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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Integrated Electrical Services, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER.
SEC 1913 (11-01)
(INTEGRATED ELECTRICAL SERVICES LOGO)
December 12, 2003
To Our Stockholders:
On behalf of the Board of Directors, I cordially invite all stockholders to
attend the Annual Meeting of Integrated Electrical Services, Inc. to be held on
Thursday, January 22, 2004, at 10:30 a.m. at the St. Regis Hotel, 1919 Briar
Oaks Lane, Houston, TX 77027. Proxy Materials, which include a Notice of the
Meeting, Proxy Statement and proxy card, are enclosed with this letter. The
Company's 2003 Annual Report, which is not a part of the proxy materials, is
also enclosed and provides additional information regarding the financial
results of the Company for its fiscal year ended September 30, 2003.
We hope that you will be able to attend the Annual Meeting. Your vote is
important. Whether you plan to attend or not, please execute and return the
proxy card in the enclosed envelope so that your shares will be represented. If
you are able to attend the meeting in person, you may revoke your proxy and vote
your shares in person. If your shares are not registered in your own name and
you would like to attend the meeting, please ask the broker, trust, bank or
other nominee that holds the shares to provide you with evidence of your share
ownership. We look forward to seeing you at the meeting.
Sincerely,
/S/ HERBERT R. ALLEN
Herbert R. Allen
President and Chief Executive Officer
INTEGRATED ELECTRICAL SERVICES, INC.
1800 WEST LOOP SOUTH, SUITE 500
HOUSTON, TEXAS 77027
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 22, 2004
TO THE STOCKHOLDERS OF INTEGRATED ELECTRICAL SERVICES, INC.,
Notice is hereby given that the Annual Meeting of the Stockholders of
Integrated Electrical Services, Inc., a Delaware corporation, will be held at
the St. Regis Hotel, 1919 Briar Oaks Lane, Houston, TX 77027, on Thursday,
January 22, 2004, at 10:30 a.m. Central Time, for the following purposes:
1. To elect three Class III directors to the Company's board to serve
until the annual stockholders' meeting held in 2007 or until their
successors have been elected and qualified.
2. To approve the Company's employee stock purchase plan, as amended
and restated, including the authorization for the issuance of an additional
1,000,000 shares of the Company's common stock to be issued pursuant
thereto.
3. To ratify the appointment of Ernst & Young LLP, independent
auditors, as the Company's auditors for the fiscal year 2004.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The holders of record of the Company's Common Stock and of the Company's
Restricted Voting Common Stock at the close of business on November 26, 2003 are
entitled to notice of, and to vote at, the meeting with respect to all
proposals, except that Restricted Voting Common Stock shall not be entitled to
vote on the proposal for the election of directors. We urge you to sign and date
the enclosed proxy card and return it promptly by mail in the enclosed envelope,
whether or not you plan to attend the meeting in person. No postage is required
if mailed in the United States. If you do attend the meeting in person, you may
withdraw your proxy and vote personally on all matters brought before the
meeting.
/s/ MARK A. OLDER
Mark A. Older
Secretary
Houston, Texas
December 12, 2003
INTEGRATED ELECTRICAL SERVICES, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
WHEN AND WHERE IS THE 2004 ANNUAL MEETING OF STOCKHOLDERS BEING HELD?
The 2004 Annual Meeting of Stockholders (the "Annual Meeting") will be held
on Thursday, January 22, 2004. The Annual Meeting will be held at 10:30 a.m.
Central Time, at the St. Regis Hotel, 1919 Briar Oaks Lane, Houston, TX 77027.
WHAT DATE WILL THE PROXY STATEMENT FIRST BE SENT TO THE STOCKHOLDERS?
The approximate date on which this Proxy Statement and the accompanying
materials were first sent or given to stockholders was December 12, 2003.
WHO IS SOLICITING MY VOTE?
The accompanying proxy is solicited by the Board of Directors of Integrated
Electrical Services, Inc. (the "Company") for use at the 2004 Annual Meeting of
Stockholders and any adjournments thereof.
HOW ARE VOTES BEING SOLICITED?
In addition to solicitation of proxies by mail, certain directors,
officers, representatives and employees of the Company may solicit proxies by
telephone and personal interview. Such individuals will not receive additional
compensation from the Company for solicitation of proxies, but may be reimbursed
for reasonable out-of-pocket expenses in connection with such solicitation.
Banks, brokers and other custodians, nominees and fiduciaries also will be
reimbursed by the Company for their reasonable expenses for sending proxy
solicitation materials to the beneficial owners of common stock of the Company.
WHO IS PAYING THE SOLICITATION COST?
The expense of preparing, printing and mailing proxy solicitation materials
will be borne by the Company.
HOW MANY VOTES DO I HAVE?
Each share of Common Stock is entitled to one vote upon each of the
matters to be voted on at the Annual Meeting. Each share of Restricted Voting
Common Stock is entitled to one-half of one vote upon each of the matters to be
voted on at the Annual Meeting, except for the election of directors, upon which
each share of Restricted Voting Common Stock has no vote. The holders of
Restricted Voting Common Stock are entitled to elect one member of the board of
directors, and at the 2003 Annual Meeting elected C. Byron Snyder to serve as a
Class II director until the 2006 Annual Meeting or until his successor is
elected and qualified.
HOW DO I VOTE?
When a proxy is properly executed and returned, the shares it represents
will be voted at the meeting in accordance with the directions noted thereon; or
if no direction is indicated, it will be voted in favor of the proposals set
forth in the notice attached hereto.
CAN I CHANGE MY VOTE?
Any stockholder giving a proxy has the power to revoke it at any time
before it is voted (i) by notifying Mark A. Older, Secretary of the Company, in
writing of such revocation, (ii) by executing a subsequent proxy
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sent to Mr. Older, or (iii) by attending the Annual Meeting in person and voting
in person. Notices to Mr. Older referenced in (i) and (ii) should be directed to
Mark A. Older, Secretary, Integrated Electrical Services, Inc., 1800 West Loop
South, Suite 500, Houston, Texas 77027. Stockholders who submit proxies and
attend the meeting to vote in person are requested to notify Mr. Older at the
Annual Meeting of their intention to vote in person at the Annual Meeting.
HOW ARE ABSTENTIONS AND BROKER NON-VOTES COUNTED?
Pursuant to the Company's bylaws, shares not voted on matters, including
abstentions and broker non-votes, will not be treated as votes cast with respect
to those matters, and therefore will not affect the outcome of any such matter.
HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
The presence, in person or by proxy, of at least a majority of the sum of
the outstanding shares of Common Stock and Restricted Voting Common Stock is
required for a quorum to ratify the appointment of the independent certified
public accountants, to approve the Company's employee stock purchase plan, as
amended and restated, and to transact such other business as may properly come
before the meeting. The presence, in person or by proxy, of at least a majority
of the outstanding shares of Common Stock is required for a quorum to elect
directors.
DOES THE COMPANY HAVE A WEBSITE?
The Company has a website, http://www.ies-co.com, which contains additional
information concerning the Company's corporate governance practices.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on November 26, 2003, the record date for the
determination of stockholders of the Company entitled to receive notice of, and
to vote at, the Annual Meeting or any adjournments thereof, the Company had
outstanding 35,663,098 shares of Common Stock and 2,605,709 shares of Restricted
Voting Common Stock.
The following table reflects the beneficial ownership of the Company's
Common Stock as of October 31, 2003, with respect to (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding shares
of the Company's Common Stock; (ii) the directors and nominees for director;
(iii) each named executive officer; and (iv) the Company's directors and
executive officers as a group.
NUMBER OF PERCENT
SHARES OWNED OF
NAME OF BENEFICIAL OWNER BENEFICIALLY CLASS(O)
------------------------ ------------ --------
Herbert R. Allen(a)......................................... 1,163,333 3.3%
Richard China(b)............................................ 217,691 *
C. Byron Snyder(c).......................................... 2,614,836 7.3
Ronald P. Badie(d).......................................... 6,443 *
Donald Paul Hodel(e)........................................ 41,967 *
Alan R. Sielbeck(e)......................................... 87,686 *
Donald C. Trauscht(f)....................................... 15,378 *
Britt Rice(g)............................................... 401,086 1.1
James D. Woods(h)........................................... 27,506 *
Danniel J. Petro(i)......................................... 496,792 1.4
William W. Reynolds(j)...................................... 262,783 *
Directors and officers as a group (14 persons)(k)........... 5,432,264 15.2
Dimensional Fund Advisors Inc.(l)........................... 2,792,600 7.8
Jeffrey L. Gendell(m)....................................... 2,084,500 5.8
State Street Research & Management Co.(n)................... 2,242,700 6.3
2
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* Indicates ownership of less than one percent of the outstanding shares of
Common Stock of the Company.
(a) Includes 200,000 shares of Common Stock owned by HRA Investment Group, LP
as to which Mr. Allen disclaims beneficial ownership and 259,333 shares of
Common Stock underlying options which are exercisable within 60 days.
(b) Includes 143,334 shares of Common Stock underlying options which are
exercisable within 60 days and 3,320 shares of Common Stock in the
Company's 401(k) Plan.
(c) The shares attributed to Mr. Snyder are as follows (i) 2,585,829 shares are
held in the 1996 Snyder Family Partnership (the "Partnership"), (ii) 699
shares are held in the 1998 Snyder Family Partnership Management Trust,
(iii) 9,599 shares are held by the Worth Byron Snyder Trust, and (iv) 9,582
shares are held by the Gregg Layton Snyder Trust. These shares attributed
to Mr. Snyder comprise all of the Company's outstanding Restricted Voting
Common Stock. Such shares may be converted to Common Stock in specific
circumstances. Mr. Snyder disclaims beneficial ownership as to 1,118,193 of
these shares which are attributable to the interests in the Partnership
held by Mr. Snyder's children. Includes 3,127 shares owned directly and
6,000 shares of Common Stock underlying options which are exercisable
within 60 days.
(d) Includes 6,000 shares of Common Stock underlying options which are
exercisable within 60 days.
(e) Includes 22,000 shares of Common Stock underlying options which are
exercisable within 60 days by each of Mr. Hodel and Mr. Sielbeck.
(f) Includes 9,000 shares of Common Stock underlying options which are
exercisable within 60 days.
(g) Includes 65,000 shares of Common Stock underlying options which are
exercisable within 60 days.
(h) Includes 12,000 shares of Common Stock underlying options which are
exercisable within 60 days.
(i) Includes 92,667 shares of Common Stock underlying options which are
exercisable within 60 days.
(j) Includes 243,002 shares of Common Stock underlying options which are
exercisable within 60 days.
(k) Includes 2,605,709 shares of Restricted Voting Common Stock described in
Note (c) above, 978,504 shares of Common Stock underlying options which are
exercisable within 60 days, and 4,529 shares of Common Stock held in the
Company's 401(k) Plan.
(l) Dimensional Fund Advisors Inc. ("Dimensional") is an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940 which
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940. Dimensional has sole voting and sole
dispositive power with respect to all of the shares, but disclaims
beneficial ownership. Dimensional's mailing address is 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401. This information is based solely on the
13G/A filed by Dimensional Fund Advisors on February 12, 2003.
(m) Mr. Gendell has shared voting and dispositive power in (i) Tontine
Partners, L.P., 953,920 shares, (ii) Tontine Power Partners, L.P., 25,000
shares, (iii) Tontine Management, L.L.C., 978,920 shares, (iv) Tontine
Associates, L.L.C., 20,000 shares, and (v) Tontine Overseas Associates,
L.L.C., 970,280 shares. Mr. Gendell holds 115,300 shares with sole voting
and sole dispositive power. Mr. Gendell's address is 237 Park Avenue, 9th
Floor, New York, NY 10017. This information is based solely on the Schedule
13D filed by Jeffrey L. Gendell on January 7, 2002.
(n) State Street Research and Management Company ("State Street") is an
investment advisor registered under the Investment Advisors Act of 1940.
State Street has sole voting and sole dispositive power with respect to all
of the shares, but disclaims beneficial ownership. All of the shares are
owned by clients of State Street, whose address is One Financial Center,
30th Floor, Boston, MA 02111. This information is based solely on the
Schedule 13G filed by State Street on February 14, 2003.
(o) Restricted Voting Common Stock is treated as options which are exercisable
within 60 days in the percent of class calculation.
3
ELECTION OF DIRECTORS
GENERAL INFORMATION
The Company's Amended and Restated Certificate of Incorporation, as
amended, and bylaws provide that the number of directors on the Board shall be
fixed from time to time by the Board of Directors but shall not be less than one
nor more than fifteen persons. The Certificate of Incorporation divides the
Board of Directors into three classes, designated as Class I, Class II and Class
III. Each class of directors is to be elected to serve a three-year term and is
to consist, so far as possible, of one-third of the number of directors required
at the time to constitute a full Board. If the number of directors is not evenly
divided into thirds, the Board of Directors shall determine which class or
classes shall have one extra director. The Board of Directors has set the number
of directors at eight, three in Class I, two in Class II and three in Class III,
whose terms of office expire with the 2005, 2006 and 2004 annual meetings,
respectively, and until their successors are elected and qualified. The holders
of the Restricted Voting Common Stock are entitled to elect one director, which
they did at the 2003 Annual Meeting. They therefore are not entitled to vote on
directors at this meeting.
The term of office of each of the current Class III Directors expires at
the time of the Annual Meeting or as soon thereafter as their successors are
elected and qualified. Messrs. Hodel, Trauscht and Woods, the current Class III
Directors, have each been nominated to serve an additional three-year term as a
Class III Director, to be elected by the holders of the Common Stock. Each of
Messrs. Hodel, Trauscht and Woods has consented to be named in this Proxy
Statement and to serve as a director if elected.
It is the intention of the holders of Common Stock named in the
accompanying proxy card to vote "FOR" the election of the nominees named below,
unless a stockholder has directed otherwise or withheld such authority. The
affirmative vote of holders of a plurality of the shares of Common Stock present
in person or represented by proxy at the Annual Meeting and entitled to vote is
required to elect each director nominee.
If, at the time of or prior to the Annual Meeting, any of the nominees
should be unable or decline to serve, the discretionary authority provided in
the proxy may be used to vote for a substitute or substitutes designated by the
Board of Directors. The Board of Directors has no reason to believe that any
substitute nominee or nominees will be required. No proxy will be voted for a
greater number of persons than the number of nominees named herein.
CLASS III DIRECTOR NOMINEES (TO SERVE UNTIL THE 2007 ANNUAL MEETING)
Each of the current Class III Directors, whose present term of office as a
director will expire at the Annual Meeting, has been nominated to serve an
additional three-year term. Certain information with respect to each of them is
as follows:
DONALD PAUL HODEL* DIRECTOR SINCE 1998
Mr. Hodel, 68, is President and CEO of Focus on the Family, a charitable
organization and a Managing Director of Summit Group International, Ltd. (and
related companies), an energy and natural resources consulting firm he founded
in 1989. Mr. Hodel served as Secretary of the Interior from 1985 to 1989 and
Secretary of Energy from 1982 to 1985. Mr. Hodel has served as director of both
publicly traded and privately held companies and is the recipient of the
Presidential Citizens Medal and honorary degrees from three universities. Mr.
Hodel serves on the boards of directors of: Salem Communications, Inc., a NASDAQ
listed company, which owns and operates radio stations; and the North American
Electric Reliability Council.
DONALD C. TRAUSCHT* DIRECTOR SINCE 2002
Mr. Trauscht, 70, has been the Chairman of BW Capital Corporation, a
private investment company, since January 1996. From 1967 to 1995, Mr. Trauscht
held various positions with Borg Warner Corporation, a diversified manufacturer
of automotive components, chemicals, financial services, industrial parts and
security services including Chairman and Chief Executive Officer. Mr. Trauscht
is a director of: ESCO Technologies Inc., a manufacturer of communications
systems, filtration products and test equipment; Global Motorsport
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Group Inc., a producer of motorcycle parts; OMI Corporation, a marine transport
company; and Bourns, Inc., a manufacturer of electronic components.
JAMES D. WOODS* DIRECTOR SINCE 2001
Mr. Woods, 72, is the retired Chairman and Chief Executive Officer of Baker
Hughes Incorporated, a provider of oilfield services. He was Chief Executive
Officer of Baker Hughes from April 1987 and Chairman from January 1989 until
January 1997. Mr. Woods is a director of: Varco International Inc., a
manufacturer of oilfield equipment; ESCO Technologies Inc.; OMI Corporation;
USEC Inc., a supplier of enriched uranium; and Foster Wheeler Inc., a provider
of engineering services.
DIRECTORS CONTINUING IN OFFICE
CLASS I
The Class I Directors, whose present terms of office as directors will
expire at the 2005 Annual Meeting, and certain additional information with
respect to each of them, are as follows:
RONALD P. BADIE* DIRECTOR SINCE 2003
Mr. Badie, 60, is the retired Vice Chairman of Deutsche Bank Alex Brown
(now Deutsche Bank Securities), Deutsche Bank's investment banking subsidiary.
From 1966 until his retirement in March 2002, Mr. Badie held a variety of
management positions with Deutsche Bank and its predecessor, Bankers Trust
Company. Mr. Badie has served on the advisory boards of Merrill Lynch Capital
Appreciation Fund, Stonington Capital Appreciation Fund, and Green Equity
Capital Fund. He also was a member of the advisory board of The Price Center for
Entrepreneurial Studies at the Anderson School of Management at U.C.L.A.
RICHARD CHINA DIRECTOR SINCE 2001
Mr. China, 45, has been the Chief Operating Officer of the Company since
October 2001. From May 2001 to October 2001, Mr. China was the Chief Executive
Officer of IES Communications, Inc., one of the Company's subsidiaries. From
August 2000 to May 2001, Mr. China was a Regional Operating Officer for the
Company. Prior to that time, Mr. China was President of Primo Electric Company,
one of the Company's subsidiaries.
ALAN R. SIELBECK* DIRECTOR SINCE 1998
Mr. Sielbeck, 50, currently serves as Chief Executive Officer of
LogisticsXperts, LLC, an inventory management and quality control company
serving the electronics manufacturing industry. He served as Chairman of the
Board and Chief Executive Officer of Service Experts, Inc., a publicly traded
heating, ventilation and air conditioning service company, since its inception
in March 1996 until January 2000. Mr. Sielbeck has served as Chairman of the
Board and President of AC Service and Installation Co. Inc. and Donelson Air
Conditioning Company, Inc. since 1990 and 1991, respectively. From 1985 to 1990,
Mr. Sielbeck served as President of RC Mathews Contractor, Inc., a commercial
building general contractor and Chief Financial Officer of RCM Interests, Inc.,
a commercial real estate development company. Mr. Sielbeck serves as a director
for Midsouth Wire Products and Nashville Wire.
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* Denotes independent director
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CLASS II
The Class II Directors, whose present terms of office as directors will
expire at the 2006 Annual Meeting, and certain additional information with
respect to each of them, are as follows:
HERBERT R. ALLEN DIRECTOR SINCE 2001
Mr. Allen, 63, has been Chief Executive Officer of the Company since
October 2001. From May 2001 to October 2001, Mr. Allen was Chief Operating
Officer of the Company. From January 2000 to May 2001, Mr. Allen was Senior Vice
President -- East Area of the Company. From June 1998 to January 2000, Mr. Allen
was a Regional Operating Officer of the Company. Prior to that time, Mr. Allen
was the President of H.R. Allen, Inc., one of the Company's subsidiaries.
C. BYRON SNYDER** DIRECTOR SINCE 1997
Mr. Snyder, 55, has been Chairman of the Board of Directors of the Company
since its inception. Mr. Snyder was a founding member and Senior Managing
Director of Main Street Equity Ventures II, LP, a Houston-based private equity
investment firm. Mr. Snyder was the President and owner of Sterling City
Capital, L.L.C., a private investment company. Mr. Snyder was owner and
President of Relco Refrigeration Co., a distributor of refrigerator equipment,
from 1992 to 1998. Prior to 1992, Mr. Snyder was the owner and Chief Executive
Officer of Southwestern Graphics International, Inc., a diversified holding
company which owned Brandt & Lawson Printing Co., a Houston-based general
printing business, and Acco Waste Paper Company, an independent recycling
business. Brandt & Lawson Printing Co. was sold to Hart Graphics in 1989, and
Acco Waste Paper Company was sold to Browning-Ferris Industries in 1990.
After reviewing all relevant facts and circumstances, the Board of
Directors has affirmatively determined that Messrs. Hodel, Trauscht, Woods,
Badie and Sielbeck are independent since they have no relationship with the
Company (either directly or as a partner, shareholder or officer of an
organization that has a relationship with the Company), other than as directors
of the Company. The review was undertaken on an individual director-by-director
basis and did not involve a pre-set formula or minimum standard of materiality.
The Board of Directors also has affirmatively determined that while Mr. Snyder
is not independent due to his extensive involvement in the formation of the
Company, he is a non-management director since he has never been employed by the
Company.
EXECUTIVE OFFICERS
Information on the executive officers is incorporated by reference from the
section titled "Item 4A. Executive Officers" in the Company's Annual Report on
Form 10-K for the year ended September 30, 2003.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During fiscal year 2003, the Board of Directors held 5 meetings of the full
Board, and each member of the Board of Directors attended at least 75% of the
aggregate number of meetings of the full Board and meetings of committees of the
Board on which he served.
The Board of Directors holds an executive session at all regularly
scheduled meetings without management directors present. Mr. Snyder, a
non-management director, routinely presides at these sessions. However, in the
future, at least once annually, the Board intends to meet in executive session
with only independent directors present. Interested parties may make any
concerns known to non-management directors by contacting the Company's
EthicsLine at 1-800-347-9550.
---------------
** Denotes non-management, non-independent director.
All ages are as of December 1, 2003.
6
Until March 31, 2003, directors of the Company who were not officers
received an annual retainer of $12,000, paid quarterly, one-half in cash and
one-half in shares of Company Common Stock. Committee chairmen received an
additional annual retainer of $3000, similarly divided between cash and stock.
Effective April 1, 2003, directors of the Company who are not officers or
employees of the Company receive an annual retainer of $24,000, paid quarterly,
one-half in cash and one-half in shares of Company Common Stock. Committee
chairmen receive an additional annual retainer of $5,000, similarly divided
between cash and stock. Non-employee directors are also paid a meeting fee of
$1,250 for each in person regular or special Board or committee meeting, and
$500 for telephonic meetings. In addition, each non-employee director of the
Company receives a grant of an option to purchase 3,000 shares of Company Common
Stock upon initial election as a director and an option to purchase 3,000
additional shares on each September 30 on which such director remains a
non-employee director. The Company paid aggregate fees of $225,827 to
non-employee directors in connection with the Board of Directors' and committee
meetings in fiscal year 2003. Employee directors receive no additional
compensation for attending Board of Directors or committee meetings.
The Company has adopted a code of business conduct and ethics which has
been memorialized as part of the Company's Legal Compliance and Corporate Policy
Manual and can be found on the Company's website at http://www.ies-co.com, under
the Corporate Governance section. The manual is also available in print to any
shareholder who requests it by contacting Mark A. Older, Counsel and Corporate
Secretary, Integrated Electrical Services, Inc., 1800 West Loop South, Suite
500, Houston, TX 77027.
CORPORATE GOVERNANCE GUIDELINES
The Company's management and Board of Directors are committed to conducting
business consistent with good corporate governance practices. To this end, the
Board has established a set of Corporate Governance Guidelines which reflect its
view in how to help achieve this goal. These guidelines, which may be amended
and refined from time to time, are outlined below and may also be found on the
Company's website at http://www.ies-co.com.
CORPORATE GOVERNANCE GUIDELINES
DIRECTORS
CORE COMPETENCIES OF THE BOARD
In order to adequately perform the general corporate oversight
responsibilities assumed by the Board, the Board as a whole should possess the
following competencies:
ACCOUNTING & FINANCE -- The Board should have one or more members who
are experienced in accounting and finance matters.
MANAGEMENT -- In order to oversee the Company's management team, the
board should have one or more directors who have experience as the CEO of a
large publicly traded corporation.
INDUSTRY KNOWLEDGE -- While the theory of management is important, it
is essential that the Board have one or more members with extensive hands
on practical relevant industry specific knowledge.
LONG-RANGE STRATEGY -- In addition to monitoring the Company's
performance in the present, the Board should have one or more members with
the skills to look to the future and provide direction for stability and
growth.
INDEPENDENCE OF THE BOARD
A majority of the Board shall be independent of management. An independent
director must meet the standards imposed by the SEC and the NYSE which
essentially demand the following:
MATERIAL RELATIONSHIPS -- The Board must affirmatively determine that
the director has no material relationship with the Company (either directly
or as a partner, shareholder, or officer of an organization that has a
relationship with the Company) other than such director's capacity as a
member of the Board.
7
FORMER EMPLOYMENT BY THE COMPANY -- No director who is an employee, or
whose immediate family member is an executive officer of the Company is
considered independent until three years after the end of such employment
relationship.
RECEIPT OF COMPENSATION -- No director shall be considered independent
who receives, or whose immediate family member receives more than $100,000
per year in direct compensation from the Company, other than directors' and
committee fees and pension or other forms of deferred compensation for
prior service until three years after he or she receives more than $100,000
per year of such compensation.
FORMER EMPLOYMENT BY THE COMPANY'S INDEPENDENT AUDITORS (PAST OR
PRESENT) -- No director who has been an affiliate with or employed by a
past or present independent auditor of the Company shall be deemed
independent until three years after the relationship has ended.
INTERLOCKING RELATIONSHIPS -- No director shall be considered
independent if such director is, or in the past three years has been
employed by any company for which an officer of the Company serves or has
served as a member of its compensation committee during the time that such
director is or was so employed.
FAMILY MEMBERS -- Directors with certain family members that fall into
the above disqualifying conditions may be prohibited from being independent
directors until the time period described above has elapsed as to those
family members.
OUTSIDE DIRECTORSHIPS -- The CEO and the senior management of the
Company may not serve on more than three outside boards of public
companies; non-employee directors may not serve on more than six.
TENURE AND RETIREMENT -- While mandatory retirement and/or term limits
may have their place in government or physically demanding occupations, it
is believed that their application to board service is arbitrary,
discriminatory, and could act to disqualify otherwise fully productive and
valuable members. The Company therefore does not have established formal
rules that limit the number of terms a director can serve or set an age at
which a member must retire.
BOARD DUTIES AND RESPONSIBILITIES
INFORMATION DISSEMINATION -- The Board is responsible for the
essential oversight of the Company and acts as the representative of the
stockholders. The board must be given sufficient information in order to
fulfill these governance responsibilities, not only in advance of Board
meetings but also periodically between meetings. In addition to regularly
scheduled meetings which members of the Board are expected to attend,
telephone updates are held monthly between meetings to insure potential
matters of concern are addressed on a timely basis.
ACCESS TO MANAGEMENT AND ADVISORS -- Board members have full access to
senior management and are encouraged to contact them at any time. In
addition, the Board is authorized to retain and compensate outside advisors
as it deems necessary or appropriate.
DIRECTOR COMPENSATION -- The compensation committee of the Board is
charged with the review of Board compensation, and upon its recommendation,
the full Board sets the level of retainers as well as meeting fees.
Compensation shall be made in the form of both cash and Company equity with
the latter being emphasized. In determining the appropriate level of
compensation the committee and the Board shall review the practice of peer
companies and general industry and tend toward the low to middle range of
fees paid to the group.
DIRECTOR ORIENTATION AND CONTINUING EDUCATION -- Members shall be
provided with detailed information concerning the Company's operations upon
their initial election or appointment to the Board. Attendance at
continuing education programs is encouraged and the Company at least
annually shall provide guest speakers to address topics of interest to the
Company or industry and members are provided the opportunity to tour works
in progress to become familiar with day-to-day operations.
8
ANNUAL PERFORMANCE EVALUATION -- The Board and each committee shall
annually conduct a performance evaluation to determine whether it and its
committees are functioning effectively. To ensure candid responses, the
completed evaluations shall be returned to the Company's independent
auditors who shall compile the results on a completely anonymous basis.
POSITIONS OF CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICERS -- Since inception, the Company has maintained a separation of the
roles of Chairman of the Board, a non-executive position and Chief
Executive Officer.
MANAGEMENT SUCCESSION -- The Board appoints a CEO, annually performs
an evaluation of his performance, with the results being communicated to
him. In order to insure a smooth transition, if and when the need arises,
the Board shall identify potential successors which by past experience and
overall competence could assume the position upon short notice.
COMMITTEES
The Board of Directors has established the Audit, Compensation,
Nominating/Governance, and Executive Committees to assist in the performance of
its functions of overseeing the management and affairs of the Company. The
Audit, Compensation and Nominating/Governance Committees are composed entirely
of independent directors under current New York Stock Exchange standards and
have the authority to retain and compensate counsel and experts.
AUDIT COMMITTEE
The Audit Committee, which met six times during fiscal year 2003, is
comprised of Messrs. Sielbeck (Chairman), Trauscht and Woods. Pursuant to its
written charter, a copy of which may be found on the Company's website, the
Audit Committee assists the Board of Directors in:
- fulfilling its responsibility to oversee management's implementation of
and the integrity of the financial statements of the Company;
- monitoring the qualifications, independence and performance of the
Company's internal and independent auditors;
- monitoring the compliance by the Company with legal and regulatory
requirements; and
- preparing the report that SEC rules require be included in the Company's
annual proxy statement.
In fulfilling these duties the Audit Committee generally:
- reviews the annual financial statements with management and the
independent auditor;
- recommends to the Board of Directors whether the Company's annual audited
financial statements and accompanying notes should be included in the
Company's Annual Report on Form 10-K;
- reviews with management and the independent auditor the effect of
regulatory and accounting initiatives as well as contingent liabilities
and off-balance sheet structures, if any, on the Company's financial
statements;
- reviews with management and the independent auditor the Company's
quarterly financial statements filed on Form 10-Q;
- discusses periodically with Company management the Company's major
financial risk exposure and steps implemented to monitor and control
same;
- reviews major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors
or management;
- has the sole authority to engage, oversee and evaluate the performance of
and, when the Audit Committee determines it to be appropriate, to
terminate the Company's independent auditors, to
9
approve all audit engagement fees and terms and to approve all
significant non-audit engagements, if any, with the independent auditors.
The independent auditors report directly to the Audit Committee;
- reviews the independence of the independent auditor, giving consideration
to the range of audit and non-audit services performed by the independent
auditor;
- reviews periodically (i) the experience, qualifications and performance
of the senior members of the Company's internal auditing team and (ii)
the internal audit activities, staffing and budget;
- reviews significant reports to management prepared in connection with
internal audit and management's responses;
- reviews with the independent auditor any problems or difficulties the
auditor may encounter and any management letter provided by the auditor
and the Company's response to that letter;
- advises the Board of Directors with respect to the Company's policies and
procedures regarding conflicts of interest and compliance with material
laws and regulations;
- reviews legal matters that may have a material impact on the financial
statements, the Company's compliance policies and any material reports or
inquiries received from regulators or government agencies; and
- establishes procedures (i) to handle complaints regarding the Company's
accounting practices, internal controls or auditing matters and (ii) to
permit confidential anonymous submission to the Audit Committee of
concerns by employees regarding accounting or auditing matters.
COMPENSATION COMMITTEE
The Compensation Committee, which met four times during fiscal year 2003,
is comprised of Messrs. Woods (Chairman), Hodel and Trauscht. Pursuant to its
written charter, a copy of which may be found on the Company's website, the
Compensation Committee assists the Board of Directors in:
- discharging its responsibilities relating to compensation of Company
executives, and
- producing an annual report on executive compensation for inclusion in the
Company's annual proxy statement.
In fulfilling these duties, the Compensation Committee generally:
- establishes the Company's compensation philosophy and ensures that the
compensation program is aligned with the Company's objectives consistent
with the interest of the Company's stockholders;
- reviews and approves new compensation plans;
- evaluates the performance of the Chief Executive Officer and determines
the compensation for the Chief Executive Officer;
- reviews salaries, salary increases and other compensation of executive
officers and evaluates the competitiveness of total compensation levels
for executives;
- receives recommendations regarding the selection of officers and key
employees for participation in incentive compensation plans and regarding
the establishment of performance goals and awards for those officers and
key employees who participate in such incentive plans;
- reviews and monitors benefits under all employee plans of the Company;
- makes recommendations to the Board of Directors with respect to the
management organization of the Company;
- reviews and approves incentive compensation and equity based plans; and
- evaluates, periodically, compensation paid to outside members of the
Board of Directors, including monitoring the competitiveness and
composition of director compensation.
10
NOMINATING/GOVERNANCE COMMITTEE
The Nominating/Governance Committee, which met three times during fiscal
year 2003, is comprised of Messrs. Trauscht (Chairman), Sielbeck and Woods.
Pursuant to its written charter, a copy of which may be found on the Company's
website, the Nominating/Governance Committee assists the Board of Directors in:
- establishing standards for Board of Directors and Nominating/Governance
Committee members and oversees the performance of the Board of Directors
and its members;
- recommends to the Board of Directors whether existing Board of Director
members should be nominated for new terms or replaced and whether more or
fewer members are appropriate;
- establishes criteria to select new directors and recommends to the Board
of Directors a process for orientation of new Board of Director or
committee members;
- identifies individuals qualified to become members of the Board of
Directors and recommends same to the Board of Directors as nominees to
fill any existing or expected vacancy;
- evaluates the Company's corporate governance procedures and recommends to
the Board of Directors changes that the Nominating/Governance deems
appropriate; and
- considers persons nominated as a director by any of our stockholders,
provided the nomination is made in accordance with our by-laws and
applicable law.
EXECUTIVE COMMITTEE
The Executive Committee, which did not meet during fiscal year 2003, is
comprised of Messrs. Allen, Snyder and Trauscht. Pursuant to its written charter
the Executive Committee is authorized to:
- act upon any urgent issues that arise between regularly scheduled
meetings of the Board of Directors.
The Executive Committee however, may not:
- approve, adopt or recommend to the stockholders any matter or action
expressly required by Delaware General Corporation Law to be submitted to
the stockholders for approval; or
- adopt, amend or repeal any bylaw or the Company.
REPORT OF THE AUDIT COMMITTEE
The information contained in this report shall not be deemed to be
"soliciting material" or "filed" or incorporated by reference in future filings
with the SEC, or subject to the liabilities of Section 18 of the Exchange Act,
except to the extent that the Company specifically incorporates it by reference
into a document filed under the Securities Act of 1933, as amended, or the
Exchange Act.
DESIGNATION OF THE AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors has designated Mr. Sielbeck as the "audit committee
financial expert" as that term is defined by the Securities and Exchange
Commission rules. In order to qualify as the audit committee financial expert,
one must have the following attributes:
- An understanding of financial statements and generally accepted
accounting principles (GAAP);
- The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
- Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by the Company's
financial statements, or experience actively supervising one or more
persons engaged in such activities;
- An understanding of internal controls and procedures for financial
reporting and
11
- An understanding of audit committee functions.
Mr. Sielbeck acquired the first four attributes as a result of serving as
Chairman of the Board, Chief Executive Officer, and President of several
construction industry companies. In addition, he has served as a member of the
Company's Audit Committee since its initial public offering.
ESTABLISHMENT OF POLICIES AND PROCEDURES
The Audit Committee has overseen the establishment of a number of policies
and procedures which are intended to facilitate the reporting and disclosure of
improper activities as well as clearly defined the use of the Company's
independent auditors for non-audit purposes.
- The Company maintains the EthicsLine which allows employees to report, on
an anonymous basis, occurrences of financial abuse, fraud, theft, or
discrimination. Complaints are forwarded to the Vice President, Law who
in turn informs the Audit Committee.
- The Company has established a Code of Ethics for Financial Executives, a
copy of which may be found in Appendix A as well as the Company's
website, at http://www.ies-co.com. The Code applies to the Chief
Executive Officer, the Chief Financial Officer, and the Chief Accounting
Officer and reflects the Company's commitment to the highest standards of
personal and professional integrity.
- The Audit Committee has established a policy of requiring pre-approval by
the Committee of all but de minimus use of the independent auditors for
non-audit services with the exception of the following:
- The Committee has pre-approved the utilization of the independent
auditors for services associated with the SEC registration statements,
periodic reports and other documents filed with the SEC or other
documents issued in the connection with securities offerings (e.g.
comfort letters, consents), and assistance in responding to SEC comment
letters so long as such fees do not exceed $20,000.
- Consultation by the Company's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or standard
setting bodies. Under SEC rules, some consultations may be "audit
related" services rather than "audit services" or vice versa and such
pre-approval is limited to $10,000 under each category.
- Internal control reviews and assistance with internal control reporting
requirements so long as such fees do not exceed $65,000, and
- The Committee must be promptly informed of any of the above uses of the
independent auditor.
The Committee has also pre-approved a statutory audit by the independent auditor
of a Company subsidiary for a fee not to exceed $21,200.
REVIEW OF OUR COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2003
The Audit Committee has reviewed and discussed our audited financial
statements for the fiscal year ended September 30, 2003 with our management. The
Audit Committee has discussed with Ernst & Young LLP, our independent auditors,
the matters required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees).
The Audit Committee has received the written disclosures and the letter
from the independent auditors required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees) and the Audit Committee
has discussed with the independent auditors the auditors' independence from
management and the Company.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2003 for filing with the Securities and Exchange Commission. The
12
Audit Committee has also named Ernst & Young LLP to serve as the Company's
independent auditors for Fiscal year 2004, subject to stockholder ratification.
Alan R. Sielbeck (Chairman)
Donald C. Trauscht
James D. Woods
AUDIT FEES
Ernst & Young LLP and its predecessor, Arthur Andersen LLP, billed the
Company fees as set forth in the table below for (i) the audit of the Company's
2002 and 2003 annual financial statements, reviews of quarterly financial
statements and services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements, (ii) assurance
and other services reasonably related to the audit or review of the Company's
2002 and 2003 financial statements, (iii) services related to tax compliance,
tax advice and tax planning for fiscal years 2002 and 2003, and (iv) all other
products and services it provided during fiscal years 2002 and 2003.
FISCAL YEAR 2002 FISCAL YEAR 2003
---------------- ----------------
AUDIT
Ernst & Young.......................................... $336,000 $369,341
Arthur Andersen........................................ 48,500 0
AUDIT RELATED(1)
Ernst & Young.......................................... 0 0
Arthur Andersen........................................ 27,000 0
TAX FEES(2)
Ernst & Young.......................................... 2,700 0
Arthur Andersen........................................ 319,015 0
ALL OTHER FEES(3)
Ernst & Young.......................................... 0 0
Arthur Andersen........................................ 30,000 0
---------------
(1) Fees related to accounting research performed during the course of the
audit.
(2) Fees paid to Ernst & Young related to tax advice and preparation of certain
filings performed prior to the engagement of Ernst & Young as independent
auditors. Fees paid to Arthur Andersen related to tax compliance and
planning services.
(3) Fees related to valuation services performed in connection with the adoption
of SFAS 142.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is pleased to present the 2003 report on
executive compensation. This report of the Compensation Committee documents the
components of the Company's executive officer compensation program and describes
the basis on which the compensation program determinations were made by the
Compensation Committee with respect to the executive officers of the Company.
The Compensation Committee meets regularly and is comprised of Messrs. Woods
(Chairman), Hodel and Trauscht. The duty of the Compensation Committee is to
establish the compensation of the Chief Executive Officer, review compensation
levels of senior members of management, and administer the Company's various
incentive plans including its annual bonus plan and its stock option plan.
13
EXECUTIVE COMPENSATION PROGRAM PHILOSOPHY
The Company's compensation philosophy and program objectives are directed
by two primary guiding principles. First, the program is intended to provide
levels of compensation sufficient to attract, motivate and retain talented
executives. Second, the program is intended to create an alignment of interests
between the Company's executives and stockholders such that a portion of each
executive's compensation is directly linked to maximizing stockholder value.
In support of this philosophy, the executive compensation program is
designed to reward performance that is directly relevant to the Company's
short-term and long-term success. As such, the Company provides both short-term
and long-term incentives. The Committee has structured the executive
compensation program with three primary underlying components: base salary,
annual incentives, and long-term incentives. The Company's compensation
philosophy is to (i) compensate its executive officers at a base level that is
near the average salaries paid by companies of similar size and nature; (ii)
provide the opportunity for its executive officers to earn additional
compensation in the form of annual bonuses if individual and business
performance goals are met; and (iii) design long-term incentive plans to focus
executive efforts on the long-term goals of the Company and to maximize total
return to the Company's stockholders.
BASE SALARY
The Committee utilizes market compensation data that is reflective of the
markets in which the Company competes for employees. Based on such data, the
Committee believes that the salaries paid to the Company's executive officers
are at or below executive officers' compensation in similar companies. The
Committee intends to insure that the executive officer's compensation is
consistent with its stated policies. Therefore, as part of its responsibilities,
the Committee reviews the salaries for the Company's executive officers.
Individual salary changes are based on a combination of factors such as the
performance of the executive, salary level relative to the competitive market,
level of responsibility, growth of Company operations and the recommendation of
the Chief Executive Officer.
ANNUAL BONUS
The Company's annual bonus is intended to reward key employees based on
Company and individual performance, motivate key employees, and provide
competitive cash compensation opportunities. Target award opportunities vary by
individual position and are expressed as a percentage of base salary. The
individual target award opportunities are set at market median levels, but
actual payouts may vary based on performance so that actual awards may fall
below the 50th or above the 75th percentile. The amount a particular executive
may earn is directly dependent on the individual's position, responsibility, and
ability to impact the Company's financial success. During the 2003 fiscal year,
no bonuses were paid to the Company's executive officers.
LONG-TERM INCENTIVES
The Company's long-term incentive plan is designed to focus executive
efforts on the long-term goals of the Company and to maximize total return to
our stockholders. While the key devices the Committee has traditionally used
were stock options and restricted stock, no grants were made during the 2003
fiscal year.
CEO COMPENSATION
In May 2003, the Committee undertook its annual detailed review of the
performance of the Chief Executive Officer. A twenty-two point evaluation was
used that highlighted all material aspects of the position, with Mr. Allen being
rated on each item by the Board of Directors and the Company's senior
management. In order to insure anonymity the results of the evaluation were
forwarded to the Company's independent auditors for compilation.
As a result of the above evaluation, Mr. Allen's salary was adjusted to
$525,500 effective October 1, 2003. Mr. Allen did not receive a bonus payment
for fiscal year 2003.
14
No member of the Committee is a former or current officer or employee of
the Company or any of its subsidiaries. The following members of the
Compensation Committee have delivered the foregoing report.
James D. Woods (Chairman)
Donald Paul Hodel
Donald C. Trauscht
The foregoing report and the performance graph and related description
included in this proxy statement shall not be deemed to be filed with the
Securities and Exchange Commission except to the extent the Company specifically
incorporates such items by reference into a filing under the Securities Act of
1933 or Securities Exchange Act of 1934.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION SECURITIES
---------------------------------------------- RESTRICTED UNDERLYING
FISCAL OTHER ANNUAL STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(A) AWARD (NUMBER) COMPENSATION(B)
--------------------------- ------ -------- -------- --------------- ---------- ---------- ---------------
Herbert R. Allen................. 2003 $475,000 -- -- -- -- $ 2,055
President and Chief............ 2002 380,002 -- -- -- 330,000 2,727
Executive Officer.............. 2001 292,500 $120,000 -- -- 30,000 2,678
Richard L. China................. 2003 $370,000 -- -- -- -- $ 3,672
Chief Operating Officer........ 2002 309,997 -- -- -- 185,000 2,330
2001 237,211 $175,000 -- -- 30,000 2808
William W. Reynolds(b)........... 2003 $295,000 -- -- -- -- $75,849
Executive Vice President....... 2002 275,002 -- -- -- 80,000 75,548
and Chief Financial Officer.... 2001 275,000 $ 55,000 -- -- 345,000 74,744
Danniel Petro.................... 2003 $295,000 -- -- -- -- $ 4,406
Regional Operating Officer..... 2002 285,000 -- -- -- 70,000 1,844
2001 242,500 $171,038 -- -- 30,000 2,774
Britt Rice....................... 2003 $295,000 -- -- -- -- $ 2,712
Senior Vice President.......... 2002 249,957 -- -- 67,500 --
and Chief Technology........... 2001 250,000 $278,502 -- 30,000 2,891
and Procurement Officer
---------------
(a) No executive officer received perquisites or other personal benefits in
excess of 10% of their total annual salary and bonus during the fiscal
years 2002 or 2003.
(b) All other compensation for fiscal years 2001, 2002, and 2003 consists of
Company contributions to the IES Corp. Executive Savings Plan and the IES,
Inc. 401 (k) Retirement Savings Plan. In addition, for 2001, 2002, and
2003, Mr. Reynolds received $73,333 per his employment agreement (paid 50%
in cash and 50% in IES common stock).
15
OPTION GRANTS IN THE LAST FISCAL YEAR
There were no option grants in Fiscal Year 2003.
AGGREGATED OPTION EXERCISES IN FISCAL 2003 AND OPTION VALUES AT SEPTEMBER 30,
2003
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN THE
OPTIONS HELD AT MONEY OPTIONS HELD AT
SHARES SEPTEMBER 30, 2003 SEPTEMBER 30, 2003
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Herbert R. Allen.......... -- -- 166,001 229,999 $362,786 $647,864
Richard L. China.......... -- -- 91,668 133,332 $198,187 $361,563
William W. Reynolds....... -- -- 223,002 301,998 $428,949 $597,401
Danniel Petro............. -- -- 74,334 56,666 $ 87,251 $113,299
Britt Rice................ -- -- 47,500 55,000 $ 69,525 $110,550
EMPLOYMENT AGREEMENTS
On January 30, 2003, the Company entered into an amended and restated
employment agreement with Mr. Allen. The agreement with Mr. Allen, which has an
initial term of three years, and which, unless terminated sooner, continues on a
year-to-year basis thereafter, provides for the annual salary then in effect to
be paid to Mr. Allen (which may be increased from time to time) during the term
of the agreement. In the event Mr. Allen terminates his employment without "Good
Reason," or is terminated for "Cause," both as defined in the agreement, he is
not entitled to receive severance compensation. If Mr. Allen terminates for Good
Reason or if he is terminated by the Company without Cause, he is entitled to
receive the base salary then in effect for whatever period of time is remaining
under the Initial Term or Extended Term, or for one year, whichever amount is
greater. The agreement generally restricts him from competing with the Company
for a period of two years following the termination of his employment. The
restriction is removed in the event he is terminated without Cause by the
Company, or he terminates for Good Reason. In the event of a change of control
of the Company, Mr. Allen may receive the equivalent of three years' base salary
plus three times annual bonus and three years' coverage under the Company's
medical benefit plan on a tax neutral basis.
Messrs. China and Reynolds have entered into employment agreements,
effective August 12, 2003 and June 13, 2003 respectively, with the Company that
also provide for severance compensation of one-year's salary, in the event of
termination by the Company without "Cause" or by the individual for "Good
Reason," both as defined in the agreements. These agreements have a three-year
term. No severance compensation is due in the event of voluntary termination by
the individual or by the Company for Cause. These agreements also contain
restrictions on competing with the Company following termination of employment
with such restrictions being reduced in the event of termination by the Company
without Cause or by the employee for Good Reason. In the event of a change of
control, Messrs. China and Reynolds may be entitled to receive two and one half
times base salary and two and one half times bonus, or two times base salary and
two times bonus respectively, as well as two year's coverage under the Company's
medical benefit plan on a tax-neutral basis.
Finally, the Company has entered into employment agreements with Messrs.
Petro and Rice, effective January 26, 2003 and October 18, 1999 respectively,
with a three-year and five-year term respectively, which provide for severance
benefits of up to one year's base pay in the event of termination of their
employment by the Company without Cause. These agreements also contain
restrictions on competing with the Company, which may be reduced or eliminated
under certain circumstances.
16
STOCK PERFORMANCE GRAPH
The following performance graph compares the Company's cumulative total
stockholder return on its Common Stock with the cumulative total return of (i)
the S&P 500 Index, (ii) the Russell 2000, and (iii) a peer group stock index
(the "Peer Group") selected in good faith by the Company made up of the
following publicly traded companies: Comfort Systems USA, Inc., Dycom Industries
Inc., Emcor Group Inc., Fluor Corp (Massey Energy Company was distributed as a
dividend to Flour Corp shareholders on December 22, 2000 and the value of such
dividend is reflected as a reinvestment), Jacobs Engineering Group, Mastec Inc.,
and Quanta Services Inc. Due to activities such as reorganizations and mergers,
additions and deletions are made to the Peer Group from time to time. As the
result of a re-organization Washington Group International (formerly known as
Morrison Knudson) has been removed from the Peer Group, as has Encompass due to
bankruptcy. The cumulative total return computations set forth in the
Performance Graph assume the investment of $100 in the Company's Common Stock,
the S&P 500 Index, the Russell 2000, and the Peer Group, on October 1, 1998.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG INTEGRATED ELECTRICAL SERVICES, INC., THE S&P 500 INDEX,
THE RUSSELL 2000 INDEX AND A PEER GROUP
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
-------------------------------------------------------------
9/98 12/98 3/99 6/99 9/99 12/99 3/00
INTEGRATED ELECTRICAL
SERVICES, INC..................... 100.00 149.58 107.56 108.40 106.30 67.65 35.29
S & P 500.......................... 100.00 121.30 127.34 136.32 127.81 146.82 150.19
RUSSELL 2000....................... 100.00 116.31 110.00 127.11 119.07 141.03 151.02
PEER GROUP......................... 100.00 136.47 138.08 173.53 135.26 152.42 279.92
CUMULATIVE TOTAL RETURN
------------------------------------------------------------
6/00 9/00 12/00 3/01 6/01 9/01 12/01
INTEGRATED ELECTRICAL
SERVICES, INC..................... 34.45 46.22 39.92 38.32 65.55 36.30 34.42
S & P 500.......................... 146.20 144.78 133.45 117.63 124.52 106.24 117.59
RUSSELL 2000....................... 145.31 146.92 136.77 127.87 146.27 115.76 140.17
PEER GROUP......................... 269.87 203.44 196.77 167.90 185.65 132.10 143.53
CUMULATIVE TOTAL RETURN
------------------------------------------------------------
3/02 6/02 9/02 12/02 3/03 6/03 9/03
INTEGRATED ELECTRICAL
SERVICES, INC..................... 33.61 42.02 25.14 25.88 28.71 48.74 46.39
S & P 500.......................... 117.92 102.12 84.48 91.61 88.72 102.38 105.09
RUSSELL 2000....................... 145.76 133.58 104.99 111.46 106.45 131.39 143.32
PEER GROUP......................... 150.89 133.05 86.95 103.19 113.66 128.87 147.09
---------------
* $100 invested on 9/30/98 in stock or index-including reinvestment of
dividends. Fiscal year ending September 30.
Copyright (C) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no related party transactions during fiscal year 2003.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2003, no executive officer of the Company served as (i)
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 on the
Compensation Committee of the Company, (ii) a director of another entity, one of
whose executive officers served on the Compensation Committee of the Company or
(iii) 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 the Company.
During fiscal year 2003, no member of the Compensation Committee (i) was an
officer or employee of the Company, (ii) was formerly an officer of the Company
or (iii) had any business relationship or conducted any business with the
Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons holding more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission ("SEC") and any stock exchange or automated quotation
system on which the Common Stock may then be listed or quoted (i) initial
reports of ownership, (ii) reports of changes in ownership and (iii) annual
reports of ownership of Common Stock and other equity securities of the Company.
Such directors, officers and ten-percent stockholders are also required to
furnish the Company with copies of all such filed reports.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
2003, the Company believes that all Section 16(a) reporting requirements related
to the Company's directors and executive officers were timely fulfilled during
2003.
APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN,
AS AMENDED AND RESTATED, INCLUDING THE AUTHORIZATION
FOR THE ISSUANCE OF AN ADDITIONAL 1,000,000 SHARES
OF THE COMPANY'S COMMON STOCK TO BE ISSUED PURSUANT THERETO
The Board of Directors of the Company originally approved the Employee
Stock Purchase Plan (the "Plan") on November 10, 1999 subject to stockholder
approval. The stockholders overwhelmingly approved the Plan at the 2000 Annual
Meeting of Stockholders held on February 9, 2000, and the Plan has been in place
since. Under the original Plan, eligible employees could purchase up to
1,000,000 shares of the Company's Common Stock, par value $0.01 per share.
The proposed revised Plan (the "Revised Plan") has been amended and
restated, subject to stockholder approval at this meeting, to increase the
number of authorized shares from 1,000,000 to 2,000,000, to shorten the
eligibility period from 90 days of service to 60 days and to create two option
periods per calendar year instead of one. It is intended that the Revised Plan
will continue to qualify under Section 423 of the Internal Revenue Code of 1986,
as amended (the "Tax Code"). A discussion of the tax consequences of the Revised
Plan is set forth below. The Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974, as amended, or Section 401(a)
of the Tax Code. The Company is unable to determine the amount of benefits which
may be received by the Revised Plan participants as participation may vary in
the discretion of individual employees.
18
As of the end of calendar year 2003, it is estimated that approximately
900,000 shares of the Company's common stock will have been issued pursuant to
the Plan. In the event the Revised Plan and additional 1,000,000 shares of
common stock are not approved by the stockholders, the terms of the original
Plan will remain in effect and it is anticipated that the balance of the
originally approved 1,000,000 shares will be issued (on a pro rata basis) to
2004 plan year participants and the Plan will consequently terminate.
Set forth below is a summary of the major provisions of the Revised Plan,
which is qualified in its entirety by reference to the full text of the Revised
Plan, attached to this Proxy Statement as Appendix B.
SUMMARY OF THE REVISED STOCK PURCHASE PLAN
Objective. The objective of the Plan is to permit employees of the Company
and its subsidiaries to acquire an equity interest in the Company through the
purchase of the Company's Common Stock.
Eligibility and Participation. Each employee of the Company or any of its
subsidiaries who has completed at least 60 days of service with the Company is
eligible to participate in the Plan except employees who are customarily
employed less than 20 hours per week or less than five months per year or are
employed by a subsidiary which has not adopted the Plan. However, no employee is
eligible who would own, after purchasing Common Stock subject to options, shares
of capital stock representing 5% or more of the total combined voting stock of
the Company. The Company estimates that approximately 13,250 employees of the
Company and its subsidiaries will be eligible to participate in the Plan. An
eligible employee may enroll in the Plan as of January 1 and/or July 1 (the
"Enrollment Dates") and may thereafter make contributions on an after-tax basis
through payroll deductions over the six month period for each period ending on
June 30 and December 31 respectively, ranging from a minimum of $5/weekly,
$10/bi-weekly and $11/semi-monthly, up to an overall maximum of $12,500 per
period or $25,000 per year. In addition, no employee may purchase more than
12,500 shares during any option period. A participant may withdraw from the Plan
at any time, in which event any accumulated payroll deductions will be paid to
him/her.
Purchase of Common Stock. On each June 30 and December 31, the
participants' payroll deductions since the preceding Enrollment Date will be
invested in shares of Common Stock. Shares will be purchased at a price equal to
85% of the Fair Market Value (as defined in the Plan) of such Common Stock on
the Enrollment Date or the date of purchase, whichever is lower. The shares
purchased may be authorized, but un-issued shares and/or shares previously
issued and reacquired by the Company.
Recapitalization. In the event of any reorganization, stock-split, reverse
stock-split, or other change in the capital structure of the Company, the
Compensation Committee may make an appropriate adjustment to the number, kind,
and purchase price of the shares available for purchase under the Plan and the
maximum number of shares which may be issued under the Plan.
Costs of Administration. The Company and its subsidiaries will pay the
costs of administering the Plan.
Taxes. The Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Tax Code. This section provides that participants
will not be taxed on the discount until the participant disposes of the stock,
and the determination of the ordinary and capital portion of the resulting gain
or loss depends of the length of time the employee has held the stock. The
Company will be entitled to a deduction equal to the amount of the employee's
ordinary income if the employee disposes of the shares within two years of the
applicable Enrollment Date; otherwise, there will be no tax consequences to the
Company.
Plan Amendment. The Board of Directors of the Company may terminate and
amend the Plan, at their discretion, at anytime as permitted by law. However, no
amendment that requires stockholder approval in order for the Plan to meet the
requirements of Section 423 will be effective unless within one year after it is
adopted by the Board of Directors, it is approved by the Company's stockholders.
Administration. A committee appointed by the Board of Directors will
administer the Plan. The committee is empowered to adopt rules and regulations
concerning the administration and interpretation of the Plan, and to amend the
Plan in certain circumstances.
19
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the Company's common stock
that may be issued upon the exercise of options and rights under all of the
Company's existing equity compensation plans as of September 30, 2003, including
the 1997 Director's Stock Plan, the 1997 Stock Plan, the 1999 Incentive
Compensation Plan and the existing Employee Stock Purchase Plan.
NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
NUMBER OF SECURITIES UNDER EQUITY
TO BE ISSUED UPON WEIGHTED-AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REFLECTED IN COLUMN
PLAN CATEGORY WARRANTS, AND RIGHTS WARRANTS, AND RIGHTS (A)).
------------- -------------------- -------------------- ---------------------
(A) (B) (C)
Equity compensation plans approved by
security holders(1).................. 2,797,810 $13.1922 3,083,614
Equity compensation plans not approved
by security holders(2)............... 2,619,547 $ 5.0579 1,402,968
--------- -------- ---------
Total................................ 5,417,357 $ 9.2803 4,486,582
========= ======== =========
---------------
(1) Includes shares issued or remaining to be issued pursuant to the 1997
Directors' Stock Plan, the 1997 Stock Plan, and the Employee Stock Purchase
Plan. The number of shares authorized under the 1997 Stock Plan is 15
percent of the aggregate number of shares of Common Stock outstanding.
(2) Includes shares issued or remaining to be issued pursuant to the 1999
Incentive Compensation Plan. For a description of the material terms of this
plan, please see footnote 10 to the Company's financial statements filed
with the Company's annual report on Form 10-K.
The affirmative vote of at least a majority of the outstanding shares
present in person or by proxy at the annual meeting is necessary for the
adoption of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE REVISED EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED AND RESTATED INCLUDING THE
ISSUANCE OF AN ADDITIONAL 1,000,000 SHARES OF COMMON STOCK, AND PROXIES EXECUTED
AND RETURNED WILL BE SO VOTED UNLESS THE CONTRARY INSTRUCTIONS ARE INDICATED
THEREON.
RATIFICATION OF THE SELECTION OF
INDEPENDENT AUDITORS
On June 6, 2002, the Audit Committee of the Board of Directors dismissed
Arthur Andersen LLP ("AA") as our independent auditors for the fiscal year 2002
and engaged Ernst & Young LLP as our independent auditors for the fiscal year
2002.
During the two fiscal years ended September 2000 and 2001, and the
subsequent interim period through June 6, 2002, there were no disagreements
between the Company and AA on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to AA's satisfaction, would have caused AA to
make a reference to the subject matter of the disagreement in connection with
its reports; and there were no "reportable events," as such term is defined in
Item 304(a)(1)(v) of Regulation S-K.
The audit reports of AA on our consolidated financial statements as of and
for the fiscal years ended September 30, 2000 and 2001 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles.
During the two fiscal years ended September 2000 and 2001, and the
subsequent interim period through June 6, 2002, the Company did not consult with
Ernst & Young LLP regarding the application of accounting
20
principles to a specified transaction, either completed or proposed, the type of
audit opinion that might be rendered on the Company's consolidated financial
statements or any of the matters or events set forth in Item 304(a)(2)(i) and
(ii) of Regulation S-K.
The Audit Committee has appointed Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30, 2004, subject to
ratification by the Company's stockholders.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement, if they desire
to do so, and to respond to appropriate questions from those attending the
meeting.
The affirmative vote of holders of a majority of the shares of Common Stock
voted at the 2004 Annual Meeting of Stockholders is required to ratify the
appointment of Ernst & Young LLP as the Company's independent auditors for
fiscal 2004.
If the stockholders fail to ratify the appointment, the Audit Committee
will reconsider its selection. Even if the appointment is ratified, the Audit
Committee, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if the Audit Committee
determines that such a change would be in the Company's and its stockholders'
best interests.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF ERNST & YOUNG LLP'S APPOINTMENT, AND PROXIES EXECUTED AND RETURNED WILL BE SO
VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
OTHER BUSINESS
The Board knows of no business that will come before the meeting except
that indicated above. However, if any other matters are properly brought before
the meeting, it is intended that the persons acting under the proxy will vote
hereunder in accordance with their best judgment.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Pursuant to the Company's bylaws, stockholder proposals submitted for
consideration at the Annual Meeting must be delivered to the Corporate Secretary
no later than the close of business on December 22, 2003. Pursuant to the
Company's bylaws, stockholder proposals submitted for consideration at the
Company's 2005 Annual Meeting of Stockholders must be delivered to the Corporate
Secretary no later than 80 days before the date of the 2005 Annual Meeting of
Stockholders; provided, however, that if less than 90 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received no later than the close
of business on the tenth day following the date of which such notice was mailed
or such public disclosure made. If such timely notice of a stockholder proposal
is not given, the proposal may not be brought before the Annual Meeting. If
timely notice is given but is not accompanied by a written statement to the
extent required by applicable securities laws, the Company may exercise
discretionary voting authority over proxies with respect to such proposal if
presented at the Company's 2005 Annual Meeting of Stockholders.
A proposal of a stockholder intended to be presented at the next annual
meeting must be received at the Company's principal executive offices no later
than August 13, 2004 if the stockholder making the proposal desires such
proposal to be considered for inclusion in the Company's proxy statement and
form of proxy relating to such meeting.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
In some cases only one copy of this proxy statement or annual report is
being delivered to multiple stockholders sharing an address unless we have
received contrary instructions from one or more of the stockholders. We will
deliver promptly, upon written or oral request, a separate copy of this proxy
statement or annual report to a stockholder at a shared address to which a
single copy of the document was delivered.
21
Stockholders sharing an address who are receiving multiple copies of proxy
statements or annual reports may also request delivery of a single copy. To
request separate or multiple delivery of these materials now or in the future, a
stockholder may submit a written request to the Corporate Secretary, Integrated
Electrical Services, Inc., 1800 West Loop South, Suite 500, Houston, TX 77027 or
an oral request by calling the Corporate Secretary at (713) 860-1500.
By Order of the Board of Directors
/s/ MARK A. OLDER
--------------------------------------
Mark A. Older
Secretary
22
APPENDIX A
INTEGRATED ELECTRICAL SERVICES, INC.
CODE OF ETHICS FOR FINANCIAL EXECUTIVES
This Integrated Electrical Services, Inc. Code of Ethics for Financial
Executives applies to the Chief Executive Officer, Chief Financial Officer, and
Chief Accounting Officer of the Company. The Company expects all of it employees
to act in accordance with the highest standards of personal and professional
integrity in all aspects of their activities, to comply with all applicable
laws, rules and regulations, to deter wrongdoing, and abide by the Company's
Legal Compliance and Corporate Policy and other policies and procedures adopted
by the Company that govern the conduct of its employees. This Code of Ethics is
intended to supplement the Company's Legal Compliance and Corporate Policy.
You agree to:
(a) Engage in and promote honest and ethical conduct, including the
ethical handling of actual or apparent conflicts of interest between
personal and professional relationships;
(b) Avoid conflicts of interest and disclose to the Audit Committee
of the Board of Directors any material transaction or relationship that
reasonably could be expected to give rise to such a conflict.
(c) Take all reasonable measures to protect the confidentiality of
non-public information about the Company or its subsidiaries and their
customers obtained or created in connection with your activities and to
prevent the unauthorized disclosure of such information unless required by
applicable law or regulation or legal regulatory process;
(d) Produce full, fair, accurate, timely, and understandable
disclosure in reports and documents that the Company files with, or submits
to, the Securities and Exchange Commission and other regulators and in
other public communications made by the Company.
(e) Comply with applicable governmental laws, rules and regulations,
as well as the rules and regulations of self-regulatory organizations of
which the Company is a member, and;
(f) Promptly report any violation of this Code of Ethics to the Audit
Committee of the Board of Directors.
You are prohibited from directly or indirectly taking any action to
fraudulently influence, coerce, manipulate or mislead the Company's independent
public auditors for the purpose of rendering the financial statements of the
Company misleading.
You understand that you will be held accountable for your adherence to this
Code of Ethics. Your failure to observe the terms of this Code of Ethics may
result in disciplinary action, up to and including termination of employment.
Violations of this Code of Ethics may also constitute violations of law and may
result in civil and criminal penalties for you, and/or the Company.
23
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24
APPENDIX B
INTEGRATED ELECTRICAL SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 2004)
TABLE OF CONTENTS
PAGE
----
1. Definitions............................................ 26
2. Purpose of the Plan.................................... 27
3. Shares Reserved for the Plan........................... 27
4. Administration of the Plan............................. 27
5. Eligibility to Participate in the Plan................. 28
6. Option Periods......................................... 28
7. Election to Participate in the Plan.................... 28
8. Payroll Deductions..................................... 28
9. Grant of Options....................................... 28
10. Exercise of Options.................................... 29
11. Withdrawal; Termination of Employment.................. 29
12. Transferability........................................ 30
13. Adjustments Upon Changes in Capitalization............. 30
14. Amendment of the Plan.................................. 30
15. Termination of the Plan................................ 30
16. Notices................................................ 30
17. Stockholder Approval................................... 31
18. Conditions Upon Issuance of Shares..................... 31
25
INTEGRATED ELECTRICAL SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Integrated Electrical Services, Inc. hereby amends and restates the
Integrated Electrical Services, Inc. Employee Stock Purchase Plan (the "Plan")
effective as of January 1, 2004. The terms of the Plan as hereby amended are as
set forth below:
1. Definitions.
As used in the Plan the following terms shall have the meanings set forth
below:
(a) "Account" means a ledger account established by the Company for a
Participant and credited with the Participant's contributions under the
Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee appointed by the Board to
administer the Plan.
(e) "Company" means Integrated Electrical Services, Inc., a Delaware
corporation, or any successor.
(f) "Company Stock" means the common stock, $0.01 par value, of the
Company.
(g) "Continuous Employment" means the absence of any interruption or
termination of service as an Eligible Employee. However, Continuous
Employment shall not be considered interrupted in the case of an authorized
leave of absence, provided that such leave is for a period of not more than
90 days or upon the expiration of such leave reemployment is guaranteed by
contract or statute.
(h) "Eligible Compensation" means, with respect to a Participant, the
total Form W-2 compensation paid to the Participant by the Participating
Companies during the Option Period, including any elective salary deferral
contributions made therefrom by the Participant pursuant to Code Sections
125, 129, 132(f)(4) or 401(k), but excluding any pay received after the
Participant ceases to be an employee.
(i) "Eligible Employee" means an employee of the Participating
Companies who is customarily employed for at least 20 hours per week and
more than five months in a calendar year. An Eligible Employee's status
shall continue during an authorized leave of absence, provided such leave
is not expected to (or does not) result in a termination in his Continuous
Employment.
(j) "Enrollment Date" means the first day of each Option Period.
(k) "Exercise Date" means the last day of each Option Period.
(l) "Exercise Price" means the price per share of the Company Stock
offered in a given Option Period, which shall be 85% of the Fair Market
Value of a share of the Company Stock on the first trading day of the
Option Period or the Exercise Date for such Option Period, whichever is
lower.
(m) "Fair Market Value" means, with respect to shares of Company
Stock, the closing price of a share quoted on the Composite Tape, or if the
shares are not listed on the New York Stock Exchange, on the principal
United States securities exchange registered under the Exchange Act on
which such stock is listed, or if the shares are not listed on any such
stock exchange, the highest closing bid quotation on the National
Association of Securities Dealers, Inc., Automated Quotations System or any
successor system then in use on the applicable date, or, if none are
available on such day, on the next preceding day for which they are
available. If no such quotations are available, the fair market value on
the applicable date of a share as determined in good faith by the
Committee. In the event the shares are not publicly traded at the time a
determination of its fair market value is required to be made hereunder,
the determination of fair market value shall be made in good faith by the
Committee. Fair Market Value shall be subject to adjustment as provided in
Section 13.
26
(n) "Option Period" means each January 1 through June 30 and each
July 1 through December 31; provided, however, upon termination of the Plan
other than on a December 31, the final Option Period shall be the shorter
period ending on such termination date.
(o) "Participant" means an Eligible Employee who has elected to
participate in the Plan by filing an enrollment agreement with the Company
as provided in Section 7 below.
(p) "Participating Companies" means the Company and each present and
future Subsidiary which the Committee, in its sole discretion, designates
as a Participating Company.
(q) "Subsidiary" means any corporation, domestic or foreign, of which
the Company owns, directly or indirectly, not less than 50% of the total
combined voting power of all classes of stock or other equity interests and
that otherwise qualifies as a "subsidiary corporation" within the meaning
of Section 424(f) of the Code or any successor thereto, and shall include
any limited liability company or partnership which is 100% owned directly
or indirectly by the Company and either is disregarded as an entity for
federal tax purposes or has elected to be taxed as a corporation.
2. Purpose of the Plan.
The purpose of the Plan is to provide an incentive for present and future
Eligible Employees of the Participating Companies to acquire a proprietary
interest (or increase an existing proprietary interest) in the Company through
the purchase of Company Stock. It is the intention of the Company that the Plan
qualify as an "employee stock purchase plan" under Section 423 of the Code.
Accordingly, the provisions of the Plan shall be administered, interpreted and
construed in a manner consistent with the requirements of that section of the
Code.
3. Shares Reserved for the Plan.
There shall be reserved for issuance and purchase by Participants under the
Plan an aggregate of 2,000,000 shares of Company Stock, subject to adjustment as
provided in Section 13 below. Shares of Company Stock subject to the Plan may be
newly issued shares, treasury shares, shares purchased in the open market or any
combination of the foregoing, as determined by the Board in its discretion. If
and to the extent that any option to purchase shares of Company Stock shall not
be exercised for any reason or if such right to purchase shares shall terminate
as provided herein, the shares that have not been so purchased hereunder shall
again become available for the purposes of the Plan unless the Plan shall have
been terminated.
4. Administration of the Plan.
(a) The Plan shall be administered by a Committee appointed by, and which
shall serve at the pleasure of, the Board. The Committee shall have the
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the administration of the Plan, to correct any defect or
rectify any omission in the Plan or to reconcile any inconsistency in the Plan
or any option, and to make all other determinations necessary or advisable for
the administration of the Plan, all of which actions and determinations shall be
final, conclusive and binding on all persons. The act or determination of a
majority of the members of the Committee shall be deemed to be the act or
determination of the Committee.
(b) The Committee may request advice or assistance or employ such other
persons as it in its discretion deems necessary or appropriate for the proper
administration of the Plan.
(c) All Eligible Employees granted options under the Plan shall have the
same rights and privileges; however, the Plan will not fail to satisfy this
requirement merely because the amount of Company Stock which may be purchased by
any Eligible Employee is determined on the basis of a uniform relationship to
the Eligible Compensation of Eligible Employees.
(d) All expenses of administering the Plan shall be paid by the
Participating Companies.
(e) A separate Account will be maintained for each Participant in the
Plan. Statements of Accounts will be given to Participants promptly following
each Exercise Date, which statements will set forth the
27
amounts of payroll deductions, the per share Exercise Price, the number of
shares purchased and the remaining cash balance in the Participant's Account, if
any.
5. Eligibility to Participate in the Plan.
Each Eligible Employee who is employed by a Participating Company on an
Enrollment Date and has completed a period of Continuous Employment of at least
60 days ending as of such Enrollment Date shall be eligible to participate in
the Plan for the Option Period beginning on that Enrollment Date subject to the
further provisions of the Plan.
6. Option Periods.
The Plan shall consist of consecutive Option Periods beginning on January
1, 2004 and continuing until the Plan is terminated.
7. Election to Participate in the Plan.
(a) Each Eligible Employee who satisfies the eligibility requirements as
of the Enrollment Date for the applicable Option Period may elect to participate
in the Plan for such Option Period by completing an enrollment agreement in the
form (written or electronic) provided by the Company (or its designee) and
filing such enrollment agreement with the Company (or its designee) prior to the
applicable Enrollment Date.
(b) Payroll deductions for a Participant shall commence on the first
payroll date following the Participant's Enrollment Date and shall continue
until (i) changed or terminated by the Participant as provided below, (ii) the
termination of the Plan, or (iii) the Participant ceases to be an Eligible
Employee, whichever occurs first.
(c) A Participant's election shall remain in effect for each successive
Option Period unless the Participant changes or terminates such election prior
to the beginning of the Option Period in accordance with the procedures
established by the Committee.
8. Payroll Deductions.
(a) All Participant contributions to the Plan shall be made by payroll
deductions only. At the time a Participant files the enrollment agreement with
respect to an Option Period, the Participant shall authorize payroll deductions
to be made on each payroll date during the Option Period in an amount equal to a
designated number of whole dollars per week, but not less than $5.00 per week,
in the case of a Participant who is paid weekly, $10 per bi-weekly pay period,
in the case of a Participant who is paid bi-weekly, or $11.00 per semi-monthly
pay period, in the case of a Participant who is paid semi-monthly; provided,
however, with respect to a Participant making a minimum contribution each pay
period, the last payroll deduction in the Option Period shall be reduced, if and
to the extent as necessary, so that the maximum aggregate amount of minimum
contributions that may be made for that Option Period is the same for all
Participants, whether on a weekly, bi-weekly or semi-monthly pay period. Subject
to the limitation set forth in Section 9(b), there shall be no maximum amount of
payroll deduction which a Participant may authorize each periodic pay period.
Such authorization shall be in writing and on such forms as provided by the
Committee.
(b) All payroll deductions made for a Participant may be deposited in the
Company's general corporate account and shall be credited to the Participant's
Account under the Plan. No interest shall accrue or be credited with respect to
the payroll deductions of a Participant under the Plan. A Participant may not
make any additional payments into such Account. Pending application of the
Accounts, the Company may, but shall not be obligated to, segregate the payroll
deductions.
(c) Except as provided in Section 11, a Participant may not change his
current contribution election during an Option Period.
9. Grant of Options.
(a) Subject to the limitations set forth in Sections 3 and 9(b) hereof,
each Participant shall be granted an option on the Enrollment Date to purchase
on the Exercise Date for such Option Period (at the Exercise Price for such
Option Period) a number of whole shares of the Company Stock determined by
dividing such
28
Participant's payroll deductions accumulated during the Option Period by the
Exercise Price for such Option Period.
(b) Notwithstanding any provision of the Plan to the contrary, no
Participant shall be granted an option under the Plan (i) if, immediately after
the grant, such Participant (or any other person whose stock would be attributed
to such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
Subsidiary of the Company, or (ii) which permits such Participant's rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiaries to accrue at a rate which exceeds $25,000 of the Fair Market Value
of such stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time. Further, subject to
Section 13, the maximum number of shares that can be purchased during an Option
Period by any Participant shall be that number of shares equal to the $12,500
divided by the Fair Market Value of the stock on the date the option is granted
for such Option Period, but not to exceed 12,500 shares.
10. Exercise of Options.
Unless a Participant withdraws or is deemed to have withdrawn from the Plan
during an Option Period as provided in Section 11, the Participant's option for
the purchase of shares for an Option Period will be exercised automatically on
the Exercise Date for such Option Period, and the maximum number of whole shares
subject to the option will be purchased for the Participant at the applicable
Exercise Price with the accumulated payroll deductions then credited to the
Participant's Account. The certificates for such purchased shares shall be
issued by the Company as soon as reasonably practical following the Exercise
Date. Any amounts remaining credited to an Account after being applied as
provided in the preceding sentence shall continue to be credited to the Account
for the next Option Period, unless the Participant requests in writing the
return of such remainder prior to the beginning of such Option Period.
11. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all, but not less than all, of the payroll
deductions credited to the Participant's Account under the Plan at any time
prior to an Exercise Date by giving proper notice (written or electronic) to the
Company. All of the Participant's payroll deductions credited to the
Participant's Account will be paid to him promptly after receipt of the
Participant's notice of withdrawal, the Participant's participation in the Plan
will be terminated, and no further payroll deductions for the purchase of shares
will be made. Payroll deductions will not resume on behalf of a Participant who
has withdrawn from the Plan unless proper notice (written or electronic) is
delivered to the Company within the enrollment period preceding the commencement
of a new Option Period directing the Company to resume payroll deductions and
the former Participant is at that time an Eligible Employee.
(b) In the event a Participant ceases to be an Eligible Employee prior to
the Exercise Date of an Option Period for any reason other than retirement on or
after reaching age 65, disability under a Company long-term disability plan,
Social Security or other determination made by the Committee on a
nondiscriminatory basis, or death, the payroll deductions credited to the
Participant's Account will be automatically returned to the Participant and the
Participant's options to purchase shares under the Plan will be automatically
terminated for such Option Period.
(c) In the event a Participant ceases to be an Eligible Employee during an
Option Period due to his retirement on or after reaching age 65, his disability
under a Company long-term disability plan, Social Security or other
determination made by the Committee on a nondiscriminatory basis, or his death,
no further contributions may be made to the Participant's Account, and the
balance of his Account at such time shall be applied to exercise his options at
the end of that Option Period as provided in Section 10, unless prior to such
Exercise Date the Participant (or beneficiary, as the case may be) elects by
proper notice (written or electronic) to the Company to receive a return in cash
of all amounts then credited to the Participant's Account in cancellation of the
options to purchase shares under the Plan.
(d) A Participant's withdrawal during an Option Period will not affect the
Participant's eligibility to participate in a succeeding Option Period.
29
12. Transferability.
Options to purchase Company Stock granted under the Plan are not
transferable by a Participant (other than by will or the laws of descent and
distribution) and are exercisable only by the Participant.
13. Adjustments Upon Changes in Capitalization.
(a) If the outstanding shares of Company Stock are increased or decreased,
or are changed into or are exchanged for a different number or kind of shares,
as a result of one or more reorganizations, restructurings, recapitalizations,
reclassifications, stock splits, reverse stock splits, stock dividends or the
like, upon authorization of the Committee, appropriate adjustments may be made
in the number and/or kind of shares, and the per share option price thereof,
which may be issued in the aggregate and to any Participant upon exercise of
options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of the
Company, the Option Period will terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Committee. In the
event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, each
option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Committee determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, that the
Participant shall have the right to exercise the option as to all of the
optioned stock, including shares as to which the option would not otherwise be
exercisable. If the Committee makes an option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Committee shall notify the Participant that the option shall be fully
exercisable for a stated period, which shall not be less than 10 days from the
date of such notice, and the option will terminate upon the expiration of such
period.
(c) In all cases, the Committee shall have full discretion to exercise any
of the powers and authority provided under this Section 13, and the Committee's
actions hereunder shall be final and binding on all Participants. No fractional
shares of stock shall be issued under the Plan pursuant to any adjustment
authorized under the provisions of this Section 13.
14. Amendment of the Plan.
The Board or the Committee may at any time, or from time to time, amend the
Plan in any respect; provided, however, that the Plan may not be amended in any
way that will cause rights issued under the Plan to fail to meet the
requirements for employee stock purchase plans as defined in Section 423 of the
Code or any successor thereto, including, without limitation, stockholder
approval if required.
15. Termination of the Plan.
The Plan and all rights of Eligible Employees hereunder shall terminate:
(a) on the Exercise Date that Participants become entitled to
purchase a number of shares greater than the number of reserved shares
remaining available for purchase under the Plan; or
(b) at any time, at the discretion of the Board.
In the event that the Plan terminates under circumstances described in
Section 15(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis based on their Account balances and
any amounts remaining in their Accounts returned to the Participants.
16. Notices.
All notices or other communications by a Participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
30
17. Stockholder Approval.
The Plan as hereby amended and restated as of January 1, 2004 shall be
subject to approval by the stockholders of the Company. If such stockholder
approval is not obtained at the 2004 annual meeting of stockholders of the
Company, this Plan amendment and restatement shall not be effective and the
terms of the Plan as in effect prior to this amendment and restatement shall
continue in effect without interruption or change.
18. Conditions Upon Issuance of Shares.
(a) The Plan, the grant and exercise of options to purchase shares of
Company Stock under the Plan, and the Company's obligation to sell and deliver
shares upon the exercise of options to purchase shares shall be subject to all
applicable federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required. In the event the Company is required to
obtain from any commission or agency authority to issue any stock certificate,
the inability of the Company to obtain from any such commission or agency
authority that counsel for the Company deems necessary for the lawful issuance
of any such certificate will relieve the Company from liability to any
Participant, except to return to him the amount of the balance in his account.
(b) The Company may make such provisions as it deems appropriate for
withholding of amounts that the Company determines it is required to withhold
pursuant to applicable tax laws in connection with the purchase or sale by a
Participant of any Company Stock acquired pursuant to the Plan. The Company may
require a Participant to satisfy any relevant tax requirements before
authorizing any issuance of Company Stock to such Participant.
31
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INTEGRATED ELECTRICAL SERVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS OF INTEGRATED ELECTRICAL SERVICES, INC.
The undersigned hereby appoints C. Byron Snyder, Herbert R. Allen and
Mark A. Older, and each of them individually, as proxies with full power of
substitution, to vote all shares of Common Stock of Integrated Electrical
Services, Inc. that the undersigned is entitled to vote at the Annual Meeting of
Stockholders thereof to be held on Thursday, January 22, 2004, at 10:30 a.m. at
the St. Regis Hotel, 1919 Briar Oaks Lane, Houston, TX 77027 or at any
adjournment or postponement thereof, as follows:
Any executed proxy which does not designate a vote shall be deemed to
grant authority for any item not designated.
PROPOSAL 1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY for all nominees
listed below
PROPOSAL 1. 01-Donald P. Hodel, 02-Donald C. Trauscht, and 03-James D.
Woods to hold office until the 2007 Annual Meeting and until their successors
are elected and qualified. INSTRUCTION: to withhold authority to vote for any
individual nominee or nominees, write the appropriate name or names in the space
provided here.
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PROPOSAL 2. APPROVAL OF THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN, AS
AMENDED AND RESTATED, INCLUDING THE AUTHORIZATION FOR THE ISSUANCE OF AN
ADDITIONAL 1,000,000 SHARES OF THE COMPANY'S COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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PROPOSAL 3. APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS FOR THE COMPANY
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please check the following box if you plan to attend the Annual Meeting of
Stockholders in person. [ ]
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P
R
O
X
Y
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ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE
DIRECTED, WILL BE VOTED "FOR" PROPOSAL 1 (ALL NOMINEES), AND "FOR" PROPOSAL
2 AND "FOR" PROPOSAL 3, AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSON
VOTING THE PROXY WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE
THE MEETING.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE THEREON.
Dated:__________________ , ______
Signature(s)______________________
Please sign exactly as name
appears on this card. Joint
owners should each sign.
Executors, administrators,
trustees, etc., should give their
full titles.
PLEASE COMPLETE, SIGN AND
PROMPTLY MAIL THIS PROXY IN THE
ENCLOSED ENVELOPE.