UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) – May 23, 2012
IEC ELECTRONICS CORP.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 0-6508 | 13-3458955 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
105 Norton Street, Newark, New York 14513
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code (315) 331-7742
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Section 1 | Registrant’s Business and Operations |
| Item 1.01 | Entry into a Material Definitive Agreement |
As previously reported, IEC Electronics Corp. (the “Company”) entered into an engagement letter (the “Insero Agreement”), dated December 28, 2011, with Insero & Company CPAs, P.C. (“Insero”), pursuant to which Vincent A. Leo, a principal and shareholder of Insero, has served as interim Chief Financial Officer of the Company since January 2, 2012. A copy of the Insero Agreement was attached as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 28, 2011. On May 25, 2012, the Company and Insero amended the Insero Agreement to change the compensation paid to Insero from a weekly rate of $7,600 based upon, and subject to, consultant hours spent, to a set monthly rate of $25,000 per month.
Since November 2010, Insero has provided various services to the Company, including acquisition support, out-sourced accounting services, Sarbanes-Oxley/internal audit support, and accounting research services.
The foregoing summary of the Insero Agreement does not purport to be complete and is qualified in its entirety by reference to the agreement itself, a copy of which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.
| Section 5 | Corporate Governance and Management |
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
Appointment of Vincent A. Leo as Chief Financial Officer
On May 23, 2012, the Board of Directors of the Company changed Vincent A. Leo’s title from Interim Chief Financial Officer and appointed him as Chief Financial Officer with the expectation that Mr. Leo would serve in that position for three years. In connection with his appointment, the Board of Directors granted 20,000 shares of restricted stock to Mr. Leo, vesting 10% on May 23, 2013, 30% on May 23, 2014, and 60% on May 23, 2015 provided that Mr. Leo continues to be serving as Chief Financial Officer of the Company on the applicable vesting date. The restricted stock award was granted to Mr. Leo under the Company’s 2010 Omnibus Incentive Compensation Plan. In addition, the Board of Directors approved modifications to the financial arrangements with Insero related to Mr. Leo’s services, as described in Item 1.01 above. Mr. Leo is not eligible to participate in the incentive plans made available to the Company’s other executive officers, described below.
Additional information regarding Mr. Leo and his relationship with Insero was previously reported under Item 5.02 of the Company’s Current Report on Form 8-K filed on December 28, 2011.
2012 Management Incentive Plan for Executive Officers
On May 23, 2012, the Compensation Committee and the Board of Directors of the Company approved the Management Incentive Plan (“MIP”) for fiscal 2012, applicable to W. Barry Gilbert, Chief Executive Officer, Jeffrey T. Schlarbaum, President, and Donald S. Doody, Executive Vice President. The MIP provides for cash awards based upon the 2012 fiscal year performance of the Company. A description of the MIP is filed herewith as Exhibit 10.2 and is incorporated herein by reference.
2012 Long Term Incentive Plan for Executive Officers
On May 23, 2012, the Compensation Committee and the Board of Directors of the Company approved the Long Term Incentive Plan (“LTIP”) for fiscal 2012, applicable to W. Barry Gilbert, Chief Executive Officer, Jeffrey T. Schlarbaum, President, and Donald S. Doody, Executive Vice President, as well as certain designated key employees of the Company. The LTIP provides for awards of restricted stock under the Company’s 2010 Omnibus Incentive Compensation Plan based upon 2012 fiscal year performance of the Company. A description of the LTIP is filed herewith as Exhibit 10.3 and is incorporated herein by reference.
Change in Compensatory Arrangements for Directors
On May 23, 2012, the Board of Directors of the Company approved an increase by $1,000 in the compensation paid to the independent directors in recognition of the ongoing increase in the level of activities of the Company, resulting in increased time spent by the directors in calls and meetings outside of regularly scheduled board meetings. A description of the additional director compensation is filed herewith as Exhibit 10.4 and is incorporated herein by reference.
| Section 9 | Financial Statements and Exhibits |
| Item 9.01 | Financial Statements and Exhibits |
| (d) | Exhibits. |
| Exhibit 10.1 | May 25, 2012 Letter amending Engagement letter dated December 28, 2011 between the Company and Insero & Company CPAs, P.C. |
| Exhibit 10.2 | Summary of Management Incentive Plan for Fiscal 2012 |
| Exhibit 10.3 | Summary of Long Term Incentive Plan for Fiscal 2012 |
| Exhibit 10.4 | Summary of Supplemental Compensation for Independent Directors |
Neither the filing or furnishing of any exhibit to this report nor the inclusion in such exhibit of a reference to the Company’s Internet address shall, under any circumstances, be deemed to incorporate the information available at such address into this report. The information available at the Company’s Internet address is not part of this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| IEC Electronics Corp. | |||
| (Registrant) | |||
| Date: May 30, 2012 | By: | /s/ W. Barry Gilbert | |
| W. Barry Gilbert | |||
| Chief Executive Officer |
EXHIBIT INDEX
| Exhibit 10.1 | May 25, 2012 Letter amending Engagement letter dated December 28, 2011 between the Company and Insero & Company CPAs, P.C. |
| Exhibit 10.2 | Summary of Management Incentive Plan for Fiscal 2012 |
| Exhibit 10.3 | Summary of Long Term Incentive Plan for Fiscal 2012 |
| Exhibit 10.4 | Summary of Supplemental Compensation for Independent Directors |
Exhibit 10.1
May 25, 2012
Mr. Barry Gilbert
Chief Executive Officer
IEC Electronics Corp.
105 Norton St.
P. O. Box 271
Newark, NY 14513-0271
Dear Barry:
Please reference our letter of December 28, 2011 (the “Agreement”) related to Insero & Company CPAs, P.C. (the “Firm”) agreement to provide Outsource Accounting Services to IEC Electronics Corp (“IEC”, or the “Company”).
We have mutually agreed that (i) the Firm will continue to make Vincent A. Leo available to provide CFO services to the Company under the revised title, “Chief Financial Officer”, and (ii) the first paragraph of the section of the Agreement titled, “Fee arrangements” shall be modified to read:
For the services described above, we will charge a fixed fee of $25,000 per month. In the event other members of our team are engaged in the delivery of Services, we will discuss with you in advance the impact on our fees.
All of the other terms and conditions of the Agreement remain unchanged and in full force and effect.
Please feel free to contact me directly should you have any questions, and if the above terms are acceptable to you, please execute and return a copy of this letter confirming your agreement to the same.
Very truly yours,
/s/ Nancy E. Catarisano
Nancy E. Catarisano, CPA
Partner
Insero & Company CPAs, P.C
| Accepted and approved for: | ||
| IEC ELECTRONICS CORP. | ||
| By: | /s/ W. Barry Gilbert | |
| W. Barry Gilbert Chairman and Chief Executive Officer | ||
| Dated: | May 25, 2012 | |
Exhibit 10.2
IEC Electronics Corp.
Summary of 2012 Management Incentive Plan (“2012 MIP”)
The 2012 MIP is a cash incentive plan which links awards to performance results and is designed to provide cash incentive awards (“Awards”) to the executive officers (the “Participants”) of the Company: the Chief Executive Officer (the “CEO”), the President, and the Executive Vice President of Operations (“EVP”). The Company’s CFO is not eligible for Awards under the 2012 MIP. The 2012 MIP was finalized by the Compensation Committee on May 23, 2012.
A precondition for payment of all Awards is achievement of a threshold minimum level of company-wide Net Income Before Taxes and Incentives (“Plan Threshold”). For purposes of the MIP, non-operating events such as acquisition escrow clawbacks are excluded from calculation of Net Income. The Plan Threshold for fiscal 2012 is $9,000,000.
If the Plan Threshold is met, each Participant is eligible to receive an Award, if any, determined on the basis of the degree of achievement of certain specified corporate level fiscal year performance objectives (“Performance Goals”). For fiscal 2012, Performance Goals based upon the following measurements were established:
(i) Net Income Before Taxes and Incentives (applicable to all Participants based on company-wide results),
(ii) Sales (for the CEO based on company-wide results, and for the President and EVP, based upon respective divisional results), and
(iii) Cash Flow from Operations (applicable only to the CEO based on company-wide results).
The Compensation Committee has assigned a weighting factor, varying from 25% to 50%, to each Performance Goal for each Participant, with the total of the weighting factors for each Participant being 100%.
In addition to the Plan Threshold, the Compensation Committee has established:
(i) minimum plan entry performance levels for each Performance Goal for each Participant (“Performance Goal 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, and
(ii) a target goal (the “Target”) for each Performance Goal for each Participant based on the Company budget.
If all Performance Goals are achieved by each respective Participant at the Target level, Awards will be earned by that Participant equal to the following percentages of base salary: (i) for the CEO - 60%, (ii) for the President – 55%, and (iii) for the EVP – 55%. If, with respect to any Participant Performance Goal, less than the applicable Target, but at least the Performance Goal Minimum, is achieved, a payment less than the Target Award will be paid to the applicable Participant, pro rated between a payment of 10% of base salary applicable to achievement at exactly all Performance Goal Minimums and such Participant’s potential Target Award. If the Target for a Participant Performance Goal is surpassed, the Target Award will increase pro rata up to a cap of 200% of the Target level Award. No Award will be made with respect to a Performance Goal if the applicable Performance Goal Minimum is not achieved.
After the end of the fiscal year, the Compensation Committee will determine the extent to which the Performance Goals have been achieved by each respective Participant and will calculate the amount of the Award to be paid to each (the “Calculated Award”). However, (i) based on his evaluation of the President’s or EVP’s performance, the CEO may recommend that the Calculated Award for that Participant be modified by plus or minus up to 25%, and (ii) the Compensation Committee may recommend that the Calculated Award for the CEO be modified by plus or minus up to 25%. All modifications to a Calculated Award for any Participant must be approved by the Compensation Committee. Additionally, any modification to the Calculated Award for the CEO must be approved by the independent members of the Board of Directors. Use of the modification factor is not expected to be an annual event, but is to be used sparingly, when the actual results achieved, whether positive or negative, are not appropriately reflected in the Calculated Award.
The Compensation Committee reserves the right in its discretion to modify categories or goals. Among others, the Performance Goals set forth in the 2012 MIP are based upon the organic growth of the Company and do not reflect the impact of any acquisitions. The Compensation Committee will separately review the impact of acquisitions, if any.
Payment of any Award to a Participant will be made within fifteen (15) days after receipt by the Company of the audited financial statements for fiscal 2012. In order to receive an Award, a Participant must be an employee of the Company on the date such Award is to be paid.
Exhibit 10.3
IEC Electronics Corp.
Summary of 2012 Long-Term Incentive Plan
The purpose of the Company’s Long-Term Incentive Plan (“LTIP”) is to motivate the Company’s executive officers (in 2012 not including the CFO) and certain designated key employees (collectively, the “Participants”) to enhance the long-term value of the Company by aligning their interests with those of the stockholders. The LTIP is also designed to help attract and retain talented personnel with outstanding abilities and skills.
The LTIP provides for awards of restricted stock (“Awards”) to be made under the Company’s 2010 Omnibus Incentive Compensation Plan (“2010 Plan”), to enable and encourage the 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 LTIP for fiscal 2012 was approved by the Compensation Committee at its meeting on May 23, 2012.
The LTIP measures Company performance over a one-year fiscal period and the Award is paid out at the end of the fiscal period based on the attainment of annual performance goals (“Performance Goals”), measured company-wide, pre-established by the Compensation Committee. The Performance Goals established for fiscal 2012 are based on two metrics which the Compensation Committee believes are key to the Company’s long-term financial success:
(i) Net Income Before Tax and
(ii) Return on Sales.
For purposes of the LTIP, non-operating events such as acquisition escrow clawbacks are excluded from calculation of Net Income. Each Performance Goal is weighted 50%.
The Compensation Committee also has established:
(i) minimum plan entry performance levels for each Performance Goal (“Performance Goal 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, and
(ii) a target goal (the “Target”) for each Performance Goal based on the Company budget.
If both Performance Goals are achieved at the Target level, Awards will be earned by the Participants with a value equal to the following percentages of base salary: (i) for the CEO – 60%, (ii) for the President – 55%, (iii) for the EVP – 55% and (iv) for other Participants – 15-20%. The Compensation Committee will determine appropriate treatment for any newly hired permanent CFO. If less than the applicable Target, but at least the Performance Goal Minimum, for any Performance Goal is achieved, the Award will be pro rated, using a calculation base of 50% of Target Award for achievement at exactly the Performance Goal Minimum level. If the Target for a Performance Goal is surpassed, the Target Award will increase pro rata up to a cap of 200% of the Target level Award. No Award will be made with respect to a Performance Goal if the applicable Performance Goal Minimum is not achieved.
The equivalent dollar value of each Award, as calculated based on the applicable percentage of base salary, is the “Calculated Value”. Each Award will be number of shares of restricted stock equal to the Calculated Award divided by the average closing price of the Company’s common stock on the NYSE/Amex for the 90 days prior to October 1, 2012.
After the end of the fiscal year, the Compensation Committee will determine the extent to which the Performance Goals have been achieved and approve the amount of the Equity Award to be paid to each Participant. However, (i) based on his evaluation of a Participant’s performance, the CEO may recommend that the Calculated Value for that Participant be modified by plus or minus up to 25%, and (ii) the Compensation 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 Compensation Committee. Additionally, any modification to the Calculated Value for the CEO must be approved by the independent members of the Board of Directors. Use of the modification factor is not expected to be an annual event, but is to be used sparingly, when the actual results achieved, whether positive or negative, are not appropriately reflected in the Calculated Award.
All Awards shall be evidenced by an Award Agreement in the manner set forth in 2010 Plan. Each Award will be subject to a five-year period of restriction, during which period the restricted stock may not be sold or otherwise transferred. As to one half (1/2) of the restricted shares, the restrictions will lapse and the shares will vest 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 will lapse and the shares will vest on the date five (5) years after the date the Award is granted. If a Participant’s 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 will be deemed forfeited by the Participant and will be returned to or cancelled by the Company. The Award Agreements may contain such other terms and conditions deemed appropriate by the Compensation Committee. Such provisions need not be uniform among all grants of Awards among all Participants. The Compensation Committee may, at its discretion, authorize the Company to pay or reimburse a Participant the amount of any income taxes the Participant incurs with the Award.
Awards earned as provided above will be made within fifteen (15) days after receipt by the Company of the audited financial statements for fiscal 2012. In order to receive an Equity Award, a Participant must be an employee of the Company on the date such Equity Award is granted. For purposes of the LTIP, the grant date is the date on which the Compensation Committee approves the Equity Awards for all Participants except the Chief Executive Officer, for whom the grant date will be the date on which the Board approves the Equity Award.
The Compensation Committee reserves the right in its discretion to modify categories or goals. Among others, the Performance Goals set forth in the 2012 LTIP are based upon the organic growth of the Company and do not reflect the impact of any acquisitions. The Compensation Committee will separately review the impact of acquisitions, if any.
Exhibit 10.4
Summary of Supplemental Compensation for Independent Directors
Each independent director will receive a supplemental $1,000 payment, payable at the end of the fourth quarter of each fiscal year.