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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000930413-02-000457.txt : 20020414
<SEC-HEADER>0000930413-02-000457.hdr.sgml : 20020414
ACCESSION NUMBER: 0000930413-02-000457
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020221
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: EMCOR GROUP INC
CENTRAL INDEX KEY: 0000105634
STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL WORK [1731]
IRS NUMBER: 112125338
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-08267
FILM NUMBER: 02554795
BUSINESS ADDRESS:
STREET 1: 101 MERRITT SEVEN CORPORATE PK
STREET 2: 7TH FLOOR
CITY: NORWALK
STATE: CT
ZIP: 06851
BUSINESS PHONE: 2038497800
MAIL ADDRESS:
STREET 1: 101 MERRITT SEVEN CORPORATE PARK
STREET 2: 7TH FLOOR
CITY: NORWALK
STATE: CT
ZIP: 06851
FORMER COMPANY:
FORMER CONFORMED NAME: JWP INC/DE/
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: WELSBACH CORP
DATE OF NAME CHANGE: 19761119
FORMER COMPANY:
FORMER CONFORMED NAME: JAMAICA WATER PROPERTIES INC
DATE OF NAME CHANGE: 19860518
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>c23256_10-k.txt
<DESCRIPTION>CURRENT REPORT
<TEXT>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
----------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 COMMISSION FILE NUMBER 0-2315
EMCOR GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-2125338
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
101 MERRITT SEVEN CORPORATE PARK 06851-1060
NORWALK, CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(203) 849-7800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of each class)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filings pursuant to
Item 405 Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in Part III of this Form 10-K to be filed as
an amendment hereto. [_]
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [_]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant on December 31, 2001 was approximately
$670,000,000.
Number of shares of Common Stock outstanding as of the close of business
on February 19, 2002: 14,822,084 shares.
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business
General ......................................................... 1
The Business .................................................... 1
Competition ..................................................... 4
Employees ....................................................... 4
Backlog ......................................................... 4
Item 2. Properties ........................................................ 5
Item 3. Legal Proceedings ................................................. 7
Item 4. Submission of Matters to a Vote of Security Holders ............... 7
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters ............................................... 9
Item 6. Selected Financial Data ........................................... 10
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition ........................................... 11
Item 8. Financial Statements and Supplementary Data ....................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .......................................... 39
PART III
Item 10. Directors and Executive Officers of the Registrant ................ 39
Item 11. Executive Compensation ............................................ 39
Item 12. Security Ownership of Certain Beneficial Owners and Management .... 39
Item 13. Certain Relationships and Related Transactions .................... 39
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ... 40
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
EMCOR Group, Inc. ("EMCOR") is one of the largest mechanical and electrical
construction and facilities services firms in the United States, Canada, the
United Kingdom and in the world. In 2001, EMCOR had revenues of more than $3.4
billion. EMCOR provides services to a broad range of commercial, industrial,
utility, and institutional customers through approximately 51 principal
operating subsidiaries, joint ventures and a majority-owned interest in a
limited liability company. EMCOR has offices in 30 states and the District of
Columbia in the United States, eight provinces in Canada and ten primary
locations in the United Kingdom. In the United Arab Emirates, Saudi Arabia and
South Africa, EMCOR carries on business through joint ventures. EMCOR's
executive offices are located at 101 Merritt Seven Corporate Park, Norwalk,
Connecticut 06851-1060, and its telephone number at those offices is (203)
849-7800.
EMCOR specializes in the design, integration, installation, start-up,
operation and maintenance of:
o Systems for generation and distribution of electrical power;
o Lighting systems;
o Low-voltage systems, such as fire alarm, security, communications and
process control systems;
o Voice and data communications systems;
o Heating, ventilation, air conditioning, refrigeration and clean-room
process ventilation systems; and
o Plumbing, process and high-purity piping systems.
EMCOR also provides services needed to support the operation of customers'
facilities, which services are not related to customers' construction programs.
These services, frequently referred to as facilities services, include site
based operations and maintenance, mobile maintenance and service, consulting,
program development and management for energy systems, and maintenance of
facilities. Facilities services are provided to a wide range of commercial,
industrial, utility and institutional facilities, including those at which EMCOR
provided construction services and others at which construction services were
provided by other contractors. EMCOR's varied facilities services are frequently
combined to provide integrated service packages which include mechanical,
electrical and other services.
EMCOR provides mechanical and electrical construction services and
facilities services directly to corporations, municipalities and other
governmental entities, owners/developers and tenants of buildings. It also
provides these services indirectly by acting as a subcontractor to construction
managers, general contractors, systems suppliers and other subcontractors.
Worldwide, EMCOR employs approximately 20,000 people.
EMCOR's revenues are derived from many different customers in numerous
industries which have operations in several different geographical areas. Of
EMCOR's 2001 revenues, approximately 80% were generated in the United States and
approximately 20% were generated internationally. In 2001, approximately 46% of
revenues were derived from new construction projects, while the remaining 54%
were derived from renovation and retrofit of customers' existing facilities
(38%) and facilities services operations (16%) (the renovation and retrofit work
and facilities services operations are sometimes referred to by stock analysts
as "MRR" or maintenance, repair and replacement and by industry analysts as
maintenance, repair and operation or "MRO"). For the period 1998 through 2001,
revenues and EBITDA (earnings before interest, taxes, depreciation and
amortization) grew at compound annual growth rates of 15.7% and 30.8%,
respectively.
On February 11, 2002, EMCOR entered into an agreement with Comfort Systems
USA, Inc. ("Comfort Systems") to acquire nineteen of Comfort Systems'
subsidiaries. The companies to be acquired had 2001 revenues of approximately
$650 million and employ approximately 3,800 technical and service employees in
11 states. These companies, which are predominantly in the Midwest and New
Jersey, are active in the installation and maintenance of mechanical systems,
including the design and installation of process and fire protection systems,
and provide services to a wide variety of industries, including the food
processing, pharmaceutical and manufacturing/distribution sectors.
THE BUSINESS
The broad scope of EMCOR's operations are more particularly described
below.
MECHANICAL AND ELECTRICAL CONSTRUCTION SERVICES AND FACILITIES SERVICES
EMCOR believes that the mechanical and electrical construction services and
facilities services business is highly fragmented, consisting of thousands of
small companies across the United States and around the world. Because EMCOR has
total assets, annual revenues, net worth, access to bank credit and surety
bonding, and expertise significantly greater than most of its competitors, EMCOR
believes
1
<PAGE>
it has a significant competitive advantage. The mechanical and electrical
construction services industry has a higher growth rate than the overall
construction industry, due principally to the increase in content and complexity
of mechanical and electrical systems in all types of projects. This increased
content and complexity is, in part, a result of the expanded use of computers
and more technologically advanced voice and data communications, lighting, and
environmental control systems in all types of facilities. For these reasons,
buildings of all types consume more electricity per square foot than in the past
and thus need more extensive electrical distribution systems. In addition,
advanced voice and data communication systems require more sophisticated power
supplies and extensive low voltage and fiber-optic communications cabling.
Moreover, the need for greater environmental controls within a building, such as
the heightened need for climate control to maintain extensive computer systems
at optimal temperatures, and the growing demand for environmental control in
individual spaces, have created expanded opportunities for the mechanical and
electrical construction services and facilities services businesses.
Mechanical and electrical construction services primarily involve the
design, integration, installation and start-up of: (1) systems for the
generation and distribution of electrical power, including power cables,
conduits, distribution panels, transformers, generators, uninterruptible power
supply systems and related switch gear and controls; (2) lighting systems,
including fixtures and controls; (3) low-voltage systems, including fire alarm,
security, and process control systems; (4) voice and data communications
systems, including fiber-optic and low voltage copper cabling; (5) heating,
ventilation, air conditioning, refrigeration and clean-room process ventilation
systems and (6) plumbing, process and high-purity piping systems.
Mechanical and electrical construction services generally fall into one of
two categories: (1) large installation projects with contracts often in the
multi-million dollar range that involve construction of industrial and
commercial buildings and institutional and public works facilities or the
fit-out of large blocks of space within commercial buildings and (2) smaller
installation projects typically involving fit-out, renovation and retrofit work.
EMCOR's mechanical and electrical construction services operations
accounted for 84% of its 2001 revenues, of which approximately 52% of revenues
was related to new construction and approximately 48% was related to renovation
and retrofit projects. EMCOR provides mechanical and electrical construction
services for both large and small installation and renovation projects. Its
largest projects include those (1) for institutional use (such as water and
wastewater treatment facilities, hospitals, correctional facilities, schools and
research laboratories); (2) for industrial use (such as pharmaceutical
factories, steel, pulp and paper mills, chemical, automotive and semiconductor
plants, and oil refineries); (3) for transportation systems (such as airports
and transit systems); (4) for commercial use (such as office buildings, data
centers, hotels, casinos, convention centers, sports stadiums, shopping malls
and resorts) and (5) for power generation and power management projects. EMCOR's
largest projects, typically in excess of $10.0 million, are usually multi-year
projects and range in size up to, and occasionally in excess of, $50.0 million.
These projects represented about 21% of EMCOR's construction services revenues
in 2001.
EMCOR's projects of less than $10.0 million accounted for approximately 79%
of 2001 construction services revenues. These projects are typically completed
in less than a year. They usually involve mechanical and electrical construction
services when an end-user or owner undertakes construction or modification of a
facility to accommodate a specific use. These projects frequently require
mechanical and electrical systems to meet special needs such as redundant power
supply systems, special environmental controls and high-purity air systems,
sophisticated electrical and mechanical systems for data centers, including
those associated with internet service providers and electronic commerce,
trading floors in financial services businesses, new production lines in
manufacturing plants and office arrangements in existing office buildings. These
types of projects are not usually dependent upon the new construction market.
Demand for them is often prompted by the expiration of leases, changes in
technology or changes in the customer's plant or office layout in the normal
course of a customer's business.
EMCOR performs its services pursuant to contracts with owners, such as
corporations, municipalities and other governmental entities, general
contractors, systems suppliers, construction managers, developers, other
subcontractors and tenants of commercial properties. Institutional and public
works projects are frequently long-term, complex projects that require
significant technical and management skills and the financial strength to, among
other things, obtain bid and performance bonds, which are often a condition to
bidding for, and award of these projects.
EMCOR also installs and maintains street, highway, bridge and tunnel
lighting, traffic signals, computerized traffic control systems and signal and
communication systems for mass transit systems in several metropolitan areas. In
addition, in the United States, EMCOR manufactures and installs sheet metal air
handling systems for both its own mechanical construction operations and for
unrelated mechanical contractors. EMCOR also maintains welding and pipe
fabrication shops for some of its own mechanical operations.
EMCOR also provides customers with facility support services which are not
related to construction projects. These services, frequently referred to as
facilities services, generated approximately 16% of 2001 revenues. Following
completion of construction projects, EMCOR has historically provided technical
support services to many of its customers, which has involved maintenance and
service of mechanical and electrical systems. In addition, EMCOR provides other
services to owners, operators, tenants and managers of all types of facilities
both on a contract basis for a specified period of time and on an individual
task order basis.
2
<PAGE>
Facilities services include customer-based operations and maintenance,
mobile maintenance service, small modification and retrofit projects,
consulting, program development and management for energy systems and
maintenance activities. These services are provided to a wide range of
commercial, industrial and institutional facilities, including both those for
which EMCOR provided construction services and those for which construction
services were provided by others. The services are frequently bundled to provide
integrated service packages and may include services in addition to EMCOR's core
mechanical and electrical services.
EMCOR has experienced an expansion in the demand for its facilities
services which it believes is driven by customers' downsizing programs and their
focus on their own core competencies, the increasing technical complexity of
their facilities and their mechanical, electrical, voice and data and other
systems, and the need for increased reliability, especially in mechanical and
electrical systems. These trends have led to outsourcing and privatization
programs whereby customers in both the private and public sectors seek to
contract out those activities that support but are not directly involved in the
customer's business.
In the early 1990's, the market for facilities services grew rapidly in the
United Kingdom as a result of government initiatives. EMCOR's United Kingdom
subsidiary expanded its traditional technical service business in response to
these opportunities and established a dedicated unit to focus on the facilities
services business. This unit currently provides a full range of facilities
services to public and private sector customers under multi-year agreements,
including maintaining British Airways' facilities at Heathrow and Gatwick
Airports, GlaxoSmithKline research laboratories, the Department of Trade and
Industry offices in London, and the Jubilee Line Extension of the London
Underground. In the United Kingdom, EMCOR also provides facilities services at
several manufacturing plants for British Aerospace. In addition, the United
Kingdom operations provide on-call and mobile service support on a task-order or
contract basis, small renovation project work, data communications, security
system installation, and maintenance services.
EMCOR, by virtue of its construction and facilities services expertise, is
involved with private finance initiatives ("PFIs") sponsored by the British
government. The PFIs, which involve governmental bodies responsible, among other
things, for the national healthcare system, social security, air traffic
control, schools, and hospitals, seek to transfer ownership and management of
United Kingdom government facilities, including office buildings and
institutional buildings, to groups of financial institutions, consulting service
organizations, and others, which competitively bid for PFI contracts. EMCOR has
been awarded several contracts by such groups to provide mechanical and
electrical services, grounds maintenance and other ancillary services for
periods typically ranging from 5 to 35 years at buildings which were formerly
owned and managed by government bodies and privatized as part of the PFI
program. EMCOR has built on its United Kingdom experience to market its
facilities services business to international markets and currently provides
facilities services through a joint venture to several companies in South
Africa.
In 1997, EMCOR established a subsidiary to expand its facilities services
operations in North America patterned on its United Kingdom business. This unit
has built on existing mechanical and electrical services capabilities,
facilities services activities at existing facilities services subsidiaries, and
EMCOR's client relationships in order to expand the scope of services currently
offered and to develop packages of services for customers on a regional,
national and global basis. The facilities services operations have also used
acquisitions to expand services offered. In addition, management also has
targeted growth in facilities services opportunities arising from the
deregulation of the electric utility industry, deregulation and expansion of the
telecommunications industry and the REIT-driven consolidation of the commercial
real estate industry.
In April 2000, EMCOR and CB Richard Ellis Inc., a nationwide real estate
management company, created a limited liability company in which EMCOR has a
majority interest. Facilities services include the operation, maintenance and
supervision of building systems including heating, air conditioning, plumbing,
lighting, ventilating, electrical control and energy management systems.
The deregulation of, and increased competition in, the utility industry,
along with government mandates calling for reduced energy consumption by
government entities, have led to renewed focus on energy costs and conservation
measures. These measures typically include energy assessments and engineering
studies, retrofit construction to implement energy savings measures, and the
long-term operation and maintenance of energy savings measures to ensure
continued performance. Various subsidiaries of EMCOR participate in energy
savings programs, and EMCOR believes it has the ability to be a single source
provider of construction and facilities services required for energy assessment
and design, installation, and operations and maintenance of energy savings
measures.
EMCOR has also responded to opportunities in the rapidly changing electric
power generation market. Some of the projects awarded during 2001 included: (1)
fast-track electrical construction of eleven 40 megawatt peaking service turbine
generators at seven locations in New York City and Long Island for the New York
Power Authority; (2) return to service of a 2,200 megawatt nuclear generating
station in Pickering, Ontario and (3) mechanical installation at a new 1,048
megawatt natural gas-fired combined cycle power plant in McKittrick, California.
In addition, EMCOR continues to support its clients on the demand side of the
energy market by constructing new cogeneration and central power plants, as well
as planning and implementing energy management programs.
<PAGE>
EMCOR has also been successful in obtaining contract awards in the public
infrastructure markets in 2001. Some examples of major awards in this area
include: (1) total mechanical installation for the 40,000 seat open-air stadium
for the University of Connecticut in Hartford; (2) expansion of the central
chiller plant at the Miami, Florida International Airport which includes the
construction of a 59,000 square foot 10 story facility that will add 16,390 tons
of cooling capacity; (3) electrical work for the north runway improvements at
the
3
<PAGE>
Miami International Airport; (4) mechanical installation at a new 11 story,
300,000 square foot research center for Harvard Medical School in Boston,
Massachusetts; (5) electrical installation at a 30 million gallon wastewater
treatment facility in Detroit, Michigan and (6) electrical installation on the
"T-Rex" light rail and highway expansion project on Interstates 25 and 225 in
Denver, Colorado.
The deregulation and expansion of the telecommunications industry have led
to a rapid expansion of installed infrastructure, including wireless
communication systems and long distance networks, much of which has been built
by companies that do not have existing maintenance operations and which seek to
contract out such services. EMCOR has provided construction services for the
infrastructure of telecommunications companies and facilities services to
support their operations. In this industry, EMCOR has installed and maintained
equipment for suppliers such as Lucent, Nortel, and Siemens, and has provided
construction and maintenance services to local service providers and to users
who maintain their own systems.
EMCOR offers facilities services to customers on single-task and multi-task
basis depending on a customer's needs, under either short-term or multi-year
agreements. Services include mobile services dispatched from EMCOR's locations,
as well as site based operations and maintenance service which often require
that its employees be permanently assigned to customer premises twenty-four
hours per day.
EMCOR believes mechanical and electrical construction services and
facilities services activities are complementary, permitting it to offer
customers a comprehensive package of services. The ability to offer both
construction and facilities services should enhance EMCOR's competitive position
with customers. Furthermore, EMCOR's facilities services operations tend to be
less cyclical than its construction operations because facilities services are
more responsive to the needs of an industry's operations requirements rather
than its construction requirements.
COMPETITION
EMCOR believes that the mechanical and electrical construction services
business is highly fragmented and competitive. A majority of EMCOR's revenues
are derived from projects requiring competitive bids; however, an invitation to
bid is often conditioned upon prior experience, technical capability and
financial strength. EMCOR competes with national, regional and local companies,
many of which are small, owner-operated entities that operate in a limited
geographic area. There are few public companies focused on providing mechanical
and electrical construction services, although in the last five years more
public national and regional firms have been established. EMCOR is one of the
largest providers of mechanical and electrical construction services in the
United States, Canada, the United Kingdom and in the world. In the future,
significant competition may be encountered from public utilities and companies
attempting to consolidate mechanical and electrical construction services
companies. Competitive factors in the mechanical and electrical construction
services business include: (1) the availability of qualified and/or licensed
personnel; (2) reputation for integrity and quality; (3) safety record; (4) cost
structure; (5) relationships with customers; (6) geographic diversity; (7) the
ability to control project costs; (8) experience in specialized markets; (9) the
ability to obtain surety bonding; (10) adequate working capital; and (11) access
to bank credit.
While the facilities services business is also highly fragmented, a number
of large corporations such as Johnson Controls, Inc. and Fluor Corp. are engaged
in this field, and there are other companies seeking to consolidate facilities
services businesses. EMCOR's facilities services operations are well established
in the United Kingdom and are being developed through the growth of EMCOR's
existing operations in the United States, including its limited liability
company owned jointly with CB Richard Ellis Inc.
EMPLOYEES
EMCOR presently employs approximately 20,000 people, approximately 75% of
whom are represented by various unions pursuant to more than 225 collective
bargaining agreements between EMCOR's individual subsidiaries and local unions.
EMCOR believes that its employee relations are generally good. None of these
collective bargaining agreements are nationwide or regional in scope.
BACKLOG
EMCOR had backlog as of December 31, 2001 of approximately $2.4 billion,
compared with backlog of approximately $1.8 billion as of December 31, 2000.
Backlog includes facilities services revenues to be derived during the
immediately succeeding 12 months pursuant to then existing contracts. Backlog
increased by $0.6 billion as of December 31, 2001 compared to December 31, 2000.
Backlog attributable to United States construction and facilities services
increased approximately $0.4 billion as of December 31, 2001 when compared to
December 31, 2000, and backlog attributable to Canada and United Kingdom
construction and facilities services increased approximately $0.2 billion as of
December 31, 2001 when compared to December 31, 2000. For the year ended
December 31, 2001, EMCOR had approximately $3.42 billion in revenues compared to
more than $3.46 billion in revenues for the year ended December 31, 2000.
4
<PAGE>
ITEM 2. PROPERTIES
The operations of EMCOR are conducted primarily in leased properties. The
following table lists major facilities, both leased and owned:
LEASE
EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
--------- ------------
CORPORATE HEADQUARTERS
101 Merritt Seven Corporate Park
Norwalk, Connecticut ................ 20,805 4/7/05
OPERATING FACILITIES
1200 North Sickles Drive
Tempe, Arizona ...................... 29,000 Owned
4050 Cotton Center Boulevard
Phoenix, Arizona .................... 9,704 2/28/06
1000 N. Kraemer Place
Anaheim, California ................. 20,228 6/30/02
4520 California Avenue
Bakersfield, California ............. 12,682 8/31/05
3208 Landco Drive
Bakersfield, California ............. 49,875 6/30/02
1166 Fesler Street
El Cajun, California ................ 42,760 8/31/10
25601 Clawiter Road
Hayward, California ................. 34,800 6/30/03
24041 Amador Street
Hayward, California ................. 40,000 10/31/11
5 Vanderbilt
Irvine, California .................. 18,000 7/31/04
4462 Corporate Center Drive
Los Alamitos, California ............ 57,863 7/31/06
4464 Alvarado Canyon Road
San Diego, California ............... 40,000 10/31/07
825 Howe Road
Martinez, California ................ 109,800 12/31/02
414 Brannan Street
San Francisco, California ........... 10,283 3/31/03
9505 and 9525 Chesapeake Drive
San Diego, California ............... 25,124 12/31/06
4405 and 4420 Race Street
Denver, Colorado .................... 17,704 9/30/11
345 Sheridan Boulevard
Lakewood, Colorado .................. 63,000 Owned
367 and 377 Research Parkway
Meriden, Connecticut ................ 27,700 7/31/04 and 6/30/04
1781 N.W. North River Drive
Miami, Florida ...................... 11,285 Owned
5801 Miami Lakes Drive
Miami Lakes, Florida ................ 10,000 5/31/03
3145 Northwoods Parkway
Norcross, Georgia ................... 25,808 1/31/06
5
<PAGE>
LEASE
EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
--------- ------------
2100 South York Road
Oak Brook, Illinois ........................ 87,700 5/31/08
2655 Garfield Road
Highland, Indiana .......................... 45,816 6/30/06
300 Walnut Street
Owensboro, Kentucky ........................ 20,600 1/07/04
4530 Hollins Ferry Road
Baltimore, Maryland ........................ 26,792 Owned
306 Northern Avenue
Boston, Massachusetts ...................... 47,456 6/30/05
70-70D Hawes Way
Stoughton, Massachusetts ................... 24,400 12/31/05
22925-22931 Industrial Drive West
St. Clair Shores, Michigan ................. 19,000 4/30/05
1743 Maplelawn
Troy, Michigan ............................. 22,000 4/30/06
6060 Hix Road
Westland, Michigan ......................... 23,000 12/31/03
3555 W. Oquendo Road
Las Vegas, Nevada .......................... 90,000 11/30/03
6325 South Valley Boulevard
Las Vegas, Nevada .......................... 23,190 12/31/04
6754 W. Washington Avenue
Pleasantville, New Jersey .................. 45,400 1/14/03
26 West Street
Brooklyn, New York ......................... 15,000 Owned
111-01 and 109-15 14th Avenue
College Point, New York .................... 82,000 2/28/11
301 and 305 Suburban Avenue
Deer Park, New York ........................ 33,535 3/31/05
111 West 19th Street
New York, New York ......................... 26,885 5/31/03
Two Penn Plaza
New York, New York ......................... 57,200 2/01/06
4906 Barrow Avenue
Cincinnati, Ohio ........................... 16,300 9/30/03
4914 Ridge Avenue
Cincinnati, Ohio ........................... 8,100 9/30/03
2300-2310 International Street
Columbus, Ohio ............................. 25,500 10/31/05
5550 Airline Drive
Houston, Texas ............................. 78,483 12/31/09
515 Norwood Road
Houston, Texas ............................. 26,676 12/31/09
1574 South West Temple
Salt Lake City, Utah ....................... 64,170 12/31/06
2925-2941 Space Road
Richmond, Virginia ......................... 26,000 8/19/03
22930 Shaw Road
Dulles, Virginia ........................... 32,600 7/31/06
6
<PAGE>
LEASE
EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
--------- ------------
109-D Executive Drive
Dulles, Virginia ........................... 19,000 8/31/04
1 Thameside Centre
Kew Bridge Road
Kew Bridge, Middlesex, United Kingdom ...... 14,000 12/22/12
86 Talbot Road
Old Trafford, Manchester, United Kingdom ... 24,300 12/24/06
2116 Logan Avenue
Winnipeg, Manitoba, Canada ................. 19,800 Owned
3455 Landmark Boulevard
Burlington, Ontario, Canada ................ 16,100 Owned
EMCOR believes that all of its property, plant and equipment are well
maintained, in good operating condition and suitable for the purposes for which
they are used.
See Note K to the consolidated financial statements for additional
information regarding lease costs. EMCOR utilizes substantially all of its
leased facilities and believes there will be no difficulty either in negotiating
the renewal of its real property leases as they expire or in finding alternative
space, if necessary.
ITEM 3. LEGAL PROCEEDINGS
In February 1995, as part of an investigation by the New York County
District Attorney's office into the business affairs of a general contractor
that did business with EMCOR's subsidiary, Forest Electric Corp. ("Forest"), a
search warrant was executed at Forest's executive offices. On July 12, 2000,
Forest was served with a Subpoena Duces Tecum to produce certain documents as
part of a broader investigation by the New York County District Attorney's
office into illegal business practices in the New York City construction
industry. Forest has been informed by the New York County District Attorney's
office that it and certain of its officers are targets of the investigation.
Forest has produced documents in response to the subpoena and intends to
cooperate fully with the District Attorney's office investigation as it
proceeds.
On July 31, 1998 a former employee of a subsidiary of EMCOR filed a
class-action complaint on behalf of the participants in two employee benefit
plans sponsored by EMCOR against EMCOR and other defendants for breach of
fiduciary duty under the Employee Retirement Income Security Act. All of the
claims relate to alleged acts or omissions which occurred during the period May
1991 to December 1994. The principal allegations of the complaint are that the
defendants breached their fiduciary duties by causing the plans to purchase and
hold stock of EMCOR when it was then known as JWP Inc. and when the defendants
knew or should have known it was imprudent to do so. The action has been
settled, subject to court approval. The amount to be paid by EMCOR in connection
with the proposed settlement will not be material.
In December 2001, the Company's Canadian subsidiary Comstock Canada Limited
("Comstock") commenced an action against Atomic Energy of Canada Limited
("AECL") claiming approximately Cdn. $6.0 million in connection with Comstock's
work on two medical isotope nuclear reactors and associated work at AECL's
facility at Chalk River, Ontario. Comstock's claim is for holdback, unpaid
change requests, loss of productivity and extended duration costs. AECL has
filed a defense denying Comstock's claim and counterclaimed against Comstock for
Cdn. $47.0 million claiming substantial deficiencies in Comstock's work which
are alleged to have resulted in the need to replace a portion of Comstock's work
and installed materials and the need to reinstall various components of the
reactor systems. These deficiencies are alleged to have caused a significant
delay in AECL's ability to obtain the necessary certifications for operation of
the systems. To date, there has been no document exchange or discovery in this
litigation. The Company believes it has good and meritorious defenses to the
AECL counterclaim.
Substantial settlements or damage judgements arising out of these matters
could have a material adverse effect on EMCOR's business, operating results and
financial condition.
In addition to the above, EMCOR is involved in other legal proceedings and
claims asserted by and against EMCOR, which have arisen in the ordinary course
of business. EMCOR believes it has a number of valid defenses to these actions,
and EMCOR intends to vigorously defend or assert these claims and does not
believe that a significant liability will result. However, EMCOR cannot predict
the outcome thereof or the impact that an adverse result of the matters
discussed above will have upon EMCOR's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
7
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
FRANK T. MACINNIS, Age 55; Chairman of the Board and Chief Executive
Officer of the Company since April 1994 and President of the Company from April
1994 to April 1997. From April 1990 to April 1994, Mr. MacInnis served as
President and Chief Executive Officer, and from August 1990 to April 1994 as
Chairman of the Board, of Comstock Group, Inc., a nationwide electrical
contracting company. From 1986 to April 1990, Mr. MacInnis was Senior Vice
President and Chief Financial Officer of Comstock Group, Inc. In addition, from
1986 to April 1994, Mr. MacInnis was also President of Spie Group Inc., which
had interests in Comstock Group, Inc., Spie Construction Inc., a Canadian
pipeline construction company, and Spie Horizontal Drilling Inc., a U.S. company
engaged in underground drilling for the installation of pipelines and
communications cable.
JEFFREY M. LEVY, Age 49; President of the Company since April 1997 and
Chief Operating Officer of the Company since February 1994, Executive Vice
President of the Company from November 1994 to April 1997, Senior Vice President
of the Company from December 1993 to November 1994. From May 1992 to December
1993, Mr. Levy was President and Chief Executive Officer of the Company's
subsidiary EMCOR Mechanical/Electrical Services (East) Inc. From January 1991 to
May 1992, Mr. Levy served as Executive Vice President and Chief Operating
Officer of Lehrer McGovern Bovis, Inc., a construction management and
construction company.
SHELDON I. CAMMAKER, Age 62; Executive Vice President and General Counsel
of the Company since September 1987 and Secretary of the Company since May 1997.
Prior to September 1987, Mr. Cammaker was a senior partner of the New York City
law firm of Botein, Hays, & Sklar.
LEICLE E. CHESSER, Age 55; Executive Vice President and Chief Financial
Officer of the Company since May 1994. From April 1990 to May 1994, Mr. Chesser
served as Executive Vice President and Chief Financial Officer of Comstock
Group, Inc., and from 1986 to May 1994, Mr. Chesser was also Executive Vice
President and Chief Financial Officer of Spie Group, Inc.
R. KEVIN MATZ, Age 43; Vice President and Treasurer of the Company since
April 1996 and Staff Vice President - Financial Services of the Company from
March 1993 to April 1996. From March 1991 to March 1993, Mr. Matz was Treasurer
of Sprague Technologies Inc., a manufacturer of electronic components.
MARK A. POMPA, Age 37; Vice President and Controller of the Company since
September 1994.
8
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION. On November 16, 2000, EMCOR's common stock began
trading on the New York Stock Exchange under the symbol "EME". Prior to that
time, EMCOR's common stock had been traded on the Nasdaq National Market tier of
the Nasdaq Stock Market.
The following table sets forth high and low sales prices for the common
stock for the periods indicated as reported by the Nasdaq National Market
through November 15, 2000, and thereafter, as reported by the New York Stock
Exchange:
2001 HIGH LOW
---- ------ -------
First Quarter ......................... $31.42 $23.75
Second Quarter ........................ $45.98 $29.87
Third Quarter ......................... $45.20 $30.60
Fourth Quarter ........................ $49.14 $31.74
2000 HIGH LOW
---- ------ -------
First Quarter ......................... $24.25 $17.50
Second Quarter ........................ $24.75 $17.75
Third Quarter ......................... $28.13 $22.25
Fourth Quarter (through November 15) .. $26.25 $22.75
Fourth Quarter (commencing November 16) $26.00 $23.00
HOLDERS. As of February 15, 2002, there were 138 shareholders of record
and, as of that date, EMCOR estimates there were approximately 3,800 beneficial
owners holding stock in nominee or "street" name.
DIVIDENDS. EMCOR did not pay dividends on its common stock during 2001 or
2000, and it does not anticipate that it will pay dividends on its common stock
in the foreseeable future. EMCOR's working capital credit facility limits the
payment of dividends on its common stock.
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data has been derived from audited
financial statements and should be read in conjunction with the consolidated
financial statements, the related notes thereto and the report of independent
public accountants thereon, included elsewhere in this Form 10-K and in
previously filed annual reports on Form 10-K of EMCOR.
<TABLE>
<CAPTION>
INCOME STATEMENT DATA YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues .............................................. $3,419,854 $3,460,204 $2,893,962 $2,210,374 $1,950,868
Gross profit .......................................... 391,823 357,817 295,907 223,287 182,183
Operating income ...................................... 88,682 78,925 58,091 37,224 27,414
Income before extraordinary items ..................... 50,012 40,089 27,821 17,092 8,581
Extraordinary items--loss on early
extinguishment of debt, net of income taxes ......... -- -- -- (4,777) (1,004)
---------- ---------- ---------- ---------- ----------
Net income ............................................ $ 50,012 $ 40,089 $ 27,821 $ 12,315 $ 7,577
---------- ---------- ---------- ---------- ----------
Basic earnings per share:
Income before extraordinary items ..................... $ 3.86 $ 3.84 $ 2.86 $ 1.67 $ 0.90
Extraordinary items--loss on early
extinguishment of debt, net of income taxes ......... -- -- -- (0.47) (0.11)
---------- ---------- ---------- ---------- ----------
Basic earnings per share .............................. $ 3.86 $ 3.84 $ 2.86 $ 1.20 $ 0.79
========== ========== ========== ========== ==========
Diluted earnings per share:
Income before extraordinary items ..................... $ 3.40 $ 2.95 $ 2.21 $ 1.46 $ 0.84
Extraordinary items--loss on early
extinguishment of debt, net of income taxes ......... -- -- -- (0.35) (0.10)
---------- ---------- ---------- ---------- ----------
Diluted earnings per share ............................ $ 3.40 $ 2.95 $ 2.21 $ 1.11 $ 0.74
========== ========== ========== ========== ==========
---------------------------------------------------------------
BALANCE SHEET DATA AS OF DECEMBER 31,
---------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- --------- ----------
Stockholders' equity (a) .............................. $ 421,933 $ 233,503 $ 170,249 $119,816 $ 95,323
Total assets .......................................... $1,349,664 $1,261,864 $1,052,246 $801,002 $660,654
Goodwill .............................................. $ 56,011 $ 67,625 $ 68,009 $ 22,745 $ 927
Notes payable ......................................... $ 573 -- $ 1,150 $ 8,314 --
Borrowings under working capital credit lines ......... -- -- -- -- $ 9,497
Other long-term debt, including current maturities .... $ 973 $ 116,056 $ 116,534 $116,086 $ 62,657
Capital lease obligations ............................. $ 249 $ 573 $ 554 $ 837 $ 1,482
</TABLE>
- ----------
(a) No cash dividends on EMCOR's common stock have been paid during the past
five years.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
HIGHLIGHTS
Revenues for the year ended December 31, 2001 were $3.42 billion, compared
to $3.46 billion and $2.89 billion for the years ended December 31, 2000 and
1999, respectively. Net income was $50.0 million for 2001, an increase of $9.9
million, or 24.7%, from $40.1 million for 2000. For 1999, net income was $27.8
million. Diluted earnings per share on net income were $3.40 per share for 2001,
compared to $2.95 per share for 2000 and $2.21 per share for 1999.
OPERATING SEGMENTS
EMCOR's business consists of the following operating segments: United
States electrical construction and facilities services, United States mechanical
construction and facilities services, United States other services, Canada
construction and facilities services, United Kingdom construction and facilities
services and Other international construction and facilities services. The
segments (i) United States other services primarily represents those operations
which principally provide energy consulting, maintenance, office and facility
management, and central energy systems monitoring services and (ii) Other
international construction and facilities services represents EMCOR's operations
outside of the United States, Canada, and the United Kingdom, primarily South
Africa, the Middle East and Europe, performing electrical construction,
mechanical construction and facilities services.
RESULTS OF OPERATIONS
EMCOR's significant accounting policies are described in Note B to the
consolidated financial statements included in Item 8 of this Form 10-K. EMCOR
believes its most critical accounting policy is revenue recognition from
long-term contracts for which EMCOR uses the percentage-of-completion method of
accounting. Percentage of completion accounting is the prescribed method of
accounting for long-term contracts in accordance with accounting principles
generally accepted in the United States and accordingly the method used for
revenue recognition within EMCOR's industry. Percentage-of-completion is
measured principally by the percentage of costs incurred to date for each
contract to the estimated total costs for each contract at completion. Certain
of EMCOR's electrical contracting business units measure
percentage-of-completion by the percentage of labor costs incurred to date for
each contract to the estimated total labor costs for such contract. Provisions
for estimated losses on uncompleted contracts are made in the period in which
such losses are determined. Application of percentage-of-completion accounting
results in the recognition of costs and estimated earnings in excess of billings
on uncompleted contracts within the consolidated balance sheets. Costs and
estimated earnings in excess of billings on uncompleted contracts reflected on
the consolidated balance sheets arise when revenues have been recognized but the
amounts cannot be billed under the terms of the contracts. Such amounts are
recoverable from customers upon various measures of performance, including
achievement of certain milestones, completion of specified units or completion
of the contract. Costs and estimated earnings in excess of billings on
uncompleted contracts also includes amounts EMCOR seeks or will seek to collect
from customers or others for errors or changes in contract specifications or
design, contract change orders in dispute or unapproved as to both scope and
price, or other customer-related causes of unanticipated additional contract
costs. Such amounts are recorded at estimated net realizable value. Due to
uncertainties inherent within estimates employed to apply
percentage-of-completion accounting, it is possible that estimates will be
revised as project work progresses. Application of percentage of completion
accounting requires that the impact of those revised estimates be reported in
the consolidated financial statements prospectively.
REVENUES
Revenues for the year ended December 31, 2001 decreased 1.2% to $3.42
billion, compared to $3.46 billion of revenues for 2000. The $40.3 million
decrease in revenues for 2001 compared to 2000 was primarily due to reduced
levels of fast-track data center construction in the New York, Chicago,
Washington D. C. and California markets, as well as a reduced level of activity
in the Las Vegas and Ohio markets and Canada. The decrease was partially offset
by growth in revenues associated with energy generation projects and
transportation infrastructure construction on the west and east coasts and
revenue growth from various activities in the Boston area market. Revenues for
2000 of $3.46 billion represented a 19.7% increase over revenues of $2.89
billion for 1999. The $566.2 million increase in revenues for 2000 compared to
1999 was attributable to (1) revenue growth from EMCOR's operations (excluding
revenues of Building Technology Engineers of North America, LLC ("BTENA"),
EMCOR's joint venture with CB Richard Ellis Inc., and 1999 acquisitions) of
$420.2 million, and to (2) revenues from BTENA and 1999 acquisitions which
approximated $146.0 million in incremental revenues during 2000.
The following table presents EMCOR's revenues by operating segment and the
approximate percentage of total revenues for the years ended December 31, 2001,
2000 and 1999 (in millions, except for percentages):
<PAGE>
<TABLE>
<CAPTION>
% OF % OF % OF
2001 TOTAL 2000 TOTAL 1999 TOTAL
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
United States electrical construction and facilities services ....... $1,334.7 39% $1,350.7 39% $ 993.1 34%
United States mechanical construction and facilities services ....... 1,202.1 35% 1,262.1 36% 1,067.1 37%
United States other services ........................................ 209.7 6% 163.9 5% 82.8 3%
-------- -------- --------
Total United States operations ...................................... 2,746.5 80% 2,776.7 80% 2,143.0 74%
Canada construction and facilities services ......................... 198.2 6% 237.0 7% 196.7 7%
United Kingdom construction and facilities services ................. 463.6 14% 446.2 13% 553.7 19%
Other international construction and facilities services ............ 11.6 0.3 0.6 --
-------- -------- --------
Total worldwide operations .......................................... $3,419.9 100% $3,460.2 100% $2,894.0 100%
======== ======== ========
</TABLE>
Revenues for EMCOR's United States electrical construction and facilities
services segment for 2001 decreased by $16.0 million, or 1.2%, compared to 2000.
The decrease in revenues was due to reduced levels of fast-track data center and
commercial construction in the New York, Chicago, Washington D. C. and
California markets, as well as reduced levels of activity in the Las Vegas and
Ohio markets. The decrease was partially offset by increases in revenues
associated with energy generation and transportation infrastructure construction
markets on the west and east coasts and increased revenues from various
activities in the Salt Lake City market. The $357.6 million, or 36.0%, increase
in 2000 revenues compared to 1999, was attributable to both new construction and
renovation and retrofit jobs for commercial construction and the communication
infrastructure and technology markets. Partially offsetting this overall
increase was a decrease in new construction revenues from casino work, although
this was partially offset by increased renovation and retrofit work at casinos.
Additionally, industrial construction related renovation and retrofit revenues
decreased principally due to industrial facilities not having as many shut-downs
in production to perform major maintenance during 2000.
United States mechanical construction and facilities services revenues
decreased $60.0 million, or 4.8%. The decrease in revenues was due to reduced
levels of fast-track data center construction, reduced levels of activity in the
Las Vegas and Denver markets and planned reductions in operations at EMCOR's
Poole & Kent subsidiary operations in the North and South Carolina markets. The
decrease in rev-
11
<PAGE>
enues was partially offset by increased revenues associated with energy
generation construction on the west and east coasts and increased revenues from
the Boston area market. A $195.0 million, or 18.3%, increase in revenues for
2000 compared to 1999 was primarily attributable to revenue growth from EMCOR's
operations excluding acquisitions. Eastern and Western United States based
operations were the major contributors to the increase in revenues due to the
continued strong renovation market and new construction market in New York City,
Houston, Connecticut, Denver and California. Revenues from 1999 acquisitions
contributed approximately $77.5 million of the increase.
United States other services revenues, which include those operations which
principally provide energy consulting, maintenance, office and facility
management, and central energy system monitoring services increased by $45.8
million, or 27.9%, for 2001 compared to 2000. The increase in revenues was
primarily attributable to an increase in building maintenance services provided
to customers. Revenues for 2000 increased by $81.1 million compared to 1999. The
primary source of the increase in 2000 was revenues of $68.6 million from BTENA
and companies acquired during 1999, as well as increases from other United
States operations.
Revenues of Canada construction and facilities services decreased by $38.8
million, or 16.4%, for 2001 as compared to 2000 revenues. The decrease in
revenues was primarily attributable to project start date delays in Eastern
Canada and a reduction of revenues in Western Canada due to timing of
anticipated projects. The $40.3 million, or 20.5%, increase in revenues for 2000
compared with 1999 was attributable to an increased level of activities in
Eastern Canada, especially in the second half of 2000.
United Kingdom construction and facilities services revenues increased
$17.4 million, or 3.9%, for 2001 compared to 2000 revenues principally due to
continued growth in construction and facilities markets in the United Kingdom
during the first half of 2001. The $107.5 million, or 19.4%, decrease in 2000
revenues compared with 1999 revenues was principally due to the completion of
the Jubilee Line project in London at the end of 1999.
Revenues of the Other international construction and facilities services
increased for 2001 to $11.6 million, compared to $0.3 million for 2000 and $0.6
million for 1999. Other international construction and facilities services
primarily consist of EMCOR's operations in the Middle East, South Africa and
Europe. The increase in revenues was due to projects performed in Europe by
EMCOR's new technology division. The remainder of the work performed in this
operating segment is accounted for under the equity method of accounting because
EMCOR has less than majority ownership in these foreign joint ventures, and
accordingly, revenues attributable to such joint ventures are not reflected as
revenues in the consolidated financial statements. EMCOR continues to pursue new
business selectively in these markets; however, the availability of
opportunities has been significantly reduced as a result of local economic
factors, particularly in the Middle East.
COST OF SALES AND GROSS PROFIT
The following table presents EMCOR's cost of sales, gross profit, and gross
profit as a percentage of revenues, for the years ended December 2001, 2000 and
1999 (in millions, except for percentages):
2001 2000 1999
-------- -------- --------
Cost of sales .............................. $3,028.0 $3,102.4 $2,598.1
Gross profit ............................... $ 391.8 $ 357.8 $ 295.9
Gross profit as a percentage of revenues ... 11.5% 10.3% 10.2%
Gross profit increased $34.0 million, or 9.5%, for 2001 compared to 2000.
Gross profit as a percentage of revenues was 11.5% for 2001 compared to 10.3%
for 2000. The dollar increase in gross profit, as well as the increase in gross
profit as a percentage of revenues, were primarily due to an increase in gross
profits realized due to the type and location of construction and facilities
services contracts performed and continued improvement in project management.
Gross profit increased $61.9 million, or 20.9%, for 2000 compared to 1999, and
gross profit as a percentage of revenues increased to 10.3% for the 2000 period
compared with 10.2% for 1999. The increase in gross profit dollars from 1999 to
2000 was due to the increase in revenues of EMCOR's operations excluding
acquisitions, as well as gross profit from companies acquired in 1999. The
increase in gross profit as a percentage of revenues was primarily a result of
an increase in gross profits on projects due to overall favorable market
conditions partially offset by losses on jobs in the South and North Carolina
markets undertaken by EMCOR's Poole & Kent subsidiary prior to its acquisition
by EMCOR.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The following table presents EMCOR's selling, general and administrative
expenses, and selling, general and administrative expenses as a percentage of
revenues, for the years ended December 31, 2001, 2000 and 1999 (in millions,
except for percentages):
2001 2000 1999
------- ------- -------
Selling, general and administrative expenses ... $ 303.1 $ 278.9 $ 237.8
Selling, general and administrative expenses
as a percentage of revenues .................. 8.9% 8.1% 8.2%
Selling, general and administrative expenses
as a percentage of revenues, excluding
amortization of goodwill ..................... 8.7% 7.9% 8.1%
12
<PAGE>
Selling, general and administrative expenses increased $24.2 million, or
8.7%, between 2001 and 2000. As a percentage of revenues, total selling, general
and administrative expenses increased to 8.9% in 2001 as compared to 8.1% in
2000. Selling, general and administrative expenses increased $41.1 million, or
17.3%, between 2000 and 1999. As a percentage of revenues, total selling,
general and administrative expenses decreased to 8.1% in 2000 as compared to
8.2% in 1999. The dollar increase and increase in expenses as a percentage of
revenues during 2001 compared to 2000 was primarily attributable to the type and
location of construction and facilities services contracts performed, increased
variable overhead costs associated with marketing and business development
efforts and expansion of information technology infrastructure support. The
dollar increase in selling, general and administrative expenses for 2000 as
compared to 1999 was attributable to the increase in revenues and corresponding
increases in variable selling, general and administrative expenses required to
support the increased revenue base, incremental fixed costs to support the
current growth in operations, plus selling, general and administrative expenses
associated with BTENA and 1999 acquisitions. The decrease in selling, general
and administrative expenses, as a percentage of revenues for 2000, as compared
to 1999 was primarily due to the leveraging of fixed costs over increased
revenues.
OPERATING INCOME
The following table presents EMCOR's operating income, and operating income
as a percentage of segment revenues, for the years ended December 31, 2001, 2000
and 1999 (in millions, except for percentages):
<TABLE>
<CAPTION>
% OF % OF % OF
SEGMENT SEGMENT SEGMENT
2001 REVENUES 2000 REVENUES 1999 REVENUES
------ -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Operating income (loss):
United States electrical construction and facilities services ........... $ 75.3 5.6% $58.6 4.3% $38.5 3.9%
United States mechanical construction and facilities services ........... 41.4 3.4% 35.9 2.8% 38.0 3.6%
United States other services ............................................ (7.2) -- (5.5) -- (4.6) --
------ ----- -----
Total United States operations .......................................... 109.5 4.0% 89.0 3.2% 71.9 3.4%
Canada construction and facilities services ............................. 2.3 1.2% 5.2 2.2% 4.0 2.0%
United Kingdom construction and facilities services ..................... 7.2 1.6% 6.0 1.3% 3.2 0.6%
Other international construction and facilities services ................ (1.2) -- 0.5 -- (0.3) --
Corporate administration ................................................ (29.1) -- (21.8) -- (20.7) --
------ ----- -----
Total worldwide operations .............................................. 88.7 2.6% 78.9 2.3% 58.1 2.0%
Other corporate items:
Interest expense ........................................................ (4.8) (9.7) (10.5)
Interest income ......................................................... 5.6 2.4 2.1
------ ----- -----
Income before taxes ..................................................... $ 89.5 $71.6 $49.7
====== ===== =====
</TABLE>
Operating income increased for the United States electrical construction
and facilities services operations for 2001 compared to 2000. The dollar
increase in operating income for 2001 of $16.7 million, or 28.5%, as compared to
2000, and increase as a percentage of revenues, was attributable to an increase
in activity associated with energy generation and transportation infrastructure
construction projects on the west and east coasts, and increased operating
income from various activities in the Salt Lake City market. This increase in
operating income was partially offset by reduced levels of fast-track data
center construction activity in San Francisco, Washington D. C. and Denver
markets and the decrease in construction activity in the Las Vegas market.
Operating income for 2000 for the United States electrical construction and
facilities services operations increased $20.1 million, or 52.2%, from 1999
levels. The increase in operating income and operating income, as a percentage
of revenues, for 2000 versus 1999 was attributable to the continuing favorable
market conditions due to increased renovation and retrofit projects as well as
new construction spending, particularly in the Eastern and Western United
States.
United States mechanical construction and facilities services operating
income increased $5.5 million for 2001, a 15.3% increase over 2000 amounts. The
increase in dollars, and as a percentage of revenues, was primarily due to (i)
energy generation construction activity on the west and east coasts, partially
offset by a reduction of construction activity in the Las Vegas market and (ii)
improved results at certain of EMCOR's Poole & Kent subsidiary operations which
had losses in the prior year. Operating income for 2000 compared to 1999
decreased $2.1 million, or 5.5%, and as a percentage of revenues decreased to
2.8% from 3.6%, primarily due to losses on jobs in the South and North Carolina
markets undertaken by EMCOR's Poole & Kent subsidiary prior to its acquisition
by EMCOR offsetting the increased operating income for most of the operations in
this segment.
United States other services operating losses increased $1.7 million for
2001 as compared to 2000 primarily due to costs associated with the continued
development of the consulting operations and maintenance services activities of
EMCOR. These operating losses for 2000 compared to 1999 increased by $0.9
million also due to the development costs of the consulting operations and
maintenance services.
Canada construction and facilities services operating income decreased by
$2.9 million for 2001 compared to 2000 principally due to project start date
delays in Eastern Canada for certain projects in backlog and a reduction of
revenues in Western Canada due to the timing of anticipated projects. Operating
income as a percentage of revenues decreased to 1.2% in 2001 compared to 2.2% in
2000 also
13
<PAGE>
due to the project start delays and the timing of anticipated projects. For 2000
compared to 1999, operating income increased by $1.2 million principally due to
an increased level of activities in Eastern Canada. The increase in operating
income as a percentage of revenues for 2000 of 2.2% compared to 2.0% in 1999 was
primarily due to the jobs performed in 2000 having higher gross profit margins.
United Kingdom construction and facilities services operating income
increased by $1.2 million for 2001 compared to 2000. The improvement was
primarily attributable to growth in construction and facilities markets in the
United Kingdom during the first half of 2001. For 2000, operating income
increased by $2.8 million as compared to 1999. This increase was primarily
attributable to the commencement of new projects that resulted in higher gross
profits in 2000 than in previous years due to improved market conditions.
Other international construction and facilities services operating losses
were $1.2 million for 2001 compared to operating income of $0.5 million in 2000
and operating losses of $0.3 million in 1999. These operating losses in 2001
were attributable to project losses related to a Middle East joint venture,
partially offset by operating income for projects in the new technology division
in Europe. EMCOR continues to pursue new business selectively in the Middle
Eastern, South African and European markets; however, the availability of
opportunities has been significantly reduced as a result of local economic
factors, particularly in the Middle East. Therefore, the business activities in
this segment were not significant for 2000 and 1999.
General corporate expenses for 2001 increased by $7.3 million from 2000
levels, and increased by $1.1 million between 2000 and 1999. The increases are
attributable to increased variable overhead costs associated with marketing and
business development efforts, including transfer from subsidiary operations to
corporate administration of certain individuals, some of whom were previously
involved in subsidiary operations, to monitor EMCOR's overall operations,
provide strategic direction and support future business activity. Additionally,
operations support activities such as information technology infrastructure
support have been expanded to meet the level of service expected by our clients.
Interest expense decreased by $4.9 million for 2001 compared to 2000
principally due to the conversion of EMCOR's $115.0 million of 5.75% Convertible
Subordinated Notes into approximately 4.2 million shares of common stock in the
second quarter of 2001. Interest expense decreased by $0.8 million in 2000
compared to 1999 primarily due to reduced borrowings under EMCOR's working
capital credit facility.
Interest income increased by $3.2 million for 2001 compared with 2000.
Interest income increased by $0.3 million for 2000 compared to 1999. The
increase in interest income for 2001 compared to 2000 was due to increased cash
on hand in 2001, partially offset by lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES
On March 18, 1998, EMCOR sold, pursuant to an underwritten public offering,
$115.0 million principal amount of 5.75% Convertible Subordinated Notes. During
the second quarter of 2001, EMCOR called the 5.75% Convertible Subordinated
Notes for redemption. As a consequence, all of the Convertible Subordinated
Notes were converted into approximately 4.2 million shares of EMCOR common
stock.
The following table presents EMCOR's net cash provided by (used in)
operating activities, investing activities and financing activities for the
years ended December 31, 2001 and 2000 (in millions):
2001 2000
------- -------
Net cash provided by operating activities .............. $ 81.1 $ 91.4
Net cash used in investing activities .................. $(31.2) $(11.1)
Net cash provided by (used in) financing activities .... $ 2.2 $ (1.2)
The Company's consolidated cash balance increased by $52.1 million from
$137.7 million at December 31, 2000 to $189.8 million at December 31, 2001. Net
cash provided by operating activities for 2001 was $81.1 million, a decrease of
$10.3 million from $91.4 million for 2000. The cash provided by operating
activities for 2001 was primarily due to increased net income, increased accrued
expenses and decreased accounts receivable, partially offset by increased
contracts in progress, net and decreased accounts payable. The cash provided by
the Provision in lieu of income taxes of $21.4 million for 2001, will not recur
beginning in 2002 as EMCOR has substantially used the net operating loss
carryforwards attributable to this item. Net cash used in investing activities
for 2001 of $31.2 million consisted primarily of $8.8 million for earn-out
payments pertaining to historical acquisitions, net disbursement for other
investments of $6.5 million and $17.9 million for the purchase of property,
plant and equipment. This activity compares to net cash used in investing
activities for 2000 of $16.7 million for the purchase of property plant and
equipment, $4.2 million for payments for acquisitions and related earn-out
agreements offset by $7.0 million of proceeds from other investments and $2.8
million in proceeds from the sale of assets. Net cash provided by financing
activities for 2001 of $2.2 million was primarily attributable to proceeds from
the exercise of stock options.
On December 22, 1998, EMCOR restated a June 19, 1996 credit facility; the
amended credit facility provides EMCOR with a credit facility for borrowings of
up to $150.0 million. The amended credit facility, which has an expiration date
of June 30, 2003, is guaranteed by certain direct and indirect subsidiaries of
EMCOR. The amended credit facility is secured by substantially all of the assets
of EMCOR and most of its subsidiaries, and it provides for borrowing capacity
available in the form of revolving loans and/or letters of credit. The amended
credit facility contains various covenants, including among other things,
maintenance of certain financial ratios and
14
<PAGE>
significant restrictions with respect to cumulative aggregate payments for
dividends, common stock repurchases, investments, acquisitions, indebtedness,
capital expenditures, and prepayments of subordinated debt, all as set forth
therein. The annual facility fee is 0.25% per $1,000 of the total credit
facility. The revolving loans bear interest at (1) a rate which is the prime
commercial lending rate announced by Harris Trust and Savings Bank from time to
time (4.75% at December 31, 2001) plus 0% to 0.5%, based on certain financial
tests or (2) at a LIBOR rate (2.04% at December 31, 2001) plus 1.25% to 2.0%
based on certain financial tests. The interest rates in effect at December 31,
2001 were 4.75% and 3.29%, respectively. Letters of credit fees issued under the
credit facility ranging from 0.5% to 2.0% are charged based on type of letters
of credit issued and certain financial tests. As of December 31, 2001 and 2000,
EMCOR had approximately $20.5 million and $12.1 million of letters of credit
outstanding, respectively. No revolving loans were outstanding under the credit
facility at December 31, 2001 or 2000.
In December 2000, the Company's Canadian subsidiary, Comstock Canada Ltd.,
renewed a credit agreement with a bank providing for an overdraft facility of up
to Cdn. $0.5 million. The facility is secured by a standby letter of credit and
provides for interest at the bank's prime rate (4.0% at December 31, 2001).
There were no borrowings outstanding under this credit agreement at December 31,
2001 or 2000.
A subsidiary of EMCOR has guaranteed indebtedness of a venture in which it
has a 40% interest; the other venture partner, Baltimore Gas and Electric, has a
60% interest. The venture designs, constructs, owns, operates, leases and
maintains facilities to produce chilled water for sale to customers for use in
cooling. These guarantees are not expected to have a material adverse effect on
EMCOR's financial position or results of operations. Under one guarantee, each
of the venturers is jointly and severally liable for the venture's $25.0 million
borrowing due December 2031. The other guarantee is related to the venture's
$50.0 million revolving credit facility expiring September 2002, under which
EMCOR's subsidiary guaranteed 40% of the indebtedness.
EMCOR believes that current cash balances and borrowing capacity available
under lines of credit, combined with cash expected to be generated from
operations, will be sufficient to provide short-term and foreseeable long-term
liquidity and meet expected capital expenditure requirements.
The primary source of liquidity for EMCOR has been, and is expected to
continue to be, cash generated by operating activities. EMCOR also maintains a
credit facility that may be utilized, among other things, to meet short-term
liquidity needs in the event that net cash generated by operating activities is
insufficient, or to enable EMCOR to seize opportunities to participate in joint
ventures or to make acquisitions that may require access to cash on short
notice.
Long-term liquidity requirements can be expected to be met through cash
generated from operating activities, the credit facility, and the sale of
various secured or unsecured debt or equity interests in the public and private
markets. Based on its current credit rating and financial condition, EMCOR can
reasonably expect to be able to issue medium and long-term debt instruments or
equity. EMCOR's primary revenue risk factor continues to be the level of demand
for non-residential construction services, which is in turn influenced by
macroeconomic trends including interest rates and governmental economic policy.
In order to provide protection against demand cycles in private sector
construction services, EMCOR has increased its participation, and its backlog of
contracts, in the public sector and in facilities services. Liquidity will be
impacted in future periods by EMCOR's recent agreement to acquire nineteen
subsidiaries of Comfort Systems USA, Inc. ("Comfort Systems"). See the
Subsequent Event disclosure that follows in this item for additional
information.
CERTAIN INSURANCE MATTERS
As of December 31, 2001, EMCOR was utilizing approximately $20.5 million of
letters of credit obtained under its credit facility as collateral for its
insurance obligations.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141") and Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires all business
combinations be accounted for using the purchase method of accounting and that
certain intangible assets acquired in a business combination be recognized as
assets apart from goodwill. SFAS 141 was effective for all business combinations
initiated after June 30, 2001. SFAS 142 requires goodwill to be tested for
impairment under certain circumstances, and written down when impaired, rather
than being amortized as previous standards required. Furthermore, SFAS 142
requires purchased intangible assets other than goodwill to be amortized over
their useful lives unless these lives are determined to be indefinite. The
annual reduction in expense due to the discontinuance of goodwill amortization
beginning in 2002 should be approximately $3.4 to $4.4 million. SFAS 142 is
effective for fiscal years beginning after December 15, 2001. All companies have
six months subsequent to the date of adoption to complete the initial goodwill
impairment test. EMCOR has not yet determined any further impact SFAS 142 will
have on its existing goodwill.
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"). SFAS 144 establishes a single accounting model, based on the framework
established in Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
15
<PAGE>
Of" ("SFAS 121"), for long-lived assets to be disposed of by sale, and resolves
significant implementation issues related to SFAS 121. This statement also
supercedes the accounting reporting provisions of Accounting Principles Board
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," ("APB 30") for the disposal of a segment of
a business. The provisions of SFAS No. 144 are effective for the fiscal years
beginning after December 15, 2001. EMCOR believes that the adoption of SFAS 144
will not have a material impact on its results of operations, financial position
or cash flows.
SUBSEQUENT EVENT
On February 11, 2002, EMCOR signed a definitive agreement with Comfort
Systems to acquire nineteen of Comfort Systems' subsidiaries. Under the terms of
the agreement, EMCOR will pay Comfort Systems $186.25 million, approximately
$164.25 million in cash and approximately $22.0 million by assumption of Comfort
Systems notes payable to former owners of certain of the acquired companies.
EMCOR will fund the acquisition through a combination of cash on hand and
borrowings under its revolving credit facility. The acquisition is expected to
close in the first quarter of 2002, pending customary closing conditions and
regulatory approval.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EMCOR is exposed to market risk for changes in interest rates for
borrowings under its credit facility. The credit facility bears interest at
variable rates, and the fair value of this borrowing is not significantly
affected by changes in market interest rates.
Amounts invested in EMCOR's foreign operations are translated into U. S.
dollars at the exchange rates in effect at year end. The resulting translation
adjustments are recorded as accumulated other comprehensive loss, a component of
stockholders' equity, in the consolidated balance sheets.
THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE PRIVATE SECURITIES REFORM ACT OF 1995, PARTICULARLY
STATEMENTS REGARDING MARKET OPPORTUNITIES, MARKET SHARE GROWTH, COMPETITIVE
GROWTH, GROSS PROFIT, AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. THESE
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN ANY SUCH FORWARD-LOOKING
STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO ADVERSE
CHANGES IN GENERAL ECONOMIC CONDITIONS, INCLUDING CHANGES IN THE SPECIFIC
MARKETS FOR EMCOR'S SERVICES, ADVERSE BUSINESS CONDITIONS, DECREASED OR LACK OF
GROWTH IN THE MECHANICAL AND ELECTRICAL CONSTRUCTION AND FACILITIES SERVICES
INDUSTRIES, INCREASED COMPETITION, PRICING PRESSURES AND RISK ASSOCIATED WITH
FOREIGN OPERATIONS AND OTHER FACTORS.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EMCOR GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31,
-----------------------
2001 2000
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 189,766 $ 137,685
Accounts receivable, less allowance for doubtful
accounts of $35,091 and $36,917, respectively ..... 777,102 825,803
Costs and estimated earnings in excess of billings
on uncompleted contracts .......................... 221,272 158,073
Inventories ......................................... 7,158 6,909
Prepaid expenses and other .......................... 22,026 10,290
---------- ----------
Total current assets .............................. 1,217,324 1,138,760
Investments, notes and other long-term receivables .... 16,817 10,364
Property, plant and equipment, net .................... 42,548 38,959
Goodwill, less accumulated amortization of $14,328
and $8,822, respectively ............................ 56,011 67,625
Other assets .......................................... 16,964 6,156
---------- ----------
Total assets .......................................... $1,349,664 $1,261,864
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital
lease obligations ................................. $ 947 $ 751
Accounts payable .................................... 313,227 365,139
Billings in excess of costs and estimated earnings
on uncompleted contracts .......................... 319,165 314,929
Accrued payroll and benefits ........................ 121,196 103,897
Other accrued expenses and liabilities .............. 99,726 67,671
---------- ----------
Total current liabilities ......................... 854,261 852,387
Long-term debt and capital lease obligations .......... 848 115,878
Other long-term obligations ........................... 72,622 60,096
---------- ----------
Total liabilities ..................................... 927,731 1,028,361
---------- ----------
Stockholders' equity:
Preferred stock, $0.10 par value, 1,000,000 shares
authorized, zero issued and outstanding ............. -- --
Common stock, $0.01 par value, 30,000,000 shares
authorized, 14,815,007 and 10,470,624 shares
issued and outstanding, respectively ................ 159 117
Capital surplus ....................................... 307,636 167,742
Accumulated other comprehensive loss .................. (5,424) (3,906)
Retained earnings ..................................... 136,398 86,386
Treasury stock, at cost, 1,131,985 and 1,131,990
shares, respectively ................................ (16,836) (16,836)
---------- ----------
Total stockholders' equity ............................ 421,933 233,503
---------- ----------
Total liabilities and stockholders' equity ............ $1,349,664 $1,261,864
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
17
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2001 2000 1999
---------- ---------- ----------
Revenues .......................... $3,419,854 $3,460,204 $2,893,962
Cost of sales ..................... 3,028,031 3,102,387 2,598,055
---------- ---------- ----------
Gross profit ...................... 391,823 357,817 295,907
Selling, general and
administrative expenses ......... 303,141 278,892 237,816
---------- ---------- ----------
Operating income .................. 88,682 78,925 58,091
Interest expense .................. (4,795) (9,705) (10,520)
Interest income ................... 5,587 2,367 2,107
---------- ---------- ----------
Income before income taxes ........ 89,474 71,587 49,678
Income tax provision .............. 39,462 31,498 21,857
---------- ---------- ----------
Net income ........................ $ 50,012 $ 40,089 $ 27,821
========== ========== ==========
Basic earnings per share .......... $ 3.86 $ 3.84 $ 2.86
========== ========== ==========
Diluted earnings per share ........ $ 3.40 $ 2.95 $ 2.21
========== ========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
18
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
2001 2000 1999
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ............................................................................... $ 50,012 $ 40,089 $ 27,821
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .......................................................... 12,694 11,483 10,675
Amortization of goodwill ............................................................... 5,506 4,618 3,418
Provision for doubtful accounts ........................................................ 2,856 6,419 5,967
Deferred income taxes .................................................................. 3,725 -- --
Non-cash expense for amortization of debt issuance costs ............................... 890 1,236 1,236
Non-cash expense for Restricted Stock Units ............................................ 1,132 -- --
Non-cash interest expense for converted subordinated notes ............................. 1,239 -- --
Provision in lieu of income taxes ...................................................... 21,425 24,422 15,645
--------- --------- ---------
99,479 88,267 64,762
Change in operating assets and liabilities excluding effect of businesses
acquired:
Decrease (increase) in accounts receivable ............................................. 48,974 (118,629) (96,875)
(Increase) decrease in inventories and contracts in progress, net ...................... (59,217) 76,376 17,784
(Decrease) increase in accounts payable ................................................ (52,337) 22,222 36,830
Increase in accrued payroll and benefits and other accrued expenses and liabilities .... 47,836 19,533 6,633
Changes in other assets and liabilities, net ........................................... (3,644) 3,667 5,371
--------- --------- ---------
Net cash provided by operating activities ................................................ 81,091 91,436 34,505
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sales of assets .......................................................... 1,925 2,765 347
Purchase of property, plant and equipment .............................................. (17,939) (16,698) (10,737)
Payments for acquisitions of businesses and related earn-out agreements ................ (8,750) (4,234) (55,782)
Net (disbursements) proceeds from other investments .................................... (6,453) 7,047 6,810
--------- --------- ---------
Net cash used in investing activities .................................................... (31,217) (11,120) (59,362)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from working capital credit lines ............................................. -- 722,829 306,400
Repayments of working capital credit lines ............................................. -- (722,829) (306,400)
Net repayments for long-term debt and capital lease obligations ........................ 143 (1,609) (7,012)
Net proceeds from exercise of stock options ............................................ 2,064 426 221
Net proceeds from exercise of common stock warrants .................................... -- -- 10,015
Purchase of common stock ............................................................... -- -- (2,868)
--------- --------- ---------
Net cash provided by (used in) financing activities ...................................... 2,207 (1,183) 356
--------- --------- ---------
Increase (decrease) in cash and cash equivalents ......................................... 52,081 79,133 (24,501)
Cash and cash equivalents at beginning of year ........................................... 137,685 58,552 83,053
--------- --------- ---------
Cash and cash equivalents at end of year ................................................. $ 189,766 $ 137,685 $ 58,552
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
19
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL ACCUMULATED
STOCK- OTHER
HOLDERS' COMMON CAPITAL COMPREHENSIVE RETAINED TREASURY COMPREHENSIVE
EQUITY STOCK WARRANTS SURPLUS LOSS (1) EARNINGS STOCK INCOME
-------- ------ -------- ------- ------------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 .......... $119,816 $ 109 $2,154 $114,867 $ (1,822) $ 18,476 $(13,968)
Net income .......................... 27,821 -- -- -- -- 27,821 -- $27,821
Foreign currency translation
adjustments ......................... (401) -- -- -- (401) -- -- (401)
----------
Comprehensive income ................ -- -- -- -- -- -- -- $27,420
==========
Provision in lieu of income taxes ... 15,645 -- -- 15,645 -- -- --
Common stock issued pursuant to
warrants exercised .................. 10,015 7 (1,190) 11,198 -- -- --
Value of expired warrants ........... -- -- (964) 964 -- -- --
Common stock issued under
stock option plans .................. 221 1 -- 220 -- -- --
Treasury stock, at cost ............. (2,868) -- -- -- -- -- (2,868)
-------- ------ ------ -------- -------- -------- --------
Balance, December 31, 1999 .......... 170,249 117 -- 142,894 (2,223) 46,297 (16,836)
Net income .......................... 40,089 -- -- -- -- 40,089 -- $40,089
Foreign currency translation
adjustments ......................... (1,683) -- -- -- (1,683) -- -- (1,683)
----------
Comprehensive income ................ -- -- -- -- -- -- -- $38,406
==========
Provision in lieu of income taxes ... 24,422 -- -- 24,422 -- -- --
Common stock issued under
stock option plans .................. 426 -- -- 426 -- -- --
-------- ------ ------ -------- -------- -------- --------
Balance, December 31, 2000 .......... 233,503 117 -- 167,742 (3,906) 86,386 (16,836)
Net income .......................... 50,012 -- -- -- -- 50,012 -- $50,012
Foreign currency translation
adjustments ......................... (1,518) -- -- -- (1,518) -- -- (1,518)
----------
Comprehensive income ................ -- -- -- -- -- -- -- $48,494
==========
Provision in lieu of income taxes ... 21,425 -- -- 21,425 -- -- --
Common stock issued under
stock option plans .................. 2,063 -- -- 2,063 -- -- --
Conversion of 5.75% Convertible
Subordinated Notes (2) .............. 113,874 42 -- 113,832 -- -- --
Value of Restricted Stock Units (3).. 2,574 -- -- 2,574 -- -- --
-------- ------ ------ -------- -------- -------- --------
Balance, December 31, 2001 .......... $421,933 $ 159 $ -- $307,636 $ (5,424) $136,398 $(16,836)
======== ====== ====== ======== ======== ======== ========
</TABLE>
- ----------
(1) Represents cumulative foreign currency translation adjustments.
(2) Represents conversion of $115.0 million 5.75% Convertible Subordinated
Notes into common stock, net of related interest and deferred financing
costs.
(3) Shares of common stock will be issued in respect of restricted stock units.
This amount represents the value of restricted stock units at the date of
grant plus the related compensation expense in the current year due to an
increase in market value of the underlying common stock.
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
20
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--NATURE OF OPERATIONS
EMCOR Group, Inc., a Delaware corporation, and subsidiaries ("EMCOR") is
one of the largest mechanical and electrical construction and facilities
services firms in the United States, Canada, the United Kingdom and in the
world. EMCOR specializes in the design, integration and installation, start-up
of: (1) systems for the generation and distribution of electrical power,
including power cables, conduits, distribution panels, transformers, generators,
uninterruptible power supply systems and related switch gear and controls; (2)
lighting systems, including fixtures and controls; (3) low-voltage systems,
including fire alarm, security, and process control systems; (4) voice and data
communications systems, including fiber-optic and low voltage copper cabling;
(5) heating, ventilation, air conditioning, refrigeration and clean-room process
ventilation systems and (6) plumbing, process and high-purity piping systems.
EMCOR provides mechanical and electrical construction services and facilities
services directly to corporations, municipalities and other governmental
entities, owners/developers, and tenants of buildings. It also provides these
services indirectly by acting as a subcontractor to construction managers,
general contractors, systems suppliers and other subcontractors. Mechanical and
electrical construction services generally fall into one of two categories: (1)
large installation projects with contracts often in the multi-million dollar
range that involve construction of industrial and commercial buildings and
institutional and public works facilities or the fit-out of large blocks of
space within commercial buildings and (2) smaller installation projects
typically involving fit-out, renovation and retrofit work. In addition, EMCOR
also provides services needed to support a customer's facilities not related to
construction projects. These services, frequently referred to as facilities
services, include customer based operations and maintenance, mobile maintenance
and service, small modification and retrofit projects, consulting, program
development and management for energy systems, and maintenance of facilities.
These services are provided to a wide range of commercial, industrial, and
institutional buildings including facilities at which EMCOR provided
construction services and at which construction services were provided by
others. Facilities services are frequently bundled to provide integrated service
packages and may include services in addition to EMCOR's core mechanical and
electrical services.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of EMCOR and its
majority-owned subsidiaries. Significant intercompany accounts and transactions
have been eliminated. Investments over which EMCOR exercises significant
influence, but does not control (generally a 20% to 50% ownership interest), are
accounted for using the equity method of accounting.
PRINCIPLES OF PREPARATION
The preparation of the consolidated financial statements, in conformity
with accounting principles generally accepted in the United States, requires
EMCOR to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications of prior years data have been made in the accompanying
consolidated financial statements where appropriate to conform to the current
presentation.
REVENUE RECOGNITION
Revenues from long-term contracts are recognized on the
percentage-of-completion method. Percentage-of-completion is measured
principally by the percentage of costs incurred to date for each contract to the
estimated total costs for each contract at completion. Certain of EMCOR's
electrical contracting business units measure percentage-of-completion by the
percentage of labor costs incurred to date for each contract to the estimated
total labor costs for such contract. Revenues from services contracts are
recognized as services are provided.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. In forecasting ultimate
profitability on certain contracts, estimated recoveries are included for work
performed under customer change orders to contracts for which firm prices have
not yet been negotiated. Due to uncertainties inherent in the estimation
process, it is reasonably possible that completion costs, including those
arising from contract penalty provisions and final contract settlements, will be
revised in the near-term. Such revisions to costs and income are recognized in
the period in which the revisions are determined.
21
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings in excess of billings on uncompleted contracts
arise when revenues have been recorded but the amounts cannot be billed under
the terms of the contracts. Such amounts are recoverable from customers upon
various measures of performance, including achievement of certain milestones,
completion of specified units or completion of the contract.
Also included in costs and estimated earnings on uncompleted contracts are
amounts EMCOR seeks or will seek to collect from customers or others for errors
or changes in contract specifications or design, contract change orders in
dispute or unapproved as to both scope and price, or other customer-related
causes of unanticipated additional contract costs (claims and unapproved change
orders). These amounts are recorded at their estimated net realizable value when
realization is probable and can be reasonably estimated. No profit is recognized
on the construction costs incurred in connection with these amounts. Unapproved
change orders involve the use of estimates, and it is reasonably possible that
revisions to the estimated recoverable amounts of recorded unapproved change
orders may be made in the near-term. Claims made by EMCOR involve negotiation
and, in certain cases, litigation. EMCOR expenses litigation costs as incurred,
although it may seek to recover these costs as part of its claim. EMCOR believes
that it has established legal basis for pursuing recovery of recorded claims,
and it is management's intention to pursue and litigate these claims, if
necessary, until a decision or settlement is reached. Claims also involve the
use of estimates, and it is reasonably possible that revisions to the estimated
recoverable amounts of recorded claims may be made in the near-term. Claims
against EMCOR are recognized when a loss is considered probable and amounts are
reasonably determinable.
Costs and estimated earnings on uncompleted contracts and related amounts
billed as of December 31, 2001 and 2000 were as follows (in thousands):
2001 2000
---------- ----------
Costs incurred on uncompleted contracts .......... $4,779,515 $5,552,430
Estimated earnings ............................... 485,394 403,416
---------- ----------
5,264,909 5,955,846
Less: billings to date ........................... 5,362,802 6,112,702
---------- ----------
$ (97,893) $ (156,856)
========== ==========
Such amounts were included in the accompanying Consolidated Balance Sheets
at December 31, 2001 and 2000 under the following captions (in thousands):
2001 2000
--------- ---------
Costs and estimated earnings in excess
of billings on uncompleted contracts ........... $ 221,272 $ 158,073
Billings in excess of costs and estimated
earnings on uncompleted contracts .............. (319,165) (314,929)
--------- ---------
$ (97,893) $(156,856)
========= =========
As of December 31, 2001, costs and estimated earnings in excess of billings
on uncompleted contracts included unbilled revenues for unapproved change orders
of approximately $48.4 million and claims of approximately $51.7 million. In
addition, accounts receivable as of December 31, 2001 include claims and
contractually billed amounts related to such contracts of approximately $40.6
million. Generally, contractually billed amounts will not be paid by the
customer to EMCOR until final resolution of related claims.
CLASSIFICATION OF CONTRACT AMOUNTS
In accordance with industry practice, EMCOR classifies as current all
assets and liabilities related to the performance of long-term contracts. The
contracting cycle for certain long-term contracts may extend beyond one year
and, accordingly, collection or payment of amounts related to these contracts
may extend beyond one year. Accounts receivable at December 31, 2001 and 2000
included $138.6 million and $160.9 million, respectively, of retainage billed
under terms of the contracts. EMCOR estimates that approximately 75% of
retainage recorded at December 31, 2001 will be collected during 2002.
22
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
CASH AND CASH EQUIVALENTS
For purposes of the consolidated financial statements, EMCOR considers all
highly liquid instruments with original maturities of three months or less to be
cash equivalents. EMCOR maintains a centralized cash management program whereby
its excess cash balances are invested in high quality, short-term money market
instruments which are considered cash equivalents. At times, cash balances in
EMCOR's bank accounts may exceed federally insured limits.
INVENTORIES
Inventories, which consist primarily of construction materials, are stated
at the lower of cost or market. Cost is determined principally using the average
cost method.
INVESTMENTS, NOTES AND OTHER LONG-TERM RECEIVABLES
Investments, notes and other long-term receivables at December 31, 2001
were $16.8 million compared to $10.4 million at December 31, 2000, and primarily
consist of investments in joint ventures accounted for using the equity method
of accounting.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is recorded
principally using the straight-line method over estimated useful lives ranging
from 3 to 40 years. As events and circumstances indicate, EMCOR reviews the
carrying amount of property, plant and equipment for impairment. In performing
the review for recoverability, long-lived assets are assessed for possible
impairment by comparing their carrying values to their undiscounted net pre-tax
cash flows expected to result from the use of the asset. Impaired assets are
written down to their fair values, generally their discounted cash flows.
Through December 31, 2001, no adjustment for the impairment of Property, plant
and equipment carrying value has been required.
Property, plant and equipment in the accompanying Consolidated Balance
Sheets consisted of the following amounts as of December 31, 2001 and 2000 (in
thousands):
2001 2000
--------- --------
Machinery and equipment ........................... $ 54,225 $ 45,042
Furniture and fixtures ............................ 22,858 16,905
Land, buildings and leasehold improvements ........ 28,016 24,740
--------- --------
105,099 86,687
Accumulated depreciation and amortization ......... (62,551) (47,728)
--------- --------
$ 42,548 $ 38,959
========= ========
GOODWILL
Goodwill at December 31, 2001 and 2000, was approximately $56.0 million and
$67.6 million, respectively, and reflects the excess of cost over fair market
value of net identifiable assets of companies acquired in purchase transactions.
Goodwill is being amortized using the straight-line method over periods ranging
from 5 to 20 years.
At the end of each quarter, EMCOR reviews events and changes in
circumstances to determine whether the recoverability of the carrying value of
goodwill should be reassessed. Should events or circumstances indicate that the
carrying value may not be recoverable based on undiscounted future cash flows,
an impairment loss measured by the difference between the discounted future cash
flows (or another acceptable method for determining fair value) and the carrying
value of goodwill would be recognized by EMCOR. Through December 31, 2001, no
adjustment for the impairment of goodwill carrying value has been required. In
July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets".
For a further discussion of this new standard, please refer to the subheading
"New Accounting Pronouncements" under this note B.
23
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
INSURANCE RESERVES
EMCOR's insurance liability is determined actuarially based on claims filed
and an estimate of claims incurred but not yet reported. At December 31, 2001
and 2000, the estimated current portion of the discounted insurance liability
was included in "Other accrued expenses and liabilities" in the accompanying
Consolidated Balance Sheets. The non-current portion of the discounted insurance
liability was included in "Other long-term obligations", and at December 31,
2001 and 2000 was $66.0 million and $53.7 million, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
EMCOR's financial instruments include accounts receivable, investments,
notes and other long-term receivables, long-term debt and other financing
commitments, for which carrying values approximate their fair values.
During the second quarter of 2001, EMCOR called its $115.0 million 5.75%
Convertible Subordinated Notes for redemption. All of the Convertible
Subordinated Notes were converted, net of related deferred financing costs, into
approximately 4.2 million shares of EMCOR common stock.
FOREIGN OPERATIONS
The financial statements and transactions of EMCOR's foreign subsidiaries
are maintained in their functional currency and translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation". Translation adjustments have been accumulated as a
separate component of Stockholders' equity as Accumulated other comprehensive
loss.
INCOME TAXES
EMCOR accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach which
requires the recognition of deferred tax assets and deferred tax liabilities for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Valuation
allowances are established when necessary to reduce net deferred tax assets to
the amount expected to be realized.
DERIVATIVES AND HEDGING ACTIVITIES
Gains and losses on contracts designated as hedges of net investments in
foreign subsidiaries are recognized in the Consolidated Statements of
Stockholders' Equity and Comprehensive Income as a component of Accumulated
other comprehensive loss.
As of December 31, 2001, EMCOR did not have any forward contracts in
effect, and forward contracts in effect during 2000 were not material to the
Consolidated Financial Statements.
VALUATION OF STOCK OPTION GRANTS
EMCOR accounts for its stock options under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). See Note
I for pro forma information relating to treatment of EMCOR's stock options under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123").
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141") and Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires all business
combinations be accounted for using the purchase method of accounting and that
certain intangible assets acquired in a business combination be recognized as
assets apart from goodwill. SFAS 141 was effective for all business combinations
initiated after June 30, 2001. SFAS 142 requires goodwill to be tested for
impairment under certain circumstances, and written down when impaired, rather
than being amortized as previous standards required. Furthermore, SFAS 142
requires purchased intangible assets other than goodwill to be amortized over
their useful lives unless these lives are determined to be indefinite. The
annual reduction in expense due to the discontinuance of goodwill amortization
beginning in 2002 should be approximately $3.4 million to $4.4 million. SFAS 142
is effective for fiscal years beginning after December 15, 2001. All companies
have six months subsequent to the date of adoption to complete the initial
goodwill impairment test. EMCOR has not yet determined any further impact SFAS
142 will have on its existing goodwill.
24
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"). SFAS 144 establishes a single accounting model, based on the framework
established in Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("SFAS 121"), for long-lived assets to be disposed of by sale, and resolves
significant implementation issues related to SFAS 121. This statement also
supercedes the accounting reporting provisions of Accounting Principles Board
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," ("APB 30") for the disposal of a segment of
a business. The provisions of SFAS No. 144 are effective for the fiscal years
beginning after December 15, 2001. EMCOR believes that the adoption of SFAS 144
will not have a material impact on its results of operations, financial position
or cash flows.
NOTE C--ACQUISITIONS OF BUSINESSES
During 2001 and 2000, EMCOR paid additional consideration by reason of
earn-outs for prior year acquisitions of an aggregate of $6.2 million and $4.2
million in cash, respectively. The purchase price of certain acquisitions is
subject to finalization based on certain contingencies provided for in the
purchase agreements. These acquisitions were accounted for by the purchase
method, and the purchase price has been allocated to the assets acquired and
liabilities assumed, based upon the estimated fair values of these assets and
liabilities at the dates of acquisition. Goodwill, representing the excess
purchase price over the fair value of amounts assigned to the net tangible
assets acquired, was $56.0 million and $67.6 million at December 31, 2001 and
2000, respectively, and is being amortized over periods of 5 to 20 years.
Amortization expense for the years ended December 31, 2001, 2000 and 1999 was
$5.5, $4.6 million and $3.4 million, respectively. Goodwill was reduced by $12.3
million during 2001 due to the realization of operating loss carryforwards and
other deferred tax attributes related to acquisitions. The pro forma effect on
EMCOR's revenues, net income and earnings per share for 1999, as though the
acquisitions occurred as of January 1, was not material.
NOTE D--EARNINGS PER SHARE
The following tables summarize EMCOR's calculation of Basic and Diluted
Earnings per Share ("EPS") for the years ended December 31, 2001, 2000 and 1999:
PER
INCOME SHARES SHARE
2001 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ---------- --------
BASIC EPS
Income available to common stockholders ... $50,012,000 12,948,230 $3.86
=====
EFFECT OF DILUTIVE SECURITIES:
Convertible Subordinated Notes,
including assumed interest
savings, net of tax ..................... 1,735,395 1,820,273
Options ................................... -- 471,705
Warrants .................................. -- --
----------- ----------
DILUTED EPS ............................... $51,747,395 15,240,208 $3.40
=========== ========== =====
PER
INCOME SHARES SHARE
2000 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ---------- --------
BASIC EPS
Income available to common stockholders ... $40,089,000 10,440,089 $3.84
=====
EFFECT OF DILUTIVE SECURITIES:
Convertible Subordinated Notes,
including assumed interest
savings, net of tax ..................... 3,967,500 4,206,291
Options ................................... -- 297,306
Warrants .................................. -- --
----------- ----------
DILUTED EPS ............................... $44,056,500 14,943,686 $2.95
=========== ========== =====
25
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D--EARNINGS PER SHARE -- (CONTINUED)
PER
INCOME SHARES SHARE
1999 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ---------- --------
BASIC EPS
Income available to common stockholders ... $27,821,000 9,732,930 $2.86
=====
EFFECT OF DILUTIVE SECURITIES:
Convertible Subordinated Notes, including
assumed interest savings, net of tax .... 4,099,750 4,206,291
Options ................................... -- 245,893
Warrants .................................. -- 259,708
----------- ----------
DILUTED EPS ............................... $31,920,750 14,444,822 $2.21
=========== ========== =====
The number of EMCOR's options granted, which were excluded from the
computation of Diluted EPS for the years ended December 31, 2001, 2000 and 1999
because they would be antidilutive, were 210,100, 37,000 and 211,720,
respectively.
NOTE E--CURRENT DEBT
1998 CREDIT FACILITY
On December 22, 1998, EMCOR restated its June 19, 1996 credit facility; the
amended credit facility provides EMCOR with a credit facility for borrowings of
up to $150.0 million. The amended credit facility, which has an expiration date
of June 30, 2003, is guaranteed by certain direct and indirect subsidiaries of
EMCOR. The amended credit facility is secured by substantially all of the assets
of EMCOR and most of its subsidiaries, and it provides for borrowing capacity
available in the form of revolving loans and/or letters of credit. The amended
credit facility contains various covenants, including, among other things,
maintenance of certain financial ratios and significant restrictions with
respect to cumulative aggregate payments for dividends, common stock
repurchases, investments, acquisitions, indebtedness, capital expenditures, and
prepayments of subordinated debt, all as set forth therein. The annual facility
fee is 0.25% per $1,000 of the total credit facility. The revolving loans bear
interest at (1) a rate which is the prime commercial lending rate announced by
Harris Trust and Savings Bank from time to time (4.75% at December 31, 2001)
plus 0% to 0.5%, based on certain financial tests or (2) a LIBOR rate (2.04% at
December 31, 2001) plus 1.25% to 2.0% based on certain financial tests. The
interest rates in effect at December 31, 2001 were 4.75% and 3.29%,
respectively. Letters of credit fees issued under the credit facility ranging
from 0.5% to 2.0% are charged based on type of letters of credit issued and
certain financial tests. As of December 31, 2001 and 2000, EMCOR had
approximately $20.5 million and $12.1 million of letters of credit outstanding,
respectively. No revolving loans were outstanding under the 1998 Credit Facility
at December 31, 2001 or 2000.
FOREIGN BORROWINGS
In December 2000, EMCOR's Canadian subsidiary, Comstock Canada Ltd.,
renewed a credit agreement with a bank providing for an overdraft facility of up
to Cdn. $0.5 million. The facility is secured by a standby letter of credit and
provides for interest at the bank's prime rate which was 4.0% at December 31,
2001. There were no borrowings outstanding under this credit agreement at
December 31, 2001 or 2000.
NOTE F--LONG-TERM DEBT
Long-term debt in the accompanying Consolidated Balance Sheets consisted of
the following amounts as of December 31, 2001 and 2000 (in thousands):
2001 2000
------- --------
Convertible Subordinated Notes at 5.75% due 2005 .......... $ -- $115,000
Note Payable at 3.0%, due 2002 ............................ 573 --
Capitalized Lease Obligations at weighted average
interest rates from 3.1% to 11.6%,
payable in varying amounts through 2006 ................. 249 573
Other, at weighted average interest rates of
approximately 10.0%, payable in varying
amounts through 2016 .................................... 973 1,056
------- --------
1,795 116,629
Less: current maturities ................................ 947 751
------- --------
$ 848 $115,878
======= ========
26
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F--LONG-TERM DEBT -- (CONTINUED)
CONVERTIBLE SUBORDINATED NOTES
In March 1998, EMCOR sold, pursuant to an underwritten public offering,
$115.0 million principal amount of 5.75% Convertible Subordinated Notes. During
the second quarter of 2001, EMCOR called its $115.0 million 5.75% Convertible
Subordinated Notes for redemption. All of the Convertible Subordinated Notes
were converted, net of related deferred financing costs, into approximately 4.2
million shares of EMCOR common stock.
CAPITALIZED LEASE OBLIGATIONS
See Note K in the Notes to Consolidated Financial Statements.
OTHER LONG-TERM DEBT
Other long-term debt consists primarily of loans for real estate, office
equipment, automobiles and building improvements. As of December 31, 2001 and
2000, respectively, other long-term debt totaling $1.6 million and $1.1 million
was owed by certain of EMCOR's subsidiaries. The aggregate amount of other
long-term debt maturing during the next five years is approximately $0.9 million
in 2002, $0.2 million in 2003, $0.1 million in each of 2004, 2005 and 2006, and
$0.2 million thereafter.
NOTE G--INCOME TAXES
EMCOR files a consolidated federal income tax return including all its U.S.
subsidiaries. At December 31, 2001, EMCOR had net operating loss carryforwards
("NOLs") for U.S. income tax purposes of approximately $3.3 million, which
expire in the year 2018. The NOLs are subject to review by the Internal Revenue
Service.
EMCOR adopted Fresh-Start Accounting in connection with EMCOR's bankruptcy
reorganization in December 1994. As a result, the tax benefit of any net
operating loss carryforwards or net deductible temporary differences which
existed as of December 15, 1994 will result in a charge to the tax provision
(provision in lieu of income taxes) and a credit to Capital surplus. Amounts
credited to capital surplus were $21.4 million, $24.4 million and $15.6 million
for the years ended December 31, 2001, 2000 and 1999, respectively.
The income tax provision in the accompanying Consolidated Statements of
Operations for the years ended December 31, 2001, 2000 and 1999 consisted of the
following (in thousands):
2001 2000 1999
------- ------- -------
Current:
Federal .................................... $ 5,274 $ 1,364 $ 872
State and local ............................ 7,049 3,394 2,510
Foreign .................................... 1,989 1,180 1,730
------- ------- -------
14,312 5,938 5,112
------- ------- -------
Deferred ................................... 3,725 1,138 1,100
------- ------- -------
Provision in lieu of income taxes ............ 21,425 24,422 15,645
------- ------- -------
$39,462 $31,498 $21,857
======= ======= =======
Factors accounting for the variation from U.S. statutory income tax rates
relating to continuing operations for the years ended December 31, 2001, 2000
and 1999 were as follows (in thousands):
2001 2000 1999
------- ------- -------
Federal income taxes at the statutory rate ... $31,316 $25,055 $17,387
State and local income taxes, net of
federal tax benefits ....................... 5,376 3,894 2,990
Foreign income taxes ......................... 68 890 271
Goodwill and other non-deductible expenses ... 2,088 1,771 1,336
Other ........................................ 614 (112) (127)
------- ------- -------
$39,462 $31,498 $21,857
======= ======= =======
27
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G--INCOME TAXES -- (CONTINUED)
The components of the net deferred income tax asset are included in
"Prepaid expenses and other" and "Other assets" at December 31, 2001 and the net
deferred income tax liability is included in "Other accrued expenses and
liabilities" at December 31, 2000 in the accompanying Consolidated Balance
Sheets. The amounts recorded for the years ended December 31, 2001, and 2000
were as follows (in thousands):
2001 2000
-------- --------
Deferred income tax assets:
Net operating loss carryforwards ....................... $ 1,166 $ 16,257
Excess of amounts expensed for financial
statement purposes over amounts deducted
for income tax purposes .............................. 61,931 49,900
Other .................................................. -- 6,403
-------- --------
Total deferred income tax assets ....................... 63,097 72,560
Valuation allowance for deferred tax assets ............ (21,805) (68,787)
-------- --------
Net deferred income tax assets ......................... 41,292 3,773
-------- --------
Deferred income tax liabilities:
Costs capitalized for financial statement
purposes and deducted for income tax purposes ........ (15,790) (7,885)
-------- --------
Total deferred income tax liabilities .................. (15,790) (7,885)
-------- --------
Net deferred income tax asset (liability) .............. $ 25,502 $ (4,112)
======== ========
Income before income taxes for the years ended December 31, 2001, 2000, and
1999 consisted of the following (in thousands):
2001 2000 1999
-------- -------- --------
United States .............................. $ 79,699 $ 59,105 $ 42,714
Foreign .................................... 9,775 12,482 6,964
-------- -------- --------
$ 89,474 $ 71,587 $ 49,678
======== ======== ========
NOTE H--COMMON STOCK
As part of a program previously authorized by the Board of Directors, EMCOR
purchased 174,100 and 957,900 shares of its common stock during 1999 and 1998,
respectively. The aggregate amount of $16.8 million paid for those shares has
been classified as "Treasury stock, at cost" in the Consolidated Balance Sheet
at December 31, 2001. EMCOR management is authorized to repurchase up to $20.0
million of EMCOR's common stock under this program.
28
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I--STOCK OPTIONS AND WARRANTS
EMCOR has stock option plans and programs under which employees receive
stock options and a stock bonus plan for executives pursuant to which they
receive restricted stock units. EMCOR also has stock option plans and restricted
stock plans under which outside directors may receive stock options or shares of
common stock. A summary of certain terms of the grants under the stock option
plans and programs and stock plans are as follows:
<TABLE>
<CAPTION>
AUTHORIZED EXERCISE
SHARES VESTING EXPIRATION PRICE/VALUATION DATE
---------- ------- ---------- ---------------------
<S> <C> <C> <C> <C>
1994 Management Stock Option Plan 1,000,000 Generally, Ten years from Fair market value
(the "1994 Plan") 33 1/3% on each grant date of common stock
anniversary of grant on grant date
date
1995 Non-Employee Directors' Non- 200,000 100% on grant date Ten years from Fair market value
Qualified Stock Option Plan grant date of common stock
(the "1995 Plan") on grant date
1997 Non-Employee Directors' Non- 300,000 (1) Five years from Fair market value
Qualified Stock Option Plan grant date of common stock
(the "1997 Directors' Stock on grant date (3)
Option Plan")
1997 Stock Plan for Directors (the 150,000 (2) Five years from Fair market value
"1997 Directors' Stock Plan") grant date of common stock
on grant date (3)
Executive Stock Bonus Plan 220,000 100% on grant date Ten years from Fair market value
("ESBP") grant date of common stock
on grant date
Other Stock Option Grants Not applicable Generally, either Ten years from Fair market value
100% on first grant date of common stock
anniversary of grant on grant date
date or 33 1/3% on
each anniversary of
grant date
</TABLE>
- ----------
(1) At the election of an individual serving as a Director, the individual may
elect to receive one-third, two-thirds or all of their retainer for a
calendar year in the form of stock options. Such options vest quarterly
over the calendar year. In addition, the individual will receive additional
stock options equal to the product of 0.5 times the amount of stock options
otherwise issued as a result of his election.
(2) At the election of an individual serving as a Director, the individual may
elect to receive one-third, two-thirds or all of their retainer for a
calendar year in the form of deferred stock units equal in value to the
retainer. In addition, the individual will receive additional deferred
stock units equal to 0.2 times the amount of deferred stock units otherwise
issued as a result of his election. Following termination of Board service,
the director receives shares of common stock equal to the number of
deferred stock units.
(3) Generally, the grant date is the first business day of a calendar year for
individuals who are serving as Directors as of such date.
29
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I--STOCK OPTIONS AND WARRANTS -- (CONTINUED)
The following table summarizes EMCOR's stock option and stock bonus plan
activity since December 31, 1998:
<TABLE>
<CAPTION>
1997 DIRECTORS' STOCK
1994 PLAN 1995 PLAN OPTION PLAN
-------------------------- ------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 .... 721,701 $10.44 85,500 $13.24 35,785 $19.94
Granted ..................... -- -- 18,000 $22.13 40,968 $16.19
Forfeited ................... -- -- -- -- -- --
Exercised ................... (16,933) $ 9.13 (10,500) $ 6.34 -- --
------- -------- --------
Balance, December 31, 1999 .... 704,768 $10.47 93,000 $15.74 76,753 $17.94
Granted ..................... -- -- 18,000 $27.13 45,612 $17.56
Forfeited ................... -- -- -- -- -- --
Exercised ................... (23,001) $ 7.54 (10,500) $ 6.34 (6,828) $16.19
------- -------- --------
Balance, December 31, 2000 .... 681,767 $10.57 100,500 $18.76 115,537 $17.89
Granted ..................... -- -- 18,000 $42.30 31,950 $25.44
Forfeited ................... -- -- -- -- -- --
Exercised ................... (97,366) $14.56 (15,000) $15.09 (7,602) $17.56
------- -------- --------
Balance, December 31, 2001 .... 584,401 $ 9.90 103,500 $23.39 139,885 $19.64
======= ======== ========
<CAPTION>
1997 DIRECTORS' STOCK OTHER STOCK OPTION
PLAN ESBP GRANTS
-------------------------- ------------------------- -------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 .... 1,800 $20.00 -- -- -- --
Granted ..................... 330 $19.63 -- -- 315,000 $18.49
Forfeited ................... -- -- -- -- -- --
Exercised ................... (1,200) $20.00 -- -- -- --
------- -------- --------
Balance, December 31, 1999 .... 930 $19.87 -- -- 315,000 $18.49
Granted ..................... -- -- -- -- 94,000 $18.44
Forfeited ................... -- -- -- -- -- --
Exercised ................... (600) $20.00 -- -- (2,000) $16.50
------- -------- --------
Balance, December 31, 2000 .... 330 $19.63 -- -- 407,000 $18.49
Granted ..................... -- -- 56,707 $21.62 262,100 $37.36
Forfeited ................... -- -- -- -- -- --
Exercised ................... -- -- -- -- (16,666) $17.28
------- -------- --------
Balance, December 31, 2001 .... 330 $19.63 56,707 $21.62 652,434 $26.10
======= ======== ========
</TABLE>
At December 31, 2001, 2000 and 1999, approximately 1,271,000, 1,005,000 and
943,000 options were exercisable, respectively. The weighted average exercise
price of exercisable options at December 31, 2001, 2000 and 1999 was
approximately $18.18, $12.77 and $12.28, respectively.
30
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I--STOCK OPTIONS AND WARRANTS -- (CONTINUED)
The following table summarizes information about EMCOR's stock options at
December 31, 2001:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- -----------------------------
RANGE OF WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICE NUMBER REMAINING LIFE EXERCISE PRICE NUMBER EXERCISE PRICE
- -------------- ------ ---------------- ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
$4.75-$5.13 397,400 3.26 Years $4.94 397,400 $ 4.94
$9.38 3,000 3.88 Years $9.38 3,000 $ 9.38
$14.13-$20.00 710,766 6.36 Years $18.69 548,435 $18.45
$20.38-$22.13 96,041 8.44 Years $21.71 83,375 $21.67
$25.44-$27.13 119,950 8.94 Years $25.69 49,950 $26.05
$41.70-$42.30 210,100 9.92 Years $41.75 189,100 $41.76
</TABLE>
The weighted average fair value of options granted during 2001, 2000 and
1999 were $30.02, $19.18 and $18.41, respectively.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 2001, 2000 and 1999: risk-free interest rates of
4.1% to 6.6% (representing the risk-free interest rate at the date of the
grant); expected dividend yields of zero percent; expected terms of 3.3 to 3.9
years; and expected volatility of 83.5%, 71.2%, 73.6% and 87.3% for options
granted during 2001, 2000, 1999 and 1998, respectively.
EMCOR applies APB 25 and related interpretations in accounting for its
stock options. Accordingly, no compensation cost has been recognized in the
accompanying Consolidated Statements of Operations for the years ended December
31, 2001, 2000 and 1999 for stock options granted during those years, as EMCOR
grants stock options at fair market value. Had compensation cost for these
options been determined consistent with SFAS 123, EMCOR's net income, Basic EPS
and Diluted EPS would have been reduced from the following as reported amounts
to the following pro forma amounts (in thousands, except per share amounts):
2001 2000 1999
------- ------- -------
Net income:
As reported ................................ $50,012 $40,089 $27,821
Pro forma .................................. $45,240 $37,204 $25,597
Basic EPS:
As reported ................................ $ 3.86 $ 3.84 $ 2.86
Pro forma .................................. $ 3.49 $ 3.56 $ 2.63
Diluted EPS:
As reported ................................ $ 3.40 $ 2.95 $ 2.21
Pro forma .................................. $ 3.08 $ 2.76 $ 2.06
WARRANTS
Pursuant to EMCOR's bankruptcy reorganization, when it was formerly known
as JWP, Inc., EMCOR issued to the holders of $7,040,000 principal amount of its
pre-bankruptcy petition 7.75% convertible subordinated debentures and $9,600,000
principal amounts of its pre-bankruptcy petition 12.0% Subordinated Notes, their
pro rata share of each of two series of five-year Warrants to purchase shares of
Common Stock, namely Series X Warrants and Series Y Warrants, with an exercise
price of $12.55 per share and $17.55 per share, respectively. In addition,
approximately 28,000 Series X Warrants and 28,000 Series Y Warrants, were issued
to Belmont Capital Partners II, L. P. as a portion of additional interest under
a debtor-in-possession credit facility. During 1999, 600,603 Series X and
141,944 Series Y Warrants were exercised. All unexercised Series X and Series Y
Warrants expired on December 15, 1999.
31
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J--RETIREMENT PLANS
EMCOR's United Kingdom subsidiary has a defined benefit pension plan
covering substantially all eligible employees. The benefits under the plan are
based on wages and years of service with the subsidiary. EMCOR's policy is to
fund the minimum amount required by law.
The change in benefit obligation and plan assets for the years ended
December 31, 2001 and 2000 consisted of the following components (in thousands):
2001 2000
--------- ---------
CHANGE IN PENSION BENEFIT OBLIGATION
Benefit obligation at beginning of year .............. $ 101,488 $ 97,217
Service cost ......................................... 5,693 6,028
Interest cost ........................................ 6,083 5,553
Plan participant's contributions ..................... 2,943 2,529
Actuarial gain ....................................... 89 1,747
Benefits paid ........................................ (3,176) (4,209)
Foreign currency exchange rate changes ............... (2,522) (7,377)
--------- ---------
Benefit obligation at end of year .................. $ 110,598 $ 101,488
--------- ---------
CHANGE IN PENSION PLAN ASSETS
Fair value of plan assets at beginning of year ....... $ 95,882 $ 101,247
Actual return on plan assets ......................... (10,322) (1,359)
Employer contributions ............................... 6,108 5,357
Plan participants' contributions ..................... 2,943 2,529
Benefits paid ........................................ (3,176) (4,209)
Foreign currency exchange rate changes ............... (2,382) (7,683)
--------- ---------
Fair values of plan assets at end of year .......... $ 89,053 $ 95,882
--------- ---------
Funded status ........................................ $ (21,545) $ (5,606)
Unrecognized transition amount ....................... (199) (278)
Unrecognized prior service cost ...................... 331 409
Unrecognized losses/(gains) .......................... 21,441 4,433
--------- ---------
Net amount recognized .............................. $ 28 $ (1,042)
========= =========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
FINANCIAL STATEMENTS
Employer contributions ............................... $ 6,108 $ 5,357
Net periodic pension benefit cost .................... (5,064) (4,391)
Accrued pension cost brought forward ................. (1,042) (2,173)
Foreign currency exchange rate changes ............... 26 165
--------- ---------
Net amount recognized as accrued
pension asset (liability) .......................... $ 28 $ (1,042)
========= =========
The assumptions used as of December 31, 2001, 2000 and 1999 in determining
pension cost and liability shown above were as follows:
2001 2000 1999
---- ---- ----
Discount rate ....................................... 6.0% 6.0% 6.0%
Annual rate of salary provision ..................... 4.0% 4.0% 4.0%
Annual rate of return on plan assets ................ 7.0% 7.0% 7.5%
For measurement purposes, a 2.5% annual rate of increase in the per capita
cost of covered pension benefits was assumed for 2001 and 2000.
32
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J--RETIREMENT PLANS -- (CONTINUED)
The components of net periodic pension benefit cost for the years ended
December 31, 2001, 2000 and 1999 were as follows (in thousands):
2001 2000 1999
------- -------- --------
Service cost ................................. $ 5,693 $ 6,028 $ 6,285
Interest cost ................................ 6,083 5,553 5,243
Expected return on plan assets ............... (6,781) 1,359 (17,810)
Net amortization of prior service cost
and actuarial (gain)/loss .................. 69 (8,549) 11,690
------- -------- --------
Net periodic pension benefit cost ............ $ 5,064 $ 4,391 $ 5,408
======= ======== ========
EMCOR contributes to various union defined contribution pension funds based
upon wages paid to union employees of EMCOR. Such contributions approximated
$92.0 million, $88.9 million and $71.1 million for the years ended December 31,
2001, 2000 and 1999, respectively.
EMCOR has a defined contribution retirement plan that covers its U.S.
non-union eligible employees. Contributions to this plan are based on a
percentage of the employee's base compensation. The expense recognized for the
years ended December 31, 2001, 2000 and 1999 for the defined contribution plan
was $3.2 million, $2.9 million and $2.2 million, respectively.
NOTE K--COMMITMENTS AND CONTINGENCIES
EMCOR and its subsidiaries lease land, buildings and equipment under
various leases. The leases frequently include renewal options and require EMCOR
to pay for utilities, taxes, insurance and maintenance expenses.
Future minimum payments, by year and in the aggregate, under capital
leases, non-cancelable operating leases and related sub-leases with initial or
remaining terms of one or more years at December 31, 2001 were as follows (in
thousands):
CAPITAL OPERATING SUBLEASE
LEASE LEASE INCOME
------ ------- ------
2002 .......................................... $ 121 $25,138 $ 637
2003 .......................................... 98 19,721 647
2004 .......................................... 34 15,080 546
2005 .......................................... 8 9,741 389
2006 .......................................... 6 5,581 355
Thereafter .................................... -- 7,708 1,457
------ ------- ------
Total minimum lease payments .................. 267 $82,969 $4,031
======= ======
Amounts representing interest ................. (18)
-----
Present value of net minimum lease payments ... $ 249
=====
Rent expense for the years ended December 31, 2001, 2000 and 1999 was $28.5
million, $25.4 million and $15.1 million, respectively. Rent expense for the
years ended December 31, 2001, 2000 and 1999 included sublease rental income of
$0.7 million, $0.6 million and $0.7 million, respectively.
EMCOR has employment agreements for a fixed term with its executive
officers and certain management personnel. The employment agreements with
executive officers may be terminated by the executive or EMCOR but if terminated
by EMCOR, the agreements provide for severance benefits. Certain of the
agreements provide the executives with certain additional rights if a change of
control (as defined) of EMCOR occurs.
EMCOR is contingently liable to sureties in respect of performance and
payment bonds issued by sureties in connection with certain contracts entered
into by EMCOR's subsidiaries in the normal course of their business. EMCOR has
agreed to indemnify the sureties for any payments made by them in respect of
such bonds.
33
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE K--COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
EMCOR is subject to regulation with respect to the handling of certain
materials used in construction which are classified as hazardous or toxic by
Federal, State and local agencies. EMCOR's practice is to avoid participation in
projects principally involving the remediation or removal of such materials.
However, where remediation is a required part of contract performance, EMCOR
believes it complies with all applicable regulations governing the discharge of
material into the environment or otherwise relating to the protection of the
environment.
A subsidiary of EMCOR has guaranteed indebtedness of a venture in which it
has a 40% interest; the other venture partner, Baltimore Gas and Electric, has a
60% interest. The venture designs, constructs, owns, operates, leases and
maintains facilities to produce chilled water for sale to customers for use in
cooling. These guarantees are not expected to have a material adverse effect on
EMCOR's financial position or results of operations. Under one guarantee, each
of the venturers is jointly and severally liable for the venture's $25.0 million
borrowing due December 2031. The other guarantee is related to the venture's
$50.0 million revolving credit facility expiring September 2002, under which
guarantee EMCOR's subsidiary could be responsible for 40% of the indebtedness.
Pursuant to EMCOR's bankruptcy reorganization, when it was formerly known
as JWP, Inc., a wholly-owned subsidiary SellCo Corporation ("SellCo") issued
approximately $48.1 million principal amount of 12.0% Subordinated Contingent
Payments Notes, due 2004, (the "SellCo Notes"). Interest is payable semiannually
in additional SellCo Notes. Net Cash Proceeds (as defined in the Indenture
pursuant to which the SellCo Notes were issued) from the sales of stock or
assets of SellCo subsidiaries were to be used to redeem SellCo Notes. The SellCo
Notes are not obligations of EMCOR and, accordingly, are not included in the
accompanying Consolidated Balance Sheets as of December 31, 2001 and 2000. Since
the date of issuance, approximately $23.2 million of the SellCo Notes have been
redeemed with proceeds from the sale of stock and assets of SellCo subsidiaries
and the prepayment by EMCOR of the Supplemental SellCo Note. The SellCo Notes
mature on December 15, 2004 if not deemed canceled at an earlier date pursuant
to the Indenture.
NOTE L--ADDITIONAL CASH FLOW INFORMATION
The following presents information about cash paid for interest and income
taxes and non-cash financing activities for the years ended December 31, 2001,
2000 and 1999 (in thousands):
2001 2000 1999
-------- -------- --------
Cash paid during the year for:
Interest ................................... $ 4,195 $8,290 $9,018
Income taxes ............................... $ 7,846 $4,039 $5,418
Non-cash financing activities:
5.75% Convertible Subordinated Notes
due 2005, converted into common stock .... $115,000 $ -- $ --
NOTE M--SEGMENT INFORMATION
EMCOR has the following reportable segments: United States electrical
construction and facilities services, United States mechanical construction and
facilities services, United States other services, Canada construction and
facilities services, United Kingdom construction and facilities services and
Other international construction and facilities services. The segments (i)
United States other services primarily represents those operations which
principally provide consulting and maintenance services and (ii) Other
international construction and facilities services represents EMCOR's operations
outside of the United States, Canada, and the United Kingdom, primarily in South
Africa, the Middle East and Europe, performing electrical construction,
mechanical construction and facilities services.
The following presents information about industry segments and geographic
areas for the years ended December 31, 2001, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
2001 2000 1999
---------- ---------- ----------
<S> <C> <C> <C>
Revenues from unrelated entities:
United States electrical construction and facilities services ... $1,334,674 $1,350,716 $ 993,073
United States mechanical construction and facilities services ... 1,202,078 1,262,006 1,067,063
United States other services .................................... 209,721 163,936 82,814
---------- ---------- ----------
Total United States operations .................................. 2,746,473 2,776,658 2,142,950
Canada construction and facilities services ..................... 198,221 236,961 196,694
United Kingdom construction and facilities services ............. 463,560 446,251 553,654
Other international construction and facilities services ........ 11,600 334 664
---------- ---------- ----------
Total worldwide operations ...................................... $3,419,854 $3,460,204 $2,893,962
========== ========== ==========
</TABLE>
34
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M--SEGMENT INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Total revenues:
United States electrical construction and facilities services .............. $ 1,371,188 $ 1,373,977 $ 1,000,234
United States mechanical construction and facilities services .............. 1,234,964 1,283,740 1,074,758
United States other services ............................................... 215,458 166,759 83,411
Less intersegment revenues ................................................. (75,137) (47,818) (15,453)
----------- ----------- -----------
Total United States operations ............................................. 2,746,473 2,776,658 2,142,950
Canada construction and facilities services ................................ 198,221 236,961 196,694
United Kingdom construction and facilities services ........................ 463,560 446,251 553,654
Other international construction and facilities services ................... 11,600 334 664
----------- ----------- -----------
Total worldwide operations ................................................. $ 3,419,854 $ 3,460,204 $ 2,893,962
=========== =========== ===========
Operating income (loss):
United States electrical construction and facilities services .............. $ 75,280 $ 58,644 $ 38,485
United States mechanical construction and facilities services .............. 41,408 35,914 37,957
United States other services ............................................... (7,163) (5,558) (4,532)
----------- ----------- -----------
Total United States operations ............................................. 109,525 89,000 71,910
Canada construction and facilities services ................................ 2,312 5,160 3,991
United Kingdom construction and facilities services ........................ 7,170 6,026 3,208
Other international construction and facilities services ................... (1,220) 551 (355)
Corporate administration ................................................... (29,105) (21,812) (20,663)
----------- ----------- -----------
Total worldwide operations ................................................. 88,682 78,925 58,091
Other corporate items:
Interest expense ........................................................... (4,795) (9,705) (10,520)
Interest income ............................................................ 5,587 2,367 2,107
----------- ----------- -----------
Income before taxes ........................................................ $ 89,474 $ 71,587 $ 49,678
=========== =========== ===========
Capital expenditures:
United States electrical construction and facilities services .............. $ 3,731 $ 3,495 $ 3,689
United States mechanical construction and facilities services .............. 5,095 6,071 3,081
United States other services ............................................... 2,022 1,867 586
----------- ----------- -----------
Total United States operations ............................................. 10,848 11,433 7,356
Canada construction and facilities services ................................ 1,043 1,520 804
United Kingdom construction and facilities services ........................ 5,065 3,470 2,226
Other international construction and facilities services ................... -- -- 113
Corporate administration ................................................... 983 275 238
----------- ----------- -----------
Total worldwide operations ................................................. $ 17,939 $ 16,698 $ 10,737
=========== =========== ===========
Depreciation and amortization:
United States electrical construction and facilities services .............. $ 3,868 $ 3,485 $ 3,284
United States mechanical construction and facilities services .............. 6,655 6,130 5,424
United States other services ............................................... 3,418 2,724 1,988
----------- ----------- -----------
Total United States operations ............................................. 13,941 12,339 10,696
Canada construction and facilities services ................................ 772 836 680
United Kingdom construction and facilities services ........................ 2,858 2,858 2,550
Other international construction and facilities services ................... -- -- 60
Corporate administration ................................................... 629 68 107
----------- ----------- -----------
Total worldwide operations ................................................. $ 18,200 $ 16,101 $ 14,093
=========== =========== ===========
<CAPTION>
2001 2000
----------- -----------
<S> <C> <C>
Costs and estimated earnings in excess of billings on uncompleted contracts:
United States electrical construction and facilities services ................................ $ 70,838 $ 46,323
United States mechanical construction and facilities services ................................ 122,104 91,977
United States other services ................................................................. 1,184 2,540
----------- -----------
Total United States operations ............................................................... 194,126 140,840
Canada construction and facilities services .................................................. 13,384 9,087
United Kingdom construction and facilities services .......................................... 13,762 8,146
Other international construction and facilities services ..................................... -- --
----------- -----------
Total worldwide operations ................................................................... $ 221,272 $ 158,073
=========== ===========
</TABLE>
35
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M--SEGMENT INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
2001 2000
---------- ----------
<S> <C> <C>
Billings in excess of costs and estimated earnings on uncompleted contracts:
United States electrical construction and facilities services ......................................... $ 176,401 $ 190,276
United States mechanical construction and facilities services ......................................... 99,267 93,491
United States other services .......................................................................... 1,914 2,191
---------- ----------
Total United States operations ........................................................................ 277,582 285,958
Canada construction and facilities services ........................................................... 7,217 5,835
United Kingdom construction and facilities services ................................................... 34,236 23,136
Other international construction and facilities services .............................................. 130 --
---------- ----------
Total worldwide operations ............................................................................ $ 319,165 $ 314,929
========== ==========
Long-lived assets:
United States electrical construction and facilities services ......................................... $ 13,083 $ 10,867
United States mechanical construction and facilities services ......................................... 66,738 71,427
United States other services .......................................................................... 22,394 23,842
---------- ----------
Total United States operations ........................................................................ 102,215 106,136
Canada construction and facilities services ........................................................... 4,365 4,553
United Kingdom construction and facilities services ................................................... 8,485 7,761
Other international construction and facilities services .............................................. 3,384 3,649
Corporate administration .............................................................................. 1,623 1,004
---------- ----------
Total worldwide operations ............................................................................ $ 120,072 $ 123,103
========== ==========
Total assets:
United States electrical construction and facilities services ......................................... $ 417,678 $ 422,647
United States mechanical construction and facilities services ......................................... 457,596 450,684
United States other services .......................................................................... 60,965 79,323
---------- ----------
Total United States operations ........................................................................ 936,239 952,654
Canada construction and facilities services ........................................................... 62,234 60,122
United Kingdom construction and facilities services ................................................... 152,981 136,645
Other international construction and facilities services .............................................. 11,497 14,181
Corporate administration .............................................................................. 186,713 98,262
---------- ----------
Total worldwide operations ............................................................................ $1,349,664 $1,261,864
========== ==========
</TABLE>
NOTE N--SELECTED UNAUDITED QUARTERLY INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
2001 QUARTERLY RESULTS
Revenues ....................................................................... $837,555 $869,506 $848,629 $864,164
Gross profit ................................................................... $ 80,519 $ 92,744 $100,867 $117,693
Net income ..................................................................... $ 5,657 $ 11,622 $ 15,291 $ 17,442
Basic EPS ...................................................................... $ 0.54 $ 1.00 $ 1.03 $ 1.18
======== ======== ======== ========
Diluted EPS .................................................................... $ 0.44 $ 0.81 $ 1.00 $ 1.14
======== ======== ======== ========
2000 QUARTERLY RESULTS
Revenues ....................................................................... $741,522 $866,850 $921,568 $930,264
Gross profit ................................................................... $ 72,545 $ 85,343 $ 88,469 $111,460
Net income ..................................................................... $ 4,930 $ 9,158 $ 11,479 $ 14,522
Basic EPS ...................................................................... $ 0.47 $ 0.88 $ 1.10 $ 1.39
======== ======== ======== ========
Diluted EPS .................................................................... $ 0.40 $ 0.68 $ 0.83 $ 1.03
======== ======== ======== ========
</TABLE>
36
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE O--LEGAL PROCEEDINGS
In February 1995, as part of an investigation by the New York County
District Attorney's office into the business affairs of a general contractor
that did business with EMCOR's subsidiary, Forest Electric Corp. ("Forest"), a
search warrant was executed at Forest's executive offices. On July 12, 2000,
Forest was served with a Subpoena Duces Tecum to produce certain documents as
part of a broader investigation by the New York County District Attorney's
office into illegal business practices in the New York City construction
industry. Forest has been informed by the New York County District Attorney's
office that it and certain of its officers are targets of the investigation.
Forest has produced documents in response to the subpoena and intends to
cooperate fully with the District Attorney's office investigation as it
proceeds.
On July 31, 1998, a former employee of a subsidiary of EMCOR filed a
class-action complaint on behalf of the participants in two employee benefit
plans sponsored by EMCOR against EMCOR and other defendants for breach of
fiduciary duty under the Employee Retirement Income Security Act. All of the
claims relate to alleged acts or omissions which occurred during the period May
1991 to December 1994. The principal allegations of the complaint are that the
defendants breached their fiduciary duties by causing the plans to purchase and
hold stock of EMCOR when it was then known as JWP, Inc. and when the defendants
knew or should have known it was imprudent to do so. The action has been
settled, subject to court approval. The amount to be paid by EMCOR in connection
with the proposed settlement would not be material.
In December 2001, the Company's Canadian subsidiary Comstock Canada Limited
("Comstock") commenced an action against Atomic Energy of Canada Limited
("AECL") claiming approximately Cdn. $6.0 million in connection with Comstock's
work on two medical isotope nuclear reactors and associated work at AECL's
facility at Chalk River, Ontario. Comstock's claim is for holdback, unpaid
change requests, loss of productivity and extended duration costs. AECL has
filed a defense denying Comstock's claim and counterclaimed against Comstock for
Cdn. $47.0 million claiming substantial deficiencies in Comstock's work which
are alleged to have resulted in the need to replace a portion of Comstock's work
and installed materials and the need to reinstall various components of the
reactor systems. These deficiencies are alleged to have caused a significant
delay in AECL's ability to obtain the necessary certifications for operation of
the systems. To date, there has been no document exchange or discovery in this
litigation. The Company believes it has good and meritorious defenses to the
AECL counterclaim.
Substantial settlements or damage judgements against EMCOR arising out of
these matters could have a material adverse effect on EMCOR's business,
operating results and financial condition.
In addition to the above, EMCOR is involved in other legal proceedings and
claims, asserted by and against EMCOR, which have arisen in the ordinary course
of business. EMCOR believes it has a number of valid defenses to these actions
and EMCOR intends to vigorously defend or assert these claims and does not
believe that a significant liability will result. However, EMCOR cannot predict
the outcome thereof or the impact that an adverse result of the matters
discussed above will have upon EMCOR's financial position or results of
operations. Expenses related to the assertion of defense of claims are expensed
as incurred.
NOTE P--SUBSEQUENT EVENT
On February 11, 2002, EMCOR signed a definitive agreement with Comfort
Systems USA, Inc. ("Comfort Systems") to acquire nineteen of Comfort Systems'
subsidiaries. Under the terms of the agreement, EMCOR will pay Comfort Systems
$186.25 million, approximately $164.25 million in cash and approximately $22.0
million by assumption of Comfort Systems notes payable to former owners of
certain of the acquired companies. EMCOR will fund the acquisition through a
combination of cash on hand and borrowings under its revolving credit facility.
The acquisition is expected to close in the first quarter of 2002, pending
customary closing conditions and regulatory approval.
37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of EMCOR Group, Inc.:
We have audited the accompanying consolidated balance sheets of EMCOR
Group, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, cash flows and stockholders' equity and comprehensive income for
each of the three years in the period ended December 31, 2001. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 2001 and 2000, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of Valuation and Qualifying
Accounts is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
February 20, 2002
38
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
The Items comprising Part III information will be filed as an amendment to
this Form 10-K no later than 120 days after December 31, 2001, the end of
EMCOR's fiscal year covered by this Form 10-K.
39
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of EMCOR Group, Inc.
and Subsidiaries are included in Part II, Item 8:
Financial Statements:
Consolidated Balance Sheets--December 31, 2001 and 2000
Consolidated Statements of Operations--Years Ended December 31, 2001,
2000 and 1999
Consolidated Statements of Cash Flows--Years Ended December 31, 2001,
2000 and 1999
Consolidated Statements of Stockholders' Equity and Comprehensive
Income--Years Ended December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
(a)(2) The following financial statement schedules are included in this Form
10-K report:
Schedule II--Valuation And Qualifying Accounts
All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the consolidated
financial statements or notes thereto.
(a)(3) The exhibits listed on the Exhibit Index following the consolidated
financial statements hereof are filed herewith in response to this
Item.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by EMCOR during the last quarter
of the year covered by this report.
40
<PAGE>
SCHEDULE II
EMCOR GROUP, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING COSTS AND CHARGED TO BALANCE AT
DESCRIPTION OF YEAR EXPENSES OTHER ACCOUNTS DEDUCTIONS(1) END OF YEAR
- ------------------------------- ---------- --------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 2001 $36,917 2,856 -- (4,682) $35,091
Year Ended December 31, 2000 $31,083 6,419 -- (585) $36,917
Year Ended December 31, 1999 $24,006 5,967 5,094 (3,984) $31,083
</TABLE>
- ----------
(1) Deductions represent uncollectible balances of accounts receivable written
off, net of recoveries.
41
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT INCORPORATED BY REFERENCE
NO. DESCRIPTION TO, OR PAGE NUMBER
---- ----------- -------------------------
2(a) -- Disclosure Statement and Third Amended Exhibit 2(a) to EMCOR's
Joint Plan of Reorganization (the "Plan Registration Statement
of Reorganization") proposed by EMCOR on Form 10 as originally
Group, Inc. (formerly JWP INC.) (the filed March 17, 1995
"Company" or "EMCOR") and its subsidiary (the "Form 10")
SellCo Corporation ("SellCo"), as
approved for dissemination by the United
States Bankruptcy Court, Southern
District of New York (the "Bankruptcy
Court"), on August 22, 1994.
2(b) -- Modification to the Plan of Exhibit 2(b) to Form 10
Reorganization dated September 29, 1994
2(c) -- Second Modification to the Plan of Exhibit 2(c) to Form 10
Reorganization dated September 30, 1994
2(d) -- Confirmation Order of the Bankruptcy Exhibit 2(d) to Form 10
Court dated September 30, 1994 (the
"Confirmation Order") confirming the
Plan of Reorganization, as amended
2(e) -- Amendment to the Confirmation Order Exhibit 2(e) to Form 10
dated December 8, 1994
2(f) -- Post-confirmation modification to the Exhibit 2(f) to Form 10
Plan of Reorganization entered on
December 13, 1994
3(a-1) -- Restated Certificate of Incorporation Exhibit 3(a-5) to
of EMCOR filed December 15, 1994 Form 10
3(a-2) -- Amendment dated November 28, 1995 to the Exhibit 3(a-2) to
Restated Certificate of Incorporation EMCOR's Annual Report on
of EMCOR Form 10-K for the year
ended December 31, 1995
(the "1995 Form 10-K")
3(a-3) -- Amendment dated February 12, 1998 to the Exhibit 3(a-3) to
Restated Certificate of Incorporation EMCOR's Annual Report on
Form 10-K for the year
ended December 31, 1997
(the "1997 Form 10-K")
3(b) -- Amended and Restated By-Laws Exhibit 3(b) to EMCOR's
Annual Report on Form
10-K for the year ended
December 31, 1998 (the
"1998 Form 10-K")
3(c) -- Rights Agreement dated March 3, 1997 Exhibit 1 to EMCOR's
between EMCOR and the Bank of New York Report on Form 8-K dated
March 3, 1997
4.1 -- Amendment and Restatement of Credit Exhibit 4.1 to 1998
Agreement (the "Credit Agreement") dated Form 10-K
as of December 22, 1998 among EMCOR,
certain of its subsidiaries and Harris
Trust and Savings Bank, individually and
as agent, and the Lenders which are or
become Parties thereto*
4.2 -- Subordinated Indenture dated as of March Exhibit 4(b) to EMCOR's
18, 1998 ("Indentured") between EMCOR Quarterly Report on Form
and State Street Bank and Trust Company, 10-Q for the quarter
as Trustee ("State Street Bank") ended March 31, 1998
("March 1998 Form 10-Q")
4.3 -- First Supplemental Indenture dated as Exhibit 4(c) to
of March 18, 1998 to Indenture between March 1998 Form 10-Q
EMCOR and State Street Bank
42
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT INCORPORATED BY REFERENCE
NO. DESCRIPTION TO, OR PAGE NUMBER
---- ----------- -------------------------
4.4 -- Indenture dated as of December 15, 1994, Exhibit 4.4 to Form 10
between SellCo and Fleet National Bank
of Connecticut, as trustee, in respect
of SellCo's 12% Subordinated Contingent
Payment Notes, Due 2004
10(a) -- Employment Agreement made as of January Page
1, 2002 between EMCOR and Frank T.
MacInnis
10(b) -- Employment Agreement made as of Page
January 1, 2002 between EMCOR and
Sheldon I. Cammaker
10(c) -- Employment Agreement made as of Page
January 1, 2002 between EMCOR
and Leicle E. Chesser
10(d) -- Employment Agreement made as of Page
January 1, 2002 between EMCOR
and Jeffrey M. Levy
10(e) -- Employment Agreement made as of Page
January 1, 2002 between EMCOR
and R. Kevin Matz
10(f) -- Employment Agreement made as of Page
January 1, 2002 between EMCOR
and Mark A. Pompa
10(g-1) -- 1994 Management Stock Option Plan Exhibit 10(o) to Form 10
("1994 Option Plan")
10(g-2) -- Amendment to Section 12 of the Exhibit 10(g-2) to
1994 Option Plan EMCOR's Annual Report on
Form 10-K for the year
ended December 31, 2000
10(g-3) -- Amendment to Section 13 of the Exhibit 10(g-3) to
1994 Option Plan EMCOR's Annual Report on
Form 10-K for the year
ended December 31, 2000
10(h-1) -- 1995 Non-Employee Directors' Exhibit 10(p) to Form 10
Non-Qualified Stock Option Plan
("1995 Option Plan")
10(h-2) -- Amendment to Section 10 of the Exhibit 10(h-2) to
1995 Option Plan EMCOR's Annual Report on
Form 10-K for the year
ended December 31, 2000
10(i-1) -- 1997 Non-Employee Directors' Exhibit 10(k) to 1999
Non-Qualified Stock Option Plan Form 10-K
("1997 Option Plan")
10(i-2) -- Amendment to Section 9 of the Exhibit 10(i-2) to
1997 Option Plan EMCOR's Annual Report on
Form 10-K for the year
ended December 31, 2000
10(j) -- 1997 Stock Plan for Directors Exhibit 10(l) to 1999
Form 10-K
10(k-1) -- Continuity Agreement dated as Exhibit 10(a) to EMCOR's
of June 22, 1998 between Quarterly Report on Form
Frank T. MacInnis and EMCOR 10-Q for the quarter
("MacInnis Continuity Agreement") ended June 30, 1998
("June 1998 Form 10-Q")
10(k-2) -- Amendment dated as of May 4, 1999 to Exhibit 10(h) to June
MacInnis Continuity Agreement 1999 Form 10-Q
10(l-1) -- Continuity Agreement dated as of Exhibit 10(c) to the
June 22, 1998 between June 1998 Form 10-Q
Sheldon I. Cammaker and EMCOR
("Cammaker Continuity Agreement")
10(l-2) -- Amendment dated as of May 4, 1999 to Exhibit 10(i) to June
Cammaker Continuity Agreement 1999 Form 10-Q
10(m-1) -- Continuity Agreement dated as of Exhibit 10(d) to the
June 22, 1998 between June 1998 Form 10-Q
Leicle E. Chesser and EMCOR
("Chesser Continuity Agreement")
10(m-2) -- Amendment dated as of May 4, 1999 to Exhibit 10(j) to
Chesser Continuity Agreement June 1999 Form 10-Q
43
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT INCORPORATED BY REFERENCE
NO. DESCRIPTION TO, OR PAGE NUMBER
---- ----------- -------------------------
10(n-1) -- Continuity Agreement dated as of Exhibit 10(b) to the
June 22, 1998 between June 1998 Form 10-Q
Jeffrey M. Levy and EMCOR
("Levy Continuity Agreement")
10(n-2) -- Amendment dated as of May 4, 1999 to Exhibit 10(l) to June
Levy Continuity Agreement 1999 Form 10-Q
10(o-1) -- Continuity Agreement dated as of Exhibit 10(f) to the
June 22, 1998 between June 1998 Form 10-Q
R. Kevin Matz and EMCOR
("Matz Continuity Agreement")
10(o-2) -- Amendment dated as of May 4, 1999 Exhibit 10(m) to June
to Matz Continuity Agreement 1999 Form 10-Q
10(p-1) -- Continuity Agreement dated as of Exhibit 10(g) to the
June 22, 1998 between June 1998 Form 10-Q
Mark A. Pompa and EMCOR
("Pompa Continuity Agreement")
10(p-2) -- Amendment dated as of May 4, 1999 to Exhibit 10(n) to June
Pompa Continuity Agreement 1999 Form 10-Q
10(q) -- Executive Stock Bonus Plan* Exhibit 10(r) to EMCOR's
Annual Report on Form
10-K for the year ended
December 31, 2000
11 -- Computation of Basic EPS and Diluted EPS Page
for the years ended December 2001
and 2000*
21 -- List of Significant Subsidiaries* Page
23 -- Consent of Arthur Andersen LLP* Page
- ----------
*Filed Herewith
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, upon request of the
Securities and Exchange Commission, the Registrant hereby undertakes to furnish
a copy of any unfiled instrument which defines the rights of holders of
long-term debt of the Registrant's subsidiaries.
44
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
EMCOR GROUP, INC.
(Registrant)
Date: February 21, 2002 by /s/ Frank T. MacInnis
-------------------------------------------
FRANK T. MACINNIS
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON FEBRUARY 21, 2002.
/s/ Frank T. MacInnis Chairman of the Board of Directors and
---------------------------
Frank T. MacInnis Chief Executive Officer
/s/ Stephen W. Bershad Director
---------------------------
Stephen W. Bershad
/s/ David A. B. Brown Director
---------------------------
David A. B. Brown
/s/ Albert Fried, Jr. Director
---------------------------
Albert Fried, Jr.
/s/ Richard F. Hamm, Jr. Director
---------------------------
Richard F. Hamm, Jr.
/s/ Kevin C. Toner Director
---------------------------
Kevin C. Toner
/s/ Leicle E. Chesser Executive Vice President and
---------------------------
Leicle E. Chesser Chief Financial Officer
/s/ Mark A. Pompa Vice President and Controller
---------------------------
Mark A. Pompa
45
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(A)
<SEQUENCE>3
<FILENAME>c23256_ex10-a.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT FRANK T. MACINNIS
<TEXT>
Exhibit 10.(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of January 1, 2002 by and between EMCOR
GROUP, INC. (the "Company") and FRANK T. MACINNIS ("Executive").
In order to induce Executive to serve as Chief Executive Officer
of the Company and Chairman of the Board of Directors of the Company (the
"Board"), the Company desires to provide Executive with compensation and other
benefits under the conditions set forth in this Agreement.
Executive is willing to accept such employment and to perform
services for the Company and its subsidiaries, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. EMPLOYMENT.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Period of Employment (as
hereinafter defined) as the Chief Executive Officer of the Company. In his
capacity as Chief Executive Officer of the Company, Executive shall have the
customary powers, responsibilities and authorities of chief executive officers
of similar corporations of the size, type and nature of the Company as it may
exist from time to time, including, but not limited to, authority over all
personnel decisions and business policies and practices, subject to the
direction of the Board.
1.2 The Company shall, during the Period of Employment (as
hereinafter defined), make its best efforts to ensure Executive's retention as
Chairman of the Board
1.3 Subject to the terms and conditions hereof, Executive
hereby agrees to be employed as the Chief Executive Officer of the Company and
shall devote his full working time and efforts, to the best of his ability,
experience and talent, to the performance of the services, duties and
responsibilities in connection therewith and agrees to serve, if elected, as
Chairman of the Board. Except upon the prior written consent of the Board,
Executive will not during the Period of Employment (i) accept any other
employment or (ii) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage), whether or not it may
be competitive with, or whether or not it might place him in a competing
position to that of, the Company or any subsidiary thereof. Nothing in this
Agreement shall preclude the Executive from (i) engaging, consistent with his
duties and responsibilities hereunder, in charitable community affairs, (ii)
managing his personal investments, (iii) continuing to serve on the boards of
directors on which he presently serves (to the extent such service is not
precluded by federal or state law or by conflict of interest by reason of his
position with the Company), or (iv) serving, subject to approval of the Board,
as a member of boards of directors of other companies, PROVIDED, that such
activities do not interfere with the performance of Executive's duties
hereunder. Notwithstanding the foregoing, it is expressly acknowledged that
Executive's existing ownership in, and service as a director and/or officer of
ComNet Communications, Inc. have been disclosed to the Company and that the
continuing ownership thereof and any reasonable actions associated therewith,
including without limitation, continuing as a director and/or officer thereof
shall be permitted under the terms of this Agreement and shall in no event
constitute a breach hereof.
<PAGE>
2. PERIOD OF EMPLOYMENT. Executive's period of employment
hereunder shall commence on January 1, 2002 (the "Commencement Date") and shall
continue through the earlier of December 31, 2004 or the date of termination
hereunder (the "Period of Employment"); PROVIDED, HOWEVER, that the Period of
Employment shall automatically be extended for successive one-year periods
unless the Company or Executive, at least six months prior to the end of such
period, provides written notice to the other party of intent not to extend the
Period of Employment. Notwithstanding anything in this Agreement to the
contrary, in the event of a Change of Control (as defined in Section 6.1(e)) the
Period of Employment shall be for a period of three years commencing as of the
date of such Change of Control.
3. COMPENSATION.
3.1 SALARY. The Company shall pay Executive a base salary
("Base Salary") at the rate of $800,000 per annum for the Period of Employment.
Base Salary shall be payable in accordance with the ordinary payroll practices
of the Company. Executive's rate of Base Salary shall be increased on the first
day of each calendar year occurring during the Period of Employment, beginning
with January 1, 2003, by the percentage increase for the prior year in the
consumer price index for the area in which the principal office of the Company
is located, as determined by the U.S. Department of Commerce, or the amount
specified by the Board, whichever is greater.
3.2 BONUS. In addition to his Base Salary, Executive shall be
entitled, while he remains employed hereunder, in respect of each calendar year,
to an annual bonus (the "Bonus") payable in cash and at such times as bonuses
are customarily paid to senior executives of the Company; provided that so long
as the Company's Executive Stock Bonus Plan (the "Plan") shall remain in effect
and the Executive shall be designated a participant therein, 25% of the
Executive's Bonus shall be payable in restricted stock units in accordance with
the Plan and the Executive, in accordance with the terms of the Plan, may elect
to receive a greater percentage of his Bonus in restricted stock units. For each
calendar year during the Period of Employment, the Compensation Committee of the
Board (the "Committee") shall establish after consultation with Executive a
formula which shall determine the amount of Executive's Bonus for the calendar
year; provided that Executive's target bonus shall be no less than $800,000 for
each such year.
3.3 SUPPLEMENTAL BENEFIT CREDITS. Executive shall be fully
vested in all employee benefit plans of the Company with respect to which the
amount of any benefits payable thereunder is determined in whole or in part by
years of service with the Company.
3.4 STOCK OPTIONS. (a) The Executive is hereby granted an
option with a ten-year term to purchase 56,800 shares of common stock ("Shares")
of the Company at $46.35 per Share. The Executive also shall be granted as of
the first business day of 2003 and 2004 an option with a ten-year term to
purchase Shares at the then fair market value of a Share; the number of Shares
subject to each such option granted in 2003 and 2004, respectively, shall be
that number determined by dividing 125% of the Executive's base salary for such
year by the value of an option as of the first business day of such year, which
value shall be that computed in accordance with the methodology of valuing
options under the 1997 Non-Employee Directors' Non-Qualified Stock Option Plan.
Each option referred to herein shall be exercisable with respect to the Shares
subject thereto as follows: one-fourth on or after the date of grant, one-fourth
on or after the first anniversary of the date of grant, one-fourth on or after
the second anniversary of the date of grant, and one-fourth on or after the last
business day of the calendar
2
<PAGE>
year immediately preceeding the third anniversary of the date of grant. In the
event of the Executive's termination of employment under Section 6.1, each such
option shall become immediately exercisable in full and shall remain exercisable
for the balance of its ten-year term.
(b) In addition, Executive was granted on December 14, 2001 an
option with a ten-year term to purchase 50,600 Shares at $41.70 per share which
option is immediately exercisable in full and remains exercisable for the
balance of its ten-year term.
4. EMPLOYEE BENEFITS.
4.1 EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Company shall
provide Executive during the Period of Employment with coverage under any
employee benefit programs, plans and practices (commensurate with his position
in the Company) in accordance with the terms thereof, which the Company
currently makes available generally to its senior executive officers, or which
the Company, with Board approval, elects to make available generally to its
senior executive officers hereafter, including, but not limited to (a)
retirement, pension and profit-sharing; and (b) medical, dental,
hospitalization, life insurance, short and long-term disability, accidental
death and dismemberment and travel accident coverage; provided that Executive
shall pay such portion of the premiums therefor as is customarily paid by senior
executives of the Company.
4.2 VACATION, FRINGE AND OTHER BENEFITS. Executive shall be
entitled to the number of vacation days customarily accorded senior executives
of the Company. In addition, during the Period of Employment, the Company shall
pay Executive $870 per month for leasing (plus maintenance, insurance, and
property taxes) of an automobile and shall make the initial capital cost
reduction payment with respect to the leasing of such automobile on Executive's
behalf. The Company shall also reimburse Executive for (a) all initiation fees
and monthly dues for membership in a club suitable for entertaining clients of
the Company and (b) all legal expenses incurred by Executive in connection with
the negotiation and drafting of this Agreement. The Company shall bear the cost
of any increased tax liability of Executive caused by the provisions of this
Section 4.2.
4.3 LIFE INSURANCE. The Company shall obtain, at the Company's
expense, insurance on the life of the Executive in the amount of $4,800,000 for
the first twelve months of the Period of Employment, $3,200,000 for the second
twelve months of the Period of Employment, and $1,600,000 for the remainder of
the Period of Employment. The proceeds of such life insurance shall be payable
to such beneficiary or beneficiaries as shall be selected by the Executive at
any time or from time to time. The Company shall bear the cost of any increased
tax liability of Executive caused by the provisions of this Section 4.3.
5. DIRECTORS AND OFFICERS LIABILITY. The Company shall keep in
effect during and after the Period of Employment, a policy of directors' and
officers' liability insurance for officers and directors of the Company at such
reasonable amount of coverage as is agreed to by Executive and the Board from
time to time and which insurance policy shall be on a claims-made basis.
6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION NOT FOR CAUSE OR RESIGNATION FOR GOOD REASON.
(a) The Company may terminate Executive's employment at any time, and Executive
may terminate his
3
<PAGE>
employment at any time. If Executive's employment is terminated by the Company
other than for Cause (as hereinafter defined), or Executive terminates his
employment for Good Reason (as hereinafter defined), Executive shall be entitled
to receive a lump sum cash payment (but not in substitution for compensation
already earned) in an amount equal to the sum of:
(i) the greater of (A) Executive's Base Salary at the highest
annual rate in effect during the Period of Employment for
the period from the date of termination through the
Expiration Date (as that term is hereafter defined) or (B)
two times Executive's Base Salary at its then current
annual rate;
(ii) the greater of (A) Executive's target Bonus pursuant to
Section 3.2 times the number of full or partial calendar
years remaining from the date of termination through the
Expiration Date or (B) two times Executive's target Bonus;
(iii) an amount equal to Executive's Bonus, for any calendar year
ending before such termination occurs, which would have
been payable had Executive remained in employment until the
date such Bonus would otherwise have been paid; and
(iv) an amount equal to Executive's target Bonus for the
calendar year in which the termination of employment
occurs, multiplied by a fraction, the numerator of which is
the number of days in the calendar year in which the
termination of employment occurs that Executive was an
employee of the Company, and the denominator of which is
365.
In the event of a termination of Executive's employment by the
Company other than for Cause or by the Executive for Good Reason following a
Change of Control, the factor of two in Clause B of subsections 6.1(a)(i) and
(ii) shall be increased to three.
(b) In addition to the amounts described in subsection 6.1(a),
Executive shall be entitled to receive:
(i) until 18 months from the date of termination, Executive
(and, to the extent applicable, Executive's dependents)
shall continue to be covered, at the Company's expense,
under the Company's medical, dental and hospitalization
coverage plans, group life, short and long-term disability,
accidental death and dismemberment and travel accident
coverage plans described in Section 4.1 hereof or the
Company will provide for equivalent coverage; and
(ii) all payments to which Executive has vested rights as of the
Expiration Date under employee benefit, disability,
insurance and similar plans which provide for payments
beyond the Period of Employment (the term "Expiration Date"
shall mean the later of (i) December 31, 2004, (ii) the
third anniversary of a Change of Control of the Company or
(iii) the date that a succeeding one-year Period of
Employment (as provided for under Section 2 hereof)
terminates).
4
<PAGE>
(c) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written consent):
(i) The assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties,
responsibilities, titles or office as set forth in Section
1 hereof, or any reduction by the Company of his duties or
responsibilities or any removal of Executive from the
position of Chairman of the Board and Chief Executive
Officer or any failure to elect or re-elect Executive as
Chairman of the Board, except in connection with the
termination of Executive's employment (A) upon the
termination of the Period of Employment on the Expiration
Date, (B) for Cause, (C) as a result of Executive's
Permanent Disability (as hereinafter defined) or death or
(D) by Executive other than for Good Reason;
(ii) A reduction by the Company in Executive's Base Salary, as
in effect on the date hereof or as the same may be
increased from time to time during the Period of
Employment;
(iii) The failure by the Company to obtain the specific
assumption of this Agreement by any successor or assign of
the Company or any person acquiring substantially all of
the Company's assets;
(iv) Failure by the Company to perform in any material respect
its obligations under this Agreement, where such failure
shall not have been remedied within 30 days after Executive
shall have notified the Company in writing thereof;
(v) Any material reduction in Executive's compensation or
benefits following a Change of Control or Executive's
principal business location is changed to a location more
than 30 miles from Executive's principal business location
(other than a relocation to the Borough of Manhattan, New
York, New York) immediately prior to a Change of Control;
(vi) The Company shall cease to keep in effect the policy of
directors' and officers' liability insurance for Executive
described in Section 5; or
(vii) The termination of the Indemnity Agreement, effective as of
April 20, 1995, between Executive and the Company.
(d)(i) Anything in this Agreement to the contrary notwithstanding,
if it is determined (as hereafter provided) that any
payment or distribution by the Company to or for the
benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement,
including without limitation any stock option, stock
appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment") ,
would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor provision thereto) by reason of
5
<PAGE>
being "contingent on a change in ownership or control" of
the Company, within the meaning of Section 28OG of the Code
(or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties
with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax") ,
then the Executive shall be entitled to receive an
additional payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
(ii) Subject to the provisions of Section 6(d)(i) hereof, all
determinations required to be made under this Section 6(d),
including whether an Excise Tax is payable by the Executive
and the amount of such Excise Tax and whether a Gross-Up
Payment is required and the amount of such Gross-Up
Payment, shall be made by the nationally recognized firm of
certified public accountants (the "Accounting Firm") used
by the Company prior to the Change of Control (or, if such
Accounting Firm declines to serve, the Accounting Firm
shall be a nationally recognized firm of certified public
accountants selected by the Executive). The Accounting Firm
shall be directed by the Company or the Executive to submit
its determination and detailed supporting calculations to
both the Company and the Executive within 15 calendar days
after the date the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than
for Cause (the "Termination Date"), if applicable, and any
other such time or times as may be requested by the Company
or the Executive. If the Accounting Firm determines that
any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such
determination and calculations. If the Accounting Firm
determines that no Excise Tax is payable by the Executive,
it shall, at the same time as it makes such determination,
furnish the Executive with an opinion that he has
substantial authority not to report any Excise Tax on his
federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the Company and
the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar
uncertainty regarding applicable state or local tax law at
the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will
not have been made by the Company should have been made (an
"Underpayment") consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to
Section 6(d)(vi) hereof and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive
shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both
the Company and the Executive as promptly as
6
<PAGE>
possible. Any such Underpayment shall be promptly paid by
the Company to, or for the benefit of, the Executive within
five business days after receipt of such determination and
calculations. If payments required pursuant to this Section
6(d)(ii) to be made by the Company to the Executive are not
made within such five day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum.
(iii) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records
and documents in the possession of the Company or the
Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the
Accounting Firm in connection with the preparation and
issuance of the determination contemplated by Section
6(d)(ii) hereof.
(iv) The federal, state and local income or other tax returns
filed by the Executive and the Company (or any filing made
by a consolidated tax group which includes the Company)
shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall
make proper payment of the amount of any Excise Tax and, at
the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income
tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as
filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing
such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local
tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced,
the Executive shall within five business days pay to the
Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and
calculations contemplated by Sections 6 (d)(ii) and (d)(iv)
hereof shall be borne by the Company. If such fees and
expenses are initially advanced by the Executive, the
Company shall reimburse the Executive the full amount of
such fees and expenses within five business days after
receipt from the Executive of a statement therefor and
reasonable evidence of his payment thereof. If such
reimbursement is not made by the Company to the Executive
within such five-day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum.
(vi) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature
of such claim and the date on which such claim is requested
to be paid (in each case, to the extent known by the
Executive). The Executive shall not pay such claim prior to
7
<PAGE>
the earlier of (a) the expiration of the 30-calendar-day
period following the date on which he gives such notice to
the Company and (b) the date that any payment of amount
with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(A) provide the Company with any written records or
documents in his possession relating to such claim
reasonably requested by the Company;
(B) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including without
limitation accepting legal representation with
respect to such claim by an attorney competent in
respect of the subject matter and reasonably
selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and
shall indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income
tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing
provisions of this Section 6 (d)(vi), the Company shall
control all proceedings taken in connection with the
contest of any claim contemplated by this Section 6 (d)(vi)
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim (provided however, that the Executive may participate
therein at his cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest
to a determination before any administrative tribunal, or a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay the tax
claimed and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free
basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax,
including interest and penalties with respect thereto,
imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is
claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of any such
contested claim shall be limited to issues with respect to
which a Gross-
8
<PAGE>
Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or
any other taxing authority.
(vii) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6 (d)(vi)
hereof, the Executive receives any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 6 (d)(vi)
hereof) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon
after any taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company
pursuant to Section 6 (d)(vi) hereof, a determination is
made that the Executive is not entitled to any refund with
respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial
or refund prior to the expiration of 30 calendar days after
such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be made pursuant to this
Section 6 (d).
(e) For purposes of this Agreement, a "Change of Control" shall
be deemed to have occurred when:
(i) any person or persons acting in concert (excluding Company
benefit plans) becomes the beneficial owner of securities
of the Company having at least 25% of the voting power of
the Company's then outstanding securities; or
(ii) the shareholders of the Company shall approve any merger or
other business combination of the Company, sale or lease of
the Company's assets or combination of the foregoing
transactions (the "TRANSACTIONS") other than a Transaction
immediately following which the shareholders of the Company
and any trustee or fiduciary of any Company employee
benefit plan immediately prior to the Transaction own at
least 65% of the voting power, directly or indirectly, of
(A) the surviving corporation in any such merger or other
business combination; (B) the purchaser or lessee of the
Company's assets; or (C) both the surviving corporation and
the purchaser or lessee in the event of any combination of
Transactions; or
(iii) within any 24-month period, the persons who were directors
immediately before the beginning of such period (the
"INCUMBENT DIRECTORS") shall cease (for any reason other
than death) to constitute at least a majority of the Board
or the board of directors of a successor to the Company.
For this purpose, any director who was not a director at
the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified
as Incumbent Directors (so long as such director was not
nominated by a person who has expressed an intent to effect
a Change of Control or engage in a proxy or other control
contest).
9
<PAGE>
(f) Except as otherwise specifically provided herein, all cash
payments under this Section 6.1 shall be made by the Company within 30 calendar
days following the event giving rise to such payments. If any such payment shall
not be made within such 30-day period (or any other specifically provided time
period), the Company shall pay interest on the unpaid amount at the rate of 10%
per annum.
6.2 PERMANENT DISABILITY. If as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties with the Company on a full-time basis for six consecutive
months (a "Permanent Disability") during his Period of Employment, the Company
or Executive may terminate his employment on written notice thereof, the Period
of Employment shall terminate on the giving of such notice, and the compensation
to which Executive is entitled pursuant to Section 3.1 shall be paid through the
last day of the month in which the notice is given. In addition, Executive shall
be entitled to receive:
(a) all unpaid amounts, as of the date of such termination, in
respect of any Bonus for any calendar year ending before the calendar year in
which such termination occurs, which would have been payable had Executive
remained in employment until the date such Bonus would otherwise have been paid,
plus Executive's target Bonus for the calendar year in which his employment
terminates, multiplied by a fraction, the numerator of which is the number of
days in such calendar year the Executive was an employee of the Company, and the
denominator of which is 365;
(b) until 24 months from the date of termination for Permanent
Disability, Executive (and, to the extent applicable, Executive's dependents)
shall continue to be covered, at the Company's expense, under the Company's
medical, dental, hospitalization coverage plans, group life, short and long-term
disability, accidental death and dismemberment and travel accident coverage
plans described in Section 4.1 or the Company will provide for equivalent
coverage; provided that if Executive is provided with comparable coverage by a
successor employer any such coverage by the Company shall cease; and
(c) all amounts payable under the Company's disability plans.
6.3 DEATH. In the event of Executive's death while employed
hereunder, the Period of Employment shall thereupon automatically terminate and
the Executive's estate or designated beneficiaries shall receive (i) payments of
Base Salary for a period of three months after the date of death; (ii) all
unpaid amounts, as of the date of such termination, in respect of any Bonus for
any calendar year ending before the calendar year in which such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid, plus Executive's target
Bonus for the calendar year in which his employment terminates, multiplied by a
fraction, the numerator of which is the number of days in such calendar year the
Executive was an employee of the Company, and the denominator of which is 365;
and (iii) any death benefits provided under the employee benefit programs, in
accordance with their terms.
6.4 VOLUNTARY RESIGNATION; DISCHARGE FOR CAUSE. If Executive
resigns voluntarily, other than for Good Reason or Permanent Disability, or the
Company terminates the employment of Executive at any time for Cause, the
Company's obligations under this Agreement to make any further payments to
Executive shall thereupon, to the extent permitted
10
<PAGE>
by law, cease and terminate except with respect to all unpaid amounts, as of the
date of such termination, in respect of any Bonus for any calendar year ending
before such termination occurs, which would have been payable had Executive
remained in employment until the date such Bonus would otherwise have been paid.
In addition, Executive shall remain entitled to all vested amounts and benefits
under the Company's employee benefit programs, plans and practices, including,
without limitation, the supplemental benefit credits provided for under Section
3.3 hereof. The term "Cause" shall be limited to (a) action by Executive
involving willful malfeasance in connection with his employment which results in
material harm to the Company, (b) material and continuing breach by Executive of
the terms of this Agreement which breach is not cured within 60 days after
Executive receives written notice from the Company of any such breach or (c)
Executive being convicted of a felony. Termination of Executive for Cause
pursuant to this Section 6.4 shall be communicated by a Notice of Termination
given within six months after the Board both (i) had knowledge of conduct or an
event allegedly constituting Cause and (ii) had reason to believe that such
conduct or event could be grounds for Cause. For purposes of this Agreement a
"Notice of Termination" shall mean delivery to Executive of a copy of a
resolution duly adopted by the Board at a meeting of the Board called and held
for that purpose (after not less than 10 days notice to Executive ("Preliminary
Notice") and reasonable opportunity for Executive, together with the Executive's
counsel, to be heard before the Board prior to such vote) finding, that in the
good faith opinion of the Board, Executive was guilty of conduct set forth in
the third sentence of this Section 6.4 and specifying the particulars thereof in
detail. The Board shall no later than 30 days after the receipt of the
Preliminary Notice by Executive communicate its findings to Executive. A failure
by the Board to make its finding of Cause or to communicate its conclusions
within such 30-day period shall be deemed to be a finding that Executive was not
guilty of the conduct described in the third sentence of this Section 6.4.
6.5 TERMINATION ON OR AFTER EXPIRATION DATE. In the event the
Period of Employment shall not be extended and Executive's employment shall be
terminated by the Company on or after the Expiration Date or Executive shall
terminate his employment on or after the Expiration Date, the Executive shall be
paid (a) his Base Salary through the last day of the month in which the
termination of employment occurs, (b) all unpaid amounts in respect of any Bonus
for any calendar year ending before such termination date occurs, which Bonus
would have been payable had Executive remained in employment until the date such
Bonus would otherwise have been paid, and (c) Executive's target Bonus for the
calendar year in which his employment terminates, multiplied by a fraction, the
numerator of which is the number of days in such calendar year the Executive was
an employee of the Company, and the denominator of which is 365. In addition,
Executive shall remain entitled to all vested amounts, benefits, and rights
under the Company's employee benefit programs, plans and practices, all rights
to which he is entitled under Company severance plans, practices and/or policies
and all other benefits to which he is entitled by law or contract.
6.6 TERMINATION OBLIGATIONS. (a) Executive hereby acknowledges
and agrees that all personal property, including, without limitation, all books,
manuals, records, reports, notes, contracts, lists, and other documents, and
equipment furnished to or prepared by Executive in the course of or incident to
his employment, belong to the Company and shall be promptly returned to the
Company upon termination of the Period of Employment.
(b) Upon termination of the Period of Employment, the Executive
shall be deemed to have resigned from all offices and directorships then held
with the Company or any subsidiary or affiliate thereof.
11
<PAGE>
7. CONFIDENTIAL INFORMATION. During and after the Period of
Employment, Executive shall not disclose to any person (other than an employee
or agent of the Company or any affiliate of the Company entitled to receive the
same) any confidential information relating to the business of the Company and
obtained by him while providing services to the Company, without the consent of
the Board, or until such information ceases to be confidential.
8. NON-COMPETITION. In the event Executive's employment is
terminated by the Company for Cause or Executive terminates his employment with
the Company without Good Reason, Executive shall not, for a period ending on the
earlier of (i) 18 months from the date of such termination or (ii) the
Expiration Date, accept any other employment or engage, directly or indirectly,
in any other business activity which is competitive with that of the Company or
any subsidiary thereof; provided, however, that Executive's ownership interest
in, and service as a director and/or officer of, ComNet Communications, Inc.
shall not be deemed to be competitive with the Company or any subsidiary
thereto.
9. EXPENSES. Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement,
including expenses for travel and similar items related to such duties and
responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of an itemized account of such
expenditures.
10. NO OBLIGATION TO MITIGATE DAMAGES. Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking (and no payment otherwise required hereunder shall be
reduced on account of) other employment or otherwise, nor will any payments
hereunder be subject to offset in respect of any claims which the Company may
have against Executive.
11. NOTICES. All notices or communications hereunder shall be
in writing, addressed as follows:
to Executive:
Frank T. MacInnis
7 Sturges Hollow
Westport, CT 06880
12
<PAGE>
to Company:
Sheldon I. Cammaker, Esq.
Executive Vice President and General Counsel
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, CT 06851
with a copy to:
Kenneth C. Edgar, Jr., Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Any such notice or communication shall be delivered by hand or sent certified or
registered mail, return receipt requested, postage prepaid, addressed as above
(or to such other address as such party may designate in a notice duly delivered
as described above), and the actual date of delivery or mailing shall determine
the time at which notice was given.
12. AGREEMENT TO PERFORM NECESSARY ACTS. Each party agrees to
perform any further acts and to execute and deliver any further documents that
may be reasonably necessary to carry out the provisions of this Agreement.
13. SEPARABILITY; LEGAL ACTIONS; LEGAL FEES. If any provision
of this Agreement shall be declared to be invalid or unenforceable, in whole or
in part, such invalidity or unenforceability shall not affect the remaining
provisions hereof, which shall remain in full force and effect. Any controversy
or claim arising out of or relating to this Agreement or the breach of this
Agreement that cannot be resolved by Executive and the Company, including any
dispute as to the calculation of Executive's benefits or any payments hereunder,
shall be submitted to arbitration in New York, New York in accordance with the
laws of the State of New York and the procedures of the American Arbitration
Association, except that if Executive institutes an action relating to this
Agreement, Executive may, at Executive's option, bring that action in any court
of competent jurisdiction. Judgment may be entered on an arbitrator(s)' award in
any court having jurisdiction.
In addition to all other amounts payable to the Executive under
this Agreement, the Company shall pay or reimburse the Executive for legal fees
(including without limitation, any and all court costs and attorneys' fees and
expenses) incurred by the Executive in connection with or as a result of any
claim, action or proceeding brought by the Company or the Executive with respect
to or arising out of this Agreement or any provision hereof, unless, in the case
of an action brought by the Executive, it is determined by an arbitrator or by a
court of competent jurisdiction that such action was frivolous and was not
brought in good faith. Such legal fees shall be paid or reimbursed by the
Company to the Executive from time to time within five business days following
receipt by the Company of copies of bills for such fees and if the Company fails
to make such payment within such five day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum. All other expenses
relating to any arbitration or court proceedings shall be paid by the Company.
13
<PAGE>
14. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by the Company
(any such purported assignment by either shall be null and void), except that
the Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
business of the Company.
15. AMENDMENT; WAIVER. The Agreement may be amended at any
time, but only by mutual written agreement of the parties hereto. Any party may
waive compliance by the other party with any provision hereof, but only by an
instrument in writing executed by the party granting such waiver.
16. ENTIRE AGREEMENT. Except as otherwise provided in a
Continuity Agreement dated as of June 22, 1998 between the Company and the
Executive, as amended by agreement dated May 4, 1999, and the agreements setting
forth in detail the terms of the options referred to in Section 3.3 hereof, and
as may be amended from time to time hereafter, the terms of this Agreement (i)
are intended by the parties to be the final expression of their agreement with
respect to the employment of Executive by the Company, (ii) may not be
contradicted by evidence of any prior or contemporaneous agreement and (iii)
shall constitute the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial, administrative
or other legal proceeding involving this Agreement.
17. DEATH OR INCOMPETENCE. In the event of Executive's death or
a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his estate or other
legal representative.
18. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions of any
other section of this Agreement.
19. GOVERNING LAW. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of New York
without reference to rules relating to conflicts of law.
20. WITHHOLDINGS. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this employment agreement
as of the date first above written.
EMCOR GROUP, INC.
By:
-----------------------------------
EXECUTIVE
--------------------------------------
Frank T. MacInnis
15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(B)
<SEQUENCE>4
<FILENAME>c23256_ex10-b.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT SHELDON I CAMMAKER
<TEXT>
Exhibit 10.(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of January 1, 2002 by and between EMCOR
GROUP, INC. (the "Company") and SHELDON I. CAMMAKER ("Executive").
In order to induce Executive to serve as Executive Vice President
and General Counsel of the Company, the Company desires to provide Executive
with compensation and other benefits under the conditions set forth in this
Agreement.
Executive is willing to accept such employment and to perform
services for the Company and its subsidiaries, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. EMPLOYMENT.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Period of Employment (as
hereinafter defined) as an Executive Vice President and the General Counsel of
the Company. In his capacity as Executive Vice President and General Counsel of
the Company, Executive shall have the customary powers, responsibilities and
authorities of executive vice presidents and general counsels of similar
corporations of the size, type and nature of the Company as it may exist from
time to time, subject to the direction of the Chairman of the Board of Directors
(the "Board") of the Company and the Chief Executive Officer of the Company (the
"Chairman").
1.2 Subject to the terms and conditions hereof, Executive
hereby agrees to be employed as an Executive Vice President and the General
Counsel of the Company and shall devote his full working time and efforts, to
the best of his ability, experience and talent, to the performance of the
services, duties and responsibilities in connection therewith. Except upon the
prior written consent of the Chairman, Executive will not during the Period of
Employment (i) accept any other employment or (ii) engage, directly or
indirectly, in any other business activity (whether or not pursued for pecuniary
advantage), whether or not it may be competitive with, or whether or not it
might place him in a competing position to that of, the Company or any
subsidiary thereof. Nothing in this Agreement shall preclude the Executive from
(i) engaging, consistent with his duties and responsibilities hereunder, in
charitable community affairs, (ii) managing his personal investments, (iii)
continuing to serve on the boards of directors on which he presently serves (to
the extent such service is not precluded by federal or state law or by conflict
of interest by reason of his position with the Company), or (iv) serving,
subject to approval of the Chairman, as a member of boards of directors of other
companies, PROVIDED, that such activities do not interfere with the performance
of Executive's duties hereunder.
2. PERIOD OF EMPLOYMENT. Executive's period of employment
hereunder shall commence on January 1, 2002 (the "Commencement Date") and shall
continue through the earlier of December 31, 2004 or the date of termination
hereunder (the "Period of Employment"); PROVIDED, HOWEVER, that the Period of
Employment shall automatically be extended for successive one-year periods
unless the Company or Executive, at least six months prior to the end of such
period, provides written notice to the other party of intent not to extend the
Period of Employment. Notwithstanding anything in this Agreement to the
contrary,
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in the event of a Change of Control (as defined in Section 6.1(e)) the Period of
Employment shall be for a period of three years commencing as of the date of
such Change of Control.
3. COMPENSATION.
3.1 SALARY. The Company shall pay Executive a base salary
("Base Salary") at the rate of $410,000 per annum for the Period of Employment.
Base Salary shall be payable in accordance with the ordinary payroll practices
of the Company. Executive's rate of Base Salary shall be increased on the first
day of each calendar year occurring during the Period of Employment, beginning
with January 1, 2003, by the percentage increase for the prior year in the
consumer price index for the area in which the principal office of the Company
is located, as determined by the U.S. Department of Commerce, or the amount
specified by the Board, whichever is greater.
3.2 BONUS. In addition to his Base Salary, Executive shall be
entitled, while he remains employed hereunder, in respect of each calendar year,
to an annual bonus (the "Bonus") payable in cash and at such times as bonuses
are customarily paid to senior executives of the Company; provided that so long
as the Company's Executive Stock Bonus Plan (the "Plan") shall remain in effect
and the Executive shall be designated a participant therein, 25% of the
Executive's Bonus shall be payable in restricted stock units in accordance with
the Plan and the Executive, in accordance with the terms of the Plan, may elect
to receive a greater percentage of his Bonus in restricted stock units. For each
calendar year during the Period of Employment, the amount of the Bonus shall be
determined by the Compensation Committee of the Board of Directors in its sole
discretion.
3.3 STOCK OPTIONS. (a) The Executive is hereby granted an
option with a ten-year term to purchase 17,500 shares of common stock ("Shares")
of the Company at $46.35 per Share. The Executive also shall be granted as of
the first business day of 2003 and 2004 an option with a ten-year term to
purchase Shares at the then fair market value of a Share; the number of Shares
subject to each option granted in 2003 and 2004, respectively, shall be that
number determined by dividing 75% of Executive's base salary for such year by
the value of an option as of the first business day of such year, which value
shall be that computed in accordance with the methodology of valuing options
under the 1997 Non-Employee Directors' Non-Qualified Stock Option Plan. Each
option referred to herein shall be exercisable with respect to the Shares
subject thereto as follows: one-fourth on or after the date of grant, one-fourth
on or after the first anniversary of the date of grant, one-fourth on or after
the second anniversary of the date of grant, and one-fourth on or after the last
business day of the calendar year immediately preceeding the third anniversary
of the date of grant. In the event of the Executive's termination of employment
under Section 6.1, each such option shall become immediately exercisable in full
and shall remain exercisable for the balance of its ten-year term.
(b) In addition, Executive was granted on December 14, 2001 an
option with a ten-year term to purchase 25,900 Shares at $41.70 per share which
option is immediately exercisable in full and remains exercisable for the
balance of its ten-year term.
4. EMPLOYEE BENEFITS.
4.1 EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Company shall
provide Executive during the Period of Employment with coverage under any
employee benefit programs, plans and practices (commensurate with his position
in the Company) in accordance
2
<PAGE>
with the terms thereof, which the Company currently makes available generally to
its senior executive officers, or which the Company, with Board approval, elects
to make available generally to its senior executive officers hereafter,
including, but not limited to (a) retirement, pension and profit-sharing; and
(b) medical, dental, hospitalization, life insurance, short and long-term
disability, accidental death and dismemberment and travel accident coverage;
provided that Executive shall pay such portion of the premiums therefor as is
customarily paid by senior executives of the Company.
4.2 VACATION, FRINGE AND OTHER BENEFITS. Executive shall be
entitled to the number of vacation days customarily accorded senior executives
of the Company. In addition, during the Period of Employment, the Company shall
pay Executive $870 per month for leasing (plus maintenance, insurance, and
property taxes) of an automobile and shall make the initial capital cost
reduction payment with respect to the leasing of such automobile on Executive's
behalf. The Company shall also reimburse Executive for (a) all initiation fees
and monthly dues for membership in a club suitable for entertaining clients of
the Company and (b) all legal expenses incurred by Executive in connection with
the negotiation and drafting of this Agreement. The Company shall bear the cost
of any increased tax liability of Executive caused by the provisions of this
Section 4.2.
4.3 LIFE INSURANCE. The Company shall obtain, at the Company's
expense, insurance on the life of the Executive in the amount of $2,460,000 for
the first twelve months of the Period of Employment, $1,640,000 for the second
twelve months of the Period of Employment, and $820,000 for the remainder of the
Period of Employment. The proceeds of such life insurance shall be payable to
such beneficiary or beneficiaries as shall be selected by the Executive at any
time or from time to time. The Company shall bear the cost of any increased tax
liability of Executive caused by the provisions of this Section 4.3.
5. DIRECTORS AND OFFICERS LIABILITY. The Company shall keep in
effect during and after the Period of Employment, a policy of directors' and
officers' liability insurance for officers and directors of the Company at such
reasonable amount of coverage as is agreed to by Executive and the Board from
time to time and which insurance policy shall be on a claims-made basis.
6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION NOT FOR CAUSE OR RESIGNATION FOR GOOD REASON.
(a) The Company may terminate Executive's employment at any time, and Executive
may terminate his employment at any time. If Executive's employment is
terminated by the Company other than for Cause (as hereinafter defined), or
Executive terminates his employment for Good Reason (as hereinafter defined),
Executive shall be entitled to receive a lump sum cash payment (but not in
substitution for compensation already earned) in an amount equal to the sum of:
(i) the product of two times the sum of (A) Executive's Base
Salary at its current annual rate at the time of
termination of employment plus (B) Executive's "Deemed
Bonus" (as defined below);
(ii) an amount equal to Executive's Bonus, for any calendar year
ending before such termination occurs, which would have
been payable had Executive remained in employment until the
date such Bonus would otherwise have been paid; and
3
<PAGE>
(iii) an amount equal to Executive's Deemed Bonus multiplied by a
fraction, the numerator of which is the number of days in
the calendar year in which the termination of employment
occurs that Executive was an employee of the Company, and
the denominator of which is 365.
In the event of a termination of Executive's employment by the
Company other than for Cause or by the Executive for Good Reason following a
Change of Control, the factor of two in subsection 6.1(a)(i) shall be increased
to three.
For purposes of subsections 6.1(a)(i) and (iii), 6.2(a) and 6.3,
the amount of the Deemed Bonus shall be the highest Bonus paid to Executive for
any year he has been employed by the Company.
(b) In addition to the amounts described in subsection 6.1(a),
Executive shall be entitled to receive:
(i) until the earlier of the Expiration Date (as that term is
hereafter defined) or 18 months from the date of
termination, Executive (and, to the extent applicable,
Executive's dependents) shall continue to be covered, at
the Company's expense, under the Company's medical, dental
and hospitalization coverage plans, and until the earlier
of the Expiration Date or 6 months from the date of
termination, Executive shall continue to be covered, at the
Company's expense, under the Company's group life, short
and long-term disability, accidental death and
dismemberment and travel accident coverage plans described
in Section 4.1 hereof or the Company will provide for
equivalent coverage (the term "Expiration Date" shall mean
the later of (i) December 31, 2004, (ii) the third
anniversary of a Change of Control of the Company or (iii)
the date that a succeeding one-year Period of Employment
(as provided for under Section 2 hereof) terminates); and
(ii) all payments to which Executive has vested rights as of the
Expiration Date under employee benefit, disability,
insurance and similar plans which provide for payments
beyond the Period of Employment.
(c) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written consent):
(i) The assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties,
responsibilities, titles or office as set forth in Section
1 hereof, or any reduction by the Company of his duties or
responsibilities or any removal of Executive from the
position of Executive Vice President and General Counsel,
except in connection with the termination of Executive's
employment (A) upon the termination of the Period of
Employment on the Expiration Date, (B) for Cause, (C) as a
result of Executive's Permanent Disability (as hereinafter
defined) or death or (D) by Executive other than for Good
Reason;
4
<PAGE>
(ii) A reduction by the Company in Executive's Base Salary, as
in effect on the date hereof or as the same may be
increased from time to time during the Period of
Employment;
(iii) The failure by the Company to obtain the specific
assumption of this Agreement by any successor or assign of
the Company or any person acquiring substantially all of
the Company's assets;
(iv) Failure by the Company to perform in any material respect
its obligations under this Agreement, where such failure
shall not have been remedied within 30 days after Executive
shall have notified the Company in writing thereof;
(v) Any material reduction in Executive's compensation or
benefits following a Change of Control or Executive's
principal business location is changed to a location more
than 30 miles from Executive's principal business location
(other than a relocation to the Borough of Manhattan, New
York, New York) immediately prior to a Change of Control;
(vi) The Company shall cease to keep in effect the policy of
directors' and officers' liability insurance for Executive
described in Section 5; or
(vii) The termination of the Indemnity Agreement, effective as of
April 20, 1995, between Executive and the Company.
(d)(i) Anything in this Agreement to the contrary notwithstanding,
if it is determined (as hereafter provided) that any
payment or distribution by the Company to or for the
benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement,
including without limitation any stock option, stock
appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment") ,
would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor provision thereto) by reason of
being "contingent on a change in ownership or control" of
the Company, within the meaning of Section 28OG of the Code
(or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties
with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax") ,
then the Executive shall be entitled to receive an
additional payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
5
<PAGE>
(ii) Subject to the provisions of Section 6(d)(i) hereof, all
determinations required to be made under this Section 6(d),
including whether an Excise Tax is payable by the Executive
and the amount of such Excise Tax and whether a Gross-Up
Payment is required and the amount of such Gross-Up
Payment, shall be made by the nationally recognized firm of
certified public accountants (the "Accounting Firm") used
by the Company prior to the Change of Control (or, if such
Accounting Firm declines to serve, the Accounting Firm
shall be a nationally recognized firm of certified public
accountants selected by the Executive). The Accounting Firm
shall be directed by the Company or the Executive to submit
its determination and detailed supporting calculations to
both the Company and the Executive within 15 calendar days
after the date the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than
for Cause (the "Termination Date"), if applicable, and any
other such time or times as may be requested by the Company
or the Executive. If the Accounting Firm determines that
any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such
determination and calculations. If the Accounting Firm
determines that no Excise Tax is payable by the Executive,
it shall, at the same time as it makes such determination,
furnish the Executive with an opinion that he has
substantial authority not to report any Excise Tax on his
federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the Company and
the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar
uncertainty regarding applicable state or local tax law at
the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will
not have been made by the Company should have been made (an
"Underpayment") consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to
Section 6(d)(vi) hereof and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive
shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible. Any
such Underpayment shall be promptly paid by the Company to,
or for the benefit of, the Executive within five business
days after receipt of such determination and calculations.
If payments required pursuant to this Section 6(d)(ii) to
be made by the Company to the Executive are not made within
such five day period, the Company shall pay the Executive
interest thereon at the rate of 10% per annum.
(iii) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records
and documents in the possession of the Company or the
Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the
Accounting Firm in connection with the preparation and
issuance of the determination contemplated by Section
6(d)(ii) hereof.
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<PAGE>
(iv) The federal, state and local income or other tax returns
filed by the Executive and the Company (or any filing made
by a consolidated tax group which includes the Company)
shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall
make proper payment of the amount of any Excise Tax and, at
the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income
tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as
filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing
such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local
tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced,
the Executive shall within five business days pay to the
Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and
calculations contemplated by Sections 6 (d)(ii) and (d)(iv)
hereof shall be borne by the Company. If such fees and
expenses are initially advanced by the Executive, the
Company shall reimburse the Executive the full amount of
such fees and expenses within five business days after
receipt from the Executive of a statement therefor and
reasonable evidence of his payment thereof. If such
reimbursement is not made by the Company to the Executive
within such five-day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum.
(vi) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature
of such claim and the date on which such claim is requested
to be paid (in each case, to the extent known by the
Executive). The Executive shall not pay such claim prior to
the earlier of (a) the expiration of the 30-calendar-day
period following the date on which he gives such notice to
the Company and (b) the date that any payment of amount
with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(A) provide the Company with any written records or
documents in his possession relating to such claim
reasonably requested by the Company;
(B) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including without
limitation accepting legal representation with
7
<PAGE>
respect to such claim by an attorney competent in
respect of the subject matter and reasonably
selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including interest and penalties) incurred
in connection with such contest and shall indemnify and hold
harmless the Executive, on an after-tax basis, for and against any
Excise Tax or income tax, including interest and penalties with
respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing
provisions of this Section 6 (d)(vi), the Company shall control
all proceedings taken in connection with the contest of any claim
contemplated by this Section 6 (d)(vi) and, at its sole option,
may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim (provided however, that the Executive may
participate therein at his cost and expense) and may, at its
option, either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, or a court of initial
jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs
the Executive to pay the tax claimed and sue for a refund, the
Company shall advance the amount of such payment to the Executive
on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest and penalties with respect thereto,
imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6 (d)(vi) hereof, the Executive
receives any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of
Section 6 (d)(vi) hereof) promptly pay to the Company the amount
of such refund (together with any interest paid or credited
thereon after any taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company pursuant to
Section 6 (d)(vi) hereof, a determination is made that the
Executive is not entitled to any refund with respect to such claim
8
<PAGE>
and the Company does not notify the Executive in writing of
its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination,
then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up
Payment required to be made pursuant to this Section 6 (d).
(e) For purposes of this Agreement, a "Change of Control" shall
be deemed to have occurred when:
(i) any person or persons acting in concert (excluding Company
benefit plans) becomes the beneficial owner of securities
of the Company having at least 25% of the voting power of
the Company's then outstanding securities; or
(ii) the shareholders of the Company shall approve any merger or
other business combination of the Company, sale or lease of
the Company's assets or combination of the foregoing
transactions (the "TRANSACTIONS") other than a Transaction
immediately following which the shareholders of the Company
and any trustee or fiduciary of any Company employee
benefit plan immediately prior to the Transaction own at
least 65% of the voting power, directly or indirectly, of
(A) the surviving corporation in any such merger or other
business combination; (B) the purchaser or lessee of the
Company's assets; or (C) both the surviving corporation and
the purchaser or lessee in the event of any combination of
Transactions; or
(iii) within any 24-month period, the persons who were directors
immediately before the beginning of such period (the
"INCUMBENT DIRECTORS") shall cease (for any reason other
than death) to constitute at least a majority of the Board
or the board of directors of a successor to the Company.
For this purpose, any director who was not a director at
the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified
as Incumbent Directors (so long as such director was not
nominated by a person who has expressed an intent to effect
a Change of Control or engage in a proxy or other control
contest).
(f) Except as otherwise specifically provided herein, all cash
payments under this Section 6.1 shall be made by the Company within 30 calendar
days following the event giving rise to such payments. If any such payment shall
not be made within such 30-day period (or any other specifically provided time
period), the Company shall pay interest on the unpaid amount at the rate of 10%
per annum.
6.2 PERMANENT DISABILITY. If as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties with the Company on a full-time basis for six consecutive
months (a "Permanent Disability") during his Period of Employment, the Company
or Executive may terminate his employment on written notice thereof, the Period
of Employment shall terminate on the giving of such notice, and the compensation
to which Executive is entitled pursuant to Section 3.1 shall be paid through the
9
<PAGE>
last day of the month in which the notice is given. In addition, Executive shall
be entitled to receive:
(a) all unpaid amounts, as of the date of such termination, in
respect of any Bonus for any calendar year ending before the calendar year in
which such termination occurs, which would have been payable had Executive
remained in employment until the date such Bonus would otherwise have been paid,
plus Executive's Deemed Bonus for the calendar year in which his employment
terminates, multiplied by a fraction, the numerator of which is the number of
days in such calendar year the Executive was an employee of the Company, and the
denominator of which is 365;
(b) until the earlier of the Expiration Date or 24 months from
the date of termination for Permanent Disability, Executive (and, to the extent
applicable, Executive's dependents) shall continue to be covered, at the
Company's expense, under the Company's medical, dental, hospitalization, group
life, short and long-term disability, accidental death and dismemberment and
travel accident coverage plans described in Section 4.1 or the Company will
provide for equivalent coverage; provided that if Executive is provided with
comparable coverage by a successor employer any such coverage by the Company
shall cease; and
(c) all amounts payable under the Company's disability plans.
6.3 DEATH. In the event of Executive's death while employed
hereunder, the Period of Employment shall thereupon automatically terminate and
the Executive's estate or designated beneficiaries shall receive (i) payments of
Base Salary for a period of three months after the date of death; (ii) all
unpaid amounts, as of the date of such termination, in respect of any Bonus for
any calendar year ending before the calendar year in which such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid, plus Executive's Deemed
Bonus for the calendar year in which his employment terminates, multiplied by a
fraction, the numerator of which is the number of days in such calendar year the
Executive was an employee of the Company, and the denominator of which is 365;
and (iii) any death benefits provided under the employee benefit programs, in
accordance with their terms.
6.4 VOLUNTARY RESIGNATION; DISCHARGE FOR CAUSE. If Executive
resigns voluntarily, other than for Good Reason or Permanent Disability, or the
Company terminates the employment of Executive at any time for Cause, the
Company's obligations under this Agreement to make any further payments to
Executive shall thereupon, to the extent permitted by law, cease and terminate
except with respect to all unpaid amounts, as of the date of such termination,
in respect of any Bonus for any calendar year ending before such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid. In addition, Executive shall
remain entitled to all vested amounts and benefits under the Company's employee
benefit programs, plans and practices. The term "Cause" shall be limited to (a)
action by Executive involving willful malfeasance in connection with his
employment which results in material harm to the Company, (b) material and
continuing breach by Executive of the terms of this Agreement which breach is
not cured within 60 days after Executive receives written notice from the
Company of any such breach or (c) Executive being convicted of a felony.
Termination of Executive for Cause pursuant to this Section 6.4 shall be
communicated by a Notice of Termination given within six months after the Board
both (i) had knowledge of conduct or an event allegedly constituting Cause and
(ii) had reason to believe that such conduct or event could be grounds for
Cause.
10
<PAGE>
For purposes of this Agreement a "Notice of Termination" shall mean delivery to
Executive of a copy of a resolution duly adopted by the Board at a meeting of
the Board called and held for that purpose (after not less than 10 days notice
to Executive ("Preliminary Notice") and reasonable opportunity for Executive,
together with the Executive's counsel, to be heard before the Board prior to
such vote) finding, that in the good faith opinion of the Board, Executive was
guilty of conduct set forth in the third sentence of this Section 6.4 and
specifying the particulars thereof in detail. The Board shall no later than 30
days after the receipt of the Preliminary Notice by Executive communicate its
findings to Executive. A failure by the Board to make its finding of Cause or to
communicate its conclusions within such 30-day period shall be deemed to be a
finding that Executive was not guilty of the conduct described in the third
sentence of this Section 6.4.
6.5 TERMINATION ON OR AFTER EXPIRATION DATE. In the event the
Period of Employment shall not be extended and Executive's employment shall be
terminated by the Company on or after the Expiration Date or Executive shall
terminate his employment on or after the Expiration Date, the Executive shall be
paid (a) his Base Salary through the last day of the month in which the
termination of employment occurs, (b) all unpaid amounts in respect of any Bonus
for any calendar year ending before such termination date occurs, which Bonus
would have been payable had Executive remained in employment until the date such
Bonus would otherwise have been paid, and (c) Executive's Deemed Bonus for the
calendar year in which his employment terminates, multiplied by a fraction, the
numerator of which is the number of days in such calendar year the Executive was
an employee of the Company, and the denominator of which is 365. In addition,
Executive shall remain entitled to all vested amounts, benefits, and rights
under the Company's employee benefit programs, plans and practices, all rights
to which he is entitled under Company severance plans, practices and/or policies
and all other benefits to which he is entitled by law or contract.
6.6 TERMINATION OBLIGATIONS. (a) Executive hereby acknowledges
and agrees that all personal property, including, without limitation, all books,
manuals, records, reports, notes, contracts, lists, and other documents, and
equipment furnished to or prepared by Executive in the course of or incident to
his employment, belong to the Company and shall be promptly returned to the
Company upon termination of the Period of Employment.
(b) Upon termination of the Period of Employment, the Executive
shall be deemed to have resigned from all offices and directorships then held
with the Company or any subsidiary or affiliate thereof.
7. CONFIDENTIAL INFORMATION. During and after the Period of
Employment, Executive shall not disclose to any person (other than an employee
or agent of the Company or any affiliate of the Company entitled to receive the
same) any confidential information relating to the business of the Company and
obtained by him while providing services to the Company, without the consent of
the Board, or until such information ceases to be confidential.
8. NON-COMPETITION. In the event Executive's employment is
terminated by the Company for Cause or Executive terminates his employment with
the Company without Good Reason, Executive shall not, for a period ending on the
earlier of (i) 18 months from the date of such termination or (ii) the
Expiration Date, accept any other employment or engage, directly or indirectly,
in any other business activity which is competitive with that of the Company or
any subsidiary thereof.
11
<PAGE>
9. EXPENSES. Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement,
including expenses for travel and similar items related to such duties and
responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of an itemized account of such
expenditures.
10. NO OBLIGATION TO MITIGATE DAMAGES. Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking (and no payment otherwise required hereunder shall be
reduced on account of) other employment or otherwise, nor will any payments
hereunder be subject to offset in respect of any claims which the Company may
have against Executive.
11. NOTICES. All notices or communications hereunder shall be
in writing, addressed as follows:
to Executive:
Sheldon I. Cammaker
18 Wampus Close
Armonk, NY 10504
to Company:
Frank T. MacInnis
Chairman of the Board and Chief Executive Officer
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, CT 06851
with a copy to:
Kenneth C. Edgar, Jr., Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Any such notice or communication shall be delivered by hand or sent certified or
registered mail, return receipt requested, postage prepaid, addressed as above
(or to such other address as such party may designate in a notice duly delivered
as described above), and the actual date of delivery or mailing shall determine
the time at which notice was given.
12. AGREEMENT TO PERFORM NECESSARY ACTS. Each party agrees to
perform any further acts and to execute and deliver any further documents that
may be reasonably necessary to carry out the provisions of this Agreement.
13. SEPARABILITY; LEGAL ACTIONS; LEGAL FEES. If any provision
of this Agreement shall be declared to be invalid or unenforceable, in whole or
in part, such invalidity or unenforceability shall not affect the remaining
provisions hereof, which shall remain in full force and effect. Any controversy
or claim arising out of or relating to this Agreement or the
12
<PAGE>
breach of this Agreement that cannot be resolved by Executive and the Company,
including any dispute as to the calculation of Executive's benefits or any
payments hereunder, shall be submitted to arbitration in New York, New York in
accordance with the laws of the State of New York and the procedures of the
American Arbitration Association, except that if Executive institutes an action
relating to this Agreement, Executive may, at Executive's option, bring that
action in any court of competent jurisdiction. Judgment may be entered on an
arbitrator(s)' award in any court having jurisdiction.
In addition to all other amounts payable to the Executive under
this Agreement, the Company shall pay or reimburse the Executive for legal fees
(including without limitation, any and all court costs and attorneys' fees and
expenses) incurred by the Executive in connection with or as a result of any
claim, action or proceeding brought by the Company or the Executive with respect
to or arising out of this Agreement or any provision hereof, unless, in the case
of an action brought by the Executive, it is determined by an arbitrator or by a
court of competent jurisdiction that such action was frivolous and was not
brought in good faith. Such legal fees shall be paid or reimbursed by the
Company to the Executive from time to time within five business days following
receipt by the Company of copies of bills for such fees and if the Company fails
to make such payment within such five day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum. All other expenses
relating to any arbitration or court proceedings shall be paid by the Company.
14. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by the Company
(any such purported assignment by either shall be null and void), except that
the Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
business of the Company.
15. AMENDMENT; WAIVER. The Agreement may be amended at any
time, but only by mutual written agreement of the parties hereto. Any party may
waive compliance by the other party with any provision hereof, but only by an
instrument in writing executed by the party granting such waiver.
16. ENTIRE AGREEMENT. Except as otherwise provided in a
Continuity Agreement dated as of June 22, 1998 between the Company and the
Executive, as amended by agreement dated May 4, 1999, and the agreements setting
forth in detail the terms of the options referred to in Section 3.3 hereof, and
as may be amended from time to time hereafter, the terms of this Agreement (i)
are intended by the parties to be the final expression of their agreement with
respect to the employment of Executive by the Company, (ii) may not be
contradicted by evidence of any prior or contemporaneous agreement and (iii)
shall constitute the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial, administrative
or other legal proceeding involving this Agreement.
17. DEATH OR INCOMPETENCE. In the event of Executive's death or
a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his estate or other
legal representative.
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<PAGE>
18. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions of any
other section of this Agreement.
19. GOVERNING LAW. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of New York
without reference to rules relating to conflicts of law.
20. WITHHOLDINGS. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed this amended
and restated employment agreement as of the date first above written.
EMCOR GROUP, INC.
By:
--------------------------------------
EXECUTIVE
-----------------------------------------
Sheldon I. Cammaker
14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(C)
<SEQUENCE>5
<FILENAME>c23256_ex10-c.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT LEICLE CHESSER
<TEXT>
Exhibit 10.(c)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of January 1, 2002 by and between EMCOR
GROUP, INC. (the "Company") and LEICLE E. CHESSER ("Executive").
In order to induce Executive to serve as Executive Vice President
and the Chief Financial Officer of the Company, the Company desires to provide
Executive with compensation and other benefits under the conditions set forth in
this Agreement.
Executive is willing to accept such employment and to perform
services for the Company and its subsidiaries, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. EMPLOYMENT.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Period of Employment (as
hereinafter defined) as an Executive Vice President and the Chief Financial
Officer of the Company. In his capacity as Executive Vice President and Chief
Financial Officer of the Company, Executive shall have the customary powers,
responsibilities and authorities of executive vice presidents and chief
financial officers of similar corporations of the size, type and nature of the
Company as it may exist from time to time, subject to the direction of the
Chairman of the Board of Directors (the "Board") of the Company and the Chief
Executive Officer of the Company (the "Chairman").
1.2 Subject to the terms and conditions hereof, Executive
hereby agrees to be employed as an Executive Vice President and the Chief
Financial Officer of the Company and shall devote his full working time and
efforts, to the best of his ability, experience and talent, to the performance
of the services, duties and responsibilities in connection therewith. Except
upon the prior written consent of the Chairman, Executive will not during the
Period of Employment (i) accept any other employment or (ii) engage, directly or
indirectly, in any other business activity (whether or not pursued for pecuniary
advantage), whether or not it may be competitive with, or whether or not it
might place him in a competing position to that of, the Company or any
subsidiary thereof. Nothing in this Agreement shall preclude the Executive from
(i) engaging, consistent with his duties and responsibilities hereunder, in
charitable community affairs, (ii) managing his personal investments, (iii)
continuing to serve on the boards of directors on which he presently serves (to
the extent such service is not precluded by federal or state law or by conflict
of interest by reason of his position with the Company), or (iv) serving,
subject to approval of the Chairman, as a member of boards of directors of other
companies, provided, that such activities do not interfere with the performance
of Executive's duties hereunder.
2. PERIOD OF EMPLOYMENT. Executive's period of employment
hereunder shall commence on January 1, 2002 (the "Commencement Date") and shall
continue through the earlier of December 31, 2004 or the date of termination
hereunder (the "Period of Employment"); PROVIDED, HOWEVER, that the Period of
Employment shall automatically be extended for successive one-year periods
unless the Company or Executive, at least six months prior to the end of such
period, provides written notice to the other party of intent not to extend the
Period of Employment. Notwithstanding anything in this Agreement to the
contrary,
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in the event of a Change of Control (as defined in Section 6.1(e)) the Period of
Employment shall be for a period of three years commencing as of the date of
such Change of Control.
3. COMPENSATION.
3.1 SALARY. The Company shall pay Executive a base salary
("Base Salary") at the rate of $410,000 per annum for the Period of Employment.
Base Salary shall be payable in accordance with the ordinary payroll practices
of the Company. Executive's rate of Base Salary shall be increased on the first
day of each calendar year occurring during the Period of Employment, beginning
with January 1, 2003, by the percentage increase for the prior year in the
consumer price index for the area in which the principal office of the Company
is located, as determined by the U.S. Department of Commerce, or the amount
specified by the Board, whichever is greater.
3.2 BONUS. In addition to his Base Salary, Executive shall be
entitled, while he remains employed hereunder, in respect of each calendar year,
to an annual bonus (the "Bonus") payable in cash and at such times as bonuses
are customarily paid to senior executives of the Company; provided that so long
as the Company's Executive Stock Bonus Plan (the "Plan") shall remain in effect
and the Executive shall be designated a participant therein, 25% of the
Executive's Bonus shall be payable in restricted stock units in accordance with
the Plan and the Executive, in accordance with the terms of the Plan, may elect
to receive a greater percentage of his Bonus in restricted stock units. For each
calendar year during the Period of Employment, the amount of the Bonus shall be
determined by the Compensation Committee of the Board of Directors in its sole
discretion.
3.3 STOCK OPTIONS. (a) The Executive is hereby granted an
option with a ten-year term to purchase 17,500 shares of common stock ("Shares")
of the Company at $46.35 per Share. The Executive also shall be granted as of
the first business day of 2003 and 2004 an option with a ten-year term to
purchase Shares at the then fair market value of a Share; the number of Shares
subject to each option granted in 2003 and 2004, respectively, shall be that
number determined by dividing 75% of Executive's base salary for such year by
the value of an option as of the first business day of such year, which value
shall be that computed in accordance with the methodology of valuing options
under the 1997 Non-Employee Directors' Non-Qualified Stock Option Plan. Each
option referred to herein shall be exercisable with respect to the Shares
subject thereto as follows: one-fourth on or after the date of grant, one-fourth
on or after the first anniversary of the date of grant, one-fourth on or after
the second anniversary of the date of grant, and one-fourth on or after the last
business day of the calendar year immediately preceeding the third anniversary
of the date of grant. In the event of the Executive's termination of employment
under Section 6.1, each such option shall become immediately exercisable in full
and shall remain exercisable for the balance of its ten-year term.
(b) In addition, Executive was granted on December 14, 2001 an
option with a ten-year term to purchase 25,900 Shares at $41.70 per share which
option is immediately exercisable in full and remains exercisable for the
balance of its ten-year term.
4. EMPLOYEE BENEFITS.
4.1 EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Company shall
provide Executive during the Period of Employment with coverage under any
employee benefit programs, plans and practices (commensurate with his position
in the Company) in accordance
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with the terms thereof, which the Company currently makes available generally to
its senior executive officers, or which the Company, with Board approval, elects
to make available generally to its senior executive officers hereafter,
including, but not limited to (a) retirement, pension and profit-sharing; and
(b) medical, dental, hospitalization, life insurance, short and long-term
disability, accidental death and dismemberment and travel accident coverage;
provided that Executive shall pay such portion of the premiums therefor as is
customarily paid by senior executives of the Company.
4.2 VACATION, FRINGE AND OTHER BENEFITS. Executive shall be
entitled to the number of vacation days customarily accorded senior executives
of the Company. In addition, during the Period of Employment, the Company shall
pay Executive $870 per month for leasing (plus maintenance, insurance, and
property taxes) of an automobile and shall make the initial capital cost
reduction payment with respect to the leasing of such automobile on Executive's
behalf. The Company shall also reimburse Executive for (a) all initiation fees
and monthly dues for membership in a club suitable for entertaining clients of
the Company and (b) all legal expenses incurred by Executive in connection with
the negotiation and drafting of this Agreement. The Company shall bear the cost
of any increased tax liability of Executive caused by the provisions of this
Section 4.2.
4.3 LIFE INSURANCE. The Company shall obtain, at the Company's
expense, insurance on the life of the Executive in the amount of $2,460,000 for
the first twelve months of the Period of Employment, $1,640,000 for the second
twelve months of the Period of Employment, and $820,000 for the remainder of the
Period of Employment. The proceeds of such life insurance shall be payable to
such beneficiary or beneficiaries as shall be selected by the Executive at any
time or from time to time. The Company shall bear the cost of any increased tax
liability of Executive caused by the provisions of this Section 4.3.
5. DIRECTORS AND OFFICERS LIABILITY. The Company shall keep in
effect during and after the Period of Employment, a policy of directors' and
officers' liability insurance for officers and directors of the Company at such
reasonable amount of coverage as is agreed to by Executive and the Board from
time to time and which insurance policy shall be on a claims-made basis.
6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION NOT FOR CAUSE OR RESIGNATION FOR GOOD REASON.
(a) The Company may terminate Executive's employment at any time, and Executive
may terminate his employment at any time. If Executive's employment is
terminated by the Company other than for Cause (as hereinafter defined), or
Executive terminates his employment for Good Reason (as hereinafter defined),
Executive shall be entitled to receive a lump sum cash payment (but not in
substitution for compensation already earned) in an amount equal to the sum of:
(i) the product of two times the sum of (A) Executive's Base
Salary at its current annual rate at the time of
termination of employment plus (B) Executive's "Deemed
Bonus" (as defined below);
(ii) an amount equal to Executive's Bonus, for any calendar year
ending before such termination occurs, which would have
been payable had Executive remained in employment until the
date such Bonus would otherwise have been paid; and
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(iii) an amount equal to Executive's Deemed Bonus multiplied by a
fraction, the numerator of which is the number of days in
the calendar year in which the termination of employment
occurs that Executive was an employee of the Company, and
the denominator of which is 365.
In the event of a termination of Executive's employment by the
Company other than for Cause or by the Executive for Good Reason following a
Change of Control, the factor of two in subsection 6.1(a)(i) shall be increased
to three.
For purposes of subsections 6.1(a)(i) and (iii), 6.2(a) and 6.3,
the amount of the Deemed Bonus shall be the highest Bonus paid to Executive for
any year he has been employed by the Company.
(b) In addition to the amounts described in subsection 6.1(a),
Executive shall be entitled to receive:
(i) until the earlier of the Expiration Date (as that term is
hereafter defined) or 18 months from the date of
termination, Executive (and, to the extent applicable,
Executive's dependents) shall continue to be covered, at
the Company's expense, under the Company's medical, dental
and hospitalization coverage plans, and until the earlier
of the Expiration Date or 6 months from the date of
termination, Executive shall continue to be covered, at the
Company's expense, under the Company's group life, short
and long-term disability, accidental death and
dismemberment and travel accident coverage plans described
in Section 4.1 hereof or the Company will provide for
equivalent coverage (the term "Expiration Date" shall mean
the later of (i) December 31, 2004, (ii) the third
anniversary of a Change of Control of the Company or (iii)
the date that a succeeding one-year Period of Employment
(as provided for under Section 2 hereof) terminates); and
(ii) all payments to which Executive has vested rights as of the
Expiration Date under employee benefit, disability,
insurance and similar plans which provide for payments
beyond the Period of Employment.
(c) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written consent):
(i) The assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties,
responsibilities, titles or office as set forth in Section
1 hereof, or any reduction by the Company of his duties or
responsibilities or any removal of Executive from the
position of Executive Vice President and Chief Financial
Officer, except in connection with the termination of
Executive's employment (A) upon the termination of the
Period of Employment on the Expiration Date, (B) for Cause,
(C) as a result of Executive's Permanent Disability (as
hereinafter defined) or death or (D) by Executive other
than for Good Reason;
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(ii) A reduction by the Company in Executive's Base Salary, as
in effect on the date hereof or as the same may be
increased from time to time during the Period of
Employment;
(iii) The failure by the Company to obtain the specific
assumption of this Agreement by any successor or assign of
the Company or any person acquiring substantially all of
the Company's assets;
(iv) Failure by the Company to perform in any material respect
its obligations under this Agreement, where such failure
shall not have been remedied within 30 days after Executive
shall have notified the Company in writing thereof;
(v) Any material reduction in Executive's compensation or
benefits following a Change of Control or Executive's
principal business location is changed to a location more
than 30 miles from Executive's principal business location
(other than a relocation to the Borough of Manhattan, New
York, New York) immediately prior to a Change of Control;
(vi) The Company shall cease to keep in effect the policy of
directors' and officers' liability insurance for Executive
described in Section 5; or
(vii) The termination of the Indemnity Agreement, effective as of
April 20, 1995, between Executive and the Company.
(d)(i) Anything in this Agreement to the contrary notwithstanding,
if it is determined (as hereafter provided) that any
payment or distribution by the Company to or for the
benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement,
including without limitation any stock option, stock
appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment") ,
would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor provision thereto) by reason of
being "contingent on a change in ownership or control" of
the Company, within the meaning of Section 28OG of the Code
(or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties
with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax") ,
then the Executive shall be entitled to receive an
additional payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
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(ii) Subject to the provisions of Section 6(d)(i) hereof, all
determinations required to be made under this Section 6(d),
including whether an Excise Tax is payable by the Executive
and the amount of such Excise Tax and whether a Gross-Up
Payment is required and the amount of such Gross-Up
Payment, shall be made by the nationally recognized firm of
certified public accountants (the "Accounting Firm") used
by the Company prior to the Change of Control (or, if such
Accounting Firm declines to serve, the Accounting Firm
shall be a nationally recognized firm of certified public
accountants selected by the Executive). The Accounting Firm
shall be directed by the Company or the Executive to submit
its determination and detailed supporting calculations to
both the Company and the Executive within 15 calendar days
after the date the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than
for Cause (the "Termination Date"), if applicable, and any
other such time or times as may be requested by the Company
or the Executive. If the Accounting Firm determines that
any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such
determination and calculations. If the Accounting Firm
determines that no Excise Tax is payable by the Executive,
it shall, at the same time as it makes such determination,
furnish the Executive with an opinion that he has
substantial authority not to report any Excise Tax on his
federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the Company and
the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar
uncertainty regarding applicable state or local tax law at
the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will
not have been made by the Company should have been made (an
"Underpayment") consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to
Section 6(d)(vi) hereof and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive
shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible. Any
such Underpayment shall be promptly paid by the Company to,
or for the benefit of, the Executive within five business
days after receipt of such determination and calculations.
If payments required pursuant to this Section 6(d)(ii) to
be made by the Company to the Executive are not made within
such five day period, the Company shall pay the Executive
interest thereon at the rate of 10% per annum.
(iii) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records
and documents in the possession of the Company or the
Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the
Accounting Firm in connection with the preparation and
issuance of the determination contemplated by Section
6(d)(ii) hereof.
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(iv) The federal, state and local income or other tax returns
filed by the Executive and the Company (or any filing made
by a consolidated tax group which includes the Company)
shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall
make proper payment of the amount of any Excise Tax and, at
the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income
tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as
filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing
such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local
tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced,
the Executive shall within five business days pay to the
Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and
calculations contemplated by Sections 6 (d)(ii) and (d)(iv)
hereof shall be borne by the Company. If such fees and
expenses are initially advanced by the Executive, the
Company shall reimburse the Executive the full amount of
such fees and expenses within five business days after
receipt from the Executive of a statement therefor and
reasonable evidence of his payment thereof. If such
reimbursement is not made by the Company to the Executive
within such five-day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum.
(vi) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature
of such claim and the date on which such claim is requested
to be paid (in each case, to the extent known by the
Executive). The Executive shall not pay such claim prior to
the earlier of (a) the expiration of the 30-calendar-day
period following the date on which he gives such notice to
the Company and (b) the date that any payment of amount
with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(A) provide the Company with any written records or
documents in his possession relating to such claim
reasonably requested by the Company;
(B) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including without
limitation accepting legal representation with
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respect to such claim by an attorney competent in
respect of the subject matter and reasonably
selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and
shall indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income
tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing
provisions of this Section 6 (d)(vi), the Company shall
control all proceedings taken in connection with the
contest of any claim contemplated by this Section 6 (d)(vi)
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim (provided however, that the Executive may participate
therein at his cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest
to a determination before any administrative tribunal, or a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay the tax
claimed and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free
basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax,
including interest and penalties with respect thereto,
imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is
claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of any such
contested claim shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6 (d)(vi)
hereof, the Executive receives any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 6 (d)(vi)
hereof) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon
after any taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company
pursuant to Section 6 (d)(vi) hereof, a determination is
made that the Executive is not entitled to any refund with
respect to such claim
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and the Company does not notify the Executive in writing of
its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination,
then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up
Payment required to be made pursuant to this Section 6 (d).
(e) For purposes of this Agreement, a "Change of Control" shall
be deemed to have occurred when:
(i) any person or persons acting in concert (excluding Company
benefit plans) becomes the beneficial owner of securities
of the Company having at least 25% of the voting power of
the Company's then outstanding securities; or
(ii) the shareholders of the Company shall approve any merger or
other business combination of the Company, sale or lease of
the Company's assets or combination of the foregoing
transactions (the "TRANSACTIONS") other than a Transaction
immediately following which the shareholders of the Company
and any trustee or fiduciary of any Company employee
benefit plan immediately prior to the Transaction own at
least 65% of the voting power, directly or indirectly, of
(A) the surviving corporation in any such merger or other
business combination; (B) the purchaser or lessee of the
Company's assets; or (C) both the surviving corporation and
the purchaser or lessee in the event of any combination of
Transactions; or
(iii) within any 24-month period, the persons who were directors
immediately before the beginning of such period (the
"INCUMBENT DIRECTORS") shall cease (for any reason other
than death) to constitute at least a majority of the Board
or the board of directors of a successor to the Company.
For this purpose, any director who was not a director at
the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified
as Incumbent Directors (so long as such director was not
nominated by a person who has expressed an intent to effect
a Change of Control or engage in a proxy or other control
contest).
(f) Except as otherwise specifically provided herein, all cash
payments under this Section 6.1 shall be made by the Company within 30 calendar
days following the event giving rise to such payments. If any such payment shall
not be made within such 30-day period (or any other specifically provided time
period), the Company shall pay interest on the unpaid amount at the rate of 10%
per annum.
6.2 PERMANENT DISABILITY. If as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties with the Company on a full-time basis for six consecutive
months (a "Permanent Disability") during his Period of Employment, the Company
or Executive may terminate his employment on written notice thereof, the Period
of Employment shall terminate on the giving of such notice, and the compensation
to which Executive is entitled pursuant to Section 3.1 shall be paid through the
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last day of the month in which the notice is given. In addition, Executive shall
be entitled to receive:
(a) all unpaid amounts, as of the date of such termination, in
respect of any Bonus for any calendar year ending before the calendar year in
which such termination occurs, which would have been payable had Executive
remained in employment until the date such Bonus would otherwise have been paid,
plus Executive's Deemed Bonus for the calendar year in which his employment
terminates, multiplied by a fraction, the numerator of which is the number of
days in such calendar year the Executive was an employee of the Company, and the
denominator of which is 365;
(b) until the earlier of the Expiration Date or 24 months from
the date of termination for Permanent Disability, Executive (and, to the extent
applicable, Executive's dependents) shall continue to be covered, at the
Company's expense, under the Company's medical, dental, hospitalization, group
life, short and long-term disability, accidental death and dismemberment and
travel accident coverage plans described in Section 4.1 or the Company will
provide for equivalent coverage; provided that if Executive is provided with
comparable coverage by a successor employer any such coverage by the Company
shall cease; and
(c) all amounts payable under the Company's disability plans.
6.3 DEATH. In the event of Executive's death while employed
hereunder, the Period of Employment shall thereupon automatically terminate and
the Executive's estate or designated beneficiaries shall receive (i) payments of
Base Salary for a period of three months after the date of death; (ii) all
unpaid amounts, as of the date of such termination, in respect of any Bonus for
any calendar year ending before the calendar year in which such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid, plus Executive's Deemed
Bonus for the calendar year in which his employment terminates, multiplied by a
fraction, the numerator of which is the number of days in such calendar year the
Executive was an employee of the Company, and the denominator of which is 365;
and (iii) any death benefits provided under the employee benefit programs, in
accordance with their terms.
6.4 VOLUNTARY RESIGNATION; DISCHARGE FOR CAUSE. If Executive
resigns voluntarily, other than for Good Reason or Permanent Disability, or the
Company terminates the employment of Executive at any time for Cause, the
Company's obligations under this Agreement to make any further payments to
Executive shall thereupon, to the extent permitted by law, cease and terminate
except with respect to all unpaid amounts, as of the date of such termination,
in respect of any Bonus for any calendar year ending before such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid. In addition, Executive shall
remain entitled to all vested amounts and benefits under the Company's employee
benefit programs, plans and practices. The term "Cause" shall be limited to (a)
action by Executive involving willful malfeasance in connection with his
employment which results in material harm to the Company, (b) material and
continuing breach by Executive of the terms of this Agreement which breach is
not cured within 60 days after Executive receives written notice from the
Company of any such breach or (c) Executive being convicted of a felony.
Termination of Executive for Cause pursuant to this Section 6.4 shall be
communicated by a Notice of Termination given within six months after the Board
both (i) had knowledge of conduct or an event allegedly constituting Cause and
(ii) had reason to believe that such conduct or event could be grounds for
Cause.
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For purposes of this Agreement a "Notice of Termination" shall mean delivery to
Executive of a copy of a resolution duly adopted by the Board at a meeting of
the Board called and held for that purpose (after not less than 10 days notice
to Executive ("Preliminary Notice") and reasonable opportunity for Executive,
together with the Executive's counsel, to be heard before the Board prior to
such vote) finding, that in the good faith opinion of the Board, Executive was
guilty of conduct set forth in the third sentence of this Section 6.4 and
specifying the particulars thereof in detail. The Board shall no later than 30
days after the receipt of the Preliminary Notice by Executive communicate its
findings to Executive. A failure by the Board to make its finding of Cause or to
communicate its conclusions within such 30-day period shall be deemed to be a
finding that Executive was not guilty of the conduct described in the third
sentence of this Section 6.4.
6.5 TERMINATION ON OR AFTER EXPIRATION DATE. In the event the
Period of Employment shall not be extended and Executive's employment shall be
terminated by the Company on or after the Expiration Date or Executive shall
terminate his employment on or after the Expiration Date, the Executive shall be
paid (a) his Base Salary through the last day of the month in which the
termination of employment occurs, (b) all unpaid amounts in respect of any Bonus
for any calendar year ending before such termination date occurs, which Bonus
would have been payable had Executive remained in employment until the date such
Bonus would otherwise have been paid, and (c) Executive's Deemed Bonus for the
calendar year in which his employment terminates, multiplied by a fraction, the
numerator of which is the number of days in such calendar year the Executive was
an employee of the Company, and the denominator of which is 365. In addition,
Executive shall remain entitled to all vested amounts, benefits, and rights
under the Company's employee benefit programs, plans and practices, all rights
to which he is entitled under Company severance plans, practices and/or policies
and all other benefits to which he is entitled by law or contract.
6.6 TERMINATION OBLIGATIONS. (a) Executive hereby acknowledges
and agrees that all personal property, including, without limitation, all books,
manuals, records, reports, notes, contracts, lists, and other documents, and
equipment furnished to or prepared by Executive in the course of or incident to
his employment, belong to the Company and shall be promptly returned to the
Company upon termination of the Period of Employment.
(b) Upon termination of the Period of Employment, the Executive
shall be deemed to have resigned from all offices and directorships then held
with the Company or any subsidiary or affiliate thereof.
7. CONFIDENTIAL INFORMATION. During and after the Period of
Employment, Executive shall not disclose to any person (other than an employee
or agent of the Company or any affiliate of the Company entitled to receive the
same) any confidential information relating to the business of the Company and
obtained by him while providing services to the Company, without the consent of
the Board, or until such information ceases to be confidential.
8. NON-COMPETITION. In the event Executive's employment is
terminated by the Company for Cause or Executive terminates his employment with
the Company without Good Reason, Executive shall not, for a period ending on the
earlier of (i) 18 months from the date of such termination or (ii) the
Expiration Date, accept any other employment or engage, directly or indirectly,
in any other business activity which is competitive with that of the Company or
any subsidiary thereof.
11
<PAGE>
9. EXPENSES. Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement,
including expenses for travel and similar items related to such duties and
responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of an itemized account of such
expenditures.
10. NO OBLIGATION TO MITIGATE DAMAGES. Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking (and no payment otherwise required hereunder shall be
reduced on account of) other employment or otherwise, nor will any payments
hereunder be subject to offset in respect of any claims which the Company may
have against Executive.
11. NOTICES. All notices or communications hereunder shall be
in writing, addressed as follows:
to Executive:
Leicle E. Chesser
10 Sunrise Lane
New Milford, CT 06776
to Company:
Sheldon I. Cammaker, Esq.
Executive Vice President and General Counsel
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, CT 06851
with a copy to:
Kenneth C. Edgar, Jr., Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Any such notice or communication shall be delivered by hand or sent certified or
registered mail, return receipt requested, postage prepaid, addressed as above
(or to such other address as such party may designate in a notice duly delivered
as described above), and the actual date of delivery or mailing shall determine
the time at which notice was given.
12. AGREEMENT TO PERFORM NECESSARY ACTS. Each party agrees to
perform any further acts and to execute and deliver any further documents that
may be reasonably necessary to carry out the provisions of this Agreement.
13. SEPARABILITY; LEGAL ACTIONS; LEGAL FEES. If any provision
of this Agreement shall be declared to be invalid or unenforceable, in whole or
in part, such invalidity or unenforceability shall not affect the remaining
provisions hereof, which shall remain in full force and effect. Any controversy
or claim arising out of or relating to this Agreement or the
12
<PAGE>
breach of this Agreement that cannot be resolved by Executive and the Company,
including any dispute as to the calculation of Executive's benefits or any
payments hereunder, shall be submitted to arbitration in New York, New York in
accordance with the laws of the State of New York and the procedures of the
American Arbitration Association, except that if Executive institutes an action
relating to this Agreement, Executive may, at Executive's option, bring that
action in any court of competent jurisdiction. Judgment may be entered on an
arbitrator(s)' award in any court having jurisdiction.
In addition to all other amounts payable to the Executive under
this Agreement, the Company shall pay or reimburse the Executive for legal fees
(including without limitation, any and all court costs and attorneys' fees and
expenses) incurred by the Executive in connection with or as a result of any
claim, action or proceeding brought by the Company or the Executive with respect
to or arising out of this Agreement or any provision hereof, unless, in the case
of an action brought by the Executive, it is determined by an arbitrator or by a
court of competent jurisdiction that such action was frivolous and was not
brought in good faith. Such legal fees shall be paid or reimbursed by the
Company to the Executive from time to time within five business days following
receipt by the Company of copies of bills for such fees and if the Company fails
to make such payment within such five day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum. All other expenses
relating to any arbitration or court proceedings shall be paid by the Company.
14. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by the Company
(any such purported assignment by either shall be null and void), except that
the Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
business of the Company.
15. AMENDMENT; WAIVER. The Agreement may be amended at any
time, but only by mutual written agreement of the parties hereto. Any party may
waive compliance by the other party with any provision hereof, but only by an
instrument in writing executed by the party granting such waiver.
16. ENTIRE AGREEMENT. Except as otherwise provided in a
Continuity Agreement dated as of June 22, 1998 between the Company and the
Executive, as amended by agreement dated May 4, 1999, and the agreements setting
forth in detail the terms of the options referred to in Section 3.3 hereof, and
as may be amended from time to time hereafter, the terms of this Agreement (i)
are intended by the parties to be the final expression of their agreement with
respect to the employment of Executive by the Company, (ii) may not be
contradicted by evidence of any prior or contemporaneous agreement and (iii)
shall constitute the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial, administrative
or other legal proceeding involving this Agreement.
17. DEATH OR INCOMPETENCE. In the event of Executive's death or
a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his estate or other
legal representative.
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<PAGE>
18. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions of any
other section of this Agreement.
19. GOVERNING LAW. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of New York
without reference to rules relating to conflicts of law.
20. WITHHOLDINGS. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed this amended
and restated employment agreement as of the date first above written.
EMCOR GROUP, INC.
By:
--------------------------------------
EXECUTIVE
-----------------------------------------
Leicle E. Chesser
14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(D)
<SEQUENCE>6
<FILENAME>c23256_ex10-d.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT JEFFREY LEVY
<TEXT>
Exhibit 10.(d)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of January 1, 2002 by and between EMCOR
GROUP, INC. (the "Company") and JEFFREY M. LEVY ("Executive").
In order to induce Executive to serve as President and Chief
Operating Officer of the Company, the Company desires to provide Executive with
compensation and other benefits under the conditions set forth in this
Agreement.
Executive is willing to accept such employment and to perform
services for the Company and its subsidiaries, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. EMPLOYMENT.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Period of Employment (as
hereinafter defined) as the President and Chief Operating Officer of the
Company. In his capacity as President and Chief Operating Officer of the
Company, Executive shall have the customary powers, responsibilities and
authorities of presidents and chief operating officers of similar corporations
of the size, type and nature of the Company as it may exist from time to time,
subject to the direction of the Chairman of the Board of Directors (the "Board")
of the Company and the Chief Executive Officer of the Company (the "CEO").
1.2 Subject to the terms and conditions hereof, Executive
hereby agrees to be employed as the President and Chief Operating Officer of the
Company and shall devote his full working time and efforts, to the best of his
ability, experience and talent, to the performance of the services, duties and
responsibilities in connection therewith. Except upon the prior written consent
of the Board, Executive will not during the Period of Employment (i) accept any
other employment or (ii) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage), whether or not it may
be competitive with, or whether or not it might place him in a competing
position to that of, the Company or any subsidiary thereof. Nothing in this
Agreement shall preclude the Executive from (i) engaging, consistent with his
duties and responsibilities hereunder, in charitable community affairs, (ii)
managing his personal investments, (iii) continuing to serve on the boards of
directors on which he presently serves (to the extent such service is not
precluded by federal or state law or by conflict of interest by reason of his
position with the Company), or (iv) serving, subject to approval of the CEO, as
a member of boards of directors of other companies, PROVIDED, that such
activities do not interfere with the performance of Executive's duties
hereunder.
2. PERIOD OF EMPLOYMENT. Executive's period of employment
hereunder shall commence on January 1, 2002 (the "Commencement Date") and shall
continue through the earlier of December 31, 2004 or the date of termination
hereunder (the "Period of Employment"); PROVIDED, HOWEVER, that the Period of
Employment shall automatically be extended for successive one-year periods
unless the Company or Executive, at least six months prior to the end of such
period, provides written notice to the other party of intent not to extend the
Period of Employment. Notwithstanding anything in this Agreement to the
contrary,
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<PAGE>
in the event of a Change of Control (as defined in Section 6.1(e)) the Period of
Employment shall be for a period of three years commencing as of the date of
such Change of Control.
3. COMPENSATION.
3.1 SALARY. The Company shall pay Executive a base salary
("Base Salary") at the rate of $525,000 per annum for the Period of Employment.
Base Salary shall be payable in accordance with the ordinary payroll practices
of the Company. Executive's rate of Base Salary shall be increased on the first
day of each calendar year occurring during the Period of Employment, beginning
with January 1, 2003, by the percentage increase for the prior year in the
consumer price index for the area in which the principal office of the Company
is located, as determined by the U.S. Department of Commerce, or the amount
specified by the Board, whichever is greater.
3.2 BONUS. In addition to his Base Salary, Executive shall be
entitled, while he remains employed hereunder, in respect of each calendar year,
to an annual bonus (the "Bonus") payable in cash and at such times as bonuses
are customarily paid to senior executives of the Company; provided that so long
as the Company's Executive Stock Bonus Plan (the "Plan") shall remain in effect
and the Executive shall be designated a participant therein, 25% of the
Executive's Bonus shall be payable in restricted stock units in accordance with
the Plan and the Executive, in accordance with the terms of the Plan, may elect
to receive a greater percentage of his Bonus in restricted stock units. For each
calendar year during the Period of Employment, the Compensation Committee of the
Board (the "Committee") shall establish after consultation with Executive a
formula which shall determine the amount of Executive's Bonus for the calendar
year; provided that Executive's target bonus shall be no less than $600,000 for
each such year.
3.3 STOCK OPTIONS. (a) The Executive is hereby granted an
option with a ten-year term to purchase 30,000 shares of common stock ("Shares")
of the Company at $46.35 per Share. The Executive also shall be granted as of
the first business day of 2003 and 2004 an option with a ten-year term to
purchase Shares at the then fair market value of a Share; the number of Shares
subject to each option granted in 2003 and 2004, respectively, shall be that
number determined by dividing 100% of the Executive's base salary for such year
by the value of an option as of the first business day of such year, which value
shall be that computed in accordance with the methodology of valuing options
under the 1997 Non-Employee Directors' Non-Qualified Stock Option Plan. Each
option referred to herein shall be exercisable with respect to the Shares
subject thereto as follows: one-fourth on or after the date of grant, one-fourth
on or after the first anniversary of the date of grant, one-fourth on or after
the second anniversary of the date of grant, and one-fourth on or after the last
business day of the calendar year immediately preceeding the third anniversary
of the date of grant. In the event of the Executive's termination of employment
under Section 6.1, each such option shall become immediately exercisable in full
and shall remain exercisable for the balance of its ten-year term.
(b) In addition, Executive was granted on December 14, 2001 an
option with a ten-year term to purchase 33,200 Shares at $41.70 per share which
option is immediately exercisable in full and remains exercisable for the
balance of its ten-year term.
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<PAGE>
4. EMPLOYEE BENEFITS.
4.1 EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Company shall
provide Executive during the Period of Employment with coverage under any
employee benefit programs, plans and practices (commensurate with his position
in the Company) in accordance with the terms thereof, which the Company
currently makes available generally to its senior executive officers, or which
the Company, with Board approval, elects to make available generally to its
senior executive officers hereafter, including, but not limited to (a)
retirement, pension and profit-sharing; and (b) medical, dental,
hospitalization, life insurance, short and long-term disability, accidental
death and dismemberment and travel accident coverage; provided that Executive
shall pay such portion of the premiums therefor as is customarily paid by senior
executives of the Company.
4.2 VACATION, FRINGE AND OTHER BENEFITS. Executive shall be
entitled to the number of vacation days customarily accorded senior executives
of the Company. In addition, during the Period of Employment, the Company shall
pay Executive $870 per month for leasing (plus maintenance, insurance, and
property taxes) of an automobile and shall make the initial capital cost
reduction payment with respect to the leasing of such automobile on Executive's
behalf. The Company shall also reimburse Executive for (a) all initiation fees
and monthly dues for membership in a club suitable for entertaining clients of
the Company and (b) all legal expenses incurred by Executive in connection with
the negotiation and drafting of this Agreement. The Company shall bear the cost
of any increased tax liability of Executive caused by the provisions of this
Section 4.2.
4.3 LIFE INSURANCE. The Company shall obtain, at the Company's
expense, insurance on the life of the Executive in the amount of $3,150,000 for
the first twelve months of the Period of Employment, $2,100,000 for the second
twelve months of the Period of Employment, and $1,050,000 for the remainder of
the Period of Employment. The proceeds of such life insurance shall be payable
to such beneficiary or beneficiaries as shall be selected by the Executive at
any time or from time to time. The Company shall bear the cost of any increased
tax liability of Executive caused by the provisions of this Section 4.3.
5. DIRECTORS AND OFFICERS LIABILITY. The Company shall keep in
effect during and after the Period of Employment, a policy of directors' and
officers' liability insurance for officers and directors of the Company at such
reasonable amount of coverage as is agreed to by Executive and the Board from
time to time and which insurance policy shall be on a claims-made basis.
6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION NOT FOR CAUSE OR RESIGNATION FOR GOOD REASON.
(a) The Company may terminate Executive's employment at any time, and Executive
may terminate his employment at any time. If Executive's employment is
terminated by the Company other than for Cause (as hereinafter defined), or
Executive terminates his employment for Good Reason (as hereinafter defined),
Executive shall be entitled to receive a lump sum cash payment (but not in
substitution for compensation already earned) in an amount equal to the sum of:
(i) the product of two times the sum of (A) Executive's Base
Salary at its then current annual rate plus (B) Executive's
target Bonus for the calendar year in which the termination
of employment occurs;
3
<PAGE>
(ii) an amount equal to Executive's Bonus, for any calendar year
ending before such termination occurs, which would have
been payable had Executive remained in employment until the
date such Bonus would otherwise have been paid; and
(iii) an amount equal to Executive's target Bonus for the
calendar year in which the termination of employment
occurs, multiplied by a fraction, the numerator of which is
the number of days in the calendar year in which the
termination of employment occurs that Executive was an
employee of the Company, and the denominator of which is
365.
In the event of a termination of Executive's employment by the
Company other than for Cause or by the Executive for Good Reason following a
Change of Control, the factor of two in subsection 6.1(a)(i) shall be increased
to three.
(b) In addition to the amounts described in subsection 6.1(a),
Executive shall be entitled to receive:
(i) until the earlier of the Expiration Date (as that term is
hereafter defined) or 18 months from the date of
termination, Executive (and, to the extent applicable,
Executive's dependents) shall continue to be covered, at
the Company's expense, under the Company's medical, dental
and hospitalization coverage plans, and until the earlier
of the Expiration Date or 6 months from the date of
termination, Executive shall continue to be covered, at the
Company's expense, under the Company's group life, short
and long-term disability, accidental death and
dismemberment and travel accident coverage plans described
in Section 4.1 hereof or the Company will provide for
equivalent coverage (the term "Expiration Date" shall mean
the later of (i) December 31, 2004, (ii) the third
anniversary of a Change of Control of the Company or (iii)
the date that a succeeding one-year Period of Employment
(as provided for under Section 2 hereof) terminates); and
(ii) all payments to which Executive has vested rights as of the
Expiration Date under employee benefit, disability,
insurance and similar plans which provide for payments
beyond the Period of Employment.
(c) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written consent):
(i) The assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties,
responsibilities, titles or office as set forth in Section
1 hereof, or any reduction by the Company of his duties or
responsibilities or any removal of Executive from the
position of President and Chief Operating Officer, except
in connection with the termination of Executive's
employment (A) upon the termination of the Period of
Employment on the Expiration Date, (B) for Cause, (C) as a
result of Executive's Permanent Disability (as hereinafter
defined) or death or (D) by Executive other than for Good
Reason;
4
<PAGE>
(ii) A reduction by the Company in Executive's Base Salary, as
in effect on the date hereof or as the same may be
increased from time to time during the Period of
Employment;
(iii) The failure by the Company to obtain the specific
assumption of this Agreement by any successor or assign of
the Company or any person acquiring substantially all of
the Company's assets;
(iv) Failure by the Company to perform in any material respect
its obligations under this Agreement, where such failure
shall not have been remedied within 30 days after Executive
shall have notified the Company in writing thereof;
(v) Any material reduction in Executive's compensation or
benefits following a Change of Control or Executive's
principal business location is changed to a location more
than 30 miles from Executive's principal business location
(other than a relocation to the Borough of Manhattan, New
York, New York) immediately prior to a Change of Control;
(vi) The Company shall cease to keep in effect the policy of
directors' and officers' liability insurance for Executive
described in Section 5; or
(vii) The termination of the Indemnity Agreement, effective as of
April 20, 1995, between Executive and the Company.
(d)(i) Anything in this Agreement to the contrary notwithstanding,
if it is determined (as hereafter provided) that any
payment or distribution by the Company to or for the
benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement,
including without limitation any stock option, stock
appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment") ,
would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor provision thereto) by reason of
being "contingent on a change in ownership or control" of
the Company, within the meaning of Section 28OG of the Code
(or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties
with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax") ,
then the Executive shall be entitled to receive an
additional payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
5
<PAGE>
(ii) Subject to the provisions of Section 6(d)(i) hereof, all
determinations required to be made under this Section 6(d),
including whether an Excise Tax is payable by the Executive
and the amount of such Excise Tax and whether a Gross-Up
Payment is required and the amount of such Gross-Up
Payment, shall be made by the nationally recognized firm of
certified public accountants (the "Accounting Firm") used
by the Company prior to the Change of Control (or, if such
Accounting Firm declines to serve, the Accounting Firm
shall be a nationally recognized firm of certified public
accountants selected by the Executive). The Accounting Firm
shall be directed by the Company or the Executive to submit
its determination and detailed supporting calculations to
both the Company and the Executive within 15 calendar days
after the date the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than
for Cause (the "Termination Date"), if applicable, and any
other such time or times as may be requested by the Company
or the Executive. If the Accounting Firm determines that
any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such
determination and calculations. If the Accounting Firm
determines that no Excise Tax is payable by the Executive,
it shall, at the same time as it makes such determination,
furnish the Executive with an opinion that he has
substantial authority not to report any Excise Tax on his
federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the Company and
the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar
uncertainty regarding applicable state or local tax law at
the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will
not have been made by the Company should have been made (an
"Underpayment") consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to
Section 6(d)(vi) hereof and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive
shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible. Any
such Underpayment shall be promptly paid by the Company to,
or for the benefit of, the Executive within five business
days after receipt of such determination and calculations.
If payments required pursuant to this Section 6(d)(ii) to
be made by the Company to the Executive are not made within
such five day period, the Company shall pay the Executive
interest thereon at the rate of 10% per annum.
(iii) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records
and documents in the possession of the Company or the
Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the
Accounting Firm in connection with the preparation and
issuance of the determination contemplated by Section
6(d)(ii) hereof.
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<PAGE>
(iv) The federal, state and local income or other tax returns
filed by the Executive and the Company (or any filing made
by a consolidated tax group which includes the Company)
shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall
make proper payment of the amount of any Excise Tax and, at
the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income
tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as
filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing
such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local
tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced,
the Executive shall within five business days pay to the
Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and
calculations contemplated by Sections 6 (d)(ii) and (d)(iv)
hereof shall be borne by the Company. If such fees and
expenses are initially advanced by the Executive, the
Company shall reimburse the Executive the full amount of
such fees and expenses within five business days after
receipt from the Executive of a statement therefor and
reasonable evidence of his payment thereof. If such
reimbursement is not made by the Company to the Executive
within such five-day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum.
(vi) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature
of such claim and the date on which such claim is requested
to be paid (in each case, to the extent known by the
Executive). The Executive shall not pay such claim prior to
the earlier of (a) the expiration of the 30-calendar-day
period following the date on which he gives such notice to
the Company and (b) the date that any payment of amount
with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(A) provide the Company with any written records or
documents in his possession relating to such claim
reasonably requested by the Company;
(B) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including without
limitation accepting legal representation with
7
<PAGE>
respect to such claim by an attorney competent in
respect of the subject matter and reasonably
selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and
shall indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income
tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing
provisions of this Section 6 (d)(vi), the Company shall
control all proceedings taken in connection with the
contest of any claim contemplated by this Section 6 (d)(vi)
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim (provided however, that the Executive may participate
therein at his cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest
to a determination before any administrative tribunal, or a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay the tax
claimed and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free
basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax,
including interest and penalties with respect thereto,
imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is
claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of any such
contested claim shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6 (d)(vi)
hereof, the Executive receives any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 6 (d)(vi)
hereof) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon
after any taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company
pursuant to Section 6 (d)(vi) hereof, a determination is
made that the Executive is not entitled to any refund with
respect to such claim
8
<PAGE>
and the Company does not notify the Executive in writing of
its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination,
then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up
Payment required to be made pursuant to this Section 6 (d).
(e) For purposes of this Agreement, a "Change of Control" shall
be deemed to have occurred when:
(i) any person or persons acting in concert (excluding Company
benefit plans) becomes the beneficial owner of securities
of the Company having at least 25% of the voting power of
the Company's then outstanding securities; or
(ii) the shareholders of the Company shall approve any merger or
other business combination of the Company, sale or lease of
the Company's assets or combination of the foregoing
transactions (the "TRANSACTIONS") other than a Transaction
immediately following which the shareholders of the Company
and any trustee or fiduciary of any Company employee
benefit plan immediately prior to the Transaction own at
least 65% of the voting power, directly or indirectly, of
(A) the surviving corporation in any such merger or other
business combination; (B) the purchaser or lessee of the
Company's assets; or (C) both the surviving corporation and
the purchaser or lessee in the event of any combination of
Transactions; or
(iii) within any 24-month period, the persons who were directors
immediately before the beginning of such period (the
"INCUMBENT DIRECTORS") shall cease (for any reason other
than death) to constitute at least a majority of the Board
or the board of directors of a successor to the Company.
For this purpose, any director who was not a director at
the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified
as Incumbent Directors (so long as such director was not
nominated by a person who has expressed an intent to effect
a Change of Control or engage in a proxy or other control
contest).
(f) Except as otherwise specifically provided herein, all cash
payments under this Section 6.1 shall be made by the Company within 30 calendar
days following the event giving rise to such payments. If any such payment shall
not be made within such 30-day period (or any other specifically provided time
period), the Company shall pay interest on the unpaid amount at the rate of 10%
per annum.
6.2 PERMANENT DISABILITY. If as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties with the Company on a full-time basis for six consecutive
months (a "Permanent Disability") during his Period of Employment, the Company
or Executive may terminate his employment on written notice thereof, the Period
of Employment shall terminate on the giving of such notice, and the compensation
to which Executive is entitled pursuant to Section 3.1 shall be paid through the
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<PAGE>
last day of the month in which the notice is given. In addition, Executive shall
be entitled to receive:
(a) all unpaid amounts, as of the date of such termination, in
respect of any Bonus for any calendar year ending before the calendar year in
which such termination occurs, which would have been payable had Executive
remained in employment until the date such Bonus would otherwise have been paid,
plus Executive's target Bonus for the calendar year in which his employment
terminates, multiplied by a fraction, the numerator of which is the number of
days in such calendar year the Executive was an employee of the Company, and the
denominator of which is 365;
(b) until the earlier of the Expiration Date or 24 months from
the date of termination for Permanent Disability, Executive (and, to the extent
applicable, Executive's dependents) shall continue to be covered, at the
Company's expense, under the Company's medical, dental, hospitalization, group
life, short and long-term disability, accidental death and dismemberment and
travel accident coverage plans described in Section 4.1 or the Company will
provide for equivalent coverage; provided that if Executive is provided with
comparable coverage by a successor employer any such coverage by the Company
shall cease; and
(c) all amounts payable under the Company's disability plans.
6.3 DEATH. In the event of Executive's death while employed
hereunder, the Period of Employment shall thereupon automatically terminate and
the Executive's estate or designated beneficiaries shall receive (i) payments of
Base Salary for a period of three months after the date of death; (ii) all
unpaid amounts, as of the date of such termination, in respect of any Bonus for
any calendar year ending before the calendar year in which such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid, plus Executive's target
Bonus for the calendar year in which his employment terminates, multiplied by a
fraction, the numerator of which is the number of days in such calendar year the
Executive was an employee of the Company, and the denominator of which is 365;
and (iii) any death benefits provided under the employee benefit programs, in
accordance with their terms.
6.4 VOLUNTARY RESIGNATION; DISCHARGE FOR CAUSE. If Executive
resigns voluntarily, other than for Good Reason or Permanent Disability, or the
Company terminates the employment of Executive at any time for Cause, the
Company's obligations under this Agreement to make any further payments to
Executive shall thereupon, to the extent permitted by law, cease and terminate
except with respect to all unpaid amounts, as of the date of such termination,
in respect of any Bonus for any calendar year ending before such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid. In addition, Executive shall
remain entitled to all vested amounts and benefits under the Company's employee
benefit programs, plans and practices. The term "Cause" shall be limited to (a)
action by Executive involving willful malfeasance in connection with his
employment which results in material harm to the Company, (b) material and
continuing breach by Executive of the terms of this Agreement which breach is
not cured within 60 days after Executive receives written notice from the
Company of any such breach or (c) Executive being convicted of a felony.
Termination of Executive for Cause pursuant to this Section 6.4 shall be
communicated by a Notice of Termination given within six months after the Board
both (i) had knowledge of conduct or an event allegedly constituting Cause and
(ii) had reason to believe that such conduct or event could be grounds for
Cause.
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<PAGE>
For purposes of this Agreement a "Notice of Termination" shall mean delivery to
Executive of a copy of a resolution duly adopted by the Board at a meeting of
the Board called and held for that purpose (after not less than 10 days notice
to Executive ("Preliminary Notice") and reasonable opportunity for Executive,
together with the Executive's counsel, to be heard before the Board prior to
such vote) finding, that in the good faith opinion of the Board, Executive was
guilty of conduct set forth in the third sentence of this Section 6.4 and
specifying the particulars thereof in detail. The Board shall no later than 30
days after the receipt of the Preliminary Notice by Executive communicate its
findings to Executive. A failure by the Board to make its finding of Cause or to
communicate its conclusions within such 30-day period shall be deemed to be a
finding that Executive was not guilty of the conduct described in the third
sentence of this Section 6.4.
6.5 TERMINATION ON OR AFTER EXPIRATION DATE. In the event the
Period of Employment shall not be extended and Executive's employment shall be
terminated by the Company on or after the Expiration Date or Executive shall
terminate his employment on or after the Expiration Date, the Executive shall be
paid (a) his Base Salary through the last day of the month in which the
termination of employment occurs, (b) all unpaid amounts in respect of any Bonus
for any calendar year ending before such termination date occurs, which Bonus
would have been payable had Executive remained in employment until the date such
Bonus would otherwise have been paid, and (c) Executive's target Bonus for the
calendar year in which his employment terminates, multiplied by a fraction, the
numerator of which is the number of days in such calendar year the Executive was
an employee of the Company, and the denominator of which is 365. In addition,
Executive shall remain entitled to all vested amounts, benefits, and rights
under the Company's employee benefit programs, plans and practices, all rights
to which he is entitled under Company severance plans, practices and/or policies
and all other benefits to which he is entitled by law or contract.
6.6 TERMINATION OBLIGATIONS. (a) Executive hereby acknowledges
and agrees that all personal property, including, without limitation, all books,
manuals, records, reports, notes, contracts, lists, and other documents, and
equipment furnished to or prepared by Executive in the course of or incident to
his employment, belong to the Company and shall be promptly returned to the
Company upon termination of the Period of Employment.
(b) Upon termination of the Period of Employment, the Executive
shall be deemed to have resigned from all offices and directorships then held
with the Company or any subsidiary or affiliate thereof.
7. CONFIDENTIAL INFORMATION. During and after the Period of
Employment, Executive shall not disclose to any person (other than an employee
or agent of the Company or any affiliate of the Company entitled to receive the
same) any confidential information relating to the business of the Company and
obtained by him while providing services to the Company, without the consent of
the Board, or until such information ceases to be confidential.
8. NON-COMPETITION. In the event Executive's employment is
terminated by the Company for Cause or Executive terminates his employment with
the Company without Good Reason, Executive shall not, for a period ending on the
earlier of (i) 18 months from the date of such termination or (ii) the
Expiration Date, accept any other employment or engage, directly or indirectly,
in any other business activity which is competitive with that of the Company or
any subsidiary thereof.
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<PAGE>
9. EXPENSES. Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement,
including expenses for travel and similar items related to such duties and
responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of an itemized account of such
expenditures.
10. NO OBLIGATION TO MITIGATE DAMAGES. Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking (and no payment otherwise required hereunder shall be
reduced on account of) other employment or otherwise, nor will any payments
hereunder be subject to offset in respect of any claims which the Company may
have against Executive.
11. NOTICES. All notices or communications hereunder shall be
in writing, addressed as follows:
to Executive:
Jeffrey M. Levy
11 Camberra Drive
Suffern, NY 10901
to Company:
Sheldon I. Cammaker, Esq.
Executive Vice President and General Counsel
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, CT 06851
with a copy to:
Kenneth C. Edgar, Jr., Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Any such notice or communication shall be delivered by hand or sent certified or
registered mail, return receipt requested, postage prepaid, addressed as above
(or to such other address as such party may designate in a notice duly delivered
as described above), and the actual date of delivery or mailing shall determine
the time at which notice was given.
12. AGREEMENT TO PERFORM NECESSARY ACTS. Each party agrees to
perform any further acts and to execute and deliver any further documents that
may be reasonably necessary to carry out the provisions of this Agreement.
13. SEPARABILITY; LEGAL ACTIONS; LEGAL FEES. If any provision
of this Agreement shall be declared to be invalid or unenforceable, in whole or
in part, such invalidity or unenforceability shall not affect the remaining
provisions hereof, which shall remain in full force and effect. Any controversy
or claim arising out of or relating to this Agreement or the breach of this
Agreement that cannot be resolved by Executive and the Company, including any
12
<PAGE>
dispute as to the calculation of Executive's benefits or any payments hereunder,
shall be submitted to arbitration in New York, New York in accordance with the
laws of the State of New York and the procedures of the American Arbitration
Association, except that if Executive institutes an action relating to this
Agreement, Executive may, at Executive's option, bring that action in any court
of competent jurisdiction. Judgment may be entered on an arbitrator(s)' award in
any court having jurisdiction.
In addition to all other amounts payable to the Executive under
this Agreement, the Company shall pay or reimburse the Executive for legal fees
(including without limitation, any and all court costs and attorneys' fees and
expenses) incurred by the Executive in connection with or as a result of any
claim, action or proceeding brought by the Company or the Executive with respect
to or arising out of this Agreement or any provision hereof, unless, in the case
of an action brought by the Executive, it is determined by an arbitrator or by a
court of competent jurisdiction that such action was frivolous and was not
brought in good faith. Such legal fees shall be paid or reimbursed by the
Company to the Executive from time to time within five business days following
receipt by the Company of copies of bills for such fees and if the Company fails
to make such payment within such five day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum. All other expenses
relating to any arbitration or court proceedings shall be paid by the Company.
14. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by the Company
(any such purported assignment by either shall be null and void), except that
the Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
business of the Company.
15. AMENDMENT; WAIVER. The Agreement may be amended at any
time, but only by mutual written agreement of the parties hereto. Any party may
waive compliance by the other party with any provision hereof, but only by an
instrument in writing executed by the party granting such waiver.
16. ENTIRE AGREEMENT. Except as otherwise provided in a
Continuity Agreement dated as of June 22, 1998 between the Company and the
Executive, as amended by agreement dated May 4, 1999, and the agreements setting
forth in detail the terms of the options referred to in Section 3.3 hereof, and
as may be amended from time to time hereafter, the terms of this Agreement (i)
are intended by the parties to be the final expression of their agreement with
respect to the employment of Executive by the Company, (ii) may not be
contradicted by evidence of any prior or contemporaneous agreement and (iii)
shall constitute the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial, administrative
or other legal proceeding involving this Agreement.
17. DEATH OR INCOMPETENCE. In the event of Executive's death or
a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his estate or other
legal representative.
18. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the
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<PAGE>
intended preservation of such rights and obligations. The provisions of this
Section are in addition to the survivorship provisions of any other section of
this Agreement.
19. GOVERNING LAW. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of New York
without reference to rules relating to conflicts of law.
20. WITHHOLDINGS. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed this amended
and restated employment agreement as of the date first above written.
EMCOR GROUP, INC.
By:
-------------------------------------
EXECUTIVE
----------------------------------------
Jeffrey M. Levy
14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(E)
<SEQUENCE>7
<FILENAME>c23256_ex10-e.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT R. KEVIN MATZ
<TEXT>
Exhibit 10.(e)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of January 1, 2002 by and between EMCOR
GROUP, INC. (the "Company") and R. KEVIN MATZ ("Executive").
In order to induce Executive to serve as Vice President and the
Treasurer of the Company, the Company desires to provide Executive with
compensation and other benefits under the conditions set forth in this
Agreement.
Executive is willing to accept such employment and to perform
services for the Company and its subsidiaries, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. EMPLOYMENT.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Period of Employment (as
hereinafter defined) as a Vice President and the Treasurer of the Company. In
his capacity as Vice President and Treasurer of the Company, Executive shall
have the customary powers, responsibilities and authorities of vice presidents
and treasurers of similar corporations of the size, type and nature of the
Company as it may exist from time to time, subject to the direction of the
Chairman of the Board of Directors (the "Board") of the Company and the Chief
Executive Officer of the Company (the "Chairman").
1.2 Subject to the terms and conditions hereof, Executive
hereby agrees to be employed as a Vice President and the Treasurer of the
Company and shall devote his full working time and efforts, to the best of his
ability, experience and talent, to the performance of the services, duties and
responsibilities in connection therewith. Except upon the prior written consent
of the Chairman, Executive will not during the Period of Employment (i) accept
any other employment or (ii) engage, directly or indirectly, in any other
business activity (whether or not pursued for pecuniary advantage), whether or
not it may be competitive with, or whether or not it might place him in a
competing position to that of, the Company or any subsidiary thereof. Nothing in
this Agreement shall preclude the Executive from (i) engaging, consistent with
his duties and responsibilities hereunder, in charitable community affairs, (ii)
managing his personal investments, (iii) continuing to serve on the boards of
directors on which he presently serves (to the extent such service is not
precluded by federal or state law or by conflict of interest by reason of his
position with the Company), or (iv) serving, subject to approval of the
Chairman, as a member of boards of directors of other companies, PROVIDED, that
such activities do not interfere with the performance of Executive's duties
hereunder.
2. PERIOD OF EMPLOYMENT. Executive's period of employment
hereunder shall commence on January 1, 2002 (the "Commencement Date") and shall
continue through the earlier of December 31, 2004 or the date of termination
hereunder (the "Period of Employment"); PROVIDED, HOWEVER, that the Period of
Employment shall automatically be extended for successive one-year periods
unless the Company or Executive, at least six months prior to the end of such
period, provides written notice to the other party of intent not to extend the
Period of Employment. Notwithstanding anything in this Agreement to the
contrary,
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in the event of a Change of Control (as defined in Section 6.1(e)) the Period of
Employment shall be for a period of three years commencing as of the date of
such Change of Control.
3. COMPENSATION.
3.1 SALARY. The Company shall pay Executive a base salary
("Base Salary") at the rate of $300,000 per annum for the Period of Employment.
Base Salary shall be payable in accordance with the ordinary payroll practices
of the Company. Executive's rate of Base Salary shall be increased on the first
day of each calendar year occurring during the Period of Employment, beginning
with January 1, 2003, by the percentage increase for the prior year in the
consumer price index for the area in which the principal office of the Company
is located, as determined by the U.S. Department of Commerce, or the amount
specified by the Board, whichever is greater.
3.2 BONUS. In addition to his Base Salary, Executive shall be
entitled, while he remains employed hereunder, in respect of each calendar year,
to an annual bonus (the "Bonus") payable in cash and at such times as bonuses
are customarily paid to senior executives of the Company; provided that so long
as the Company's Executive Stock Bonus Plan (the "Plan") shall remain in effect
and the Executive shall be designated a participant therein, 25% of the
Executive's Bonus shall be payable in restricted stock units in accordance with
the Plan and the Executive, in accordance with the terms of the Plan, may elect
to receive a greater percentage of his Bonus in restricted stock units. For each
calendar year during the Period of Employment, the amount of the Bonus shall be
determined by the Compensation Committee of the Board of Directors in its sole
discretion.
3.3 STOCK OPTIONS. (a) The Executive is hereby granted an
option with a ten-year term to purchase 12,800 shares of common stock ("Shares")
of the Company at $46.35 per Share. The Executive also shall be granted as of
the first business day of 2003 and 2004 an option with a ten-year term to
purchase Shares at the then fair market value of a Share; the number of Shares
subject to each option granted in 2003 and 2004, respectively, shall be that
number determined by dividing 75% of Executive's base salary for such year by
the value of an option as of the first business day of such year, which value
shall be that computed in accordance with the methodology of valuing options
under the 1997 Non-Employee Directors' Non-Qualified Stock Option Plan. Each
option referred to herein shall be exercisable with respect to the Shares
subject thereto as follows: one-fourth on or after the date of grant, one-fourth
on or after the first anniversary of the date of grant, one-fourth on or after
the second anniversary of the date of grant, and one-fourth on or after the last
business day of the calendar year immediately preceeding the third anniversary
of the date of grant. In the event of the Executive's termination of employment
under Section 6.1, each such option shall become immediately exercisable in full
and shall remain exercisable for the balance of its ten-year term.
(b) In addition, Executive was granted on December 14, 2001 an
option with a ten-year term to purchase 19,000 Shares at $41.70 per share which
option is immediately exercisable in full and remains exercisable for the
balance of its ten-year term.
4. EMPLOYEE BENEFITS.
4.1 EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Company shall
provide Executive during the Period of Employment with coverage under any
employee benefit programs, plans and practices (commensurate with his position
in the Company) in accordance
2
<PAGE>
with the terms thereof, which the Company currently makes available generally to
its senior executive officers, or which the Company, with Board approval, elects
to make available generally to its senior executive officers hereafter,
including, but not limited to (a) retirement, pension and profit-sharing; and
(b) medical, dental, hospitalization, life insurance, short and long-term
disability, accidental death and dismemberment and travel accident coverage;
provided that Executive shall pay such portion of the premiums therefor as is
customarily paid by senior executives of the Company.
4.2 VACATION, FRINGE AND OTHER BENEFITS. Executive shall be
entitled to the number of vacation days customarily accorded senior executives
of the Company. In addition, during the Period of Employment, the Company shall
pay Executive $700 per month for leasing (plus maintenance, insurance, and
property taxes) of an automobile and shall make the initial capital cost
reduction payment with respect to the leasing of such automobile on Executive's
behalf. The Company shall also reimburse Executive for (a) all initiation fees
and monthly dues for membership in a club suitable for entertaining clients of
the Company and (b) all legal expenses incurred by Executive in connection with
the negotiation and drafting of this Agreement. The Company shall bear the cost
of any increased tax liability of Executive caused by the provisions of this
Section 4.2.
4.3 LIFE INSURANCE. The Company shall obtain, at the Company's
expense, insurance on the life of the Executive in the amount of $1,800,000 for
the first twelve months of the Period of Employment, $1,200,000 for the second
twelve months of the Period of Employment, and $600,000 for the remainder of the
Period of Employment. The proceeds of such life insurance shall be payable to
such beneficiary or beneficiaries as shall be selected by the Executive at any
time or from time to time. The Company shall bear the cost of any increased tax
liability of Executive caused by the provisions of this Section 4.3.
5. DIRECTORS AND OFFICERS LIABILITY. The Company shall keep in
effect during and after the Period of Employment, a policy of directors' and
officers' liability insurance for officers and directors of the Company at such
reasonable amount of coverage as is agreed to by Executive and the Board from
time to time and which insurance policy shall be on a claims-made basis.
6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION NOT FOR CAUSE OR RESIGNATION FOR GOOD REASON.
(a) The Company may terminate Executive's employment at any time, and Executive
may terminate his employment at any time. If Executive's employment is
terminated by the Company other than for Cause (as hereinafter defined), or
Executive terminates his employment for Good Reason (as hereinafter defined),
Executive shall be entitled to receive a lump sum cash payment (but not in
substitution for compensation already earned) in an amount equal to the sum of:
(i) the product of two times the sum of (A) Executive's Base
Salary at its current annual rate at the time of
termination of employment plus (B) Executive's "Deemed
Bonus" (as defined below);
(ii) an amount equal to Executive's Bonus, for any calendar year
ending before such termination occurs, which would have
been payable had Executive remained in employment until the
date such Bonus would otherwise have been paid; and
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<PAGE>
(iii) an amount equal to Executive's Deemed Bonus multiplied by a
fraction, the numerator of which is the number of days in
the calendar year in which the termination of employment
occurs that Executive was an employee of the Company, and
the denominator of which is 365.
In the event of a termination of Executive's employment by the
Company other than for Cause or by the Executive for Good Reason following a
Change of Control, the factor of two in subsection 6.1(a)(i) shall be increased
to three.
For purposes of subsections 6.1(a)(i) and (iii), 6.2(a) and 6.3,
the amount of the Deemed Bonus shall be the highest Bonus paid to Executive for
any year he has been employed by the Company.
(b) In addition to the amounts described in subsection 6.1(a),
Executive shall be entitled to receive:
(i) until the earlier of the Expiration Date (as that term is
hereafter defined) or 18 months from the date of
termination, Executive (and, to the extent applicable,
Executive's dependents) shall continue to be covered, at
the Company's expense, under the Company's medical, dental
and hospitalization coverage plans, and until the earlier
of the Expiration Date or 6 months from the date of
termination, Executive shall continue to be covered, at the
Company's expense, under the Company's group life, short
and long-term disability, accidental death and
dismemberment and travel accident coverage plans described
in Section 4.1 hereof or the Company will provide for
equivalent coverage (the term "Expiration Date" shall mean
the later of (i) December 31, 2004, (ii) the third
anniversary of a Change of Control of the Company or (iii)
the date that a succeeding one-year Period of Employment
(as provided for under Section 2 hereof) terminates); and
(ii) all payments to which Executive has vested rights as of the
Expiration Date under employee benefit, disability,
insurance and similar plans which provide for payments
beyond the Period of Employment.
(c) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written consent):
(i) The assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties,
responsibilities, titles or office as set forth in Section
1 hereof, or any reduction by the Company of his duties or
responsibilities or any removal of Executive from the
position of Vice President and Treasurer, except in
connection with the termination of Executive's employment
(A) upon the termination of the Period of Employment on the
Expiration Date, (B) for Cause, (C) as a result of
Executive's Permanent Disability (as hereinafter defined)
or death or (D) by Executive other than for Good Reason;
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<PAGE>
(ii) A reduction by the Company in Executive's Base Salary, as
in effect on the date hereof or as the same may be
increased from time to time during the Period of
Employment;
(iii) The failure by the Company to obtain the specific
assumption of this Agreement by any successor or assign of
the Company or any person acquiring substantially all of
the Company's assets;
(iv) Failure by the Company to perform in any material respect
its obligations under this Agreement, where such failure
shall not have been remedied within 30 days after Executive
shall have notified the Company in writing thereof;
(v) Any material reduction in Executive's compensation or
benefits following a Change of Control or Executive's
principal business location is changed to a location more
than 30 miles from Executive's principal business location
(other than a relocation to the Borough of Manhattan, New
York, New York) immediately prior to a Change of Control;
(vi) The Company shall cease to keep in effect the policy of
directors' and officers' liability insurance for Executive
described in Section 5; or
(vii) The termination of the Indemnity Agreement, effective as of
April 20, 1995, between Executive and the Company.
(d)(i) Anything in this Agreement to the contrary notwithstanding,
if it is determined (as hereafter provided) that any
payment or distribution by the Company to or for the
benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement,
including without limitation any stock option, stock
appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment") ,
would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor provision thereto) by reason of
being "contingent on a change in ownership or control" of
the Company, within the meaning of Section 28OG of the Code
(or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties
with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax") ,
then the Executive shall be entitled to receive an
additional payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
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<PAGE>
(ii) Subject to the provisions of Section 6(d)(i) hereof, all
determinations required to be made under this Section 6(d),
including whether an Excise Tax is payable by the Executive
and the amount of such Excise Tax and whether a Gross-Up
Payment is required and the amount of such Gross-Up
Payment, shall be made by the nationally recognized firm of
certified public accountants (the "Accounting Firm") used
by the Company prior to the Change of Control (or, if such
Accounting Firm declines to serve, the Accounting Firm
shall be a nationally recognized firm of certified public
accountants selected by the Executive). The Accounting Firm
shall be directed by the Company or the Executive to submit
its determination and detailed supporting calculations to
both the Company and the Executive within 15 calendar days
after the date the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than
for Cause (the "Termination Date"), if applicable, and any
other such time or times as may be requested by the Company
or the Executive. If the Accounting Firm determines that
any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such
determination and calculations. If the Accounting Firm
determines that no Excise Tax is payable by the Executive,
it shall, at the same time as it makes such determination,
furnish the Executive with an opinion that he has
substantial authority not to report any Excise Tax on his
federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the Company and
the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar
uncertainty regarding applicable state or local tax law at
the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will
not have been made by the Company should have been made (an
"Underpayment") consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to
Section 6(d)(vi) hereof and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive
shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible. Any
such Underpayment shall be promptly paid by the Company to,
or for the benefit of, the Executive within five business
days after receipt of such determination and calculations.
If payments required pursuant to this Section 6(d)(ii) to
be made by the Company to the Executive are not made within
such five day period, the Company shall pay the Executive
interest thereon at the rate of 10% per annum.
(iii) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records
and documents in the possession of the Company or the
Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the
Accounting Firm in connection with the preparation and
issuance of the determination contemplated by Section
6(d)(ii) hereof.
6
<PAGE>
(iv) The federal, state and local income or other tax returns
filed by the Executive and the Company (or any filing made
by a consolidated tax group which includes the Company)
shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the
Excise Tax payable by the Executive. The Executive shall
make proper payment of the amount of any Excise Tax and, at
the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income
tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as
filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing
such payment. If prior to the filing of the Executive's
federal income tax return, or corresponding state or local
tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced,
the Executive shall within five business days pay to the
Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and
calculations contemplated by Sections 6 (d)(ii) and (d)(iv)
hereof shall be borne by the Company. If such fees and
expenses are initially advanced by the Executive, the
Company shall reimburse the Executive the full amount of
such fees and expenses within five business days after
receipt from the Executive of a statement therefor and
reasonable evidence of his payment thereof. If such
reimbursement is not made by the Company to the Executive
within such five-day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum.
(vi) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature
of such claim and the date on which such claim is requested
to be paid (in each case, to the extent known by the
Executive). The Executive shall not pay such claim prior to
the earlier of (a) the expiration of the 30-calendar-day
period following the date on which he gives such notice to
the Company and (b) the date that any payment of amount
with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(A) provide the Company with any written records or
documents in his possession relating to such claim
reasonably requested by the Company;
(B) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including without
limitation accepting legal representation with
7
<PAGE>
respect to such claim by an attorney competent in
respect of the subject matter and reasonably
selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and
shall indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income
tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing
provisions of this Section 6 (d)(vi), the Company shall
control all proceedings taken in connection with the
contest of any claim contemplated by this Section 6 (d)(vi)
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim (provided however, that the Executive may participate
therein at his cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest
to a determination before any administrative tribunal, or a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay the tax
claimed and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free
basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax,
including interest and penalties with respect thereto,
imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is
claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of any such
contested claim shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6 (d)(vi)
hereof, the Executive receives any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 6 (d)(vi)
hereof) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon
after any taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company
pursuant to Section 6 (d)(vi) hereof, a determination is
made that the Executive is not entitled to any refund with
respect to such claim
8
<PAGE>
and the Company does not notify the Executive in writing of
its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination,
then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up
Payment required to be made pursuant to this Section 6 (d).
(e) For purposes of this Agreement, a "Change of Control" shall
be deemed to have occurred when:
(i) any person or persons acting in concert (excluding Company
benefit plans) becomes the beneficial owner of securities
of the Company having at least 25% of the voting power of
the Company's then outstanding securities; or
(ii) the shareholders of the Company shall approve any merger or
other business combination of the Company, sale or lease of
the Company's assets or combination of the foregoing
transactions (the "TRANSACTIONS") other than a Transaction
immediately following which the shareholders of the Company
and any trustee or fiduciary of any Company employee
benefit plan immediately prior to the Transaction own at
least 65% of the voting power, directly or indirectly, of
(A) the surviving corporation in any such merger or other
business combination; (B) the purchaser or lessee of the
Company's assets; or (C) both the surviving corporation and
the purchaser or lessee in the event of any combination of
Transactions; or
(iii) within any 24-month period, the persons who were directors
immediately before the beginning of such period (the
"INCUMBENT DIRECTORS") shall cease (for any reason other
than death) to constitute at least a majority of the Board
or the board of directors of a successor to the Company.
For this purpose, any director who was not a director at
the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified
as Incumbent Directors (so long as such director was not
nominated by a person who has expressed an intent to effect
a Change of Control or engage in a proxy or other control
contest).
(f) Except as otherwise specifically provided herein, all cash
payments under this Section 6.1 shall be made by the Company within 30 calendar
days following the event giving rise to such payments. If any such payment shall
not be made within such 30-day period (or any other specifically provided time
period), the Company shall pay interest on the unpaid amount at the rate of 10%
per annum.
6.2 PERMANENT DISABILITY. If as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties with the Company on a full-time basis for six consecutive
months (a "Permanent Disability") during his Period of Employment, the Company
or Executive may terminate his employment on written notice thereof, the Period
of Employment shall terminate on the giving of such notice, and the compensation
to which Executive is entitled pursuant to Section 3.1 shall be paid through the
9
<PAGE>
last day of the month in which the notice is given. In addition, Executive shall
be entitled to receive:
(a) all unpaid amounts, as of the date of such termination, in
respect of any Bonus for any calendar year ending before the calendar year in
which such termination occurs, which would have been payable had Executive
remained in employment until the date such Bonus would otherwise have been paid,
plus Executive's Deemed Bonus for the calendar year in which his employment
terminates, multiplied by a fraction, the numerator of which is the number of
days in such calendar year the Executive was an employee of the Company, and the
denominator of which is 365;
(b) until the earlier of the Expiration Date or 24 months from
the date of termination for Permanent Disability, Executive (and, to the extent
applicable, Executive's dependents) shall continue to be covered, at the
Company's expense, under the Company's medical, dental, hospitalization, group
life, short and long-term disability, accidental death and dismemberment and
travel accident coverage plans described in Section 4.1 or the Company will
provide for equivalent coverage; provided that if Executive is provided with
comparable coverage by a successor employer any such coverage by the Company
shall cease; and
(c) all amounts payable under the Company's disability plans.
6.3 DEATH. In the event of Executive's death while employed
hereunder, the Period of Employment shall thereupon automatically terminate and
the Executive's estate or designated beneficiaries shall receive (i) payments of
Base Salary for a period of three months after the date of death; (ii) all
unpaid amounts, as of the date of such termination, in respect of any Bonus for
any calendar year ending before the calendar year in which such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid, plus Executive's Deemed
Bonus for the calendar year in which his employment terminates, multiplied by a
fraction, the numerator of which is the number of days in such calendar year the
Executive was an employee of the Company, and the denominator of which is 365;
and (iii) any death benefits provided under the employee benefit programs, in
accordance with their terms.
6.4 VOLUNTARY RESIGNATION; DISCHARGE FOR CAUSE. If Executive
resigns voluntarily, other than for Good Reason or Permanent Disability, or the
Company terminates the employment of Executive at any time for Cause, the
Company's obligations under this Agreement to make any further payments to
Executive shall thereupon, to the extent permitted by law, cease and terminate
except with respect to all unpaid amounts, as of the date of such termination,
in respect of any Bonus for any calendar year ending before such termination
occurs, which would have been payable had Executive remained in employment until
the date such Bonus would otherwise have been paid. In addition, Executive shall
remain entitled to all vested amounts and benefits under the Company's employee
benefit programs, plans and practices. The term "Cause" shall be limited to (a)
action by Executive involving willful malfeasance in connection with his
employment which results in material harm to the Company, (b) material and
continuing breach by Executive of the terms of this Agreement which breach is
not cured within 60 days after Executive receives written notice from the
Company of any such breach or (c) Executive being convicted of a felony.
Termination of Executive for Cause pursuant to this Section 6.4 shall be
communicated by a Notice of Termination given within six months after the Board
both (i) had knowledge of conduct or an event allegedly constituting Cause and
(ii) had reason to believe that such conduct or event could be grounds for
Cause.
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<PAGE>
For purposes of this Agreement a "Notice of Termination" shall mean delivery to
Executive of a copy of a resolution duly adopted by the Board at a meeting of
the Board called and held for that purpose (after not less than 10 days notice
to Executive ("Preliminary Notice") and reasonable opportunity for Executive,
together with the Executive's counsel, to be heard before the Board prior to
such vote) finding, that in the good faith opinion of the Board, Executive was
guilty of conduct set forth in the third sentence of this Section 6.4 and
specifying the particulars thereof in detail. The Board shall no later than 30
days after the receipt of the Preliminary Notice by Executive communicate its
findings to Executive. A failure by the Board to make its finding of Cause or to
communicate its conclusions within such 30-day period shall be deemed to be a
finding that Executive was not guilty of the conduct described in the third
sentence of this Section 6.4.
6.5 TERMINATION ON OR AFTER EXPIRATION DATE. In the event the
Period of Employment shall not be extended and Executive's employment shall be
terminated by the Company on or after the Expiration Date or Executive shall
terminate his employment on or after the Expiration Date, the Executive shall be
paid (a) his Base Salary through the last day of the month in which the
termination of employment occurs, (b) all unpaid amounts in respect of any Bonus
for any calendar year ending before such termination date occurs, which Bonus
would have been payable had Executive remained in employment until the date such
Bonus would otherwise have been paid, and (c) Executive's Deemed Bonus for the
calendar year in which his employment terminates, multiplied by a fraction, the
numerator of which is the number of days in such calendar year the Executive was
an employee of the Company, and the denominator of which is 365. In addition,
Executive shall remain entitled to all vested amounts, benefits, and rights
under the Company's employee benefit programs, plans and practices, all rights
to which he is entitled under Company severance plans, practices and/or policies
and all other benefits to which he is entitled by law or contract.
6.6 TERMINATION OBLIGATIONS. (a) Executive hereby acknowledges
and agrees that all personal property, including, without limitation, all books,
manuals, records, reports, notes, contracts, lists, and other documents, and
equipment furnished to or prepared by Executive in the course of or incident to
his employment, belong to the Company and shall be promptly returned to the
Company upon termination of the Period of Employment.
(b) Upon termination of the Period of Employment, the Executive
shall be deemed to have resigned from all offices and directorships then held
with the Company or any subsidiary or affiliate thereof.
7. CONFIDENTIAL INFORMATION. During and after the Period of
Employment, Executive shall not disclose to any person (other than an employee
or agent of the Company or any affiliate of the Company entitled to receive the
same) any confidential information relating to the business of the Company and
obtained by him while providing services to the Company, without the consent of
the Board, or until such information ceases to be confidential.
8. NON-COMPETITION. In the event Executive's employment is
terminated by the Company for Cause or Executive terminates his employment with
the Company without Good Reason, Executive shall not, for a period ending on the
earlier of (i) 18 months from the date of such termination or (ii) the
Expiration Date, accept any other employment or engage, directly or indirectly,
in any other business activity which is competitive with that of the Company or
any subsidiary thereof.
11
<PAGE>
9. EXPENSES. Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement,
including expenses for travel and similar items related to such duties and
responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of an itemized account of such
expenditures.
10. NO OBLIGATION TO MITIGATE DAMAGES. Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking (and no payment otherwise required hereunder shall be
reduced on account of) other employment or otherwise, nor will any payments
hereunder be subject to offset in respect of any claims which the Company may
have against Executive.
11. NOTICES. All notices or communications hereunder shall be
in writing, addressed as follows:
to Executive:
R. Kevin Matz
80 Silver Spring Road
Ridgefield, CT 06877
to Company:
Sheldon I. Cammaker, Esq.
Executive Vice President and General Counsel
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, CT 06851
with a copy to:
Kenneth C. Edgar, Jr., Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Any such notice or communication shall be delivered by hand or sent certified or
registered mail, return receipt requested, postage prepaid, addressed as above
(or to such other address as such party may designate in a notice duly delivered
as described above), and the actual date of delivery or mailing shall determine
the time at which notice was given.
12. AGREEMENT TO PERFORM NECESSARY ACTS. Each party agrees to
perform any further acts and to execute and deliver any further documents that
may be reasonably necessary to carry out the provisions of this Agreement.
13. SEPARABILITY; LEGAL ACTIONS; LEGAL FEES. If any provision
of this Agreement shall be declared to be invalid or unenforceable, in whole or
in part, such invalidity or unenforceability shall not affect the remaining
provisions hereof, which shall remain in full force and effect. Any controversy
or claim arising out of or relating to this Agreement or the
12
<PAGE>
breach of this Agreement that cannot be resolved by Executive and the Company,
including any dispute as to the calculation of Executive's benefits or any
payments hereunder, shall be submitted to arbitration in New York, New York in
accordance with the laws of the State of New York and the procedures of the
American Arbitration Association, except that if Executive institutes an action
relating to this Agreement, Executive may, at Executive's option, bring that
action in any court of competent jurisdiction. Judgment may be entered on an
arbitrator(s)' award in any court having jurisdiction.
In addition to all other amounts payable to the Executive under
this Agreement, the Company shall pay or reimburse the Executive for legal fees
(including without limitation, any and all court costs and attorneys' fees and
expenses) incurred by the Executive in connection with or as a result of any
claim, action or proceeding brought by the Company or the Executive with respect
to or arising out of this Agreement or any provision hereof, unless, in the case
of an action brought by the Executive, it is determined by an arbitrator or by a
court of competent jurisdiction that such action was frivolous and was not
brought in good faith. Such legal fees shall be paid or reimbursed by the
Company to the Executive from time to time within five business days following
receipt by the Company of copies of bills for such fees and if the Company fails
to make such payment within such five day period, the Company shall pay the
Executive interest thereon at the rate of 10% per annum. All other expenses
relating to any arbitration or court proceedings shall be paid by the Company.
14. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by the Company
(any such purported assignment by either shall be null and void), except that
the Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
business of the Company.
15. AMENDMENT; WAIVER. The Agreement may be amended at any
time, but only by mutual written agreement of the parties hereto. Any party may
waive compliance by the other party with any provision hereof, but only by an
instrument in writing executed by the party granting such waiver.
16. ENTIRE AGREEMENT. Except as otherwise provided in a
Continuity Agreement dated as of June 22, 1998 between the Company and the
Executive, as amended by agreement dated May 4, 1999, and the agreements setting
forth in detail the terms of the options referred to in Section 3.3 hereof, and
as may be amended from time to time hereafter, the terms of this Agreement (i)
are intended by the parties to be the final expression of their agreement with
respect to the employment of Executive by the Company, (ii) may not be
contradicted by evidence of any prior or contemporaneous agreement and (iii)
shall constitute the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial, administrative
or other legal proceeding involving this Agreement.
17. DEATH OR INCOMPETENCE. In the event of Executive's death or
a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his estate or other
legal representative.
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<PAGE>
18. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions of any
other section of this Agreement.
19. GOVERNING LAW. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of New York
without reference to rules relating to conflicts of law.
20. WITHHOLDINGS. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed this amended
and restated employment agreement as of the date first above written.
EMCOR GROUP, INC.
By:
--------------------------------------
EXECUTIVE
-----------------------------------------
R. Kevin Matz
14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(F)
<SEQUENCE>8
<FILENAME>c23256_ex10-f.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT MARK POMPA
<TEXT>
Exhibit 10.(f)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of January 1, 2002 by and between EMCOR
GROUP, INC. (the "Company") and MARK A. POMPA ("Executive").
In order to induce Executive to serve as Vice President and the
Controller of the Company, the Company desires to provide Executive with
compensation and other benefits under the conditions set forth in this
Agreement.
Executive is willing to accept such employment and to perform
services for the Company and its subsidiaries, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. EMPLOYMENT.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Period of Employment (as
hereinafter defined) as a Vice President and the Controller of the Company. In
his capacity as Vice President and Controller of the Company, Executive shall
have the customary powers, responsibilities and authorities of vice presidents
and controllers of similar corporations of the size, type and nature of the
Company as it may exist from time to time, subject to the direction of the the
Chief Financial Officer of the Company.
1.2 Subject to the terms and conditions hereof, Executive
hereby agrees to be employed as a Vice President and the Controller of the
Company and shall devote his full working time and efforts, to the best of his
ability, experience and talent, to the performance of the services, duties and
responsibilities in connection therewith. Except upon the prior written consent
of the Chairman of the Board of Directors (the "Board") of the Company (the
"Chairman"), Executive will not during the Period of Employment (i) accept any
other employment or (ii) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage), whether or not it may
be competitive with, or whether or not it might place him in a competing
position to that of, the Company or any subsidiary thereof. Nothing in this
Agreement shall preclude the Executive from (i) engaging, consistent with his
duties and responsibilities hereunder, in charitable community affairs, (ii)
managing his personal investments, (iii) continuing to serve on the boards of
directors on which he presently serves (to the extent such service is not
precluded by federal or state law or by conflict of interest by reason of his
position with the Company), or (iv) serving, subject to approval of the
Chairman, as a member of boards of directors of other companies, PROVIDED, that
such activities do not interfere with the performance of Executive's duties
hereunder.
2. PERIOD OF EMPLOYMENT. Executive's period of employment
hereunder shall commence on January 1, 2002 (the "Commencement Date") and shall
continue through the earlier of December 31, 2004 or the date of termination
hereunder (the "Period of Employment"); PROVIDED, HOWEVER, that the Period of
Employment shall automatically be extended for successive one-year periods
unless the Company or Executive, at least six months prior to the end of such
period, provides written notice to the other party of intent not to extend the
Period of Employment. Notwithstanding anything in this Agreement to the
contrary,
1
<PAGE>
in the event of a Change of Control (as defined in Section 6.1(e)) the Period of
Employment shall be for a period of three years commencing as of the date of
such Change of Control.
3. COMPENSATION.
3.1 SALARY. The Company shall pay Executive a base salary
("Base Salary") at the rate of $260,000 per annum for the Period of Employment.
Base Salary shall be payable in accordance with the ordinary payroll practices
of the Company. Executive's rate of Base Salary shall be increased on the first
day of each calendar year occurring during the Period of Employment, beginning
with January 1, 2003, by the percentage increase for the prior year in the
consumer price index for the area in which the principal office of the Company
is located, as determined by the U.S. Department of Commerce, or the amount
specified by the Board, whichever is greater.
3.2 BONUS. In addition to his Base Salary, Executive shall be
entitled, while he remains employed hereunder, in respect of each calendar year,
to an annual bonus (the "Bonus") payable in cash and at such times as bonuses
are customarily paid to senior executives of the Company; provided that so long
as the Company's Executive Stock Bonus Plan (the "Plan") shall remain in effect
and the Executive shall be designated a participant therein, 25% of the
Executive's Bonus shall be payable in restricted stock units in accordance with
the Plan and the Executive, in accordance with the terms of the Plan, may elect
to receive a greater percentage of his Bonus in restricted stock units. For each
calendar year during the Period of Employment, the amount of the Bonus shall be
determined by the Compensation Committee of the Board of Directors in its sole
discretion.
3.3 STOCK OPTIONS. (a) The Executive is hereby granted an
option with a ten-year term to purchase 11,100 shares of common stock ("Shares")
of the Company at $46.35 per Share. The Executive also shall be granted as of
the first business day of 2003 and 2004 an option with a ten-year term to
purchase Shares at the then fair market value of a Share; the number of Shares
subject to each option granted in 2003 and 2004, respectively, shall be that
number determined by dividing 75% of Executive's base salary for such year by
the value of an option as of the first business day of such year, which value
shall be that computed in accordance with the methodology of valuing options
under the 1997 Non-Employee Directors' Non-Qualified Stock Option Plan. Each
option referred to herein shall be exercisable with respect to the Shares
subject thereto as follows: one-fourth on or after the date of grant, one-fourth
on or after the first anniversary of the date of grant, one-fourth on or after
the second anniversary of the date of grant, and one-fourth on or after the last
business day of the calendar year immediately preceeding the third anniversary
of the date of grant. In the event of the Executive's termination of employment
under Section 6.1, each such option shall become immediately exercisable in full
and shall remain exercisable for the balance of its ten-year term.
(b) In addition, Executive was granted on December 14, 2001 an
option with a ten-year term to purchase 16,500 Shares at $41.70 per share which
option is immediately exercisable in full and remains exercisable for the
balance of its ten-year term.
4. EMPLOYEE BENEFITS.
4.1 EMPLOYEE BENEFIT PLANS AND PROGRAMS. The Company shall
provide Executive during the Period of Employment with coverage under any
employee benefit programs, plans and practices (commensurate with his position
in the Company) in accordance
2
<PAGE>
with the terms thereof, which the Company currently makes available generally to
its senior executive officers, or which the Company, with Board approval, elects
to make available generally to its senior executive officers hereafter,
including, but not limited to (a) retirement, pension and profit-sharing; and
(b) medical, dental, hospitalization, life insurance, short and long-term
disability, accidental death and dismemberment and travel accident coverage;
provided that Executive shall pay such portion of the premiums therefor as is
customarily paid by senior executives of the Company.
4.2 VACATION, FRINGE AND OTHER BENEFITS. Executive shall be
entitled to the number of vacation days customarily accorded senior executives
of the Company. In addition, during the Period of Employment, the Company shall
pay Executive $700 per month for leasing (plus maintenance, insurance, and
property taxes) of an automobile and shall make the initial capital cost
reduction payment with respect to the leasing of such automobile on Executive's
behalf. The Company shall also reimburse Executive for (a) all initiation fees
and monthly dues for membership in a club suitable for entertaining clients of
the Company and (b) all legal expenses incurred by Executive in connection with
the negotiation and drafting of this Agreement. The Company shall bear the cost
of any increased tax liability of Executive caused by the provisions of this
Section 4.2.
4.3 LIFE INSURANCE. The Company shall obtain, at the Company's
expense, insurance on the life of the Executive in the amount of $1,560,000 for
the first twelve months of the Period of Employment, $1,040,000 for the second
twelve months of the Period of Employment, and $520,000 for the remainder of the
Period of Employment. The proceeds of such life insurance shall be payable to
such beneficiary or beneficiaries as shall be selected by the Executive at any
time or from time to time. The Company shall bear the cost of any increased tax
liability of Executive caused by the provisions of this Section 4.3.
5. DIRECTORS AND OFFICERS LIABILITY. The Company shall keep in
effect during and after the Period of Employment, a policy of directors' and
officers' liability insurance for officers and directors of the Company at such
reasonable amount of coverage as is agreed to by Executive and the Board from
time to time and which insurance policy shall be on a claims-made basis.
6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION NOT FOR CAUSE OR RESIGNATION FOR GOOD REASON.
(a) The Company may terminate Executive's employment at any time, and Executive
may terminate his employment at any time. If Executive's employment is
terminated by the Company other than for Cause (as hereinafter defined), or
Executive terminates his employment for Good Reason (as hereinafter defined),
Executive shall be entitled to receive a lump sum cash payment (but not in
substitution for compensation already earned) in an amount equal to the sum of:
(i) the product of two times the sum of (A) Executive's Base
Salary at its current annual rate at the time of
termination of employment plus (B) Executive's "Deemed
Bonus" (as defined below);
(ii) an amount equal to Executive's Bonus, for any calendar year
ending before such termination occurs, which would have
been payable had Executive remained in employment until the
date such Bonus would otherwise have been paid; and
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(iii) an amount equal to Executive's Deemed Bonus multiplied by a
fraction, the numerator of which is the number of days in
the calendar year in which the termination of employment
occurs that Executive was an employee of the Company, and
the denominator of which is 365.
In the event of a termination of Executive's employment by the
Company other than for Cause or by the Executive for Good Reason following a
Change of Control, the factor of two in subsection 6.1(a)(i) shall be increased
to three.
For purposes of subsections 6.1(a)(i) and (iii), 6.2(a) and 6.3,
the amount of the Deemed Bonus shall be the highest Bonus paid to Executive for
any year he has been employed by the Company.
(b) In addition to the amounts described in subsection 6.1(a),
Executive shall be entitled to receive:
(i) until the earlier of the Expiration Date (as that term is
hereafter defined) or 18 months from the date of
termination, Executive (and, to the extent applicable,
Executive's dependents) shall continue to be covered, at
the Company's expense, under the Company's medical, dental
and hospitalization coverage plans, and until the earlier
of the Expiration Date or 6 months from the date of
termination, Executive shall continue to be covered, at the
Company's expense, under the Company's group life, short
and long-term disability, accidental death and
dismemberment and travel accident coverage plans described
in Section 4.1 hereof or the Company will provide for
equivalent coverage (the term "Expiration Date" shall mean
the later of (i) December 31, 2004, (ii) the third
anniversary of a Change of Control of the Company or (iii)
the date that a succeeding one-year Period of Employment
(as provided for under Section 2 hereof) terminates); and
(ii) all payments to which Executive has vested rights as of the
Expiration Date under employee benefit, disability,
insurance and similar plans which provide for payments
beyond the Period of Employment.
(c) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written consent):
(i) The assignment to Executive by the Company of duties
inconsistent with Executive's positions, duties,
responsibilities, titles or office as set forth in Section
1 hereof, or any reduction by the Company of his duties or
responsibilities or any removal of Executive from the
position of Vice President and Controller, except in
connection with the termination of Executive's employment
(A) upon the termination of the Period of Employment on the
Expiration Date, (B) for Cause, (C) as a result of
Executive's Permanent Disability (as hereinafter defined)
or death or (D) by Executive other than for Good Reason;
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(ii) A reduction by the Company in Executive's Base Salary, as
in effect on the date hereof or as the same may be
increased from time to time during the Period of
Employment;
(iii) The failure by the Company to obtain the specific
assumption of this Agreement by any successor or assign of
the Company or any person acquiring substantially all of
the Company's assets;
(iv) Failure by the Company to perform in any material respect
its obligations under this Agreement, where such failure
shall not have been remedied within 30 days after Executive
shall have notified the Company in writing thereof;
(v) Any material reduction in Executive's compensation or
benefits following a Change of Control or Executive's
principal business location is changed to a location more
than 30 miles from Executive's principal business location
(other than a relocation to the Borough of Manhattan, New
York, New York) immediately prior to a Change of Control;
(vi) The Company shall cease to keep in effect the policy of
directors' and officers' liability insurance for Executive
described in Section 5; or
(vii) The termination of the Indemnity Agreement, effective as of
April 20, 1995, between Executive and the Company.
(d)(i) Anything in this Agreement to the contrary notwithstanding,
if it is determined (as hereafter provided) that any
payment or distribution by the Company to or for the
benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement,
including without limitation any stock option, stock
appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment") ,
would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor provision thereto) by reason of
being "contingent on a change in ownership or control" of
the Company, within the meaning of Section 28OG of the Code
(or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties
with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax") ,
then the Executive shall be entitled to receive an
additional payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
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(ii) Subject to the provisions of Section 6(d)(i) hereof, all
determinations required to be made under this Section 6(d),
including whether an Excise Tax is payable by the Executive
and the amount of such Excise Tax and whether a Gross-Up
Payment is required and the amount of such Gross-Up
Payment, shall be made by the nationally recognized firm of
certified public accountants (the "Accounting Firm") used
by the Company prior to the Change of Control (or, if such
Accounting Firm declines to serve, the Accounting Firm
shall be a nationally recognized firm of certified publ