EMCOR Group, Inc.

Annual cash incentive awards under our Key Executive Incentive Bonus Plan form a significant element of the Annual Incentive Program. For more than fifteen years, named executive officer annual incentive awards have been based, in large part, on pre-established annual financial results emphasizing pay-for-performance. We expect annual incentive awards to motivate our named executive officers to improve performance on an annual basis. We believe such performance improvements should lead to sustained growth and ultimately to enhanced stockholder value.

For 2023, each named executive officer had a targeted annual incentive award that was based upon the achievement of 2023 financial targets (2023 diluted earnings per share from continuing operations and the ratio of our 2023 positive operating cash flow to our 2023 operating income) as well as meeting his/her pre-established personal goals and objectives. The maximum potential aggregate annual incentive awards payable for 2023 to Mr. Guzzi and Mr. Pompa were 250% and 220%, respectively, of their respective 2023 base salaries and to Mr. Matz and Ms. Mauricio were 200% of their respective 2023 base salaries. We refer to a named executive’s maximum potential aggregate annual incentive awards sometimes as his/her “Maximum Potential Incentive Award.”

For Messrs. Guzzi and Pompa, their 2023 targeted annual incentive awards, based upon our meeting certain financial measurements for 2023, were 125% and 110%, respectively, of their respective annual base salaries, and for Mr. Matz and Ms. Mauricio, their 2023 targeted annual incentive awards, based upon our meeting those 2023 financial measurements, were 100% of their respective 2023 annual base salaries. We refer to this targeted annual incentive award sometimes as the “Financial Target Bonus.” The exact amount of each named executive officer’s 2023 annual incentive award that we would pay based on our financial performance ranged from 0% to the maximum percentage of his or her annual base salary indicated in the immediately preceding paragraph, depending on our 2023 earnings per share and the ratio of our 2023 positive operating cash flow to our 2023 operating income. When we refer to earnings per share with respect to our Annual Incentive Program, we mean earnings per share on a diluted basis from continuing operations. However, in calculating such 2023 earnings per share and operating income for purposes of determining annual incentive awards there was, as provided in the program, to be excluded from such calculations (a) non-cash charges directly associated with the write-down of balance sheet values of assets, (b) investment banking, consulting, legal, and accounting fees and related disbursements directly associated with any proposed or consummated (i) sale or disposition of Company assets or securities or (ii) acquisition or investment, (c) the effect of any changes in statutory tax rates from those in effect on March 7, 2023, (d) restructuring charges due to a sale or closure of a subsidiary’s business, inclusive of the U.K., (e) the cumulative effect of any change in accounting principles, (f) charges relating to withdrawal liabilities in connection with multi-employer pension plans and specific surcharges assessed by a multi-employer plan related to supplemental contributions (i.e., lump sum type contributions and not an increase in the hourly contribution rate) to ameliorate an underfunding in such plan, (g) income or loss from discontinued operations and (h) costs and expenses related to COVID-19 diagnostic testing (as so adjusted, “adjusted earnings per share” and “adjusted operating income,” as applicable). For the purpose of calculating operating cash flow, amounts that are the subject of clauses (a) through (h) above, and any lump sum supplemental contributions to the U.K. defined benefit plans were, as provided in the program, to be excluded from such calculation (as so adjusted, “adjusted positive operating cash flow”).

Mr. Guzzi, together with certain other named executive officers, developed proposed 2023 financial metrics (based upon 2023 diluted earnings per share from continuing operations and the ratio of our 2023 positive operating cash flow to our 2023 operating income) for the payment of the annual incentive awards under our Key Executive Incentive Bonus Plan. Mr. Guzzi then proposed to the Compensation Committee the financial measurements. Our Compensation Committee established financial measurements for those annual incentive awards in February 2023, taking into account the recommendations of management, the report of Mercer, our 2023 budget, and annual earnings per share guidance for 2023 that was to be provided to the equity markets. The Compensation Committee determined that no annual incentive award based upon the foregoing financial measurements was to be payable unless we achieved adjusted earnings per share for 2023 in excess of $7.50 and 2023 adjusted positive operating cash flow of at least 20% of 2023 adjusted operating income. Consequently, the financial measurements emphasize earnings as well as positive operating cash flow — a measure of quality of earnings — and are linked to guidance we provide to the equity markets. In 2023, Mercer reviewed such financial measurements in order to assess whether they continued to meet our goals and objectives with respect to our Annual Incentive Program and to aid the Compensation Committee in determining whether the measurements should be changed. Mercer examined the measurements, the total incentive awards payable under the program and what was actually paid with respect to 2022, as well as the performance of the Company and its Common Stock versus the Comparator Companies. Mercer concluded that the financial measurements continued to be an appropriate means to incentivize and retain our executives.

The 2023 incentive award based on financial measurements that could have been awarded to a named executive officer, whether at, above, or below his or her 2023 Financial Target Bonus, was determined in accordance with a matrix adopted by the Compensation Committee, which we refer to as the “Matrix” and which took into account 2023 adjusted earnings per share and the ratio of 2023 adjusted positive operating cash flow to 2023 adjusted operating income (the “2023 Cash Flow Ratio”). For example, if our 2023 adjusted earnings per share had been $8.60, then, in accordance with the Matrix, the named executive officer’s 2023 Financial Target Bonus could have been awarded to him or her only if the 2023 Cash Flow Ratio was 60%. If 2023 adjusted earnings per share had been less than $8.60 (but greater than $7.50), each named executive officer could have been awarded an annual incentive award based on financial measurements, in accordance with the Matrix, greater or less than his or her Financial Target Bonus, the amount of which would depend upon the 2023 adjusted earnings per share and the 2023 Cash Flow Ratio (provided the 2023 Cash Flow Ratio was at least 20%). If 2023 adjusted earnings per share had been greater than $8.60, each named executive officer could have been awarded an annual incentive award based on financial measurements, in accordance with the Matrix, greater or less than his or her Financial Target Bonus, the amount of which would depend upon the 2023 adjusted earnings per share and the 2023 Cash Flow Ratio. The exact amount of this incentive award was determined by the intersection on the Matrix of 2023 adjusted earnings per share and the 2023 Cash Flow Ratio. In no event could an incentive award based on financial measurements have exceeded the named executive officer’s Maximum Potential Incentive Award. However, if, as indicated above, 2023 adjusted earnings per share had not been in excess of $7.50, or if the 2023 Cash Flow Ratio had been less than 20%, no annual incentive award based on financial measurements could have been paid to any named executive officer.

For 2023, our adjusted earnings per share was $13.37 and our 2023 Cash Flow Ratio was approximately 102% which, in accordance with the Matrix, permitted payment to each named executive officer of his or her Maximum Potential Incentive Award based solely on financial metrics. However, the Compensation Committee also determined that each named executive officer had achieved his or her personal goals and objectives for 2023 as described below.

A summary of the Matrix containing key threshold levels is set forth below.

As indicated above, under our Annual Incentive Program, during the first quarter of each calendar year, our Chief Executive Officer proposes for each of our other named executive officers such officer’s personal goals and objectives for the year. The Compensation Committee reviews those goals and objectives, which are subject to its approval. In the case of our Chief Executive Officer, the Compensation Committee and Lead Director agree on his annual personal goals and objectives. Under the Annual Incentive Program, if a named executive officer is not paid the Maximum Potential Incentive Award based solely on financial measures, then we may pay such named executive officer an award based upon his or her personal goals and objectives; provided that in any case, such an award may not exceed 20% of the total award paid to such named executive officer. For 2023, the named executive officers received the Maximum Potential Incentive Award based solely on financial measures and, as a result, no additional awards based on their achievement of personal goals and objectives were made.

For 2023, the personal goals and objectives for the named executive officers were: