shorter-run, higher complexity contracts. Demand in the overall electronics
manufacturing services industry remains generally strong and is being driven
both by growth in the electronics industry and even more importantly, by
increased outsourcing from OEMs. The Company's percentage of turnkey sales has
steadily increased. Such sales represented 98%, 95% and 85% of net sales in
fiscal 1998, 1997, and 1996, respectively.
Page 15 of 112
Gross Profit and Selling and Administrative Expenses
----------------------------------------------------
(as a % of Net Sales)
For Year Ended September 30, 1998 1997 1996
---- ---- ----
Gross Profit 5.5% 10.8% 8.5%
Selling and Administrative Expenses 6.2% 6.1% 7.2%
Gross profit as a percentage of sales decreased more than 5 percentage points
in fiscal 1998 compared to fiscal 1997. This decrease was a result of lower
overhead absorption due to underutilized capacity, a sizeable loss at the
Alabama facility, customer mix, greater customer product complexity with
requests for design changes, and multiple new customer and product launches.
Frequent design changes and customer start-ups cause manufacturing production
interruptions, and restarts, increase set-up expense, creating
excess production downtime.
The Company's gross profit percentage increased over 2 percentage points
between fiscal 1996 and fiscal 1997. This increase resulted from improved
utilization of manufacturing capacity, customer mix, benefits from material
purchase volume, and strategic initiatives such as the master distribution
programs with Arrow Electronics and Pioneer-Standard Electronics.
Selling and administrative expenses as a percentage of sales remained
relatively stable at 6.2% compared to 6.1% in fiscal 1997 and down from 7.2% in
fiscal 1996. Actual selling and administrative expenditures decreased in
fiscal 1998 to $15.3 million from $15.8 million as a result of the elimination
of bonuses and other cost-cutting measures Selling and administrative expenses
of $15.8 million in fiscal 1997 were 22.4% higher than $12.9 million in fiscal
1996. This increase was largely attributable to staff additions, increases in
salaries, bonuses and related costs and to increases in commission expense
related to increased net sales.
Other Income and Expense
------------------------
(dollars in millions)
For Year Ended September 30, 1998 1997 1996
---- ---- ----
Interest Expense $1.8 $1.6 $1.6
Life Insurance Proceeds - - 2.0
Other Income .3 .5 .4
Interest Expense of $1.8 million was higher than $1.6 million in fiscal 1997
due to higher borrowing levels in the early part of fiscal 1998, caused by
significant working capital requirements in the first and second quarters of
fiscal 1998 to support a very large one-time customer contract. Overall,
interest rates decreased significantly between fiscal 1997 and fiscal 1998 as a
result of a general trend downward and the Company's new senior credit facility
(see Liquidity and Capital Resources). Interest expense remained nearly
constant at $1.6 million in 1997 and 1996. Life insurance proceeds of $2.0
million were received in 1996 as a result of the death of the Company's
founder, Roger E. Main. Other income is composed primarily of investment
earnings.
Page 16 of 112
Income Taxes
------------
For Year Ended September 30, 1997 1996 1995
---- ---- ----
Effective Tax Rate (31.9%) 37.9% 20.6%
The Company's low effective tax (benefit) rate of 31.9% in 1998 resulted largely
from the federal income tax benefit from operating losses offset by state
income tax expense. The 1997 effective tax rate of 37.9% reflects a more
typical rate based on the Company's current mix of federal and state
jurisdictions. The 1996 very low effective tax rate of 20.6% resulted from the
aforementioned receipt of non-taxable life insurance proceeds of $2.0 million.
Restructuring Charge
- - - --------------------
In August 1998, the Company announced its plan to close its underutilized
Alabama facility and transfer many of the customers served there to its other
operations in New York and Texas. Accordingly, a restructuring charge of $4.7
million was recorded in the fourth quarter of fiscal 1998. The components of
the charge are as follows: the write-down of assets to be disposed of to their
fair market value ($2.2 million), the write-down of goodwill ($1.3 million),
and severance and employee benefits ($1.2 million). After an income tax benefit
of $1.6 million, this restructuring charge reduced fiscal 1998 earnings by $3.1
million or $.42 per share.
The Alabama plant was closed in late October 1998. Following the transfer of
most of Alabama's larger customers, the equipment has been moved to the
Company's other facilities, and the buildings are currently marketed for sale.
Liquidity and Capital Resources
- - - -------------------------------
As reflected in the Consolidated Statement of Cash Flows for 1998, the $20.4
million of cash provided by operating activities was used to fund $13.5 million
used in financing activities and $8.6 million of net investing activities, thus
decreasing cash by $1.7 million. Significant changes in working capital items
that impacted cash flow from operating activities in 1998 were a $26.2 million
decrease in accounts receivables largely due to an increased focus on working
capital management as well as lower sales in the last half of the year compared
to a record sales month of $36.7 million in September 1997; a $25.5 million
decrease in inventory as a result of an active reduction program and lower
operating volumes; and a $30.6 million decrease in accounts payable resulting
from lower inventories and the timing of capital additions.
Capital additions were $8.1 million in 1998 and $9.9 million in 1997. These
expenditures were primarily used to upgrade the manufacturing capabilities of
the Company. The Company also purchased selected assets of Ohshima Electronics
Manufacturing Limited located in Longford, Ireland, for an initial purchase
price of $1.1 million with additional amounts due (up to $300,000) if certain
profit targets are met over the period September 1, 1999 though August 31, 2000.
During May, 1998 the Company refinanced its $33 million of available lines of
credit with a new three-year $65 million senior credit facility with a bank
group. The credit facility is collateralized by the majority of assets of the
Company. At September 30, 1998, $7.0 million was outstanding under this
facility. The Company is required to maintain certain financial ratios as
well being subject to other restrictions described in "Notes to Consolidated
Financial Statements." The Company was in compliance with all financial
covenants as of September 30, 1998.
The Company believes its cash balances, funds generated from operations and its
credit facilities will be sufficient for the Company to meet its capital
expenditures and working capital needs for its operations as presently
conducted. As part of its overall business strategy, the Company may from time
to time evaluate acquisition opportunities. The funding of these future
transactions, if any, may require the Company to obtain additional sources of
financing.
Page 17 of 112
Impact of Inflation
- - - -------------------
The impact of inflation on the Company's operations for the last three years has
been minimal due to the fact that it is able to adjust its bids to reflect any
inflationary increases in cost.
Year 2000 Conversion
- - - --------------------
The Year 2000 issue is the result of many existing computer programs written to
handle two digits, rather than four, to define the applicable year.
Accordingly, date-sensitive software or hardware may not be able to distinguish
between the year 1900 and year 2000, and programs that perform arithmetic
operations, comparisons or sorting of date fields may begin yielding incorrect
results. This could potentially cause a system failure or miscalculations that
could disrupt operations, including, among other things, an inability to
process transactions, send invoices, or engage in normal business activities.
These Year 2000 issues affect virtually all companies and organizations.
The Company has developed plans to address the potential risks it faces as a
result of Year 2000 issues. These risks include, among other things, the
possible failure or malfunction of the Company's internal information systems,
possible problems with the products and services the Company has provided its
customers, and possible problems arising from the failure of the Company's
supplier systems.
The Company has developed a plan to address its Year 2000 issues by initially
identifying and assessing Year 2000 compliance for all of its applications and
information technology equipment (including all mainframe, network and desktop
software and hardware, custom and packaged applications, and IT embedded
systems), as well as its non-information technology embedded systems,
(including non-IT equipment and machinery such as security, fire prevention and
climate control systems) into the categories of "business critical",
"important", and "non-important" systems.
Business critical systems are those whose Year 2000 compliance is necessary to
ensure the proper functioning of the business. These systems have the highest
priority in being tested and upgraded, where applicable. It is expected that
all "business critical" systems will be Year 2000 compliant by June 1999.
"Important" systems will also be tested and upgraded with the expectation that,
where necessary, they will be Year 2000 compliant by no later than
September 30, 1999. Certain other systems classified as "not important", since
they do not use the date function, will also be tested and upgraded where it is
of benefit to the Company, but with the lowest priority of the Company's three
systems classifications. The Company's remediation plan for its Year 2000
issue is an ongoing process, and the estimated completion dates above are
subject to change.
Overall, at this time the Company believes that its systems will be Year 2000
compliant in a timely manner for several reasons. The main or "central"
operating system used by the Company is already compliant with the exception of
one sub-system. To the extent that current systems that will not be replaced
have been determined to be non-compliant, the Company is working with the
suppliers of such systems to obtain upgrades and/or enhancements to ensure Year
2000 compliance. Also, comprehensive testing of nearly all critical systems
was performed in November, 1998, at the shut-down Alabama facility in a
simulated Year 2000 environment. Only minor issues were found from the testing
which have since been corrected and retested successfully.
Page 18 of 112
At this stage in the process, the Company has not identified any significant
risks. However, the Company believes that the area of the greatest potential
risk relates to significant suppliers' failing to remediate their Year 2000
issues in a timely manner. The Company is conducting formal communications
with its significant suppliers to determine the extent to which it may be
affected by those parties' plans to remediate their own Year 2000 issues in a
timely manner. If a number of significant suppliers are not Year 2000
compliant, this could have a material adverse effect on the Company's results
of operations, financial position or cash flow. At this point, the Company has
not been advised by any significant supplier that it is not Year 2000 compliant.
The Company will develop contingency plans and expects to have them completed
during 1999. To mitigate the effects of the Company's or significant
suppliers' potential failure to remediate the Year 2000 issue in a timely
manner, the Company will take appropriate actions. Such actions may include
having arrangements for alternate suppliers, using manual intervention to
ensure the continuation of operations where necessary and scheduling activity
in December 1999 that would normally occur at the beginning of January 2000.
If it becomes necessary for the Company to take these corrective actions, it is
uncertain, until the contingency plans are finalized, whether this would result
in significant delays in business operations or have a material adverse effect
on the Company's results of operations, financial position or cash flow.
Based upon the Company's current estimates, incremental out-of-pocket costs of
its Year 2000 program are expected not to be material. Costs incurred in
fiscal 1998 have been minimal and expensed as incurred. Additional costs are
expected to be incurred in fiscal 1999 and will be associated primarily with
the remediation of existing computer software and hardware. Such costs are
estimated to be approximately $500,000. Such costs do not include internal
management time, which the Company does not separately track, nor the deferral
of other projects, the effects of which are not expected to be material to the
Company's results of operations or financial condition.
Recently Issued Accounting Standards
- - - ------------------------------------
In late 1997, Statement of Financial Accounting Standards No. 130 (SFAS No.
130), "Reporting Comprehensive Income" and Statement of Financial Accounting
Standards No. 131 (SFAS No. 131), "Disclosure about Segments of an Enterprise
and Related Information" were issued. These statements will be effective for
the Company in fiscal 1999. The Company believes that the effect of adoption
of both SFAS No. 130 and SFAS No. 131 will not be material.
Additionally, in June, 1998, Statement of Financial Accounting Standards No.
133 (SFAS No. 133), "Accounting for Derivative Instruments and Hedging
Activities" was issued. This statement will be effective for the Company in
fiscal 2000. The Company believes that the effect of adoption of SFAS No. 133
will not be material based on the Company's current risk management strategies.
Page 19 of 112
.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - - ----------------------------------------------------
The information required by this item is incorporated herein by reference
to pages 23 through 43 of this Form 10-K and is indexed under Item 14(a)(1) and
(2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- - - ---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
There have been no disagreements on accounting and financial disclosure
matters.
Page 20 of 112
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- - - ------------------------------------------------------------
The information required by this item is presented under the caption
entitled "Election of Directors - Nominees for Election as Directors" contained
in the definitive proxy statement issued in connection with the Annual Meeting
of Stockholders to be held February 24, 1999 and is incorporated in this report
by reference thereto. The information regarding Executive Officers of the
Registrant is found in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
- - - --------------------------------
The information required by this item is presented under the caption
entitled "Executive Officer Compensation" contained in the definitive proxy
statement issued in connection with the Annual Meeting of Stockholders to be
held February 24, 1999 and is incorporated in this report by reference thereto,
except, however, the sections entitled "Performance Graph" and "Report of the
Compensation Committee of the Board of Directors" are not incorporated in this
report by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- - - -------------------------------------------------------------
MANAGEMENT
----------
The information required by this item is presented under the caption
entitled "Security Ownership of Certain Beneficial Owners and Management"
contained in the definitive proxy statement issued in connection with the Annual
Meeting of Stockholders to be held February 24, 1999 and is incorporated in this
report by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - - --------------------------------------------------------
The information required by this item is presented under the caption
"Executive Officer Compensation - Certain Transactions" contained in the
definitive proxy statement issued in connection with the Annual Meeting of
Stockholders to be held February 24, 1999 and is incorporated in this report
by reference thereto.
Page 21 of 112
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
- - - ----------------------------------------------------------------
FORM 8-K
--------
(a) The following documents are filed as part of this report and as
response to Item 8:
Page
(1) and (2) Financial Statements and Supplementary Schedule
Report of Independent Public Accountants...................... 26
Consolidated Balance Sheets as of
September 30, 1998 and 1997.................................. 27
Consolidated Statements of Operations for the years
ended September 30, 1998, 1997 and 1996 .................... 29
Consolidated Statements of Changes in Shareholders'
Equity for the years ended September 30, 1998,
1997 and 1996................................................ 30
Consolidated Statements of Cash Flows for the years
ended September 30, 1998, 1997 and 1996...................... 31
Notes to Consolidated Financial Statements.................... 32
Schedule II Valuation and Qualifying Accounts................. 44
All other schedules are either inapplicable or the information is
included in the financial statements and, therefore, have been
omitted.
(3) Exhibits
Exhibit No. Title Page
3.1 Amended and Restated Certificate of Incorporation
of DFT Holdings Corp. (Incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement
on Form S-1, Registration No. 33-56498)
3.2 Amended Bylaws of IEC Electronics Corp. (Incorporated
by reference to Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 27, 1998)
3.3 Agreement and Plan of Merger of IEC Electronics into DFT
Holdings Corp. (Incorporated by reference to Exhibit 3.3 to the
Company's Registration Statement on Form S-1, Registration No.
33-56498)
3.4 Certificate of Merger of IEC Electronics Corp.
into DFT Holdings Corp. - New York. (Incorporated by
reference to Exhibit 3.4 to the Company's Registration
Statement on Form S-1, Registration No. 33-56498)
3.5 Certificate of Ownership and Merger merging IEC
Electronics Corp. into DFT Holdings Corp. - Delaware.
(Incorporated by reference to Exhibit 3.5 to the
Company's Registration Statement on Form S-1,
Registration No. 33-56498)
3.6 Certificate of Merger of IEC Acquisition Corp. into
IEC Electronics Corp. (Incorporated by reference to
Exhibit 3.6 to the Company's Registration Statement
on Form S-1, Registration No. 33-56498)
3.7 Certificate of Admendment of Certificate of Incorporation of
IEC Electronics Corp. filled with the Secretary of State of the
State of Delaware on Feb. 26, 1998 (Incorporated by reference to
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for
the Quarter ended March 27, 1998)
3.8 Certificate of Designations of the Series A 45
Preferred Stock of IEC Electronics Corp. filed with the
Secretary of State of the State of Delaware on June 3, 1998.
3.9 Articles of Incorporation of Calidad Electronics, Inc.
(Incorporated by reference to Exhibit 3.7 to the
Company's Registration Statement on Form S-1,
Registration No. 33-56498)
3.10 Articles of Amendments to the Articles of Incorporation
of Calidad Electronics, Inc. (Incorporated by reference to
Exhibit 3.8 to the Company's Registration Statement on
Form S-1, Registration No. 33-56498)
3.11 Statement of Change of Registered Office or Registered Agent or
both by a Profit Corporation. (Incorporated by reference to
Exhibit 3.9 to the Company's Registration Statement on Form S-1,
Registration No. 33-56498)
Page 22 of 112
3.12 By-laws of Calidad Electronics, Inc. (Incorporated by
reference to Exhibit 3.10 to the Company's Registration
Statement on Form S-1, Registration No. 33-56498)
4.1 Specimen of Certificate for Common Stock. (Incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-1, Registration No. 33-56498)
4.2 Rights Agreement dated as of June 2, 1998 between IEC
Electronics Corp. and ChaseMellon Shareholder Services. LLC.,
as Rights Agents(Incorporated by reference to Exhibit 4.1 to the
Company's Curent Report on Form 8-K dated June 2, 1998)
10.1* IEC Electronics Corp. Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1, Registration
No. 33-56498)
10.2* Form of Amended and Restated Incentive Stock Option
Agreement. (Incorporated by reference to Exhibit 10.2 to
the Company's Registration Statement on Form S-1,
Registration No. 33-56498)
10.3* Form of Non-Qualified Stock Option Agreement. (Incorporated
by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1, Registration No. 33-56498)
10.4 Documents Executed in Connection with the Acquisition of Certain
Real Estate: (i) Agreement for Purchase of Shares, for the
Purchase of Certain Real Estate, and for Certain Other Matters
among IEC Electronics Corp., Rettel Corporation, Rodney J.
Graybill, Jacob A. Graybill and Robert M. Tyle, dated as of
August 29, 1983. (ii) Bond Purchase Agreement among IEC
Electronics Corp., Wayne County Industrial Development Agency,
Rodney J. Graybill, Robert M. Tyle and the Estate of Jacob A.
Graybill, dated as of December 1, 1983. (iii) Mortgage from the
Wayne County Industrial Development Agency to Rodney J.
Graybill, Robert M. Tyle and the Estate of Jacob A. Graybill,
dated as of December 1, 1983. (iv) Lease Agreement between the
Wayne County Industrial Development Agency and IEC Electronics
Corp., dated as of December 1, 1983. (v) Amendment to Agreement
for Purchase of Shares, for the Purchase of Certain Real Estate,
and for Certain Other Matters among IEC Electronics Corp.,
Rettel Corporation, Rodney J. Graybill, the Estate of Jacob A.
Graybill and Robert M. Tyle, dated as of December 28, 1983. (vi)
Loan Agreement between IEC Electronics Corp. and The Village of
Newark, dated as of December 28, 1983. (vii) Mortgage between
Wayne County Industrial Development Agency and IEC Electronics
Corp., as mortgagors, and Wayne County Industrial Development
Agency, as mortgagee, dated December 28, 1983. (viii) Mortgage
between Wayne County Industrial Development Agency and The
Village of Newark, dated December 28, 1983. (ix) First Agreement
of Amendment to Loan Agreement of December 28, 1983, between IEC
Electronics Corp. and The Village of Newark, dated as of
December 30, 1983. (x) Loan and Use Agreement among Wayne County
Economic Development Corp., Wayne County Industrial Development
Agency, IEC Electronics Corp. and New York Job Development
Authority, dated December 30, 1983.
(Incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-1, Registration No. 33-56498)
10.5* Form of Indemnity Agreement. (Incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 2, 1993)
Page 23 of 112
10.6 Credit Agreement dated as of May 16, 1998 amoung IEC Electronics
Corp. and Any Designed Borrower(s) as "Borrowers" with the Lenders
signatory thereto and The Chase Manhattan Bank as Adminstrative
Agent (Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 26, 1998)
10.7 Consent and Waiver dated as of July 10, 1998 to Credit 48
Agreement dated May 15, 1998.
10.8 Amendment No. 1 and Consent dated as of Novenber 6, 1998 55
to Credit Agreement dated as May 15, 1998.
10.9* IEC Electronics Corp. 1993 Stock Option Plan, as amended 68
10.10* Form of Incentive Stock Option Agreement (Incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-8, Registration No. 33-79360)
10.11* Form of Non-Statutory Stock Option Agreement (Incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement
on Form S-8, Registration No. 33-79360)
10.12* Form of Non-Employee Director Stock Option Agreement
(Incorporated by reference to Exhbit 4.4 to the Company's
Registration Statement on Form S-8, Registration No. 33-79360)
10.13* Employment Agreement between IEC Electronics Corp. and
David W. Fradin (Incorporated by reference to Exhibit 10.18 to the
Compant's Annual Report on Form 10-K for the year ended September 30,
1997)
10.14* Employment Agreement between IEC Electronics Corp. and 76
Diana R. Kurty, dated September 5, 1997
10.15* Consulting Agreement between IEC Electronics and Edward Butka, 78
dated dated as of March 1, 1998
10.16* Change in Control Agreement between IEC Electronics Corp. and 80
Russell E. Stingel, dated as of May 1, 1998
10.17* Admendment No.1 to Employment Agreement, Restatement of 84
Non Compete Agreement and Change in Control Agreement between IEC
Electronics Corp. and David W. Fradin, dated as of May 1, 1998
10.18* Admendment No.1 to Employment Agreement, Restatement of Non 88
Compete Agreement and Change in Control Agreement between IEC
Electronics Corp. and Diana R. Kurty, dated as of May 1, 1998
10.19* Form of Change-in-Control Agreement between IEC Electronics 92
Corp and each of its Vice Presidents, dated as of May 1, 1998.
10.20* Severance Agreement between IEC Electronics Corp. and Joseph S. 96
Schadeberg, dated as of November 12, 1998.
10.21* IEC Electronics Corp. Savings and Security Plan effective June 1,
1997 (Incorporated by reference to Exhibit 10.17 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1997.)
10.22* Admendment to IEC Electronics Corp. Savings and Security 100
Plan effective June 1, 1998.
10.23* Iec Electronics Corp. Director Compensation Plan 106
11.1 Statement relating to computation of per share earnings. See Note 43
12 to the Notes to the Company's Consolidated Financial
Statements contained herein.
11.2 Statement relating to Valuation and Qualifing Accounts. See Note 44
12 to the Notes to the Company's Consolidated Financial
Statements contained herein.
22.1 Subsidiaries of IEC Electronics Corp. 111
24.1 Consent of Arthur Andersen LLP 112
(b) Reports on Form 8-K:
None
*Mangement contract or compensatory plan or Arrangement
Page 24 of 112
SIGNATURES
Pursuant to the requirement 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.
Dated: December 29, 1998.
IEC Electronics Corp..
By:/s/Russell E. Stingel
-----------------------
Russell E. Stingel
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Russell E. Stingel Chairman of the Board and
- - - --------------------- Chief Executive Officer
(Russell E. Stingel) (Principal Executive Officer) December 29, 1998
/s/Diana R. Kurty Vice President of Finance
- - - ----------------- (Principal Financial
(Diana R. Kurty) and Accounting Officer) December 29, 1998
/s/David J. Beaubien Director December 29, 1998
- - - --------------------
(David J. Beaubien)
/s/Thomas W. Folger Director December 29, 1998
- - - --------------------
(Thomas W. Folger)
/s/W.Barry Gilbert Director December 29, 1998
- - - -------------------
(W.Barry Gilbert)
/s/Robert P. B. Kidd Director December 29, 1998
- - - -------------------
(Robert P. B. Kidd)
/s/Eben S. Mouilon Director December 29, 1998
- - - ------------------
(Eben S. Moulton)
/s/Justin L. Vigdor Director December 29, 1998
- - - -------------------
(Justin L. Vigdor)
Page 25 of 112
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To IEC Electronics Corp.:
We have audited the accompanying consolidated balance sheets of IEC Electronics
Corp.(a Delaware corporation) and subsidiaries as of September 30, 1998 and
1997, and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended September 30, 1998. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IEC Electronics Corp. and
subsidiaries as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14(a)2 is
presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic finanical statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic finanical statements and, in our opinion, fairly state in relation
all material repects the finanical data required to be set forth therein
to the basic finanical statements taken as a whole.
/s/Arthur Andersen LLP
Rochester, New York,
November 17, 1998
Page 26 of 112
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
(in thousands, except share data)
ASSETS
1998 1997
----------------------
CURRENT ASSETS:
Cash and cash equivalents $ 2,278 $ 3,921
Accounts receivable, net of allowance for doubtful
accounts of $1,975 in 1998 and $722 in 1997 22,842 49,045
Inventories 20,072 45,360
Income taxes receivable 1,960 -
Deferred income taxes 3,226 1,900
Other current assets 441 98
----------------------
Total current assets 50,819 100,324
----------------------
PROPERTY, PLANT, AND EQUIPMENT, net 36,321 39,391
----------------------
OTHER ASSETS:
Costs in excess of net assets acquired, net 11,310 12,346
Other assets 215 9
----------------------
11,525 12,355
----------------------
$ 98,665 $ 152,070
======================
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets
Page 27 of 112
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
(in thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
1998 1997
-------------------------
CURRENT LIABILITIES:
Short-term borrowings under lines of Credit $ - $10,530
Current portion of long-term debt 20 3,291
Accounts payable 13,424 43,904
Accrued payroll and related expenses 3,878 5,611
Accrued income taxes - 1,887
Accrued insurance 1,353 -
Other accrued expenses 380 479
-------------------------
Total current liabilities 19,055 65,702
-------------------------
DEFERRED INCOME TAXES 2,904 3,919
-------------------------
LONG-TERM DEBT 7,138 6,988
-------------------------
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01 per
share, authorized - 500,000 shares;
issued and outstanding - none - -
Common stock, par value $.01 per
share, authorized - 50,000,000
shares; issued and outstanding -
7,583,076 and 7,552,201 shares,
respectively 76 75
Additional paid-in capital 38,563 38,430
Retained earnings 31,207 37,367
Cummulative Transition Adjustments 133 -
Treasury stock, at cost - 20,573 shares,
respectively (411) (411)
-------------------------
Total shareholders' equity 69,568 75,461
-------------------------
$ 98,665 152,070
=========================
The accompanying notes to consolidated financial statements are
an integral part of these balance sheets
Page 28 of 112
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(in thousands, except share data)
1998 1997 1996
------------------------------
Net sales $ 248,159 $ 260,686 $ 179,707
Cost of sales 234,519 232,592 164,488
------------------------------
Gross profit 13,640 28,094 15,219
Selling and administrative expenses 15,319 15,773 12,886
Customer Bankruptcy 1,130 - -
Restructuring charge 4,745 - -
------------------------------
Total operating expenses 21,194 15,773 12,886
------------------------------
Operating (loss)income (7,554) 12,321 2,333
Interest expense 1,768 1,586 1,584
Life insurance proceeds - - 2,002
Other income, net 283 472 396
------------------------------
(Loss)income before income taxes (9,039) 11,207 3,147
(Benefit from)provision for income taxes (2,879) 4,249 649
------------------------------
Net (loss)income $ (6,160)$ 6,958 $ $2,498
==============================
Net income per common and
common equivalent share
Basic $ (.82)$ .93 $ .34
==============================
Diluted $ (.82)$ .91 $ .33
==============================
Weighted average number of common
and common equivalent shares
outstanding
Basic 7,541,541 7,441,881 7,412,226
========= ========= =========
Diluted 7,541,541 7,617,345 7,496,420
========= ========= =========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
Page 29 of 112
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(in thousands)
Additional Cummulative Total
Common Paid-In Retained Translation Treasury Shareholders'
Stock Capital Earnings Adjustment Stock Equity
------------------------------------------------------------
BALANCE,
September 30, 1995 $ 74 $36,914 $27,911 - - $64,899
Exercise of
stock options - 60 - - - 60
Net income - - 2,498 - - 2,498
------------------------------------------------------------
BALANCE,
September 30, 1996 74 36,974 30,409 - - 67,457
Exercise of
stock options 1 1,456 - - - 1,457
Purchase of
treasury shares - - - (411) (411)
Net income - - 6,958 - - 6,958
------------------------------------------------------------
BALANCE,
September 30, 1997 75 38,430 37,367 - (411) 75,461
Exercise of
stock options 1 133 - - - 134
Cummulative
transition
Adjustment - - - 133 - 133
Net income(loss) - - (6,160) - - (6,160)
------------------------------------------------------------
BALANCE,
September 30, 1998 $ 76 $38,563 $31,207 $ 133 $(411) $69,568
============================================================
The accompanying notes to consolidated financial statements are
an integral part of these statements.
Page 30 of 112
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(in thousands)
1998 1997 1996
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(6,160) $ 6,958 $ 2,498
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating
activities:
Depreciation and amortization 10,013 9,252 8,271
Deferred income taxes (2,341) (570) (45)
Gain on sale of fixed assets (165) (53) (15)
Amortization of costs in excess of net assets
acquired 475 474 471
Goodwill and building writedown related to
restructuring 2,376 - -
Changes in operating assets and liabilities:
(Increase)Decrease
Accounts receivable 26,211 (20,834) (10,833)
Inventories 25,538 (19,354) (1,909)
Income taxes receivable (1,960) 757 (757)
Other current assets (307) 67 286
Other assets (206) 355 -
Increase (Decrease)
Accounts payable (30,617) 26,929 4
Accrued payroll and related expenses (1,783) 2,839 (275)
Accrued income taxes (1,887) 1,887 (1,247)
Accrued insurance 1,353 - -
Other accrued expenses (99) 174 70
-------------------------
Net cash provided by (used in)
operating activities 20,441 8,881 (3,481)
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (8,092) (9,912) (9,096)
Purchase of certain assets from Ohshima Manufacturing (1,173) - -
Proceeds from sale of equipment 655 335 54
-------------------------
Net cash used in investing activities (8,610) (9,577) (9,042)
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and warrants 134 1,457 60
Purchase of treasury stock - (411) -
Net (repayments)borrowings under line of credit
agreements (10,530) 2,000 4,990
Proceeds from long-term debt 16,380 3,150 4,062
Principal payments on long-term debt (19,501) (3,061) (3,747)
--------------------------
Net cash (used in) provided by
financing activities (13,517) 3,135 5,365
--------------------------
NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (1,686) 2,439 (7,158)
Effect of exchange rate on cash and cash equivalents 43 - -
CASH AND CASH EQUIVALENTS, beginning of year 3,921 1,482 8,640
-------------------------
CASH AND CASH EQUIVALENTS, end of year $ 2,278 $ 3,921 $ 1,482
=========================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,645 $ 1,586 $ 1,584
=========================
Income taxes, net of refunds received $ 3,261 $ 1,769 $ 2,698
=========================
The accompanying notes to consolidated financial statements are
an integral part of these statements.
Page 31 of 112
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- - - -- --------------------------------------------------------
Business
IEC Electronics Corp. (IEC) is an independent contract manufacturer of complex
printed circuit board assemblies and electronic products and systems. IEC offers
its customers a wide range of manufacturing and management services, on either a
turnkey or consignment basis, including material procurement and control,
manufacturing and test engineering support, statistical quality assurance, and
complete resource management.
Consolidation
The consolidated financial statements include the accounts of IEC and its
wholly-owned subsidiaries, IEC Edinburg Texas Operations(Edinburg),IEC Arab
Alabama Operations (Arab)and IEC Electronics - Ireland Ltd. (Longford) as of
August 31, 1998 (collectively, the Company). All significant intercompany
transactions and accounts have been eliminated.
Revenue Recognition
The Company recognizes revenue upon shipment of product for both turnkey and
consignment contracts.
Cash and Cash Equivalents
Cash and cash equivalents include money market and bank account balances. The
Company's cash and cash equivalents are held and managed by institutions which
follow the Company's investment policy. The fair value of the Company's
financial instruments approximates carrying amounts due to the relatively short
maturities and variable interest rates of the instruments, which approximate
current market interest rates.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Page 32 of 112
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and are depreciated over
various estimated useful lives using the straight-line method.
Maintenance and repairs are charged to expense as incurred; renewals and
improvements are capitalized. At the time of retirement or other disposition of
property, plant, and equipment, the cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in other income.
Long-Lived Assets
The Company reviews its long-lived assets and certain identifiable intangibles
to be held and used for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If such
events or changes in circumstances are present, a loss is recognized to the
extent the carrying value of the asset is in excess of the sum of the
undiscounted cash flows expected to result from the use of the asset and its
eventual disposition.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practical to estimate that
value.
Current Assets and Liabilities - The carrying amount of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value because of the short maturity of those instruments.
Debt - The fair value of the Company's debt is estimated based upon the quoted
market prices for the same or similar issues which approximates carrying amount.
Costs in Excess of Net Assets Acquired
Costs in excess of net assets acquired of $14.8 million is being amortized on a
straight-line basis over a range of 15 to 40 years. The balance is presented net
of accumulated amortization of $3.5 million at September 30, 1998 and 1997.
Amortization of $475,000, $474,000, and $471,000 was charged against operations
for the years ended September 30, 1998, 1997, and 1996, respectively.
The writeoff of net goodwill related to the Alabama facility of $1.3 million
was charged to the restructuring reserve. (orginial cost of $1.8 million net
amortization of $0.5 million.) See Note 3.
Page 33 of 112
Net Income per Common and Common Equivalent Share
Income(Loss) Shares Per Share
Year-Ended (Numerator) (Denominator) Amount
- - - ------------------------ ------------ ------------ ---------
September 30, 1998
Basic EPS
Loss available to
common shareholders $ (6,160) 7,541,541 $ (.82)
=========== ========= =========
September 30, 1997
Basic EPS
Income available to
common shareholders $ 6,958 7,441,881 $ .93
=========
Effect of dilutive options - 175,464
----------- ----------
Diluted EPS
Income available to
common shareholders and
and assumed conversions $ 6,958 7,617,345 $ .91
========== ========= ========
September 30, 1996
Basic EPS
Income available to
common shareholders $ 2,498 7,421,226 $ .34
=========
Effect of dilutive options - 84,194
----------- ----------
Diluted EPS
Income available to
common shareholders and
and assumed conversions $ 2,498 7,496,420 $ .33
========== ========= ========
Basic EPS was computed by dividing reported earnings available to common
shareholders by weighted-average common shares outstanding during the year. No
reconcilation is provided for 1998 as the effect would be antidilutive. Options
to purchase 36,000 and 398,000 common shares at an average price of $20 and
$12.58 per share were outstanding for the years ending September 30, 1997 and
1996, respectively, but were not includedin the computation of diluted EPS
since the options exercise price was greater than the average market price of
common shares.
The Company adopted Statement of Financial Accounting Standards (SFAS) No.128,
"Earnings per Share", and restated for all periods presented.
Page 34 of 112
Foreign Currency Translation
The assets and liabilities of the Company's foreign subsidary are translated
based on the current exchange rate at the end of the period for the Balance
Sheet and weighted-average rate for the period of the Consolidated Statement of
Operations. Translation adjustments are recorded as a separate component of
equity. Transaction gains or losses are included in operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
reported amounts of assets and liabilities and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Certain amounts presented in the prior years have been reclassified to conform
with current-year presentation.
2. ACQUISITION OF SELECTED ASSETS:
In August 1998, the Company acquired certain assets of Ohshima Electronics
Manufacturing Limited (Ohshima) located in Langford, Ireland, for an initial
purchase price of approximately $1.2 million with additional amounts due
(up to $300,000) if certain profit targets are met over the period
September 1, 1999 - August 31, 2000.
The acquistion was funded through the Company's existing senior credit facility
and accounted for as a purchase. The purchase price exceeded the fair market
value of net assets by approximately $740,000, which is being
amortized on a straight line basis over 15 years.
The accompanying financal results include results of the Irish operation,
renamed IEC Electronics - Ireland Limited, from the date of acquistion
(August 31, 1998) through the end of the fiscal year. Pro forma financal data
has not been presented for the fiscal 1998 and 1997 since the results of
operations of the Irish facility were not material to the financial
statements.
Page 35 of 112
3. RESTRUCTURING:
In August 1998, the Company annouced plans to close its Alabama operation (Arab)
and to transfer many of its customers served in that facility to the Company's
other operations in New York and Texas. The restructuring charge of $4.7 million
relates primarily to the write down of assets to be disposed of, to their fair
market value ($2.2 million), the writedown of goodwill ($1.3 million), and
severance and employee benefits ($1.2 million). After an income tax benefit of
$1.6 million, this closure reduced fiscal 1998 earnings by $3.1 million or
$.42 per share.
4. INVENTORIES:
The major classifications of inventories are as follows at September 30 (in
thousands):
1998 1997
-------- --------
Raw materials $14,170 $38,209
Work-in-process 5,902 7,151
-------- --------
$20,072 $45,360
======== ========
5. PROPERTY, PLANT, AND EQUIPMENT:
The major classifications of property, plant, and equipment are as follows at
September 30 (in thousands):
1998 1997
-------- --------
Land and land improvements $ 1,166 $ 1,071
Buildings and improvements 11,341 10,394
Machinery and Equipment 65,756 59,842
Furniture and fixtures 6,640 5,874
-------- --------
84,903 77,181
Less- Accumulated depreciation
and amortization (48,582) (37,790)
-------- --------
$ 36,321 $ 39,391
======== ========
Depreciation and amortization was $10.0 million, $9.3 million, and $8.3 million
for the years ended September 30, 1998, 1997 and 1996, respectively.
Page 36 of 112
The principal depreciation and amortization lives used are as follows:
Estimated
Description Useful
Lives
- - - ---------------------------- ------------
Land improvements 10 years
Buildings and improvements 10 to 40 years
Machinery and equipment 3 to 10 years
Furniture and fixtures 5 to 7 years
6. LONG-TERM DEBT:
Long-term debt consists of the following at September 30 (in thousands):
1998 1997
-------- -------
Senior debt facility obtained through revolving line of
credit. $ 7,000 $ -
Equipment notes payable obtained through revolving line
credit with interest at prime,repaid during May 1998. - 9,380
Mortgage note payable with interest at 8.25%, repaid
May 1998 - 85
Mortgage note payable with interest at prime, repaid
May 1998. - 80
Mortgage note payable with interest at 7.0%, repaid
May 1998. - 40
Mortgage note payable with interest at 7.75%, repaid
May 1998. - 271
Mortgage note payable with interest at 6.19%, through
May 2005, secured by real property 158 177
Capital leases payable with interest ranging from 4.33%
to 8.33%, repaid December 1997, - 19
Capital lease payable with interest at 7.02%, repaid
May 1998. - 102
Capitalized lease payable with interest at 12%,
repaid during May 1998 - 125
-------- -------
7,158 10,279
Less- Current portion (20) (3,291)
-------- -------
$ 7,138 $ 6,988
======== =======
During May 1998, the Company refinanced its 33 million of available lines of
credit with a new three-year $65 million committed senior credit facility with a
bank group. Interest on this revolving credit facility is determined at the
Company's option on a LIBOR or prime rate basis plus a margin. Additionally, a
Page 37 of 112
facility fee is paid on the unused portion of the facility. At September 30,
1998, the interest rate related to the revolving credit facility ranged from
6.08 percent to 6.64 percent.
The three-month LIBOR rate was 5.31% and the prime rate was 8.25% at September
30, 1998.
The credit facility is collaterlized by the majority of assets of the Company.
The Company is required to maintain certain financial ratios as well as to
comply with certain restrictions including limits on incurring additional
indebtness, or creating liens or other encumbrances; making certain payments,
investments, loans, and guarantees; selling or otherwise disposing of a
substantial portion of assets, or merge or consolidate with an unaffiliated
entity. The most significant financial covenants include a leverage ratio, an
interest coverage ratio, and a ratio of consolidated current assets to
consolidated total indebtedness. The Company was in compliance with all
financial covenants as of September 30, 1998.
Under the aforementioned refinanced short-term lines of credit, the balance
outstanding at September 30, 1997 was $10,530,000, with a weighted average
interest rates on these balances were 8.5%.
The aggregate annual maturities of long-term debt at September 30, 1998 are as
follows (in thousands):
1999 $ 20
2000 21
2001 7,022
2002 24
2003 26
Thereafter 45
-------
$ 7,158
=======
Based on borrowing rates currently available to the Company for bank loans with
similar terms and average maturities, the fair value of long-term debt
approximates its recorded value.
Page 38 of 112
7. INCOME TAXES:
The (benefit from)provision for income taxes in fiscal 1998, 1997 and 1996 is
summarized as follows(in thousands):
1998 1997 1996
------- ------- -------
Current
Federal $ (747) $ 4,462 $ $565
State 209 357 129
Deferred (2,341) (570) (45)
-------- --------- --------
(Benefit from)provision
for income taxes, net $(2,879) $4,249 $ 649
======= ========= ========
The components of the deferred tax asset (liability) at September 30 are as
follows(in thousands):
1998 1997
---- ----
Accelerated Depreciation $(4,323) $(4,318)
New York State investment tax credits 3,036 3,102
Conpensated Abscences 587 336
Inventories 1,781 1,318
Receivables 671 245
Restructuring Reserve 1,020 -
Other 186 -
------- -------
2,958 683
Less- Valuation allowance (2,636) (2,702)
------- -------
$ 322 $(2,019)
======= =======
The Company has available approximately $4.6 million in New York State
tax credits through 2008. A valuation allowance has been recorded at
September 30, 1998 and 1997 to offset a majority of the deferred tax assets
generated by New York State investment tax credits since the Company anticipates
generating additional investment tax credits each year during the carryforward
period, which limits the utilization of the tax credit carryforward.
Page 39 of 112
The difference between the effective tax rates and the statutory federal income
tax rate for fiscal years 1998, 1997 and 1996 is summarized as follows:
1998 1997 1996
----- ----- -----
(Benefit)provision for income taxes
at statutory rates (34.0%) 34.0% 34.0%
Amortization of cost in excess
of net assets acquired 1.3 1.1 3.8
Life insurance proceeds _ - (21.6)
Provision for state taxes,net 1.5 2.1 4.8
Other (0.7) 0.7 (0.4)
----- ----- -----
(31.9%) 37.9% 20.6%
===== ===== =====
8. SHAREHOLDERS' EQUITY:
Stock-Based Compensation Plans
In November 1993, the Company adopted the 1993 Stock Option Plan (SOP) which
replaces and supersedes the 1989 Stock Option Plan. However, any outstanding
options under the 1989 Plan remain in effect in accordance with and subject to
the terms of the 1989 plan.
Under the SOP, a total of 1,400,000 shares, inclusive of the foregoing, were
reserved for key employees, officers, directors and consultants as of September
30, 1998. The option price for incentive options must be at least 100% of the
fair market value at date of grant, or if the holder owns more than 10% of total
common stock outstanding at the date of grant, then not less than 110% of the
fair market value at the date of grant. Stock options issued prior to 1992
terminate 10 years from date of grant, while incentive and nonqualified stock
options issued subsequent to 1991 terminate seven and five years from date of
grant, respectively.
Incentive stock options granted during the periods between July 1995 through
September 1998 vest in increments of 25 percent. Non-qualified stock options
granted during fiscal year 1998 and 1997 vest in increments of 33 1/3 percent.
Page 39 of 112
Changes in the status of options under the SOP at September 30, are summarized
as follows:
Weighted
Options
Shares Average Available
Under Exercise for
September 30, Option Price Grant Exercisable
------------- --------- -------- -------- ----------
1995 525,720 $10.19 13,030 231,720
Options granted 15,000 $ 9.19
Options exercised (27,704) $ 2.18
Options forfeited (8,474) $14.38
---------
1996 504,542 $10.53 306,504 306,542
Options granted 376,500 $ 8.56
Options exercised (137,131) $ 7.67
Options forfeited (105,000) $11.89
---------
1997 638,911 $ 9.75 35,004 199,661
Options granted 113,500 $ 11.89
Options exercised (30,875 $ 4.33
Options forfeited (69,500) $ 11.96
---------
1998 652,036 $ 10.23 491,004 338,911
=========
The following table summarizes information about stock options outstanding as of
September 30, 1998:
Options Outstanding Options Exercisable
-------------------------------------- --------------------------
Weighted
Range Number Average Weighted Number Weighted
of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Prices September 30, Life Price September 30, Price
1998 1998
- - - -------------- ---------------- ---------- --------- ---------------- ---------
$ 5.00-6.25 162,036 4.58 $ 6.06 56,286 $ 5.71
$ 7.625-10.00 224,750 4.37 $ 8.83 112.875 $ 8.73
$10.825-13.00 181,750 3.64 $ 12.08 133,000 $ 12.53
$14.375-16.50 47,500 5.95 $ 16.21 750 $ 16.00
$20.00 36,000 0.38 $ 20.00 36,000 $ 20.00
---------------- -----------------
652,036 338,911
================ ================
The weighted average fair value of options granted during fiscal 1998, 1997 and
1996 was $11.34, $4.80 and $5.01, respectively. The fair value of options is
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions: risk-free interest rate of 5.75
percent, 6.43 percent and 5.89 percent for fiscal 1998, 1997 and 1996,
respectively; volatility of 53 percent, 50 percent and 50 percent for fiscal
1998, 1997, and 1996, respectively; and expected option life of 7 years, 5.8
years and 5,8 year for fiscal 1998, 1997 and 1996 repectively. The dividend
yield was 0%. Forfeitures are recognized as they occur.
Page 40 of 112
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and the disclosure only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
Stock-Based Compensation." Accordingly, no compensation expense has been
recognized for its stock-based compensation plans. Had the Company recognized
compensation cost based upon the fair value at the date of grant for awards
under its plans consistent with the methodology prescribed by SFAS No. 123, net
income and net income per common and common equivalent share would have been as
follows for years ended September 30 (in thousands, except per share data):
1998 1997 1996
--------------- --------------- ---------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
--------- ------ ------ ------- ------- -------
Net (loss) income $(6,160) $(6,412) $6,958 $6,683 $2,498 $2,487
======== ======== ====== ======= ======= =======
Net (loss)income per
common and common
equivalent share:
Basic $(.82) $(.85) $0.93 $0.90 $0.34 $0.34
======== ======== ====== ======= ======= =======
Diluted $(.82) $(.85) $0.91 $0.88 $0.33 $0.33
======== ======== ====== ======= ======= =======
Because the SFAS No. 123 method of accounting had not been applied to options
granted prior to October 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
Treasury Stock
On August 25, 1997, a note receivable from an officer was paid in full,
including accrued interest, by the surrender of Company stock held by the
officer. Accordingly, the Company acquired 20,573 shares at the fair market
value of $411,000.
9. LIFE INSURANCE PROCEEDS:
Due to the death of Roger E. Main, President and Chief Executive Officer in July
1996, the Company realized nontaxable income from life insurance proceeds in the
amount of $2 million, which is separately presented in the Consolidated
Statement of Operations for the year ended September 30, 1996.
10. MAJOR CUSTOMERS AND CREDIT RISK CONCENTRATIONS:
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash, cash equivalents, and trade accounts
receivable. The Company has concentrations of credit risk due to sales to its
major customers.
Page 41 of 112
The Company's revenues are derived primarily from sales to North American
customers in the computer industry and are concentrated among specific
companies. For the fiscal year ended September 30, 1998, two customers accounted
for 38 percent and 15 percent, respectively, of the Company's net sales.
For the fiscal year ended September 30, 1997, two customers accounted for 26
percent and 20 percent, respectively, of the Company's net sales. For the fiscal
year ended September 30, 1996, two customers accounted for 22 perent and 13
percent, respectively, of the Company's net sales.
At September 30, 1998, amounts due from the two customers represented 29 percent
and 12 percent, respectively, of trade accounts receivable. At September 30,
1997, amounts due from the two customers represented 44 percent and 12 percent,
respectively, of trade accounts receivable. The Company performs ongoing credit
evaluation of its customers' financial positions and generally does not require
collateral.
Sales to foreign source customers (primarily in Europe) totaled approximately
34 percent, 32 percent, and 17 percent of total net sales in fiscal years 1998,
1997 and 1996, respectively.
11. RETIREMENT PLAN:
The Company has a retirement savings plan, established pursuant to Sections
401(a) and 401(k) of the Internal Revenue Code. This plan is for the exclusive
benefit of its eligible employees and beneficiaries. Eligible employees may
elect to contribute a portion of their compensation each year to the plan.
Effective June 1, 1998, The Board of Directors approved a change in the employer
match from 33% of the amount contributed by participant to 100% of the first
3% of employee contributios, and 50% of the next 3% of employee contributions.
The matching Company contributions were approximately $717,000, $524,000,
and $519,000 for the years ended September 30, 1998, 1997, and 1996,
respectively. The plan also allows the Company to make an annual discretionary
contribution determined by the Board of Directors. There were no discretionary
contributions for fiscal 1998, 1997, or 1996.
12. ACCOUNTING PRONOUNCEMENTS:
In 1997, Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," and SFAS 131, "Disclosure about Segments of an Enterprise
and Related Information," were issued. These statements will be effective for
the Company in fiscal 1999. The Company believes that the effect of adoption
of both SFAS No. 130 and SFAS No. 131 will not be material.
Additionally, in June 1998, SFAS No. 133,"Accounting for Derivative Instruments
and Hedging Activies", was issued. This statement will be effective for the
Company in fiscal 2000. The Company believes that the effect of adoption of
SFAS No. 133 will not be material based on the Company's current risk
management strategies.
Page 42 of 112
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- ----------
(in thousands, except share data)
YEAR ENDED SEPTEMBER 30,1998:
Net sales $94,115 $71,045 $43,125 $39,874
Gross profit (loss) 8,688 4,307 1,258 ( 613)
Net income (loss) 2,327 (891) (1,337) (6,259)
Net income (loss) per common and
common equivalent share:
Basic 0.31 (0.12) (0.18) (0.83)
Diluted 0.30 (0.12) (0.18) (0.83)
YEAR ENDED SEPTEMBER 30, 1997:
Net sales $50,522 $61,103 $62,798 $86,263
Gross profit 4,708 7,088 7,904 8,394
Net income (loss) 912 1,873 1,823 2,350
Net income (loss) per common and
common equivalent share:
Basic 0.12 0.25 0.25 0.31
Diluted 0.12 0.25 0.24 0.30
YEAR ENDED SEPTEMBER 30, 1996:
Net sales $46,982 $44,385 $43,352 $44,988
Gross profit 6,579 4,277 699 3,694
Net income (loss) 1,914 419 (1,880) 2,045
Net income (loss) per common and
common equivalent share
Basic 0.26 0.06 (0.25) 0.27
Diluted 0.26 0.06 (0.25) 0.26
Page 43 of 112
SCHEDULE II
IEC ELECTRONICS CORP. AND SUBSIDARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(All amounts in thousands)
1998 1997 1996
------------------------------
Accounts Receivable Reserve Balance, $ 722 $ 100 $ -
at beginning, of year
Provision for doubtful accounts 1,639 672 100
Write-off of doubtful accounts, net of
recoveries (1) 386 - -
-------------------------------
Balance, at end of year $ 1,975 $ 772 $ 100
===============================
1998 1997 1996
------------------------------
Restructuring Reserve Balance, $ - $ - $ -
at beginning, of year
Provision for restructuring 4,745 - -
Deductions 3,545 - -
-------------------------------
Balance, at end of year $ 1,200 - -
===============================
(1) Write off of doubtful accounts, net of recoveries does not include the
direct write off of the customer bankruptcy.
Page 44 of 112
EXHIBIT 3.8
CERTIFICATE OF DESIGNATIONS
OF THE SERIES A PREFERRED STOCK
of
IEC Electronics Corp.
Pursuant to Section 151
of the General Corporation Law
of the State of Delaware
IEC Electronics Corp., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors of the
Corporation by the Certificate of Incorporation (the "Certificate"), and,
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors, at a duly called meeting held on June
2, 1998, at which a quorum was present and acted throughout, adopted the
following resolutions, which resolutions remain in full force and effect on the
date hereof, creating a series of 100,000 shares of preferred stock having a par
value of $.01 per share, designated as Series A Preferred Stock (the "Series A
Preferred Stock") out of the class of 500,000 shares of preferred stock of the
par value of $.01 per share (the "Preferred Stock"):
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of the Certificate of
Incorporation of the Corporation, the Board of Directors does hereby create,
authorize and provide for the issuance of the Series A Preferred Stock having
the voting and other powers, designations, relative, participating, optional and
other special rights, preferences, and the qualifications, limitations and
restrictions thereof that are set forth as follows:
Section 1.Designation And Amount. The shares of such series shall be
designated as "Series A Preferred Stock". The number of shares initially
constituting the Series A Preferred Stock shall be 100,000; provided, however,
that if more than a total of 100,000 shares of Series A Preferred Stock shall be
issuable upon the exercise of Rights (the "Right") issued pursuant to the Rights
Agreement dated as of June 2, 1998 between the Corporation and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agreement"), the
Board of Directors of the Corporation, pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware, shall direct by resolution or
resolutions that a certificate be properly executed, acknowledged, filed and
recorded, in accordance with the provisions of Section 103 thereof, providing
for the total number of shares of Series A Preferred Stock authorized to be
issued to be increased (to the extent that the Certificate of Incorporation then
permits) to the largest number of whole shares (rounded up to the nearest whole
share) issuable upon exercise of such Rights.
Section 2.Dividends and Distributions. (A) Subject to the prior and
superior rights of the holders of shares of any other series of Preferred Stock
or other class of stock of the Corporation ranking prior and superior to the
Series A Preferred Stock with respect to dividends, each holder of
one-thousandth of a share (a "Unit") of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, dividends payable in cash in an amount
per Unit (rounded to the nearest cent) equal to the per share amount of cash
dividends declared on shares of the Common Stock. In the event the Corporation
shall at any time after June 15, 1998 (the "Rights Declaration Date"), (i)
declare any dividend on outstanding shares of Common Stock, payable in Common
Shares, (ii) subdivide outstanding shares of Common Stock, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, then in each
such case the amount to which the holder of a Unit of Series A Preferred Stock
was entitled immediately prior to such event pursuant to the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of Common Shares outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock, that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Units
of Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the shares of Common
Stock (other than a dividend payable in shares of Common Stock).
Section 3. Voting Rights. The holders of Units of Series A
Preferred Shares shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth and
except as otherwise provided in the Certificate of Incorporation or required by
law, each Unit of Series A Preferred Stock shall entitle the holder thereof to
one vote on all matters upon which the holders of the shares of Common Stock of
Page 45 of 112
the Corporation are entitled to vote. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on outstanding
shares of Common Stock, payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock, or (iii) combine outstanding shares of
Common Stock into a smaller number of shares, then in each such case the number
of votes per Unit to which holders of Units of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or in any other Amendment creating a series of Preferred Stock or
any similar stock, and except as otherwise required by law, the holders of Units
of Series A Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of shareholders of the
Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders
of Units of Series A Preferred Stock shall have no special voting rights and
their consents shall not be required (except to the extent they are entitled to
vote with holders of shares of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Reacquired Shares. Any Units of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
Units shall, upon their cancellation, become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
Section 5. Liquidation, Dissolution or Winding Up. (A) Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of junior stock unless
the holders of Units of Series A Preferred Stock shall have received, subject to
adjustment as hereinafter provided in paragraph (B), the greater of either (a)
$1.00 per Unit or (b) the amount equal to the aggregate per share amount to be
distributed to holders of shares of Common Stock, or (ii) to the holders of
shares of parity stock, unless simultaneously therewith distributions are made
ratably on Units of Series A Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of Units of Series
A Preferred Stock are entitled under clause (i)(a) of this sentence and to which
the holders of shares of such parity stock are entitled, in each case upon such
liquidation, dissolution or winding up.
(B) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on outstanding shares of Common Stock,
payable in shares of Common Stock, (ii) subdivide outstanding shares of Common
Stock, or (iii) combine outstanding shares of Common Stock into a smaller number
of shares, then in each such case the aggregate amount to which holders of Units
of Series A Preferred Stock were entitled immediately prior to such event
pursuant to clause (i)(b) of paragraph (A) of this Section 5 shall be adjusted
by multiplying such amount by a fraction the numerator of which shall be the
number of shares of Common Stock that are outstanding immediately after such
event and the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 6. Consolidation, Merger, Etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are converted into, exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case Units
of Series A Preferred Stock shall at the same time be similarly converted into,
exchanged for or changed into an amount per Unit (subject to the provisions for
adjustment hereinafter set forth) equal to the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is converted, exchanged
or converted. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on outstanding shares of Common Stock
payable in Common Shares, (ii) subdivide outstanding Common Shares, or (iii)
combine outstanding shares of Common Stock into a small number of shares, then
in each such case the amount set forth in the immediately preceding sentence
with respect to the exchange or conversion of Units of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which shall be the number of shares of Common Stock that are outstanding
immediately after such event and the denominator of which shall be the number of
shares of Common Stock that were outstanding immediately prior to such event.
Page 46 of 112
Section 7. No Redemption. The Units of Series A Preferred
Stock shall not be redeemable from any holder.
Section 8.Rank. The Units of Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, junior to all other
series of Preferred Stock unless the terms of any such series shall provide
otherwise and senior to the shares of Common Stock.
Section 9. Amendment. If any proposed amendment to the Certificate of
Incorporation would alter, change, or repeal any of the preferences, powers or
special rights given to the Series A Preferred Stock so as to affect the Series
A Preferred Stock adversely, then the holders of the Series A Preferred Stock
shall be entitled to vote separately as a class upon such amendment, and the
affirmative vote of a majority of the outstanding shares of the Series A
Preferred Stock, voting separately as a class, shall be necessary for the
adoption thereof.
Section 10. Fractional Shares. The Series A Preferred Stock may be issued
in Units or other fractions of a share, which Units or fractions shall entitle
the holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Preferred Stock. In lieu of
fractional shares, the Corporation may elect to make a cash payment as provided
in the Rights Agreement for fractions of a share other than one-thousandth of a
share or any integral multiple thereof.
Section 11. Certain Definitions. As used herein with
respect to the Series A Preferred Stock, the following terms
shall have the following meanings:
(A) The term "Common Stock" shall mean the class of stock designated as
the common stock, par value $.01 per share, of the Corporation at the date
hereof or any other class of stock resulting from successive changes or
reclassification of such common stock.
(B) The term "Junior Stock", as used in Section 5 hereof, shall mean the
Common Stock and any other class or series of capital stock of the Corporation
over which the Series A Preferred Stock has preference or priority in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
(C) The term "Parity Stock", as used in Section 5 hereof, shall mean any
class of series of capital stock ranking pari passu with the Series A Preferred
Stock in the distribution of assets or any liquidation, dissolution or winding
up of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be duly executed in its corporate name on this 2nd day of June,
1998.
IEC Electronics Corp.
By: /s/Russell E. Stingel
Name: Russell E. Stingel
Title:Chairman of the Board and
Chief Executive Officer
Page 47 of 112
EXHIBIT 10.7
CONSENT AND WAIVER
DATED AS OF JULY 10, 1998
TO
CREDIT AGREEMENT DATED AS OF MAY 15, 1998
AMONG
IEC ELECTRONICS CORP.
ANY DESIGNATED AFFILIATE BORROWER(S)
THE LENDERS SIGNATORY THERETO
AND
THE CHASE MANHATTAN BANK
AS ADMINISTRATIVE AGENT
Page 48 of 112
CONSENT AND WAIVER
Consent and Waiver dated as of July 10, 1998 among IEC ELECTRONICS CORP.
(the "Primary Borrower"), each of the Lenders which is a party to the Credit
Agreement as defined below (individually a "Lender" and collectively the
"Lenders") and THE CHASE MANHATTAN BANK, as Administrative Agent for the Lenders
(in such capacity, together with its successors in such capacity, the
"Administrative Agent").
R E C I T A L S
R.1 The parties have entered into a Credit Agreement dated as of May 15,
1998 (the "Credit Agreement,,). Except as otherwise specified herein, the terms
defined in the Credit Agreement are used herein as so defined.
R.2 As described in a letter dated July 1, 1998, a copy of which is
attached here as Exhibit R.2 (the "Request Letter,,), the Primary Borrower
desires to acquire certain assets in Longford, Ireland through a wholly owned
Subsidiary to be formed under the laws of the Republic of Ireland (the "Irish
Subsidiary,,). As set forth in the Request Letter, the assets to be so acquired
by the Irish Subsidiary will be purchased for cash at a price of approximately
800,000 Irish Pounds, the U.S. Dollar Equivalent of which is approximately
$1,110,480, with a second payment, contingent on specified financial performance
targets, of approximately 200,000 Irish Pounds (approximate U.S. Dollar
Equivalent of $277,620) to be made approximately twelve months after the
acquisition. (The formation of the Irish Subsidiary and the acquisition of such
assets is hereinafter referred to as the "Transaction,,). As used in this
Consent and Waiver, the term "U. S. Dollar Equivalent,, assumes that Irish
Pounds are deemed a Foreign Currency.
R.3 Pursuant to Section 5.27 of the Credit Agreement, the Primary Borrower
is permitted to make Acquisitions provided that certain conditions are met, and
the Primary Borrower has represented in the Request Letter that the proposed
Acquisition will qualify as an Acceptable Acquisition within the meaning of
Section 5.27.
R.4 Under Section 5.12 of the Credit Agreement, the Primary Borrower is
prohibited from organizing any new Subsidiary unless such new Subsidiary
provides the Lenders and the Administrative Agent with a Guarantee and a
Security Agreement with respect to the Facility Obligations. Pursuant to the
Request Letter, the Primary Borrower has requested a waiver of the provisions of
Section 5.12 as they relate to the formation of the Irish Subsidiary, as well as
a waiver of the prohibition contained in Section 5.22 of the Credit Agreement
with regard to the Primary Borrower's loans to or investments in the Irish
Subsidiary, provided that the total investments in the Irish Subsidiary do not
exceed $3,000,000.00.
R.5 The Lenders and the Administrative Agent desire to grant the waivers
requested on the terms hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Except as otherwise set forth herein, as used in this
Consent and Waiver, the terms defined in the Credit Agreement shall have the
meanings assigned to them in the Credit Agreement.
2. Provided that the conditions set forth in Section 3 below are met no
later than September 30, 1998, and subject to the conditions subsequent set
forth in Section 6 below, each Lender signatory hereto, hereby (a) consents to
the formation of the Irish Subsidiary for the purpose of completing the
Acquisition and waives the provisions of Section 5.12(a) of the Credit Agreement
in connection with the creation of the Irish Subsidiary as a Subsidiary, and (b)
waives the provisions of Section 5.22 to the extent necessary to permit the
Primary Borrower to make "Investments,, in the Irish Subsidiary. For purposes of
this Consent and Waiver, the term "Investments,, shall mean the purchase,
holding or acquisition of capital stock, evidences of indebtedness or other
securities of the Irish Subsidiary, and the making of loans and advances to, the
guarantee of obligations of, and the making of other investment in the Irish
Subsidiary.
3. Conditions to Consent by Lenders. The consents and waivers of the
Lenders under Section 2 above are given only as to the specific Transaction and
Investments described therein and do not otherwise waive or modify any other
terms of the Credit Agreement, and are specifically conditioned on the following
matters:
Page 49 of 112
3.1 Representations and Warranties. The representations and
warranties set forth in Section 4 below shall be true and correct as of the date
on which the consents and waivers set forth in Section 2 become effective.
3.2 Report of Transaction. The Administrative Agent and each of the
Lenders shall receive a report from the Primary Borrower on completion of the
Transaction, describing the principal terms and conditions on which the
Transaction was completed.
4. Representations and Warranties. The Primary Borrower hereby represents
and warrants to the Lenders that:
4.1 Corporate Power and Authority: No Conflicts. The Transaction and
the execution, delivery and performance by the Primary Borrower of this Consent
and Waiver have been duly authorized by all necessary corporate action and do
not and will not: (a) require any consent or approval of the Primary Borrower's
stockholders; (b) contravene its charter or by-laws; (c) violate any provision
of, or require any filing, registration, consent or approval under, any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to the Primary Borrower or any of
its Subsidiaries or Affiliates (other than any appropriate disclosure required
to be contained in periodic reports to be filed by the Primary Borrower pursuant
to the Securities Exchange Act of 1934 and applicable regulations thereunder);
(d) result in a breach of or constitute a default or require any consent under
any indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Primary Borrower is a party or by which it or its
properties may be bound or affected; or (e) cause the Primary Borrower to be in
default under any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, agreement, lease or
instrument.
4.2 Legally Enforceable Agreement. Each of this Consent and Waiver
and the Credit Agreement, is a legal, valid and binding obligation of the
Primary Borrower enforceable against the Primary Borrower in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally.
4.3 No Default. On and as of the date of this Consent and Waiver,
and after giving effect to this Consent and Waiver and to the Transaction, no
event has occurred and is continuing which constitutes a Default or Event of
Default.
4.4 Credit Agreement. The representations and warranties
contained in the Credit Agreement are true and correct.
4.5 Description of Transaction. The description of the Transaction
set forth in Recital R.2 of this Consent and Waiver is complete and accurate.
Page 50 of 112
5. Effectiveness. This Consent and Waiver shall be of no force or effect
unless and until each of the following conditions are met:
5.1 Counterparts. The Primary Borrower and the Administrative Agent
shall have each received counterparts of this Consent and Waiver duly executed
by the Primary Borrower, the Administrative Agent, and the Required Lenders.
5.2 Resolutions. The Administrative Agent shall have received
certified copies of the resolutions of the board of directors of the Primary
Borrower, in form and content reasonably satisfactory to the Administrative
Agent, authorizing the Transaction and the execution, delivery and performance
of this Consent and Waiver and of all other documents related to the Transaction
to which Primary Borrower is a party.
6. Conditions Subsequent. The consents and waivers set forth in Section 2
above shall be subject to the condition subsequent that such consents and
waivers shall be rescinded and of no further force or effect in the event that
the aggregate Investment made by the Primary Borrower and of its Subsidiaries
and Affiliates in the Irish Subsidiary at any time exceeds the U.S. Dollar
Equivalent of $3,000,000.00. The value of each such Investment shall be
determined by the U.S. Dollar Equivalent thereof on and as of the date it is
made.
7. Agent's Expenses. Primary Borrower agrees to pay the Administrative
Agent for all costs, expenses and charges (including, without limitation, fees
and charges of external legal counsel for the Administrative Agent and costs
allocated by its internal legal department) incurred by the Administrative Agent
in connection with the negotiation, preparation and execution of this Consent
and Waiver and the documents executed in connection herewith.
8. Miscellaneous. Except as expressly provided in this Consent and Waiver,
the Credit Agreement shall remain unchanged and in full force and effect.
This Consent and Waiver shall be governed by and construed in accordance
with the laws of the State of New York.
The section headings in this Consent and Waiver are inserted for
convenience only and shall not be a part of this instrument.
This Consent and Waiver may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signature thereto
and hereto were upon the same instrument. SIGNATURE PAGES 6 THROUGH 10 TO
FOLLOW.
IN WITNESS WHEREOF, the parties have caused this Consent and Waiver to be
executed as of the date first above written.
IEC ELECTRONICS CORP.
By/s/Diana R. Kurty
-------------------------------
Name: Diana R. Kurty
Title: VP of Finance
and Chief Financial Officer
As Guarantors, the undersigned hereby consent to the provisions of the
foregoing Consent and Waiver.
IEC ARAB ALABAMA, INC.
By:/s/Diana R. Kurty
-------------------------------
Name: Diana R. Kurty
Title: VP of Finance
and Chief Financial Officer
IEC ELECTRONICS - EDINBURG, TEXAS, INC.
By:/s/Diana R. Kurty
--------------------------------
Name: Diana R.Kurty
Title:VP of Finance
and Chief Financial Officer
ADMINISTRATIVE AGENT:
THE CHASE MANHATTAN BANK
By:/s/ Gail C. Fiorini
------------------------------
Name:Gail C. Fiorini
Title:Vice President
Page 51 of 112
LENDER:
THE CHASE MANHATTAN BANK
By:/s/ Gail C. Fiorini
----------------------------
Name:Gail C. Fiorini
Title: Vice President
Page 52 of 112
BANKS:
MARINE MIDLAND BANK
By:/s/ Richard L. Ford
----------------------------
Name:Richard L. Ford
Title:Vice President
Page 53 of 112
BANKS:
KEYBANK NATIONAL ASSOCIATION
By:/s/Lawrence A. Mack
-------------------
Name:Lawrence A. Mack
Title:Senior Vice President
Page 54 of 112
EXHIBIT 10.8
AMENDMENT NO. 1 AND CONSENT
DATED AS OF NOVEMBER 6, 1998
TO
CREDIT AGREEMENT DATED AS OF MAY 15, 1998
AMONG
IEC ELECTRONICS CORP.
ANY DESIGNATED AFFILIATE BORROWER(S)
THE LENDERS SIGNATORY THERETO
AND
THE CHASE MANHATTAN BANK
AS ADMINISTRATIVE AGENT
AND TO
AMENDMENT NO. 1 TO SECURITY AGREEMENTS
Page 55 of 112
AMENDMENT NO. 1 AND CONSENT
(Warehousing)
Amendment No. 1 and Consent dated as of November 6, 1998 ("Amendment
No. 1,,) among IEC ELECTRONICS CORP. (the "Primary Borrower"), IEC ELECTRONICS
- - - - EDINBURG, TEXAS, INC. ("Texas Sub,,), each of the Lenders which is a party
to the Credit Agreement as defined below (individually a "Lender" and
collectively the "Lenders") and THE CHASE MANHATTAN BANK, as Administrative
Agent for the Lenders (in such capacity, together with its successors in such
capacity, the "Administrative Agent").
R E C I T A L S
R.1 The Primary Borrower, the Lenders and the Administrative Agent have
entered into a Credit Agreement dated as of May 15, 1998 (the "Credit
Agreement,,). Except as otherwise specified herein, the terms defined in the
Credit Agreement are used herein as so defined.
R.2 Primary Borrower is a party to a Warehouse Operating Agreement dated
December 29, 1997 ("Warehouse Agreement,,) with Customized Transportation, Inc.
("CTI,,), a copy of which is attached hereto as Exhibit R.2, pursuant to which
CTI agreed to supply warehousing services to the
Primary Borrower.
R.3 Pursuant to a letter dated October 15, 1996 to the Primary Borrower, a
copy of which is attached hereto as Exhibit R.3, CTI notified the Primary
Borrower of certain changes to the Warehouse Agreement and requested that the
Primary Borrower execute the Amendment to Warehouse Operating Agreement in the
form attached to such letter (the "Amendment to Warehouse Agreement,,). One of
the changes anticipated in CTI's letter was the relocation of the inventory to
be warehoused pursuant to the Warehouse Agreement. Under the Loan Documents, the
Primary Borrower is required to obtain the consent of the Required Lenders to
the Amendment of the Warehouse Agreement and to the relocation of the inventory
stored pursuant to the Warehouse Agreement.
R.4 Primary Borrower and Texas Sub have negotiated an Assignment of
Warehouse Operating Agreement from Primary Borrower to Texas Sub (the
"Assignment of Warehouse Agreement,,) by reason of the fact that all of the
inventory currently stored with CTI pursuant to the Warehouse Agreement, and
anticipated to be stored hereafter, is and will be owned by Texas Sub and not by
Primary Borrower. A copy of the Assignment of Warehouse Agreement is attached as
Exhibit R.4 to this Amendment No. 1 and the Primary Borrower and Texas Sub have
requested that the Required Lenders consent to the execution of such Assignment
by Primary Borrower and Texas Sub
R.5 Under Paragraph 4.3.1(f) of each of the Security Agreements executed
by the Primary Borrower and by Texas Sub, the debtor under each such agreement
is required to deliver to the Administrative Agent an Acknowledgment in the form
of Schedule 4.3.1 to the respective Security Agreement. The parties have been
unable to obtain CTI's signature on such Acknowledgment and desire to amend each
of such Security Agreements and to provide for a substitute for such
Acknowledgment.
R.6 The parties wish to amend Schedule 3.20 to the Credit Agreement and
Schedule 3.2 to each of the Security Agreements executed by Primary Borrower and
Texas Sub to conform with the foregoing facts.
R.7 The parties desire to amend the Credit Agreement and the Security
Agreements, and the Lenders and the Administrative Agent desire to grant the
consents, all as requested by Primary Borrower, on the terms hereinafter set
forth.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Except as otherwise set forth herein, as used in this
Amendment No. 1, the terms defined in the Credit Agreement shall have the
meanings assigned to them in the Credit Agreement.
2. Amendments. The Credit Agreement is hereby amended as set forth below:
2.1 Definition. The following definition is added to Section 1.01 of
the Credit Agreement:
"Amendment No. 1,, shall mean Amendment No. 1 and
Consent dated as of November 6, 1998 to Credit
Agreement dated as of May 15, 1998.
"Amendment to Warehouse Agreement,, means the
Amendment to Warehouse Operating Agreement attached
as part of Exhibit R.3 to Amendment No. 1.
"Assignment of Warehouse Agreement,, means the
document attached as Exhibit R.4 to Amendment No. 1.
"Warehouse Agreement,, means the document attached as
Exhibit R.2 to Amendment No. 1.
Page 56 of 112
2.2 Locations of Assets. Section 3.20 is hereby amended to read in
its entirety as follows:
SECTION 3.20. Locations of Assets. Each of the Primary Borrower,
Texas Sub and Alabama Sub is, as of the date of Amendment No. 1,
engaged in business at the addresses listed on the Schedule 3.20,
which is attached as Exhibit 2.2 to Amendment No. 1 and which
replaces the Schedule 3.20 attached to the Credit Agreement as
originally executed; and as of the date of Amendment No. 1, the
assets of each and all of its records relating to such assets, are
kept at such business addresses, except for the "Warehouse
Inventory,,. As of the date of Amendment No. 1, the inventory that
is described on the Schedule 3.20 as "Warehouse Inventory,, is (i)
located at the address or addresses determined pursuant to the
agreements referred to in footnote 1 to such Schedule, (ii) is so
located either pursuant to the Warehouse Agreement, as the same is
or may hereafter be amended by the Amendment to Warehouse Agreement
and the Assignment of Warehouse Agreement, or pursuant to agreements
with the Primary Borrower and/or Texas Sub that are attached as part
of such Schedule, (iii) qualifies as "Warehouse Inventory,, under
the definition set forth in Section 1.01, (iv) has a book value as
described in such Schedule, and (v) is not covered by any "documents
of title,,, as such term is defined in Section 1-201(15) of the
Uniform Commercial Code of the State of New York.
3. Lenders' Consents. Provided that the condition set forth in Section 5
below are met, each Lender signatory hereto hereby (a) consents to the
execution, delivery and performance by the Primary Borrower of the Amendment to
Warehouse Agreement and (b) consents to the execution, delivery and performance
by the Primary Borrower and by Texas Sub of the Assignment of Warehouse
Agreement.
4. Amendment of Security Agreement. Clause (f) of Section 4.3.1 of each of
the Security Agreements executed by the Primary Borrower and by Texas Sub is
hereby deleted and of no further force or effect. Primary Borrower and Texas Sub
agree to execute the three letters to CTI attached as Exhibit 4 to Amendment No.
1. Schedule 3.2 of the Texas Sub Security Agreement is replaced by Schedule 3.2
in the form of Exhibit 4a to Amendment No. 1.
5. Conditions to Consent by Lenders. The consents of the Lenders under
Section 3 above (a) are given only as to the specific transactions described
therein, (b) do not otherwise waive or modify any other terms of or waive any
non compliance with or default under the Credit Agreement or any Security
Agreement and (c) are specifically conditioned on the representations and
warranties set forth in Section 6 below being true and correct as of the date on
which this Amendment No. 1 becomes effective pursuant to Section 7 below.
6. Representations and Warranties. The Primary Borrower and Texas Sub
hereby represent and warrant to the Lenders that:
6.1 Corporate Power and Authority: No Conflicts. The execution,
delivery and performance by the Primary Borrower and Texas Sub of this Amendment
No. 1 have been duly authorized by all necessary corporate action and do not and
will not: (a) require any consent or approval of the Primary Borrower's
stockholders; (b) contravene the charter or by-laws of either; (c) violate any
provision of, or require any filing, registration, consent or approval under,
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the Primary
Borrower or any of its Subsidiaries or Affiliates (other than any appropriate
disclosure required to be contained in periodic reports to be filed by the
Primary Borrower pursuant to the Securities Exchange Act of 1934 and applicable
regulations thereunder); (d) result in a breach of or constitute a default or
require any consent under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which the Primary Borrower or any of its
Subsidiaries is a party or by which any of them or their properties may be bound
or affected; or (e) cause the Primary Borrower or any Subsidiary to be in
default under any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, agreement, lease or
instrument.
6.2 Legally Enforceable Agreement. Each of this Amendment No. 1, and
the Credit Agreement and the Primary Borrower's Security Agreement, each as
amended by this Amendment No. 1, is a legal, valid and binding obligation of the
Primary Borrower enforceable against the Primary Borrower in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally. Each of this Amendment No. 1 and each Loan Document to which Texas
Sub is a party, as amended by this Amendment No. 1, is a legal, valid and
binding obligation of Texas Sub enforceable against Texas Sub in accordance with
its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditor's rights
generally.
Page 57 of 112
7. Effectiveness. This Amendment No. 1 shall be of no force or effect
unless, the Primary Borrower and the Administrative Agent shall have each
received counterparts of this Amendment No. 1 duly executed by the Primary
Borrower, Texas Sub, each Guarantor, the Administrative Agent, and the Required
Lenders on or before December 31, 1998:
8. Agent's Expenses. Primary Borrower agrees to pay the Administrative
Agent for all costs, expenses and charges (including, without limitation, fees
and charges of external legal counsel for the Administrative Agent and costs
allocated by its internal legal department) incurred by the Administrative Agent
in connection with the negotiation, preparation and execution of this Amendment
No. 1 and the documents executed in connection herewith.
9. Miscellaneous. Except as expressly provided in this Amendment No. 1,
the Credit Agreement and each Security Agreement shall remain unchanged and in
full force and effect, except that each reference in the Credit Agreement, and
in any other Loan Document and in any agreements, certificates and notices
simultaneously herewith or hereafter executed under or pursuant to the Credit
Agreement or the other Loan Documents, to the "Credit Agreement,,, "this
Agreement,,, the "Security Agreements,, of either Primary Borrower or Texas Sub,
"hereof,,, "herein,, and similar terms referring to the Credit Agreement or
either of such Security Agreements, shall be deemed to refer to the Credit
Agreement or either of such Security Agreements as amended by this Amendment No.
1.
This Amendment No. 1 shall be governed by and construed in accordance
with the laws of the State of New York.
The section headings in this Amendment No. 1 are inserted for convenience
only and shall not be a part of this instrument.
This Amendment No. 1 may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signature
thereto and hereto were upon the same instrument.
SIGNATURE PAGES 8 THROUGH 11 TO FOLLOW.
Page 58 of 112
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
executed as of the date first above written.
IEC ELECTRONICS-EDINBURG, IEC ELECTRONICS CORP.
TEXAS, INC.
By /s/Diana R. Kurty By /s/Diana R. Kurty
------------------------- -------------------------
Name:Diana R. Kurty Name:Diana R. Kurty
Title:Vice President Title: Vice President
and Chief Financial Officer and Chief Financial Officer
As Guarantors, the undersigned hereby consent to the provisions of the
foregoing Amendment No. 1 and agree that their respective Guarantees remain in
full force and effect after giving effect to this Amendment No. 1.
IEC ARAB ALABAMA, INC.
By:/s/Diana R. Kurty
-------------------------
Name:Diana R. Kurty
Title:Vice President
And Chief Financial Officer
IEC ELECTRONICS - EDINBURG, TEXAS, INC.
By:/s/Diana R. Kurty
-------------------------
Name:Diana R. Kurty
Title:Vice President
And Chief Financial Officer
Page 59 of 112
ADMINISTRATIVE AGENT:
THE CHASE MANHATTAN BANK
By:/s/Gail G. Fiorini
--------------------
Name:Gail G. Fiorini
Title:Vice President
LENDER:
THE CHASE MANHATTAN BANK
By:/s/Gail G. Fiorini
--------------------
Name:Gail G. Fiorini
Title:Vice President
Page 60 of 112
BANKS:
MARINE MIDLAND BANK
By:/s/Richard L. Ford
-------------------
Name:Richard L. Ford
Title:Vice President
Page 61 of 112
BANKS:
KEYBANK NATIONAL ASSOCIATION
By:/s/Lawrence A. Mack
-----------------------
Name:Lawrence A. Mack
Title:Vice President
Page 62 of 112
SCHEDULE 3.20
Locations of Assets
Addresses
----------------------------------------------------------------
Primary Borrower 105 Norton Street, Newark, New York
----------------------------------------------------------------
235 Murray Street, Newark, New York
----------------------------------------------------------------
204 Norton Street, Newark, New York
----------------------------------------------------------------
400 Norton Street, Newark, New York
----------------------------------------------------------------
510 W. Union Street, Newark, New York
----------------------------------------------------------------
Texas Sub 1920 S.E. Industrial Park Drive, Edinburg,
Texas
----------------------------------------------------------------
Alabama Sub 350 11th St. SW, Arab, Alabama
----------------------------------------------------------------
1117 Old Cullman Road, Arab, Alabama
----------------------------------------------------------------
WAREHOUSE INVENTORY
As of November 4, 1998
- - - -------------------------------------------------------------------------------
Owner Hub Location Book Value
- - - -------------------------------------------------------------------------------
Primary Borrower Scotland $0
- - - -------------------------------------------------------------------------------
Texas Sub Houston(1) $2,098,715
- - - -------------------------------------------------------------------------------
Texas Sub Scotland $343,502
- - - -------------------------------------------------------------------------------
Texas Sub Singapore $16,073
- - - -------------------------------------------------------------------------------
(1) Assets are warehoused pursuant to a Warehouse Operating Agreement made as
of December 29, 1997 between Customized Transportation, Inc. ("CTI,,) and
IEC Electronics Corp. A copy of such Agreement (the "Warehouse
Agreement,,) is attached to Amendment No. 1 to the Credit Agreement. The
Warehouse Agreement has been or is being amended pursuant to Amendment to
Warehouse Operating Agreement dated as of November 1, 1998 between CTI and
the Primary Borrower; and the Warehouse Agreement is being or has been
assigned by the Primary Borrower to Texas Sub pursuant to an Assignment of
Warehouse Operating Agreement dated as of October 28, 1998 between Primary
Borrower and Texas Sub. Copies of such Amendment to Warehouse Operating
Agreement and such Assignment of Warehouse Operating Agreement are
attached to Amendment No. 1 to the Credit Agreement.
Page 63 of 112
EXHIBIT 4
Letters to CTI
, 1998
------ --
Customized Transportation, Inc.
10407 Centurion Parkway, Suite 400
Jacksonville, Florida 32256
Attn: David J. Siler, Vice President and Controller
Re: Warehouse Operating Agreement dated December 29, 1997 (the
"Agreement,,) by and between Customized Transportation, Inc.
("CTI,,) and IEC Electronics Corp. ("IEC,,) [as amended by
Amendment to Warehouse Operating Agreement dated as of November
1, 1998, and as assigned by IEC to IEC Electronics - Edinburg,
Texas, Inc. ("IEC Texas,,)].
Dear Mr. Siler:
On behalf of IEC, IEC Texas and The Chase Manhattan Bank, as
Administrative Agent, we write to inform you that IEC has entered into financing
agreements with The Chase Manhattan Bank and certain other lending institutions
(collectively, the "Lenders,,).
Pursuant to the financing agreements entered into with the Lenders, (a)
IEC and IEC Texas have each granted the Lenders and The Chase Manhattan Bank, as
Administrative Agent for the Lenders (the "Administrative Agent,,), a security
interest in, among other things, all of their respective inventory now and
hereafter stored with CTI from time to time pursuant to the Agreement (the
"Materials,,) and any related documents of title that may from time to time be
issued by CTI under the Agreement and (b) IEC and IEC Texas have each agreed not
to enter into any new agreements with CTI regarding storage of the Materials,
nor to revise or amend the Agreement, without the Administrative Agent's prior
written approval.
Very truly yours,
THE CHASE MANHATTAN BANK, IEC ELECTRONICS CORP.
as ADMINISTRATIVE AGENT
for the LENDERS
By: By:
------------------------- -------------------------------
Its: Its:
IEC ELECTRONICS-EDINBURG, TEXAS, INC.
By:
--------------------------------
Its:
Page 64 of 112
EXHIBIT 4
(continued)
---------- --, ----
Customized Transportation, Inc.
10407 Centurion Parkway, Suite 400
Jacksonville, Florida 32256
Attn: David J. Siler, Vice President and Controller
Re: Warehouse Operating Agreement dated December 29, 1997 (the
"Agreement,,) by and between Customized Transportation, Inc.
("CTI,,) and IEC Electronics Corp. ("IEC,,) [as amended by
Amendment to Warehouse Operating Agreement dated as of November
1, 1998, and as assigned by IEC to IEC Electronics - Edinburg,
Texas, Inc. ("IEC Texas,,)].
Dear Mr. Siler:
IEC and IEC Texas hereby elect, pursuant to Section 3.1 of the Agreement,
to terminate the Agreement effective . Terms defined in the
---------
Agreement are used herein as so defined.
By copy of this letter, IEC and IEC Texas are providing notice of the
above termination to Compaq Computer Corporation, pursuant to Section 3.3 of the
Agreement.
Written instructions for removal of all of IEC's and IEC Texas' materials
from CTI's facility on or before the effective date of the above termination
shall be provided under separate cover.
IEC ELECTRONICS CORP.
By:
------------------------------
Its:
IEC ELECTRONICS-EDINBURG, TEXAS, INC.
By:
-------------------------------
Its:
cc: Compaq Computer Corporation
Page 65 of 112
EXHIBIT 4
(continued)
----- --, ----
Customized Transportation, Inc.
10407 Centurion Parkway, Suite 400
Jacksonville, Florida 32256
Attn: David J. Siler, Vice President and Controller
Re: Warehouse Operating Agreement dated December 29, 1997 (the
"Agreement,,) by and between Customized Transportation, Inc.
("CTI,,) and IEC Electronics Corp. ("IEC,,) [as amended by
Amendment to Warehouse Operating Agreement dated as of November
1, 1998, and as assigned by IEC to IEC Electronics - Edinburg,
Texas, Inc. ("IEC Texas,,)].
Dear Mr. Siler:
Reference is made to a letter dated sent by IEC and IEC
-------------
Texas to CTI, in which IEC and IEC Texas served notice of termination of the
Agreement pursuant to Section 3.1 of the Agreement. Terms defined in the
Agreement are used herein as so defined.
As required by Section 3.4 of the Agreement, IEC and IEC Texas hereby
instruct CTI to ship all Materials presently held by CTI pursuant to the
Agreement on the date, to the address, and by the shipping method set forth
below.
Date:
Method of Shipment:
Address:
IEC ELECTRONICS CORP.
By:
------------------------------
Its:
IEC ELECTRONICS-EDINBURG, TEXAS, INC.
By:
--------------------------------
Its:
Page 66 of 112
EXHIBIT 4a
SCHEDULE 3.2
to
Security Agreement
granted by
IEC Electronics - Edinburg, Texas, Inc. (the "Guarantor,,)
in favor of
The Chase Manhattan Bank, as "Administrative Agent,,, and the "Lenders,,
under a Credit Agreement (the "Credit Agreement,,) among the Debtor,
the Administrative Agent and the Lenders
dated as of May 15, 1998 (collectively as the "Secured Party,,)
The Guarantor's exact legal name: IEC Electronics - Edinburg, Texas, Inc.
All names, if any, other than the name set forth above, under which the
Guarantor conducts business (if none, insert "None,,): None
Principal place of business of the Guarantor:
1920 SE Industrial Park Drive
Edinburg, TX 78539
Chief executive office of the Guarantor:
Russell E. Stingel
Chief Executive Officer
All other places of business, if any, of the Guarantor (if none, insert
"None,,): None
All locations of inventory of the Guarantor: Scotland; Guarantor's principal
place of business as set forth above; and Guarantor's location for
Warehouse Inventory described in Schedule 3.20 to the Credit Agreement,
as amended by Amendment No. 1 thereto.
All prior names of the Guarantor, if any (if none, insert "None,,): Calidad
Electronics, Inc.
Page 67 of 112
EXHIBIT 10.9
AS AMENDED THROUGH 2/25/98
IEC ELECTRONICS CORP.
1993 STOCK OPTION PLAN
1. Title and Purpose. The plan described herein shall be known as the "IEC
Electronics Corp. 1993 Stock Option Plan" (the "Plan"). The purpose of the Plan
is to advance the interests of IEC Electronics Corp. (the "Company") and its
stockholders by strengthening the Company's ability to attract and retain
individuals of training, experience, and ability as officers, key employees,
directors and consultants and to furnish additional incentive to such key
individuals to promote the Company's financial success by providing them with an
equity ownership in the Company commensurate with Company performance, as
reflected in increased stockholder value. It is the intent of the Company that
such individuals be encouraged to obtain and retain an equity interest in the
Company and each Participant will be specifically apprised of said intent.
2. Definitions. As used herein, the following words or terms have the
meaning set forth below. The masculine gender is used throughout the Plan but is
intended to apply to members of both sexes.
2.1 "Board" means the Board of Directors of the Company, except
that, whenever action is to be taken under the Plan with respect to a Reporting
Person, "Board" shall mean only such directors who are disinterested persons
within the meaning of Rule 16b-3 under the Exchange Act or any successor rule.
2.2 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute.
2.3 "Committee" means the Compensation Committee of the Board. To
the extent that the Committee delegates its power to grant Options as permitted
by Section 4.2, all references in the Plan to the Committee's authority to grant
Options and determinations with respect thereto shall be deemed to include the
Committee's delegate or delegates.
2.4 "Common Stock" or "Stock" means the Company's $.01 par value
Common Stock..
2.5 "Company" means IEC Electronics Corp., a corporation established
under the laws of the State of Delaware, and its subsidiaries.
2.6 "Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
2.7 "Disability" means a physical or mental condition of such a
nature that it would qualify a Participant for benefits under the Company's
long-term disability insurance plan.
2.8 "Disinterested Person" shall have the same meaning as defined in
Rule 16b-3(c)(2) promulgated by the Securities and Exchange Commission pursuant
to its authority under the Exchange Act.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
2.10 "Fair Market Value" in the case of a share of Common Stock on a
particular day, means (a) if the primary market for the Common Stock is a
national securities exchange, the NASDAQ National Market System, or other market
quotation system in which last sale transactions are reported on a
contemporaneous basis, the last reported sale price of the Common Stock on such
exchange or in such quotation system for that day or, if there shall not have
been a sale or such exchange or reported through such system on such trading
day, the closing or last bid quotation therefor on such exchange or quotation
system on such trading day; (b) if the primary market for the Common Stock is
not such an exchange or quotation market in which transactions are
contemporaneously reported, the closing or last bid quotation in the
over-the-counter market on such trading day as reported by the National
Association of Securities Dealers through NASDAQ, its automated system for
reporting quotations, or its successor, or such other generally accepted source
of publicly reported bid quotations as the Company may reasonably designate.
2.11 "Incentive Stock Option" ("ISO") means an Option which is
intended to satisfy the requirements of Section 422 of the Code or any successor
provision.
2.12 "Non-Employee Director" means a member of the Board who is not
an employee of the Company.
2.13 "Non-Employee Director Stock Option" ("NEDSO") means a
Nonstatutory Stock Option granted to a Non-Employee Director of the Company.
2.14 "Nonstatutory Stock Option" ("NSO") means an Option which is
not intended to qualify as an Incentive Stock Option.
2.15 "Option" means any Option granted under the Plan and includes
an Incentive Stock Option, a Nonstatutory Stock Option, a Reload Option and a
Non-Employee Director Stock Option.
Page 68 of 112
2.16 "Option Price" means the purchase price per share of Common
Stock upon the exercise of an Option.
2.17 "Outside Director" shall have the same meaning as defined or
interpreted for purposes of Section 162(m) of the Code.
2.18 "Participant" means an individual who has been granted an
Option under the Plan.
2.19 "Reload Option" means an Option granted upon the delivery of
shares to the Company in payment of another Option for up to the number of
shares delivered to the Company in payment of such other Option.
2.20 "Reporting Person" means a person required to file reports
under Section 16(a) of the Exchange Act or any successor statute.
2.21 "Retirement" means termination of employment with the Company
if such termination of employment constitutes normal retirement, early
retirement, disability retirement or other retirement as provided for at the
time of such termination of employment under the applicable retirement program
then maintained by the Company, provided that the Participant does not continue
in the employment of the Company.
3. Shares Subject to the Plan. Subject to adjustment as provided in
Section 10.4 below, an aggregate of 1,400,000 shares of Common Stock shall be
available for grant under the Plan. Such shares may be authorized but previously
unissued shares or shares reacquired by the Company, including shares purchased
in the open market. In the event that any outstanding Option granted under the
Plan for any reason expires or is terminated without having been exercised in
full, the shares allocable to the unexercised portion of such Option shall
(unless the Plan shall have been terminated) become available for subsequent
grants of Options under the Plan; provided that in no event may the number of
shares issued hereunder exceed the total number of shares reserved for issuance.
4. Administration of the Plan.
4.1 The Plan shall be administered by the Committee. No individual
may be appointed to the Committee who is not a both a Disinterested Person and
an Outside Director. Grants of NEDSOs and the amounts and nature of such Options
shall be automatic as described in Section 9. Subject to the preceding sentence
and the provisions set forth herein, the Committee shall have full authority to
determine the provisions of Options, to interpret the terms of the Plan and of
Options made under the Plan, to adopt, amend and rescind rules and guidelines
for the administration of the Plan and for its own acts and proceedings and to
decide all questions and settle all controversies and disputes which may arise
in connection with the Plan. The Committee shall report any action taken by it
to the meeting of the Board next following such action.
4.2 To the extent permitted by applicable law, the Committee may
delegate to one or more executive officers who are also directors of the Company
the power to grant Options to Participants who are not Reporting Persons at the
time of such Options and all determinations under the Plan with respect thereto,
provided that the Committee shall fix the maximum amount of Options for such
Participants as a group. Such delegate or delegates shall report any action
taken by it or them to the meeting of the Committee next following such action.
4.3 The decision of the Committee on any matter as to which the
Committee is given authority shall be final and binding on all persons
concerned. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
under it.
5. Indemnification of the Committee. In addition to such other rights of
indemnification as they may have as directors of the Company or as members of
the Committee or otherwise, the members of the Committee shall be indemnified by
the Company as and to the fullest extent permitted by law, including without
limitation, indemnification against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any or them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Options
granted hereunder, and against all amounts paid by them in settlement thereof
provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member is liable
for negligence, bad faith or misconduct in the performance of his duties;
provided that within 60 days after institution of such action, suit or
proceeding a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
Page 69 of 112
6. Types of Options Under the Plan. Options under the Plan may be in the
form of any one or more of the following:
a. Incentive Stock Options (ISOs)
b. Nonstatutory Stock Options (NSOs)
c. Reload Options
d. Non-Employee Director Stock Options (NEDSOs)
All Options shall be subject to the terms and conditions set forth herein and to
such other terms and conditions as may be established by the Committee.
Determinations by the Committee under the Plan including without limitation,
determinations of the Participants, the form, amount and timing of Options, the
terms and provisions of Options, and the agreements evidencing Options, need not
be uniform and may be made selectively among Participants who receive, or are
eligible to receive, Options hereunder, whether or not such Participants are
similarly situated. Except as otherwise provided by the Plan or a particular
Option, any determination with respect to an Option may be made by the Committee
at the time of grant of the Option or any time thereafter.
7. Incentive Stock Options and Nonstatutory Stock Options.
7.1 Eligibility. Any officer or key employee of the Company
shall be eligible to receive an ISO or NSO under the Plan. In addition, any
consultant to the Company, who. in the opinion of the Committee, is in a
position to have a significant effect upon the Company's business, shall be
eligible to receive a NSO under the Plan. No ISO or NSO may be granted to an
individual under this Plan at a time when such individual is serving as a member
of the Committee. An employee owning stock possessing more than 10 percent of
the total combined voting power or value of all classes of stock of the Company
or any parent or subsidiary corporation ("Ten Percent Stockholder") is not
eligible to receive an ISO unless the option price is at least 110 percent of
the fair market value of the Common Stock at the time the ISO is granted and the
ISO option by its terms is not exercisable more than 5 years from the date it is
granted. Common Stock which a grantee may purchase under outstanding Options
shall be treated as stock owned by such grantee for purposes of this
calculation. The Committee also may authorize the granting of ISOs and NSOs to
prospective employees. In the case of a prospective employee, the grant of an
ISO or NSO shall be the on condition of employment by the Company in a key
position, and the date of the grant of the ISO or NSO shall be the date such
employment begins or such later date as the Committee may have specified when
authorizing the grant.
7.2 Grant of ISOs and NSOs.
7.2.1 From time to time while the Plan is in effect, the
Committee may, in its absolute discretion, select from among persons eligible to
receive ISOs and NSOs (including persons to whom ISOs and NSOs were previously
granted) those persons to whom ISOs and NSOs are to be granted.
7.2.2 The Committee shall, in its absolute discretion,
determine the number of shares of Common Stock to be subject to each ISO and NSO
made by it under the Plan, provided, however, that the maximum number of shares
of Common Stock with respect to which ISOs and NSOs may be granted to any
individual in any one taxable year of the Company shall not exceed 200,000
shares (the "Maximum Annual Grant").
7.2.3 The Committee shall determine at the time of each grant
hereunder whether the option is an ISO or NSO. The terms and conditions of ISOs
shall be subject to and comply with Section 422 of the Code or any successor
provision, and any regulations thereunder.
7.3 Option Price. The option price per share of Common Stock with
respect to each ISO and NSO, shall not be less than 100% of the Fair Market
Value per share at the time the ISO or NSO is granted.
7.4 Period of Options. An ISO and NSO shall be exercisable during
such period of time as the Committee may specify, subject, in the case of ISOs,
to any limitation required by the Code. No ISO or NSO shall be exercisable after
the expiration of ten years from the date the ISO or NSO is granted.
7.5 Exercise of Options. Each ISO and NSO shall be made exercisable
at such time or times as the Committee shall determine. In the case of an ISO or
NSO made exercisable in installments, the Committee may later determine to
accelerate the time at which one or more of such installments may be exercised.
The Committee may impose such conditions with respect to the exercise of ISOs
and NSOs, including conditions relating to applicable federal or state tax or
securities laws, as it considers necessary or advisable and such condition may
differ with respect to each Participant.
7.6 Limitation on Grant of ISOs. The aggregate fair market value
(determined as of the time the ISO is granted) of the shares with respect to
which ISOs are exercisable for the first time by a grantee during any calendar
year (under all such plans of the Company) shall not exceed $100,000.
7.7 Options Non-Transferable. No ISO or NSO granted under the Plan
shall be transferable other than by will or by the laws of descent and
distribution. No interest of a Participant under an ISO or NSO or the Plan shall
be subject to the attachment, execution, garnishment, sequestration, the laws of
bankruptcy or any other legal equitable process. During the lifetime of the
Participant, ISOs and NSOs shall be exercisable only by the Participant who
received them
Page 70 of 112
7.8 Termination of Emp1oyment.
7.8.1 Death During or After Employment. If a Participant dies
during employment or within three (3) months after terminating employment, and
at a time when the Participant is entitled to exercise an ISO or NSO, then at
any time or times within one year after death (or such greater or lesser period
after death as may be specified in the documentation evidencing the ISO or NSO)
such ISO or NSO may be exercised, but only as to any or all of those shares
which the Participant was entitled to purchase immediately prior to the
Participant's death (unless the Committee within thirty (30) days after the
Participant's death shall have accelerated the vesting of the ISO or NSO) ISOs
or NSOs exercisable after death may be exercised by the Participant's Designated
Beneficiary, and except as so exercised shall expire at the end of the specified
post-death exercise period. In no event, however, may any ISO or NSO granted
under the Plan be exercised after the expiration of the ISO or NSO exercise
period established at the time of grant.
7.8.2 Retirement or Disability. In the event of a
Participant's Retirement or Disability at a time when the Participant is
entitled to exercise an ISO or NSO, then within three months after Retirement or
one year after Disability (or such greater or lesser period after Retirement or
Disability as may be specified in the documentation evidencing the ISO or NSO)
the Participant may exercise such ISO or NSO only as to those shares which the
Participant was entitled to purchase immediately prior to such Retirement or
Disability (unless the Committee within thirty (30) days after the Participant's
Retirement or Disability shall have accelerated the vesting of the ISO or NSO).
If the Participant dies within the specified post-Retirement or post-Disability
exercise period, the Participant's ISO or NSO may be exercised by the
Participant's Designated Beneficiary, to the same extent as if the deceased
Participant had survived, during the greater of one year from the date of such
death or, if a post-Retirement or post-Disability exercise period greater than
three months or one year was specified in the ISO or NSO documentation, the
remainder of such longer period.
Except as exercised within the applicable period
described above, each ISO or NSO shall expire at the end of such period. In no
event, however, may any ISO or NSO granted under the Plan be exercised after the
expiration of the ISO or NSO exercise period established at the time of grant.
7.8.3 Other Terminations of Employment. If the employment of a
Participant is terminated for cause, the Participant's option rights, both
accrued and future, under any then outstanding ISO or NSO shall be forfeited and
terminated immediately and may not thereafter be exercised to any extent.
If the employment of a Participant is terminated for
any reason other than cause, death, Retirement or Disability at a time when the
Participant is entitled to exercise an ISO or NSO, then within three months
after such termination of employment (or such greater or lesser period after
termination of employment as may be specified in the documentation evidencing
the ISO or NSO), the Participant may exercise such ISO or NSO only as to those
shares which the Participant was entitled to purchase immediately prior to such
termination of employment (unless the Committee within thirty (30) days after
the Participant's termination of employment shall have accelerated the vesting
of the ISO or NSO). If the Participant dies within the specified
post-termination of employment exercise period, the Participant's ISO or NSO may
be exercised by the Participant's Designated Beneficiary, to the same extent as
if the deceased Participant had survived, during a period equal to the greater
of one year form the date of such death or the remainder of such specified
post-termination of employment exercise period.
If the Committee so decides, an ISO or NSO may provide
that a leave of absence granted by the Company is not a termination of
employment for the purpose of this subsection 7.8.3 and in the absence of such a
provision the Committee or the Board may in any particular case determine that
such a leave of absence is not a termination of employment for such purpose.
8. Reload Options
8.1 Authorization of Reload Options.
8.1.1 Concurrently with or subsequent to the grant of any ISO,
NSO, or Reload Option to any Participant, the Committee may authorize Reload
Options to purchase a number of shares of Common Stock. The number of Reload
Options shall equal the number of shares of Common Stock used to exercise the
underlying ISO, NSO, or Reload Option.
8.1.2 The grant of a Reload Option will automatically become
effective upon the exercise of the underlying ISO, NSO, or Reload Option through
the use of shares of Common Stock held by a Participant for at least six months.
8.1.3 Notwithstanding the fact that the underlying option may
be an ISO, a Reload Option is not intended to qualify as an ISO under Section
422 of the Code.
8.2 Reload Option Price. The option price per share of Common Stock
deliverable upon the exercise of a Reload Option shall be the Fair Market Value
of a share of Common Stock on the date the grant of the Reload Option becomes
effective.
8.3 Term and Exercise. Each Reload Option is fully exercisable six
months from the effective date of grant. The term of each Reload Option shall be
equal to the remaining option term of the underlying ISO, NSO, or Reload Option.
Page 71 of 112
8.4 Termination of Employment. No additional Reload Options shall be
granted to Participants when ISOs, NSOs, or Reload Options are exercised
pursuant to the terms of this Plan following termination of the Participant's
employment.
8.5 Applicability of Sections 7.7 and 7.8. The terms and provisions
of Sections 7.7 and 7.8 shall apply equally to Reload Options. Sections 7.7 and
7.8 are incorporated by reference in this Section 8 as though fully set forth
herein.
9. Non-Employee Director Stock Options
9.1 Eligibility. Each Non-Employee Director of the Board shall
receive a NEDSO as determined hereunder without further action by the Board or
Committee.
9.2 Option Grant Dates. Subject to the approval of the Plan by the
stockholders at the 1994 Annual Meeting, a NEDSO shall be granted to each
Non-Employee Director automatically every three years on the date of grant,
commencing on the date of the 1994 Annual Meeting of stockholders and every
three years thereafter on the date of the Annual Meeting of stockholders.
Non-Employee Directors elected by the Board to fill vacancies and newly created
directorships in the interim between grant dates will receive a pro rated NEDSO
based upon the number of full months such Non-Employee Director will serve
between such election and the next grant date.
9.3 Option Formula. Commencing on the date of the 1994 Annual
Meeting of stockholders, each Non-Employee Director will receive a NEDSO to
purchase 6,000 shares of Stock on each grant date, without further action by the
Board or Committee. Commencing on the date of the 1998 Annual Meeting of
stockholders and every three years thereafter on the date of Annual Meeting of
stockholders, each Non-Employee Director will receive a NEDSO to purchase 9,000
shares of stock on each grant date, without further action by the Board or
Committee.
9.4 Period of Options. Except as otherwise provided herein. each
NEDSO will be exercisable as follows: 33 1/3% six months from the date of grant;
66 2/3% one year from the date of grant; and 100% two years from the date of
grant. All NEDSOs shall terminate upon the expiration of five years from the
date upon which such NEDSOs were granted (subject to prior termination as
hereinafter provided).
9.5 Option Price. The price per share of Stock at which a NEDSO may
be exercised shall be equal to 100% of the Fair Market Value of the price per
share of Stock on the date the NEDSO is granted.
9.6 Options Non-Transferable. No NEDSO granted under the Plan shall
be transferable other than by will or by the laws of descent and distribution.
No interest of a Non-Employee Director under a NEDSO or the Plan shall be
subject to attachment, execution, garnishment, sequestration, the laws of
bankruptcy or any other legal or equitable process. During the lifetime of the
Non-Employee Director, NEDSOs shall be exercisable only by the Non-Employee
Director who received them.
9.7 Death or Disability of Non-Employee Director. If a Non-Employee
Director shall terminate performance of services for the Company because of
death or Disability, or shall die after termination of performance of services
for the Company but while the Non-Employee Director could have exercised a
NEDSO, that NEDSO may be exercised, to the extent that the Non-Employee Director
was entitled to do so at the date of termination of performance of services, at
any time, or from time to time, within one year after the date of death or
termination of performance of services because of Disability, but in no event
later than the expiration date specified pursuant to Section 9.4. In the case of
death, exercise may be made by the Non-Employee Director's Designated
Beneficiary.
9.8 Termination of Services as Non-Employee Director. If a
Non-Employee Director's performance of services for the Company shall terminate
for any reason other than death or Disability, the Non-Employee Director must
exercise such NEDSO, to the extent the Non-Employee Director was entitled to do
so at the date of termination of performance of services, at any time, or from
time to time, within three months after the date of termination of performance
of services, but in no event later than the expiration date specified pursuant
to Section 9.4; provided, however, in the case of termination of performance of
services for cause, the NEDSO shall cease to be exercisable on the date of such
termination.
Page 72 of 112
10. General Provisions Applicable to All Options.
10.1 Exercise of Options; Payment of Option Price. Options may
be exercised (in full or in part) only by written notice of exercise delivered
to the Company at its principal executive office, accompanied by payment equal
to the full Option Price for the shares of Stock which are exercised. The Option
Price of each share of Common Stock purchased upon exercise of an Option shall
be paid in full (a) in cash at the time of exercise, (b) with shares of Common
Stock owned by the Participant, (c) by delivering to the Company (i) irrevocable
instructions to deliver the stock certificates representing the shares of Stock
for which the Option is being exercised, directly to a broker, and (ii)
instructions to the broker to sell such shares of Stock and promptly deliver to
the Company the portion of the proceeds equal to the total Option Price, or (d)
in any combination thereof. For purposes of payment in shares of Common Stock,
such shares shall be valued at their Fair Market Value on the date of exercise
of the Option and shall have been held by the Participant for a period of at
least six (6) months.
10.2 Documentation of Options. Neither anything contained in the
Plan nor in any resolutions adopted or to be adopted by the Board or the
stockholders nor any action taken by the Committee shall constitute the granting
of any Option. The granting of an Option shall take place only when a written
Option Agreement shall have been duly executed and delivered by the Company and
the Participant. Each Option Agreement shall specify the terms and conditions of
the Option and contain such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles. The Option Agreement with respect to ISOs shall
provide, among other things, that the Participant shall advise the Company
immediately upon any sale or transfer of shares of Common Stock received upon
exercise of the Option to the extent such sale or transfer takes place prior to
the later of (a) two (2) years from the date of grant or (b) one (1) year from
the date of exercise.
10.3 Tax Withholding. The Committee shall require, on such terms as
it deems necessary, that the Participant pay to the Company or make other
satisfactory provision for payment of, any federal, state or local taxes
required by law to be withheld in respect to Options under the Plan. In the
Committee's discretion, such tax obligations may be paid in whole or in part in
shares of Common Stock, including shares retained from the Option creating the
tax obligation, valued at their Fair Market Value on the date of delivery. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.
10.4 Option Adjustments. In the event of a stock dividend, stock
split or other change in corporate structure or capitalization affecting the
Common Stock or any other transaction (including, without limitation, an
extraordinary cash dividend) which, in the determination of the Committee,
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made available under
the Plan, then the Committee shall equitably adjust any or all of (i) the number
and kind of shares in respect of which Options may be made under the Plan (ii)
the Maximum Annual Grant, (iii) the number and kind of shares subject to
outstanding Options, and (iv) the Option price with respect to any of the
foregoing, provided that the number of shares subject to any Option shall always
be a whole number. In the event of any tender offer or exchange offer (other
than an offer by the Company) for the Company's Common Stock, or a dissolution
or liquidation of the Company, or a merger or consolidation or similar
transaction in which the Company is not the surviving company, or a sale,
exchange or other disposition of all or substantially all of the Company assets,
the Committee, in its sole discretion, may, as to any outstanding Options, make
such substitution or adjustment in the aggregate number of shares reserved for
issuance under the Plan and in the number and purchase price (if any) of shares
subject to such Options as it may determine, make outstanding Options fully
exercisable, or amend or terminate such Options upon such terms and conditions
as it shall provide (which, in the case of the termination of the vested portion
of any Option, shall require payment or other consideration which the Committee
deems equitable in the circumstances).
10.5 Amendment of Options. The Committee may modify or amend any
outstanding Option if it determines, in its sole discretion, that amendment is
necessary or advisable in the light of any addition to or change in the Code or
in the regulations issued thereunder, or any federal or state securities laws or
other law or regulation, which change occurs after the date of grant of the
Option and by its terms applies to the Option. In addition, subject to the terms
and conditions and within the limitations of the Plan the Committee may modify,
amend, extend or renew outstanding Options granted under the Plan, or accept the
surrender of outstanding Options under the Plan or under any other stock option
plan of the Company (to the extent not theretofore exercised) and authorize the
granting of new Options under the Plan in substitution therefor (to the extent
not theretofore exercised). No amendment of an outstanding Option, however, may,
without the consent of the Participant, make any changes which would adversely
effect the rights of such Participant.
Page 73 of 112
11. Financing. In the discretion of the Committee, the Company may
guarantee bank loans or make loans to a Participant to finance the Option Price
of the shares purchased upon the exercise of an Option and also to finance
payment by the Participant of income taxes incurred with such exercise upon the
following terms and conditions:
11.1 Term of Loan. Each loan or guaranty will extend for a period of
not more than five (5) years.
11.2 Promissory Note. Each loan will be evidenced by a promissory
note given by the Participant and for which the Participant shall have full
personal liability. Each such note shall bear interest at such rate per annum as
determined by the Committee which interest shall be not less than the rate in
effect for the Company's senior indebtedness to a Financial institution and
shall be payable at such times as determined by the Committee but at least no
less frequently then annually. Payments of principal, or installments thereof,
need not be required by the terms of the notes, but may be required thereby if
so determined by the Committee. Principal and interest may be prepaid in whole
or in part, from time to time, without penalty. Each such note shall in all
events become due and payable without demand on the Fifth anniversary of the
date of the note, or upon the Participant's failure to pay any installment of
principal and interest when due or within 30 days thereafter, or immediately
upon the insolvency or bankruptcy of the Participant, or within 30 days from the
date of termination of his employment or directorship or office for whatever
cause, excepting only death, Disability and Retirement. In the event of the
death of a Participant, such note shall become due and payable without demand 9
months from the date of such death. In the event of the Disability or Retirement
of a Participant such note shall become due and payable without demand 3 months
from the date of such permanent disability or approved retirement.
11.3 Pledge of Shares. Each note or guaranty will be secured by a
pledge of the shares purchased with the proceeds of the loan which shall be
deposited with the Company. Dividends paid on shares subject to the pledge shall
be first applied against interest charges due upon the bank loan, or the note
secured, with any balance applied to reduce the principal thereof. Regardless of
any other provision of this Plan, shares pledged to secure the guaranty or note
may not be withdrawn from the pledge unless the proportionate amount of the
guaranteed bank loan or the note secured thereby shall be immediately repaid.
11.4 Other Terms and Conditions. All such notes, guaranty and
pledges may contain such further terms and conditions consistent with this Plan,
including provisions for additional collateral security, as may be determined by
the Committee. from time to time.
11.5 Approval by Stockholders. Approval and adoption of this Plan by
the stockholders of the Company shall constitute full and complete authorization
for any guaranty, loan, or interest reimbursement made to or on behalf of
Participant hereunder.
11.6 Loans to Non-Employee Directors and Consultants.
Notwithstanding anything contained herein to the contrary, each note or guaranty
representing a loan or guaranty to a Non-Employee Director or Consultant shall
be secured by a pledge of shares equal to twice their maximum loan value as
defined in Federal Reserve Regulation G (12 CFR Part 207) or by such other or
additional collateral security as the Committee deems appropriate and in the
best interests of the Company.
12. Miscellaneous
12.1 No Right to Employment. No person shall have any claim or right
to be granted an Option, and the grant of an Option shall not be construed as
giving a Participant the right to continued employment. The Company expressly
reserves the right at any time to terminate the employment of a Participant free
from any liability or claim under the Plan except as may be expressly provided
in the applicable Option.
12.2 No Right to Continue as a Director. The granting of a NEDSO
shall not constitute or be evidence of any agreement or understanding, express
or implied, that the Company will retain a Non-Employee Director for any period
of time.
12.3 No Rights as Stockholder. Subject to the provisions of the
applicable Option, no Participant shall have any rights as a stockholder with
respect to any shares of Common Stock to be distributed under the Plan until he
becomes the holder thereof.
12.4 No Fractional Shares. No fractional shares of Common Stock
shall be issued under the Plan, and cash shall be paid in lieu of any fractional
shares in settlement of Options granted under the Plan.
12.5 Unfunded Plan. The Plan shall be unfunded, shall not create (or
be construed to create) a trust or a separate fund or funds, and shall not
establish any fiduciary. relationship between the Company and any Participant or
other person.
12.6 Successors and Assigns. The Plan shall be binding on all
successors and assigns of the Participant. including without limitation the
Participant's Designated Beneficiary or any receiver or trustee in bankruptcy or
representative of the Participant's creditors.
Page 74 of 112
12.7 Compliance With Other Laws and Regulations. The Plan, the grant
and exercise of Options under the Plan, and the obligation of the Company to
transfer shares under such Options shall be subject to all applicable federal
and state laws, rules and regulations, including those related to disclosure of
Financial and other information to Participants, and to any approvals by any
government or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Stock prior to (a)
the listing of such shares on any stock exchange on which the Stock may then be
listed, where such listing is required under the rules or regulations of such
exchange, and (b) the compliance with applicable federal and state securities
laws and regulations relating to the issuance and delivery of such certificates;
provided, however, that the Company shall make all reasonable efforts to so list
such shares and to comply with such laws and regulations.
12.8 Compliance with Rule 16b-3. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Committee.
12.9 Amendment of Plan. The Board may amend, suspend or terminate
the Plan or any portion thereof at any time in such respects as the Board may
deem advisable (including, but not limited to, amendments which the Board deems
appropriate to enhance the Company's ability to claim deductions related to
stock option exercises), except that it may not amend the Plan without
stockholder approval where the absence of such approval would cause the Plan to
fail to comply with Rule 16b-3 under the Exchange Act, the performance based
compensation requirements under Section 162(m) of the Code, Section 422 of the
Code, the requirements of any securities exchange on which the shares of Common
Stock are then listed, or any other requirement of applicable law or regulation.
The Board may not amend Section 9 more than once every six months, other than to
conform with changes in the Code or the rules and regulations thereunder. The
Committee may make non-material amendments to the Plan. No amendment shall apply
to adversely affect any Participant with respect to whom an Option shall
heretofore have been granted.
12.10 Governing Law. To the extent not superseded by federal law,
the provisions of the Plan shall be governed by and interpreted in accordance
with the laws of the State of Delaware.
13. Effective Date of Plan: Term of Plan. The Plan shall be effective as
of August 4, 1993, the date on which the Board adopted the Plan, subject to the
approval by the stockholders at the 1994 Annual Meeting of Stockholders pursuant
to the provisions of Section 12.8. The Plan shall terminate on August 3, 2003
and no Options shall be granted under the Plan after that date, provided,
however, that the Plan and all Options granted under the Plan prior to such date
shall remain in effect until such Options have been satisfied or terminated in
accordance with the Plan and the terms of such Options.
Page 75 of 112
EXHIBIT 10.14
September 5, 1997
Diana R. Kurty CPA
57 Cambric Circle
Pittsford, NY 14534
Dear Diana:
We are pleased to offer you the position of Vice President and Chief
Financial Officer of IEC Electronics Corp. (IEC) upon the following terms and
conditions:
1. Compensation
(a) Base Salary. For all services rendered to IEC in any capacity,
IEC shall pay you a salary at the annual rate of $130,000.00 ("Base Salary").
The Base Salary shall be payable in accordance with the customary payroll
practices of IEC, subject to such deductions and withholdings as may be required
by law or agreed to by you.
(b) Hiring Bonus. IEC shall pay you, within 90 days after the
commencement of your employment, a hiring bonus in the amount of $15,000.00.
(c) Performance Bonus. Beginning with the fiscal year commencing
October 1, 1997, you will be eligible for participation in the key employee
bonus program. This program is based on a combination of company and individual
performance. I plan to have specific goals tied to bonuses, but details have yet
to be worked out.
2. Benefits. You will be entitled to all benefits of full time employees or
officers as set forth in IEC's Policy Manual as to which you meet the
eligibility requirements universally applicable to all employees and such other
benefit as may be accorded to executives from time to time. Enclosed is
information on company benefits including medical, life insurance and long term
disability. Also, after six months, you may participate in our 401K plan with a
company match of 33-1/3% and after two years you are eligible to participate in
the company's profit sharing plan.
3. Stock Options. IEC will grant you an incentive stock option for 25,000
shares of IEC common stock pursuant to the terms and provisions of IEC's 1993
Stock Option Plan. Said option will be granted as of the date on which it is
approved by IEC's Board of Directors, at an exercise price equal to the fair
market value of IEC's common stock on that date. The option will vest in 25%
increments beginning one year from the date of grant.
If you employment is terminated by IEC for any reason other than
Cause (as hereinafter defined), or death or disability of if you terminate your
employment with IEC for Good Reason (as hereinafter defined), the option will
become fully vested and exercisable. In addition, in the event of a merger or
consolidation in which IEC is not the surviving company or a sale or exchange of
all or substantially all of IEC's assets ("Change of Control Event"), if the
surviving or acquiring company does not assume the option upon the same terms
and conditions, then the option shall become fully vested and exercisable
immediately prior to such event.
Page 76 of 112
4. Severance. In the event of the termination of your employment (a) by IEC
for any reason other than Cause (as hereinafter defined), death or disability or
(b) upon the occurrence of a Change of Control Event, and if within 90 days of
such Event you voluntarily leave or are terminated by the surviving company, or
(c) by you for Good Reason (as hereinafter defined), IEC will pay you for a
period of six months following such termination an amount equal to your Base
Salary at the annual rate then in effect. Such amount shall be payable
bi-weekly. In addition, during such six month period unless you accept other
full-time employment, IEC will provide you with such benefits, if any, as may be
applicable pursuant to IEC's Policy Manual. All payments made to you hereunder
will be subject to all applicable employment and withholding taxes.
5. Confidentiality and Non-Competition. As a condition of employment and in
consideration of the severance payments, you will be expected to execute prior
to the commencement of your employment a Confidentiality and Non-Competition
Agreement in the form attached hereto as Exhibit A prohibiting competition
during your employment and for a period of six months thereafter.
6. Certain Definitions.
(a) Cause. Cause shall mean the existence or occurrence of any of
the following: (i) the failure or refusal to perform such services as may
reasonably be delegated or assigned to you consistent with your position, by the
Chief Executive Officer, the Chief Operating Officer or the Board of directors,
(ii) gross negligence in connection with the performance of your duties, (iii)
the commission of acts involving dishonesty, willful misconduct, breach of
fiduciary duty, fraud, or any similar offense which materially affects your
ability to perform your duties for IEC or may materially adversely affect IEC,
(iv) the conviction of a felony, or (v) the violation or breach in any respect
of any material term, covenant, or condition contained in this letter or in the
Confidentiality and Non-Competition Agreement.
(b) Good Reason. Good Reason shall mean the occurrence or existence
of any of the following with respect to you: (i) your annual rate of salary is
reduced from the annual rate then currently in effect or your other employee
benefits are in the aggregate materially reduced from those then currently in
effect (unless such reduction of employee benefits applies to employees of IEC
generally), or (ii) your place of employment, without your approval, is moved
more than 30 miles from Newark, New York, or (iii) you are assigned duties that
are demeaning or are otherwise materially inconsistent with the duties of a Vice
President and Chief Financial Officer or (iv) a reasonable determination by you
that, as a result of a Change of Control Event and a change in circumstances
thereafter significantly affecting your position, you are unable to exercise the
authority, powers, functions or duties attached to your position.
Before you may terminate your employment for Good Reason, you must
notify IEC in writing of your intention to terminate and IEC shall have 15 days
after receiving such written notice to remedy the situation, if possible.
Diana, we are sincerely pleased to extend this offer of employment and
look forward to hearing from you soon. If you have any questions, please don't
hesitate to call Joe Schadeberg or me.
Sincerely,
IEC ELECTRONICS CORP.
/s/David W. Fradin
David W. Fradin
Chief Operating Officer
DWF/ls
I accept your offer of employment.
/s/ Diana Kurty 12/2/97
- - - --------------- -------
(Signature) (Date)
Page 77 of 112
Exhibit 10.15
AGREEMENT
CONSULTING AGREEMENT, dated as of March 1, 1998, between IEC
Electronics Corp., a Delaware corporation with its office at 105 Norton
Street, Newark, New York 14513 ("IEC"), and Edward Butka, residing at 1221
Route 31, Macedon, New York 14502 (the "Consultant").
WHEREAS, the Consultant had been employed by IEC as Vice President and
Assistant General Manager; and
WHEREAS, the Consultant retired on February 28, 1998 and the parties
desire to provide for the engagement of the Consultant as a consultant to IEC
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IEC and the Consultant agree as follows:
1. Engagement as Consultant; Term. IEC shall engage the Consultant
and the Consultant shall serve IEC for a period (the "Consulting Period")
upon the terms and conditions of this Agreement, commencing as of the date
hereof and terminating on a date ninety (90) days following written notice
given by either party to the other.
2. Services to be Rendered. During the Consulting Period, the
Consultant agrees to consult with and advise IEC to the best of his abilities
with respect to such matters involving the business and affairs of IEC as may
be reasonably assigned to the Consultant by the President or Chief Executive
Officer or Board of Directors of IEC and as are consistent with the
Consultant's knowledge, abilities and experience. The total number of hours
of service required to be rendered by the Consultant may vary without any
specified minimum or maximum but the parties contemplate that, on average,
they shall not exceed 20 hours per month, which shall include time devoted to
travel undertaken at the request of IEC. The Consultant shall render his
services as requested by IEC, it being in his discretion to determine the
time at which consulting services are to be performed and the number of hours
necessary to perform such services. Nothing herein shall prevent Consultant
from taking extended vacations.
In performing the services required hereunder, the Consultant shall use
his best efforts to promote the best interests of IEC. The Consultant shall
have no liability to IEC arising out of the Consultant's duties hereunder,
and IEC shall hold the Consultant harmless therefrom, provided that such
liability does not arise from the Consultant's negligence or intentional
wrongdoing.
Nothing in this Agreement shall be construed as prohibiting the
Consultant from entering into non-competitive employment or consulting
arrangements with other business entities, subject to the provisions of
Sections 4 and 5 hereof.
3. Compensation. In consideration of the consulting services to be
rendered by the Consultant hereunder, as well as the other agreements of the
Consultant hereunder:
(a) During the Consulting Period IEC shall pay the Consultant
an hourly fee of $55 payable on the first day of each month commencing
March 1, 1998. IEC shall pay or reimburse the Consultant, upon his
submission to IEC of appropriate written receipts, for all reasonable
out-of-pocket expenses incurred by him in connection with his
performance of the services to be rendered hereunder. During the
Consulting Period Consultant may maintain, at his expense, Blue Cross
and Blue Shield medical and hospital insurance ("Medical Insurance") in
accordance with and to the extent permitted by the Company's plans as
in effect from time to time.
(b) During the Non-competition Period described in Section 5,
the Company will bear the expense of such Medical Insurance.
4. Confidentiality. The Consultant acknowledges that as an employee
of IEC he has had, and as a consultant to IEC he may have, access to
proprietary confidential information that directly or indirectly relates to
the business of IEC. The Consultant agrees that he will not, without the
prior written consent of IEC, (a) disclose to any person any information
obtained or developed by him while employed by or engaged as a consultant to
IEC with respect to IEC's business, except information which at the time is
available to others in the business or generally known or available to the
public other than as a result of disclosure by him not permitted hereunder,
or lawfully acquired from a third party who is not obligated to IEC to
Page 78 of 112
maintain such information in confidence ("Confidential Information") or (b)
take with him following the termination of the Consulting Period any
documents or papers relating to any Confidential Information or any property
of IEC.
5. Noncompetition/Non-Solicitation. In light of the special and
unique services that have been and will be furnished to the Company by
Employee, and the Confidential Information that has been disclosed to
Employee by the Company during Employee's relationship with the Company,
Employee agrees that for a period of three (3) years from the expiration of
the Consulting Period (the "Non-Competition Period") Employee will not,
without the written consent of the Company, directly or indirectly, whether
as a principal, agent, officer, director, consultant, employee, partner,
stockholder, or owner of or in any capacity with any corporation,
partnership, business, firm, individual, company, or any entity located in
the United States or Canada, engage in, or assist another to engage in, any
work or activity in any way competitive with the Business of the Company (as
hereinafter defined). However, nothing herein shall prevent Employee from
owning not more than five percent (5%) of the outstanding publicly traded
shares of common stock of a corporation, as to which corporation Employee has
no relationship other than stockholder. In addition, during the
Non-Competition Period, Employee will not, directly or indirectly, (a) induce
or attempt to induce any officer or employee of the Company to leave the
employ of the Company, or in any way interfere with the relationship between
the Company and any officer, employee, director or stockholder thereof, or
(b) hire directly or through another entity any person who was an employee of
the Company at the termination of the Consulting Period, or (c) induce or
attempt to induce any customer, dealer, supplier or licensee to cease doing
business with the Company, or in any way interfere with the relationship
between any such customer, dealer, supplier or licensee and the Company.
Employee specifically agrees that because of Employee's special
expertise and the special and unique services that Employee has been and will
be furnishing the Company, and because the Confidential Information that has
been acquired by Employee or has been disclosed to Employee during the
Employee's employment, the above stated geographic area and time period
during which Employee will not compete are reasonable in scope and duration
and are necessary to afford the Company just and adequate protection against
the irreparable damage which would result to the Company from any activities
prohibited by this section.
For purposes of this section, the "Business of the Company" is that of
a contract manufacturer offering its customers manufacturing and management
services including material procurement and control, engineering services,
manufacturing and test engineering support, statistical quality assurance and
resource management.
6. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the Consultant's consulting obligations
to IEC and may not be changed orally but only by agreement in writing signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
7. Governing Law. This Agreement shall be governed in all respects
by the laws of the State of New York, without giving effect to the principles
of conflicts of law.
8. Parties in Interest; Binding Effect. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and, their
successors. Nothing in this Agreement, expressed or implied, is intended to
confer upon any person other than the parties hereto any rights or remedies
under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
IEC ELECTRONICS CORP.
By:/s/Russell E. Stingel
-----------------------
/s/ Edward Butka
------------------------
Edward Butka
Page 79 of 112
EXHIBIT 10.16
CHANGE-IN-CONTROL AGREEMENT
AGREEMENT, dated as of May 1, 1998, by and between IEC Electronics Corp.,
a Delaware corporation (the "Company"), and Russell E. Stingel, the Chief
Executive Officer and Chairman of the Board of the Company (the "Executive").
WHEREAS, in order to enhance Executive's continued service to the Company
in an effective manner without distraction by reason of the possibility of a
change in control of the Company and in order to assure both the Company and the
Executive of continuity of management in the event of any actual or threatened
change in control of the Company, the Company wishes to provide in this
agreement for severance benefits to the Executive in the event of change in
control of the Company.
NOW, THEREFORE, in consideration of the premises and of Executive agreeing
to continue to serve as an employee of the Company, the parties hereto agree as
follows:
1. Severance Payment. In the event of the termination of employment of
Executive within the two year period following a Change in Control (as
hereinafter defined) of the Company, and such termination is (i) by the Company
for any reason other than Termination for Cause (as hereinafter defined), death
or disability, or (ii) by the Executive for "Good Reason" (as hereinafter
defined), the Company will pay the Executive for a period of three years
following such termination an aggregate amount equal to the product of the sum
of (x) Executive's salary at the annual rate then in effect and (y) the average
annual bonus paid to Executive under the Company's current Incentive Plan or any
successor plan in the three full fiscal years preceding termination multiplied
by 2.9. Payments of such amount will be made in installments which are in
accordance with the customary payroll practices of the Company but will not be
less than once a month. In addition, Executive will be immediately vested in any
retirement, incentive, or option plans or agreements then in effect and the
Company will continue to provide Executive with Executive's then current health,
dental, life and accidental death and dismemberment insurance benefits for a
period of three years. All payments made to Executive hereunder will be subject
to all applicable employment and withholding taxes.
2. Limitations. Notwithstanding anything in this Agreement to the
contrary, the maximum amount of cash and other benefits payable (whether on a
current or deferred basis and whether or not includible in income for income tax
purposes) under Section 1 of this Agreement (the "Severance Benefits") shall be
limited to the extent necessary to avoid causing any portion of such Severance
Benefits, or any other payment in the nature of compensation to the Executive,
to be treated as a "parachute payment" within the meaning of Section 280G(b)(2)
of the Internal Revenue Code of 1986, as amended. Any adjustment required to
satisfy the limitation described in the preceding sentence shall be accomplished
first by reducing any cash payments that would otherwise be made to the
Executive and then, if further reductions are necessary, by adjusting other
benefits as determined by the Company.
3. Certain Definitions.
(a) Change in Control. A "Change in Control" shall be deemed to have
occurred (i) on the date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, other than the
Company or any person or group who has reported or is required to report such
ownership on Schedule 13G under such Act, in a transaction or series of
transactions, has become the beneficial owner, directly or indirectly (with
beneficial ownership as determined as provided in Rule 13d-3, or any successor
rule under such Act), of 15% or more of the outstanding voting securities of the
Company; or (ii) on the date on which one third or more of the members of the
Board of Directors shall consist of persons other than Current Directors (for
these purposes, as "Current Director" shall mean any member of the Board of
Directors elected at or continuing in office after, the 1998 Annual Meeting of
Stockholders, any successor of a Current Director who has been approved by a
majority of the Current Directors then on the Board, and any other person who
has been approved by a majority of the Current Directors then on the Board); or
(iii) on the date of approval of (x) the merger or consolidation of the Company
with another corporation where the shareholders of the Company, immediately
prior to the merger or consolidation, would not beneficially own, immediately
after the merger or consolidation, shares entitling such shareholders to 50% or
more of all votes (without consideration of the rights of any class of stock to
elect directors by a separate class vote) to which all shareholders of the
corporation would be entitled in the election of directors or where the members
of the Board of Directors of the Company, immediately prior to the merger or
consolidation, would not immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the corporation issuing cash
or securities in the merger or consolidation or (y) on the date of approval of
the sale or other disposition of all or substantially all the assets of the
Company.
(b) Termination for Cause. The Company shall have the right to
terminate the services of Executive at any time without further liability or
obligations to Executive if: (i) Executive has failed or refused to perform such
services as may reasonably be delegated or assigned to Executive consistent with
the Executive's position, by the Chief Executive Officer, the President or the
Board of Directors, (ii) Executive has been grossly negligent in connection with
Page 80 of 112
the performance of Executive's duties, (iii) Executive has committed acts
involving dishonesty, willful misconduct, breach of fiduciary duty, fraud, or
any similar offense which materially affects Executive's ability to perform
Executive's duties for the Company or may materially adversely affect the
Company, (iv) Executive has been convicted of a felony; or (v) Executive has
violated or breached in any respect any material term, covenant or condition
contained in this Agreement or in any employment, confidentiality and/or
non-competition agreement between the Company and Executive.
Termination of the services of Executive for Cause shall not be effective
unless and until acted upon by the Board of Directors and unless and until
written notice shall have been given to Executive which notice shall include
identification with specificity of each and every factual basis or incident upon
which the termination is based.
(c) Good Reason. Good Reason shall mean the occurrence or existence
of any of the following with respect to Executive: (i) Executive's annual rate
of salary is reduced from the annual rate then currently in effect or
Executive's other employee benefits are in the aggregate materially reduced from
those then currently in effect (unless such reduction of employee benefits
applies to employees of the Company generally), or (ii) Executive's place of
employment is moved more than 50 miles from its then current location, or (iii)
Executive is assigned duties that are demeaning or are otherwise materially
inconsistent with the duties then currently performed by Executive.
Before Executive may terminate Executive's employment for Good Reason,
Executive must notify the Company in writing of Executive's intention to
terminate and the Company shall have 15 days after receiving such written notice
to remedy the situation, if possible.
4. Confidential Information. Executive acknowledges and agrees that
Executive has been exposed to and will likely continue to be exposed to
Confidential Information, knowledge or data as described below and Executive
further acknowledges and agrees that such Confidential Information, knowledge or
data is proprietary to and a valuable trade secret of the Company and that any
disclosure or unauthorized use thereof will cause irreparable harm and loss to
the Company. Executive understands that the Company has invested large sums in
developing these materials and it would be difficult for Executive to develop
these same materials from any independent sources without expenditure of large
sums of money and effort. Executive also acknowledges that any use of the
Company's materials other than in the scope of Executive's employment with the
Company would constitute an unlawful use and taking of the materials from the
Company for which the Company would have remedies against Executive.
Executive agrees that during the period of Executive's employment by the
Company or by any parent or subsidiary of the Company or at any time thereafter,
Executive will not, directly or indirectly, disclose or authorize anyone else to
disclose or use or make known for Executive's or another's benefit any
Confidential Information, knowledge, or data of the Company whether or not
patentable or copyrightable, in any way acquired by Executive during Executive's
employment by the Company or by any parent or subsidiary of the Company.
Confidential Information, knowledge or data of the Company shall, for purposes
of this Agreement, include but not be limited to matters not readily available
to the public which are:
(a) of a technical nature, such as, but not limited to, methods,
know-how, formulae, compositions, drawings, blueprints, compounds, processes,
discoveries, machines, inventions, computer programs, and similar items;
(b) of a business nature such as, but not limited to, information
about sales or lists of customers, prices, costs, purchasing, profits, markets,
product strengths and weaknesses, business processes, business and marketing
plans and activities, and employee personnel records;
(c) pertaining to future developments such as, but not limited to,
research and development, or future marketing or merchandising plans or ideas.
All records (whether in hard copy or digital form), books and computer
discs relating in any manner whatsoever to the Company shall be the exclusive
property of the Company regardless of who actually prepared the original record
or book. Executive shall not copy or cause to have copied any such records and
books except in the ordinary course of business. Immediately upon termination of
Executive's employment, Executive will deliver to the Company all copies of
data, information and knowledge, including without limitation, all documents,
correspondence, specifications, blueprints, notebooks, reports, sketches,
formulae, computer programs, sales and other manuals, price lists, customer
lists, samples, and all other materials and copies thereof relating to the
business of the Company obtained by Executive during the period of Executive's
employment by the Company or by any parent or subsidiary of the Company which
are in Executive's possession or under Executive's control.
5. Covenant Not to Compete.
During the period of employment and during the Non-Compete Period (as
hereinafter defined) the Executive will not, directly or indirectly (a) own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, director or
otherwise with, or have any financial interest in, or aid or assist any other
person in the conduct of, any entity or business which competes with any
business, venture or activity being conducted or proposed to be conducted on the
date of termination of the Executive's employment of any group, division or
affiliate of the Company, in any geographic area where such business is being
Page 81 of 112
conducted or is proposed to be conducted at the date of cessation of the
Executive's employment, or (b) induce or attempt to induce any officer or
employee of the Company to leave the employ of the Company, or in any way
interfere with the relationship between the Company and any officer, employee,
director or shareholder thereof, or (c) hire directly or through another entity
any person who is an employee of the Company on the date of termination of
employment of Executive, or (d) induce or attempt to induce any customer,
dealer, supplier or licensee to cease doing business with the Company, or in any
way interfere with the relationship between any such customer, dealer, supplier
or licensee and the Company. However, nothing herein shall prevent Executive
from owning not more than five percent (5%) of the outstanding publicly traded
shares of common stock of a corporation, as to which corporation Executive has
no relationship other than as a shareholder. For purposes of this Agreement,
"Non-Compete Period" shall mean the period during which Executive is receiving
severance payments and benefits pursuant to Section 1 hereof.
Executive specifically agrees that because of Executive's special
expertise and the special and unique services that Executive has been and will
be furnishing the Company, and because of the Confidential Information that has
been acquired by Executive or will be disclosed to Executive during Executive's
employment, the above stated geographic areas and time period, in and during
which Executive will not compete with the Company, are reasonable in scope and
duration and are necessary to afford the Company just and adequate protection
against the irreparable damage which would result to the Company from any
activities prohibited by this Section.
In connection with the foregoing provisions of this Section 5, the
Executive represents that Executive's experience, capabilities and circumstances
are such that such provisions will not unreasonably prevent Executive from
earning a livelihood and that the limitations set forth herein are reasonable
and properly required for the adequate protection of the Company and its
affiliates.
If Executive in any way breaches the obligations specified in this Section
5, the Company shall have the right, in addition to any other remedies available
to it, to terminate the further payment of any amounts due, any compensation,
any severance payments, or any benefits.
If the geographic or time restriction contained in this Section 5 shall be
determined by an arbitrator or court of law or equity to be unreasonable, the
arbitrator or court may amend this Section 5 to provide a reasonable geographic
or time restriction which shall then be binding upon the Company and the
Executive.
6. Injunctive Relief. Executive agrees that any breach or threatened
breach by Executive of any of the provisions contained in Sections 4 and 5
cannot be remedied solely by the recovering of damages and the Company shall be
entitled to an injunction against such breach or threatened breach. Nothing
herein, however, shall be construed as prohibiting the Company from pursuing, in
conjunction with an injunction or otherwise, any other remedies available at law
or in equity for any such breach or threatened breach, including the recovery of
damages.
7. Right to Employment. Nothing contained herein shall confer upon
Executive any right to be continued in the employment of the Company or
interfere in any way with the right of the Company to terminate Executive's
employment at any time for any reason. Executive hereby acknowledges that
Executive is and will remain an Executive-at-will of the Company, terminable
with or without Cause.
8. Notices. All notice given in connection with this Agreement shall be in
writing and shall be delivered either by personal delivery, by telegram, telex,
telecopy or similar facsimile means, by certified or registered mail, return
receipt requested, or by express courier or delivery services, addressed to the
parties hereto at the following addresses:
To Executive: To IEC Electronics Corp.:
Russell E. Stingel IEC Electronics Corp.
102 Grandview Avenue 105 Norton Street
Fairport, NY 14450 P.O. Box 271
Newark, NY 14513
Attn: President
FAX: (315) 331-8185
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notice shall be deemed given when received, if sent by telegram,
telex, telecopy or similar facsimile means (confirmation of such receipt by
confirmed facsimile transmission being deemed receipt of communications sent by
telex, telecopy or other facsimile means); and when delivered and receipted for
(or upon the date of attempted delivery where delivery is refused), if
hand-delivered, sent by express courier or delivery services, or sent by
certified or registered mail, return receipt requested.
9. Waiver. Any waiver of a breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or of any other
terms, nor shall failure to enforce any term hereof operate as a waiver of any
such term or of any other term.
Page 82 of 112
10. Severability. If any term of this Agreement or the application thereof
is held invalid or unenforceable, the validity or unenforceability shall not
effect any other term of this Agreement which can be given effect without the
invalid or unenforceable term.
11. Governing Law; Venue. This Agreement shall be construed and enforced
in accordance with and governed by the internal laws of the State of New York,
without reference to conflict of law principles of any jurisdiction (including
without limitation New York) which would result in the application of the
domestic substantive laws of any other jurisdiction. The parties consent to the
exclusive jurisdiction of the Supreme Court of New York, Monroe County or of the
United States District Court of the Western District of New York for any legal
action instituted by any party against any other with respect to the subject
matter hereof.
12. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof. This Agreement may not be
amended or changed except by a writing signed by both parties.
13. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the date set forth above.
IEC Electronics Corp.
By: /s/David W. Fradin
Its: President
EXECUTIVE
/s/ Russell E. Stingel
Page 83 of 112
EXHIBIT 10.17
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT,
RESTATEMENT OF NON-COMPETE AGREEMENT
AND
CHANGE-IN-CONTROL AGREEMENT
AGREEMENT, dated as of May 1, 1998, by and between IEC Electronics Corp.,
a Delaware corporation (the "Company"), and David W. Fradin, President and Chief
Operating Officer of the Company (the "Executive").
WHEREAS, the Company and Executive entered into an Employment Agreement
dated June 10, 1997 (the "Employment Agreement"), a copy of which is appended
hereto as Attachment A; and
WHEREAS, the Company and Executive entered into a Confidentiality and
Non-Compete Agreement (the "Non-Compete Agreement"), a copy of which is appended
as Exhibit A to the Employment Agreement; and
WHEREAS, in order to enhance Executive's continued service to the Company
in an effective manner without distraction by reason of the possibility of a
change in control of the Company and in order to assure both the Company and the
Executive of continuity of management in the event of any actual or threatened
change in control of the Company, the Company wishes to provide in this
agreement for severance benefits to the Executive in the event of change in
control of the Company; and
WHEREAS, the parties accordingly desire to amend in certain respects the
Employment Agreement and to amend in certain respects and restate in its
entirety the Non-Compete Agreement.
NOW, THEREFORE, in consideration of the premises and of Executive agreeing
to continue to serve as an employee of the Company, the parties hereto agree as
follows:
1. Amendment of Employment Agreement and Restatement of Non-Compete
Agreement.
a. Section 5 of the Employment Agreement, "Severance", is hereby
amended to read as follows:
"5. Severance Prior to a Change-in-Control. In the event of the
termination of your employment (a) by IEC for any reason other than
Cause (as hereinafter defined), death, disability or
Change-in-Control (as defined in the Change-in-Control Agreement
dated as of May 1, 1998) or (b) by you for Good Reason (as
hereinafter defined) prior to a Change-in-Control, IEC will pay you
for a period of one year following such termination an amount equal
to your Base Salary at the annual rate then in effect. Such amount
shall be payable bi-weekly. In addition, IEC will provide you with
such benefits, if any, as may be applicable pursuant to IEC's Policy
Manual. All payments made to you hereunder will be subject to all
applicable employment and withholding taxes."
b. The Non-Compete Agreement is amended and restated in its entirety
in Sections 5, 6 and 7 of this Agreement.
2. Severance Payment following a Change-in-Control. In the event of the
termination of employment of Executive within the two year period following a
Change in Control (as hereinafter defined) of the Company, and such termination
is (i) by the Company for any reason other than Termination for Cause (as
hereinafter defined), death or disability, or (ii) by the Executive for "Good
Reason" (as hereinafter defined), the Company will pay the Executive for a
period of three years following such termination an aggregate amount equal to
the product of the sum of (x) Executive's salary at the annual rate then in
effect and (y) the average annual bonus paid to Executive under the Company's
current Incentive Plan or any successor plan in the three full fiscal years
preceding termination multiplied by 2.9. Payments of such amount will be made in
installments which are in accordance with the customary payroll practices of the
Company but will not be less than once a month. In addition, Executive will be
immediately vested in any retirement, incentive, or option plans or agreements
then in effect and the Company will continue to provide Executive with
Executive's then current health, dental, life and accidental death and
dismemberment insurance benefits for a period of three years. All payments made
to Executive hereunder will be subject to all applicable employment and
withholding taxes.
3. Limitations. Notwithstanding anything in this Agreement to the
contrary, the maximum amount of cash and other benefits payable (whether on a
current or deferred basis and whether or not includible in income for income tax
purposes) under Section 2 of this Agreement (the "Severance Benefits") shall be
limited to the extent necessary to avoid causing any portion of such Severance
Benefits, or any other payment in the nature of compensation to the Executive,
to be treated as a "parachute payment" within the meaning of Section 280G(b)(2)
of the Internal Revenue Code of 1986, as amended. Any adjustment required to
satisfy the limitation described in the preceding sentence shall be accomplished
first by reducing any cash payments that would otherwise be made to the
Executive and then, if further reductions are necessary, by adjusting other
benefits as determined by the Company.
Page 84 of 112
4. Certain Definitions.
a. Change in Control. A "Change in Control" shall be deemed to have
occurred (i) on the date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, other than the
Company or any person or group who has reported or is required to report such
ownership on Schedule 13G under such Act, in a transaction or series of
transactions, has become the beneficial owner, directly or indirectly (with
beneficial ownership as determined as provided in Rule 13d-3, or any successor
rule under such Act), of 15% or more of the outstanding voting securities of the
Company; or (ii) on the date on which one third or more of the members of the
Board of Directors shall consist of persons other than Current Directors (for
these purposes, as "Current Director" shall mean any member of the Board of
Directors elected at or continuing in office after, the 1998 Annual Meeting of
Stockholders, any successor of a Current Director who has been approved by a
majority of the Current Directors then on the Board, and any other person who
has been approved by a majority of the Current Directors then on the Board); or
(iii) on the date of approval of (x) the merger or consolidation of the Company
with another corporation where the shareholders of the Company, immediately
prior to the merger or consolidation, would not beneficially own, immediately
after the merger or consolidation, shares entitling such shareholders to 50% or
more of all votes (without consideration of the rights of any class of stock to
elect directors by a separate class vote) to which all shareholders of the
corporation would be entitled in the election of directors or where the members
of the Board of Directors of the Company, immediately prior to the merger or
consolidation, would not immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the corporation issuing cash
or securities in the merger or consolidation or (y) on the date of approval of
the sale or other disposition of all or substantially all the assets of the
Company.
b. Termination for Cause. The Company shall have the right to
terminate the services of Executive at any time without further liability or
obligations to Executive if: (i) Executive has failed or refused to perform such
services as may reasonably be delegated or assigned to Executive consistent with
the Executive's position, by the Chief Executive Officer or the Board of
Directors, (ii) Executive has been grossly negligent in connection with the
performance of Executive's duties, (iii) Executive has committed acts involving
dishonesty, willful misconduct, breach of fiduciary duty, fraud, or any similar
offense which materially affects Executive's ability to perform Executive's
duties for the Company or may materially adversely affect the Company, (iv)
Executive has been convicted of a felony; or (v) Executive has violated or
breached in any respect any material term, covenant or condition contained in
this Agreement or in any employment, confidentiality and/or non-competition
agreement between the Company and Executive.
Termination of the services of Executive for Cause shall not be effective
unless and until acted upon by the Board of Directors and unless and until
written notice shall have been given to Executive which notice shall include
identification with specificity of each and every factual basis or incident upon
which the termination is based.
c. Good Reason. Good Reason shall mean the occurrence or existence of
any of the following with respect to Executive: (i) Executive's annual rate of
salary is reduced from the annual rate then currently in effect or Executive's
other employee benefits are in the aggregate materially reduced from those then
currently in effect (unless such reduction of employee benefits applies to
employees of the Company generally), or (ii) Executive's place of employment is
moved more than 50 miles from its then current location, or (iii) Executive is
assigned duties that are demeaning or are otherwise materially inconsistent with
the duties then currently performed by Executive.
Before Executive may terminate Executive's employment for Good Reason,
Executive must notify the Company in writing of Executive's intention to
terminate and the Company shall have 15 days after receiving such written notice
to remedy the situation, if possible.
5. Confidential Information. Executive acknowledges and agrees that
Executive has been exposed to and will likely continue to be exposed to
Confidential Information, knowledge or data as described below and Executive
further acknowledges and agrees that such Confidential Information, knowledge or
data is proprietary to and a valuable trade secret of the Company and that any
disclosure or unauthorized use thereof will cause irreparable harm and loss to
the Company. Executive understands that the Company has invested large sums in
developing these materials and it would be difficult for Executive to develop
these same materials from any independent sources without expenditure of large
sums of money and effort. Executive also acknowledges that any use of the
Company's materials other than in the scope of Executive's employment with the
Company would constitute an unlawful use and taking of the materials from the
Company for which the Company would have remedies against Executive.
Executive agrees that during the period of Executive's employment by the
Company or by any parent or subsidiary of the Company or at any time thereafter,
Executive will not, directly or indirectly, disclose or authorize anyone else to
disclose or use or make known for Executive's or another's benefit any
Confidential Information, knowledge, or data of the Company whether or not
patentable or copyrightable, in any way acquired by Executive during Executive's
Page 85 of 112
employment by the Company or by any parent or subsidiary of the Company.
Confidential Information, knowledge or data of the Company shall, for purposes
of this Agreement, include but not be limited to matters not readily available
to the public which are:
a. of a technical nature, such as, but not limited to, methods,
know-how, formulae, compositions, drawings, blueprints, compounds, processes,
discoveries, machines, inventions, computer programs, and similar items;
b. of a business nature such as, but not limited to, information
about sales or lists of customers, prices, costs, purchasing, profits, markets,
product strengths and weaknesses, business processes, business and marketing
plans and activities, and employee personnel records;
c. pertaining to future developments such as, but not limited to,
research and development, or future marketing or merchandising plans or ideas.
All records (whether in hard copy or digital form), books and computer
discs relating in any manner whatsoever to the Company shall be the exclusive
property of the Company regardless of who actually prepared the original record
or book. Executive shall not copy or cause to have copied any such records and
books except in the ordinary course of business. Immediately upon termination of
Executive's employment, Executive will deliver to the Company all copies of
data, information and knowledge, including without limitation, all documents,
correspondence, specifications, blueprints, notebooks, reports, sketches,
formulae, computer programs, sales and other manuals, price lists, customer
lists, samples, and all other materials and copies thereof relating to the
business of the Company obtained by Executive during the period of Executive's
employment by the Company or by any parent or subsidiary of the Company which
are in Executive's possession or under Executive's control.
6. Covenant Not to Compete.
During the period of employment and during the Non-Compete Period (as
hereinafter defined) the Executive will not, directly or indirectly (a) own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, director or
otherwise with, or have any financial interest in, or aid or assist any other
person in the conduct of, any entity or business which competes with any
business, venture or activity being conducted or proposed to be conducted on the
date of termination of the Executive's employment of any group, division or
affiliate of the Company, in any geographic area where such business is being
conducted or is proposed to be conducted at the date of cessation of the
Executive's employment, or (b) induce or attempt to induce any officer or
employee of the Company to leave the employ of the Company, or in any way
interfere with the relationship between the Company and any officer, employee,
director or shareholder thereof, or (c) hire directly or through another entity
any person who is an employee of the Company on the date of termination of
employment of Executive, or (d) induce or attempt to induce any customer,
dealer, supplier or licensee to cease doing business with the Company, or in any
way interfere with the relationship between any such customer, dealer, supplier
or licensee and the Company. However, nothing herein shall prevent Executive
from owning not more than five percent (5%) of the outstanding publicly traded
shares of common stock of a corporation, as to which corporation Executive has
no relationship other than as a shareholder. For purposes of the Employment
Agreement and this Agreement, "Non-Compete Period" shall mean the period during
which Executive is receiving severance payments pursuant to Section 5 of the
Employment Agreement, as amended, or Section 2 of this Agreement, whichever is
appropriate.
Executive specifically agrees that because of Executive's special
expertise and the special and unique services that Executive has been and will
be furnishing the Company, and because of the Confidential Information that has
been acquired by Executive or will be disclosed to Executive during Executive's
employment, the above stated geographic areas and time period, in and during
which Executive will not compete with the Company, are reasonable in scope and
duration and are necessary to afford the Company just and adequate protection
against the irreparable damage which would result to the Company from any
activities prohibited by this Section.
In connection with the foregoing provisions of this Section 6, the
Executive represents that Executive's experience, capabilities and circumstances
are such that such provisions will not unreasonably prevent Executive from
earning a livelihood and that the limitations set forth herein are reasonable
and properly required for the adequate protection of the Company and its
affiliates.
If Executive in any way breaches the obligations specified in this Section
6, the Company shall have the right, in addition to any other remedies available
to it, to terminate the further payment of any amounts due, any compensation,
any severance payments, or any benefits.
If the geographic or time restriction contained in this Section 6 shall be
determined by an arbitrator or court of law or equity to be unreasonable, the
arbitrator or court may amend this Section 6 to provide a reasonable geographic
or time restriction which shall then be binding upon the Company and the
Executive.
Page 86 of 112
7. Injunctive Relief. Executive agrees that any breach or threatened
breach by Executive of any of the provisions contained in Sections 5 and 6
cannot be remedied solely by the recovering of damages and the Company shall be
entitled to an injunction against such breach or threatened breach. Nothing
herein, however, shall be construed as prohibiting the Company from pursuing, in
conjunction with an injunction or otherwise, any other remedies available at law
or in equity for any such breach or threatened breach, including the recovery of
damages.
8. Right to Employment. Nothing contained herein shall confer upon
Executive any right to be continued in the employment of the Company or
interfere in any way with the right of the Company to terminate Executive's
employment at any time for any reason. Executive hereby acknowledges that
Executive is and will remain an Executive-at-will of the Company, terminable
with or without Cause.
9. Notices. All notice given in connection with this Agreement shall be in
writing and shall be delivered either by personal delivery, by telegram, telex,
telecopy or similar facsimile means, by certified or registered mail, return
receipt requested, or by express courier or delivery services, addressed to the
parties hereto at the following addresses:
To Executive: To IEC Electronics Corp.:
David W. Fradin IEC Electronics Corp.
513 West Maple Avenue 105 Norton Street
Newark, NY 14513 P.O. Box 271
Newark, NY 14513
Attn: Chief Executive Officer
FAX: (315) 331-0454
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notice shall be deemed given when received, if sent by telegram,
telex, telecopy or similar facsimile means (confirmation of such receipt by
confirmed facsimile transmission being deemed receipt of communications sent by
telex, telecopy or other facsimile means); and when delivered and receipted for
(or upon the date of attempted delivery where delivery is refused), if
hand-delivered, sent by express courier or delivery services, or sent by
certified or registered mail, return receipt requested.
10. Waiver. Any waiver of a breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or of any other
terms, nor shall failure to enforce any term hereof operate as a waiver of any
such term or of any other term.
11. Severability. If any term of this Agreement or the application thereof
is held invalid or unenforceable, the validity or unenforceability shall not
effect any other term of this Agreement which can be given effect without the
invalid or unenforceable term.
12. Governing Law; Venue. This Agreement shall be construed and enforced
in accordance with and governed by the internal laws of the State of New York,
without reference to conflict of law principles of any jurisdiction (including
without limitation New York) which would result in the application of the
domestic substantive laws of any other jurisdiction. The parties consent to the
exclusive jurisdiction of the Supreme Court of New York, Monroe County or of the
United States District Court of the Western District of New York for any legal
action instituted by any party against any other with respect to the subject
matter hereof.
13. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof. This Agreement may not be
amended or changed except by a writing signed by both parties.
14. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the date set forth above.
IEC Electronics Corp.
By: /s/Russell E. Stingel
Russell E. Stingel
Its: Chief Executive Officer
EXECUTIVE:
/s/David W. Fradin
David W. Fradin
Page 87 of 112
EXHIBIT 10.18
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT,
RESTATEMENT OF NON-COMPETE AGREEMENT
AND
CHANGE-IN-CONTROL AGREEMENT
AGREEMENT, dated as of May 1, 1998, by and between IEC Electronics Corp.,
a Delaware corporation (the "Company"), and Diana R. Kurty, Vice President,
Finance, Chief Financial Officer and Treasurer of the Company (the "Executive").
WHEREAS, the Company and Executive entered into an Employment Agreement
dated as of September 5, 1997 (the "Employment Agreement"), a copy of which is
appended hereto as Attachment A; and
WHEREAS, the Company and Executive entered into a Confidentiality and
Non-Compete Agreement (the "Non-Compete Agreement"), a copy of which is appended
as Exhibit A to the Employment Agreement; and
WHEREAS, in order to enhance Executive's continued service to the Company
in an effective manner without distraction by reason of the possibility of a
change in control of the Company and in order to assure both the Company and the
Executive of continuity of management in the event of any actual or threatened
change in control of the Company, the Company wishes to provide in this
agreement for severance benefits to the Executive in the event of change in
control of the Company; and
WHEREAS, the parties accordingly desire to amend in certain respects the
Employment Agreement and to amend in certain respects and restate in its
entirety the Non-Compete Agreement.
NOW, THEREFORE, in consideration of the premises and of Executive agreeing
to continue to serve as an employee of the Company, the parties hereto agree as
follows:
1. Amendment of Employment Agreement and Restatement of
Non-Compete Agreement.
a. Section 4 of the Employment Agreement, "Severance", is hereby
amended to read as follows:
"4. Severance Prior to a Change-in-Control. In the event of the
termination of your employment (a) by IEC for any reason other than
Cause (as hereinafter defined), death, disability or
Change-in-Control (as defined in the Change-in-Control Agreement
dated as of May 1, 1998) or (b) by you for Good Reason (as
hereinafter defined) prior to a Change-in-Control, IEC will pay you
for a period of six months following such termination an amount equal
to your Base Salary at the annual rate then in effect. Such amount
shall be payable bi-weekly. In addition, during such six-month period
unless you accept other full-time employment, IEC will provide you
with such benefits, if any, as may be applicable pursuant to IEC's
Policy Manual. All payments made to you hereunder will be subject to
all applicable employment and withholding taxes."
b. The Non-Compete Agreement is amended and restated in its entirety
in Sections 5, 6 and 7 of this Agreement.
2. Severance Payment following a Change-in-Control. In the event of the
termination of employment of Executive within the two year period following a
Change in Control (as hereinafter defined) of the Company, and such termination
is (i) by the Company for any reason other than Termination for Cause (as
hereinafter defined), death or disability, or (ii) by the Executive for "Good
Reason" (as hereinafter defined), the Company will pay the Executive for a
period of three years following such termination an aggregate amount equal to
the product of the sum of (x) Executive's salary at the annual rate then in
effect and (y) the average annual bonus paid to Executive under the Company's
current Incentive Plan or any successor plan in the three full fiscal years
preceding termination multiplied by 2.9. Payments of such amount will be made in
installments which are in accordance with the customary payroll practices of the
Company but will not be less than once a month. In addition, Executive will be
immediately vested in any retirement, incentive, or option plans or agreements
then in effect and the Company will continue to provide Executive with
Executive's then current health, dental, life and accidental death and
dismemberment insurance benefits for a period of three years. All payments made
to Executive hereunder will be subject to all applicable employment and
withholding taxes.
3. Limitations. Notwithstanding anything in this Agreement to the
contrary, the maximum amount of cash and other benefits payable (whether on a
current or deferred basis and whether or not includible in income for income tax
purposes) under Section 2 of this Agreement (the "Severance Benefits") shall be
limited to the extent necessary to avoid causing any portion of such Severance
Benefits, or any other payment in the nature of compensation to the Executive,
to be treated as a "parachute payment" within the meaning of Section 280G(b)(2)
of the Internal Revenue Code of 1986, as amended. Any adjustment required to
satisfy the limitation described in the preceding sentence shall be accomplished
first by reducing any cash payments that would otherwise be made to the
Executive and then, if further reductions are necessary, by adjusting other
benefits as determined by the Company.
Page 88 of 112
4. Certain Definitions.
a. Change in Control. A "Change in Control" shall be deemed to have
occurred (i) on the date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, other than the
Company or any person or group who has reported or is required to report such
ownership on Schedule 13G under such Act, in a transaction or series of
transactions, has become the beneficial owner, directly or indirectly (with
beneficial ownership as determined as provided in Rule 13d-3, or any successor
rule under such Act), of 15% or more of the outstanding voting securities of the
Company; or (ii) on the date on which one third or more of the members of the
Board of Directors shall consist of persons other than Current Directors (for
these purposes, as "Current Director" shall mean any member of the Board of
Directors elected at or continuing in office after, the 1998 Annual Meeting of
Stockholders, any successor of a Current Director who has been approved by a
majority of the Current Directors then on the Board, and any other person who
has been approved by a majority of the Current Directors then on the Board); or
(iii) on the date of approval of (x) the merger or consolidation of the Company
with another corporation where the shareholders of the Company, immediately
prior to the merger or consolidation, would not beneficially own, immediately
after the merger or consolidation, shares entitling such shareholders to 50% or
more of all votes (without consideration of the rights of any class of stock to
elect directors by a separate class vote) to which all shareholders of the
corporation would be entitled in the election of directors or where the members
of the Board of Directors of the Company, immediately prior to the merger or
consolidation, would not immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the corporation issuing cash
or securities in the merger or consolidation or (y) on the date of approval of
the sale or other disposition of all or substantially all the assets of the
Company.
b. Termination for Cause. The Company shall have the right to
terminate the services of Executive at any time without further liability or
obligations to Executive if: (i) Executive has failed or refused to perform such
services as may reasonably be delegated or assigned to Executive consistent with
the Executive's position, by the Chief Executive Officer, the Chief Operating
Officer or the Board of Directors, (ii) Executive has been grossly negligent in
connection with the performance of Executive's duties, (iii) Executive has
committed acts involving dishonesty, willful misconduct, breach of fiduciary
duty, fraud, or any similar offense which materially affects Executive's ability
to perform Executive's duties for the Company or may materially adversely affect
the Company, (iv) Executive has been convicted of a felony; or (v) Executive has
violated or breached in any respect any material term, covenant or condition
contained in this Agreement or in any employment, confidentiality and/or
non-competition agreement between the Company and Executive.
Termination of the services of Executive for Cause shall not be effective
unless and until acted upon by the Board of Directors and unless and until
written notice shall have been given to Executive which notice shall include
identification with specificity of each and every factual basis or incident upon
which the termination is based.
c. Good Reason. Good Reason shall mean the occurrence or existence of
any of the following with respect to Executive: (i) Executive's annual rate of
salary is reduced from the annual rate then currently in effect or Executive's
other employee benefits are in the aggregate materially reduced from those then
currently in effect (unless such reduction of employee benefits applies to
employees of the Company generally), or (ii) Executive's place of employment is
moved more than 30 miles from its then current location, or (iii) Executive is
assigned duties that are demeaning or are otherwise materially inconsistent with
the duties then currently performed by Executive, or (iv) a reasonable
determination by Executive that, as a result of a Change-in-Control and a change
in circumstances significantly affecting Executive's position, Executive is
unable to exercise the authority, powers, functions or duties attached to
Executive's position.
Before Executive may terminate Executive's employment for Good Reason,
Executive must notify the Company in writing of Executive's intention to
terminate and the Company shall have 15 days after receiving such written notice
to remedy the situation, if possible.
5. Confidential Information. Executive acknowledges and agrees that
Executive has been exposed to and will likely continue to be exposed to
Confidential Information, knowledge or data as described below and Executive
further acknowledges and agrees that such Confidential Information, knowledge or
data is proprietary to and a valuable trade secret of the Company and that any
disclosure or unauthorized use thereof will cause irreparable harm and loss to
the Company. Executive understands that the Company has invested large sums in
developing these materials and it would be difficult for Executive to develop
these same materials from any independent sources without expenditure of large
sums of money and effort. Executive also acknowledges that any use of the
Company's materials other than in the scope of Executive's employment with the
Company would constitute an unlawful use and taking of the materials from the
Company for which the Company would have remedies against Executive.
Executive agrees that during the period of Executive's employment by the
Company or by any parent or subsidiary of the Company or at any time thereafter,
Page 89 of 112
Executive will not, directly or indirectly, disclose or authorize anyone else to
disclose or use or make known for Executive's or another's benefit any
Confidential Information, knowledge, or data of the Company whether or not
patentable or copyrightable, in any way acquired by Executive during Executive's
employment by the Company or by any parent or subsidiary of the Company.
Confidential Information, knowledge or data of the Company shall, for purposes
of this Agreement, include but not be limited to matters not readily available
to the public which are:
a. of a technical nature, such as, but not limited to, methods,
know-how, formulae, compositions, drawings, blueprints, compounds, processes,
discoveries, machines, inventions, computer programs, and similar items;
b. of a business nature such as, but not limited to, information
about sales or lists of customers, prices, costs, purchasing, profits, markets,
product strengths and weaknesses, business processes, business and marketing
plans and activities, and employee personnel records;
c. pertaining to future developments such as, but not limited to,
research and development, or future marketing or merchandising plans or ideas.
All records (whether in hard copy or digital form), books and computer
discs relating in any manner whatsoever to the Company shall be the exclusive
property of the Company regardless of who actually prepared the original record
or book. Executive shall not copy or cause to have copied any such records and
books except in the ordinary course of business. Immediately upon termination of
Executive's employment, Executive will deliver to the Company all copies of
data, information and knowledge, including without limitation, all documents,
correspondence, specifications, blueprints, notebooks, reports, sketches,
formulae, computer programs, sales and other manuals, price lists, customer
lists, samples, and all other materials and copies thereof relating to the
business of the Company obtained by Executive during the period of Executive's
employment by the Company or by any parent or subsidiary of the Company which
are in Executive's possession or under Executive's control.
6. Covenant Not to Compete.
During the period of employment and during the Non-Compete Period (as
hereinafter defined) the Executive will not, directly or indirectly (a) own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, director or
otherwise with, or have any financial interest in, or aid or assist any other
person in the conduct of, any entity or business which competes with any
business, venture or activity being conducted or proposed to be conducted on the
date of termination of the Executive's employment of any group, division or
affiliate of the Company, in any geographic area where such business is being
conducted or is proposed to be conducted at the date of cessation of the
Executive's employment, or (b) induce or attempt to induce any officer or
employee of the Company to leave the employ of the Company, or in any way
interfere with the relationship between the Company and any officer, employee,
director or shareholder thereof, or (c) hire directly or through another entity
any person who is an employee of the Company on the date of termination of
employment of Executive, or (d) induce or attempt to induce any customer,
dealer, supplier or licensee to cease doing business with the Company, or in any
way interfere with the relationship between any such customer, dealer, supplier
or licensee and the Company. However, nothing herein shall prevent Executive
from owning not more than five percent (5%) of the outstanding publicly traded
shares of common stock of a corporation, as to which corporation Executive has
no relationship other than as a shareholder. For purposes of the Employment
Agreement and this Agreement, "Non-Compete Period" shall mean the period during
which Executive is receiving severance payments pursuant to Section 4 of the
Employment Agreement, as amended, or Section 2 of this Agreement, whichever is
appropriate.
Executive specifically agrees that because of Executive's special
expertise and the special and unique services that Executive has been and will
be furnishing the Company, and because of the Confidential Information that has
been acquired by Executive or will be disclosed to Executive during Executive's
employment, the above stated geographic areas and time period, in and during
which Executive will not compete with the Company, are reasonable in scope and
duration and are necessary to afford the Company just and adequate protection
against the irreparable damage which would result to the Company from any
activities prohibited by this Section.
In connection with the foregoing provisions of this Section 6, the
Executive represents that Executive's experience, capabilities and circumstances
are such that such provisions will not unreasonably prevent Executive from
earning a livelihood and that the limitations set forth herein are reasonable
and properly required for the adequate protection of the Company and its
affiliates.
If Executive in any way breaches the obligations specified in this Section
6, the Company shall have the right, in addition to any other remedies available
to it, to terminate the further payment of any amounts due, any compensation,
any severance payments, or any benefits.
If the geographic or time restriction contained in this Section 6 shall be
determined by an arbitrator or court of law or equity to be unreasonable, the
arbitrator or court may amend this Section 6 to provide a reasonable geographic
or time restriction which shall then be binding upon the Company and the
Executive.
Page 90 of 112
7. Injunctive Relief. Executive agrees that any breach or threatened
breach by Executive of any of the provisions contained in Sections 5 and 6
cannot be remedied solely by the recovering of damages and the Company shall be
entitled to an injunction against such breach or threatened breach. Nothing
herein, however, shall be construed as prohibiting the Company from pursuing, in
conjunction with an injunction or otherwise, any other remedies available at law
or in equity for any such breach or threatened breach, including the recovery of
damages.
8. Right to Employment. Nothing contained herein shall confer upon
Executive any right to be continued in the employment of the Company or
interfere in any way with the right of the Company to terminate Executive's
employment at any time for any reason. Executive hereby acknowledges that
Executive is and will remain an Executive-at-will of the Company, terminable
with or without Cause.
9. Notices. All notice given in connection with this Agreement shall be in
writing and shall be delivered either by personal delivery, by telegram, telex,
telecopy or similar facsimile means, by certified or registered mail, return
receipt requested, or by express courier or delivery services, addressed to the
parties hereto at the following addresses:
To Executive: To IEC Electronics Corp.:
Diana R. Kurty IEC Electronics Corp.
57 Cambric Circle 105 Norton Street
Pittsford, NY 14534 P.O. Box 271
Newark, NY 14513
Attn: Chief Executive Officer
FAX: (315) 331-0454
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notice shall be deemed given when received, if sent by telegram,
telex, telecopy or similar facsimile means (confirmation of such receipt by
confirmed facsimile transmission being deemed receipt of communications sent by
telex, telecopy or other facsimile means); and when delivered and receipted for
(or upon the date of attempted delivery where delivery is refused), if
hand-delivered, sent by express courier or delivery services, or sent by
certified or registered mail, return receipt requested.
10. Waiver. Any waiver of a breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or of any other
terms, nor shall failure to enforce any term hereof operate as a waiver of any
such term or of any other term.
11. Severability. If any term of this Agreement or the application thereof
is held invalid or unenforceable, the validity or unenforceability shall not
effect any other term of this Agreement which can be given effect without the
invalid or unenforceable term.
12. Governing Law; Venue. This Agreement shall be construed and enforced
in accordance with and governed by the internal laws of the State of New York,
without reference to conflict of law principles of any jurisdiction (including
without limitation New York) which would result in the application of the
domestic substantive laws of any other jurisdiction. The parties consent to the
exclusive jurisdiction of the Supreme Court of New York, Monroe County or of the
United States District Court of the Western District of New York for any legal
action instituted by any party against any other with respect to the subject
matter hereof.
13. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof. This Agreement may not be
amended or changed except by a writing signed by both parties.
14. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the date set forth above.
IEC Electronics Corp.
By:/s/Russell E. Stingel
Russell E. Stingel
Its: Chief Executive Officer
EXECUTIVE
/s/Diana R.Kurty
Diana R. Kurty
Page 91 of 112
EXHIBIT 10.19
CHANGE-IN-CONTROL AGREEMENT
AGREEMENT, dated as of May 1, 1998, by and between IEC Electronics
Corp., a Delaware corporation (the "Company"), and ,
of the Company (the "Executive"). ------------- ---------------
WHEREAS, in order to enhance Executive's continued service to the Company
in an effective manner without distraction by reason of the possibility of a
change in control of the Company and in order to assure both the Company and the
Executive of continuity of management in the event of any actual or threatened
change in control of the Company, the Company wishes to provide in this
agreement for severance benefits to the Executive in the event of change in
control of the Company.
NOW, THEREFORE, in consideration of the premises and of Executive agreeing
to continue to serve as an employee of the Company, the parties hereto agree as
follows:
1. Severance Payment. In the event of the termination of employment of
Executive within the two year period following a Change in Control (as
hereinafter defined) of the Company, and such termination is (i) by the Company
for any reason other than Termination for Cause (as hereinafter defined), death
or disability, or (ii) by the Executive for "Good Reason" (as hereinafter
defined), the Company will pay the Executive for a period of eighteen (18)
months following such termination an aggregate amount equal to the sum of (x)
Executive's salary at the annual rate then in effect and (y) the average annual
bonus paid to Executive under the Company's current Incentive Plan or any
successor plan in the three full fiscal years preceding termination. Payments of
such amount will be made in installments which are in accordance with the
customary payroll practices of the Company but will not be less than once a
month. In addition, Executive will be immediately vested in any retirement,
incentive, or option plans or agreements then in effect and the Company will
continue to provide Executive with Executive's then current health, dental, life
and accidental death and dismemberment insurance benefits for a period of 18
months. All payments made to Executive hereunder will be subject to all
applicable employment and withholding taxes.
2. Limitations. Notwithstanding anything in this Agreement to the
contrary, the maximum amount of cash and other benefits payable (whether on a
current or deferred basis and whether or not includible in income for income tax
purposes) under Section 1 of this Agreement (the "Severance Benefits") shall be
limited to the extent necessary to avoid causing any portion of such Severance
Benefits, or any other payment in the nature of compensation to the Executive,
to be treated as a "parachute payment" within the meaning of Section 280G(b)(2)
of the Internal Revenue Code of 1986, as amended. Any adjustment required to
satisfy the limitation described in the preceding sentence shall be accomplished
first by reducing any cash payments that would otherwise be made to the
Executive and then, if further reductions are necessary, by adjusting other
benefits as determined by the Company.
3. Certain Definitions.
(a) Change in Control. A "Change in Control" shall be deemed to have
occurred (i) on the date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, other than the
Company or any person or group who has reported or is required to report such
ownership on Schedule 13G under such Act, in a transaction or series of
transactions, has become the beneficial owner, directly or indirectly (with
beneficial ownership as determined as provided in Rule 13d-3, or any successor
rule under such Act), of 15% or more of the outstanding voting securities of the
Company; or (ii) on the date on which one third or more of the members of the
Board of Directors shall consist of persons other than Current Directors (for
these purposes, as "Current Director" shall mean any member of the Board of
Directors elected at or continuing in office after, the 1998 Annual Meeting of
Stockholders, any successor of a Current Director who has been approved by a
majority of the Current Directors then on the Board, and any other person who
has been approved by a majority of the Current Directors then on the Board); or
(iii) on the date of approval of (x) the merger or consolidation of the Company
with another corporation where the shareholders of the Company, immediately
prior to the merger or consolidation, would not beneficially own, immediately
after the merger or consolidation, shares entitling such shareholders to 50% or
more of all votes (without consideration of the rights of any class of stock to
elect directors by a separate class vote) to which all shareholders of the
corporation would be entitled in the election of directors or where the members
of the Board of Directors of the Company, immediately prior to the merger or
consolidation, would not immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the corporation issuing cash
or securities in the merger or consolidation or (y) on the date of approval of
the sale or other disposition of all or substantially all the assets of the
Company.
Page 92 of 112
(b) Termination for Cause. The Company shall have the right to
terminate the services of Executive at any time without further liability or
obligations to Executive if: (i) Executive has failed or refused to perform such
services as may reasonably be delegated or assigned to Executive consistent with
the Executive's position, by the Chief Executive Officer, the President or the
Board of Directors, (ii) Executive has been grossly negligent in connection with
the performance of Executive's duties, (iii) Executive has committed acts
involving dishonesty, willful misconduct, breach of fiduciary duty, fraud, or
any similar offense which materially affects Executive's ability to perform
Executive's duties for the Company or may materially adversely affect the
Company, (iv) Executive has been convicted of a felony; or (v) Executive has
violated or breached in any respect any material term, covenant or condition
contained in this Agreement or in any employment, confidentiality and/or
non-competition agreement between the Company and Executive.
Termination of the services of Executive for Cause shall not be effective
unless and until acted upon by the Board of Directors and unless and until
written notice shall have been given to Executive which notice shall include
identification with specificity of each and every factual basis or incident upon
which the termination is based.
(c) Good Reason. Good Reason shall mean the occurrence or existence
of any of the following with respect to Executive: (i) Executive's annual rate
of salary is reduced from the annual rate then currently in effect or
Executive's other employee benefits are in the aggregate materially reduced from
those then currently in effect (unless such reduction of employee benefits
applies to employees of the Company generally), or (ii) Executive's place of
employment is moved more than 50 miles from its then current location, or (iii)
Executive is assigned duties that are demeaning or are otherwise materially
inconsistent with the duties then currently performed by Executive.
Before Executive may terminate Executive's employment for Good Reason,
Executive must notify the Company in writing of Executive's intention to
terminate and the Company shall have 15 days after receiving such written notice
to remedy the situation, if possible.
4. Confidential Information. Executive acknowledges and agrees that
Executive has been exposed to and will likely continue to be exposed to
Confidential Information, knowledge or data as described below and Executive
further acknowledges and agrees that such Confidential Information, knowledge or
data is proprietary to and a valuable trade secret of the Company and that any
disclosure or unauthorized use thereof will cause irreparable harm and loss to
the Company. Executive understands that the Company has invested large sums in
developing these materials and it would be difficult for Executive to develop
these same materials from any independent sources without expenditure of large
sums of money and effort. Executive also acknowledges that any use of the
Company's materials other than in the scope of Executive's employment with the
Company would constitute an unlawful use and taking of the materials from the
Company for which the Company would have remedies against Executive.
Executive agrees that during the period of Executive's employment by the
Company or by any parent or subsidiary of the Company or at any time thereafter,
Executive will not, directly or indirectly, disclose or authorize anyone else to
disclose or use or make known for Executive's or another's benefit any
Confidential Information, knowledge, or data of the Company whether or not
patentable or copyrightable, in any way acquired by Executive during Executive's
employment by the Company or by any parent or subsidiary of the Company.
Confidential Information, knowledge or data of the Company shall, for purposes
of this Agreement, include but not be limited to matters not readily available
to the public which are:
(a) of a technical nature, such as, but not limited to, methods,
know-how, formulae, compositions, drawings, blueprints, compounds, processes,
discoveries, machines, inventions, computer programs, and similar items;
(b) of a business nature such as, but not limited to, information
about sales or lists of customers, prices, costs, purchasing, profits, markets,
product strengths and weaknesses, business processes, business and marketing
plans and activities, and employee personnel records;
(c) pertaining to future developments such as, but not limited to,
research and development, or future marketing or merchandising plans or ideas.
All records (whether in hard copy or digital form), books and computer
discs relating in any manner whatsoever to the Company shall be the exclusive
property of the Company regardless of who actually prepared the original record
or book. Executive shall not copy or cause to have copied any such records and
books except in the ordinary course of business. Immediately upon termination of
Executive's employment, Executive will deliver to the Company all copies of
data, information and knowledge, including without limitation, all documents,
correspondence, specifications, blueprints, notebooks, reports, sketches,
formulae, computer programs, sales and other manuals, price lists, customer
lists, samples, and all other materials and copies thereof relating to the
business of the Company obtained by Executive during the period of Executive's
employment by the Company or by any parent or subsidiary of the Company which
are in Executive's possession or under Executive's control.
5. Covenant Not to Compete.
During the period of employment and during the Non-Compete Period (as
hereinafter defined) the Executive will not, directly or indirectly (a) own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, director or
Page 93 of 112
otherwise with, or have any financial interest in, or aid or assist any other
person in the conduct of, any entity or business which competes with any
business, venture or activity being conducted or proposed to be conducted on the
date of termination of the Executive's employment of any group, division or
affiliate of the Company, in any geographic area where such business is being
conducted or is proposed to be conducted at the date of cessation of the
Executive's employment, or (b) induce or attempt to induce any officer or
employee of the Company to leave the employ of the Company, or in any way
interfere with the relationship between the Company and any officer, employee,
director or shareholder thereof, or (c) hire directly or through another entity
any person who is an employee of the Company on the date of termination of
employment of Executive, or (d) induce or attempt to induce any customer,
dealer, supplier or licensee to cease doing business with the Company, or in any
way interfere with the relationship between any such customer, dealer, supplier
or licensee and the Company. However, nothing herein shall prevent Executive
from owning not more than five percent (5%) of the outstanding publicly traded
shares of common stock of a corporation, as to which corporation Executive has
no relationship other than as a shareholder. For purposes of this Agreement,
"Non-Compete Period" shall mean the period during which Executive is receiving
severance payments and benefits pursuant to Section 1 hereof.
Executive specifically agrees that because of Executive's special
expertise and the special and unique services that Executive has been and will
be furnishing the Company, and because of the Confidential Information that has
been acquired by Executive or will be disclosed to Executive during Executive's
employment, the above stated geographic areas and time period, in and during
which Executive will not compete with the Company, are reasonable in scope and
duration and are necessary to afford the Company just and adequate protection
against the irreparable damage which would result to the Company from any
activities prohibited by this Section.
In connection with the foregoing provisions of this Section 5, the
Executive represents that Executive's experience, capabilities and circumstances
are such that such provisions will not unreasonably prevent Executive from
earning a livelihood and that the limitations set forth herein are reasonable
and properly required for the adequate protection of the Company and its
affiliates.
If Executive in any way breaches the obligations specified in this Section
5, the Company shall have the right, in addition to any other remedies available
to it, to terminate the further payment of any amounts due, any compensation,
any severance payments, or any benefits.
If the geographic or time restriction contained in this Section 5 shall be
determined by an arbitrator or court of law or equity to be unreasonable, the
arbitrator or court may amend this Section 5 to provide a reasonable geographic
or time restriction which shall then be binding upon the Company and the
Executive.
6. Injunctive Relief. Executive agrees that any breach or threatened
breach by Executive of any of the provisions contained in Sections 4 and 5
cannot be remedied solely by the recovering of damages and the Company shall be
entitled to an injunction against such breach or threatened breach. Nothing
herein, however, shall be construed as prohibiting the Company from pursuing, in
conjunction with an injunction or otherwise, any other remedies available at law
or in equity for any such breach or threatened breach, including the recovery of
damages.
7. Right to Employment. Nothing contained herein shall confer upon
Executive any right to be continued in the employment of the Company or
interfere in any way with the right of the Company to terminate Executive's
employment at any time for any reason. Executive hereby acknowledges that
Executive is and will remain an Executive-at-will of the Company, terminable
with or without Cause.
8. Notices. All notice given in connection with this Agreement shall be in
writing and shall be delivered either by personal delivery, by telegram, telex,
telecopy or similar facsimile means, by certified or registered mail, return
receipt requested, or by express courier or delivery services, addressed to the
parties hereto at the following addresses:
To Executive: To IEC Electronics Corp.:
IEC Electronics Corp.
105 Norton Street
P.O. Box 271
Newark, NY 14513
Attn: Chief Executive Officer
FAX: (315) 331-0454
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notice shall be deemed given when received, if sent by telegram,
telex, telecopy or similar facsimile means (confirmation of such receipt by
confirmed facsimile transmission being deemed receipt of communications sent by
telex, telecopy or other facsimile means); and when delivered and receipted for
(or upon the date of attempted delivery where delivery is refused), if
hand-delivered, sent by express courier or delivery services, or sent by
certified or registered mail, return receipt requested.
Page 94 of 112
9. Waiver. Any waiver of a breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or of any other
terms, nor shall failure to enforce any term hereof operate as a waiver of any
such term or of any other term.
10. Severability. If any term of this Agreement or the application thereof
is held invalid or unenforceable, the validity or unenforceability shall not
effect any other term of this Agreement which can be given effect without the
invalid or unenforceable term.
11. Governing Law; Venue. This Agreement shall be construed and enforced
in accordance with and governed by the internal laws of the State of New York,
without reference to conflict of law principles of any jurisdiction (including
without limitation New York) which would result in the application of the
domestic substantive laws of any other jurisdiction. The parties consent to the
exclusive jurisdiction of the Supreme Court of New York, Monroe County or of the
United States District Court of the Western District of New York for any legal
action instituted by any party against any other with respect to the subject
matter hereof.
12. Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof. This Agreement may not be
amended or changed except by a writing signed by both parties.
13. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the date set forth above.
IEC Electronics Corp.
By: /s/Russell E. Stingel
Russell E. Stingel
Its: Chief Executive Officer
EXECUTIVE
Page 95 of 112
EXHIBIT 10.20
November 12, 1998
Joe Schadeberg
240 Hamlin Ave.
East Aurora, New York 14052
RE: Separation Agreement
Dear Joe:
Although IEC has no standard formal or informal plan for any severance
payments, it is our intent to provide you with a fair separation package.
Therefore, the separation package which IEC is offering to you as set forth in
this letter is in consideration for your agreement to release IEC from any and
all claims related to your employment.
1. GENERAL. Your employment will be terminated November 12, 1998 ("Employment
Termination Date"). The intent of this letter is to mutually, amicably and
finally resolve all issues and claims surrounding the employment relationship
between you and IEC, and the termination of that relationship.
2. SEVERANCE PACKAGE.
A. SEPARATION PAY. In exchange for the general release
of all claims as described below, IEC agrees to pay you
severance in the amount of $2115.39 per week (your
current earnings) until the pay period ending August
13, 1999, less applicable deductions for Federal and
state income tax withholdings, FICA, and Medicare Tax.
IEC will include the above amounts in the Form W-2 Wage
and Tax Statement which it will issue to you for the
1998 and 1999 calendar years. Notwithstanding the
first sentence of this paragraph, if you receive
compensation from any source, either directly or
indirectly, for services performed by you any time
between May 14, 1999 and August 13, 1999, all such
compensation shall be offset against the severance
amounts due from IEC hereunder, and you agree to
provide IEC with a monthly report of any and all such
compensation.
B. BENEFITS CONTINUATION. In addition, if you elect
COBRA continuation coverage, IEC shall pay for such
coverage, with standard IEC contributions and employee
co-payments during the period you are receiving
separation pay, or until you become eligible for
medical and dental benefits through another employer.
You agree to promptly notify IEC when you become
eligible for medical benefits through another employer.
C. STOCK OPTIONS. You were granted incentive stock
options on July 19, 1995 for 15,000 shares of IEC stock
at an exercise price of $8.625 and on October 31, 1996
for 5,000 shares of IEC stock at an exercise price of
$6.25. Such options have not fully vested. To the
extent they are vested, they will expire three months
after the Employment Termination Date. As further
consideration for your resignation and release, the
Board of Directors of IEC would cause all unvested
options to immediately vest and would allow you to
exercise any or all such options as well as any and all
previously vested options at their set option prices
anytime on or before November 12, 2000 , at which time
all such options, to the extent not exercised, shall
expire. However, as the result of extending the period
in which you may exercise the options, you should be
aware that your incentive stock options will become
non-qualified stock options. There is no income
recognition on the exercise of incentive stock options
but, on the exercise of a non-qualified stock option,
you would have to recognize as taxable income in the
year of exercise an amount equal to the difference
between the fair market value of IEC stock on the date
of exercise and the exercise price you pay. We
recommend that you consult your financial advisor
regarding the stock options.
Page 96 of 112
D. ADDITIONAL OBLIGATIONS AND EXPECTATIONS. You agree
that the payments and benefits described above are in
lieu of and discharge any obligations of IEC to you for
compensation, incentive, or performance payments, or
any other expectation or form of remuneration or
benefit to which you may be entitled except for any
unpaid wages due for work performed during the last pay
period, and any unused earned vacation. All other
employment benefits will be terminated as of the
Employment Termination Date. You agree that this
separation package represents additional consideration
being granted to you in exchange for your waiver of
rights.
3. COVENANTS. You agree not to disparage IEC in any manner and not to disclose
any confidential information or trade secretes which you learned while
employed by IEC. You further represent and agree that, unless otherwise
required by law, you will keep the terms, amount and facts of this agreement
completely confidential, and that you will not hereafter disclose any
information concerning this agreement to anyone other than your immediate
family and professional representatives who will be informed of and bound by
this confidentiality clause. You understand and agree that monetary damages
would be insufficient to compensate IEC fully for its losses in the event
that you violate the covenants herein. In addition to seeking monetary
damages, IEC therefore shall be entitled to enjoin you from continuing to
violate these covenants, and you shall not raise a defense to any action or
proceeding for any injunction the claim that IEC would be adequately
compensated by monetary damages.
4. RELEASE. You agree that the terms set forth in this letter agreement are in
full satisfaction of all obligations IEC may have to you. You agree
irrevocably and unconditionally to release IEC and any related companies,
their affiliates, predecessors, and successors, and all of their officers,
directors, employees, stockholders, agents, representatives, assigns,
insurers, and employee benefit programs and the trustees, administrators,
fiduciaries, and insurers of such programs from any and all claims, demands,
and liabilities whatsoever you may have, or claim to have, arising out of any
act or omission which occurred prior to the date you sign this agreement.
This includes a release of any rights or claims you may have under Title VII
of the Civil Rights Act of 1964, the Equal Pay Act, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the New York
State Human Rights Law, or any other federal, state, or local laws or
regulations which prohibit employment discrimination, restrict any employer's
right to terminate employees, or otherwise regulate employment. This also
includes a release by you of any claims for breach of contract, wrongful
discharge, and all claims for alleged physical or personal injury, emotional
distress relating to or arising our of your employment with IEC or the
termination of that employment, and all claims under the Employee Retirement
Income Security Act. In return for this severance package being accorded to
you under this agreement, it is your intent to provide to IEC the broadest
release of claims and liabilities that may be provided by law. This agreement
shall not be construed as an admission by IEC that it has acted wrongfully
with respect to you.
5. REMEDIES. You promise never to file a lawsuit or other complaint or charge
asserting any claims that are released above. If you break this promise by
filing a lawsuit or other complaint or charge based on claims that you have
released, you agree to pay the reasonable attorney's fees and all other costs
incurred in defending against your claim. In addition, if you break a promise
or violate any terms of this agreement, you shall forfeit all right to
further benefits under this agreement, and you must repay all benefits
previously received, upon IEC's demand.
6. ACKNOWLEDGMENT. YOU ACKNOWLEDGE AND AGREE THAT YOU HAVE BEEN ADVISED TO SEEK
THE ADVICE OF LEGAL COUNSEL BEFORE EXECUTING THIS AGREEMENT, AND YOU HAVE IN
FACT CONSULTED A PRIVATE ATTORNEY OF YOUR OWN CHOOSING TO REVIEW THIS
AGREEMENT, AND YOU HAVE HAD THE OPPORTUNITY TO THOROUGHLY DISCUSS ALL ASPECTS
OF THIS AGREEMENT PRIOR TO EXECUTION THEREOF TO THE EXTENT THAT YOU CONSIDER
APPROPRIATE. YOU ACKNOWLEDGE THAT YOU FULLY UNDERSTAND THE TERMS OF THIS
AGREEMENT, AND THAT YOU HAVE ENTERED INTO THIS AGREEMENT KNOWINGLY,
VOLUNTARILY, AND WITHOUT THREAT OR DURESS. YOU FURTHER ACKNOWLEDGE THAT IEC
HAS ADVISED YOU THAT YOU HAVE TWENTY-ONE (21) DAYS TO CONSIDER THE TERMS OF
THIS AGREEMENT, AND THAT YOU UNDERSTAND THAT YOU MAY REVOKE THIS AGREEMENT IN
WRITING WITHIN SEVEN (7) DAYS FROM THE DATE THAT YOU SIGN IT, AND THAT THE
RELEASE WILL NOT BE EFFECTIVE UNTIL THE EXPIRATION OF THE SEVEN DAY PERIOD.
Page 97 of 112
7. MISCELLANEOUS. This letter agreement is the entire agreement between you and
IEC with respect to your ceasing employment with IEC. You are not relying on
any other written or oral agreements or representations that are not fully
expressed in this agreement. If any provision of this Agreement is invalid or
unenforceable, the remaining provisions shall, to the extent possible, be
enforced, taking into account the purposes and spirit of this Agreement. To
the extent any provision is held invalid or unenforceable for being too broad
or extensive, it is the intention of the parties that the court enforce such
provision to the limits of proper scope or breadth. This Agreement shall be
governed and construed in accordance with the laws of the State of New York.
PLEASE READ THIS AGREEMENT CAREFULLY, AS IT CONTAINS A RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS.
Very truly yours,
IEC Electronics Corp.
/s/David W. Fradin
-------------------
David W. Fradin
President and Chief Operating Officer
I hereby accept and agree to the foregoing terms and conditions for my
termination of employment with IEC.
Dated:Dec 4, 1998
----------- /s/Joseph Schadeberg
------------------------------
Joseph Schadeberg
Page 98 of 112
ADDENDUM
IEC Electronics Corp.
105 Norton Street
Newark, NY 12413
David W. Fradin, PhD
President & Chief Operating Officer
TO: Joe Schadeberg
Subject: Separation Agreement
Date: 1 December 98
Joe-
The following items are additions to your separation agreement:
1. Outplacement Assistance. IEC will pay for professional outplacement services
up to a maximum amount of $4,500 (which is equivalent to 6 months at $750 per
month.) You need to supply us with itemized invoices, and we will then
reimburse you.
2. Medical Insurance. You will receive coverage under the IEC medical plan in
which you are currently enrolled for the full severance period (a minimum of
6 and a maximum of 9 months.) While you are receiving severance, the cost to
you for this coverage will be the same as you were paying prior to
separation. After the severance period, you can elect COBRA conversion.
3. Moving Expenses. IEC will reimburse you for the following items: (1)storage
charge of $27.50 and (2) U-Haul charge of $229.96. Please submit itemized
invoices for these items.
4. Reason for Separation. As we discussed, due to current business conditions
for the company, IEC has eliminated your your position. This is reason is the
basis for your separation.
/s/David W. Fradin
-------------------
David W. Fradin
/s/Joseph B. Schadeberg 12-4-98
-----------------------
Joseph B. Schadeberg
Page 99 of 112
EXHIBIT 10.22
June 1, 1998
Admendment
to
IEC Electronics Corporation Savings and Security Plan
The IEC Electronics Corporation Savings and Security Plan, maintained through
adoption of the Connecticut General Life Insurance Company Defined Contribution
Prototype Profit Sharing/Thrift Plan with 401(k) Feature, Basic Plan
Document 03, by execution of a Non-Standardized Adoption Agreement Number 011-03
effective October 1, 1985, is hereby amended as follows:
1. Effective June 1, 1998, the Adoption Agreement is amended by replacing
current pages 10, 13, 15, and 18 with revised pages 10, 13, 15, and 18
dated June 1, 1998, as attached to and made part of this Admendment.
Note: The Employer must execute the Admendment is provided below. The Plan
Adminstrator (if different than the Employer) and the Trustee(s) must sign the
second page of the Admendment as indicated to show acceptance. This Admentment
must be accepted by Connecticut General Life Insurance Company as PLan Sponsor.
EXECUTED at Newark, NY, this 15th day of July
------------ -- -----
Witness:/s/Michael J. McCarthy By:Diana R. Kurty
Title:Vice President
and Chief Financial Officer
Page 100 of 112
June 1, 1998 Admendment to
IEC Electronics Corporation Savings and Security Plan
Accepted this 15 day of July, 1998
---- ----
Witness: By: /s/Diana R. Kurty, CFO
------------------------- ----------------------
Plan Administrator
ACCEPTED this day of , 19
--- ------- --
Witness: By:
------------------------- ----------------------
Trustee
Witness: By:
------------------------- ----------------------
Trustee
Witness: By:
------------------------- ----------------------
Trustee
ACCEPTED this 15 day of July, 1998
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: B. Oliver
---------------------------------
Authorized Represenative
CAUTION: You should very carefully examine the elections that you have made in
the revised pages of the Adoption Agreement as attached to this Amendment and
discuss them with your legal counsel. Failure to properly fill out the Adoption
Agreement may result in disqualification of your plan. Neither Connecticut
General Life Insurance Company nor any of its employees can provide you with
legal advice or counsel in connection with the execution of this document.
Page 101 of 112
Plan Document VII. ELIGIBILITY REQUIREMENTS
Section
- - - --------------------------------------------------------------------------------
Check or fill out appropriate requirements for each type of contribution in the
Plan
- - - --------------------------------------------------------------------------------
2A.5(a), 2B.1 A. Eligibility Requirements
1. If Employee is a Partnership or Sole Proprietorship:
Self-Employed Individuals are eligible to participate
in the Plan.
X Yes No
2. Immediate Paricipation.
No age or sevice requirement.
Elective Deferral Contributions
Matching Contributions
Nonelective Contributions
Employee Contributions
3. Service Requirements
Not to exceed 1 year if graded vesting. not to exceed 2
years if 100% immediate vesting. Not to exceed 1/2 year
if graded vesting or 1 1/2 years if 100% immediate
vesting if Annual Entry date is chosen in Section VIII
"Entry Date." Not to exceed 1 year for Elective Deferral
Contributions
Elective Deferral Contributions: (indicate Number of years)
Matching Contributions: (indicate Number of years)
Nonelective Contributions: (indicate Number of years)
Employee Contributions: (indicate Number of years)
Fill in the blank(s) above with the amount of service required.
Any service requirement not in units of whole years requires
service eligibility to be determined based on elasped time
(See Section VI.A.1.a)
4. Age Requirement
Not greater than 21 years. If the annual entry date is
chosen in Section VIII "Entry Date." not greater than 20 1/2
years.
Elective Deferral Contributions: 18 (indicate minimum age)
Matching Contributions: 18 (indicate minimum age)
Nonelective Contributions: (indicate minimum age)
Employee Contributions: (indicate minimum age)
5. Employees who were employed on or before the initial Effective
Date of the Admendment and restatement of the Plan, as
indicated on page 2, shall/shall not be immediately eligible
without regard to an Age and/or service requirements specified
in 2 or 3 above
X Shall Shall Not
Page 102 of 112
Plan Document VII. ELIGIBILITY REQUIREMENTS
Section
- - - --------------------------------------------------------------------------------
3. Employees covered by the following designed qualified employee
benefit plans:
--------------------------------------
--------------------------------------
Elective Deferral Contributions
Matching Contributions:
Nonelective Contributions:
Employee Contributions:
1.15 E. The Plan covers Employees whose conditions of employment are
mandated under the Davis-Bacon Act.
Yes X No
- - - --------------------------------------------------------------------------------
Plan Document VII. ELIGIBILITY REQUIREMENTS
Section
- - - --------------------------------------------------------------------------------
Check the appropriate requirements for Entry Date
- - - --------------------------------------------------------------------------------
1.25 A. Immediately.
X Elective Deferral Contributions
X Matching Contributions
Noelective Contributions
Employee Contributions
1.25 B. The first day of the month.
Elective Deferral Contributions
Matching Contributions
Noelective Contributions
Employee Contributions
1.25 C. Quarterly (that is, three months apart) on each:
(MM/DD) ,or(MM/DD) or
(MM/DD) ,or(MM/DD)
Fill in Dates.
Elective Deferral Contributions
Matching Contributions
Noelective Contributions
Employee Contribution
Page 103 of 112
Plan Document VII. ELIGIBILITY REQUIREMENTS
Section
- - - --------------------------------------------------------------------------------
1.76 A. Vesting Percentage
The Vesting Schedule, based on the number of Years or Periods
of Service, shall be indicated below. Indicate the number of
vesting schedule that applies to any Noelective Contribution,
Matching Contributions, and Prior Employer Contributions. The
vesting schedules are depicted in 1 through 8, below.
Noelective Contributions are subject to vesting schedule
Matching Contributions are subject to vesting schedule 1
Prior Employer Contributions are subject to vesting schedule
1. Immediately = 100%
2. 0-3 Years = 0%
3 Years = 100%
3. 1 Year = 20%
2 Year = 40%
3 Year = 60%
4 Year = 80%
5 Year = 100%
4. 0-3 Years = 0%
3 Years = 20%
4 Year = 40%
5 Year = 60%
6 Year = 80%
7 Year = 100%
5. 0-2 Years = 0%
2 Years = 20%
3 Year = 40%
4 Year = 60%
5 Year = 80%
6 Year = 100%
6. 0-5 Years = 0%
5 Years = 100%
7. 1 Year = 25%
2 Year = 50%
3 Year = 75%
4 Year = 100%
Page 104 of 112
Plan Document X. CONTRIBUTIONS
Section
- - - --------------------------------------------------------------------------------
2C.1(k)(1) A. Elective Deferral Contribution
1. Availability/Amount
Not Available under the Plan
X Available under the Plan (complete the following)
Each participant MAY elect to have his Compensation
actually paid during the Plan year reduced by :
a. %
-----------
b.up to %
-----------
X c. from 1% to 15%
d. up to the maximum percentage allowable, not to exceed
the limits of Code sections 402(g) and 415.
Lump sum amounts and/or cash bonues must be subject to the
salary deferral unless the definition of compensation in
Section IV.A.9 has been elected and these almounts have
been specifically excluded from that compensation
definition. Lump sum amounts and cash bonuses are deferred
upon and tested in the Plan Year in which paid.
2. A participant may change the amount of Elective Deferral
Contribution the participant makes to the Plan. (complete a
and b):
X a. 52 per calender year (may not be less frequent than
once)
X b. As of the following date(s) (MM/DD):
any payroll period
Page 105 of 112
EXHIBIT 10.23
IEC ELECTRONICS CORP.
Director Compensation Plan
Article I Purpose of the Plan
1.1 Purpose of Plan. IEC Electronics Corp. (the "Company") adopts the IEC
Electronics Corp. Compensation Plan for Non-Employee Directors (the "Plan") to
provide for payment either in cash or in shares of the Company's Common Stock,
$.01 par value ("Stock"), of the compensation paid for the services of members
of the Board of directors of the Company who are not employees of the Company or
any of its affiliates or subsidiaries ("Non-Employee Directors"). The Plan also
allows the Non-Employee Directors to defer all or a portion of the compensation
for their service as directors. The Plan is intended to provide Non-Employee
Directors with a larger equity interest in the Company, to enhance the identity
of interests between Non-Employee Directors and the shareholders of the Company,
and to assist the Company in attracting and retaining well-qualified individuals
to serve as Non-Employee Directors.
Article II Eligibility and Participation
2.1 Eligibility and Participation. Only Non-Employee Directors shall be eligible
to participate in the Plan. An eligible Plan participant may be referred to
herein as "Participant".
Article III Director Compensation Elections
3.1 Compensation Payable in Cash or Stock. Each Non-Employee Director may elect
to have fees for attendance at meetings of the Company's Board of Directors
and/or committees thereof (determined without regard to the Plan) ("Meeting
Fees") and any other compensation paid to him or her for services as a director
(determined without regard to the Plan) ("Other Compensation") payable in cash
or in Stock.
3.2 Deferral of Compensation. Each Non-Employee Director may elect to defer
receipt of all or a specified portion of the Meeting Fees or Other Compensation
otherwise payable to him or her. If the amount to be deferred would have been
payable in cash pursuant to Section 3.1, the Company will credit a Deferral
Account maintained for the Non-Employee Director as provided in this Plan with
an amount that would otherwise have been payable to the Non-Employee Director in
cash. If the amount to be deferred would have been payable in Stock pursuant to
Section 3.1, the Company will credit units ("Stock Units") to a Unit Account
maintained for the Non-Employee Director as provided in this Plan.
For purposes of the Plan, Deferral Account means an account maintained in a
ledger for a Non-Employee Director to which cash equivalent amounts allocable to
the Non-Employee Director under this Plan are credited and a Unit Account means
the account maintained in a ledger for a Non-Employee Director to which Stock
Units allocable to the Non-Employee Director under this Plan are credited. A
Stock Unit means a credit in a Non-Employee Director Unit Account representing
one share of Stock.
3.3 Elections. An election under Sections 3.1 and 3.2 must be made in writing
and delivered to the Company prior to the start of the calendar year in which
the Meeting Fees or Other Compensation would otherwise be paid (but for the
deferral election) and such election will be irrevocable for the affected
calendar year (the "Affected Year"). To participate in the Plan during the
calendar year in which the Plan becomes effective, the Non-Employee Director
must make an election under Sections 3.1 and 3.2 for services to be performed
subsequent to the election within 30 days after the Effective Date (as defined
in Section 9.1) and such election will be irrevocable for the remainder of the
Affected Year. To participate in the Plan during the first calendar year in
which a Non-Employee Director becomes eligible to participate in the Plan, the
new Non-Employee Director must make an election under Sections 3.1 and 3.2 for
services to be performed subsequent to the election within 30 days after the
date he or she becomes eligible and such election will be irrevocable for the
remainder of the Affected Year. Each election shall remain in effect until
revoked in writing, and any such revocation shall become effective no earlier
than the first day of the first calendar year commencing after such revocation
is received by the Company. If a Non-Employee Director does not file an election
form by the specified date, he or she will be deemed to have elected to receive
all of the Meeting Fees and Other Compensation in cash.
Page 106 of 112
3.4 Payment in Stock. If a Non-Employee Director elects to receive Stock in
payment of all or part of his or her Meeting Fees and Other Compensation, the
number of shares of Stock to be issued on the date that payment would otherwise
have been made in cash shall equal the cash amount that would have been paid
divided by the Fair Market Value of one share of Stock on the date on which such
cash amount would have been paid.
For purposes of the Plan, the Fair Market Value of Stock on any business day
means (a) if the primary market for the Stock is a national securities exchange,
the Nasdaq National Market, or other market quotation system in which last sale
transactions are reported on a contemporaneous basis, the last reported sale
price of the Stock on such exchange or in such quotation system for that day or,
if there shall not have been a sale on such exchange or reported through such
system on such trading day, the closing or last bid quotation therefor on such
exchange or quotation system on such trading day; (b) if the primary market for
the Stock is not such an exchange or quotation market in which transactions are
contemporaneously reported, the closing or last bid quotation in the
over-the-counter market on such trading day as reported by the National
Association of Securities Dealers through NASDAQ, its automated system for
reporting quotations, or its successor, or such other generally accepted source
of publicly reported bid quotations as the Company may reasonably designate. To
the extent that the application of any formula described in this Section 3.4
does not result in a whole number of shares of Stock, the result shall be
rounded upwards to the next whole number such that no fractional shares of Stock
shall be issued under the Plan.
3.5 Crediting Cash to a Deferral Account. If a Non-Employee Director defers
receipt of any portion of the Meeting Fees or Other Compensation by having an
amount credited to a Deferral Account, then on each date that payment would have
been made in cash, the Company will credit to the Non-Employee Director's
Deferral Account an amount equal to the dollar amount of the Meeting Fees or
Other Compensation deferred. On the last day of each calendar year the Company
will also credit the Deferral Account with interest, calculated at the Interest
Rate, on the aggregate amount credited to the Deferral Account.
For purposes of the Plan "Interest Rate" means the annual rate at which interest
is deemed to accrue on the amounts credited in a Deferral Account for a
Non-Employee Director. The annual rate shall be the average interest rate paid
by the Company during the year to its senior lender.
3.6 Deferral Account Fully Vested. All sums credited to a Deferral Account
shall at all times be fully vested.
3.7 Crediting Stock Units to Unit Accounts. If a Non-Employee Director defers
receipt of any portion of Meeting Fees or Other Compensation by having Stock
Units credited to a Unit Account, then on each date that payment would have been
made in cash, the Company will credit to the Non-Employee Director's Unit
Account a certain number of Stock Units. The number of Stock Units credited to a
Unit Account with respect to any Non-Employee Director shall equal the amount
deferred divided by the Fair Market Value of one share of Stock on the date on
which such cash amount would have been paid but for the deferral election
pursuant to Section 3.3.
3.8 Fully Vested Stock Units. All Stock Units credited to a Participant's Unit
Account pursuant to this Article III shall be at all times fully vested and
nonforfeitable.
3.9 Distribution of the Amounts in a Deferral Account. After the Distribution
Date, as hereinafter defined, for a Non-Employee Director, the Company will pay
the Non-Employee Director cash equal to the amount with which the Non-Employee
Director's Deferral Account is credited. The Non-Employee Director may elect to
receive all of the cash at one time or in any number of installments up to 10
annual installments as described below. If the Non-Employee Director has elected
to receive all of the cash at one time, the Company will pay the cash to the
Non-Employee Director as soon as practicable after the Distribution Date.
If the Non-Employee Director has elected to be paid the cash in installments, a
pro rata portion of the amount credited to the Deferral Account on the
Distribution Date will be paid in each installment, along with the additional
amount credited to the Deferral Account as interest since the last installment
was paid. The Company will pay to the Non-Employee Director the cash to be paid
in the first installment as soon as practicable after the Distribution Date. The
remaining installments of cash shall be paid on or about each anniversary of the
Director's Distribution Date.
For purposes of this Plan, the "Distribution Date" means any date subsequent to
the Affected Year specified by a Non-Employee Director on an election form filed
pursuant to Section 3.3 and, in any case, the date on which a Non-Employee
Director (i) ceases to be a director of the Company or (ii) becomes employed by
the Company or an affiliate, or (iii) dies.
Page 107 of 112
3.10 Distribution of the Amounts in a Unit Account. After the Distribution Date
for a Non-Employee Director, the Company will issue to the Non-Employee Director
a certificate for that number of shares equal to the number of Units with which
the Non-Employee Director's Unit Account is credited. The Non-Employee Director
may elect to receive all of the shares of Stock at one time or in up to 10
annual installments as described below. If the Non-Employee Director has elected
to receive all of the shares of Stock at one time, the Company will issue the
shares of Stock as soon as practicable after the Distribution Date.
If the Non-Employee Director has elected to receive the shares of Stock in
installments, a pro rata number of shares of Stock will be issued for each
installment plus additional shares of Stock equal to the Units credited to the
Unit Account respecting dividends paid on the Stock since the last installment
was made. The Company will issue the first installment of shares of Stock as
soon as practicable after the Non-Employee Director's Distribution Date. The
remaining installments of shares of Stock will be issued on or about each
anniversary of the Non-Employee Director's Distribution Date.
3.11 Conversion of Accounts. At any time prior to the Distribution Date, a
Non-Employee Director who has a Deferral Account may convert all or any portion
of the Deferral Account into Units credited to a Unit Account. The number of
Units to be credited to the Non-Employee Director's Unit Account upon the
conversion shall equal (1) the amount credited to the Non-Employee Director's
Deferral Account so converted divided by (2) the Fair Market Value on the date
of the Non-Employee Director's election to convert.
At any time prior to the Distribution Date, a Non-Employee Director who has a
Unit Account may convert all or any portion of the Unit Account into a Deferral
Account. The cash amount to be credited to the Non-Employee Director's Deferral
Account upon the conversion shall equal (1) the number of Units credited to his
or her Unit Account so converted multiplied by (2) the Fair Market Value on the
date of the Non-Employee Director's election to convert.
Any election to convert must be made on a form prescribed by the Company and
filed with its Secretary. The conversion of a Unit Account or a Deferral Account
shall be deemed to occur on the date of the Director's election.
Page 108 of 112
Article IV - Stock
4.1 Authorized Stock. The aggregate number of shares of Stock that may be issued
under the Plan shall not exceed 50,000 shares, unless such number of shares is
adjusted as provided in Article V of the Plan. Such shares of Stock may be
authorized but unissued shares, treasury shares or shares acquired in the open
market for the account of the Participant.
4.2 Fractional Shares. No fractional shares of Stock shall be issued under the
Plan under any circumstances.
Article V - Adjustment upon Changes in Capitalization
5.1 Adjustment upon Changes in Capitalization. In the event of a stock dividend,
stock split or combination, reclassification, recapitalization or other capital
adjustment of shares of Stock, the number of shares of Stock that may be issued
pursuant to Stock Units and the number of Stock Units credited to Unit Accounts
shall be appropriately adjusted by the Board of Directors of the Company, whose
determination shall be final, binding on the Company and the Participants and
conclusive.
5.2 No Effect on Rights of Company. The grant of Stock Units pursuant to the
Plan shall not affect in any way the right or power of the Company to issue
additional Stock or other securities, make adjustments, reclassifications,
reorganizations or other changes in its corporate, capital or business
structure, to participate in a merger, consolidation or share exchange or to
transfer its assets or dissolve or liquidate.
Article VI - Termination or Amendment of the Plan
6.1 In General. The Board of Directors of the Company may at any time terminate,
suspend or amend the Plan. An amendment or the termination of this Plan shall
not adversely affect the right of a Non-Employee Director or Beneficiary to
receive shares of Stock issuable or cash payable at the effective date of the
amendment or termination or any rights that a Non-Employee Director, former
Non-Employee Director, or a Beneficiary has in any Deferral Account or Unit
Account at the effective date of the amendment or termination. If the Plan is
terminated, however, the Company may, at its option, accelerate the payment of
all deferred and other benefits payable under this Plan.
Article VI - Government Regulations
6.1 Government Regulations.
(a) The obligations of the Company to issue any Stock pursuant to the Plan
shall be subject to all applicable laws, rules and regulations and the obtaining
of all such approvals by governmental agencies as may be deemed necessary or
appropriate by the Board of Directors of the Company.
(b) The Board of Directors of the Company may make such changes to the
Plan as may be necessary or appropriate to comply with the rules and regulations
of any governmental authority.
Article VII - Administration
7.1 In General. The Plan shall be administered by the Compensation Committee of
the Board of Directors (the "Committee"), which shall have full power and
authority, subject to the provisions of the Plan, to supervise administration of
the Plan and to interpret the provisions of the Plan and of any award, issuance
or payment of Stock or Stock Units hereunder. Any decision by the Committee
shall be final and binding on all parties. No member of the Committee shall be
liable for any determination made, or any decision or action taken with respect
to the Plan or any award, issuance or payment of Stock or Stock Units under the
Plan. The Committee may delegate any of its responsibilities to one or more
agents, including employees of the Company or one or more of its affiliates and
subsidiaries, and may retain advisors to provide advice to the Committee. No
Participant shall participate in the making of any decision with respect to any
question relating to any Stock or Stock Unit issued under the Plan exclusively
to that Participant.
7.2 Rules and Interpretation. The Committee shall be vested with full authority
to make such rules and regulations as it deems necessary to administer the Plan
and to interpret and administer the provisions of the Plan in a uniform manner.
Any determination, decision or action of the Committee in connection with the
construction, interpretation, administration or application of the Plan shall be
final, conclusive and binding on all parties.
7.3 Expenses. The cost of issuing and paying Stock and Stock Units pursuant to
the Plan and the expenses of administering the Plan shall be borne by the
Company.
Page 109 of 112
Article VIII - Miscellaneous
8.1 Unfunded Plan. The Plan shall be unfunded with respect to the Company's
obligation to pay any amounts in the Deferral Accounts and any Stock Units in
the Unit Accounts and a Participant's rights to receive any payment of any
amounts in the Deferral Accounts and any Stock Units in the Unit Accounts shall
not be greater than the rights of an unsecured general creditor of the Company.
8.2 Assignment; Non-Alienation. The rights, benefits or interests a Non-Employee
Director may have under this Plan, any Deferral Account or any Unit Account are
not assignable or transferable and shall not be subject in any manner to
alienation, sale or any encumbrances, liens, levies, attachments, pledges or
charges of the Participant or his or her creditors. Any action attempting to
effect any transaction of that type shall be void and of no force and effect.
8.3 Death Benefit; Designation of Beneficiaries. Upon the death of a
Participant, the Stock Units remaining in his or her Unit Account as of the date
of death and the amounts of cash remaining in his or her Deferral Account as of
the date of death shall be paid to the beneficiary or beneficiaries of the
Participant, or to his or her estate, as described in this Section 8.3, in
shares of Stock and in cash, as the case may be, in a single distribution. A
Participant may designate a beneficiary or beneficiaries to receive any payments
under the Plan upon his or her death. A beneficiary designation shall be in
writing on a form acceptable to the Company and shall be effective only upon
delivery to the Company. A beneficiary designation may be revoked by a
Participant at any time by delivering to the Company either written notice of
revocation or a new written beneficiary designation. The written beneficiary
designation last delivered to the Company prior to the death of the Participant
shall control. If no beneficiary has been designated, amounts due hereunder
shall be paid to the Participant's estate.
8.4 No Guarantee of Directorship. Neither the adoption and maintenance of the
Plan nor any election made hereunder by a Participant shall be deemed to be a
contract between the Company and the Participant to retain his or her position
as a director of the Company.
8.5 Applicable Law. The validity, interpretation and administration of the Plan
and any rules, regulations, determinations or decisions hereunder, and the
rights of any and all persons having or claiming to have any interest herein or
hereunder, shall be determined exclusively in accordance with the laws of the
State of New York (without regard to the choice of laws provisions thereof),
except to the extent such laws are preempted by the laws of the United States of
America.
8.6 Notices. All notices, elections or other communications made or given
pursuant to the Plan shall be in writing and shall be sufficiently made or given
if hand-delivered or mailed by certified mail, addressed (if from the Company to
the Participant) to any Participant at the address contained in the records of
the Company for such Participant, or addressed (if from the Participant to the
Company) to the Secretary of the Company at its principal office.
8.7 Headings. The headings in the Plan are for reference purposes only and shall
not affect the meaning or interpretation of the Plan.
Article IX - Effective Date of the Plan
9.1 Effective Date. The Plan shall be effective immediately upon the date of its
approval by the stockholders of the Company (the "Effective Date").
Page 110 of 112
EXHIBIT 22.1
Subsidiaries of IEC Electronics Corp.
IEC Electronics - Edinburg, Texas, Inc., a Texas corporation,
wholly-owned by IEC Electronics Corp.
IEC Arab, Alabama Inc., a Alabama corporation, wholly-owned by IEC Electronics
Corp.
IEC Electronics - Ireland Limited, an Irish corporation, wholly-owned by IEC
Electronics Corp
IEC Electronics Foreign Sales Corporation, a Barbados corporation, wholly-
owned by IEC Electronics Corp.
Page 111 of 112
Exhibit 24.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 File Nos. 33-63816, 33-79360 and 333-4634.
/s/ Arthur Andersen LLP
Rochester, New York,
December 29, 1998
Page 112 of 112