On March
29, 2010, Integrated Electrical Services, Inc. (the “Company”)
announced that Terry L. Freeman has been appointed Senior Vice President and
Chief Financial Officer of the Company. Mr. Freeman, age 59, has been
an independent business consultant since December 2005. From 1997
until December 2005, Mr. Freeman served Metals USA, a metal service company that
served OEM manufacturers, contractors and metal fabrication businesses, in
several senior financial roles, most recently serving as Senior Vice President
and Chief Financial Officer.
For
additional information concerning Mr. Freeman’s prior experience, please refer
to the press release announcing Mr. Freeman’s appointment, which is attached
hereto as Exhibit 99.1.
On March
29, 2010, the Company entered into an Employment Agreement with Mr. Freeman (the
“Employment
Agreement”). The Employment Agreement provides that Mr. Freeman shall
commence employment with the Company on March 29, 2010 (the “Effective
Date”). The Employment Agreement has no definitive employment term and
may be terminated at any time, upon written notice to the other party for any
reason, at the option either of the Company or Mr. Freeman. Pursuant to the
Employment Agreement, Mr. Freeman will serve as a Senior Vice President and
Chief Financial Officer of the Company.
The
Employment Agreement provides for (i) an annual base salary of $350,000 (which
may be increased in the sole discretion of the Company’s Compensation
Committee), (ii) an annual bonus (the “Annual
Bonus”) with a target annual bonus opportunity of 75% of annual base
salary (the “Annual
Bonus Opportunity”) for fiscal year 2010, pro rated, and thereafter as
shall be determined by the Compensation Committee and (iii) a signing bonus of
$50,000. On the Effective Date, Mr. Freeman received a grant of 12,886
restricted shares of the Company’s common stock (the “Restricted
Shares”) under the Company’s 2006 Equity Incentive Plan (as amended and
stated) (the “Equity
Plan”), which vests on December 15, 2010. The terms of the Restricted
Shares shall be governed by the Equity Plan and the award agreement to be
executed on the Effective Date. The grant of these shares represents
a guaranteed Annual Bonus for fiscal year 2010. In the event Mr.
Freeman earns an Annual Bonus and/or any other bonus or annual incentive
compensation for fiscal year 2010 in excess of $75,000, such excess amount shall
be paid to him in cash. Mr. Freeman is also eligible to participate
in the Company’s Long-Term Incentive Plan, as modified, amended or replaced from
time to time (the “LTIP”). Mr.
Freeman’s annual long term award opportunities under the LTIP shall be
determined by the Compensation Committee, in its sole discretion. His
target LTIP opportunity for fiscal year 2010 shall be 125% of his annual base
salary.
If Mr.
Freeman terminates his employment for Good Reason (as defined in the Employment
Agreement) or if his employment is terminated by the Company without Cause (as
defined in the Employment Agreement) he is entitled to receive: (i) continued
payment of base salary then in effect for 12 months immediately following the
date of such termination, (ii) any unpaid Annual Bonus for the immediately
preceding fiscal year plus the current year Annual Bonus, pro rated based upon
the percentage of the fiscal year that shall have elapsed through the date of
termination, (iii) Company paid COBRA coverage, an automobile allowance of
$1,500 per month and outplacement services (reasonable in amount but not to
exceed $20,000) for 12 months immediately following the date of such termination
or until Mr. Freeman obtains comparable employment, whichever is shorter, and
(iv) a pro rated amount of unvested equity awards under all equity
plans. The vesting proration period shall be calculated as the
percentage of the vesting period for each unvested equity award in which he was
actively employed.
If Mr.
Freeman terminates for Good Reason or if he is terminated by the Company without
Cause within twelve months following a Change in Control (as defined in the
Agreement), he is entitled to receive: (i) continued payment of base salary then
in effect for 24 months immediately following the date of such termination, (ii)
two times the greater of (a) the most recent Annual Bonus paid to him or (b) the
Annual Bonus Opportunity, and (iii) Company paid COBRA coverage continued for 12
months or until he becomes eligible for health benefits through subsequent
employment, whichever is shorter, an automobile allowance of $1,500 per month
for 12 months from the termination date or until he obtains comparable
employment, whichever is shorter, and outplacement services (reasonable in
amount but not to exceed $20,000) for 12 months immediately following the date
of such termination or until he obtains comparable employment, whichever is
shorter, Notwithstanding the foregoing, in the event these payments
and benefits would constitute a “parachute payment” as defined in section
280(G)(b)(2) of the Internal Revenue Code (the “Code”),
then the payments and benefits would be either (i) reduced (but not below zero)
so that the present value of such total would be one dollar ($1.00) less than
three times Mr. Freeman’s “base amount” (as defined in section 280(G) of the
Code), such that no portion would be subject to the excise tax imposed by
section 4999 of the Code, or (ii) paid in full, whichever produces the better
after tax position of Mr. Freeman.
Mr.
Freeman is subject to non-compete and non-solicit restrictive covenants during
the term of his employment and for a period of one year (or two years if
terminated by the Company with Cause or if Mr. Freeman resigns without Good
Reason) following the termination of his employment. Mr. Freeman is also subject
to restrictive covenants prohibiting disclosure of confidential information and
intellectual property of the Company.
The
foregoing description of the Employment Agreement is qualified in its entirety
by reference to the Employment Agreement, which is attached hereto as Exhibit
10.1 and incorporated herein by reference.