-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q1lHEs+c+vGpCV4elqiun3bvWa2a/LhSeaXJJsf3Nd/+mkI5kRcoGaDgK67r9wR6 9rmlSK1PvRMsFoAaW9awdA== 0000105634-99-000007.txt : 19990505 0000105634-99-000007.hdr.sgml : 19990505 ACCESSION NUMBER: 0000105634-99-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990504 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-Q SEC ACT: SEC FILE NUMBER: 000-02315 FILM NUMBER: 99609441 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: JAMAICA WATER PROPERTIES INC DATE OF NAME CHANGE: 19860518 FORMER COMPANY: FORMER CONFORMED NAME: WELSBACH CORP DATE OF NAME CHANGE: 19761119 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 - ------------------------------------------------------------------------------ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from __________ to __________ - -------------------------------------------------------------------------- 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 incorporation (I.R.S. Employer or organization) Identification Number) 101 Merritt Seven Corporate Park 06851-1060 Norwalk, Connecticut ----------------------- - ------------------------------------------------- (Zip) (Address of principal executive offices) (203) 849-7800 - ------------------------------------------------- (Registrant's telephone number) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 and 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 filing requirements for the past 90 days. Yes X No __ Applicable Only To Issuers Involved In Bankruptcy Proceedings During The Previous Five Years Indicate by check mark whether the registrant has filed all documents required to be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934, subsequent to the distribution of securities under a plan confirmed by a court. Yes X No __ Applicable Only To Corporate Issuers Number of shares of Common Stock outstanding as of the close of business on April 30, 1999: 9,667,003 shares. EMCOR GROUP, INC. INDEX Page No. PART I - Financial Information Item 1 Financial Statements Condensed Consolidated Balance Sheets - as of March 31, 1999 and December 31, 1998 1 Condensed Consolidated Statements of Operations - three months ended March 31, 1999 and 1998 3 Condensed Consolidated Statements of Cash Flows - three months ended March 31, 1999 and 1998 4 Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income - three months ended March 31, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II - Other Information Item 1 Legal Proceedings 15 Item 4 Submission of Matters to a Vote of Security Holders 15 Item 6 Exhibits and Reports on Form 8-K 15 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) - ------------------------------------------------------------------------------------------------------------------------------------ March 31 December 31, 1999 1998 ASSETS (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Current assets: Cash and cash equivalents .................................................. $ 94,172 $ 83,053 Accounts receivable, net ................................................... 523,520 538,457 Costs and estimated earnings in excess of billings on uncompleted contracts ................................... 79,180 91,569 Inventories ................................................................ 8,086 7,188 Prepaid expenses and other ................................................. 9,151 11,702 -------- -------- 714,109 731,969 Total current assets ........................................................... Investments, notes and other long-term receivables ................................................................ 6,938 6,974 Property, plant and equipment, net ............................................. 31,246 32,098 Other assets ................................................................... 30,112 29,961 -------- -------- Total assets ................................................................... $782,405 $801,002 ======== ========
See Notes to Condensed Consolidated Financial Statements. EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) - ------------------------------------------------------------------------------------------------------------------------------------ March 31, December 31, 1999 1998 LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Current liabilities: Current maturities of long-term debt and capital lease obligations ....................................................... $ 1,708 $ 7,963 Borrowings under working capital credit lines............................... -- -- Accounts payable ........................................................... 220,320 246,856 Billings in excess of costs and estimated earnings on uncompleted contracts ....................................... 145,253 135,094 Accrued payroll and benefits ............................................... 68,334 62,008 Other accrued expenses and liabilities ..................................... 60,232 59,996 -------- -------- Total current liabilities ............................................... 495,847 511,917 Long-term debt and capital lease obligations ............................... 117,201 117,274 Other long-term obligations ................................................ 49,208 51,995 -------- -------- Total liabilities ....................................................... 662,256 681,186 -------- -------- Stockholders' equity: Preferred stock, $0.10 par value, 1,000,000 shares.......................... -- -- authorized zero issued and outstanding Common stock, $0.01 par value, 1,370,000 shares authorized, 9,667,003 and 9,830,603 shares issued and outstanding or issuable, respectively................................ 109 109 Warrants ................................................................... 2,154 2,154 Capital surplus ............................................................ 116,252 114,867 Accumulated other comprehensive income ..................................... (2,057) (1,822) Retained earnings .......................................................... 20,527 18,476 Treasury stock, at cost, 1,132,000 shares and 957,900 shares, respectively ........................................ (16,836) (13,968) --------- -------- Total stockholders' equity ..................................................... 120,149 119,816 --------- -------- Total liabilities and stockholders' equity ..................................... $782,405 $801,002 ======== ========
See notes to Condensed Consolidated Financial Statements EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Three months ended March 31, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues ....................................................................... $539,983 $493,923 Costs and expenses: Cost of sales .............................................................. 488,028 449,683 Selling, general and administrative ........................................ 46,907 40,305 -------- -------- 534,935 489,988 -------- Operating income ............................................................... 5,048 3,935 Interest expense, net .......................................................... 1,473 2,406 -------- -------- Income before income taxes and extraordinary item ....................................................................... 3,575 1,529 Provision for income taxes ..................................................... 1,524 727 -------- -------- Income before extraordinary item ............................................... 2,051 802 Extraordinary item - loss on early extinguishment of debt, net of income taxes ................................ -- (4,777) -------- -------- Net income (loss) .............................................................. $ 2,051 $ (3,975) ======== ======== Basic earnings (loss) per share: Income before extraordinary item ............................................... $ 0.21 $ 0.08 Extraordinary item - loss on early extinguishment of debt, net of income taxes ................................ -- (0.49) -------- -------- Basic earnings (loss) per share ................................................ $ 0.21 $ (0.41) ======== ======== Diluted earnings (loss) per share: Income before extraordinary item ............................................... $ 0.20 $ 0.08 Extraordinary item - loss on early extinguishment of debt, net of income taxes ................................ -- (0.49) -------- -------- Diluted earnings (loss) per share .............................................. $ 0.20 $ (0.41) ======== ========
See Notes to Condensed Consolidated Financial Statements. EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Three months ended March 31, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income (loss)........................................................... $ 2,051 $ (3,975) Extraordinary item - loss on early extinguishment of debt, net of income taxes....................................................... -- 3,152 Depreciation and amortization............................................... 2,413 2,048 Amortization of goodwill.................................................... 446 94 Other non-cash expenses .................................................... 1,673 913 Changes in operating assets and liabilities ................................ 15,520 17,322 -------- -------- Net cash provided by operating activities ...................................... 22,103 19,554 -------- -------- Cash flows from financing activities: Issuance of Convertible subordinated notes ................................. -- 115,000 Net proceeds from sale of Common stock ..................................... -- 22,485 Purchase of Treasury stock ................................................. (2,868) -- Debt issuance costs ........................................................ -- (4,074) Payment of Series C Notes .................................................. -- (61,854) Premiums paid on early extinguishment of debt .............................. -- (2,437) Payment of working capital credit lines .................................... -- (9,497) Payment of long-term debt and capital lease obligations..................... (6,328) (150) Exercise of stock options .................................................. 67 56 -------- -------- Net cash (used for) provided by financing activities ........................... (9,129) 59,529 -------- -------- Cash flows from investing activities: Purchase of Property, plant and equipment, net ............................. (1,891) (2,348) Acquisition of businesses .................................................. -- (1,398) Increase (decrease) in Investments, notes and other long-term receivables .............................................................. 36 (825) -------- -------- Net cash used in investing activities .......................................... (1,855) (4,571) -------- -------- Increase in cash and cash equivalents .......................................... 11,119 74,512 Cash and cash equivalents at beginning of period ............................... 83,053 49,376 -------- -------- Cash and cash equivalents at end of period ..................................... $ 94,172 $123,888 ======== ======== Supplemental cash flow information: Cash paid for: Interest ................................................................ $ 130 $ 1,697 Income Taxes ............................................................ $ 582 $ 159
See Notes to Condensed Consolidated Financial Statements. EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (In thousands) (Unaudited) ==================================================================================================================================== Accumulated Retained other earnings Common Capital comprehensive (accumulated Treasury Comprehensive Total stock Warrants surplus income(loss)(1) deficit) stock income (loss) ==================================================================================================================================== Balance, January 1, 1998 $ 95,323 $ 96 $ 2,154 $ 87,107 $ (195) $ 6,161 -- Net loss (3,975) -- -- -- -- (3,975) -- $(3,975) Foreign currency translation adjustments 242 -- -- -- 242 -- -- 242 Comprehensive loss -- -- -- -- -- -- -- ------- $(3,733) ======= NOL utilization, net (2,108) -- -- (2,108) -- -- -- Issuance of common stock 22,485 11 -- 22,474 -- -- -- -------- -------- -------- -------- -------- -------- -------- Balance, March 31, 1998 $111,967 $ 107 $ 2,154 $107,473 $ 47 $ 2,186 -- ======== ======== ======== ======== ======== ======== ======== Balance, January 1, 1999 $119,816 $ 109 $ 2,154 $114,867 $ (1,822) $ 18,476 $(13,968) Net income 2,051 -- -- -- -- 2,051 -- $ 2,051 Foreign currency translation adjustments (235) -- -- -- (235) -- -- (235) ------- Comprehensive income -- -- -- -- -- -- -- $ 1,816 ======= NOL utilization, net 1,318 -- -- 1,318 -- -- -- Common stock issued under stock option plans 67 -- -- 67 -- -- -- Treasury stock repurchased (2,868) -- -- -- -- -- (2,868) -------- -------- -------- -------- -------- -------- -------- Balance, March 31, 1999 $120,149 $ 109 $ 2,154 $116,252 $ (2,057) $ 20,527 $(16,836) ======== ======== ======== ======== ======== ======== ========
(1) Represents cumulative foreign currency translation adjustments. See Notes to Condensed Consolidated Financial Statements. EMCOR Group, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE A Basis of Presentation The accompanying condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Readers of this report should refer to the consolidated financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of a normal recurring nature) necessary to present fairly the financial position of the Company and the results of its operations. The results of operations for the three month period ended March 31, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. Certain reclassifications of prior year amounts have been made to conform to current year presentation. NOTE B Other Assets Other assets at March 31, 1999 primarily consists of approximately $21.4 million of the excess of cost over fair market value of net identifiable assets ("Goodwill") of companies acquired in purchase transactions. Additionally, approximately $3.7 million of debt issuance costs, net of amortization, incurred in connection with the Company's offering of its 5.75% Convertible Subordinated Notes (hereafter discussed) are included in Other assets. Other assets at December 31, 1998 included approximately $22.8 million of Goodwill and $3.9 million of debt issuance costs. Goodwill is being amortized using the straight-line method over periods ranging from 5 to 15 years. Debt issuance costs are amortized using the effective interest method. At the end of each quarter, the Company 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 the Company. NOTE C Long-Term Debt
Long-term debt in the accompanying Condensed Consolidated Balance Sheets consists of the following amounts at March 31, 1999 and December 31, 1998 (in thousands): - ------------------------------------------------------------------------------------------------------------------------------------ March 31, December 31, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Convertible subordinated notes, at 5.75% , due 2005 $115,000 $115,000 Note payable, due 1999 -- 6,164 Other 3,909 4,073 -------- -------- 118,909 125,237 Less: current maturities (1,708) (7,963) -------- -------- $117,201 $117,274 ======== ========
On March 18, 1998, the Company called for redemption of approximately $61.9 million principal amount of Series C Notes and irrevocably funded such amounts, together with a redemption premium, with the trustee of the Series C Notes. In accordance with the Indenture governing the Series C Notes, the redemption price of the Series C Notes was 104% of the principal amount redeemed. The Company recorded an extraordinary loss related to the early retirement of debt amounting to approximately $4.8 million, net of income taxes. The extraordinary loss consisted primarily of the write-off of the associated debt discount plus the redemption premium and costs associated with the redemption, net of income tax benefits. On March 18, 1998, the Company sold, pursuant to an underwritten public offering, $100.0 million principal amount of 5.75% Convertible Subordinated Notes ("Subordinated Notes"). On March 24, 1998, the underwriter of the Subordinated Notes offering exercised in full its over-allotment option to purchase an additional $15.0 million of Subordinated Notes, and accordingly, Subordinated Notes in the additional principal amount of $15.0 million were issued. The Subordinated Notes will mature on April 2005 and are general unsecured obligations of the Company, subordinated in right to all existing and future Senior Indebtedness (as defined in the indenture pursuant to which Subordinated Notes were issued (the "Subordinated Indenture") of the Company. The Subordinated Indenture does not contain any financial covenants or any restrictions on the payment of dividends, the repurchase of securities of the Company or the incurrence of Indebtedness (as defined in the Subordinated Indenture) or Senior Indebtedness (as defined in the Subordinated Indenture). Holders of the Subordinated Notes have the right at any time to convert the Subordinated Notes into Common Stock of the Company at a conversion price of $27.34 per share. NOTE D Income Taxes The Company files a consolidated federal income tax return including all U.S. subsidiaries. At March 31, 1999, the Company had net operating loss carryforwards ("NOLs") for U.S. income tax purposes of approximately $150.0 million, which expire in the years 2007 through 2012. The NOLs are subject to review by the Internal Revenue Service. Future changes in ownership of the Company, as defined by Section 382 of the Internal Revenue Code, could limit the amount of the Company's NOLs available for use in any one year. As a result of the adoption of Fresh-Start Accounting, the tax benefit of any net operating loss carryforwards or net deductible temporary differences which existed as of the date of the Company's emergence from Chapter 11 in December 1994 will result in a charge to the tax provision (provision in lieu of income taxes) and be allocated to Capital surplus. The Company has provided a valuation allowance as of March 31, 1999 for the full amount of the tax benefit of its remaining NOLs and other deferred tax assets. Income tax expense recorded for the three month periods ended March 31, 1999 and 1998 represent a provision primarily for federal, foreign and state and local income taxes. The Company's utilization of NOLs and other deferred tax assets for the three month periods ended March 31, 1999 and 1998 of approximately $1.3 million and $0.6 million have been added to Capital surplus, respectively. NOTE E Earnings Per Share The following tables summarize the Company's calculation of Basic and Diluted Earnings per Share ("EPS") for the three month periods ended March 31, 1999 and 1998: -------------------------------------------- Three months ended March 31, 1999 -------------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount -------------------------------------------- Basic EPS Income available to common stockholders $2,051,000 9,700,162 $0.21 ===== Effect of Dilutive Securities: Options -- 212,061 Warrants -- 148,493 ---------- ---------- Diluted EPS $2,051,000 10,060,716 $0.20 ========== =========== ===== -------------------------------------------- Three months ended March 31, 1998 -------------------------------------------- Income Shares Per Share (Numerator) (Denominator)) Amount -------------------------------------------- Basic EPS Income before extraordinary item available to common stockholders $ 802,000 9,765,012 $0.08 ===== Effect of Dilutive Securities: Options -- 363,007 Warrants -- 253,071 ---------- ------------ Diluted EPS - before extraordinary item $ 802,000 10,381,090 $0.08 ========== ========== ===== For the three month periods ended March 31, 1999 and 1998, the "if converted" amount of Subordinated Notes was excluded from the calculation of Diluted EPS as the effect would be antidilutive. For the three month periods ended March 31, 1999 and 1998, 129,973 and 5,000 options, respectively, were excluded from the calculation of Diluted EPS as the inclusion of the options would be antidilutive. NOTE F Common Stock On March 18, 1998, the Company sold, pursuant to an underwritten public offering, 1,100,000 shares of its Common Stock at a price of $21.875 per share. The proceeds of the offering, together with the proceeds of the Subordinated Notes public offering, were used to repay the Company's Series C Notes, the Company's Supplemental SellCo Note and the Company's working capital credit facility. The balance was used for general corporate purposes and acquisitions. As a part of a program previously authorized by the Board of Directors, the Company purchased 174,100 shares of its common stock in the three months ended March 31, 1999 at an aggregate cost of approximately $2.9 million. This amount is classified as a component of "Treasury stock, at cost" in the accompanying Condensed Consolidated Balance Sheet. NOTE G New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133" or "the Statement"), which establishes accounting and reporting standards requiring derivative instruments, as defined, to be measured in the financial statements at fair value. The Statement also requires that changes in the derivatives' fair value be recognized currently in earnings unless certain accounting criteria are met. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999 and cannot be applied retroactively. The Company currently has two forward exchange contracts which are designated as hedges against intercompany loans to the Company's U.K. subsidiary. Therefore, the Company does not expect the provision of SFAS No. 133 to have a significant effect on the financial condition or results of operations of the Company. NOTE H Segment Information In 1998, the Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", ("SFAS No. 131") which changed the way the Company reports information about its operating segments. The Company evaluates financial performance based on the operating income of the reportable business units. The Company has the following reportable segments pursuant to SFAS 131: United States electrical construction and facilities services ("United States Electrical Business Units"), United States mechanical construction and facilities services ("United States Mechanical Business Units"), Canada construction and facilities services ("Canada Business Units") and United Kingdom construction and facilities services ("United Kingdom Business Units"). United States "Other" primarily represents those operations which principally provide consulting operations and maintenance services. "Other International" represents the Company's operations outside of the United States, Canada, and the United Kingdom, primarily those in the Middle East and Asia-Pacific performing electrical construction, mechanical construction and facilities services ("Other International Business Units"). Inter-segment sales are not material for any of the periods presented. The Extraordinary item - loss on early extinguishment of debt, net of income taxes, of $4.8 million for the three months ended March 31, 1998 is related to corporate administration of the Company.
The following presents information about industry segments and geographic areas: (in thousands): - ------------------------------------------------------------------------------------------------------------------------------------ For the three months ended March 31, March 31, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues: United States Electrical Business Units ..................................... $219,546 $199,333 United States Mechanical Business Units ..................................... 144,583 128,610 United States Other Business Units .......................................... 7,929 1,510 -------- -------- Total United States Operation ............................................... 372,058 329,453 Canada Operations Business Units ............................................ 33,182 46,616 United Kingdom Operations Business Units .................................... 134,336 112,707 Other International Operations Business Units ............................... 407 5,147 -------- -------- Total Worldwide Operations .................................................. $539,983 $493,923 ======== ======== Operating income: United States Electrical Business Units ..................................... $ 7,597 $ 5,526 United States Mechanical Business Units ..................................... 3,698 3,002 United States Other Business Units .......................................... (1,463) (997) -------- -------- Total United States Operations .............................................. 9,832 7,531 Canada Operations Business Units ............................................ 79 612 United Kingdom Operations Business Units .................................... (661) (215) Other International Operations Business Units .............................. (256) (33) Corporate Administration .................................................... (3,946) (3,960) -------- -------- Total Worldwide Operations .................................................. 5,048 3,935 Other Corporate items: Interest expense ............................................................ (2,272) (3,137) Interest income ............................................................. 799 731 -------- -------- Income before taxes and extraordinary item ......................................................... $ 3,575 $ 1,529 ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------ March 31, December 31, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets: United States Electrical Business Units ..................................... $283,856 $282,580 United States Mechanical Business Units ..................................... 201,381 204,469 United States Other Business Units .......................................... 23,221 25,725 --------- -------- Total United States Operations .............................................. 508,458 512,774 Canada Operations Business Units ............................................ 43,337 49,463 United Kingdom Operations Business Units .................................... 150,856 156,693 Other International Operations Business Units .............................. 21,514 14,605 Corporate Administration .................................................... 58,240 67,467 -------- -------- Total Worldwide Operations .................................................. $782,405 $801,002 ======== ========
NOTE I Subsequent Event On April 15, 1999, the Company acquired all of the capital stock of Monumental Investment Corporation which owns all of the Poole & Kent companies, providers of mechanical services to water and wastewater treatment utilities, government agencies, transportation authorities, and commercial and industrial clients in a variety of industries. The purchase price is subject to finalization based on contingency adjustments per the purchase agreement. The acquisition will be accounted for by the purchase method. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations EMCOR Group Inc.'s ("EMCOR" or the "Company") Revenues for the three months ended March 31, 1999 and 1998 were $540.0 million and $493.9 million, respectively. Net income for the three months ended March 31, 1999 was $2.1 million compared to net loss of $4.0 million for the three months ended March 31, 1998. Basic Earnings Per Share ("Basic EPS") were $0.21 per share for the three months ended March 31, 1999 compared to a Basic EPS loss of $0.41 per share in the year earlier period. Net income for the three months ended March 31, 1998 included after-tax charges of approximately $4.8 million ($7.5 million pre-tax), or a loss of $0.49 per Basic share, associated with the early retirement of approximately $61.9 million of the Company's Series C Notes. These extraordinary charges are reflected in the accompanying Consolidated Statements of Operations under the caption "Extraordinary item - loss on early extinguishment of debt, net of income taxes". The Company had a 9.3% increase in Revenues for the three months ended March 31, 1999 compared to 1998. The increase over the prior year period was primarily attributable to the impact of 1998 acquisitions which contributed approximately $45.0 million of additional revenues. Gross Profit (Revenues less Cost of Sales ("GP")) increased to $52.0 million for the three months ended March 31, 1999 compared to $44.2 million for the three months ended March 31, 1998. As a percentage of Revenues, GP increased to 9.6% from 9.0% for the three months ended March 31, 1999 and 1998, respectively. The increase in GP as a percentage of Revenues was a result of increased volume in markets where higher gross profit projects are available. Selling, general and administrative expenses ("SG&A") for the three months ended March 31, 1999 were $46.9 million, or 8.7% of Revenues, compared to $40.3 million, or 8.2% of Revenues, for the three months ended March 31, 1998. The dollar increase in SG&A for the three months ended March 31, 1999 compared to the prior year was attributable to companies acquired during 1998 and to the increase in operating volume and corresponding increases in variable SG&A costs. The increase in SG&A as a percentage of Revenues was primarily due to the geographic area in which the Revenue was earned and the continued development of the Company's facilities services activities, which activities usually require greater SG&A than construction services. The Company had Operating income of $5.0 million for the three months ended March 31, 1999 compared with Operating income of $3.9 million for the three months ended March 31, 1998. The increase in Operating income of $1.1 million for the year ended March 31, 1999 as compared to the same period in 1998 was due to increased Revenues and incremental Operating income attributable to businesses acquired in 1998, offset by increased expenses associated with the development of the Company's facilities services activities. The Company's Interest expense, net decreased by $0.9 million to $1.5 million in the three months ended March 31, 1999 due to the Company's lower interest rates on borrowings, due to the repurchase and redemption of the Company's Series C Notes discussed above, offset by lower average outstanding borrowings during 1998. The Income tax provision increased by $0.8 million to $1.5 million for the three months ended March 31, 1999, versus $0.7 million for the same period in 1998. The increase in provision was due to increased Income before taxes and extraordinary item, offset partially by a decrease in the effective income tax rate for the three months ended March 31, 1999 to 43% from 48% for 1998. The decrease in the effective income tax rate was due to changes in the tax jurisdictions in which income was earned as well as continued income tax planning strategies. A portion of the liability for Income taxes, $1.3 million for 1999 and $0.6 million for 1998, was not payable in cash due to the utilization of NOL's and was recorded as an increase in Capital surplus for both years. The Company's backlog was $1,399.1 million at March 31, 1999 and $1,329.1 million at December 31, 1998. Between December 31, 1998 and March 31, 1999, the Company's backlog in Canada increased by $8.3 million, its backlog in the United Kingdom increased by $31.1 million and its backlog in the United States increased by $30.6 million. The increase in the Company's Canadian backlog was primarily attributable to several large contract awards in Western Canada. The increase in the United Kingdom backlog was due to the continued improvement of economic conditions in the United Kingdom and change orders on the Jubilee Line Contract. The increase in the United States backlog was due to large contract awards in the East and Midwest with two acquisitions contributing an additional $15.4 million to backlog. United States Operations The Company's United States operations consist of three segments: electrical construction and facilities services, mechanical construction and facilities services and other. Revenues of electrical construction and facilities services business units ("Electrical Business Units") for the three months ended March 31, 1999 were $219.5 million compared to $199.5 million for the three months ended March 31, 1998. Operating income of the Electrical Business Units (before deduction of general corporate and other expenses discussed below) for the three months ended March 31, 1999 was $7.6 million or 3.4% of Revenues compared to $5.5 million or 2.8% of Revenues for the three months ended March 31, 1998. The $20.2 million increase in current quarter Revenues was attributable to $7.8 million of Revenues related to 1998 acquisitions and continuing favorable market conditions in the Eastern United States. Revenues at mechanical construction and facilities services business units ("Mechanical Business Units") for the three months ended March 31, 1999 were $144.6 million compared to $128.6 million for the three months ended March 31, 1998. Operating income of the Mechanical Business Units (before deduction of general corporate and other expenses discussed below) for the three months ended March 31, 1999 was $3.7 million or 2.7% of Revenues compared to $3.0 million or 2.3% of Revenues for the three months ended March 31, 1998. The $16.0 million or 12.4% increase in Revenues were attributable to $22.3 million of Revenues from 1998 acquisitions offset by the continued planned reduction of certain business activities in the Western United States. Other United States Revenues of $7.9 million for the three months ended March 31, 1999, which include those operations which principally provide consulting and maintenance services increased by $6.4 million compared to the same three months in 1998. The increase in Revenues was primarily attributable to 1998 acquisitions. Operating losses relative to these activities were $1.5 million and $1.0 million for the three months end March 31, 1999 and 1998, respectively. These Operating losses were primarily attributable to costs associated with the continued development of the consulting operations and maintenance services activities. International Operations The Company's International Operations consist of three segments: Canada construction and facilities services, United Kingdom construction and facilities services and other international construction and facilities services. Revenues of Canada construction and facilities services business units ("Canada Business Units") for the three months ended March 31, 1999 were $33.2 million compared to $46.6 million for the three months ended March 31, 1998. Operating income of the Canada Business Units was $0.1 million compared to $0.6 million for the three months ended March 31, 1999 and 1998, respectively. The decrease in both Revenues and Operating income in the current period was primarily due to decreased level of activities in Eastern Canada and from short-term delays in the commencement of certain projects. Revenues of United Kingdom construction and facilities services business units ("United Kingdom Business Units") for the three months ended March 31, 1999 were $134.3 million compared to $112.7 million for the three months ended March 31, 1998. Operating losses of the United Kingdom business units (before deduction of general and other expenses discussed below) for the three months ended March 31, 1999 were $0.7 million compared to $0.2 million of the three months ended March 31, 1998. The $21.6 million increase in Revenues is attributable to continued growth in the United Kingdom construction facilities services market. The activity in this segment continued to produce operating losses for the quarter ended March 31, 1999. Other International construction and facilities services business units ("Other International Business Units") primarily consists of the Company's operations in the Middle East and Asia-Pacific. Revenues for the three months ended March 31, 1999 were $0.5 million compared to $5.1 million for the three months ended March 31, 1998. Operating losses increased by $0.2 million for the three months ended March 31, 1999 compared to the three months ended March 31, 1998. The decline in Revenues was due to the completion of several large projects in the Middle East and Asia/Pacific markets that were active last year. The increase in Operating losses was due to costs associated with the administration and completion of the activities in these regions. The Company 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. General Corporate and Other Expenses General Corporate expenses for the three months ended March 31, 1999 were $3.9 million compared to $4.0 million for the three months ended March 31, 1998. Interest expense for the three months ended March 31, 1999 was $2.3 million compared to $3.1 million for the three months ended March 31, 1998. The decrease in Interest expense was attributable to the Company's lower interest rates on borrowings, partially offset by the lower outstanding borrowings during the three months ended March 31, 1998 due to the repurchase and redemption of the Company's Series C Notes on March 18, 1998. The increase in Interest income of $0.1 million for the three months ended March 31, 1999 compared to the same three months in 1998 is attributable to increased available cash balances resulting from the sale of Convertible Subordinated Notes and net proceeds from issuance of common stock that also occurred on March 18, 1998. Liquidity and Capital Resources During the third quarter of 1998, the Company's Board of Directors authorized a stock repurchase program under which the Company may repurchase up to $20.0 million of its Common Stock. As of March 31, 1999 the Company had repurchased 1,132,000 shares of its Common Stock at an aggregate cost of approximately $16.8 million. The Company's consolidated cash balance increased by approximately $11.1 million from $83.1 million at December 31, 1998 to $94.2 million at March 31, 1999, primarily as a result of Net cash provided by operating activities of $22.1 million, partially offset by Net cash used for financing activities of $9.1 million and Net cash used in investing activities of $1.9 million. As of March 31, 1999 the Company's total borrowing capacity under its revolving credit facility was $150.0 million. The Company had approximately $17.5 million of letters of credit outstanding as of that date. There were no revolving loans outstanding as of March 31, 1999 and December 31, 1998 under the credit facility. The Company 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. Year 2000 The Year 2000 issue concerns the inability of information systems to properly recognize and process date sensitive information beyond January 1, 2000. The Company has performed a comprehensive review of its internal application systems ("Internal Systems"), including information technology ("IT") systems and Non-IT systems, to identify those systems that could be affected by the Year 2000 issue (the "Issue") and has developed a plan to resolve the Issue. The Company defines IT systems as those systems , which are software applications and related computer hardware critical to operation of the business. These IT systems would include, but not be limited to, accounting systems that encompass billing and estimating, accounts payable and payroll. Additionally, other non-accounting software applications that are part of business operations would be included. Non-IT systems would primarily include software applications and related computer hardware that are used in building systems such as, but not limited to, temperature controls, security systems and other building systems. The Company estimates that it is approximately 90% complete with its IT Systems modifications and expects the balance of any required modifications to be completed by mid 1999. With respect to Non-IT systems, the Company has completed approximately 50% of the modifications required and anticipates that the modifications will be substantially complete by the end of the third quarter of 1999. Modification costs have and will be expensed as SG&A as incurred and costs of new software have and will be capitalized and amortized over the expected useful life of the related software. Since the inception of the Company's efforts to address the Year 2000 issues, approximately $0.5 million has been expensed as incurred. Additional modification and testing costs to be incurred are not anticipated to exceed an additional $0.5 million. The Company is utilizing both internal and external resources to identify, correct or reprogram, and test its systems to ensure Year 2000 compliance. The Company expects its Year 2000 conversion project to be completed before January 1, 2000. While the Company believes its planning efforts are adequate to address its Year 2000 concerns, the Company's operations and financial results could be adversely impacted by the Year 2000 issue if the conversion schedule and cost estimate for its Internal Systems are not met or suppliers and or customers and other businesses on which the Company relies do not address the Issue successfully. The Company is requesting that its significant suppliers confirm that they have plans for achieving Year 2000 compliance. The Company continues to assess these risks in order to reduce any impact on the Company. Contingency plans include both ordering and receiving, prior to January 1, 2000, an inventory of general supplies to be used on jobs and identifying back-up suppliers for these items. Specific supplies, which may only be available from limited resources will be identified, and if necessary, ordered in advance to meet anticipated job requirements near the January 1, 2000 date. The Company has not yet been able to clearly identify the most reasonably likely worst case scenarios, if any, and the appropriate contingency plans for such scenarios. The Company operates in a variety of markets in the United States, Canada, the United Kingdom and other countries, and in a number of local markets within these regions, consequently, it does not believe that a Company-wide risk associated with the Issue will likely exist. However, the Company will continue to monitor all identifiable scenarios and prepare contingency plans as necessary to attempt to mitigate any exposures. Based on currently available information, the Company does not believe that the matters discussed above related to its Internal Systems or to services provided to customers will have a material adverse impact on the Company's financial condition or overall trends in results of operations; however, it is uncertain to what extent the Company may be affected by such matters. In addition, there can be no assurance that the failure to ensure Year 2000 capability by a supplier, customer or another third party would not have a material adverse effect on the Company. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The information on legal proceedings is hereby incorporated by reference to Note P of the Company's Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Incorporated by Reference to, Exhibit No Description or Page Number ---------- ----------- ------------------------------ 10(t) Employment Agreement made as Page 19 of March 1, 1999 between the Company and Sheldon I. Cammaker 10(u) Continuity Agreement dated as Page 27 of March 1, 1999 between the Company and Sheldon I. Cammaker 11 Computation of Basic Note E of the Notes EPS and Diluted EPS to the Condensed Consolidated for the three months Financial Statements. end March 31, 1999 and 1998 27 Financial Data Schedule Filed herewith. (b) No reports on Form 8-K were filed during the quarter ended March 31, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EMCOR GROUP, INC. --------------------------------------- (Registrant) Date: May 4, 1999 By: /s/FRANK T. MACINNIS --------------------------------------- Frank T. MacInnis Chairman of the Board of Directors and Chief Executive Officer Date: May 4, 1999 By: /s/LEICLE E. CHESSER --------------------------------------- Leicle E. Chesser Executive Vice President and Chief Financial Officer EX-10 2 EMPLOYMENT AGREEMENT Exhibit 10 (t) EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of this 1st day of March, 1999 by and between EMCOR GROUP, INC., a Delaware Corporation (the "Company"), and SHELDON I. CAMMAKER ("Executive"). RECITALS 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 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 condition hereof, Executive hereby agrees to be employed as the Executive Vice President and 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 (as hereinafter defined) (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 the date hereof (the "Commencement Date") and shall continue through the earlier of December 31, 2000 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, following a Change of Control (as defined in Section 6.1(e)) the Period of Employment shall in no event be less than three years. 3. Compensation. 3.1 Salary. The Company shall pay Executive a base salary ("Base Salary") at the rate of no less than $365,000 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, 2000, 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. 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) During each calendar year the Period of Employment, the Company shall recommend to the Compensation Committee of the Board that Executive shall receive as of the first business day of each calendar year an option ("Option") to purchase not less than 10,000 shares of common stock of the Company ("Shares") at fair market value pursuant to the Company's then applicable stock option plan. Each such Option shall be exercisable with respect to the Shares subject thereto on the first anniversary of the date of grant. (b) In the event of Executive's termination of employment under Section 6.1, each Option shall become immediately exercisable in full and shall remain exercisable for the balance of its ten-year term. 4. Employee Benefits. 4.1 Employee Benefit Plans and Programs. The Company shall provide the 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, and after the lease for the current vehicle ("Current Vehicle") provided by the Company to the Executive expires, the Company shall pay Executive $800 per month for leasing (plus maintenance and insurance) of an automobile and shall make the initial capital cost reduction payment with respect to the leasing of such automobile on Executive's behalf. During the lease of the Current Vehicle the Company shall continue to pay for maintenance and insurance of such vehicle. 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. 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 are 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) for the calendar year in which the termination of employment occurs; (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 Deemed 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 such calendar year that Executive was an employee of the Company, and the denominator of which is 365. In the event of termination of a termination of Executive's employment by the Company other than for Cause or by the Executive for Good Reason following a Change in 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; provided, however, in the event Executive's Bonus for 1996, 1997, or 1998 shall be used to determine his Deemed Bonus, then such 1996, 1997 or 1998 Bonus shall be increased by $100,000 for purposes of calculating the Deemed Bonus. (b) In addition to the amount described in subsection 6.1(a), Executive shall be entitled to receive: (i) until the earlier of December 31, 2000 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 December 31, 2000 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; and (ii) all payments to which Executive has vested rights as of the expiration of the Period of Employment 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 December 31, 2000, (B) upon the termination of a succeeding one-year Period of Employment (as provided for under Section 2 hereof), (C) for Cause, (D) as a result of Executive's Permanent Disability (as hereinafter defined) or death or (E) by Executive other than for Good Reason; (ii) A reduction by the Company in Executive's Base Salary, except as provided herein, as in effect at the commencement of employment hereunder 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 in Control; provided if a Change of Control shall occur prior to determination in the year 2000 by the Board of the Executive's bonus for 1999, the sum of the Executive's annual base salary plus annual bonus shall aggregate an amount less than the sum of (i) his annual salary for 1998 plus (ii) his bonus for 1998; (vi) 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 New York, New York) immediately prior to a Change in Control; or (vii)The Company shall cease to keep in effect the policy of directors' and officers' liability insurance for Executive described in Section 5; (viii)The termination of the Indemnity Agreement effective as of April 20, 1995 between the Executive and the Company. (d) If all or any portion of the payments or benefits provided under this Section 6.1, either alone or together with other payments and benefits which Executive receives or is then entitled to receive from the Company, would constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended ("Code"), Executive shall be entitled to such additional payments as may be necessary to ensure that the net after tax benefit of all payments under this Section 6.1, including the payment provided for in this subsection 6.1 (c), shall be equal to the net after tax benefit of Executive as if no excise tax had been imposed under Section 4999 of the Code. The foregoing calculations shall be made, at the Company's expense, by the Company and Executive. If no agreement on the calculations is reached, Executive and the Company shall agree to the selection of an accounting firm to make the calculations. If no agreement can be reached regarding the selection of an accounting firm, the Company shall select a nationally recognized accounting firm which has no current or recent business relationship with the Company. The determination of any such firm selected shall be conclusive and binding on all parties. (e) For purposes of this Agreement, a "Change in Control of the Company" 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 (unless the event causing the 25% threshold to be crossed is an acquisition of voting common securities directly from the Company, other than upon the conversion of convertible debt securities or other securities and/or the exercise of options or warrants); 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) 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. 6.2 Permanent Disability. If as a result of Executive's incapacity due to physical or mental illness, 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 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 December 31, 2000 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 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. 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 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, 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) December 31, 2000, 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. 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 29 Lambert Road White Plains, NY 10605 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, New York 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. All expenses, including legal expenses incurred by Executive, relating to any arbitration shall be paid by the Company. Judgment may be entered on an arbitrator(s)' award in any court having jurisdiction. 14. Assignment. This contract 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. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that 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. Withholding. 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. EMCOR GROUP, INC. By:______________________________ EXECUTIVE -------------------------------- Sheldon I. Cammaker EX-10 3 CONTINUITY AGREEMENT DATED JANUARY 11, 1999 Ehibit 10 (u) CONTINUITY AGREEMENT This Agreement ("Agreement") dated as of January 31, 1999 amends and restates a Continuity Agreement dated as of June 22, 1998 by and between the EMCOR GROUP, INC., a Delaware corporation (the "Company"), and SHELDON I. CAMMAKER (the "Executive"). WHEREAS, the Company's Board of Directors (the "Board") considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and WHEREAS, the Board desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances arising from the possibility or occurrence of a change of control of the Company; and WHEREAS, the Board has authorized the Company to enter into continuity agreements with those key executives of the Company who are designated by the Compensation and Personnel Committee of the Board of Directors ("Committee"), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and WHEREAS, the Executive is a key executive of the Company and has been designated by the Committee as an executive to be offered such a continuity compensation agreement with the Company. NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows: 1. Term of Agreement. On the date on which a Change of Control occurs (the "Effective Date"), this Agreement shall become effective. If Executive ceases to be employed by reason of an Anticipatory Termination (as defined in Section 3 (c)) prior to the Effective Date, then Executive shall receive the severance benefits provided herein and the Effective Date of this Agreement shall be deemed to be the date immediately preceding the occurrence of an Anticipatory Termination. If Executive ceases to be employed for any reason other than an Anticipatory Termination prior to a Change of Control, this Agreement shall terminate and have no effect and Executive shall receive such severance payments as are provided in any existing agreement between the Executive and the Company. If a Change of Control occurs, the Executive's employment shall be continued hereunder for the period (the "Employment Period") commencing on the Effective Date and ending on the second anniversary of the date on which a Change of Control occurs, subject to the termination of Executive's employment as described hereinafter. Any existing employment agreement between the Executive and the Company shall continue to be effective following the Change of Control, but severance amounts under this Agreement shall be reduced by amounts payable under any such employment agreement. 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 (unless the event causing the 25% threshold to be crossed is an acquisition of voting common securities directly from the Company, other than upon the conversion of convertible debt securities or other securities and/or the exercise of options or warrants); or (ii) the stockholders 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 stockholders 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). 2. Employment following Change of Control. Executive shall have at least the same titles and responsibilities as those in effect immediately prior to the Change of Control. Executive shall receive an annual base salary which is not less than that in effect immediately prior to the Change of Control and the Company shall review the salary annually with a view to increasing it; provided any such increase shall be in the sole discretion of the Board. Once increased, base salary can not be decreased. The Executive shall also be paid an annual bonus (the "Bonus") which shall be no less than the higher of (i) the bonus paid or payable in respect of the year prior to the Change of Control, or (ii) the average of the annual bonuses paid or payable in respect of the three years prior to the Change of Control. Notwithstanding the foregoing, if a Change of Control shall occur prior to determination in the year 2000 by the Board of the Executive's bonus for 1999, then the sum of the Executive's annual base salary plus annual bonus shall equal an amount not less than (i) his annual base salary for 1998 plus (ii) his bonus for 1998 (or if not then determined,1997). In addition, the Executive shall be provided with incentive compensation, pension, general insurance and fringe benefits and perquisites that are commensurate with the benefits and perquisites provided to Executive immediately prior to the Change of Control or, if more favorable to Executive, at the level made available to other similarly situated executive officers of the Company after the Change of Control. Upon the Change of Control, the Company shall also cause Executive's outstanding options to become immediately exercisable. 3. Termination Following Change of Control. (a) The Executive shall be entitled to the severance benefits provided in Section 4 hereof in the event Executive's employment is terminated (A) within two years following a Change of Control (i) by the Company without Cause, (ii) by Executive for Good Reason, or (iii) for any reason during the 30-day period immediately following the first anniversary of the Change of Control or (B) prior to a Change of Control, as a result of an Anticipatory Termination. Notwithstanding the foregoing, except as set forth in item (iii) above, Executive shall not be entitled to severance benefits in the event of a termination of employment on account of death, Disability or Retirement, but excluding any such termination which is coincident with or subsequent to a termination which would otherwise give rise to severance benefits. For purposes of this Agreement: (i) "Disability" shall mean an illness or injury preventing Executive from performing his duties, as they existed immediately prior to the illness or injury, on a full time basis for 180 consecutive business days. (ii) "Retirement" shall mean a termination of employment by Executive pursuant to late, normal or early retirement under a pension plan sponsored by the Company, as defined in such plan. (b) Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Executive by the Board or an officer of the Company which specifically identifies the manner in which the Board or the officer believes that Executive has not substantially performed Executive's duties; or (ii) (A) the conviction of, or plea of guilty or nolo contendere to, a felony or (B) the willful engaging by Executive in gross misconduct which is materially and demonstrably injurious to the Company. In each case above, for a termination of employment to be for Cause: (a) the Executive must be provided with a Notice of Termination (as described in Section 3 (d)); (b) the Executive must be provided with an opportunity to be heard by the Board no earlier than 30 days following the Notice of Termination (during which notice period Executive has failed to cure or resolve the behavior in question); and (c) there must be a good faith determination of Cause by at least 3/4 of the non-employee outside directors of the Company. (c) Good Reason and Anticipatory Termination. For purposes of this Agreement, "Good Reason" shall mean: (i) Executive's annual salary is reduced below the higher of (A) the amount in effect on the Effective Date, or (B) the highest amount in effect at any time thereafter; (ii) Executive's annual bonus is reduced below the Bonus; (iii)if a Change of Control shall occur prior to determination in the year 2000 by the Board of the Executive's bonus for 1999, the sum of Executive's annual base salary plus annual bonus in respect of 1999 shall aggregate an amount less than the sum of (i) his annual salary for 1998 plus (ii) his bonus for 1998 (or if not then determined,1997); (iv) Executive's duties and responsibilities or the program of incentive compensation and retirement and general insurance benefits offered to Executive are materially and adversely diminished in comparison to the duties and responsibilities or the program of benefits enjoyed by Executive on the Effective Date; (v) Executive is required to be based at a location more than 50 miles from the location where Executive was based and performed services on the Effective Date; or (vi) failure to provide for the assumption of this Agreement by any successor entity; provided, however, that any diminution of duties or responsibilities that occurs solely as a result of the fact that the Company ceases to be a public company shall not, in and of itself, constitute Good Reason. Any event or condition describe d in clauses (i) through (vi) or a termination without Cause, either of which occurs prior to a Change of Control but which Executive reasonably demonstrates (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control (a "Third Party"), or (B) otherwise arose in connection with, or in anticipation of a Change of Control, shall constitute Good Reason for purposes of this Agreement, notwithstanding that it occurred prior to a Change of Control ("Anticipatory Termination"). Executive shall give the Company written notice of any event which he claims is the basis for Good Reason and the Company shall have 30 days within which to cure or resolve the behavior in question before Executive can terminate for Good Reason. (d) Notice of Termination. Any purported termination of the Executive's employment with the Company shall be communicated by a Notice of Termination to the Executive, if such termination is by the Company, or to the Company, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated. For purposes of this Agreement, no purported termination of Executive's employment with the Company shall be effective without such a Notice of Termination having been given. (e) Dispute Resolution. Disputes arising from the operation of this Agreement, including, but not necessarily being limited to, the manner of giving the Notice of Termination, the reasons or cause for the Executive's termination or the amount of severance compensation due to the Executive subsequent to the Executive's termination, may be resolved, at the Executive's discretion, by arbitration; provided, however, that -- disputes arising under Section 11 of this Agreement shall not be resolved under this Section 3 (e). In the event that any such dispute which the Executive elects to be resolved by arbitration, after notice thereof is given to the other party in writing, is not able to be resolved by mutual agreement of the parties within sixty (60) calendar days of the giving of such notice, the Executive and the Company hereby agree to promptly submit such a dispute to binding arbitration in New York, New York in accordance with New York law and the rules and procedures of the American Arbitration Association. During any period in which a dispute is pending that the Executive elects to be resolved by arbitration, the Executive shall continue to receive his salary (including any Bonus), as provided in Section 2 hereof, and benefits as if his employment with the Company had continued through the date of the arbiters' determination, and any such payments or benefits shall not be offset against any severance, either under this Agreement or otherwise, to which Executive may be entitled. 4. Compensation Upon Termination After a Change of Control. If within two (2) years after the Effective Date, the Executive's employment by the Company shall be terminated in accordance with Section 3 (a) (the "Termination"), the Executive shall be entitled to the following payments and benefits: (a) Severance. As soon as practicable after the Termination, but in any event no later than 10 business days following such Termination, the Company shall pay or cause to be paid to the Executive, a lump sum cash amount equal to three (3) times the sum of (i) the Executive's annual base salary on the Effective Date (the "Base Salary"), (ii) the Bonus, and (iii) the value of the perquisites (e.g., car allowance, club dues, etc., including any ordinary tax gross-ups for perquisites) provided to Executive in respect of the year prior to the Change of Control and, if greater, the year in respect of which the Change of Control occurs. In making the calculation in the immediately preceding sentence, if a Change of Control shall occur prior to a determination by the Board in the year 2000 of the Executive's bonus for 1999, the annual base salary referred to in clause (i) of the immediately preceding sentence shall be deemed the Executive's annual base salary for 1998 and the Bonus referred to in clause (ii) of the immediately preceding sentence shall be deemed the bonus paid to him in respect of 1998 (or if not then determined, 1997). In addition, at the time of the above payment, the Executive shall be entitled to an additional lump sum cash payment equal to the sum of (A) Executive's annual salary through the date of termination, (B) a pro rata portion of the Bonus (calculated through the date of termination); provided, however, if a Change of Control shall occur prior to a determination by the Board in the year 2000 of the Executive's bonus for 1999, the amount payable in respect of clause (A) shall be calculated as if the Executive's annual salary rate were that payable to him in 1998 and the amount payable in respect of clause (B) shall be the pro rata portion of his Bonus for 1998 (or if not then determined, 1997), and (C) an amount, if any, equal to compensation previously deferred (excluding any qualified plan deferral) and any accrued vacation pay, in each case, in full satisfaction of Executive's rights thereto. (b) Additional Benefits. The Executive shall be entitled to continued medical, dental and life insurance coverage for the Executive and the Executive's eligible dependents on the same basis as in effect prior to the Change of Control or the Executive's Termination of employment, whichever is deemed to provide for more substantial benefits, until the earlier of (A) thirty-six (36) months (the "Separation Period") after the Executive's Termination or (B) the commencement of comparable coverage with a subsequent employer; provided, however, that such continued coverage shall not count against any continued coverage required by law. (c) Outplacement. If so requested by the Executive, outplacement services shall be provided by a professional outplacement provider at a cost to the Company of not more than 20% of the Executive's Base Salary. (d) Withholding. Payments and benefits provided pursuant to this Section 4 shall be subject to any applicable payroll and other taxes required to be withheld. 5. Certain Additional Payments by the Company: (a) 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 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. (b) Subject to the provisions of Section 5 (f) hereof, all determinations required to be made under this Section 5, 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 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 5(f) 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. (c) 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 5(b) hereof. (d) 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. (e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 5 (b) and (d) 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. (f) 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: (i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company; (ii) 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; (iii)cooperate with the Company in good faith in order effectively to contest such claim; and (iv) 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 5 (f), the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Section 5 (f) 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, in 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 or 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. (g) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 5 (f) 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 5 (f) 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 5(f) 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 repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be pursuant to this Section 5. 6. Obligations Absolute; No Mitigation; No Effect On Other Rights. (a) The obligations of the Company to make the payment to the Executive, and to make the arrangements, provided for herein are absolute and unconditional and may not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (b) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment. (c) The provisions of this Agreement, and any payment provided for herein, shall not supersede or in any way limit the rights, benefits, duties or obligations which the Executive may now or in the future have under any benefit, incentive or other plan or arrangement of the Company or any other agreement with the Company. 7. Not an Employment Agreement. Subject to the terms of this or any other agreement or arrangement between the Company and the Executive that may then be in effect, nothing herein shall prevent the Company from terminating the Executive's employment. 8. Successors; Binding Agreement, Assignment. (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 8(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's estate or designated beneficiary. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive. 9. Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed United States certified or registered mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to the Company at: 101 Merritt Seven, 7th Floor Norwalk, CT 06851 Attention: Frank T. MacInnis, Chairman of the Board and in the case of the Executive, to the Executive at the most current address shown on the Executive's employment records. Either party may designate a different address by giving notice of change of address in the manner provided above, except that notices of change of address shall be effective only upon receipt. 10. Expenses. 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. 11. Confidentiality. The Executive shall retain in confidence any and all confidential information concerning the Company and its respective business which is now known or hereafter becomes known to the Executive, except as otherwise required by law and except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated, from a third party not employed by or otherwise affiliated with the Company or (iii) which is or becomes known to the public by any means other than a breach of this Section 11. Upon any termination of Executive's employment, the Executive shall not take or keep any proprietary information or documentation belonging to the Company. 12. Miscellaneous. No provision of this Agreement may be amended, altered, modified, waived or discharged unless such amendment, alteration, modification, waiver or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without giving effect to its conflict of laws rules. Any action brought by the Executive or the Company shall be brought and maintained in a court of competent jurisdiction in the State of New York. 13. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 14. Revocation. This Agreement may be revoked at any time prior to the Effective Date, without prior notice to Executive, upon the resolution of the Board that the continued existence of this Agreement and of similar agreements with other employees of the Company is no longer in the best interests of the Company. 15. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. 16. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior oral or written agreements, commitments or understanding with respect to the matters provided for herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. EMCOR GROUP, INC. By: --------------------------- Frank T. MacInnis Chairman of the Board and Chief Executive Officer -------------------------------- Executive: Sheldon I. Cammaker EX-27 4 FDS
5 This schedule contains summary financial information extracted from EMCOR's Condensed Consolidated Financial Statements for the three months ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000105634 EMCOR Group, Inc. 1000 U.S. 3-MOS Dec-31-1999 Jan-01-1999 Mar-31-1999 1 94172 0 523520 21744 8086 714109 56715 25467 782405 495847 116986 0 0 109 120040 782405 539983 539983 488028 534935 0 70 1473 3575 1524 2051 0 0 0 2051 0.21 0.20
-----END PRIVACY-ENHANCED MESSAGE-----