Washington, D.C. 20549
IEC ELECTRONICS CORP.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUALSTOCKHOLDER MEETING TO BE HELD ON JANUARY 28, 2015.MARCH 3, 2016.
Our proxy statement and Annual Report to Stockholders, which are enclosed with this mailing, are also available online, at https://materials.proxyvote.com/44949L.
www.proxyvote.com
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If you have any questions, require assistance with voting, or need additional copies of the proxy materials, please contact:
INVESTORCOM, INC.
at
65 Locust Avenue, Suite 302, New Canaan, CT 06840
or
info@investor-com.com
or
Stockholders can call toll free at (877) 972-0090
Banks and Brokers may call collect at (203) 972-9300
PRELIMINARY COPY - SUBJECT TO COMPLETION
IEC ELECTRONICS CORP.Electronics Corp.
105 NORTON STREETNorton Street
NEWARK, NEW YORKNewark, New York 14513
(315) 331-7742
PROXY STATEMENTProxy Statement
FOR 2015 ANNUAL MEETING OF STOCKHOLDERSFor 2016 Annual Meeting of Stockholders
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I receiving these materials?
We are sending you this proxy statement and the enclosed WHITE proxy card because the board of directors of IEC Electronics Corp. (“IEC”, the “Company”, “we”, “our”, “us”) is soliciting your proxy to vote at the 2015 Annual Meeting2016 annual meeting of Stockholdersstockholders and any adjournment or postponement thereof. We invite you to attend the annual meeting and request that you vote on the proposals described in this proxy statement. The meeting will be held on Wednesday, January 28, 2015Thursday, March 3, 2016 at 9:00 a.m. (local time) at our office, 105 Norton Street, Newark, New York. To obtain directions to be able to attend the Annual Meetingannual meeting and vote in person, please contact our Corporate Secretary, Beth Ela Wilkens,Jennifer Brown at (585) 419-8645.(315) 331-7742. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, date, sign and return the enclosed WHITE proxy card, or vote by telephone or Internet following the simple instructions on the card.
We are mailing this proxy statement, the accompanying WHITE proxy card, and our Annual Report to Stockholders for the fiscal year ending Tuesday, September 30, 20142015 (“Fiscal 2014 ”)2015”) on or about December [15], 2014January 28, 2016 to all stockholders of record entitled to vote at the annual meeting.
What am I voting on?
There are three matters scheduled for a vote, and the board of directors recommends that you vote “FOR” each of the Proposals:
Proposal 1: the election of seven directors to serve until the 20162017 Annual Meeting of Stockholders,
Proposal 2: the ratification of the selection of Crowe Horwath LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2015,2016, and
Proposal 3: an advisory vote to approve the compensation paid to our named executive officers (“say-on-pay”).
With respect to Proposal 1 (election of directors), Vintage Opportunity Partners, LP (“Vintage”) has announced its intention to propose seven alternative director nominees. As a result, if such nominees are in fact proposed for election at the annual meeting, the election of directors will be a contested election (there are more nominees than available positions). Directors will be elected on a plurality basis, meaning the seven directors who received the greatest number of votes “for” at the annual meeting will be elected. Background regarding the nomination by Vintage is provided on page 6 below. THE BOARD OF DIRECTORS URGES YOU NOT TORETURN ANY PROXY CARD SENT TO YOU ON BEHALF OF VINTAGE, AND TO USETHE ENCLOSED WHITE PROXY CARD TO VOTE “FOR” THE ELECTION OF THE DIRECTORS DESCRIBED IN PROPOSAL 1.
Our board of directors does not intend to bring any other matters before the meeting and is not aware of anyone else who will submit any other matters to be voted on. However, if any other matters properly come before the meeting, the people named on the WHITEproxy card, or their substitutes, will be authorized to vote on those matters in their own judgment.
Who can vote at the annual meeting?
Only stockholders of record at the close of business on December 1, 2014 ,January 11, 2016, the record date for the annual meeting, will be entitled to vote at the annual meeting. As of the record date, there were 10,135,12910,198,192 shares of common stock outstanding and entitled to vote.
Stockholder of Record: Shares Registered in Your Name
If on December 1, 2014 ,January 11, 2016, your shares of IEC common stock were registered directly in your name with our transfer agent, Registrar and Transfer Company (now Computershare, Inc.), then you are a stockholder of record. As a stockholder of record, you may vote in person at the meeting or vote by proxy. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, TO ENSURE YOUR VOTE IS COUNTED WE URGE YOU TO FILL OUT AND RETURN THE ENCLOSED WHITEPROXY CARD OR TO VOTE BY TELEPHONE OR INTERNET AS PROVIDED ON THE WHITECARD.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If on December 1, 2014,January 11, 2016, your shares of IEC common stock were held in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the annual meeting. However, since you are not the stockholder of record, you may notFor instructions on how to vote your shares in person at the annual meeting, unless you request and obtain a signed letter or other valid proxy from your broker or other agent.see "How do I vote?" below.
How many votes do I have?1
On each matter to be voted upon, you have one vote for each share of common stock you owned as of December 1, 2014, the record date for the annual meeting.
How do I vote?
The procedures for voting are set forth below:
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote in person at the annual meeting or vote by proxy using the enclosed WHITE proxy card. Whether or not you plan to attend the meeting, we urge you to vote by submitting the WHITE proxy card, or following the telephone or Internet voting instructions on it to ensure your vote is counted. You may still attend the meeting and vote in person if you have already voted by proxy.
To vote in person, come to the annual meeting with photo identification and we will give you a ballot when you arrive.
To vote using the proxy card, simply complete, date and sign the enclosed WHITE proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the annual meeting, we will vote your shares as you direct.
To vote by telephone or Internet, follow the instructions on the WHITE proxy card and we will vote your shares as you direct. You will need your unique control number printed on the WHITE proxy card. You may vote 24 hours a day, seven days a week at (866) 287-9714, or at https://www.proxyvotenow.com/iec.
Although we do not know for certain whether Vintage will in fact solicit proxies or nominate persons for election of directors at the annual meeting, you may receive a proxy statement and proxy card, and letters or other solicitation materials from Vintage or persons affiliated with Vintage. The Vintage nominees are not endorsed by our board of directors, and the board URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY VINTAGE. Voting on a proxy card provided by Vintage will revoke any prior WHITE proxy card you have submitted, even if you indicate “Withhold” votes for Vintage nominees. If you have signed a proxy card sent to you on behalf of Vintage, you have the right to change your vote by completing and returning the enclosed WHITE proxy card or following the telephone or Internet voting instructions on it. You also may contact InvestorCom for assistance at info@investor-com.com (stockholders can call toll free at (877) 972-0090 and banks and brokers may call collect at (203) 972-9300).
Only the latest proxy you submit will be counted.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you hold your shares in “street name” and thus areas a beneficial owner of shares registered in the name of your broker, bank or other agent ("broker"), you must vote your shares in the manner prescribed by your broker. Your broker has enclosed or otherwise provided a voting instruction card for you to use in directing the broker how to vote your shares. Check the voting form used by that organization to see if it offers Internet or telephone voting. To vote in person at the annual meeting, you must obtainpresent photo identification and a validlegal proxy from your broker. Follow the instructions from your broker included with these proxy materials, or contact your broker to request a proxy form.voting instructions card.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock you owned as of January 11, 2016, the record date for the annual meeting.
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least a majority of the outstanding shares entitled to vote are present at the meeting. Your shares are counted as present at the meeting if:
You are present and vote in person at the meeting; or
You have properly submitted a proxy card;
You have voted by telephone or Internet; or
If your shares are held in street name, a proxy card is submitted by your broker on your instructions, or voted by your broker on a discretionary item.
Additionally, abstentions and broker non-votes on discretionary items will be counted towards the quorum requirement. If there is no quorum, a majority of the shares present at the meeting and entitled to vote may adjourn the meeting to another date.
How are votes counted?
You may either vote “FOR” or “WITHHOLD” authority to vote for our nominees for the board of directors in Proposal 1, or you may withhold authority to vote for a particular nominee by voting “FOR ALL EXCEPT” and writing the namenumber of one or more nominees in the designated space on the proxy card. You may vote “FOR”, “AGAINST” or “ABSTAIN” on Proposals 2 (ratification of the selection of our independent public accounting firm) and 3 (advisory vote to approve the compensation paid to our named executive officers).
If you submit your proxy but abstain from voting or withhold authority to vote on one or more matters, your shares will be counted as present at the meeting for the purpose of determining a quorum. Your shares also will be counted as present at the meeting for the purpose of calculating the required vote on the particular matter with respect to which you abstained from voting or withheld authority to vote.
If a broker receives proxy materials from both the Company and Vintage there will be a “contested election”. If you hold your shares in street name and do not provide voting instructions to your broker, under the rules of The New York Stock Exchange (“NYSE”):
If the election is not contested, your broker willbrokerage firm, it may still be able to vote your shares with respect to certain “discretionary” (or routine) items, but it will not be allowed to vote your shares with respect to certain “non-discretionary” items. In the case of non-discretionary items, for which no instructions are received, the shares will be treated as “broker non-votes”. If the election is not contested, only Proposal 2 (ratification of the selection of our independent accounting firm) will be considered discretionary and your broker will not be able to vote on Proposals 1 (election of directors) and 3 (say-on-pay). Shares that constitute broker non-votes will be counted as present at the meeting for the purpose of determining a quorum,quorum. A broker will have discretionary authority to vote on Proposal 2 relating to the ratification of the selection of our independent accounting firm, but will not be considered entitled to vote on the proposal in question.
If the election is contested, each of Proposals 1, 2 and 3 will be considered nondiscretionary and the broker will not have discretionary authority to vote on any other matter. As a result, if you do not vote your street name shares, your broker has the authority to vote on your behalf with respect to Proposal 2 (the ratification of them.
the selection of the accounting firm), but not with respect to Proposal 1 (the election of directors) and Proposal 3 (advisory vote to approve the compensation paid to our named executive officers). We encourage you to provide instructions to your broker to vote your shares on all of the Proposals described in this proxy statement.1 and 3.
An inspector of election appointed by the Company will tabulate votes at the annual meeting.
How many votes are needed to approve each Proposal?
Proposal 1- Election of directors
The outcome of this vote will be determined by a plurality of the votes cast. This means that the seven director nominees with the most affirmative votes will be elected. Withheld votes and broker non-votes will have no effect on the outcome of this matter.the election of directors.
Proposal 2 – Ratification of the selection of Crowe Horwath LLP as the independent registered public accounting firm of the Company for the fiscal year ending September 30, 20152016
and
Proposal 3– AdvisoryAdvisory vote onto approve the compensation paid to our named executive officers
Approval forof each of Proposals 2 and 3 requires the affirmative vote of a majority of the shares present in person or by proxy at the meeting and entitled to vote.vote at the meeting. Abstentions are counted and have the effect of a vote against the proposal,these proposals, because abstentions are deemed to be present and entitled to vote but are not counted toward the affirmative vote required to approve such proposal. Broker non-votes will not be consideredcount as present and entitled to vote on the proposal. Therefore, under applicable Delaware law, broker non-votes will have no effect on the number of affirmative votes required to adopt such proposal.against Proposal 3.
What if I return a proxy card but do not make specific choices? What are the recommendations of our board of directors?
If you return a signed and dated WHITE proxy card without marking any voting selections, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the board of directors. The board’s recommendation is set forth below together with the description of each proposal in this proxy statement. In summary, the board recommends a vote:
FOR election of all of the nominated directors (see Proposal 1);
FOR ratification of Crowe Horwath LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 20152016 (see Proposal 2); and
FOR approval of the compensation paid to our named executive officers (see Proposal 3).
If you return a signed and dated WHITE proxy card, with respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the board of directors or, if no recommendation is given, in their own discretion.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are a stockholder of record, you may revoke your proxy in any one of three ways:
You may submit another properly completed proxy card, or vote by telephone or Internet, with a later date.Internet.
You may send a written notice that you are revoking your proxy to: Corporate Secretary, IEC Electronics Corp., 105 Norton Street, Newark, NY 14513.
You may attend the annual meeting and vote in person. Simply attendingAttending the meeting will not, by itself, revoke your proxy.
If you hold your shares in street name, contact your broker or other nomineeorganization regarding how to revoke your proxyinstructions and change your vote.
If you have returned a proxy provided by Vintage, your board of directors urges you to submit another properly completed WHITE proxy card with a later date, send a written notice revoking the proxy as provided above, or for assistance contact InvestorCom at info@investor-com.com (stockholders can call toll free at (877) 972-0090 and banks and brokers may call collect at (203) 972-9300).
How can I find out the voting results of the voting at the annual meeting?
Preliminary voting results will be announced at the annual meeting. Final voting results will be published in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission (“SEC”) within four business days after the annual meeting.
What does it mean if I receive more than one WHITE proxy card?
If you receive more than one WHITE proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, date, sign and return each WHITE proxy card to ensure that all of your shares are voted.
Who is paying for this proxy solicitation?
IEC will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors, and nominees, and our officers and employees also may solicit proxies in person, by telephone, by email or by other means of communication such as mail, facsimile, telegraph, Internet or advertisements. Information regarding these possible participants (“Participants”) in our solicitation of proxies from our stockholders is set forth in Appendix A.communication. We will not pay our directors, officers and employees any additional compensation for soliciting proxies. In addition, we have retained the firm of InvestorCom, Inc., a professional solicitation firm, to assist us in the distribution and solicitation of proxies. It is anticipated that InvestorCom will employ approximately 30 persons to solicit stockholders for the Annual Meeting. InvestorCom, Inc. will be reimbursed for its expenses, and will be paid up to $60,000 depending on the services it provides during the course of, and the outcome of, the solicitation. It also will be indemnified against certain liabilities and expenses. IEC has requested banks, brokerage houses and other custodians, nominees and fiduciaries to forward all solicitation materials to the beneficial owners of the shares they hold of record. IEC will reimburse these record holders for their reasonable out-of-pocket expenses in so doing.
When are stockholder proposals and director nominations due for next year’s annual meeting?
At our annual meeting each year, our board of directors submits to stockholders its nominees for election as directors. In addition, the board of directors may submit other matters to the stockholders for action at the annual meeting.
Our stockholders also may submit proposals for inclusion in the proxy materials. These proposals must be made by stockholders satisfying eligibilitysatisfy the requirements of Rule 14a-8 of the SEC, and the proposal also must meet SEC requirements.Securities Exchange Act of 1934, as amended. To be considered for inclusion in next year’s proxy materials, you must submit your proposal in writing by August 21, 2015September 30, 2016 to our Corporate Secretary, IEC Electronics Corp., 105 Norton Street, Newark, New York 14513.
In addition, our by-laws provide that a stockholder may present from the floor a proposal that is not included in the proxy statement if the stockholder delivers written notice to our Corporate Secretary not less than 90 days before the date of the meeting. The notice must set forth your name, address and number of shares of stock you hold, a representation that you are a holder of record of our stock and you intend to appear in person or by proxy at the meeting to make the proposal, and a description of the business to be brought before the meeting, the reasons for conducting such business at the annual meeting, any material interest you have in the proposal, and such other information regarding the proposal as would be required to be included in a proxy statement.meeting. We have received no such notice for the 20152016 annual meeting. For the 2016Assuming a date of March 3, 2017 for our 2017 annual meeting of stockholders, written notice must be delivered to our Corporate Secretary at our principal office, 105 Norton Street, Newark, New York 14513, no later than October 29, 2015.December 3, 2016.
Our by-laws also provide that if a stockholder intends to nominate a candidate for election as a director at the annual meeting, the stockholder must deliver written notice of such intent to our Corporate Secretary. The notice must be delivered not less than 90 days before the date of a meeting of stockholders. The notice must set forth your name and address, and number of shares of stock you own, the name and address of the person to be nominated, a representation that you are a holder of record of stock entitled to vote at the meeting, a representation that you intend to appear in person or by proxy at the meeting to nominate the person specified in the notice, a
description of all arrangements or understandings between such stockholder and each nominee and any other person (naming such person) pursuant to which the nomination is to be made by such stockholder, the nominee’s business address and experience during the past five years, any other directorships held by the nominee, the nominee’s involvement in certain legal proceedings during the past ten years and such other information concerning the nominee as would be required to be included in a proxy statement soliciting proxies for the election of the nominee. In addition, the notice must include the consent of the nominee to serve as a director if elected. We receivedAssuming a noticedate of March 3, 2017 for the 2015 annual meeting from Vintage indicating that it intends to nominate Keith M. Butler, Charles P. Hadeed, Lynn J. Hartrick, Andrew M. Laurence, Jeremy R. Nowak, Jeffrey T. Schlarbaum and Eric Singer for election as directors. For the 2016our 2017 annual meeting of stockholders, written notice of a nomination must be delivered to our Corporate Secretary at our principal office, 105 Norton Street, Newark, New York 14513 no later than October 29, 2015.December 3, 2016.
Security Ownership of Certain Beneficial Owners
The table below presents certain information as of January 11, 2016 about the persons known by us to be the record or beneficial owner of more than 5% of our common stock. Percentages are based on 10,198,192 shares issued and outstanding.
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| Name and Address of Beneficial Owner | Number of Shares
of Common Stock
Beneficially Owned | | Percent
of
Class |
Vintage Capital Management, LLC, et al
4705 S. Apopka Vineland Road, Suite 210
Orlando, Florida 32819 | 958,694 | (1) | 9.40 | % |
Tocqueville Asset Management L.P.
40 West 57th Street, 19th Floor
New York, New York 10019 | 648,620 | (2) | 6.36 | % |
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(1) | This information as to the beneficial ownership of shares of our common stock is based on an amendment to Schedule 13D dated February 9, 2015 filed with the Securities and Exchange Commission by Vintage Capital Management, LLC ("Vintage Capital"), Kahn Capital Management, LLC, a member and majority owner of Vintage Capital and Brian R. Kahn, manager of each of Vintage Capital and Kahn Capital, and subsequent Section 16 reports filed with the Securities and Exchange Commission by Andrew M. Laurence, a partner of Vintage Capital, and Jeremy R. Nowak, a partner and Chief Operating Officer of Vintage Capital. Vintage Capital, Kahn Capital Management, LLC and Brian R. Kahn each report shared voting and shared dispositive power with respect to all 958,694 shares. |
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(2) | This information as to the beneficial ownership of shares of our common stock is based on the Schedule 13G dated January 30, 2015 filed with the Securities and Exchange Commission by Tocqueville Asset Management L.P., an investment adviser. Tocqueville Asset Management L.P. reports sole voting and sole dispositive power with respect to all 648,620 shares. |
BackgroundSecurity Ownership of the solicitation for this year’s meeting:
On February 13, 2014 Vintage Capital Management LLC, Kahn Capital Management, LLC, and Brian R. Kahn (together with Vintage, the “Vintage Holders”) filed a Schedule 13D with the SEC reporting beneficial ownership of 564,828 shares (5.6%) of the Company’s outstanding stock. Among others, the Schedule 13D indicated the beneficial holders reserved the right to acquire additional stock of the Company.
On April 22, 2014, W. Barry Gilbert, the Chairman and CEO of the Company, traveled to Florida and met with Mr. Kahn. The meeting was held at the request of Mr. Gilbert, who wanted to meet with representatives of Vintage so that he could better understand Vintage’s goals with respect to its investment in IEC. In addition to Mr. Kahn, Jeremy Nowak also attended the meeting. There was no formal agenda for the meeting. Mr. Kahn asked Mr. Gilbert questions about IEC’s strategy and plans for growth. Mr. Gilbert responded that he could not comment on such matters beyond what IEC had already said in its public disclosures. Mr. Kahn expressed frustration at this position and indicated that he was seeking information that would help him decide whether to increase or reduce his investment in IEC. Mr. Gilbert indicated that Vintage had made its initial decision to invest in IEC based on publicly available information and that it would have to continue to make its decisions based on the information available to all IEC stockholders. At one point during this meeting, Mr. Kahn asked Mr. Gilbert if he would be willing to nominate one of Vintage’s representatives to the IEC Board of Directors. Mr. Gilbert pointed out that the existing Directors of IEC have a broad range of skills and expertise, discussed the qualifications of the three members recently added to the Board and asked what additional expertise Vintage’s representatives would bring to the IEC Board. The conversation about nominating a Vintage representative to the Board ended without further substantive discussion.
On May 28, 2014, the Vintage Holders filed a Schedule 13D/A with the SEC reporting an increase in their beneficial ownership to 640,173 shares (6.3%) of the Company’s outstanding stock.
On July 31, 2014, the board of directors approved a Tax Benefit Preservation Plan Rights Agreement (the “Rights Agreement”) between the Company and Registrar and Transfer Company (now Computershare, Inc.), and declared a dividend distribution of one right for each outstanding share of the Company’s common stock to stockholders of record at the close of business on August 15, 2014, all as described in detail in the Company’s Current Report on Form 8-K filed on with the SEC the same day. The board of directors adopted the Rights Agreement in an effort to protect stockholder value by attempting to protect against a possible limitation on the Company’s ability to use its net operating loss carryforwards (the “NOLs”) to reduce potential future federal income tax obligations by virtue of an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). The Company has experienced substantial operating losses, and under the Code, and rules promulgated by the Internal Revenue Service, the Company may “carry forward” these losses in certain circumstances to offset any current and future earnings and thus reduce the Company’s federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise become limited, the Company believes that it will be able to carry forward a significant amount of NOLs, and therefore these NOLs could be a substantial asset to the Company. However, if the Company experiences an “ownership change,” its ability to use the NOLs will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.
On August 14, 2014, the Vintage Holders filed a Schedule 13D/A with the SEC attaching a letter to the board of directors requesting that the Rights Agreement be rescinded immediately.
On October 2, 2014, Mr. Gilbert traveled to Florida and met with Mr. Kahn. Mr. Gilbert requested the October 2, 2014 meeting because he wanted to keep lines of communication open with Mr. Kahn. There was no specific agenda for this meeting and no one other than Mr. Kahn and Mr. Gilbert were present. During the discussions on October 2, 2014, Mr. Kahn asked questions about IEC’s strategy and the formal investigation by the staff of the SEC relating to the restatement of the Company’s financial statements and other matters. After some discussion about the implications of Vintage receiving information, Mr. Gilbert told Mr. Kahn that he would consider providing Vintage with non-public information about IEC if Vintage were willing to sign a confidentiality and standstill agreement agreeing to keep such information confidential and not to trade in IEC’s stock while in possession of the information. Following the meeting, counsel for IEC and counsel for Vintage began to negotiate the terms of a confidentiality and standstill agreement. During these negotiations, Mr. Gilbert reached the conclusion that it would not be appropriate to provide non-public information to Vintage, even pursuant to a confidentiality and standstill agreement. Mr. Gilbert’s decision was based in part on the terms of the confidentiality and standstill agreement requested by Vintage which would have permitted Vintage to make disclosure of the information after a specified period of time if it had not previously been disclosed by IEC, and in part by his decision that it was not appropriate to provide Vintage with non-public information regarding IEC when he was not sure of how Vintage would use that information even if Vintage agreed to keep the information confidential.
By letter to the Company dated October 27, 2014, Vintage submitted notice (the “Vintage Nomination”) of its nomination of seven candidates for election to the board of directors at the annual meeting, including Keith M. Butler, Charles P. Hadeed, Lynn J. Hartrick, Andrew M. Laurence, Jeremy R. Nowak, Jeffrey T. Schlarbaum, and Eric Singer. In the Vintage Nomination, Vintage represented that it directly owns 1,000 shares of Company stock, and is the beneficial owner of an additional 709,960 shares by virtue of its affiliation with Vintage Capital Management, LLC. Vintage disclosed the Vintage Nomination in a Schedule 13D/A filed by the Vintage Holders with the SEC on October 27, 2014.
On November 3, 2014, the Company sent a letter to Vintage indicating that the Nominating and Governance Committee would consider Vintage’s nominees in connection with its regular review of potential nominees for the board of directors. The letter indicated that as part of its normal review, the Committee typically asks nominees to meet with one or more members of the Committee and to provide information in the form of the Company’s standard directors and officers questionnaire. In the letter the Company requested that Vintage provide contact information for the Vintage nominees so that the Nominating and Governance Committee could contact each of them. A copy of the letter was filed with the SEC in the Company’s Current Report on Form 8-K on November 3, 2014.
On November 7, 2014, Vintage Capital Management, LLC sent a letter to the Company indicating that it did not believe the Nominating and Governance Committee interview process would be productive and Vintage did not provide contact information for interviews by the Nominating and Governance Committee. Vintage filed a copy of the letter with the SEC as an Exhibit to Schedule 13D/A on November 7, 2014.
On November 14, 2014 the Nominating and Governance Committee met and considered the qualifications of not only the incumbent directors, but also each of the Vintage nominees based upon the limited information provided in the Vintage Nomination. The Committee also considered Vintage’s assertion of self-entrenchment of the board of directors. The committee determined to recommend re-nomination of each of the incumbent directors based upon (i) its inability to interview the Vintage nominees to obtain sufficient information to fully assess their qualifications, (ii) its determination, based upon the limited information available in the Vintage Nomination, that none of the Vintage nominees offer qualifications or skills not already provided by one or more of the incumbent directors, as well as the Committee’s belief that one or more of the incumbent directors have qualifications not possessed by any of the Vintage nominees, (iii) its concern that certain of the Vintage nominees have relationships with a competitor of the Company that could create conflicts of interest for such nominees, and put such nominees in a position where they could not act solely in the best interests of the Company and its stockholders, (iv) the board’s experience with Jeffrey T. Schlarbaum while he was employed by the Company, resulting in the committee’s belief that Mr. Schlarbaum would not be an appropriate addition to the board, and (v) the fact that three of the seven incumbent directors have joined the board since 2012, bringing with them fresh perspectives.
With respect to relationships with a competitor of the Company that could create conflicts of interest by certain Vintage nominees, Andrew M. Laurence and Jeremy Richard Nowak are partners in Vintage and Keith M. Butler serves as a member of Vintage’s Strategic Advisory Board. Vintage owns approximately 40% of the outstanding common stock of API Technologies Corp. (“API”), a contract manufacturing company that makes various electronic components, and is a competitor of IEC. Additionally, Mr. Butler has provided consulting services for API on a short term basis. None of IEC’s nominees for director have relationships with competitors of IEC.
With respect to Mr. Schlarbaum, the Board lost confidence in him as time progressed during the approximately two-year period in which he served as President of the Company. The Board concluded that Mr. Schlarbaum did not have the skills or the ability to lead IEC’s future success, and therefore determined to make a change. There was no single causal event for the Board’s determination. It believed Mr. Schlarbaum failed to exercise the judgment necessary to execute the operating plans for which he had responsibility. Important contributing factors were the decline in backlog, and that Mr. Schlarbaum was failing to establish satisfactory numbers of new customer relationships and a centralized sales force that supported all of the company's businesses. The Board also believed he failed to proactively cooperate with the integration into the Company of Southern California Braiding (“SCB”) management and take advantage of expanded customer opportunities arising from the SCB acquisition. Among others, these factors led to his departure, and are the basis of the Board’s belief that Mr. Schlarbaum would not be an appropriate addition to the Board.
On November 19, 2014, the board of directors adopted the recommendation of the Nominating and Governance Committee to re-nominate the incumbent directors.
Some of the Company’s compensation arrangements are affected by a “Change in Control,” including certain changes in the make-up of the Board of Directors, as follows:
The Company’s stockholder approved 2001 Stock Option and Incentive Plan (“2001 Plan”) and 2010 Omnibus Incentive Compensation Plan (“2010 Plan”) each contain provisions related to a “Change in Control” of the
Company. As defined in the 2001 Plan and 2010 Plan, among others a Change in Control occurs if the election of at least two-thirds of the directors was not approved by a majority of the incumbent directors (or in the case of the 2010 Plan, was approved as a result of an actual or threatened proxy contest with respect to election of directors). Thus, if two or more members of the Vintage slate are elected, a Change in Control will be deemed to occur. The participant restricted stock award agreements under the 2001 Plan and the 2010 Plan include provisions for immediate lapse of all restrictions on shares of restricted stock upon the occurrence of a Change in Control. As of December 1, 2014, there were 302,248 unvested shares of restricted stock, with an aggregate value of $1,644,229.12 based upon the $5.44 closing price of the Company’s shares on that date. The participant stock option award agreements under the 2001 Plan provide that options may, in the Compensation Committee’s discretion, be vested and exercisable, or terminated subject to an equitable payment. The participant stock option award agreements under the 2010 Plan provide for vesting of unvested stock options, possible immediate exercise or termination subject to an equitable payment. On December 1, 2014 there were 99,500 unvested stock options, of which 55,000 had an exercise pricetable below $5.44. The aggregate intrinsic value (difference between the exercise price of the unvested stock options and $5.44) of such 55,000 options is $68,190.
The Company has a Deferred Compensation Plan pursuant to which executive employees may elect to defer salary or bonus earned in a particular year to be paid out on later date specified by the employee. As defined in the Deferred Compensation Plan, among others a Change in Control occurs if the election of a majority of the directors was not approved by two-thirds of the incumbent directors. Thus, if four or more members of the Vintage slate are elected, a Change in Control will be deemed to occur. Upon a Change in Control, payment obligations to the participants are accelerated and the entire deferred compensation account of participants are paid to them within ten days in a lump sum. W. Barry Gilbert is currently the only participant in the Deferred Compensation Plan. If a Change in Control had occurred on December 1, 2014, Mr. Gilbert would have been entitled to a payment of approximately $682,000.
The Company has an employment agreement with W. Barry Gilbert more fully described below under “Employment Agreements and Change in Control Agreements - Employment Agreement - W. Barry Gilbert”. The agreement provides that a Change in Control is defined as provided in Section 409A of the Code (including if the election of a majority of the directors was not approved by a majority of the incumbent directors). Thus, if four or more members of the Vintage slate are elected, a Change in Control will be deemed to occur. If Mr. Gilbert is no longer Chief Executive Officer of the Company at the time of such Change in Control, Mr. Gilbert’s Transition Term payments are payable in a lump sum, as described below under “Employment Agreements and Change in Control Agreements - Employment Agreement - W. Barry Gilbert”.
The Company has an employment agreement with Michael T. Williams more fully described below under “Employment Agreements and Change in Control Agreements - Employment Agreement - Michael T. Williams”. The agreement provides, among others, that a Change in Control occurs if the election of at least two-thirds of the directors was not approved by a majority of the incumbent directors. Thus, if two or more members of the Vintage slate are elected, a Change in Control will be deemed to occur. After a Change in Control, if Mr. Williams is terminated by the Company without cause, or Mr. Williams terminates his employment for any reason, he is entitled to receive twelve months of salary continuation. His salary effective January 1, 2015 will be $205,000 per year.
The Company has Salary and Non-Competition Agreements with Brett E. Mancini more fully described below under “Employment Agreements and Change in Control Agreements - Employment Agreement - Brett E. Mancini,” and with two other employees. The agreements provide, among others, that a Change in Control occurs if the election of at least two-thirds of the directors was not approved by a majority of the incumbent directors. Thus, if two or more members of the Vintage slate are elected, a Change in Control will be deemed to occur. Within the twelve months after a Change in Control, if the applicable employee is terminated by the Company without cause or the employee terminates his or her employment for any reason, the employee is entitled to receive salary continuation for a period between six and twelve months, varying by employee. The aggregate of all potential salary continuation payments at salary rates effective January 1, 2015 is approximately $393,000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates the amount of IEC’s common stock beneficially ownedpresents certain information as of December 1, 2014 by (i) each person who is known by us to beneficially own more than 5%January 11, 2016 about shares of our common stock (ii)held by (1) each of our directors, (iii)directors; (2) each of our named executive officers identified in the Summary Compensation Table, below,officers; and (iv)(3) all of our directors and executive officers as a group. The information as to each person has been furnished by such person, and, except as noted, each person named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned, and none of such shares have been pledged as security.
group:
|
| | | | | | | | |
| Name of Beneficial Owner |
| Shares Beneficially Owned (1) |
| |
| Percent of Shares Beneficially Owned (1) |
| 5% Beneficial Owners |
|
|
|
|
|
|
|
|
Vintage Capital Management, LLC 4705 S. Apopka Vineland Road Suite 210 Orlando, FL 32819 |
| 710,960 |
|
| (2) |
| 7.01 | % |
Tocqueville Asset Management L.P. 40 West 57th Street 19th Floor New York, NY 10019 |
| 603,920 |
|
| (3) |
| 5.96 | % |
| Directors |
| |
|
| |
|
|
|
| W. Barry Gilbert* |
| 438,879 |
|
| (4) |
| 4.33 | % |
| Florence D. Hudson |
| 13,333 |
|
| (5) |
| † |
|
| John Carlton Johnson |
| 9,768 |
|
| (6) |
| † |
|
| Edward W. Kay, Jr. |
| 12,166 |
|
| (7) |
| † |
|
| Eben S. Moulton |
| 350,602 |
|
| (8) |
| 3.46 | % |
| James C. Rowe |
| 274,457 |
|
| (9) |
| 2.71 | % |
| Jerold L. Zimmerman |
| 133,902 |
|
| (10) |
| 1.32 | % |
| Named Executive Officers |
| |
|
| |
|
|
|
| Vincent A. Leo |
| 8,000 |
|
| (11) |
| † |
|
| Brett E. Mancini |
| 47,865 |
|
| (12) |
| † |
|
| Michael T. Williams |
| 50,000 |
|
| (13) |
| † |
|
All directors and executive officers as a group (9 persons) (14) |
| 1,330,972 |
|
| |
| 13.13 | % |
| |
* | Mr. Gilbert is also an executive officer. |
|
| | | | |
| Name of Beneficial Owner | Number of Shares
of Common Stock
Beneficially Owned (1) | | Percent
of
Class (1) |
| Directors | | | |
| Keith M. Butler | 5,910 |
| | † |
| Charles P. Hadeed | 10,660 |
| | † |
| Lynn J. Hartrick | 5,910 |
| | † |
| Andrew M. Laurence | 5,910 |
| (2) | † |
| Jeremy R. Nowak | 5,910 |
| (3) | † |
| Jeffrey T. Schlarbaum | 4,900 |
| | † |
| Eric B. Singer | 110,561 |
| (4) | 1.08% |
| Named Executive Officers | | | |
| W. Barry Gilbert | 404,426 |
| (5) | 3.97% |
| Jens Hauvn | 10,853 |
| | † |
| Brett E. Mancini | 62,511 |
| (6) | † |
| Michael T. Williams | 30,354 |
| | † |
| All directors and executive officers as a group (11 persons) | 657,905 |
| | 6.45% |
| |
| † | Indicates beneficial ownershipWe have omitted percentages of less than one percent.1% |
| |
(1) | The numberamounts reported by such persons are as of January 11, 2016, with percentages based on 10,198,192 shares issued and percentageoutstanding except where the person has the right to receive shares within the next 60 days, which would increase the number of shares beneficially owned by such person and the number of shares outstanding. Under the rules of the Securities and Exchange Commission, “beneficial ownership” is deemed to include shares for which an individual, directly or indirectly, has or shares voting or dispositive power, whether or not they are based on 10,135,129held for the individual’s benefit, and includes shares of our common stock outstanding and entitledthat may be acquired within 60 days, including, but not limited to, vote on December 1, 2014 , adjusted as required by rules promulgatedthe right to acquire shares by the SEC.exercise of options. Unless otherwise indicated in the other footnotes to this table, each stockholder named in the table has sole voting and sole investment power with respect to the all of the shares shown as owned by the stockholder. |
| |
(2) | Based upon disclosure in Schedule 13D/A filed October 27, 2014 with the SEC.Does not include 958,694 shares of common stock held by Vintage Opportunity Partners LP, an affiliate of Vintage Capital Management, LLC. Mr. Laurence disclaims beneficial ownership of these shares. |
| |
(3) | Based upon disclosure in Schedule 13G filed January 30, 2014 with the SEC.Does not include 958,694 shares of common stock held by Vintage Opportunity Partners LP, an affiliate of Vintage Capital Management, LLC. Mr. Nowak disclaims beneficial ownership of these shares. |
| |
(4) | Includes 121,282104,651 shares of common stock held by Vertex Capital Advisors, LLC (now known as VIEX Capital Advisors, LLC). Mr. Gilbert’s wife, and 36,231 sharesSinger disclaims beneficial ownership of restricted stock.these shares. |
| |
(5) | Includes 8,635Based upon the most recent ownership information provided by Mr. Gilbert. The amount reported includes 121,282 shares of restricted stock.common stock owned by Mr. Gilbert’s spouse. |
| |
(6) | Includes 6,068 shares of restricted stock.Based upon the most recent ownership information provided by Mr. Mancini. |
| |
(7)
| Includes 8,635 shares of restricted stock. |
| |
(8)
| Includes 9,947 shares of restricted stock |
| |
(9)
| Includes 127,281 shares held by Mr. Rowe’s 401(k) plan, 31,440 shares held by a general partnership in which Mr. Rowe is a general partner and may be deemed a beneficial owner, and 9,947 shares of restricted stock. |
| |
(10)
| Includes 45,000 shares owned by Dr. Zimmerman’s wife, and 9,947 shares of restricted stock. |
| |
(11)
| Mr. Leo’s ceased to be Chief Financial Officer of the Company effective June 1, 2014. Mr. Leo’s beneficial ownership is reported based on information available to the Company that may not be complete. Mr. Leo’s services were provided pursuant to an agreement between the Company and Insero & Company CPAs, P.C. (“Insero”), as more fully described below under “Certain Relationships and Related Person Transactions”. In connection with his services, Mr. Leo received a grant of 20,000 restricted shares. We were advised that at the time the shares were granted (all of which were then restricted) Mr. Leo agreed with Insero to hold such shares for the benefit of Insero. 8,000 shares of the restricted stock vested and the remainder were forfeited upon Mr. Leo’s departure from the Company. Mr. Leo later advised the Company that Insero, as part of Insero’s compensation arrangements with Mr. Leo, agreed that 2,000 of the vested shares would no longer be held for the benefit of Insero and would be held by Mr. Leo without further beneficial interest of Insero. |
| |
(12)
| Includes 36,762 shares of restricted stock. |
| |
(13)
| Includes 50,000 shares of restricted stock. |
| |
(14)
| Does not include shares owned by Mr. Leo as he was not serving as an executive officer at the end of Fiscal 2014. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, and executive officers and persons who own moregreater than 10% of a registered class of our equity securities,stockholders to file with the SEC reports of ownership and changes in ownership of our common stock andstock.
During Fiscal 2015, all of our other equity securities. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnishofficers timely complied with the Company withfiling requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, except for Mr. Hauvn who filed one report late disclosing one transaction and Mr. Mancini who filed two reports late each disclosing one transaction. In making this statement, we have relied upon the written representations of our directors and officers and copies of all Section 16(a) formsthe reports that they file.
SEC regulations requirehave filed with the Company to identify each person who filed a required report late during the most recent fiscal year. Based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended September 30, 2014, we believe that, during Fiscal 2014, one late report was filed by Brett E. Mancini related to 333 shares withheld to pay withholding tax in connection with vesting of restricted stock, and one report was timely filed by Michael T. Williams but later amended because it contained a typographical error reflecting a grant of 30,000 restricted shares rather than 50,000 restricted shares.SEC.
(PROPOSAL 1)
ELECTION OF DIRECTORS
The number of directors is established by the board and is currently fixed at seven. At thisthe annual meeting, the seven persons listed below will be nominated as directors. The term of office of each person elected as a director will continue until the next annual meeting or until his or her successor has been elected and qualified, or until the director’s earlier death, resignation or removal.
All of the Board's nominees for director except Mr. Johnson, were elected at the last annual meeting. Mr. Johnson was appointed on February 8, 2014 to fill a vacancy on the board. All of the Board’s nomineesmeeting, and have consented to serve if elected. The Company has no reason to believe that any Board-nominated director nominee will be unavailable or will decline to serve. In the event however, that any nominee should be unable to serve or for good cause will not serve, the proxies will be voted for the election of such other persons as the Governancenominating and Nominating Committeegovernance committee of the Boardboard of Directorsdirectors may recommend.
Required Vote
Directors are elected by a plurality of the votes cast. Thiscast, which means that the seven nominees identified below will be elected if theythat receive morethe most affirmative votes than any other nominees.
As a result of Vintage’s intention to nominate seven alternative director nominees in opposition to the nominees recommended by your Board, the aggregate number of nominees from the Company and Vintage exceed the number of
available seats. Under our Bylaws, directors are elected by a plurality of the votes cast. Because our Board size remains at seven persons, this means that the seven candidates receiving the highest number of “FOR” votes cast by holders of shares represented in person or by proxy at the Annual Meeting will be elected. It is intended thatIn an uncontested election, all of the accompanying proxyboard’s nominees will be voted FORelected. You may vote “FOR” the seven persons listed below to serve as directors unlessnominees, or you may “WITHHOLD” your vote from one or more of the stockholder indicates to the contrarynominees. Withheld votes, abstentions and broker non-votes will have no effect on the proxy.voting results.
A properly executed proxy card marked “WITHHOLD” with respect to the electionThe board of directors unanimously recommends a director nominee will be counted for purposes of determining if there is a quorum at the Annual Meeting, but will not be considered to have been voted for the director nominee. Similarly, broker non-votes, if any, will be counted for purposes of determining if there is a quorum, but will not be considered to have been voted for the director nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEvote FOR THE ELECTION AS DIRECTORS OF EACH OF THE NOMINEES LISTED BELOW.the election as directors of each of the nominees listed below.
Nominees for Election as Directors
The following table sets forth each director nominee and includes such person’s name, age, the year he or she first became a director and whether he or she has been determined to be an “independent director”, as that term is defined in Section 803A of the NYSE MKT Company Guide. Biographies of the director nominees follow the table. Unless otherwise indicated, all directors have been employed in their current positions for at least five years.
|
| | | | | | | | |
| Name | | Age | | Year First Elected Director | | Term to Expire | | Independent? |
| W. Barry Gilbert | | 68 | | 1993 | | 2016 | | No |
| Florence D. Hudson | | 55 | | 2012 | | 2016 | | Yes |
| John Carlton Johnson | | 67 | | 2014 | | 2016 | | Yes |
| Edward W. Kay, Jr. | | 59 | | 2012 | | 2016 | | Yes |
| Eben S. Moulton | | 68 | | 1992 | | 2016 | | Yes |
| James C. Rowe | | 66 | | 2000 | | 2016 | | Yes |
| Jerold L. Zimmerman | | 67 | | 2006 | | 2016 | | Yes |
The following paragraphs provide additional information as of the date of this proxy statement about each nominee. The information presented includes information each director has given us about all positions they hold, their principal occupation and businessWe believe these nominees are highly qualified individuals with a diversity of experience. Several of the nominees have experience forserving on the past five years, andboards of directors of public companies and/or operational experience in the names of other publicly-held companies for which they currently serve as a director or have served as a director during the past five years. In addition, information is presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our board to the conclusion that such nominee should serve as a director.electronic contract manufacturing sector. We also believe that all of our nominees have a reputation for integrity, honesty and adherence to high ethical standards. In addition, each has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to the Company and our board.
Keith M. Butler, age 57, has been the Chief Operating Officer of RxSafe LLC, a pharmacy automation equipment company, since April 2014. From October 2013 to April 2014, Mr. Butler pursued personal interests. From September 2010 to October 2013, Mr. Butler was Executive Vice President of Operations for OnCore Manufacturing Services, LLC, an electronic contract manufacturer. From August 2007 to September 2010, Mr. Butler was Executive Vice President and General Manager of the San Diego division of OnCore. In 1979, Mr. Butler founded Verified Technical Corporation (“Veritek"), a manufacturer of high quality through hole and surface mount technology assemblies and served as its President until 1997, when he sold Veritek to REMEC, Inc. From 1997 to July 2005, Mr. Butler served as the President of REMEC’S Global Electronic Manufacturing Services (“EMS”) division and in 2005, Mr. Butler purchased the San Diego-based EMS division from REMEC and renamed it Veritek Manufacturing Services, a company designed to provide turnkey manufacturing solutions to customers in the western United States. Mr. Butler served as the President of Veritek Manufacturing from July 2005 to December 2007. Mr. Butler later acquired two additional manufacturing sites and merged Veritek Manufacturing with Nu Visions Manufacturing, LLC to form OnCore. Mr. Butler has served as a strategic advisory board member of Vintage Capital Management, LLC since March 2009.
We believe that continuing service of qualified incumbents promotes stability and continuityMr. Butler brings extensive operational experience in the board room, contributing to the board’s ability to work collaborativelycontract manufacturing sector. Mr. Butler’s past and present service as a collective body, while givingfounder and executive of several contract manufacturing companies provides him with significant experience and insight relative to our industry segment as well as the Company the benefitcompetitive advantages of our operations.
Charles P. Hadeed, age 65, is a director and Chairman of the familiarityBoard of Transcat, Inc. (NASDAQ:TRNS), a provider of accredited calibration and insight into the Company’s affairs thatcompliance services and distributor of professional grade handheld test, measurement and control instrumentation. Mr. Hadeed served as Transcat’s Executive Chairman from July 2013 until June 2014, as its directors have accumulated during their tenure. We have coupled this viewChief Executive Officer from April 2007 to July 2013 and as its President from May 2006 to September 2012. Mr. Hadeed also served as Transcat’s Chief Operating Officer from October 2004 to November 2011. Mr. Hadeed joined Transcat in April 2002 as Vice President of Finance and Chief Financial Officer, a role he served in until May 2006. Prior to Transcat, Mr. Hadeed most
recently served as Vice President-Healthcare Ventures Group with an understanding of the need for fresh perspectives in the board room andHenry Schein Inc. Prior to that, end three of the seven incumbent director nominees have joined the board since 2012.
W. Barry Gilbert hashe served as ourGroup Vice President-Operations at Del Laboratories Inc., and in various executive positions during a 20-year career at Bausch & Lomb Incorporated. Mr. Hadeed is a Certified Public Accountant and holds a B.S. in accounting from Syracuse University.
We believe that Mr. Hadeed’s extensive management, financial and operational experience as a former chief executive officer, chief financial officer and chief operating officer of a public company with a similar market capitalization to ours provides us with valuable experience at the board level. Mr. Hadeed’s prior experiences also include turnaround management of a public company that faced obstacles similar to ours as we attempt to return to profitability.
Lynn J. Hartrick, age 68, has been the President and Owner of Business Leadership Professionals, LLC, an executive coaching and business advisory firm, since April 2010. From January 2004 and served as acting2007 to April 2010, Mr. Hartrick was the sole proprietor of Coyote Consulting, LLC, which provided contracted interim chief executive officer from June 2002 until that time. He has been a director of the Company since February 1993 and chairman of the board since February 2001. He is also an adjunct faculty member at the Simon School of Business at the University of Rochester. From 1991 until 1999, he was president of the Thermal Management Group of Bowthorpe Plc. (now known as Spirent Plc) of Crawley, West Sussex, England.services. Prior to that, time heMr. Hartrick was corporate vice presidentManaging Partner of Vitalwork, a management consulting firm. Before that, Mr. Hartrick worked for 26 years in multiple senior roles at Rochester Telephone Corporation, including roles in operations, personnel, construction, engineering, customer service and president, Analytical Products Division of Milton Roy Company,commercial operations. Mr. Hartrick holds a manufacturer of analytical instrumentation. Mr. Gilbert has served on a number of charitable boardsB.A. from Mount Union College and advisory boards for privately-held companies. Mr. Gilbert received his M.B.A. degreean M.B.A from the University of Rochester. As
We believe that Mr. Hartrick’s executive leadership and executive coaching experience make him a valuable addition to our chairmanboard of directors. Mr. Hartrick has over 20 years of experience in advising executive teams as they pursue strategies to change prior habits and effect change in organizations. The board believes his experiences bring significant value as it moves to effect positive change within our organization.
Andrew M. Laurence, age 41, is a partner of Vintage Capital Management, LLC. Mr. Laurence joined Vintage Capital Management in January 2010 and is responsible for all aspects of Vintage's transaction sourcing, due diligence and execution. Mr. Laurence has served as Corporate Secretary of API Technologies Corp. (NASDAQ: ATNY), a leading provider of high performance Radio Frequency microwave, microelectronic, power, and security solutions, since January 2011 and served as API’s Vice President of Finance and Chief Accounting Officer from January 2011 to June 2011. From 2008 to January 2010, Mr. Laurence was a Partner at Coral Reef Capital Partners, a merchant banking firm making control and structured equity investments and providing strategic mergers and acquisition and capital raising advisory services. Before that, Mr. Laurence was the Managing Partner of Causeway Partners. Previously, Mr. Laurence spent seven years at Triumph Capital and its successor, Washington & Congress Managers. Mr. Laurence began his career at Bowles Hollowell Conner & Co., a boutique mergers and acquisitions advisory firm that was purchased by First Union Corp. Mr. Laurence also serves on the Board of Directors of Energes Services, LLC, an oilfield services company. Mr. Laurence holds a B.A. in economics from Harvard University.
We believe that Mr. Laurence’s experience investing in, growing and improving companies, some of which are within our industry segment, make him a valuable member of our board of directors.
Jeremy R. Nowak, age 40, is our Chairman of the boardBoard. Mr. Nowak has been a partner and chief executive officer,the Chief Operating Officer of Vintage Capital Management, LLC since July 2010. Mr. Gilbert provides our board with invaluable institutional knowledgeNowak is responsible for Vintage's business development, transactional due diligence and trading execution. Mr. Nowak joined Kahn Capital Management, LLC, a predecessor to Vintage, in September 2006. Prior to joining Kahn, Mr. Nowak worked at B. Riley and Co., LLC, a small cap and research-based brokerage firm, where he served as Director of Institutional Sales and spearheaded the establishment of the operationsfirm’s New York office. Mr. Nowak began his career with Tarpon Scurry Investments, a boutique investment bank, in March 1997. Mr. Nowak holds a B.A. in business administration from the University of Florida.
Mr. Nowak’s financial and investment experience make him a valuable member of our board. Mr. Nowak’s experiences at Vintage provide a needed stockholder perspective of the change the Company its markets, its customersintends to effect.
Jeffrey T. Schlarbaum, age 49, has served as a director and as our President and Chief Executive Officer since February 2015. From February 2013 to June 2013 and from June 2014 to February 2015, Mr. Schlarbaum pursued personal interests. From June 2013 to June 2014, Mr. Schlarbaum served as Chief Operations Officer for LaserMax, Inc., a manufacturer of laser gun sights for law enforcement and the industry in which it operates. He becameshooting sports community. From October 2010 to February 2013, Mr. Schlarbaum served as our acting chief executive officer in June 2002 during a particularly challenging period for the Company. His extensive leadership, financialPresident. Prior to that, Mr. Schlarbaum served as our Executive Vice President and management skillsPresident of Contract Manufacturing from October 2008 to October 2010, Executive Vice President from November 2006 to October 2008 and his strategic initiatives contributedVice President, Sales & Marketing from May 2004 to the financial turnaround and growthNovember 2006. Prior to joining the Company, has experienced during his tenure as chief executive. Mr. Gilbert’s serviceSchlarbaum served in senior management roles with us, as well as his prior servicevarious contract manufacturing companies. Mr. Schlarbaum holds a B.B.A. from National University and an M.B.A. from Pepperdine University.
We believe that Mr. Schlarbaum’s background as a senior executive of other public companies,the Company provides him with extensive knowledge of complex strategic, operationsour operating history. We believe that this long-term institutional knowledge of the Company, its customers and management issues faced by
the company. This experience bringsits executive team make Mr. Schlarbaum a significant asset to our board important expertiseboard. Mr. Schlarbaum also brings general management, marketing and insight relatedoperational experience that is of value to strategic planning, business development, sales and marketing, corporate finance, mergers and acquisitions, human resources and investor relations.
Florence D. Hudson has been a director since August 2012. Ms. Hudson is a Director in Corporate Strategy at International Business Machines Corporation (IBM). She leads the development of business and technical growth strategies for IBM in areas such as energy & the environment, the internet of things/machine to machine, cloud computing, analytics, emerging markets, financing, hardware, software and services. The growth strategies include defining and developing opportunities in existing business areas, as well as new opportunities involving both organic and inorganic investments. Ms. Hudson has leadership skills in strategic planning, marketing, channels, partner development, sales and diversity programs, as well as technical experience in mechanical and aerospace engineering. Ms. Hudson has held a variety of leadership positions since joining IBM in 1981 including Vice President and Director of strategy and marketing developing new businesses, developing and executing growth strategies for current businesses, and serving industrial sector clients in aerospace, defense, electronics, automotive, chemical and petroleum industries. Prior to joining IBM, Ms. Hudson worked at Hewlett Packard in 1980-1981. She worked as an Aerospace Engineer at Grumman Corporation as a Grumman Scholar during the summers while in college in 1976 through 1978 and in 1979 at the NASA Jet Propulsion Laboratory. Her projects included U.S. defense aircraft programs, solar power satellites, the space shuttle and future missions around Jupiter. Ms. Hudson graduated from Princeton University with a Bachelor of Science degree in Mechanical and Aerospace Engineering in 1980, and has attended executive education at Harvard Business School and Columbia University. She has extensive not-for-profit Board experience including Special Director for Strategic Planning on the Board of Directors for the Society of Women Engineers, Trustee for the Society of Women Engineers, President of the Juvenile Law Education Project, and Vice President for SHORE which provides homes for homeless families. She currently is a member of the Princeton University Technology Advisory Council and the Princeton University Advisory Council for the Department of Civil and Environmental Engineering. Ms. Hudson’s extensive leadership skills in strategy and business development, coupled with her leadership experience in information technology, and experience as an engineer in the aerospace and defense industry, provide the board with a unique blend of deep and broad business and technical insight in the business environment in which the Company operates.board.
John Carlton Johnson Eric B. Singerjoined, age 42, is the Company’s boardChairman of directorsVIEX Capital Advisors, LLC formerly Vertex Capital Advisors, LLC, a hedge fund which he founded in May 2014. He is founder of Sandavista, LLC, and provides executive consultingFrom March 2012 to board members, executive officers and senior corporate leadership teams with a focus on increased profitability across businesses and programs.May 2014, Mr. Johnson currently serves on the Board of Regents at Potomac Institute for Policy Studies, with involvement in critical issues affecting national security. He held a number of executive positions at Northrop Grumman Electronic Systems, including starting in 1998 as Director, SD&T Business, in 2000 as Vice President, Mission Business, in 2005 as Vice President and General Manager for Aerospace Systems division, in 2010 as Vice President and General Manager of ISR Systems division, and ultimately as Vice President, General Manager and Deputy President with a portfolio of approximately $5 billion. Mr. Johnson retiredSinger served as a colonel and commanderco-managing member of flight operations forPotomac Capital Management III, L.L.C., the 33rd Tactical Fighter Wing, United States Air Force, earned a masters degree in systems management from the University of Southern California School of Engineering, completed the General Manager Program at Harvard Business School, completed the Executive Strategy Program at UCLA and recently completed National Association of Corporate Directors (NACD) Professionalism, Governance Fellowship and Cybersecurity training. Mr. Johnson brings to the board wide and deep experience in corporate leadership, operations, increasing profitability across businesses and programs, and the defense and space industries.
Edward W. Kay, Jr., a director since November 2012, is a Certified Public Accountant who spent his 33-year career with PricewaterhouseCoopers LLP (PwC) working with companies in a wide variety of industries, including manufacturing, distribution, software and technology. During his tenure with PwC, he served in many capacities, including among others in the Accounting and SEC Services practice section of the Firm’s National Office in New York City, as leader of the firm’s technology practice in Dallas, Texas, as Managing Partner of the upstate New York practice, and, most recently, as Managing Partner, Rochester, New York Office from 1999-2012. He first joined PwC in 1979, and retired in June 2012. Mr. Kay earned a B.S. in Accounting from Duke University, and an M.B.A. in Finance degree from Northwestern University. Mr. Kay’s community involvement includes service as the Treasurer for the 2013 PGA Tournament at Oak Hill Country Club, Rochester, New York; President of Oak Hill Country Club, Rochester, New York from 2010-2012; Treasurer and Trustee of St. Bernard’s Institute, Rochester, New York; Audit Committee Chair, Roman Catholic Diocese of Rochester, Rochester, New York; and Finance Committee member, Greater Rochester YMCA, Rochester, New York. During Mr. Kay’s tenure at PwC, he accumulated a wealth of experience in financial, securities, and business matters, including significant leadership roles in dealing with accounting and auditing matters related to public companies, which enables Mr. Kay to be a valuable contributor to our board.
Eben S. Moulton, a director since November 1992, has served as managing partner of Seacoast Capital Corporation, Danvers, Massachusetts, a private investment firm, since its inception in 1994 and served as president of Signal Capital Corporation, Danvers, Massachusetts, a financial services corporation, from 1988 until 1994. Mr. Moulton is a general partner of SeacoastPotomac Capital CorporationPartners III, L.P., and a director and chairPotomac Capital Management II, L.L.C., the general partner of the compensation committee of Unitil Corporation, Hampton, New
Hampshire, a utility company. He is also a director of several privately-held companies and a trustee of Colorado College, Colorado Springs, Colorado.Potomac Capital Partners II, L.P. Previously, Mr. Moulton received his undergraduate degree from Colorado College, his Ph.D. degree from Vanderbilt University and his M.B.A. degree in Finance from Columbia University. As a result of these and other professional experiences,Singer served as well as his educational background, Mr. Moulton possesses particular knowledge and expertise in banking and financial services, mergers and acquisitions, capital raising, strategic planning and capital markets, and has demonstrated significant leadership skills as a managing partner in, or president of, various investment banking firms. With more than 20 years of service on our boardan advisor to Potomac Capital Management, L.L.C. and its committees,related entities from May 2009 to December 2014. From July 2007 to April 2009, Mr. Moulton also brings to our board significant institutional knowledge and perspective.
James C. Rowe, a director since January 7, 2000, has served as president of Rowe & Company LLC, Milwaukee, Wisconsin, a merchant banking firm, since April 1994. From April 1972 through March 1994, Mr. RoweSinger was a director and vice president of Lubar & Co., Incorporated, Milwaukee, Wisconsin, a merchant banking firm.senior investment analyst at Riley Investment Management. He managed private portfolios for Alpine Resources, LLC from January 2003 to July 2007. Mr. Rowe is a director of several privately held companies. Mr. Rowe received his Bachelor of Business Administration degree from the University of Wisconsin. As President of Rowe & Company, and as a Director and Vice President of Lubar & Co., Mr. Rowe has had more than 40 years of experience investing in, and acquiring businesses in, diverse industries and providing leadership, expertise and experience to the management of those companies in several key business and investment areas, including developing and executing strategic plans, structuring sound capitalization, financing growth, identifying, negotiating and financing acquisitions, building shareholder value and corporate governance. His experience in overseeing and assessing the performance of companies with respect to the preparation, auditing and evaluation of financial statements and with companies that have complex financial and accounting functions are beneficial to our board and audit committee.
Jerold L. ZimmermanSinger has served as a director of TigerLogic Corporation (OTCQX: TIGR), a global provider in engagement solutions, since January 2006. Dr. Zimmerman is the Ronald L. Bittner Professor2015. Mr. Singer served as a director of Business Administration at the Simon SchoolMeru Networks, Inc., a Wi-Fi network solutions company, from January 2014 to January 2015, and as a director of Business at the University of Rochester, where he has taught finance, accounting and economics since 1974. He has published numerous books and papers, and isPLX Technology, Inc., a founding editorsemiconductor company, from December 2013 until its sale to Avago Technologies Limited in August 2014. Mr. Singer served as Chairman of the JournalBoard of AccountingSigma Designs, Inc., a semiconductor company, from January 2013 until December 2013, and Economics, the most highly cited peer reviewed accounting journal in the world. As such, Dr. Zimmerman is knowledgeable of the latest findings involving financial disclosure and corporate governance. Dr. Zimmerman was a director of CPAC, Inc., Leicester, New York, from 2000August 2012 until the firm became privateDecember 2013. From August 2008 until its sale in 2007. Dr. Zimmerman received his B.S. Degree in Finance from the University of Colorado and a Ph.D. in Business Administration from the University of California, Berkeley. He has been teaching financial and managerial accounting to M.B.A., MACC, Ph.D. and DBA students for over 39 years, and has done extensive research and consulting in the areas of financial disclosures, executive compensation, corporate governance and cost accounting, and hasFebruary 2010, Mr. Singer served as an expert witness in a varietydirector of legal actions involving, among other things, fraudulent financial disclosures. Dr. ZimmermanZilog Corporation, a semiconductor company. Mr. Singer holds a B.A. from Brandeis University.
We believe that Mr. Singer brings to theour board of directors significant experience as a director at public companies, as well as significant financial analysis and its committees his considerable analytical skills and expertise in accounting, corporate finance, executive compensation, corporate governance and strategic planning.investment experience.
Corporate Governance and Board Matters
Corporate Governance Guidelines
Our business, property and affairs are managed under the direction of our board of directors. The board is committed to sound and effective corporate governance practices and, accordingly, has adopted Corporate Governance Guidelines that provide a system of best practices with respect to board function and communication. Our Corporate Governance Guidelines address matters including board composition, director responsibilities, director independence, selection of board nominees, board membership criteria, mandatory retirement, meeting participation, executive sessions of our independent directors, evaluation of the performance of the chief executive officer, committees, succession planning, orientation and continuing education.
Director Independence
The listing requirements of the NYSE MKT requireCompany Guide requires that a majority of the members of a listed company’s board of directors be independent. The rules provide that noNo director will qualify as “independent” unless the board affirmatively determines that the director has no relationship with the Company or any of its subsidiaries that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Based upon the NYSE MKT rulesCompany Guide and applicable SEC rules and regulations, our board has determined that eachthe following directors are independent: Messrs. Butler, Hadeed, Hartrick, Laurence, Nowak and Singer.
In determining the independence of Messrs. Nowak and Laurence, the board of directors considered that we reimbursed Vintage Capital Management, LLC for its reasonable proxy solicitation expenses in connection with our directors is an independent director, other than Mr. Gilbert, who serves as our chief executive officer.
2015 annual meeting of stockholders.
Board Leadership Structure and Role in Risk Oversight
Our board is responsible for the selection of the chairman of the board and the chief executive officer. OurThe prior board doesdid not require the separation of the offices of chairman of the board and the chief executive officer, and currentlyofficer. At this time, the positionscurrent board of directors believes that separating the roles of chairman of the board and chief executive officer are held by the same person.best serves our interest in achieving effective corporate governance. The current board believes that thisseparating these two positions allows each person to focus on his individual responsibilities, which is the most appropriateessential to strategic focus on improving our operational and suitablefinancial performance. Under this leadership structure, forour chief executive officer can focus his attention on the day-to-day operations and performance of the Company atand can work to implement our long-term strategic plans. At the presentsame time, because Mr. Gilbert, our non-executive chairman of the board can focus his attention on addressing long-term strategic issues, working collaboratively with our other board members, and providing independent insight and guidance to our chief executive officer. In addition, maintaining a separation of the roles of chairman of the board and chief executive officer aids the board in its oversight of the our risk management. Although we believe that the separation of the roles of chairman of the board and chief executive officer is appropriate in the director most familiar withcurrent environment, our board leadership structure may change in the future as our business, and industry, and their challenges and is, therefore, best able to identify the strategic priorities to be discussed by the board. Mr. Gilbert is the direct link between senior management and the board, and provides critical insight and perspective to the board, as well as feedback to senior management through his thorough understanding of the issues at hand.
The board acknowledges, however, that independent board leadership is important and believes that the current structure provides independent board leadership and oversight while also benefiting from having Mr. Gilbert as chairman of the board. Six of our seven current directors, and six of the seven nominees, qualify as independent directors, and each of the audit, compensation and nominating andcorporate governance committees is comprised solely of independent directors. Our independent directors meet regularly in an executive session, without the presence of Mr. Gilbert, or any other member of management. In addition, our independent directors have the ability to participate in the agenda setting process and have direct access to management. While the Board has not formally designated a lead director, generally the chairman of one of our committees presides at these executive sessions.practices evolve.
The board of directors is responsible for overseeing risks that could affect our Company and management’s processes for managing risk. This oversight is conducted primarily through the board’s committees. Our audit committee focuses on risks and exposures associated with financial matters, particularly financial reporting, tax, accounting, disclosure, internal control over financial reporting, financial policies, credit and liquidity matters and compliance with legal and regulatory matters. Our nominating and governance committee focuses on the management of risks associated with board membership and structure, as well as corporate governance. Our compensation committee focuses on the management of risks arising from our compensation policies and programs.
While our board committees are focused on these specific areas of risk, the full board retains responsibility for general oversight of risk. ThisThe board satisfies this responsibility is satisfied throughby taking reports from each committee chairman regarding the risk considerations within each committee’s area of expertise, as well as throughexpertise. In addition, the board receives reports from members of our senior management team responsible for oversight of material risk to the Company.
In addition, theThe full board focuses on the strategic, financial and execution risks associated with the annual operating plan, significant legal matters, acquisitions and senior management succession planning.
As part of its risk oversight responsibilities, our board of directors and its committees review the processes that senior management uses to manage our risk exposure. In doing so, the board and its committees monitor our overall risk function and senior management’s establishment of appropriate systems and processes for managing areas of material risk to our company,Company, including, but not limited to, operational, financial, legal, regulatory and strategic risks.
Board Meetings and Attendance
During Fiscal 2014,2015, our board held six19 in-person or telephonic meetings and acted five times by unanimous written consent. In addition,meetings. The prior board met ten times; the directors considered Company matters and had frequent communication with the chairman of thecurrent board and other directors apart from the formal meetings.met nine times.
During Fiscal 2014,2015, each incumbent director attended at least 75% of the meetings of the board, and of those committees upon which such director served, held during the period that he or she served.
Director Attendance at Annual Meetings
We typically schedule a board of directors meeting in conjunction with our annual meeting of stockholders and allAll directors are expected to attend the annual meeting. EachNone of our incumbentcurrent directors attendedwere members of the 2014 Annual Meetingboard at the time of Stockholders.the 2015 annual meeting of stockholders.
Board Committees
Our board has established fourthree standing committees to assist in the discharge of its responsibilities: the audit committee, the compensation committee, and the nominating and governance committee, and the executive committee. The following table indicates the committee(s) on which each director serves, and the identity of the chair of each such committee:committee, and the number of times each committee met during Fiscal 2015:
Committee Membership
|
| | | | | | | | |
Director: | | Audit | | Compensation | | Nominating and
Governance
| | Executive |
W. Barry Gilbert | | - | | - | | - | | Chair |
Florence D. Hudson | | - | | X | | - | | - |
John Carlton Johnson | | - | | X | | - | | - |
Edward W. Kay, Jr. | | Chair | | - | | X | | - |
Eben S. Moulton | | - | | X | | Chair | | X |
James C. Rowe | | X | | - | | X | | X |
Jerold L. Zimmerman | | X | | Chair | | - | | - |
|
| | | |
| Director: | Audit | Compensation | Nominating and Governance |
| Keith M. Butler | — | x | — |
| Charles P. Hadeed | Chair | — | Chair |
| Lynn J. Hartrick | — | Chair | x |
| Andrew M. Laurence | x | — | — |
| Jeremy R. Nowak | x | x | — |
| Jeffrey T. Schlarbaum | — | — | — |
| Eric B. Singer | — | — | x |
| | | | |
| Total Meetings in Fiscal 2015:* | 8 | 4 | 7 |
*Includes meetings of the current and prior boards.
Each committee acts pursuant to a written charter adopted by the board. The charter of each of the audit, compensation and nominating and governance committees complies with the NYSE MKT corporate governance requirements. There are no NYSE MKT requirements with respect to the charter of the executive committee.listing standards. The committees regularly report their activities and actions to the full board at the next board meeting. Each committee’s charter is available on our website at www.iec-electronics.com under the heading, “Investors” and the subheading, “Corporate Governance.”
Audit Committee
The audit committee oversees our corporate accounting and financial reporting processes. Itprocesses and the audits of our financial statements. The audit committee is responsible for a separately-designated standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. Its responsibilities include:
the appointment, dismissal,retention, termination, compensation and oversight of our independent auditors, including an evaluation of the engagementqualifications, performance and independence of our auditors for the next fiscal year, independent auditors;
the review with the independent auditors and approval of the plan of the audit engagement, the review with the independent auditors of the results of their audit, the inquiry as to the adequacy of our internal accounting controls and our disclosure controls and procedures, the approval of audit and non-audit services to be provided to us by the independent auditors, and overseeing compliance matters for us. The audit committee reviewsdiscussion with management and the independent auditors of the financial statements and related disclosures included in our annual reportreports on Form 10-K and the interim financial statements prior to the filing of our quarterly reports on Form 10-Q. The audit committee also monitors compliance with10-Q;
the oversight of management’s implementation of internal controls and procedures and disclosure controls and procedures;
the establishment of procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential and anonymous submission by employees regarding questionable accounting or auditing matters;
administration and oversight of our Code of Business Conduct and Ethics, our conflictEthics; and
the review and approval of interest policy, our policy concerning trading in our securitiesrelated persons transactions.
The audit committee has authority to engage independent counsel and our related person transactions policy.other advisers as necessary to carry out its responsibilities. In Fiscal 2014,addition, the audit committee whose current members are Mr. Kay (Chairman), Mr. Rowehas sole authority to determine the fees payable to such independent counsel and Dr. Zimmerman, held nine meetings and acted onceadvisers, which fees shall be paid by unanimous consent. the Company.
The board of directors in its business judgment has determined that each member of the audit committee is “independent” as defined in Section 803A of the NYSE MKT LLC Company Guide and, in addition, meets the more stringent independence standards set forth in SEC Rule 10A-3 and the independence and financial literacy standards set forth in Section 803B ofrequirements applicable to audit committee members under the NYSE MKT LLC Company Guide. The board of directors has further determined that Mr. Kay, Mr. Rowe and Dr. Zimmerman each qualifyHadeed qualifies as an “audit committee financial expert” in accordance with the applicable rules and regulations of the SEC. For
Compensation Committee
The compensation committee assists the audit committee’s report relatingboard in its discharge of responsibilities with respect to Fiscal 2014, see “Audit Committee Report”. The audit committee’s charter, which sets forth more specifically executive and director compensation. Its responsibilities include:
the dutiesoversight and responsibilities of the committee, is available on our website at www.iec-electronics.com under the heading of “Investors” and subheading of “Corporate Governance”.
The compensation committee oversees the development and administration of our executive compensation plans, reviewsplans;
the review and approvesapproval of the compensation for all executive officers other than the chief executive officer, reviews and recommendsofficer;
the recommendation to the independent members of the board of the compensation of the chief executive officer, reviews and approves performance goals and objectives with respect to incentive plans for all executive officers, oversees officer;
the evaluation of the chief executive officer, reviewsofficer;
the review and recommendsrecommendation to the board of the terms of any employment, severance, change in control, termination or retirement arrangements for all executive officers,officers;
the review and reviews and recommendsrecommendation to the board of the compensation paid to directors. In Fiscal 2014,directors; and
the assessment of the independence of any compensation consultant, independent legal counsel or other adviser retained by the committee.
The compensation committee approves equity awards for our other employees, including the delegation of authority to our chief executive officer to award up to a specified number of stock options to non-executive employees for special performance or recruitment to the Company.
The compensation committee has sole authority, in its discretion, to retain or obtain advice of a compensation consultant, independent legal counsel or other adviser to assist the compensation committee held eight meetingsin carrying out its responsibilities. The compensation committee is responsible for the oversight and actedcompensation of any compensation consultant, independent legal counsel or other adviser it retains. We are responsible for paying such compensation as determined by unanimous written consent three times.the compensation committee. The current memberscompensation committee did not retain a compensation consultant for Fiscal 2015.
The board of directors has determined that each member of the compensation committee are Dr. Zimmerman (Chairman), Ms. Hudson, Mr. Johnson and Mr. Moulton, each of whom has been determined bymeets the boardindependence requirements applicable to be “independent” as defined in Section 803A ofcompensation committee members under the NYSE MKT LLC Company Guide.
Nominating and Governance Committee
The compensation committee’s charter, which sets forth more specifically the duties and responsibilities of the committee, is available on our website at www.iec-electronics.com under the heading of “Investors” and subheading of “Corporate Governance”. For more information on executive officer and director compensation and the role of the compensation committee, see “Compensation of Named Executive Officers and Directors”.
The nominating and governance committee identifies and recommends to the board individuals to serve as directors and as nominees for election as directors of the Company and develops, recommends and reviews corporate governance
principles applicable to the Company. In Fiscal 2014,The nominating and governance committee’s responsibilities include:
the development and recommendation to the board of director qualification criteria;
the development and periodic review of corporate governance principles;
the oversight of the board’s self-evaluation process; and
development of the board’s chief executive officer succession policies.
The board of directors has determined that each member of the nominating and governance committee met three times and acted by unanimous written consent three times. The current members ofmeets the committee are Messrs. Moulton (Chairman), Kay and Rowe, each of whom has been determined by the board to be “independent” as defined in Section 803Adirector independence requirements of the NYSE MKT LLC Company Guide. The nominating and governance committee charter, which sets forth more specifically the duties and responsibilities of the committee, is available on our website at www.iec-electronics.com under the heading of “Investors” and subheading of “Corporate Governance”.
The executive committee exercises the powers of the board in the interval between regular meetings of the full board. The executive committee did not hold any formal meetings during Fiscal 2014. The current members of the committee are Messrs. Gilbert (Chairman), Moulton and Rowe. Messrs. Moulton and Rowe have been determined by the board to be “independent” as defined in Section 803A of the NYSE MKT LLC Company Guide. The executive committee charter, which sets forth more specifically the duties and responsibilities of the committee, is available on our website at www.iec-electronics.com under the heading of “Investors” and subheading of “Corporate Governance.”
Nominating Process
The process followed by the nominating and governance committee to identify and evaluate candidates includes requests to board members, the chief executive officer, and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and their qualifications, and interviews of selected candidates. The nominating and governance committee also will consider director candidates recommended by stockholders. Nominations of persons for election to our board may be made at a meeting of stockholders only (i) by or aton the direction of the board; or (ii) by any stockholder who has complied with the notice procedures set forthsame basis in our bylaws and in the section entitled “Questions and Answers About This Proxy Material and Voting – When are stockholder proposals and director nominations due for next year’s annual meeting?”. In addition, stockholderswhich it considers other potential candidates. Stockholders who wish to recommend a prospective nominee for the nominating and governance committee’s consideration should submit the candidate’s name and qualifications to: Corporate Secretary, IEC Electronics Corp., 105 Norton Street, Newark, New York 14513.
In evaluating the suitability of candidates to serve on the board of directors, including stockholder nominees,recommendations, the nominating and governance committee seeks candidates who are independent pursuant to the NYSE MKT independence standards and meet certain selection criteria established by the committee. The specific criteria required for the selection of each board member will be determined from time to time within the context of the current member composition of the board of directors and the evolving needs of the Company based on business strategy and current senior management competencies. The committee also considers an individual’s skills, character and professional ethics, judgment, leadership experience, business experience and acumen, familiarity with relevant industry issues, and other relevant criteria that may contribute to our success. This evaluation is performed in light of the skill set and other characteristics that would most complement those of the current
directors, including the diversity, maturity, skills and experience of the board as a whole. We do not have a formal policy regarding board diversity in the identification of nominees, but diversity is one of several factors that the nominating and governance committee takes into account when evaluating candidates. The committee believes that diversity includes perspective gained from different educational, cultural and business backgrounds and life experiences.
Compensation Committee Interlocks and Insider Participation
During Fiscal 2014, Florence D. Hudson, John Carlton Johnson, Eben S. Moulton and Jerold L. Zimmerman served onNominations of persons for election to our compensation committee. No memberboard may be made at a meeting of our compensation committee: (1) was an officerstockholders only (i) by or employeeat the direction of the Company during Fiscal 2014; (2) was formerly an officer ofboard; or (ii) by any stockholder who has complied with the Company or (3) had any relationship requiring disclosurenotice procedures set forth in this proxy statement as a related person transaction pursuant to SEC rules.
In addition, during Fiscal 2014 none of our executive officers served: (1) as a member of the compensation committee (or other board committee performing equivalent functions or,by-laws and in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our compensation committee, (2) as asection entitled “Questions and Answers About This Proxy Material and Voting – When are stockholder proposals and director of another entity, one of whose executive officers served on our compensation committee or (3) as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director of our Company.
Stock Ownership Guidelines
The board believes that it is importantnominations due for directors to maintain an equity position in IEC to further align their interests with those of our stockholders and to demonstrate their commitment to the long term success of the Company. Our board established stock ownership guidelines for the directors that became effective on October 1, 2009. The guidelines require that the directors own, at a minimum, that number of shares of common stock with a value equal to three times the director’snext year’s annual board retainer ($32,000, for Fiscal 2014) within three years from the later of October 1, 2009 or the date the director was elected to the board. At October 1, 2014, the stock ownership requirement was 20,824 shares. Unexercised stock options
(whether or not vested) do not count toward a director’s ownership for purposes of these guidelines. Currently, all the directors are in compliance with these guidelines.meeting?”.
Code of Ethics and Whistleblower Policy
We have a Code of Business Conduct and Ethics, which applies to all of our directors, officers (including our principal executive officer, principal financial officer, principal accounting officer and other executive officers) and employees. It is a statement of the Company’sour high standards for ethical behavior, legal compliance and financial disclosure. We also maintain a whistleblower policy, which encourages the Company’sour employees to report illegal activities and business conduct that would damage the Company’sour good name, business interests and its relationships with stockholders, suppliers, residents and the community at large. The Code of Business Conduct and Ethics and the Whistleblower Policy are distributed to all employees of the Companyour employees who in turn acknowledge, in writing, receipt of this information.
Availability of Corporate Governance Documents
We make available to the public a variety of corporate governance information on our website (www.iec-electronics.com) under “Investors– Corporatethe heading “Investors" and the subheading, "Corporate Governance”. Information on our website includes our Code of Business Conduct and Ethics, our Corporate Governance Guidelines, the Audit Committee Charter, the Compensation Committee Charter, the Nominating and Governance Committee Charter, the Executive Committee Charter, our Related Person Transactions Policies and Procedures, and our Whistleblower Policy. Information regarding any amendment to, or waiver from, the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer or principal accounting officer will also be posted in that section of our website.
Communications with the Board of Directors
Stockholders and other parties may communicate directly with the board of directors or the relevant board member by addressing communications to:
[Name of director(s) or Board of Directors]
IEC Electronics Corp.
c/o Corporate Secretary
105 Norton Street
Newark, New York 14513
All stockholder correspondence will be compiled by our Corporate Secretary and forwarded as appropriate.
(PROPOSAL 2)
RATIFICATION OF THE SELECTION OF THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 20152016
The audit committee has selected the accounting firm of Crowe Horwath LLP (“Crowe Horwath”) to serve as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2015.2016. The stockholders are being asked to ratify the audit committee’s selection of Crowe Horwath. The audit committee engaged Crowe Horwath was selected by the audit committeeon November 18, 2014 to replace EFP Rotenberg LLP (“EFPR”) whoas our independent registered public accounting firm. EFPR served as the Company’sour independent registered public accounting firm from May 2002 through completion of the Company’sour audited consolidated financial statements for Fiscal 2014 and filing of the Company’s Annual Reportour annual report on Formform 10-K in November 2014. The stockholders are being asked to ratify the audit committee’s appointment of Crowe Horwath.
Stockholder ratification of the selection of Crowe Horwath is not required by our by-laws or otherwise. However, the board is submitting the selection of our independent registered accounting firm to the stockholders for ratification as a matter of good corporate practice.governance. If the stockholders fail to ratify this appointment, the audit committee may, but is not required to, reconsider whether to retain Crowe Horwath. Even if the appointment is ratified, the audit committee in its discretion may direct the appointment of a different accounting firm at any time during the year if it determines that such a change would be in
the best interests of the Company and its stockholders. Representatives of EFPR and Crowe Horwath will be present at the annual meeting, will be given the opportunity to make statements if they so desire and will be available to respond to appropriate questions.
The following table shows the fees that were billed by EFPRCrowe Horwath for professional services listed below related to Fiscal 2014 and theour last two fiscal year ending September 30, 2013 (“Fiscal 2013”).
years:
| | | Description of Fees | | Fiscal 2014 | | Fiscal 2013 | | Fiscal 2015 |
| | Fiscal 2014 |
|
Audit Fees(1) | | $ | 178,000 |
| | $ | 255,895 |
| | $ | 314,500 |
| | $ | 635,000 |
|
| Audit-Related Fees | | — |
| | — |
| | — |
| | — |
|
Tax Fees(2) | | 900 |
| | 1,400 |
| | — |
| | — |
|
All Other Fees(3) | | 33,025 |
| | 8,500 |
| | — |
| | — |
|
| TOTAL EFPR Fees | | $ | 211,925 |
|
| $ | 265,795 |
| |
| TOTAL Fees | | | $ | 314,500 |
|
| $ | 635,000 |
|
| |
(1) | Audit fees primarily represent amounts billed for the audit of our annual consolidated financial statements for the respective fiscal yearsyear and the reviews of financial statements included in our quarterly reports on Form 10-Q quarterly reports for each suchthe fiscal year. Audit fees for Fiscal 2013 include additional billings related to the Fiscal 2013 audit that were not known as of Proxy Statement on Schedule 14A filed on December 27, 2013. |
| |
(2)
| Tax fees consist of professional services rendered by EFPR primarily in connection with IRS audits in fiscal 2014 and 2013. |
| |
(3)
| All other fees in Fiscal 2014 are associated with Crowe Horwath’s reaudit of our consolidated financial statements for services rendered in connection with the SEC investigation and subpoena as well as audit services related to our 401(k) plan. All other fees in Fiscal 2013 are for audit services related to our 401(k) plan.2014. |
Pre-Approval of Fees by Audit Committee
In accordance with applicable laws, rules and regulations, our audit committee charter and pre-approval policies established by the audit committee require that the audit committee review in advance and pre-approve all audit and permitted non-audit fees for services provided to us by our independent registered public accounting firm. The audit committee pre-approved all services performed by, and all fees to be paid to, EFPRCrowe Horwath in Fiscal 2014 and Fiscal 2013.2015.
Independence Analysis by Audit Committee
The audit committee has considered whether the provision of the services described above was compatible with maintaining the independence of EFPRCrowe Horwath and determined that it was compatible with the firm’s independence. For each ofFiscal 2015 and Fiscal 2014, and Fiscal 2013, EFPRCrowe Horwath provided no services other than those services described above.
Change in Independent Registered Public Accounting Firm
The Company wasWe were notified on September 5, 2014 by its currentour then-current independent registered public accounting firm, EFPR, that EFPR willwould not serve as the Company’s independent registered public accounting firm for the Company’sour fiscal year ended September 30, 2015 (“Fiscal 2015”). EFPR continued its engagement through completion of the audit of the Company’sour financial statements for Fiscal 2014. The Company understandsWe understand the basis for theirEFPR’s decision iswas that EFPR has made a strategic decision to serve public companies in roles other than as independent auditor.
EFPR’s reports on the financial statements of the Company for each of the past two fiscal years haveFiscal 2014 and Fiscal 2013 neither contained an adverse opinion or a disclaimer of opinion, nor beenwere qualified or modified as to uncertainty, audit scope or accounting principles. During the past two fiscal yearsFiscal 2014 and Fiscal 2013 and the interim periods preceding the date on which EFPR notified the Company that it willwould decline to stand for re-election, there were no disagreements with EFPR on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of EFPR, would have caused it to make reference to the subject matter of the disagreements in connection with its reports.
The Company provided EFPR with a copy of the foregoing disclosures and requested that EFPR furnish a letter addressed to the SEC stating whether or not it agreesagreed with the disclosures. A copy of suchthe letter, dated September 10, 2014, was filed as Exhibit 16.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 11, 2014.
On November 18, 2014, the Audit Committee of the Board of Directors engaged Crowe Horwath as the Company’s independent registered public accounting firm for Fiscal 2015.
During the past two fiscal years and the interim period preceding the engagement of Crowe Horwath, the Company did not consult with Crowe Horwath regarding (1) the application of accounting principles to a specified transaction, (2) the type of audit opinion that might be rendered on the Company’s financial statements, (3) written or oral advice provided that would be an important factor considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue, or (4) any matter that was the subject of a disagreement between the Company and EFPR as described in Item 304(a)(1)(iv) or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.issue.
Required Vote
The affirmative vote of the holders of a majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote onat the mattermeeting is needed to ratify the appointment of Crowe Horwath as our independent registered public accounting firm for the fiscal year ending September 30, 2015. Under Delaware law, an2016. An abstention will have the same legal effect as a vote against the ratification of Crowe Horwath, and broker non-votes will have no effect on the outcome of the ratification of the independent registered public accounting firm.proposal.
Unless authority to so vote is withheld,you specify otherwise, the persons named in the proxy card intend to vote shares as to which proxies are received IN FAVOR OFfor the approval of ratification of the selection of Crowe Horwath as our independent registered public accounting firm for the fiscal year ending September 30, 2016.
The audit committee and our board of directors unanimously recommend that the stockholders vote FOR the ratification of the appointment of Crowe Horwath as our independent registered public accounting firm for the fiscal year ending September 30, 2015.2016.
THE AUDIT COMMITTEE AND OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT THE STOCKHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF CROWE HORWATH AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2015.
AUDIT COMMITTEE REPORT[1]
Membership and Role of Audit Committee Report
The audit committee ofIn connection with our financial statements for the Company's board is responsible for providing independent, objective oversight and review of its accounting functions, internal controls and financial reporting process. Currently,fiscal year ended September 30, 2015, the audit committee is comprised of Mr. Kay, Mr. Rowehas (1) reviewed and Dr. Zimmerman. The audit committee operates pursuant to a written charter adopted bydiscussed the board of directors which was amended and restated in February 2009 and further amended in November 2013, and may be found on the Company's website www.iec-electronics.com under the heading of “Investors” and subheading of “Corporate Governance”. The audit committee believes that each of its members is independent as defined by NYSE MKT rules and applicable SEC rules and regulations. During Fiscal 2014, the committee met nine times and acted once by written consent. The committee’s meetings include, no less frequently than quarterly, executive sessionsaudited financial statements with management; (2) discussed with the Company’s independent registered public accounting firm without(the “Auditors”) the presence of the Company’s management.
Management has the primary responsibility for the financial statements and the reporting process, including the Company's system of internal controls, and for the preparation of the consolidated financial statements in accordance with generally accepted accounting principles. The Company's independent accountants are responsible for performing an independent audit of those financial statements in accordance with generally accepted auditing standards and for issuing a report thereon. The audit committee’s responsibility is to monitor and oversee these processes on behalf of the board. The members of the audit committee are not professional accountants or auditors and their functions are not intended to duplicate or certify the activities of management or the independent auditors.
Review of the Company's Audited Financial Statements
In fulfilling its oversight responsibilities, the audit committee reviewed the audited financial statements in the Company's Annual Report on Form 10-K for Fiscal 2014 with management and discussed the quality and acceptability of the Company's accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the Company's financial statements.
1The material in this audit committee report is not deemed to be “soliciting material,” or to be “filed” with the Securities and Exchange Commission and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filings.
The audit committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality and acceptability of the Company's accounting principles and such other matters as are required to be discussed with the committee under generally accepted auditing standards, including PCAOBby Public Company Accounting Oversight Board Auditing Standard No. 16, CommunicationCommunications with Audit Committees, as adopted by the Public Company Accounting Oversight Board. In addition, the audit committee hasCommittees; and (3) received the written disclosures and the letter from the independent auditorsAuditors required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’Auditors’ communications with the audit committee concerning independence, and has discussed with the independent auditorsAuditors their independence.
Based on the auditors’ independence,review and considered the compatibility of non-audit services with the auditors’ independence.
The audit committee discussed with the Company's independent auditors the overall scope and plans for their audit. The audit committee met with the independent auditors, with and without management present,discussions referred to discuss the results of their examination, their evaluationin items (1) through (3) of the Company's internal controls, and the overall quality of the Company's financial reporting.
In reliance on these reviews and discussions,above paragraph, the audit committee recommended to the Company's board of directors (andthat the board has approved) the inclusion of the Company's audited financial statements for the fiscal year ended September 30, 2014be included in the Company'sour Annual Report on Form 10-K for the fiscal year ended September 30, 20142015, for filing with the SEC.Securities and Exchange Commission.
Charles P. Hadeed, Chair
The audit committee selects the Company’s independent registered public accounting firm annually and has submitted such selection for the fiscal year ending September 30, 2015 for ratification by stockholders at the Company’s annual meeting.Andrew M. Laurence
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| Audit Committee |
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| Edward W. Kay, Jr., Chairman |
| James C. Rowe, |
| Jerold L. Zimmerman |
Jeremy R. Nowak
(PROPOSAL 3)
CONSIDERATION OF AN ADVISORY VOTE ONTO APPROVE THE COMPENSATION PAID TO
THE COMPANY’SCOMPANY'S NAMED EXECUTIVE OFFICERS
General
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, we are requesting stockholder approval ofthat our stockholders approve on a non-binding, advisory resolution approvingbasis the compensation paid to our named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation tables and narrative discussion in this proxy statement under the caption “Compensation of Named Executive Officers and Directors”Officers” beginning on page 2116 of this proxy statement. At our 2013 annual meeting of stockholders, we recommended, and our stockholders approved, that we hold this non-binding, advisory vote on executive compensation on an annual basis.
The board of directors requests that stockholders approve the following advisory resolution:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402402(m)-(q) of Regulation S-K, including the compensation tables and narrative discussion, is hereby APPROVED.
We believe thatAt our compensation policies2013 annual meeting of stockholders, we recommended, and procedures are effective in achieving IEC’s goals of rewarding sustained financial and operating performance and leadership excellence, aligning the executives’ long-term interests with those of our stockholders and motivating the executives to remain with the Company for long and productive careers. These policies and procedures are described below under the section “Compensationapproved, that we hold this non-binding, advisory vote on executive compensation on an annual basis. The next required vote on frequency will occur at our 2019 annual meeting of Named Executive Officers and Directors”. The compensation committee of our board of directors, composed entirely of independent directors, in consultation with consultants from time to time, oversees our compensation programs and monitors policies to ensure that those policies are appropriate.stockholders.
We urge stockholders to read the section entitled “Compensation of Named Executive Officers and Directors”” beginning on page 2116 of this proxy statement, including the 2014 Summary Compensation table and relatedcompensation tables and narrative included within that section, which provide detailed information on IEC’s compensation policies and practices and the compensation of our named executive officers. As discussed in greater detail in that section, our executive compensationstockholders elected a new slate of directors at our 2015 annual meeting of stockholders. Due to the timing of required disclosures and the change in
program consistsour board of four principal components: (1) base salary, (2) annual cash incentivedirectors, some of the decisions related to executive compensation (3) long-term equityfor Fiscal 2015 as reported in this proxy statement were made by our prior compensation committee and (4) perquisitesprior board of directors.
Our current compensation committee and personal benefits.board of directors have made key changes with respect to our executive management team and their compensation. In Fiscal 2015, we entered into new employment agreements with each named executive officer who remained employed with us at the end of Fiscal 2015. We believe that we have established reasonable base salaries as well as total compensation for our executive officers based on internal comparabilitythese agreements and external market data, as well as individual responsibilities and performance. We believe that the cash bonuses paid under our annual incentive plan should and do reward theother incentives granted to these named executive officers for businessin Fiscal 2015 better align our named executive officers’ interests with those of our stockholders. Our compensation committee and individual performance, encourage effective short-term performance while balancing that approachboard of directors continues to evaluate our executive compensation program with a long-term focus, and put a significant portion of total compensation opportunity at risk. We believe that awards granted under our long-term equity incentive plan giveview toward motivating our named executive officers a meaningful equity staketo meet our strategic operational and financial goals in the best interests of our business and encourage performance by our named executive officers that increases long-term stockholder return, and also serve as an effective tool in attracting and retaining experienced and skilled executive officers. The perquisites and personal benefits paid to our named executive officers are minimal.stockholders.
Non-Binding ResolutionVote
This advisory resolution,vote, commonly referred to as a “say-on-pay” resolution,vote, is not binding on the Company, the board of directors or the compensation committee of the board of directors, and may not be construed as overruling any decision made by the board. However, the board and the compensation committee will take the voting results into account when evaluating our executive compensation program and considering future compensation arrangements.
Required Vote
The affirmative vote of the holders of a majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote onat the mattermeeting is needed to approve the non-binding resolution approving the compensation paid to our named executive officers. Under Delaware law, an abstention will have the same legal effect as a vote against approval of this non-binding resolution,Abstentions and broker non-votes will have no effect on the outcome of the vote.count as votes against this proposal.
Unless authority to soThe board of directors unanimously recommends that the stockholders vote is withheld,FOR the persons named in the proxy card intend to vote shares as to which proxies are received in favor of approval of the non-binding resolution approving the compensation paid to our named executive officers.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS.
COMPENSATION OF NAMED EXECUTIVE OFFICERS AND DIRECTORS
Named Executive Officers
This proxy statement containsThe following tables and related narrative contain information aboutregarding the compensation paid to our named executive officers for our most recently completed fiscal year, which ended on September 30, 2015. Our named executive officers are our chief executive officer, our two other most highly compensated executive officers serving at the end of Fiscal 2014,2015, our former chief executive officer and one former executive officer, who would have been one of our most highly compensated executive officers during Fiscal 20142015 but for the fact that he was no longer serving as an executive officer at the end of Fiscal 2014 (collectively, the “named executive officers”).2015:
W. Barry GilbertJeffrey T. Schlarbaum - ChairmanPresident and Chief Executive Officer (“CEO”)
Michael T. Williams - Vice President, Finance and Chief Financial Officer (“CFO”)
Jens Hauvn - Senior Vice President, Operations
W. Barry Gilbert - Former Chairman and Chief Executive Officer
Brett E. Mancini - Former Vice President, Business Development and Engineering Solutions (“VP”)
Vincent A. Leo - Former Chief Financial Officer (“former CFO”)
Management Changes in Fiscal 2015
General Information
The following discussion provides a summaryIn January 2015, at our 2015 annual meeting of stockholders, our stockholders elected the slate of directors nominated by our stockholder, Vintage Capital Management, LLC to replace our then-current board of directors in its entirety. Subsequently, our newly-elected board of directors terminated the employment of our compensation policiesthen-Chairman and Chief Executive Officer, W. Barry Gilbert and elected Jeffrey T. Schlarbaum to replace him as President and Chief Executive Officer. In March 2015, Brett E. Mancini voluntarily resigned from the compensation decisions made with respect to our named executive officers.
Objective of Our Compensation Program
The goal of our executive compensation program is to support the attainment of our long and short-term strategic and financial objectives, thereby aligning the interests ofCompany, effective April 2015. In September 2015, we promoted Jens Hauvn, the Company’s executivesVice President of Quality and Operational Excellence to the position of Senior Vice President, Operations.
As discussed further in the narrative and footnotes to the Summary Compensation Table, we entered into employment agreements with Messrs. Schlarbaum, Williams and Hauvn during Fiscal 2015. Mr. Williams received a one-time cash payment of $15,000 in consideration of entering into a new employment agreement with us. Our employment agreements with Messrs. Schlarbaum and Hauvn included one-time incentives associated with their taking on new leadership roles with the interestsCompany. In addition, Mr. Schlarbaum also received a one-time cash payment of stockholders. Our executive compensation program is intended$50,000 upon his election to provide a competitive program that enables us to attract, motivate,the office of President and retain the key executives required to enhance stockholder value.Chief Executive Officer.
The Company’s Approval and Decision Making ProcessBecause our Fiscal 2015 began in October 2014, certain elements of compensation discussed below were determined by our prior board of directors.
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning total compensation committee ofearned or paid to our board of directors (the “Committee”) reviews and recommends to the full board all compensation decisions regarding our directors and chief executive officer, and reviews and approves all compensation decisions regarding our other named executive officers. The Committee approves equity awardsofficers for Fiscal 2015 and Fiscal 2014. We present more detailed information regarding these items of compensation in the Company’s other employees, including by delegation tofootnotes and in the Company’s CEOnarrative that follow the authority to award at his discretion up to a specified number of stock options to non-executive employees for special performance or recruitment to the Company. In Fiscal 2014, an aggregate of 50,500 options was granted to non-executive employees and new hires pursuant to such delegated authority. Additionally, an aggregate of 225,703 shares of restricted stock was issued by the Committee to key employees, including members of the senior management team.table.
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Name and Principal
Position | | Year | | Salary (1) | | Bonus(2) | | Stock
Awards
(3) (4) | | Option
Awards (5) | | Non-Equity
Incentive
Plan
Compensation(6) | | Nonqualified Deferred Compensation Earnings (7) | | All Other
Compensation(8) | | Total |
| Jeffrey T. Schlarbaum | | 2015 | | $ | 222,865 |
| | $ | 50,000 |
| | $ | — |
| | $ | 602,263 |
| | $ | 95,000 |
| | $ | — |
| | $ | — |
| | $ | 970,128 |
|
| CEO | | 2014 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Michael T. Williams | | 2015 | | 197,748 |
| | 15,000 |
| | — |
| | — |
| | 25,000 |
| | — |
| | 895 |
| | 238,643 |
|
| CFO | | 2014 | | 111,742 |
| | — |
| | 206,000 |
| | — |
| | 25,000 |
| | — |
| | 895 |
| | 343,637 |
|
| Jens Hauvn | | 2015 | | 175,639 |
| | 9,500 |
| | 70,650 |
| | 69,233 |
| | — |
| | — |
| | — |
| | 325,022 |
|
| VP | | 2014 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| W. Barry Gilbert | | 2015 | | 147,074 |
| | — |
| | — |
| | — |
| | — |
| | 1,163 |
| | 10,277 |
| | 158,514 |
|
| Former CEO | | 2014 | | 359,093 |
| | — |
| | — |
| | — |
| | — |
| | 1,313 |
| | 40,085 |
| | 400,491 |
|
| Brett E. Mancini | | 2015 | | 105,709 |
| | — |
| | 111,600 |
| | — |
| | — |
| | — |
| | 382 |
| | 217,691 |
|
| Former VP | | 2014 | | 187,374 |
| | — |
| | 122,400 |
| | — |
| | — |
| | — |
| | 1,109 |
| | 310,883 |
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(1) | The “Salary” column reflects the base salary actually paid to each of our named executive officers during the applicable fiscal year, which may differ from the salary described in “Compensation of Named Executive Officers - Base Salary Compensation” due to effective dates for increases that do not fall on the first day of the fiscal year and pay periods that may overlap fiscal years. |
In order to maintain market competitiveness the Committee periodically reviews relevant competitive data provided by third party compensation professionals for the purpose
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(2) | Amounts reflect cash sign-on bonuses for Messrs. Schlarbaum and Hauvn, and a cash payment to Mr. Williams in connection with his acceptance of a new employment agreement. |
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(3) | We granted restricted stock awards in Fiscal 2015 to Mr. Hauvn upon his hiring as an inducement award and as a retention grant paid to Mr. Mancini prior to the change in the board of directors. Both of these awards automatically vested upon the election of our new board of directors at our 2015 annual meeting of shareholders. |
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(4) | The amounts shown reflect the aggregate grant date fair value computed in accordance with FASB ASC 718. Under ASC 718, the fair value of such stock awards is determined as of the date of grant using the closing market price of common stock on the date of grant. These amounts reflect our accounting for these awards and do not correspond to the actual values that may be realized by the named executive officers and do not represent actual cash compensation paid to the recipient. Pursuant to SEC rules, we disregarded the estimates of forfeitures related to service-based vesting conditions. |
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(5) | We granted option awards in Fiscal 2015 in connection with the appointments of Mr. Schlarbaum and Mr. Hauvn as executive officers of the Company. Valuation assumptions used to determine grant date fair value as required by FASB ASC 718 are disclosed in Note 14 to our consolidated financial statements included in our annual report on form 10-K for the fiscal year ended September 30, 2015. |
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(6) | See “Annual Cash Incentive Awards” on page 20, for a description of Mr Schlarbaum's Fiscal 2015 Non-Equity Incentive Plan Compensation. As a condition to his employment by the Company, Mr. Williams was guaranteed a minimum $25,000 payout if he remained employed on July 15, 2014, and an additional $25,000 payout if he remained employed at the time the 2014 10-K was filed. He was employed on each of such dates. Thus, the first $25,000 payout was earned in Fiscal 2014 and the remaining payout was earned in fiscal 2015. |
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(7) | See "Deferred Compensation" on page 23, for a description of Mr. Gilbert's nonqualified deferred compensation earnings. |
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(8) | Amounts shown for Fiscal 2015 include $1,275 in insurance premiums paid with respect to policies of life insurance maintained for the benefit of Mr. Gilbert, and $9,002 being the difference between $16,935, the full medical insurance premiums paid for Mr. Gilbert and his wife and $7,933 which would otherwise be paid by the Company in connection with its non-discriminatory contribution to health insurance plans covering all employees. Amounts shown in Fiscal 2015 and Fiscal 2014 also include $895 in insurance premiums paid with respect to policies of life insurance maintained for the benefit of Mr. Williams and $382 in insurance premiums paid with respect to policies of life insurance maintained for the benefit of Mr. Mancini. Amounts shown for Fiscal 2014 include $17,941 in premiums paid on long-term care insurance contracts for Mr. Gilbert and his wife, in accordance with Section 7702B of the Internal Revenue Code, $9,177 in insurance premiums paid with respect to policies of life insurance maintained for the benefit of Mr. Gilbert, and $12,967 being the difference between $20,912, the full medical insurance premiums paid for Mr. Gilbert and his wife and $7,945 which would otherwise be paid by the Company in connection with its non-discriminatory contribution to health insurance plans covering all employees. Amounts shown in Fiscal 2014 include $1,109 in insurance premiums paid with respect to policies of life insurance maintained for the benefit of Mr. Mancini. |
NARRATIVE TO SUMMARY COMPENSATION TABLE
Elements of understanding current compensation practices. The Committee last engaged a compensation consultant, Grahall Partners LLC, to assist the Committee in reviewing compensation for our executive officers and directors in the fiscal year ended September 30, 2012 ("Fiscal 2012"). The Committee does not have a formal policy of “benchmarking” named executive officer compensation or director compensation against a certain percentile of the market data or using the market data to establish the level or mix of compensation. Rather, it uses market data as one reference point among a number of factors in evaluating compensation. The Committee also considers factors described in more detail below in “Compensation of Our Named Executive Officers – Elements”.Compensation
Starting in Fiscal 2013, the Committee considered the results of the stockholder advisory vote on executive compensation at the most recent annual meeting of stockholders. Approximately 86% of stockholders who voted on the say-on-pay proposal at the 2014 Annual Meeting voted to approve the Company’s executive compensation.
Compensation of Our Named Executive Officers – Elements
The compensation program for the named executive officers consists of the following elements:
Base salary compensation;salary;
Annual cash incentive compensation;incentive;
Long-term equity incentive compensation;incentive; and
Perquisites and other personal benefits.
Our named executive officers are also entitled to participate in a deferred compensation plan and a 401(k) savings plan, both described below.
The Committee has designed an executive compensation program consisting of these elements, which are intended to work together to provide a total compensation package that is reasonable, competitive and related to both the Company’s performance and the individual performance of Company employees, includingBase Salary
Base salaries for our named executive officers. The philosophy guiding the Committeeofficers generally are set forth in establishing the Company’s compensation policies and practices is to establish a program that:
is competitivetheir employment agreements with the market in order to help attract, motivate and retain highly qualified employees and executives;
creates a performance-based link between executive compensation and the attainment of financial, operational and strategic goals that we believe are critical drivers of sustained value creation over the long term;
aligns our executives’ interests with the interests of our stockholders;
does not create excessive risk taking behavior by our employees and executives; and
fosters a long-term commitment by executives.
Mr. Leo, our former CFO, did not participate in any of the compensation programs described above. He was not an employee of the Company, but rather performed his services under an engagement letter between the Company and Insero more particularly described in “Certain Relationships and Related Person Transactions – Policies and Proceduresare subject to review for Review, Approval and Ratification of Related Person Transactions” on page 34.
Base Salary Compensation
Base salaries are used to provide a fixed amount of compensation for the named executive officer’s regular work. The salaries of the named executive officers are reviewed on an annual basis, as well as at the time of promotion or other change in responsibilities. Salaries are developed for each position using internal comparability, external market data collected through Grahall, affordability, the responsibilities and scope of each position, and experience, skills and leadership capabilities required to perform each position.
increases. For the named executive officers other than the CEO,chief executive officer, the CEO prepares achief executive officer makes recommendations for salary recommendation following a review of individual performance and the factors described above. The recommendation is presentedincreases to the Committee.compensation committee. The Committee relies in part oncompensation committee reviews the CEO’s evaluation of each other namedchief executive officer’s performance in deciding whether to make an adjustment to each executive’sbase salary in a given year. In the case of a change in role, careful consideration is givenand makes recommendations to the new responsibilities, internal pay practices and external market data, in addition to past performance and experience. With respect to theboard of directors for increases.
The compensation committee set Mr. Schlarbaum’s base salary of the CEO, the board considers individual and Company performance, as well as affordability forat $350,000 when he joined the Company in February 2015. Pursuant to their employment agreements entered into with the Company in September 2015, Mr. Hauvn’s base salary is $220,000 and external market practicesMr. Williams’ base salary is $205,000. Before taking the position of Senior Vice President, Operations in September 2015, Mr. Hauvn’s base salary was $180,000. The prior compensation committee increased Mr. Williams’ salary from $185,000 to recommending any changes.$205,000, effective January 2015.
ChangesUpon his termination of employment in the CEO’s compensation are generally effective on November 1 of each year, and compensation changes for other executives are typically effective on January 1 of each year. With respect to executive officers serving at the end of Fiscal 2014, for Fiscal 2013, the Committee recommended, and the board approved, a 7% increase inFebruary 2015, Mr. Gilbert’s base salary was $350,000. Mr. Mancini’s base salary upon his resignation from the Company was $205,000. The prior compensation committee increased Mr. Mancini’s base salary from $326,000$183,000 to $350,000, and for Fiscal 2014 no change was made to his salary. In Fiscal 2014 Mr. Mancini’s salary of $183,000, and Mr. Williams’s salary of $185,000, were approved by the Committee in connection with their appointments as executive officers on$205,000, effective January 29, 2014 and February 8, 2014 respectively.
Our former executive officer, Mr. Leo, served as our chief financial officer during Fiscal 2013 and until June 1, 2014, remained a principal and shareholder of Insero during the entire period of his service, and was compensated by Insero, as more fully described below under “Certain Relationships and Related Person Transactions”. The Company did not pay any base salary directly to Mr. Leo.2015.
Annual Cash Incentive Awards
For Fiscal 2015, Mr. Schlarbaum earned an annual cash incentive of $95,000 pursuant to the employment agreement he entered into with the Company in connection with his election as President and Chief Executive Officer. Under his employment agreement, he earned $47,500 when the Company met its deadline of May 11, 2015 for filing its amended annual report on Form 10-K for the fiscal year ended September 30, 2014 and quarterly reports on Forms 10-Q for the fiscal quarters ended December 26, 2014 and March 27, 2015. His employment agreement provided that he would also receive the greater of (a) $47,500 and (b) a pro rata payment pursuant to the 2015 management incentive plan for the portion of Fiscal 2015 during which he was employed. The target value of his annual incentive award was 65% of base salary.
Our employed named executive officers generally are eligible for awards of annual cash bonusesincentive awards under our annual management incentive plan, (“MIP”).which we refer to as the MIP. Our named executive officers earn their MIP awards based on achievement of performance goals for the fiscal year. The compensation committee generally sets target incentive plan for Fiscal 2014 (the “2014 MIP”) was designed to reward executives and management for overall Company performance with respect to increases in net income before taxes and incentives and sales. The incentive bonuses under the MIP are generally grantedaward opportunities based on a percentage of each named executive officer’s base salary earned during the fiscal year. We believe this variable performance plan aligns the interests of our named executive officers with our stockholders’ interest in improving the financial strength of the Company as it continues to grow.
The 2014prior compensation committee established a minimum of Net Income Before Taxes of $900,000 for Fiscal 2015 as a precondition for payment of any MIP linked awards to performance results andawards. This threshold was designed to provide cash incentive awards to the participating executive officers ofnot met for Fiscal 2015, so the Company (“Participants”). For Fiscal 2014, the Participants consisted of our CEO, our CFO and our VP. Because Mr. Leo, our former CFO, wasdid not an employee of the Company, he was not eligible to receivepay any annual incentive plan awards under the 2014MIP with respect to Fiscal 2015. However, we present the following tables and narrative to illustrate the terms of the 2015 MIP.
The 2014 MIP was finalized by the Committee on November 13, 2013.award opportunities as a percentage of base salary for annual incentive awards for Fiscal 2015 were as follows:
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| Named Executive Officer | | Threshold | | Target | | Maximum |
| Jeffrey T. Schlarbaum | | 10 | | 65 | | 130 |
| Michael T. Williams | | 10 | | 45 | | 90 |
| Jens Hauvn | | 10 | | 45 | | 90 |
| W. Barry Gilbert | | 10 | | 65 | | 130 |
| Brett E. Mancini | | 10 | | 45 | | 90 |
Each Participant was eligible to receive an award, if any, determined onThe prior compensation committee established performance measures of equal weighting for the basis of the degree of achievement of certain specified fiscal year performance objectives (“Goals”). For Fiscal 2014, Goals were2015 MIP based upon the following measurements:on:
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(i) | Net Income Before Taxes and Incentives; and Incentives -- Adjustments are made for gains or losses from non-operating events such as acquisition escrow clawbacks, and calculations exclude the impact of unbudgeted legal and accounting fees and director’s and officer’s insurance payments arising from the restatement of the Company’s earnings described in its Annual Report on Form 10-K/A and Quarterly Report on Form 10-Q/A, each filed with the Securities and Exchange Commission on July 3, 2013 |
(ii) Sales
The Committee assigned a weighting factorprior compensation committee determined that the performance measure of 50%,Net Income Before Taxes and Incentives, would be subject to each Goaladjustment for each Participant,gains or losses from non-operating events such as acquisition escrow clawbacks, and calculations would exclude the impact of unbudgeted legal and accounting fees and director’s and officer’s insurance payments arising from the restatement of the Company’s earnings described in our annual report on Form 10-K/A and quarterly report on Form 10-Q/A filed with the total of the weighting factors for each Participant being 100%.SEC on July 3, 2013.
The Compensation Committee established:following table sets forth the Fiscal 2015 goals at the threshold, target and maximum performance levels.
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(i) | as a precondition for payment of any awards, the Company had to have positive net income for Fiscal 2014 ("Plan Threshold"), |
| |
(ii) | minimum plan entry performance levels for each Goal for each Participant (“Minimum(s)”), set at a level in excess of prior fiscal year achievement to assure that stockholders receive the first portion of the benefit of increased value, |
(iii) a target goal (the “Target”) for each Goal for each Participant based on the Company budget, and |
| | | | | | | | |
| Performance Measure | | Weight | | Threshold | | Target | | Maximum |
| (in thousands) | | | | | | | | |
| NIBT & Incentives | | 50% | | $56 | | $4,985 | | $8,803 |
| Sales | | 50% | | $142,380 | | $152,100 | | $159,390 |
(iv) a maximum cap ("Maximum")A reconciliation of 200% of the Target percentage of base salary.NIBT & Incentives follows:
|
| | | |
| | Year Ended |
| | September 30, 2015 |
| (in thousands) | |
| Net loss | $ | (10,186 | ) |
| Loss on discontinued operations, net | 6,415 |
|
| Provision for income taxes | 1 |
|
| Restatement & related expenses - Prior Restatement | 730 |
|
| Incentives | — |
|
| | $ | (3,040 | ) |
If all Targets were achieved, Awards would be earned by Participants equal to the following percentagesThe compensation committee evaluates achievement of base salary: (i) for the CEO - 60%, (ii) for the CFO- 45%, pro rated for the portion of the year worked, with a minimum of $50,000 provided he remains employed on the date of filing of the Company’s Annual Report of Form 10-K for Fiscal 2014, and (iii) for the VP- 50%. If performance was less than Target but at least the Minimum the Participants would receive a prorated Award between the Minimum and the Target based upon actual performance. If achievement was in excess of Target, the Award would be prorated between the Target and the Maximum. At the Minimum, entry is at 5% of base salary for each Goal. For performance from Minimum to Target, and from Target to Maximum, Awards are measured prorated linearly. The Compensation Committee retained the right to review and consider performance above the 200% cap. No Award would be made with respect to a Goal if the applicable Minimum was not achieved.
After the end of thegoals after fiscal year the Compensation Committee determines the extentend and may increase or decrease payouts by up to which25%, subject to the Goals have been achieved by each respective Participant and calculates the amount of the Award to be paid to each (the “Calculated Award”). However, the Compensation Committee with approval of the independent members of the Boardboard of Directors indirectors with respect to the casechief executive officer’s incentive award. The payment of MIP awards generally will be made within 15 days after receipt of the CEO, andaudited financial statements for the Compensation Committeefiscal year. Generally, in consultation withorder to receive awards under the CEO inMIP, participants must be employed at the case of other Participants, may modifytime the Calculated Award by plus or minus up to 25%.awards are paid.
The Compensation Committeecompensation committee reserved the right in its discretion to modify or waive categories or goals. Among others, the GoalsThe goals set forth in the 20142015 MIP arewere based upon the organic growth of the Company and dodid not reflect the impact of any acquisitions, the impact of which, if any, would be separately reviewed by the Compensation Committee.acquisitions.
Payment of any Award to a Participant is made within fifteen (15) days after receipt by the Company of the audited financial statements for the applicable fiscal year. In order to receive an Award, a Participant must be an employee of the Company on the date such Award is to be paid.
The following tables set forth the Fiscal 2014 Targets (weighted as a percentage of targeted bonus) and potential payout amounts for each of the named executive officers, at the threshold, targeted and maximum performance levels. The threshold award level must have been exceeded after taking into consideration the impact of the payment of any bonus under the MIP before there can be any payout.
W. Barry Gilbert, Chairman & CEO:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Entry Threshold | | Target | | Maximum |
| Component | | Weight | | Goal | | Payout | | Goal | | Payout | | Goal | | Payout |
| | | |
| | (in thousands) | | |
| | (in thousands) | | |
| | (in thousands) | | |
|
| NIBT & Incentive | | 50 | % | | $ | 1,118 |
| | $ | 17,500 |
| | $ | 9,463 |
| | $ | 105,000 |
| | $ | 15,853 |
| | $ | 210,000 |
|
| Sales | | 50 | % | | 148,694 |
| | 17,500 |
| | 159,026 |
| | 105,000 |
| | 166,775 |
| | 210,000 |
|
| Total Potential: | | 100 | % | | |
| | $ | 35,000 |
| | |
| | $ | 210,000 |
| | |
| | $ | 420,000 |
|
Michael T. Williams, Vice President, Finance and Chief Financial Officer:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Entry Threshold | | Target | | Maximum |
| Component | | Weight | | Goal | | Payout(1) | | Goal | | Payout | | Goal | | Payout |
| | | |
| | (in thousands) | | |
| | (in thousands) | | |
| | (in thousands) | | |
|
| NIBT & Incentive | | 50 | % | | $ | 1,118 |
| | $ | 9,250 |
| | $ | 9,463 |
| | $ | 41,625 |
| | $ | 15,853 |
| | $ | 83,250 |
|
| Sales | | 50 | % | | 148,694 |
| | 9,250 |
| | 159,026 |
| | 41,625 |
| | 166,775 |
| | 83,250 |
|
| Total Potential: | | 100 | % | | |
| | $ | 18,500 |
| | |
| | $ | 83,250 |
| | |
| | $ | 166,500 |
|
(1)For Fiscal 2014 only, subject to proration for portion of year worked and a minimum payout of $25,000 if employed on July 15, 2014 and additional $25,000 if employed at time of filing of Annual Report on Form 10-K ("2014 10-K")
Brett E. Mancini, Vice President, Business Development and Engineering Solutions:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Entry Threshold | | Target | | Maximum |
| Component | | Weight | | Goal | | Payout | | Goal | | Payout | | Goal | | Payout |
| | | |
| | (in thousands) | | |
| | (in thousands) | | |
| | (in thousands) | | |
|
| NIBT & Incentive | | 50 | % | | $ | 1,118 |
| | $ | 9,150 |
| | $ | 9,463 |
| | $ | 45,750 |
| | $ | 15,853 |
| | $ | 91,500 |
|
| Sales | | 50 | % | | 148,694 |
| | 9,150 |
| | 159,026 |
| | 45,750 |
| | 166,775 |
| | 91,500 |
|
| Total Potential: | | 100 | % | | |
| | $ | 18,300 |
| | |
| | $ | 91,500 |
| | |
| | $ | 183,000 |
|
No MIP awards were earned related to Fiscal 2014 with the exception of the guaranteed minimum of $50,000 for Mr. Williams described above, $25,000 of which was earned on filing the Company's 10-K for fiscal 2014 during fiscal 2015. The actual cash incentive awards paid to our named executive officers for Fiscal 2013 and Fiscal 2014 performance are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 28.
Long-Term Equity Incentive Awards
The purpose of the Company’s Long-Term Incentive Plan (“LTIP”) islong-term incentive plan for Fiscal 2015, which we refer to motivate the Company’s executives and certain designated key employees to enhance the long-term value of the Company by aligning their interests with those of the stockholders. Because Mr. Leo, our former chief financial officer, was not an employee of the Company, he was not eligible to participate inas the LTIP, during Fiscal 2014. However, in Fiscal 2012, Mr. Leo received an awardprovided for awards of 20,000 shares oftime-vesting restricted stock in connection with his appointment as our chief financial officer. 2,000 of these shares vested in Fiscal 2013 and an additional 6,000 shares vested in Fiscal 2014. The remaining unvested shares were forfeited when Mr. Williams replaced Mr. Leo as our CFO. We have been advised that originally Mr. Leo held the restricted such shares for the benefit of Insero, but as part of Insero’s compensation arrangements with Mr. Leo, Insero agreed that 2,000 of the vested shares would no longer be held for the benefit of Insero and instead would be held by Mr. Leo without further beneficial interest of Insero.
Equity-based compensation and ownership is intended to ensure that our named executive officers and other key employees have a continuing investment in the long-term success of the Company. The Committee believes that methods of equity-based incentive compensation, such as restricted stock, are critical in motivating the long-term creation of stockholder value and in attracting and retaining key employees with outstanding abilities and skills. For Fiscal 2014, equity-based compensation awarded to our named executive officers was awarded under the Company’s stockholder-approved 2010 Omnibus Incentive Compensation Plan, (the “2010 Plan”).
which we refer to as the 2010 Plan. The LTIP for Fiscal 2014 (the “2014 LTIP”) provided for awards of restricted stock to be made under the 2010 Plan, to enable and encourage participants to increase their ownership in the Company by rewarding achievement of a high level of corporate financial performance through providing opportunities to participate in stockholder gains. The 2014 LTIP was approved by the Committee at its meeting on November 13, 2013.
The LTIP measuresmeasured Company performance over a one-year fiscal period andperiod. We grant the award is paid outrestricted stock awards, if at all, at the end of the fiscal periodyear based on the attainment of annualcompany-wide performance goals, measured company-wide and pre-established bygoals. For Fiscal 2015, the Committee. The Committeeprior compensation committee established arevenue growth as the single performance goal (“Performance Goal”) for Fiscal 2014, revenue growth, which is the metric that the Committee believes is key to building long-term stockholder value. Revenue growth was chosen as an objective measure of building long-term stockholder value because it best captures the nature of the Company’s business strategy. The Company’s customers seek contract manufacturing partners that provide high quality, long-term stable capabilities that enhance their supply chain. Establishing and growing these relationships requires several years to build trust, and once that trust is established, these relationships can extend over several years. Moreover, potential customers often rely on thegoal.
Company’s current customers as tangible signalsBecause we grant equity awards under the LTIP based on the prior fiscal year’s performance, we do not grant awards until after the end of the Company’s capabilities. Growing revenues today generates future revenuesfiscal year and hence future value for the shareholders.completion of our audited financial statements. No awards were granted during either Fiscal 2014 or Fiscal 2015 because the threshold performance measure was not met. Although we did not grant awards under the Fiscal 2015 LTIP, we provide the following tables and narrative to illustrate the terms of the Fiscal 2015 LTIP.
The Committee also establishes:
| |
(i) | a minimum entry performance level for the Performance Goal (“Performance Goal Minimum”), set at a level in excess of prior fiscal year achievement to assure that stockholders receive the first portion of the benefit of increased value, and |
| |
(ii) | a target goal (the “Target”) for the Performance Goal based on the Company budget. |
If the Performance Goal was achieved at Target, the respective Participants would earn awards with a value equal to the following percentages of base salary: (i) for the CEO - 60%, (ii) for the VP - 30% and (iii) for other Participants - 20%. For Fiscal 2014 the CFO, Mr. Williams, was not eligible to participate in the LTIP, and instead received a grant of 50,000 shares of restricted stock vesting 10%, 20%, 30% and 40%, respectively, on the second through fifth anniversary dates of his employment.
If performance was less than the Target, but at least the Performance Goal Minimum, the award would be pro rated, usingopportunities as a calculation base of 50% of the award at Target for achievement at exactly the Performance Goal Minimum. If the Target was surpassed, the award at Target would increase pro rata up to a cap of 200% of the Target level award. The Compensation Committee reserved the right to review and consider performance above the 200% cap. No award would be made if the Performance Goal Minimum was not achieved.
The equivalent dollar value of each award, as calculated based on the applicable percentage of base salary isfor the “Calculated Value”. Forlong-term incentive awards for Fiscal 2014, each award would be calculated in2015 were as follows:
|
| | | | | | |
| Named Executive Officer | | Threshold | | Target | | Maximum |
| Jeffrey T. Schlarbaum | | 10 | | 65 | | 130 |
| Michael T. Williams | | 10 | | 45 | | 90 |
| Jens Hauvn | | 10 | | 45 | | 130 |
| W. Barry Gilbert | | 10 | | 65 | | 130 |
| Brett E. Mancini | | 10 | | 45 | | 90 |
The following table sets forth the following way. performance goal at the threshold, target and maximum level.
|
| | | | | | | | | | | | |
| Performance Measure | | Threshold | | Target | | Maximum |
| (in thousands) | | | | | | |
| Revenue | | $ | 142,380 |
| | $ | 152,100 |
| | $ | 159,390 |
|
The number of shares of restricted stock awarded is equal towould have equaled the Calculated Valuedollar value of the applicable award opportunity based on achievement of the performance goal divided by the average closing price of the Company’s common stock on the NYSE MKT for all trading days falling within the period beginning July 1, 2014 and ending September 30, 2014.2015.
After the end of the fiscal year, the Committeecompensation committee determines the extent to whichachievement of the Performance Goal has been achievedperformance goal and approves the amountvalue of the awardawards to be paidgranted to each participant.the named executive officers. Under the 2015 LTIP, the compensation committee did not award grants because the Company did not achieve its performance goal at the threshold level. However, (i) based on hisan evaluation of a Participant’sthe named executive officers’ performance, the CEO may recommend thatcompensation committee had the Calculated Value for that Participant be modifiedability to increase or decrease grants by plus or minus up to 25%, and (ii) the Committee may recommend that the Calculated Value for the CEO be modified by plus or minus up to 25%. All modifications to a Calculated Value for any participant must be approved by the Committee. Additionally, any modificationsubject to the Calculated Value for the CEO must be approved byapproval of the independent members of the board of directors. Usedirectors with respect to the chief executive officer’s incentive award. The compensation committee reserved the right in its discretion to modify categories or goals. In addition, the compensation committee had the right to adjust the LTIP for non-operating events that affected goals. The performance goal of revenue set forth in the 2015 LTIP was set in contemplation of the modification factor is not expected toorganic growth of the Company. The impact of acquisitions would have been be an annual event, but is to be used sparingly, whenreviewed separately by the actual results achieved, whether positive or negative, are not appropriately reflected in the Calculated Value.Committee.
AllThe Company grants LTIP awards are evidenced bypursuant to a Restricted Stock Award Agreementrestricted stock award agreement in the manner set forth in 2010 Plan. Each awardUnder the 2015 LTIP, shares would be subject to a five-year period of restriction, during which periodhave vested on the unvested restricted stock may not be sold or otherwise transferred. As to one half (1/2)anniversary of the restricted shares, the restrictions would lapse and the shares would vestgrant date as follows: 10% on the date four (4) years after the date the award is granted. As to the other one half (1/2) of the shares, the restrictions would lapse and the shares would vestfirst anniversary, 20% on the date five (5) years aftersecond anniversary, 30% on the datethird anniversary and 40% on the Award is granted. If a Participant’sfourth anniversary. Generally, named executive officers forfeit unvested shares if their employment with the Company is terminated for any reason whatsoever, other than death, disability, retirement or change in control, before the lapse of the restrictions, the unvested restricted stock would be deemed forfeited by the participant and would be returned to or cancelled by the Company. restrictions.
The Restricted Stock Award Agreements may contain such other terms and conditions deemed appropriate by the Compensation Committee. Such provisions need not be uniform among allCompany generally grants of Awards among all Participants.
Awardsawards earned as provided above generally are made within 15 days after receipt by the Company of the audited financial statements for the applicable fiscal year. In order to receive an award, a participant must be an employee of the Company on the date such award is granted. For purposes of the LTIP, the grant date is the date on which the Committeecompensation committee approves the awards for all Participantsparticipants except the CEO,chief executive officer, for whom the grant date is the date on which the board approves the award.
The Committee reserves the right in its discretion to modify categories or goals. In addition, (i) the Committee may adjust the plan for non-operating events that affect goals, and (ii) the Performance Goal set forth in the 2014 LTIP is based upon the organic growth of the Company. The impact of acquisitions would be reviewed separately by the Committee.
The following table sets forth the 2014 LTIP Performance Goal at the threshold, Target and maximum level.
|
| | | | | | | | | | | | |
| Component | | Threshold | | Target | | Maximum |
| Revenue (in thousands) | | $ | 148,694 |
| | $ | 159,026 |
| | $ | 166,775 |
|
To the extent the Performance Goal was achieved, the Calculated Value would be determined for each Participant.
Because equity awards under the LTIP are based on the prior fiscal year’s performance, they are not granted until after the end of the fiscal year and the completion of our audited financial statements. Therefore, awards related to performance in one fiscal year are not reflected in any of the compensation tables in this proxy statement for that fiscal year. Instead, they are included in the compensation tables for the following fiscal year. Thus, awards for Fiscal 2013 performance would be reflected in Fiscal 2014 and awards for Fiscal 2014 performance would be reflected in Fiscal 2015; provided, however, no awards were earned for either Fiscal 2013 or Fiscal 2014 performance.
The restricted share awards included in the Executive Officer Compensation Tables section that follows this section reflect awards granted to the CFO and VP in Fiscal 2014 outside the 2014 LTIP in connection with their appointments as executive officers. In recognition of his appointment as an executive officer in Fiscal 2014, Mr. Mancini, the VP, received a grant of 30,000 restricted shares vesting 10%, 20%, 30% and 40%, respectively, on the first through fourth anniversary dates of such appointment. Mr. Williams also received a grant of 50,000 restricted shares in connection with his employment by the Company as its Vice President, Finance, vesting on the same schedule.
Perquisites and Personal Benefits
In Fiscal 2014,Pursuant to the Companyterms of our new employment agreements with Messrs. Schlarbaum, Williams and Hauvn, we are not obligated to pay any perquisites or personal benefits to our current executive officers, although we intend to continue to pay life insurance premiums for Mr. Williams. We previously paid $17,941 inthe premiums in lieufor life insurance policies maintained by Messrs. Gilbert, Williams and Mancini.
Under the terms of salaryMr. Gilbert’s employment agreement, we were obligated to pay the full premium for long terman employee and spouse health insurance plan for Mr. Gilbert. We also previously paid the premiums for long-term care insurance contractspolicies for Mr. Gilbert and his wife, and $9,177 in premiums with respect to life insurance policies maintained for his benefit. Although the Company pays only a portion of medical insurance premiums for all employees, the Company paid the full premium for a family plan for Mr. Gilbert, resulting in payments over and above the Company plan of $5,022.spouse.
In Fiscal 2014, the Company paid $1,109 in premiums in lieu of salary for life insurance policies maintained for the benefit of Mr. Mancini.
Deferred Compensation
Effective January 1, 2009, theThe Company established the IEC Electronics Corp.maintains a Management Deferred Compensation Plan (the “Deferred Compensation Plan”) which allows certain designated employees, including the named executive officers to defer up to 100% of their base salary and up to 100% of any performance-based incentive bonus on a tax-deferred basis. On the last day of each quarter, the Company credits the deferred account with interest, which is based on the weighted average interest rate paid by the Company to its senior lender. Deferredlender as in effect on the last day of the quarter. We will pay deferred compensation will be paid to a participantparticipants upon separation from service on the date and in the manner elected by the participant in his/her deferred compensation agreement. If nothe participant does not make an election, is made, the deferred accountwe will be paid outmake payments in quarterly installments over ten years beginning January 1 of the year following separation from service. Deferred amounts may not be withdrawn prior to their payment start date, except to meet an “unforeseeable financial emergency” (in the Committee’s discretion) or in the event of a change in control of the Company. PaymentsWe delay payments to “key employees” as defined under the Federal tax laws are delayedfor at least six months after termination of employment. DuringThere were no amounts deferred in Fiscal 2014, only Mr. Gilbert elected to defer a portion of his compensation. Amounts deferred by Mr. Gilbert are included in the Summary Compensation Table but were deducted from the Company’s cash salary payments to him and deferred by him pursuant to the Deferred Compensation Plan.2015 or 2014. In Fiscal 20142015 and 20132014 the average interest rate paid by the Company to its senior lender exceeded 120% of the applicable federal rate of interest (“AFR”). Theinterest. For Mr. Gilbert, the amount of interest earned in Fiscal 2015 and 2014 in excess of 120% of AFRthe applicable rate of interest was $1,163 and $1,313, and $275, for Fiscal 2014 and 2013, respectively. TheWe report these excess interest is reflectedpayments in Nonqualified Deferred Compensation Earnings column of the Summary Compensation Table.
Retirement Benefits
All employees, including our named executive officers, are eligible to participate in the Company’s 401(k) Employee Savings Plan (“Savings Plan”). The Savings Plan is a defined contribution tax-qualified retirement savings plan pursuant to which employees are able to contribute a portion of their eligible cash compensation to the Savings Plan. The Company matches up to 1.5% of contributions made by participating employees of our IEC Electronics Corp – Albuquerque subsidiary and beginning June 28, 2014, 2014, up to 1.5% of contributions made by other participating Company employees. None of our named executive officers is covered by a pension plan.
Employment Agreements and Other Arrangements
The employment agreements we entered into in Fiscal 2015 with Messrs. Schlarbaum, Williams and Hauvn contain clawback provisions for recovering certain compensation in the event of an accounting restatement resulting from the executives’ willful or grossly negligent conduct or financial dishonesty.
Jeffrey T. Schlarbaum, President and Chief Executive Officer
On March 20, 2015, we entered into a three-year employment agreement with Mr. Schlarbaum in connection with his election to the office of President and Chief Executive Officer on February 6, 2015. Mr. Schlarbaum’s employment agreement entitles him to an annual base salary of $350,000, which the compensation committee will review for increases after the initial year. The employment agreement also entitles Mr. Schlarbaum to earn annual and long-term incentive awards on the terms established by the compensation committee for the applicable fiscal year. Mr. Schlarbaum’s employment agreement provided for a one-time sign-on award of a stock option to purchase shares of the Company’s common stock equal to four percent of the Company’s common stock outstanding on the date of grant. Thus, on March 20, 2015, we granted Mr. Schlarbaum an option to purchase 400,000 shares of our common stock under the 2010 Plan and an option to purchase 16,145 shares as an inducement award outside of the 2010 plan, each at an exercise price of $4.10 per share. The sign-on options will vest and become exercisable in equal installments on each of the first, second, third and fourth anniversaries of March 20, 2015, the date of the employment agreement.
In the event of Mr. Schlarbaum’s termination without “cause” by us or by Mr. Schlarbaum for “good reason”, as such terms are defined in his employment agreement, we will pay or provide the following termination benefits:
salary continuation at his base salary then in effect for one year following termination;
a pro rata annual incentive award;
accelerated vesting of his sign-on option;
accelerated vesting of any outstanding long-term incentive awards; and
continued coverage under our health insurance plan for twelve months following termination.
In the event of Mr. Schlarbaum’s termination without “cause” by us or by Mr. Schlarbaum for “good reason” within two years of a “change-in-control”, as such terms are defined in his employment agreement, we will pay or provide all of the above compensation and benefits referred to immediately above, except that continued coverage under our health insurance plan will continue for twenty-four months following termination.
In connection with his joining the Company, Mr. Schlarbaum also received a cash sign-on bonus of $50,000.
ExecutiveMichael T. Williams, Vice President, Finance and Chief Financial Officer Compensation Tables
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning total compensation earned or paid to our named executive officers for Fiscal 2014 and Fiscal 2013. A description of the material factors necessary to understand the information in the table is contained above in the “Base Salary Compensation,” “Annual Cash Incentive Awards,” and “Long-Term Equity Incentive Awards” subsections of “Compensation of Named Executive Officers and Directors - General Information. More detailed information also is presented in the other tables and in the footnotesIn September 2015, we entered into an at-will employment agreement with Mr. Williams that superseded his prior employment agreement with us dated February 11, 2014. We refer to the tables.employment agreement dated February 11, 2014 as the prior employment agreement. In consideration for entering into the new employment agreement, Mr. Williams received a one-time cash payment of $15,000. The terms of this new employment agreement generally were consistent with the terms of his prior employment agreement except as noted below:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary (1) | | Stock Awards (2) (3) | | Option Awards | | Non-Equity Incentive Plan Compensation (4) | | All Other Compensation (5) (6) | | Total |
| W. Barry Gilbert, | | 2014 | | $ | 359,093 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 33,453 |
| | $ | 392,546 |
|
| Chairman & CEO | | 2013 | | $ | 348,154 |
| | $ | 135,547 |
| | $ | — |
| | $ | — |
| | $ | 31,903 |
| | $ | 515,604 |
|
| Michael T. Williams | | 2014 | | $ | 111,742 |
| | $ | 206,000 |
| | $ | — |
| | $ | 25,000 |
| | $ | — |
| | $ | 342,742 |
|
| VP and CFO | | 2013 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Brett E. Mancini | | 2014 | | $ | 187,374 |
| | $ | 122,400 |
| | $ | — |
| | $ | — |
| | $ | 1,109 |
| | $ | 310,883 |
|
| VP | | 2013 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Vincent A. Leo, | | 2014 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 237,500 |
| | $ | 237,500 |
|
| Former CFO | | 2013 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 329,000 |
| | $ | 329,000 |
|
|
| | |
(1)
Provision | The “Salary” column reflects the base salary actually paid to each of our named executive officers during the applicable fiscal year, which may differ from the salary described in “Compensation of Named Executive Officers - Base Salary Compensation” due to effective dates for increases that do not fall on the first day of the fiscal year and pay periods that may overlap fiscal years. The amounts shown for Mr. Gilbert include any portion of base salary deferred and contributed by him to our Deferred Compensation Plan. |
| Prior Employment Agreement | Current Employment Agreement |
(2)
Severance | Restricted share awards were granted toSalary continuation for 12 months if the named executive officersCompany terminates his employment without “cause” as such term is defined in Fiscal 2013 based upon the achievement of certain performance targets in Fiscal 2012. In Fiscal 2013agreement. | Salary continuation for Fiscal 2012 performance, Mr. Gilbert was awarded 19,616 restricted shares,12 months, a pro rata annual bonus and Mr. Mancini was awarded 3,012 restricted shares. All awards were madecontinued coverage under the LTIPCompany’s health insurance plans for Fiscal 2013six (6) months if he terminates his employment for “good reason” or the Company terminates his employment without “cause” as describedsuch terms are defined in the Company’s definitive proxy statement on Schedule 14/A filed with the SEC on December 27, 2013. Provided that the executive officer remains employed byagreement. |
| Change in control | Salary continuation for 12 months if he terminates employment for any reason or the Company 50%terminates employment for any reason other than for “cause” as such term is defined in the agreement. | Salary continuation for 12 months, a pro rata annual bonus, accelerated vesting of any outstanding long term incentive plan awards grantedand continued coverage under the Company’s health insurance plans for six (6) months if he terminates his employment for “good reason” or the Company terminates his employment without “cause” within two (2) years of a “change in Fiscal 2013 will vest on each of November 26, 2016 and 2017.control” as such terms are defined in the agreement. |
| Clawback provisions? | No | Yes |
The following table sets forth information concerning stock options and stock awards held by the named executive officers at September 30, 2014.2015.
Effective January 1, 2009, the board established the IEC Electronics Corp. Board of Directors Deferred Compensation Plan (“Directors Deferred Plan”) which allows the non-employee directors of the Company the opportunity to defer all or part of their cash compensation. No director elected to participate in the Directors Deferred Plan in Fiscal 2014.2015.
Policies and Procedures for Review, Approval or Ratification of Related Person Transactions
Our board has adopted a written policy addressing the Company’s procedures with respect to the review, approval and ratification of transactions with related persons that are required to be disclosed pursuant to SEC rules. The policy provides that any transaction, arrangement or relationship with a “related person” (as defined in the policy) in which the Company participates and in which the related person has or will have a direct or indirect material interest and in which the amount involved is expected to exceed $90,000 in any fiscal year, will be subject to the prior review and approval or ratification by the audit committee.
In addition to the services under the engagement letter described above, Insero has provided various services to the Company, including acquisition support, out-sourced accounting services, Sarbanes-Oxley/internal audit support, tax services, and accounting research services. During Fiscal 2013 and 2014, IEC incurred fees payable to Insero of approximately $87,024 and $59,675 in connection with such services.
