8-KLeadership ChangesMaterial Agreements

EMCOR Group, Inc. 8-K Report, Material Agreement (Apr 4, 2006)

Filed April 4, 2006For Securities:EME

Summary

EMCOR Group, Inc. (EME) filed an 8-K on April 4, 2006, to report a material definitive agreement related to the resignation and new role of its Executive Vice President and Chief Financial Officer, Leicle E. Chesser. Mr. Chesser transitioned from CFO to Vice Chairman through December 31, 2006, in exchange for specific compensation and benefits outlined in a separation agreement. This filing is important for investors as it details the financial and incentive arrangements accompanying a significant executive transition. Key elements include continued base salary, bonus eligibility, benefits continuation, and specific terms for stock options and restricted stock units. The agreement also includes non-compete and non-solicitation clauses, along with consulting services Mr. Chesser will provide. Concurrently, Mark A. Pompa was appointed as the new Executive Vice President and Chief Financial Officer.

Key Highlights

  • 1Leicle E. Chesser resigned as Executive Vice President and CFO, transitioning to Vice Chairman until December 31, 2006.
  • 2Mr. Chesser will continue to receive his annual base salary of $450,000 through December 31, 2006.
  • 3He is eligible for a senior executive incentive bonus for fiscal year 2006, payable in cash by March 15, 2007.
  • 4Company will pay Mr. Chesser's health insurance premiums for 18 months post-termination.
  • 5Specific stock options (67,400 adjusted) and restricted stock units (6,834 adjusted) have adjusted vesting or exercise terms.
  • 6Mr. Chesser agreed to confidentiality, non-competition, and non-solicitation obligations.
  • 7Mark A. Pompa was appointed as the new Executive Vice President and Chief Financial Officer.

Frequently Asked Questions

The primary financial impacts involve continued salary payments ($450,000 annually through Dec 31, 2006), potential bonus payouts, continuation of benefits (including health insurance premium payments for 18 months post-termination), and specific adjustments to stock options and restricted stock units. Additionally, EMCOR will pay the 2006 premium for Mr. Chesser's term life insurance policy ($14,859.20) and may engage him for consulting services at $300/hour.

The company appears to have structured this transition to retain Mr. Chesser's expertise in a new capacity as Vice Chairman through the end of 2006. This role, coupled with specific ongoing compensation and benefits, was likely agreed upon in exchange for his commitment to remain with the company in a transitional role and to adhere to restrictive covenants like non-competition and non-solicitation.

The modification of stock options and restricted stock units for Mr. Chesser means that certain awards will vest or become exercisable at different times than originally planned. Specifically, more than two-thirds of his options cannot be exercised until January 3, 2007, and restricted stock units are now set to deliver on July 1, 2007. This change in timing could potentially affect the immediate dilution or share supply in the market related to these awards.

Mr. Chesser has agreed to provide EMCOR Group with a general release, abide by confidentiality obligations, and adhere to non-competition and non-solicitation clauses for a specified period after his termination date. He has also agreed to be available for consulting services and to assist the company in investigations or litigation at an hourly rate.