Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
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Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
EMCOR GROUP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
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[GRAPHIC OMITTED]
KNOWLEDGE IN ACTION(TM)
EMCOR GROUP, INC.
301 Merritt Seven
Norwalk, Connecticut 06851
--------------------
NOTICE OF ANNUAL MEETING
--------------------
To the Stockholders of EMCOR Group, Inc.
The Annual Meeting of Stockholders of EMCOR Group, Inc. (the "Company")
will be held in the Central Park Room, The Drake Swissotel, 440 Park Avenue, New
York, New York, on Thursday, June 10, 2004 at 10:00 A.M. (local time) for the
following purposes:
1. To elect seven directors to serve until the next annual meeting and
until their successors are duly elected and qualified.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for 2004.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 15,
2004 as the record date for determination of stockholders entitled to receive
notice of, and to vote at, the Annual Meeting and any adjournment thereof.
YOUR ATTENTION IS RESPECTFULLY DIRECTED TO THE ACCOMPANYING PROXY
STATEMENT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE
COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
Sheldon I. Cammaker
SECRETARY
Norwalk, Connecticut
April 27, 2004
[GRAPHIC OMITTED]
KNOWLEDGE IN ACTION(TM)
EMCOR GROUP, INC.
-------------------------
PROXY STATEMENT
-------------------------
2004 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 10, 2004
------------------------------
The enclosed proxy is solicited by the Board of Directors of EMCOR
Group, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held at 10:00 A.M. (local
time) on Thursday, June 10, 2004 in the Central Park Room, The Drake Swissotel,
440 Park Avenue, New York, New York and at any adjournment or postponement of
such meeting. The enclosed proxy may be revoked at any time before it is
exercised by delivering a written notice to the Secretary of the Company stating
that the proxy is revoked, by duly executing a proxy bearing a later date and
presenting it to the Secretary of the Company, or by attending the Annual
Meeting and voting in person. Unless otherwise specified, the proxies from
holders of the Company's Common Stock, par value $.01 per share ("Common
Stock"), will be voted in favor of each proposal set forth in the Notice of
Annual Meeting.
As of April 15, 2004, the Company had outstanding 15,135,157 shares of
Common Stock. Only stockholders of record of Common Stock at the close of
business on April 15, 2004 (the "Record Date") are entitled to notice of, and to
vote at, the Annual Meeting. Each share of Common Stock entitles the holder to
one vote at the Annual Meeting. The mailing address of the principal executive
office of the Company is 301 Merritt Seven, Norwalk, Connecticut 06851, and the
approximate date on which this Proxy Statement and the accompanying proxy are
being first sent or given to stockholders is April 27, 2004.
The Common Stock was the only voting security of the Company
outstanding and entitled to vote on the Record Date. The holders of record of a
majority of the outstanding shares of Common Stock entitled to vote will
constitute a quorum for the transaction of business at the Annual Meeting.
Assuming the presence of a quorum at the Annual Meeting, the affirmative vote of
the holders of a plurality of the votes cast by the holders of shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting is necessary for the election of Directors. The affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting is required for
ratification of the appointment of independent auditors to audit the accounts of
the Company and its subsidiaries. With respect to an abstention from voting on
any matter and broker "non-votes", the shares will be considered present and
entitled to vote at the Annual Meeting for purposes of determining a quorum.
Abstentions will have the effect of a vote against any proposal brought before
the meeting, but will not have an effect on the election of Directors. A broker
"non-vote" occurs if a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular proposal.
Accordingly, broker "non-votes" will be disregarded and will have no effect on
the outcome of the vote on that proposal.
CORPORATE GOVERNANCE
The Company has a long history of good corporate governance practices
that has greatly aided its long-term success. The Board of Directors of the
Company and management have recognized for many years the need for sound
corporate governance practices in fulfilling their respective duties and
responsibilities to stockholders. During the past year the Company has modified
its corporate governance practices to comply with the new corporate governance
listing standards of the New York Stock Exchange and recently adopted rules and
regulations of the Securities and Exchange Commission. In particular, the Board
of Directors has:
o adopted Corporate Governance Guidelines, which provide the
framework for the governance of the Company;
o adopted categorical Standards for Determining Director
Independence, under which six of the seven directors of the
Company are independent; the seventh being Mr. Frank T. MacInnis,
Chairman of the Board, Chief Executive Officer and President of
the Company;
o redesignated the Corporate Governance Committee of the Board of
Directors as the Nominating and Corporate Governance Committee
(the "Corporate Governance Committee") and adopted a new charter
for this Committee setting forth its purpose and responsibilities;
the Corporate Governance Committee has, among other things,
adopted a formal policy for consideration of candidates for Board
membership, including those proposed by stockholders;
o adopted new charters for the Audit Committee and the Compensation
and Personnel Committee (the "Compensation Committee") of the
Board of Directors setting forth the purpose and responsibilities
of each such Committee;
o instituted executive sessions of the Board of Directors, whereby
non-management directors meet without any Company representatives
present at the beginning of each regularly scheduled meeting of
the Board; the chairpersons of the Audit Committee, Compensation
Committee and Corporate Governance Committee rotate presiding over
those sessions;
o amended the Company's Standards of Conduct to revise it and make
it applicable to all directors, officers and employees of the
Company and its subsidiaries and designate it as the Code of
Business Conduct and Ethics; in addition, the Board of Directors
has adopted a separate Code of Ethics for the Company's chief
executive officer and senior financial officers which imposes
additional ethical obligations upon them; and
o instituted a formal process for stockholders and other interested
persons to communicate with one or more members of the Board of
Directors.
The Audit Committee Charter is attached as Appendix A to this proxy
statement and the categorical Standards for Determining Director Independence
are attached as Appendix B to this proxy statement. Copies of these documents,
as well as the charters of the Compensation Committee and the Corporate
Governance Committee, the Corporate Governance Guidelines, the Code of Business
Conduct and Ethics, Code of Ethics for the Company's chief executive officer and
senior financial officers and other corporate governance materials, may be
obtained at the Company's web-site at www.emcorgroup.com or by writing to the
Company at 301 Merritt Seven, Norwalk, Connecticut 06851, Attention: Corporate
Secretary.
COMMUNICATION WITH DIRECTORS. The Board of Directors has adopted a
process by which stockholders and other interested persons may communicate with
members of the Board of Directors as a group, or with one or more members of the
Board (including non-management directors as a group), by writing to them c/o
EMCOR Group, Inc., 301 Merritt Seven, Norwalk, Connecticut 06851, Attention:
Corporate Secretary. Such communications will be forwarded to the individuals
addressed. In addition, communications may be sent to the non-management
directors as a group by e-mail to nonmanagementdirectors@emcorgroup.com or to
the entire Board of Directors by e-mail to alldirectors@emcorgroup.com
-2-
ELECTION OF DIRECTORS (PROPOSAL 1)
At the Annual Meeting, seven directors are to be elected by the holders
of Common Stock to serve until the next Annual Meeting of Stockholders and until
their successors have been duly elected and qualified. To be elected as a
director, each nominee must receive the favorable vote of a plurality of the
shares present in person or represented by proxy and entitled to vote at the
Annual Meeting. Certain information concerning the nominees for election at the
Annual Meeting is set forth below. Each nominee is presently a director of the
Company. While the Board of Directors has no reason to believe that any of those
named as a nominee for election to the Board will not be available as a
candidate, should such a situation arise, the proxy may be voted for the
election of other nominees in the discretion of the persons acting pursuant to
the proxy.
FRANK T. MACINNIS, Age 57. Mr. MacInnis has been Chairman of the Board
and Chief Executive Officer of the Company since April 1994 and President of the
Company since February 26, 2004. He also served as President of the Company from
April 1994 to April 1997. From April 1990 to April 1994, Mr. MacInnis was
President and Chief Executive Officer, and from August 1990 to April 1994 was
Chairman of the Board, of Comstock Group Inc., a nationwide electrical
contracting company. From 1986 to April 1990 Mr. MacInnis served as 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
has or had interests in Comstock Group Inc., Spie Construction Inc., a Canadian
pipeline construction company, and Spie Horizontal Drilling Inc., a United
States company engaged in underground drilling for pipelines and communications
cable. Mr. MacInnis is also a director of The Williams Companies, Inc. and ITT
Industries, Inc.
STEPHEN W. BERSHAD, Age 62. Mr. Bershad has been Chairman of the Board
and Chief Executive Officer for more than the past five years of Axsys
Technologies, Inc., a manufacturer of precision components and systems for high
technology markets. He has been a director of the Company since December 15,
1994.
DAVID A.B. BROWN, Age 60. Mr. Brown has been President of The Windsor
Group, a management consulting firm of which he is a co-founder, for more than
the past five years. He has been a director of the Company since December 15,
1994. Mr. Brown is also a director of Layne-Christensen Corp., Mission Resources
Inc., Pride International, Inc. and NS Group, Inc.
LARRY J. BUMP, Age 64. Mr. Bump, a private investor, has been Chairman
of the Board since 1981 of Willbros Group, Inc., an international engineering
and construction company. From 1977 to 1980, he was President and Chief
Operating Officer of Willbros Group, Inc. and from 1980 until 2002, when he
retired, he was President and Chief Executive Officer of that company. Mr. Bump
has been a director of the Company since February 27, 2003.
ALBERT FRIED, JR., Age 74. Mr. Fried has been Managing Member of Albert
Fried & Company, LLC, a broker/dealer and member of the New York Stock Exchange,
since 1955. He has been a director of the Company since December 15, 1994.
RICHARD F. HAMM, JR., Age 44. Mr. Hamm has been Deputy General Counsel
and a Vice President of Medtronic, Inc., a medical technology company since
April 2002. From July 2000 to April 2002 he was Vice President, Corporate
Development & Planning of Carlson Companies, Inc. ("Carlson"), a global travel,
hospitality and marketing services company, and was Vice President, Corporate
Strategic Development & Acquisitions of Carlson from January 1999 to June 2000.
From January 1997 to December 1998 he was Senior Vice President, Legal and
Business Development of Tropicana Products, Inc. ("Tropicana"), a manufacturer
of fruit juices, and Vice President and General Counsel of Tropicana from June
1993 to January 1997. Mr. Hamm has been a director of the Company since June 19,
1998. He is also a director of Axsys Technologies, Inc.
MICHAEL T. YONKER, Age 61. For more than nine years prior to his
retirement in June 1998, Mr. Yonker was President and Chief Executive Officer of
Portec, Inc., a diversified industrial products company with operations in the
construction equipment, materials handling and railroad products industries. He
has been a director of the Company since October 25, 2002. Mr. Yonker is also a
director of Modine Manufacturing Company and Woodward Governor Company.
-3-
INDEPENDENCE OF DIRECTORS
In order to assist the Board in determining the independence of each
director, the Board of Directors has adopted categorical Standards for
Determining Director Independence, a copy of which is attached to this proxy
statement as Appendix B. To be considered independent the Board must
affirmatively determine that the director has no material relationship with the
Company.
The Board of Directors has determined that six of its seven directors,
including all members of the Audit, Compensation and Corporate Governance
Committees are "independent" as defined by the listing standards of the New York
Stock Exchange, and all applicable rules and regulations of the Securities and
Exchange Commission and for purposes of Rule 162(m) of the Internal Revenue Code
of 1986, as amended. These six directors are: Stephen W. Bershad, David A. B.
Brown, Larry J. Bump, Albert Fried, Jr., Richard F. Hamm, Jr. and Michael T.
Yonker. The seventh director, Frank T. MacInnis, is Chairman of the Board, Chief
Executive Officer and President of the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met nine times during 2003, and Committees of
the Board held 12 meetings during 2003. Each director attended 100% of the
meetings of the Board and Committees on which he served while the director was a
member. As provided in the Company's Corporate Governance Guidelines, each
director is expected to attend all Annual Meetings of Stockholders, and each
director attended the 2003 Annual Meeting of Stockholders.
The Company's Board of Directors has standing Audit, Compensation and
Corporate Governance Committees. The members and the principal responsibilities
of these committees are as follows:
The Audit Committee, comprised of Messrs. Bershad, Brown, Bump and
Hamm, among other things, is responsible for engaging, subject to ratification
by stockholders, overseeing, and discharging, the independent auditors for the
Company, setting their fees, reviewing the scope and audit procedures of the
independent auditors, approving their audit and permitted non-audit services,
reviewing with management and the independent auditors annual and quarter-annual
financial statements, receiving periodic reports from the independent auditors
and management regarding the auditors' independence, meeting with the Company's
management and independent auditors on matters relating to, among other things,
major issues regarding accounting principles and practices and financial
statement presentation, the Company's risk assessment and risk management
policies and major risk exposures, and the adequacy of the Company's internal
audit controls, and reviewing the Company's internal auditing and accounting
personnel.
The Audit Committee met four times during 2003. The Board of Directors
has determined that each of the members of the Audit Committee, Messrs. Bershad,
Brown, Bump, and Hamm, are "audit committee financial experts", within the
meaning of the rules of the Securities and Exchange Commission. Mr. Brown, the
chairperson of the Audit Committee, serves on the audit committees of more than
three public companies. The Board has determined that this simultaneous service
will not impair Mr. Brown's ability to effectively serve on the Company's Audit
Committee.
The Compensation Committee, comprised of Messrs. Bershad, Bump, Fried
and Yonker, oversees the evaluation of the Company's management and reviews and
advises the Board of Directors with respect to the qualifications of individuals
identified as candidates for positions as the Company's Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, and General Counsel and for
the position of chief executive officer of each subsidiary of the Company whose
proposed annual base salary is $400,000 or more. It also reviews and approves
corporate goals and objectives relevant to compensation for the Chief Executive
Officer, evaluates his performance in light of those goals and objectives and,
together with the other independent directors, has sole authority to determine
his compensation level based on this evaluation. The Compensation Committee also
is responsible for reviewing and approving, based on proposals made by the Chief
Executive Officer, compensation for the other executive officers of the Company
as well as the compensation of other officers and employees of the Company and
each subsidiary whose proposed annual base salary is $400,000 or more and for
approving, together with the other independent directors, any employment,
severance or similar contracts for the executive officers of the Company and
other officers and
-4-
employees of the Company and each subsidiary whose annual base salary is
$400,000 or more. The Compensation Committee also makes recommendations to the
Board of Directors with respect to incentive compensation and equity-based plans
for officers and other employees of the Company, administers the 1994 Management
Stock Option Plan, the Executive Stock Bonus Plan, the 2003 Management Stock
Incentive Plan, and the Key Executive Incentive Bonus Plan and reviews executive
development plans. During 2003, the Compensation Committee held four meetings.
The Corporate Governance Committee, comprised of Messrs. Brown, Fried,
Hamm and Yonker, is charged with leading the search for individuals qualified to
become members of the Board of Directors, consistent with criteria approved by
the Board and set forth in the Company's Corporate Governance Guidelines;
recommending to the Board nominees for election to the Board; developing and
overseeing an annual self-evaluation process for the Board and its committees;
making recommendations with respect to corporate governance guidelines,
compensation and benefits for non-employee directors and matters relating to
Board members' retirement and removal, the number, function and membership of
Board committees, and directors and officer liability insurance and indemnity
agreements between the Company and officers and directors. During 2003, the
Corporate Governance Committee held four meetings.
RECOMMENDATIONS FOR DIRECTOR CANDIDATES
The Corporate Governance Committee will consider recommendations for
candidates for Board membership suggested by Committee members, other Board
members and stockholders. A stockholder who wishes the Corporate Governance
Committee to consider his/her recommendations for nominees for the position of
director should submit his/her recommendations in writing to the Corporate
Governance Committee in care of Corporate Secretary, EMCOR Group, Inc., 301
Merritt Seven, Norwalk, Connecticut 06851, together with whatever supporting
material the stockholder considers appropriate. The material, at a minimum,
should include such background and biographical material as will enable the
Corporate Governance Committee to make an initial determination as to whether
the prospective nominee satisfies the criteria for directors set out in the
Company's Corporate Governance Guidelines. The Corporate Governance Guidelines
are available at the Company's website at www.emcorgroup.com. A stockholder may
also nominate director candidates by complying with the Company's bylaw
provisions discussed below under "Other Matters--Stockholder Proposals."
If the Corporate Governance Committee identifies a need to replace a
current member of the Board of Directors, to fill a vacancy in the Board, or to
expand the size of the Board, the process to be followed by the Committee to
identify and evaluate candidates includes (a) consideration of those individuals
recommended by stockholders as candidates for Board membership and those
individuals recommended in response to requests for recommendations made of
Board members and others, including those suggested by third party executive
search firms retained by the Committee, from time to time, (b) meetings from
time to time to evaluate biographical information and background material
relating to candidates, and (c) interviews of selected candidates by members of
the Committee.
As provided in the Company's Corporate Governance Guidelines, in its
assessment of each potential candidate, the Corporate Governance Committee is to
consider the candidate's achievements in his or her personal career, experience,
wisdom, integrity, ability to make independent analytical inquiries, and
understanding of the business environment. The Corporate Governance Committee
will also take into account the willingness of a candidate to devote adequate
time to Board duties. The Corporate Governance Committee may also consider any
other relevant factors that it may from time to time deem appropriate, including
the current composition of the Board, the balance of management and independent
directors, the need for Audit Committee expertise and the evaluation of all
prospective nominees.
DIRECTOR COMPENSATION
The annual retainer for each director who is not an employee of the
Company or any subsidiary ("non-employee director") for 2003 was $40,000 payable
in options to purchase shares of Common Stock. Accordingly, in January 2003,
each non-employee director then on the Board was granted options to purchase
3,327 shares of Common Stock at $54.73 per share, the fair market value of a
share of Common
-5-
Stock on the grant date. Mr. Bump, who was elected a director in February 2003,
received on the date of his election, in respect of his 2003 retainer, an option
grant to purchase 3,327 shares of Common Stock at $48.15 per share, the fair
market value of a share of Common Stock on the grant date. All "retainer
options" vest during the course of the calendar year in which they are granted
and have a five-year term. In addition, upon his election as a director in
February 2003, Mr. Bump was granted an additional option to purchase 3,000
shares of Common Stock at $48.15 (the fair market value on the grant date)
pursuant to the Company's 1995 Non-Employee Directors' Non-Qualified Stock
Option Plan and a supplemental option grant outside of such plan for 2,000
shares of Common Stock at $48.15 (the fair market value on the grant date),
which grants were comparable to those made to the other directors when they were
re-elected to the Board in June 2002. The options granted to Mr. Bump for 5,000
shares of Common Stock became fully exercisable as of the date of grant and have
a term of ten years. In addition, pursuant to the terms of the Company's 2003
Non-Employee Directors' Non-Qualified Stock Option Plan, each non-employee
director, upon his election in 2003 as a director at the 2003 Annual Meeting of
Stockholders, was granted an option to purchase 5,000 shares of Common Stock at
$52.78 per share, the fair market value of a share of Common Stock on the grant
date; all of these options became fully exercisable as of the date of grant and
have a term of ten years.
Each non-employee director also is entitled to fees payable in cash for
attending meetings of the Board of Directors, fees for attending meetings of
committees of the Board upon which he serves and fees for acting as Chairman of
a committee of the Board. The fee for participating in a Board meeting is
$1,500, other than a telephonic meeting of the Board in which case the fee is
$750; the fee for participating in a meeting of the Compensation Committee and
the Corporate Governance Committee is $1,000, other than a telephonic meeting in
which case the fee is $750; and the annual fee for acting as a Chairman of each
such Committee is $3,000. In addition, the fee each member of the Audit
Committee receives for attending Audit Committee meetings is $1,000 except for
meetings of the Audit Committee at which the financial statements included in
the Company's Forms 10-K and Forms 10-Q are reviewed in which case the meeting
fee is $1,500 and except for a telephonic meeting in which case the meeting fee
is $750. The annual fee for acting as Chairman of the Audit Committee is $4,000.
-6-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of April 15, 2004 certain information
regarding beneficial ownership of the Common Stock by each person or group known
by the Company to be a beneficial owner of more than five percent of the
outstanding shares of Common Stock.
Amount and Nature Percent
Name and Address of Beneficial Owner of Beneficial Ownership Owned
--------------------------------------------------------------------------------
The TCW Group, Inc. ...................... 1,970,115(1) 13.0%
86 South Figueroa Street
LOS ANGELES, CALIFORNIA 90017
FMR Corp ................................. 1,927,312(2) 12.7%
82 Devonshire Street
Boston, Massachusetts 02109
Mac-Per-Wolf Company ..................... 1,759,370(3) 11.6%
310 S. Michigan Avenue
Suite 2500
Chicago, Illinois
and
Janus Small Cap Value Fund
100 Fillmore Street
Denver, Colorado 80206
----------------------------
(1) Based on a Schedule 13G Information Statement filed by The TCW Group, Inc.
("TCW") on behalf of the TCW Business Unit, which consists of TCW and its
direct and indirect subsidiaries. The Schedule 13G discloses that the TCW
Business Unit has shared power to vote or direct the vote of 1,803,515 of
such shares and has shared power to dispose or to direct the disposition
of 1,970,115 shares.
(2) Based on a Schedule 13G Information Statement filed by FMR Corp. ("FMR"),
Edward C. Johnson, 3rd ("Mr. Johnson") and Abigail P. Johnson
(collectively, the "Reporting Persons"). The Schedule 13G Information
Statement discloses that the Reporting Persons own beneficially 1,927,312
shares of Common Stock, have sole power to vote or to direct the vote of
47,240 of such shares, sole power to dispose or to direct the disposition
of the 1,927,312 shares, and the interest of Fidelity Low Price Stock Fund
in such shares amounted to 1,499,072 shares. The Schedule 13G also
discloses that Fidelity Management & Research Company ("Fidelity"), a
wholly owned subsidiary of FMR and an investment adviser, is the
beneficial owner of 1,880,412 of such 1,927,312 shares as a result of
acting as investment adviser to various investment companies, including
Fidelity Low Price Fund, and that Mr. Johnson, Chairman of FMR, and FMR,
through its control of Fidelity and certain investment companies, each has
sole power to dispose of the 1,880,412 shares, that neither FMR nor Mr.
Johnson has sole power to vote or direct the voting of such 1,880,412
shares, that Fidelity Management Trust Company ("FMT"), a subsidiary of
FMR, is the beneficial owner of 22,000 of such 1,927,312 shares of Common
Stock, that Mr. Johnson and FMR, through its control of FMT, each has sole
dispositive power over the 22,000 shares and sole power to vote or to
direct the voting of such 22,000 shares, and that Fidelity International
Limited, which is an affiliate of FMR and Mr. Johnson, and an investment
adviser, has sole power to vote and sole power to dispose of 24,900 of
such 1,927,312 shares.
(3) Based on a Schedule 13G Information Statement filed by Mac-Per-Wolf
Company ("MPW") and Janus Small Cap Value Fund ("Janus"). The Schedule 13G
discloses that MPW is filing on behalf of its two subsidiaries, PWMCO, LLC
and Perkins, Wolf, McDonald and Company (collectively, "Perkins Wolf"),
that Perkins Wolf furnishes investment advice to various investment
companies and to individual and institutional clients, including Janus,
that MPW has sole voting power of such 1,759,370 shares and sole
dispositive power of such shares and that Janus has sole voting power of
1,134,100 of such shares and sole dispositive power of 1,134,100 of such
shares.
-7-
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of April 15, 2004 certain information
regarding the beneficial ownership of the Common Stock by each of the Company's
directors, its Chief Executive Officer, each of the other four most highly
compensated executive officers of the Company, and all its directors and
executive officers as a group, for the fiscal year ended December 31, 2003.
Except as otherwise noted, to the Company's knowledge, each of the persons
listed below has sole voting power and investment power with respect to the
shares listed next to his name.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent
------------------------ ----------------------- -------
Frank T. MacInnis .................................. 694,148(2) 4.4
Stephen W. Bershad ................................. 64,492(3) *
David A.B. Brown ................................... 36,890(3) *
Larry J. Bump ...................................... 15,465(3) *
Albert Fried, Jr. .................................. 53,390(3) *
Richard F. Hamm, Jr. ............................... 35,890(3) *
Michael T. Yonker .................................. 16,898(3) *
Jeffrey M. Levy .................................... 208,712(2) 1.4
Sheldon I. Cammaker ................................ 142,376(2) *
Leicle E. Chesser .................................. 163,866(2) 1.1
R. Kevin Matz ...................................... 96,362(2) *
All directors and executive officers as a group .... 1,604,107(4) 9.6
-------------------------------------
* Represents less than 1%.
(1) The information contained in the table reflects "beneficial ownership"
as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended. All percentages set forth in this table have been rounded.
(2) Includes in the case of Mr. MacInnis 629,454 shares, in the case of Mr.
Levy 189,984 shares, in the case of Mr. Cammaker 128,249 shares, in the
case of Mr. Chesser 143,249 shares, and in the case of Mr. Matz 84,331
shares, that may be acquired upon the exercise of presently exercisable
options or options exercisable within 60 days of the date hereof and
granted pursuant to the Company's stock option plans and programs. Also
includes in the case of Mr. MacInnis 38,054 shares, in the case of Mr.
Levy 13,148 shares, in the case of Mr. Cammaker 10,120 shares, in the case
of Mr. Chesser 13,915 shares, and in the case of Mr. Matz 9,526 shares, to
be issued in respect of stock units granted under the Company's Executive
Stock Bonus Plan described below (the "Stock Bonus Plan") in the notes to
"Summary Compensation Table" under "Executive Compensation."
(3) Includes in the case of Mr. Bershad 49,492 shares, in the case of Mr.
Brown 35,890 shares, in the case of Mr. Bump 15,465 shares, in the case of
Mr. Fried 38,890 shares, in the case of Mr. Hamm 35,890 shares, and in the
case of Mr. Yonker 16,898 shares, that may be acquired upon exercise of
presently exercisable options or options exercisable within 60 days of the
date hereof and granted pursuant to the Company's stock options plans and
programs for non-employee directors.
(4) Includes 1,437,351 shares that may be acquired upon the exercise of
presently exercisable options or options exercisable within 60 days of the
date hereof and granted pursuant to the Company's stock options plans and
programs and 91,536 shares to be issued in respect of stock units granted
under the Stock Bonus Plan.
-8-
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following Summary Compensation Table sets forth the compensation
awarded to, earned by or paid to, each of the Chief Executive Officer and the
other four most highly compensated executive officers of the Company
(collectively, the "named executive officers") during the fiscal years ended
December 31, 2003, 2002 and 2001 for services rendered in all capacities to the
Company and its subsidiaries. For information regarding employment agreements of
the named executive officers, see "Employment Contracts and Termination of
Employment and Change of Control Arrangements" below.
SUMMARY COMPENSATION TABLE
================================================================================
Annual Long Term
Compensation Compensation Awards(3)
-------------------------------------------------------------------------
Number of
Restricted Securities
Other Annual Stock Underlying All Other
Bonus Compensation Award Options/ Compensation
Salary (1) (2) (4) SARs(5) (6)
Name and Principal Position Year ($) ($) ($) ($) (#) ($)
---------------------- ----- ------ ------ ----------- ---------- ----------- ----------
Frank T. MacInnis ............. 2003 800,000 317,638 23,778 117,638 55,443 30,242
Chairman of the Board and 2002 800,000 992,608 29,624 367,608 56,800 30,242
Chief Executive Officer 2001 775,000 992,602 13,586 367,602 75,600 8,700
Jeffrey M. Levy ............... 2003 525,000 0 10,634 0 29,108 13,367
President and 2002 525,000 660,893 12,371 82,330 30,000 13,367
Chief Operating Officer(7) 2001 510,000 731,699 12,073 91,170 48,200 8,700
Sheldon I. Cammaker ........... 2003 410,000 236,043 36,709 29,409 17,049 25,123
Executive Vice President and 2002 410,000 405,963 37,189 50,576 17,500 25,123
General Counsel and Secretary 2001 400,000 377,636 18,325 47,045 35,900 8,700
Leicle E. Chesser ............. 2003 410,000 245,885 23,129 48,524 17,049 24,459
Executive Vice President and 2002 410,000 473,870 26,324 93,513 17,500 24,459
Chief Financial Officer 2001 400,000 447,069 15,764 88,250 35,900 8,700
R. Kevin Matz ................. 2003 315,000 221,245 30,938 34,784 12,475 11,072
Senior Vice President-- 2002 300,000 341,937 23,982 52,237 12,800 11,072
Shared Services 2001 260,000 314,177 16,980 48,019 24,000 8,700
------------------------------------------
(1) The amounts reported under "Bonus" include the value of units that
correspond to shares of Common Stock mandatorily deferred and credited to
each named executive officer's account under the Company's Executive Stock
Bonus Plan (the "Stock Bonus Plan"). Pursuant to the Stock Bonus Plan, 25%
of the annual bonus earned by each named executive officer is
automatically credited to him in the form of units that will subsequently
be converted into Common Stock at a 15% discount from the fair market
value of Common Stock as of the date the annual bonus is determined. The
units are to be converted into shares of Common Stock and delivered to the
executive officer on the earliest of (i) the first business day
immediately following the day upon which the Company releases to the
public generally its results in respect of the fourth quarter of the third
year following the year in respect of which such units were issued, (ii)
the executive officer's termination of employment for any reason or (iii)
immediately prior to a "change of control" (as defined in the Stock Bonus
Plan). Dividend equivalents are credited in the form of additional units
(at a 15% discount) at the same rate as dividends are paid to all
stockholders. The portion of the amount reported under "Bonus" for 2003,
2002, and 2001, respectively, associated with mandatory deferrals under
the Stock Bonus Plan for each named executive officer is as follows: Frank
T. MacInnis--$117,638, $367,708 and $367,602; Jeffrey M. Levy--$0,
$205,893 and $227,949; Sheldon I. Cammaker--$73,543, $126,463 and
$117,636; Leicle E. Chesser--$80,885, $155,870 and $147,069; and R. Kevin
Matz--$72,245, $108,837 and $99,977.
(2) The personal benefits provided to the named executive officers did not
exceed the disclosure threshold established by the Securities and Exchange
Commission pursuant to applicable rules. Figures represent amounts
reimbursed for the payment of taxes upon certain fringe benefits.
-9-
(3) The column specified by Item 402 (b) of Regulation S-K of the Securities
and Exchange Commission to report Long-Term Incentive Plan Payouts has
been excluded because the Company has no long-term incentive compensation
plan and has not had any such plan during any portion of fiscal years
2003, 2002 and 2001.
(4) The amounts reported under "Restricted Stock Award" for 2003, 2002 and
2001 represent the value of units that correspond to shares of Common
Stock voluntarily deferred and credited to a named executive officer's
account under the Stock Bonus Plan. Pursuant to the Stock Bonus Plan, each
named executive officer is permitted at his election to cause all or part
of his annual bonus not mandatorily deferred under the Stock Bonus Plan to
be credited to him in the form of units that will subsequently be
converted into Common Stock at a 15% discount from the fair market value
of Common Stock as of the date the annual bonus is determined. Any
voluntary deferral election under the Stock Bonus Plan must be made at
least six months prior to the end of the calendar year in respect of which
the bonus will be payable. These units are to be converted into shares of
Common Stock and delivered to the executive officer on the earliest of (i)
the date elected by the executive officer but in no event earlier than the
first business day immediately following the day upon which the Company
releases to the public generally its results in respect of the fourth
quarter of the third calendar year following the year in respect of which
such units were issued, (ii) the executive officer's termination of
employment for any reason, or (iii) immediately prior to a "change of
control." Dividend equivalents are credited in the form of additional
units (at a 15% discount) at the same rate as dividends are paid to all
stockholders. The total holdings of shares of Common Stock represented by
the aforementioned units, including units granted in 2004 in respect of
2003, and the aggregate market value of such underlying shares as of
December 31, 2003 ($43.90 per share) for each of the named executive
officers was as follows: Frank T. MacInnis--38,054 shares, $1,670,571;
Jeffrey M. Levy--13,148 shares, $577,197; Sheldon I. Cammaker--10,120
shares, $444,268; Leicle E. Chesser--13,915 shares, $610,869; R. Kevin
Matz--9,526 shares, $418,191.
(5) The awards set forth in this column are of stock options only. The Company
did not award stock appreciation rights.
(6) The amounts reported in this column include insurance premiums paid by the
Company during 2003 with respect to term life insurance for the benefit of
each named executive officer, matching contributions made by the Company
under the 401(k) part of the Company's Retirement and Savings Plan, a
defined contribution profit sharing plan, during 2003 for the account of
each named executive officer, and contributions to be paid during 2004 in
respect of 2003 by the Company pursuant to the retirement account part of
the Company's Retirement and Savings Plan for the account of each named
executive officer.
(7) Mr. Levy resigned as President and Chief Operating Officer of the Company
on February 26, 2004.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth certain information concerning certain
grants to the named executive officers of stock options during fiscal 2003. As
indicated under the Summary Compensation Table above, the Company did not grant
stock appreciation rights ("SARs") of any kind.
OPTION GRANTS IN LAST FISCAL YEAR
Grant Date
Individual Grants Value
--------------------------------------------------------- ----------
Number of % of Total
Securities Options
Underlying Granted to Exercise or Grant Date
Options Employees in Base Price Expiration Present
Granted#(1) Fiscal Year ($/Sh)(2) Date Value($)(3)
---------- ------------ ---------- ---------------- ----------
Frank T. MacInnis ..... 55,443 36% $54.73 January 2, 2013 $1,712,743
Jeffrey M. Levy ....... 29,108 19% $54.73 January 2, 2013 $ 899,203
Sheldon I. Cammaker ... 17,049 11% $54.73 January 2, 2013 $ 526,677
Leicle E. Chesser ..... 17,049 11% $54.73 January 2, 2013 $ 526,677
R. Kevin Matz ......... 12,475 8% $54.73 January 2, 2013 $ 385,377
-------------------------------------------
(1) The options referred to in this table have a ten-year term and are
exercisable as follows: one-fourth on the grant date, one-fourth on the
first anniversary of the grant date, one-fourth on the second anniversary
of the grant date and one-fourth on the last business day of the calendar
year immediately preceding the third anniversary of the grant date.
(2) The stock option exercise price for a share of Common Stock is the fair
market value of a share of Common Stock on the date of grant. No SARs,
performance units or other instruments were granted in tandem with the
stock options reported herein.
(3) Present value was calculated using the Black-Scholes option-pricing model
which involves an extrapolation of future price levels based solely on
past performance. The present value as of the date of grant, calculated
using the Black-Scholes method, is based on assumptions about future
interest rates, dividend yield, stock price volatility, and exercise
dates. In calculating the present value as of the date of grant of the
options reported in the table, the Company assumed an interest rate of
4.07% per annum, an annual dividend yield of zero, volatility of 38.40%,
and an exercise date at the end of contractual term in 2013. There is no
assurance that these assumptions will prove to be true in the future. The
actual value, if any, that may be realized by each individual will depend
on the future market price of the Common Stock and cannot be forecasted
accurately by application of an option-pricing model.
-10-
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning
unexercised options to purchase Common Stock held at the end of fiscal year 2003
by the named executive officers. None of the named executive officers exercised
any options during fiscal year 2003. No named executive officer holds any SARs.
AGGREGATED OPTION EXERCISES FISCAL 2003 AND
FISCAL 2003 YEAR-END OPTION VALUES
Value of Unexercised
Number of Unexercised In-the-Money
Options at Options at
Shares Value FY-End (#) FY-End ($)(1)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
----- ---------- ------ ------------------ ----------------
Frank T. MacInnis ......... None -- 582,861/69,982 $14,790,070/$--
Jeffrey M. Levy ........... None -- 165,477/36,831 $3,457,690/$--
Sheldon I. Cammaker ....... None -- 113,913/21,536 $2,378,030/$--
Leicle E. Chesser ......... None -- 128,913/21,536 $2,959,580/$--
R. Kevin Matz ............. None -- 73,519/15,756 $1,171,460/$--
------------------------------
(1) For purposes of this column, value is calculated based on the aggregate
amount of the excess of $43.90 (the closing price of the Common Stock as
reported on the New York Stock Exchange on December 31, 2003) over the
relevant exercise price for a share of Common Stock with respect to the
options.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE OF CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS
The Company has an employment agreement made as of January 1, 2002 with
Frank T. MacInnis providing for his employment as Chief Executive Officer of the
Company through December 31, 2004. Mr. MacInnis' employment agreement provides
that the term of employment will automatically be extended for successive
one-year periods unless the Company or he gives written notice not to extend at
least six months prior to the end of the initial term or any extended term of
the employment agreement. However, following the date of a Change of Control (as
defined in his employment agreement), the term of Mr. MacInnis' employment shall
be for a period of three years from such date. Under Mr. MacInnis' employment
agreement, the Company is also to use its best efforts to ensure his election as
Chairman of the Board of Directors of the Company.
Pursuant to the terms of his employment agreement, Mr. MacInnis is to
receive an annual base salary of $820,000 for 2004. Mr. MacInnis also is
entitled to receive an annual bonus, which is to be determined with reference to
a target bonus and based upon factors agreed upon annually by him and the
Compensation Committee; provided that Mr. MacInnis' annual target bonus may not
be less than $800,000. Under the terms of his employment agreement, Mr. MacInnis
also received an option on January 2, 2004 to purchase 74,129 shares of Common
Stock at $43.83 per share, the fair market value of a share of Common Stock on
the grant date. The option has a ten-year term and is exercisable as follows:
one-fourth on or after the grant date, one-fourth on or after the first
anniversary of the grant date, one-fourth on or after the second anniversary of
the grant date and one-fourth on or after the last business day of the calendar
year immediately preceding the third anniversary of the grant date.
Under the terms of his employment agreement, Mr. MacInnis also has been
provided with certain benefits customarily accorded to the Company's executive
officers. These benefits include $870 per month for the leasing of an automobile
and the cost of a lease capital reduction payment; maintenance and insurance on
his automobile; reimbursement for initiation fees and monthly dues for
membership in a club suitable for entertaining clients of the Company; life
insurance in an amount equal to approximately twice his annual salary
-11-
times the number of full or partial calendar years that remain prior to the
expiration of his employment agreement; all legal expenses incurred by Mr.
MacInnis in connection with his employment agreement; and the cost of any
increased tax liability to him caused by receipt of those fringe benefits.
If, during the term of his employment agreement, Mr. MacInnis'
employment is terminated by the Company other than for Cause (as defined in his
employment agreement) or he terminates his employment for Good Reason (as
defined in his employment agreement), he will be entitled to receive a cash
payment equal to the sum of (i) the greater of (A) his base salary at the
highest annual rate in effect during his term of employment for the period from
the date of termination through December 31, 2004 or (B) two times his base
salary at its then current annual rate and (ii) the greater of (A) his target
bonus for the calendar year in which the termination takes place multiplied by
the number of full or partial calendar years remaining from the date of
termination through December 31, 2004 and (B) two times his target bonus for the
calendar year in which the termination occurs; however, in the event of a
termination following a Change of Control (as defined in his employment
agreement), the factor of two in clauses (i)(B) and (ii)(B) above will be
increased to three. In addition, Mr. MacInnis will be entitled to receive all
unpaid amounts in respect of his bonus for any calendar year ended before the
date of termination and an amount equal to his target bonus for the calendar
year in which the termination takes place multiplied by a fraction, the
numerator of which is the number of days in the calendar year in which the
termination occurs and the denominator of which is 365.
The Company also has employment agreements made as of January 1, 2002
with Sheldon I. Cammaker providing for his employment as Executive Vice
President and General Counsel of the Company through December 31, 2004, with
Leicle E. Chesser providing for his employment as Executive Vice President and
Chief Financial Officer of the Company through December 31, 2004, and with R.
Kevin Matz providing for his employment as Senior Vice President, Shared
Services of the Company through December 31, 2004. Each such employment
agreement provides that the term of employment will automatically be extended
for successive one-year periods unless the Company or the officer gives written
notice not to extend at least six months prior to the end of the initial term or
any extended term of the employment agreement. However, following the date of a
Change of Control (as defined in their respective employment agreements), the
terms of their respective employment shall be for a period of three years from
such date.
Pursuant to the terms of their respective employment agreements, Mr.
Cammaker is to receive an annual base salary of $420,000 for 2004, Mr. Chesser
is to receive an annual base salary of $420,000 for 2004, and Mr. Matz is to
receive an annual base salary of $340,000 for 2004. In addition, each of them is
entitled to receive an annual cash bonus determined by the Compensation
Committee, and under the terms of their respective employment agreements,
Messrs. Cammaker and Chesser each received an option on January 2, 2004 to
purchase 22,795 shares of Common Stock, and Mr. Matz received an option on
January 2, 2004 to purchase 17,970 shares of Common Stock. Each option has a
ten-year term and an exercise price of $43.83, the fair market value of a share
of Common Stock on the grant date, and is exercisable as follows: one-fourth on
or after the grant date, one-fourth on or after the first anniversary of the
grant date, one-fourth on or after the second anniversary of the grant date and
one-fourth on or after the last business day of the calendar year immediately
preceding the third anniversary of the grant date.
Under the terms of their employment agreements, Messrs. Cammaker,
Chesser and Matz each have been provided with certain benefits customarily
accorded to the Company's executive officers, including in Messrs. Cammaker's
and Chesser's case, $870 per month, and in Mr. Matz' case, $700 per month, for
leasing of an automobile and the cost of a lease capital reduction payment;
maintenance and insurance on their respective automobiles; reimbursement for
initiation fees and monthly dues for membership in a club suitable for
entertaining clients of the Company; life insurance in an amount equal to
approximately twice their respective annual salaries times the number of full or
partial calendar years that remain prior to the expiration of their respective
employment agreements; all legal expenses incurred by the executives in
connection with their respective employment agreements; and the cost of any
increased tax liability to them caused by receipt of those fringe benefits.
If Messrs. Cammaker's, Chesser's or Matz' employment is terminated
during the term of his respective employment agreement by the Company other than
for Cause (as defined in his employment agreement), or if he terminates his
employment for Good Reason (as defined in his employment agreement),
-12-
he will be entitled to receive a cash payment generally equal to the sum of (i)
two times his base salary at its then current annual rate and (ii) two times the
highest bonus paid to him during his employment by the Company. However, in the
event of a termination following a Change of Control (as defined in his
employment agreement), the factor of two in clauses (i) and (ii) above will be
increased to three. In addition, Messrs. Cammaker, Chesser and Matz each will be
entitled to receive all unpaid amounts in respect of his bonus for any calendar
year ended before the date of termination and an amount equal to the highest
bonus paid to him during his employment by the Company multiplied by a fraction
the numerator of which is the number of days in the calendar year in which the
termination occurs and the denominator of which is 365.
Mr. Levy resigned as President and Chief Operating Officer of the
Company on February 26, 2004 and will continue as an employee of the Company
through May 31, 2004. In connection with an agreement between him and the
Company providing for the terms of his separation, Mr. Levy received a payment
of $2,443,706, will be reimbursed for up to $70,000 to cover the costs of
out-placement services, legal fees he incurred in connection with his separation
agreement and certain office and secretarial expenses he may incur through May
31, 2004. In addition, Mr. Levy will continue to be paid through May 31, 2004 a
salary at the monthly rate of $45,154 and will also be paid $150,000 as a bonus
upon termination of his employment.
CONTINUITY AGREEMENTS
Each of Messrs. MacInnis, Cammaker, Chesser and Matz (each referred to
herein as an "Executive") is a party to a Continuity Agreement with the Company.
The purpose of the Continuity Agreements is to retain the services of these
Executives and to assure their continued productivity without disturbance in
circumstances arising from the possibility or occurrence of a Change of Control
of the Company. For purposes of these agreements a "Change of Control" means, in
general, the occurrence of (i) the acquisition by a person or group of persons
of 25% or more of the voting securities of the Company, (ii) the approval by the
Company's stockholders of a merger, business combination or sale of the
Company's assets, the result of which is that less than 65% of the voting
securities of the resulting corporation is owned by the holders of the Common
Stock prior to such transaction or (iii) the failure of Incumbent Directors (as
defined in the Continuity Agreements) to constitute at least a majority of the
Board of Directors of the Company during any two year period.
Generally, no benefits are provided under the Continuity Agreements for
any type of termination before a Change of Control, for termination after a
Change of Control due to death, disability, any termination for Cause (as that
term is defined in the Continuity Agreements) or for voluntary termination
(other than for Good Reason) (as that term is defined in the Continuity
Agreements).
Each Continuity Agreement generally provides to the Executive a
severance benefit if the Company terminates the Executive's employment without
Cause or the Executive terminates his employment for Good Reason within two
years following a Change of Control equal to the sum of three times (i) his base
salary at the time of the Change of Control, (ii) the higher of (A) his bonus in
respect of the year prior to the Change of Control and (B) the average of his
bonuses for the three years prior to the Change of Control and (iii) the value
of perquisites provided in respect of the year prior to the Change of Control.
Other severance benefits include outplacement assistance and a continuance of
insurance benefits for three years. The severance benefits under each
Executive's Continuity Agreement are reduced by any severance benefits payable
under such Executive's employment agreement.
If all or any portion of the payments or benefits referred to in the
preceding paragraphs under "Employment Agreements" and "Continuity Agreements"
either alone or together with other payments and benefits which any of Messrs.
MacInnis, Cammaker, Chesser or Matz 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 (the "Code"), then such
officer shall be entitled to such additional payments as may be necessary to
ensure that the net after tax benefit of all such payments shall be equal to his
respective net after tax benefit as if no excise tax had been imposed under
Section 4999 of the Code.
-13-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2003, the Compensation Committee was responsible for matters
concerning executive compensation.
Messrs. Bershad, Fried and Yonker, served as members of the
Compensation Committee during all of 2003, and Mr. Bump has been serving as a
member of the Compensation Committee since June 12, 2003. Mr. Hamm served as a
member of the Compensation Committee from January 1, 2003 to June 12, 2003.
No member of the Compensation Committee was at any time during 2003 a
present or former officer or present employee of the Company or any of its
subsidiaries or had any relationship requiring disclosure by the Company under
any paragraph of Item 404 of Regulation S-K of the Securities and Exchange
Commission.
COMPENSATION COMMITTEE REPORT
The Compensation Committee reviews and approves corporate goals and
objectives relevant to the compensation of the Company's Chief Executive
Officer, evaluates his performance in light of those goals and objectives, and,
subject to the terms of any incentive compensation plan, together with the other
independent directors, determines his compensation level (including salary,
bonus, stock options and other benefits) based on this evaluation. The
Compensation Committee also no less than annually reviews and determines, based
on proposals made by the Company's Chief Executive Officer, compensation levels
(including salary, bonus, stock options and other benefits) for each of the
Company's other executive officers and other officers and employees of the
Company and each of its subsidiaries whose proposed base salary is $400,000 or
more. It also is responsible for approving, together with the other independent
directors, any employment, severance or similar agreements with such
individuals. The Compensation Committee also administers the Company's 1994
Management Stock Option Plan, the Executive Stock Bonus Plan, the 2003
Management Stock Incentive Plan, and the Key Executive Incentive Bonus Plan and
is charged with making recommendations to the Board of Directors with respect to
incentive compensation plans and equity-based plans for officers and other
employees of the Company and its subsidiaries. The entire Board determines the
amount, if any, of the Company's matching contributions under the 401(k) part of
its Retirement and Savings Plan. While other compensation decisions generally
are not submitted to the Board, it has the ultimate power and authority with
respect to compensation matters.
The members of the Compensation Committee reviewed salaries paid to the
Company's executive officers for 2003, agreed with the executive officers that
there would be no salary increases for 2003 and recommended to the Board of
Directors for its approval their bonuses in respect of 2003.
The Compensation Committee seeks to compensate executive officers at
levels competitive with other companies in the same industry that are comparable
in size to the Company and to motivate such executive officers by providing
short-term rewards and long-term incentives based on individual and corporate
performance. In making compensation decisions, the Compensation Committee
periodically reviews information about the compensation paid or payable to
officers of comparably sized public companies (both in the same and related
businesses), the compensation recommendations of Mr. MacInnis, and reports from
outside consultants. The Compensation Committee does not have target amounts of
stock ownership for its executive officers.
The key components of executive officer compensation are base salary,
an annual bonus (a portion of which is payable in restricted stock units), and
stock options. The Compensation Committee attempts to combine these components
in such a way as to attract, motivate and retain key executives critical to the
long-term success of the Company. A discussion of the various components of the
executives' compensation for 2003 follows.
BASE SALARY. Each executive officer received a base salary and has the
potential for annual salary increases largely determined by reference to the
salaries of executive officers holding comparable positions in companies of
comparable size.
-14-
BONUSES. Each executive officer was eligible for an annual bonus based
upon both his individual performance and the Company's performance. For 2003,
bonuses were awarded to the executive officers which took into account their
performance, the Company's contractual obligations and the Company's
performance. Under the terms of their respective employment agreements, Messrs.
MacInnis and Levy were each entitled to a bonus for 2003 determined with
reference to a target bonus (which may be greater or less than his actual bonus)
and based upon factors agreed upon annually by the respective executive officer
and the Compensation Committee. For 2003, Mr. MacInnis' target bonus was
$1,000,000, and he received a bonus of $400,000, of which a portion was paid in
restricted stock units, as described in footnotes 1 and 4 to the "Summary
Compensation Table" in the section entitled "Executive Compensation-Summary of
Cash and Certain Other Compensation," above. Mr. MacInnis' bonus was based upon
several goals, including the Company's net income goal and completion and
efficient integration of significant acquisitions, and upon an evaluation of his
overall management performance, including policy formation and communication of
corporate values. Pursuant to his employment agreement, during the term thereof
Mr. MacInnis' annual target bonus may not be less than $800,000. For 2003, Mr.
Levy's target bonus was $700,000, and he did not receive any bonus in respect of
that year, inasmuch as the Company failed to achieve its operating income goal
upon which his target bonus was based.
STOCK OPTIONS. The Company's stock options are intended to provide
executive officers with the promise of long-term rewards which appreciate in
value with the positive performance of the Company. As previously reported, in
2003 each executive officer was granted stock options pursuant to the terms of
his employment agreement.
OTHER COMPENSATION. The executive officers also participate in the
Retirement and Savings Plan as well as the medical, life and disability
insurance plans available to all employees of the Company. In addition, under
the terms of their respective employment agreements each of the executive
officers is to receive life insurance in an amount approximately equal to twice
his annual salary times the number of full or partial calendar years that remain
prior to the expiration of his respective employment agreement.
CHIEF EXECUTIVE OFFICER COMPENSATION. The minimum compensation of Mr.
MacInnis is provided for in his employment agreement described above. The basis
for Mr. MacInnis' 2003 bonus is described earlier in this Report. As part of its
evaluation, the Compensation Committee also considered a report by Mr. MacInnis
on his activities and the Company's performance.
SECTION 162(M). Section 162(m) of the Code provides that the deduction
by a publicly-held corporation for compensation paid in a taxable year to the
Chief Executive Officer and any of the other four most highly compensated
executive officers whose compensation is required to be reported in the "Summary
Compensation Table" is limited to $1,000,000 per officer, subject to certain
exceptions. The Compensation Committee has taken, and intends to continue to
take, such actions as are necessary to reduce, if not eliminate, the Company's
non-deductible compensation expense, while maintaining, to the extent possible,
the flexibility which the Compensation Committee believes to be an important
element of the Company's executive compensation program.
By: Compensation and Personnel Committee
Stephen W. Bershad, Chairperson,
Larry J. Bump
Albert Fried, Jr.
Michael T. Yonker
-15-
PERFORMANCE GRAPH
The following performance graph compares the Company's total
stockholder return on its Common Stock from January 1, 1999 to December 31, 2003
as compared to the Russell 2000 Index and the Dow Jones Heavy Construction
Index.
The following performance graph assumes $100 was invested on January 1,
1999 in Common Stock of the Company and in each of the indices and assumes
reinvestment of all dividends.
[DATA BELOW REPRESENTS LINE CHART IN THE PRINTED PIECE]
Russell Dow Jones Heavy
EMCOR 2000 Index Construction Index
----- ---------- ------------------
1/1/99 100 100 100
106.59 94.5 73.68
139.15 108.19 97.89
117.83 100.37 89.47
12/31/99 113.18 119.62 84.21
120.54 127.76 67.37
143.8 122.58 84.21
161.24 123.56 84.21
12/31/00 158.14 114.59 92.63
189.33 103.01 106.53
224.19 114.53 125.91
197.83 98.34 119.62
12/31/01 281.55 115.77 114.83
359.69 117.96 122.83
364.03 104.49 109.37
308.22 82.47 87.18
12/31/02 328.74 90.79 94.3
306.36 88.46 100.83
305.86 108.15 106.46
215.75 121.4 116.73
12/31/03 272.25 131.98 123.78
AUDIT COMMITTEE REPORT
The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the fiscal year ended December 31,
2003, included in the Company's annual report on Form 10-K for that year.
The Audit Committee has reviewed and discussed these audited financial
statements with management and the Company's independent auditors, Ernst & Young
LLP.
The Audit Committee has discussed with Ernst & Young LLP the matters
required to be discussed by Statement of Auditing Standards No. 61 (Codification
of Statements on Auditing Standards, AUss.380).
The Audit Committee has received the written disclosures and letter
from Ernst & Young LLP required by Independence Standards Board Standard No. 1
("Independence Discussions with Audit Committees") as amended, and has discussed
with Ernst & Young LLP that firm's independence from the Company. The Audit
Committee has also concluded that the provision to the Company by Ernst & Young
LLP of audit and non-audit services, as described under the table of "Fees" in
the Section entitled "Ratification of Appointment of Independent Auditors", is
compatible with the independence of Ernst & Young LLP.
Based on the review and discussions referred to above in this report,
the Audit Committee recommended to the Company's Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2003 for filing with the Securities
and Exchange Commission.
By: Audit Committee
David A. B. Brown, Chairman
Stephen W. Bershad
Larry J. Bump
Richard F. Hamm, Jr.
-16-
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 2)
The Audit Committee, which is comprised entirely of independent
directors, has appointed Ernst & Young LLP, certified public accountants, as the
Company's independent auditors for 2004, subject to ratification by stockholders
and presents this selection to the stockholders for ratification. If the
stockholders do not approve the appointment of Ernst & Young LLP, the
solicitation of other independent auditors will be considered by the Audit
Committee.
Ernst & Young LLP has acted as the Company's independent auditors since
May 14, 2002. On May 14, 2002 with the approval of the Board of Directors, the
Audit Committee decided to no longer engage Arthur Andersen LLP as the Company's
independent auditors and appointed Ernst & Young LLP as the Company's
independent auditors for 2002.
The reports of Arthur Andersen LLP on the Company's consolidated
financial statements for 2000 and 2001 did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
During 2000 and 2001 and the period January 1, 2002 through May 14,
2002 (the "Interim Period"), there were no disagreements with Arthur Andersen
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction Arthur Andersen LLP, would have caused it to make reference thereto
in connection with its report on the Company's consolidated financial statements
for such years; and there were no reportable events, as such term is used in
Item 304(a)(1)(v) of Regulation S-K ("Regulation S-K") of the Securities and
Exchange Commission.
During 2000 and 2001 and the Interim Period, the Company did not
consult Ernst & Young LLP with respect to the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events set forth in Items
304(a)(1)(iv) or (v) of Regulation S-K.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and will have an opportunity
to make a statement if they desire to do so.
FEES
The aggregate fees for professional services rendered for the Company
by Ernst & Young LLP for the years ended December 31, 2003 and 2002 were as
follows:
Services Provided Fee Amount
--------------------------------------------------------------------------------
2003 2002
---- ----
Audit Fees(1) .............................. $1,850,000 $1,651,485
Audit Related Fees(2) ...................... $ 105,000 $ 83,345
Tax Fees(3) ................................ $ 418,000 $ 268,000
All Other Fees(4) .......................... $ 136,000 $ 55,364
Total ................................ $2,509,000 $2,061,194
--------------------------------------------------------------------------------
---------------------------------
(1) Fees in connection with the annual audit of the Company's annual financial
statements, reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q, statutory audits, and for 2003 includes
$20,000 in connection with the issuance of a consent with respect to a
Registration Statement on Form S-8.
(2) Fees rendered for employee benefit plan audits and for 2003 includes
$60,000 for consulting services related to the adoption of Section 404 of
the Sarbanes-Oxley Act of 2002 and for 2002 includes $34,965 for due
diligence services.
(3) Fees for services related to tax compliance, including consulting
services, the preparation of tax returns, tax planning and tax advice.
(4) For 2003 represents fees for Health Insurance Portability and
Accountability Act compliance review and software subscriptions and for
2002 represents fees for valuation services relating to intangible assets.
-17-
AUDIT COMMITTEE PRE-APPROVAL PROCEDURES
The 2003 and 2002 audit and non-audit services provided by Ernst &
Young LLP were approved by the Audit Committee. The non-audit services which
were approved by the Audit Committee were also reviewed by the Audit Committee
to ensure compatibility with maintaining the auditors' independence.
The Audit Committee has implemented pre-approval policies and
procedures related to the provision of audit and non-audit services. Under these
procedures, the Audit Committee pre-approves both the type of services to be
provided by Ernst & Young LLP and the estimated fees related to those services.
During the approval process, the Audit Committee considers the impact of the
types of services and the related fees on the independence of the auditors. The
services and fees must be deemed compatible with the maintenance of the
auditors' independence, including compliance with the rules and regulations of
the Securities and Exchange Commission. The Chairperson of the Audit Committee
may pre-approve permissible services that arise between Audit Committee meetings
provided that the decision to pre-approve services is reported at the next
scheduled Audit Committee meeting. However, approximately 14% of the 2003 Tax
Fees referred to in the table above were not pre-approved by the Audit Committee
prior to the rendering of the related services. Such fees represented less than
3% of total Ernst & Young LLP fees billed to the Company for 2003, and approval
of the Audit Committee of such fees and services was obtained prior to the
completion of the 2003 audit.
ADOPTION OF PROPOSAL NO. 2
The Company believes that its best interests will be served by the
approval of Proposal No. 2.
Approval of Proposal No. 2 requires the affirmative vote of a majority
of the shares of the Common Stock represented at the Annual Meeting and entitled
to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 2004.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file initial reports
of ownership and reports of change in ownership of Common Stock and other equity
securities of the Company with the Securities and Exchange Commission and to
furnish copies of such statements to the Company.
To the Company's knowledge and based solely upon a review of such
reports, during the fiscal year 2003 all such reports relating to share
ownership were timely filed.
OTHER MATTERS
RELATED TRANSACTIONS. During 2003, the Company provided facilities
services in the ordinary course of business to an affiliate of FMR Corp. FMR
Corp. beneficially owned more than 5% of the outstanding shares of the Company
Common Stock as of December 31, 2003. Such services were provided on
substantially the same terms as those provided to unrelated third parties for
comparable services.
STOCKHOLDER PROPOSALS. Stockholders' proposals must be received by the
Company at its headquarters in Norwalk, Connecticut on or before December 28,
2004 in order to be considered for inclusion in next year's Proxy Statement.
The Company's bylaws set forth advance notice provisions and procedures
to be followed by stockholders who wish to bring business before an annual
meeting of stockholders or who wish to nominate candidates for election to the
Board of Directors. A stockholder may propose business to be included in the
agenda of an annual meeting only if written notice of such stockholder's intent
is given to the Secretary of the Company, not earlier than 90 days nor later
than 60 days in advance of the anniversary of the date of the immediately
preceding annual meeting, or if the date of the annual meeting occurs more than
30 days before or 60 days after the anniversary of such immediately preceding
annual meeting, not later than the close of
-18-
business on the later of (a) the sixtieth day prior to such annual meeting and
(b) the tenth day following the date on which a public announcement of the date
of such meeting is first made. Each such notice must set forth certain
background and other information specified in the bylaws, including a
description of the proposed business and the reasons for conducting such
business at the annual meeting.
A stockholder may nominate candidates for election to the Board of
Directors at an annual meeting only if written notice of such stockholder's
intent to make such nomination is given to the Secretary of the Company not
earlier than 90 days nor later than 60 days in advance of the anniversary of the
date of the immediately preceding annual meeting, or if the date of the annual
meeting occurs more than 30 days before or 60 days after the anniversary of such
immediately preceding annual meeting not later than the close of business on the
later of (a) the sixtieth day prior to such annual meeting and (b) the tenth day
following the date on which a public announcement of the date of such meeting is
first made. Each such notice must set forth certain background and other
information specified in the bylaws.
The time limits described above also apply in determining whether
notice is timely for purposes of Rule 14a-4(c)(1) under the Securities Exchange
Act of 1934 relating to exercise of discretionary voting authority, and are
separate from and in addition to the Securities and Exchange Commission's
requirements that a stockholder must meet to have a proposal included in the
Company's proxy statement.
OTHER INFORMATION
The cost of soliciting proxies will be borne by the Company. The
Company expects to solicit proxies primarily by mail. Proxies also may be
solicited personally and by telephone by certain officers and regular employees
of the Company. D.F. King & Co., Inc. has been retained for solicitation of all
brokers and nominees for a fee of $7,500, plus customary out-of-pocket expenses.
The Company may reimburse brokers and other nominees for their expenses in
communicating with the persons for whom they hold Common Stock.
The Board of Directors is aware of no other matters that are to be
presented to the stockholders for formal action at the Annual Meeting. If,
however, any other matters properly come before the meeting or any adjournments
thereof, it is the intention of the persons named in the enclosed proxy to vote
in accordance with their judgment on such matters.
UPON THE WRITTEN REQUEST OF ANY STOCKHOLDER OF RECORD ON APRIL 15,
2004, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2003 (EXCLUDING EXHIBITS) AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WILL BE SUPPLIED WITHOUT CHARGE. REQUESTS SHOULD BE DIRECTED
TO SHELDON I. CAMMAKER, SECRETARY, EMCOR GROUP, INC., 301 MERRITT SEVEN,
NORWALK, CONNECTICUT 06851.
BY ORDER OF THE BOARD OF DIRECTORS
SHELDON I. CAMMAKER
SECRETARY
April 27, 2004
-19-
Appendix A
EMCOR GROUP, INC.
AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee is appointed by the Board of Directors (the "Board") to
assist the Board in its oversight of (1) the integrity of the financial
statements of the Company, (2) the independent auditor's qualifications and
independence, (3) the performance of the Company's internal audit function and
independent auditor, and (4) the compliance by the Company with legal and
regulatory requirements.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy statement.
COMMITTEE MEMBERSHIP
The Audit Committee shall by comprised of three or more directors as determined
by the Board. The members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange, Section 10A(m)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and
regulations of the Commission. At least one member of the Audit Committee shall
be an "audit committee financial expert" as defined by the Commission. Audit
Committee members shall not simultaneously serve on the audit committees of more
than two other public companies unless the Board (i) determines that such
simultaneous service would not impair the ability of such member to effectively
serve on the Committee and (ii) discloses such determination in the Company's
annual proxy statement.
The members of the Audit Committee shall be appointed by the Board at the annual
organizational meeting of the Board to serve until their successors shall be
duly elected and qualified. Audit Committee members may be replaced by the
Board. Unless a Chairperson is appointed by the full Board, the members of the
Audit Committee may designate a Chairperson by majority vote of the full Audit
Committee membership.
MEETINGS
The Audit Committee shall meet at such places and as often as it determines, but
not less frequently than quarterly. The Audit Committee shall periodically meet
separately with management, the internal auditing department and the independent
auditor to discuss any matters that the Audit Committee or any of these groups
believes should be discussed privately. The Audit Committee may request any
officer or employee of the Company or the Company's independent auditor to
attend a meeting of the Audit Committee or to meet with any members of, or
consultants to, the Audit Committee. The presence in person of a majority of the
Audit Committee members shall be necessary to constitute a quorum of the Audit
Committee, provided that participation in a meeting by means of a telephone
conference call or other communication medium allowing all members participating
in the meeting to hear each other at the same time shall constitute presence in
person.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall have the sole authority to appoint or replace the
independent auditor (subject, if applicable, to stockholder ratification). The
Audit Committee shall be directly responsible for the compensation and oversight
of the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditor shall report directly to the Audit Committee.
The Audit Committee shall preapprove all auditing services, internal
control-related services, and permitted non-audit services (including the fees
and terms thereof) to be performed for the Company by its independent auditor,
subject to the de minimis exceptions for non-audit services described in Section
10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior
to completion of the audit. The Audit
-A-1-
Committee may delegate authority to one or more members when appropriate,
including the authority to grant preapprovals of audit and permitted non-audit
services, provided that decisions of such subcommittee to grant preapprovals
shall be presented to the full Audit Committee at its next scheduled meeting.
The Audit Committee shall have authority to retain independent legal, accounting
or other advisors. The Company shall provide for appropriate funding, as
determined by the Audit Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an audit report and
to any advisors employed by the Audit Committee.
The Audit Committee shall make regular reports to the Board, including with
respect to any issues that arise with respect to the quality or integrity of the
Company's financial statements, the Company's compliance with legal or
regulatory requirements, the performance and independence of the Company's
independent auditor, the performance of the internal audit function, and such
other matters as are relevant to the Committee's discharging its
responsibilities.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
FINANCIAL STATEMENT AND DISCLOSURE MATTERS
1. Review and discuss with management and the independent auditor
the annual audited financial statements, including disclosures
made in the Form 10-K Management's Discussion and Analysis
("MDA"). Recommend to the Board whether the audited financial
statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor
the Company's quarterly financial statements including
disclosures made in the MDA included in the Form 10-Q. Such
discussion shall include the results of the independent auditor's
review of the quarterly financial statements.
3. Discuss with management and the independent auditor any major
issues regarding accounting principles and financial statement
presentation and judgments made in connection with the
preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of
accounting principles, any major issues as to the adequacy of the
Company's internal controls and special audit steps adopted in
light of material control deficiencies.
4. Review and discuss quarterly reports from the independent auditor
on:
(a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management, ramifications of the use of
such alternative disclosures and treatments, and the
treatment preferred by the independent auditor; and
(c) other material written communications between the
independent auditor and management, such as any management
letter or schedule of unadjusted differences.
5. Review and discuss with management (including the senior internal
auditor) and the independent auditor the Company's internal
controls report and the independent auditor's attestation of the
report prior to the filing of the Company's Form 10-K.
6. Discuss with management the Company's earnings press releases
(including the use of "pro forma" or "adjusted" non-GAAP
information) and financial information and earnings guidance
provided to analysts and rating agencies. Such discussion may be
done generally (consisting of discussing the types of information
to be disclosed and the types of presentations to be made) and
need not take place in advance of each earnings release or each
instance in which the Company may provide earnings guidance.
-A-2-
7. Review and discuss with management and the independent auditor
the effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Company's financial
statements.
8. Discuss with management and the independent auditor the Company's
guidelines and policies with respect to risk assessment and risk
management, the Company's major financial risk exposures, and the
steps management has taken to monitor and control such exposures.
9. Discuss with independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to
the conduct of the audit, including any difficulties encountered
by it in the course of the audit work, any restrictions on its
scope of activities or access to requested information, and any
significant disagreements between it and management and
management's response. Review with the independent auditor any
accounting adjustments that were noted or proposed by it but were
"passed" (as immaterial or otherwise); any communications between
the audit team and the independent auditor's national office
respecting auditing or accounting issues presented by the
engagement; and any "management" or "internal control letter"
issued, or proposed to be issued, by the independent auditor to
the Company.
10. Review the disclosures made to the Audit Committee by the
Company's Chief Executive Officer and Chief Financial Officer
during their certification process for the Form 10-K and Form
10-Q about any significant deficiencies in the design or
operation of internal controls or material weaknesses therein and
any fraud involving management or other employees who have a
significant role in the Company's internal controls.
OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
11. Review and evaluate the lead partner of the independent auditor
team, taking into account the opinions of management and the
Company's internal auditors.
12. Obtain and review a report by the independent auditor at least
annually describing (a) the independent auditor's internal
quality-control procedures, (b) any material issues raised by the
most recent internal quality-control review, or peer review, of
the independent auditor, or by any inquiry or investigation by
governmental or professional authorities within the preceding
five years respecting one or more independent audits carried out
by the independent auditor, (c) any steps taken to deal with any
such issues, and (d) all relationships between the independent
auditor and the Company.
13. Evaluate the qualifications, performance and independence of the
independent auditor, including whether the provision of permitted
non-audit services is compatible with maintaining the auditor's
independence, and taking into account the opinions of management
and internal auditors. This shall include review of a statement
from the independent auditor consistent with Independence
Standards Board Standard 1.
14. Ensure the rotation of the audit partners as required by law.
Consider whether, in order to assure continuing auditor
independence, it is appropriate to adopt a policy of rotating
independent auditing firms on a regular basis.
15. The Audit Committee shall present its conclusions with respect to
the independent auditor's qualifications, performance and
independence to the Board.
16. Set clear hiring policies for the Company's hiring of employees
or former employees of the independent auditor. At a minimum
these policies should provide that the independent auditor may
not provide audit services to the Company if the chief executive
officer, controller, chief financial officer, chief accounting
officer or any other person serving in an equivalent capacity for
the Company was employed by the independent auditor and
participated in the audit of the Company within one year of the
initiation of the current audit.
17. Meet with the independent auditor prior to the annual audit to
discuss the scope, planning and staffing of the audit.
-A-3-
OVERSIGHT OF THE COMPANY'S INTERNAL AUDIT FUNCTION
18. Review the appointment and replacement of senior internal
auditing personnel.
19. Review the reports to management prepared by the internal
auditing department and management's responses and review
cooperation of the internal auditing department with the
independent auditor.
20. Discuss with the independent auditor and management, separately
and collectively, the internal audit department responsibilities,
budget and staffing.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
21. Obtain from the independent auditor assurance that Section 10A(b)
of the Exchange Act has not been implicated.
22. Obtain reports from management, the internal auditing department
and the independent auditor that the Company and its subsidiaries
are in conformity with applicable legal requirements and the
Company's Code of Business Conduct and Ethics.
23. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Business Conduct and
Ethics.
24. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
25. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any
published reports which raise material issues regarding the
Company's financial statements or accounting policies.
26. Review, at least on an annual basis with the Company's General
Counsel any legal matter that may have significant impact on the
Company's financial statements, the Company's compliance
policies, and any material reports or inquiries received from
regulators and governmental agencies.
27. The Audit Committee shall review and reassess the adequacy of
this Charter annually and recommend any proposed changes to the
Board for approval. The Audit Committee shall annually review and
evaluate its own performance.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent auditor.
-A-4-
Appendix B
EMCOR GROUP, INC.
STANDARDS FOR DETERMINING DIRECTOR INDEPENDENCE
It is the policy of the Board of Directors that a substantial majority
of Directors be independent of the Company and of the Company's management. For
a Director to be deemed "independent," the Board shall affirmatively determine
that the Director has no material relationship with the Company (either directly
or as a partner, stockholder or officer of an entity that has a relationship
with the Company). This determination shall be disclosed in the proxy statement
for each annual meeting of the Company's stockholders. In making this
determination, the Board shall apply the following standards:
o A Director who is an employee, or whose immediate family member is
an executive officer, of the Company shall not be deemed
independent until three years after the end of such employment
relationship.
o A Director who receives, or whose immediate family member
receives, more than $100,000 per year in direct compensation from
the Company, other than director and committee fees and pension or
other forms of deferred compensation for prior service (provided
such compensation is not contingent in any way on continued
service), shall not be deemed independent until three years after
he or she ceases to receive more than $100,000 in such
compensation.
o A Director who is affiliated with or employed by, or whose
immediate family member is affiliated with or employed in a
professional capacity by, a present or former internal or external
auditor of the Company shall not be deemed independent until three
years after the end of the affiliation or the employment or
auditing relationship.
o A Director who is employed, or whose immediate family member is
employed, as an executive officer of another company where any of
the Company's current executive officers serve on that company's
compensation committee shall not be deemed independent until three
years after the end of such service or the employment
relationship.
o A Director who is a significant equity holder, an executive
officer, general partner, or employee, or whose immediate family
member is a significant equity holder, an executive officer or
general partner, of any entity that makes payments to, or receives
payments from, the Company for property or services in an amount
which, in any single fiscal year of such entity, exceeds 2% of
such other entity's consolidated gross revenues, shall not be
deemed independent until three years after falling below such
threshold.
o A Director who is a significant equity holder, an executive
officer, general partner or employee, or whose immediate family
member is a significant equity holder, an executive officer or
general partner, of an entity to which the Company was indebted at
the end of the Company's fiscal year in an aggregate amount in
excess of 2% of the Company's total consolidated assets at the end
of such fiscal year, shall not be deemed independent until three
years after falling below such threshold.
o A Director who is a significant equity holder, an executive
officer, general partner or employee, or whose immediate family
member is a significant equity holder, an executive officer or
partner, of an entity which was indebted to the Company at the end
of such entity's fiscal year in an aggregate amount in excess of
2% of such entity's total consolidated assets at the end of such
fiscal year, shall not be deemed independent until three years
after falling below such threshold.
o A Director who is, or whose immediate family member is, an
executive officer (or who serves in a comparable position) of a
tax-exempt entity that receives significant contributions (i.e.
more than $200,000 or more than 2% of the annual contributions
received by the entity in a single fiscal year of the tax-exempt
entity, whichever amount is lower) from the Company, any executive
officer
-B-1-
or any immediate family member of an executive officer shall not
be deemed independent until three years after falling below such
threshold, unless such contributions were approved in advance by
the Board of Directors.
For purposes of these Guidelines, the term:
o "immediate family" includes a person's spouse, parents, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law,
brothers and sisters-in-law and anyone (other than domestic
employees) sharing a person's home, but excluding any person who
is no longer an immediate family member as a result of legal
separation or divorce, or death or incapacitation.
o "Company" includes any parent or subsidiary in a consolidated
group with the Company.
o "significant" equity holder of an entity means a holder of 10% or
more of such entity's equity.
The Board shall undertake an annual review of the independence of all
non-employee Directors. In advance of the meeting at which this review occurs,
each non-employee Director shall be asked to provide the Board with full
information regarding the Director's business and other relationships with the
Company to enable the Board to evaluate the Director's independence.
Directors have an affirmative obligation to inform the Board of any
material changes in their circumstances or relationships that may impact their
designation by the Board as "independent." This obligation includes all business
relationships between, on the one hand, Directors or members of their immediate
family, and, on the other hand, the Company.
-B-2-
EMCOR GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 10, 2004
The undersigned hereby appoints Frank T. MacInnis, Sheldon I. Cammaker
and Leicle E. Chesser, and each of them, with full power to act without the
other and with full power of substitution, as proxies to represent and to vote,
as directed herein, all shares the undersigned is entitled to vote at the annual
meeting of the stockholders of EMCOR Group, Inc. to be held in the Central Park
Room, The Drake Swissotel, 440 Park Avenue, New York, New York on Thursday, June
10, 2004 at 10:00 A.M. (local time), and all adjournments thereof.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE AND RETURN IT
PROMPTLY USING THE ENCLOSED POSTAGE PREPAID ENVELOPE.
UNLESS OTHERWISE MARKED, THE PROXIES ARE APPOINTED WITH AUTHORITY TO
VOTE "FOR" ALL NOMINEES FOR ELECTION AND "FOR" THE APPOINTMENT OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS.
(Continued and to be signed on the reverse side.)
EMCOR GROUP, INC.
P.O. BOX 11343
NEW YORK, N.Y. 10203-0343
To change your address, please mark this box. [_]
To include any comments, please mark this box. [_]
\/ Detach Proxy Card Here \/
[_] Sign, Date and Return the [X]
Proxy Card Promptly Using
the Enclosed Envelope. Votes must be indicated
(X) in Black or Blue Ink.
The Board of Directors recommends a vote "FOR" all nominees in item 1 and
"FOR" item 2.
1. Election of Directors
FOR all nominees [_] WITHOLD AUTHORITY to vote [_] *EXCEPTIONS [_]
listed below for all nominees listed below
Nominees: F. MacInnis, S. Bershad, D. Brown, L. Bump, A. Fried, R. Hamm,
M. Yonker (INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the "Exceptions" box and write that nominee's name in the
space provided below.)
*Exceptions _____________________________________________________________
FOR AGAINST ABSTAIN
2. Appointment of Ernst & Young LLP [_] [_] [_]
as Independent Auditors.
In their discretion to vote upon other matters that may
properly come before the meeting. Please sign exactly
as your name appears to the left.
_ When signing as attorney, executor, administrator,
| trustee or guardian, please give your full title.
If shares are held jointly, each holder should sign.
Date Share Owner sign here Co-Owner sign here
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| | | | |
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_|