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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1
to
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
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International Comfort Products Corporation
(Name of Subject Company)
International Comfort Products Corporation
(Name of Person(s) Filing Statement)
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ORDINARY SHARES, NO PAR VALUE PER SHARE
(Title of Class of Securities)
458978-10-3
(CUSIP Number of Class of Securities)
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David P. Cain, Esq.
Senior Vice President, General Counsel and Secretary
International Comfort Products Corporation
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
(615) 771-0216
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of Person(s) Filing Statement)
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With a copy to:
Gary M. Brown, Esq.
Tuke Yopp & Sweeney, PLC
Suite 1100 NationsBank Plaza
414 Union Street
Nashville, Tennessee 37219
(615) 313-3325
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Item 1. Security and Subject Company.
The name of the subject company is International Comfort Products
Corporation, a Canadian corporation (the "Company"). The Company's registered
office is located at 1 First Canadian Place, 66th Floor, Toronto, Ontario,
Canada M5X1B8. The title of the class of equity securities to which this
Solicitation/Recommendation Statement (the "Statement") relates is the
ordinary shares, no par value per share, of the Company (the "Shares").
Item 2. Tender Offer of the Bidder.
This Statement relates to the tender offer (the "Offer") by Titan
Acquisitions, Ltd., a Canadian corporation (the "Purchaser") and a wholly-
owned subsidiary of United Technologies Corporation, a Delaware corporation
("Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated
June 30, 1999 (the "Schedule 14D-1"), to purchase all of the outstanding
Shares of the Company at a price of $11.75 (U.S.) per Share (the "Offer
Price"), net to the seller in cash (subject to applicable withholding of
taxes) without interest thereon, upon the terms and subject to certain
conditions set forth in the Offer to Purchase, dated June 30, 1999, and the
related Letter of Transmittal, Notice of Guaranteed Delivery and Summary
Advertisement (which, together with the Offer to Purchase, constitute the
"Offer Documents").
The Offer is being made pursuant to the Pre-Acquisition Agreement, dated as
of June 23, 1999 (the "Pre-Acquisition Agreement"), by and among the Company,
the Purchaser and Parent, a copy of which is filed herewith as Exhibit 1 to
this Statement and incorporated herein by this reference. Subject to certain
terms and conditions of the Pre-Acquisition Agreement, the Purchaser will use
its reasonable best efforts to acquire the balance of any Shares not tendered
pursuant to the Offer as soon as practicable after the consummation of the
Offer pursuant to a second stage transaction which may take the form of a
statutory arrangement, amalgamation, merger, reorganization, consolidation,
recapitalization or other type of acquisition transaction(s) (the "Second Step
Transaction").
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and the Purchaser are located at One Financial Plaza, Hartford,
Connecticut 06101. A copy of the joint press release issued by the Company and
Parent on June 24, 1999 announcing the execution of the Agreement is filed
herewith as Exhibit 2 to this Statement and incorporated herein by this
reference.
Item 3. Identity and Background.
(a) The name and business address of the Company, which is the entity filing
this Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
on the date hereof, there exists no material contract, agreement, arrangement
or understanding and no actual or potential conflict of interest between the
Company or its affiliates and (i) the Company or its executive officers,
directors or affiliates or (ii) the Purchaser or its executive officers,
directors or affiliates.
In connection with the transactions contemplated by the Offer, the following
agreements were entered into: the Pre-Acquisition Agreement and the
Confidentiality Agreement, dated as of March 19, 1999, between the Company and
Parent (the "Confidentiality Agreement").
The Pre-Acquisition Agreement
The following is a summary of certain material provisions of the Pre-
Acquisition Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of the Pre-
Acquisition Agreement, a copy of which is filed herewith as Exhibit 1 to this
Statement and incorporated herein by reference. Capitalized terms used but not
defined herein shall have the meanings set forth in the Pre-Acquisition
Agreement.
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The Offer. The Pre-Acquisition Agreement provides for the commencement of
the Offer as promptly as practicable, but in no event later than five (5)
business days after the date of the public announcement of the execution of
the Pre-Acquisition Agreement.
The Pre-Acquisition Agreement provides that the obligation of the Purchaser
to, and of Parent to cause the Purchaser to, consummate the Offer and accept
for payment, and pay for, any Shares tendered and not withdrawn pursuant to
the Offer is subject only to the conditions set forth below under "--Certain
Conditions of the Offer" (the "Offer Conditions") (any of which may be waived
in whole or in part by the Purchaser in its sole discretion). The Purchaser
expressly reserved in the Pre-Acquisition Agreement the right, subject to
applicable Securities Laws (as defined in Section 1.1 of the Pre-Acquisition
Agreement, which is filed herewith as Exhibit 1 to this Statement and
incorporated herein by reference), to modify the terms of the Offer, except
that, without the express written consent of the Company, the Purchaser shall
not (i) reduce the number of Shares subject to the Offer, (ii) reduce the
Offer Price, (iii) add to or modify the Offer Conditions, (iv) except as
provided in the next paragraph, change the expiration date of the Offer, (v)
change the form of consideration payable in the Offer or (vi) amend, alter,
add or waive any term of the Offer in any manner that is, in the opinion of
the Company, adverse to the holders of the Shares.
The Pre-Acquisition Agreement provides that, notwithstanding the foregoing,
(A) if on any scheduled expiration date of the Offer, all of the Offer
Conditions have not been satisfied or waived, the Purchaser shall, unless in
the reasonable judgment of Parent all of the Offer Conditions cannot be
satisfied or waived on or prior to December 15, 1999, from time to time,
extend the Offer for such period of time as is necessary to satisfy or fulfill
such conditions, (B) Purchaser may extend the Offer for any period required by
any rule, regulation, interpretation or position of any appropriate securities
commissions or similar regulatory authorities in Canada and each of the
provinces and territories thereof and in the United States and each of the
states thereof (the "Securities Authorities") applicable to the Offer, or to
permit the Company to cure any misrepresentation, breach or non-performance
during the time period referred to in the proviso to clause (d) of the Offer
Conditions (See "--Certain Conditions of the Offer" below), and (C) Purchaser
may extend the Offer for up to ten (10) business days (but not beyond December
15, 1999) if there has been validly tendered (and not properly withdrawn)
prior to the expiration of the Offer such number of Shares that would
constitute at least 80%, but less than 90%, of the issued and outstanding
Shares as of the date of determination. The Pre-Acquisition Agreement provides
that, subject only to the Offer Conditions, the Purchaser shall, and Parent
shall cause the Purchaser to, pay, as soon as practicable after the expiration
of the Offer, for all Shares validly tendered (and not properly withdrawn)
that Purchaser becomes obligated to accept pursuant to the Offer.
Directors. The Pre-Acquisition Agreement provides that promptly upon the
purchase by the Purchaser of outstanding Shares pursuant to the Offer, and
from time to time thereafter, Parent shall be entitled to designate such
number of directors (rounded up to the next whole number) on the board of the
directors of the Company (the "Board") as will give Parent, subject to
compliance with Section 14(f) of the United States Securities Exchange Act of
1934, as amended (the "Exchange Act"), representation equal to the product of
the total number of directors on the Board (giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Parent or any affiliate of
Parent following such purchase bears to the total number of Shares then
outstanding, and the Company shall, at such time, take all actions necessary
to cause Parent's designees to be so appointed (including increasing the size
of the Board or securing the resignation of incumbent directors, or both). The
Pre-Acquisition Agreement provides that the Company shall take all actions
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and shall include in its Schedule 14D-9 required by the United
States Securities and Exchange Commission (the "Commission") such information
with respect to the Company and its officers and directors as is required
under Section 14(f) and Rule 14f-1 to fulfill such obligations (provided,
however, that Parent shall supply to the Company and be solely responsible for
any information with respect to Parent and its nominees, officers, directors
and affiliates required by such Section 14(f) and Rule 14f-1).
Following the appointment of Parent's designees prior to consummation of the
Second Step Transaction, any amendment of the Pre-Acquisition Agreement or of
the Company's Certificate and Articles of Continuation or By-laws (the
"Governing Documents"), any termination of the Pre-Acquisition Agreement by
the Company,
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any extension by the Company of the time for performance of any obligation or
other act of Parent under the Pre-Acquisition Agreement, or any waiver
thereof, any waiver of any condition to the obligations of the Company or any
of the Company's rights under the Pre-Acquisition Agreement or other action by
the Company shall require the concurrence of a majority of the directors of
the Company then in office who were not designated by Parent, which action
shall be deemed to constitute the action of the full Board even if such
majority does not constitute a majority of all directors then in office.
Stock Options. The Pre-Acquisition Agreement provides that the Company shall
cause the vesting of option entitlements under the International Comfort
Products Corporation Employee Stock Option Plan and the International Comfort
Products Corporation 1998 Employee Stock Option Plan (the "Stock Option
Plans") to accelerate prior to or concurrent with the expiration of the Offer,
such that all outstanding options to purchase Shares (a "Company Option") are
exercisable prior to or concurrent with the expiration of the Offer. At the
time that the Purchaser shall have acquired ownership of and paid for Shares
pursuant to the Offer (the "Effective Time"), each holder of a then
outstanding Company Option shall, in settlement thereof, be entitled to
receive from the Company, and shall be paid in full satisfaction for each
Share subject to such Company Option, an amount (subject to any applicable
withholding tax) in cash equal to the product of (i) the excess of the Offer
price over the per share exercise or purchase price of such Company Option and
(ii) the number of Shares subject to such Company Option. Upon receipt of such
consideration, each such Company Option shall be cancelled. The surrender of a
Company Option to the Company in exchange for such consideration shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Company Option. The Stock Option Plans shall terminate as of
the Effective Time and any and all rights under any provisions in any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any subsidiary
thereof shall be cancelled by the Company as of the Effective Time.
Employment Agreements and Termination. In the Pre-Acquisition Agreement, the
Purchaser agreed and after the Effective Time agreed to cause the Company and
any successor to the Company to agree, to honor and comply with the terms of
any existing executive termination and severance agreements, plans or policies
of the Company and its subsidiaries. In addition, if Parent, the Purchaser or
the Company choose to terminate, whether constructively or actually, the
employment of any employees (other than for cause) of the Company or any of
its subsidiaries within one year of the completion of the Offer, notice and
severance shall be provided to such employees in accordance with the Company's
existing severance practices.
Representations and Warranties. The Pre-Acquisition Agreement contains
various customary representations and warranties of one or all of the parties
thereto, including representations by the Company with respect to the
following: (i) corporate organization, qualification and authority to do
business, (ii) corporate authority, (iii) absence of conflicts under the
Company's governing documents or material contracts and absence of
governmental or legal restrictions, (iv) authorized and outstanding capital,
(v) absence of material adverse change, (vi) absence of material undisclosed
liabilities, (vii) absence of brokerage fees, (viii) conduct of business, (ix)
absence of material misstatements in filings made with Securities Authorities,
(x) United States registration, (xi) ownership of subsidiaries, (xii) absence
of material litigation, (xiii) insurance, (xiv) absence of undisclosed
material environmental liabilities, (xv) Company benefit plans, (xvi) tax
matters, (xvii) "Year 2000" compliance, (xviii) absence of material defaults
or violations of law, and (xviv) the Company's borrowing capacity under
certain debt instruments applicable to the Company; and representations and
warranties of Parent and the Purchaser with respect to the following: (i)
organization, qualification and authority to do business, (ii) corporate
authority, (iii) absence of conflicts under the Parent's and Purchaser's
governing documents or material contracts and absence of governmental or legal
restrictions, (iv) availability of funds to pay for Shares tendered pursuant
to the Offer or acquired in any Second Step Transaction, and (v) absence of
certain litigation. None of the representations and warranties of the parties
shall survive the Effective Time or, in the case of the Company, shall survive
the acceptance of, and payment for, any Shares by the Purchaser pursuant to
the Offer.
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Conduct of Business. Under the Pre-Acquisition Agreement, the Company has
covenanted and agreed that, during the period from the date of the Pre-
Acquisition Agreement until the termination of the Pre-Acquisition Agreement,
except as otherwise contemplated by the Pre-Acquisition Agreement or to the
extent that the Purchaser shall otherwise consent in writing:
(1) the business of the Company and its subsidiaries shall be conducted
only in, and the Company and its subsidiaries shall not take any action
except in, the usual and ordinary course of business and consistent with
past practice, and the Company shall use all commercially reasonable
efforts to maintain and preserve its and its subsidiaries' business
organization, assets, employees and advantageous business relationships;
(2) the Company shall not directly or indirectly do or permit to occur
any of the following: (i) amend the Company's governing documents; (ii)
declare, set aside or pay any dividend or other distribution or payment
(whether in cash, Shares or property) in respect of its share capital;
(iii) issue, grant, sell or pledge or agree to issue, grant, sell or pledge
any Shares of the Company or its subsidiaries, or securities convertible
into or exchangeable or exercisable for, or otherwise evidencing a right to
acquire, Shares of the Company or its subsidiaries, other than Shares
issuable pursuant to the terms of Company Options outstanding on the date
of the Pre-Acquisition Agreement; (iv) redeem, purchase or otherwise
acquire any of its outstanding Shares or other securities; (v) split,
combine or classify any of its Shares; (vi) adopt a plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or reorganization of the Company or any of its subsidiaries;
or (vii) enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing, except as permitted
above;
(3) other than pursuant to commitments entered into prior to the date of
the Pre-Acquisition Agreement, neither the Company nor any of its
subsidiaries shall directly or indirectly: (i) sell, pledge, dispose of or
encumber any assets except in the ordinary course of business; (ii) acquire
(by merger, amalgamation, consolidation or acquisition of shares or assets)
any corporation, partnership or other business organization or division
thereof, or, except for investments in securities made in the ordinary
course of business, make any investment either by purchase of shares or
securities, contributions of capital (other than to subsidiaries), property
transfer, or, except in the ordinary course of business, purchase of any
property or assets of any other individual or entity; (iii) incur any
indebtedness for borrowed money or any other material liability or
obligation or issue any debt securities or assume, guarantee, endorse or
otherwise as an accommodation become responsible for, the obligations of
any other individual or entity, or make any loans or advances, except in
the ordinary course of business; (iv) except for the Officer Obligations
(defined in the Pre-Acquisition Agreement as existing written obligations
or liabilities of the Company or any of its subsidiaries to pay any amount
to its officers, directors or employees, other than for salary, bonuses
under their existing bonus arrangements and directors' fees in the ordinary
course and, without limiting the generality of the foregoing, shall include
the obligations of the Company or any of its subsidiaries to officers or
employees (1) for severance or termination payments on the change of
control of the Company pursuant to any executive involuntary severance and
termination agreements in the case of officers and pursuant to the
Company's severance policy in the case of employees, and (2) for retention
bonus payments pursuant to any retention bonus program), pay, discharge or
satisfy any material claims, liabilities or obligations other than the
payment, discharge or satisfaction in the ordinary course of business
consistent with past practice of liabilities reflected or reserved against
in its financial statements or incurred in the ordinary course of business
consistent with past practice; (v) authorize, recommend or propose any
release or relinquishment of any material contract right other than in the
ordinary course of business consistent with past practice; (vi) waive,
release, grant or transfer any rights of material value or modify or change
in any material respect any existing material license, lease, contract,
production sharing agreement, government land concession or other document,
other than in the ordinary course of business consistent with past
practice; (vii) enter into any interest rate swaps, currency swaps or any
other rate fixing agreement for a financial transaction or enter into any
call arrangement of any sort or any forward sale agreement for commodities,
other than in the ordinary course of business consistent with past
practice; (viii) authorize or propose any of the foregoing, or enter into
or modify any contract, agreement, commitment or arrangement to do any of
the foregoing; or (ix) make any capital expenditures other than in
accordance with the 1999 capital expenditure budget previously disclosed in
writing to Parent;
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(4) neither the Company nor any of its subsidiaries shall create any new
Officer Obligations and, except for payment of the existing Officer
Obligations, neither the Company nor any of its subsidiaries shall grant to
any officer or director an increase in compensation in any form, grant any
general salary increase other than in accordance with the requirements of
any existing collective bargaining or union contracts, grant to any other
employee any increase in compensation in any form other than routine
increases in the ordinary course of business consistent with past
practices, make any loan to any officer or director, or take any action
with respect to the grant of any severance or termination pay arising from
the Offer or a change of control of the Company or the entering into of any
employment agreement with, any senior officer or director, or with respect
to any increase of benefits payable under its current severance or
termination pay policies;
(5) neither the Company nor any of its subsidiaries shall adopt or amend
or make any contribution to any bonus, profit sharing, option, pension,
retirement, deferred compensation, insurance, incentive compensation, other
compensation or other similar plan, agreement, trust, fund or arrangements
for the benefit of employees, except as is necessary to comply with the law
or as required by existing provisions of any such plans, programs,
arrangements or agreements; and
(6) the Company shall use its reasonable efforts to cause its current
insurance (or re-insurance) policies not to be cancelled or terminated or
any of the coverage thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement policies underwritten by
insurance and re-insurance companies of nationally recognized standing
providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums
are in full force and effect.
Shareholders Meetings for Second Step Transaction; Information
Circular. (a) The Pre-Acquisition Agreement provides that if any Second Step
Transaction requires the approval of the Company's shareholders (the "Company
Shareholder Approval"), the Company will, as soon as practicable and in
accordance with the Securities Laws, other applicable Canadian laws, the
Governing Documents and the requirements of The Toronto Stock Exchange and the
American Stock Exchange or any other regulatory authority having jurisdiction
to duly call, give notice of, convene and hold a meeting of its shareholders
(the "Shareholders Meeting") to consider and vote upon the Second Step
Transaction.
(b) The Pre-Acquisition Agreement provides that if a Shareholders Meeting is
required, the Company will mail to its shareholders an Information Circular
(which shall include such proxy or other required informational statement or
circular, as the case may be, and all related materials at the time required
to be mailed to the Company's shareholders and all amendments or supplements
thereto, if any) with respect to the Shareholders Meeting.
No Solicitation; Directors' Recommendation. (a) Pursuant to the Pre-
Acquisition Agreement, the Company has agreed to immediately cease and cause
to be terminated all existing discussions and negotiations, if any, with any
parties conducted before the date of the Pre-Acquisition Agreement with
respect to any Take-over Proposal (as defined below) and, without limitation,
shall promptly, following the execution of the Pre-Acquisition Agreement,
request the return of all confidential information provided by the Company to
all parties who have had such discussions or negotiations or who have entered
into confidentiality agreements with the Company pertaining to the sale of the
Company or a substantial portion of its assets.
(b) The Pre-Acquisition Agreement provides that neither the Company nor any
of its subsidiaries, nor any of their respective directors, officers,
employees, agents, financial advisors, counsel or other representatives shall,
directly or indirectly, (i) solicit, initiate or encourage, or enter into any
agreements or understandings with respect to, any Take-over Proposal (as
defined below) (other than from Parent and its subsidiaries and their
respective directors, officers, employees, agents, financial advisors, counsel
or other representatives) or (ii) provide any confidential information to any
person or entity (other than Parent and its affiliates) or participate in any
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discussions or negotiations relating to any such Take-over Proposal.
Notwithstanding the foregoing, if a party that has proposed a Take-over
Proposal (as defined below) that the Board determines is reasonably likely to
lead to a Superior Take-over Proposal has requested confidential information,
the Board, subject to its fiduciary obligations and entering into a suitable
confidentiality agreement with such party, may provide to such party the same
information as has been provided to Parent and may consider and negotiate a
Superior Take-over Proposal. Neither the Company nor the Board, however, may
approve, make a recommendation to the Company's shareholders or enter into an
agreement with respect to a Superior Take-over Proposal unless the Pre-
Acquisition Agreement has been previously terminated. The Company also is
prohibited from waiving the "standstill" provisions applicable to any
confidentiality agreement to which it is a party (except with respect to
Parent).
For purposes of the Pre-Acquisition Agreement, "Take-over Proposal" means,
with respect to the Company or its subsidiaries or their assets, any proposal
or offer regarding any take-over bid, merger, consolidation, amalgamation,
arrangement, sale of a material amount of assets, sale of treasury shares
(other than pursuant to options under the Stock Option Plans) or other
business combination or similar transaction. "Superior Take-over Proposal"
means any written unsolicited Take-over Proposal (i) which, in the opinion of
the Board, after consulting with and receipt of advice from its independent
financial advisor, is more favorable to the Company's shareholders from a
financial point of view than the Offer (including, and after considering, any
adjustment to the terms and conditions proposed by Parent and Purchaser in
response to such Take-over Proposal), and (if such Take-over Proposal includes
cash as consideration) that sufficient financing commitments have been
obtained with respect to such Take-over Proposal that it reasonably expects a
transaction pursuant to such proposal could be consummated and that such
transaction is reasonably capable of being consummated without material delay
taking into account all legal, accounting, regulatory and other aspects of
such Take-over Proposal; and (ii) with respect to which Parent has received a
copy of such Take-over Proposal as executed by the party making the proposal,
at least 48 hours prior to acceptance or recommendation of such proposal by
the Board.
(c) Pursuant to the Pre-Acquisition Agreement, the Board has agreed, subject
to its fiduciary obligations and certain other conditions set forth in
subsection (d) below, to recommend acceptance of the Offer by the Company's
shareholders, provided that the Offer is not amended except in accordance with
the terms of the Pre-Acquisition Agreement. On the date the Offer Documents
are filed with the appropriate Securities Authorities, the Company has agreed
to file a directors' circular with respect to the Offer which shall comply in
all material respects with the requirements of applicable Securities Laws and
which shall contain the recommendation of acceptance of the Offer, as well as
notification of the intention of the directors of the Company to tender their
Shares pursuant to the Offer, and shall mail the directors' circular to the
Company's shareholders. The Company agreed to provide Parent with any comments
the Company or its counsel may receive from the Securities Authorities with
respect to such directors' circular promptly after the receipt of such
comments.
(d) The Pre-Acquisition Agreement provides that, in the event that a
Superior Take-over Proposal is offered or made to the Company's shareholders
or to the Company prior to the expiration of the Offer, the Board may
withdraw, modify or change any recommendation regarding the Offer if the
Board, acting in good faith, after consulting outside counsel, determines that
the directors are required to do so in order to discharge properly their
fiduciary duties under applicable law.
Regulatory Filings. (a) In the Pre-Acquisition Agreement, the parties have
agreed to (i) promptly take all actions necessary to make the filings required
of Parent, the Purchaser, the Company or any of their affiliates under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"), and
the Competition Act (Canada), as amended, and any other similar statutes in
other jurisdictions, (ii) comply at the earliest practicable date with any
request for additional information or documentary material received by any of
the parties and their affiliates from the U.S. Department of Justice pursuant
to HSR or from the Canadian Competition Bureau pursuant to the Competition Act
(Canada), as amended, or any other governmental authority, as the case may be,
(iii) consult and cooperate in connection with any investigation or other
inquiry concerning the transactions contemplated by the Pre-Acquisition
Agreement commenced by the U.S. Federal Trade Commission (the "FTC") or the
Antitrust Division of the U.S. Department of Justice (the "Antitrust
Division") or state attorneys general or by the Canadian Competition Bureau,
as the case may be, (iv) as promptly as
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practicable, make any necessary filings under the Investment Canada Act, as
amended, or any other governmental authority, (v) as promptly as possible,
prepare and file any filings required under Securities Laws, the rules of The
Toronto Stock Exchange and the American Stock Exchange, or any other
applicable law relating to the transactions contemplated by the Pre-
Acquisition Agreement.
(b) Pursuant to the Pre-Acquisition Agreement, the parties have agreed to
promptly inform the other parties of any material communication received by
such party from the FTC, the Antitrust Division, the Canadian Competition
Bureau or any other governmental authority regarding any of the transactions
contemplated by the Pre-Acquisition Agreement. In addition, Parent and the
Purchaser have agreed to advise the Company promptly of any understandings,
undertakings or agreements which such parties propose to make or enter into
with the FTC, the Antitrust Division, the Canadian Competition Bureau or any
other governmental authority in connection with the transactions contemplated
by the Pre-Acquisition Agreement.
Debt Obligations. In the Pre-Acquisition Agreement, the Company has agreed
to use reasonable efforts to cooperate and assist Parent in obtaining consents
to modifications and in purchasing certain of the Company's outstanding debt
obligations, including the conduct of (or provision of assistance to Parent in
conducting) a consent solicitation and tender offer for the outstanding debt
securities of the Company or its subsidiaries on terms satisfactory to Parent;
provided that (i) the Company shall not be required to purchase any debt
obligations or pay any fees in connection with such efforts prior to
consummation of the Second Step Transaction, unless funds therefor are
provided by Parent on terms satisfactory to the Company and (ii) Parent shall
pay or reimburse the Company for all reasonable expenses in connection
therewith. The Company also represented that, as of the date of the Pre-
Acquisition Agreement, the Company was able to incur at least $1.00 of
additional Indebtedness under certain of its existing debt instruments. The
Company is advised that Parent or its affiliates intend to make a tender
offer/consent solicitation for certain of the Company's outstanding debt
obligations that will be contingent upon consummation of the transactions
contemplated by the Pre-Acquisition Agreement.
Compensation; Benefit Plans. Pursuant to the Pre-Acquisition Agreement,
except as otherwise agreed with a relevant employee, Parent and the Purchaser
agree, and after the Effective Time will cause the Company and any successor
thereto to agree, to maintain until December 31, 1999 salaries and all benefit
plans and compensation programs currently available to employees of the
Company or any of its subsidiaries, including without limitation members of
management of the Company or any of its subsidiaries, or to make available
until December 31, 1999 alternative benefit plans and compensation programs
which are comparable in the aggregate to those currently available to such
employees. For these purposes, "benefit plans" means all arrangements,
agreements, programs or policies, whether funded or unfunded, relating to
employees to which the Company or any of its subsidiaries is a party or by
which it is bound and under which the Company or any of its subsidiaries have
any liability or contingent liability and relating to: (i) retirement savings
or pensions, including any defined benefit pension plan, defined contribution
plan, group registered retirement savings plan, thrift and saving plan or
supplemental pension or retirement plan; (ii) employee welfare benefits, as
defined for purposes of Section 3(1) of the Employee Retirement Income
Security Act of 1974 (United States), as amended, including hospitalization,
health, disability, life or severance pay benefits; and (iii) profit sharing,
bonus, stock incentive, stock purchase and other incentive plans or programs.
Indemnification. (a) The Pre-Acquisition Agreement provides that if Parent
acquires the Shares under the Offer, Parent shall cause the Company to fulfill
its obligations pursuant to indemnities provided or available to past and
present officers and directors of the Company pursuant to the provisions of
the Company's governing documents, the Canada Business Corporations Act, as
amended (the "Canada BCA"), and the written indemnity agreements entered into
between the Company and its officers and directors.
(b) Pursuant to the Pre-Acquisition Agreement, the Purchaser has agreed to
use reasonable efforts to secure directors' and officers' liability insurance
coverage for the Company's current and former directors and officers on a six
year "trailing" or "runoff" basis from and after the Effective Time. If a
"trailing" policy is not available, then the Purchaser has agreed that, for
the entire period from the Effective Time until six years after the Effective
Time, the Purchaser will use reasonable efforts to cause the Company or any
successor thereto to
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maintain the Company's current directors' and officers' insurance policy or an
equivalent policy, subject in either case to terms and conditions no less
advantageous to the directors and officers of the Company than those contained
in the policy in effect on the date of the Pre-Acquisition Agreement, for all
present and former directors and officers of the Company, covering claims made
prior to or within six years after the Effective Time. The Purchaser, however,
shall not be required to pay an annual premium in excess of 200% of the
aggregate annual amounts currently paid by the Company to maintain the
existing policies (the "Insurance Amount") and, if equivalent coverage cannot
be obtained, or can be obtained only by paying an annual premium in excess of
such amount, Purchaser shall use its reasonable best efforts to obtain as much
comparable insurance as is available for the Insurance Amount.
Termination. The Pre-Acquisition Agreement may be terminated upon written
notice at any time prior to the completion of the transactions contemplated
thereby:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company (provided that the terminating party
is not then in breach, in any material respect, of any covenant or other
agreement contained in the Pre-Acquisition Agreement and no representation
or warranty of such terminating party contained in the Pre-Acquisition
Agreement that is qualified as to materiality shall be untrue or incorrect,
and no representation or warranty of such terminating party contained in
the Pre-Acquisition Agreement that is not so qualified shall be untrue or
incorrect in any material respect, at any time before the Effective Time,
in each case, as if made at and as of such time (or, to the extent such
representation or warranty speaks as of a specific date, no such
representation or warranty was so untrue or incorrect as of such date)), if
there shall have been a breach, in any material respect, of any covenant or
other agreement contained in the Pre-Acquisition Agreement on the part of
the other party or if any representation or warranty of such other party
contained in the Pre-Acquisition Agreement that is qualified as to
materiality shall not be true and correct, or any representation or
warranty of such other party contained in the Pre-Acquisition Agreement
that is not so qualified shall not be true and correct in all material
respects, at any time before the Effective Time, in each case as if made at
and as of such time (or, to the extent such representation or warranty
speaks as of a specific date, such representation or warranty was not so
true and correct as of such date), which breach or misrepresentation is not
cured within 10 days following written notice to such other party, or such
breach, by its nature or timing cannot be cured prior to the expiration of
the Offer;
(c) by the Company, following receipt of, and in order to accept or
recommend, a Superior Take-over Proposal if, after consulting with outside
counsel, the Board has determined that such action is required in order to
discharge properly the directors' fiduciary duties under applicable law;
(d) by Parent, if (i) the Board or any committee thereof modifies or
amends in any manner adverse to Parent or Purchaser, or withdraws, its
authorization, approval or recommendation of the Offer or the Pre-
Acquisition Agreement or shall have resolved to do any of the foregoing or
(ii) the Company or any of its subsidiaries (or the Board or any committee
thereof) shall have approved, recommended, authorized, proposed or filed a
document with any Securities Authority not opposing, or publicly announced
its intention to enter into any Take-over Proposal (other than with Parent,
Purchaser or any of their affiliates), or shall have resolved to do any of
the foregoing;
(e) by either Parent or the Company, if the Offer terminates or expires
at the Expiry Time, without Purchaser taking up and paying for any Shares
on account of the failure of any of the Offer Conditions which has not been
waived by Purchaser, unless the absence of such occurrence shall be due to
the failure of the party seeking to terminate the Pre-Acquisition Agreement
to perform its requisite obligations thereunder; or
(f) by either Parent or the Company, if the date that Purchaser first
takes up and acquires Shares pursuant to the Offer (the "Take-up Date") has
not occurred on or prior to December 15, 1999.
In the event of a termination of the Pre-Acquisition Agreement by either the
Company or Parent as provided under "--Termination", the Pre-Acquisition
Agreement shall forthwith have no further force or effect and there shall be
no obligation on the part of Parent, the Purchaser or the Company thereunder,
except (A) Parent shall be
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obligated to reimburse the Company for certain expenses that it may have
incurred in connection with repurchasing debt obligations of the Company, (B)
if the Pre-Acquisition Agreement is terminated pursuant to subsections (c) or
(d) described under "--Termination" above, the Company is required to pay
Parent $15 (U.S.) million either concurrently (in the case of a termination
under subsection (c)) or within two business days after the termination (in
the case of a termination under (d)) and (C) if the Pre-Acquisition Agreement
is terminated pursuant to subsections (e) or (f) described under "--
Termination" above, principally as a result of the failure to obtain antitrust
approvals contemplated under clause (b) of the Offer Conditions (See "--
Certain Conditions of the Offer" below), Parent shall pay the Company $10
(U.S.) million unless the Company has breached certain covenants in the Pre-
Acquisition Agreement.
In addition, the Pre-Acquisition Agreement provides that if a Take-over
Proposal is announced publicly while the Offer is open for acceptance and the
minimum acceptance condition contemplated under clause (a) of the Offer
Conditions is not satisfied at the expiration of the Offer (other than
principally as a result of a failure to obtain certain antitrust approvals),
then, within two business days after such expiration, the Company shall pay
Parent a fee in the amount of $15 (U.S.) million. In the event a Take-over
Proposal is announced publicly and made after the expiration of the Offer but
prior to March 31, 2000, then, if Purchaser did not take up and pay for any
Shares under the Offer, but the Company was not entitled to any payment from
Parent because of a failure to obtain antitrust approvals, the Company, within
two business days after such Take-over Proposal is made, shall pay to Parent a
fee in the amount of $15 (U.S.) million.
Extension; Waiver. The Pre-Acquisition Agreement provides that Parent and
the Purchaser, on the one hand, and the Company, on the other hand, may (i)
extend the time for the performance of any of the obligations or other acts of
the other, (ii) waive compliance with any of the other's agreements or the
fulfillment of any conditions to its own obligations contained in the Pre-
Acquisition Agreement, or (iii) waive inaccuracies in any of the other's
representations and warranties contained in the Pre-Acquisition Agreement or
in any document delivered pursuant thereto; provided, however, that any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
Other Covenants. Nothing in the Pre-Acquisition Agreement (other than as
expressly provided for) shall obligate Parent or the Purchaser (i) to keep the
Offer open for acceptance beyond the expiration date set forth in the Offer
(as it may be extended from time to time) or (ii) to take any action that, in
the reasonable judgment of Parent, would reasonably be expected to materially
impair the overall benefits to be realized by Parent from consummation of the
Offer and the other transactions contemplated by the Pre-Acquisition
Agreement.
Subject to the Confidentiality Agreement and upon reasonable notice, the
Company is obligated to afford Parent's officers, employees, counsel,
accountants and other authorized representatives and advisers reasonable
access, during normal business hours and until the expiration of the Pre-
Acquisition Agreement, to all of its properties, books, contracts and records
as well as to its management personnel, and, during such period, the Company
is obligated to furnish promptly to Parent all information concerning its
business, properties and personnel as Parent may reasonably request.
Fees and Expenses. Except in connection with fees payable to obtain
modification of debt covenants or fees payable as a result of the reason for
the termination of the Pre-Acquisition Agreement, all fees, costs and expenses
incurred in connection with the Pre-Acquisition Agreement and the transactions
contemplated thereby shall be paid by the party incurring such cost or
expense, whether or not the Offer is consummated.
Amendment. The Pre-Acquisition Agreement provides that it may be amended by
mutual agreement between the parties thereto, by an instrument in writing
signed by the appropriate officers on behalf of each of the parties thereto.
Certain Conditions of the Offer. Notwithstanding any other term of the
Offer, the obligation of the Purchaser to, and of Parent to cause the
Purchaser to, commence the Offer, conduct and consummate the Offer and accept
for payment or, subject to any applicable rules and regulations of the
Commission, including
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Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation
to pay for or return tendered Shares after the termination or withdrawal of
the Offer), to pay for, any Shares tendered (and not properly withdrawn)
pursuant to the Offer shall be subject only to the following Offer Conditions:
(a) at the expiration of the Offer, the number of Shares that shall have
been validly deposited under the Offer (and not properly withdrawn),
together with any Shares held by or on behalf of Parent, or any of its
subsidiaries, shall constitute at least 71.0% of the outstanding Shares
(calculated on a diluted basis) (the "Minimum Condition");
(b) all material requisite governmental and regulatory approvals and
consents (including, without limitation, those of any stock exchanges or
Securities Authorities) required in Parent's reasonable judgment to make
lawful the purchase by, or the sale to, Purchaser of, the Shares (whether
under the Offer, a compulsory acquisition or Second Step Transaction) shall
have been obtained and all applicable statutory or regulatory waiting
periods during the pendency of which the purchase by, or the sale to,
Purchaser of the Shares would be illegal shall have expired or been
terminated without the imposition of any conditions that, individually or
in the aggregate, have or are reasonably likely to have the consequences
referred to in clauses (i) through (iii) of paragraph (c) below; without
limiting the foregoing: (i) the applicable waiting periods under HSR and
the Competition Act with respect to the Offer shall have expired or been
terminated; (ii) the Offer shall have been approved or deemed to be
approved or exempted pursuant to the Investment Canada Act; and (iii) all
other consents and approvals without which in Parent's reasonable judgment
the purchase by, or the sale to, Purchaser of the Shares (whether under the
Offer, a compulsory acquisition or Second Step Transaction) would be
illegal have been obtained;
(c) no statute, rule, regulation, executive or other order shall have
been enacted, issued, promulgated or enforced by any governmental authority
and no preliminary or permanent injunction, temporary restraining order or
other legal restraint or prohibition shall have been threatened or issued
by (and no action, proceeding or counterclaim shall be pending or
threatened by or before) a court or other governmental authority (i)
preventing or rendering, or seeking to prevent or render, illegal the
making of the Offer, the acceptance for payment of, the payment for, or
ownership, directly or indirectly, of some or all of the Shares by
Purchaser or the completion of a compulsory acquisition or Second Step
Transaction, (ii) imposing or confirming, or seeking to impose or confirm,
limitations on the ability of Parent or Purchaser, directly or indirectly,
effectively to acquire or hold or to exercise full rights of ownership of
the Shares or otherwise control the Company, in a manner that, in the
reasonable judgment of Parent, would reasonably be expected, in the
aggregate, to materially impair the overall benefits to be realized by
Parent from consummation of the Offer and the other transactions
contemplated by the Pre-Acquisition Agreement, or (iii) requiring, or
seeking to require, divestiture by Purchaser, directly or indirectly, of
any Shares or requiring Purchaser, Parent, the Company or any of their
respective subsidiaries or affiliates to dispose of or hold separate all or
any portion of their respective businesses, assets or properties or
imposing any limitations on the ability of any of such entities to conduct
their respective businesses or own such assets, properties or the Shares or
on the ability of Parent or Purchaser to conduct the business of the
Company and its subsidiaries and own the assets and properties of the
Company and its subsidiaries, in each case under this clause (iii) in a
manner that, in the reasonable judgment of Parent, would reasonably be
expected, in the aggregate, to materially impair the overall benefits to be
realized by Parent from consummation of the Offer and the other
transactions contemplated by the Pre-Acquisition Agreement;
(d) (i) the Company shall not have breached, or failed to comply with, in
any material respect, any of its covenants or other obligations under the
Pre-Acquisition Agreement, and (ii) each of the representations and
warranties of the Company contained in the Pre-Acquisition Agreement that
is qualified as to materiality shall be true and correct and any such
representation or warranty that is not so qualified shall be true and
correct, in all material respects, as of the date of the Pre-Acquisition
Agreement and as of the expiration of the Offer as if made on and as of the
expiration of the Offer (except to the extent such representations and
warranties speak as of a specific date, which shall be so true and correct
as of such date); provided that in either case the Company has been given
notice of and ten (10) business days to cure any such
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<PAGE>
misrepresentation, breach or non-performance or such misrepresentation,
breach or non-performance by its timing or nature cannot be cured before
such tenth business day;
(e) at any time after the date of the Pre-Acquisition Agreement, there
shall not have occurred any event, occurrence, development or state of
circumstances that has had any effect on the business, operations, results
of operations or financial condition of the Company or any of its
subsidiaries that, individually or in the aggregate, is materially adverse
to the business of the Company and its subsidiaries considered as a whole,
other than any such effect (i) which arises out of a matter that has been
publicly disclosed prior to the date of the Pre-Acquisition Agreement or
otherwise disclosed to Parent in the disclosure schedule to the Pre-
Acquisition Agreement, (ii) resulting from conditions affecting the
residential and light commercial air conditioning and heating product
industries in Canada and the United States, (iii) resulting from general
economic, financial, currency exchange, securities or commodity market
conditions in Canada, the United States or elsewhere or (iv) resulting
solely from the public announcement of the transactions contemplated by the
Pre-Acquisition Agreement;
(f) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or major financial occurrence
of national or international consequence or any law, regulation, action,
governmental regulation, inquiry or other occurrence of any nature
whatsoever which, in the reasonable judgment of Parent, materially
adversely affects or involves, the general economic, financial, currency
exchange, securities or commodity market operations in Canada or the United
States;
(g) neither the Company nor any of its subsidiaries (or the Board or any
committee thereof) shall have approved, recommended, authorized, proposed,
filed a document with any Securities Authorities not opposing, or publicly
announced its intention to enter into, any Take-over Proposal (other than
with Purchaser or any of its affiliates) and shall not have resolved to do
any of the foregoing;
(h) the Pre-Acquisition Agreement shall not have been terminated pursuant
to its terms; and
(i) the Board or any committee thereof shall not have modified or amended
in any manner adverse to Parent or Purchaser, and shall not have withdrawn,
its authorization, approval or recommendation of the Offer or the Pre-
Acquisition Agreement and shall not have resolved to do any of the
foregoing.
The Confidentiality Agreement
The following is a summary of certain material provisions of the
Confidentiality Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of the
Confidentiality Agreement, a copy of which is filed herewith as Exhibit 3 to
this Statement and incorporated herein by reference.
Pursuant to the Confidentiality Agreement, Parent and its representatives
agreed to keep confidential certain information received from the Company. The
Confidentiality Agreement also contains a six-month standstill provision and a
provision pursuant to which Parent agreed not to solicit for employment any
person employed by the Company. The provisions of the Confidentiality
Agreement shall remain binding and in full force and effect for a period of
two years and the parties shall comply with, and shall cause their respective
agents and representatives to comply with, all of their respective obligations
under the Confidentiality Agreement.
The Letter Agreements
The following sets forth a summary of certain provisions of Letter
Agreements that were entered into between Purchaser and Ravine Partners, Ltd.
("Ravine") and between Purchaser and the Ontario Teachers Pension Plan Board
("Teachers"), respectively (each, a "Letter Agreement" and, collectively, the
"Letter Agreements"). Richard W. Snyder, the Chairman of the Board, is the
general partner of Ravine and Roy T. Graydon, a director of the Company, is
the portfolio manager of Teachers. Copies of the Letter Agreements are filed
herewith as Exhibits 7 and 8 to this Statement and are incorporated herein by
this reference.
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The Letter Agreements were entered into concurrently with the execution of
the Pre-Acquisition Agreement. Ravine is the owner of 7,889,870 Shares
(representing approximately 18.42% of the outstanding Shares on a fully
diluted basis) and Teachers is the owner of 7,919,638 Shares (representing
approximately 18.49% of the outstanding Shares on a fully diluted basis).
Pursuant to the Letter Agreements, Ravine and Teachers agreed to validly
tender and not withdraw their Shares, unless (in the case of Teachers only) a
Superior Take-over Proposal is made. In addition, Ravine has granted Purchaser
an option to purchase its Shares at a price of $11.75 (U.S.) per Share (or any
greater amount per Share paid in the Offer). Such option is exercisable in
certain circumstances following termination of the Pre-Acquisition Agreement.
The option to acquire Ravine's Shares is exercisable if (a) the Pre-
Acquisition Agreement is terminated (i) by the Company because the Company has
received a Superior Take-over Proposal and the Board has determined that its
fiduciary duties require it to terminate the Pre-Acquisition Agreement, or
(ii) by Parent because (A) the Board or any committee thereof has modified in
any manner adverse to Parent or Purchaser or withdrawn its approval or
recommendation of the Offer or (B) the Company has publicly announced its
intention to enter into a business combination with any person other than
Parent or Purchaser or taken other public actions not opposing any Take-over
Proposal (other than with Parent or Purchaser); (b) a Take-over Proposal with
respect to the Company is announced by a person other than Parent or Purchaser
while the Offer is open and the Minimum Condition contemplated under
subsection (a) described under "--Certain Conditions of the Offer" is not
satisfied (other than principally as a result of a failure to obtain antitrust
approvals); or (c) a Take-over Proposal with respect to the Company is
announced by a person other than Parent or Purchaser after the Offer has
closed but prior to March 31, 2000 and Purchaser did not consummate the Offer
(other than principally as a result of a failure to obtain antitrust
approvals).
If Purchaser acquires Ravine's Shares by exercising its option and then
sells such Shares to a buyer in connection with any Take-over Proposal within
12 months of the Closing, Ravine is entitled to receive 75% of the excess of
the aggregate proceeds received by the Purchaser in such sale over the
aggregate price the Purchaser paid in exercising the option for those Shares.
The Letter Agreements also contain covenants by Ravine and Teachers not to
take any action to solicit, initiate or encourage inquiries, proposals or
offers from, or provide information to any other person relating to the direct
or indirect acquisition or disposition of any securities of the Company or its
subsidiaries. Each of Ravine and Teachers further covenants not to cooperate
or participate in any amalgamation, merger or other business combination of
the Company or its subsidiaries and not to dispose of any of their Shares,
except in accordance with the applicable Letter Agreement.
The Letter Agreements further contain a covenant by Ravine and Teachers to
use all reasonable efforts to cause their associates or nominees who serve
directors of the Company to resign as the Purchaser requests after the
Purchaser acquires the Shares under the Offer. Currently, at least two Board
members, one of whom is the chair, are designees of Ravine and Teachers.
In the case of the Letter Agreement with Ravine, if the option is not
exercised, then from and after the date when the option ceases to be
exercisable, the Letter Agreement terminates. Teachers may terminate its
Letter Agreement at the earlier of (i) a third party's making a bona fide
offer that constitutes a Superior Take-over Proposal; (ii) termination of the
Pre-Acquisition Agreement; or (iii) December 15, 1999.
Arrangements with Directors or Executive Officers of the Company
Information regarding contracts, agreements, arrangements or other
understandings and any potential conflict of interest between the Company and
its executive officers and directors that may be material to the Offer was
contained in the Company's Notice of Annual and Special Meeting and Management
Proxy Circular (the "1999 Proxy Circular") sent to shareholders of the Company
in connection with its meeting held May 19, 1999. A copy of the relevant
portions of the 1999 Proxy Circular is included in the Company's Information
Statement attached as Annex A hereto and filed herewith as Exhibit 4 to this
Statement.
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As described in the 1999 Proxy Circular, the five executive officers for
whom disclosure was required in the 1999 Proxy Circular (W. Michael Clevy,
David P. Cain, Stephen L. Clanton, Augusto H. Millan and James R. Wiese) are
parties to change in control and termination agreements. In addition, seven
other executive officers are parties to such agreements. Four (Herman V.
Kling, Francis C. Harrell, Robert C. Henningsen and H. David Tayler) are
parties to change in control agreements having 24 month Severance Periods (as
described in the 1999 Proxy Circular) and three (Douglas K. Gibbs, David B.
Schumacher and Karla G. Smith) are parties to change in control agreements
having 18 month Severance Periods. In addition, Mr. Kling is a party to a
termination agreement substantially identical to that described in the 1999
Proxy Circular with respect to Mr. Clanton. Under certain of the Company's
annual and long term incentive plans, a change in control of the Company such
as will result from the consummation of the Offer also will result in the
acceleration of benefits thereunder to the Company's executive officers.
The Pre-Acquisition Agreement provides that the Purchaser shall honor and
comply with the terms of any existing executive termination agreements (see
"--Employment Agreements and Termination").
Parent has offered employment to each of Messrs. Kling, Schumacher and
Wiese, effective upon consummation of the Offer upon terms to be negotiated.
Each has been offered sign-on bonuses of $100,000 and the opportunity to
convert certain severance benefits and stock awards. At this time, no
agreement has been reached with any of these individuals.
The Company, in consultation with Parent, also has adopted an incremental
bonus plan for certain senior officers in respect of services to be provided
by such officers in connection with the transition of the Company's ownership
to Purchaser. The bonus plan will provide for bonuses to be paid by the
Company within 60 to 90 days after the consummation of the Offer and will
involve aggregate payments of approximately $1 million (U.S.). With the
exception of Mr. Clevy, who is proposed to receive $500,000, the participants
and the amounts to be paid to the participating officers have not yet been
determined; however, the Company and Parent intend to consult with each other
in respect of the details of the plan.
Item 4. The Solicitation or Recommendation.
(a) Recommendation. The Board, at a special meeting duly called and held on
June 23, 1999, by a vote of all directors present, unanimously (i) determined
that the Pre-Acquisition Agreement and the transactions contemplated thereby,
including the Offer, are fair to and in the best interests of the shareholders
of the Company, (ii) approved the Offer and the Pre-Acquisition Agreement and
resolved to recommend acceptance of the Offer by the Company's shareholders,
provided that the Offer is not amended except in accordance with the terms of
the Pre-Acquisition Agreement, and (iii) determined to elect, to the extent
permitted by law, not to be subject to any "moratorium", "control share
acquisition", "business combination", "fair price" or other form of anti-
takeover laws and regulations of any jurisdiction that may purport to be
applicable to the Pre-Acquisition Agreement. A copy of the Company's letter to
shareholders, dated as of June 30, 1999, is filed herewith as Exhibit 5 to
this Statement and incorporated herein by reference.
(b) Background; Reasons for the Board's Recommendation.
Background. As part of its responsibilities, the Board considers and reviews
from time to time strategic alternatives available to the Company. In light of
the interest of Ravine and Teachers in possibly selling some or all of their
respective holdings of Shares and the interest of the President and Chief
Executive Officer in possibly being part of a group which might make an offer
for the Company, the Board established on January 20, 1999 a committee of
directors (the "Special Committee") to consider strategic alternatives
available to the Company.
The members of the Special Committee are Messrs. Stanley M. Beck, Q.C.,
Marvin G. Marshall, David A. Rattee and William A. Wilson. Each of these
directors is an independent member of the Board, is independent of Ravine and
Teachers and is independent of Parent and Purchaser. The Special Committee has
met frequently on a formal and an informal basis (primarily by conference
telephone) during the past six months amongst themselves and together with,
among others, management, CSFB, Ravine, Teachers and legal counsel to each of
the Company and CSFB.
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On January 26 and 28, 1999, members of the Special Committee met separately
with representatives of three nationally recognized investment banking firms
and received from each of them a presentation on their respective credentials
to assist the Special Committee and the Board and to act as financial advisor
in connection with the Company's review of strategic alternatives. Following
these presentations, the Special Committee unanimously recommended, and the
Board unanimously authorized and approved on February 3, 1999, the appointment
of CSFB as financial advisor to the Company. CSFB was retained and an
engagement letter between the Company and CSFB was negotiated and executed.
Following its due diligence review of the Company, CSFB discussed initially
with the Special Committee, and subsequently with the Board on March 9, 1999,
its views on the Company, potential industry and financial buyers and
recommendations with respect to the strategic review process. After discussion
with CSFB, the Board authorized the Special Committee and CSFB to pursue a
confidential selective sale process in order to determine whether there was
any third party interest in an acquisition of the Company.
CSFB initially approached more than 40 potential industry and financial
buyers, including Parent, in order to solicit preliminary indications of
interest in an acquisition of the Company. The Company received preliminary
indications of interest from more than 20 parties, including Parent.
Confidentiality and standstill agreements were forwarded to these parties and
such agreements were negotiated and entered into by the Company with these
parties, including Parent. A confidential information memorandum relating to
the Company and its businesses, which had been prepared by CSFB in conjunction
with senior management of the Company, was delivered to the parties, including
Parent, who had signed a confidentiality agreement. Further indications of
interest in a potential acquisition of the Company were received from
interested parties, including Parent, on April 23, 1999. Following discussions
with CSFB about the respective levels of interest from these parties, the
Special Committee directed CSFB to continue to deal with a select group of
these parties, including Parent. Each of these parties, including Parent, was
invited to conduct due diligence with respect to the Company and to attend a
confidential management presentation focussing on the Company and its
businesses.
During the week of May 24, 1999, at the request of the Special Committee,
CSFB forwarded to each of the final round bidders, including Parent, a formal
request that any offer to acquire all of the Shares be made in writing by June
15, 1999. Accompanying the bid request was a form of pre-acquisition agreement
which each party was asked to review and indicate any necessary changes
thereon for purposes of that party's offer. Each of the final round bidders,
including Parent, responded to CSFB's request with an acquisition proposal,
together with a marked-up copy of the pre-acquisition agreement or a
memorandum setting out their principal concerns with the agreement. At a
meeting held on June 16, 1999, the respective terms and conditions of the
final round offers were reviewed with the Special Committee by CSFB and legal
counsel for CSFB and the Company. The Special Committee was also advised that
a key term of the Parent's offer was that two of the Company's major
shareholders, Ravine and Teachers enter into agreements with Purchaser under
which they would agree to tender, and grant an option to transfer their
Shares, to Purchaser (the "Letter Agreements"). As well, the Special Committee
received a report on the course of discussions which had taken place earlier
on June 16, 1999 relating to the Parent's offer and its terms and conditions
at a meeting involving representatives of Parent, its legal counsel, CSFB, a
member of the Special Committee and legal counsel for CSFB and the Company.
Following questions by, and discussions among, members of the Special
Committee, CSFB was instructed to contact each of the final round bidders to
discuss certain aspects of their proposals.
Following discussions between Parent and CSFB on June 17, 1999 and June 18,
1999, concerning Parent's proposal, the Special Committee instructed CSFB and
legal counsel for the Company to meet with representatives of Parent and its
legal advisors to negotiate the final terms of the pre-acquisition agreement
(which the parties agreed would provide for the making of an offer for all the
Shares by the Purchaser at a price of $11.75 per Share). Such negotiations
commenced on June 21, 1999 and were intensively conducted through June 21, 22
and 23, 1999. During this period, the status and subject matter of
negotiations were discussed with the Chairman of the Special Committee, and
Parent independently negotiated the terms of the Letter Agreements with Ravine
and Teachers.
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The Special Committee met at noon on June 23, 1999 and received a further
report from CSFB on the final round offers to acquire the Company. CSFB
reviewed various aspects of each of the offers with the Special Committee,
including CSFB's assessment of the overall value of each offer, the conditions
and terms of the respective offers (including financing), break-fee
arrangements and other factors. CSFB also confirmed its ability to provide the
Board with a fairness opinion with respect to the Parent's offer. The Special
Committee was also updated by legal counsel on the status of negotiations on
the pre-acquisition agreement. Following these presentations and discussions
and after deliberations, the Special Committee concluded unanimously that the
Parent's offer of $11.75 cash per Share was an offer which the Board could
approve and recommend for acceptance by the holders of Shares.
The Board met at 2:00 p.m. on June 23, 1999. Eleven of the twelve directors
attended and participated in person or telephonically at this meeting. At the
outset of the meeting, the Board received a report from the Chairman of the
Special Committee. The report provided the Board with an update on the
confidential selective sale process concluding with the Special Committee's
view on the final round offers made for the Company and its recommendation
that the Parent's offer was an offer which the Board could approve and
recommend for acceptance by the holders of Shares. CSFB provided the Board
with its review of the final round offers, their respective terms and
conditions and their assessment of the relative values contemplated by the
offers. Legal counsel briefed the Board on the fiduciary duties of directors
and other matters of Canadian corporate law and on certain regulatory matters.
As well, counsel reviewed with the Board the terms and conditions of the
proposed pre-acquisition agreement with Parent, including the (i) terms of the
offer; (ii) offer conditions; (iii) no solicitation limitation; (iv) fiduciary
duty exception for a Superior Take-Over Proposal; (v) events of termination;
(vi) mutual termination fees; (vii) covenants, representations and warranties
of the Company, the Purchaser and Parent; (viii) conduct of the Company's
business during the offer period; and (ix) other key terms and provisions.
CSFB then completed its review of the fairness of the Parent's offer from a
financial point of view. CSFB delivered an oral opinion to the Board, which
was subsequently confirmed in writing, that, as of June 23, 1999 and based
upon and subject to the matters reviewed with the Board, the consideration to
be received by the shareholders of the Company in the Offer and in the Second
Step Transaction was fair to the shareholders from a financial point of view.
A copy of the CSFB opinion is attached hereto as Annex B to this Statement and
incorporated herein by this reference. CSFB has provided their written consent
to the inclusion of and reference to their opinion in this Schedule 14D-9.
After these presentations on the Parent's offer and after deliberation with
respect thereto, the Board members present unanimously (i) determined that the
Parent's offer is fair to holders of Shares and is in the best interests of
the Company; (ii) approved the Parent's offer; (iii) authorized and approved
the execution and delivery of the Pre-Acquisition Agreement; (iv) resolved to
recommend acceptance of the Parent's offer by holders of Shares; and (v)
determined to elect, to the extent permitted by law, not to be subject to
certain forms of anti-takeover laws and regulations.
After the close of trading on June 23, 1999, the Company, Parent and
Purchaser executed the Pre-Acquisition Agreement. Also on June 23, 1999,
Ravine and Teachers entered into their respective Letter Agreements with the
Purchaser.
Early on June 24, 1999, the Company and Parent issued a press release
announcing the execution of the Acquisition Transaction and the Letter
Agreements. On June 30, 1999, the Offer was commenced.
Reasons for the Board's Recommendation
After considering the Offer and other matters it considered relevant, the
Board, by a unanimous vote of all directors present, resolved to recommend
that holders of the Shares accept the Offer.
In arriving at that conclusion, the Board relied upon and considered, among
other things, the following:
. the familiarity of the Board with the Company's business, financial
condition, results of operations, properties and prospects as an
independent entity, and the nature of the industry in which it operates,
based in part upon presentations by the Company's management;
16
<PAGE>
. the Offer Price represents a premium of $3.20 or approximately 37.4%
over the average closing price of the Shares reported on the American
Stock Exchange for the three calendar month period ended June 23, 1999,
the last trading day prior to the public announcement of the Offer on
June 24, 1999. In focusing on the premium over the average Share price
during the three months prior to the date of the public announcement of
the Offer, the Board acknowledged the significant increase in the
Company's stock price during the month prior to the public announcement
of the Offer;
. the fact that Ravine and Teachers have agreed with the Purchaser to
tender an aggregate of 36.9% of the outstanding Shares (on a fully
diluted basis);
. that the Offer is for all of the Shares;
. the opinion dated June 23, 1999 of CSFB (a copy of which is attached
hereto as Annex B to this Statement and incorporated herein by this
reference) that, as of such date and based upon and subject to the
matters set forth therein, the consideration to be received by the
shareholders of the Company under the Offer and in any Second Step
Transaction (as defined therein) was fair to such shareholders from a
financial point of view;
. information regarding the financial, operating and stock price history
of the Company in comparison to selected comparable companies, including
certain of the Company's competitors;
. consideration of other possible acquirors of the Company;
. that the Pre-Acquisition Agreement is structured to permit the Company,
upon determination of the Board that such action would further the best
interests of the shareholders of the Company, to respond to any written
unsolicited Superior Take-over Proposal (as hereinafter defined) and to
furnish information to and to negotiate with the party making such
Superior Take-over Proposal, provided that the acceptance or
recommendation of any such Superior Take-over Proposal may entitle the
Purchaser to a termination fee;
. the terms and conditions of the Pre-Acquisition Agreement, including
that the Company or the Purchaser could, under certain circumstances, be
entitled to a termination fee; and
. that the Offer is not subject to a financing condition.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the Offer,
the Board did not find it practicable to, and did not, quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its determinations and recommendation. In addition, individual
members of the Board may have given different weight to different factors.
Shareholders should nevertheless consider the Offer carefully and come to
their own decision as to acceptance or rejection of the Offer. Shareholders
who are in doubt as to how to respond to the Offer should consult their
investment dealer, stockbroker, chartered accountant, lawyer or other
professional advisor.
Based on the foregoing factors, the Board determined to recommend the
acceptance of the Offer by the Company's shareholders as described above.
Item 5. Persons Retained, Employed or to be Compensated.
The Company has retained CSFB, an internationally recognized investment
bank, to act as its exclusive financial advisor in connection with the
transactions contemplated by the Pre-Acquisition Agreement. Pursuant to the
terms of their engagement, the Company has agreed to pay CSFB a fee in a total
amount of approximately $5.5 (U.S.) million, approximately $4.3 (U.S.) million
of which will be payable upon the completion of the transaction. The Company
will reimburse CSFB for its reasonable out-of-pocket expenses and has agreed
to indemnify CSFB against certain liabilities, including liabilities under the
United States federal securities laws, that may arise in connection with its
engagement.
17
<PAGE>
In the ordinary course of business, CSFB and its affiliates have performed,
and may from time to time perform, investment banking services for the Company
and Parent, and have received customary fees for such services. In the
ordinary course of business, CSFB and its affiliates may actively trade the
debt and equity securities of both the Company and Parent for their own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or compensated any other person to make
solicitations or recommendations to shareholders on its behalf concerning the
Offer or any other transaction contemplated by the Pre-Acquisition Agreement.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) Except as set forth below, no transactions in the Shares have been
effected during the past 60 days by the Company or, to the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Company:
On June 25, 1999, Francis C. Harrell, an executive
officer of the Company, sold 8,000 Shares.
(b) To the best knowledge of the Company, each of its executive officers,
directors, affiliates and subsidiaries currently intends to tender all Shares
which are held of record or beneficially owned by them to the Purchaser
pursuant to the Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Prior to entering into the Pre-Acquisition Agreement, the Company had
contacts and negotiations with other entities that had expressed interest in
the Company. Upon execution of the Pre-Acquisition Agreement, the Company
ceased contacts with such other entities. Except as set forth in this
Statement, no negotiation is underway or is being undertaken by the Company in
response to the Offer that relates to or would result in (1) an extraordinary
transaction, such as a merger or reorganization, involving the Company or any
of its subsidiaries; (2) a purchase, sale or transfer of a material amount of
assets by the Company or any of its subsidiaries; (3) a tender offer for or
other acquisition of securities by or of the Company; or (4) any material
change in the present capitalization or dividend policy of the Company.
(b) Except as set forth in this Statement, there is no transaction, board
resolution, agreement in principle or signed contract in response to the Offer
that relates to or would result in one or more of the events referred to in
Item 7(a) above.
Item 8. Additional Information to be Furnished.
(a) The Company's Information Statement attached as Annex A hereto and filed
as Exhibit 4 hereto is being furnished in connection with the possible
designation by the Purchaser, pursuant to the Pre-Acquisition Agreement, of
certain persons to be appointed to the Company's Board other than at a meeting
of the Company's shareholders.
(b) On June 25, 1999, Stanley Ginkowski and Jeff Grau filed a class action
lawsuit in the Chancery Court of Marshall County, Tennessee, naming as
defendants the Company and all of the directors of the Company. The plaintiffs
seek to enjoin any actions by the Company in furtherance of the Offer or,
alternatively, to recover damages in the event the Offer and any subsequent
merger is consummated. The plaintiffs claim that the consideration to be
received by shareholders in the proposed transaction with Parent and Purchaser
is unfair and inadequate, that the Company's directors breached certain
alleged fiduciary duties to the Company's shareholders and that the Company's
directors will be unjustly enriched by the transaction. The Company believes
the claims against the Company and its directors are without merit and intends
to vigorously defend all claims made against them. The Company and Parent do
not anticipate that the suit will have any effect on their plans to proceed
with the proposed transaction.
18
<PAGE>
(c) Under the HSR, the purchase of Shares pursuant to the Offer cannot be
made until the expiration of a 15-calendar day waiting period following the
required filing of a Premerger Notification and Report Form by the ultimate
parent entity of the Purchaser, which the Company understands will be
submitted on July 6, 1999. Accordingly, the waiting period under the HSR Act
will expire at 11:59 p.m., New York City time, on July 21, 1999, unless early
termination of the waiting period is granted by the FTC and the Antitrust
Division, or the ultimate parent entity of the Purchaser receives a request
for additional information or documentary material prior thereto. If either
the FTC or the Antitrust Division issues a request for additional information
or documentary material prior to the expiration of the 15-day waiting period,
the waiting period will be extended and will expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance
by the ultimate parent entity of the Purchaser with such request unless
terminated earlier by the FTC and the Antitrust Division. If such a request is
issued, the purchase of and payment for Shares pursuant to the Offer will be
deferred until the additional waiting period expires or is terminated. Only
one extension of such waiting period pursuant to a request for additional
information or documentary material is authorized by the rules promulgated
under the HSR. Thereafter, the waiting period can be extended only by court
order or by consent of the ultimate parent entity of the Purchaser.
Item 9. Material to be Filed as Exhibits.
The following exhibits are filed herewith:
<TABLE>
<C> <S>
Exhibit 1. Pre-Acquisition Agreement, dated as of June 23, 1999, by and among
Parent, the Purchaser and the Company, filed as Exhibit 1 to the
Company's Solicitation/Recommendation Statement on Schedule 14D-9
filed with the Commission on June 30, 1999 and incorporated herein
by this reference.
Exhibit 2. Press Release issued by the Company and Parent on June 24, 1999,
filed as Exhibit 2 to the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Commission on June 30,
1999 and incorporated herein by this reference.
Exhibit 3. Confidentiality Agreement, dated March 19, 1999, between Parent and
the Company, filed as Exhibit 3 to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Commission on June 30, 1999 and incorporated herein by this
reference.
Exhibit 4. The Company's Information Statement filed pursuant to Section 14(f)
of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder
(filed as Annex A hereto).
Exhibit 5. Letter to Shareholders dated as of June 30, 1999, filed as Exhibit
5 to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 filed with the Commission on June 30, 1999 and
incorporated herein by this reference.
Exhibit 6. Directors' Circular dated as of June 30, 1999, filed as Exhibit 6
to the Company's Solicitation/Recommendation Statement on Schedule
14D-9 filed with the Commission on June 30, 1999 and incorporated
herein by this reference.
Exhibit 7. Letter Agreement between Ravine Partners, Ltd. and Titan
Acquisitions, Ltd., filed as Exhibit 7 to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Commission on June 30, 1999 and incorporated herein by this
reference.
Exhibit 8. Letter Agreement between Ontario Teachers Pension Plan Board and
Titan Acquisitions, Ltd., filed as Exhibit 8 to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Commission on June 30, 1999 and incorporated herein by this
reference.
Exhibit 9. Change in Control Agreement with W. Michael Clevy, filed as Exhibit
10.11 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, filed with the Commission on May 14,
1999, and incorporated herein by this reference.
</TABLE>
19
<PAGE>
<TABLE>
<C> <S>
Exhibit 10. Change in Control Agreement with David P. Cain, filed as Exhibit
10.12 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, filed with the Commission on May 14,
1999, and incorporated herein by this reference.
Exhibit 11. Change in Control Agreement with Stephen L. Clanton.
Exhibit 12. Change in Control Agreement with Douglas K. Gibbs, filed as
Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, filed with the Commission on May
14, 1999, and incorporated herein by this reference.
Exhibit 13. Change in Control Agreement with Herman V. Kling.
Exhibit 14. Change in Control Agreement with Francis C. Harrell.
Exhibit 15. Change in Control Agreement with Robert C. Henningsen.
Exhibit 16. Change in Control Agreement with Augusto H. Millan.
Exhibit 17. Change in Control Agreement with David B. Schumacher.
Exhibit 18. Change in Control Agreement with Karla G. Smith.
Exhibit 19. Change in Control Agreement with H. David Tayler.
Exhibit 20. Change in Control Agreement with James R. Wiese.
Exhibit 21. Termination Agreement with W. Michael Clevy, filed as Exhibit
10.14 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, filed with the Commission on March 30,
1998, and incorporated herein by this reference.
Exhibit 22. Termination Agreement with Stephen L. Clanton, filed as Exhibit
10.12 to the Company's Annual Report on Form 10-K for the year
ending December 31, 1997, filed with the Commission on March 30,
1998, and incorporated herein by this reference.
Exhibit 23. Termination Agreement with Herman V. Kling.
Exhibit 24. International Comfort Products Corporation Annual and Long-Term
Incentive Plan, filed as Exhibit A to the Company's Proxy
Statement filed with the Commission on April 15, 1999, and
incorporated herein by this reference.
Exhibit 25. International Comfort Products Corporation Long Term Incentive
Plan, filed as Exhibit 10.25 to ICP(USA)'s Registration Statement
on Form S-1 (File No. 33-56238), filed with the Commission on
December 23, 1992, and incorporated herein by this reference.
Exhibit 26. International Comfort Products Corporation 1997 Long Term
Incentive Plan for Senior Management, filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997, filed with the Commission on March 30, 1998, and
incorporated herein by this reference.
Exhibit 27. Written opinion of Credit Suisse First Boston Corporation dated
June 23, 1999 (filed as Annex B).
Exhibit 28. Transition Services Agreement dated July 7, 1999 between Carrier
Corporation and W. Michael Clevy.
</TABLE>
20
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION
By: /s/ David P. Cain
-----------------------------------
David P. Cain
Senior Vice President, General
Counsel
and Secretary
Dated: July 19, 1999
21
<PAGE>
Annex A
INTERNATIONAL COMFORT PRODUCTS CORPORATION
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about June 30, 1999 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to holders of Ordinary Shares (the "Shares") of International Comfort
Products Corporation, a corporation continued under the federal laws of Canada
(the "Company"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Schedule 14D-9. You are
receiving this Information Statement in connection with the designation of
persons by Titan Acquisitions, Ltd., a corporation organized under the laws of
the Canadian Province of New Brunswick ("Purchaser"), and a wholly owned
subsidiary of United Technologies Corporation, a Delaware corporation
("Parent"), to the board of directors of the Company (the "Company Board").
Such designation is to be made pursuant to a Pre-Acquisition Agreement, dated
as of June 23, 1999 (the "Pre-Acquisition Agreement"), by and among Parent,
Purchaser and the Company, whereby Purchaser has agreed to make a tender offer
(the "Offer") for all of the outstanding Shares of the Company. The Offer is
scheduled to expire at 12:00 midnight, Toronto time, on Wednesday, July 28,
1999, unless the Offer is extended or withdrawn.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. YOU ARE URGED TO READ THIS INFORMATION STATEMENT CAREFULLY. YOU
ARE NOT, HOWEVER, REQUIRED TO TAKE ANY ACTION. WE ARE NOT NOW ASKING YOU FOR A
PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY AT THIS TIME.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. As of June 25, 1999, there were 40,789,128 Shares outstanding.
Each Share has one vote.
PROPOSED CHANGES TO THE COMPANY BOARD
Promptly upon the purchase by Purchaser of the outstanding Shares pursuant
to the Offer, and from time to time thereafter, Parent shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Company Board as shall give Parent representation on the Company Board
equal to the product of the total number of directors on the Company Board
(giving effect to the directors appointed pursuant to this sentence)
multiplied by the percentage that the aggregate number of the Shares
beneficially owned by Parent or any affiliate of Parent following such
purchase bears to the total number of Shares then outstanding, and the Company
shall, at such time, immediately take all actions necessary to cause Parent's
designees to be appointed as directors of the Company, including increasing
the size of the Company Board or securing the resignations of incumbent
directors or both.
The Company is obligated to promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill such obligations (including mailing to its stockholders the
information required by such Section and Rule) and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under Section 14(f) and Rule 14f-1. Parent shall
supply to the Company and be solely responsible for any information with
respect to Parent and its nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1.
Following the appointment of designees of Parent and prior to consummation
of a compulsory acquisition or Second Stage Transaction (as described below),
any amendment of the Pre-Acquisition Agreement or the Company's Certificate
and Articles of Continuance or By-Laws (collectively, the "the Company
Governing
A-1
<PAGE>
Documents"), any termination of the Pre-Acquisition Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or waiver thereof, any waiver of any
condition to the obligations of the Company or waiver of any of the Company's
rights under the Pre-Acquisition Agreement or other action by the Company
shall require the concurrence of a majority of the directors of the Company
then in office who were not designated by Parent, which action shall be deemed
to constitute the action of the Company Board even if such majority does not
constitute a majority of all directors then in office.
PURCHASER DESIGNEES
Purchaser has informed the Company that Purchaser will choose the Purchaser
Designees from the list of persons set forth in the following table. With
respect to the Purchaser Designees, the following table, prepared from
information furnished to the Company by Purchaser, sets forth the name, age,
citizenship, present principal occupation or employment and five-year
employment history for each of the persons who may be designated by Purchaser
as Purchaser Designees. If necessary, Purchaser may choose additional or other
Purchaser Designees, subject to the requirements of Rule 14f-1. Unless
otherwise indicated below, the business address of each person is United
Technologies Corporation, One Financial Plaza, MS 524, Hartford, CT 06101, and
such person is a Canadian citizen.
<TABLE>
<CAPTION>
Present Principal Occupation or
Employment;
Material Positions Held During The Past
Name Age Five Years
---- --- ---------------------------------------
<C> <C> <S>
Dennis Moyer..................... 47 Senior Vice President, Carrier Canada
Limited
Ken Kapustiak.................... 43 Vice President (Finance) of Carrier
Canada Limited/Otis; Regional Finance
Manager, Otis; various other finance
positions with affiliates of Parent
Peter Dilmar..................... 45 Residential Sales Manager, Carrier
Canada Limited
Marisa Soulis.................... 51 Executive Assistant, Carrier Canada
Limited
William Trachsel................. 56 Senior Vice President, General Counsel
Citizenship: United States and Secretary of Parent since 1998;
previously Vice President, Secretary
and Deputy General Counsel of Parent
David Fitzpatrick................ 45 Senior Vice President and Chief
Citizenship: United States Financial Officer of Parent since 1998;
previously Vice President and
Controller, Eastman Kodak Co.; Finance
Director--Cadillac Luxury Car Division,
Chief Accounting Officer, General
Motors Corp.
Ari Bousbib...................... 38 Vice President, Strategic Planning, of
Citizenship: French/Portuguese Parent since 1997; previously Managing
Director, the Strategic Partners Group;
Partner, Booz, Allen & Hamilton
</TABLE>
Purchaser has advised the Company that to the best knowledge of Purchaser,
none of the Purchaser Designees currently is a director of, or holds any
position with, the Company, and except as disclosed in the Offer to Purchase
and Circular, none of the Purchaser Designees beneficially owns any securities
(or rights to acquire any securities) of the Company or has been involved in
any transactions with the Company or any of its directors, executive officers
or affiliates that are required to be disclosed pursuant to the rules of the
Securities and Exchange Commission (the "SEC"), except as may be disclosed in
the Offer to Purchase and Circular. None of the Purchaser Designees has any
family relationship with any director or executive officer of the Company.
Purchaser has advised the Company that each of the persons listed in the
table above has consented to act as a director, and that none of such persons
has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was, or is, subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws or is involved in any other legal proceeding which is
required to be disclosed under Item 401(f) of Regulation S-K promulgated by
the SEC.
It is expected that the Purchaser Designees may assume office promptly upon
the purchase by Purchaser of the outstanding Shares pursuant to the Offer,
which cannot be earlier than July 28, 1999, and that, upon assuming office,
the Purchaser Designees will thereafter constitute at least a majority of the
Company Board.
A-2
<PAGE>
CURRENT DIRECTORS OF THE COMPANY
The following table sets forth certain information as of June 30, 1999,
regarding the current directors of the Company. Unless otherwise indicated,
each director has been engaged in the principal occupation shown for more than
the past five years.
<TABLE>
<S> <C>
RICHARD C. BARNETT STANLEY M. BECK, Q.C.
Retired Arbitrator
Age--60 Age -- 64
Director since May 1998 Director since June 1991
W. MICHAEL CLEVY THE HONOURABLE WILLIAM G.
President and Chief Executive DAVIS, P.C., C.C., Q.C.
Officer of the Company Counsel for Tory Tory
Age--50 DesLauriers & Binnington,
Director since September 1995 Barristers & Solicitors(2)
Age -- 69
Director from August 1985 to April
1990 and since June 1992
JOHN F. FRASER, O.C. ROY T. GRAYDON
Chairman of Air Canada Portfolio Manager, Ontario
(airline company)(3) Teachers' Pension Plan Board
Age--68 (pension administrator)
Director from May 1985 to Age -- 38
April 1990 and since June Director since June 1997
1992
MARVIN G. MARSHALL ERNEST C. MERCIER
President and Chief Corporate Director(4)
Executive Officer of Age -- 66
Remington Capital Director since August 1994
Investments Limited (real
estate and related ventures)
Age -- 61
Director since August 1994
DAVID H. MORRIS DAVID A. RATTEE
Corporate Director(5) President and Chief
Age--57 Executive Officer of CIGL
Director since August 1994 Holdings Limited (insurance and
financial services holding
company)(6)
Age -- 57
Director since June 1993
RICHARD W. SNYDER WILLIAM A. WILSON
Chairman, SnyderCapital Corporation President and Chief
(investment company) Executive Officer, Fresh Air
Age--61 Solutions (developer of
Director since June 1996 air conditioning technology)
Age -- 65
Director since June 1996
</TABLE>
- --------
(1) All of the directors and nominees have had the principal occupation listed
above for the previous five years except as follows: Mr. Barnett was Vice
President and General Manager of Tyler Pipe Company (valve and
A-3
<PAGE>
fitting manufacturer) until his retirement in 1998; Mr. Clevy joined the
Company as President and Chief Operating Officer of the Company's U.S.
operating subsidiary, International Comfort Products Corporation (USA)
("ICP USA"), in September 1994. He was appointed President and Chief
Executive Officer of the Company in December 1995. Prior to joining the
Company, he was Vice President of Manufacturing and Technology of Carrier
Corporation (HVAC manufacturer); Mr. Fraser, from 1995 to 1997, was Vice
Chairman of Russel Metals Inc. (metals distribution and processing
company). Prior to that time, Mr. Fraser had served as Chairman of Federal
Industries Ltd. (transportation and distribution company) from May 1992 to
May 1995; Mr. Graydon was Vice President and Director, Mergers &
Acquisitions and Corporate Finance with Toronto-Dominion Securities Inc.
(investment bank) from 1989 until June 1995; Mr. Marshall served as
Chairman of the Board of the Company from December 1995 to June 1997. He
also previously served as President and Chief Executive Officer of Bramalea
Inc. (real estate developer); Mr. Morris, until his retirement in 1995,
served as President and Chief Operating Officer of The Toro Company
(outdoor power equipment manufacturer), a position he had held since 1988;
Mr. Rattee also is Chairman, President and Chief Executive Officer of MICC
Investments Ltd. (insurance and financial services holding company).
(2) Also serves as a director of Corel Corporation, The First American
Financial Corporation, First American Title Insurance Company, Magna
International Inc, and The Seagram Company Ltd.
(3) Also serves as a director of Air Canada, the Bank of Montreal, and The
Thomson Corporation.
(4) Also serves as a director of Cascade Corporation and Golden Star Resources
Ltd.
(5) Also serves as a director of Alamo Group Inc.
(6) Also serves as a director of Aluma Enterprises Inc. and Derlan Industries
Limited.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Compensation of Directors--Standard Arrangements. Each director who is not
either the Chairman or a full-time employee of the Company is paid a fee of
$1,000 per Board meeting attended and $1,000 per committee meeting attended,
as well as an annual retainer of $20,000. In addition, the Chairman of each
committee is paid an additional annual retainer of $4,000. Directors also are
reimbursed for any out-of-pocket expenses incurred in attending meetings of
the Board or committees of the Board. Pursuant to the Company's Share
Compensation Arrangement for Non-Employee Directors, at least 20 percent, or
at an individual director's election, up to 100 percent of a director's fees,
less taxes, is to be paid in Shares, rather than cash. The number of Shares
that a director receives is determined at the end of each calendar quarter by
dividing the aggregate fees to which the director is entitled by the average
closing price of the Shares during the last five trading days of the quarter,
multiplied by 20% to 100% based upon the election of the director described
above.
Compensation of Directors--Other Arrangements. Upon Mr. Snyder becoming
Chairman in 1997, he assisted Mr. Clevy and handled various matters of
corporate business. Mr. Snyder is an ex-officio member of all committees of
the Board and attends all meetings of all Board committees. Mr. Snyder also
actively assists management in the day-to-day identification and evaluation of
strategic alternatives for the Company. Since becoming Chairman, Mr. Snyder
has received $10,000 per month for serving as Chairman. During his period of
service as Chairman, Mr. Snyder has not received any other fees (excluding
expenses) for serving as a director.
Board of Directors. The Board held eight regular meetings during 1998.
Audit Committee. The Audit Committee, which currently is comprised of
Messrs. Fraser, Graydon and Rattee, reviews the Company's financial
statements, accounting practices and business and financial controls. It also
recommends to the Board the external auditors to be appointed by the
shareholders at each annual meeting of shareholders, reviews their audit work
plan and approves their fees. The Audit Committee met five times in 1998.
Compensation and Pension Committee. The Compensation and Pension Committee,
which currently is comprised of Messrs. Beck, Davis, Morris and Wilson,
reviews and makes recommendations to the Board in
A-4
<PAGE>
respect of the overall compensation philosophy of the Company and specific
compensation policies, programs and plans. The Compensation and Pension
Committee met four times in 1998.
Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee, which currently is comprised of Messrs. Beck, Marshall,
and Rattee, recommends to the Board nominees for election as directors of the
Company and makes recommendations on other matters relating to corporate
governance policy. Although the Committee does not solicit suggestions for
nominees for the Board, suggestions for nominees accompanied by biographical
data will be considered if sent to the Company's Secretary. The Nominating and
Corporate Governance Committee met two times in 1998.
Strategic Planning Committee. The Strategic Planning Committee, which
currently is comprised of Messrs. Barnett, Clevy, Mercier, Morris, and Wilson,
assists in the development and updating of strategic plans for the Company's
existing businesses and reviews and considers alternative plans for growth and
diversification opportunities. The Strategic Planning Committee met two times
in 1998.
During 1998, all directors attended at least seventy-five percent of the
meetings of the Board and the committees of the Board of which they were
members.
A-5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation paid or accrued in 1998 and the
two prior financial years by (i) the Chief Executive Officer of the Company,
and (ii) each of the Company's four most highly compensated executive
officers, other than the Chief Executive Officer, who continued to serve as at
December 31, 1998 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation(1)
Annual -----------------------
Compensation(2) Awards Payouts
------------------ ------------ ----------
Securities
Under
Options/Sars LTIP All Other
Name and Occupation Year Salary($) Bonus($) Granted(#) Payouts($) Compensation($)
------------------- ---- --------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. Michael Clevy........ 1998 $433,500 $200,000 -- -- --
President and Chief Ex-
ecutive Officer 1997 425,000 405,500 200,000 -- --
1996 385,000 250,101 200,000 -- $206,038
David P. Cain........... 1998 $178,512 $45,217 -- -- --
Senior Vice President, 1997 175,008 70,000 50,000 -- --
General Counsel and
Secretary 1996 150,000 60,101 45,000 -- --
Stephen L. Clanton(3)... 1998 $188,712 $46,654 25,000 -- --
Senior Vice President,
Chief Financial 1997 178,754 75,000 50,000 -- --
Officer and Treasurer 1996 81,843 60,101 45,000 -- 63,416
Augusto H. Millan....... 1998 $178,512 $50,000 -- -- 10,000(4)
Senior Vice President
and General Manager, 1997 175,008 70,000 50,000 -- --
International Sales and
General Manager, 1996 150,000 60,101 45,000 -- --
Aftermarket Sales
James R. Wiese.......... 1998 $178,512 $40,000 -- 41,418 --
Senior Vice President
and General Manager, 1997 175,008 70,000 50,000 -- --
Residential Products
Group 1996 145,000 60,101 45,000 -- --
</TABLE>
- --------
(1) During the periods indicated, the Company has made no Restricted Stock
Awards to the Named Executive Officers.
(2) For 1998, 1997, and 1996, perquisites and other personal benefits did not
exceed the lesser of $50,000 and 10 percent of the total salary and bonus
for each of the Named Executive Officers.
(3) Mr. Clanton joined the Company on July 19, 1996.
(4) Represents reimbursement for moving expenses.
A-6
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets out the particulars of all grants of stock
options(1) to any of the Named Executive Officers during the Company's fiscal
year ended December 31, 1998.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Number of Percent of Appreciation For
Securities Total Option Term
Under Options Granted Exercise or (Cdn.$)(2)
Options to Employees In Base Price Expiration ----------------
Name Granted(#) Fiscal Year (Cdn. $/Share) Date 5% 10%
---- ---------- --------------- -------------- ---------- --- --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Clanton............. 25,000 6.9% $15.30 12/19/01 $74,434 $158,814
</TABLE>
- --------
(1) The exercise price of each option is equal to 100% of the fair market
value of the Shares on the date of the grant. Fair market value for the
purposes of option grants means the closing market price of the Shares on
The Toronto Stock Exchange (the "TSE") on the last trading day preceding
the date of the grant. Each option is exercisable after one year from the
date of grant as to 33 1/3% of the Shares and in cumulative increments of
33 1/3% per year thereafter.
(2) The dollar amounts under these columns are the result of calculations at
5% and 10% rates set by the SEC and, therefore, are not intended to
forecast possible future appreciation, if any, in the price of the Shares.
No benefit to the option holder is possible without an increase in the
price of the Shares. In order to realize the values set forth in the 5%
and 10% columns, the per share price would be Cdn. $18.28 and Cdn. $21.65,
respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information regarding outstanding
stock options held by each of the Named Executive Officers as at December 31,
1998. No options were exercised by any of the Named Executive Officers during
the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at Fiscal The-Money Options at
Year-End(#) Fiscal Year-End (CDN.$)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mr. Clevy............. 345,000 200,000 $2,764,500 $1,330,000
Mr. Cain.............. 72,000 48,000 569,900 314,100
Mr. Clanton........... 47,000 73,000 317,700 294,300
Mr. Millan............ 72,000 48,000 569,900 314,100
Mr. Wiese............. 72,000 48,000 569,900 314,100
</TABLE>
A-7
<PAGE>
PENSION PLANS
The Named Executive Officers participate in the salaried pension plan of ICP
USA (the "Pension Plan"). Pension benefits are not reduced by a participant's
social security benefits. Earnings for the purposes of the Pension Plan
benefit formula consist of the participant's average monthly base rate of pay.
The following table sets forth the estimated annual benefits payable upon
retirement at age 65 to participants, based upon the 60 consecutive months of
highest average earnings within 120 months of the date of determining
benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------
Remuneration 5 10 15 20 25 30+
------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000................... $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
125,000................... 12,500 25,000 37,500 50,000 62,500 75,000
160,000+.................. 16,000 32,000 48,000 64,000 80,000 96,000
</TABLE>
The maximum amount of a participant's earnings that may be taken into
account in any year is limited to an amount specified in the United States
Internal Revenue Code of 1986, as amended (the "Code"), as adjusted annually
for cost-of-living increases (such amount is $160,000 for 1998).
As at December 31, 1998, Messrs. Clevy, Cain, Clanton, Millan and Wiese had
4.3, 22.0, 2.5, 4.2 and 10.4 years of credited service, respectively, under
the Pension Plan.
In addition, Mr. Clevy has a supplemental pension plan with ICP USA which
will provide a maximum pension on retirement equal to 3 1/3% of Mr. Clevy's
average annual earnings (salary and bonus), based on three consecutive years
of highest earnings, for each year of service up to a maximum of 15 such
years, plus an additional 1% for each additional year of service up to a
maximum of 20 such additional years, less the amount payable under the Pension
Plan. Sixty percent of Mr. Clevy's pension will continue to his spouse on his
death.
The following table sets forth estimated annual amounts payable under a
supplemental pension plan before reduction for amounts payable under the
Pension Plan, if applicable.
SUPPLEMENTAL PENSION PLAN TABLE (CLEVY)
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$400,000................ $ 66,667 $133,333 $200,000 $220,000 $240,000 $260,000 $280,000
500,000................ 83,333 166,667 250,000 275,000 300,000 325,000 350,000
600,000................ 100,000 200,000 300,000 330,000 360,000 390,000 420,000
700,000................ 116,667 233,333 350,000 385,000 420,000 455,000 490,000
800,000................ 133,333 266,667 400,000 440,000 480,000 520,000 560,000
900,000................ 150,000 300,000 450,000 495,000 540,000 585,000 630,000
</TABLE>
As at December 31, 1998, Mr. Clevy had 4.3 years of credited service under
his supplemental pension plan.
TERMINATION AND CHANGE IN CONTROL AGREEMENTS
Mr. Clevy has an agreement with ICP USA which provides that upon termination
of his employment with the Company (as defined therein), he will continue to
be entitled to receive his annual salary and other benefits he was receiving
at the time of termination for 24 months (or, at his option, he may receive a
lump sum payment equal to the aggregate face value of these amounts).
A-8
<PAGE>
Mr. Clanton has an agreement with ICP USA which provides that upon
termination of his employment with the Company (as defined therein), he will
continue to be entitled to receive his annual salary and other benefits he was
receiving at the time of termination for 12 months (or, at his option, he may
receive a lump sum payment equal to the aggregate face value of these
amounts).
The Company has also entered into contracts with each of the Named Executive
Officers that provide generally for continuation of the executive's salary for
a stated number of months following a Change in Control (the "Severance
Period") in the event of a termination of the officer's employment by the
Company other than "for cause" or as a result of death or disability. In
addition, the executive will receive, in such event, on an annual basis,
during the Severance Period, an amount equal to the average of the executive's
bonus during the three years prior to termination. For Mr. Clevy, the
Severance Period is 36 months; for Messrs. Cain, Clanton, Millan and Wiese,
the Severance Period is 24 months. Additionally, the contracts provide that
the officers shall be paid such amounts if the officer voluntarily terminates
his employment with the Company if, after a Change in Control: (a) a material
change in the executive's duties and responsibilities for the Company from
those duties and responsibilities for the Company in effect at the time a
Change in Control occurs, which change results in the assignment of duties and
responsibilities inferior to the executive's duties and responsibilities at
the time such Change in Control occurs; (b) a reduction in the executive's
salary and benefits (excluding discretionary bonuses), from the salary and
benefits in effect at the time a Change in Control occurs; (c) a change in the
location of the executive's work assignment from the location at the time a
Change in Control occurs to any other city or geographical location that is
located further than one hundred (100) miles from that location; or (d) the
Company terminates or amends any incentive plan so that, when considered in
the aggregate with any substitute plan or other substitute compensation, the
incentive plan in which the executive is participating fails to provide the
executive with a level of benefits equivalent to at least 85% of the value of
the level of benefits provided in the aggregate by the terminated or amended
incentive plan at the date of such termination or amendment. These contracts
generally provide for an excise tax gross-up with respect to any taxes
incurred under Section 4999 of the Code after a Change in Control.
Additionally, these contracts provide for an extension of life insurance,
medical insurance, and other employment benefits throughout the executive's
applicable Severance Period. A "Change in Control" occurs when a person (other
than the executive or a group of which
the executive is a member or participant) becomes the beneficial owner,
directly or indirectly, of 50% or more of the then outstanding Shares. Any
executive who is a party to both a termination agreement and a change in
control agreement may not receive benefits under both agreements.
COMPENSATION AND PENSION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
The following individuals served as members of the Compensation and Pension
Committee during 1998: Prior to May 13, 1998, the Hon. William G. Davis, P.C.,
C.C., Q.C., Stanley M. Beck, Q.C., and David H. Morris; after May 13, 1998,
the Hon. William G. Davis, P.C., C.C., Q.C., Stanley M. Beck, Q.C., David H.
Morris, and William A. Wilson. None of the directors who served as members of
the Committee during 1998 is, or has ever been, an officer or an employee of
the Company or any of its subsidiaries.
REPORT OF THE COMPENSATION AND PENSION COMMITTEE
The Compensation and Pension Committee of the Board of Directors (the
"Committee") reviews and makes recommendations to the Board in respect of the
overall compensation philosophy of the Company and specific compensation
policies, programs and plans. The Committee also reviews and makes
recommendations to the Board in respect of the compensation to be paid to the
Chief Executive Officer and, after considering the recommendations of the
Chief Executive Officer, to the other officers of the Company and its
principal operating subsidiaries, ICP USA and International Comfort Products
Corporation (Canada). The Committee retains the services of independent
consultants to advise it on such matters as the structuring of compensation
arrangements, design of compensation and benefit plans and competitive
benchmarking. The Committee retained the services of a consultant from
Deloitte & Touche to advise it with respect to executive compensation matters
in 1998.
A-9
<PAGE>
When determining the appropriate levels of executive compensation to be
recommended to the Board for approval, the Committee utilizes various
information sources, including data prepared by independent consultants. The
Committee also considers the Company's performance, viability, the integrity
of its assets, future outlook, ethical standards related to its role as a
worldwide corporate citizen and applicable tax, securities and other
regulations affecting the Company. As the Company's business is carried on
principally in the United States, pay levels and practices for executives
resident in the United States or with significant North American
responsibilities are established with reference to those of U.S. industrial
companies of similar size and complexity but are paid in the currency of the
country in which the executive is resident without taking currency exchange
rates into account. Pay levels and practices in respect of executives resident
in Canada who do not have broader geographical responsibilities are
established with reference to a similar sample of Canadian organizations. In
each case, the comparator groups were selected by the Committee as they are
considered to be the prime sources of management resources for the Company as
well as the principal competitors for management talent.
General Strategy
The executive compensation strategy is a guideline for policy formulation
and decision-making that aligns the Company's human resources and business
strategies. The Company believes that effective compensation plans must be
performance-based, cost-effective and must maximize long-term shareholder
value. The Committee reviews ICP's compensation strategy, market-
competitiveness and plan effectiveness annually at minimum.
Base Salary
ICP base salaries are generally competitive with the market median, relative
to similar job scope and company size. The relative significance of ICP base
salaries is subordinate to variable, performance-based compensation
components. Therefore, when base salary increases are granted, they typically
consist of
competitive market and internal equity adjustments. Adjustments are not
necessarily made at set intervals, but are made when significant variance from
the market exists.
ICP may also award lump sum base salary increases based on the achievement
of previously determined corporate and individual Performance Management
Program goals. Lump-sum increases, when awarded, do not change the
individual's rate of base salary.
Incentive Compensation
ICP pays total cash compensation levels (base salaries plus annual
incentives) and total direct compensation levels (total cash plus long-term
incentives) which are market competitive when budgeted expectations are met,
and highly competitive when expectations are exceeded. No incentive
compensation is paid when performance results fall below a pre-established
threshold level.
The Committee recommends to the Board target, threshold and maximum
incentive performance and award levels for all participants. Once approved by
the Board, these levels are communicated for each position, level or group.
ICP may also recognize extraordinary achievement through discretionary
incentive awards.
Annual Incentive Compensation
ICP's short-term incentive plan for executives is a simple formula-based
design that rewards executives for the achievement of short-term goals, which
create growth and profitability. Short-term incentives for other managers and
salaried employees take the form of annual incentive plans, lump-sum salary
increases, sales commissions and the like, that best reflect and motivate each
position's contribution to the achievement of short-term goals and objectives.
A-10
<PAGE>
Long-Term Incentives
ICP's long-term incentive plans reward the achievement of long-term growth,
profitability, shareholder value and stock price appreciation; reward team
effort; and serve to closely align shareholder interests and organizational
success with the executive's personal, financial and career interests. ICP
provides long-term compensation opportunities in the form of stock options or
stock grants and deferred cash compensation. Plan designs enhance the
retention of executive talent and discourage behavior that does not further
the overall long-term good of the organization. As such, long-term awards are
subject to vesting or other long-term capital accumulation restrictions.
Compensation of the Chief Executive Officer
The Chief Executive Officer's compensation program has the same components
as those described for the other members of the executive officer group: base
salary, annual incentive and long-term incentive. The Chief Executive
Officer's compensation program is established with reference to the comparator
groups described above. The Committee makes recommendations to the Board
regarding the Chief Executive Officer's compensation on the same performance-
related basis as for the other executive officers.
Section 162(m) of the Code limits to $1 million per year the compensation
expense deduction the Company may take under United States federal tax laws
for non-performance-based compensation paid to a person who is "highly-
compensated" for purposes of the Code (generally, the CEO and other Named
Executive Officers). In making its decisions about compensation for Mr. Clevy
and other officers likely to be named executive officers, the Committee
considers Section 162(m). Although the Company's compensation levels have not
historically resulted in total compensation in excess of $1 million (excluding
the spread on stock option exercises which generally should qualify for
deductibility under Section 162(m)) for Named Executive Officers other than
Mr. Clevy, it is generally the policy of the Company that the components of
executive compensation that are inherently performance-based should qualify
for exclusion from the deduction limitation under Section 162(m).
The Committee believes, however, that while tax deductibility is an
important factor, it is not the sole factor to be considered in setting
executive compensation policy, and accordingly reserves the right, in
appropriate circumstances, to pay amounts, in addition to base salary, that
might not be deductible. If non-performance-based compensation in excess of $1
million should become payable to a person who is "highly-compensated" for
purposes of the Code and regulations, the Committee will consider requiring
that individual to defer any amounts earned in excess of the cap to a tax year
following the year in which the individual leaves the employment of the
Company.
Submitted by the Compensation and Pension
Committee of the Board:
The Hon. William G. Davis, P.C., C.C., Q.C.
(Chairman)
Stanley M. Beck, Q.C.
David H. Morris
William A. Wilson
A-11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Except as set forth in the following table, the Company is not aware of any
person who, as of June 30, 1999, was the beneficial owner of 5% or more of the
Shares.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Beneficial Class
Name and Address of Beneficial Owner Ownership (fully diluted)
------------------------------------ ---------- ---------------
<S> <C> <C>
Ravine Partners, Ltd
3219 McKinney Avenue
Dallas, Texas 75204 ....................... 8,304,111(1) 19.4%
Ontario Teachers' Pension Plan Board
5650 Yonge Street, 5th Floor
North York, Ontario M2M 4H5................ 7,916,638 18.4%
</TABLE>
- --------
(1) Includes 414,241 Shares owned by Richard W. Snyder, a director of the
Company, who is a general partner of Ravine Partners, Ltd.
A-12
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Shares by all directors, by each of the executive officers named
in the Summary Compensation Table beginning on page A-6 and by all directors
and executive officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name of Beneficial Owner Ownership(1) Class(2)
------------------------ ------------ ----------
<S> <C> <C>
Richard C. Barnett............................. 3,389 *
Stanley M. Beck, Q.C........................... 2,723 *
W. Michael Clevy............................... 456,772(3) *
The Honourable William G. Davis, P.C.,
C.C., Q.C..................................... 2,337 *
John F. Fraser, O.C............................ 5,171 *
Roy T. Graydon................................. 7,919,638(4) 18.4%
Marvin G. Marshall............................. 18,183 *
Ernest C. Mercier.............................. 9,800 *
David H. Morris................................ 3,585 *
David A. Rattee................................ 21,568(5) *
Richard W. Snyder.............................. 8,304,111(6) 19.4%
William A. Wilson.............................. 11,634 *
David P. Cain.................................. 118,929(3) *
Stephen L. Clanton............................. 87,921(3) *
Augusto H. Millan.............................. 119,615(3) *
James R. Wiese................................. 152,044(3) *
All directors and executive officers
as a group (22 persons)....................... 17,657,195(3) 41.22%
</TABLE>
- --------
(1) Includes Shares that any person has the right to acquire within 60 days of
the Record Date. Ownership is direct unless otherwise noted.
(2) An asterisk (*) in this column denotes ownership of less than one percent
of the outstanding Shares as of the Record Date.
(3) Includes Shares subject to options that currently are exercisable as
follows: Mr. Clevy (425,000); Mr. Cain (91,000); Mr. Clanton (74,333); Mr.
Millan (91,000); Mr. Wiese (91,000); all executive officers as a group
(1,120,083).
(4) Includes 7,916,638 Shares owned by the Ontario Teachers' Pension Plan
Board, of which Mr. Graydon is an employee. Mr. Graydon disclaims any
beneficial interest in these Shares.
(5) Includes 6,125 Shares owned by Mr. Rattee's spouse.
(6) Includes 7,889,870 Shares owned by Ravine Partners, Ltd., of which Mr.
Snyder is a general partner.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent of the
Shares are required to report their ownership of the Shares and any changes in
that ownership to the United States Securities and Exchange Commission ("SEC")
and the American Stock Exchange ("AMEX"). These persons also are required by
SEC regulations to furnish the Company with copies of these reports. Specific
due dates for these reports have been established and the Company is required
to report in this Proxy Circular any failure to file such reports by these
dates during the Company's 1998 fiscal year. Based solely on a review of the
reports furnished to the Company and written representations from the
Company's directors and executive officers, the Company believes that all of
these filing requirements were satisfied by the Company's directors, executive
officers, and ten percent holders during 1998 except as follows: Mr. Graydon,
pursuant to the Company's Share Compensation Arrangement for Non-Employee
Directors, receives a portion of his directors' fees in Shares. Mr. Graydon,
however, as a representative of the Ontario Teachers' Pension Plan
A-13
<PAGE>
Board ("Teachers"), assigns all Shares so received to Teachers. Mr. Graydon's
receipt and assignment of all such Shares to Teachers during 1998 were timely
reported by Mr. Graydon; however, their receipt was not reported by Teachers
until it filed a Form 5 on February 17, 1999, which was one (1) day late.
PERFORMANCE GRAPHS
The following graph provides a five year comparison of cumulative total
return performance of an initial investment in Shares on December 31, 1993, of
Cdn. $100, versus the cumulative total return of the TSE 300 Composite Index.
The year-end values of each investment shown on the graph are based on share
price appreciation or depreciation plus, in the case of the TSE 300 Composite
Index, dividend re-investment.
<TABLE>
<CAPTION>
International TSE 300
--------------------------------------------------------------------------
Measurement Period Comfort Composite
(Fiscal Year Covered) Products Index
--------------------- -------- ---------
<S> <C> <C>
12/31/93............................................... 100 100
12/31/94............................................... 075 100
12/31/95............................................... 036 114
12/31/96l.............................................. 091 147
12/31/97............................................... 267 169
12/31/98............................................... 273 166
</TABLE>
The following graph provides a five year comparison of cumulative total
return performance of an initial investment in Shares on December 31, 1993, of
U.S. $100, versus the cumulative total return of the Standard and Poor's (the
"S&P") Midcap 400 Index, and the Industrial Component of the S&P Midcap 400
Index. The year-end values of each investment shown on the graph are based on
share price appreciation or depreciation plus, in the case of each index,
dividend re-investment.
<TABLE>
<CAPTION>
Industrial
Component of
International S&P
--------------------------------------------------------------------------
S&P
Midcap Midcap
Measurement Period Comfort 400 400
(Fiscal Year Covered) Products Index Index
--------------------- -------- ------ ------
<S> <C> <C> <C>
12/31/93........................................... 100 100 100
12/31/94........................................... 69 96 99
12/31/95........................................... 37 126 125
12/31/96........................................... 88 150 148
12/31/97........................................... 258 199 184
12/31/98........................................... 246 237 225
</TABLE>
CERTAIN TRANSACTIONS
During 1998, except as disclosed above under "Compensation of Executive
Officers," and except as set forth below, the Company's executive officers and
directors did not have significant business relations with the Company
requiring disclosure under applicable regulations and no such transactions are
anticipated during fiscal year 1999.
Mr. Snyder is a general partner of Ravine Partners, Ltd. ("Ravine"), a Texas
limited partnership. On April 30, 1996, Mr. Snyder, Ravine and Roberta W.
Snyder, a general partner of Ravine, (collectively, the "Snyder Group")
entered into an agreement (the "Snyder Group Agreement") with the Company
relating to the Snyder Group's shareholdings which provides for, among other
things, a prohibition on the acquisition by the Snyder Group of in excess of
20 percent of the outstanding Shares or the sale by the Snyder Group of any
Shares to a buyer who after such sale would own in excess of 20 percent of the
outstanding Shares, without first having offered the Shares to the Company or
a third party buyer arranged by the Company. The Snyder Group Agreement was
amended in July 1997 to provide for an exception to the prohibition of the
acquisition by the Snyder Group of more than 20 percent of the outstanding
Shares in the circumstances of the issuance of Shares to Mr. Snyder in his
capacity as a director or Chairman of the Company pursuant to the Company's
Share Compensation Arrangement for Non-Employee Directors.
A-14
<PAGE>
B-1
CREDIT FIRST Credit Suisse First Boston Corporation
SUISSE BOSTON Eleven Madison Avenue Telephone 212 325 2000
New York, NY 10010-3629
June 23, 1999
Board of Directors
International Comfort Products Corporation
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
Members of the Board:
You have asked us to advise you with respect to the fairness to the shareholders
of International Comfort Products Corporation (the "Company") from a financial
point of view of the consideration to be received by such shareholders pursuant
to the terms of the Pre-acquisition Agreement (the "Pre-acquisition Agreement")
among the Company, United Technologies Corporation (the "Acquiror") and Titan
Acquisitions, Ltd., a wholly owned subsidiary of the Acquiror ("Acquisition
Subsidiary"). The Pre-acquisition Agreement provides, among other things, for
(i) the commencement by Acquisition Subsidiary of a tender offer (the "Tender
Offer") for all outstanding ordinary shares of the Company (the "Shares") at a
purchase price of $11.75 per Share in cash and (ii) the consummation of a Second
Stage Transaction (as defined in the Pre-Acquisition Agreement) in which all
remaining Shares will be acquired for not less than $11.75 per Share in cash.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as a draft dated June
23, 1999 of the Pre-acquisition Agreement. We have also reviewed certain other
information, including financial forecasts, provided to us by the Company and
have met with the management of the Company to discuss the business and
prospects of the Company. We have also considered certain financial and stock
market data of the Company, and we have compared that data with similar data for
other publicly held companies in businesses similar to those of the Company and
we have considered the financial terms of certain other business combinations
and other transactions which recently have been effected. We have also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company.
<PAGE>
B-2
In addition, we have not been requested to make, and have not made, an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of the Company, nor have we been furnished with any such evaluations
or appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. In
connection with our engagement, we approached third parties to solicit
indications of interest in a possible acquisition of the Company and held
preliminary discussions with certain of these parties prior to the date hereof.
We have acted as financial advisor to the Board of Directors of the Company in
connection with the Tender Offer and the Second-Stage Transaction and will
receive a fee for our services, a significant portion of which is contingent
upon the consummation of the Tender Offer. In the past, we have performed, and
may from time to time perform, investment banking services for the Company and
the Acquiror, and have received customary fees for such services. In the
ordinary course of our business, we and our affiliates may actively trade the
debt and equity securities of both the Company and the Acquiror for our own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
It is understood that this letter is for the information of Board of Directors
of the Company in connection with its consideration of the Tender Offer and the
Second-Stage Transaction and does not constitute a recommendation to any
shareholder of the Company as to whether or not such shareholder should tender
its Shares pursuant to the Tender Offer or vote its Shares in favor of any
Second-Stage Transaction. This letter is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy statement,
or in any other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without our
prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the shareholders of the Company in
the Tender Offer and the Second-Stage Transaction is fair to such shareholders
from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
[ICP LETTERHEAD]
March 15, 1999
Mr. Stephen L. Clanton
9016 English Woods Court
Brentwood, TN 37027
Dear Mr. Clanton:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that: (a) a person (other than you
or a group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for twenty-four (24) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for twenty-
four (24) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The twenty-four (24) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ S. Clanton
________________________
Please Print or Type Name: Steve Clanton
___________________________
Please Print or Type Title: SVP & CFO
____________________________
-6-
[ICP LETTERHEAD]
March 15, 1999
Mr. Herman V. Kling
9416 Ashford Place
Brentwood, TN 37027
Dear Mr. Kling:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that: (a) a person (other than you
or a group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for twenty-four (24) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for twenty-
four (24) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The twenty-four (24) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ Herman V. Kling
________________________
Please Print or Type Name: Herman V. Kling
___________________________
Please Print or Type Title: Sr VP Sales and Marketing
____________________________
-6-
[ICP LETTERHEAD]
March 15, 1999
Mr. Francis C. Harrell
920 Calloway Drive
Brentwood, TN 37027
Dear Mr. Harrell:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that: (a) a person (other than you
or a group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for twenty-four (24) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for twenty-
four (24) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The twenty-four (24) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ Francis C. Harrell
________________________
Please Print or Type Name: Francis C. Harrell
___________________________
Please Print or Type Title: Sr Vice President Business Development
____________________________
-6-
[ICP LETTERHEAD]
March 15, 1999
Mr. Robert C. Henningsen
9456 Chenowith Place
Brentwood, TN 37027
Dear Mr. Henningsen:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that: (a) a person (other than you
or a group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for twenty-four (24) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for twenty-
four (24) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The twenty-four (24) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ David P. Cain /s/ W. Michael Clevy
David P. Cain W. Michael Clevy
Senior Vice President, General President and Chief Executive Officer
Counsel and Secretary
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ Robert C. Henningsen
________________________
Please Print or Type Name: Robert C. Henningsen
___________________________
Please Print or Type Title: Sr VP
____________________________
-6-
[ICP LETTERHEAD]
March 15, 1999
Mr. Augusto H. Millan
A-1 Components
625 West 18th Street
Hialeah, FL 33010
Dear Mr. Millan:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that: (a) a person (other than you
or a group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for twenty-four (24) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for twenty-
four (24) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The twenty-four (24) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ Augusto Millan
________________________
Please Print or Type Name: Augusto Millan
___________________________
Please Print or Type Title: Sr. V.P. International and Aftermarket
____________________________
-6-
[ICP LETTERHEAD]
March 15, 1999
Mr. David B. Schumacher
1021 Riverview Drive
Franklin, TN 37064
Dear Mr. Schumacher:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that a person (other than you or a
group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances by either the Company or you following a
Change in Control. Section 6 also set forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause After a Change in
Control. If, during a Change in Control, your employment with the Company is
terminated by the Company without Cause, you shall be entitled to receive
Benefits (as defined in Section 3) for eighteen (18) months following the
Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for
eighteen (18) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The eighteen (18) month period of time described in either
Sections 2.2 or 2.3 is hereinafter referred to as the "Severance Period".
Notwithstanding anything to the contrary in this Agreement, no benefits under
Sections 3.1 or 4 shall be paid to you until and unless any amounts then owed
by you to the Company have been paid in full and the Company may offset against
any such benefits any amounts that are owed, irrespective of the maturity date
thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
All payments made by the Company pursuant to this Agreement specifically
include termination and severance pay under common law and the Ontario
Employment Standards Act. Upon compliance by the Company with the terms of
this Agreement, the Company shall be released and held harmless by you from any
and all claims which you may have for whatever reason or cause in connection
with your employment with the Company, or the termination thereof following a
Change in Control. In agreeing to the terms set out in this Agreement, you
specifically agree to execute a formal release document to that effect, and
will deliver upon request appropriate resignations from all offices and
positions with the Company if and when requested to do so upon the termination
of your employment in the circumstances contemplated by this Agreement.
-4-
7.2 Other Plans. Nothing in this Agreement shall affect your
rights during your employment to receive increases in compensation,
responsibilities or duties or to participate in and receive benefits from any
pension plan, benefit plan or profit sharing plans except such plans which
specifically address benefit(s) of the type addressed in Sections 3 and 4 of
this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the Province of Ontario and the
courts of the Province of Ontario, Canada.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ David B. Schumacher
________________________
Please Print or Type Name: David B. Schumacher
___________________________
Please Print or Type Title: VP & GM, Commercial Products Group
____________________________
-6-
[ICP LETTERHEAD]
March 15, 1999
Ms. Karla G. Smith
634 Brook Hollow Road
Nashville, TN 37205
Dear Ms. Smith:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that a person (other than you or a
group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances by either the Company or you following a
Change in Control. Section 6 also set forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause After a Change in
Control. If, during a Change in Control, your employment with the Company is
terminated by the Company without Cause, you shall be entitled to receive
Benefits (as defined in Section 3) for eighteen (18) months following the
Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for
eighteen (18) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The eighteen (18) month period of time described in either
Sections 2.2 or 2.3 is hereinafter referred to as the "Severance Period".
Notwithstanding anything to the contrary in this Agreement, no benefits under
Sections 3.1 or 4 shall be paid to you until and unless any amounts then owed
by you to the Company have been paid in full and the Company may offset against
any such benefits any amounts that are owed, irrespective of the maturity date
thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
All payments made by the Company pursuant to this Agreement specifically
include termination and severance pay under common law and the Ontario
Employment Standards Act. Upon compliance by the Company with the terms of
this Agreement, the Company shall be released and held harmless by you from any
and all claims which you may have for whatever reason or cause in connection
with your employment with the Company, or the termination thereof following a
Change in Control. In agreeing to the terms set out in this Agreement, you
specifically agree to execute a formal release document to that effect, and
will deliver upon request appropriate resignations from all offices and
positions with the Company if and when requested to do so upon the termination
of your employment in the circumstances contemplated by this Agreement.
-4-
7.2 Other Plans. Nothing in this Agreement shall affect your
rights during your employment to receive increases in compensation,
responsibilities or duties or to participate in and receive benefits from any
pension plan, benefit plan or profit sharing plans except such plans which
specifically address benefit(s) of the type addressed in Sections 3 and 4 of
this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the Province of Ontario and the
courts of the Province of Ontario, Canada.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ Karla G. Smith
________________________
Please Print or Type Name: Karla G. Smith
___________________________
Please Print or Type Title: Vice President, Corporate Communications
____________________________
-6-
[ICP LETTERHEAD]
March 15, 1999
Mr. H. David Tayler
238 Appleby Road
Ancaster, Ontario L9G 2V7
Dear Mr. Tayler:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that: (a) a person (other than you
or a group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for twenty-four (24) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for twenty-
four (24) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The twenty-four (24) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ D. Tayler 3/26/99
________________________
Please Print or Type Name: D. Tayler
___________________________
Please Print or Type Title: Sr. Vice President
____________________________
-6-
[ICP LETTERHEAD]
March 15, 1999
Mr. James R. Wiese
810 Foxboro Court
Brentwood, TN 37027
Dear Mr. Wiese:
The Board of Directors of the International Comfort Products
Corporation recognizes the contribution that you have made to International
Comfort Products Corporation or one of its direct or indirect subsidiaries
(collectively herein "Company") and wishes to ensure your continuing
commitment. Accordingly, in exchange for your continuing commitment to the
Company, the Company hereby agrees to the following, which sets forth certain
rights that you have in the event your employment with the Company is
terminated following a Change in Control:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
1.1 "Cause" shall mean any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means that: (a) a person (other than you
or a group of which you are a member or participant) hereafter becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding voting securities.
1.3 "Change in Control Period" means a twenty-four (24) month
period beginning the day after there occurs a Change in Control.
1.4 "Change in Duties or Compensation" means any one of: (a) a
material change in your duties and responsibilities for the Company from those
duties and responsibilities for the Company in effect at the time a Change in
Control occurs, which change results in the assignment of duties and
responsibilities inferior to your duties and responsibilities at the time such
Change in Control occurs (it being understood and acknowledged by you that a
Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change
in your duties and responsibilities); (b) a reduction in your salary and
benefits (excluding discretionary bonuses), from the salary and benefits in
effect at the time a Change in Control occurs; (c) a change in the location of
your work assignment from your location at the time a Change in Control occurs
to any other city or geographical location that is located further than one
hundred (100) miles from that location; or (d) the Company terminates or amends
any Incentive Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the Incentive Plan in which
you are participating fails to provide you with a level of benefits equivalent
to at least 85% of the value of the level of benefits provided in the aggregate
by the terminated or amended Incentive Plan at the date of such termination or
amended Incentive Plan at the date of such termination or amendment; provided,
however, that a Change in Duties or Compensation shall not be deemed to exist
under this clause (d) if the decline in Incentive Plan compensation is related
to a decline in performance.
1.5 "Incentive Plans" shall mean any incentive, bonus, deferred
compensation, pension, retirement or similar plan or arrangement currently or
hereafter made available by Company in which you are eligible to participate.
1.6 "Welfare Plans" shall mean any health and dental plan,
disability plan, survivor income plan and life insurance plan or arrangement
currently or hereafter made available by Company in which you are eligible to
participate.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL;
SEVERANCE. The Company's Board of Directors may terminate your employment,
with or without cause, at any time by giving you written notice of such
termination, such termination of employment to be effective on the date
specified in such notice. You also may terminate your employment with the
Company at any time. The effective date of termination (the "Effective Date")
shall be the last day of your employment with the Company, as specified in a
notice by you, or if you are terminated by the Company, the date that is
specified by the Company in its notice to you. The following sections set
forth your rights to severance in the event of the termination of your
employment in certain circumstances following a Change in Control by either the
Company or you. Section 6 also sets forth certain restrictions on your
activities in the event that your employment with the Company is terminated,
whether by the Company or you. That section shall survive any termination of
this Agreement or your employment with the Company.
2.1. Termination by the Company for Cause. If you are terminated
for Cause, the Company shall have no obligation whatsoever under this Agreement
to you, and your participation in all of the Company's benefit plans and
programs shall cease as of the Effective Date. In the event of a termination
for Cause, you shall not be entitled to receive severance benefits described
in Section 3.
2.2. Termination by the Company Without Cause. If, during a Change
in Control Period, your employment with the Company is terminated by the
Company without Cause, you shall be entitled to receive Benefits (as defined
in Section 3) for twenty-four (24) months following the Effective Date.
2.3. Termination By You For Change in Duties or Compensation During
a Change in Control Period. In addition to your rights under Section 2.2, if
during a Change in Control Period there occurs a Change in Duties or
Compensation, you may terminate your employment with the Company at any time
by giving, within thirty (30) days after the occurrence of the Change in Duties
or Compensation, not less than one hundred twenty (120) nor more than one
hundred eighty (180) days' notice of such termination to the Company. During
whatever notice period that you work any reduction in your Compensation will
be restored. At the option of the Company, following receipt of such notice,
it may: (a) change and/or cure, within fifteen (15) days, the condition that
you claim has caused the Change in Duties or Compensation, in which case, your
rights to terminate your employment with the Company pursuant to this Section
2.3 shall cease (unless there occurs thereafter another Change in Duties or
Compensation) and you shall continue in the employment of the Company
notwithstanding the notice that you have given; (b) allow you to continue your
employment through the date of that you have specified in your notice; or (c)
immediately terminate your employment pursuant to Section 2.2. In the event
you terminate your employment with the Company pursuant to this Section 2.3,
you shall be entitled to receive Benefits (as defined in Section 3) for twenty-
four (24) months following the Effective Date. Your failure to provide the
notice required by this Section 2.3 shall result in you having no right to
receive any further compensation from the Company except for any base salary
or vacation earned but not paid plus any bonus earned and accrued by the
Company through the Effective Date. It is expressly understood and agreed that
you shall have no rights arising under this Section 2.3 following a Change in
Control if the Change in Control results from you or a group of which you are
a member or participant becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding voting securities.
3. SEVERANCE BENEFITS. In the event that your employment with
the Company is terminated as described in Section 2.2 or 2.3, you shall be
entitled to the following benefits contained in subsections 3.1, 3.2, 3.3 and
3.4 (herein "Benefits") for the respective period of time set forth in the
applicable section. The twenty-four (24) month period of time described in
either Sections 2.2 or 2.3 is hereinafter referred to as the "Severance
Period". Notwithstanding anything to the contrary in this Agreement, no
benefits under Sections 3.1 or 4 shall be paid to you until and unless any
amounts then owed by you to the Company have been paid in full and the Company
may offset against any such benefits any amounts that are owed, irrespective
of the maturity date thereof.
-2-
3.1 Salary Continuance. Throughout the applicable Severance
Period, you shall continue to be paid, on an annual basis, an amount equal to
the average of your regular salary and bonus (excluding reimbursements for
certain expenses or costs and/or gross-ups designed to reimburse you for
certain expenses or costs) that you received during the three (3) years
preceding your termination. Such amounts shall be paid on a periodic basis
using the Company's regular payroll periods. At the option of the Company,
which may be exercised by the Company in writing at any time after the
Effective Date, you shall receive a single lump sum payment equal to the
present value payment of any remaining payments that you would receive during
the remaining portion of the applicable Severance Period. The determination
of the amount of this payment shall be made by the Company's actuaries and
benefit consultants and, absent manifest error, shall be final, binding and
conclusive upon you and the Company.
3.2 Continuation of Benefits. During the applicable Severance
Period, you shall continue to receive all benefits to which you were entitled
and which you were receiving on the day preceding the Effective Date. Without
limiting the generality of the foregoing, the following provisions shall apply:
(a) For purposes of any Incentive Plans, you shall be given
service credit for all purposes for, and shall be deemed to be
an employee of Company during the Severance Period,
notwithstanding the fact that you are not an employee of
Company or any of its affiliates during the Severance Period;
provided that, if the terms of any of such Incentive Plans do
not permit such credit or deemed employee treatment, Company
will make payments and distributions to you outside of the
Incentive Plans in amounts substantially equivalent to the
payments and distributions you would have received pursuant to
the terms of the Incentive Plans and attributable to such
credit or deemed employee treatment, had such credit or deemed
employee treatment been permitted pursuant to the terms of the
Incentive Plans.
(b) During the Severance Period, you and your spouse and family
will continue to be covered by all Welfare Plans maintained by
Company in which you or your spouse or family were
participating immediately prior to the date of your
termination as if you continued to be an employee of Company;
provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Company
will provide substantially identical benefits. If, however,
you obtain employment with another employer during the
Severance Period such coverage shall be provided until the
earlier of: (i) the end of the Severance Period or (ii) the
date on which you and your spouse and family can be covered
under the plans of a new employer without being excluded from
full coverage because of any actual pre-existing condition.
Nothing contained herein is intended to in any way limit your
rights under COBRA.
3.3 Unused or Accrued Vacation. You will be paid for any unused
or accrued vacation that you had earned as of the Effective Date.
3.4 Automobile. You shall continue to have use of the automobile
provided to you by the Company. At the end of the applicable Severance Period,
you shall have the option to purchase any automobile furnished by the Company
for your use. The exercise price of this option shall be the net book value,
as set forth on the Company's books, of the automobile at such time.
4. EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of any
termination of your employment, all stock options held by you that are vested
prior to the Effective Date shall be exercisable in accordance with their
terms; all stock options held by you that are not vested prior to the Effective
Date shall lapse and be void; provided, however, in the event that your
employment with the Company is terminated as described in Section 2.2 or 2.3,
then, unless your option provides that it is immediately exercisable in the
event of a Change in Control, in which case the terms of your option agreement
shall control, you shall receive, within thirty (30) days after the Effective
Date, a lump sum cash distribution equal to: (a) the number of shares of the
Company's ordinary shares that are subject to options held by you that are not
vested on the Effective Date; multiplied by (b) the difference between: (i) the
closing price of a share of the Company's ordinary shares on the American Stock
Exchange as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the American Stock Exchange is closed on that date, on
the last preceding date on which the American Stock Exchange was open for
trading), and (ii) the applicable exercise price(s) of such non-vested shares.
-3-
5. ADDITIONAL AMOUNT.
(a) The Company will pay you an amount (the "Additional Amount")
equal to the excise tax under the United States internal Revenue Code of 1986,
as amended (the "Code"), if any, incurred by you by reason of the payments
under this Agreement and any other plan, agreement or understanding between you
and the Company or its parent, subsidiaries or affiliates (collectively,
"Separation Payments") constituting excess parachute payments under Section
280G of the Code (or any successor provision thereof). In addition, the
Company will pay you an amount equal to all excise taxes and federal, state and
local income taxes incurred by you with respect to receipt of the Additional
Amount.
(b) All determinations required to be made under this Section 5,
including whether an Additional Amount is required and the amount of any
Additional Amount, will be made by the independent auditors engaged by the
Company immediately prior to the Change in Control (the "Accounting Firm"),
which will provide detailed supporting calculations to the Company and you.
In computing taxes, the Accounting Firm will use the highest marginal federal,
state and local income tax rates applicable to you and will assume the full
deductibility of state and local income taxes for purposes of computing federal
income tax liability, unless you demonstrate that you will not in fact be
entitled to such a deduction for the year of payment.
(c) The Additional Amount, computed assuming all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision thereof), will be paid to you in proportion
to the and at the times that the Separation Payments are received unless the
Company, prior to the Severance Period, provides you with an opinion of the
Accounting Firm that you will not incur an excise tax on part or all of the
Separation Payments. Any such opinion will be based upon the applicable
regulations under Sections 280G and 4999 of the Code (or any successor
provisions thereof) or substantial authority within the meaning of Section 6662
of the Code. If such opinion applies only to part of the Separation Payments,
the Company will pay you the Additional Amount with respect to that part of the
Separation Payments not covered by the opinion.
6. DISCLOSURE OF INFORMATION. You recognize and acknowledge
that, as a result of your employment by the Company, you have or will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of the Company.
You agree that any such confidential information and trade secrets are the
property of the Company. Therefore, you agree that, for and during your
employment with the Company and continuing following the termination of your
employment for any reason whatsoever, any such confidential information and
trade secrets shall be considered to be proprietary to the Company and kept as
the private records of the Company and will not be divulged to any firm,
individual, or institution, or used to the detriment of the Company. The
parties agree that nothing herein shall be construed as prohibiting the Company
from pursuing any remedies available to it for any breach or threatened breach
of this Section 6, including, without limitation, the recovery of damages from
you or any person or entity acting in concert with you.
7. GENERAL PROVISIONS.
7.1 Full Satisfaction. You acknowledge and agree that the
payments and benefits that may be provided to you pursuant to Sections 2.2,
2.3, 3, 4 and 5 of this Agreement are reasonable and sufficient and that you
are not entitled to any additional notice or pay in lieu of notice, termination
pay, severance pay, stock options or other payments or benefits whether under
statute, common law, Company policy, contract or otherwise as a result of any
termination of your employment with the Company following a Change in Control.
Upon compliance by the Company with the terms of this Agreement, the Company
shall be released and held harmless by you from any and all claims which you
may have for whatever reason or cause in connection with your employment with
the Company, or the termination thereof following a Change in Control.
7.2 Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities
or duties or to participate in and receive benefits from any pension plan,
benefit plan or profit sharing plans except such plans which specifically
address benefit(s) of the type addressed in Sections 3 and 4 of this Agreement.
7.3 Death During Severance Period. If you die during the
applicable Severance Period, any Benefits remaining to be paid to you shall be
paid to the beneficiary designated by you to receive such Benefits (or in the
absence of such a designation, to your surviving spouse or next of kin).
-4-
7.4 Notices. Any notices to be given hereunder by either party to
the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing on the
first page of this Agreement (to the attention of the Secretary in the case of
notices to the Company), but each party may change such address by written
notice in accordance with this Section 7.4. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of the second day following deposit in the United States Mail.
7.5 Entire Agreement. This Agreement supersedes any and all
previous oral or written agreements, understandings or arrangements between the
Company and you regarding a termination of your employment with the Company or
a change in your status, scope or authority and the salary, benefits or other
compensation that you receive from the Company as a result of the termination
of your employment with the Company following a Change in Control (the "Subject
Matter"), all of which are hereby wholly terminated and canceled. Any benefits
that you receive as a result of your termination following a Change in control
shall be determined solely and exclusively by this Agreement and,
notwithstanding any policy of the Company or the terms of any other agreement
or understanding, you will be entitled to no other benefits in the event of
such a termination. This Agreement contains all of the covenants and
agreements between the parties with respect to the Subject Matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made with respect to the Subject
Matter by any party, or anyone acting on behalf of any party, which are not
embodied herein. Any subsequent agreement relating to the Subject Matter or
any modification of this Agreement will be effective only if it is in writing
signed by the party against whom enforcement of such modification is sought.
Subject to the foregoing, this Agreement, however, does not affect or supersede
any policy or other agreements that you may have with the Company regarding
termination of your employment with the Company or a change in your status,
scope or authority and the salary, benefits or other compensation that you
receive from the Company as a result of the termination of your employment in
the absence of a Change in Control.
7.6 Partial Invalidity. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
7.7 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee and the
courts of the State of Tennessee USA.
7.8 Waiver of Jury Trial. The Company and you hereby expressly
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, and agree that any such action or
proceeding shall be tried before a court and not a jury. You irrevocably
waive, to the fullest extent permitted by law, any objection that you may have
or hereafter have to the laying of the venue of any such action or proceeding
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
7.9 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any
express waiver of any provision of this Agreement will not operate and is not
to be construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. You may not assign any
of your rights under this Agreement. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company. The Company agrees that it will
assign this Agreement to any successor company and ensure that its terms are
continued.
-5-
If all of the foregoing contained in this Agreement is agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning the same to us upon which this letter, as so agreed upon,
shall constitute an Agreement between us.
INTERNATIONAL COMFORT PRODUCTS INTERNATIONAL COMFORT PRODUCTS
CORPORATION CORPORATION
/s/ Robert C. Henningsen /s/ W. Michael Clevy
Robert C. Henningsen W. Michael Clevy
Senior Vice President, Human President and Chief Executive Officer
Resources and Administration
The foregoing is agreed to and accepted by:
Company Employee's Signature: /s/ James R. Wiese
________________________
Please Print or Type Name: James R. Wiese
___________________________
Please Print or Type Title: Sr. V.P. & G.M. Res.
____________________________
-6-
[ICP LETTERHEAD]
January 13, 1997
Mr. Herman V. Kling
5622 Timber Creek Court
Prospect, KY 40059
Dear Herman:
Following our discussions over the last several months, it gives me great
pleasure to offer you the position of Senior Vice President - Marketing
for Inter-City Products Corporation (USA). In this assignment you will be
responsible for the design and implementation of the total Marketing program
to insure corporate goals are met in sales, profitability and market share.
In this key management position you will report directly to Mike Clevy,
President and Chief Executive Officer.
The compensation, perquisites and relocation assistance associated with
the position are as follows:
Your total compensation will consist of a base salary, cash incentive bonus
and stock options, plus an attractive benefits package as follows:
Salary
* $12,500 per month.
Bonus
* A bonus up to 30% of base salary based on the Corporation meeting
its financial objectives and you meeting the specified objectives
established for the position in the fiscal year. This assumes
the Company meets the Operating Plan goal and you achieve 100%
of your MBO. Please Note: This program is currently under review and
could increase if approved by the Compensation and Benefits Committee
of the Board of Directors. For performance in the year 1997, the
minimum bonus payment, to be paid in 1998, will be $20,000.
Mr. Herman F. Kling
Page 2
January 13, 1997
Stock Options
* An award of 45,000 shares, subject to the approval of the Compensation
Committee of the Board of Directors, will be issued to you and you
will be immediately eligible to exercise 20% of the shares granted
under the Option. Thereafter, 20% per year becomes exercisable for
the next four years.
Car
* Leased vehicle in accordance with our policies and guidelines for
this key management position.
Country Club
* The Company will pay the initiation fee and monthly dues associated
with a club membership.
Vacation
* Four weeks vacation per year.
Pension
* Participation in our defined benefit pension plan and voluntary
participation is available in our employee share ownership savings
program (401K).
Life Insurance
* Participation in accordance with our standard policy and procedures
for employees.
Health and Disability
* Participation in accordance with our standard policy and
procedures for employees. You may elect a Health Maintenance
Organization (HMO) or a Preferred Provider Organization (PPO)
with 90% paid in-network and 80% paid out-of-network.
Relocation
* Relocation of household goods.
* Reimbursement of usual fees associated with the purchase of a
residence in the Nashville areas and sale of your former
residence.
* Temporary living expenses of 30 days.
Mr. Herman F. Kling
Page 2
January 13, 1997
Termination
* In the event that you are terminated by the Company from the
employment of the Company other than for cause, you will receive
a base salary and continuation of your health care, automobile
lease and club dues for a twelve (12) month period. At the
Company's discretion, the payment may be paid as a lump-sum or
paid in monthly installments. Further, this payment will be made
provided you agree not to work in the employment of another
company involved, directly or indirectly, in the design,
manufacture or sale of heating and air conditioning equipment for
a twelve (12) month period following termination.
We are looking forward to your acceptance of this offer and an employment
date of February 1, 1997. This offer is conditional on the satisfactory
completion of a routine drug screen which is given to all employees. As a
reminder, you should bring a copy of your drivers license and birth
certificate when you begin employment since this is required by Inter-City
Products Corporation (USA) under the Immigration Act of 1986. Upon
acceptance, please sign the extra copy enclosed and return to my office for
the files.
If you have any questions or need additional information, please contact
me.
Sincerely,
/s/ Robert C. Henningsen
Robert C. Henningsen
Enclosures
c: M. Clevy
R. Williams
ACCEPTED: /s/ Herman V. Kling 1-21-97
------------------------------------ ------------------------
Herman V. Kling Date
Carrier Corporation CARRIER
Carrier World Headquarters ------------------
One Carrier Place A United Technologies Company
P.O. Box 4015
Farmington, CT 06034-4015
860 674 3000
July 7, 1999
Mr. W. Michael Clevy
9104 Heritage Drive
Brentwood, TN 37027
Re: Transition Services Agreement
-----------------------------
Dear Mike:
As Chief Executive Officer of International Comfort Products Corporation
("ICP"), your efforts and support will be critical to the immediate tasks of
bringing Carrier's acquisition of ICP to a successful closing and
transitioning ICP's operations to ownership under Carrier. In recognition of
the special challenges presented, Carrier will pay you a special transition
bonus of $500,000 at the end of the Transition Period (as defined below),
subject to your satisfactory discharge of the following duties and
responsibilities: (i) you will continue to devote your full time efforts to
ICP for the period beginning at the time of announcement (June 24, 1999) and
ending on the 90th day following the Closing Date (the "Transition Period");
(ii) you will cooperate fully with Carrier on all matters required to bring
the transaction to closing; (iii) you will successfully maintain ICP business
operations during the Transition Period; (iv) you will assist in managing
critical operations during the Transition Period; (iv) you will assist in
managing critical ICP business relationships through the ownership
transition; and (v) you will agree to certain restrictions following the
Transition Period, as described below.
Examples of these responsibilities include using your best efforts to
preserve customer, distributor and supplier relationships through the
Transition Period, to obtain all regulatory approvals that may be required to
close the transaction and to successfully solicit ICP shareholders. You will
also be expected to use your best efforts to achieve current financial and
operating plans, to retain key employees, to continue current quality,
productivity, engineering, marketing and other strategic programs and
initiatives and to take such other steps as you deem appropriate to protect
the value of the business during the Transition Period.
At the end of the Transition Period, UTC will pay you the special
transition bonus (less applicable tax withholdings), subject to the following
conditions: (i) you remain employed by ICP through the Closing Date and
render services to ICP as an employee or consultant (to be determined by
Carrier) on a full time basis at your current salary for the remainder of the
Transition Period; and (ii) Carrier determines that you have successfully
discharged your responsibilities
as described above. If you leave prior to the end of the Transition Period,
or if Carrier fails to complete its acquisition of ICP, no transition bonus
will be paid. Please note that this transition bonus will not be treated as
compensation under ICP's pension or other benefit plans. This letter and any
benefits that you may receive hereunder are in addition to any other benefits
to which you may be entitled as a result of your employment (or the
termination of your employment) with ICP or its affiliates (including without
limitation, any termination of your employment) with ICP or its affiliates
(including without limitation, any termination or change of control
agreements) and shall not in any way limit, affect or amend any other such
benefits.
In further consideration of the benefits provided to you under this
Agreement, you agree that you will not disclose "Company Information" during
or after the Transition Period. For purposes of this Agreement, "Company
Information" means any proprietary, privileged, technical, financial,
strategic, customer, marketing or other nonpublic information pertaining to
ICP, the disclosure of which would reasonably be considered to be adverse to
the business or prospects of ICP and Carrier. You also agree, that for a
period of one year following the Transition Period, you will not hire or
recruit any employee of ICP unless you have first obtained Carrier's written
consent.
If you are in agreement with the terms of this letter, please
acknowledge your acceptance where indicated below and return one copy to my
office.
Very truly yours,
/s/ John R. Lord
------------------------------
John R. Lord
President
Acknowledged and Accepted:
/s/ W. Michael Clevy 7-12-99
- ---------------------------------- -----------------------------
By: W. Michael Clevy Date
2
