-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EAJu4OI/9lLgqeek7LkZf7kTyHX0Ftu2rgwmwv3Asc4Me4L2TSTlw1czUcq4Tb/b 9KOW70k1Vs155iaxOxvYVQ== 0000105634-97-000001.txt : 19970304 0000105634-97-000001.hdr.sgml : 19970304 ACCESSION NUMBER: 0000105634-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970303 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMCOR GROUP INC CENTRAL INDEX KEY: 0000105634 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL WORK [1731] IRS NUMBER: 112125338 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02315 FILM NUMBER: 97549094 BUSINESS ADDRESS: STREET 1: 101 MERRITT SEVEN CORPORATE PK STREET 2: 7TH FLOOR CITY: NORWALK STATE: CT ZIP: 06851 BUSINESS PHONE: 2038497800 MAIL ADDRESS: STREET 1: 101 MERRITT SEVEN CORPORATE PARK STREET 2: 7TH FLOOR CITY: NORWALK STATE: CT ZIP: 06851 FORMER COMPANY: FORMER CONFORMED NAME: JWP INC/DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: JAMAICA WATER PROPERTIES INC DATE OF NAME CHANGE: 19860518 FORMER COMPANY: FORMER CONFORMED NAME: WELSBACH CORP DATE OF NAME CHANGE: 19761119 10-K 1 EMCOR GROUP, INC. DECEMBER 31, 1996 FORM 10-K - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 0-2315 EMCOR GROUP, INC. - ------------------------------------------------------------------------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 11-2125338 -------- ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 101 MERRITT SEVEN CORPORATE PARK NORWALK, CONNECTICUT 06851-1060 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (203) 849-7800 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: ____None____ SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of each class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filings pursuant to Item 405 Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No The aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant on February 24, 1997 was approximately $159,131,000 Number of shares of Common Stock outstanding as of the close of business on February 24, 1997: 9,514,636 shares. Part III incorporates certain information by reference from the Registrant's definitive proxy statement for the annual meeting of stockholders to be held on June 20, 1997, which proxy statement will be filed no later than 120 days after the close of the registrant's fiscal year ended December 31, 1996. TABLE OF CONTENTS Page PART I Item 1. Business General...................................................... 1 The Business................................................. 1 Item 2. Properties..................................................... 3 Item 3. Legal Proceedings.............................................. 5 Item 4. Submission of Matters to a Vote of Security Holders............ 5 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters ...................................................7 Item 6. Selected Financial Data........................................ 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................ 10 Item 8. Financial Statements and Supplementary Data.................... 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................................... 50 PART III Item 10. Directors and Executive Officers of the Registrant............. 50 Item 11. Executive Compensation......................................... 50 Item 12. Security Ownership of Certain Beneficial Owners and Management. 50 Item 13. Certain Relationships and Related Transactions................. 50 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 51 PART I ITEM 1. BUSINESS General EMCOR Group, Inc. ("EMCOR" or the "Company") (formerly known as "JWP INC.") is a leader in mechanical and electrical construction and facilities services. EMCOR, which conducts its business through subsidiaries, specializes in the design, integration, installation, start-up, testing, operation and maintenance of complex mechanical and electrical systems. In addition, certain of its subsidiaries operate and maintain mechanical and/or electrical systems for customers under contracts and provide other services commonly referred to as facilities services, including the management of facilities and the provision of support services at the customers facilities. Mechanical and electrical construction and facilities services are provided to a broad range of commercial, industrial and institutional customers through offices located in major markets throughout the United States, Canada, the United Kingdom, the Middle East and Hong Kong. On December 15, 1994 (the "Effective Date"), the Company emerged from Chapter 11 of the United States Bankruptcy Code pursuant to its Third Amended Joint Plan of Reorganization dated August 9, 1994, as amended (the "Plan of Reorganization"), proposed by EMCOR and its subsidiary SellCo Corporation ("SellCo"). The Company, which employs approximately 12,000 people worldwide, provides (i) mechanical and electrical construction services directly to end-users (including corporations, municipalities and other governmental entities, owners, developers and tenants of buildings) and, indirectly, by acting as subcontractor to construction managers, general contractors, systems and equipment suppliers and other subcontractors and (ii) facilities services directly to end-users such as corporations, owners, property managers and tenants of buildings. EMCOR is a Delaware corporation, formed in 1987 to continue the business of its predecessor, a New York corporation with the name JWP INC. The Delaware corporation was also originally named JWP INC. but changed its name to EMCOR Group, Inc. on the Effective Date. The Company's executive offices are located at 101 Merritt Seven Corporate Park, Norwalk, Connecticut 06851-1060, and its telephone number at those offices is (203) 849-7800. The Business. The Company specializes in complex mechanical and electrical systems. The broad scope of the Company's operations are more particularly described below. The Company had total revenues of approximately $1,669.3 million and $1,588.7 million in 1996 and 1995, respectively. Mechanical and electrical construction services primarily involve the design, integration, installation, start-up, testing, operation and maintenance of (i) distribution systems for electrical power (including power cables, conduits, distribution panels, transformers, generators, uninterruptible power supply systems and related switch gear and controls); (ii) lighting systems, including fixtures and controls; (iii) low-voltage systems, including fire alarm, security, communications and process control systems; (iv) heating, ventilation, air conditioning, refrigeration and clean-room process ventilation systems; and (v) plumbing, process and high purity piping systems. EMCOR believes its mechanical and electrical construction services business is the largest of its kind in the United States and Canada and one of the largest in the United Kingdom. Mechanical and electrical construction services are principally of three types: (i) large installation projects, with contracts generally in the multi-million dollar range, in connection with construction of industrial, institutional and public works facilities and commercial buildings and fit-out of large blocks of space within commercial buildings; (ii) smaller installation projects typically involving fit-out, renovation and retrofit work; and (iii) testing and service of completed facilities. The Company's largest installation projects include those (i) for institutional use (such as water and wastewater treatment facilities, hospitals, correctional facilities, schools and research laboratories); (ii) for industrial use (such as pharmaceutical, semiconductor, steel, pulp and paper, chemical, and automotive manufacturing plants and oil refining and water and waste treatment facilities); (iii) for transportation systems (such as airports and transit systems); and (iv) for commercial use (such as office buildings, hotels and casinos, convention centers, shopping malls and resorts). These can be multi-year projects ranging in size up to, and occasionally in excess of, $50.0 million. Major projects are performed pursuant to contracts with owners, such as corporations and municipalities and other governmental entities, general contractors, construction managers, owners, developers and tenants of commercial properties. Institutional and public works projects are frequently long-term, complex projects requiring significant technical and management skills and financial strength to, among other things, obtain bid and performance bonds, which are often a condition to bidding for, and award of, contracts for such projects. Smaller projects, which are typically completed in less than a year, involve mechanical and electrical construction services in connection with the fit-out of space when an end-user or owner undertakes construction or modification of a facility to accommodate a specific use, such as a trading floor in a financial services business, a new production line in a manufacturing plant, a process modification in a refinery, or an office arrangement in an existing office building. These projects frequently require particular mechanical and electrical systems to meet special needs such as redundant power supply systems, special environmental controls, or high purity air systems. These projects are not typically dependent upon the new construction market; their demand is often prompted by the expiration of leases, changes in technology or changes in the customer's plant or office layout in the normal course of business. The Company also installs and maintains street, highway, bridge and tunnel lighting, traffic signals, computerized traffic control systems and signal and communication systems for mass transit systems in several metropolitan areas. In addition, in the United States, the Company operates sheet metal fabrication facilities which manufacture and install sheet metal systems for both its own mechanical construction operations and for unrelated mechanical contractors. The Company also maintains welding and pipe fabrication shops for its own mechanical operations. In addition to mechanical and electrical construction services, the Company provides facilities services which principally includes the testing, operation, maintenance and service of mechanical and electrical installations of customers under contracts ranging from one to several years, which vary widely in scope. These services frequently require a number of the Company's employees being permanently assigned to, and located at, the customer's building or facility being serviced, occasionally on a 24 hour basis. In the United Kingdom, the Company also provides a broad range of services, including building maintenance, housekeeping, reprographics and catering services to customers, in addition to operation and maintenance of mechanical and electrical systems. The Company is currently in the process of expanding its mechanical and electrical services business to include increased facilities services in the North American market. The facilities services business continues to grow as customers seek to "outsource" services not specifically related to the core services or the products its customers offer for sale. In addition, increases in privatization of government functions, particularly in the United Kingdom, has afforded private enterprise the opportunity to operate, maintain, and often modernize and expand government facilities. Backlog. The Company had a backlog as of December 31, 1996 of approximately $1,043.7 million, compared with a backlog of approximately $1,060.7 million as of December 31, 1995. Employees. The Company presently employs approximately 12,000 people, approximately 75% of whom are represented by various unions. The Company believes that its employee relations are generally satisfactory. Competition. The business in which the Company engages is extremely competitive. A majority of the Company's revenues are derived from jobs requiring competitive bids; however, an invitation to bid is often conditioned upon prior experience, technical capability and financial strength. The Company competes with national, regional and local companies. The Company believes that, at present, it is the largest provider of mechanical and electrical construction and facilities services in the United States and Canada and one of the largest in the United Kingdom. Segment information relating to the geographic areas in which the Company operates is included in Note P to the consolidated financial statements. ITEM 2. PROPERTIES ......The operations of the Company are conducted primarily in leased properties. The following table lists major facilities: Lease Approximate Expiration Square Date, Unless Feet Owned ----------- -------------- Corporate Headquarters 101 Merritt Seven Corporate Park Norwalk, Connecticut 15,725 4/8/00 Operating Facilities 1200 North Sickles Road Tempe, Arizona 29,000 Owned 3208 Landco Drive Bakersfield, California 49,875 6/30/97 4462 Corporate Center Drive Los Alamitos, California 41,400 12/31/00 4464 Alvarado Canyon Road San Diego, California 53,800 10/31/00 9505 Chesapeake Drive San Diego, California 44,000 1/31/01 345 Sheridan Boulevard Lakewood, Colorado 63,000 Owned 5697 New Peachtree Road Atlanta, Georgia 27,200 11/30/98 2100 South York Road Oak Brook, Illinois 77,700 1/09/02 2655 Garfield Road Highland, Indiana 34,600 7/08/01 3555 W. Oquendo Road Las Vegas, Nevada 100,000 11/30/98 111-01 14th Avenue College Point, New York 77,000 2/28/06 111 West 19th Street New York, New York 27,200 5/31/98 Lease Approximate Expiration Square Date, Unless Feet Owned ----------- -------------- Two Penn Plaza New York, New York 57,200 2/01/06 165 Robertson Road Ottawa, Ontario, Canada 35,400 4/01/02 5550 Airline Road Houston, Texas 74,500 6/30/01 515 Norwood Road Houston, Texas 26,600 6/30/01 1 Thameside Centre Kew Bridge Road Kew Bridge, Middlesex, United Kingdom 14,000 12/22/12 2116 Logan Avenue Winnipeg, Manitoba, Canada 19,800 Owned 3455 Landmark Blvd. Burlington, Ontario, Canada 16,100 Owned 1574 South West Temple Salt Lake City, Utah 38,800 12/31/99 22930 Shaw Road Sterling, Virginia 32,600 7/31/99 109-D Executive Drive Sterling, Virginia 19,000 8/31/97 The Company believes that all of its property, plant and equipment is well maintained, in good operating condition and suitable for purposes for which they are used. See Note K to the consolidated financial statements for additional information regarding lease costs. The Company believes there will be no difficulty either in negotiating the renewal of its real property leases as they expire or in finding other satisfactory space. ITEM 3. LEGAL PROCEEDINGS The Dynalectric Company ("Dynalectric"), a wholly-owned subsidiary of the Company, is a defendant in an action entitled Computran v. Dynalectric, et al., pending in Superior Court of New Jersey, Bergen County, arising out of its participation in a joint venture. In the action, which was instituted in 1988, the plaintiff, Computran, a participant in, and a subcontractor to the joint venture, alleges that Dynalectric wrongfully terminated its subcontract, fraudulently diverted funds due it, misappropriated its trade secrets and proprietary information, fraudulently induced it to enter into the joint venture and conspired with other defendants to commit certain acts in violation of the New Jersey Racketeering Influence and Corrupt Organization Act. Dynalectric believes that Computran's claims are without merit and intends to defend this matter vigorously. Dynalectric has filed counterclaims against Computran. Discovery is ongoing and no trial date has been scheduled. In February 1995 as part of an investigation by the New York County District Attorney's office into the business affairs of Herbert Construction Company ("Herbert"), a general contractor that does business with the Company's subsidiary, Forest Electric Corporation ("Forest"), a search warrant was executed at Forest's executive offices. At that time, the Company was informed that Forest and certain of its officers are targets of the continuing investigation. Neither the Company nor Forest has been advised of the precise nature of any suspected violation of law by Forest or its officers. On July 11, 1995, Ted Kohl, a principal of Herbert, and DPL Interiors, Inc., a company allegedly owned by Mr. Kohl were indicted by a New York County grand jury for grand larceny, fraud, repeated failure to file New York City Corporate Tax Returns and related money laundering charges. Mr. Kohl was also charged with filing false personal income and earnings tax returns, perjury and offering false instruments for filing with the New York City School Construction Authority. In a press release announcing the indictment, the Manhattan District Attorney said that the investigation disclosed that Mr. Kohl allegedly received more than $7.0 million in kickbacks from subcontractors through a scheme in which he allegedly inflated subcontracts on Herbert's construction contracts. At a July 11, 1995 press conference following the indictment, the District Attorney announced that the investigation was continuing and that he expected further indictments in the investigation. Forest performs electrical contracting services primarily in the New York City commercial market and is one of EMCOR's largest subsidiaries. In addition to the above, the Company is involved in other legal proceedings and claims asserted by and against the Company, which have arisen in the ordinary course of business. The Company believes it has a number of valid defenses to these actions and the Company intends to vigorously defend or assert these claims and does not believe that a significant liability will result. However, the Company cannot predict the outcome thereof or the impact that an adverse result of the matters discussed above will have upon the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None EXECUTIVE OFFICERS OF THE REGISTRANT Frank T. MacInnis, Age 50; Chairman of the Board, President and Chief Executive Officer of the Company since April 1994. From April 1990 to April 1994 Mr. MacInnis served as President and Chief Executive Officer, and from August 1990 to April 1994 as Chairman of the Board, of Comstock Group, Inc., a nationwide electrical contracting company. From 1986 to April 1990, Mr. MacInnis was Senior Vice President and Chief Financial Officer of Comstock Group, Inc. In addition, from 1986 to April 1994 Mr. MacInnis was also President of Spie Group Inc., which owns or owned Comstock Group, Inc., Spie Construction Inc., a Canadian pipeline construction company, and Spie Horizontal Drilling Inc., a U.S. company engaged in underwater drilling for the installation of pipelines and communications cable. Sheldon I. Cammaker, Age 57; Executive Vice President and General Counsel of the Company for more than the past five years. Leicle E. Chesser, Age 50; Executive Vice President and Chief Financial Officer of the Company since May 1994. From April 1990 to May 1994 Mr. Chesser served as Executive Vice President and Chief Financial Officer of Comstock Group, Inc. and from 1986 to May 1994 he was also Executive Vice President and Chief Financial Officer of Spie Group Inc. Jeffrey M. Levy, Age 44; Executive Vice President of the Company since November 1994, Senior Vice President of the Company from December 1993 to November 1994 and Chief Operating Officer of the Company since February 1994. From May 1992 to December 1993, Mr. Levy was President and Chief Executive Officer of the Company's subsidiary EMCOR Mechanical/Electrical Services (East) Inc. From January 1991 to May 1992 Mr. Levy served as Executive Vice President and Chief Operating Officer of Lehrer McGovern Bovis, Inc., a construction management and construction company. R. Kevin Matz, Age 38; Vice President and Treasurer of the Company since April 1996 and Staff Vice President - Financial Services of the Company from March 1993 to April 1996. From March 1991 to March 1993, Mr. Matz was Treasurer of Sprague Technologies Inc., a manufacturer of electronic components. Mark A. Pompa, Age 32; Vice President and Controller of the Company since September 1994. From June 1992 to September 1994, Mr. Pompa was an Audit and Business Advisory Manager of Arthur Andersen LLP, an accounting firm, and from June 1988 to June 1992 Mr. Pompa was a Senior Accountant at that firm. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information The Company's Common Stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market under the symbol "EMCG". From December 15, 1994 through December 27, 1995 the Common Stock was traded in the over-the-counter market. The following table sets forth the high and low bid quotations (as reported in the "pink sheets" of the National Quotation Bureau, Inc.) for the Common Stock for each calendar quarter during the period from January 6, 1995, when bid quotations were first readily available, through December 27, 1995. The quotations reflect inter-dealer prices, without adjustments for retail mark-up, mark-down or commissions and may not represent actual transactions. For the period commencing December 28, 1995, when the Common Stock began trading on the Nasdaq Stock Market, through December 31, 1996, the following table sets forth high and low sales prices for the Common Stock. High Low 1996 First Quarter 12 3/8 9 3/8 Second Quarter 17 3/8 11 3/4 Third Quarter 17 3/8 14 1/8 Fourth Quarter 15 5/8 13 1995 First Quarter (commencing January 6, 5 1/2 4 1995) Second Quarter 7 3/4 4 1/2 Third Quarter 9 6 3/4 Fourth Quarter (through December 27, 9 3/8 7 1995) December 28, 1995 through December 9 5/8 9 3/8 31, 1995 Holders As of February 24, 1997 there were 66 shareholders of record, and, as of that date, the Company estimates there were approximately 800 beneficial owners holding stock in nominee or "street" name. Dividends The Company did not pay dividends on its Common Stock during 1995 or 1996, and it does not anticipate that it will pay dividends on its Common Stock in the foreseeable future. The Company's working capital credit facility prohibits the payment of dividends on its Common Stock prior to January 1, 1998 and thereafter limits its payment of dividends; the Company's Series C Notes provide that dividends are limited to 50% of consolidated net income (as defined) for the period from December 15, 1994 to the most recently ended fiscal quarter. ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following selected financial data has been derived from audited financial statements and should be read in conjunction with the consolidated financial statements, the related notes thereto and the reports of independent public accountants thereon, included elsewhere in this annual report on Form 10-K. The consolidated financial statements for the year ended December 31, 1992 were audited by Ernst & Young LLP whose report of independent public accountants thereon dated June 30, 1994 includes a disclaimer of opinion due to going concern considerations. A disclaimer of opinion due to going concern considerations nevertheless provides assurance that there were no limitations on the scope of the audit and that the accounting principles applied in the preparation of the consolidated financial statements are in conformity with generally accepted accounting principles. See Note A to the consolidated financial statements regarding the basis of presentation and the Company's emergence from bankruptcy.
Income Statement Data (a) (d) Reorganized Company Predecessor Company Year Ended December Year Ended December 31, 31, 1996 1995 1994 1993 1992 ---------- ---------- --------- ---------- --------- Revenues $1,669,274 $1,588,744 $1,763,961 $2,194,735 $2,404,577 Gross profit 160,788 143,147 156,372 151,177 243,854 Reorganization items -- -- (91,318) -- -- Income (loss) from continuing operations including reorganization items 9,437 (10,853) (118,934) (113,991) (363,515) Income (loss) from discontinued operations -- -- 10,216 (9,087) (253,230) Extraordinary item - gain on debt discharge -- -- 413,249 -- -- Cumulative effect of change in method of accounting for: -Income taxes -- -- -- -- 4,315 -Post-employment benefits -- -- (2,100) -- -- ---------- ---------- ---------- ---------- ---------- Net income (loss) $9,437 $(10,853) $302,431 $(123,078) $(612,430) ========== ========== ========== ========== ========== Supplemental net income (loss) per common share and common equivalent share (b): Continuing operations $0.95 $(1.13) $(12.62) Discontinued operations -- -- 1.08 Extraordinary item - gain on debt discharge -- -- 43.85 Cumulative effect of change in method of accounting for: Post-employment benefits -- -- (0.22) ---------- ---------- --------- Net income (loss) per common share and common equivalent share $0.95 $(1.13) $32.09 ========== ========== =========
Balance Sheet Data (d) Reorganized Company Predecessor Company As of December 31, As of December 31, 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- Stockholders' equity (deficit)(c) ........ $ 83,883 $ 70,610 $ 81,130 $(302,262) $(175,979) 70,610 81,130 Total assets .......... 614,747 710,945 707,498 806,442 907,584 Net assets held for sale............. -- 61,969 55,401 Notes payable ......... -- 14,665 4,803 172 6,452 Borrowings under working capital credit lines......... 14,200 25,000 40,000 -- -- 7% Senior Secured Notes........ -- 61,969 55,401 -- -- Long-term debt, including current maturities........... 72,405 68,989 61,290 4,465 6,040 Debt in default ....... -- -- -- 501,007 501,007 Capital lease obligations.......... $ 1,007 $ 1,284 $ 2,029 $ 2,561 $ 3,935 (a)The income statement data for the year ended December 31, 1995 excludes the operating results of businesses held for sale since the operations of these businesses accrued to the benefit of holders of the notes issued by the Company's subsidiary SellCo Corporation, and prior to their payment in full during 1996, the Company's Series A Notes, and certain other obligations (See Notes F and G to the consolidated financial statements). Income statement data has been reclassified for all periods presented prior to 1995 to reflect the Company's water supply business and other businesses for sale as discontinued operations (See Note L to the consolidated financial statements). (b)Historical per share data for periods prior to December 31, 1994 have not been presented as it is not meaningful since the Company has been recapitalized and adopted Fresh-Start Accounting as of December 31, 1994. (c) No cash dividends on the Company's Common Stock have been paid during the past five years. (d) Selected financial data for periods as of and after the adoption of Fresh-Start Accounting are not comparable to selected financial data of periods presented prior to December 31, 1994 and have been separated by a black line. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS JWP INC. emerged from Chapter 11 of the United States Bankruptcy Code on December 15, 1994 (the "Effective Date") and changed its name to EMCOR Group, Inc. ("EMCOR" or the "Company"). The Company reorganized pursuant to its Third Amended Joint Plan of Reorganization dated August 9, 1994, as amended (the "Plan of Reorganization"), and proposed by the Company and its wholly-owned subsidiary SellCo Corporation ("SellCo"). In connection with the Plan of Reorganization, the Company adopted the American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). The Company has accounted for its reorganization by using the principles of Fresh-Start Accounting as required by SOP 90-7. For accounting purposes, the Company assumed that the Plan of Reorganization was consummated on December 31, 1994. Under the principles of Fresh-Start Accounting, the Company's total net assets were recorded at their assumed reorganization value, with the reorganization value allocated to identifiable assets on the basis of their estimated fair value. The primary valuation methodology employed by the Company, with the assistance of its financial advisors to determine the reorganization value of the Company, was a net present value approach. The valuation was based on the Company's forecasts of unleveraged, after-tax cash flows calculated for each year over the four-year period from 1994 to 1997, capitalizing projected earnings before interest, taxes, depreciation and amortization at multiples ranging from 3 to 10, selected to value earnings and cash flows beyond 1997, and discounting the resulting amounts to present value at rates ranging from 10% to 30% selected to approximate the Company's projected weighted average cost of capital. The excess of reorganization value over the value of identifiable assets of $5.0 million was included in the Consolidated Balance Sheet as of December 31, 1995 in Other Assets as "Miscellaneous" and was being amortized over 15 years. In accordance with SOP 90-7, the Company's reduction of its deferred tax valuation allowance during 1996 related to its federal and foreign income tax provision was first allocated to reduce reorganization value in excess of amounts allocable to identifiable assets to zero and then allocated to capital surplus. As a result of the implementation of Fresh-Start Accounting, the consolidated financial statements of the Company for periods subsequent to consummation of the Plan of Reorganization are not comparable to the Company's consolidated financial statements for prior periods. Accordingly, a black line has been used to separate the consolidated financial statements of the Company after the consummation of the Plan of Reorganization from those of the Company prior to the consummation of the Plan of Reorganization. The operating results of businesses held for sale have been excluded from the consolidated financial statements for the year ended December 31, 1995 since the operations of these businesses accrued to the benefit of the holders of the notes issued by the Company's subsidiary SellCo, and prior to their payment in full during 1996, the Company's Series A Notes, and certain other obligations (See Notes F and G to the consolidated financial statements). Operating results of businesses held for sale substantially offset interest accrued on the Company's Series A Notes which interest was recognized within the caption "Net assets held for sale" in the Consolidated Balance Sheet as of December 31, 1995. Results of Operations: Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Revenues for the years ended December 31, 1996 and 1995 were $1,669.3 million and $1,588.7 million, respectively. Net income for the year ended December 31, 1996 was $9.4 million or $0.95 per share compared to a net loss of $10.9 million or $1.13 per share for the year ended December 31, 1995. Income from continuing operations before reorganization items, income taxes, extraordinary items and cumulative effect of accounting change was $17.0 million and a loss of $9.9 million for the years ended December 31, 1996 and 1995, respectively. 1996 income includes a gain of $12.5 million ($8.1 million after-tax) on the sale of certain assets held for sale, including the sale of substantially all of the assets of the Company's principal water supply subsidiary Jamaica Water Supply Company ("JWS"). JWS and the Company's other water supply subsidiary, Sea Cliff Water Company ("Sea Cliff"), are referred to hereafter as the "Water Companies". The 1995 loss includes a third quarter loss of $0.9 million associated with the disposition of a subsidiary engaged principally in the installation of industrial boilers. The Company generated operating income of $17.1 million for the year ended December 31, 1996 compared with operating income of $5.9 million for the year ended December 31, 1995. The improvement in operating income for 1996 was principally attributable to continued improvement in gross profit due to cost control efforts and improved job performance offset partially by an increase in selling, general and administrative expenses in the first quarter of 1996 related to an adverse arbitration award requiring the Company to pay $4.8 million in damages in connection with a contract dispute involving its subsidiary Pace Mechanical Services, Inc. (formerly known as T.L. Cholette, Inc.). In October 1996, the Company settled the arbitration award for approximately $4.3 million. Net interest expense for the year ended December 31, 1996 was $12.6 million compared to $14.8 million in the year earlier period. Mechanical and Electrical Construction Services and Facilities Services Revenues of the mechanical and electrical construction and facilities services business units for the year ended December 31, 1996 were $1,669.3 million compared to $1,588.7 million for the year ended December 31, 1995. Operating income of these business units for the year ended December 31, 1996 was $17.1 million compared to operating income of $5.9 million for the year ended December 31, 1995. Revenues for the year ended December 31, 1996 increased by approximately 5.1% when compared with the year earlier period. While revenues of business units operating in the Western United States increased due to improved economic conditions, these increases were substantially offset by decreased revenues (a) in the Northeastern United States resulting from, among other things, adverse weather conditions in the first quarter of 1996 and increased competition, and (b) in the Midwestern United States due to reduced construction activity as compared with 1995 and the Company's earlier downsizing of its Midwestern operations and (c) in the United Kingdom due to decreased activity in the commercial construction market. Selling, general and administrative expenses ("SG&A") for the years ended December 31, 1996 and 1995 were $143.7 million and $137.3 million, respectively. The increase was primarily attributable to increased operating volume and the $4.3 million adverse arbitration result discussed above. At December 31, 1996, the mechanical and electrical construction and facilities services business backlog was approximately $1,043.7 million compared to approximately $1,060.7 million at December 31, 1995. The Company's backlog in the United States increased by $56.7 million between December 31, 1996 and December 31, 1995, whereas its backlog in Canada and the United Kingdom decreased by $15.0 million and $58.7 million, respectively, during that same period. The decline in Canadian backlog is attributable to the shift in emphasis from multi-period commercial work to industrial work including both modifications to existing facilities and new facilities, as well as completion of certain large projects. The industrial work is characterized by shorter schedules, frequently less than one year, than commercial work. The United Kingdom decline is attributable to continued progress toward completion of several large projects and the continued weakness in the United Kingdom commercial construction market. Results Of Operations: Year Ended December 31, 1995 Compared To Year Ended December 31, 1994 Revenues for the years ended December 31, 1995 and 1994 were $1,588.7 million and $1,595.0 million, respectively, exclusive of $169.0 million attributable to businesses held for sale or sold in 1994. Net loss for the year ended December 31, 1995 was $10.9 million or $1.13 per share compared to net income of $302.4 million or $32.09 per share for the year ended 1994. Net income for 1994 includes an extraordinary item for the gain on debt discharge of $413.2 million as well as a charge for the required adoption of Financial Accounting Standards No. 112, "Employers' Accounting for Post-employment Benefits" ("SFAS 112"), of $2.1 million. In addition, net income for 1994 includes charges for reorganization items totaling $91.3 million consisting of professional fees of $12.5 million and fresh-start adjustments of $78.8 million to record the Company's assets and liabilities at fair value in accordance with the adoption of Fresh-Start Accounting as prescribed by SOP 90-7. Net income for the year ended December 31, 1994 includes income from discontinued operations of $10.2 million as well as a loss of $13.7 million attributable to other businesses held for sale or sold. Loss from continuing operations before reorganization items, income taxes, extraordinary items and cumulative effect of accounting change was $9.9 million and $27.9 million for the years ended December 31, 1995 and 1994, respectively. The 1995 loss includes $14.8 million of net interest expense associated with borrowings outstanding during 1995 under the Company's Old Credit Agreements (hereafter defined) compared to $2.5 million in 1994 which amount excluded interest on debt in default which the Company ceased accruing in December 1993. In addition the 1995 loss includes a third quarter loss of $0.9 million associated with the disposition of a subsidiary engaged principally in the installation of industrial boilers. The 1994 loss reflects, among other things: a gain of $1.9 million from the settlement of a construction claim; a net gain of $1.2 million on the sale of certain businesses; a loss of $13.7 million attributable to other businesses held for sale or sold; a loss of $4.5 million due to the write-down of an investment; a loss of $10.8 million attributable to job write-downs and provisions for loss contingencies on certain industrial and municipal projects; a loss of $1.4 million for lender fees associated with the Company's working capital and debtor-in-possession credit facilities; and a loss of $0.6 million for severance of certain employees. The losses associated with job write-downs in 1994 were primarily attributable to adverse weather conditions, inadequate estimating of job costs and labor problems. The Company generated operating income of $5.9 million for the year ended December 31, 1995 compared with an operating loss of $22.2 million for the year ended December 31, 1994, inclusive of $13.7 million of operating losses attributable to businesses held for sale or sold. The increase in operating income is attributable to: a $41.3 million reduction in SG&A expenses, inclusive of $30.6 million of SG&A expenses attributable to businesses held for sale or sold, as a result of the implementation of the Company's cost reduction plans; an increase in gross profit of $3.7 million and as a percentage of revenues, which is attributable to successful completion and close out of lower margin contracts undertaken before the Company emerged from its Chapter 11 proceeding as well as higher profitability of post-emergence contracts completed or currently in process, exclusive of $16.9 million of gross profit attributable to businesses held for sale or sold in 1994. Professional fees associated with the Chapter 11 proceeding are classified as "Reorganization Items" in the 1994 Consolidated Statement of Operations. Net interest expense for the year ended December 31, 1995 was $14.8 million compared to $2.5 million in the year earlier period. The Company ceased accruing interest on debt in default in December 1993 upon the filing of an involuntary bankruptcy petition against the Company. Accordingly, no interest expense on debt in default is included in the Consolidated Statement of Operations for the year ended December 31, 1994. Mechanical and Electrical Construction Services and Facilities Services Revenues of the mechanical and electrical construction and facilities services business units for the year ended December 31, 1995 were $1,588.7 million compared to $1,595.0 million for the year ended December 31, 1994, exclusive of $169.0 million attributable to businesses held for sale or sold. Operating income of these business units (before deduction of general corporate and other expenses discussed below) for the year ended December 31, 1995 was $21.6 million compared to an operating loss of $6.4 million, inclusive of $13.7 of operating losses attributable to businesses held for sale or sold, for the year ended December 31, 1994. In connection with the Company's restructuring plan adopted in connection with its Plan of Reorganization, certain mechanical and electrical business units have been sold or identified for sale. The operating results of these units are excluded from operating results for the year ended December 31, 1995. Revenues for the year ended December 31, 1995 relating to business units which the Company retained remained substantially unchanged compared with the year earlier period. While 1995 revenues of business units operating in the Eastern United States and Central United Kingdom increased due to improved economic conditions, this increase was offset by decreased revenues in the Midwestern and Western regions of the United States, Canada and Northern and Southern parts of the United Kingdom due to, among other things, continuing poor market conditions and downsizing. Selling, general and administrative expenses, excluding general corporate and other expenses, for the years ended December 31, 1995 and 1994 were $121.6 million and $162.8 million, respectively. The 1994 SG&A expenses include $132.3 million attributable to the continuing electrical and mechanical construction and facilities services operations. The decrease in SG&A expenses was attributable to cost cutting and downsizing. At December 31, 1995, the mechanical and electrical construction and facilities services business backlog was approximately $1,060.7 million compared to approximately $1,046.4 million at December 31, 1994, exclusive of businesses sold or held for sale. The Company's backlog in the United States increased by $43.1 million between December 31, 1994 and December 31, 1995, whereas its backlog in Canada and the United Kingdom decreased by $18.3 million and $10.5 million, respectively, during that same period. The decline in Canadian backlog was principally attributable to the downsizing of the Canadian operations, while the United Kingdom decline was attributable to poor market conditions. General Corporate And Other Expenses General corporate expenses for the years ended December 31, 1995 and 1994 were $15.7 million and $28.3 million, respectively, inclusive of $12.5 million of legal and other professional fees incurred in connection with the Company's reorganization in 1994. The higher amount of general corporate expenses, exclusive of legal, consulting and other professional fees in 1994, was attributable to debt issuance costs related to the Company's debtor-in-possession credit facility ("DIP Loan"), severance paid to terminated employees and insurance costs. Net Assets Held for Sale The operating results of businesses held for sale, which included the Company's water supply business classified as discontinued operations prior to the consummation of the Plan of Reorganization, have been excluded from the consolidated financial statements for the year ended 1995 since the operation of these businesses accrued to the benefit of the holders of notes issued by SellCo, and prior to their payment in full during 1996, the Company's Series A Notes, and certain other obligations. (See Notes F and G to the consolidated financial statements). Businesses held for sale are recorded in the accompanying Consolidated Balance Sheets at the lower of cost or estimated net realizable value and are classified as current based on their estimated disposition dates. Liquidity And Capital Resources: The Company's consolidated cash balance decreased by $2.3 million from $53.0 million at December 31, 1995 to $50.7 million at December 31, 1996. The Company generated positive operating cash flow of $33.1 million for the year ended December 31, 1996 which was used primarily to repay borrowings under the Company's working capital credit lines and to fund capital expenditures resulting in the consolidated cash balance decrease. The December 31, 1996 cash balance includes approximately $4.5 million in foreign subsidiaries' bank accounts which accounts are available only to support their respective operations. On June 19, 1996, the Company and its subsidiary Dyn Specialty Contracting Inc. ("Dyn") entered into a credit agreement with Harris Trust and Savings Bank ("Harris") providing the Company with up to a $100.0 million revolving credit facility (the "New Credit Facility") for a three year period. The New Credit Facility, which is guaranteed by certain direct and indirect U.S. subsidiaries of the Company and is secured by substantially all of the assets of the Company and those subsidiaries, initially provided for up to $50.0 million in borrowing capacity available in the form of revolving loans ("Revolving Loans") and/or letters of credit ("LCs" or "LC"). As subsequently amended, the New Credit Facility currently provides for up to $72.5 million in borrowing capacity. The remaining $27.5 million in borrowing capacity is subject to: receipt of additional commitments from other banks; consents of bonding companies providing surety bonds to the Company's Canadian and United Kingdom subsidiaries; and the guarantee by these subsidiaries of the facility and the collateralization of the guarantees with liens upon their assets. The Revolving Loans bear interest at a variable rate, which is Harris' prime rate (8.25% at December 31, 1996) plus 1.0% - 2.0% based on certain financial tests. The interest rate on the Revolving Loans was 9.25% at December 31, 1996. LC fees ranging from 1.50% to 3.25% are charged based on the type of LC issued. The New Credit Facility expires on June 19, 1999. As of December 31, 1996, the Company had approximately $29.1 million of LCs outstanding under the New Credit Facility. In addition, there were $14.2 million of Revolving Loans outstanding as of December 31, 1996. Pursuant to the Plan of Reorganization, the Company and SellCo issued, or reserved for issuance, four series of notes (the "New Notes") and 9,424,083 shares of stock of the Company's Common Stock (constituting 100% of the issued or issuable shares as of the Effective Date) to pre-petition creditors of the Company, other than holders of the Company's pre-petition subordinated debt, in settlement of their pre-petition claims and to Belmont Capital Partners II, L.P. ("Belmont"), which provided a debtor-in-possession credit facility ("DIP Loan"), in payment of additional interest under the terms of the DIP Loan. The entire $11.9 million principal amount of Series B Notes, a series of the New Notes, and approximately $4.1 million principal amount of Series A Notes, a series of the New Notes, were redeemed on the Effective Date with the net cash proceeds derived from the sale of certain of the Company's subsidiaries, the stock of which would have been pledged as part of the collateral securing the Series B Notes had such subsidiaries not been sold (and an additional $600,000 of such proceeds were reserved for prepayment of certain of the Series A Notes which have been reserved for issuance in respect of disputed and unliquidated claims). The Series A Notes were paid in full with proceeds received by the Company from the sale of the Water Companies. Holders of SellCo Notes, a series of the New Notes, will only be paid from and to the extent of any remaining net cash proceeds (as defined) from the sale of SellCo's subsidiaries and the proceeds of a $5.5 million promissory note issued by the Company to SellCo pursuant to the Plan of Reorganization (the "EMCOR Supplemental SellCo Note"). Interest on the EMCOR Supplemental SellCo Note is payable at maturity. On December 14, 1994, the Company and certain of its subsidiaries entered into two credit agreements (the "Old Credit Agreements") with Belmont and other lenders providing the Company and certain of its subsidiaries with working capital facilities of up to an aggregate of $45.0 million which became available upon the Effective Date. The MES Credit Agreement, one of the Old Credit Agreements, was among the Company, its subsidiary MES Holdings Corporation ("MES"), substantially all of the U.S. subsidiaries of MES, as guarantors, and the lenders and provided the Company and MES with loans in an aggregate amount of up to $35.0 million. The Dyn Credit Agreement, the other Old Credit Agreement, was among the Company, Dyn, Dyn's subsidiaries, as guarantors, and the lenders and provided Dyn with loans in an aggregate amount of up to $10.0 million. The loans bore interest on the principal amount thereof at the rate of 15% per annum. The proceeds of the MES loans under the MES Credit Agreement were used to repay amounts outstanding under the DIP Loan and pay fees and expenses in connection with the MES Credit Agreement and the Plan of Reorganization and the balance was used for the general working capital of MES, the MES subsidiaries and the Company. The proceeds of the Dyn Credit Agreement were used to pay fees and expenses in connection with the Dyn Credit Agreement and was used for the general working capital of Dyn and the Dyn subsidiaries. Borrowings outstanding under the Old Credit Agreements were repaid in part on June 12, 1996 from proceeds received by the Company from the sale of the Water Companies and the balance was repaid on June 20, 1996 from borrowings under the New Credit Facility at which time these credit agreements were terminated. In December 1996, the Company's Canadian subsidiary Comstock Canada Ltd., renewed a credit agreement with a bank providing for an overdraft facility of up to Cdn. $2.0 million. The facility is secured by certain assets of Comstock Canada Ltd. and deposit instruments of another Canadian subsidiary of the Company. The facility provides for interest at the bank's prime rate (4.75% at December 31, 1996) plus 3/4% and expires on June 30, 1997. There were no borrowings outstanding under this credit agreement at December 31, 1996. The Company is seeking to include its Canadian subsidiary under the New Credit Facility. In September 1995, a number of the Company's United Kingdom subsidiaries renegotiated and renewed a demand credit facility with a U.K. bank for a credit line of (pound)17.1 million (approximately U.S. $26.8 million). The credit facility consisted of the following components with individual credit limits as follows: an overdraft line of up to (pound)9.0 million (approximately U.S. $14.1 million) which overdraft line was subsequently reduced to (pound)7.0 million (approximately U.S. $11.0 million); a facility for the issuance of guarantees, bond and indemnities of up to (pound)7.3 million (approximately U.S. $11.4 million); and other credit facilities of up to (pound)0.8 million (approximately U.S. $1.3 million). The facility was secured by substantially all of the assets of the Company's principal U.K. subsidiaries. The overdraft facility provided for interest at the bank's base rate, as defined (6.5% as of December 31, 1995), plus 3.0% on the first (pound)5.0 million of borrowings and at the bank's base rate plus 4.0% for borrowings over (pound)5.0 million. During the third quarter of 1996, the Company obtained an (pound)7.4 million LC under the New Credit Facility for use as collateral for bonds issued under the U.K. facility thereby releasing funds previously deposited as collateral for those bonds. On October 1, 1996, the Company's United Kingdom subsidiaries replaced the U.K. facility with Revolving Loans under the New Credit Facility. As reported in the Company's Report on Form 8-K, dated February 29, 1996, an aggregate majority of principal amount of the outstanding Series A Notes and an aggregate majority of principal amount of the outstanding Series C Notes consented to amendments to the Series A Indenture and Series C Indenture under which the Series A Notes and the Series C Notes, respectively, were issued. The amendments (i) reduced the ratio required to be maintained by the Company and certain of its subsidiaries under a Consolidated Fixed Charge Coverage Ratio (the "Ratio"), as defined, contained in each of the Indentures and (ii) provided for the exclusion from the Ratio calculation certain non-cash interest payments payable by the issuance of additional Series A Notes and Series C Notes. The Series A Notes have been paid in their entirety. The Company has no significant plans or commitments for capital expenditures outside of those required for normal operations. Such expenditures are anticipated to be funded by cash generated through continuing operations. The Company believes that projected cash flows from operations combined with the available funds under the New Credit Facility will provide sufficient liquidity to meet the Company's operating, capital and scheduled debt service requirements through at least 1997 based on the terms of the Company's existing indentures and loan agreements, including interest and amortization terms. Certain Insurance Matters During the second quarter of 1996, the Company entered into an agreement with one of its insurers to reinsure the Company's obligations to bear certain losses incurred for insurance plan years from October 1, 1992 to September 30, 1995. Under this agreement, amounts previously deposited by the Company with one of the Company's insurers as collateral to fund certain losses under the deductible portion of the Company's insurance program were returned to the Company and used to fund the cost of that agreement and to pay down, in July 1996, approximately $10.1 million of indebtedness under the New Credit Facility. As of December 31, 1996, the Company was utilizing $16.4 million of letters of credit obtained under the New Credit Facility as collateral for its current insurance obligations, and therefore presently is not required to deposit cash for such obligations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA EMCOR Group, Inc. And Subsidiaries Consolidated Balance Sheets (In Thousands, Except Share and Per Share Data) December 31, 1996 1995 ------------ ------------ ASSETS Current Assets: Cash and cash equivalents $50,705 $53,007 Accounts receivable, less allowance for doubtful accounts of $18,812 and $14,892, respectively 442,930 435,974 Costs and estimated earnings in excess of billings on uncompleted contracts 67,765 65,551 Inventories 9,108 8,031 Prepaid expenses and other 8,143 8,365 Net assets held for sale -- 61,969 ------------ ------------ Total Current Assets 578,651 632,897 Investments, Notes And Other Long-Term Receivables 5,737 4,684 Property, Plant And Equipment, Net 26,952 27,137 Other Assets: Insurance cash collateral -- 30,812 Funds held in escrow -- 8,271 Miscellaneous 3,407 7,144 ------------ ------------ 3,407 46,227 ------------ ------------ Total Assets $614,747 $710,945 ============ ============ The accompanying notes to the consolidated financial statements are an integral part of these statements. EMCOR Group, Inc. And Subsidiaries Consolidated Balance Sheets (In Thousands, Except Share and Per Share Data) December 31, 1996 1995 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Borrowings under working capital credit lines $14,200 $25,000 Notes payable -- 14,665 Current maturities of long-term debt and capital lease obligations 361 1,875 7% Senior Secured Notes (Series A) -- 61,969 Accounts payable 218,099 224,002 Billings in excess of costs and estimated earnings on uncompleted contracts 105,653 113,590 Accrued payroll and benefits 43,789 38,928 Other accrued expenses and liabilities 39,596 45,287 ------------ ------------ Total Current Liabilities 421,698 525,316 Long-Term Debt 73,051 68,398 Other Long-Term Obligations 36,115 46,621 Stockholders' Equity: Preferred Stock, $.10 par value, 1,000,000 shares authorized, zero issued and outstanding -- -- Common Stock, $.01 par value, 13,700,000 shares aythorized, 9,514,636 and 9,424,706 shares issued, or reserved for issuance, and outstanding, respectively 95 94 Warrants 2,154 2,179 Capital surplus 81,672 78,863 Cumulative translation adjustment 1,378 327 Accumulated deficit (1,416) (10,853) ------------ ------------ Total Stockholders' Equity 83,883 70,610 ------------ ------------ Total Liabilities And Stockholders' Equity $614,747 $710,945 ============ ============ The accompanying notes to the consolidated financial statements are an integral part of these statements. EMCOR Group, Inc. And Subsidiaries Consolidated Statements Of Operations For The Years Ended December 31, (In Thousands, Except Per Share Data) Predecessor Reorganized Company Company 1996 1995 1994 ----------------------- ---------- Revenues $1,669,274 $1,588,744 $1,763,961 Costs And Expenses: Cost of sales 1,508,486 1,445,597 1,607,589 Selling, general and administrative 143,674 137,254 178,575 --------- ----------- ---------- 1,652,160 1,582,851 1,786,164 --------- ----------- ---------- Operating Income (Loss) 17,114 5,893 (22,203) Other income 12,500 -- -- Interest expense (14,890) (17,453) (3,867) Interest income 2,244 2,633 1,391 Net (loss) gain on businesses sold or held for sale -- (926) 1,183 Loss on investment -- -- (4,452) --------- ----------- ---------- Income (Loss) From Continuing Operations Before Reorganization Items, Income Taxes, Extraordinary Item And Cumulative Effect Of Accounting Change 16,968 (9,853) (27,948) --------- ----------- ---------- Reorganization Items: Professional fees -- -- (12,535) Fresh-start adjustments -- -- (78,783) --------- ----------- ---------- -- -- (91,318) --------- ----------- ---------- Income (Loss) From Continuing Operations Including Reorganiztion Items, Before Income Taxes, Extraordinary Item And Cumulative Effect Of Accounting Change 16,968 (9,853) (119,266) Income Tax Provision (Benefit) 7,531 1,000 (332) --------- ----------- ---------- Income (Loss) From Continuing Operations Including Reorganization Items, Before Extraordinary Item And Cumulative Effect Of Accounting Change 9,437 (10,853) (118,934) ===== ======= ======== Income From Discontinued Operations, Net Of Income Taxes -- -- 10,216 Extraordinary Item - Gain On Debt Discharge -- -- 413,249 Cumulative Effect Of Change In Method Of Accounting For: Post-employment benefits -- -- (2,100) ========= =========== ========== Net Income (Loss) $9,437 $(10,853) $302,431 ========= =========== ========== Supplemental Income (Loss) Per Common Share And Common Equivalent Share Continuing operations before extraordinary item and cumulative effect of accounting change $0.95 $(1.13) $(12.62) Income from discontinued operations -- -- 1.08 Extraordinary item -- -- 43.85 Cumulative effect of change in method of accounting for: Post-employment benefits -- -- (0.22) ========= =========== ========== Net Income (Loss) $0.95 $(1.13) $32.09 ========= =========== ========== The accompanying notes to the consolidated financial statements are an integral part of these statements. EMCOR Group, Inc. And Subsidiaries Consolidated Statements Of Cash Flows For The Years Ended December 31, (In Thousands) Predecessor Reorganized Company Company 1996 1995 1994 ----------- ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $9,437 $(10,853) $ 302,431 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 7,864 8,912 15,724 Net loss (gain) from businesses sold or held for sale -- 926 (1,183) Write-down of investment -- -- 4,452 Stock compensation -- 6 -- Cumulative effect of change in accounting for post- employment benefits -- -- 2,100 Non-cash interest expense 4,748 7,690 -- Non-cash income tax provision 6,771 -- -- Other, net 252 465 -- ----------- ---------- ------------ 29,072 7,146 323,524 Change in Operating Assets and Liabilities Excluding Effect of Businesses Disposed of and Acquired: (Increase) decrease in accounts receivable, net (6,956) 2,635 9,172 Increase in inventories and contracts in progress (11,228) (16,320) (6,879) (Decrease) increase in accounts payable and other accrued expenses and liabilities (6,891) 5,312 22,703 Decrease (increase) in insurance cash collateral 30,812 6,765 (16,183) Decrease (increase) funds held in escrow 8,271 378 (8,314) Changes in other assets and liabilities, net (9,997) 4,785 3,794 Changes due to reorganization activities: Reorganization charges - professional fees -- -- 12,535 Reorganization charges - fresh-start adjustments -- -- 78,783 Gain on debt discharge -- -- (413,249) ----------- ----------- ---------- Net Cash Provided by Operations $33,083 $10,701 $5,886 ----------- ----------- ---------- (continued) EMCOR Group, Inc. And Subsidiaries Consolidated Statements Of Cash Flows For The Years Ended December 31, (In Thousands)(continued) Predecessor Reorganized Company Company 1996 1995 1994 ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from working capital credit lines $45,625 $ -- $ 40,000 Payments of working capital credit lines (56,425) (15,000) -- Proceeds from debtor-in-possession financing -- -- 30,000 Payment of debtor-in-possession financing -- -- (30,000) Cash deposited in trust account for funding of post-bankruptcy debt -- -- (15,940) Proceeds from long-term debt and capital lease obligations 226 180 -- Payments of long-term debt and capital lease obligations (873) (1,379) (1,430) Repayment of Series A Notes (66,424) -- (4,162) Repayment of Series B Notes -- -- (11,892) Exercise of stock options 487 -- -- Proceeds from notes payable 9,596 21,266 4,646 Payments of notes payable (24,363) (11,404) (172) Debt issuance costs (1,600) -- (900) ---------- ---------- ---------- Net Cash (Used in) Provided by Financing Activities (93,751) (6,337) 10,150 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of businesses and other assets 353 650 13,620 Proceeds from sales of net assets held for sale 66,424 -- -- Purchase of property, plant and equipment (7,428) (4,512) (4,164) Net disbursements for other investments (983) -- (2,442) Change in cash balances of businesses held for sale or sold -- -- (10,079) ---------- ---------- ---------- Net Cash Provided by (Used in) Investing Activities 58,366 (3,862) (3,065) ---------- ---------- ---------- (Decrease) Increase in Cash and Cash Equivalents (2,302) 502 12,971 Cash and Cash Equivalents at Beginning of Year 53,007 52,505 39,534 ========== ========== ========== Cash and Cash Equivalents at End of Year $50,705 $53,007 $ 52,505 ========== ========== ========== The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc. And Subsidiaries Consolidated Statements of Stockholders' Equity (Deficit) (in thousands) Old Retained Old Warrants Cumulative Earnings Stockholders' Common Preferred Old Common of New Capital Translation (Accumulated Equity Stock Stock Stock Participation Warrants Surplus Adjustments Deficit) (Deficit) - ------------------ ----------- ----------- ------------ ------------- --------- ---------- ------------ ------------- ------------- JANUARY 1, 1994 $-- $21,250 $4,072 $576 $-- $204,247 $(6,068) $(526,339) $(302,262) Foreign currency translation adjustment -- -- -- -- -- -- (173) -- (173) Exchange of preferred stock for common stock -- (345) 1 -- -- 344 -- -- -- Net income -- -- -- -- -- -- -- 302,431 302,431 Exchange of stock and fresh- start adjustments 94 (20,905) (4,073) (576) 2,179 (125,734) 6,241 223,908 81,134 ----------- ----------- ------------ ----------- --------- ---------- ------------ ------------- ------------- BALANCE, DECEMBER 31, 1994 94 -- -- -- 2,179 78,857 -- -- 81,130 Foreign currency translation adjustment -- -- -- -- -- -- 327 -- 327 Other -- -- -- -- -- 6 -- -- 6 Net loss -- -- -- -- -- -- -- (10,853) (10,853) ----------- ----------- ------------ ----------- --------- ---------- ------------ ------------- ------------- BALANCE, DECEMBER 31, 1995 94 -- -- -- 2,179 78,863 327 (10,853) 70,610 Foreign currency translation adjustment -- -- -- -- -- -- 1,051 -- 1,051 Common Stock issued under stock option plans 1 -- -- -- -- 486 -- -- 487 NOL utilization -- -- -- -- -- 2,298 -- -- 2,298 Net income -- -- -- -- -- -- -- 9,437 9,437 Other -- -- -- -- (25) 25 -- -- -- ----------- ----------- ------------ ----------- --------- ---------- ------------ ------------- ------------- BALANCE, DECEMBER 31, 1996 $95 $-- $-- $-- $2,154 $81,672 $1,378 $(1,416) $83,883 =========== =========== ============ ========== ========== ========== ============ ============= ============= The accompanying notes to the consolidated financial statements are an integral part of these statements.
EMCOR Group, Inc. And Subsidiaries Notes To Consolidated Financial Statements NOTE A BASIS OF PRESENTATION JWP INC. emerged from Chapter 11 of the United States Bankruptcy Code on December 15, 1994 (the "Effective Date") and changed its name to EMCOR Group, Inc. ("EMCOR" or the "Company"). The Company reorganized pursuant to its Third Amended Joint Plan of Reorganization (the "Plan of Reorganization") dated August 9, 1994, as amended and proposed by the Company and its wholly-owned subsidiary SellCo Corporation ("SellCo"). Under the Plan of Reorganization, the old common stock of the Company was extinguished and newly issued shares of Common Stock were issued to creditors. Pursuant to the Plan of Reorganization, on the Effective Date EMCOR issued or reserved for issuance to pre-petition creditors of EMCOR (other than holders of EMCOR's subordinated debentures and notes) in exchange for approximately $525.7 million of EMCOR senior bank and institutional indebtedness and substantially all other general unsecured claims, both allowed and disputed, against the Company, and to Belmont Capital Partners II, L.P. ("Belmont"), which provided a debtor-in-possession credit facility ("DIP Loan") to the Company during its Chapter 11 proceeding, the following securities: (i) 9,424,083 shares of Common Stock of the Company (constituting 100% of the issued or issuable shares as of the Effective Date); (ii) approximately $62.2 million principal amount of 7% Senior Secured Notes, Series A, due 1997 of the Company ("Series A Notes") issued on the Effective Date and up to a maximum of $8.8 million additional principal amount of Series A Notes which were reserved for issuance to holders of general unsecured claims and to Belmont upon resolution of disputed and unliquidated pre-petition general unsecured claims (assuming such claims are ultimately allowed in full); (iii) approximately $11.9 million principal amount of 7% Senior Secured Notes, Series B, due 1997 ("Series B Notes"); (iv) approximately $62.8 million principal amount of 11% Notes, Series C, due 2001, of the Company ("Series C Notes"); and (v) approximately $48.1 million principal amount of 12% Subordinated Contingent Payment Notes, due 2004, of SellCo (the "SellCo Notes"). The entire $11.9 million principal amount of Series B Notes and approximately $4.1 million principal amount of the Series A Notes issued on the Effective Date were immediately redeemed on that date at their face amount in accordance with their terms from the proceeds realized from the sale and liquidation of certain subsidiaries, the stock of which would have been pledged as part of the collateral securing the Series B Notes had such subsidiaries not been sold (and an additional $600,000 of such proceeds was reserved for redemption of certain of the Series A Notes reserved for disputed and unliquidated claims). The Company recorded the Series A Notes based upon an assumed total of $100.0 million of pre-petition general unsecured claims after settlement of disputed and unliquidated pre-petition general unsecured claims. From February 14, 1994 to the Effective Date, the Company was a debtor-in-possession under Chapter 11 of the U.S. Bankruptcy Code. The accompanying 1994 consolidated financial statements were prepared on the basis of the principles prescribed by the American Institute of Certified Public Accountants' Statement of Position 90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"). As of December 21, 1993, and through the Effective Date, the Company ceased to accrue interest on its debt in default. As of December 31, 1994, in accordance with SOP 90-7, the Company adopted Fresh-Start Accounting. As a result of the implementation of Fresh-Start Accounting, the consolidated financial statements of the Company for periods subsequent to consummation of the Plan of Reorganization are not comparable to the Company's consolidated financial statements for prior periods. Accordingly, a black line has been used to separate the consolidated financial statements of the Company after the consummation of the Plan of Reorganization from those of the Company prior to the consummation of the Plan of Reorganization. The operating results of businesses held for sale have been excluded from the consolidated financial statements for the year ended December 31, 1995 since the operations of these businesses accrued to the benefit of the holders of the notes issued by the Company's subsidiary SellCo, and prior to their payment in full during 1996, the Company's Series A Notes, and certain other obligations. See Notes F and G. The operating results substantially offset interest accrued on the Company's Series A Notes, which interest was recognized within the caption "Net assets held for sale" ("NAHFS") in the Consolidated Balance Sheet as of December 31, 1995. As indicated in Notes L and M, during its bankruptcy proceeding the Company developed and implemented a business restructuring plan which included the sale of its water supply business and other non--core businesses. The net assets of businesses that have been designated for sale are classified in the Consolidated Balance Sheets as of December 31, 1995 as NAHFS. Operating results for all periods presented prior to 1995 reflect the Company's water supply business and other non-core businesses as discontinued operations. The water supply business was sold during 1996. See Note L. NOTE B NATURE OF OPERATIONS EMCOR is a multinational corporation involved in mechanical and electrical construction and facilities services. EMCOR's subsidiaries specialize in the design, integration, installation, start-up, testing, operation and maintenance of (i) distribution systems for electrical power (including power cables, conduits, distribution panels, transformers, generators, uninterruptible power supply systems and related switch gear and control); (ii) lighting systems, including fixtures and controls; (iii) low-voltage systems, including fire alarm, security, communications and process control systems; (iv) heating, ventilation, air conditioning, refrigeration and clean-room process ventilation systems; and (v) plumbing, process and high purity piping systems. EMCOR's subsidiaries provide mechanical and electrical construction and facilities services directly to end-users (including corporations, municipalities and other governmental entities, owners/developers, and tenants of buildings) and, indirectly, by acting as a subcontractor for construction managers, general contractors and other subcontractors. Mechanical and electrical construction services are principally either large installation projects with contracts generally in the multi-million dollar range; smaller system installations involving renovation and retrofit work; and maintenance and service. In addition, certain of its subsidiaries operate and maintain mechanical and/or electrical systems for customers under contracts and provide other services commonly referred to as facilities services including the management of facilities and the provision of support services to customers at the customer's facilities. Mechanical and electrical construction and facilities services are provided to a broad range of commercial, industrial and institutional customers through offices located in major markets throughout the United States, Canada, the United Kingdom, the Middle East and Hong Kong. NOTE C SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company continues to account for its stock option plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). See Note I for pro forma information relating to treatment of the Company's stock option plans under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Post-employment Benefits" ("SFAS 112"). See Note S. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated. Reclassifications of prior year data have been made in the accompanying consolidated financial statements where appropriate to conform to the 1996 presentation. Principles of Preparation The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition Revenues from long-term contracts are recognized on the percentage-of-completion method. Percentage-of-completion for the mechanical contracting business is measured principally by the percentage of costs incurred and accrued to date for each contract to the estimated total costs for each contract at completion. Certain of the Company's electrical contracting business units measure percentage-of-completion by the percentage of labor costs incurred to date for each contract to the estimated labor costs for such contract, while others are on the cost to cost method. Revenues from facilities services are recognized when the earnings process is complete. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. In forecasting ultimate profitability on certain contracts, estimated recoveries are included for work performed under customer change orders to contracts for which firm prices have not yet been negotiated. Due to uncertainties inherent in the estimation process, it is reasonably possible that completion costs, including those arising from contract penalty provisions and final contract settlements, will be revised in the near-term. Such revisions to costs and income are recognized in the period in which the revisions are determined. Costs and Estimated Earnings on Uncompleted Contracts Costs and estimated earnings in excess of billings on uncompleted contracts arise when revenues have been recorded but the amounts cannot be billed under the terms of the contracts. Such amounts are recoverable from customers upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of the contract. Also included in costs and estimated earnings on uncompleted contracts are amounts the Company seeks or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders in dispute or unapproved as to both scope and price, or other customer-related causes of unanticipated additional contract costs (pending change orders and claims). These amounts are recorded at their estimated net realizable value when realization is probable and can be reasonably estimated. No profit is recognized on the construction costs incurred in connection with these amounts. Pending change orders involve the use of estimates and it is reasonably possible that revisions to the estimated recoverable amounts of recorded pending change orders may be made in the near-term. Claims made by the Company involve negotiation and, in certain cases, litigation. The Company expenses such costs as incurred, although it may seek to recover these costs as part of the claim. The Company believes that it has established legal bases for pursuing recovery of recorded claims and it is management's intention to pursue and litigate these claims, if necessary, until a decision or settlement is reached. Claims also involve the use of estimates and it is reasonably possible that revisions to the estimated recoverable amounts of recorded claims may be made in the near-term. Claims against the Company are recognized when a loss is considered probable and amounts are reasonably determinable. Costs and estimated earnings on uncompleted contracts and related amounts billed as of December 31, 1996 and 1995 are as follows (in thousands): 1996 1995 ------------ ------------ Costs incurred on uncompleted contracts $2,442,197 $2,528,864 Estimated earnings 175,094 175,490 ------------ ------------ 2,617,291 2,704,354 Less billings to date 2,655,179 2,752,393 ------------ ------------ $(37,888) $(48,039) ============ ============ Such amounts are included in the accompanying Consolidated Balance Sheets at December 31, 1996 and 1995 under the following captions (in thousands): 1996 1995 ------------ ------------ Costs and estimated earnings in excess of billings on uncompleted contracts $67,765 $65,551 Billings in excess of costs and estimated earnings on uncompleted contracts (105,653) (113,590) ------------ ------------ $(37,888) $(48,039) ============ ============ As of December 31, 1996 costs and estimated earnings in excess of billings on uncompleted contracts includes unbilled revenues for pending change orders of approximately $26.4 million and claims of approximately $13.3 million. In addition, accounts receivable as of December 31, 1996 includes claims and contractually billed amounts related to such contracts of approximately $49.2 million. Claims and related amounts aggregated approximately $73.2 million as of December 31, 1995. Generally, contractually billed amounts will not be paid by the customer to the Company until final resolution of the related claims. Classification of Contract Amounts In accordance with industry practice, the Company classifies as current all assets and liabilities related to the performance of long-term contracts. The contracting cycle for certain long-term contracts may extend beyond one year and, accordingly, collection or payment of amounts related to these contracts may extend beyond one year. Accounts receivable at December 31, 1996 and 1995 included $70.9 million and $64.8 million, respectively, of retainage billed under terms of the contracts. The Company estimates that approximately 85% of retainage recorded at December 31, 1996 will be collected during 1997. Restricted Cash In connection with a bank credit agreement for the Company's Canadian subsidiary, Comstock Canada Ltd. ("Comstock Canada"), approximately $1.5 million of cash and cash equivalents, included in the accompanying Consolidated Balance Sheet as of December 31, 1996, is deposited as security against borrowings under this credit facility. The Company is precluded from withdrawing any of these deposits if there are borrowings outstanding under the credit facility. Comstock Canada has no borrowings under this facility at December 31, 1996 and accordingly, the restricted deposits have been classified as a current asset. As further described in Note F, the Company's various revolving credit agreements include certain restrictions on the transfer of assets, including cash and cash equivalents, between the Company and its foreign subsidiaries, as well as certain domestic subsidiaries. Fair Value of Financial Instruments Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments", requires disclosure of the year-end value of significant financial instruments, including long-term debt. At December 31, 1996 and 1995, cash and cash equivalents, current debt and long-term debt have fair values that approximate their carrying amounts. Property, Plant and Equipment Property, plant and equipment is stated at cost. Depreciation is recorded principally using the straight--line method over estimated useful lives ranging from 3 to 40 years. Property, plant and equipment in the accompanying Consolidated Balance Sheets consisted of the following amounts as of December 31, 1996 and 1995 (in thousands): 1996 1995 ------------------- ------------------ Machinery and equipment $22,615 $19,398 Furniture and fixtures 4,507 3,802 Land, buildings and leasehold improvements 13,554 12,516 ------------------- ------------------ 40,676 35,716 Accumulated depreciation and amortization (13,724) (8,579) ------------------- ------------------ $26,952 $27,137 =================== ================== Inventories Inventories, which consist primarily of construction materials, are stated at the lower of cost or market. Cost is determined principally by using average costs. Reorganization Value in Excess of Amounts Allocable to Identifiable Assets On the Effective Date, the Company recorded $5.0 million of reorganization value in excess of amounts allocable to identifiable assets and began straight line amortization over 15 years. As of December 31, 1995, reorganization values in excess of amounts allocable to identifiable assets was classified as Other Assets under the caption "Miscellaneous" in the accompanying Consolidated Balance Sheet. See Note H for discussion of the reduction of reorganization value in excess of amounts allocable to identifiable assets during 1996. Foreign Operations The financial statements and transactions of the Company's foreign subsidiaries are maintained in their functional currency and translated into U.S. dollars in accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation". Translation adjustments have been accumulated as a separate component of stockholders' equity. Other Income Other income in the accompanying Consolidated Statement of Operations for the year ended December 31, 1996 includes a gain of $12.5 million ($8.1 million after-tax) on the sale of certain assets held for sale, including the sale of substantially all of the assets of the Company's principal water supply subsidiary Jamaica Water Supply Company ("JWS"). See Note L. JWS and the Company's other water supply subsidiary, Sea Cliff Water Company ("Sea Cliff"), are referred to hereafter as the "Water Companies". Supplemental Net Income (Loss) Per Common Share and Common Equivalent Share Supplemental net income (loss) per common share and common equivalent share data have been calculated based on the assumed issuance of 9,424,083 shares of Common Stock as of January 1, 1994 and the weighted average number of shares outstanding as of December 31, 1996 (9,938,651 shares) and 1995 (9,580,418 shares). When dilutive, stock options and warrants are included in weighted average number of shares outstanding using the treasury stock method. Statements of Cash Flows For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. Income Taxes The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. NOTE D REORGANIZATION ITEMS For the year ended December 31, 1994, the Company recorded $12.5 million of reorganization charges which are reflected in the accompanying Consolidated Statement of Operations for various legal and other professional fees associated with its Chapter 11 proceeding. Such reorganization charges are expensed as incurred as prescribed by SOP 90-7. In addition, "Reorganization Items" in the accompanying Consolidated Statement of Operations for the year ended December 31, 1994 include fresh-start adjustments (see Note U) which reflect the net charge to state assets and liabilities at fair value. NOTE E EXTRAORDINARY ITEM -- DISCHARGE OF DEBT The Plan of Reorganization resulted in the discharge of pre-bankruptcy liabilities totaling approximately $623.0 million. The value of securities distributed pursuant to the Plan of Reorganization was $413.2 million less allowed claims, and, accordingly, the resulting gain was recorded as an extraordinary item in 1994. NOTE F CURRENT DEBT New Credit Facility On June 19, 1996, the Company and its subsidiary Dyn Specialty Contracting Inc. ("Dyn") entered into a credit agreement with Harris Trust and Savings Bank ("Harris") providing the Company with up to a $100.0 million revolving credit facility (the "New Credit Facility") for a three year period. The New Credit Facility, which is guaranteed by certain direct and indirect U.S. subsidiaries of the Company and is secured by substantially all of the assets of the Company and those subsidiaries, initially provided for up to $50.0 million in borrowing capacity available in the form of revolving loans ("Revolving Loans") and/or letters of credit ("LCs" or "LC"). As subsequently amended, the New Credit Facility currently provides for up to $72.5 million in borrowing capacity. The remaining $27.5 million in available credit is subject to: receipt of additional commitments from other banks; consents of bonding companies providing surety bonds to the Company's Canadian and United Kingdom subsidiaries; and the guarantee by these subsidiaries of the facility and the collateralization of the guarantees with liens upon their assets. The Revolving Loans bear interest at a variable rate, which is Harris' prime rate (8.25% at December 31, 1996) plus 1.0% - 2.0% based on certain financial tests. The interest rate on the Revolving Loans was 9.25% at December 31, 1996. LC fees ranging from 1.50% to 3.25% are charged based on the type of LC issued. The New Credit Facility expires on June 19, 1999. As of December 31, 1996, the Company had approximately $29.1 million of LCs outstanding under the New Credit Facility. In addition, there were $14.2 million of Revolving Loans outstanding as of December 31, 1996, which are classified as Current Liabilities under the caption "Borrowings under working capital credit lines" in the accompanying Consolidated Balance Sheet. MES and Dyn Credit Agreements On December 14, 1994, the Company and certain of its subsidiaries entered into a credit agreement (the "MES Credit Agreement") with Belmont, certain directors of the Company and/or their affiliates and other lenders (the "Lenders") providing the Company and MES Holdings Corporation ("MES"), a wholly-owned subsidiary of the Company, with revolving credit loans (the "MES Loans") of up to an aggregate amount of $35.0 million. The MES Loans were guaranteed by certain direct or indirect subsidiaries of MES (the "MES Subsidiaries") and were secured by, among other things, substantially all of the assets of the Company, MES and the U.S. MES Subsidiaries, including the proceeds of the sale of all of the assets of the Company, MES and the U.S. MES Subsidiaries and the proceeds of the sale of stock or assets of the Water Companies to the extent of the first $15.0 million of such proceeds, subject to the right to such proceeds of the Lenders under the Dyn Credit Agreement (as that term is hereafter defined). The MES Loans bore interest on the principal amount thereof at the rate of 15.0% per annum. On December 14, 1994, the Company, Dyn, and Dyn's subsidiaries also entered into a credit agreement (the "Dyn Credit Agreement") with the Lenders providing revolving credit loans (the "Dyn Loans") of up to an aggregate amount of $10.0 million. The Dyn Loans were guaranteed by the Dyn subsidiaries and were secured by substantially all of the assets of Dyn and the Dyn subsidiaries, including the proceeds of the sale of stock or assets of the Water Companies to the extent of the first $15.0 million of such proceeds, subject to the right to such proceeds of the Lenders under the MES Credit Agreement. The Dyn Loans bore interest on the principal amount thereof at the rate of 15% per annum. Borrowings under the MES and Dyn Credit Agreements of $25.0 million and $0 million, respectively, at December 31, 1995, are classified as Current Liabilities under the caption "Borrowings under working capital credit lines" in the accompanying Consolidated Balance Sheet. Albert Fried, Jr., a director of the Company, the Managing Partner of Albert Fried & Company, which agreed to loan up to $7.0 million as one of the Lenders under the MES and Dyn Credit Agreements. Kevin C. Toner, a director of the Company, agreed to loan up to $1.0 million as one of the Lenders under the MES and Dyn Credit Agreements. In addition, UBS Mortgage Finance Inc., an affiliate of UBS Securities Inc., Mr. Toner's former employer, agreed to loan up to $2.0 million as one of the Lenders under the MES and Dyn Credit Agreements. Borrowings outstanding as of December 31, 1995 related to the above individual lenders were $3.9 million, $0.6 and $1.1 million, respectively, under the MES and Dyn Credit Agreements. Borrowings outstanding under the MES Credit Agreement and Dyn Credit Agreement were repaid in June 1996 from proceeds received by the Company from the sale of the Water Companies (see Note L) and from borrowings under the New Credit Facility at which time the MES and Dyn Credit Agreements were terminated. Series A Notes Pursuant to the Plan of Reorganization, on December 15, 1994 the Company issued or reserved for issuance approximately $62.2 million principal amount of Series A Notes and reserved for issuance up to a maximum of $8.8 million additional principal amount of Series A Notes upon resolution of disputed and unliquidated pre-petition general unsecured claims. Approximately $4.7 million of the issued Series A Notes were redeemed in 1995 and the balance of the Series A Notes were paid in full during the second quarter of 1996 (approximately $66.5 million in principal and accrued interest thereon) with proceeds received by the Company from the sale of the Water Companies. See Note L. Foreign Borrowings In December 1996, Comstock Canada renewed a credit agreement with a bank providing for an overdraft facility of up to Cdn. $2.0 million. The facility is secured by certain assets of Comstock Canada and deposit instruments of another Canadian subsidiary of the Company. The facility provides for interest at the bank's prime rate (4.75% at December 31, 1996) plus 3/4% and expires on June 30, 1997. There were no borrowings outstanding under this facility at December 31, 1996. The Company is seeking to include its Canadian operations under the New Credit Facility. In September 1995, a number of the Company's United Kingdom subsidiaries renegotiated and renewed a demand credit facility with a U.K. bank for a credit line of (pound)17.1 million (approximately U.S. $26.8 million). The credit facility consisted of the following components with the individual credit limits as indicated: an overdraft line of up to (pound)9.0 million (approximately U.S. $14.1 million) which overdraft line was subsequently reduced to (pound)7.0 million (approximately U.S. $11.0 million); a facility for the issuance of guarantees, bond and indemnities of up to (pound)7.3 million (approximately U.S. $11.4 million); and other credit facilities of up to (pound)0.8 million (approximately U.S. $1.3 million). The facility was secured by substantially all of the assets of the Company's principal U.K. subsidiaries. The overdraft facility provided for interest at the bank's base rate, as defined (6.5% as of December 31, 1995), plus 3.0% on the first (pound)5.0 million of borrowings and at the bank's base rate plus 4.0% for borrowings over (pound)5.0 million. During the third quarter of 1996, the Company obtained an (pound)7.4 million LC under the New Credit Facility for use as collateral for bonds issued under the U.K. facility discussed above thereby releasing funds previously deposited as collateral for those bonds. On October 1, 1996, the Company's U.K. subsidiaries replaced the overdraft line with Revolving Loans under the New Credit Facility. NOTE G LONG-TERM DEBT Long-Term Debt in the accompanying Consolidated Balance Sheets consist of the following amounts as of December 31, 1996 and 1995 (in thousands): 1996 1995 ------------- ------------ Series C Notes, outstanding face value of approximately $73.8 million at 11.0% discounted to a 14% effective rate, due 2001 $66,039 $61,494 Supplemental SellCo Note, outstanding face value of approximately $5.5 million at 8.0%, discounted to a 14.0% effective rate, due 2004 4,474 4,270 Capitalized Lease Obligations at weighted average interest rates from 7.25% to 11.0%, payable in varying amounts through 2004 1,007 1,284 Other, at weighted average interest rates of approximately 9.6%, payable in varying amounts through 2012 1,892 3,225 ------------- ------------ 73,412 70,273 Less current maturities (361) (1,875) ------------- ------------ $73,051 $68,398 ============= ============ Series C Notes Pursuant to the Plan of Reorganization, on December 15, 1994 the Company issued approximately $62.8 million principal amount of Series C Notes. Interest on the Series C Notes was payable semiannually through June 15, 1996 by the issuance of additional Series C Notes and is currently payable quarterly in cash. The Series C Notes are unsecured indebtedness of the Company which are subordinate to indebtedness under the Company's New Credit Facility. The Series C Notes have been recorded at a discount to their face amount to yield an estimated effective interest rate of 14.0%. The Series C Notes mature on December 15, 2001. On February 29, 1996, an aggregate majority of principal amount of the outstanding Series C Notes consented to amendments to the Series C Indenture under which the Series C Notes were issued. The amendments (i) reduced the ratio required to be maintained by the Company and certain of its subsidiaries under a Consolidated Fixed Charge Coverage Ratio (the "Ratio"), as defined, and (ii) provided for the exclusion from the Ratio calculation certain non-cash interest payments payable by the issuance of additional Series C Notes. Supplemental SellCo Note Pursuant to the Plan of Reorganization, EMCOR issued to SellCo its 8.0% promissory note in the principal amount of approximately $5.5 million (the "Supplemental SellCo Note"). The note matures on the earlier of (i) December 15, 2004 or (ii) one day prior to the date on which the SellCo Notes are deemed canceled. If at any time after the fifth anniversary of the Effective Date and prior to the maturity date of the SellCo Notes (December 15, 2004) the value of the consolidated assets of SellCo and its subsidiaries (excluding the Supplemental SellCo Note) is determined by independent appraisal to be less than $250,000, the balance of the SellCo Notes (not theretofore paid from net sales proceeds from the sale of the stock or assets of SellCo subsidiaries and the proceeds of the Supplemental SellCo Note which will have become due and payable) will be deemed canceled. Interest on the Supplemental SellCo Note is payable upon maturity. The Supplemental SellCo Note has been recorded at a discount to its face amount to yield an estimated effective interest rate of 14.0%. SellCo Notes Pursuant to the Plan of Reorganization, on December 15, 1994, SellCo issued approximately $48.1 million principal amount of SellCo Notes. Interest is payable semiannually in additional SellCo Notes. Net Cash Proceeds (as defined in the Indenture pursuant to which the SellCo Notes were issued) from the sales of stock or assets of SellCo subsidiaries are to be used to redeem SellCo Notes. The SellCo Notes are not obligations of EMCOR and accordingly are not included in the accompanying Consolidated Balance Sheets as of December 31, 1996 and 1995. The holders of the SellCo Notes may only look to EMCOR to the extent of EMCOR's obligation to pay the Supplemental SellCo Note plus accrued interest thereon. In May 1996, the Company completed the sale of substantially all of the assets of its subsidiary JWS to The City of New York and the Water Authority of Western Nassau County. In May 1996, the Company also completed the sale of the stock of Sea Cliff to a subsidiary of Aquarion Company. See Notes L and M. Approximately $2.1 and $0.7 million of the proceeds from the sale of the stock of Sea Cliff and the sale of assets of JWS, respectively, were used to redeem, in part, the SellCo Notes during August 1996. On February 28, 1997, the Company redeemed approximately $6.6 million of SellCo Notes with proceeds from the sale of assets of JWS which monies had been retained pending disposition of the lawsuit brought by certain holders of Warrants of Participation ("Warrants") that had been issued by the Company prior to its Chapter 11 proceedings. As the liabilities of JWS are finally determined, JWS' various contingent liabilities are resolved, funds held in escrow under the sales agreements (the "Sales Agreements") for the sale of assets of JWS and the stock of Sea Cliff are released, and post closing adjustments under the Sales Agreements are agreed upon, additional amounts of the sales proceeds may become available, from time to time, for additional redemptions of the SellCo Notes. The SellCo Notes mature on December 15, 2004 if not deemed canceled at an earlier date as discussed above under Supplemental SellCo Note. Other Long-Term Debt Other long-term debt consists primarily of loans for real estate, office equipment, automobiles and building improvements. As of December 31, 1996 and 1995, respectively, long-term debt, excluding current maturities, totaling $1.8 million and $1.9 million was owed by certain of the Company's subsidiaries. The aggregate amount of other long-term debt maturing during the next five years is approximately: $0.1 million in 1997; $0.3 million in 1998; $0.1 million in each of 1999; 2000, 2001 and $1.2 million thereafter. NOTE H INCOME TAXES The Company files a consolidated federal income tax return including all its U.S. subsidiaries. At December 31, 1996, the Company had net operating loss carryforwards ("NOLs") for U.S. income tax purposes of approximately $200.0 million, which expire in the years 2007 through 2011. 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 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 Effective Date will result in a charge to the tax provision (provision in lieu of income taxes) and be allocated to reorganization value in excess of amounts allocable to identifiable assets established in connection with the Company's emergence from bankruptcy and to capital surplus. For the year ended December 31, 1996 the Company allocated approximately $4.5 million of its tax provision to reorganization value in excess of amounts allocable to identifiable assets which was classified as Other Assets under the caption "Miscellaneous" in the accompanying Consolidated Balance Sheet as of December 31, 1995, thereby reducing this balance to zero. The remaining utilization of NOLs and other deferred tax assets, approximately $2.3 million, have been applied to capital surplus for the year ended December 31, 1996. SFAS 109 requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has provided a valuation allowance as of December 31, 1996 and 1995 of $91.1 million and $97.2 million, respectively, for the full amount of the tax benefit of its NOLs and other deferred tax assets. The income tax provision (benefit) relating to continuing operations in the accompanying Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 consists of (in thousands): Predecessor Reorganized Company Company 1996 1995 1994 ------------ ------------ ----------- Current: Federal $6,068 $-- $-- State and local 760 925 1,000 Foreign 703 75 -- ------------ ------------ ----------- 7,531 1,000 1,000 ------------ ------------ ----------- Deferred: State and Local -- -- (1,332) ------------ ------------ ----------- -- -- (1,332) ------------ ------------ ----------- $7,531 $1,000 $(332) ============ ============ =========== Factors accounting for the variation from U.S. statutory income tax rates relating to continuing operations for the years ended December 31, 1996, 1995 and 1994 are as follows (in thousands): Predecessor Reorganized Company Company 1996 1995 1994 ------------ ----------- ------------ Federal income taxes at the statutory rate $5,939 $(3,449) $(9,782) State and local income taxes, net of federal tax benefits 494 650 650 Foreign income taxes 1,094 -- -- Valuation allowance against deferred tax asset -- 3,799 8,800 Other 4 -- -- ------------ ----------- ------------ $7,531 $1,000 $(332) ============ =========== ============ Factors accounting for the variation from U.S. statutory income tax rates relating to discounted operations for the year ended December 31, 1994 are as follows (in thousands): Predecessor Company 1994 --------------- Federal income taxes at the statutory rate $3,576 Valuation allowance against deferred tax asset (3,576) =============== $-- =============== The components of the net deferred income tax liability for the years ended December 31, 1996 and 1995 are as follows (the 1996 and 1995 net deferred income tax liability related to NAHFS have been netted against NAHFS) (in thousands): 1996 1995 ----------- ------------ Deferred tax assets: Net operating loss carryforward $78,878 $91,987 Excess of amounts expensed for financial statement purposes over amounts deducted for income tax purposes 28,527 42,593 Other 2,899 2,899 ----------- ------------ Total deferred tax asset 110,304 137,479 ----------- ------------ Deferred tax liabilities: Costs capitalized for financial statement purposes and deducted to income tax purposes 19,175 40,233 ----------- ------------ Total deferred tax liability 19,175 40,233 ----------- ------------ Net deferred tax asset before valuation allowance 91,129 97,246 Valuation allowance for net deferred tax asset (91,129) (97,246) =========== ============ Net deferred income tax liability $-- $-- =========== ============ Income (loss) before income taxes from continuing operations for the years ended December 31, 1996, 1995 and 1994 consists of the following (in thousands): Predecessor Reorganized Company Company 1996 1995 1994 --------------- ------------ ---------------- United States $18,086 $(10,063) $(10,897) Foreign (1,118) 210 (17,051) =============== ============ ================ $16,968 $(9,853) $(27,948) =============== ============ ================ Income before income taxes from discontinued operations for the year ended December 31, 1994 was derived entirely from domestic operations. NOTE I STOCK OPTIONS AND WARRANTS 1994 Management Stock Option Plan In connection with the Plan of Reorganization the Company adopted a Management Stock Option Plan (the "1994 Plan"), which was approved by the stockholders of the Company. The aggregate number of shares of Common Stock that may be issued pursuant to options under the 1994 Plan may not exceed 1,000,000 shares. The maximum number of shares which may be the subject of options granted to any individual in any calendar year may not exceed 500,000 shares. Options may be granted by the Compensation Committee of the Board of Directors to eligible employees as incentive stock options or as non-qualified stock options. The exercise price of an incentive stock option and a non-qualified stock option must be at least equal to the fair market value of the Common Stock on the date of grant. Options may not be exercised more than ten years after the date of grant. Options may be exercisable at such rate and times as may be fixed by the Compensation Committee of the Board of Directors on the date of grant; however, the rate at which the option first becomes exercisable may not be more rapid than 33-1/3% on each of the first, second and third anniversaries. 1995 Non-Employee Directors' Non-Qualified Stock Option Plan On March 20, 1995, the Company adopted the 1995 Non-Employee Directors' Non-Qualified Stock Option Plan (the "1995 Plan"), which was approved by stockholders of the Company. The 1995 Plan provides for automatic grants of non-qualified stock options to directors of the Company who are not also employees of the Company or a subsidiary. Pursuant to the 1995 Plan, each non-employee director on March 20, 1995 was granted an option to purchase 7,500 shares of Common Stock at an exercise price of $5.125 per share. Under the 1995 Plan, each person who is elected to serve as a non-employee director after March 20, 1995 (including those persons who were non-employee directors on March 20, 1995) is to be granted an option during each calendar year (beginning with 1995) to purchase 3,000 shares of Common Stock on the date on which the Board of Directors holds its first meeting following the annual meeting of stockholders held during such calendar year; however, if, beginning with 1996, an annual stockholders' meeting does not occur within the period ending on the last day of the 16th month following the month in which the prior year's annual meeting was held, such option is to be granted on the last day of such 16th month. Accordingly on November 17, 1995 and June 14, 1996, each non-employee director was granted an option to purchase 3,000 shares of Common Stock at an exercise price of $9.375 and $17.125 per share, respectively. The aggregate number of shares of Common Stock that may be issued pursuant to options under the 1995 Plan may not exceed 200,000 shares. The exercise price of an option granted under the 1995 Plan is equal to the fair market value of the Common Stock on the date of grant. Such options are fully exercisable as of the date of grant. However, no option may be exercised more than ten years after the date of grant. No options may be granted under the 1995 Plan after ten years following the date of its adoption. The Board of Directors may at any time withdraw or amend the 1995 Plan and may, with the consent of the affected holder of an outstanding option, at any time withdraw or amend the terms and conditions of outstanding options. Amendments which would increase the number of shares issuable pursuant to options, change the class of persons who are eligible to be granted options or materially increase the benefits to participants in the 1995 Plan are subject to the approval of the stockholders of the Company. In addition, no amendment may be made more than once every six months to any provision of the 1995 Plan that specifies the directors to whom options may be granted, the timing of option grants, the number or purchase price of shares of Common Stock that can be purchased under options or the time when options may be exercised, except any amendment that is necessary to conform with changes in the Internal Revenue Code or the Employee Retirement Income Security Act of 1974, as amended. The following table summarizes the Company's stock option activity since the Effective Date. 1994 Plan 1995 Plan Weighted Weighted Average Average Shared Price Shares Price --------- ---------- ---------- ---------- Balance, December 15, 1994 -- $-- -- $-- Activity -- -- -- -- --------- ---------- ---------- ---------- Balance December 31, 1994 -- -- -- -- Granted 715,000 5.10 63,000 6.34 --------- ---------- ---------- ---------- Balance December 31, 1995 715,000 5.10 63,000 6.34 Granted 15,000 14.90 18,000 17.13 Forfeited (40,334) 5.13 -- -- Exercised (61,430) 5.13 (28,500) 6.02 --------- ---------- ---------- ---------- Balance December 31, 1996 628,236 $5.33 52,500 $10.21 ========= ---------- ========== ---------- At December 31, 1996 and 1995, approximately 208,000 options and 63,000 options were exercisable, respectively. There were no options exercisable at December 31, 1994. The weighted average exercise price of exercisable options at December 31, 1996 and 1995 was approximately $6.33 and $6.34, respectively. The weighted average fair value of options granted during 1996 and 1995 were $10.10 and $3.28, respectively. The Company applies APB 25 and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized in the accompanying Consolidated Statements of Operations for the years ended December 31, 1996 and 1995 for options granted during those years. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net income and earnings per common share and common equivalent share ("EPS") would have been reduced from the following as reported amounts to the following pro forma amounts: 1996 1995 --------------- --------------- Net Income (Loss): As Reported $9,437 $(10,853) Pro Forma $8,840 $(11,354) Primary EPS: As Reported $0.95 $(1.13) Pro Forma $0.89 $(1.19) Fully Diluted EPS: As Reported $0.95 $(1.13) Pro Forma $0.89 $(1.18) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1996 and 1995: risk-free interest rates from 5.9% to 7.1% representing the risk-free interest rate at the date of grant; expected dividend yields of zero percent; expected lives of 6.5 years; and expected volatility of 57%. Warrants 1,450,000 shares of Common Stock were reserved for issuance upon exercise of Warrants to purchase Common Stock issued pursuant to the Plan of Reorganization. Pursuant to the Plan of Reorganization, the Company issued to the holders of $7,040,000 principal amount of its pre-petition 7 3/4% Convertible Subordinated Debentures, due 2012, and $9,600,000 principal amount of its pre-petition 12% Subordinated Notes due 1996, their pro rata share of each of two series of five-year Warrants to purchase shares of Common Stock, namely, 600,000 Series X Warrants and 600,000 Series Y Warrants, with an exercise price of $12.55 per share and $17.55 per share, respectively. In addition, the Company issued to pre-petition holders of other contingent and statutory subordinate claims and to holders of EMCOR's pre-petition common stock, preferred stock and Warrants of Participation, as well as to the plaintiffs in a stockholder class action lawsuit, their pro rata share of 250,000 Series Z Warrants to purchase shares of Common Stock, which Series Z Warrants had an exercise price of $50.00 per share. The Series Z Warrants expired on December 15, 1996. In addition to the warrants issued above, approximately 28,000 Series X Warrants, 28,000 Series Y Warrants and 12,000 Series Z Warrants were issued to Belmont as a portion of additional interest under the DIP Loan. If the Company's Common Stock trades at $30.46 per share for ten of the preceding fifteen trading days at any time prior to December 15, 1999, the Company may accelerate the expiration date of the Warrants to a date 15 days after notice to such Warrant holders. As of December 31, 1996, the number of Series X Warrants and Series Y Warrants issued and outstanding were approximately 605,000 and 605,000, respectively. NOTE J RETIREMENT PLANS A foreign subsidiary has a defined benefit pension plan covering substantially all eligible employees. The benefits under the plan are based on wages and years of service with the subsidiary. The Company's policy is to fund the minimum amount required by law. Net pension expense for the foreign defined benefit plan included in the accompanying Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 consists of the following components (in thousands): Predecessor Reorganized Company Company 1996 1995 1994 ------------- ------------- -------------- Service costs--benefits earned $4,222 $2,659 $1,725 Interest on projected benefit obligations 4,295 3,337 2,772 Actual return on plan assets (6,264) (6,493) 2,554 Net amortization and deferral 1,254 2,875 (6,296) ============= ============= ============== Net pension expense $3,507 $2,378 $755 ============= ============= ============== The benefit obligations and funded status of the plan at December 31, 1996 and 1995 are as follows (in thousands): 1996 1995 ------------ ------------ Accumulated benefit obligations: Vested $49,663 $38,825 Impact of future salary increases 7,936 6,367 ------------ ------------ Projected benefit obligations 57,599 45,192 Plan assets at market value 58,991 45,503 ------------ ------------ Excess of plan assets over projected benefit obligations 1,392 311 Unrecognized prior service cost 791 790 Unrecognized net gain from past experience different from that assumed and effect of changes in assumptions (663) (898) Unrecognized net asset from initial application of SFAS No. 87 (3,004) (679) ------------ ------------ Accrued pension $(1,484) $(476) ============ ============ The assumptions used as of December 31, 1996, 1995 and 1994 in determining the pension cost and liability shown above were as follows: 1996 1995 1994 ----------------------- Discount rate 8.5% 8.5% 9.0% Rate of salary progressions 6.5% 6.5% 7.0% Rate of return on assets 10.0% 10.0% 10.0% The unrecognized net asset of the foreign plan is being amortized over 15 years. The plan assets are invested approximately 80% in equity securities and 20% in fixed income securities. The Company contributes to various union pension funds based upon wages paid to union employees of the mechanical and electrical construction and facilities services business units. Such contributions approximated $41.1 million, $35.1 million and $41.4 million for the years ended December 31, 1996, 1995 and 1994, respectively. The Company has a defined contribution retirement plan that covers its U.S. non-union eligible employees. Contributions to this plan are based on a percentage of the employee's base compensation. The expense recognized for the years ended December 31, 1996, 1995 and 1994, relating to continuing operations for the defined contribution plan was $2.1 million, $2.1 million and $6.9 million, respectively. NOTE K COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries lease land, buildings and equipment under various leases. The leases frequently include renewal options and require the Company to pay for utilities, taxes, insurance and maintenance expenses. Future minimum payments, by year and in the aggregate, under capital leases, non-cancelable operating leases and related sub-leases with initial or remaining terms of one or more years at December 31, 1996 are as follows (in thousands): Capital Operating Leases Leases Sub-leases Year 1 $237 $12,708 $2,291 Year 2 168 10,330 2,405 Year 3 143 7,972 2,233 Year 4 101 4,698 2,222 Year 5 358 2,567 1,814 Thereafter -- 9,795 8,839 ----------- ---------- ----------- Total minimum lease payments 1,007 $48,070 $19,804 ========== =========== Amounts representing interest 246 ----------- Present value of net minimum lease payments $761 =========== Rent expense relating to continuing operations for the years ended December 31, 1996, 1995 and 1994 was $17.5 million, $17.5 million and $20.2 million, respectively. Rent expense for the years ended December 31, 1996, 1995 and 1994 includes sub-lease rentals of $2.4 million, $1.7 million and $1.4 million, respectively. Rent expense relating to discontinued operations for the year ended December 31, 1994 was $2.8 million. The Company has employment agreements with certain of its executive officers and management personnel. These agreements generally continue until terminated by the executive or the Company and provide for salary continuation for a specified number of months under certain circumstances. Certain of the agreements provide the employees with certain additional rights if a change in control (as defined) of the Company occurs. The Company is contingently liable to sureties in respect of performance and payment bonds issued by the sureties in connection with certain contracts entered into by the Company in the normal course of business. The Company has agreed to indemnify the sureties for any payments made by them in respect of such bonds. NOTE L DISCONTINUED OPERATIONS As discussed in Note C, in May 1996, the Company completed the sale of substantially all of the assets of JWS for an aggregate purchase price of approximately $179.0 million, subject to post-closing adjustments; approximately $1.2 million of this purchase price is being held in escrow pending determination of post-closing adjustments, and in May 1996, the Company also completed the sale of the stock of Sea Cliff for approximately $2.6 million, subject to post-closing adjustments; approximately $0.5 million of this purchase price is being held in escrow for a period of approximately one year pending determination of post-closing adjustments and as collateral security for certain indemnification obligations. Approximately 96% of the common stock of JWS is owned by the Company. The proceeds, as defined, from the sale of JWS' assets have been and will be applied to pay JWS liabilities and preferred stock obligations and to satisfy the minority stock interest in JWS. Of the balance, $15.0 million was used to repay a portion of indebtedness under the Company's then outstanding MES Credit Agreement and approximately $66.5 million was used to redeem in full its Series A Notes. As the liabilities of JWS are finally determined, JWS' various contingent liabilities are resolved, funds held in escrow under the Sales Agreements for the sale of assets of JWS and the stock of Sea Cliff are released, and post closing adjustments under the Sales Agreements are agreed upon, additional amounts of the sales proceeds may become available, from time to time, for additional redemptions of the SellCo Notes. Revenues of the water supply business were $65.0 million for the year ended December 31, 1994. Operating income of the water supply business was $14.3 million for the year ended December 31, 1994. Operating results of discontinued operations (the water supply business) for the year ended December 31, 1994 are as follows (in thousands): Predecessor Company 1994 ------------- Revenues $64,993 Costs and expenses 50,725 ------------- Operating income 14,268 Interest expense (4,052) ------------- Income before taxes 10,216 Provision for income taxes -- ============= Income from discontinued operations $10,216 ============= NOTE M BUSINESSES SOLD AND OTHER NET ASSETS HELD FOR SALE For the year ended December 31, 1994, the Company received cash proceeds of $13.6 million from the sale of certain non-core businesses and other assets. The assets sold included the sale of the Company's telephone systems business, its minority ownership in an environmental business and other non-core businesses. Revenues and operating losses of businesses sold and other net assets held for sale for the year ended December 31, 1994 are as follows (in thousands): Predecessor Company 1994 ---------------- Revenues $168,939 Operating loss $(13,651) NOTE N INSURANCE RESERVES The Company's insurance liability is determined actuarially based on claims filed and an estimate of claims incurred but not yet reported. The present value of such claims was determined at December 31, 1996 and 1995 using a 4% discount rate. The estimated current portion of the insurance liability was approximately $3.2 million and $4.9 million at December 31, 1996 and 1995, respectively. Such amounts are included in "Other accrued expenses and liabilities" in the accompanying Consolidated Balance Sheets. The non-current portion of the insurance liability was approximately $18.5 million and $32.2 million at December 31, 1996 and 1995, respectively. Such amounts are included in "Other Long-Term Obligations". The undiscounted liability was approximately $24.9 million and $42.3 million at December 31, 1996 and 1995, respectively. During the second quarter of 1996, the Company entered into an agreement with one of its insurers to reinsure the Company's obligations to bear certain losses incurred for insurance plan years from October 1, 1992 to September 30, 1995. Under this agreement, amounts previously deposited by the Company with one of its insurers as collateral to fund certain losses under the deductible portion of its insurance program were returned to the Company and used to fund the cost of that agreement and to pay down, in July 1996, approximately $10.1 million of indebtedness under the New Credit Facility. As of December 31, 1996, the Company was utilizing $16.4 million of letters of credit obtained under the New Credit Facility referred to in Note F as collateral for its current insurance obligations, and therefore presently is not required to deposit cash as collateral for such obligations. The Company is subject to regulation with respect to the handling of certain materials used in construction which are classified as hazardous or toxic by Federal, State and local agencies. The Company's practice is to avoid participation in projects principally involving the remediation or removal of such materials. However, where remediation is a required part of contract performance, the Company believes it complies with all applicable regulations governing the discharge of material into the environment or otherwise relating to the protection of the environment. The Company believes that it maintains adequate insurance coverage for its current operations. NOTE O ADDITIONAL CASH FLOW INFORMATION (in thousands) Reorganized Company Predecessor Company December 31, December 31, 1996 1995 1994 ---------- ---------- ------------------ Cash paid during the year for: Interest $7,624 $6,797 $7,250 Income taxes $168 $886 $720 NOTE P SEGMENT INFORMATION The following presents information about continuing operations by geographic areas for the years ended December 31, 1996, 1995 and 1994 (in thousands): Net (Loss) Gain On Businesses Net Operating Sold or Assets Income Held For Identifiable Held Revenues (loss) Sale Assets For Sale ----------- ----------- ---------- ---------- --------- 1996 United States $1,131,882 $16,509 $-- $405,954 $-- United Kingdom 358,334 902 -- 139,620 -- Canada 139,554 1,517 -- 39,499 -- Other 39,504 (1,814) -- 29,674 -- =========== =========== ========== ========== ========= $1,669,274 $17,114 $-- $614,747 $-- =========== =========== ========== ========== ========= 1995 United States $1,035,975 $4,847 $(926) $447,790 $61,969 United Kingdom 379,691 2,383 -- 139,000 -- Canada 135,031 1,307 -- 41,376 -- Other 38,047 (2,644) -- 20,810 -- =========== =========== ========== ========== ========= $1,588,744 $ 5,893 $(926) $648,976 $61,969 =========== =========== ========== ========== ========= 1994 United States $1,334,537 $(9,773) $1,183 $487,438 $55,401 United Kingdom 287,372 (5,274) -- 119,461 -- Canada 113,331 (6,966) -- 35,681 -- Other 28,721 (190) -- 12,588 -- =========== =========== ========== ========== ========= $1,763,961 $ (22,203) $1,183 $655,168 $55,401 =========== =========== ========== ========== ========= Other includes the Far East and Middle East. NOTE Q - SELECTED UNAUDITED QUARTERLY INFORMATION (In Thousands, Except Per Share Data) 1996 QUARTERLY RESULTS March 31 June 30 Sept 30 Dec 31 ---------- ---------- --------- --------- Revenues $382,744 $387,657 $432,452 $466,421 Gross profit 37,172 37,814 41,549 44,253 Net (loss) income ($3,653) $9,207 $1,931 $1,952 ========== ========== ========= ========= Net (loss) income per share ($0.37) $0.93 $0.19 $0.20 ========== ========== ========= ========= 1995 QUARTERLY RESULTS March 31 June 30 Sept 30 Dec 31 ---------- ---------- --------- --------- Revenues $386,015 $381,562 $403,941 $417,226 Gross profit 31,867 31,934 38,709 40,637 Net (loss) income ($6,959) ($5,718) $593 $1,231 ========== ========== ========= ========= Net (loss) income per share ($0.74) ($0.61) $0.06 $0.13 ========== ========== ========= ========= NOTE R LEGAL PROCEEDINGS The Dynalectric Company ("Dynalectric"), a wholly-owned subsidiary of the Company, is a defendant in an action entitled Computran v. Dynalectric, et. al., pending in Superior Court of New Jersey, Bergen County, arising out of its participation in a joint venture. In the action, which was instituted in 1988, the plaintiff, Computran, a participant in and a subcontractor to the joint venture, alleges that Dynalectric wrongfully terminated it from the subcontract, fraudulently diverted funds due it, misappropriated its trade secrets and proprietary information, fraudulently induced it to enter into the joint venture and conspired with other defendants to commit certain acts in violation of the New Jersey Racketeering Influence and Corrupt Organization Act. Dynalectric believes that Computran's claims are without merit and intends to defend this matter vigorously. Dynalectric has filed counterclaims against Computran. Discovery is ongoing and no trial date has been scheduled. In February 1995 as part of an investigation by the New York County District Attorney's office into the business affairs of Herbert Construction Company ("Herbert"), a general contractor that does business with the Company's subsidiary, Forest Electric Corporation ("Forest"), a search warrant was executed at Forest's executive offices. At that time, the Company was informed that Forest and certain of its officers are targets of the continuing investigation. Neither the Company nor Forest has been advised of the precise nature of any suspected violation of law by Forest or its officers. On July 11, 1995, Ted Kohl, a principal of Herbert, and DPL Interiors, Inc., a company allegedly owned by Kohl, were indicted by a New York County grand jury for grand larceny, fraud, repeated failure to file New York City Corporate Tax Returns and related money laundering charges. Kohl was also charged with filing false personal income and earnings tax returns, perjury and offering false instruments for filing with the New York City School Construction Authority. In a press release announcing the indictment, the Manhattan District Attorney said that the investigation disclosed that Mr. Kohl allegedly received more than $7 million in kickbacks from subcontractors through a scheme in which he allegedly inflated subcontracts on Herbert's construction contracts. At a July 11, 1995 press conference following the indictment, the District Attorney announced that the investigation was continuing and that he expected further indictments in the investigation. Forest performs electrical contracting services primarily in the New York City commercial market and is one of the Company's largest subsidiaries. In addition to the above, the Company is involved in other legal proceedings and claims, asserted by and against the Company, which have arisen in the ordinary course of business. The Company believes it has a number of valid defenses to these actions and the Company intends to vigorously defend or assert these claims and does not believe that a significant liability will result. However, the Company cannot predict the outcome thereof or the impact that an adverse result of the matters discussed above will have upon the Company's financial position or results of operations. NOTE S ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Effective January 1, 1994, the Company adopted the provisions of SFAS 112. This standard requires that the cost of benefits provided to former or inactive employees be recognized on an accrual basis of accounting. Previously, the Company recognized such post employment benefit costs (primarily short-term disability and severance costs) when paid. The cumulative effect of adopting SFAS 112 was to record a charge of $2.1 million as of January 1, 1994. Such amount has been reflected in the Consolidated Statements of Operations for the year ended December 31, 1994 under the caption "Cumulative Effect of Change in Method of Accounting for Post -employment Benefits". The adoption of SFAS 112 did not have a material effect on the 1994 loss before extraordinary item and cumulative effect of accounting changes. NOTE T OTHER During 1994, the Company wrote down its investment in Health Care International Ltd. ("HCI"), a Scottish hospital, due to its deteriorating financial condition. HCI was placed in receivership in November, 1994. NOTE U FRESH-START REPORTING The Company has accounted for its reorganization by using the principles of Fresh-Start Accounting as required by SOP 90-7. For accounting purposes, the Company assumed that the Plan of Reorganization was consummated on December 31, 1994. Under the principles of Fresh-Start Accounting, the Company's total net assets were recorded at their assumed reorganization value, with the reorganization value allocated to identifiable assets on the basis of their estimated fair value. Accordingly, the Company's accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts were reduced by approximately $11.6 million. In addition, its intangible assets of approximately $60.5 million were written off. The Company's accumulated stockholders' deficit of approximately $334.5 million and cumulative translation adjustments of $6.2 million were eliminated. The excess of reorganization value over the value of identifiable assets is reported as "Reorganization value in excess of amounts allocable to identifiable assets" (the "Excess Reorganization Value"). The primary valuation methodology employed by the Company, with the assistance of its financial advisors, to determine the reorganization value of the Company was a net present value approach. The valuation was based on the Company's forecasts of unleveraged, after-tax cash flows calculated for each year over the four year period from 1994 to 1997, capitalizing projected earnings before interest, taxes, depreciation and amortization at multiples ranging from 3 to 10 selected to value earnings and cash flows beyond 1997, and discounting the resulting amounts to present value at rates ranging from 10% to 30% selected to approximate the Company's projected weighted average cost of capital. The above calculations resulted in an estimated reorganization value of approximately $81.1 million, of which the Excess Reorganization Value was $5.0 million. As a result of the implementation of Fresh-Start Accounting, the consolidated financial statements of the Company after consummation of the Plan of Reorganization are not comparable to the Company's consolidated financial statements of prior periods, and have been separated by a black line. The effect of the Plan of Reorganization, including the discharge of debt, and the implementation of Fresh-Start Accounting on the Company's Consolidated Balance Sheet as of December 31, 1994 was as follows (in thousands): Adjustments to Record Plan of Reorganization --------------------------------------------------- Debt Pre-Fresh-Start Discharge Fresh-Start Balance and Balance Sheet Exchange Fresh-Start Sheet December of Stock Adjustments December 31, 1994 (a) (f) 31, 1994 --------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents $52,505 $-- $ -- $52,505 Accounts receivable, net 441,958 -- (3,000) 438,958 Costs and estimated earnings in excess of billings on uncompleted contracts 60,912 -- (8,565) 52,347 Inventories 6,910 -- -- 6,910 Prepaid expenses and other 8,115 -- -- 8,115 Net assets held for sale 83,113 -- (27,712)(g) 55,401 ------------- ---------- ----------- ----------- TOTAL CURRENT ASSETS 653,513 -- (39,277) 614,236 ------------- ---------- ----------- ----------- INVESTMENTS, NOTES, AND OTHER LONG-TERM RECEIVABLES 6,122 -- -- 6,122 PROPERTY, PLANT AND EQUIPMENT, NET 33,670 -- -- 33,670 Other assets: Excess of cost of acquired businesses over net assets 57,435 -- (57,435) -- Reorganization value in excess of amounts allocable to identifiable assets -- -- 5,000 5,000 Miscellaneous 51,595 -- (3,125) 48,470 ------------- ---------- ----------- ----------- 109,030 -- (55,560) 53,470 ============= ========== =========== =========== TOTAL ASSETS $ 802,335 $-- $(94,837) $ 707,498 ============= ========== =========== =========== (continued) Adjustments to Record Plan of Reorganization ------------------------------------------------------ Pre-Fresh- Debt Start Discharge Balance and Fresh-Start Sheet Exchange Fresh-Start Sheet December of Stock Adjustments December 31, 1994 (a) (f) 31, 1994 ------------------------------------------------------ CURRENT LIABILITIES: Notes payable $4,803 $-- $-- $4,803 Borrowings under working capital credit lines 40,000 -- -- 40,000 Current maturities of long term debt of capital lease obligations 2,627 (538)(b) -- 2,089 Series A Senior Notes -- 63,785(b) (8,384)(g) 55,401 Accounts payable 219,564 -- -- 219,564 Billings in excess of costs and estimated earnings on uncompleted contracts 115,567 -- -- 115,567 Accrued expenses and other liabilities 84,574 -- -- 84,574 ------------ ------------ ------------- ----------- TOTAL CURRENT LIABILITIES 467,135 63,247 (8,384) 521,998 ------------ ------------ ------------- ----------- LONG TERM DEBT 3,667 68,292(b) (10,729) 61,230 ------------ ------------ ------------- ----------- OTHER LONG TERM OBLIGATIONS 43,140 -- -- 43,140 ------------ ------------ ------------- ----------- PRE-CONSENT DATE LIABILITIES SUBJECT TO COMPROMISE 622,859 (622,859)(b)(c) -- -- ------------ ------------ ------------- ----------- STOCKHOLDERS' (DEFICIT) EQUITY Old Series A Preferred Stock 20,905 (20,905)(d) -- -- Old Common Stock 4,073 (4,073)(d) -- -- New Common Stock -- 94 (d) -- 94 Old Warrants of Participation 576 (576)(d) -- -- New Warrants -- -- 2,179 2,179 Capital Surplus 204,591 25,460 (151,194) 78,857 Cumulative translation adjustments (6,241) -- 6,241 -- (Deficit) (558,370) 491,320 (e) 67,050 -- ------------ ------------ ------------- ----------- TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (334,466) 491,320 (75,724) 81,130 ------------ ------------ ------------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $802,335 $-- $(94,837) $707,498 ============ ============ ============= =========== (a) Reflects adjustments relating to discharge of debt and exchange of newly issued debt and equity securities pursuant to the Plan of Reorganization. (b) Reflects the discharge of old debt and issuance of new debt under the Plan of Reorganization as follows (In thousands): Historical Restructure Fresh Carrying Discharge/ Start Amount Exchange Balance* ------------ ------------ ------------ Senior Notes Payable under Revolving Credit Facility $155,795 $(155,795) $-- Senior Notes Payable under Various Indentures 328,572 (328,572) -- Subordinated Note Payable 9,600 (9,600) -- Convertible Subordinated Debentures 7,040 (7,040) -- ------------ ------------ ------------ Total Debt in Default $501,007 $(501,007) -- ============ ============ ============ Other Senior Notes (included in current maturities of long-term debt) $538 $(538) $-- ============ ============ ============ New 7% Series A Senior Secured Notes $-- $63,785(1) $63,785 ============ ============ ============ New 11% Series C Notes (included in long-term debt) $-- $62,827 $62,827 ============ ============ ============ New 8% Supplemental SellCo Note (included in long-term debt) $-- $5,464 $ 5,464 ============ ============ ============ * The pro forma adjustments to the recorded debt balances reflect the differences between the historical carrying amounts of the old debt securities and the face amount of the new debt securities issued pursuant to the Plan of Reorganization before fresh-start adjustments. (1) The amount of Series A Notes to be issued are based upon an assumed total of $100.0 million of pre-petition general unsecured claims after settlement of disputed and unliquidated pre-petition general unsecured claims. An additional $7.2 million of Series A Notes were available to be issued to holders of general unsecured claims calculated as follows (in millions): Authorized value of Series A Notes $71.0 Series A Notes issued or estimated to be issued 63.8 Series A Notes available for issue $ 7.2 ====== (c) Reflects reduction of recorded amounts of accrued interest, insurance reserves, other impaired liabilities and unexpired leases rejected by the Company during its bankruptcy proceeding classified as pre-consent liabilities subject to compromise (in thousands): Long Accounts Accrued Term Payable Expenses Liabilities Total Accrued interest $-- $43,315 $-- $ 43,315 Insurance reserves -- 9,600 26,800 36,400 Amount due to JWP Information Services, Inc. -- 24,933 -- 24,933 Foreign debt guarantees -- 6,037 -- 6,037 Stock price guarantees -- 5,118 -- 5,118 Preferred dividends in arrears -- 2,257 -- 2,257 Unexpired leases -- -- 1,718 1,718 Directors' retirement benefits -- -- 975 975 Other impaired claims 400 699 -- 1,099 --------- --------- --------- -------- Total $ 400 $91,959 $29,493 $121,852 ========= ========= ========= ========= (d) Reflects the elimination of the recorded book value of old common stock, old preferred stock and warrants of participation upon consummation of the Plan of Reorganization and the issuance of 1,518,000 Warrants and 9,424,083 shares of Common Stock, $.01 par value. (e) The deficit was reduced by the net reduction in debt due to the discharge of old debt and issuance of new debt instruments at face value, as well as the reduction of recorded amounts of impaired liabilities as described in Note (c). Reconciliation to "Gain on debt discharge" shown in the Consolidated Statement of Operations (in thousands): $491,320 Equity adjustment to record plan of reorganization 14,951 Debt discount recorded as Fresh start adjustment (81,130) Fair value of equity securities issue recorded as Fresh-start adjustment (11,892) Series B Notes which were paid on the Effective ------- Date $413,249 Gain on debt discharge ======== (f) To record the adjustments to state assets and liabilities at fair value and to eliminate the deficit in accumulated earnings against additional paid-in capital. Reconciliation to "Fresh-start adjustments" shown in the Consolidated Statement of Operations (in thousands): $ 75,724 Equity adjustment to record plan of reorganization 14,951 Debt discount included in calculation of gain on debt discharge (11,892) Series B Notes which were paid on the Effective ------- Date $ 78,783 Fresh-start adjustments ======== (g) Amount includes approximately $4.1 million of principal reduction of Series A Notes on the Effective Date. NOTE V PRO FORMA STATEMENT OF OPERATIONS The following unaudited Consolidated Pro Forma Statement of Operations reflects the financial results of the Company as if the reorganization had been effective January 1, 1994 (in thousands, except per share data): Operations Sold or Other Held For Pro Forma Pro Forma Historical Sale (a) Adjustments Reorganized ---------- -------- ----------- ----------- REVENUES $1,763,961 $(168,939) $-- $1,595,022 ----------- ------------ ----------- ------------ COSTS AND EXPENSES: Cost of sales 1,607,589 (152,023) -- 1,455,566 Selling, general and administrative 178,575 (30,567) (3,646)(b) 144,362 ----------- ------------ ----------- ------------ 1,786,164 (182,590) (3,646) 1,599,928 ----------- ------------ ----------- ------------ OPERATING LOSS: (22,203) 13,651 3,646 (4,906) Interest expense, net (2,476) 120 (13,211)(c) (15,567) Net gain on businesses sold or held for sale 1,183 -- (1,183)(d) -- Loss on investment (4,452) -- -- (4,452) REORGANIZATION ITEMS: Professional fees (12,535) -- 12,535(e) -- Fresh--start adjustments (78,783) -- 78,783(e) -- ----------- ------------ ----------- ------------ (119,266) 13,771 80,570 (24,925) INCOME TAX BENEFIT (332) -- -- (332) ----------- ------------ ----------- ------------ (LOSS) FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE $(118,934) $13,771 $80,570 $(24,593) =========== ============ =========== ============ NET INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE $(12.62) $1.46 $8.55 $(2.61) =========== ============ =========== ============ (a) Reflects adjustments to the Company's historical Consolidated Statement of Operations to eliminate revenues, cost and expenses and interest. (b) Reflects the following adjustments to selling, general and administrative expenses: To eliminate amortization of goodwill and other intangibles $ 3,646 ======= (c) Reflects the following adjustments to interest expense, net: To record interest expense on 11% Series C Notes based upon the pro forma discounted carrying value and assuming a discount rate of 14% $ 7,745 To record interest expense on 8% SellCo Supplemental Note (as that term is hereafter defined) based upon the pro forma discounted carrying value and assuming a discount rate of 14% 596 To record interest expense on new working capital credit facilities assuming an average of $30.0 million outstanding at 15%(f) 4,500 To reverse interest on debtor-in-possession credit facility (2,030) To record debt issuance costs at closing 2,400 ----- $13,211 ======= Interest expense on the 7% Series A Notes and Series B Notes is not included as a component of interest expense as amounts will be paid from the net cash proceeds of sale of stock or assets of subsidiaries of SellCo and other net assets held for sale. Under the terms of the Series A Notes, interest expense would have been $6.8 million for the year ended December 31, 1994. (d) To eliminate net gain on sale of businesses $ 1,183 ======= (e) To eliminate various legal and other professional fees associated with the Chapter 11 proceeding and to record fair value adjustments in accordance with SOP 90-7. (f) The amount of borrowings under credit lines made available to the Company on the Effective Date was contingent upon the cash requirements of the Company. The following table reflects the impact of various borrowing levels on the pro forma statement of operations: Pro Forma Reorganized - ---------------------------------------------------------------------------- Net loss per share from continuing operations Net Income (loss) before from continuing extraordinary operations before item and Total extraordinary effect cumulative Borrowing Interest and cumulative effect effect of Level Expense of accounting change accounting change ----- ------- -------------------- ----------------- $35 million $16,317 ($25,343) ($2.69) $40 million 17,067 (26,093) (2.77) $45 million $17,817 ($26,843) ($2.85) Report of Independent Public Accountants To the Board of Directors and Stockholders of EMCOR Group, Inc.: We have audited the accompanying Consolidated Balance Sheets of EMCOR Group, Inc. and its subsidiaries (a Delaware corporation) (the "Company"), as of December 31, 1996 and 1995, and the related Consolidated Statements of Operations, Cash Flows and Stockholders' Equity for the years then ended. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of Valuation and Qualifying Accounts is presented for purposes of complying with the Securities and Exchange Commission rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements as of and for the years ended December 31, 1996 and 1995 and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Stamford, Connecticut February 28, 1997 Report of Independent Public Accountants To the Board of Directors and Stockholders of EMCOR Group, Inc.: We have audited the accompanying Consolidated Statements of Operations, Stockholders' Equity (Deficit) and Cash Flows of EMCOR Group, Inc. (formerly JWP INC.) and its subsidiaries (the "Company"), for the year ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to report on these financial statements based on our audits. Our audit also included the financial statement schedule for the year ended December 31, 1994 listed in the Index at Item 14 (a)(2). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to report on these financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Notes A and U to the consolidated financial statements, the Company emerged from Chapter 11 of the U.S. Bankruptcy Code on December 15, 1994. Accordingly, the accompanying financial statements have been prepared in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. The Company accounted for the Reorganization as of December 31, 1994 and adopted Fresh-Start Reporting. In our opinion, such consolidated financial statements present fairly, in all material respects, the Company's operations and its cash flows for the year ended December 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth. As more fully described in Note R to the consolidated financial statements, the Company is involved with certain legal proceedings. The Company is presently unable to predict the outcome of these proceedings, and the impact, if any, that the ultimate resolution of such matters will have upon the Company and its consolidated financial statements. No provision for any liability that may result from the resolution of these uncertainties has been made in the accompanying consolidated financial statements. As discussed in Note S to the consolidated financial statements, the Company changed its method of accounting for post-employment benefits effective January 1, 1994. DELOITTE & TOUCHE LLP New York, New York March 17, 1995 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 with respect to identification of directors is incorporated herein by reference to the material to be included under the caption "Election of Directors" in the Company's definitive proxy statement for its Annual Meeting of Stockholders, at which Directors are to be elected, which definitive proxy statement is to be filed not later than 120 days after the end of the Company's fiscal year ended December 31, 1996. The information called for by Item 10 with respect to "Executive Officers of the Registrant" is included in Part I under the caption "Executive Officers of the Registrant". ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 with respect to executive compensation is incorporated herein by reference to the material to be included in the Company's definitive proxy statement for its Annual Meeting of Stockholders, at which Directors are to be elected, which definitive proxy statement is to be filed not later than 120 days after the end of the Company's fiscal year ended December 31, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 with respect to certain beneficial owners and management is incorporated herein by reference to the material under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in the Company's definitive proxy statement for its Annual Meeting of Stockholders, at which Directors are to be elected, which definitive proxy statement is to be filed not later than 120 days after the end of the Company's fiscal year ended December 31, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 with respect to certain transactions with management and directors is incorporated herein by reference to the material under the caption "Certain Relationships and Related Transactions" in the Company's definitive proxy statement for its Annual Meeting of Stockholders, at which Directors are to be elected, which definitive proxy statement is to be filed not later than 120 days after the end of the Company's fiscal year ended December 31, 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1 The following consolidated financial statements of EMCOR Group, Inc. and subsidiaries are included in Part II, Item 8: Financial Statements: Consolidated Balance Sheets - December 31, 1996 and 1995 Consolidated Statements of Operations - Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows - Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Stockholders' Equity (Deficit) - Years Ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements Report of Independent Public Accountants (a)(2)The following financial statement schedules are included in this Form 10-K report: Schedule II - Valuation And Qualifying Accounts All other schedules are omitted because they are not required, are inapplicable, or the information is otherwise shown in the consolidated financial statements or notes thereto. (a)(3)The exhibits listed on the Exhibit Index following the consolidated financial statements hereof are filed herewith in response to this Item. Schedule II EMCOR Group, Inc. Valuation and Qualifying Accounts Additions Balance Charged To at Costs Other Balance at Description Beginning and Accounts Deductions End of Year of Year Expenses (1) - ------------------------------------------------------------------------------- Allowance for doubtful accounts Year Ended December $14,892 $1,258 $2,736 $(74) $18,812 31, 1996 Year Ended December 19,820 2,538 (3,553) (3,913) 14,892 31, 1995 Year Ended December $31,170 $2,909 $(7,695) $(6,564) $19,820 31, 1994 (1) Deductions represent uncollectible balances of accounts receivable written off, net of recoveries. EMCOR GROUP, INC. EXHIBIT INDEX Exhibit Description Incorporated By Reference No To, or Page Number 2(a) Disclosure Statement and Third Exhibit 2(a) to the Amended Joint Plan of Company's Registration Reorganization (the "Plan of Statement on Form 10 as Reorganization") proposed by originally filed March 17, EMCOR Group, Inc. (formerly JWP 1995 (the "Form 10") INC.) (the "Company" or "EMCOR") and its subsidiary SellCo Corporation ("SellCo"), as approved for dissemination by the United States Bankruptcy Court, Southern District of New York (the "Bankruptcy Court"), on August 22, 1994 2(b) Modification to the Plan of Exhibit 2(b) to Form 10 Reorganization dated September 29, 1994 2(c) Second Modification to the Plan Exhibit 2(c) to Form 10 of Reorganization dated September 30, 1994 2(d) Confirmation Order of the Exhibit 2(d) to Form 10 Bankruptcy Court dated September 30, 1994 (the "Confirmation Order") confirming the Plan of Reorganization, as amended 2(e) Amendment to the Confirmation Exhibit 2(e) to Form 10 Order dated December 8, 1994 2(f) Post--confirmation modification to Exhibit 2(f) to Form 10 the Plan of Reorganization entered on December 13, 1994 2(g) Asset Acquisition Agreement dated Exhibit 2(g) to the Company's February 9, 1996 between The City Annual Report on Form 10-K for of New York, Jamaica Water Supply the year ended December 31, 1995 Company and EMCOR (the "1995 EMCOR Form 10-K") 2(h) Asset Acquisition Agreement dated Exhibit 2(h) to 1995 Form February 9, 1996 between Water 10-K Authority of Western Nassau County, Jamaica Water Supply Company and EMCOR 3(a-1) Restated Certificate of Exhibit 3(a-5) to Form 10 Incorporation of EMCOR filed December 15, 1994 3(a-2) Amendment dated November 28, 1995 Exhibit 3(a-2) to 1995 Form to the Restated Certificate of 10-K Incorporation of EMCOR 3(b) By-Laws Exhibit 3(b) to Form 10 4.1 Credit Agreement (the "Credit Exhibit 4 to the Company's Agreement") dated as of June 19, Report on Form 8-K dated 1996 among EMCOR, certain of its June 25, 1996 subsidiaries and Harris Trust and Savings Bank, individually and as agent, and the lenders which are or become parties thereto Exhibit Description Incorporated By Reference No To, or Page Number 4.2 First Amendment dated as of Page September 27, 1996 to Credit Agreement* 4.3 Second Amendment dated as of Page December 24, 1996 to Credit Agreement* 4.4 Third Amendment dated as of Page February 28, 1997 to Credit Agreement* 4.5 Indenture, dated as of December Exhibit 4.3 to Form 10 15, 1994, among EMCOR, MES, as guarantor, and Fleet National Bank of Connecticut, as trustee, in respect of 11% Series C Notes, Due 2001 ("Series C Indenture") 4.6 First Supplemental Indenture Exhibit 4.4 to 1995 Form 10-K dated as of January 28, 1995 to Series C Indenture 4.7 Second Supplemental Indenture Exhibit 4.9 to the Company's dated as of February 29, 1996 to Registration Statement on Series C Indenture Form S-8 dated April 25, 1996 4.8 Indenture, dated as of December Exhibit 4.4 to Form 10 15, 1994, between SellCo and Fleet National Bank of Connecticut, as trustee, in respect of SellCo's 12% Subordinated Contingent Payment Notes, Due 2004 10(a-1) Employment Agreement dated as of Exhibit 10(e) to the September 14, 1987 between the Company's Annual Report on Company and Sheldon I. Cammaker 10-K for the year ended December 31, 1987 (the "1987 Form 10-K") 10(a-2) Amendment dated March 15, 1988 to Exhibit 10(f) to 1987 Form Employment Agreement dated as of 10-K September 14, 1987 between the Company and Sheldon I. Cammaker 10(b) Employment Agreement dated as of Exhibit 10(t) to the April 18, 1994 between the Company's Annual Report on Company and Frank T. MacInnis Form 10-K for the year ended December 31, 1992 10(c) Employment Agreement dated as of Page January 1, 1996 between the Company and Leicle E. Chesser* 10(d) Employment Agreement dated as of Page January 1, 1996 between the Company and Jeffrey M. Levy* 10(e) 1994 Management Stock Option Plan Exhibit 10(o) to Form 10 Exhibit Description Incorporated By Reference No To, or Page Number 10(f) 1995 Non-Employee Directors' Exhibit 10(p) to Form 10 Non-Qualified Stock Option Plan 10(g) Form of Indemnification Agreement Exhibit 10(q) to Form 10 10(h) Reliance Insurance Companies' Exhibit 10(r) to Form 10 Underwriting and Continuing Indemnity Agreement dated as of November 22, 1994, among the Company, Dyn Specialty Contracting, Inc. ("Dyn"), B&B Contracting & Supply Company ("B&B"), Dynalectric Company ("Dyn Co."), Dynalectric Company of Nevada ("Dyn-- Nevada"), Contra Costa Electric, Inc. ("Contra Costa"), Kirkwood Electric Co., Inc. ("Kirkwood") and Reliance Surety Company, Reliance Insurance Company, United Pacific Insurance Company, Reliance National Indemnity Company, Reliance National Insurance Company of New York and Reliance Insurance Company of Illinois 10(i) Form of Security Agreement dated Exhibit 10(s) to Form 10 as of November 22, 1994 made by each of Dyn, B&B, Dyn Co., Dyn--Nevada, Contra Costa, and Kirkwood, in favor of and for the benefit of Reliance Surety Company, Reliance Insurance Company, United Pacific Insurance Company, Reliance National Indemnity Company and Reliance Insurance Company of Illinois 10(j) Pledge Agreement dated November Exhibit 10(t) to Form 10 22, 1994 between the Company and Reliance Surety Company, Reliance Insurance Company, United Pacific Insurance Company, Reliance National Indemnity Company and Reliance Insurance Company of Illinois 10(k) Pledge Agreement dated November Exhibit 10(u) to Form 10 22, 1994 between Dyn and Reliance Surety Company, Reliance Insurance Company, United Pacific Insurance Company Reliance National Indemnity Company and Reliance Insurance Company of Illinois 10(l) Subordination Agreement dated Exhibit 10(v) to Form 10 November 22, 1994 among Dyn, Dyn Co., B&B, Dyn--Nevada, Contra Costa and Kirkwood and Reliance Surety Company, Reliance Insurance Company, United Pacific Insurance Company, Reliance National Indemnity Company and Reliance Insurance Company of Illinois Exhibit Description Incorporated By Reference No To, or Page Number 11 Computation of Primary Earnings Page Per Common Share and Common Share Equivalent for the years ended December 31, 1996 and 1995* 21 List of Significant Subsidiaries* Page 27 Financial Data Schedule* Page * Filed Herewith Pursuant to Item 601(b)(4)(iii) of Regulation S--K, upon request of the Securities and Exchange Commission, the Registrant hereby undertakes to furnish a copy of any unfiled instrument which defines the rights of holders of long-term debt of the Registrant's subsidiaries. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EMCOR GROUP, INC. ------------------------------------ (Registrant) Date: March 3, 1997 By /s/Frank T. MacInnis ------------------------------------ FRANK T. MacINNIS Chairman of the Board of Directors, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on March 3, 1997 /s/Frank T. MacInnis Chairman of the Board of - -------------------- Director, President and FRANK T. MacINNIS Chief Executive Officer /s/Stephen W. Bershad Director - --------------------- STEPHEN W. BERSHAD /s/David A.B. Brown Director - ------------------- DAVID A.B. BROWN /s/Thomas D. Cunningham Director - ----------------------- THOMAS D. CUNNINGHAM /s/Albert Fried, Jr. Director - -------------------- ALBERT FRIED, JR. /s/Malcolm T. Hopkins Director - --------------------- MALCOLM T. HOPKINS /s/Kevin C. Toner Director - ----------------- KEVIN C. TONER /s/Leicle E. Chesser Executive Vice President and - -------------------- Chief Financial Officer LEICLE E. CHESSER /s/Mark A. Pompa Vice President and Controller - ---------------- MARK A. POMPA EX-4.2 2 FIRST AMENDMENT TO CREDIT AGREEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Exhibit 4.2 EMCOR, Inc. First Amendment to Credit Agreement Harris Trust and Savings Chicago, Illinois and the other Lenders from time to time party hereto Gentlemen: We refer to the Credit Agreement dated as of June 19, 1996 as currently in effect between The Company, DYN and you (the "Credit Agreement"), capitalized terms used without definition below to have the meanings ascribed to them in the Credit Agreement. Upon your acceptance hereof in the space provided for that purpose below, this letter shall serve to amend the Credit Agreement as follows: 1. Addition of EMCOR (UK) Limited as a Borrower. Subject to all of the terms and conditions hereof and of the Credit Agreement, EMCOR (UK) Limited, a United Kingdom corporation ("EMCOR UK") shall be and become a Borrower under the Credit Agreement with a Sublimit equal to the U.S. Dollar Equivalent of (pound)9,000,000 and subject to such Sublimit EMCOR UK Limited shall have all of the rights and obligations of a "Borrower" under the Credit Agreement all with the same force and effect as though it were a signatory as a Borrower thereto. 2. Miscellaneous Except as specifically amended hereby all of the terms, conditions and provisions of the Credit Agreement shall stand and remain unchanged and in full force and effect. No reference to this First Amendment to Credit Agreement need be made in any instrument or document at any time or referring to the Credit Agreement, a reference to the Credit Agreement in any of such to be deemed to be a reference to the Credit Agreement as amended hereby. This First Amendment to Credit Agreement shall be construed in accordance with and governed by the laws of Illinois and may be executed in counterparts and by separate parties on separate counterparts, each to constitute an original, but all one and the same instrument. Any revolving Credit Note executed by EMCOR U.K. shall constitute a "Revolving Credit Note" and a "Note" for all purposes of the Loan Documents. Dated as of this 27th day of September 1996. EMCOR Group, Inc. BY /S/ FRANK T. MACINNIS ------------------------ ITS CHAIRMAN OF THE BOARD, PRESIDENT Dyn Specialty Contracting Inc. BY /S/ JEFFREY M. LEVY ---------------------- ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER EMCOR (UK) Limited BY /S/ FRANK T. MACINNIS ------------------------ ITS DIRECTOR Accepted and agreed as of the date last above written. Harris Trust and Savings Bank BY /S/ JOSEPH E. LONG --------------------- ITS VICE PRESIDENT EX-4.3 3 SECOND AMENDMENT TO CREDIT AGREEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Exhibit 4.3 EMCOR Group, Inc. Second Amendment to Credit Agreement Harris Trust and Savings Chicago, Illinois and the other from time to time Lenders party to the Credit Agreement referred to below Gentlemen: We refer to the Credit Agreement dated as of June 19, 1996 as amended and currently in effect between the EMCOR Group, Inc., DYN Specialty Contracting, Inc., EMCOR (UK) Limited and you (the "Credit Agreement"), capitalized terms used without definition below to have the meanings ascribed to them in the Credit Agreement. Upon your acceptance hereof in the space provided for that purpose below, this letter shall serve to amend the Credit Agreement as follows: 1. Addition of Drake & Scull Engineering Ltd. as a Borrower in lieu of EMCOR (UK) Limited. Subject to all of the terms and conditions hereof and of the Credit Agreement, Drake & Scull Engineering Ltd., a United Kingdom corporation ("Drake & Scull"), shall be and become a Borrower under the Credit Agreement with a Sublimit equal to the U.S. Dollar Equivalent of (pound)12,000,000 and subject to such Sublimit Drake & Scull shall have all of the rights and obligations of a "Borrower" under the Credit Agreement all with the same force and effect as though it were a signatory as a Borrower thereto and EMCOR (UK) Limited, a United Kingdom corporation, shall cease to be a "Borrower" under the Credit Agreement. Drake & Scull hereby agrees to be bound by, and to pay, perform and observe, all of the obligations and agreements of EMCOR (UK) Limited under that certain Application and Agreement for Irrevocable Standby Letter of Credit dated as of July 12, 1996 and executed and delivered by EMCOR (UK) Limited to the Agent (the "London Underground Application") pursuant to which the Agent has issued its Letter of Credit number SPL 35322 in favor of Barclays Bank PLC in the amount of (pound)7,387,754 all with the same force and effect as though Drake & Scull had executed the London Underground Application. The liability of Drake & Scull under the London Underground Application shall be deemed a utilization of the Activated Commitments but such liability and the liability of Drake & Scull under any amendment to the London Underground Application that does not increase the amount of the Letter of Credit issued pursuant thereto above the amount set forth above shall not count against Sublimit of Drake & Scull and the amount of credit available under such Sublimit shall be computed exclusive of the liability under the London Underground Application and any such amendment. Guarantees and Collateral shall be provided by Drake & Scull as and when required by Section 4(c) hereof. 2. Addition of LaSalle National Bank and Bank of Scotland as Lenders Subject to all of the terms and conditions hereof, LaSalle National Bank and Bank of Scotland shall be and become Lenders under the Credit Agreement with Commitments (each of which shall be an Activated Commitment) in the amounts set forth opposite their signatures hereto and with an address for notices as set forth on the signature pages hereto. Each of LaSalle National Bank and Bank of Scotland shall have all of the rights and obligations of a Lender under the Credit Agreement and the other Loan Documents and makes all of the acknowledgments and undertakings to the Agent as are set forth in Section 10 of the Credit Agreement. Each of LaSalle National Bank and Bank of Scotland shall be entitled to receive its Percentage of all commitment fees accruing under Section 3.1 of the Credit Agreement from and after the date this Second Amendment to Credit Agreement becomes effective and of all Letter of Credit fees payable under the first sentence of Section 3.3 of the Credit Agreement from and after the date this Second Amendment to Credit Agreement becomes effective. The Letters of Credit and Revolving Loans which are outstanding as December 23, 1996 are listed on Schedule I attached hereto. After giving effect to LaSalle National Bank and Bank of Scotland becoming "Lenders" under the Credit Agreement and other Loan Documents, $15,000,000 of the Tranche D Activation shall be deemed to have occurred. 3. Non Dollar Borrowings. Anything contained in the Credit Agreement to the contrary notwithstanding, all Borrowings (and repayments thereof) shall be in U.S. Dollars unless and until the Borrowers and all Lenders otherwise agree in writing. 4. Amendments to Specific Provisions of the Credit Agreement. The Credit Agreement shall be further amended as follows: (a) Section 1.1 (Revolving Credit). Section 1.1 of the Credit Agreement shall be amended by adding the following immediately after the third sentence thereof: "The foregoing to the contrary notwithstanding, not more than the greater of $10,000,000 or an amount equal to 15% of the Activated Commitments (but in any event not more than $15,000,000) of the Credit Utilizations extended to Borrowers other than Drake & Scull shall be utilized at any time for purposes other than funding and carrying loans to Operating Companies (the "Operating Company Loans") or, in the case of Letters of Credit, to support obligations of Operating Companies. The Operating Company Loans shall be evidenced by promissory notes of the Operating Companies which are pledged to the Agent as collateral security for the Obligations. Letters of Credit shall be deemed to support obligations of Operating Companies if they support payment of obligations incurred by a Borrower for the benefit of Operating Companies and notwithstanding the fact that they may similarly benefit Borrowers or other subsidiaries thereof." (b) Section 1.3 (Letters of Credit). Section 1.3(b) of the Credit Agreement shall be amended by adding the following immediately after the first sentence thereof: "Each Application executed after December 23, 1996 shall also be co-signed by each Restricted Subsidiary which is liable in respect of the obligation supported thereby (pursuant to which co-signature such Restricted Subsidiaries shall become liable for the reimbursement obligations in respect of the related Letter of Credit) and, in the case of Letters of Credit which support obligations undertaken by a Borrower for the benefit of itself and/or one or more Restricted Subsidiaries (such as letters of credit issued in connection with insurance arrangements which benefit Restricted Subsidiaries), by all Restricted Subsidiaries benefited thereby." (c) Section 4. The Collateral and the Guarantees.. Section 4 of the Credit Agreement shall be amended by adding the following Section 4.3 thereto: "Section 4.3. Certain Guarantees and Collateral. Anything contained in Section 4.1, 4.2 or 6.3(b) hereof to the contrary notwithstanding and whether or not the other conditions precedent to the Tranche B Activation shall have occurred, by not later than April 30, 1997 the conditions contained in clauses (ii) (construed without regard to the parenthetical clause thereof), (iii), (iv) and (v) of Section 6.3(b) shall be satisfied." (d) Section 4.1 (The Collateral). Clause (viii) of the second proviso to the first sentence of Section 4.1 of the Credit Agreement shall be amended by adding the following immediately after the phrase "in the aggregate": "(except that the notes evidencing the Operating Company Loans shall be delivered to the Agent and the liens thereon perfected)". (e) Section 6.3. Activation of the Commitments. The last sentence of Section 6.3 of the Credit Agreement shall be amended and as so amended shall be restated in its entirety to read as follows: "Upon any Tranche D Activation occurring subsequent to the activation accomplished by the December 24, 1996 Second Amendment to Credit Agreement and upon the occurrence of any Tranche B Activation or Tranche C Activation the Commitment of Harris Trust and Savings Bank shall be reduced by the amount of the activation in question. Fifty percent of each such reduction shall be taken against the amount of the Commitment of Harris Trust and Savings Bank which was an Activated Commitment prior to giving effect to the activation in question unless and until the Activated Commitment of Harris Trust and Savings Bank is reduced to $25,000,000 after which all of such reductions shall be taken against the inactive portion of the Harris Trust and Savings Bank Commitment." (f) Section 9.1 (Definitions). Section 9.1 of the Credit Agreement shall be amended by inserting the following definitions therein in alphabetical order: "Drake & Scull" shall mean Drake & Scull Engineering Ltd., a United Kingdom corporation. "Operating Company" shall mean any Restricted Subsidiary whose principal activity consists of the conduct of a trade or business rather than the ownership of equity securities or intangible assets or the provision of administrative or other support services to companies engaged in the operation of a trade or business or the ownership of tangible assets." "Operating Company Loan" shall mean a loan from a Borrower other than Drake & Scull to an Operating Company authorized by resolutions of the Board of Directors of such Operating Company which is (i) payable upon demand, bears interest at the prime commercial rate, the lender's cost of funding such loan or another rate of interest or index rate which is fair and reasonable to both the borrower and the lender and be payable in a stated maximum principal amount, and (ii) evidenced by a promissory note of the applicable Operating Company, reasonably acceptable to the Agent payable to the order of the applicable Borrower upon demand, which note has been endorsed in blank or to the Agent for collateral purposes and delivered to the Agent and as to which the Operating Company in question has executed as of or prior to the time of determination an acknowledgement of pledge in favor of the Agent in the form attached hereto as Exhibit F. In addition, the definitions of the terms "Lenders" and "Required Lenders" shall be amended and as so amended shall be restated in their entirety to read as follows: ""Lenders" shall mean Harris Trust and Savings Bank, LaSalle National Bank, Bank of Scotland and all other lenders becoming parties hereto pursuant to Section 11.18 hereof." ""Required Lenders" shall mean at any time Lenders whose Percentages aggregate 66 and 2/3% or more." (g) Sections 10.4 and 10.5 (Costs and Expenses and Indemnity). Sections 10.4 and 10.5 of the Credit Agreement shall be amended by striking the last sentence of each of such Sections. (h) Section 11.1(b) (U.S. Withholding Tax Exemption). Section 11.1(b) of the Credit Agreement shall be amended by inserting the following at the end thereof: Notwithstanding the foregoing, (i) a Lender which becomes a Lender after the date hereof shall not be required to submit a Form 1001 or Form 4224 until the date it becomes a Lender; and (ii) a Lender shall have no obligations to provide either such Form (or successor form) subsequent to the date it becomes a Lender if such Lender is excused from doing so pursuant to Section 11.1(c). 5. Exhibits. The Credit Agreement shall be amended by adding Exhibit F thereto in the form annexed hereto. 6. Conditions Precedent to Effectiveness. This Second Amendment to Credit Agreement shall become effective upon satisfaction of each of the following conditions precedent: (a) The Agent shall have received counterparts hereof which, taken together, bear the signatures of the Borrowers, the Lenders and EMCOR (UK) Limited; (b) The Agent shall have received a Revolving Credit Note of Drake & Scull Engineering Ltd. for each Lender in such Lender's pro rata share of the Sublimit of Drake & Scull Engineering Ltd. (each such Revolving Credit Note to constitute a "Revolving Credit Note" and a "Note" for all purposes of the Loans Documents); (c) The Agent shall have received Resolutions of the Board of Directors of Drake & Scull Engineering Ltd. authorizing its becoming a Borrower party to the Credit Agreement, the execution and delivery by it of Revolving Credit Notes and its becoming liable in respect of loans and letters of credit as a "Borrower" hereunder; (d) The Agent shall have received an acknowledgement from each of the Guarantors that Drake & Scull Engineering Ltd. shall be treated as a "Borrower" for purpose of its Guaranty; (e) the Agent shall have received for each of LaSalle National Bank and Bank of Scotland a Revolving Credit Note of each Borrower properly signed and completed; (f) each of LaSalle National Bank and Bank of Scotland shall have received such non-refundable fees as may have been agreed to between them and the Borrowers; and (g) the Agent shall have paid to each of LaSalle National Bank and The Bank of Scotland their respective Percentages of all Letter of Credit fees payable under the first sentence of Section 3.3 of the Credit Agreement for the period from the date this Second Amendment to Credit Agreement becomes effective through the date through which such fees have been paid. Upon satisfaction of the foregoing conditions precedent to effectiveness the Agent shall so notify the Company and the Lenders and (i) EMCOR (UK) Limited shall cease to be a "Borrower" hereunder and shall cease to be obligated under the London Underground Application, Drake & Scull shall become a Borrower with a Sublimit as set forth above, the outstanding Revolving Loans from the Lenders to EMCOR (UK) Limited shall automatically be deemed refunded by Revolving Loans in a like amount made by the Lenders to Drake & Scull (all with the same force and effect as though Drake & Scull Engineering Ltd. had always been a Borrower under the Credit Agreement and had been the initial Borrower on such Revolving Loans) and in consideration thereof an equivalent amount of indebtedness of Drake & Scull owing to EMCOR (UK) Limited shall be deemed paid and satisfied and (ii) there shall be such nonratable borrowings and repayments of Revolving Loans under the Credit Agreement as shall be necessary so that after giving effect thereto the percentages of the Activated Commitments in use (including usage through participation in Letter of Credit liabilities and the amount of Revolving Loans owing each Lender) are identical. The Borrowers hereby authorize and direct the Agent to effect the foregoing nonratable borrowings and repayments by calling for borrowings from Bank of Scotland and LaSalle National Bank on their behalf and applying them to the repayment of Revolving Loans owing Harris Trust and Savings Bank in the amounts necessary to effectuate the foregoing. If this Second Amendment to Credit Agreement does become effective then on or before January 17, 1997 the Company shall cause all Restricted Subsidiaries benefited by the Letters of Credit identified on numbered lines 2 and 3 of Schedule I hereto to become jointly liable with the Company for reimbursing all drafts drawn thereunder in a manner reasonably satisfactory to the Required Lenders. If the conditions precedent to effectiveness set forth in this Section 6 have not been satisfied by the close of business on December 31, 1996, any party hereto may upon written or telecopy notice to the Agent withdraw its signature hereto, in which event this agreement shall be of no further force or effect. 7. Miscellaneous. Except as specifically amended hereby all of the terms, conditions and provisions of the Credit Agreement shall stand and remain unchanged and in full force and effect. No reference to this Second Amendment to Credit Agreement need be made in any instrument or document at any time referring to the Credit Agreement, a reference to the Credit Agreement in any of such to be deemed to be a reference to the Credit Agreement as amended hereby. This Second Amendment to Credit Agreement shall be construed in accordance with an governed by the laws of Illinois and may be executed in counterparts and by separate parties on separate counterparts, each to constitute an original but all one and the same instrument. Dated as of this 24th day of December 1996. EMCOR Group, Inc. BY /S/ Frank T. MacInnis ----------------------- Its Chairman of the Board, President Dyn Specialty Contracting Inc. BY /s/ Frank T. MacInnis ------------------------ Its Executive Vice President EMCOR (UK) Limited BY /s/ Frank T. MacInnis ------------------------ Its Director Drake & Scull Engineering Ltd. BY /s/ Frank T. MacInnis ------------------------ Its Director Accepted and agreed as of the date last above written. Commitment (both active and inactive): $78,250,000 Harris Trust and Savings Bank Activated Commitment: $43,250,000 Percentage: 66.538462% By /s/ Joseph E. Long --------------------- Its Vice President Activated Commitment: $11,750,000 BANK OF SCOTLAND Percentage: 18.076923% By /s/ Elizabeth Wilson ----------------------- Its Vice President 565 Fifth Avenue New York, New York 10017 Attention: John P. Carlson Activated Commitment: $10,000,000 LASALLE NATIONAL BANK Percentage: 15.384615% By /s/ Robert W. Frentzel ------------------------- Its First Vice President 135 South LaSalle Street Chicago, Illinois 60603 Attention: Robert W. Frentzel Exhibit F Acknowledgement of Pledge Harris Trust and Savings, as Agent Chicago, Illinois Gentlemen: Each of the undersigned may from time to time receive loans and advances from EMCOR Group Inc. and/or Dyn Specialty Contracting Inc. (the "Lenders"). This will serve to confirm that all such loans and advances will be evidenced by demand promissory notes in the form heretofore submitted to you (the "Notes"). Each of the undersigned acknowledge that the lending companies will be pledging the Notes to you as Agent for certain other from time to time lenders to the lending companies. Each of the undersigned acknowledge that you shall have the right to demand payment of the Notes by notice to the undersigned at its addresses shown below and each of the undersigned agrees that it shall pay the full balance of its Notes together with accrued interest thereon, to you at your offices in Chicago, Illinois upon such demand. VERY TRULY YOURS, [Insert Names and Addresses of Operating Companies] Schedule I Letters of Credit and Revolving Loans Outstanding as of December 23, 1996 Letters of Credit Applicant Amount Expiration Date 1. EMCOR (UK) Limited (pound)7,387,754 12/31/96 (Drake & Scull after giving effect to amendment) 2. EMCOR Group, Inc. $12,210,022 10/1/97 3. EMCOR Group, Inc. up to $12,160,475 9/30/97 Revolving Loans BORROWER Amount EMCOR Group, Inc. -0- DYN Specialty -0- Contracting, Inc. EMCOR (UK) Limited -$14,200,000 EX-4.4 4 THIRD AMENDMENT TO CREDIT AGREEMENT Exhibit 4.4 EMCOR Group, Inc. Third Amendment to Credit Agreement Harris Trust and Savings Bank Chicago, Illinois and the other Lenders from time to time party to the Credit Agreement referred to below Gentlemen: We refer to the Credit Agreement dated as of June 19, 1996 as amended and currently in effect between EMCOR Group, Inc., DYN Specialty Contracting, Inc., Drake & Scull Engineering Ltd. and you (the "Credit Agreement"), capitalized terms used without definition below to have the meanings ascribed to them in the Credit Agreement. Upon your acceptance hereof in the space provided for that purpose below, this letter shall serve to amend the Credit Agreement as follows: 1. Addition of CoreStates Bank, N.A. as a Lender. Subject to all of the terms and conditions hereof, CoreStates Bank, N.A. shall be and become a Lender under the Credit Agreement with a Commitment (which shall be an Activated Commitment) in the amount set forth opposite its signature hereto and with an address for notices as set forth on the signature pages hereto. CoreStates Bank, N.A. shall have all of the rights and obligations of a Lender under the Credit Agreement and the other Loan Documents and makes all of the acknowledgments and undertakings to the Agent as are set forth in Section 10 of the Credit Agreement. CoreStates Bank, N.A. shall be entitled to receive its Percentage of all commitment fees accruing under Section 3.1 of the Credit Agreement from and after the date this Third Amendment to Credit Agreement becomes effective and of all Letter of Credit fees payable under the first sentence of Section 3.3 of the Credit Agreement from and after the date this Third Amendment to Credit Agreement becomes effective. After giving effect to CoreStates Bank, N.A. becoming a "Lender" under the Credit Agreement and other Loan Documents (i) $22,500,000 of the Tranche D Activation shall be deemed to have occurred and (ii) the Activated Commitments and Percentages of the Lenders and the total Commitment of Harris Trust and Savings Bank shall be as set forth on the signature pages hereof. 2. Addition of Comstock Canada, Ltd. as a Borrower. Subject to all of the terms and conditions hereof and of the Credit Agreement, Comstock Canada, Ltd., a Canadian corporation ("Comstock Canada"), shall be and become a Borrower under the Credit Agreement with a Sublimit of $5,000,000 and subject to such Sublimit Comstock Canada shall have all of the rights and obligations of a "Borrower" under the Credit Agreement all with the same force and effect as though it were a signatory as a Borrower thereto. 3. Increase in the Sublimit of Drake & Scull. Subject to all of the terms and conditions hereof, the Sublimit of Drake & Scull shall be increased to the U.S. Dollar Equivalent of (pound)15,000,000. 4. Borrowings in Alternative Currencies. The provisions of Section 3 of the December 24, 1996 Second Amendment to Credit Agreement suspending the provisions of the Credit Agreement permitting Borrowings in Alternative Currencies shall be of no further force and effect and, accordingly, from and after the date this Third Amendment to Credit Agreement becomes effective Borrowings may be made in Alternative Currencies subject to all of the terms and conditions of the Credit Agreement and to the following additional provisions hereof but unless and until all Lenders otherwise agree, the only Alternative Currency shall be pounds sterling. All Borrowings in an Alternative Currency and all interest thereon shall be payable in the Alternative Currency in question. The provisions hereinafter set forth shall supercede any inconsistent provisions contained in the Credit Agreement. (a) Manner of Borrowing in Alternative Currencies. The Company shall give notice to the Agent by no later than 10:00 a.m. (Chicago time) at least three Business Days before the date on which the Company requests the Lenders to advance a Borrowing in an Alternative Currency (such notices to be irrevocable) and to specify the initial Interest Period (as hereinafter defined) selected therefore and the Agent shall promptly notify each Lender of its receipt of each such notice. If any Lender reasonably determines that the currency requested is unavailable to it in the amount and for the term requested it shall so notify the Agent within two hours of its receipt of the aforesaid notice and the Agent shall promptly notify the Company and each other Lender of its receipt of such notice and the request of the Company for the Borrowing in the Alternative Currency in question shall be deemed withdrawn. No later than 10:00 a.m. (Chicago time) at least three Business Days before the lapse of each Interest Period selected by the Company for a Borrowing in an Alternative Currency, the Company shall notify the Agent of the new Interest Period selected for such Borrowing (such notices, once given to be irrevocable) and the Agent shall promptly notify the Lenders thereof. If the Agent has not received a timely notice from the Company of the selection of a new Interest Period as hereinabove provided or if any Lender notifies the Agent within two hours of its receipt of notice from the Agent of the selection by the Company of a new Interest Period for a Borrowing in an Alternative Currency that it has reasonably determined that the currency in question is not readily available to it in the amount and for the term requested, then in any such event the Borrowing in the Alternative Currency in question shall be due and payable on the last day of the then applicable Interest Period therefor. (b) Prepayments of Borrowings in Alternative Currencies. Borrowings in Alternative Currencies may only be voluntarily prepaid on the last day of the applicable Interest Period and then only if the Company has not previously given the Agent a notice of its election of a new Interest Period therefor. Mandatory pre-payments shall be first applied to Borrowings in U.S. Dollars until payment in full thereof and then to the Borrowings in Alternative Currencies in the order in which their Interest Periods expire, but if any such mandatory prepayment of a Borrowing in an Alternative Currency would require the Company or the applicable Borrower to make a payment to the Lenders on account thereof pursuant to the provisions of Section 2(d) hereof, then in lieu thereof and provided always that no Default or Event of Default has occurred and is continuing the Company may request the Agent to hold the amount of the prepayment in question until the applicable Interest Period expires. Cash so held by the Agent shall be and constitute collateral security for the Obligations and may, at the request of the Company and provided that no Default or Event of Default has occurred and is continuing, be invested in investments of the type described in clauses (a) through (c) of Section 7.12 of the Credit Agreement (all such investments to be and constitute collateral security for the Obligations) held by the Agent. The interest earned thereon, absent a Default or Event of Default, shall be released from time to time to the applicable Borrower. (c) Interest on Borrowings in an Alternative Currency. Each Borrowing in an Alternative Currency shall bear interest for each Interest Period applicable thereto at the Applicable Index Rate computed for such Interest Period plus the Applicable Margin. The Applicable Index Rate shall be the rate determined by adding the rate of 2.5% per annum to Adjusted LIBOR for such Interest Period and for the currency in question, such interest to be due and payable on the last day of the Interest Period applicable thereto and at maturity (whether by acceleration or otherwise) and if the applicable Interest Period is longer than three months then on each day occurring every three months after the commencement of such Interest Period: "Adjusted LIBOR" means, for any Interest Period, a rate per annum determined in accordance with the following formula: Adjusted LIBOR = LIBOR ------------------------------------ 1 - Eurocurrency Reserve Percentage "LIBOR" means, for an Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be determined, the average rate of interest per annum (rounded upwards, if necessary, to the nearest one hundred-thousandth of a percentage point) at which deposits in the relevant Alternative Currency in immediately available funds are offered to the Agent at 11:00 a.m. (London, England time) two (2) Business Days before the beginning of such Interest Period by major banks in the interbank eurocurrency market for delivery on the first day of and for a period equal to such Interest Period in an amount equal or comparable to the principal amount of the Borrowing in an Alternative Currency scheduled to be made by the Agent. "LIBOR Index Rate" means, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in the Alternative Currency for a period equal to such Interest Period, which appears on the Telerate Page 3750 for such currency, as of 11:00 a.m. (London, England time) on the day two (2) Business Days before the commencement of such Interest Period. "Telerate Page "3750" means the display designated as "Page 3750", on the Telerate Service (or such other page as may replace Page 3750 on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for pounds sterling. "Eurocurrency Reserve Percentage" means, for any Borrowing in an Alternative Currency, the daily average for the applicable Interest Period of the maximum rate, expressed as a decimal, at which reserves (including, without limitation, any supplemental, marginal and emergency reserves) are imposed during such Interest Period by the Board of Governors of the Federal Reserve System (or any successor) on "eurocurrency liabilities", as defined in such Board's Regulation D (or in respect of any other category of liabilities that includes deposits by reference to which the interest rate on Loans in an Alternative Currency is determined or any category of extensions of credit or other assets that include loans by non-United States offices of any Lender to United States residents), subject to any amendments of such reserve requirement by such Board or its successor, taking into account any transitional adjustments thereto. For purposes of this definition, the Loans in an Alternative Currency shall be deemed to be "eurocurrency liabilities" as defined in Regulation D without benefit or credit for any prorations, exemptions or offsets under Regulation D. The term "Interest Period" means the period commencing on the date a Borrowing in an Alternative Currency is advanced or continued through a new Interest Period and ending 1, 2, 3, or 6 months thereafter; provided, however, that: (i) an Interest Period may not extend beyond the Termination Date; (ii) whenever the last day of any Interest Period would otherwise be a day that is not a Business Day, the last day of such Interest Period shall be extended to the next succeeding Business Day, provided that, if such extension would cause the last day of an Interest Period to occur in the following calendar month, the last day of such Interest Period shall be the immediately preceding Business Day; and (iii) for purposes of determining an Interest Period, a month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month; provided, however, that if there is no numerically corresponding day in the month in which such an Interest Period is to end or if such an Interest Period begins on the last Business Day of a calendar month, then such Interest Period shall end on the last Business Day of the calendar month in which such Interest Period is to end. If any payment of principal on any Loan in an Alternative Currency is not made when due (whether by acceleration or otherwise), such Loan shall bear interest (computed on the basis of 360 days and actual days elapsed) from the date such payment was due until paid in full, payable on demand, at a rate per annum equal to the sum of two percent (2%) plus the rate of interest in effect thereon at the time of such default until the end of the Interest Period applicable thereto and thereafter at a rate per annum equal to the sum of the Applicable Margin, plus a rate of four and one half percent (4.5%) plus the rate of interest per annum as determined by the Agent (rounded upwards, if necessary, to the nearest whole multiple of one-sixteenth of one percent (1/16%)) at which overnight or weekend deposits of the appropriate currency (or, if such amount due remains unpaid more than three Business Days, then for such other period of time not longer than six months as the Agent may elect in its absolute discretion) for delivery in immediately available and freely transferable funds would be offered by the Agent to major banks in the interbank market upon request of such major banks of the applicable period as determined above and in an amount comparable to the unpaid principal amount of any such Loan (or, if the Agent is not placing deposits in such currency in the interbank market, then the Agent's cost of funds in such currency for such period). (d) Funding Indemnity. If any Lender shall incur any loss, cost or expense (including, without limitation, any loss of profit, and any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Lender to fund or maintain any Loan in an Alternative Currency or the relending or reinvesting of such deposits or amounts paid or prepaid to such Lender) as a result of: (i) any payment or prepayment of a Loan in an Alternative Currency on a date other than the last day of its Interest Period for any reason, (ii) any failure (because of a failure to meet the conditions of Borrowing or otherwise) by a Borrower to borrow or continue a Loan in an Alternative Currency, or on the date specified in a notice given pursuant this Agreement, (iii) any failure by a Borrower to make any payment of principal on any Loan in an Alternative Currency when due (whether by acceleration or otherwise), or (iv) any acceleration of the maturity of a Loan in an Alternative Currency as a result of the occurrence of any Event of Default hereunder, then, upon the demand of such Lender, the applicable Borrower shall pay to such Lender such amount as will reimburse such Lender for such loss, cost or expense. If any Lender makes such a claim for compensation, it shall provide to the Company, with a copy to the Agent, a certificate executed by an officer of such Lender setting forth the amount of such loss, cost or expense in reasonable detail (including an explanation of the basis for and the computation of such loss, cost or expense) and the amounts shown on such certificate shall be deemed prima facie correct. (e) Change of Law. Notwithstanding any other provisions of this Agreement or any Note, if at any time any change in applicable law or regulation or in the interpretation thereof makes it unlawful for any Lender to make or continue to maintain Loans in an Alternative Currency or to perform its obligations as contemplated hereby, such Lender shall promptly give notice thereof to the Borrower and such Lender's obligations to make or maintain Loans in an Alternative Currency under this Agreement shall terminate until it is no longer unlawful for such Bank to make or maintain such Loans. The applicable Lender shall prepay on demand the outstanding principal amount of any such affected Loans, together with all interest accrued thereon and all other amounts then due and payable to such Lender under this Agreement; provided, however, subject to all of the terms and conditions of this Agreement, the applicable Borrower may then elect to borrow the principal amount of the affected Loans from such Lender by means of Loans in U.S. Dollars from such Lender, which Loans shall not be made ratably by the Lenders but only from such affected Lender. (f) Unavailability. If prior to the commencement of any Interest Period for any Borrowing of Loans in an Alternative Currency: (a) the Agent determines that deposits in the applicable Alternative Currency (in the applicable amounts) are not being offered to it in the eurocurrency interbank market for such Interest Period, or that by reason of circumstances affecting the interbank eurocurrency market adequate and reasonable means do not exist for ascertaining the applicable LIBOR, or (b) The Required Lenders notify the Agent that (i) LIBOR as determined by the Agent will not adequately and fairly reflect the cost to such Lender of funding their Loans in an Alternative Currency for such Interest Period or (ii) that the making or funding of Loans in the relevant currency has become impracticable, in either case as a result of an event occurring after the date hereof which in the opinion of such Lender materially affects such Loans, then and in any such event the Agent shall not less than two days prior to the commencement of such Interest Period, give notice thereof to the Company and the Lender, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, the obligations of the Lenders to make Loans in the currency so affected shall be suspended. (g) Increased Cost and Reduced Return. If, on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its lending office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall subject any Lender (or its applicable lending office) to any tax, duty or other charge with respect to its Loans in an Alternative Currency, its Notes, its Letter(s) of Credit, or its participation in any thereof, or its obligation to make Loans, issue a Letter of Credit, or to participate therein, or shall change the basis of taxation of payments to any Lender (or its applicable lending office) of the principal of or interest on its Loans in an Alternative Currency, Letter(s) of Credit, or participations therein or any other amounts due under this Agreement in respect of its Loans in an Alternative Currency, Letter(s) of Credit, or participations therein or its obligation to make Eurocurrency Loans, issue a Letter of Credit, or acquire participations therein (except for changes in the rate of tax on the overall net income of such Lender or its lending office imposed by the jurisdiction in which such Lender's principal executive office or applicable lending office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any such requirement included in an applicable Eurocurrency Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Lender (or its applicable lending office) or shall impose on any Lender (or its lending office) or on the interbank market any other condition affecting its Loans, its Notes, its Letter(s) of Credit, or its participation in any thereof, any of its obligation to make Loans, to issue a Letter of Credit, or to participate therein; and the result of any of the foregoing is to increase the cost to such Lender (or its lending office) of making or maintaining any Loan in the currency requested or issuing or maintaining a Letter of Credit, or participating therein, or to reduce the amount of any sum received or receivable by such Lender (or its applicable lending office) under this Agreement or under its Notes with respect thereto, by an amount deemed by such Lender, in its reasonable judgement, to be material, then, within fifteen (15) days after demand by such Lender (with a copy to the Agent), the Company shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction Each Lender that determines to seek compensation under this clause (g) shall notify the Company and the Agent of the circumstances that entitle the Lender to such compensation pursuant to this clause (g) and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation under this clause (g) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 5. Definitions. (a) The definition of the term "Lenders" appearing in Section 9.1 of the Credit Agreement shall be amended and as so amended shall be restated in its entirety to read as follows: ""Lenders" shall mean Harris Trust and Savings Bank, CoreStates Bank, N.A., LaSalle National Bank, Bank of Scotland and all other lenders becoming parties hereto." (b) The following additional definition shall be added to Section 9.1 of the Credit Agreement: ""Comstock Canada" shall mean Comstock Canada, Ltd., a Canadian corporation." 6. Conditions Precedent to Effectiveness. This Third Amendment to Credit Agreement shall become effective upon satisfaction of each of the following conditions precedent: (a) The Agent shall have received counterparts hereof which, taken together, bear the signatures of the Borrowers and the Lenders; (b) the Agent shall have received for CoreStates Bank, N.A. a Revolving Credit Note of each Borrower properly signed and completed; (c) CoreStates Bank, N.A. shall have received such non- refundable fees as may have been agreed to between it and the Borrowers; (d) the Agent shall have paid to CoreStates Bank, N.A. its Percentage of all Letter of Credit fees payable under the first sentence of Section 3.3 of the Credit Agreement for the period from the date this Third Amendment to Credit Agreement becomes effective through the date through which such fees have been paid; (e) The Agent shall have received a Revolving Credit Note of Comstock Canada for each Lender (each such Revolving Credit Note to constitute a "Revolving Credit Note" and a "Note" for all purposes of the Loans Documents); (f) The Agent shall have received Resolutions of the Board of Directors of Comstock Canada authorizing its becoming a Borrower party to the Credit Agreement, the execution and delivery by it of Revolving Credit Notes and its becoming liable in respect of loans and letters of credit as a "Borrower" under the Credit Agreement; and (g) The Agent shall have received an acknowledgement from each of the Guarantors that Comstock Canada shall be treated as a "Borrower" for purpose of its Guaranty. Upon satisfaction of the foregoing conditions precedent to effectiveness the Agent shall so notify the Company and the Lenders and there shall then be such nonratable borrowings and repayments of Revolving Loans under the Credit Agreement as shall be necessary so that after giving effect thereto the percentages of the Activated Commitments in use (including usage through participation in Letter of Credit liabilities and the amount of Revolving Loans owing each Lender) are identical. The Borrowers hereby authorize and direct the Agent to effect the foregoing nonratable borrowings and repayments by calling for borrowings from CoreStates Bank, N.A. on their behalf and applying them to the repayment of Revolving Loans owing the other Lenders. 7. Miscellaneous. Except as specifically amended hereby all of the terms, conditions and provisions of the Credit Agreement shall stand and remain unchanged and in full force and effect. No reference to this Third Amendment to Credit Agreement need be made in any instrument or document at any time referring to the Credit Agreement, a reference to the Credit Agreement in any of such to be deemed to be a reference to the Credit Agreement as amended hereby. This Third Amendment to Credit Agreement shall be construed in accordance with and governed by the laws of Illinois and may be executed in counterparts and by separate parties on separate counterparts, each to constitute an original but all one and the same instrument. Dated as of this 28th day of February 1997. EMCOR GROUP, INC. By Frank T. MacInnis ----------------- Its President and Chief Executive Officer DYN SPECIALTY CONTRACTING INC. By Frank T. MacInnis ----------------- Its Executive Vice President DRAKE & SCULL ENGINEERING LTD. By Frank T. MacInnis ----------------- Its Director COMSTOCK CANADA, LTD. By Frank T. MacInnis ----------------- Its Director Accepted and agreed as of the date last above written. Commitment (both active and inactive): $63,250,000 HARRIS TRUST AND SAVINGS BANK Activated Commitment: $35,750,000 Percentage: 49.310345% By /s/ Wes W. Frangul ------------------ Its Vice President Activated Commitment: $15,000,000 CORESTATES BANK, N.A. Percentage: 20.689655% By /s/ Michael J. Labrum --------------------- Its Vice President 1339 Chestnut Street Philadelphia, PA 19101-7618 Attention: Michael J. Labrum Activated Commitment: $11,750,000 BANK OF SCOTLAND Percentage: 16.206897% By /s/ Catherine M. Oniffrey ------------------------- Its Vice President Activated Commitment: $10,000,000 LASALLE NATIONAL BANK Percentage: 13.793103% By /s/ Robert W. Frentzel ---------------------- Its First Vice President EX-10 5 LEICLE E. CHESSER EMPLOYMENT AGREEMENT Exhibit 10(c) EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of this 1st day of January, 1996 by and between EMCOR GROUP, INC., a Delaware Corporation (the "Company"), and LEICLE E. CHESSER ("Executive"). RECITALS In order to induce Executive to continue to serve as Executive Vice President and Chief Financial Officer of the Company, the Company desires to provide Executive with compensation and other benefits under the conditions set forth in this Agreement. Executive is willing to continue 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 continue to employ Executive during the Period of Employment (as hereinafter defined) as Executive Vice President and Chief Financial Officer of the Company. Executive shall have the customary powers, responsibilities and authorities of similarly situated executive officers of similar corporations of the size, type and nature of the Company as it may exist from time to time, subject to the direction of the Chief Executive Officer of the Company (the "CEO"). 1.2 Subject to the terms and condition hereof, Executive hereby agrees to serve as Executive Vice President and Chief Financial Officer of the Company and shall devote his full working time and efforts, to the best of his ability, experience and talent, to the performance of the services, duties and responsibilities in connection therewith. Except upon the prior written consent of the CEO, 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 CEO, as a member of boards of directors of other companies, provided, that such activities do not interfere with the performance of Executive's duties hereunder. 2. Period of Employment. Executive's employment under this Agreement shall commence on January 1, 1996 (the "Commencement Date") and shall continue through the earlier of December 31, 1997 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. 3. Compensation. . 3.1 Salary. The company shall pay Executive a base salary ("Base Salary") at the rate of $309,000 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 by the amount specified by the Compensation and Personnel Committee of the Board of Directors of the Company (the "Committee"). 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. The amount of the Bonus shall be determined by the Committee in its sole discretion. 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 Committee approval, elects to make available generally to its senior executive officers hereafter, including, but not limited to (a) retirement, pension and profit-sharing; and (b) medical, dental, hospitalization, life insurance, short and long-term disability, accidental death and dismemberment and travel accident coverage; provided that Executive shall pay such portion of the premiums therefor as is customarily paid by senior executives of the Company. 4.2 Vacation, Fringe and Other Benefits. Executive shall be entitled to the number of vacation days customarily accorded senior executives of the Company. In addition, during the Period of Employment, the Company shall pay Executive $700 per month for leasing (plus maintenance 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. 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 ("Insurance Policy") for directors and officers 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 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 greater of (A) Executive's Base Salary at the highest annual rate in effect during the Period of Employment, for the period from the date of termination through December 31, 1997 or (B) one times Executive's Base Salary at its then current annual rate; and (ii) the greater of (A) the Bonus payable by the Company pursuant to Section 3.2 times the number of full or partial calendar years remaining from the date of termination through December 31, 1997 or (B) one times Executive's Bonus. For purposes of this Section 6.1 (a), the amount of the Bonus shall be deemed to be the highest Bonus paid to Executive during the Period of Employment; and (iii) In the event of termination of Executive's employment for Good Reason (within 60 days following the occurrence of such Good Reason) following a Change in Control (as hereinafter defined), the amounts payable pursuant to subsections 6.1 (a) (i) and (ii) shall be increased by 50%; provided, however, that this clause (iii) shall only apply in the case of a Change in Control. In addition to the amount described in subsections 6.1 (a) (i) - (iii), Executive shall be entitled to receive: (iv) 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; (v) until the earlier of December 31, 1997 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, 1997 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 (vi) 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. (b) If Executives' employment is terminated by the Company other than for Cause or Executive terminates his employment for Good Reason, the Company shall take all action necessary to cause the Executive to be fully vested as of the expiration of the Period of Employment in employee benefit plans of the Company (other than stock options) with respect to which the amount of any benefit payable thereunder is determined in whole or in part by years of service with the Company. In the event the terms of any such employee benefit plan do not permit such vesting, the Company shall pay to the Executive an amount equal to such unvested benefit. (c) For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express prior written consent): (i) Any material reduction by the Company of Executive's duties or responsibilities or any removal of Executive from his position, except in connection with the termination of Executive's employment (A) upon the termination of the Period of Employment on December 31, 1997, (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 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 with 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 or Executive's principal business location is changed to a location more than 30 miles from Executive's principal business location immediately prior to a Change in Control; (vi) The Company shall cease to keep in effect the policy of directors' and officers' liability insurance for Executive described in Section 5; or (vii) The termination of the Indemnity Agreement effective as of April 20, 1995 between 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 (d) 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 if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the beneficial owner (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, (iv) there occurs any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company or (v) there occurs any other event designated as a Change in Control by the Board for purposes of this Agreement. (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, and 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, provided, however, that any amount described in this subsection (a) in respect of the calendar year in which Executive's employment terminates shall be determined with respect to the period commencing January 1 of such year and expiring on the day on which the Period of Employment terminates; (b) until the earlier of December 31, 1997 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 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, and 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, provided, however, that any amount described in this Section 6.3 in respect of the calendar year in which Executive's employment terminates shall be determined with respect to the period commencing January 1 of such year and expiring on the day on which the Period of Employment terminates; 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, including, without limitation, the benefits referred to in subsection 6.1(b) hereof. The term "Cause" shall be limited to (a) action by Executive involving willful malfeasance in connection with his employment which results in material harm to the Company, (b) material and continuing breach by Executive of the terms of this Agreement which breach is not cured within 30 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 of Directors of the Company (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 the 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 (i) 18 months from the date of such termination or (ii) December 31, 1997, 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: Leicle E. Chesser 101 Merritt Seven, 7th Floor Norwalk, CT 06851 to Company: Frank T. MacInnis Chairman, President and Chief Executive Officer EMCOR Group, Inc. 101 Merritt Seven 7th Floor Norwalk, CT 06851 with a copy to: Sheldon I. Cammaker EMCOR Group, Inc. 101 Merritt Seven 7th Floor Norwalk, CT 06851 Any such notice or communication shall be delivered by hand or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the actual date of delivery or mailing shall determine the time at which notice was given. 12. Agreement to Perform Necessary Acts. Each party agrees to perform any further acts and to execute and deliver any further documents that may be reasonably necessary to carry out the provisions of this Agreement. 13. Separability; Legal Actions; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof, which shall remain in full force and effect. Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement that cannot be resolved by Executive and the Company, including any dispute as to the calculation of Executive's benefits or any payments hereunder, shall be submitted to arbitration in New York, New York in accordance with the laws of the State of New York and the procedures of the American Arbitration Association, except that if Executive institutes an action relating to this Agreement, Executive may, at Executive's option, bring that action in any court of competent jurisdiction. All expenses, including legal expenses incurred by Executive, relating to any arbitration shall be paid by the Company. Judgment may be entered on an arbitrator(s)' award in any court having jurisdiction. 14. Assignment. This contract shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of the laws of intestate succession) or by the Company (any such purported assignment by either shall be null and void), except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or business of the Company. 15. Amendment; Waiver. The Agreement may be amended at any time, but only by mutual written agreement of the parties hereto. Any party may waive compliance by the other party with any provision hereof, but only by an instrument in writing executed by the party granting such waiver. 16. Entire Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative or other legal proceeding involving this Agreement. 17. Death or Incompetence. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his estate or other legal representative. 18. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. The provisions of this Section are in addition to the survivorship provisions of any other section of this Agreement. 19. Governing Law. This Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of New York without reference to rules relating to conflicts of law. 20. Withholding. The Company shall be entitled to withhold from payment the amount of any taxes required to be withheld 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: /s/ Frank T. MacInnis ---------------------- Its Chairman of the Board of Directors, President and Chief Executive Officer EXECUTIVE /s/ Leicle E. Chesser --------------------- Leicle E. Chesser EX-10 6 JEFFREY M. LEVY EMPLOYMENT AGREEMENT Exhibit 10(d) EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of this 1st day of January, 1996 by and between EMCOR GROUP, INC., a Delaware Corporation (the "Company"), and JEFFREY M. LEVY ("Executive"). RECITALS In order to induce Executive to continue to serve as Executive Vice President and Chief Operating Officer of the Company, the Company desires to provide Executive with compensation and other benefits under the conditions set forth in this Agreement. Executive is willing to continue 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 continue to employ Executive during the Period of Employment (as hereinafter defined) as Executive Vice President and Chief Operating Officer of the Company. Executive shall have the customary powers, responsibilities and authorities of similarly situated executive officers of similar corporations of the size, type and nature of the Company as it may exist from time to time, subject to the direction of the Chief Executive Officer of the Company (the "CEO"). 1.2 Subject to the terms and condition hereof, Executive hereby agrees to serve as Executive Vice President and Chief Operating Officer of the Company and shall devote his full working time and efforts, to the best of his ability, experience and talent, to the performance of the services, duties and responsibilities in connection therewith. Except upon the prior written consent of the CEO, 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 CEO, as a member of boards of directors of other companies, provided, that such activities do not interfere with the performance of Executive's duties hereunder. 2. Period of Employment. Executive's employment under this Agreement shall commence on January 1, 1996 (the "Commencement Date") and shall continue through the earlier of December 31, 1997 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. 3. Compensation. . 3.1 Salary. The company shall pay Executive a base salary ("Base Salary") at the rate of $309,000 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 by the amount specified by the Compensation and Personnel Committee of the Board of Directors of the Company (the "Committee"). 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. The amount of the Bonus shall be determined by the Committee in its sole discretion. 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 Committee approval, elects to make available generally to its senior executive officers hereafter, including, but not limited to (a) retirement, pension and profit-sharing; and (b) medical, dental, hospitalization, life insurance, short and long-term disability, accidental death and dismemberment and travel accident coverage; provided that Executive shall pay such portion of the premiums therefor as is customarily paid by senior executives of the Company. 4.2 Vacation, Fringe and Other Benefits. Executive shall be entitled to the number of vacation days customarily accorded senior executives of the Company. In addition, during the Period of Employment, the Company shall pay Executive $655.19 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. 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 ("Insurance Policy") for directors and officers 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 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 greater of (A) Executive's Base Salary at the highest annual rate in effect during the Period of Employment, for the period from the date of termination through December 31, 1997 or (B) one times Executive's Base Salary at its then current annual rate; and (ii) the greater of (A) Bonus payable by the Company pursuant to Section 3.2 times the number of full or partial calendar years remaining from the date of termination through December 31, 1997 or (B) one times Executive's Bonus. For purposes of this Section 6.1 (a), the amount of the Bonus shall be deemed to be the highest Bonus paid to Executive during the Period of Employment; and (iii) In the event of termination of Executive's employment for Good Reason (within 60 days following the occurrence of such Good Reason) following a Change in Control (as hereinafter defined), the amounts payable pursuant to subsections 6.1 (a) (i) and (ii) shall be increased by 50%; provided, however, that this clause (iii) shall only apply in the case of a Change in Control. In addition to the amount described in subsections 6.1 (a) (i) - (iii), Executive shall be entitled to receive: (iv) 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; (v) until the earlier of December 31, 1997 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, 1997 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 (vi) 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. (b) If Executives' employment is terminated by the Company other than for Cause or Executive terminates his employment for Good Reason, the Company shall take all action necessary to cause the Executive to be fully vested as of the expiration of the Period of Employment in employee benefit plans of the Company (other than stock options) with respect to which the amount of any benefit payable thereunder is determined in whole or in part by years of service with the Company. In the event the terms of any such employee benefit plan do not permit such vesting, the Company shall pay to the Executive an amount equal to such unvested benefit. (c) For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express prior written consent): (i) Any material reduction by the Company of Executive's duties or responsibilities or any removal of Executive from his position, except in connection with the termination of Executive's employment (A) upon the termination of the Period of Employment on December 31, 1997, (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 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 with 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 or Executive's principal business location is changed to a location more than 30 miles from Executive's principal business location immediately prior to a Change in Control; (vi) The Company shall cease to keep in effect the policy of directors' and officers' liability insurance for Executive described in Section 5; or (vii) The termination of the Indemnity Agreement effective as of April 20, 1995 between 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 (d) 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 if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the beneficial owner (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, (iv) there occurs any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company or (v) there occurs any other event designated as a Change in Control by the Board for purposes of this Agreement. (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, and 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, provided, however, that any amount described in this subsection (a) in respect of the calendar year in which Executive's employment terminates shall be determined with respect to the period commencing January 1 of such year and expiring on the day on which the Period of Employment terminates; (b) until the earlier of December 31, 1997 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 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, and 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, provided, however, that any amount described in this Section 6.3 in respect of the calendar year in which Executive's employment terminates shall be determined with respect to the period commencing January 1 of such year and expiring on the day on which the Period of Employment terminates; 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, including, without limitation, the benefits referred to in subsection 6.1(b) hereof. The term "Cause" shall be limited to (a) action by Executive involving willful malfeasance in connection with his employment which results in material harm to the Company, (b) material and continuing breach by Executive of the terms of this Agreement which breach is not cured within 30 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 of Directors of the Company (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 the 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 (i) 18 months from the date of such termination or (ii) December 31, 1997, 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: Jeffrey M. Levy 101 Merritt Seven, 7th Floor Norwalk, CT 06851 to Company: Frank T. MacInnis Chairman, President and Chief Executive Officer EMCOR Group, Inc. 101 Merritt Seven 7th Floor Norwalk, CT 06851 with a copy to: Sheldon I. Cammaker, Esq. EMCOR Group, Inc. 101 Merritt Seven 7th Floor Norwalk, CT 06851 Any such notice or communication shall be delivered by hand or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the actual date of delivery or mailing shall determine the time at which notice was given. 12. Agreement to Perform Necessary Acts. Each party agrees to perform any further acts and to execute and deliver any further documents that may be reasonably necessary to carry out the provisions of this Agreement. 13. Separability; Legal Actions; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof, which shall remain in full force and effect. Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement that cannot be resolved by Executive and the Company, including any dispute as to the calculation of Executive's benefits or any payments hereunder, shall be submitted to arbitration in New York, New York in accordance with the laws of the State of New York and the procedures of the American Arbitration Association, except that if Executive institutes an action relating to this Agreement, Executive may, at Executive's option, bring that action in any court of competent jurisdiction. All expenses, including legal expenses incurred by Executive, relating to any arbitration shall be paid by the Company. Judgment may be entered on an arbitrator(s)' award in any court having jurisdiction. 14. Assignment. This contract shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of the laws of intestate succession) or by the Company (any such purported assignment by either shall be null and void), except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or business of the Company. 15. Amendment; Waiver. The Agreement may be amended at any time, but only by mutual written agreement of the parties hereto. Any party may waive compliance by the other party with any provision hereof, but only by an instrument in writing executed by the party granting such waiver. 16. Entire Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative or other legal proceeding involving this Agreement. 17. Death or Incompetence. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his estate or other legal representative. 18. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. The provisions of this Section are in addition to the survivorship provisions of any other section of this Agreement. 19. Governing Law. This Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of New York without reference to rules relating to conflicts of law. 20. Withholding. The Company shall be entitled to withhold from payment the amount of any taxes required to be withheld 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: /s/ Frank T. MacInnis ---------------------- Its Chairman of the Board of Directors, President and Chief Executive Officer EXECUTIVE /s/ Jeffrey M. Levy ------------------- Jeffrey M. Levy EX-11 7 SCHEDULE OF COMPUTATION OF EARNINGS Exhibit 11 EMCOR Group, Inc. Schedule of Computation of Earnings Per Common Share and Common Equivalent Share (Amounts In Thousands, Except Share and Per Share Data) Years Ended December 31, 1996 1995 ------------------------------- Primary - ------------------------------------------- Net income (loss) $9,437 $(10,853) ============== ============== Weighted average number of common shares outstanding 9,479,817 9,424,201 Add - common equivalent shares (determined using the "treasury stock" method) representing shares issuable upon exercise of stock options 458,834 156,217 -------------- -------------- Weighted average number of shares used in calculation of primary income per common share and common equivalent share 9,938,651 9,580,418 ============== ============== Primary net income (loss) per common share and common equivalent share $0.95 $(1.13) ============== ============== Fully Diluted - ------------------------------------------- Net income (loss) for primary income per common share and common equivalent share $9,437 $(10,853) ============== ============== Weighted average number of shares used in calculating primary income per common share and common equivalent share 9,938,651 9,580,418 Shares issuable upon exercise of stock options included in primary calculation above (458,834) (156,217) Shares issuable upon exercise of stock options based on year-end market price 458,834(a) 182,657 -------------- -------------- Weighted average number of shares used in calculation of fully diluted (loss) income per common share and common equivalent share 9,938,651(a) 9,606,858 ============== ============== Fully diluted net income (loss) per common share and common equivalent share $0.95 $(1.13) ============== ============== (a) The weighted average number of shares used in calculation of income per common share and common equivalent share for both primary and fully diluted calculations are equivalent as the average market price for the year ended December 31, 1996 exceeded the market price on December 31, 1996. EX-21 8 LIST OF SIGNIFICANT SUBSIDIARIES EXHIBIT 21 LIST OF SIGNIFICANT SUBSIDIARIES Dyn Specialty Contracting, Inc. MES Holdings Corporation SellCo Corporation EMCOR Construction Holdings Services Inc. EMCOR International, Inc. EMCOR Mechanical/Electrical Services (East), Inc. EMCOR Mechanical/Electrical Services (MidWest), Inc. EMCOR Mechanical/Electrical Services (West), Inc. EMCOR Mechanical/Electrical Services (South), Inc. EMCOR (UK) Limited Drake & Scull Engineering Ltd. EX-27 9 FDS --
5 (Replace this text with the legend) 0000105634 EMCOR GROUP, INC. 1 U.S. 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 1 50,705 0 461,742 18,812 9,108 578,651 40,676 13,724 614,747 421,698 0 95 0 0 83,788 614,747 1,669,274 1,669,274 1,508,486 1,652,160 0 1,258 12,646 16,968 7,531 9,437 0 0 0 9,437 0.95 0.95
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