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 __________
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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
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(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.
<PAGE>
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
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EMCOR Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
March 31 December 31,
1999 1998
ASSETS (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
- ------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
======== ========
</TABLE>
See notes to Condensed Consolidated Financial Statements
<PAGE>
EMCOR Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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)
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
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)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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)
======== ======== ======== ======== ======== ======== ========
</TABLE>
(1) Represents cumulative foreign currency translation adjustments.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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.
<PAGE>
NOTE C Long-Term Debt
<TABLE>
<CAPTION>
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
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
======== ========
</TABLE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
<TABLE>
<CAPTION>
The following presents information about industry segments and geographic areas:
(in thousands):
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended
March 31, March 31,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
======== ========
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
======== ========
</TABLE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
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.
<PAGE>
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
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.
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<CIK> 0000105634
<NAME> EMCOR Group, Inc.
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<EXCHANGE-RATE> 1
<CASH> 94172
<SECURITIES> 0
<RECEIVABLES> 523520
<ALLOWANCES> 21744
<INVENTORY> 8086
<CURRENT-ASSETS> 714109
<PP&E> 56715
<DEPRECIATION> 25467
<TOTAL-ASSETS> 782405
<CURRENT-LIABILITIES> 495847
<BONDS> 116986
0
0
<COMMON> 109
<OTHER-SE> 120040
<TOTAL-LIABILITY-AND-EQUITY> 782405
<SALES> 539983
<TOTAL-REVENUES> 539983
<CGS> 488028
<TOTAL-COSTS> 534935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 1473
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<INCOME-TAX> 1524
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2051
<EPS-PRIMARY> 0.21
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</TABLE>
