<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1996
REGISTRATION NO. 333-00483
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FEDDERS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3585 22-2572390
(State or other jurisdiction
of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification No.)
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505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938-0813
(908) 604-8686
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
ROBERT N. EDWARDS, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938-0813
(908) 604-8686
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
with a copy to:
PAUL G. HUGHES, ESQ.
CUMMINGS & LOCKWOOD
FOUR STAMFORD PLAZA
P.O. BOX 120
STAMFORD, CT 06904
(203) 327-1700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CROSS-REFERENCE SHEET
LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY
PART I OF FORM S-4
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Item 1 Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Facing Page of Registration Statement; Cross-
Reference Sheet; Outside Front and Inside
Front Cover Page of Prospectus
Item 2 Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page of Prospectus;
Available Information
Item 3 Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................ Summary; Selected Financial Data; Unaudited
Pro Forma Financial Statements; Special
Factors
Item 4 Terms of the Transaction....................... Summary; The Merger; The Merger -- Description
of Fedders Capital Stock; Annex A
Item 5 Pro Forma Financial Information................ Summary; Unaudited Pro Forma Financial
Statements
Item 6 Material Contacts with the Company Being
Acquired..................................... Special Factors; The Merger
Item 7 Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters................................. Not Applicable
Item 8 Interests of Named Experts and Counsel......... Not Applicable
Item 9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
Item 10 Information with Respect to S-3 Registrants.... Incorporation of Certain Documents by
Reference
Item 11 Incorporation of Certain Information by
Reference.................................... Incorporation of Certain Documents by
Reference
Item 12 Information with Respect to S-2 or
S-3 Registrants.............................. Not Applicable
Item 13 Incorporation of Certain Information
by Reference................................. Not Applicable
Item 14 Information with Respect to Registrants Other
Than S-3 or S-2 Registrants.................. Not Applicable
Item 15 Information with Respect to S-3 Companies...... Not Applicable
Item 16 Information with Respect to S-2 or
S-3 Companies................................ Incorporation of Certain Documents by
Reference; Annexes B, C, D and E
Item 17 Information with Respect to Companies Other
Than S-2 or S-3 Companies.................... Not Applicable
Item 18 Information if Proxies, Consents or
Authorizations Are to be Solicited........... The Fedders Annual Meeting; The NYCOR Special
Meeting; Security Ownership of Directors and
Executive Officers of Fedders; Principal
Stockholders of Fedders; Security Ownership
of Directors and Executive Officers of
NYCOR; Principal Stockholders of NYCOR; The
Merger -- Interests of Certain Persons in
the Merger; Election of Directors of
Fedders; Executive Compensation
Item 19 Information if Proxies, Consents or
Authorizations Are not to be Solicited, or in
an Exchange Offer............................ Not Applicable
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FEDDERS CORPORATION NYCOR, INC.
WESTGATE CORPORATE CENTER 287 CHILDS ROAD
505 MARTINSVILLE ROAD BASKING RIDGE, NEW JERSEY 07920
LIBERTY CORNER, NEW JERSEY 07938 (908) 953-8200
(908) 604-8686
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PROXY STATEMENT-PROSPECTUS
CONVERTIBLE PREFERRED STOCK OF FEDDERS CORPORATION
OR
CLASS A STOCK OF FEDDERS CORPORATION
This Proxy Statement-Prospectus is being furnished to the stockholders of
Fedders Corporation ("Fedders" or the "Company") in connection with the
solicitation by the Board of Directors of Fedders of proxies in the accompanying
form to be used at the Annual Meeting of Stockholders of the Company (the
"Fedders Annual Meeting") to be held on Monday, June 24, 1996, and at all
adjournments thereof, for the purposes set forth below.
This Proxy Statement-Prospectus is being furnished to the stockholders of
NYCOR, Inc. ("NYCOR") in connection with the solicitation by the Board of
Directors of NYCOR of proxies in the accompanying form to be used at the Special
Meeting of Stockholders of NYCOR (the "NYCOR Special Meeting") to be held on
Monday, June 24, 1996, and at all adjournments thereof, for the purpose of
voting on the Merger (as defined below). This document also constitutes a
prospectus of Fedders relating to the shares of Convertible Preferred Stock of
Fedders (the "Fedders Convertible Preferred Stock") or shares of Class A Stock,
par value $1.00 (the "Fedders Class A Stock"), that are issuable upon
consummation of the Merger or upon conversion of any Fedders Convertible
Preferred Stock issued upon consummation of the Merger. See, "Description of
Fedders Capital Stock" and "Certain Differences in the Rights of Fedders and
NYCOR Stockholders."
This Proxy Statement-Prospectus, the accompanying Notice of Annual Meeting
and form of proxy are first being mailed to the stockholders of Fedders on or
about April 26, 1996. This Proxy Statement-Prospectus, the accompanying Notice
of Special Meeting and form of proxy are first being mailed to the stockholders
of NYCOR on or about April 26, 1996.
At the Fedders Annual Meeting, the stockholders of Fedders will be asked to
consider and act on proposals (i) to approve and adopt the Agreement and Plan of
Merger dated November 30, 1995 and amended on March 15, 1996 and as of April 10,
1996 (as amended, the "Merger Agreement") between Fedders and NYCOR and the
transactions contemplated by the Merger Agreement pursuant to which NYCOR will
merge with and into Fedders (the "Merger"), (ii) to adopt amendments (the
"Amendments") to the Restated Certificate of Incorporation of Fedders (the
"Fedders Charter") (a) to increase the number of the authorized shares of Common
Stock, par value $1.00 (the "Fedders Common Stock"), from 60,000,000 to
80,000,000; (b) to increase the number of authorized shares of Fedders Class A
Stock from 30,000,000 to 60,000,000; and (c) to increase the number of the
authorized shares of the Preferred Stock of the Company from 5,000,000 to
15,000,000; (iii) to elect three (3) directors; (iv) to adopt the Company's
Stock Option Plan VIII; and (v) to ratify the appointment of the Company's
independent auditors.
At the NYCOR Special Meeting, the stockholders of NYCOR will be asked to
consider and act upon a proposal to approve and adopt the Merger Agreement and
the Merger.
Upon consummation of the Merger, each share of Fedders Common Stock, Fedders
Class A Stock and Class B Stock, par value $1.00 of Fedders (the "Fedders Class
B Stock"), would remain outstanding and unchanged (other than shares of Fedders
Class B Stock the holders of which exercise their dissenters' rights under the
Delaware General Corporation Law (the "DGCL")). The stock of Fedders to be
received by the stockholders of NYCOR (other than holders of Class B Stock of
NYCOR who exercise their dissenters' rights under the DGCL) upon consummation of
the Merger will depend upon the average closing price per share of Fedders Class
A Stock for the 15 trading days ending five business days before the date of the
NYCOR Special Meeting (the "Fedders Average Price"). If the Fedders Average
Price is at or above $6.25, each share of Common Stock, Class A Stock and Class
B Stock of NYCOR will be converted into the right to receive a number of shares
of Fedders Class A Stock determined by dividing $6.25 by the Fedders Average
Price. If the Fedders Average Price is below $6.25, each share of Common Stock,
Class A Stock and Class B Stock of NYCOR will be converted into the right to
receive one share of Fedders Convertible Preferred Stock with terms expected to
support an initial market value of $6.25. While Fedders and NYCOR expect that
the terms of the Fedders Convertible Preferred Stock will support a market value
of $6.25 per share, there is currently no market for such stock and there can be
no guarantee that Fedders Convertible Preferred Stock, when issued, will trade
at that price or, if it does, for how long, as matters beyond the control of
Fedders and NYCOR may impact its market value. Each of the shares of Fedders
Convertible Preferred Stock will be convertible into one share of Fedders Class
A Stock. See, "Summary," "The Merger" and Annex A to this Proxy
Statement-Prospectus.
Only the holders of the Fedders Class B Stock and the Class B Stock of NYCOR
are entitled to dissent from the Merger and to receive cash equal to the fair
value of their Fedders or NYCOR capital stock, as the case may be. See,
"Proposal No. 1 -- The Merger -- Dissenting Stockholders' Rights."
Stockholders of Fedders or NYCOR who wish to be advised of the Fedders
Average Price and of the consideration to be paid per share of Common Stock,
Class A Stock and Class B Stock of NYCOR and of the terms of the Fedders
Convertible Preferred Stock, if applicable, upon consummation of the Merger may
obtain such information by calling (800) 733-8481, Ext. 456 during normal
business hours beginning on June 17, 1996 and ending on the date of the Fedders
Annual Meeting and the NYCOR Special Meeting.
The Fedders Convertible Preferred Stock, if issued, would have cumulative
dividends, payable quarterly (currently estimated to be 2.5%) and would have a
liquidation preference of $6.25 per share. Except for certain rights to elect
two additional directors if dividends on the Fedders Convertible Preferred Stock
for six quarterly periods are in arrears, to vote on certain matters related to
changes in Fedders' capital stock or as otherwise required by Delaware law, the
Fedders Convertible Preferred Stock would have no voting rights. The Fedders
Convertible Preferred Stock would be convertible on a share for share basis into
Fedders Class A Stock at the option of the holder, or redeemable by the Company
at any time for $6.25 in cash or in equivalent value of Fedders Class A Stock.
The Fedders Class A Stock ranks equally with the Fedders Common Stock except
that the holders of the Fedders Class A Stock have no voting rights other than
as required under Delaware law and, under certain circumstances, each share of
Fedders Class A Stock will be converted into one share of Fedders Common Stock.
See, "Proposal 1 -- Description of Fedders Capital Stock."
The Fedders Common Stock and Fedders Class A Stock are listed and traded on
the New York Stock Exchange ("NYSE") and the Common Stock and Class A Stock of
NYCOR are listed on the National Association of Securities Dealers Automated
Quotation System, National Market System ("NASDAQ/NMS"). It is a condition to
Fedders' and NYCOR's obligation to consummate the Merger that any Fedders
Convertible Preferred Stock issuable in the Merger be authorized for listing on
the NYSE.
NEITHER THIS TRANSACTION NOR THESE SECURITIES HAVE BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS PASSED UPON THE FAIRNESS OR
MERITS OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT-
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
------------------------
The date of this Proxy Statement-Prospectus is April , 1996.
<PAGE> 4
AVAILABLE INFORMATION
Fedders and NYCOR are subject to the information requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by Fedders and NYCOR can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661 and copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports, proxy
statements and other information concerning Fedders are available for inspection
and copying at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
This Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4, of which this Proxy
Statement-Prospectus is a part, and the exhibits thereto (together with any
amendments or supplements thereto, the "Registration Statement"), which has been
filed by Fedders with the Commission under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"),
certain portions of which have been omitted pursuant to the rules and
regulations of the Commission and to which portions reference is hereby made for
further information.
No person has been authorized to give any information or to make any
representations other than those contained in this Proxy Statement-Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by Fedders or NYCOR. Neither the delivery of this
Proxy Statement-Prospectus nor any distribution of Fedders Convertible Preferred
Stock or Fedders Class A Stock pursuant to the Merger Agreement (or of Fedders
Class A Stock issuable upon conversion of any Fedders Convertible Preferred
Stock distributed pursuant to the Merger Agreement) shall, under any
circumstances, create any implication that there has been no change in the
affairs of Fedders or NYCOR since the date hereof or that the information
contained herein is correct as of any time subsequent to its date. This Proxy
Statement-Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the Fedders Convertible Preferred
Stock or Fedders Class A Stock to be issued pursuant to the Merger Agreement (or
of Fedders Class A Stock issuable upon conversion of any Fedders Convertible
Preferred Stock distributed pursuant to the Merger Agreement) or an offer to
sell or solicitation of an offer to buy such securities in any circumstances in
which such an offer or solicitation is not lawful.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Fedders and NYCOR, respectively, with the
Commission (Fedders File No. 1-8831; NYCOR File No. 0-15299) under Section 13(a)
or 15(d) of the Exchange Act are hereby incorporated by reference in this Proxy
Statement-Prospectus:
Fedders documents:
(i) Fedders Annual Report on Form 10-K for the fiscal year ended
August 31, 1995; and
(ii) Fedders Quarterly Reports on Form 10-Q for the periods ended
November 30, 1995 and February 29, 1996.
NYCOR documents:
(i) NYCOR's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
All documents filed by Fedders or NYCOR pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
earlier of the effective date of the Merger or the termination of the Merger
Agreement (or prior to the date the Registration Statement is withdrawn in the
event Fedders Convertible Preferred Stock is issued upon consummation of the
Merger) are hereby incorporated by reference into this Proxy
Statement-Prospectus and shall be deemed a part hereof from the date of filing
of such documents
i
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All information contained or incorporated by reference in this Proxy
Statement-Prospectus with respect to Fedders was supplied by Fedders, and all
information contained or incorporated by reference in this Proxy
Statement-Prospectus with respect to NYCOR was supplied by NYCOR.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF SUCH DOCUMENTS IS
AVAILABLE WITHOUT CHARGE (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A PROXY STATEMENT-PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST. ANY SUCH REQUEST SHOULD BE MADE TO
FEDDERS CORPORATION, WESTGATE CORPORATE CENTER, 505 MARTINSVILLE ROAD, LIBERTY
CORNER, NEW JERSEY 07938, ATTENTION: ROBERT N. EDWARDS, ESQ. (TELEPHONE NUMBER
(908) 604-8686) AS TO FEDDERS DOCUMENTS AND TO NYCOR, INC., 287 CHILDS ROAD,
BASKING RIDGE, NEW JERSEY 07920, ATTENTION: KENT E. HANSEN, ESQ. (TELEPHONE
NUMBER (908) 953-8200) AS TO NYCOR DOCUMENTS. IN ORDER TO ENSURE TIMELY DELIVERY
OF SUCH DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY JUNE 17, 1996.
Any statement contained herein, in any supplement hereto or in a document
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of the Registration Statement and this
Proxy Statement-Prospectus to the extent that a statement contained herein, in
any supplement hereto or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Proxy Statement-Prospectus or any supplement hereto.
INCLUSION OF ANNUAL REPORT, QUARTERLY REPORTS,
DEFINITIVE PROXY STATEMENT AND CURRENT REPORTS
NYCOR's Annual Report on Form 10-K for the fiscal year ended December 31,
1995, is attached to this Proxy Statement-Prospectus as Annex B.
ii
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TABLE OF CONTENTS
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AVAILABLE INFORMATION................................................................. i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... i
INCLUSION OF ANNUAL REPORT, QUARTERLY REPORTS, DEFINITIVE PROXY STATEMENT AND CURRENT
REPORTS............................................................................. ii
SUMMARY............................................................................... 1
Parties to the Merger............................................................... 1
Fedders.......................................................................... 1
NYCOR............................................................................ 1
The Fedders Annual Meeting; Record Date............................................. 1
The NYCOR Special Meeting; Record Date.............................................. 1
The Merger; Exchange Ratio.......................................................... 2
Votes Required...................................................................... 2
Fedders Annual Meeting........................................................... 2
NYCOR Special Meeting............................................................ 3
Effective Date...................................................................... 3
Recommendation of the Boards of Directors........................................... 3
Board of Directors of Fedders.................................................... 3
Board of Directors of NYCOR...................................................... 3
Opinions of Financial Advisors...................................................... 4
Fedders.......................................................................... 4
NYCOR............................................................................ 4
Interests of Certain Persons in the Merger.......................................... 4
Certain Federal Income Tax Consequences of the Merger............................... 4
Dissenting Stockholders' Rights..................................................... 5
Resale of Fedders Convertible Preferred Stock or Fedders Class A Stock.............. 5
Business Pending Consummation....................................................... 5
Exchange of NYCOR Preferred Shares.................................................. 5
Conditions to Consummation; Termination............................................. 5
Breakup Fee......................................................................... 6
Comparative Stock Price Information................................................. 6
Market Prices -- Fedders......................................................... 7
Market Prices -- NYCOR........................................................... 7
Comparison of Certain Unaudited Per Share Data...................................... 8
Selected Financial Information...................................................... 10
Pro Forma Financial Data............................................................ 13
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends........... 18
INTRODUCTION.......................................................................... 19
SPECIAL FACTORS....................................................................... 19
THE FEDDERS ANNUAL MEETING............................................................ 22
THE NYCOR SPECIAL MEETING............................................................. 24
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF FEDDERS..................... 26
PRINCIPAL STOCKHOLDERS OF FEDDERS..................................................... 28
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF NYCOR....................... 29
PRINCIPAL STOCKHOLDERS OF NYCOR....................................................... 31
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iii
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PROPOSAL NO. 1 -- THE MERGER.......................................................... 32
General............................................................................. 32
Reasons for the Merger.............................................................. 32
Background of the Merger............................................................ 34
Opinion of Financial Advisor to Fedders............................................. 36
Opinion of Financial Advisor to NYCOR............................................... 40
The Merger Agreement................................................................ 44
The Merger....................................................................... 44
Exchange of NYCOR Preferred Shares............................................... 44
Exchange Procedure............................................................... 45
Representations and Warranties................................................... 45
Conduct of Business Pending the Merger........................................... 45
Indemnification.................................................................. 46
Conditions to the Consummation of the Merger..................................... 46
Directors, Officers, and Employees............................................... 47
Amendment of the Merger Agreement................................................ 47
Responses to Other Acquisition Proposals......................................... 48
Termination of the Merger Agreement.............................................. 48
Breakup Fee...................................................................... 48
Dissenting Stockholders' Rights..................................................... 48
Interests of Certain Persons in the Merger.......................................... 49
Certain Federal Income Tax Consequences of the Merger............................... 49
Accounting Treatment................................................................ 52
Directors of Fedders................................................................ 52
Executive Compensation of Management of Fedders..................................... 52
Expenses of the Merger.............................................................. 53
COMPARATIVE STOCK PRICE INFORMATION................................................... 53
DESCRIPTION OF FEDDERS CAPITAL STOCK.................................................. 56
Authorized Capital.................................................................. 56
Fedders Convertible Preferred Stock................................................. 56
Dividend Rights.................................................................. 56
Voting Rights.................................................................... 57
Liquidation Rights............................................................... 57
Conversion Rights................................................................ 58
Optional Redemption.............................................................. 58
Listing and Transfer Agent....................................................... 58
Fedders Common Stock................................................................ 59
Dividend Rights.................................................................. 59
Voting Rights.................................................................... 59
Liquidation Rights............................................................... 59
Listing and Transfer Agent....................................................... 59
Fedders Class A Stock............................................................... 59
Dividend Rights.................................................................. 59
Voting Rights.................................................................... 59
Liquidation Rights............................................................... 60
Change of Control................................................................ 60
Conversion....................................................................... 60
Listing and Transfer Agent....................................................... 60
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iv
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Fedders Class B Stock............................................................... 60
Voting Rights.................................................................... 60
Dividend Rights.................................................................. 60
Liquidation Rights............................................................... 60
Restrictions on Transfer......................................................... 61
Conversion Rights................................................................ 61
Listing and Transfer Agent....................................................... 61
CERTAIN DIFFERENCES IN THE RIGHTS OF FEDDERS AND NYCOR STOCKHOLDERS................... 62
PROPOSAL NO. 2 -- ELECTION OF DIRECTORS OF FEDDERS.................................... 62
Meetings of the Board of Directors and Certain Committees........................... 63
EXECUTIVE COMPENSATION................................................................ 64
Summary Compensation Table.......................................................... 64
Options/SAR Grants Table............................................................ 65
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table.......... 65
Compensation Committee Interlocks and Insider Participation......................... 66
Report of the Compensation Committee on Executive Compensation...................... 66
Employment Contract................................................................. 66
Performance Graph................................................................... 67
PROPOSAL NO. 3 -- AMENDMENTS OF FEDDERS' CHARTER TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF FEDDERS COMMON STOCK, CLASS A STOCK, AND PREFERRED STOCK.................. 67
PROPOSAL NO. 4 -- APPROVAL OF FEDDERS' STOCK OPTION PLAN VIII......................... 69
Summary of Plan..................................................................... 69
Federal Income Tax Consequences..................................................... 70
Incentive Stock Options.......................................................... 70
Non-Qualified Stock Options...................................................... 70
Stock Appreciation Rights........................................................ 71
Eligible Employees and Non-Employees................................................ 71
PROPOSAL NO. 5 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS OF FEDDERS........ 71
RESALE OF FEDDERS CONVERTIBLE PREFERRED STOCK OR FEDDERS CLASS A STOCK................ 72
LEGAL OPINIONS........................................................................ 72
EXPERTS............................................................................... 72
STOCKHOLDER PROPOSALS -- NEXT FEDDERS ANNUAL MEETING.................................. 72
COST OF SOLICITATION.................................................................. 73
</TABLE>
ANNEX A -- Agreement and Plan of Merger between Fedders and NYCOR dated
November 30, 1995
ANNEX B -- NYCOR's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995
ANNEX C -- Opinion of Fedders Financial Advisor
ANNEX D -- Opinion of NYCOR Financial Advisor
ANNEX E -- Section 262 of the Delaware General Corporation Law
ANNEX F -- Stock Option Plan VIII
v
<PAGE> 9
SUMMARY
The following is a brief summary of certain information relating to the
actions to be taken at the Fedders Annual Meeting and the NYCOR Special Meeting
contained elsewhere in this Proxy Statement-Prospectus. This summary is not
intended to be a summary of all material information relating to such actions
and is qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement-Prospectus, including the Annexes
hereto and in the documents incorporated by reference in this Proxy
Statement-Prospectus. A copy of the Merger Agreement is set forth in Annex A to
this Proxy Statement-Prospectus and reference is made thereto for a complete
description of the terms of the Merger. Stockholders are urged to read carefully
the entire Proxy Statement-Prospectus, including the Annexes.
PARTIES TO THE MERGER
Fedders
Fedders is a holding company which, through its wholly owned operating
subsidiaries and through a joint venture in China, is engaged in the manufacture
and sale of a complete line of room air conditioners and dehumidifiers,
principally for the residential market. Based upon industry statistics compiled
by a trade association, Fedders believes it is the largest manufacturer of room
air conditioners in North America. The principal executive offices of Fedders
are located at Westgate Corporate Center, 505 Martinsville Road, Liberty Corner,
New Jersey 07938; telephone (908) 604-8686.
NYCOR
NYCOR is also a holding company which currently owns two operating
companies, Rotorex Company, Inc. ("Rotorex") and Melcor Corporation ("Melcor").
Rotorex manufactures rotary compressors principally for use in room air
conditioners. Melcor produces thermoelectric heating and cooling modules used in
a variety of applications in which space and weight are considerations or
precise temperature control is required. Fedders has been the major customer for
Rotorex compressors for more than 20 years. The principal executive offices of
NYCOR are located at 287 Childs Road, Basking Ridge, New Jersey 07920; telephone
(908) 953-8200.
THE FEDDERS ANNUAL MEETING; RECORD DATE
The Fedders Annual Meeting will be held at 2:00 p.m. on Monday, June 24,
1996 at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, New Jersey
07060. The close of business on April 25, 1996 has been fixed as the record date
for the determination of the stockholders of Fedders entitled to notice of, and
to vote at, the Fedders Annual Meeting. At the Fedders Annual Meeting, holders
of shares of Fedders Common Stock and Fedders Class B Stock will be asked to
consider and act on proposals to approve the actions of the Board of Directors
of Fedders (i) to adopt the Merger Agreement and the transactions contemplated
by the Merger Agreement, (ii) to elect three (3) directors, (iii) to adopt the
Stock Option Plan VIII of Fedders and (iv) to ratify the appointment of Fedders'
independent auditors. In addition, at the Fedders Annual Meeting, holders of
shares of Fedders Common Stock, Fedders Class A Stock and Fedders Class B Stock
will be asked to consider and act on a proposal to increase the authorized
number of shares of Fedders Common Stock, Fedders Class A Stock and Preferred
Stock of Fedders. See, "The Fedders Annual Meeting."
THE NYCOR SPECIAL MEETING; RECORD DATE
The NYCOR Special Meeting will be held at 10:30 a.m. on Monday, June 24,
1996 at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, NJ 07060. The
close of business on April 25, 1996 has been fixed as the record date for the
determination of the stockholders of NYCOR entitled to notice of, and to vote
at, the NYCOR Special Meeting.
The only matter to be presented at the NYCOR Special Meeting is the
proposal to approve the Merger Agreement and the Merger. See, "The NYCOR Special
Meeting."
1
<PAGE> 10
THE MERGER; EXCHANGE RATIO
Upon consummation of the Merger, each share of Fedders Common Stock,
Fedders Class A Stock and Fedders Class B Stock would remain outstanding and
unchanged, except to the extent that holders of Fedders Class B Stock exercise
their dissenters' rights.
Upon consummation of the Merger, stockholders of NYCOR will receive stock
of Fedders with a market value of $6.25 on the effective date of the Merger. If
the Fedders Average Price is at or above $6.25, each share of Common Stock,
Class A Stock and Class B Stock of NYCOR will be converted into the right to
receive Fedders Class A Stock having a market value equal to $6.25. The Fedders
Class A Stock ranks equally with the Fedders Common Stock except that the
holders of the Fedders Class A Stock have no voting rights other than as
required under Delaware law and, under certain circumstances, each share of
Fedders Class A Stock will be converted into one share of Fedders Common Stock.
See "Proposal 1 -- Description of Fedders Capital Stock." If the Fedders Average
Price is below $6.25, each share of Common Stock, Class A Stock and Class B
Stock of NYCOR will be converted into the right to receive one share of Fedders
Convertible Preferred Stock with terms expected to support an initial market
value of $6.25. Each share of Fedders Convertible Preferred Stock would be
convertible into one share of Fedders Class A Stock. The Fedders Convertible
Preferred Stock will be a new issue of Fedders equity securities, will be listed
on the NYSE, and will have no trading history when issued. While Fedders and
NYCOR expect that the terms of the Fedders Convertible Preferred Stock will
support an initial market value of $6.25 per share, with no market for such
stock there can be no guarantee that Fedders Convertible Preferred Stock, when
issued, will trade at that price or, if it does, for how long, as matters beyond
the control of Fedders and NYCOR may impact its market value.
See, "The Merger -- The Merger Agreement" and " -- Dissenting Stockholders'
Rights."
VOTES REQUIRED
Fedders Annual Meeting
Under the terms of the Fedders Charter, approval of the Merger requires an
affirmative vote of a majority of the outstanding shares of the Fedders Common
Stock and Fedders Class B Stock, each voting separately as a class, and
two-thirds of the outstanding Fedders Common Stock and Fedders Class B Stock
voting together as a single class. Directors and executive officers of Fedders,
who collectively beneficially own 514,610 shares or 2.71% of the outstanding
shares of Fedders Common Stock, and 2,262,566 shares or 99.78% of the
outstanding shares of Fedders Class B Stock, have indicated that they intend to
vote for the Merger. Because of the class vote requirement, approval of the
Merger will require the affirmative vote of the holders of an additional 47.29%
of the Fedders Common Stock entitled to vote. See, "Security Ownership of
Directors and Executive Officers of Fedders."
Under the DGCL, approval of the amendments to the Fedders Charter requires
the affirmative vote of a majority of the outstanding Fedders Common Stock and
Fedders Class B Stock, voting together as a single class, and, under the DGCL
and the provisions set forth in the Fedders Charter, approval of the proposed
amendments requires the affirmative vote of a majority of the outstanding shares
of Fedders Common Stock, Fedders Class B Stock and Fedders Class A Stock (on the
proposal to increase the number of authorized shares of Fedders Class A Stock),
each voting separately as a class.
Approval of the Fedders Stock Option Plan VIII and ratification of the
appointment of independent auditors requires the affirmative vote of a majority
of the shares of Fedders Common Stock and Fedders Class B Stock voted on such
Proposals at the Fedders Annual Meeting so long as at least a majority of the
Fedders Common Stock and Fedders Class B Stock are voted on such Proposals.
A plurality of the votes of the shares of Fedders Common Stock and Fedders
Class B Stock present in person or represented by proxy at the Fedders Annual
Meeting shall be needed for the election of directors, provided those shares
present in person or represented by proxy at the Fedders Annual Meeting
constitute a quorum. See, "The Fedders Annual Meeting."
2
<PAGE> 11
NYCOR Special Meeting
Approval of the Merger Agreement and the Merger by the stockholders of
NYCOR requires the affirmative vote of a majority of the outstanding shares of
NYCOR Common Stock and NYCOR Class B Stock, each voting separately as a class.
Directors and executive officers of NYCOR, who collectively beneficially own
213,102 shares or 7.6% of the outstanding shares of NYCOR Common Stock, and
640,352 shares or 89.7% of the outstanding shares of NYCOR Class B Stock, have
indicated that they intend to vote for the Merger. Because of the class vote
requirement, approval of the Merger will require the affirmative vote of the
holders of an additional 42.4% of the Common Stock of NYCOR entitled to vote.
See, "The NYCOR Special Meeting" and "Security Ownership of directors and
Executive Officers of NYCOR."
EFFECTIVE DATE
The Merger will become effective within five business days following the
satisfaction or waiver of the conditions to closing set forth in the Merger
Agreement or on such other date as Fedders and NYCOR may agree. It is currently
anticipated that the Merger will become effective promptly following the Fedders
Annual Meeting and the NYCOR Special Meeting.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
Board of Directors of Fedders
The Board of Directors of Fedders has determined that the Merger is in the
best interests of Fedders and its stockholders and recommends that the Merger
Agreement and the Merger be approved by the stockholders of Fedders. In making
its determination to recommend approval of the Merger, the Board of Directors of
Fedders considered that (i) in the last three years, Fedders has increased its
sales and market share and expanded its customer base in North America due, in
part, to its ability to meet retailers' delivery requirements, which is in large
part dependent upon Rotorex; (ii) Fedders' compressor requirements already
surpass, by more than 600,000 units, what Rotorex is committed to provide
Fedders under the terms of the supply agreement between Fedders and Rotorex;
(iii) it is expected that the recently completed joint venture in China will
require 500,000 compressors annually within three years; and (iv) there is a
worldwide shortage of compressors, and if Rotorex was going to be sold, it would
be critically important to regain ownership of Rotorex. See, "The Fedder Annual
Meeting" and "The Merger -- Background of the Merger." The Board of Directors of
Fedders also recommends that the stockholders of Fedders vote in favor of the
election of the nominees for director of Fedders named herein, the approval of
the proposed amendments to the Fedders Charter, the adoption of the Stock Option
Plan VIII of Fedders and the ratification of the selection of independent
auditors.
Board of Directors of NYCOR
The Board of Directors of NYCOR has determined that the Merger is in the
best interests of NYCOR and its stockholders and that the Merger is fair to the
unaffiliated stockholders of NYCOR, and recommends that the Merger Agreement and
the Merger be approved by the stockholders of NYCOR. In making its
determination, the Board of Directors of NYCOR considered (i) the value of the
consideration to be received by its stockholders compared to the then current
market value of the Common Stock and Class A Stock of NYCOR; (ii) the impact on
NYCOR of the concentration of its sales to one customer, including its access to
capital necessary to take advantage of business opportunities that may arise;
and (iii) the benefits that Rotorex may realize as part of a larger, major
participant in the world-wide air conditioner market such as Fedders. The Board
of Directors of NYCOR also considered the provision in the Merger Agreement that
receipt of a fairness opinion from its financial advisor is a condition to the
obligation of NYCOR to consummate the Merger. See, "Special Factors," "The NYCOR
Special Meeting" and "The Merger -- Background of the Merger."
On similar bases, Salvatore Giordano, Sal Giordano, Jr., Joseph Giordano,
William J. Brennan, and S. A. Muscarnera, who are directors of both NYCOR and
Fedders (the "Affiliated Directors"), and Fedders
3
<PAGE> 12
each reasonably believes that the Merger is fair to the unaffiliated
stockholders of NYCOR. See, "Special Factors."
OPINIONS OF FINANCIAL ADVISORS
Fedders
On January 31, 1996, TM Capital Corp. delivered its oral opinion and on
February 12, 1996 delivered its written opinion and on March 20, 1996 delivered
its substantially identical additional written opinion that the consideration to
be paid by Fedders in the Merger is fair to Fedders from a financial point of
view. TM Capital's opinion related only to the consideration to be paid by
Fedders in connection with the Merger and does not constitute a recommendation
to any stockholder of Fedders as to how such stockholder should vote at the
Fedders Annual Meeting. The full text of the written opinion of TM Capital which
sets forth the assumptions made, the matters considered and the limitations of
the review undertaken in rendering such opinion is attached as Annex C to this
Proxy Statement-Prospectus and is incorporated herein by reference. See,
"Proposal No. 1 -- The Merger -- Opinion of Financial Advisor to Fedders."
NYCOR
On February 1, 1996, Laidlaw Equities, Inc. ("Laidlaw") delivered its oral
opinion, which was subsequently confirmed in writing, as of March 19, 1996, that
the consideration to be paid in the Merger is fair to NYCOR from a financial
point of view. Laidlaw's opinion related only to the consideration to be paid by
Fedders in connection with the Merger and does not constitute a recommendation
to any stockholder of NYCOR as to how such stockholder should vote at the NYCOR
Special Meeting. The full text of the written opinion of Laidlaw which sets
forth the assumptions made, the matters considered and the limitations of the
review undertaken in rendering such opinion is attached as Annex D to this Proxy
Statement-Prospectus and is incorporated herein by reference. See, "Proposal No.
1 -- The Merger -- Opinion of Financial Advisor to NYCOR."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreement provides that the employees, officers and directors of
NYCOR shall be placed in the same economic position following the Merger as they
were immediately prior to the date of the execution of the Merger Agreement with
respect to stock options, directors fees, salaries and employee benefits
provided by NYCOR. Certain persons serve as directors and executive officers of,
and have significant stockholdings in, both Fedders and NYCOR. See, "Proposal
No. 1 -- Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986 (the "Code"),
as amended, and, accordingly, for Federal income tax purposes (i) no gain or
loss will be recognized by Fedders, NYCOR or the stockholders of Fedders as a
result of the Merger except to the extent that holders of Fedders Class B Stock
may receive cash upon exercise of dissenters' rights and (ii) stockholders of
NYCOR will not recognize gain or loss upon the receipt of Fedders Convertible
Preferred Stock or Fedders Class A Stock in exchange for their shares of capital
stock of NYCOR, except to the extent of any cash received in lieu of fractional
shares or cash received upon exercise of any dissenters' rights. Fedders and
NYCOR have received an opinion of McCarter & English, Special Tax Counsel to
Fedders, substantially to this effect. See, "The Merger -- Certain Federal
Income Tax Consequences of the Merger."
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH STOCKHOLDER OF NYCOR, IT IS RECOMMENDED THAT STOCKHOLDERS
OF NYCOR CONSULT THEIR TAX ADVISERS CONCERNING THE FEDERAL (AND ANY STATE AND
LOCAL) TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
4
<PAGE> 13
DISSENTING STOCKHOLDERS' RIGHTS
Under the DGCL, a stockholder owning shares of Fedders Class B Stock is
entitled to dissent from the Merger and to receive cash from Fedders equal to
the fair value of such stockholder's shares of Fedders capital stock. Under the
DGCL, the holders of the Fedders Common Stock and the Fedders Class A Stock do
not have dissenters' rights.
Under the DGCL, a stockholder owning shares of NYCOR Class B Stock is
entitled to dissent from the Merger and to receive cash from Fedders as the
surviving corporation in the Merger equal to the fair value of such
stockholder's shares of NYCOR capital stock. Under the DGCL, the holders of
NYCOR Common Stock and NYCOR Class A Stock do not have dissenters' rights.
See, "The Merger -- Dissenting Stockholders' Rights."
RESALE OF FEDDERS CONVERTIBLE PREFERRED STOCK OR FEDDERS CLASS A STOCK
The Fedders Convertible Preferred Stock or Fedders Class A Stock received
in the Merger will be freely transferable by the holders of such shares, except
for those shares held by holders who may be deemed to be "affiliates" (generally
including directors, certain executive officers and ten percent or more
stockholders) of NYCOR or Fedders under applicable federal securities laws. If
issued, the Fedders Convertible Preferred Stock will be a new issue of Fedders
equity securities and thus will have no trading history when issued. While
Fedders and NYCOR expect that the terms of the Fedders Convertible Preferred
Stock will support an initial market value of $6.25 per share, with no market
for such stock there can be no guarantee that Fedders Convertible Preferred
Stock, when issued, will trade at that price or, if it does, for how long, as
matters beyond the control of Fedders and NYCOR may impact its market value. It
is a condition to consummation of the Merger that the Fedders Convertible
Preferred Stock be authorized for listing on the NYSE. See, "Resale of Fedders
Convertible Preferred Stock or Fedders Class A Stock."
BUSINESS PENDING CONSUMMATION
In general, Fedders and NYCOR have agreed in the Merger Agreement that each
will conduct its business in the ordinary course consistent with past practice
between the date of the Merger Agreement and the consummation of the Merger.
Both Fedders and NYCOR have agreed that they will not take certain actions
during such period, including not paying dividends (other than as required by
the terms of NYCOR's Preferred Stock and Fedders' normal quarterly dividend of
two cents per share) and not issuing, selling or otherwise disposing of any of
its capital stock, except upon the conversion or exercise of options, warrants
and other rights outstanding or granted to employees or directors as allowed by
the Merger Agreement. NYCOR has also agreed that it will not enter into or
modify the employment terms of any of its directors, officers or employees
except that it may make changes for non-executive employees in the ordinary
course of business. See, "The Merger -- Conduct of Business Pending the Merger."
EXCHANGE OF NYCOR PREFERRED SHARES
In accordance with the Merger Agreement, on March 15, 1996, NYCOR exchanged
all of the then outstanding shares of NYCOR Preferred Stock for its 8 1/2%
convertible subordinated debentures due 2012 in accordance with the terms of the
NYCOR Preferred Stock. The subordinated debentures issued by NYCOR would, as a
result of the Merger, become obligations of Fedders. See, "Special
Factors -- Increased Leverage from NYCOR Preferred Stock Conversion."
CONDITIONS TO CONSUMMATION; TERMINATION
Consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions including (i) the approval of the Merger Agreement and the
Merger by the stockholders of Fedders and NYCOR; (ii) the approval by the
stockholders of Fedders of the proposed increases in the number of authorized
shares of Fedders Common Stock, Fedders Class A Stock and Preferred Stock of
Fedders; (iii) the continued accuracy of the representations and warranties of
Fedders and NYCOR; (iv) the expiration of the waiting
5
<PAGE> 14
period under the Hart-Scott-Rodino Antitrust Improvements Act; (v) the
effectiveness of the Registration Statement of which this Proxy
Statement-Prospectus is a part; (vi) the compliance by Fedders and NYCOR with
its respective obligations under the Merger Agreement; (vii) the receipt by
NYCOR of an opinion of its investment banker to the effect that the terms of the
Fedders Convertible Preferred Stock (if such stock is to be issued in the
Merger) will support an initial market value of $6.25; (viii) the receipt of
certain certificates and opinions of counsel including an opinion to the effect
that the Merger will constitute a tax-free reorganization; and (ix) the
authorization for listing on the NYSE of the Fedders Convertible Preferred Stock
or Fedders Class A Stock to be issued in the Merger. Under the terms of the
Merger Agreement, either party is deemed to waive any condition precedent to its
obligation to consummate the Merger if, with respect to such condition, it has
complete knowledge of the actual facts and circumstances relating to such
condition as of the closing and proceeds to consummate the Merger. Neither
Fedders nor NYCOR currently intends to waive any of the conditions to its
obligations to consummate the Merger.
The Merger Agreement may be terminated (i) by mutual written consent of
Fedders and NYCOR (whether before or after stockholder approval); (ii) by either
party if the other party has breached any material representation, warranty or
covenant in any material respect and such breach is not cured within 30 days
after notice; (iii) by either party after August 31, 1996 if the Merger has not
become effective unless the failure of the Merger to become effective results
primarily from the breach by the party seeking to terminate the Merger
Agreement; or (iv) by either party if the Merger Agreement and the Merger is not
approved by the stockholders of Fedders at the Fedders Annual Meeting or by the
stockholders of NYCOR at the NYCOR Special Meeting.
See, "The Merger -- Conditions to Consummation of the Merger" and
"-- Termination of the Merger Agreement."
BREAKUP FEE
Other than as permitted by the terms of the Merger Agreement, if the Board
of Directors of NYCOR terminates the Merger for any reason within its control,
then NYCOR must pay Fedders the sum of $20,000,000 plus expenses in cash or by
delivery to Fedders of that number of shares of NYCOR Common Stock and/or NYCOR
Class A Stock and/or NYCOR Class B Stock that would equal $20,000,000, the
choice between cash and NYCOR Common Stock being solely that of Fedders. See,
"The Merger -- Breakup Fee."
COMPARATIVE STOCK PRICE INFORMATION
The Fedders Common Stock and the Fedders Class A Stock are listed on the
NYSE (symbols: FJC and FJA, respectively). It is a condition to the obligation
of NYCOR to consummate the Merger that the Fedders Convertible Preferred Stock
or Fedders Class A Stock to be issued in the Merger be authorized for listing on
the NYSE upon official notice of issuance. The Fedders Convertible Preferred
Stock will constitute a new class of capital stock of Fedders and there has been
no trading market for such shares. The NYCOR Common Stock, the NYCOR Class A
Stock and the NYCOR Preferred Stock are included for quotation on the NASDAQ
National Market System ("NASDAQ/NMS") (symbols: NYCO, NYCOA and NYCOP,
respectively).
The following tables set forth the high and low reported last sale prices
per share of Fedders Common Stock and Fedders Class A Stock as reported on the
NYSE Composite Transactions Tape and per share of NYCOR Common Stock, NYCOR
Class A Stock and NYCOR Preferred Stock as reported on the NASDAQ/NMS during the
first three fiscal quarters of Fedders' 1996 fiscal year (through April 9, 1996)
and on a quarterly basis for the two fiscal years ended August 31, 1995 and
1994, and per share of NYCOR Common Stock and NYCOR Class A Stock as reported on
the NASDAQ/NMS during the first two quarters of 1996 (through April 9, 1996) and
on a quarterly basis for the two years ended December 31, 1995 and 1994. If the
Fedders Average Price is less than $6.25, shares of Fedders Convertible
Preferred Stock will be issued in the Merger and the equivalent value thereof
per share of NYCOR Common Stock, NYCOR Class A Stock and NYCOR Class B Stock
will depend on market conditions, although it is anticipated that
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<PAGE> 15
the features of the Fedders Convertible Preferred Stock will be fixed to support
an initial market value of $6.25 per share. If the Fedders Average Price is at
or above $6.25, each share of NYCOR Common Stock, NYCOR Class A Stock and NYCOR
Class B Stock will be converted into the right to receive shares of Fedders
Class A Stock determined by dividing $6.25 by the Fedders Average Price and, in
that circumstance, the equivalent value per share of NYCOR Common Stock, NYCOR
Class A Stock and NYCOR Class B Stock would be $6.25.
MARKET PRICES -- FEDDERS
<TABLE>
<CAPTION>
COMMON CLASS A
-------------- -------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
FISCAL 1994
First Quarter.......................................... 3 5/16 2 1/2 -- --
Second Quarter......................................... 4 1/8 3 1/8 -- --
Third Quarter.......................................... 4 3/4 3 1/2 -- --
Fourth Quarter......................................... 4 3/8 3 1/2 -- --
FISCAL 1995
First Quarter.......................................... 6 1/4 3 7/8 4 3/8 3 1/4
Second Quarter......................................... 6 1/8 5 4 3/4 3 5/8
Third Quarter.......................................... 6 1/8 5 3/8 4 3/4 4
Fourth Quarter......................................... 7 7/8 5 3/8 5 3/8 4 1/8
FISCAL 1996
First Quarter.......................................... 6 3/4 5 1/4 5 3 3/4
Second Quarter......................................... 6 3/4 5 5 5/8 3 7/8
Third Quarter (through April 9, 1996).................. 7 6 6 1/4 5 1/2
</TABLE>
MARKET PRICES -- NYCOR
<TABLE>
<CAPTION>
COMMON CLASS A
----------------- ---------------
HIGH LOW HIGH LOW
------ ----- ------ -----
<S> <C> <C> <C> <C>
1994
First Quarter............................................ 5 1/2 3 7/8 4 3/4 3 1/4
Second Quarter........................................... 4 3/4 3 1/2 4 1/2 3 1/8
Third Quarter............................................ 5 1/8 2 3/4 5 2 1/2
Fourth Quarter........................................... 3 2 1/8 2 7/8 2
1995
First Quarter............................................ 3 1/4 2 5/8 2 7/8 2 1/4
Second Quarter........................................... 2 15/16 2 3/8 2 3/4 2 3/8
Third Quarter............................................ 3 1/8 2 3/8 3 1/8 2 3/8
Fourth Quarter........................................... 5 7/8 2 1/8 5 1/2 2 1/8
1996
First Quarter............................................ 5 7/16 4 7/8 5 1/2 4 7/8
Second Quarter (through April 9, 1996)................... 5 1/4 5 1/8 5 1/4 5 1/8
</TABLE>
The Board of Directors of Fedders reinstated its regular quarterly cash
dividend of two cents per share of Fedders Common Stock and Fedders Class A
Stock and 1.8 cents per share of Fedders Class B Stock on June 27, 1995, and
intends to continue paying quarterly dividends at this level. When appropriate,
the Board of Directors of Fedders will also consider extra year-end dividends
commencing December, 1996. NYCOR has not paid dividends on the NYCOR Common
Stock, NYCOR Class A Stock, or NYCOR Class B Stock since 1992 and does not have
a current program for the payment of dividends.
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<PAGE> 16
On (i) October 30, 1995, the last business day preceding announcement that
Fedders and NYCOR had reached an agreement in principle to merge, (ii) November
30, 1995, the last business day preceding public announcement of the signing of
the Merger Agreement and (iii) April 9, 1996, a date shortly prior to the
mailing of this Proxy Statement-Prospectus, the closing price per share of
Fedders Class A Stock was $4 3/8, $4 1/8 and $5 1/8, respectively. Based on such
closing prices and the provisions of the Merger Agreement, each share of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock would have been
converted into the right to receive one share of Fedders Preferred Stock. On
such dates, the closing prices per share of NYCOR Common Stock and NYCOR Class A
Stock as reported by NASDAQ/NMS were as follows:
<TABLE>
<CAPTION>
NYCOR COMMON NYCOR CLASS A
------------ -------------
<S> <C> <C>
October 30, 1995....................................... $2 1/8 $ 2 9/32
November 30, 1995...................................... 4 7/8 4 3/4
April 9, 1996.......................................... 5 1/8 5 1/8
</TABLE>
The stockholders of Fedders and of NYCOR are advised to obtain current
market quotations for Fedders Common Stock, Fedders Class A Stock, NYCOR Common
Stock, NYCOR Class A Stock.
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following table summarizes certain unaudited selected financial
information on a historical, pro forma and pro forma equivalent per share basis
and is derived from, should be read in conjunction with and is qualified in its
entirety by reference to, the unaudited pro forma condensed consolidated
financial data of Fedders that is included elsewhere in this Proxy
Statement-Prospectus and the historical financial statements of Fedders and
NYCOR which are incorporated in this Proxy Statement-Prospectus by reference.
The information presented in this table is for informational purposes only and
is not necessarily indicative of future consolidated earnings or financial
position or of consolidated earnings or financial position that would have been
reported had the Merger been completed at the beginning of the respective
periods or as of the dates for which such unaudited pro forma information is
presented.
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED(B) HISTORICAL
----------------------------- -------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
FEB. 29, 1996 AUG. 31, 1995 FEB. 29, 1996 AUG. 31, 1995
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FEDDERS:
Book value per share at end of
period(a)............................ $ 2.19 $ 2.06 $ 2.19 $ 2.06
Tangible book value per share
at end of period..................... 1.14 1.01 2.04 1.90
Cash dividends declared per share:
Preferred (estimated)................ 0.078 $ 0.156 -- --
Common............................... 0.040 0.020 0.040 0.020
Class A.............................. 0.040 0.020 0.040 0.020
Class B.............................. 0.036 0.018 0.036 0.018
Primary earnings per share............. 0.09 0.55 0.16 0.72
</TABLE>
8
<PAGE> 17
<TABLE>
<CAPTION>
PRO FORMA EQUIVALENT(C) HISTORICAL
------------------------------- --------------------------------
SIX MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
FEB. 29, 1996 AUG. 31, 1995 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
NYCOR:
Book value per share at end of
period(a)........................... $ 2.19 $ 2.06 $ 6.57 $ 7.37
Tangible book value per share
at end of period.................... 1.14 1.01 0.93 1.52
Cash dividends declared per share:
Preferred........................... 0.078 $ 0.156 1.700 2.980
Common.............................. 0.040 0.020 -- --
Class A............................. 0.040 0.020 -- --
Class B............................. 0.036 0.018 -- --
Primary earnings (loss) per share..... 0.09 0.55 (0.79) (0.17)
</TABLE>
- ---------------
(a) Historical book value per share is calculated as the net book value
reflected in the consolidated financial statements at the end of the period,
less the liquidation preference of outstanding preferred stock ($0 for
Fedders and $23,000,000 for NYCOR), divided by the number of outstanding
Common, Class A and Class B shares. Pro forma book value per share is
calculated as the net book value reflected in the pro forma condensed
consolidated financial statements as of February 29, 1996, less the
liquidation preference of outstanding preferred stock ($47,275,000), divided
by the number of Common, Class A and Class B shares outstanding on a pro
forma basis.
(b) If the Fedders Average Price is at or above $6.25, the new Convertible
Preferred Stock of Fedders will not be issued. Instead, Fedders Class A
Stock will be issued in a ratio determined by dividing $6.25 by the Fedders
Average Price per share of NYCOR Common, Class A and Class B shares
outstanding. In that case there would be no pro forma cash dividend declared
on preferred stock and the pro forma amounts for book value per share,
tangible book value per share and earnings per share would vary as the
assumed Fedders Average Price changed. If the Fedders Average Price was
$6.25, the pro forma book value per share and tangible book value per share
as of February 29, 1996 would be $2.83 and $1.95, respectively, and all
other pro forma amounts would not change. For each increment of $.50 in the
assumed Fedders Average Price above $6.25, the pro forma amounts for book
value per share and tangible book value per share would increase by a
further $0.03 and $0.02, respectively, and earnings per share for the six
months ended February 29, 1996 and the year ended August 31, 1995 would
increase from the pro forma amounts shown above by approximately $0.001 and
$0.006, respectively.
(c) Pro forma equivalent amounts for NYCOR are computed by multiplying the pro
forma consolidated amounts by the exchange ratio of 1:1. If the Fedders
Average Price is at or above $6.25, Fedders Class A Stock will be issued in
a ratio determined by dividing $6.25 by the Fedders Average Price per share
of NYCOR Common, Class A and Class B shares outstanding. In that case the
pro forma equivalent amounts of NYCOR for book value per share, tangible
book value per share, cash dividends declared per share, and primary
earnings (loss) per share would be the amounts presented above on a pro
forma basis, as applicable, multiplied by the ratio that the Fedders Average
Price is to $6.25. Assuming the Fedders Average Price was $6.75, then the
multiple used in determining pro forma equivalent amounts for NYCOR would be
1.08 ($6.75/$6.25).
9
<PAGE> 18
SELECTED FINANCIAL INFORMATION
Fedders Historical Consolidated Financial Information
The following table sets forth summary historical consolidated financial
information of Fedders and has been derived from and should be read in
conjunction with Fedders' audited consolidated financial statements and
unaudited interim consolidated financial statements, including the notes
thereto, which are incorporated by reference in this Proxy Statement-Prospectus.
Unaudited interim data reflects, in the opinion of Fedders' management, all
adjustments (consisting solely of normal recurring adjustments) considered
necessary for a fair presentation of results for such interim periods. Results
of operations for the unaudited interim periods are not necessarily indicative
of the results that may be expected for any other interim or annual period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------- YEAR ENDED AUGUST 31,(A)
FEB. 29 FEB. 28 ---------------------------------------------
1996(A) 1995(A) 1995 1994 1993 1992 1991(E)
-------- -------- -------- -------- -------- -------- --------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $116,136 $ 92,482 $316,494 $231,572 $158,602 $192,365 $191,423
Gross profit............ 24,782 17,992 67,125 49,263 27,744 25,607 27,750
Percent of net sales.... 21.3 19.5 21.2 21.3 17.5 13.3 14.5
Operating income
(loss)................ 11,131 6,064 37,653 23,905 1,907 (9,392) (1,883)
Percent of net sales.... 9.6 6.6 11.9 10.3 1.2 (4.9) (.01)
Pre-tax income (loss)... 10,828 5,254 35,691 19,803 (2,340) (24,965) (13,666)
Percent of net sales.... 9.3 5.7 11.3 8.6 (1.5) (12.7) (7.1)
Net income (loss)....... $ 6,713 $ 4,350 $ 29,504 $ 20,989(c) $ (1,775) $(24,931)(d) $(11,178)(f)
Net income (loss) per
share................. $ 0.16 $ 0.11 $ 0.72 $ 0.53(c) $ (0.05) $ (0.67) $ (0.32)
Cash dividends declared
per share:
Common................ $ 0.040 -- $ 0.020 -- -- -- $ 0.360
Class A............... 0.040 -- 0.020 -- -- -- --
Class B............... 0.036 -- 0.018 -- -- -- 0.324
Cash.................... $ 13,347 $ 2,383 $ 57,707 $ 34,869 $ 8,553 $ 8,738 $ 2,908
Total assets............ 211,236 143,891 136,775 100,653 81,285 179,249 197,243
Long-term debt
(including current
portion).............. 14,698 18,025 5,106 17,943 25,590 49,588 65,075
Stockholders' equity.... 88,242 54,689 82,542 49,317 24,229 19,039 44,181
Capital expenditures.... 2,523 3,152 9,041(b) 2,634 2,379 3,599 3,607
Depreciation and
amortization.......... 1,934 1,909 7,519 9,374 5,646 14,876 10,580
</TABLE>
- ---------------
(a) The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
and the consolidated financial statements and the notes thereto.
(b) Includes buyout of $1,750,000 of equipment under lease.
(c) In 1994, the Company adopted SFAS 109, Accounting for Income Taxes, which
resulted in income of $1,780,000 or $0.04 per share from the cumulative
effect of an accounting change.
(d) Includes a net restructuring charge of $3,300,000 for costs associated with
the shutdown of the Company's New Jersey production facilities offset, in
part, by the benefit from the sale of its compressor business.
(e) Information presented is for the eight months ended August 31, 1991.
(f) Includes a pre-tax provision of $5,000,000 for a product recall.
10
<PAGE> 19
NYCOR Historical Consolidated Financial Information
The following table sets forth summary historical consolidated financial
information of NYCOR and has been derived from and should be read in conjunction
with NYCOR's audited consolidated financial statements, including the notes
thereto, which are incorporated by reference in this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(A)
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales.......................................... $78,867 $75,237 $59,226 $ 4,624 --
Interest and other income.......................... -- -- -- 9,586 $ 6,380
Net income (loss).................................. (4,061) 635 4,244(b) 5,240 4,065
Net income (loss) attributable to common
stockholders..................................... (6,016) (1,320) 2,289(b) 3,285 2,110
Net income (loss) per share........................ (0.79) (0.17) 0.30(b) 0.48 0.30
Cash dividends declared per share:
Preferred Stock.................................. 1.70 2.98 0.850 1.275 1.700
Common Stock..................................... -- -- -- 0.120 0.160
Class A Stock.................................... -- -- -- 0.120 0.160
Class B Stock.................................... -- -- -- 0.108 0.144
Cash and cash equivalents.......................... 1,533 1,981 1,336 1,495 12,214
Total assets....................................... 93,502 88,994 90,956 89,073 75,642
Long-term debt (including current portion)......... 6,877 33 26 546 --
Stockholders' equity............................... 72,730 78,746 81,565 76,524 74,056
Capital expenditures(c)............................ 10,440 1,707 957 430 35
Depreciation and amortization...................... 4,648 4,523 4,242 1,033 36
</TABLE>
- ---------------
(a) The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the consolidated financial statements and the notes thereto.
(b) In 1993, NYCOR adopted SFAS No. 109, Accounting for Income Taxes, which
resulted in income of $627,000 or $0.09 per share from the cumulative
effect of an accounting change.
(c) Includes $7,463,000 of assets acquired under capital lease arrangements
during 1995.
11
<PAGE> 20
Fedders Unaudited Pro Forma Condensed Financial Information
The following summary unaudited pro forma condensed financial information
of Fedders has been derived from the unaudited pro forma condensed financial
statements included elsewhere in this Proxy Statement-Prospectus. This data is
presented for illustrative purposes only and is not necessarily indicative of
the combined results of operations or financial position that would have
occurred if the Merger had occurred at the beginning of each period presented or
on the dates indicated, nor is it necessarily indicative of the future operating
results or financial position of Fedders.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 1996(A) AUGUST 31, 1995(A)
-------------------- ------------------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Net sales(b)..................................... $122,390 $329,516
Gross profit..................................... 26,268 74,228
Percent of net sales............................. 21.4 22.5
Operating income................................. 8,418 36,203
Percent of net sales............................. 6.8 11.0
Pre-tax income................................... 6,882 32,168
Percent of net sales............................. 5.6 9.8
Net income....................................... 4,267 26,755
Net income attributable to common stockholders... $ 3,676 $ 25,573
Primary earnings per share....................... $ 0.09 $ 0.55
Cash dividends declared per share:
Preferred(c)................................... $ 0.078 $ 0.156
Common......................................... 0.040 0.020
Class A........................................ 0.040 0.020
Class B........................................ 0.036 0.018
Cash............................................. $ 14,880 --
Total assets..................................... 300,423 --
Long-term debt (including current portion)(d).... 44,575 --
Stockholders' equity............................. 135,517 --
</TABLE>
- ---------------
(a) The pro forma selected financial data should be read in conjunction with pro
forma condensed consolidated financial statements and notes thereto.
(b) Includes the elimination of intercompany sales of compressors by NYCOR to
Fedders.
(c) Includes dividend related to the issuance of 7,565,000 shares of the new
Fedders Convertible Preferred Stock with an estimated dividend rate of 2.5%
based on the market value of Fedders Class A Stock of $6.125 on March 14,
1996. If such Preferred Stock is issued it would be convertible into
Fedders Class A on a 1:1 basis.
(d) Includes $23,000,000 related to the exchange of 1,150,000 shares of
outstanding NYCOR Preferred Stock for NYCOR's 8 1/2% Convertible
Subordinated Debentures due 2012.
12
<PAGE> 21
PRO FORMA FINANCIAL DATA
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited pro forma condensed consolidated financial
statements are based upon the consolidated financial statements of Fedders and
NYCOR, adjusted to give effect to the Merger. Under the terms of the Merger, if
the Fedders Average Price is at or above $6.25, the Company will issue shares of
Class A Stock for each share of NYCOR Common, Class A and Class B Stock in a
ratio determined by dividing $6.25 by the Fedders Average Price with fractional
share amounts being paid in cash. If the Fedders Average Price is lower than
$6.25, the Company will issue one share of a new Fedders Convertible Preferred
Stock, with an expected initial market value of $6.25 per share for each share
of NYCOR Common, Class A and Class B Stock. Each share of Fedders Convertible
Preferred Stock will be convertible into one share of Fedders Class A Stock and
will entitle the holder to a cumulative dividend at an annual rate which is
expected to support an initial market value of $6.25 per share (currently
estimated to be $0.156). The dividend rate to be set for the Preferred Stock is
therefore dependent upon the Fedders Average Price.
The accompanying unaudited pro forma condensed financial statements give
effect to the Merger accounted for as a purchase, are based upon an allocation
of the expected purchase price of $47,275,000 and include the adjustments
described in the notes attached hereto. Such information assumes the issuance of
Fedders Convertible Preferred Stock based on the trading price of Fedders Class
A Stock of $6.125 on March 14, 1996, and an estimate of the corresponding
Preferred Stock dividend rate of 2.5%. The pro forma condensed consolidated
financial statements also give effect to NYCOR's exchange of $23,000,000 in face
value of outstanding Preferred Stock for 8 1/2% Convertible Subordinated
Debentures due 2012. Final adjustments, other than as described in Note 4, are
not expected to be material to the depicted pro forma financial statements.
The accompanying unaudited pro forma condensed consolidated balance sheet
of the Company combines the historical consolidated balance sheet of Fedders as
of February 29, 1996 with the historical consolidated balance sheet of NYCOR as
of December 31, 1995 as if the Merger had occurred on February 29, 1996. The
accompanying unaudited pro forma condensed consolidated statements of operations
for the six months ended February 29, 1996 and the year ended August 31, 1995
combine the historical consolidated statements of operations of Fedders for
those periods, with the historical consolidated statements of operations of
NYCOR for the six months ended December 31, 1995 and the twelve months ended
September 30, 1995, respectively, all as if the Merger had occurred on August
31, 1994. NYCOR's results for the six months ended December 31, 1995 reflect
NYCOR's normal seasonal shutdown for the month of August, while Fedders results
for the six months ended February 29, 1996 do not include a seasonal shutdown
which normally occurs in the month of August.
The pro forma condensed consolidated financial statements are not
necessarily indicative of the results that would have been obtained if the
Merger had occurred on the dates indicated or for any future period or date. The
pro forma adjustments give effect to available information and assumptions that
the Company believes are reasonable. The pro forma condensed consolidated
financial statements should be read in conjunction with the Company's historical
consolidated financial statements and notes thereto and the historical
consolidated financial statements of NYCOR and the notes thereto, all of which
are incorporated herein by reference. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
13
<PAGE> 22
FEDDERS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FEDDERS NYCOR
AUGUST 31, SEPTEMBER 30, PRO FORMA
1995 1995 ADJUSTMENTS PRO FORMA
---------- ------------- ----------- ---------
(NOTE 1) (NOTE 4)
<S> <C> <C> <C> <C>
Net sales................................. $ 316,494 $75,709 $ (62,687)(a) $ 329,516
Costs and expenses
Cost of sales........................... 249,369 68,984 (63,065)(a,b) 255,288
Selling, general and administrative..... 29,472 9,056 (503)(c) 38,025
-------- -------- -------- --------
278,841 78,040 (63,568) 293,313
Operating income (loss)................... 37,653 (2,331) 881 36,203
Net interest expense...................... (1,962) (118) (1,955)(d) (4,035)
-------- -------- -------- --------
Income (loss) before income taxes......... 35,691 (2,449) (1,074) 32,168
Federal, state and foreign income tax
(benefit)............................... 6,187 565 (1,339)(e,f) 5,413
-------- -------- -------- --------
Net income (loss)......................... 29,504 (3,014) 265 26,755
Less: Preferred Stock
Dividend requirements................... -- (1,955) 1,955(d) --
-- -- (1,182)(g) (1,182)
-------- -------- -------- --------
Income (loss) attributable to common
stockholders............................ $ 29,504 $(4,969) $ 1,038 $ 25,573
======== ======== ======== ========
Primary earnings (loss) per share (Note
3)...................................... $ 0.72 $ (0.66) $ 0.55
======== ======== ========
</TABLE>
See accompanying notes.
14
<PAGE> 23
FEDDERS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FEDDERS NYCOR
FEBRUARY 29, DECEMBER 31, PRO FORMA
1996 1995 ADJUSTMENTS PRO FORMA
------------- -------------- --------- ---------
(NOTE 1) (NOTE 4)
<S> <C> <C> <C> <C>
Net sales................................ $ 116,136 $ 38,124 $ (31,870)(a) $ 122,390
Costs and expenses
Cost of sales.......................... 91,354 35,931 (31,163)(a,b) 96,122
Selling, general and administrative.... 13,651 4,451 (252)(c) 17,850
------ ------ ------- ------
105,005 40,382 (31,415) 113,972
Operating income (loss).................. 11,131 (2,258) (455) 8,418
Minority interest in loss of joint
venture................................ 153 -- -- 153
Net interest income (expense)............ (456) (255) (978)(d) (1,689)
------ ------ ------- ------
Income (loss) before income taxes........ 10,828 (2,513) (1,433) 6,882
Federal, state and foreign income tax
(benefit).............................. 4,115 321 (1,821)(e,f) 2,615
------ ------ ------- ------
Net income (loss)........................ 6,713 (2,834) 388 4,267
Less: Preferred Stock Dividend
requirements........................... -- (978) 978(d) --
(591)(g) (591)
------ ------ ------- ------
Income (loss) attributable to Common
Stockholders........................... 6,713 $ (3,812) $ 775 $ 3,676
====== ====== ======= ======
Primary earnings (loss) per share (Note
3)..................................... $ 0.16 $ (0.50) $ 0.09
====== ====== ======
</TABLE>
See accompanying notes.
15
<PAGE> 24
FEDDERS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF FEBRUARY 29, 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FEDDERS NYCOR
FEBRUARY 29, DECEMBER 31, PRO FORMA PRO
1996 1995 ADJUSTMENTS FORMA
------------ ------------- ----------- --------
(NOTE 2) (NOTE 4)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 13,347 $ 1,533 -- $ 14,880
Accounts receivable.................. 43,324 2,215 -- 45,539
Accounts receivable from Fedders..... -- 1,860 (1,860)(e) --
Inventories.......................... 106,786 11,783 (1,206)(f) 117,363
Deferred income taxes................ 2,954 -- 198(c) 3,152
Other current assets................. 2,150 1,417 -- 3,567
-------- ------- ------- --------
Total current assets................... 168,561 18,808 (2,868) 184,501
Net property, plant and equipment...... 34,807 31,179 -- 65,986
Deferred income taxes.................. 1,277 -- 5,338(c,d) 6,615
Other assets........................... 6,591 43,515 (6,785)(b) 43,321
-------- ------- ------- --------
$211,236 $93,502 $ (4,315) $300,423
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowing................. $ 34,776 -- -- $ 34,776
Current portion of long-term debt.... 258 $ 1,176 -- 1,434
Accounts payable..................... 24,390 7,709 $ (1,860)(e) 30,239
Accrued expenses..................... 28,539 4,724 -- 33,263
Income taxes payable................. 8,532 81 -- 8,613
-------- ------- ------- --------
Total current liabilities.............. 96,495 13,690 (1,860) 108,325
Long-term debt......................... 14,440 5,701 23,000(g) 43,141
Other long-term liabilities............ 6,551 1,381 -- 7,932
Minority interest in joint venture..... 5,508 -- -- 5,508
Stockholders' equity:
Fedders Preferred Stock.............. -- -- 47,275(a) 47,275
NYCOR Preferred Stock................ -- 23,000 (23,000)(g) --
Fedders Common Stock, Class A Stock,
Class B Stock and cumulative
translation adjustment............ 87,168 -- -- 87,168
Retained earnings.................... 1,074 -- -- 1,074
Net assets acquired.................. -- 49,730 (49,730)(c,d,f,h) --
-------- ------- ------- --------
Total stockholders' equity............. 88,242 72,730 (25,455) 135,517
-------- ------- ------- --------
$211,236 $93,502 $ (4,315) $300,423
======== ======= ======= ========
</TABLE>
See accompanying notes.
16
<PAGE> 25
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Pro forma adjustments giving effect to the Merger in the unaudited pro
forma condensed statements of operations reflect the following:
(a) The elimination of intercompany sales of compressors by NYCOR to
Fedders including the decrease in unrealized intercompany profit of
$208,000 during the year ended August 31, 1995 and the increase in
unrealized intercompany profit of $792,000 during the six months ended
February 29, 1996.
(b) The reduction of amortization expense resulting from a reduction
in goodwill (assuming amortization over 40 years) which amounted to
$170,000 for the year ended August 31, 1995 and $85,000 for the six months
ended February 29, 1996.
(c) The reduction of administrative expenses resulting from the
elimination of redundant costs related to the existence of a separate
public company. Such redundant costs include franchise taxes, reports to
stockholders, audit fees, bank fees and others.
(d) The increase in interest expense and decrease in Preferred Stock
dividends related to NYCOR's exchange of Preferred Stock for 8 1/2%
Convertible Subordinated Debentures due 2012.
(e) The tax effect on adjustments (a), (b), (c) and (d), above,
calculated at the Company's marginal effective tax rate of 38% which
amounted to a benefit of $408,000 for the fiscal year ended August 31, 1995
and $545,000 for the six months ended February 29, 1996.
(f) The reduction in the Company's tax provision as a result of
NYCOR's losses offsetting Fedders' income, calculated at Fedders' marginal
effective tax rate of 38%, which amounted to $931,000 for the year ended
August 31, 1995 and $1,277,000 for the six months ended February 29, 1996.
(g) The increase in Preferred Stock dividends related to the assumed
issuance of Fedders Convertible Preferred Stock with an estimated annual
dividend rate of 2.5% issued in connection with the Merger based on the
market value of Fedders Class A Stock of $6.125 on March 14, 1996.
(h) The results of operations of NYCOR for the quarter ended September
30, 1995 are included in both the unaudited pro forma condensed statements
of operations for the year ended August 31, 1995 and the six months ended
February 29, 1996. NYCOR's results of operations for the quarter ended
September 30, 1995 included $15,844,000 in net sales, a net loss of
$1,887,000 and a loss attributable to common stockholders of $2,376,000,
all such amounts before any of the pro forma adjustments described above.
2. Pro forma adjustments giving effect to the Merger in the unaudited pro
forma condensed balance sheet reflect the following:
(a) Based upon the March 14, 1996 closing price of Fedders Class A
Stock of $6.125 per share, the issuance of approximately 7,565,000 shares
of Fedders Convertible Preferred Stock, with a value of $6.25 per share,
for all the outstanding Common, Class A and Class B shares of NYCOR.
(b) The net reduction of NYCOR goodwill resulting from the allocation
of total expected consideration from the Merger.
(c) The reduction of NYCOR's deferred tax asset valuation allowance by
$3,229,000 resulting from certain net operating loss carryforwards and
reversing temporary differences of NYCOR becoming available to the Company
in future years, and their utilization being more likely than not.
(d) The further increase in NYCOR's deferred tax asset by $2,307,000
resulting from the reduction in the book basis of NYCOR's deductible
goodwill referred to in 2(b) above.
(e) The elimination of the intercompany receivable and payable
resulting from compressor sales by NYCOR to Fedders.
(f) The elimination of unrealized intercompany profit in ending
inventory related to compressor sales by NYCOR to Fedders.
17
<PAGE> 26
(g) The exchange of 1,150,000 shares of outstanding NYCOR Preferred
Stock for NYCOR's 8 1/2% Convertible Subordinated Debentures due 2012, at
the rate of $20 principal amount of Debentures for each share of Preferred
Stock.
(h) The elimination of the NYCOR net assets acquired.
3. Pro Forma earnings per share
Pro forma earnings per share for the year ended August 31, 1995 and the six
months ended February 29, 1996 have been computed by dividing pro forma
consolidated net income, before Preferred Stock dividends, by the weighted
average number of shares of Common, Class A, and Class B and other common stock
equivalents (including the Fedders Convertible Preferred Stock) outstanding
during the period, which amounted to 48,565,000 and 48,655,000, respectively.
Fully diluted pro forma earnings (loss) per share was not materially dilutive
and, accordingly, is not presented.
4. Shares issued as consideration in the Merger
If the Fedders Average Price is at or above $6.25, the Fedders Convertible
Preferred Stock will not be issued. Instead, Fedders Class A Stock with a total
value of $47,275,000 will be issued for NYCOR Common, Class A and Class B shares
outstanding in a ratio determined by dividing $6.25 by the Fedders Average
Price. In that case there would be no preferred stock dividend and pro forma
consolidated income attributable to common stockholders for the year ended
August 31, 1995 and the six months ended February 29, 1996 would be equal to pro
forma net income. If the Fedders Average Price was $6.25, the pro forma earnings
per share for the year ended August 31, 1995 and the six months ended February
29, 1996 would not change. As the assumed Fedders Average Price is increased
above $6.25, pro forma earnings per share would also increase. For each
increment of $.50 in the assumed Fedders Average Price above $6.25, the pro
forma earnings per share for the year ended August 31, 1995 and for the six
months ended February 29, 1996 would increase by approximately $0.006 and
$0.001, respectively.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges of Fedders for the fiscal years
ended August 31, 1995 and 1994 and for the six months ended February 29, 1996
were 12.4, 5.2 and 12.5, respectively. The actual deficiency of earnings versus
fixed charges for the years ended August 31, 1993 and 1992 and the eight months
ended August 31, 1991 were $2,340,000, $24,965,000 and $13,666,000,
respectively. If Fedders Convertible Preferred Stock is issued upon consummation
of the Merger, the ratio of earnings to combined fixed charges and preferred
stock dividends of Fedders on a pro forma basis for the year ended August 31,
1995 and the six months ended February 29, 1996 would have been 5.3 and 2.9,
respectively. For purposes of computing the foregoing pro forma ratios, Fedders
has assumed that the number of shares of Fedders Convertible Preferred Stock
issued in the Merger will equal the aggregate number of shares of Common Stock,
Class A Stock and Class B Stock of NYCOR outstanding.
If the Fedders Average Price is at or above $6.25, the new Convertible
Preferred Stock of Fedders will not be issued. Instead, Fedders Class A Stock
will be issued in a ratio determined by dividing $6.25 by the Fedders Average
Price per share of NYCOR Common, Class A and Class B shares outstanding. In that
case the pro forma ratio of earnings to combined fixed charges and preferred
stock dividends would no longer be applicable, and the pro forma ratio of
earnings to fixed charges would be computed instead. If the Fedders Average
Price is at or above $6.25, the pro forma ratio of earnings to fixed charges of
Fedders for the year ended August 31, 1995 and the six months ended February 29,
1996 would have been 7.2 and 4.2, respectively.
The ratio of earnings to combined fixed charges and preferred stock
dividends of NYCOR for the fiscal years ended December 31, 1993, 1992 and 1991
were 1.42, 1.81 and 1.40, respectively. The deficiency of earnings to combined
fixed charges and preferred stock dividends of NYCOR for the fiscal year ended
December 31, 1994 and 1995 were $2,272,000 and $6,831,000, respectively.
18
<PAGE> 27
INTRODUCTION
This Proxy Statement-Prospectus is being furnished by the Board of
Directors of Fedders to the stockholders of Fedders for the purpose of
soliciting proxies to be voted at the Fedders Annual Meeting. Information about
the Fedders Annual Meeting is set forth below under "The Fedders Annual
Meeting."
This Proxy Statement-Prospectus is being furnished by the Board of
Directors of NYCOR to the holders of Common Stock and Class B Stock of NYCOR for
the purpose of soliciting proxies to be voted at the NYCOR Special Meeting.
Information about the NYCOR Special Meeting is set forth below under "The NYCOR
Special Meeting." When delivered to the stockholders of NYCOR, this document
also constitutes the prospectus of Fedders with respect to the Fedders
Convertible Preferred Stock or Fedders Class A Stock to be issued by Fedders
upon consummation of the Merger (and to the Fedders Class A Stock issuable upon
conversion of any Fedders Convertible Preferred Stock issued upon consummation
of the Merger).
The principal executive offices of Fedders are located at Westgate
Corporate Center, 505 Martinsville Road, Liberty Corner, New Jersey 07938;
telephone: (908) 604-8686, and the principal executive offices of NYCOR are
located at 287 Childs Road, Basking Ridge, New Jersey 07920; telephone: (908)
953-8200.
SPECIAL FACTORS
In evaluating the proposed Merger, the stockholders of Fedders and NYCOR
should carefully consider the following factors, as well as all the information
included in this Proxy-Statement Prospectus.
PURPOSES AND EFFECTS OF THE MERGER
In July 1995, the Board of Directors of NYCOR (the "NYCOR Board"),
including the Affiliated Directors, reviewed alternatives available for
enhancing stockholder value. One possibility discussed was a transaction
involving Rotorex, in light of the strong demand for Rotorex compressors and the
improvements made to the Rotorex facilities in 1995. The NYCOR Board believed
that it had only limited options available to it, principally related to a
transaction involving Rotorex. The NYCOR Board also concluded that selling
Rotorex and remaining an independent company with one small operation and the
balance of its assets in cash would not be the most effective method to enhance
stockholder value, as the market would not fully value NYCOR's stock until NYCOR
invested its cash in another business. See, "The Merger -- Reasons for the
Merger" and "-- Background of the Merger."
When the Board of Directors of Fedders (the "Fedders Board"), including the
Affiliated Directors, became aware that NYCOR would consider a sale of Rotorex,
it assessed the impact which such a sale might have on the operations of
Fedders. In assessing the potential impact, the Fedders Board considered a
number of factors, including (i) the importance of assuring its supply of
compressors, (ii) the projected growth of the Fedders business and the
availability of compressors to support that growth and (iii) the values that had
been communicated by the NYCOR Board, particularly the value that had been
expressed as the lowest acceptable price. As a result of these deliberations,
the Fedders Board determined that it would propose a merger to the NYCOR Board,
whereby NYCOR would be merged into Fedders and each share of NYCOR Common, Class
A and Class B Stock would be converted into the right to receive $6.25 in value
of Fedders Class A Stock, such value to be determined at the time of the merger.
See, "The Merger -- Reasons for the Merger" and "-- Background of the Merger."
In order that an acquisition of NYCOR by Fedders be tax free for Federal income
tax purposes for NYCOR, Fedders and the stockholders of NYCOR and Fedders, the
Fedders Board proposed the merger of NYCOR with and into Fedders. See, "The
Merger -- Certain Federal Income Tax Consequences of the Merger."
The Fedders Board determined that it would be unwilling to issue the number
of shares of Fedders Class A Stock which would be required if NYCOR were
acquired at a time when the Fedders Average Price was below $6.25. The Fedders
Board therefore proposed a transaction in which, depending on the Fedders
Average Price, either Fedders Class A Stock or Fedders Convertible Preferred
Stock would be issued upon the merger of NYCOR into Fedders. See, "The Merger --
General" and "-- The Merger Agreement." Such proposal was accepted by the NYCOR
Board.
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<PAGE> 28
Upon consummation of the Merger, Fedders would succeed to all of the
business and assets of NYCOR and would become liable for all of the liabilities
of NYCOR. Fedders would thereafter have a 100% interest in the net book value
and net earnings of NYCOR. The separate corporate existence of NYCOR would
terminate. As a result of the Merger, the Common Stock and Class A Stock of
NYCOR would no longer be held by 300 persons, and NYCOR would no longer be
obligated to file periodic reports and other information pursuant to the
Exchange Act.
It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code, and, accordingly, for Federal income
tax purposes (i) no gain or loss will be recognized by Fedders, NYCOR or the
stockholders of Fedders as a result of the Merger except to the extent that
holders of Fedders Class B Stock may receive cash upon exercise of dissenters'
rights and (ii) stockholders of NYCOR will not recognize gain or loss upon the
receipt of Fedders Convertible Preferred Stock or Fedders Class A Stock in
exchange for their shares of capital stock of NYCOR, except to the extent of any
cash received in lieu of fractional shares or cash received upon exercise of any
dissenters' rights. Fedders and NYCOR have received an opinion of McCarter &
English, Special Tax Counsel to Fedders, substantially to this effect. See, "The
Merger -- Certain Federal Income Tax Consequences of the Merger."
Insofar as the Affiliated Directors are stockholders of NYCOR, they would
receive shares of Fedders Class A Stock or Fedders Convertible Preferred Stock
in the Merger on the same basis as stockholders of NYCOR who are not affiliates
of NYCOR. See, "Security Ownership of Directors and Executive Officers of NYCOR"
and "Principal Stockholders of NYCOR." The Merger Agreement provides that the
employees, officers and directors of NYCOR (including the Affiliated Directors)
shall be placed in the same economic position following the Merger as they were
immediately prior to the date of the execution of the Merger Agreement with
respect to stock options, directors fees, salaries and employee benefits
provided by NYCOR. See, "Proposal No. 1 -- Interests of Certain Persons in the
Merger."
FAIRNESS OF THE MERGER TO THE STOCKHOLDERS OF NYCOR
In assessing whether the terms of the Merger are fair to the unaffiliated
stockholders of NYCOR, the NYCOR Board considered a number of factors. These
included (i) the current and historical prices per share of Common Stock and
Class A Stock of NYCOR, the current and historical prices per share of Class A
Stock of Fedders (see "Comparative Stock Price Information") and the expectation
that, if issued, the terms of the Fedders Convertible Preferred Stock would
support an initial market value of $6.25 per share, (ii) the provision in the
Merger Agreement providing that receipt of an opinion of NYCOR's financial
advisor is a condition to the obligation of NYCOR to consummate the Merger and
(iii) the historical and pro forma results of operations of NYCOR and Fedders
and the historical and pro forma book value per share of capital stock of NYCOR
(see "Summary Selected Financial Information" and "Pro Forma Financial Data" and
the financial statements of Fedders and NYCOR incorporated herein by reference
described under "Incorporation of Certain Documents by Reference"). The opinion
of Laidlaw, NYCOR's financial advisor, contemplated by the Merger Agreement was
subsequently received by NYCOR. See, "The Merger -- Opinion of Financial Advisor
to NYCOR." In evaluating the fairness of the Merger, including its fairness to
the unaffiliated stockholders of NYCOR, the NYCOR Board did not assign any
particular weight to any of the factors described above or otherwise considered,
but considered each such factor as part of the totality of information available
to it. The Merger was unanimously approved by the directors of NYCOR (including
all directors who are not employees of NYCOR), and none of the directors of
NYCOR dissented to or abstained from voting on the proposal to approve the
Merger Agreement.
In considering the Merger, the directors of NYCOR who are not also
employees of NYCOR did not retain an unaffiliated representative to act solely
on behalf of the unaffiliated security holders of NYCOR for the purpose of
negotiating the terms of the Merger Agreement or preparing a report concerning
the fairness of the Merger to the unaffiliated stockholders of NYCOR.
In evaluating the fairness of the Merger to the unaffiliated stockholders
of NYCOR, each of the Affiliated Directors and Fedders reviewed the analyses of
the fairness of the Merger performed by the NYCOR Board, and each adopted such
analyses as his or its own. As a result, each of the Affiliated Directors
20
<PAGE> 29
and Fedders has concluded that the terms of the Merger are fair to the
stockholders of NYCOR, including the unaffiliated stockholders of Fedders.
Approval of the Merger by the stockholders of NYCOR requires the
affirmative vote of a majority of the outstanding shares of NYCOR Common Stock
and NYCOR Class B Stock, each voting separately as a class. While the executive
officers and directors of NYCOR (including the Affiliated Directors) have the
power to vote more than a majority of the shares of NYCOR Class B Stock entitled
to vote, such executive officers and directors as a group beneficially own
approximately 7.6% of the shares of NYCOR Common Stock entitled to vote on
approval of the Merger. See "Security Ownership of Directors and Executive
Officers of NYCOR" and "Principal Stockholders of NYCOR." Assuming all of the
shares of NYCOR Common Stock owned by its directors and executive officers are
voted in favor of the Merger, an additional 42.4% of the outstanding NYCOR
Common Stock would need to be voted in favor of approval of the Merger in order
for the Merger to be approved by the stockholders of NYCOR.
During the 18 months preceding the execution of the Merger Agreement, other
than the proposal received from Fedders, NYCOR did not receive any firm offer
for the merger or consolidation of NYCOR into or with another person, for the
sale or other transfer of all or any substantial part of its assets or for
securities of NYCOR which would enable the holder thereof to exercise control of
NYCOR. NYCOR has been advised by the Affiliated Directors that they are not
aware of any such firm offer from any unaffiliated person.
OPINION OF FINANCIAL ADVISOR TO NYCOR
On February 1, 1996, Laidlaw delivered its oral opinion, which was
subsequently confirmed in writing, that the consideration to be paid in the
Merger is fair to NYCOR from a financial point of view. Laidlaw's opinion
related only to the consideration to be paid by Fedders in connection with the
Merger and does not constitute a recommendation to any stockholder of NYCOR as
to how such stockholder should vote at the NYCOR Special Meeting. The full text
of the written opinion of Laidlaw which sets forth the assumptions made, the
matters considered and the limitations of the review undertaken in rendering
such opinion is attached as Annex D to this Proxy Statement-Prospectus and is
incorporated herein by reference. See, "Proposal No. 1 -- The Merger -- Opinion
of Financial Advisor to NYCOR." The opinion of Laidlaw relates to the fairness
of the consideration to be paid to the stockholders of NYCOR in the Merger;
Laidlaw did not recommend the amount of such consideration.
Laidlaw is an investment banking firm engaged on a regular basis to provide
a range of investment banking and financial advisory services, including the
valuation of businesses and their securities in connection with mergers and
acquisitions. NYCOR selected Laidlaw as its financial advisor in connection with
the Merger on the basis of its background, experience and reputation. Other than
its engagement in connection with the Merger including the fee of $85,000 paid
by NYCOR to Laidlaw in connection with its opinion concerning the Merger, there
has been no material relationship between Laidlaw and NYCOR, the Affiliated
Directors or Fedders during the past two years nor is any such relationship
mutually understood to be contemplated and any compensation received or to be
received as a result of such relationship.
LACK OF AN ESTABLISHED TRADING MARKET FOR THE FEDDERS CONVERTIBLE PREFERRED
STOCK
If the Fedders Average Price (which will be calculated 5 business days
prior to the Fedders Annual Meeting and NYCOR Special Meeting) is below $6.25,
each share of Common Stock, Class A Stock and Class B Stock of NYCOR will be
converted into the right to receive one share of Fedders Convertible Preferred
Stock with terms expected to support an initial market value of $6.25. The
Fedders Convertible Preferred Stock will be a new issue of Fedders equity
securities and thus will have no trading history when issued. The Fedders
Convertible Preferred Stock will, however, be listed on the NYSE where the
Fedders Common Stock and Fedders Class A Stock are currently listed. While
Fedders and NYCOR expect that the terms of the Fedders Convertible Preferred
Stock will support an initial market value of $6.25 per share, there can be no
assurance that Fedders Convertible Preferred Stock, if issued in the Merger,
will trade at that price
21
<PAGE> 30
or, if it does, for how long, as matters beyond the control of Fedders and NYCOR
may impact its market value.
INCREASED LEVERAGE FROM NYCOR PREFERRED STOCK CONVERSION
At August 31, 1995, Fedders had $5.1 million of debt with an average
interest rate of 1.9%. Most of this debt is the result of a 1.0% loan with the
State of Illinois relating to a factory located in that State. At February 29,
1996, total debt of $49.2 million included seasonal working capital borrowing of
$34.4 million and $10.4 million related to Fedders' Chinese joint venture,
Fedders Xinle. The $10.4 million (RMB 86 million), 15% loan matures in twelve
years and is not guaranteed by Fedders.
On March 15, 1996, NYCOR exchanged its Preferred Stock for debentures
totaling $23,000,000 with an 8.5% rate of interest. On the effective date of the
Merger, Fedders will assume this additional debt. The NYCOR Preferred Stock was
exchanged for debentures to simplify the structure of the Merger in the
following particulars: (i) the terms of the Fedders Convertible Preferred Stock
could be fixed without reference to another series of preferred stock, the NYCOR
Preferred Stock, which would be outstanding following the Merger if not
exchanged and (ii) Fedders would not have to create a new series of preferred
stock to accommodate its assumption of the NYCOR Preferred Stock, it could
simply assume the obligations under the debentures issued in exchange therefor.
The NYCOR Board believed that since (i) the NYCOR Preferred Stock would, at some
point in the future, likely be exchanged for debentures and NYCOR's financial
obligations are no greater under the debentures than they were with respect to
the NYCOR Preferred Stock, and (ii) the Merger is in the best interests of
NYCOR's stockholders, simplifying the structure of the Merger to be presented
for stockholder approval would be an appropriate course of action.
RECENT HISTORY OF NYCOR'S LOSSES
For the year ended December 31, 1994, NYCOR had a loss of 17 cents per
share of Common Stock, Class A Stock and Class B Stock of NYCOR on earnings of
$0.64 million. For the year ended December 31, 1995, NYCOR had a net loss of
$4.1 million, or 79 cents per share, on revenues of $78.9 million. The per-share
losses in 1994 and 1995 gives effect to dividends paid on NYCOR's $1.70
Convertible Exchangeable Preferred Stock. The losses NYCOR has experienced in
fiscal 1995 resulted principally from manufacturing inefficiencies of its
compressor operations as efforts continue to bring on line an automated assembly
system delivered in the third quarter of 1995. If these inefficiencies were to
continue, it would negatively affect earnings potential.
To help correct the manufacturing inefficiencies, the manufacturer of the
assembly system has agreed to supply additional equipment necessary for the
system to assemble compressors at the rate specified in the agreement to supply
the system. Additionally, Rotorex and the manufacturer continue to work to
resolve certain other deficiencies in the performance of the system.
RISKS INHERENT TO THE AIR CONDITIONER BUSINESS
Although Fedders is rapidly expanding on a global basis, which should have
the effect of smoothing out the seasonality of its business and provide more
level sales activity year-round, its business is still weather dependent, and a
cooler than normal summer season in any of its markets can negatively affect its
earning potential for such season.
THE FEDDERS ANNUAL MEETING
The Fedders Annual Meeting will be held at 2:00 p.m. on Monday, June 24,
1996 at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, NJ 07060, for
the purposes set forth below.
A stockholder who shall sign and return a proxy in the form enclosed with
this Proxy Statement-Prospectus has the power to revoke it at any time before it
is exercised by giving written notice to the Secretary of the Company to such
effect or by delivering to the Company an executed proxy bearing a later
22
<PAGE> 31
date. Because the terms of the Fedders Convertible Preferred Stock, if issuable,
will not be fixed before June 17, 1996, Fedders will accept facsimile
transmissions of proxies from stockholders of record entitled to vote at the
Fedders Annual Meeting. Any such stockholder desiring to submit a proxy by
facsimile should transmit the properly executed proxy to Fedders' transfer
agent, The Bank of Boston, at (617) 575-2420. Stockholders owning their shares
in "street name" should contact their bank or broker. Any stockholder who has
given a proxy may still attend the Fedders Annual Meeting, revoke his or her
proxy, and vote in person.
The Company's Annual Report to Stockholders for the period from September
1, 1994 to August 31, 1995 (the "Fiscal Year"), including financial statements,
was previously mailed to stockholders of Fedders.
At the Fedders Annual Meeting, holders of shares of Fedders Common Stock
and Fedders Class B Stock will be asked to consider and act on proposals to
approve the actions of the Board of Directors to (i) adopt the Merger Agreement
and the Merger, (ii) elect three (3) directors, (iii) adopt the Company's Stock
Option Plan VIII; and (iv) ratify the appointment of the Company's independent
auditors. In addition, at the Fedders Annual Meeting, holders of shares of
Fedders Common Stock, Fedders Class A Stock and Fedders Class B Stock will be
asked to consider and act on a proposal to adopt the Amendments to the Fedders
Charter (i) to increase the number of the authorized shares of Fedders Common
Stock from 60,000,000 to 80,000,000; (b) to increase the number of the
authorized shares of Fedders Class A Stock from 30,000,000 to 60,000,000; and
(c) to increase the number of the authorized shares of the Preferred Stock of
Fedders from 5,000,000 to 15,000,000.
The close of business on April 25, 1996 has been fixed as the record date
for the determination of the stockholders entitled to notice of, and to vote at,
the Fedders Annual Meeting. As of such date, 18,989,298 shares of Fedders Common
Stock and 2,267,206 shares of Fedders Class B Stock were outstanding and
entitled to be voted at the Fedders Annual Meeting. On the record date, there
were also issued and outstanding shares of Fedders Class A Stock
entitled to vote on that portion of the proposal to adopt the Amendments that
proposes to increase the number of authorized shares of Fedders Class A Stock
from 30,000,000 to 60,000,000. The holders of Fedders Class B Stock are entitled
to ten votes per share in any election of directors if more than 15% of the
shares of Fedders Common Stock outstanding on the record date are owned
beneficially by a person or a group of persons acting in concert, or if a
nomination for the Board of Directors is made by a person or a group of persons
acting in concert (other than the Board) provided such nomination is not made by
one or more of the holders of Fedders Class B Stock, acting in concert with each
other, who beneficially own more than 15% of the shares of Fedders Class B Stock
outstanding on such record date. The Board of Directors is not presently aware
of any circumstance that would give holders of Fedders Class B Stock the right
to ten votes per share in the election of directors at the Fedders Annual
Meeting.
A plurality of the votes of the shares of Fedders Common Stock and Fedders
Class B Stock present in person or represented by proxy at the Fedders Annual
Meeting shall be needed for the election of directors, provided those shares
present in person or represented by proxy at the Fedders Annual Meeting
constitute a quorum. Approval of the Fedders Stock Option Plan VIII and
ratification of the appointment of independent auditors requires the affirmative
vote of a majority of the shares of Fedders Common Stock and Fedders Class B
Stock voted on such Proposals at the Fedders Annual Meeting so long as at least
a majority of the Fedders Common Stock and Fedders Class B Stock are voted on
such Proposals. Under the DGCL, approval of the Amendments to the Fedders
Charter requires the affirmative vote of a majority of the outstanding Fedders
Common Stock and Fedders Class B Stock voting together as a single class, and,
under the DGCL and the provisions set forth in the Fedders Charter, approval of
the Amendments requires the affirmative vote of a majority of the outstanding
shares of (i) Fedders Common Stock, (ii) Fedders Class B Stock, and (iii)
Fedders Class A Stock (on the portion of the proposal to increase the number of
authorized shares of Fedders Class A Stock only), each voting separately as a
class. Under the terms of the Fedders Charter, approval of the Merger requires
an affirmative vote of a majority of the outstanding shares of the Fedders
Common Stock and Fedders Class B Stock, each voting separately as a class, and
two-thirds ( 2/3) of the outstanding Fedders Common Stock and Fedders Class B
Stock voting together as a single class. Directors and executive officers of
Fedders, who collectively beneficially own 514,610 shares or 2.71% of the
outstanding shares of Fedders Common Stock, and 2,262,566 shares or 99.78% of
the outstanding shares of Fedders Class B Stock, have indicated that they intend
to vote for the Merger. The executive officers and directors of
23
<PAGE> 32
Fedders, by themselves, cannot assure passage of any of the proposals, since
they hold less than a majority of the combined Fedders Common Stock and Fedders
Class B Stock. In the case of the Amendments to the Fedders Charter the holders
of Fedders Common Stock or Fedders Class A Stock voting separately as classes
can offset the separate vote of the Fedders Class B Stock. In the case of the
Merger, the holders of the Fedders Common Stock voting separately as a class can
offset the separate vote of the Fedders Class B Stock. Approval of the
Amendments to the Fedders Charter is required in order for Fedders to complete
the Merger, if approved. Approval of such Amendments is also required in order
for there to be a sufficient number of authorized but unissued and unreserved
shares of Fedders Class A Stock available for issuance under the Fedders Stock
Option Plan VIII, if approved.
THE BOARD OF DIRECTORS OF THE COMPANY (INCLUDING ALL OF THE INDEPENDENT
DIRECTORS) HAS UNANIMOUSLY CONCLUDED THAT THE MERGER IS IN THE BEST INTEREST OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER AND THE OTHER
PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
The proxies in the accompanying form will be voted as specified, but if no
specification is made they will be voted in favor of (i) the approval of the
Merger Agreement and the Merger, (ii) the adoption of the Amendments, (iii) the
election of the nominees for director set forth herein, (iv) the adoption of the
Company's Stock Option Plan VIII, and (v) ratification of the appointment of BDO
Seidman, LLP as the Company's independent auditors for the ensuing fiscal year.
In the discretion of the proxyholders, the proxies will also be voted for or
against such other matters as may properly come before the Fedders Annual
Meeting. The Board of Directors is not aware that any other matters are to be
presented for action at the Fedders Annual Meeting.
The shares represented by a proxy which is timely returned and marked
"Abstain" as to any matter as well as broker non-votes will be considered
present at the Fedders Annual Meeting and will be included in the calculation of
those shares needed to constitute a quorum. The shares represented by such
proxies, although considered present for quorum purposes, will not be considered
a part of the voting power present with respect to any proposal which is
abstained from or to which the broker non-vote relates. With respect to the
proposals to approve the Merger Agreement and the Merger and to adopt the
Amendments, an abstention or a broker non-vote is the equivalent of a negative
vote on such proposal.
THE NYCOR SPECIAL MEETING
The NYCOR Special Meeting will be held at 10:30 a.m. on Monday, June 24,
1996 at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, NJ 07060 for
the purpose of considering and acting on a proposal to approve the Merger
Agreement and the Merger.
A stockholder of NYCOR who shall sign and return a proxy in the form
enclosed with this Proxy Statement-Prospectus has the power to revoke it at any
time before it is exercised by giving written notice to the Secretary of NYCOR
to such effect or by delivering to NYCOR an executed proxy bearing a later date.
Because the terms of the Fedders Convertible Preferred Stock, if issuable, will
not be fixed before June 17, 1996, NYCOR will accept facsimile transmissions of
proxies from stockholders of record entitled to vote at the NYCOR Special
Meeting. Any such stockholder desiring to submit a proxy by facsimile should
transmit the properly executed proxy to NYCOR's transfer agent. The Bank of
Boston. at (617) 575-2420. Stockholders owning their shares in "street name"
should contact their bank or broker. Any stockholder of NYCOR who has given a
proxy may still attend the NYCOR Special Meeting, revoke his or her proxy, and
vote in person.
The close of business on April 25, 1996 has been fixed as the record date
for the determination of the stockholders of NYCOR entitled to notice of, and to
vote at, the NYCOR Special Meeting. As of such date, shares of NYCOR
Common Stock and shares of NYCOR Class B Stock were outstanding and
entitled to be voted at the NYCOR Special Meeting. The holders of shares of
NYCOR Class A Stock, of which there were outstanding as of
the record date, are not entitled to vote at
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<PAGE> 33
the NYCOR Special Meeting. As of the record date, there were
approximately holders of record of NYCOR Common
Stock, holders of record of NYCOR Class A Stock
and holders of record of NYCOR Class B Stock.
The Board of Directors of NYCOR believes that the Merger is the best method
to create value for NYCOR's stockholders. The Board of Directors has concluded
that, although the current strategies of its operating units are sound, the
potential for growth of its businesses, particularly Rotorex, will be enhanced
as part of a larger, financially sound company such as Fedders. As a result of
the Merger, NYCOR's stockholders will recognize value in their stock and have
the opportunity to participate in that growth as stockholders of Fedders.
Therefore, the Board of Directors has concluded that the Merger is in the best
interests of NYCOR's stockholders. See, "the Merger -- Reasons for the Merger"
and "Background of the Merger." Approval of the Merger by the stockholders of
NYCOR requires the affirmative vote of a majority of the outstanding shares of
NYCOR Common Stock and NYCOR Class B Stock each voting separately as a class.
Directors and executive officers of NYCOR, who collectively beneficially own
213,102 shares or 7.6% of the outstanding shares of NYCOR Common Stock, and
640,352 shares or 89.7% of the outstanding shares of NYCOR Class B Stock, have
indicated that they intend to vote for the Merger. The executive officers and
directors of NYCOR, by themselves, cannot assure passage of the proposal, as the
holders of the NYCOR Common Stock voting separately as a class can offset the
separate vote of the NYCOR Class B Stock.
THE BOARD OF DIRECTORS OF NYCOR HAS UNANIMOUSLY CONCLUDED THAT THE MERGER
IS IN THE BEST INTEREST OF NYCOR AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE
STOCKHOLDERS OF NYCOR VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER.
The proxies in the accompanying form will be voted as specified, but if no
specification is made, they will be voted in favor of the adoption of the Merger
Agreement and the Merger. In the discretion of the proxyholders, the proxies
will also be voted for or against such other matters as may properly come before
the NYCOR Special Meeting.
The shares represented by a proxy which is timely returned and marked
"Abstain" as well as broker non-votes will be considered present at the NYCOR
Special Meeting and will be included in the calculation of those shares needed
to constitute a quorum. With respect to the proposal to approve the Merger
Agreement and the Merger, an abstention or a broker non-vote is the equivalent
of a negative vote on such proposal.
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<PAGE> 34
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF FEDDERS
As of March 29, 1996, each director of the Company and all directors and
executive officers of the Company owned beneficially the number of shares of the
Company's equity securities set forth in the following table. Shares subject to
acquisition within 60 days pursuant to stock options are shown separately.
Unless otherwise indicated, the owners listed have sole voting and investment
power. Fedders Class A Stock has no voting rights except as provided under the
DGCL.
<TABLE>
<CAPTION>
SHARES
AMOUNT AND SUBJECT TO
NATURE OF ACQUISITION PERCENT
TITLE OF NAME OF INDIVIDUAL BENEFICIAL WITHIN 60 OF CLASS
CLASS OR PERSONS IN GROUP OWNERSHIP DAYS(15) OWNED(16)
- ------------------- --------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Common Stock Salvatore Giordano..................... 1,100(1) 0 Less than 1%
Sal Giordano, Jr....................... 1,100(1) 0 Less than 1%
Joseph Giordano........................ 13,910(1) 0 Less than 1%
Howard S. Modlin....................... 256,800(2) 0 1.35%
Clarence Russel Moll................... 61,400(3) 0 Less than 1%
William J. Brennan..................... 5,000 0 Less than 1%
Anthony E. Puleo....................... 2,000(4) 0 Less than 1%
Robert L. Laurent, Jr.................. 115,000 0 Less than 1%
S. A. Muscarnera....................... 55,000 0 Less than 1%
All directors and executive officers as
a group................................ 514,610 0 2.71%
Class A Stock Salvatore Giordano..................... 2,355,474(5)(6) 487,500 14.51%
Sal Giordano, Jr....................... 1,521,509(5)(7)(8) 487,500 10.25%
Joseph Giordano........................ 1,710,170(5)(8) 234,375 9.92%
Howard S. Modlin....................... 224,701(9) 164,064 1.98%
Clarence Russel Moll................... 34,725(10) 96,563 Less than 1%
William J. Brennan..................... 4,375 121,876 Less than 1%
Anthony E. Puleo....................... 0 9,375 Less than 1%
Robert L. Laurent, Jr.................. 100,625 325,000 2.17%
S. A. Muscarnera....................... 48,125 243,750 1.49%
Gordon Newman.......................... 0(11) 0 Less than 1%
All directors and executive officers as
a group................................ 1,984,876 2,211,254 19.89%
Class B Stock(16) Salvatore Giordano..................... 1,866,476(12) 0 82.31%
Sal Giordano, Jr....................... 2,153,746(12)(13)(14) 0 94.98%
Joseph Giordano........................ 2,150,296(12)(14) 0 94.83%
All directors and executive officers as
a group................................ 2,262,566 0 99.78%
Ownership of Common Stock, Class A
Stock and Class B Stock combined, by
all directors and executive officers as
a group................................ 4,762,052 2,211,254 16.38%
</TABLE>
- ---------------
(1) The amount shown includes 1,100 shares as to which Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment
power.
(2) Includes 3,100 shares owned by members of Mr. Modlin's family as to which
Mr. Modlin disclaims beneficial ownership.
(3) Includes 15,000 shares owned by Dr. Moll's wife, as to which Dr. Moll
disclaims beneficial ownership.
(4) Through inadvertence, Mr. Puleo reported, in an untimely manner, one
transaction on Form 4 covering the purchase of shares of Fedders Common
Stock during the Fiscal Year. The Company is not aware of any failure of
Mr. Puleo to file any required Form.
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<PAGE> 35
(5) Includes 825 shares as to which Messrs. Salvatore Giordano, Sal Giordano,
Jr. and Joseph Giordano share voting and investment power; 502,025 shares
as to which the same individuals also share voting and investment power;
100,150 are shares held by the Salvatore Giordano Foundation; and 35,817
are shares held by the Giordano Foundation, for both of which foundations
these individuals are officers, directors and stockholders.
(6) Includes 117,548 shares held of record by Mr. Giordano's wife, and 148,904
shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(7) Includes 9,197 shares held of record by Mr. Giordano's wife, as to which
Mr. Giordano disclaims beneficial ownership.
(8) Includes 153,125 shares held in trust, as to which Messrs. Sal Giordano,
Jr. and Joseph Giordano share voting and investment power.
(9) Includes 2,713 shares owned by members of Mr. Modlin's family as to which
Mr. Modlin disclaims beneficial ownership.
(10) Includes 13,125 shares owned by Dr. Moll's wife as to which Dr. Moll
disclaims beneficial ownership.
(11) Through inadvertence, Mr. Newman reported, in an untimely manner, two
transactions on Form 4 for the month of August, 1995 covering the sale of
Fedders Common Stock and Fedders Class A Stock during the Fiscal Year. The
Company is not aware of any failure of Mr. Newman to file any required
Form.
(12) The amount shown includes 1,810,186 shares as to which Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment
power; 52,500 are shares held by the Salvatore Giordano Foundation, and
3,790 are shares held by the Giordano Foundation, for both of which they
are officers, directors and stockholders.
(13) The amount shown includes 1,150 shares held of record by Mr. Giordano's
wife, as to which Mr. Giordano disclaims beneficial ownership.
(14) The amount shown includes 175,000 shares held in trust, as to which Messrs.
Sal Giordano, Jr. and Joseph Giordano share voting and investment power.
(15) The amounts shown are the number of shares held under options exercisable
within 60 days.
(16) The Fedders Class B Stock is convertible into Fedders Common Stock at any
time on a share-for-share basis. In the event that the individuals named as
owning Fedders Class B Stock converted their shares into Fedders Common
Stock, less than 5% of the class would remain outstanding, and pursuant to
the terms of the Fedders Charter, all remaining Fedders Class B Stock and
all outstanding Fedders Class A Stock would automatically be converted into
Fedders Common Stock. If such conversion took place, and the named
individuals exercised all of the options indicated, such individuals and
the group would beneficially own the following number of shares
constituting the indicated percentage of Fedders Common Stock outstanding:
Mr. Salvatore Giordano, 4,710,550 shares (of which 2,314,136 are shares as
to which Mr. Giordano shares voting and investment power with Messrs.
Joseph Giordano and Sal Giordano, Jr.; 154,650 are shares held by the
Salvatore Giordano Foundation, and 39,607 are shares held by the Giordano
Foundation, for both of which he is an officer, director and shareholder)
constituting 11.53%; Mr. Sal Giordano, Jr., 4,163,855 shares (of which
2,314,136 are shares as to which Mr. Giordano shares voting and investment
power with Messrs. Salvatore Giordano and Joseph Giordano; 154,650 are
shares held by the Salvatore Giordano Foundation, and 39,607 are shares
held by the Giordano Foundation, for both of which he is an officer,
director and shareholder) constituting 10.19%; Mr. Joseph Giordano,
4,108,751 shares (of which 2,214,136 are shares as to which Mr. Giordano
shares voting and investment power with Messrs. Salvatore Giordano and Sal
Giordano, Jr.; 154,650 are shares held by the Salvatore Giordano
Foundation, and 39,607 are shares held by the Giordano Foundation, for both
of which he is an officer, director and shareholder) constituting 10.12%;
and all directors and executive officers as a group 6,973,306 shares
constituting 16.38%.
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<PAGE> 36
PRINCIPAL STOCKHOLDERS OF FEDDERS
The following table sets forth information at March 29, 1996 with respect
to the beneficial ownership of the Company's voting securities by all persons
known by the Company to own more than 5% of the Company's outstanding voting
securities. Unless otherwise indicated, the owners listed have sole voting and
investment power.
<TABLE>
<CAPTION>
AMOUNT
TITLE OF NAME AND ADDRESS BENEFICIALLY PERCENT
CLASS OF BENEFICIAL OWNER OWNED OF CLASS
- -------------- ---------------------------------------------- ------------ --------
<S> <C> <C> <C>
Class B Stock Salvatore Giordano(1)......................... 2,262,566 99.78%
Joseph Giordano and
Sal Giordano, Jr.
c/o Fedders Corporation
Liberty Corner, NJ 07938
Common Stock Strong Capital Management, Inc.(2)............ 2,185,500 11.6%
100 Heritage Reserve
P.O. Box 2936
Milwaukee, WI 53201
</TABLE>
- ---------------
(1) In the event that the named individuals converted their shares of Fedders
Class B Stock into Fedders Common Stock, less than 5% of the class would
remain outstanding, and pursuant to the terms of the Fedders Charter, all
remaining Fedders Class B Stock and all outstanding Fedders Class A Stock
would automatically be converted into Fedders Common Stock. If such
conversion took place, and the named individuals exercised all of their
currently exercisable stock options, they would own 5,053,363 shares of
Fedders Common Stock constituting 12.15% of the Fedders Common Stock which
would then be outstanding.
See the previous table and the notes thereto for more detailed information
with respect to the security ownership of the named individuals.
(2) Strong Capital Management, Inc. is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940. The information provided
is based upon a Schedule 13G filed by this Stockholder with the Commission
on February 13, 1996.
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<PAGE> 37
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF NYCOR
As of April 1, 1995 each director of NYCOR and all directors and executive
officers of NYCOR owned beneficially the number of shares of NYCOR's equity
securities set forth in the following table. As of such date, no director or
executive officer of NYCOR owns beneficially any shares of NYCOR Preferred
Stock. Shares subject to acquisition within 60 days pursuant to stock options
are shown separately. Unless otherwise indicated, the owners listed have sole
voting and investment power. NYCOR Class A Stock has no voting rights except as
provided under the DGCL.
<TABLE>
<CAPTION>
SHARES
AMOUNT AND SUBJECT TO
NATURE OF ACQUISITION PERCENT
TITLE OF NAME OF INDIVIDUAL BENEFICIAL WITHIN 60 OF CLASS
CLASS OR PERSONS IN GROUP OWNERSHIP DAYS(8) OWNED(9)
- ------------- -------------------------------------- ---------- ----------- ------------
<C> <S> <C> <C> <C>
Common Stock Salvatore Giordano.................... 12,816 (1) 0 Less than 1%
Sal Giordano, Jr...................... 83,917 (1)(2) 0 3%
Joseph Giordano....................... 47,528 (1) 0 1.7%
William J. Brennan.................... 58,529 (3) 0 2.1%
S. A. Muscarnera...................... 16,250 0 Less than 1%
All directors and executive officers
as a
group................................. 213,102 7.6%
Class A Stock Salvatore Giordano.................... 587,850 (4)(5) 90,000 16.4%
Sal Giordano, Jr...................... 368,988 (4)(6) 90,000 11.1%
Joseph Giordano....................... 141,942 (4) 75,000 5.3%
William J. Brennan.................... 63,373 (3) 22,500 2.1%
S. A. Muscarnera...................... 35,903 22,500 1.4%
C. A. Keen............................ 14,250 22,500 Less than 1%
Kent E. Hansen........................ 25,000 75,000 2.4%
All directors and executive officers
as a
group................................. 1,016,944 397,500 31.8%
Class B Stock Salvatore Giordano.................... 640,352 (7) 0 89.7%
Sal Giordano, Jr...................... 640,352 (7) 0 89.7%
Joseph Giordano....................... 640,352 (7) 0 89.7%
All directors and executive officers
as a
group................................. 640,352 (7) 0 89.7%
Ownership of Common Stock, Class A
Stock and Class B Stock combined,
by all directors and executive
officers
as a group............................ 1,870,248 397,500 28.5%
</TABLE>
- ---------------
(1) The amount shown includes 2,969 shares as to which Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment
power.
(2) The amount shown includes 2,500 shares held of record by Mr. Giordano's wife
and 20,201 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(3) The amount shown includes 250 shares as to which Mr. Brennan shares voting
and investment power.
(4) The amount shown includes 110,256 shares as to which Messrs. Salvatore
Giordano, Joseph Giordano and Sal Giordano, Jr. share voting and investment
power.
(5) The amount shown includes 80,201 shares held of record by Mr. Giordano's
wife in trust for their grandchildren, as to which Mr. Giordano disclaims
beneficial ownership.
29
<PAGE> 38
(6) The amount shown includes 4,991 shares held of record by Mr. Giordano's wife
and 8,610 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(7) The amount shown is held by Giordano Holding Corp. Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano are officers and directors
of such corporation and share voting and investment power over these shares.
(8) The amounts shown are the number of shares held under options exercisable
within 60 days.
(9) The NYCOR Class B Stock is convertible into NYCOR Common Stock at any time
on a share-for-share basis. In the event that the individuals named as
owning NYCOR Class B Stock converted their shares into NYCOR Common Stock
less than 5% of the class would remain outstanding, and pursuant to the
terms of the Certificate of Incorporation of NYCOR, all remaining NYCOR
Class B Stock and all outstanding NYCOR Class A Stock would automatically be
converted into NYCOR Common Stock. In such event, and assuming exercise of
all options, such individuals and the group would beneficially own the
following number of shares constituting the indicated percentage of NYCOR
Common Stock which would then be outstanding: Mr. Salvatore Giordano,
1,241,018 shares (of which 753,577 are shares as to which Mr. Giordano
shares voting and investment power with Messrs. Joseph Giordano and Sal
Giordano, Jr.) constituting 17.4%; Mr. Sal Giordano, Jr., 1,093,257 shares
(of which 753,577 are shares as to which Mr. Giordano shares voting and
investment power with Messrs. Salvatore Giordano and Joseph Giordano)
constituting 15.5%; Mr. Joseph Giordano, 829,822 shares (of which 753,577
are shares as to which Mr. Giordano shares voting and investment power with
Messrs. Salvatore Giordano and Sal Giordano, Jr.) constituting 11.9%; and
all directors and executive officers as a group 1,649,886 shares
constituting 25.7%.
In May 1994, (i) Messrs. Salvatore Giordano and Sal Giordano, Jr. each
purchased 15,000 shares of NYCOR Common Stock and 15,000 shares of NYCOR Class A
Stock, (ii) Mr. Joseph Giordano purchased 7,500 shares of NYCOR Common Stock and
7,500 shares of NYCOR Class A Stock and (iii) Messrs. William J. Brennan and
S.A. Muscarnera each purchased 3,750 shares of NYCOR Common Stock and 3,750
shares of NYCOR Class A Stock. These purchases were through the exercise of
stock options under NYCOR's stock option plans. The exercise price for the NYCOR
Common Stock was $2.50 per share and for the NYCOR Class A Stock was $2.3125 per
share. Other than such purchases in May 1994, none of the Affiliated Directors
has acquired any shares of NYCOR Common Stock or NYCOR Class A Stock since
January 1, 1994.
30
<PAGE> 39
PRINCIPAL STOCKHOLDERS OF NYCOR
The following table sets forth information at April 1, 1996 as to Messrs.
Giordano and December 31, 1995, as to the other stockholders with respect to the
beneficial ownership of NYCOR's voting securities by all persons known by NYCOR
to own more than 5% of NYCOR's outstanding voting securities. Unless otherwise
indicated, the owners listed have sole voting and investment power.
<TABLE>
<CAPTION>
AMOUNT
TITLE OF NAME AND ADDRESS BENEFICIALLY PERCENT
CLASS OF BENEFICIAL OWNER(1) OWNED OF CLASS
- ------------- ------------------------------------------------ ------------ ---------
<S> <C> <C> <C>
Common Stock Heartland Advisors, Inc......................... 524,146 18.9%
790 North Milwaukee Street
Milwaukee, WI 53202
Lindner Investment Series Trust................. 380,432(2) 12.1%
Ryback Management Corporation
7711 Carondelet Ave., Box 16900
St. Louis, MO 63105
Class B Stock Salvatore Giordano.............................. 640,352 89.7%
Joseph Giordano and
Sal Giordano, Jr.
c/o NYCOR, Inc.
287 Childs Road
Basking Ridge, NJ 07920
Dimensional Fund Advisors, Inc.................. 67,515(1) 9.5%
1299 Ocean Avenue 11th Floor
Santa Monica, CA 90901
</TABLE>
- ---------------
(1) The following statement has been provided by Dimensional Fund Advisors,
Inc.: "Dimensional Fund Advisors, Inc. ("Dimensional") a registered
investment advisor, is deemed to have beneficial ownership of 67,515 shares
of NYCOR, Inc., all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional Fund
Advisors, Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares."
(2) Includes 345,432 shares which would be held upon conversion of $1.70
Convertible Exchangeable Preferred Stock.
31
<PAGE> 40
PROPOSAL NO. 1
THE MERGER
GENERAL
Pursuant to the Merger Agreement, NYCOR would be merged with and into
Fedders, with Fedders as the surviving corporation. Upon the effectiveness of
the Merger, each share of Fedders Common Stock, Fedders Class A Stock and
Fedders Class B Stock would remain outstanding and unchanged except to the
extent holders of Fedders Class B Stock exercise dissenters' rights. Upon the
effectiveness of the Merger, stockholders of NYCOR will receive stock of
Fedders. If the Fedders Average Price is at or above $6.25, each share of Common
Stock, Class A Stock and Class B Stock of NYCOR (other than Class B Stock the
holders of which exercise dissenters' rights) will be converted into the right
to receive a number of shares of Fedders Class A Stock determined by dividing
$6.25 by the Fedders Average Price. If the Fedders Average Price is below $6.25,
each share of Common Stock, Class A Stock and Class B Stock of NYCOR (other than
Class B Stock the holders of which exercise dissenters' rights) will be
converted into the right to receive one share of Fedders Convertible Preferred
Stock. While Fedders and NYCOR expect that the terms of the Fedders Convertible
Preferred Stock will support an initial market value of $6.25 per share, there
is currently no market for such stock and there can be no guarantee that Fedders
Convertible Preferred Stock, when issued, will trade at that price or, if it
does, for how long, as matters beyond the control of Fedders and NYCOR may
impact its market value.
Stockholders of Fedders or NYCOR who wish to be advised of the Fedders
Average Price and of the consideration to be paid per share of Common Stock,
Class A Stock and Class B Stock of NYCOR and of the terms of the Fedders
Convertible Preferred Stock, if applicable, upon consummation of the Merger may
obtain such information by calling (800) 733-8481, Ext. 456 during normal
business hours beginning on June 17, 1996 and ending on the date of the Fedders
Annual Meeting and the NYCOR Special Meeting.
REASONS FOR THE MERGER
Fedders is a holding company which, through its wholly owned operating
subsidiaries, is engaged in the manufacture and sale of a complete line of room
air conditioners and dehumidifiers, principally for the residential market.
Based upon industry statistics compiled by a trade association, Fedders believes
it is the largest manufacturer of room air conditioners in North America. In
November 1995, Fedders and Ningbo General Air Conditioner Factory of Ningbo,
China formed a joint venture to manufacture and market ductless split room air
conditioners as well as window type air conditioners.
NYCOR currently comprises two operating companies, Rotorex and Melcor.
Rotorex manufactures rotary compressors principally for use in room air
conditioners. Melcor produces thermoelectric heating and cooling modules used in
a variety of applications in which space and weight are considerations or
precise temperature control is required. Both operations were acquired by NYCOR
in 1992. Rotorex was acquired from Fedders and Melcor was acquired from its
stockholders. In September 1992, Fedders sold Rotorex to NYCOR as part of a
restructuring effort designed to strengthen its balance sheet and lower its
break-even volume by reducing excess capacity and fixed costs. The purchase
price for Rotorex was approximately $72.8 million, including liabilities assumed
by NYCOR in the approximate amount of $11.6 million. As more fully discussed
below, the underlying basis for the Merger is Fedders' desire to ensure a
guaranteed supply of compressors to support its growth in global markets by
acquiring Rotorex.
Rotorex has supplied Fedders' wholly owned subsidiary, Fedders North
America, Inc. ("Fedders NA"), with a substantial portion of its requirements for
rotary compressors for more than 20 years. Currently, Rotorex supplies rotary
compressors to Fedders NA under a ten-year supply agreement effective as of
September 28, 1992 ( the "Supply Agreement"). The provisions of the Supply
Agreement require Fedders NA to purchase 80% of its requirements for rotary
compressors from Rotorex, to a maximum of 800,000 units annually and require
Rotorex to supply such number of rotary compressors if ordered by Fedders NA. In
the last three years, Fedders has increased its sales and market share and
expanded its customer base in North
32
<PAGE> 41
America due, in part, to its ability to meet retailers' delivery requirements,
which is in large part dependent upon Rotorex. Fedders' compressor requirements
already surpass, by more than 600,000 units, what Rotorex is committed to
provide Fedders under the terms of the Supply Agreement. Additionally, it is
expected that the recently completed joint venture in China will require 500,000
compressors annually within three years. These factors, coupled with a worldwide
shortage of compressors, caused Fedders to conclude, upon learning that Rotorex
might be for sale, that it would be important to regain ownership of Rotorex.
Since it was acquired by NYCOR in September 1992, Rotorex has sought to
fulfill its requirements to Fedders NA under the Supply Agreement and, at the
same time, increase its sales in the growing international market. Rotorex's
strategy is to participate in the domestic market through sales to Fedders NA
under the Supply Agreement and to concentrate its efforts to build its customer
base in the growing international markets.
In order to implement its strategy, Rotorex has invested approximately $14
million in its facilities, equipment and engineering capabilities in 1995. These
investments include an automated assembly system, automated gauging, plantwide
air conditioning necessary to maintain tolerances on parts and design
engineering lab facilities. In order to remain competitive in the market for
rotary compressors from a quality and efficiency perspective and to improve its
profitability, it is likely that Rotorex would be required to make additional
investments in the coming years.
NYCOR believes that Rotorex's strategy is sound, but while the Supply
Agreement with Fedders NA provides significant advantages and opportunities to
Rotorex, the fact that, as a result of its obligations under the Supply
Agreement, and despite successfully implementing its strategy in the
international markets, a substantial amount of NYCOR's sales will continue to be
concentrated to one customer. Many lending institutions have policies that make
it difficult for prospective borrowers that have significant concentration of
business with one customer. During the period from its acquisition of Rotorex in
September 1992 to the present, NYCOR has met with numerous lending institutions
in connection with working capital financing and capital projects financing and
on "sales calls" by such institutions. During such meetings and following the
normal credit review process by such institutions, NYCOR was advised by many
potential lenders that the concentration of its sales to one customer would be
an impediment to obtaining approval for financing. In some cases, the lending
institution had a policy of not lending in a situation in which sales
concentration exceeded a certain percentage. In other cases, approval was denied
or burdensome restrictions would have been imposed on NYCOR for approval to be
obtained, due expressly to the sales concentration issue. While NYCOR has been
successful in financing its operations and capital programs to date, and expects
to be able to finance its currently anticipated future requirements, in order
for Rotorex to take advantage of business opportunities that may arise and
respond rapidly to competitive requirements, access to capital will be
important. In addition, in order to participate to the greatest possible extent
in the growing China market, Rotorex may choose to explore joint venture or
other opportunities that would require greater access to capital. Rotorex
recently signed a letter of intent to form a joint venture to manufacture rotary
compressors in Ningbo, China. Based upon these factors, NYCOR believes that the
ability for Rotorex to grow and achieve its full capability will be enhanced as
part of a larger, major participant in the world-wide air conditioner market
such as Fedders.
As a result of considering alternatives available to increase stockholder
value, the NYCOR Board began considering a possible sale of Rotorex. Upon
learning that the NYCOR Board was considering such a transaction, the Fedders
Board communicated to NYCOR its interest in acquiring Rotorex.
In light of Rotorex's contractual obligations to Fedders NA, the NYCOR
Board concluded that Fedders would be the only viable purchaser for Rotorex. The
NYCOR Board believed that, because of the constraints imposed on Rotorex by the
contractual relationship between Rotorex and Fedders NA, it was unlikely that
any other potential purchaser of Rotorex would offer as much for Rotorex as
Fedders would be willing to offer. The NYCOR Board believed that the most likely
potential purchasers for Rotorex would be air conditioner manufacturers or
compressor companies. The NYCOR Board did not believe that competitors of
Fedders would be viable candidates. Many compressor companies are part of a
larger organization that manufactures air conditioners. Nor did the NYCOR Board
believe that a company in an unrelated business would be willing
33
<PAGE> 42
to offer as much as Fedders for Rotorex, since more than half of Rotorex's
capacity was committed to one customer, Fedders, for the next seven years. While
Rotorex still has the capacity to possibly sell a substantial quantity of
compressors to other customers, more than one-half of its total sales would be
to one company. As discussed above, such concentration of sales in one customer
is viewed unfavorably by most lending institutions. As a result of the
foregoing, the NYCOR Board did not solicit bids from any other potential
purchasers and, therefore, could not be certain how much another purchaser may
be willing to pay for Rotorex. Upon receiving a specific offer from the Fedders
Board at a price per share that the NYCOR Board deemed acceptable, the NYCOR
Board accepted the offer to merge NYCOR into Fedders.
NYCOR has agreed not to solicit other Acquisition Proposals (as that term
is defined in the Merger Agreement). Additionally, NYCOR has agreed that if it
terminates the Merger for any reason within its control, other than as permitted
in the Merger Agreement, it will pay to Fedders the sum of $20 million plus all
expenses incurred by Fedders involving the Merger. See "The Merger
Agreement -- Termination."
BACKGROUND OF THE MERGER
At its regular meeting on July 27, 1995, as part of its regular review of
the business and prospects of NYCOR, the NYCOR Board discussed in a general way
options that might be available to enhance stockholder value. It was evident
that, given the structure of NYCOR, with one large subsidiary, Rotorex, no
excess cash and constraints on NYCOR's ability to borrow, the only viable option
was a transaction involving Rotorex. The possibility of a potential sale of
Rotorex was discussed. The NYCOR Board believed that there might not be a better
time to consider such a transaction, in light of the strong market for Rotorex
compressors and the improvements that had been made to the Rotorex facility
during 1995. The NYCOR Board did not discuss or otherwise address the issue of
enhancement of stockholder value until its next regular meeting in October 1995.
At a regular meeting of the Fedders Board on October 24, 1995, the Vice
Chairman of the Fedders Board (who is also the Vice Chairman of the NYCOR Board)
notified the Fedders Board that he was going to recommend to the NYCOR Board at
its upcoming meeting, that Rotorex be sold. Such recommendation was based upon
the discussions at the meeting of the NYCOR Board held in July 1995 to the
effect that a sale of Rotorex could significantly enhance value for its
stockholders. The Fedders Board considered the effect a sale of Rotorex could
have on its supply of compressors, particularly the impact on its ability to
respond quickly to its customers' changing requirements during the air
conditioner season, and concluded that it would be in the best interests of
Fedders and its stockholders to seek to regain control of Rotorex. The Fedders
Board further concluded that the most advantageous structure for a transaction
would be a merger of NYCOR into Fedders.
Fedders' interest in a merger transaction was communicated to the NYCOR
Board at its regular meeting on October 27, 1995. At this meeting, the NYCOR
Board considered the options available to it for enhancing stockholder value and
concluded that a transaction involving the entire company at an acceptable value
would be in the best interests of the NYCOR stockholders. The NYCOR Board
believed that it had only limited options available to it, principally related
to a transaction involving Rotorex. The NYCOR Board also concluded that selling
Rotorex and remaining an independent company with one small operation and the
balance of its assets in cash would not be the most effective method to enhance
stockholder value, as the market would not fully value NYCOR's stock until NYCOR
invested its cash in another business. The NYCOR Board considered a number of
factors in its deliberations regarding a transaction with Fedders including: (i)
capital expenditures made during 1995 at Rotorex, (ii) capital expenditures that
could be required in the next several years, (iii) potential sources of
financing for capital expenditures and offshore production and (iv) the impact
of these and other factors on the rate of growth of Rotorex's business.
On October 30, 1995, the Fedders Board was advised that NYCOR would
consider a transaction for the entire company and was given an indication of the
minimum value at which a transaction might be concluded. This minimum value was
$6.25 per share of NYCOR Common, Class A and Class B Stock. The NYCOR Board
judged the market value of NYCOR, net of the liquidation value of NYCOR
Preferred Stock, to be approximately $65 million. Since a sale of the operating
subsidiaries would leave NYCOR with assets consisting almost entirely of cash,
the NYCOR Board reduced this amount by approximately 25%, which
34
<PAGE> 43
represented the NYCOR Board's judgment as to the discount that the market would
apply to the value of a company with assets comprised totally of cash. The
resultant net value of $48.9 million was divided by the 7.8 million shares
outstanding to yield a per share value of $6.25. The Fedders Board considered a
number of factors in its deliberations in determining how to respond to this
invitation to make an offer, including (i) the importance of assuring its supply
of compressors, (ii) the projected growth of the Fedders business and the
availability of compressors to support that growth and (iii) the values that had
been communicated by the NYCOR Board, particularly the value that had been
expressed as the lowest acceptable price. While the NYCOR Board and the Fedders
Board received and reviewed certain projections concerning the future operations
of Fedders and NYCOR, respectively, such projections were not a material factor
in the determination of either the NYCOR Board or the Fedders Board to approve
the Merger Agreement. As a result of these deliberations, the Fedders Board
determined that it would propose a merger to the NYCOR Board, whereby NYCOR
would be merged into Fedders and each share of NYCOR Common, Class A and Class B
Stock would receive $6.25 in value of Fedders Class A Stock, such value to be
determined at the time of the merger. The Fedders Board did not negotiate the
$6.25 value per share with the NYCOR Board. The proposal was approved
unanimously by the Fedders Board and also, separately, unanimously by the
independent members of the Fedders Board.
The NYCOR Board, having previously arranged to meet on October 30, 1995 in
the event an offer from Fedders was forthcoming, received the offer from the
Fedders Board. Since the offer met the minimum price indicated, the full NYCOR
Board considered and unanimously accepted the proposal. At this point, the NYCOR
Board had not retained a financial advisor as it believed its judgment on the
value of NYCOR was sound. In any event, the terms of the Merger Agreement
provide that NYCOR is not obligated to consummate the Merger until it receives a
fairness opinion that is, in its opinion, satisfactory. The agreement reached in
principle to merge NYCOR into Fedders was subject to negotiation as to specific
terms and conditions, execution of a definitive agreement, and approval of the
stockholders and lenders of both companies as well as any required government
approvals.
After reaching the agreement in principle, representatives of Fedders and
NYCOR commenced negotiation of a definitive agreement. Officers of Fedders and
NYCOR who did not hold positions as officers or directors of the other company
were delegated responsibility to negotiate the terms of the agreement. On
November 16, 1995, the NYCOR Board met to consider a proposal by Fedders to
modify the agreement in principle to provide that if, on the day prior to the
merger, Fedders Class A Stock closed at less than $6.25 per share, NYCOR
stockholders would receive one share of a new Fedders Convertible Preferred
Stock which would be convertible into one share of Fedders Class A Stock and
have terms consistent with a security having a value of $6.25. The new preferred
stock would be listed on the New York Stock Exchange. If Fedders Class A Stock
closed on such date at a price of $6.25 or more, NYCOR stockholders would
receive $6.25 in market value of Fedders Class A Stock for each share of NYCOR
Common, Class A and Class B Stock which they own. The purpose of the proposal
was to limit the number of shares of Fedders Class A Stock which Fedders would
be required to issue in the Merger.
The NYCOR Board discussed the proposal at length without reaching a
decision and agreed to re-convene on November 20, 1995. On November 20, 1995,
the Fedders Board and the NYCOR Board agreed to modify the agreement in
principle with the additional provision that NYCOR receive an opinion from an
investment banking firm that the terms of the new preferred stock were
consistent with a security having an initial market value of $6.25.
As of November 20, 1995, the NYCOR Board had not yet retained a financial
advisor both because it believed its judgment as to the value of NYCOR was
reasonable and because receipt of an opinion of its financial advisor would be a
condition to the obligation of NYCOR to consummate the Merger. NYCOR engaged
Laidlaw as its financial advisor on January 15, 1996, and Fedders engaged TM
Capital Corp. as its financial advisor on January 16, 1996. An opinion from
Laidlaw, NYCOR's financial advisor, was received by NYCOR on March 19, 1996 and
is attached hereto as Annex D.
Representatives of Fedders and NYCOR continued to negotiate the terms of a
definitive agreement and, on November 30, 1995, the parties signed the Merger
Agreement.
On March 15, 1996, the Boards of Directors of Fedders and NYCOR amended the
Merger Agreement to provide that the stock of Fedders to be received by the
stockholders of NYCOR (other than holders of
35
<PAGE> 44
Class B Stock of NYCOR who exercise their dissenters' rights under the DGCL)
upon consummation of the Merger will depend upon the Fedders Average Price.
OPINION OF FINANCIAL ADVISOR TO FEDDERS
On January 31, 1996, TM Capital Corp. ("TM Capital"), Fedders' financial
advisor, delivered its oral opinion, on February 12, 1996 delivered its written
opinion and on March 20, 1996 delivered its substantially identical written
opinion that the consideration to be paid by Fedders in the Merger is fair to
Fedders from a financial point of view. TM Capital's opinion related only to the
consideration to be paid by Fedders in connection with the Merger and does not
constitute a recommendation to any shareholder of Fedders as to how such
shareholder should vote at the Fedders Annual Meeting. The full text of the
written opinion of TM Capital which sets forth the assumptions made, the matters
considered and the limitations of the review undertaken in rendering such
opinion is attached as Annex C to this Proxy Statement-Prospectus and is
incorporated herein by reference.
As set forth in its opinion, TM Capital relied on the accuracy and
completeness of publicly available information and such other information
provided to it regarding Fedders and NYCOR, including the views of management of
Fedders and NYCOR, and has not assumed any responsibility for the independent
verification of such information. TM Capital further relied upon the assurance
of management of Fedders and NYCOR that they were unaware of any facts that
would make such information incomplete or misleading. In arriving at its
opinion, TM Capital did not perform nor obtain any independent evaluation or
appraisal of the assets of Fedders or NYCOR. TM Capital's opinion is necessarily
based on the economic, market and other conditions existing on the date of the
opinion.
In rendering its opinion, TM Capital, among other things, (i) reviewed the
Merger Agreement, (ii) reviewed publicly available information relating to
Fedders and NYCOR, including Fedders' annual reports on Form 10-K and annual
reports to shareholders for the five fiscal years ended August 31, 1995 and
report on Form 10-Q for the quarter ended November 30, 1995, and NYCOR's annual
reports on Form 10-K and annual reports to shareholders for the five fiscal
years ended December 31, 1994 and reports on Form 10-Q for the three quarters
ended September 30, 1995, (iii) discussed with senior management of Fedders and
NYCOR their respective company's historical and current operations, financial
condition and future prospects and reviewed certain internal financial
information, business plans and forecasts prepared by their respective
managements, (iv) visited the headquarters of both Fedders and NYCOR, as well as
the principal manufacturing facility of Rotorex, (v) reviewed the historical
prices and trading volumes of the Common Stock and Class A Stock of Fedders and
NYCOR, (vi) reviewed certain financial and market data for Fedders and NYCOR and
compared such information with similar information for certain publicly traded
companies which TM Capital deemed comparable, (vii) reviewed certain mergers and
acquisitions of businesses which TM Capital deemed comparable, (viii) analyzed
the pro forma contributions of Fedders and NYCOR to the combined business, and
(ix) performed such other analyses and investigations and considered such other
factors as TM Capital deemed appropriate.
In rendering its opinion and making its presentation to the Board of
Directors, TM Capital discussed various financial analyses and certain other
factors it deemed relevant in rendering its opinion. Certain valuation
methodologies and certain other factors considered are summarized below. The
summary set forth below does not purport to be a complete description of the
analyses performed and the assumptions made by TM Capital in reaching its
opinion.
TM Capital considered the financial and stock market performance of a group
of selected publicly traded companies for both Fedders and NYCOR, and reviewed
selected groups of recent transactions involving acquisitions of companies
deemed reasonably comparable to NYCOR. The companies and transactions analyzed
were deemed by TM Capital to be reasonably comparable in certain relevant
respects to Fedders and NYCOR for the purpose of this analysis. However, an
analysis of these results is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
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characteristics of the comparable companies and transactions and other factors
that could affect the valuation of the companies to which they are being
compared.
Analysis of Selected Publicly Traded Comparable Companies. TM Capital
compared selected historical operating financials and financial ratios with
similar data as well as stock market data for a group of selected publicly
traded companies for both Fedders (the "Fedders Public Comparables") and NYCOR
(the "NYCOR Public Comparables"). The NYCOR Public Comparables included: Baldor
Electric Company; Franklin Electric, Inc.; MagneTek, Inc.; Tecumseh Products
Company; and Watsco, Inc. TM Capital considered these companies to be reasonably
similar to NYCOR because they compete in the same general industry.
The Fedders Public Comparables included Duracraft Corporation; Maytag
Corporation; Mestek, Inc.; Whirlpool Corporation; and York International. TM
Capital considered these companies to be reasonably similar to Fedders because
they compete in the same general industry. However, TM Capital noted that both
the Fedders Public Comparables and the NYCOR Public Comparables possess a wide
range of revenues, market values and profitability.
For the NYCOR Public Comparables, TM Capital calculated the multiples of
market capitalization and debt-free market value for a variety of financial
parameters including net sales, earnings before interest expense taxes,
depreciation and amortization ("EBITDA"), operating income, and net income for
the latest twelve months ("LTM") and the three most recent fiscal years, and
book value as of the end of the latest fiscal quarter. The analysis of NYCOR
Public Comparables (excluding certain companies where multiples were not
considered meaningful because the denominator was negative or minimal or where
information regarding that statistic was not available) yielded the following
ranges of debt-free market value multiples of LTM and Historical (defined as the
average of LTM and latest three fiscal years) net sales, EBITDA and operating
income. With respect to debt-free market value multiples to net sales, the range
was from 0.5x to 1.2x for LTM net sales and 0.5x to 1.4x for Historical net
sales; the Merger (in all cases based upon consideration of $6.25 per share)
results in multiples of 1.0x for LTM net sales (within the range) and 1.1x for
Historical net sales (within the range). With respect to debt-free market value
multiples to EBITDA, the range was from 3.3x to 8.5x for LTM EBITDA and 4.1x to
10.8x for Historical EBITDA; the Merger results in 31.3x LTM EBITDA (above the
range) and 13.9x Historical EBITDA (above the range). With respect to debt-free
market value multiples to operating income, the range was from 4.7x to 10.5x for
LTM operating income and 5.6x to 14.2x for Historical operating income; the
Merger results in multiples of operating income that are not meaningful, as a
result of negative operating income for NYCOR (considered above the range). The
analysis of this group of companies yielded a range of market capitalization
multiples of 9.7x to 18.6x for LTM net income and 14.1x to 32.7x for Historical
net income; the Merger results in multiples that are not meaningful, as a result
of negative net income for NYCOR (considered above the range). The analysis of
these companies also resulted in market capitalization multiples of 10.1x to
18.0x for current fiscal year forecast net income and 6.8x to 15.7x for next
fiscal year forecast net income; the Merger results in multiples for current
fiscal year forecast net income that are not meaningful, as a result of negative
forecast net income for NYCOR (considered above the range) and 16.0x for next
fiscal year forecast net income (above the range). The analysis of this group of
companies yielded a range of multiples for book value as of the latest fiscal
quarter of 1.4x to 3.0x; the Merger results in a multiple of 0.9x (below the
range). TM Capital noted that while certain statistics were below or within the
range of comparable multiples, a number of statistics were above the range;
however, TM Capital also noted that management had indicated that historical
results for NYCOR were impacted by manufacturing inefficiencies at Rotorex
related to the operation of a recently installed automated assembly system.
For the Fedders Public Comparables, TM Capital calculated the multiples of
market capitalization and debt-free market value for a variety of financial
parameters including net sales, EBITDA, operating income, and net income for the
LTM and the three most recent fiscal years, and book value as of the end of the
latest fiscal quarter. The analysis of Fedders Public Comparables (excluding
certain companies where multiples were not considered meaningful because the
denominator was negative or minimal or where information regarding that
statistic was not available) yielded the following ranges of debt-free market
value multiples of
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LTM and Historical net sales, EBITDA and operating income. With respect to the
debt-free market value multiple to net sales, the range was from 0.6x to 0.9x
for LTM net sales and 0.6x to 1.3x for Historical net sales; the Fedders
multiple was 0.7x for LTM net sales (within the range) and 0.9x for Historical
net sales (within the range). With respect to debt-free market value multiples
to EBITDA, the range was from 5.0x to 12.5x for LTM EBITDA and from 5.7x to
10.4x for Historical EBITDA; the Fedders multiple was 4.8x for LTM EBITDA (below
the range) and 6.8x for Historical EBITDA (within the range). With respect to
debt-free market value multiples to operating income, the range was from 5.9x to
25.7x for LTM operating income and from 7.6x to 16.3x for Historical operating
income; the Fedders multiple was 5.7x for LTM operating income (below the range)
and 8.8x for Historical operating income (within the range). The analysis of
this group of companies yielded a range of market capitalization multiples of
10.9x to 38.1x for LTM net income and 14.4x to 22.2x for Historical net income;
the Fedders multiple was 7.7x for Fedders Common Stock and 6.4x for Fedders
Class A Stock for LTM net income (both below the range) and 12.2x and 10.2x,
respectively, for Historical net income (both below the range). The analysis of
these companies also resulted in market capitalization multiples of 14.1x to
16.6x for current fiscal year forecast net income and 10.1x to 14.1x for next
fiscal year forecast net income; the Fedders multiples were 8.2x and 6.8x for
Fedders Common Stock and Fedders Class A Stock, respectively, for current fiscal
year forecast (both below the range) and 8.0x and 6.7x for Fedders Common Stock
and Fedders Class A Stock, respectively, for next fiscal year forecast (both
below the range). The analysis of this group of companies yielded a range of
multiples for book value as of the latest fiscal quarter of 1.3x to 3.0x; the
Fedders multiples for book value were 2.9x for Fedders Common Stock (within the
range) and 2.4x for Fedders Class A Stock (within the range). TM Capital noted
that while certain statistics were within the range of comparable multiples, a
number of statistics were below the range; however, TM Capital also noted that
management had indicated that historical results for Fedders benefited from
favorable weather conditions during the historical periods.
Analysis of Selected Acquisitions. TM Capital also reviewed acquisitions
of businesses (the "Merger Comparables") in the electrical components
manufacturing industry over the past three (3) years. TM Capital reviewed recent
transactions involving the purchase of the following businesses: Welbilt
Corporation; Rexnord Corporation; Designatronics, Inc.; Mr. Coffee, Inc.; and
Reliance Electric Corporation. These five (5) transactions were selected by TM
Capital because their products, markets and/or customers are broadly similar to
those of NYCOR.
For the Merger Comparables, TM Capital calculated the multiples of
acquisition price for a variety of financial parameters including net sales,
EBITDA, and operating income for the LTM and the three most recent fiscal years,
and book value as of the end of the latest fiscal quarter. The analysis of
Merger Comparables (excluding certain companies where multiples were not
considered meaningful because the denominator was negative or minimal or where
information regarding that statistic was not available) yielded the following
ranges of acquisition price multiples of LTM and Historical net sales, EBITDA
and operating income. With respect to the acquisition price multiple to net
sales, the range was from 0.6x to 1.5x for LTM net sales and from 0.7x to 1.5x
for Historical net sales; the NYCOR multiple was 1.0x for LTM net sales (within
the range) and 1.1x Historical net sales (within the range). With respect to
acquisition price multiples to EBITDA, the range was from 5.6x to 12.0x for LTM
EBITDA and from 7.7x to 11.3x for Historical EBITDA; the NYCOR multiple was
31.3x for LTM EBITDA (above the range) and 13.9x for Historical EBITDA (above
the range). With respect to acquisition price multiples to operating income, the
range was from 6.7x to 17.8x for LTM operating income and from 10.0x to 15.8x
for Historical operating income; the NYCOR multiple to operating income was not
meaningful in the LTM or the Historical period, as a result of negative
operating income for NYCOR (considered above the range). The analysis of this
group of mergers yielded a range of acquisition price to net income multiples of
9.8x to 38.3x for the LTM period and 18.6x to 51.4x for the Historical period;
the NYCOR multiples were not meaningful for the LTM and Historical periods, as a
result of negative net income for NYCOR (considered above the range). The
analysis of this group of mergers yielded a range of multiples for book value as
of the latest fiscal quarter of 1.4x to 7.5x; the NYCOR multiple for book value
was 3.1x (within the range). TM Capital noted that while certain statistics were
within the range of comparable multiples, a number of statistics were above the
range; however, TM Capital also noted that management had indicated that
historical results for NYCOR were impacted by manufacturing inefficiencies at
Rotorex related to the operation of a recently installed automated assembly
system.
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TM Capital also analyzed the acquisition premiums inherent in the Merger
over the prices at which NYCOR Common Stock had traded prior to the announcement
of the Offer and compared such premiums to those paid in the Merger Comparables.
The Merger Comparables yielded a range of premiums of 23.3% to 56.0% and 20.8%
to 51.2% relative to the target companies' stock prices one day and one month
prior to announcement, respectively; the Merger results in premiums of 194.1%
and 163.2% (both above the range), respectively. TM Capital noted that the price
of NYCOR Common Stock had decreased substantially in the period preceding the
announcement of the Merger and that the multiples paid in an acquisition depend
heavily upon the timing of the acquisition relative to a variety of criteria,
including the trading conditions in the target's common stock and the overall
market, and thus may be considered only on a limited basis.
Stock Trading History. TM Capital examined the historical price and
trading volume of the Common and Class A Shares of Fedders and NYCOR. TM Capital
also compared the share price performance of NYCOR to an index of the NYCOR
Comparables and the S&P 500, and compared the share price performance of Fedders
to an index of the Fedders Comparables and the S&P 500.
Discounted Cash Flow Analysis. TM Capital also analyzed, through the use
of a discounted cash flow analysis, the present value of the future unleveraged
after-tax cash flow streams that NYCOR could produce over a five-year period
ending December 31, 2000, if NYCOR performed in accordance with forecasts and
other information provided by management. After-tax cash flow was calculated by
taking projected operating income, adding depreciation, amortization and other
non-cash items, and then subtracting income taxes, increases in working capital
and capital expenditures. TM Capital estimated the terminal value for NYCOR at
the end of the five-year period by applying a range of multiples to the
terminal-year EBITDA. In performing this analysis, TM Capital utilized discount
rates ranging from 15% to 20% and EBITDA multiples ranging from 5.5x to 6.5x,
which resulted in common equity values for NYCOR ranging from $37.3 million to
$58.9 million; the Merger results in a common equity value of $47.3 million
(within the range).
Pro Forma Contribution Analysis. TM Capital reviewed the pro forma
contributions of certain historical and projected operating information and
certain historical balance sheet information of Fedders and NYCOR to the
combined business as it compared to the pro forma contribution of the market
value of common and the debt-free market value of the proposed Merger. This
review included an analysis of operating data, including net sales, gross
profit, EBITDA, operating income, pre-tax income and net income for the three
fiscal years ended 1995 and the projected fiscal year ending 1996 for both
Fedders and NYCOR. Fiscal year end information reflects Fedders' August 31 year
end and NYCOR's December 31 year end. In fiscal 1993, the operating data pro
forma contributions by NYCOR ranged from 27.2% to 69.7%, with two data points
not meaningful. In fiscal 1994, the operating data pro forma contributions by
NYCOR ranged from 3.5% to 24.5%, with one data point not meaningful. In fiscal
1995, the operating data pro forma contributions by NYCOR ranged from 4.6% to
19.9%, with three data points not meaningful. For the projected fiscal 1996
period, the operating data pro forma contributions by NYCOR ranged from 9.0% to
20.0%. This review also included an analysis of certain balance sheet data,
including cash and equivalents, total assets, total debt, total liabilities,
preferred equity, common equity and total equity which reflect Fedders' November
30, 1995 balance sheet and NYCOR's September 30, 1995 balance sheet. The balance
sheet pro forma contributions by NYCOR ranged from 6.8% to 47.3%. By way of
comparison, TM Capital noted that the pro forma contributions by NYCOR of the
market value of common and the debt-free market value based upon the proposed
Merger were 17.9% and 25.2%, respectively, and that such proportions were
generally within the range of contributions discussed above.
Pro Forma Equity Ownership Analysis. TM Capital performed an analysis of
the Merger which considered various Fedders Class A Stock prices above and below
the $6.25 per share in the proposed Merger, and the resulting relative pro forma
ownership in the combined company. At a Fedders Class A Stock price below $6.25
per share, NYCOR shareholders would receive Fedders Convertible Preferred Stock,
and ownership by existing Fedders common shareholders would be 84.2% of the
combined equity, and ownership by former NYCOR shareholders upon conversion
would be 15.8%. At a Fedders Class A Stock price of $6.25 per share or higher,
NYCOR shareholders would receive Fedders Class A Stock. At a Fedders Class A
Stock price of $6.25 per share, ownership by existing Fedders common
shareholders would be 84.2% of the combined equity, and ownership by former
NYCOR shareholders would be 15.8%; at a Fedders Class A Stock price of
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$7.00 per share, ownership by Fedders common shareholders and NYCOR shareholders
would be 85.6% and 14.4%, respectively; at a Fedders Class A Stock price of
$8.00 per share, ownership by Fedders common shareholders and NYCOR shareholders
would be 87.2% and 12.8%, respectively. TM Capital noted that these ownership
proportions for Fedders were generally within or above the ranges indicated
under "Pro Forma Contribution Analysis."
In reaching its conclusion, TM Capital broadly considered all of the above
discussed analyses and did not assign specific weights to any analysis. TM
Capital did not consider any single analysis as a threshold measurement for
rendering its opinion. Ranges of fairness within each analysis and with respect
to the consideration to be paid in the Merger were not established. In addition,
TM Capital considered other factors, as discussed above, including historical
market and trading volume of Fedders and NYCOR Common Stock and Class A Stock,
past and current business prospects and management's prepared projections. Based
on the foregoing, TM Capital concluded that the consideration to be paid by
Fedders in the proposed Merger was within the fair values indicated by the above
analyses considered in the aggregate, and therefore concluded that the
consideration to be paid by Fedders in the Merger is fair to Fedders from a
financial point of view.
The analysis conducted by TM Capital in arriving at its opinion included
numerous macroeconomic, operating and financial assumptions and involved the
application of complex methodologies and educated judgment. Such analysis
involves complex considerations and judgments concerning differences in
financial operating characteristics of the comparable companies and transactions
and other factors that could affect the valuations of the companies to which
they are being compared. As indicated above, in preparing its opinion, TM
Capital relied on the accuracy and the completeness of all information supplied
or otherwise made available to it by Fedders and NYCOR and assumed, without
independent verification, that financial projections had been reasonably
prepared and reflected the best currently available estimates and judgments of
Fedders' and NYCOR's managements as to the expected future financial performance
of Fedders and NYCOR. TM Capital also made numerous assumptions regarding
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Fedders or NYCOR. Any estimates
incorporated in the analyses performed by TM Capital are not necessarily
indicative of the actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimates of values do
not purport to be appraisals and do not necessarily reflect the prices at which
companies may be sold in the future.
Fedders has paid TM Capital a fee of $90,000 for its opinion. In addition,
Fedders has also agreed to reimburse TM Capital for its reasonable out-of-pocket
expenses, and to indemnify TM Capital against certain liabilities, including
liabilities under federal securities laws. Other than its engagement in
connection with the Merger, there has been no material relationship between TM
Capital and Fedders, the Affiliated Directors or NYCOR during the past two
years.
TM Capital is an investment banking firm engaged on a regular basis to
provide a range of investment banking and financial advisory services, including
the valuation of businesses and their securities in connection with mergers and
acquisitions. Fedders selected TM Capital as its financial advisor on the basis
of the background, experience and reputation of TM Capital.
OPINION OF FINANCIAL ADVISOR TO NYCOR
NYCOR retained Laidlaw and its affiliates as of January 16, 1996 to act as
its financial advisor with respect to NYCOR's proposed Merger with Fedders. On
February 1, 1996, Laidlaw delivered to NYCOR's Board of Directors its written
opinion to the effect that, based upon and subject to certain matters stated
therein, as of such date, the consideration proposed to be paid by Fedders in
the Merger (whether such consideration is in the form of Fedders Class A Stock
or Fedders Convertible Preferred Stock) was fair to NYCOR from a financial point
of view. Laidlaw subsequently confirmed its opinion by delivery of written
opinions dated March 19, 1996 and the date of this Proxy Statement-Prospectus,
to the effect that, based upon and subject to certain matters stated therein, as
of such dates, the consideration proposed to be paid by Fedders in the Merger
was fair to NYCOR from a financial point of view. The text of the written
opinion of Laidlaw dated February 1, 1996 is substantially identical to the text
of the written opinions of Laidlaw dated March 19, 1996 and the date of this
Proxy Statement-Prospectus.
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THE FULL TEXT OF LAIDLAW'S WRITTEN OPINION DATED THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS OF THE REVIEW UNDERTAKEN IN RENDERING SUCH AN OPINION, IS
ATTACHED AS ANNEX D TO THE PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN
BY REFERENCE. NYCOR STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY.
THE SUMMARY OF THE OPINION SET FORTH IN THIS PROXY STATEMENT-PROSPECTUS IS
QUALIFIED BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
Laidlaw's opinion is addressed to NYCOR's Board of Directors and addresses
only the fairness to NYCOR from a financial point of view of the consideration
proposed to be paid by Fedders pursuant to the Merger and does not constitute a
recommendation to any NYCOR stockholder as to how such stockholder should vote
at the NYCOR Special Meeting. The consideration was determined through
negotiations between NYCOR and Fedders and was approved by the Board of
Directors of NYCOR, and Laidlaw did not make a recommendation with respect to
the amount of the consideration. The Laidlaw opinion does not address the
fairness of the transaction from a financial point of view or otherwise to
Fedders or Fedders stockholders and, consequently, does not constitute a
recommendation to any Fedders stockholder as to how such stockholder should vote
at the Fedders Annual Meeting.
For purposes of its opinion, Laidlaw defined the consideration to be paid
for each share of NYCOR Common Stock, Class A Stock or Class B Stock as either
(i) such number of shares of Fedders Class A Stock representing $6.25 if the
Fedders Average Price is equal to or greater than $6.25 per share; or (ii) one
share of newly issued Fedders Convertible Preferred Stock. If issued, each share
of Fedders Convertible Preferred Stock (i) will be convertible into one share of
Fedders Class A Stock; (ii) may be called for redemption by Fedders at any time
at the redemption price of $6.25, plus unpaid dividends to the dividend payment
date next preceding the date of redemption, in cash or in equivalent value of
Fedders Class A Stock; and (iii) shall have such other rights and preferences
expected to support an initial market value of $6.25 per share. Although the
precise terms of the Fedders Convertible Preferred Stock if issued, will not be
set until five business days before the NYCOR Special Meeting, and only if
Fedders Average Price is below $6.25, Laidlaw was informed that it is currently
contemplated that the Fedders Convertible Preferred Stock will have (i) an
annual dividend rate of 2.5%; and (ii) a liquidation preference of $6.25 per
share, plus unpaid dividends to the dividend payment date next preceding such
liquidation (the "Proposed Terms"), and Laidlaw's opinion is based on the
Proposed Terms. In aggregate, the purchase price for the Common Stock, Class A
Stock and Class B Stock of NYCOR is assumed to be $47,275,000. Total transaction
value is assumed to be $70,275,000, including the conversion of NYCOR Preferred
Stock at $20.00 per share into $23,000,000 face amount of NYCOR 8 1/2%
convertible subordinated debentures due 2012.
In arriving at its opinion, Laidlaw (1) reviewed certain publicly available
business and financial information relating to NYCOR and Fedders, (2) reviewed
the Merger Agreement, (3) reviewed certain other information, including
financial forecasts for fiscal 1996 for NYCOR and Fedders, provided by each
company, (4) met with management of both companies to discuss the businesses and
prospects of NYCOR and Fedders, their respective projected performance, the
strategic importance of NYCOR to Fedders, and the benefits expected to be
achieved through the combination of the operations of NYCOR and Fedders, (5)
considered certain financial and stock market data of NYCOR and Fedders and
compared such data with similar data for other publicly held companies in
businesses similar to those of NYCOR and Fedders, (6) considered the financial
terms of certain other business combinations and other transactions which
recently have been effected, and (7) considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which Laidlaw deemed relevant.
In connection with its review, Laidlaw did not assume any responsibility
for independent verification of the foregoing information and relied on its
being complete and accurate in all material respects. With respect to the
financial forecasts, Laidlaw assumed that such forecasts were reasonably
prepared on bases reflecting the best currently available estimates and
judgements of management of NYCOR and Fedders as to the future financial
performance of NYCOR and Fedders. In addition, Laidlaw did not make an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of NYCOR or Fedders, nor was Laidlaw furnished with any such
evaluations or appraisals. Laidlaw's opinion is necessarily based upon
financial, economic, market and other conditions as they existed and could be
evaluated on the date of its
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opinion. Laidlaw does not express any opinion as to the prices at which Fedders
Class A Stock or Fedders Convertible Preferred Stock will trade subsequent to
the Merger.
Laidlaw estimated NYCOR's value using the following methodologies:
Stock Price History. Laidlaw compared the historic weekly closing per
share market price of NYCOR Common Stock and Class A Stock to the price per
share contemplated in the Merger Agreement. During the period beginning January
1, 1995 and ending October 31, 1995, the date of the announcement of the
transaction, NYCOR Common Stock closed at a high of $3.00 on February 24, 1995
and a low of $2.25 on October 27, 1995. The per share purchase price of $6.25
contemplated in the Merger Agreement represents a significant premium over the
trading prices during this period.
Stock Price Premium Analysis. Laidlaw compared the market premium for
NYCOR Common Stock and Class A Stock for 1 day, 1 week and 4 weeks prior to the
announcement of the Merger to stock premiums for other public merger and
acquisitions transactions effected within the last year. The amount offered by
Fedders was a premium of approximately 195%, 178% and 163% over the trading
price of the NYCOR Common Stock and Class A Stock for 1 day, 1 week and 4 weeks
prior to the announcement of the Merger, respectively, compared to an average
premium of 31%, 37% and 45%, respectively, for 20 mergers announced during 1995
involving public companies.
Comparable Trading Valuation. Valuations of publicly traded comparable
companies as multiples of operating results were compared to the market
valuation of NYCOR as a multiple of its operating results. Laidlaw reviewed and
compared certain actual and forecasted financial and operating information of
NYCOR with comparable information for other publicly traded companies in the
refrigeration, heating and cooling industries, including Aaon, Inc.; Fedders
Corporation; Kysor Industrial; Mestek, Inc.; Modine Manufacturing; Tecumseh
Products; and York International. Laidlaw selected these companies based on the
companies' primary line of business, size relative to NYCOR and relative
financial performance, and it calculated recent trading multiples of net
earnings, earnings before interest and taxes ("EBIT") and revenues to equity
value. All forecasted multiples for the comparable companies were based on
information contained in equity research reports. The equity values of the
comparable companies used in the foregoing analyses were based on stock prices
as of January 23, 1996. All financial estimates for NYCOR for the 1996 fiscal
year were based on certain operating and financial forecasts provided by NYCOR
management. Laidlaw determined that the ranges of multiples for the comparable
companies are: (i) LTM (last twelve months results) revenues 0.3x - 0.8x (ii)
LTM EBIT (earnings before interest and taxes) 4.3x - 8.5x (iii) LTM net income
8.1x - 16.6x (iv) 1996 projected net income 8.3x - 13.3x.
The purchase price of $47,275,000 for the common equity and $23,000,000 for
the preferred equity of NYCOR implies an equity value of 0.9x LTM revenues,
above the comparable public companies. Multiples of LTM results for net income
and EBIT for NYCOR are not meaningful due to losses. The purchase price of
$47,275,000 for the common equity of NYCOR implies a purchase price multiple of
16.1x forecast 1996 net income attributable to the common stock of NYCOR,
representing a premium compared to other similar public companies.
Comparable Transaction Valuation. Multiples of operating results to
transaction value for recent transactions of comparable companies were compared
to multiples of NYCOR operating results to the consideration contemplated in the
Merger Agreement. Laidlaw examined recent transactions in the refrigeration, air
conditioning, compressor and pump industries to select a sample of comparable
transactions. Using publicly available information, Laidlaw analyzed purchase
prices and multiples paid in the following transactions: the acquisition of
Imeco by Frick Co.; the acquisition of Revco Scientific by General Signal; the
acquisition of Evcon Holdings by York International; the acquisition of Byron
Valve & Machine by Parker Hannifin; the acquisition of Western Co. of North
America by B.J. Services; the acquisition of Flair Corp. by United Dominion
Industries; the acquisition of Shannon Group by Manitowoc Corp.; and the
proposed acquisition of Crown Anderson by Astec Industries, Laidlaw determined
that the average of multiples for recent transactions involving these eight
companies in the refrigeration, pump and compressor industries are: (i) LTM
revenues 0.9x (ii) LTM EBITDA (earnings before interest, taxes, depreciation and
amortization) 9.7x (iii) LTM EBIT 19.0x (iv) LTM net income 43.2x. In the case
of revenues and EBITDA, the
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consideration offered for NYCOR was equal or greater than the average of the
range of consideration offered in comparable recent transactions. NYCOR did not
have positive EBIT or net income during the last twelve months, and therefore no
comparison could be made for these multiples.
Summary Stand-Alone Discounted Cash Flow. Laidlaw analyzed the ongoing
businesses of NYCOR using discounted cash flow analysis to estimate the
enterprise value of NYCOR for comparison to the value of the proposed
transaction with Fedders. Due to the volatility of air conditioner demand,
neither Fedders nor NYCOR management believes that accurate forecasts of demand
and pricing can be made beyond the period of one year. This volatility of demand
is due in large part to variation in weather; unseasonably hot weather spurs
excess demand for air conditioners while unseasonably cool weather reduces
demand. This climatic variability is offset, to some extent, by recent growth in
sales to markets outside the United States.
To determine the present value of potential future cash flows for NYCOR
without the benefit of long-range management forecasts, Laidlaw used historic
operating results and one-year forecasts provided by the management of NYCOR as
a predictor for future operating results to develop a discounted cash flow
scenario. Therefore, operating assumptions for long term forecasts used by
Laidlaw in its discounted cash flow analysis may not accurately reflect the
operations of NYCOR. Actual results achieved by the combined company may vary
from forecasted results, and the variations may be material.
Laidlaw calculated an equity value for NYCOR based upon the present value
of NYCOR's 10-year stream of forecasted free cash flows and fiscal year 2006
terminal value. The fiscal year 2006 terminal value was calculated as a
perpetuity of the estimated rate of return on invested capital.
In conducting its analysis, Laidlaw relied on certain assumptions relating
to sales growth, operating margins and capital expenditures of NYCOR's
businesses provided by NYCOR management. For the 10-year forecast, Laidlaw
applied a discount rate of 13% to future cash flows. This analysis resulted in a
per share valuation of $5.99 for NYCOR Common Stock and Class A Stock based on
Laidlaw operating assumptions, which may or may not reflect actual future
operations.
Other Considerations. Laidlaw considered employing other methodologies in
its valuation of NYCOR but chose to use only those methodologies listed above
for several reasons. Several unique characteristics of NYCOR render certain
analyses, such as a pro forma projected earnings analysis or leveraged buyout
analysis, less insightful in developing a valuation. These factors include:
- - an extremely high level of sales under a long-term contract with one customer
(Fedders), which increases business risk and reduces the attractiveness of
NYCOR to potential suitors, who might currently compete with Fedders, or to
potential lenders.
- - high volatility of demand for air conditioners due to climatic variations and
seasonality, which might reduce the attractiveness of NYCOR to potential
suitors in other industries.
- - difficulty in obtaining financing for NYCOR operations due to the
concentration and volatility of sales, which would make a leveraged buyout of
NYCOR impractical.
Convertible Preferred Stock. Laidlaw compared the terms and market values
of a sample of ninety-eight publicly-traded convertible preferred stocks with
investment grade credit ratings to the Proposed Terms. The purpose of the
analysis was to determine whether the Proposed Terms could be expected to
support an initial market value of $6.25 per share based on the trading price of
Fedders Class A Stock at the date of the analysis and market valuation of
similar convertible preferred stocks, should the Fedders Preferred Stock be
issued. Laidlaw compared the current trading price, the current dividend yield,
the current conversion premium over common stock, the rating of the issue and
other aspects of each of the ninety-eight convertible preferred stocks to the
Proposed Terms. Based on the analysis described above, Laidlaw believes that the
Proposed Terms for the Fedders Preferred Stock taken as a whole are within the
range of terms for other publicly-traded convertible preferred stocks and could
be expected to support an initial value of $6.25 per share.
Laidlaw believes that its analyses must be considered as a whole and that
selecting portions of its analyses or portions of the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinion. In its analysis, Laidlaw made
numerous
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assumptions with respect to NYCOR and Fedders, industry performance, general
business, regulatory, economic, market and financial condition and other
matters, many of which are beyond the control of NYCOR and Fedders. The
estimates contained in such analyses are not necessarily indicative of actual
values or of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, because such estimates of actual values or future results or values
are inherently subject to substantial uncertainty, Laidlaw assumes no
responsibility for their accuracy.
NYCOR has paid Laidlaw a fee of $85,000 for its opinion. In addition, NYCOR
has also agreed to reimburse Laidlaw for its reasonable out-of-pocket expenses,
and to indemnify Laidlaw against certain liabilities, including liabilities
under federal securities laws. Other than its engagement in connection with the
Merger, there has been no material relationship between Laidlaw and NYCOR, the
Affiliated Directors or Fedders during the past two years nor is any such
relationship mutually understood to be contemplated and any compensation
received or to be received as a result of such relationship.
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement. This summary is qualified in its entirety by reference to the full
text of the Merger Agreement which is attached hereto as Annex A and which is
incorporated herein by reference.
The Merger
Subject to the terms and conditions of the Merger Agreement, at the time
the Company and NYCOR have filed the certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware, or such later
time or date as may be specified in the Certificate of Merger (the "Effective
Time"), NYCOR will be merged with and into the Company, and the separate
existence of NYCOR will cease. The Company will be the surviving corporation in
the Merger and will continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the Company and all of its,
rights and liabilities as a corporation organized under the laws of the State of
Delaware will continue.
The closing of the Merger is to be held at the offices of the Company, in
Liberty Corner, New Jersey, within five business days following the satisfaction
or waiver of the conditions to closing set forth in the Merger Agreement (the
"Closing Date") at 9:00 a.m., Eastern Time, or at any other place and date as
the parties fix by mutual consent.
At the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of NYCOR, all of the shares of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock (collectively, the
"NYCOR Shares") other than NYCOR Shares held by dissenting NYCOR stockholders,
will be converted into, and become exchangeable for, one Fedders Convertible
Preferred Share with dividend and other features reasonably necessary to support
an initial market value of $6.25, if required, unless the Fedders Average Price
is $6.25 or greater, in which case each NYCOR Share (other than any share of
NYCOR Class B Stock the holder of which exercises dissenters' rights) shall be
converted into the right to receive a number of shares of Fedders Class A Stock
determined by dividing $6.25 by the Fedders Average Price and rounding the
quotient to the third decimal place, together with cash in lieu of fractional
shares. The Merger consideration payable to the holders of NYCOR Shares was
determined through discussions and mutual compromise between the Company and
NYCOR.
Exchange of NYCOR Preferred Shares
On or about February 2, 1996, NYCOR gave written notice to the holders of
the NYCOR $1.70 Convertible Exchangeable Preferred Stock the ("NYCOR Preferred
Stock") in accordance with the notice provisions contained in the prospectus for
the NYCOR Preferred Stock, that the NYCOR Preferred Stock would be exchanged for
debt on March 15, 1996 in accordance with the terms of the NYCOR Preferred
Stock. On such date, NYCOR exchanged all of the outstanding NYCOR Preferred
Stock for NYCOR's 8 1/2% Convertible Subordinated Debentures due 2012.
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Exchange Procedure
Within a reasonable time after the Effective Time, Fedders shall furnish to
each of the NYCOR stockholders a letter of transmittal setting forth the
procedure to follow for each of them to surrender their NYCOR Shares, for one or
more stock certificates representing that number of shares of Fedders
Convertible Preferred Stock or Fedders Class A Stock (collectively, the "Fedders
Shares"), together, in the case of the issuance of Fedders Class A Stock, with
cash in lieu of the issuance of fractional shares of Fedders Class A Stock to
which such holder is entitled under the Merger Agreement. The Company will not
pay any dividend or make any distribution on Fedders Shares (with a record date
at or after the Effective Time) to any record holder of outstanding NYCOR Shares
until the holder surrenders for exchange his certificates which represented
NYCOR Shares. In the event that any stock certificate representing NYCOR Shares
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate to be lost, stolen or
destroyed, the Company will issue or cause to be issued in exchange for such
lost, stolen or destroyed certificate the number of Fedders Shares into which
such shares are converted and a check for any fractional shares. The Board of
Directors of the Company may, in its discretion and as a condition precedent to
the issuance of such certificate and check, require the owner of such lost,
stolen or destroyed certificate to give the Company a bond in such sum as it may
direct as indemnity or such other form of indemnity as it shall direct, against
any claims that may be made against the Company with respect to the certificate
alleged to have been lost, stolen or destroyed. No certificates or scrip for
fractional shares of Fedders Class A Stock will be issued but each holder of
NYCOR Shares who would otherwise be entitled to receive a fractional share shall
be entitled to receive, in lieu thereof, cash in an amount equal to such
fraction multiplied by the closing price of Fedders Class A Stock on the NYSE on
the trading day immediately prior to the Closing Date.
Representations and Warranties
The Merger Agreement contains certain representations and warranties to the
Company by NYCOR relating to: (i) NYCOR's due organization, qualification, power
and standing; (ii) the enforceability of the Merger Agreement; (iii) NYCOR's
capital structure; (iv) the absence of conflicts with NYCOR's governing
documents or any governmental regulation or order or any agreement to which it
is subject; (v) the accuracy of NYCOR's financial statements; (vi) the absence
of undisclosed liabilities or material adverse changes in the business or future
prospects of NYCOR since September 30, 1995; (vii) liabilities for taxes; (viii)
liabilities for finders' fees with respect to the Merger; (ix) the existence of
all necessary licenses, certificates and permits to run the business; (x) the
status or absence of pending or threatened litigation; (xi) the status of
material contracts; (xii) the accuracy and completeness of disclosure contained
in this Proxy Statement-Prospectus; and (xiii) the actions of NYCOR to comply
with all federal, state and local environmental laws.
The Merger Agreement contains certain representations and warranties by the
Company to NYCOR relating to: (i) the Company's due organization, qualification,
power and standing; (ii) the Company's capital structure; (iii) the
enforceability of the Merger Agreement; (iv) the absence of conflicts with the
Company's governing documents or any governmental regulation or order or any
agreement to which it is subject; (v) the filing of required reports with the
Commission; (vi) the accuracy of the Company's financial statements; (vii) the
absence of undisclosed liabilities or material adverse changes in the business
or future prospects of the Company since August 31, 1995; (viii) liabilities for
taxes; (ix) liabilities for finders' fees with respect to the Merger; (x) the
status or absence of pending or threatened litigation; (xi) the status of
licenses and regulatory matters; (xii) the status of material contracts; and
(xiii) the accuracy and completeness of disclosure contained in this Proxy
Statement-Prospectus.
Conduct of Business Pending the Merger
NYCOR and the Company have each agreed, among other things, prior to the
consummation of the Merger, to conduct its operations in the ordinary course of
business consistent with past custom and practice in substantially the same
manner as theretofore conducted. Unless the following restrictions are
specifically limited to one party, neither party will: (i) make any change in
its governing documents except that at the
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Fedders Annual Meeting, Fedders may ask Fedders stockholders to approve the
Amendments; (ii) grant any options, warrants or other rights to purchase any of
its capital stock, except for grants of options to employees or directors under
existing stock incentive plans, provided that the Company or NYCOR may not grant
more than an aggregate of 100,000 options; (iii) issue, sell or otherwise
dispose of any of its capital stock, except upon the conversion or exercise of
options, warrants and other rights currently outstanding or granted to employees
or directors as allowed by the Merger Agreement; (iv) declare, set aside or pay
any dividend or distribution with respect to its capital stock (whether in cash
or in kind) or purchase or redeem any of its capital stock, except as required
by the terms of the NYCOR Preferred Stock, Fedders' normal quarterly dividend of
two cents per share to the record date holders of Fedders Common Stock, Fedders
Class A Stock, and Fedders Class B Stock (who receive 90% of the two cent
dividend); (v) issue or guarantee any indebtedness outside the ordinary course
of business, except to refinance existing debt; (vi) impose any security
interest upon any of its assets, outside the ordinary course of business; (vii)
make any capital investment in, make any loan to, or acquire the securities or
assets of any other person outside the ordinary course of business, except that
either party can fund up to $5,000,000 in capital investments or acquisitions
without the written consent of the other party; provided, however, that NYCOR
and Fedders will discuss the terms and conditions of all acquisitions prior to
closing such acquisitions; (viii) NYCOR or its Subsidiaries will not make any
change in employment terms of any of its directors, officers and employees,
except that it may make changes for non-executive employees in the ordinary
course of business; or (ix) merge, consolidate, combine with another party or
agree to be acquired by or to sell all or substantially all of its assets to
another party.
NYCOR and the Company have each agreed to afford the officers and
representatives of the other party, until consummation of the Merger, full
access to their business records and to use their best efforts to consummate the
transactions contemplated by the Merger Agreement.
Indemnification
The Company, as the surviving corporation in the Merger, will observe any
indemnification provisions now existing in the certificate of incorporation or
bylaws of NYCOR, to the extent allowable under Delaware law and the Fedders
Charter, for the benefit of any individual who served as a director or officer
of NYCOR at any time prior to the Effective Time until the statute of
limitations relating thereto has expired.
Conditions to the Consummation of the Merger
The obligations of the Company and/or NYCOR under the Merger Agreement are
subject to satisfaction of the following conditions on or prior to the Closing
Date, unless waived: (i) the Merger Agreement and the Merger shall have received
the requisite NYCOR stockholder approval, the requisite Fedders stockholder
approval, approval of any lenders who require prior approval, and the number of
Dissenting Shares shall not exceed 5% of the number of outstanding NYCOR Class B
and/or Fedders Class B Shares; (ii) the proposal at the Fedders Annual Meeting
to approve the Amendments shall have received the required Fedders stockholder
approval; (iii) there shall be no litigation seeking injunctive or other relief
against any party to the Merger in connection with the Merger and NYCOR shall
have provided information reasonably satisfactory to Fedders concerning its
compliance with environmental regulations; and (iv) all of the material third
party consents required by the Merger Agreement shall have been obtained.
The obligations of the Company under the Merger Agreement are subject to
satisfaction of the following additional conditions on or prior to the Closing
Date, unless waived: (i) the supplemental disclosure schedules to the Merger
Agreement shall reflect that there shall have been no material adverse change
with respect to NYCOR which would render the representations and warranties of
NYCOR untrue or inaccurate in any material respect, and the Company shall have
received from NYCOR a certificate, dated as of the Closing Date, of the
president and chief financial officer of NYCOR, to such effect; (ii) there shall
have been no event, condition or act of God that shall have caused a material
adverse change of NYCOR which would render the representations and warranties of
NYCOR untrue or inaccurate in any material respect; (iii) NYCOR shall have
performed and complied with all of its covenants set forth in the Merger
Agreement in all material respects through the Closing Date; (iv) NYCOR shall
have delivered to the Company a
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certificate to the effect that each of the conditions specified in the Merger
Agreement is satisfied in all respects; (v) the Company shall have received the
Fedders Fairness Opinion and an opinion from its tax advisors, which shall be
reasonably satisfactory to its Board of Directors, that the Merger will be a tax
free transaction as to the Company; (vi) the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act shall have expired; (vii) the
Registration Statement shall have become effective and shall provide for the
legal and valid issuance of the Fedders Shares for the NYCOR Shares, and the
Fedders Shares shall have been accepted for listing on the NYSE; (viii) the
Company shall have received from counsel to NYCOR an opinion addressed to the
Company, and dated as of the Closing Date in form and substance reasonably
acceptable to Fedders; (ix) all actions to be taken by NYCOR in connection with
consummation of the transactions contemplated by the Merger Agreement and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated by the Merger Agreement will be reasonably
satisfactory in form and substance to the Company; (x) NYCOR shall have
exchanged the NYCOR Preferred Shares for debentures in accordance with the
provisions of the Merger Agreement and (xi) nothing shall have occurred to
affect the tax-free status of the Merger.
The obligations of NYCOR under the Merger Agreement are subject to the
satisfaction of the following additional conditions on or prior to the Closing
Date, unless waived: (i) the Registration Statement shall have become effective
under the Securities Act and the Fedders Shares issuable in the Merger shall
have been accepted for listing on the NYSE; (ii) NYCOR shall have received the
NYCOR Fairness Opinion reasonably satisfactory to its Board of Directors,
including an opinion prior to the Closing Date, that the terms of the Fedders
Convertible Preferred Stock will support an initial market value of $6.25; (iii)
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act shall
have expired; (iv) the supplemental disclosure schedules to the Merger Agreement
shall reflect that there shall have been no material adverse change with respect
to the Company which would render the representations and warranties of the
Company untrue or inaccurate in any material respect, and NYCOR shall have
received from the Company a certificate, dated as of the Closing Date, of the
president and chief financial officer of the Company, to such effect; (v) there
shall have been no event, condition or act of God that shall have caused a
material adverse change with respect to the Company which would render the
representations and warranties of the Company untrue or inaccurate in any
material respect; (vi) the Company shall have performed and complied with all of
its covenants set forth in the Merger Agreement in all material respects through
the Closing Date; (vii) the Company shall have delivered to NYCOR a certificate
to the effect that each of the conditions specified in the Merger Agreement is
satisfied in all respects; (viii) NYCOR shall have received from counsel to the
Company an opinion addressed to NYCOR, and dated as of the Closing Date in form
and substance reasonably acceptable to NYCOR; and (ix) all actions to be taken
by the Company in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to NYCOR.
Directors, Officers and Employees
At or prior to the Effective Time, the parties shall take all necessary
action such that, at the Effective Time, the Company's Board of Directors shall
be the directors then serving on the Fedders Board.
The officers of the Company, as the surviving corporation, shall be the
same as the officers of Fedders at and as of the Effective Time.
The employees and directors of NYCOR shall be placed in the same economic
position following the Merger as they were immediately prior to the date of the
execution of the Merger Agreement with respect to stock options, directors fees,
salaries and employee benefits provided by NYCOR.
Amendment of the Merger Agreement
The Merger Agreement may be amended by a written agreement between the
parties, provided that any amendment effected subsequent to stockholder approval
will be subject to the rights of the stockholders of both parties to approve any
such amendment.
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Responses to Other Acquisition Proposals
The Merger Agreement provides that each party to the Merger Agreement and
its respective subsidiaries will not, and will use their best efforts to cause
their respective directors, officers, employees, financial advisors, legal
counsel, accountants and other agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, or take any other action to
facilitate any inquiries or the making of any proposal with respect to, or
except to the extent required in the exercise of the fiduciary duties of its
Board of Directors under applicable law as advised in writing by independent
counsel, engage or participate in negotiations concerning, provide any nonpublic
information or data to or have any discussions with any person other than a
party to the Merger Agreement or their affiliates relating to, any acquisition,
tender offer (including a self-tender offer), exchange offer, merger,
consolidation, acquisition of beneficial ownership of or the right to vote
securities representing 10% or more of the total voting power of such party or
any of its subsidiaries, dissolution, business combination, purchase of all or
any significant portion of the assets or any division of, or any equity interest
in, such party or any subsidiary, or similar transaction other than the Merger.
Each party to the Merger Agreement will promptly notify the other orally and in
writing if any such acquisition proposal (including the terms thereof and
identity of the persons making such proposal) is received, and furnish to the
other party to the Merger Agreement a copy of any written proposal.
Termination of the Merger Agreement
Either of the Company or NYCOR may terminate the Merger Agreement with the
prior authorization of its Board of Directors (whether before or after
stockholder approval): (i) by mutual written consent at any time prior to the
Effective Time; (ii) by giving written notice to the other party at any time
prior to the Effective Time (A) in the event the other party has breached any
material representation, warranty or covenant contained in the Merger Agreement
in any material respect, the non-breaching party has notified the other party of
the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach or (B) if the closing has not occurred on or before
August 31, 1996 unless the failure results primarily from the other party
breaching any representation, warranty or covenant contained in the Merger
Agreement; or (iii) by giving written notice to the other of its intent to do so
at any time after the Fedders Annual Meeting or the NYCOR Special Meeting in the
event the Merger Agreement and the Merger fail to receive the requisite
stockholder approval(s).
Breakup Fee
Other than as permitted by the terms of the Merger Agreement, if the NYCOR
Board terminates the Merger for any reason within its control, then NYCOR must
pay the Company the sum of $20,000,000 plus expenses in cash or by delivery to
the Company of that number of shares of NYCOR Common Stock, and/or NYCOR Class A
Stock and/or NYCOR Class B Stock that would equal $20,000,000, the choice being
solely that of the Company. This termination fee is payable within 30 days of
demand therefor by the Company.
DISSENTING STOCKHOLDERS' RIGHTS
Under the DGCL, the holders of Fedders Common Stock, Fedders Class A Stock,
NYCOR Common Stock and NYCOR Class A Stock do not have dissenters' rights.
Under the DGCL, stockholder's owning shares of the Fedders Class B Stock
are entitled to dissent from the Merger and to receive cash from the Company
equal to the fair value of such stockholder's shares of Fedders capital stock.
The executive officers and directors of Fedders own 99.8% of the outstanding
Fedders Class B Stock, and have indicated their intention to vote in favor of
the Merger, thus reducing the potential population of those who might exercise
appraisal rights to approximately 0.2%. The executive officers and directors of
NYCOR have the same appraisal rights under the DGCL, and own 89.7% of the
outstanding NYCOR Class B Stock. It is expected that NYCOR's executive officers
and directors will vote in favor of the Merger and thus reduce the potential for
the exercise of appraisal rights to the holders of 10.3% of the NYCOR Class B
Stock.
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Pursuant to Section 262 of the DGCL (a copy of which is attached hereto as
Annex E), a holder of Fedders Class B Stock or NYCOR Class B Stock who complies
with the statutory provisions thereof shall be entitled to an appraisal by the
Delaware Court of Chancery of the fair value of his or her capital stock and to
receive payment of such amount in lieu of the consideration provided for in the
Merger Agreement. Such amount may be more or less than the value of the
consideration provided for in the Merger Agreement. Any holder of Fedders Class
B Stock or NYCOR Class B Stock desiring to exercise dissenters' rights of
appraisal should refer to the statute in its entirety and should consult with
legal counsel prior to taking any action to insure that such holder complies
strictly with the applicable statutory provisions.
To exercise dissenter's rights, a holder of Fedders Class B Stock or NYCOR
Class B Stock must:
(i) hold shares of Fedders Class B Stock or NYCOR Class B Stock, as
the case may be, on the date of the making of a demand for appraisal of
such shares and continuously hold such shares through the Effective Time;
(ii) before the taking of the vote on the Merger, deliver to Fedders
or NYCOR, as the case may be, written demand for appraisal of his or her
shares;
(iii) not have voted in favor of the Merger nor consented thereto in
writing pursuant to Section 228 of the DGCL; and
(iv) make a demand to Fedders for appraisal of such shares in writing
within twenty days after the mailing of a notice by Fedders to such holder,
which notice by Fedders shall state the Effective Time, that appraisal
rights are available and be accompanied by a copy of Section 262 of the
DGCL.
Thereafter, within 120 days after the Effective Time, any stockholder who
has met such requirements, or Fedders, may file a petition with the Delaware
Court of Chancery seeking a determination of the value of the stock of all
dissenting stockholders. The Court of Chancery must hold a hearing and determine
the fair value (exclusive of any element of value arising from the Merger),
together with a fair rate of interest to be paid on the fair value. Fedders, as
the surviving corporation, will pay the fair value of the stock held by
dissenting stockholders and the interest determined by the Court.
Notwithstanding the foregoing, at any time within 60 days after the Effective
Time, any stockholder shall have the right to withdraw his demand for appraisal
rights and accept the terms offered in the Merger.
The failure of a holder of Fedders Class B Stock or NYCOR Class B Stock to
vote against the proposal to approve the Merger Agreement and the Merger will
not constitute a waiver of such holder's appraisal rights under the DGCL. A vote
against approval of the Merger Agreement and the Merger will not satisfy the
obligation of a dissenting stockholder to give notice pursuant to Section 262 of
the DGCL.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreement provides that the employees, officers and directors of
NYCOR shall be placed in the same economic position following the Merger as they
were immediately prior to the date of the execution of the Merger Agreement with
respect to stock options, directors fees, salaries and employee benefits
provided by NYCOR. The Merger Agreement does not specify the period during which
such economic position must be maintained. For certain information concerning
compensation and directors fees paid by NYCOR, employment agreements with NYCOR
and options outstanding from NYCOR, reference is made to Item No. 11 in NYCOR's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, a copy
of which is attached hereto as Annex B. Certain persons serve as directors and
executive officers of, and have significant stockholdings in, both Fedders and
NYCOR. For certain information concerning compensation and directors fees paid
by, employment agreements with and options outstanding from Fedders, see
"Proposal No. 2 -- Executive Compensation."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general summary of the material Federal income tax
consequences under the Code of the Merger to Fedders, NYCOR and the stockholders
of Fedders and NYCOR. This discussion does not deal with all the tax
consequences of the Merger that may be relevant to the particular circumstances
of any
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individual NYCOR or Fedders stockholder. This summary is based on certain
provisions of the Code, the final, temporary, and proposed Treasury Regulations
promulgated thereunder (the "Regulations") and administrative and judicial
interpretations thereof, all in effect as of the date hereof and all subject to
change (possibly on a retroactive basis). Legislative, judicial or
administrative actions or interpretations could alter or modify the tax analysis
of the issues set forth below at any time.
Neither Fedders nor NYCOR will seek a private letter ruling from the
Internal Revenue Service (the "IRS") as to the tax consequences of the Merger.
Fedders and NYCOR have received an opinion of Fedders' special tax counsel,
McCarter & English, with respect to certain Federal income tax consequences of
the Merger to Fedders, NYCOR and the stockholders of Fedders and NYCOR. This
opinion, which is referred to herein as the "Tax Opinion," is not binding on the
IRS. In rendering the Tax Opinion, special tax counsel relied on certain
representations made by the principal stockholders of NYCOR and certain
corporate officers of Fedders and NYCOR, including representations that (i) the
fair market value of the shares of Fedders Class A Stock or Fedders Convertible
Preferred Stock, as the case may be, to be received by each stockholder of NYCOR
in connection with the Merger will be approximately equal to the fair market
value of the shares of NYCOR Common Stock, NYCOR Class A Stock and NYCOR Class B
Stock, as the case may be, surrendered in exchange therefor in the Merger, (ii)
there is no plan or intention on the part of the stockholders of NYCOR who own
one percent (1%) or more of the stock of NYCOR, and to the best of the knowledge
of the management of NYCOR, there is no plan or intention on the part of the
remaining stockholders of NYCOR, to sell, exchange, or otherwise dispose of a
number of shares of the Fedders Class A Stock or Fedders Convertible Preferred
Stock to be received in the Merger that would reduce the aggregate value of the
shares of the Fedders Class A Stock or Fedders Convertible Preferred Stock
received by the stockholders of NYCOR in the Merger to less than fifty percent
(50%) of the aggregate value of all of the outstanding shares of NYCOR Common
Stock, NYCOR Class A Stock and NYCOR Class B Stock immediately prior to the
Merger, (iii) no stockholder of NYCOR will directly or indirectly receive from
Fedders any consideration in the Merger in respect of such stockholder's shares
of NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock other than
shares of Fedders Class A Stock or Fedders Convertible Preferred Stock,
excluding payments of cash to NYCOR stockholders in lieu of fractional shares of
Fedders Class A Stock or payments of cash to holders of NYCOR Class B Stock who
exercise dissenters' rights, (iv) Fedders has no plan or intention to reacquire
any of the shares of Fedders Class A Stock or Fedders Convertible Preferred
Stock to be issued to the stockholders of NYCOR pursuant to the Merger and
Fedders is under no contractual obligation and has no contractual right to
acquire any of such shares of Fedders Class A Stock or Fedders Convertible
Preferred Stock from such holders, (v) Fedders intends to continue the historic
business of NYCOR after the Merger in a substantially unchanged manner and has
no plan or intention to dispose of any of NYCOR's assets after the Merger other
than in the ordinary course of business, (vi) the liabilities of NYCOR assumed
by Fedders to which the assets transferred to Fedders in the Merger are subject
were incurred by NYCOR in the ordinary course of business, (vii) the payment of
cash in lieu of fractional shares of Fedders Class A Stock is solely for the
purpose of avoiding the expense and inconvenience to Fedders of issuing
fractional shares and does not represent separately bargained for consideration,
(viii) the total cash consideration that will be paid in the Merger to NYCOR
stockholders in lieu of fractional shares of Fedders Class A Stock will not
exceed one percent (1%) of the aggregate consideration that will be issued to
NYCOR stockholders with respect to their shares of NYCOR Common Stock, NYCOR
Class A Stock and NYCOR Class B Stock surrendered in the Merger, (ix) none of
the compensation for services rendered to be received by any employee of NYCOR
who is also a stockholder of NYCOR is consideration for, or allocable to, such
employee's shares of NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B
Stock exchanged in the Merger, (x) there is no intercorporate indebtedness
existing between NYCOR and Fedders that was issued, acquired or will be settled
at a discount in connection with the Merger, (xi) no two parties to the
transaction are investment companies as defined in Code Section
368(a)(2)(F)(iii), (xii) NYCOR is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Code Section 368 (a)(3)(A),
(xiii) the fair market value of the assets of NYCOR transferred to Fedders will
equal or exceed the sum of NYCOR liabilities assumed by Fedders in the Merger,
plus the amount of liabilities, if any, to which the transferred assets are
subject, and (xiv) the Merger
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is based upon valid business purposes unrelated to the avoidance of Federal
income taxes and will comply in all respects with the laws of the states of
incorporation of Fedders and NYCOR.
The Tax Opinion, rendered by Fedder's tax advisor, McCarter & English, is
limited to only the Federal income tax consequences enumerated below, and is in
the following general form:
1. The Merger will be a reorganization within the meaning of Code
Section 368 (a) (1) (A) of the Code, and Fedders and NYCOR will be parties
to such reorganization within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized for Federal income tax purposes
by NYCOR on the transfer of its assets to Fedders and the assumption by
Fedders of NYCOR's liabilities pursuant to the Merger. Code Section 361(a)
and 357(a).
3. Fedders will recognize no gain or loss for Federal income tax
purposes upon the receipt by Fedders of NYCOR's assets in exchange for
Fedders Class A Stock or Fedders Convertible Preferred Stock, the
assumption by Fedders of the liabilities of NYCOR pursuant to the Merger
and payments by Fedders to stockholders of NYCOR in lieu of issuing
fractional shares of Fedders Class A Stock. Code Section 1032.
4. No gain or loss will be recognized by the stockholders of NYCOR
whose shares of NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B
Stock are converted solely into shares of Fedders Class A Stock or Fedders
Convertible Preferred Stock, as the case may be, in connection with and
pursuant to the Merger. Code Section 354(a). No gain or loss will be
recognized by the stockholders of Fedders as a consequence of the Merger,
with the exception of those holders of Fedders Class B Stock who exercise
dissenters' rights with respect to the Merger and receive cash pursuant
thereto. Whether the cash received by the holders of Fedders Class B Stock
who exercise their dissenters' rights with respect to the Merger is
characterized and taxable as a dividend (ordinary income) or as a payment
in exchange for shares of Fedders Class B Stock (capital gain or loss) will
depend on whether the cash received by such stockholders is treated as part
or full payment for such shares under Code Section 302.
5. The tax basis of the shares of Fedders Class A Stock or Fedders
Convertible Preferred Stock received by the stockholders of NYCOR in the
Merger will be equal, in each instance, to the tax basis of the shares of
NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock, as the case
may be, surrendered by such stockholders in exchange therefor. Code Section
358(a).
6. Fedder's tax basis in the assets of NYCOR received by Fedders in
connection with the Merger will be, in each instance, the same as the
adjusted basis of NYCOR in such assets immediately prior to the Merger.
Code Section 362(b).
7. The holding period of the shares of Fedders Class A Stock or
Fedders Convertible Preferred Stock received by the stockholders of NYCOR
in the Merger will include, in each instance, the period during which the
shares of NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock,
as the case may be, surrendered therefor were held by such stockholders,
provided that, in each instance, the shares of NYCOR Common Stock, NYCOR
Class A Stock or NYCOR Class B Stock, as the case may be, were capital
assets in the hands of the NYCOR stockholders on the effective date of the
Merger. Code Section 1223(1).
8. The holding period of the assets of NYCOR received by Fedders in
the Merger shall include the period during which NYCOR held such assets.
Code Section 1223(2).
9. The NYCOR stockholders receiving cash in lieu of fractional shares
of Fedders Class A Stock will be treated as if such fractional shares had
been issued by Fedders and then subsequently redeemed by Fedders and will
be taxed on any resulting gain in an amount which shall not exceed the
amount of the cash received. Code Section 356(a). Whether the cash received
by NYCOR stockholders in lieu of fractional shares or by the holders of
NYCOR Class B Stock who exercise dissenters' rights is characterized as a
dividend or as a payment in exchange for the shares of NYCOR Common Stock,
NYCOR Class A Stock and/or NYCOR Class B Stock, as the case may be, will
depend on whether the
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<PAGE> 60
distribution of cash to such stockholders, when viewed as part of the
reorganization as a whole and as a redemption by Fedders, and in light of
tax principles analogous to those under Code Section 302(b), more closely
resembles a dividend distribution or a payment in exchange for shares of
NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock, as the case
may be, surrendered in exchange therefor.
A successful IRS challenge to the status of the Merger as a tax-free
reorganization within the meaning of Section 368 of the Code would result in
each NYCOR stockholder recognizing gain or loss with respect to each share of
NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock surrendered in
the Merger equal to the difference between the stockholder's tax basis in such
share and the fair market value, as of the time of the Merger, of the Fedders
Class A Stock or Fedders Convertible Preferred Stock received in exchange
therefor. Even if the Merger qualifies as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, a recipient of Fedders Class A Stock or
Fedders Convertible Preferred Stock may recognize income, gain or loss to the
extent such shares are considered to have been received in exchange for services
or property (i.e., for consideration other than solely shares of NYCOR Common
Stock, NYCOR Class A Stock or NYCOR Class B Stock).
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND DOES NOT SET FORTH ALL THE ASSUMPTIONS, QUALIFICATIONS AND
LIMITATIONS REFERENCED IN THE TAX OPINION. STOCKHOLDERS OF NYCOR SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS REGARDING THE POTENTIAL TAX CONSEQUENCES OF THE
MERGER WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE
APPLICABILITY OF FOREIGN, STATE AND/OR LOCAL LAWS.
ACCOUNTING TREATMENT
The Merger transaction will be accounted for as a purchase.
DIRECTORS OF FEDDERS
For information concerning the directors of Fedders, including nominees for
election at the Fedders Annual Meeting and directors whose terms of office will
continue after the Fedders Annual Meeting, see "Proposal 2 -- Election of
Directors of Fedders."
EXECUTIVE COMPENSATION OF MANAGEMENT OF FEDDERS
For information concerning the compensation of the management of Fedders
for the three fiscal years ended August 31, 1995 and related information, see
"Proposal No. 2. -- Executive Compensation." For a description of Stock Option
Plan VIII of Fedders which will become effective if approved by the stockholders
of Fedders at the Fedders Annual Meeting, see "Proposal No. 4 -- Adoption of
Stock Option Plan VIII of Fedders."
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<PAGE> 61
EXPENSES OF THE MERGER
Set forth below is a summary of expenses incurred or estimated to be
incurred by each of Fedders and NYCOR in connection with the Merger. Except for
the filing fees and the fees of financial advisors, all such amounts are
estimates.
<TABLE>
<CAPTION>
FEDDERS NYCOR
-------- --------
<S> <C> <C>
Filing fees $ 61,336 $ --
Financial advisor fees 90,000 85,000
Legal expenses 80,000 18,000
Accounting expenses 40,000 15,000
Printing costs 47,500 47,500
Solicitation fees 5,000 5,000
Miscellaneous 9,164
-------- --------
$333,000 $170,500
======== ========
</TABLE>
COMPARATIVE STOCK PRICE INFORMATION
The Fedders Common Stock and the Fedders Class A Stock are listed on the
NYSE (symbols: FJC and FJA, respectively). It is a condition to the obligation
of NYCOR to consummate the Merger that the Fedders Convertible Preferred Stock
or Fedders Class A Stock to be issued in the Merger be authorized for listing on
the NYSE upon official notice of issuance. The Fedders Convertible Preferred
Stock will constitute a new series of capital stock of Fedders and there has
been no trading market for such shares. The NYCOR Common Stock and the NYCOR
Class A Stock are included for quotation on the NASDAQ/NMS (symbols: NYCO and
NYCOA, respectively).
The following table sets forth the high and low reported last sale prices
per share of Fedders Common Stock and Fedders Class A Stock as reported on the
NYSE Composite Transactions Tape during the first three fiscal quarters of
Fedders' 1996 fiscal year (through April 9, 1996) and on a quarterly basis for
the two fiscal years ended August 31, 1995 and 1994. If the Fedders Average
Price is less than $6.25, shares of Fedders Convertible Preferred Stock will be
issued in the Merger and the market value thereof per share of NYCOR Common
Stock, NYCOR Class A Stock and NYCOR Class B Stock will depend on market
conditions, although it is expected that the features of the Fedders Convertible
Preferred Stock will be fixed to support an initial market value of $6.25 per
share. There can be no guarantee that the Fedders Convertible Preferred Stock,
when issued, will trade at that price or, if it does, for how long, as matters
beyond the control of Fedders or NYCOR may impact its market value. If the
Fedders Average Price is at or above $6.25, each share of NYCOR Common Stock,
NYCOR Class A Stock and NYCOR Class B Stock will be converted into the right to
receive shares of Fedders Class A Stock determined by dividing $6.25 by the
Fedders Average Price and, in that circumstance, the equivalent price per share
of NYCOR Common Stock, NYCOR Class A Stock and NYCOR Class B Stock would be
$6.25.
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<PAGE> 62
MARKET PRICES
FEDDERS
<TABLE>
<CAPTION>
COMMON CLASS A
---------------- ----------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
FISCAL 1994
First Quarter...................................... 35/16 2 1/2 -- --
Second Quarter..................................... 4 1/8 3 1/8 -- --
Third Quarter...................................... 4 3/4 3 1/2 -- --
Fourth Quarter..................................... 4 3/8 3 1/2 -- --
FISCAL 1995
First Quarter...................................... 6 1/4 3 7/8 4 3/8 3 1/4
Second Quarter..................................... 6 1/8 5 4 3/4 3 5/8
Third Quarter...................................... 6 1/8 5 1/4 4 3/4 4
Fourth Quarter..................................... 7 7/8 5 3/8 5 3/8 4 1/8
FISCAL 1996
First Quarter...................................... 6 3/4 5 1/4 5 3 3/4
Second Quarter..................................... 6 3/4 5 5 5/8 3 7/8
Third Quarter (through April 9, 1996).............. 7 6 6 1/4 5 1/2
</TABLE>
The following table sets forth the high and low last reported sales prices
per share of NYCOR Common Stock and NYCOR Class A Stock as reported on the
NASDAQ/NMS during the first two quarters of 1996 (through April 9, 1996) and on
a quarterly basis for the two years ended December 31, 1995 and 1994.
NYCOR
<TABLE>
<CAPTION>
COMMON CLASS A
---------------- ----------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
1994
First Quarter........................................ 5 1/2 3 7/8 4 3/4 3 1/4
Second Quarter....................................... 4 3/4 3 1/2 4 1/2 3 1/8
Third Quarter........................................ 5 1/8 2 3/4 5 2 1/2
Fourth Quarter....................................... 3 2 1/8 2 7/8 2
1995
First Quarter........................................ 3 1/4 2 5/8 2 7/8 2 1/4
Second Quarter....................................... 215/16 2 3/8 2 3/4 2 3/8
Third Quarter........................................ 3 1/8 2 3/8 3 1/8 2 3/8
Fourth Quarter.......................................
1996
First Quarter........................................ 57/16 4 7/8 5 1/2 4 7/8
Second Quarter (through April 9, 1996)............... 5 1/4 5 1/8 5 1/4 5 1/8
</TABLE>
The Board of Directors of Fedders reinstated its regular quarterly cash
dividend of two cents per share of Fedders Common Stock and Fedders Class A
Stock and 1.8 cents per share of Fedders Class B Stock on June 27, 1995, and
intends to continue paying quarterly dividends at this level. When appropriate,
the Board of Directors of Fedders will also consider extra year-end dividends
commencing December, 1996. NYCOR does not have a current program for the payment
of dividends.
On (i) October 30, 1995, the last business day preceding announcement that
Fedders and NYCOR had reached an agreement in principle to merge, (ii) November
30, 1995, the last business day preceding public announcement of the signing of
the Merger Agreement and (iii) April 9, 1996, a date shortly prior to the
mailing of this Proxy Statement-Prospectus, the closing price per share of
Fedders Class A Stock was $4 3/8, $4 1/8 and $6 1/8, respectively. Based on such
closing prices and the provisions of the Merger Agreement, each share of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock would have been
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<PAGE> 63
converted into one share of Fedders Convertible Preferred Stock. On such dates,
the closing prices per share of NYCOR Common Stock and NYCOR Class A Stock as
reported by NASDAQ/NMS were as follows:
<TABLE>
<CAPTION>
NYCOR COMMON NYCOR CLASS A
------------ -------------
<S> <C> <C>
October 30, 1995..................................... $2 1/8 $ 29/32
November 30, 1995.................................... 4 7/8 4 3/4
April 9, 1996........................................ 5 1/8 5 1/8
</TABLE>
The stockholders of Fedders and of NYCOR are advised to obtain current
market quotations for Fedders Common Stock, Fedders Class A Stock, NYCOR Common
Stock, and NYCOR Class A Stock.
The ratio of earnings to fixed charges of Fedders for the fiscal years
ended August 31, 1995 and 1994 and for the six months ended February 29, 1996
were 12.4, 5.2 and 12.5 respectively. The actual deficiency of earnings versus
fixed charges for the years ended August 31, 1993 and 1992 and the eight months
ended August 31, 1991 were $2,340,000, $24,965,000 and $13,666,000,
respectively. If Fedders Convertible Preferred Stock is issued upon consummation
of the Merger, the ratio of earnings to combined fixed charges and preferred
stock dividends of Fedders on a pro forma basis for the year ended August 31,
1995 and the six months ended February 29, 1996 would have been 5.3 and 2.9,
respectively. For purposes of computing the foregoing pro forma ratios, Fedders
has assumed that the number of shares of Fedders Convertible Preferred Stock
issued in the Merger would equal the aggregate number of shares of Common Stock,
Class A Stock and Class B Stock of NYCOR outstanding.
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<PAGE> 64
DESCRIPTION OF FEDDERS CAPITAL STOCK
The descriptive information supplied herein outlines certain provisions of
the Fedders Charter, the By-Laws of Fedders and the DGCL. The information does
not purport to be complete and is qualified in all respects by reference to the
provisions of the Fedders Charter, the By-Laws of Fedders and of the DGCL.
AUTHORIZED CAPITAL
The authorized capital stock of Fedders currently consists of 102,500,000
shares consisting of 60,000,000 shares of Common Stock, par value $1.00 per
share (i.e., the Fedders Common Stock), 30,000,000 shares of Class A Stock, par
value $1.00 per share (i.e., the Fedders Class A Stock), 7,500,000 shares of
Class B Stock, par value $1.00 per share (i.e., the Fedders Class B Stock), and
5,000,000 shares of Preferred Stock, par value $1.00 per share. At the Fedders
Annual Meeting, the stockholders of Fedders will be asked to approve the
Amendments to the Fedders Charter increasing the authorized number of shares of
Fedders Common Stock, Fedders Class A Stock, and Preferred Stock to 80,000,000,
60,000,000 and 15,000,000, respectively. See "Proposal No. 3 -- Amendments of
Fedders Charter to Increase the Number of Authorized Shares of Fedders Common
Stock, Class A Stock and Preferred Stock". If the stockholders of Fedders do not
approve the Amendments increasing the authorized number of shares of Fedders
Common Stock, Fedders Class A Stock and Preferred Stock of Fedders, Fedders will
have the right to terminate the Merger Agreement.
As of March 29, 1996, 18,989,298 shares of Fedders Common Stock, 19,111,594
shares of Fedders Class A Stock and 2,267,206 shares of Fedders Class B Stock
were issued and outstanding. As of such date none of the Preferred Stock of
Fedders was issued. The Preferred Stock of Fedders is issuable in one or more
series and, with respect to any series, the Board of Directors of Fedders is
authorized to fix the numbers of shares, dividend rates, liquidation prices,
liquidation rights of holders, redemption, conversion and voting rights and
other terms of the series.
FEDDERS CONVERTIBLE PREFERRED STOCK
If Fedders Convertible Preferred Stock is issued upon consummation of the
Merger, the relative rights and preferences thereof will be as described below.
Dividend Rights
Subject to the prior rights of any additional series of Preferred Stock of
Fedders hereafter created, the holders of the shares of Fedders Convertible
Preferred Stock will be entitled to receive, when and as declared by the Board
of Directors of the Company out of funds of the Company legally available for
payment of cash dividends at the annual rate estimated to be $0.156 per share.
Dividends would be payable quarterly in arrears on April 1, July 1, October 1
and January 1 of each year, commencing October 1, 1996, except that if any such
date is not a business day in New York City then such dividend shall be payable
on the next such succeeding business day (each such date on which a dividend is
payable, a "Dividend Payment Date"). Dividends on the Fedders Convertible
Preferred Stock will be cumulative from the date of original issue and will be
payable to holders of record of the Fedders Convertible Preferred Stock as they
appear on the books of the Company on such respective dates as may be fixed by
the Board of Directors of the Company in advance of the payment of each
particular dividend. Accumulations of dividends will not bear interest.
So long as the Fedders Convertible Preferred Stock is outstanding, the
Company may not declare or pay any dividend on Fedders Common Stock, Fedders
Class A Stock or Fedders Class B Stock or other stock ranking junior to or on a
parity with the Fedders Convertible Preferred Stock (other than a dividend
payable in Fedders Common Stock or other junior stock), or acquire Fedders
Common Stock, Fedders Class A Stock or Fedders Class B Stock or any other stock
ranking junior to or on a parity with the Fedders Convertible Preferred Stock
(except by conversion into or exchange for stock of the Company ranking junior
to the Fedders Convertible Preferred Stock), unless the full cumulative
dividends on the Fedders Convertible Preferred Stock have been paid, or
contemporaneously are declared and paid, through the last Dividend Payment Date.
Should dividends not be paid in full on the Fedders Convertible Preferred Stock
and any other preferred stock ranking on a parity as to dividends with the
Fedders Convertible Preferred Stock, all dividends
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<PAGE> 65
declared on the Fedders Convertible Preferred Stock and any other preferred
stock ranking on a parity as to dividends with the Fedders Convertible Preferred
Stock will be declared pro rata, so that the amount of dividends declared per
share on the Fedders Convertible Preferred Stock and such other preferred stock
will bear to each other the same ratio that accumulated dividends per share on
the shares of Fedders Convertible Preferred Stock and such other preferred stock
bear to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Fedders
Convertible Preferred Stock which may be in arrears.
Voting Rights
Except as indicated below or as required by the DGCL, the holders of the
Fedders Convertible Preferred Stock will not be entitled to vote.
If at any time dividends payable on the Convertible Preferred Stock are in
arrears and unpaid in an amount equal to or exceeding the amount of dividends
payable thereon for six quarterly dividend periods, the holders of the
Convertible Preferred Stock, voting separately as a class with the holders of
any other series of Preferred Stock of Fedders so entitled as provided in the
certificate of designation of such series, will have the right to elect two
directors of Fedders, such directors to be in addition to the number of
directors constituting the Fedders Board immediately prior to the accrual of
that right. So long as the Fedders Board is divided into classes, the two
directors of Fedders so elected by the holders of shares of the Convertible
Preferred Stock and of such other series of Preferred Stock of Fedders so
entitled will be elected to the two classes with the longest remaining terms.
Such voting right will continue for the Convertible Preferred Stock until all
dividends accumulated and payable on the Convertible Preferred Stock have been
paid in full, at which time such voting rights of the holders of the Convertible
Preferred Stock will terminate, subject to revesting in the event of a
subsequent similar arrearage. Upon any termination of such voting right with
respect to the Convertible Preferred Stock and any other series of Preferred
Stock of Fedders which may then have such right, subject to the requirements of
the DGCL, the term of office of the directors elected by the holders of the
Preferred Stock of Fedders voting separately as a class will terminate.
The approval of the holders of at least 66 2/3% of the shares of
Convertible Preferred Stock then outstanding will be required to amend, alter or
repeal any of the provisions of the Fedders Charter or the Certificate of
Designation of the Convertible Preferred Stock or to authorize any
reclassification of the Convertible Preferred Stock, in either case so as to
affect adversely the preferences, special rights or powers of the Convertible
Preferred Stock, either directly or indirectly or through a merger or
consolidation with any corporation. A similar 66 2/3% vote is required (a) to
authorize or create any class of stock senior to the authorized class of
Preferred Stock of Fedders as to dividends and distributions upon liquidation;
(b) to create any series of the Preferred Stock of Fedders ranking senior to the
Convertible Preferred Stock as to dividends or distributions upon liquidation;
or (c) to increase the authorized amount of the Preferred Stock of Fedders.
Liquidation Rights
In the event of any dissolution, liquidation or winding up of the affairs
of Fedders, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of Fedders, the holders of the
Fedders Convertible Preferred Stock would be entitled to receive (before any
distribution or payment is made to holders of Fedders Common Stock, Fedders
Class A Stock or Fedders Class B Stock), out of the net assets of Fedders, $6.25
per share, plus an amount equal to all dividends unpaid on shares of such series
to the Dividend Payment Date next preceding the date fixed for distribution, and
no more. After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of Fedders Convertible Preferred
Stock will not be entitled to any further participation in any distribution of
assets by the Company. A consolidation, merger or sale of all or substantially
all of the assets of the Company will not be considered a liquidation,
dissolution or winding-up for this purpose.
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<PAGE> 66
Conversion Rights
The holders of Fedders Convertible Preferred Stock would be entitled at any
time to convert the shares of Fedders Convertible Preferred Stock into Fedders
Class A Stock at the rate of one share of Fedders Class A Stock for each share
of Fedders Convertible Preferred Stock subject to adjustment as set forth below.
No adjustment with respect to dividends on Fedders Convertible Preferred
Stock or any dividend on the Fedders Class A Stock issued upon conversion will
be made upon conversion of shares of Fedders Convertible Preferred Stock. The
registered holder of shares of Fedders Convertible Preferred Stock at the close
of business on a dividend payment record date will be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof subsequent to such record date.
The conversion rate is subject to adjustment upon the occurrence of any of
the following events: the subdivision or combination of outstanding shares of
Fedders Class A Stock; the payment of dividends in shares of Fedders Class A
Stock; the issuance of rights or warrants to holders of Fedders Class A Stock
entitling them to acquire shares of Fedders Class A Stock (or securities
convertible into or exchangeable for such shares) at less than the current
market price per share (as defined) of Fedders Class A Stock; or the
distribution to holders of Fedders Class A Stock of evidences of indebtedness or
securities or assets (excluding cash dividends payable out of consolidated
earnings or retained earnings or dividends payable in shares of Fedders Class A
Stock) or rights or warrants to subscribe for securities of the Company or any
of its subsidiaries (other than those referred to above). In case of any
reclassification or change in the Fedders Class A Stock (other than a change in
par value or a subdivision or combination), any consolidation or merger of the
Company with or into any other corporation (other than a merger in which the
Company is the surviving corporation), or any sale or transfer of substantially
all the assets of the Company, any holder of the Fedders Convertible Preferred
Stock would be entitled, after the occurrence of any such event, to receive on
conversion the consideration which the holder would have received had he
converted immediately prior to the occurrence of the event. No adjustment in the
conversion rate is required unless it would result in at least a 1% increase or
decrease in that rate; however, any adjustment not made is carried forward.
Optional Redemption
The Fedders Convertible Preferred Stock is redeemable in whole or in part,
at the sole option of the Company, at the redemption price of $6.25, plus unpaid
dividends to the Dividend Payment Date next preceding the date of such
redemption, in cash or in equivalent value of Fedders Class A Stock, at any
time. If less than all the outstanding shares of Fedders Convertible Preferred
Stock are to be redeemed, the Company will select those to be redeemed by lot or
by such other equitable method as the Board of Directors may direct.
Notice of redemption will be mailed to each holder of Fedders Convertible
Preferred Stock to be redeemed at the address of such holder shown on the books
of the Company not less than 30 days nor more than 60 days prior to the
redemption date. If the Company provides monies as specified in such notice, on
and after the redemption date, dividends will cease to accumulate on shares of
Fedders Convertible Preferred Stock called for redemption and all rights of the
holders thereof as stockholders of the Company (except the right to receive the
redemption price without interest) will cease.
Listing and Transfer Agent
Application will be made to list the Fedders Convertible Preferred Stock on
the New York Stock Exchange.
Bank of Boston, P.O. Box 644, Boston, Massachusetts 02102-0644, has been
appointed as the transfer agent and registrar for the Fedders Convertible
Preferred Stock.
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<PAGE> 67
FEDDERS COMMON STOCK
Dividend Rights
Subject to the prior rights of the holders of the Fedders Convertible
Preferred Stock and any additional series of Preferred Stock of Fedders
hereafter issued, holders of Fedders Common Stock, Fedders Class A Stock and
Fedders Class B Stock are entitled to receive such dividends and other
distributions in cash, stock or property of Fedders as may be declared thereon
by the Board of Directors of Fedders from time to time out of assets or funds of
Fedders legally available therefor, provided, that in the case of cash
dividends, if at any time a cash dividend is paid on the Fedders Common Stock, a
cash dividend of equal amount must be paid on the Fedders Class A Stock and a
cash dividend must also be paid on the Fedders Class B Stock in an amount per
share of Fedders Class B Stock equal to 90% of the amount of the cash dividend
paid on each share of Fedders Common Stock. In the case of a dividend or other
distribution payable in stock of Fedders other than Preferred Stock of Fedders,
unless the dividend or distribution is solely of shares of Fedders Class A
Stock, in which case a dividend or distribution payable solely in shares of
Fedders Class A Stock may be made with respect to shares of Fedders Common
Stock, Fedders Class A Stock and Fedders Class B Stock, only shares of Fedders
Common Stock may be distributed with respect to Fedders Common Stock, only
shares of Fedders Class A Stock may be distributed with respect to Fedders Class
A Stock and only shares of Fedders Class B Stock may be distributed with respect
to Fedders Class B Stock, in each case, in an amount per share equal to the
amount per share paid with respect to the Fedders Common Stock.
Voting Rights
Each share of Fedders Common Stock is entitled to one vote per share on all
matters submitted to the stockholders of Fedders. In most cases, including the
election of directors, the holders of the Fedders Common Stock vote together
with the holders of Fedders Class B Stock. However, under certain circumstances,
including any amendment to the Fedders Charter, any merger or consolidation of
Fedders, the sale of all or substantially all of the assets of Fedders or the
dissolution of Fedders, the holders of the Fedders Common Stock have the right
to approve such action voting separately as a class.
Liquidation Rights
After payment in full of amounts payable to the holders of the Preferred
Stock of Fedders of all series, the remaining assets and funds of Fedders would
be divided among and paid ratably to the holders of the Fedders Common Stock and
Fedders Class A Stock (including those persons who become holders of Fedders
Common Stock by reason of converting their shares of Fedders Class B Stock).
Listing and Transfer Agent
The Fedders Common Stock is listed on the New York Stock Exchange under the
symbol FJC.
Bank of Boston, P.O. Box 644, Boston, Massachusetts 02102-0644, is the
transfer agent and registrar for the Fedders Common Stock.
FEDDERS CLASS A STOCK
Dividend Rights
For a description of the dividend rights of the holders of Fedders Class A
Stock, see "Fedders Common Stock -- Dividend Rights."
Voting Rights
The holders of Fedders Class A Stock have no voting rights other than as
required under the DGCL. Under the DGCL, the holders of Fedders Class A Stock
would have the right to vote separately as a class on any amendment to the
Fedders Charter if such amendment would increase or decrease the aggregate
number of authorized shares of Fedders Class A Stock, increase or decrease the
par value of Fedders Class A Stock or
59
<PAGE> 68
alter or change the powers, preferences or special rights of the shares of
Fedders Class A Stock so as to affect them adversely.
Liquidation Rights
For a description of the liquidation rights of the holders of Fedders Class
A Stock, see "Fedders Common Stock -- Liquidation Rights."
Change of Control
In the event of a merger or consolidation of Fedders with or into another
entity (whether or not Fedders is the surviving entity), the holders of Fedders
Class A Stock are entitled to receive the same per share consideration in such
merger or consolidation as is received by the holders of Fedders Common Stock,
if any.
Conversion
All outstanding shares of Fedders Class A Stock will be converted into
fully paid and nonassessable shares of Fedders Common Stock, immediately and
without any action on the part of the holders thereof, in the event the Fedders
Class B Stock is converted into Fedders Common Stock in accordance with the
provisions of the Fedders Charter. See, "Fedders Class B Stock -- Conversion."
Listing and Transfer Agent
The Fedders Class A Stock is listed on the New York Stock Exchange under
the symbol FJA.
Bank of Boston, P.O. Box 644, Boston, Massachusetts 02102-0644, is the
transfer agent and registrar for Fedders Class A Stock.
FEDDERS CLASS B STOCK
Voting Rights
Each share of Fedders Class B Stock is entitled to one vote on all matters
submitted to the stockholders of Fedders, provided that each share of Fedders
Class B Stock is entitled to ten votes per share in any election of directors if
more than 15% of the shares of Fedders Common Stock outstanding on the record
date are owned beneficially by a person or group of persons acting in concert
(other than the Board of Directors of Fedders) provided such nomination is not
made by one or more of the holders of Fedders Class B Stock, acting in concert
with each other, who beneficially own more than 15% of the shares of Fedders
Class B Stock outstanding on such record date.
In addition, under the Fedders Charter, the holders of the Fedders Class B
Stock have the right to vote separately as a class on certain matters. These
matters include any amendment to the Fedders Charter, any merger or
consolidation of Fedders, any sale of all or substantially all of the assets of
Fedders, any dissolution of Fedders and any additional issuance of Fedders Class
B Stock (except in connection with stock splits and stock dividends).
Dividend Rights
The dividend rights of the holders of Fedders Class B Stock are described
herein under "Fedders Common Stock -- Dividend Rights."
Liquidation Rights
In the event of any liquidation or winding up of Fedders, the holders of
Fedders Class B Stock are not entitled to receive any distribution; provided,
that, if Fedders Class B Stock is converted into Fedders Common Stock, the
holder of Fedders Common Stock so issued would have the rights described herein
under "Fedders Common Stock -- Liquidation Rights."
60
<PAGE> 69
Restrictions on Transfer
Under the provisions of the Fedders Charter, the ability of a holder of
Fedders Class B Stock to transfer such stock whether by sale, assignment, gift,
bequest, appointment or otherwise, can only be made to a Permitted Transferee
(as defined in the Fedders Charter).
Conversion Rights
Each share of Fedders Class B Stock is convertible at any time by the
holder thereof into one share of Fedders Common Stock, with no payment or
adjustment on account of dividends accrued or in arrears on Fedders Class B
Stock surrendered for conversion or on account of any dividends on Fedders
Common Stock issuable on such conversion. Any conversion of Fedders Class B
Stock is deemed to occur on the date the certificate therefor is surrendered,
and the person or persons entitled to receive Fedders Common Stock issuable upon
conversion of Fedders Class B Stock shall be treated for all purposes as the
record holder of such Fedders Common Stock on such date.
At any time when the number of outstanding shares of Fedders Class B Stock
falls below 5% of the aggregate number of the issued and outstanding shares of
Fedders Common Stock and Fedders Class B Stock, or the Board of Directors of
Fedders and the holders of a majority of the outstanding shares of Fedders Class
B Stock approve the conversion of all of Fedders Class B Stock into Fedders
Common Stock, then, immediately upon the occurrence of either such event, the
outstanding shares of Fedders Class B Stock will be converted into shares of
Fedders Common Stock.
Listing and Transfer Agent
Fedders Class B Stock is not actively traded. Fedders acts as the transfer
agent and registrar for Fedders Class B Stock.
61
<PAGE> 70
CERTAIN DIFFERENCES IN THE RIGHTS OF FEDDERS AND NYCOR STOCKHOLDERS
As corporations organized under Delaware law, both Fedders and NYCOR are
corporations subject to the provisions of the DGCL. Upon consummation of the
Merger, stockholders of NYCOR will become stockholders of Fedders, and their
rights will then be governed by the Fedders Charter and its By-Laws. The
provisions of the Fedders Charter and its By-Laws are substantially the same as
the provisions of the Certificate of Incorporation and By-Laws of NYCOR insofar
as the provisions thereof affect the rights of the stockholders of the
respective corporation.
The most significant differences in the rights of the holders of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock following the Merger
are:
1. The holders of NYCOR Common Stock and NYCOR Class B Stock will have
no voting rights as holders of Fedders Convertible Preferred Stock or
Fedders Class A Stock issued in the Merger or if such holders convert any
Fedders Convertible Preferred Stock issued in the Merger into Fedders Class
A Stock, except for certain rights to elect two additional directors if
dividends on the Fedders Convertible Preferred Stock (if issued) for six
quarterly periods are in arrears, or to vote on certain matters related to
changes in Fedders' capital stock or as such voting rights are otherwise
required by law; and
2. If Fedders Convertible Preferred Stock is issued in the Merger, the
holders will have a preferential right to receive dividends at the annual
rate estimated to be $0.156 per share payable quarterly and will, in the
event of any voluntary or involuntary liquidation of Fedders be entitled to
receive $6.25 plus unpaid dividends to the Dividend Payment Date next
preceding the date fixed for distribution before the holders of Fedders
Common Stock, Fedders Class A Stock and Fedders Class B Stock would be
entitled to receive any distribution.
PROPOSAL NO. 2
ELECTION OF DIRECTORS OF FEDDERS
Stockholders of Fedders may vote for a maximum of three directors at the
Fedders Annual Meeting. The nominees for election as directors are Messrs.
Salvatore Giordano, Howard S. Modlin and William J. Brennan. Messrs. Giordano,
Modlin and Brennan were elected directors at the March 23, 1993 Annual Meeting
and are now serving as such. Set forth opposite the name of each nominee and
each director is his age, principal occupation for the past five years, the name
and principal business of any corporation or other organization in which such
employment is carried on and other business directorships held by the nominee or
director. The Company is not presently aware of any circumstance which would
prevent any nominee from fulfilling his duties as a director of the Company.
62
<PAGE> 71
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AND AGE SINCE
- ---------------------- ----------------------------------------------------------- --------
<S> <C> <C>
NOMINEES -- THREE YEAR TERM
Salvatore Giordano Chairman of the Board of the Company(1)(2); 85 1945
Howard S. Modlin Partner, Weisman, Celler, Spett & Modlin(3); 64 1977
William J. Brennan Financial Consultant(1)(4); 67 1980
DIRECTORS -- TWO YEAR REMAINING TERM
Joseph Giordano President, NYCOR, Inc.(1)(5); 62 1961
Clarence Russel Moll President Emeritus, Widener University(6); 82 1967
Anthony E. Puleo President, Puleo Tree Co.(7); 60 1994
DIRECTORS -- ONE YEAR REMAINING TERM
Sal Giordano, Jr. Vice Chairman, President and Chief Executive Officer of the 1965
Company(1)(2); 57
S. A. Muscarnera Senior Vice President and Secretary of the Company(1)(2); 1982
55
</TABLE>
- ---------------
(1) Messrs. Sal Giordano, Jr. and Joseph Giordano are sons, and Mr. Muscarnera
is the nephew, of Mr. Salvatore Giordano. Messrs. Salvatore Giordano and Sal
Giordano, Jr. are also executive officers and (along with Joseph Giordano,
William J. Brennan and S. A. Muscarnera) directors of NYCOR.
(2) Messrs. Salvatore Giordano, Sal Giordano, Jr. and S.A. Muscarnera, have been
associated in executive capacities with the Company for more than five
years.
(3) Principal occupation during the past five years. The law firm of Weisman,
Celler, Spett & Modlin renders legal services to the Company. Mr. Modlin is
also a director of General DataComm Industries, Inc. and Trans-Lux
Corporation.
(4) Principal occupation during the past five years. Mr. Brennan served as a
director of the Company from 1980 to 1987, and was again elected a director
in 1989. He is also on the board of directors of CSM Environmental Systems,
Inc.
(5) Principal occupation during the past three years. NYCOR is a holding company
currently comprising two operating companies, one manufacturing rotary
compressors and the other thermoelectric heating and cooling modules. Mr.
Giordano was a Senior Vice President of the Company for more than five years
prior to his retirement August 31, 1992.
(6) Principal occupation during the past five years. Dr. Moll is also a director
of Ironworkers' Savings Bank.
(7) Principal occupation during the past two and one half years. Puleo Tree Co.
is an importer of Christmas items and garden furniture. Prior to that Mr.
Puleo was President of Boulderwood Corporation.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During the Fiscal Year, the Board of Directors of the Company held 9
meetings. All of the present directors attended 75% or more of such meetings and
of meetings of committees of which they were members. Directors who are not
employees receive an annual fee of $20,000.
The Board of Directors has an Audit Committee consisting of Messrs.
Clarence Russel Moll, William J. Brennan and Howard S. Modlin. During the Fiscal
Year, this committee held 5 meetings. The Audit Committee reviews the audit
function with the Company's independent auditors. The Chairman and other members
of the Audit Committee receive a fee of $1,000 and $500, respectively, for each
meeting they attend.
The Board of Directors has a Compensation Committee consisting of Messrs.
Howard S. Modlin, William J. Brennan and Anthony E. Puleo. During the Fiscal
Year, this committee held 2 meetings. The Compensation Committee develops
compensation plans for the executive officers of the Company, subject to
approval by the Board of Directors. Members of the Compensation Committee serve
without remuneration.
The Company does not have a nominating committee.
63
<PAGE> 72
EXECUTIVE COMPENSATION
The following information is furnished as to all cash compensation paid by
the Company and its subsidiaries during the Fiscal Year to each of the five
highest paid executive officers of the Company whose aggregate direct
compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------- ------------
(A) (B) (C) (D) (G) (I)
ALL OTHER
FISCAL SALARY BONUS OPTIONS COMPENSATION(1)
NAME AND PRINCIPAL POSITION YEAR $ $ (#) $
- ------------------------------------------- ------ ------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Salvatore Giordano......................... 1993 237,133 -- 120,000 7,114
Chairman of the Board of Directors 1994 252,150 282,045 150,000 15,753
1995 245,354 520,365 77,314 3,097,691(2)
Sal Giordano, Jr........................... 1993 307,800 -- 590,000 9,234
Vice Chairman, President and 1994 335,375 282,045 180,000 17,548
Chief Executive Officer 1995 352,902 520,365 139,066 32,424
Robert L. Laurent , Jr..................... 1993 186,101 -- 85,000 5,583
Executive Vice President-Finance and 1994 209,725 141,023 95,000 8,425
Administration, and Chief Financial 1995 226,489 260,183 50,590 15,281
Officer
S. A. Muscarnera........................... 1993 173,633 -- 120,000 5,209
Senior Vice President and 1994 181,875 141,023 15,000 7,641
Secretary 1995 191,144 260,183 18,750 16,726
Gordon E. Newman........................... 1993 61,990 -- 14,063 1,860
Senior Vice President, 1994 100,016 21,456 -- 3,205
Supply Chain 1995 122,498 48,072 22,782 5,123
</TABLE>
- ---------------
(1) Includes the Company contribution to savings and investment retirement plans
up to the 3% offered to all employees of the Company and in 1995, the dollar
value of the benefit of premiums paid for split-dollar life insurance
policies projected on an actuarial basis, which cost will be recovered by
the Company from the proceeds of such policies (Mr. Sal Giordano, Jr.
$6,226; Mr. Robert L. Laurent, Jr. $681; and Mr. S. A. Muscarnera $3,186).
(2) Includes a special award granted to Mr. Giordano in recognition of over
fifty years of extraordinary and exemplary service to the Company as its
President or Chairman, overseeing the growth of the Company from a
$7,000,000 radiator manufacturer to the leading manufacturer of room air
conditioners in North America.
64
<PAGE> 73
OPTIONS/SAR GRANTS TABLE
The following table sets forth information concerning the grant of stock
options and/or stock appreciation rights (SAR's) during the Fiscal Year to the
individual executive officers named in the Summary Compensation Table.
The table shows the number of options granted to each named executive
officer, the number of options granted as a percentage of options granted to all
employees during the Fiscal Year, the exercise price of each option, the
expiration date for each option, and a presentation of the potential realizable
value for each option assuming annual rates of stock appreciation of 5% and 10%
over each option term.
OPTIONS/SAR GRANTS LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
--------------------------------------------------------- AT ASSUMED ANNUAL
% OF RATES OF STOCK
TOTAL OPTIONS EXERCISE PRICE APPRECIATION
OPTIONS GRANTED TO OR BASE FOR OPTION TERM
GRANTED EMPLOYEES IN PRICE ------------------
NAME (#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
- --------------------------- ------- ------------- ------------- --------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Salvatore Giordano......... 37,500 $3.30 Dec. 31, 1999 $42,478 $ 93,866
39,814 4.50 Aug. 31, 2000 49,499 109,381
-------
77,314 19.2%
Sal Giordano, Jr........... 37,500 3.30 Dec. 31, 1999 34,190 75,551
101,566 4.50 Aug. 31, 2000 126,274 279,032
-------
139,066 34.5%
Robert L. Laurent, Jr...... 25,000 3.30 Dec. 31, 1999 22,793 50,367
25,590 4.50 Aug. 31, 2000 31,815 70,303
-------
50,590 12.6%
S. A. Muscarnera........... 18,750 4.7% 3.30 Dec. 31, 1999 17,095 37,945
Gordon E. Newman........... 22,782 5.7% 4.50 Aug. 31, 2000 28,324 62,589
</TABLE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table sets forth the number of shares exercised during the
Fiscal Year, the value realized upon exercise, the number of unexercised options
at the end of the Fiscal Year, and the value of unexercised in-the-money options
at the end of the Fiscal Year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT OPTIONS
SHARES FY-END(#) AT FY-END($)
ACQUIRED ON VALUE ------------- -------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------------------- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Salvatore Giordano.......................... -- -- 450,000E $ 440,257E
120,000U 54,278U
Sal Giordano, Jr............................ -- -- 459,000E 447,761E
1,076,066U 1,892,024U
Robert L. Laurent, Jr....................... -- -- 300,000E 312,877E
50,590U 36,071U
S. A. Muscarnera............................ -- -- 225,000E 233,246E
18,750U 24,750U
Gordon E. Newman............................ -- -- 14,063E 24,432E
22,782U 2,734U
</TABLE>
65
<PAGE> 74
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of three directors who are not
officers or employees of the Company (Howard S. Modlin, William J. Brennan and
Anthony E. Puleo). The Committee submitted a plan to the Fedders Board for the
Fiscal Year which was approved by the Fedders Board on October 25, 1994.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
In determining the total compensation package for the chief executive
officer and all other executive officers for the Fiscal Year, the Committee
considered several factors including: the performance of the Company; the
individual contribution of each executive officer; the need to attract and
retain highly qualified executives in the air conditioning industry necessary to
build long-term stockholder value; and the need to link a portion of each
executive officer's long-term capital accumulation to the growth in the market
value of the Fedders Common Stock. Executive compensation was broken down into
three major components; (i) cash compensation, (ii) incentive bonuses, and (iii)
stock options.
Cash compensation for the Fiscal Year is shown on the Summary Compensation
Table. For the Fiscal Year, the Committee recommended and the Fedders Board
adopted the same incentive plan used for the Company's executive officers for
the past three fiscal years. The awards under the plan (the "Executive Plan")
are based heavily upon the performance of the Company. In accordance with the
terms of the Executive Plan, the executive officers designated by the Fedders
Board may receive incentive awards based upon a prescribed formula. The amount
of the award ranges from 0.5% to 1.5% of an amount equal to consolidated pre-tax
income of the Company minus $1,000,000 ("Adjusted Pre-Tax Income"). With respect
to the individuals named in the Summary Compensation Table, the following
percentages of Adjusted Pre-Tax Income have been designated: Mr. Salvatore
Giordano, 1.5%; Mr. Sal Giordano, Jr., 1.5%; Mr. Robert L. Laurent, Jr., 0.75%;
and Mr. S. A. Muscarnera, 0.75%. Under the Executive Plan, the following awards
were made for Fiscal Year 1995 performance: Mr. Salvatore Giordano, $520,365,
Mr. Sal Giordano, Jr., $520,365, Mr. Robert L. Laurent, Jr. $260,183, and Mr.
S.A. Muscarnera, $260,183. Mr. Gordon E. Newman, as Vice President, Supply
Chain, qualifies for incentive remuneration under a separate plan. Applying the
formula, Mr. Newman earned an incentive award of $48,072.
Respectfully submitted,
COMPENSATION COMMITTEE
Howard S. Modlin -- Chairman
William J. Brennan
Anthony E. Puleo
EMPLOYMENT CONTRACT
Mr. Salvatore Giordano has an Employment Agreement with the Company, which
became effective on March 23, 1993. The material provisions of the Agreement
include: (1) an annual base salary of at least $238,000, payable in equal
semi-monthly installments; (2) annual participation in all compensatory plans
and arrangements of the Company no less favorable than the fiscal year 1993
plans including, but not limited to, a bonus not less than the amount of the
fiscal year 1993 bonus (none was paid), and continuing eligibility to be awarded
stock options; (3) reimbursement for all expenses incurred while on Company
related business; and (4) annual consideration for base salary and plan
participation increases, if deemed justified by the Company. The Agreement has a
stated expiration date of March 23, 2003, but the term of the Agreement
automatically extends and has a remaining term of ten years from any point in
time, until the term is finally fixed at a period of ten years from an
intervening event, as provided in the Agreement, such as permanent disability or
death. During the Fiscal Year, the Company amortized the estimated present value
of future non-salary benefits payable under the Agreement based upon certain
assumptions, in the amount of $468,000.
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<PAGE> 75
PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
stockholder return on the Company's Common Stock with returns on the New York
Stock Exchange Composite Index, and stocks included in the "Home Appliance"
category by The Value Line Investment Survey.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG FEDDERS CORPORATION, NYSE COMPOSITE INDEX,
AND HOME APPLIANCE STOCKS
ASSUMES $100 INVESTED ON JANUARY 1, 1990 WITH DIVIDENDS REINVESTED.
FISCAL YEARS ENDED AUGUST 31 THEREAFTER.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) FEDDERS CP PEER GROUP BROAD MARKET
<S> <C> <C> <C>
1990 100 100 100
1991 109.81 154.30 121.37
1992 58.69 151.07 130.74
1993 81.41 232.34 152.29
1994 115.49 222.93 162.42
1995 159.79 239.32 185.07
</TABLE>
PROPOSAL NO. 3
AMENDMENTS OF FEDDERS' CHARTER TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF FEDDERS COMMON STOCK, CLASS A STOCK, AND PREFERRED STOCK
Subject to the approval of the stockholders of Fedders, the Fedders Board
has unanimously adopted the Amendments to the Fedders Charter which will (a)
increase the number of the authorized shares of Fedders Common Stock from
60,000,000 to 80,000,000; (b) increase the number of the authorized shares of
Fedders Class A Stock from 30,000,000 to 60,000,000; and (c) increase the number
of the authorized shares of the Preferred Stock of the Company from 5,000,000 to
15,000,000. The authorized number of shares of Fedders Class B Stock will remain
at 7,500,000. Thus, the total number of shares of all classes of capital stock
which the Company is authorized to issue will be increased from 102,500,000 to
162,500,000. The Fedders Board approved the Amendments on October 30, 1995 and
November 20, 1995.
The Amendments are necessary to (i) provide additional shares of Fedders
Class A Stock for use with the proposed Stock Option Plan VIII, (ii) provide
additional shares of Fedders Class A Stock and Preferred Stock for the
conversion of the NYCOR Shares to take place as of the Effective Time of the
Merger, and (iii) provide additional shares of Fedders Common Stock to be
available upon conversion of the Fedders Class A Stock and/or Fedders Class B
Stock under limited circumstances, as provided in the Fedders Charter.
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<PAGE> 76
The proposed increase in the number of authorized shares of Fedders Class A
Stock by 30,000,000 shares is needed to have an adequate supply of Fedders Class
A Stock available to issue to holders of the Common Stock, Class A Stock and
Class B Stock of NYCOR upon consummation of the Merger if the Fedders Average
Price is at or above $6.25, to issue upon conversion of the Fedders Convertible
Preferred Stock which would be issued upon consummation of the Merger if the
Fedders Average Price is less than $6.25, and to optionees upon exercise of
options which might be granted under the Fedders Stock Option Plan VIII if such
Plan is approved. The proposed increase in the number of authorized shares of
the Preferred Stock of Fedders by 10,000,000 shares is needed to be able to
issue a new series of Preferred Stock (the Fedders Convertible Preferred Stock)
to holders of the Common Stock, Class A Stock and Class B Stock of NYCOR upon
approval of the Merger, if the Fedders Average Price is below $6.25. Finally,
the proposed increase in the number of authorized shares of Fedders Common Stock
by 20,000,000 shares is needed to assure an adequate reserve of Fedders Common
Stock in the event the shares of Fedders Class A Stock issued in the Merger or
issued upon conversion of Fedders Convertible Preferred Stock issued in the
Merger or upon exercise of options which might be granted under the Fedders
Stock Option Plan VIII are converted into Fedders Common Stock as provided in
the Fedders Charter.
The Fedders Board would be authorized to provide for the issue from time to
time of the authorized but unissued shares of the Preferred Stock of Fedders,
Fedders Common Stock and Fedders Class A Stock without further stockholder
approval. The Fedders Board would continue to have the right to fix the relative
rights and preferences, including voting, dividend and liquidation rights, of
any additional series of Preferred Stock of Fedders created after approval of
the Amendments and the filing of an amendment to the Fedders Charter with the
Secretary of State of Delaware. Such uses might include additional stock option
plans, dividends, acquisitions, financing, and other general corporate purposes.
The relative rights and preferences of the Fedders Common Stock, Fedders
Class A Stock, Fedders Class B Stock and the Fedders Convertible Preferred Stock
which might be issued upon consummation of the Merger, as well as the
circumstances under which additional shares of Fedders Common Stock would be
issued upon conversion of the Fedders Class A Stock following the conversion of
the Fedders Class B Stock, are described herein under "Proposal No.
1 -- Description of Fedders Capital Stock." Other than the shares of Fedders
Convertible Preferred Stock or Fedders Class A Stock to be issued in the Merger,
the conversion of any Fedders Convertible Preferred Stock into Fedders Class A
Stock and the exercise of outstanding options or options which may be granted
under Fedders' Stock Option Plan VIII described herein under "Proposal No.
4 -- Approval of Fedders' Stock Option Plan VIII," the Fedders Board does not
have any current intention of issuing additional shares of capital stock. If the
Amendments are approved, the Fedders Board would have the authority to authorize
the issuance of the additional shares of Fedders Common Stock, Fedders Class A
Stock and Preferred Stock of Fedders without the approval of the stockholders of
Fedders.
The issuance of additional shares of either Fedders Convertible Preferred
Stock or Fedders Class A Stock, would, if converted to Fedders Common Stock
dilute the voting power of existing holders of Fedders Common Stock. The
additional shares could also dilute earnings per share of existing Fedders
Common Stock and Fedders Class A Stock if NYCOR's operations do not contribute
sufficient earnings to offset the dividends on the Fedders Convertible Preferred
Stock, if issued, or the increase in the number of shares of Fedders Class A
Stock outstanding.
If the Amendments are not authorized, Fedders will not have sufficient
authorized but unissued and unreserved shares of capital stock to consummate the
Merger. If the stockholders approve the adoption of the Amendments to the
Fedders Charter, the Company will file a certificate with the Secretary of State
of the State of Delaware as soon as reasonably practicable after the Fedders
Annual Meeting reflecting the changes resulting from the Amendments, such
changes to become effective on the filing thereof.
68
<PAGE> 77
PROPOSAL NO. 4
APPROVAL OF FEDDERS' STOCK OPTION PLAN VIII
On October 24, 1995, the Fedders Board adopted the Fedders Stock Option
Plan VIII (the "Plan") and directed that adoption of the Plan be submitted for
approval of the Company's stockholders at the Fedders Annual Meeting. The Plan
is intended as a means of rewarding outstanding performance and to enable the
Company to maintain a competitive position in attracting and retaining key
personnel necessary for growth and profitability. Under the Plan, the Fedders
Board may grant options to key employees, other eligible employees, non-employee
directors, consultants, and employees of companies with which the Company has
entered or enters into a joint venture or similar business relationship
(collectively, the "Optionees"), who contribute and are expected to contribute
materially to the success of the Company. The Fedders Board may also grant
options to purchase a limited number of shares to all other employees of the
Company. The Fedders Board recommends that the stockholders approve the adoption
of Stock Option Plan VIII, in order that this broad-based incentive program can
continue.
SUMMARY OF PLAN
The basic provisions of the Plan are described below. This description is
qualified in its entirety by reference to the full text of the Plan, which is
set forth in Annex F attached hereto.
1. 5,000,000 shares of Fedders Common Stock, and 5,000,000 shares of
Fedders Class A Stock, are to be reserved for issuance under the Plan.
Notwithstanding the duplicate reservation of shares, the total aggregate number
of shares available under the Plan is 5,000,000 which may be issued as either
Fedders Common Stock or Fedders Class A Stock at the discretion of the Fedders
Board. The number of shares reserved is subject to adjustment by reason of
certain specified changes in the capitalization of the Company. As of December
31, 1995, the fair market value of 5,000,000 shares of Fedders Common Stock was
$28,750,000, and the fair market value of 5,000,000 shares of Fedders Class A
Stock was $21,250,000. As noted above, no more than 5,000,000 shares may be
issued upon exercise of options granted under the Plan.
2. Both non-qualified options and "incentive stock options" as defined in
Section 422A of the Code, may be granted under the Plan. Incentive stock options
may be granted only to employees, while non-qualified stock options may be
granted to all Optionees. The Plan shall be administered by the Fedders Board,
who shall select the Optionees to be granted stock options, the appropriate type
of option to be granted (incentive or non-qualified), the class of the Company's
stock in which the option will be granted, and the number of shares covered by
each option.
3. The granting of an option under the Plan shall take place whenever the
Fedders Board shall make such grant and designate the person to receive the
option. Each option shall be evidenced by the execution of the Company's
standard "Stock Option Contract," as amended by the Fedders Board from
time-to-time.
4. The Plan shall terminate on October 24, 2005, and no option shall be
granted under the Plan after that date.
5. The option price at which options may be granted shall not be less than
the fair market value of the Fedders Common Stock or Fedders Class A Stock, as
applicable, on the date the option is granted, except that if the Optionee would
own more than 10% of the outstanding shares of voting stock if the option were
to be exercised on the date of grant, the exercise price of such option which is
an incentive stock option shall be not less than 110% of the market price for
such shares on the date of grant.
6. The term of each option shall be for a period not exceeding ten years
from the date of grant thereof (but only five years if the Optionee owns more
than 10% of the voting power).
7. Except as expressly provided in the Plan, which includes the right to
grant options to non-employee directors, consultants and employees of companies
with which the Company has entered or enters into a joint venture or similar
business relationship, no option granted under the Plan may be exercised during
the life of the Optionee unless the Optionee remains in the continuous employ of
the Company or one of its subsidiaries from the date of grant to the date of
exercise. The options shall be exercisable in whole or in part from time to
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time during the term thereof as may be determined by the Fedders Board and
stated in the option; provided, however, that unless otherwise provided by the
Fedders Board, no option may be exercised prior to the first anniversary of the
date of the grant of such option.
8. Payment for shares purchased must be made in full in cash or by the
surrender of previously owned shares of Fedders Common Stock or Fedders Class A
Stock, as applicable, valued at the market price for such shares at the time of
exercise of the option under the Plan.
9. The Fedders Board may grant stock appreciation rights to Optionees,
subject to terms set by the Fedders Board. Each right will relate to a specific
option granted under the Plan and may be granted simultaneously with or
subsequent to the grant of the option. A right will entitle the recipient
thereof to elect to receive, as an alternative to exercising a related option
and without payment of cash to the Company, that number of shares of Fedders
Common Stock, or Fedders Class A Stock, as applicable, having an aggregate fair
market value which is equal to the difference between the aggregate fair market
value of the shares of Fedders Common Stock or Fedders Class A Stock, as
applicable, subject to the related option on the exercise date and on the date,
as determined by the Fedders Board, that the related option or right was granted
to the Optionee. In lieu of paying any such right totally in shares of Fedders
Common Stock or Fedders Class A Stock, as applicable, the Fedders Board may
elect to pay the right totally in cash or partly in cash and partly in shares of
Fedders Common Stock or Fedders Class A Stock, as applicable. A right may be
exercisable only during the period the related option is exercisable. The number
of shares that may be purchased pursuant to an exercise of a related option will
be reduced to the extent such shares are used in calculating the number of
shares or cash to be received pursuant to an exercise of a related right. In
addition, each share subject to the related option may be used only once to
calculate the number of shares or cash to be received pursuant to exercise of a
right. No options or stock appreciation rights have been granted under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of stock options under present law are
generally as follows:
Incentive Stock Options
The Optionee will recognize no income, for regular income tax purposes,
upon either the grant or the exercise of an incentive stock option, and the
Company will not be allowed a deduction for federal income tax purposes upon
either the grant or the exercise of an incentive stock option. Although the
Optionee will not recognize income, for regular income tax purposes, upon the
exercise of an incentive stock option, the amount by which the fair market value
of the shares on the date of exercise exceeds the option price will be an item
of tax preference for purposes of the alternative minimum tax. If the Optionee
holds the shares acquired upon exercise of an incentive stock option for at
least two years from the date the option was granted and for at least one year
from the date the shares were transferred to the Optionee, any gain or loss
recognized upon a subsequent sale of the shares will, for regular income tax
purposes, constitute capital gain or loss. The amount of the capital gain or
loss will be the difference between the sales proceeds and the option price. If
the Optionee sells the shares acquired upon exercise of an incentive stock
option before satisfying the applicable two-year and one-year periods, special
rules apply. For example, if the shares have not changed in value after the date
of exercise and if the Optionee is not subject to the requirements of Section
16(b) of the Exchange Act, the Optionee will, in the year of the sale, recognize
additional compensation equal to the difference between the fair market value of
the shares on the date of exercise and the exercise price. The Company will be
entitled to a deduction for federal income tax purposes at the same time that
the Optionee recognizes this additional compensation and in the same amount.
Non-Qualified Stock Options
With respect to options which do not qualify as incentive stock options,
the Optionee will recognize no income upon the grant of the option and, upon
exercise, will recognize additional compensation equal to the difference between
the option price and the fair market value of the shares on the date of
exercise. The Company will be entitled to a deduction for federal income tax
purposes at the same time and for the same
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amount which the Optionee is required to recognize as additional compensation.
Upon a subsequent disposition of the shares received under the option, the
Optionee will recognize capital gain or loss, as the case may be, equal to the
difference between the fair market value of the shares at the time of exercise
and the amount realized on the disposition. Special rules apply if the Optionee
is subject to the requirements of Section 16(b) of the Exchange Act.
Stock Appreciation Rights
The Optionee will recognize additional compensation upon the exercise of a
stock appreciation right in an amount equal to the cash received or the fair
market value of the shares received on the exercise date. Special rules apply if
the Optionee is subject to the requirements of Section 16(b) of the Exchange
Act.
ELIGIBLE EMPLOYEES AND NON-EMPLOYEES
Approximately 85 employees and three non-employee directors have been
granted options under similar prior option plans. Approximately 1,200 employees
may be granted options to purchase a limited number of shares under the Plan. In
addition, non-employee consultants and employees of companies with which the
Company has entered or enters into joint venture or similar business
relationships, are also eligible to receive options under the Plan.
The Fedders Board unanimously recommends the approval of the Plan.
PROPOSAL NO. 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS OF FEDDERS
Pursuant to the recommendations of its Audit Committee, the Board of
Directors of Fedders selected the firm of Ernst & Young, LLP ("E&Y") independent
auditors, to audit the consolidated financial statements of the Company for the
year ended August 31, 1995. The Company's stockholders ratified that selection
at their Annual Meeting on December 20, 1994. On May 23, 1995, the Company
dismissed E&Y as its independent auditors. The reports of E&Y on the Company's
financial statements for the years ended August 31, 1994 and 1993 did not
contain an adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principle. The Fedders
Board approved the decision to change independent auditors upon the
recommendation of the Company's Audit Committee. During the last two fiscal
years, the Company has not had any disagreement with E&Y on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure that would require disclosure in this Proxy
Statement-Prospectus. There have been no reportable events (as defined in
Regulation S-K Item 304(a) (1) (v)). At the Company's request, E&Y furnished a
letter addressed to the Commission as required by Item 304 (a) of Regulation
S-K. A copy of such letter was attached to the Company's report to the
Commission on Form 8-K, dated May 24, 1995 and incorporated herein in its
entirety by reference.
The Company has engaged BDO Seidman, LLP ("BDO") as its new independent
auditors as of May 23, 1995. Prior to this engagement, BDO performed audits on
the Company's pension plans for the plan years ended October 31 and December 31,
1993. In 1995, BDO provided various services for the Company's foreign
subsidiaries, Fedders de Mexico S.A. de C.V. and Fedders Asia Pte. Ltd. BDO has
been assisting the Company with work related to prospective foreign investments.
On recommendation of the Audit Committee, the Board of Directors appointed
the firm of BDO, independent auditors, to audit the consolidated financial
statements of the Company and its subsidiaries for the fiscal year ending August
31, 1996, subject to ratification by the Company's stockholders at the Fedders
Annual Meeting. BDO does not have any direct financial interest in the Company.
Representatives of BDO are expected to be at the Fedders Annual Meeting and
will be available to respond to any appropriate questions by stockholders and
may make a statement, if they so choose.
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RESALE OF FEDDERS CONVERTIBLE PREFERRED STOCK OR FEDDERS CLASS A STOCK
The shares of Fedders Convertible Preferred Stock or Fedders Class A Stock
to be issued upon consummation of the Merger have been registered under the
Securities Act, thereby allowing such shares to be traded freely and without
restriction by those holders of NYCOR Common Stock, NYCOR Class A Stock or NYCOR
Class B Stock who receive such shares following consummation of the Merger and
who are not deemed to be "affiliates" (as defined under the Securities Act, but
generally including directors, certain executive officers and ten percent or
more stockholders) of NYCOR or Fedders. Each holder of NYCOR Common Stock, NYCOR
Class A Stock or NYCOR Class B Stock who is deemed by NYCOR to be an affiliate
will not transfer any Fedders Convertible Preferred Stock or Fedders Class A
Stock received by such holder in the Merger except in compliance with the
Securities Act. This Proxy Statement-Prospectus does not cover any resales of
Fedders Convertible Preferred Stock or Fedders Class A Stock received by
affiliates of NYCOR or Fedders.
LEGAL OPINIONS
The validity of the Fedders Convertible Preferred Stock or the Fedders
Class A Stock being offered hereby is being passed upon for Fedders by Cummings
& Lockwood, Stamford, CT.
EXPERTS
The consolidated balance sheet of Fedders as of August 31, 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended August 31, 1995, included in Fedders Annual Report on
Form 10-K for the fiscal year ended August 31, 1995, which is incorporated
herein, have been audited by BDO, independent certified public accountants, and
are incorporated herein in reliance upon such report given upon the authority of
such firm as experts in auditing and accounting. The consolidated balance sheet
of Fedders as of August 31, 1994 and the related consolidated statement of
operations, stockholders equity and cash flows for the years ending August 31,
1994 and 1993 appearing in Fedders Corporation Annual Report (Form 10-K) for the
year ended August 31, 1995, have been audited by E & Y, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated balance sheet of NYCOR, Inc. as of December 31, 1995 and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1995, included in NYCOR's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, which is included herein,
have been audited by BDO, independent certified public accountants, and are
included herein in reliance upon such report given upon the authority of such
firm as experts in auditing and accounting. The consolidated financial
statements of NYCOR for the years ended December 31, 1994 and 1993 included in
NYCOR's Annual Report (Form 10-K) for the year ended December 31, 1995, have
been audited by E & Y, independent auditors, as set forth in their report
thereon included therein. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS -- NEXT FEDDERS ANNUAL MEETING
Fedders anticipates that its next annual meeting of stockholders will be
held in December 1996. If any stockholder of Fedders desires to submit a
proposal for action at such meeting of stockholders of Fedders, it must be
received by Fedders, P.O. Box 813, Liberty Corner, New Jersey 07938 within a
reasonable time before its solicitation for that meeting.
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COST OF SOLICITATION
The cost of preparing and mailing material in connection with the
solicitation of proxies is to be borne by Fedders with respect to the
stockholders of Fedders and by NYCOR with respect to the stockholders of NYCOR,
except that Fedders and NYCOR have agreed to divide equally the costs of
printing the proxy material. To the extent necessary in order to assure
sufficient representation at the Fedders Annual Meeting and the NYCOR Special
Meeting, such solicitation will be made by the regular employees of Fedders or
NYCOR, as the case may be, in the total approximate number of five and four,
respectively. Solicitations will be made by mail and may also be made by
telegram, telephone and in person. The firm of William F. Doring, Inc.
("Doring") will act as professional proxy solicitators for Fedders and NYCOR.
Doring will forward the solicitation materials to brokers, firms, nominees,
fiduciaries and other custodians for forwarding to the beneficial owners of
shares held in "street name". Doring will also follow up with such brokers,
firms, nominees, fiduciaries and custodians to obtain the maximum number of
votes of the street name stockholders of Fedders and NYCOR as possible.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
FEDDERS CORPORATION
AND
NYCOR, INC.
<PAGE> 83
ANNEX A
[COMPOSITE CONFORMED COPY]
AGREEMENT AND PLAN OF MERGER
Agreement entered into this 30th day of November, 1995, [as amended by
Amendment No. 1 dated March 15, 1996 and Amendment No. 2 dated as of April 10,
1996] between NYCOR, Inc., a Delaware corporation ("NYCOR") and Fedders
Corporation, a Delaware corporation ("FEDDERS"). NYCOR and FEDDERS are sometimes
referred to individually as a "Party" and collectively as the "Parties."
This Agreement contemplates a tax-free merger of NYCOR with and into
FEDDERS in a reorganization pursuant to Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"). The NYCOR Stockholders will
receive capital stock of FEDDERS in exchange for their capital stock of NYCOR.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Annual FEDDERS Meeting" has the meaning set forth in Section 5(c)(ii)
below.
"Breakup Fee" has the meaning set forth in Section 7(c) below.
"FEDDERS" has the meaning set forth in the preface above.
"FEDDERS Average Price" means the average closing price of a FEDDERS Class
A Share as reported on the Composite Transactions Tape of the New York Stock
Exchange for the 15 trading days ending five business days before the date of
the Special NYCOR Meeting.
"FEDDERS Fairness Opinion" has the meaning set forth in Section 5(d) below.
"FEDDERS Preferred Share" means any share of the Convertible Preferred
Stock, $1.00 par value per share of FEDDERS, convertible into a FEDDERS Class A
Share at a price of $6.25 per share.
"FEDDERS Common Share" means any share of the Common Stock, $1.00 par value
per share, of FEDDERS.
"FEDDERS Class A Share" means any share of the Class A Stock, $1.00 par
value per share, of FEDDERS.
"FEDDERS Class B Share" means any share of the Class B Stock, $1.00 par
value per share, of FEDDERS.
"FEDDERS Share" means any share of the FEDDERS Preferred Shares or FEDDERS
Class A Shares.
"Certificate of Merger" has the meaning set forth in Section 2(d)(iii)
below.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Confidential Information" means any information concerning the businesses
and affairs of FEDDERS or NYCOR and their respective Subsidiaries, and all
analyses, compilations, studies or other documents prepared by either Party that
contain or otherwise reflect or are generated from such information, but does
not include any information that (i) is on the date hereof or hereafter becomes
generally available to the public other than as a result of a disclosure in
violation of Section 5(f) hereof; or (ii) was available to the other Party on a
nonconfidential basis or becomes available to the other Party on a
nonconfidential basis from a source not bound by a confidentiality agreement.
<PAGE> 84
"Definitive FEDDERS Proxy Materials" means the definitive proxy materials
relating to the Annual FEDDERS Meeting.
"Definitive NYCOR Proxy Materials" means the definitive proxy materials
relating to the Special NYCOR Meeting.
"Delaware General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended, from time to time.
"Disclosure Schedule" means the disclosure schedule accompanying this
Agreement and initialed by the Parties.
"Dissenting Share" means any NYCOR Share, the holder of record of which is
entitled to and has exercised appraisal rights under the Delaware General
Corporation Law.
"Effective Time" has the meaning set forth in Section 2(e)(i) below.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as in effect from time to time in the United States of
America.
"IRS" means the Internal Revenue Service.
"ISRA" means the Industrial Site Recovery Act.
"Knowledge" means actual knowledge after reasonable investigation.
"Material Adverse Change" means any developments or changes which would
have a Material Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, results of operation or financial condition of a Party and its
Subsidiaries taken as a whole or (ii) the ability of such Party to perform its
obligations under this Agreement.
"Merger" has the meaning set forth in Section 2(a) below.
"NYCOR" has the meaning set forth in the preface above.
"NYCOR Fairness Opinion" has the meaning set forth in Section 5(d) below.
"NYCOR Preferred Share " means any share of the $1.70 Convertible
Exchangeable Preferred Stock, par value $1.00 per share, of NYCOR.
"NYCOR Common Share" means any share of the Common Stock, $1.00 par value
per share, of NYCOR.
"NYCOR Class A Share" means any share of the Class A Stock, $1.00 par value
per share, of NYCOR.
"NYCOR Class B Share" means any share of the Class B Stock, $1.00 par value
per share, of NYCOR.
"NYCOR Prospectus" has the meaning set forth in Section 2(c) below.
"NYCOR Share" shall mean any NYCOR Common Share, NYCOR Class A Share or
NYCOR Class B Share.
"NYCOR Stockholder" means any person who or which holds any NYCOR Common
Shares, NYCOR Class A Shares, or NYCOR Class B Shares.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
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"Prospectus" means the final prospectus relating to the registration of
FEDDERS Shares under the Securities Act.
"Public Report" has the meaning set forth in Section 4(e) below.
"Registration Statement" has the meaning set forth in Section 5(c)(i)
below.
"Replacement Options" has the meaning set forth in Section 2(d)(iv).
"Requisite FEDDERS Stockholder Approval" means the affirmative vote of the
holders of a majority of the outstanding FEDDERS Common Shares and Class B
Shares, voting separately as a class, in favor of this Agreement and the Merger.
"Requisite NYCOR Stockholder Approval" means the affirmative vote of the
holders of a majority of the outstanding NYCOR Common Shares and Class B Shares,
voting separately as a class, in favor of this Agreement and the Merger.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease or
operating lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Special NYCOR Meeting" has the meaning set forth in Section 5(c)(ii)
below.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation" has the meaning set forth in Section 2(a) below.
2. BASIC TRANSACTION
(a) The Merger. On and subject to the terms and conditions of this
Agreement, NYCOR will merge with and into FEDDERS (the "Merger") at the
Effective Time. FEDDERS shall be the corporation surviving the Merger (the
"Surviving Corporation") and the separate existence of NYCOR shall thereupon
cease. The Merger shall have the effects set forth in Section 251 of the
Delaware General Corporation Law.
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of FEDDERS, commencing
at 9:00 a.m. local time within five business days following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than the actions referred to in
paragraphs (c) and (d) below) or such other date as the Parties may mutually
determine (the "Closing Date").
(c) Actions Prior to the Closing. Sixty (60) days prior to March 15, 1996,
NYCOR will give written notice to the holders of the NYCOR Preferred Shares in
accordance with the notice provisions set forth in the prospectus for the NYCOR
Preferred Shares (the "NYCOR Prospectus") notifying such stockholders that the
NYCOR Preferred Shares will be exchanged for debt on March 15, 1996, in
accordance with the terms of the NYCOR Prospectus. On March 15, 1996, NYCOR,
pursuant to the terms of the NYCOR Prospectus, shall exchange all of the then
outstanding shares of the NYCOR Preferred Shares for NYCOR's 8 1/2% convertible
subordinated debentures due 2012.
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(d) Actions at the Closing. At the Closing:
(i) NYCOR will deliver to FEDDERS the various certificates,
instruments, and documents referred to in Section 6(a) below;
(ii) FEDDERS will deliver to NYCOR the various certificates,
instruments, and documents referred to in Section 6(b) below;
(iii) FEDDERS and NYCOR will file with the Secretary of State of the
State of Delaware, a Certificate of Merger in a form agreed to by the
Parties (the "Certificate of Merger").
(iv) FEDDERS will replace all outstanding stock options held by NYCOR
employees, officers, directors, non-employee directors and consultants (the
"Replacement Options"), under the following terms:. (1) the option price of
the Replacement Option and the number of shares of FEDDERS Class A Shares
covered by the Replacement Option shall be determined so that the excess of
the aggregate fair market value of Class A Shares for which the Replacement
Option is granted over the aggregate option price of the Replacement Option
shall not be more than the excess of the aggregate fair market value of the
stock covered by the former option over the aggregate exercise price of the
former option, with fair market value being determined on the date of grant
of the Replacement Option; and (2) with respect to a Replacement Option
that is an incentive stock option, the ratio of the option price of the
Replacement Option for each FEDDERS Class A Share to the fair market value
of each FEDDERS Class A Share shall not be less than the ratio of the
exercise price of the former option for each share of stock to the fair
market value of each share of stock, with fair market value being
determined on the date of grant of the Replacement Option. Aside from price
and the number of FEDDERS Class A Shares covered, the Replacement Option
shall contain terms and conditions identical to those contained in the
former option (irrespective of whether those terms and conditions are
inconsistent with the provisions of the FEDDERS stock option plan) or such
different terms and conditions as the Board of Directors shall, in its sole
discretion, determine, provided that if the Replacement Option is an
incentive stock option, it shall not contain any terms or conditions that
would cause it to fail to meet the requirements of Section 424 of the
Internal Revenue Code. Upon issuance of the Replacement Options, the NYCOR
option agreements shall be cancelled and be of no further force or effect.
(e) Effect of Merger.
(i) General. The Merger shall become effective at the time (the
"Effective Time") FEDDERS and NYCOR have filed the Certificate of Merger
with the Secretary of State of the State of Delaware. The Merger shall have
the effect set forth in the Delaware General Corporation Law. The Surviving
Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf
of either FEDDERS or NYCOR in order to carry out and effectuate the Merger
and the transactions contemplated by this Agreement.
(ii) Charter. The Charter of FEDDERS in effect at and as of the
Effective Time shall remain the Charter of the Surviving Corporation
without any modification or amendment in the Merger except that FEDDERS
will ask the FEDDERS Stockholders to approve a proposal to amend its
articles of incorporation to increase the number of authorized FEDDERS
Preferred Shares from 5,000,000 to 15,000,000, FEDDERS Common Shares from
60,000,000 to 80,000,000 and the number of authorized FEDDERS Class A
Shares from 30,000,000 to 60,000,000. The name of the Surviving Corporation
shall be FEDDERS CORPORATION.
(iii) Bylaws. The Bylaws of FEDDERS in effect at and as of the
Effective Time will remain the Bylaws of the Surviving Corporation without
modification or amendment as a result of the Merger.
(iv) Directors, Officers and Employees.
(A) At or prior to the Effective Time, the Parties shall take or
cause to be taken all necessary action at the Annual FEDDERS Meeting and
otherwise such that, at the Effective Time, the Surviving Corporation's
Board of Directors shall be the directors then serving on the FEDDERS
Board of Directors.
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(B) The officers of the Surviving Corporation shall be the same as
the officers of FEDDERS at and as of the Effective Time.
(C) The employees and directors of NYCOR shall be placed in the
same economic position following the Merger as they were immediately
prior to the date of the execution of this Agreement with respect to
stock options, directors fees, salaries and employee benefits provided
by NYCOR.
(v) Conversion of NYCOR Shares. At and as of the Effective Time, (A)
each NYCOR Common Share, NYCOR Class A Share and NYCOR Class B Share (other
than any Dissenting Share) shall be converted into the right to receive one
FEDDERS Preferred Share with dividend or other features reasonably
necessary to support an initial market value of $6.25, if required, unless
the FEDDERS Average Price is $6.25 per share or greater, in which case each
NYCOR Common Share, NYCOR Class A Share and NYCOR Class B Share (other than
any Dissenting Share) shall be converted into the right to receive a number
of shares of FEDDERS Class A Shares determined by dividing $6.25 by the
FEDDERS Average Price and rounding the quotient to the third decimal place,
with fractional Shares being paid in cash and (B) each Dissenting Share
shall be converted into the right to receive payment from the Surviving
Corporation with respect thereto in accordance with the provisions of the
Delaware General Corporation Law; provided, however, that the conversion
ratio shall be subject to equitable adjustment in the event of any stock
split, stock dividend, reverse stock split, or other change in the
capitalization of FEDDERS. No NYCOR Share shall be deemed to be outstanding
or to have any rights other than those set forth above in this Section 2(e)
(v) after the Effective Time.
(vi) Stock Certificates. At the Effective Time, each certificate
previously representing any NYCOR Shares (other than Dissenting Shares)
shall thereafter represent FEDDERS Shares into which such NYCOR Shares have
been converted. Certificates representing NYCOR Shares shall be exchanged
for certificates representing whole FEDDERS Shares issued in consideration
therefor upon the surrender of such certificate in accordance with the
provisions hereof.
(vii) At and after the Effective Time, the holders of certificates
representing NYCOR Shares (other than Dissenting Shares) exchanged for
FEDDERS Shares pursuant to this Agreement shall cease to have any rights as
stockholders of NYCOR except for the right to surrender such stock
certificates in exchange for FEDDERS Shares as provided hereunder.
(viii) FEDDERS Shares. Each FEDDERS Share issued and outstanding at
and as of the Effective Time will remain issued and outstanding.
(f) Procedure for Payment.
(i) Within a reasonable time after the Effective Time, (A) FEDDERS
shall furnish to each of the NYCOR Stockholders a letter of transmittal
setting forth the procedure to follow for each of them to surrender their
NYCOR Shares and receive one or more stock certificates (issued in the name
of the NYCOR Stockholders or their nominees) representing that number of
FEDDERS Shares specified in Section 2(e) (v) (A) above.
(ii) FEDDERS will not pay any dividend or make any distribution on
FEDDERS Shares (with a record date at or after the Effective Time) to any
record holder of outstanding NYCOR Shares until the holder surrenders for
exchange his or its certificates which represented NYCOR Shares.
(iii) In the event that any stock certificate representing NYCOR
Shares shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed, FEDDERS will issue or cause to be issued in exchange
for such lost, stolen or destroyed certificate the number of FEDDERS Shares
into which such shares are converted in the Merger in accordance with this
Section 2(f). When authorizing such issuance in exchange therefor, the
Board of Directors of FEDDERS may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen
or destroyed certificate to give FEDDERS a bond in such sum as it may
direct as indemnity, or such other form of indemnity, as it shall direct,
against any claim
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that may be made against FEDDERS with respect to the certificate alleged to
have been lost, stolen or destroyed.
(iv) No certificates or scrip for fractional FEDDERS Shares will be
issued but each holder of NYCOR Shares who would otherwise be entitled to
receive a fractional share (if the FEDDERS Average Price is $6.25 or
higher) shall be entitled to receive, in lieu thereof, cash in an amount
equal to such fraction multiplied by the closing price of FEDDERS Class A
Shares on The New York Stock Exchange on the trading day immediately prior
to the Closing Date.
(g) Closing of Transfer Records. After the close of business on the
Closing Date, transfers of NYCOR Shares outstanding prior to the Effective Time
shall not be made on the stock transfer books of the Surviving Corporation.
3. REPRESENTATIONS AND WARRANTIES OF NYCOR
NYCOR represents and warrants to FEDDERS that the statements contained in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as the Disclosure Schedule
is amended pursuant to Section 5(g) hereof). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization, Qualification, and Corporate Power. Each of NYCOR and
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of NYCOR
and its Subsidiaries is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a Material
Adverse Effect. Each of NYCOR and its Subsidiaries has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
(b) Capitalization. The entire authorized capital stock of NYCOR consists
of:
(i) 115,000,000 NYCOR Common Shares, 2,800,019 of which are issued and
outstanding; 1,276,500 of which are reserved for issuance upon the
conversion of NYCOR Preferred Shares; 4,051,375 of which are reserved for
issuance upon the conversion of NYCOR Class A Shares; 713,675 of which are
reserved for issuance upon the conversion of NYCOR Class B Shares; and
82,561 of which are held in treasury;
(ii) 5,000,000 NYCOR Preferred Shares, 1,150,000 of which are issued
and outstanding;
(iii) 100,000,000 NYCOR Class A Shares, 4,051,375 of which are issued;
1,276,500 of which are reserved for issuance upon the conversion of the
NYCOR Preferred Shares; 472,500 of which are reserved for issuance upon the
exercise of outstanding options; and 178,596 of which are held in treasury;
and
(iv) 7,500,000 NYCOR Class B Shares, 713,675 of which are issued and
outstanding.
All of the issued and outstanding NYCOR Shares have been duly authorized
and validly issued and are fully paid and nonassessable. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require NYCOR to issue, sell, or otherwise cause to become
outstanding any of its capital stock except as set forth in the Disclosure
Schedule. There are no outstanding stock appreciation rights and there are no
outstanding or authorized, phantom stock, profit participation, or similar
rights with respect to NYCOR's capital stock.
(c) Authorization of Transaction. NYCOR has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder; provided, however, that
NYCOR cannot consummate the Merger unless and until it receives the Requisite
NYCOR Stockholder Approval, approval of any lenders who require prior approval,
and the requisite governmental approvals. This Agreement constitutes the valid
and legally binding obligation of NYCOR, enforceable in accordance with its
terms and conditions.
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(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which NYCOR or any of its Subsidiaries is
subject or any provision of the articles of incorporation or bylaws of NYCOR or
any of its Subsidiaries or (ii) conflict with, result in a breach of or
constitute a default under, result in the acceleration of, create in any person
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which NYCOR or any of its Subsidiaries is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets), except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, or
failure to give notice would not have a Material Adverse Effect on NYCOR and
except as set forth in the Disclosure Schedule. Other than in connection with
the provisions of the Hart-Scott-Rodino Antitrust Improvements Act, required
filings with the SEC, and the provisions of the Delaware General Corporation
Law, or as described in the Disclosure Schedule, none of NYCOR and its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(e) Financial Statements. The consolidated balance sheets of NYCOR at
December 31, 1995 and December 31, 1994, and the consolidated statements of
operations, consolidated statements of stockholders' equity and consolidated
statements of cash flows of NYCOR for the three years ended December 31, 1995,
and the consolidated balance sheet and statement of operations of NYCOR for the
three months ended September 30, 1995 (including the related notes and
schedules) (the "NYCOR Financials"), have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, and fairly
present the financial condition of NYCOR and its Subsidiaries as of the
indicated dates, and the results of operations of NYCOR and its Subsidiaries for
the indicated periods, are correct and complete in all material respects, and
are consistent with the books and records of NYCOR and its Subsidiaries;
provided, however, that the unaudited interim statements are subject to normal
year-end adjustments.
(f) Events Subsequent to Most Recent Financial Statements. Except as set
forth in the Disclosure Schedule, since September 30, 1995, there has not been
any Material Adverse Change in the business, financial condition, operations,
results of operations, or future prospects of NYCOR and its Subsidiaries taken
as a whole.
(g) Undisclosed Liabilities. Except as set forth in the Disclosure
Schedule, none of NYCOR and its Subsidiaries has any material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any material liability for taxes,
except for (i) liabilities set forth on the balance sheet at September 30, 1995
(or in the notes thereto), and (ii) liabilities which have arisen after
September 30, 1995, in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of or was caused by breach of
any material contract, breach of warranty, tort, infringement, or material
violation of law).
(h) Taxes. NYCOR and its Subsidiaries have filed, within the time and in
the manner required by law, all returns, declarations, information, and
statements required to be filed with any federal, state or local tax authority
("Returns"), except for such state and local tax Returns, of which the failure
to file would not have a Material Adverse Effect on NYCOR, and all such Returns
are correct and complete in all material respects. NYCOR has paid all taxes and
assessments that are due and payable and no deficiency has been proposed,
asserted or assessed. Except as set forth in the Disclosure Schedule, no
examination or audit of any Returns by any governmental agency is currently in
progress or, to the knowledge of NYCOR, contemplated. NYCOR is not a party to
any tax sharing or allocation agreement and has no actual or potential liability
for any tax obligation of any other taxpayer.
(i) Brokers' Fees. None of NYCOR and its Subsidiaries has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement except as set forth
in the Disclosure Schedule.
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(j) Litigation. Except as set forth in the Disclosure Schedule, there are
no material actions, suits or proceedings involving claims by or against NYCOR,
either pending or to the knowledge of NYCOR threatened, at law or in equity or
before any governmental agency; and there are no writs, judgments, injunctions
or decrees of any court or governmental agency binding upon NYCOR.
(k) Licenses. Except as set forth in the Disclosure Schedule, NYCOR and
each of its Subsidiaries has, and is operating in material compliance with, all
necessary licenses, certificates and permits from governmental authorities that
are material to the conduct of its business. There is no proceeding pending or,
to the knowledge of NYCOR, threatened (or any basis therefor) which may cause
any such license, certificate or permit that is material to the conduct of the
business of NYCOR or any of its Subsidiaries as presently conducted to be
revoked, withdrawn, canceled, suspended or not renewed. NYCOR and each of its
Subsidiaries are conducting their business in compliance with all laws, rules
and regulations applicable thereto, the violation of which would have a Material
Adverse Effect on NYCOR and its Subsidiaries, taken as a whole.
(l) Contracts. The Disclosure Schedule has attached thereto NYCOR's
material contracts. Except as set forth in the Disclosure Schedule, each
material contract to which NYCOR or any of its Subsidiaries is a party is,
valid, binding and in full force and effect. Except to the extent that the
consummation of the transactions contemplated by this Agreement may require the
consent of third parties, (i) there are no existing defaults by NYCOR and its
Subsidiaries and, to the knowledge of NYCOR, by any other party to any of the
material revenue producing contracts, and (ii) except as set forth in the
Disclosure Schedule, there are no disputes between NYCOR and any other party
with respect to the foregoing contracts outside the Ordinary Course of Business.
(m) Disclosure. The Definitive NYCOR Proxy Materials will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they will be made not misleading; providing, however, that NYCOR
makes no representation or warranty with respect to any information that FEDDERS
will supply specifically for use in the Definitive NYCOR Proxy Materials. None
of the information that NYCOR has supplied or will supply to FEDDERS for use in
the Registration Statement, the Prospectus, or the Definitive FEDDERS Proxy
Materials, will contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they have been or will be made, not
misleading.
(n) Environmental. NYCOR will take all reasonable actions to comply with
all obligations imposed upon it under ISRA and any other federal, state or local
environmental laws.
4. REPRESENTATIONS AND WARRANTIES OF FEDDERS.
FEDDERS represents and warrants to NYCOR that the statements contained in
this Section 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as the Disclosure Schedule
is amended pursuant to Section 5 (g) hereof). The Disclosure Schedule will be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Section 4.
(a) Organization, Qualification and Corporate Power. Each of FEDDERS and
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of
FEDDERS and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a Material
Adverse Effect. Each of FEDDERS and its Subsidiaries has full corporate power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it.
(b) Capitalization. The entire authorized capital stock of FEDDERS
consists of (i) 60,000,000 shares of FEDDERS Common Shares 18,908,598 of which
are issued and outstanding, 1,050,000 of which are reserved for issuance upon
the exercise of currently outstanding options, and none of which are held in
treasury; (ii) 30,000,000 shares of FEDDERS Class A Shares, 18,831,376 of which
are issued and
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outstanding and 6,253,000 of which are reserved for issuance upon the exercise
of currently outstanding options, (iii) 7,500,000 shares of FEDDERS Class B
Shares, 2,267,206 of which are outstanding, and (iv) 5,000,000 shares of Fedders
Preferred Shares, 1,718,200 of which were previously issued and none of which
are currently outstanding. All of the issued and outstanding FEDDERS Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
Subject to the outcome of the vote of the FEDDERS stockholders to approve a
proposed increase in the number of authorized FEDDERS Common Shares, Class A
Shares and Preferred Shares as set forth in Section 6 (a) (ii), all FEDDERS
Shares to be issued in the Merger have been duly authorized and, upon
consummation of the Merger, will be validly issued, fully paid, and
nonassessable. There are no outstanding or authorized options, warrants,
purchase rights, conversion rights, exchange rights, or other contracts or
commitments that would require FEDDERS to issue, sell or otherwise cause to
become outstanding any of its capital stock except as set forth in the
Disclosure Schedule. There are no outstanding stock appreciation rights, and
there are no outstanding or authorized phantom stock, profit participation or
similar rights with respect to FEDDERS's capital stock.
(c) Authorization of Transaction. FEDDERS has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement, and to perform its obligations hereunder; provided, however, that
FEDDERS cannot consummate the Merger unless and until it receives the Requisite
FEDDERS Stockholder Approval, the approval described in Section 6 (a) (ii)
below, approval of any lenders who require prior approval, and the requisite
governmental approvals. This Agreement constitutes the valid and legally binding
obligation of FEDDERS, enforceable in accordance with its terms and conditions.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transaction contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which FEDDERS or any of its Subsidiaries is
subject or any provision of the charter or bylaws of FEDDERS or any of its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any Person the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
FEDDERS or any of its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject, except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, or
failure to give notice would not have a Material Adverse Effect on FEDDERS and
except as disclosed in the Disclosure Schedule. Other than in connection with
the provisions of the Hart-Scott-Rodino Antitrust Improvements Act, required
filings with the SEC, and the provisions of the Delaware General Corporation
Law, or as described in the Disclosure Schedule, FEDDERS does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(e) Filings with the SEC. Except as disclosed in the Disclosure Schedule,
FEDDERS has timely made all filings with the SEC that it has been required to
make under the Securities Act and the Securities Exchange Act (collectively the
"Public Reports"). Except as set forth in the Disclosure Schedule, each of the
Public Reports has complied with the Securities Act and the Securities Exchange
Act in all material respects. Except as set forth in the Disclosure Schedule,
none of the Public Reports, as of their respective dates (as amended through the
date hereof), contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading on the
date filed and the date hereof. FEDDERS has delivered to NYCOR a correct and,
complete copy of each Public Report (together with all exhibits and schedules
thereto, and as amended through the date hereof).
(f) Financial Statements. The financial statements included in or
incorporated by reference into the Public Reports (including the related notes
and schedules), have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, and fairly present the
financial condition of FEDDERS and its Subsidiaries as of the indicated dates
and the results of operations of FEDDERS and its Subsidiaries for the indicated
periods, are correct and complete in all material respects, and are consistent
with the books and records of FEDDERS and its Subsidiaries; provided, however,
that the unaudited interim statements are subject to normal year-end
adjustments.
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(g) Events Subsequent to Most Recent Financial Statements. Except as set
forth in the Disclosure Schedule, since August 31, 1995, there has not been any
Material Adverse Change in the business, financial condition, operations,
results of operations, or future prospects of FEDDERS and its Subsidiaries taken
as a whole.
(h) Undisclosed Liabilities. None of FEDDERS and its Subsidiaries has any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due), including any material
liability for taxes, except for (i) liabilities set forth on the balance sheet
dated as of August 31, 1995 (or in the notes thereto), and (ii) liabilities
which have arisen after August 31, 1995 in the Ordinary Course of Business (none
of which results from, arises out of, relates to, is in the nature of, or was
caused by breach of any material contract, breach of warranty, tort,
infringement, or violation of law).
(i) Taxes. FEDDERS and its Subsidiaries have filed, within the time and in
the manner required by law, all returns, declarations, information, and
statements required to be filed with any federal, state or local tax authority
except for such state and local tax returns, of which the failure to file would
not have a Material Adverse Effect on FEDDERS ("Returns") and all such Returns
are correct and complete in all material respects. FEDDERS has paid all taxes
and assessments that are due and payable and no deficiency has been proposed,
asserted or assessed. No examination or audit of any Returns by any governmental
agency is currently in progress or, to the knowledge of FEDDERS, contemplated.
FEDDERS is not a party to any tax sharing or allocation agreement and has no
actual or potential liability for any tax obligation of any other taxpayer.
(j) Brokers' Fees. FEDDERS does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of NYCOR and its
Subsidiaries could become liable or obligated.
(k) Litigation. Except as set forth in the Disclosure Schedule, there are
no material actions, suits or proceedings involving claims by or against
FEDDERS, either pending or to the knowledge of FEDDERS threatened, at law or in
equity or before any governmental agency; and there are no writs, judgments,
injunctions or decrees of any court or governmental agency binding upon FEDDERS.
(l) Licenses. Except as set forth in the Disclosure Schedule, FEDDERS and
each of its Subsidiaries has, and is operating in material compliance with, all
necessary licenses, certificates and permits from governmental authorities that
are material to the conduct of its business. There is no proceeding pending or,
to the knowledge of FEDDERS, threatened (or any basis therefor) which may cause
any such license, certificate or permit that is material to the conduct of the
business of FEDDERS or any of its Subsidiaries as presently conducted to be
revoked, withdrawn, canceled, suspended or not renewed. FEDDERS and each of its
Subsidiaries is conducting its business in compliance with all laws, rules and
regulations applicable thereto, the violation of which, would have a Material
Adverse Effect on FEDDERS and its Subsidiaries, taken as a whole.
(m) Contracts. Except as set forth in the Disclosure Schedule, each
material contract to which FEDDERS is a party, is to FEDDER's knowledge valid,
binding and in full force and effect. Except to the extent that the consummation
of the transactions contemplated by this Agreement may require the consent of
third parties (i) there are no existing defaults by FEDDERS and, to the
knowledge of FEDDERS, by any other party to any of the foregoing contracts, and
(ii) except as set forth in the Disclosure Schedule, there are no disputes
between FEDDERS and any other party with respect to the foregoing contracts
outside the Ordinary Course of Business.
(n) Disclosure. The Registration Statement, the Prospectus, and the
Definitive FEDDERS Proxy Materials will comply with the Securities Act and the
Securities Exchange Act in all material respects. The Registration Statement,
the Prospectus, and the Definitive FEDDERS Proxy Materials will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they will be made, not misleading; provided, however, that FEDDERS
makes no representation or warranty with respect to any information that NYCOR
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will supply specifically for use in the Registration Statement, the Prospectus,
and the Definitive FEDDERS Proxy Materials. None of the information that FEDDERS
has supplied or will supply to NYCOR in connection with this Agreement, whether
specifically for use in the Definitive NYCOR Proxy Materials or otherwise, will
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they have been or will be made, not misleading.
5. COVENANTS.
The Parties agree as follows with respect to the period from and after the
execution of this Agreement until the Closing Date:
(a) General. Each of the Parties will use all reasonable efforts to
take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the transactions contemplated by
this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in Section 6 below).
(b) Notices and Consents. NYCOR and FEDDERS will each give any
notices (and will cause each of its Subsidiaries to give any notices) to
third parties, and will use its reasonable best efforts to obtain (and will
cause each of its Subsidiaries to use its reasonable best efforts to
obtain) any third party consents, that the other Party may request in
connection with the agreements referred to in Section 3(d) and Section 4(d)
above.
(c) Regulatory Matters and Approvals. Each of the Parties will (and
will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use all reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3(d) and
Section 4(d) above. Without limiting the generality of the foregoing:
(i) Securities Act, Securities Exchange Act and State Securities
Laws. As promptly as practicable after the date hereof, FEDDERS will
prepare and file with the SEC a registration statement on Form S-4 under
the Securities Act relating to the offering and issuance of FEDDERS
Shares pursuant to the Merger (the "Registration Statement") and
preliminary proxy materials under the Securities Exchange Act relating
to the Annual FEDDERS Meeting. FEDDERS will use its reasonable best
efforts to respond to the comments of the SEC thereon and will make any
further filings (including amendments and supplements) in connection
therewith that may be necessary, proper, or advisable. NYCOR will
provide FEDDERS with whatever information and assistance in connection
with the foregoing filings that FEDDERS may reasonably request. FEDDERS
will take all actions that may be necessary, proper, or advisable under
state securities laws in connection with the offering and issuance of
FEDDERS Shares pursuant to the Merger.
(ii) Delaware General Corporation Law. NYCOR will call a special
meeting of its stockholders (the "Special NYCOR Meeting") as soon as
practicable in order that stockholders may consider and vote upon the
adoption of this Agreement and the approval of the Merger in accordance
with the Delaware General Corporation Law. FEDDERS will call its annual
meeting of stockholders (the "Annual FEDDERS Meeting") as soon as
practicable in order that its stockholders may consider and vote, among
other things, upon the adoption of this Agreement and the approval of
the Merger.
(iii) [NOT APPLICABLE]
(d) Fairness Opinions. NYCOR will use its best efforts to deliver to
FEDDERS on or before the date the Definitive FEDDERS Proxy is mailed to
their respective stockholders (i) a copy of an opinion of an investment
banker addressed to the Board of Directors of NYCOR as to the fairness of
the Merger to NYCOR Stockholders from a financial point of view (the "NYCOR
Fairness Opinion"). FEDDERS will use its best efforts to deliver to NYCOR
on or before the date the Definitive FEDDERS Proxy is mailed to their
respective stockholders (i) a copy of an opinion of an investment banker
addressed to the
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Board of Directors of FEDDERS as to the fairness of the Merger to FEDDER's
stockholders from a financial point of view (the "FEDDER's Fairness
Opinion"). The NYCOR Fairness Opinion shall be reasonably satisfactory to
NYCOR in form and substance. The FEDDERS Fairness Opinion shall be
reasonably satisfactory to FEDDERS in form and substance; provided that
nothing herein shall require the Parties to put the NYCOR Fairness Opinion
in the FEDDERS Proxy unless required by law.
(e) Operation of Business. Each Party will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business
except with the prior written consent of the other Party. Without limiting
the generality of the foregoing, without the prior written consent of the
other Party:
(i) Neither Party or its Subsidiaries will authorize or effect any
change in its articles of incorporation or charter or its bylaws, except
that at the Annual FEDDERS Meeting, FEDDERS may ask the FEDDERS
Stockholders to approve a proposal to amend its articles of
incorporation to increase the number of authorized FEDDERS Preferred
Shares from 5,000,000 to 15,000,000, FEDDERS Common Shares from
60,000,000 to 80,000,000 and the number of authorized FEDDERS Class A
Shares from 30,000,000 to 60,000,000, and as otherwise contemplated
hereby;
(ii) Neither Party or its Subsidiaries will (A) grant any options,
warrants, other rights to purchase or obtain any of its capital stock,
except for grants of options to employees, consultants or non-employee
directors under existing stock incentive plans provided that FEDDERS or
NYCOR shall not grant more than an aggregate of 100,000 options to its
employees, consultants or non-employee directors under any such plans or
(B) issue, sell, or otherwise dispose of any of its capital stock
(except upon the conversion or exercise of options, warrants, and other
rights currently outstanding or granted to employees, consultants or
non-employee directors as allowed by clause (A));
(iii) Neither Party or its Subsidiaries will declare, set aside, or
pay any dividend or distribution with respect to its capital stock
(whether in cash or in kind), or redeem, repurchase, or otherwise
acquire any of its capital stock, except as required by the terms of the
NYCOR Preferred Shares, FEDDERS' normal quarterly dividend of two cents
per share to the record date holders of FEDDERS Common Shares, FEDDERS
Class A Shares, and FEDDERS Class B Shares, and as specifically provided
herein;
(iv) Neither Party or its Subsidiaries will issue any note, bond,
or other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside
the Ordinary Course of Business except to refinance existing debt;
(v) Neither Party or its Subsidiaries will impose any Security
Interest upon any of its assets outside the Ordinary Course of Business;
(vi) Neither Party or its Subsidiaries will make any capital
investment in, make any loan to, or acquire the securities or assets of
any other Person outside the Ordinary Course of Business except that
either Party can fund up to $5,000,000 in capital investments or
acquisitions without the written consent of the other Party; provided,
however, that NYCOR and FEDDERS will discuss the terms and conditions of
all acquisitions prior to closing such acquisitions;
(vii) NYCOR or its Subsidiaries will not make any change in
employment terms for any of its directors, officers, and employees,
except that it may make changes for non-executive employees if in the
Ordinary Course of Business;
(viii) Neither Party or its Subsidiaries will merge, consolidate,
combine with another Party or agree to be acquired by or agree to sell
all or substantially all of its assets to another person; and
(ix) Neither Party or its Subsidiaries will commit to any of the
foregoing.
(f) Full Access; Confidentiality. FEDDERS and NYCOR will each (and
will cause each of its Subsidiaries to) permit representatives of the other
Party to have full access, at all reasonable times and
12
<PAGE> 95
in a manner so as not to interfere with the normal business operations of
the other Party and its Subsidiaries, to all premises, properties,
personnel, books, records (including but not limited to tax records),
contracts, and documents of or pertaining to it and its Subsidiaries and,
during such period, each shall furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request. Each Party will (i) treat and hold as
confidential any Confidential Information relating to the other Party and
its Subsidiaries; (ii) inform all of its representatives of the
confidential nature of such information and direct all such representatives
not to use any of the Confidential Information except in connection with
this Agreement; (iii) make all reasonable, necessary and appropriate
efforts to safeguard the Confidential Information from disclosure to anyone
other than as permitted hereby; (iv) keep a record of the Confidential
Information furnished by the other Party and the location thereof; and (v)
if this Agreement is terminated for any reason whatsoever, return to the
other Party all tangible embodiments of Confidential Information (and all
copies thereof) that are in its possession. Notwithstanding anything herein
to the contrary, NYCOR authorizes FEDDERS to use any information relating
to NYCOR necessary to comply with the Securities Act, the Securities
Exchange Act and the requirements of the SEC thereunder in the Registration
Statement and the Definitive FEDDERS Proxy Materials.
(g) Notice of Developments. Each Party will give prompt written
notice to the other of any material adverse development which would result
in a breach of any of its own representations and warranties in Section 3
and Section 4 above. At least two business days prior to Closing, each
Party shall deliver to the other Party an amended or supplemented
Disclosure Schedule reflecting any modifications thereto necessary to make
its representations and warranties true and complete as of the Closing
Date. If the Disclosure Schedule reflects adverse changes or developments
that exceed an aggregate of $250,000 with respect to such Party, then such
changes or developments shall be deemed to be a Material Adverse Change.
The Party receiving the Disclosure Schedule reflecting a Material Adverse
Change shall have the right to either (i) accept the Disclosure Schedule
and close the Merger subject to such disclosures or (ii) reject the
Disclosure Schedule and exercise its right to terminate this Agreement
pursuant to Section 7 of this Agreement.
(h) Exclusivity. Each Party and its respective Subsidiaries will not,
and will use their best efforts to cause their respective directors,
officers, employees, financial advisors, legal counsel, accountants and
other agents and representatives not to, initiate, solicit or encourage,
directly or indirectly, or take any other action to facilitate any
inquiries or the making of any proposal with respect to, or except to the
extent required in the exercise of the fiduciary duties of its Board of
Directors under applicable law as advised in writing by independent
counsel, engage or participate in negotiations concerning, provide any
nonpublic information or data to or have any discussions with any Person
other than a Party hereto or their Affiliates relating to, any acquisition,
tender offer (including a self-tender offer), exchange offer, merger,
consolidation, acquisition of beneficial ownership of or the right to vote
securities representing 10% or more of the total voting power of such Party
or any of its Subsidiaries, dissolution, business combination, purchase of
all or any significant portion of the assets or any division of, or any
equity interest in, such Party or any Subsidiary, or similar transaction
other than the Merger (such proposals, announcements, or transactions being
referred to as "Acquisition Proposals"). Each Party will promptly notify
the other orally and in writing if any such Acquisition Proposal (including
the terms thereof and identity of the Persons making such proposal) is
received and furnish to the other Party hereto a copy of any written
proposal.
(i) Indemnification. FEDDERS, as the Surviving Corporation in the
Merger, will observe any indemnification provisions now existing in the
articles of incorporation or bylaws of NYCOR, to the extent allowable under
Delaware law and the Amended and Restated Charter of FEDDERS, for the
benefit of any individual who served as a director or officer of NYCOR at
any time prior to the Effective Time until the statute of limitation
relating thereto has expired.
(j) Transactions. Prior to Closing, each of FEDDERS and NYCOR shall
deliver to the other a summary of any material transactions that it is
currently pursuing.
13
<PAGE> 96
(k) [RESERVED]
(l) Exchange of NYCOR Preferred Shares. On March 15, 1996, NYCOR,
pursuant to the terms of the NYCOR Prospectus, shall exchange all of the
then outstanding shares of NYCOR Preferred Shares for NYCOR's 8 1/2%
convertible subordinated debentures due 2012.
(m) [RESERVED]
6. CONDITIONS TO OBLIGATIONS TO CLOSE.
(a) Conditions to Obligation of FEDDERS. The obligation of FEDDERS to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the Requisite
NYCOR Stockholder Approval, approval of any lenders who require prior
approval, and the number of Dissenting Shares shall not exceed 5% of the
number of outstanding NYCOR Class B Shares and/or FEDDERS Class B Shares;
(ii) the proposal to be presented by FEDDERS to its stockholders at
the Annual FEDDERS Meeting to increase the number of authorized FEDDERS
Preferred Shares from 5,000,000 to 15,000,000, FEDDERS Common Shares from
60,000,000 to 80,000,000 and the number of authorized FEDDERS Class A
Shares from 30,000,000 to 60,000,000, shall have received the required
FEDDERS stockholder approval;
(iii) NYCOR and its Subsidiaries shall have procured all of the third
party consents specified in Section 5(b) above which, the failure to
receive, would have a Material Adverse Effect on the Surviving Corporation;
(iv) NYCOR shall have provided information reasonably satisfactory to
FEDDERS concerning the status of its compliance with ISRA and other
federal, state and local environmental obligations;
(v) the supplemented Disclosure Schedule shall reflect that there
shall have been no Material Adverse Change of NYCOR which would render the
representations and warranties of NYCOR untrue or inaccurate in any
material respect without giving effect to the disclosures contained in any
such supplement, and FEDDERS shall have received from NYCOR a certificate
to such effect, dated as of the Closing Date, of the president and chief
financial officer of NYCOR, to such effect in a form acceptable to the
counsel for FEDDERS;
(vi) there shall have been no event, condition or act of God that
shall have caused a Material Adverse Change of NYCOR which would render the
representations and warranties of NYCOR untrue or inaccurate in any
material respect;
(vii) NYCOR shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(viii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) materially and adversely affect
the right of the Surviving Corporation to own the former assets, to operate
the former businesses, and to control the former Subsidiaries of NYCOR, or
(D) materially and adversely affect the right of any of the former
Subsidiaries of NYCOR to own its assets and to operate its businesses (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect); there shall not be any judgment, order, decree, stipulation,
injunction, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
14
<PAGE> 97
(ix) NYCOR shall have delivered to FEDDERS a certificate of its
president and its chief financial officer to the effect that each of the
conditions specified above in Section 6(a) (i)-(vi) is satisfied in all
respects;
(x) this Agreement and the Merger shall have received the Requisite
FEDDERS Stockholder Approval, and approval of any lenders who require prior
approval;
(xi) FEDDERS shall have received the FEDDERS Fairness Opinion which
shall be reasonably satisfactory to its board of directors, and an opinion,
from its tax advisors, reasonably satisfactory to its board of directors,
that the Merger will be a tax free transaction as to FEDDERS;
(xii) the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act shall have expired;
(xiii) the Registration Statement shall have become effective under
the Securities Act and all applicable state securities laws and shall
provide for the legal and valid issuance of the FEDDERS Shares for the
NYCOR Shares, and the FEDDERS Shares shall have been accepted for listing
on The New York Stock Exchange;
(xiv) FEDDERS shall have received from counsel to NYCOR an opinion in
form and substance reasonably acceptable to FEDDERS to be attached hereto
as Exhibit A, addressed to FEDDERS, and dated as of the Closing Date;
(xv) all actions to be taken by NYCOR in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to FEDDERS;
(xvi) NYCOR shall have exchanged the NYCOR Preferred Shares for
debentures in accordance with the terms set forth in Section 2 (c); and
(xvii) nothing shall have occurred to effect the tax-free status of
the Merger.
FEDDERS shall be deemed to have waived any condition specified in this Section
6(a) upon the Closing of the Merger if, with respect to such condition, it has
complete knowledge of the actual facts and circumstances relating to such
condition as of the Closing.
(b) Conditions to Obligation of NYCOR. The obligation of NYCOR to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the Requisite
FEDDERS Stockholder Approval, and the approval of any lenders who require
prior approval;
(ii) the Registration Statement shall have become effective under the
Securities Act and all applicable state securities laws and shall provide
for the legal and valid issuance of the FEDDERS Shares for the NYCOR
Shares, and the FEDDERS Shares shall have been accepted for listing on The
New York Stock Exchange;
(iii) NYCOR shall have received the NYCOR Fairness Opinion which shall
be reasonably satisfactory to its Board of Directors, including an opinion,
prior to the Closing Date, that the terms of the FEDDERS Preferred Shares
will support an initial market value of $6.25;
(iv) the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act shall have expired;
(v) [RESERVED];
(vi) [RESERVED];
15
<PAGE> 98
(vii) NYCOR and its subsidiaries shall have procured all of the third
party consents specified in Section 5(b) above, which, the failure to
receive would have a Material Adverse Effect on the Surviving Corporation;
(viii) the supplemented Disclosure Schedule shall reflect that there
shall have been no Material Adverse Change of FEDDERS which would render
the representations and warranties of FEDDERS untrue or inaccurate in any
material respect without giving effect to the disclosures contained in any
such supplement, and NYCOR shall have received from FEDDERS a certificate
to such effect, dated as of the Closing Date, of the president and chief
financial officer of FEDDERS to such effect, in a form acceptable to
counsel of NYCOR;
(ix) there shall have been no event, condition or act of God that
shall have caused a Material Adverse Change of FEDDERS which would render
the representations and warranties of FEDDERS untrue or inaccurate in any
material respect;
(x) FEDDERS shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(xi) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) materially and adversely affect
the right of the Surviving Corporation to own the former assets, to operate
the former businesses, and to control the former Subsidiaries of NYCOR, or
(D) materially and adversely affect the right of any of the Subsidiaries of
FEDDERS to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
there shall not be any judgment, order, decree, stipulation, injunction, or
charge in effect preventing consummation of any of the transactions
contemplated by this Agreement;
(xii) FEDDERS shall have delivered to NYCOR a certificate of its
president and its chief financial officer to the effect that each of the
conditions specified above in Section 6(b)(i), (iii), (v), (vii)-(ix) is
satisfied in all respects;
(xiii) this Agreement and the Merger shall have received the Requisite
NYCOR Stockholder Approval, and the approval of any lenders who require
prior approval;
(xiv) [RESERVED];
(xv) [RESERVED];
(xvi) [RESERVED];
(xvii) NYCOR shall have received from counsel to FEDDERS an opinion in
form and substance reasonably acceptable to NYCOR to be attached hereto as
Exhibit B, addressed to NYCOR, and dated as of the Closing Date;
(xviii) all actions to be taken by FEDDERS in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to NYCOR. NYCOR shall be deemed to have waived any condition
specified in this Section 6(b) upon the Closing of the Merger if, with
respect to such condition, it has complete knowledge of the actual facts
and circumstances relating to such condition as of the Closing.
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<PAGE> 99
7. TERMINATION.
(a) Termination of Agreement. Either of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether before
or after stockholder approval) as provided below:
(i) the Parties may terminate this Agreement by mutual written consent
at any time prior to the Effective Time;
(ii) FEDDERS may terminate this Agreement by giving written notice to
NYCOR at any time prior to the Effective Time (A) in the event NYCOR has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, FEDDERS has notified NYCOR of the
breach, and the breach has continued without cure for a period of 30 days
after the notice of breach or (B) if the Closing shall not have occurred on
or before August 31, 1996, by reason of the failure of any condition
precedent under Section 6(a) hereof other than Section 6(a) (iii), unless
the failure results primarily from FEDDERS breaching any representation,
warranty, or covenant contained in this Agreement;
(iii) NYCOR may terminate this Agreement by giving written notice to
FEDDERS at any time prior to the Effective Time (A) in the event FEDDERS
has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, NYCOR has notified FEDDERS of
the breach, and the breach has continued without cure for a period of 30
days alter the notice of breach, (B) if the Closing shall not have occurred
on or before August 31, 1996, by reason of the failure of any condition
precedent under Section 6(b) hereof other than Section 6(b) (vii), unless
the failure results primarily from NYCOR breaching any representation,
warranty, or covenant contained in this Agreement; or
(iv) either NYCOR or FEDDERS may terminate this Agreement by giving
written notice to the other at any time after the Annual FEDDERS Meeting or
the Special NYCOR Meeting in the event this Agreement and the Merger fail
to receive the Requisite FEDDERS Stockholder Approval or the Requisite
NYCOR Stockholder Approval, respectively.
(v) either NYCOR or FEDDERS may terminate this Agreement by giving
written notice to the other at any time after receiving written notice from
any of its lenders that require prior approval of the Merger, that such
approval will not be forthcoming;
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7 (a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of either Party to the other Party (except
for any liability of either Party then in breach); provided, however, that the
confidentiality provisions contained in Section 5(f) above and the obligation to
pay fees pursuant to Section 7(c) below shall survive any such termination.
(c) Breakup Fee. Other than as permitted by this Agreement, if, after the
date hereof, the Board of Directors of NYCOR terminates the Merger for any
reason within its control including, but not limited to, the acceptance of an
offer to merge with another entity, then NYCOR shall be obligated to make a
payment to FEDDERS of $20,000,000, plus all expenses incurred by FEDDERS
involving the Merger to the date of the termination, in cash or by delivery to
FEDDERS of that number of NYCOR Shares that would equal $20,000,000 calculated
as an average of the closing price of NYCOR Shares on the NASDAQ over the
20-trading day period prior to such termination, the choice of receiving cash or
NYCOR Shares being that solely of FEDDERS. The termination fee shall be paid
within 30 days of demand therefor by FEDDERS.
8. [RESERVED]
9. MISCELLANEOUS.
(a) [RESERVED]
(b) Press Releases and Public Announcements. Except for the press releases
to be issued announcing the execution of this Agreement, neither Party shall
issue any press release or make any public announcement
17
<PAGE> 100
relating to the subject matter of this Agreement without the prior written
approval of the other Party; provided, however, that either Party may make any
public disclosure that it believes in good faith to be required by applicable
law (in which case the disclosing Party will give the other Party a reasonable
opportunity to review and consent to the form of such disclosure prior to making
the disclosure).
(c) No Third Party Beneficiaries. Except as provided in Section 2 (e) (iv)
(C), this Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns;
provided, however, that (i) the provisions in Section 2 above concerning
issuance of FEDDERS Shares are intended for the benefit of NYCOR Stockholders
and (ii) the provisions in Section 5(i) above concerning insurance and
indemnification are intended for the benefit of the individuals specified
therein and their respective legal representatives.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to NYCOR:
NYCOR, Inc.
287 Childs road
Basking Ridge, NJ 07920
Attention: Kent E. Hansen
If to FEDDERS:
FEDDERS Corporation
505 Martinsville Road
Liberty Corner, NJ 07938
Attention: Robert N. Edwards
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(i) Governing Law. Except for matters of corporation law where the laws of
the State of Delaware must be applied, this Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New Jersey
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey.
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<PAGE> 101
(j) Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the prior
authorization of their respective boards of directors; provided, however, that
any amendment effected subsequent to stockholder approval will be subject to the
restrictions contained in the Delaware General Corporation Law. No amendment of
any provision of this Agreement shall be valid unless the same shall be in
writing and signed by both of the Parties. No waiver by either Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear its own costs and expenses
(including the fees and expenses of its agents, advisors, attorneys and
accountants) incurred in connection with this Agreement and the transactions
contemplated hereby.
(m) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring either Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
INTENDING TO BE LEGALLY BOUND, the Parties hereto have executed this
Agreement on the date first above written.
FEDDERS CORPORATION
By: /s/ Robert L. Laurent, Jr.
--------------------------------------
Title: Executive Vice President
NYCOR, INC.
By: /s/ Kent E. Hansen
--------------------------------------
Title: Vice President
19
<PAGE> 102
ANNEX B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-15299
NYCOR, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-2748564
(State of Incorporation) (I.R.S. Employer Identification No.)
287 CHILDS ROAD, BASKING RIDGE, NEW JERSEY 07920
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (908) 953-8200
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ------------------------------------------------------------------
<C> <S>
None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
Common Stock, $1 par value
Class A Stock, $1 par value
Class B Stock, $1 par value
8 1/2% Convertible Subordinated Debentures due 2012
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
As of the close of business on March 19, 1996, there were outstanding
2,810,868 shares of registrant's Common Stock, 4,062,124 shares of its Class A
Stock and 713,575 shares of its Class B Stock. The approximate aggregate market
value (based upon the closing sale price of such stock) of these shares held by
non-affiliates of the registrant as of March 19, 1996 was $28,539,453. (The
value of a share of Common Stock is used as the value of a share of Class B
Stock as there is no established market for Class B Stock and it is convertible
into Common Stock on a share-for-share basis.)
DOCUMENTS INCORPORATED BY REFERENCE
NONE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 103
NYCOR, INC.
FORM 10-K ANNUAL REPORT -- 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business........................................................... 1
Item 2. Properties......................................................... 5
Item 3. Legal Proceedings.................................................. 6
Item 4. Submission of Matters to a Vote of Security Holders................ 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters............................................................ 7
Item 6. Selected Financial Data............................................ 7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 7
Item 8. Financial Statements and Supplementary Data........................ 8
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... 8
PART III
Item 10. Directors and Executive Officers of the Registrant................. 9
Item 11. Executive Compensation............................................. 10
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 12
Item 13. Certain Relationships and Related Transactions..................... 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 15
</TABLE>
<PAGE> 104
ITEM 1. BUSINESS
(a) General Development of Business
NYCOR, Inc. (the "Company" or the "Registrant") is a holding company
currently comprising two operating companies, Rotorex Company, Inc. ("Rotorex")
and Melcor Corporation ("Melcor"). Rotorex manufactures rotary compressors
principally for use in room air conditioners. Melcor produces thermoelectric
heating and cooling modules used in a variety of applications in which space and
weight are considerations or precise temperature control is required. The
Company acquired both Rotorex and Melcor in September 1992. Unless otherwise
indicated, all references herein to the Company or the Registrant are to NYCOR,
Inc. and its subsidiaries.
The Company has announced that it has reached an agreement to merge with
Fedders Corporation ("Fedders"), subject to the approval of the stockholders of
both companies. The Company has agreed to merge with Fedders primarily because
it believes that, in order for Rotorex to take advantage of business
opportunities that may arise and respond rapidly to competitive requirements,
access to capital will be important. The concentration of Rotorex's sales to
Fedders (see below) may make access to capital more difficult as many lending
institutions have policies that make it difficult for borrowers that have a
significant concentration of business with one customer. The Company believes
that Rotorex will have a better ability to grow and achieve its full capability
as part of a larger, major participant in the world-wide air conditioner market
such as Fedders.
(c) Narrative Description Of Business
Rotorex and Melcor manufacture and sell components for use in cooling and
heating applications to original equipment manufacturers in the air conditioning
and refrigeration industries. Rotorex compressors use vapor compression to
create a cooling effect while Melcor's thermoelectric modules utilize
electricity, the Peltier effect, to perform cooling and heating functions.
ROTOREX
Products
Rotorex manufactures and sells a broad line of rotary compressors,
principally for the air conditioning and refrigeration markets.
Compressors are used as a principal component in a variety of cooling and
heating applications. Their function is to compress gas which is introduced into
the compressor, causing the temperature of the gas to rise. The change in
temperature of the gas permits a heat transfer to occur within the cooling and
heating system. Rotary compressors are characterized by a circular, or rotary,
motion and are generally smaller, quieter and more energy efficient than the
traditional reciprocating compressors.
Rotorex's product line consists of two basic series of compressors,
designated as the 39 Frame and 48 Frame, with capacities ranging from 5,100 to
18,500 BTUs. Models within each series, with specific cooling capacities within
the indicated range, are produced by varying the mechanical pump assembly and
motor. By varying the motors, Rotorex also creates compressors capable of
operating with different voltages for applications in various parts of the
world.
The air conditioners in which Rotorex's compressors are used are subject to
regulations providing for minimum energy efficiency rating ("EER") requirements.
Achieving required EERs results from a combination of an efficient compressor
and the design of the air conditioning system in which the compressor is
installed. Current proposed rulemaking by the Energy Department under the
National Appliance Energy Conservation Act would have the effect of increasing
minimum required EERs. Rotorex's compressors currently provide efficiencies
which enable its customers to meet EER requirements applicable to their air
conditioners. In the event that the new regulations are adopted, the efficiency
of certain models of Rotorex's compressors would have to be improved. It is not
certain at present if the proposed regulations will be adopted and, if they are,
when the requirements would become effective. Regardless of the adoption of
these proposed regulations, Rotorex is continually seeking to improve the
efficiency of its compressors in order to remain
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<PAGE> 105
competitive in the markets it serves. Investments were made in 1995 to upgrade
Rotorex's laboratory facilities. These investments, which totaled approximately
$1.6 million, coupled with a strong design staff with many years of compressor
experience, give Rotorex the design capability necessary to make such
improvements. Investments in an automated assembly system are expected to help
improve mechanical efficiency and an ongoing motor design program further
enhances Rotorex's ability to improve the efficiency of its compressors.
Freon is used as a refrigerant in air conditioning systems. Freon is one of
the ozone-depleting chemicals that are currently being phased out of use. The
type of freon used in room air conditioners is an HCFC, which is currently an
acceptable substitute for the CFC refrigerants which have a much more harmful
effect on the environment. Rotorex does not expect that requirements to
ultimately phase out the use of HCFC refrigerants will have a material effect on
its operations or expenditures.
Marketing
Rotorex compressors are currently sold in the United States principally to
the residential room air conditioning market, with sales concentrated to
Fedders. Fedders has been the major customer for Rotorex compressors for more
than 20 years. Rotorex expects that, with the implementation of programs
designed to capitalize on the growing international market, international sales
may become a greater percentage of Rotorex's overall sales; however, there can
be no assurance as to the extent of such sales. Rotorex has entered into a
supply agreement (the "Supply Agreement") with Fedders, pursuant to which
Rotorex is required to sell to Fedders up to 800,000 rotary compressors annually
and Fedders is required to purchase 80% of its requirements for rotary
compressors from Rotorex up to 800,000 compressors, subject to certain
exceptions. The terms of sales to Fedders under the Supply Agreement are
negotiated annually and must be no less favorable than sales to other customers.
This requirement for sales to Fedders leaves Rotorex with substantial capacity
to expand its markets and customer base. Rotorex believes that its agreement
with Fedders provides it with a substantial base of sales from which to expand
its sales in the international markets for room air conditioners. Rotorex
participates in a substantial portion of the relatively mature United States
market for room air conditioners through the Supply Agreement and it intends to
capitalize on this base to increase its sales in the more rapidly growing
international markets. In 1995, Rotorex's sales were favorably impacted as a
result of the recent successful years enjoyed by the domestic air conditioning
industry. As previously indicated, as Rotorex's efforts in the international
markets continue, sales in these markets may represent a greater percentage of
Rotorex's overall sales.
Rotorex believes that significant growth opportunities exist in the
international market, particularly in Asia. Rotorex has been active in the
international market for a number of years through its technology licensing
program. Currently, Rotorex has three licensees in mainland China and one each
in Taiwan and South Korea. The license agreements require Rotorex to provide
technology to the licensees and the licensees to pay royalties to Rotorex based
upon sales of finished compressors. In early 1995, Rotorex established a
representative office in Beijing which is expected to enhance Rotorex's presence
in the important China market. Rotorex has also opened a branch office in
England to serve the European, Middle Eastern and North African markets and has
also established a sales office in Singapore. Late in 1995, Rotorex signed a
letter of intent to form a joint venture to manufacture rotary compressors in
Ningbo, China. Rotorex will continue to assess the international markets to
determine how best to participate in those markets.
A number of countries in which Rotorex is pursuing sales opportunities,
including China, impose tariffs on imported compressors. At present, Rotorex
believes that the demand for compressors in these markets will continue to
provide opportunities to increase sales in these markets. Rotorex will
continually assess the impact of tariffs on its markets to determine how best to
effectively serve such markets.
Rotorex promotes its products through the use of product literature,
catalogs and advertising in industry publications and exhibits its products at
industry and target market trade shows.
Production
Rotorex currently manufactures all of its compressors in a 200,000 square
foot facility owned by Rotorex in Frederick, Maryland. Efforts to improve
efficiency and productivity at this facility and the quality of the
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products manufactured are ongoing. In early 1995, Rotorex obtained the highest
level of certification, ISO 9001, for its quality management system under the
International Standards Organization. The ISO 9000 program is an internationally
recognized benchmark of quality management systems within a production facility.
During 1995, Rotorex completed several investments which are expected to
enhance manufacturing efficiencies. An automated compressor assembly system is
expected to increase capacity and improve quality and efficiency. As of March
26, 1996, the assembly system was not operating as specified. The manufacturer
of the system continues to work to bring the system to specified performance
levels. New gauging systems automate gauging of parts prior to their assembly in
the pump component of the compressor. Plant wide air conditioning provides
better temperature and humidity control which is beneficial in the manufacture
of high tolerance parts. These investments along with related site preparation,
cost approximately $10.3 million.
MELCOR
Products
Melcor manufactures solid state heat pump modules that utilize the Peltier
effect to perform the same cooling and heating functions as freon-based
compressors and absorption refrigerators.
Melcor's modules are typically used in spaces with special requirements,
such as limited space, lightweight cooling requirements or a space existing
under special environmental conditions. They are also used for precise
temperature control by reversing the electric current to cycle from cooling to
heating.
Melcor's customers are original equipment manufacturers that primarily use
the modules for cooling purposes in applications such as portable beverage
coolers and refrigerators, laboratory, scientific, medical and restaurant
equipment and telecommunications and computer equipment.
Melcor's products are sold under the trademark FRIGICHIP.
Marketing
Melcor's modules are currently sold by salaried salespeople and a network
of sales representative firms located throughout the world. The representative
firms purchase products from Melcor and resell them to their own customers. The
sales representatives provide all technical support and engineering design
required by their customers.
Over the past two years, softness in the Japanese and European economies
has impacted Melcor's sales in those markets. Additionally, Melcor has begun to
experience increased competition in certain product markets it serves, which has
primarily impacted sales of portable beverage coolers and refrigerators. This
increased competition is being addressed by an aggressive sales effort.
Melcor advertises its products in a variety of national and international
technical and trade publications, principally in the electronics and
electro-optical industries, and participates in international trade exhibitions.
Production
Melcor manufactures its modules in facilities near Lawrence Township, New
Jersey, comprising 53,000 square feet. The Company believes that the production
capacity available at Melcor's facilities is sufficient for its needs for the
foreseeable future.
Melcor designs and builds internally certain module producing equipment.
Melcor has a program in place to maintain, upgrade and replace equipment as
necessary and seeks to selectively automate its processes on an ongoing basis to
improve productivity.
SEASONALITY
Rotorex's results of operations and financial condition currently are
substantially dependent on its sales to the domestic room air conditioner
market, which is highly seasonal. In addition, Rotorex's working capital
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<PAGE> 107
needs are seasonal, with its greatest utilization of lines of credit early in
the calendar year. Melcor's sales are moderately seasonal. Demand for its
products is lowest in the third calendar quarter.
RAW MATERIALS AND PURCHASED COMPONENTS
The most important material purchased by Rotorex is steel. However, steel
is a relatively small part of the overall cost of a compressor and increases in
its cost have not had a material impact on Rotorex's cost of production. Rotorex
also purchases from other domestic and foreign manufacturers certain components,
the most important of which is motors. Melcor's primary purchases of materials
are the elements that comprise the metal ingots, ceramic plates, stampings and
plating.
Neither Rotorex nor Melcor is dependent upon any one source for major
components of its manufactured products, except that General Electric Company,
Rotomatika (a Slovenian company), Daewoo and Goldstar, are major suppliers of
motors used by Rotorex in manufacturing compressors.
COMPETITION
Rotorex competes against approximately eight domestic and foreign
companies, many of which are substantially larger and have greater resources
than Rotorex. Competition in the market for Rotorex compressors is generally on
the basis of price and quality. The Company believes that its pricing and
warranty policies are competitive with those of similar manufacturers. In the
markets in which Rotorex competes, it faces competition from large manufacturers
from the United States, Japan and Korea. The Company believes that its pricing,
design and quality allow it to be competitive in these markets. In addition, the
investments previously described are expected to allow Rotorex to remain
competitive while improving operating margins. Purchasers of rotary compressors
generally require high efficiency, low noise and long-term reliability. The
Company believes that Rotorex is generally competitive based on these criteria.
A new design engineering laboratory and the other investments previously
described herein will allow Rotorex to continually improve its compressors to
remain competitive.
Melcor competes against several other manufacturers of thermoelectric
modules and believes it is one of the world's leading producers of
thermoelectric heat pump modules, in terms of unit sales and revenues, and
maintains this position on the basis of the price and quality of its products.
The quality of thermoelectric heat pump modules is measured by, among other
things, the change in temperature which can be produced by the modules and the
long-term reliability of the modules, which do not contain any moving parts.
BACKLOG
Orders for the Company's products are entered into the production sequence
as they are received. Generally, there is only a short production time necessary
to satisfy customer orders. Based on the foregoing, the Company does not believe
that recorded order backlog is a significant factor in understanding or
evaluating its business.
RESEARCH AND DEVELOPMENT
Information with respect to amounts spent on research and development by
the Company is included in Note 1 of the Notes to Consolidated Financial
Statements at page 22 herein. During 1993 and 1994, the expenses for research
and development increased significantly, primarily as a result of increased
expenditures at Rotorex necessary to staff and equip its design engineering
group in a manner appropriate to Rotorex's operations following the Company's
acquisition of Rotorex in September 1992. It is expected that these costs will
continue to increase but on a more moderate scale, consistent with the increase
in 1995. At Melcor, there is also a strong research and development effort and
certain costs previously otherwise classified were reclassified to research and
development in 1994.
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TRADEMARKS
Rotorex sells its compressors under the trademark ROTOREX. Melcor's modules
are sold under the trademark FRIGICHIPS. While the Company believes that these
trademarks are well known and enhance the marketing of Rotorex's and Melcor's
products, the Company does not consider that the successful conduct of either
operation is dependent upon such trademarks.
WORKING CAPITAL PRACTICES
The Company regularly reviews working capital components with a view to
maintaining the lowest level consistent with requirements of anticipated levels
of operations. Sales of both Rotorex compressors and Melcor modules are
currently weighted toward the first half of the calendar year, and the Company's
working capital requirements are greatest during this period. Information with
respect to the Company's warranty and return policies is included in Note 1 of
the Notes to Consolidated Financial Statements at page 21 herein.
ENVIRONMENTAL MATTERS
It is the Company's policy to take all practicable measures to minimize air
and water pollution resulting from its operations. Neither Rotorex nor Melcor
made capital expenditures on environmental protection related items during 1995
which were material to their total capital expenditures, earnings and
competitive position or anticipate making material capital expenditures on such
items in 1996.
EMPLOYEES
The Company has approximately 920 employees. The contract with the union
representing Rotorex employees expires in August 1997. The current agreement,
which was negotiated in 1994, created a new classification for employees who
work in operations in which high precision is a requirement and which are most
important from a quality standpoint. This and certain other work-rules changes
are expected to be a factor in improving efficiency at the Rotorex facility.
Melcor's employees are non-union. The Company considers its relations with its
employees to be satisfactory.
ITEM 2. PROPERTIES
The Company's executive offices are located in facilities owned by the
Company in Basking Ridge, New Jersey. Rotorex and Melcor own or lease the
following facilities:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
LOCATION PRINCIPAL FUNCTION OF FLOOR AREA
-------------------------------------------------- ---------------------- -------------
<S> <C> <C>
Frederick, Maryland manufacture of rotary 200,000
(owned by Rotorex) compressors
780 North Clinton Ave. manufacture of 15,000
Trenton, New Jersey components
(leased by Melcor)
990 Spruce Street manufacture of 15,000
Lawrence Twp, New Jersey components
(owned by Melcor)
1040 Spruce Street assembly of modules 22,400
Lawrence Twp, New Jersey and executive offices
(leased by Melcor)
</TABLE>
The Company believes that Rotorex's and Melcor's machinery, equipment and
facilities are in good operating condition. Certain of the investments at the
Rotorex facility described previously coupled with additional selected
investments and process changes are expected to increase Rotorex's capacity by
the fourth quarter of 1996, enabling Rotorex to support growing international
sales opportunities. Melcor has sufficient capacity to support sales growth for
the foreseeable future and continually seeks to selectively automate processes
at its facilities.
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<PAGE> 109
ITEM 3. LEGAL PROCEEDINGS
On June 28, 1989, Rotorex received notice that it was named as a
potentially responsible party in a proceeding pending before the United States
Environmental Protection Agency captioned In the Matter of Spectron, Inc. Site.
This proceeding involves a superfund site in Elkton, Maryland which is currently
being remediated. Activities at the site are currently being undertaken by a
large (more than 850) group of companies under an Administrative Order by
Consent, Docket No. III-89-23-DC. In October 1995, Rotorex received a notice
describing a proposed settlement addressing all cleanup liabilities at the site.
Rotorex has indicated its interest in joining in the settlement as a de minimis
settlor. Assuming a settlement is reached on this basis, Rotorex's liability
would be approximately $140,000. The Company believes that the outcome of such
litigation will not have a materially adverse effect on the financial
statements.
As of December 31, 1995, the Company was on appeal in the United States
Court of Appeals for the Second Circuit from a judgment, in the amount of $1.2
million, exclusive of interests and costs, rendered against Rotorex in the
United States District Court for the Northern District of New York in a case
captioned Delchi Carrier SpA v Rotorex Corporation. The appeal was filed in
October 1994 and seeks to overturn a judgment for lost profits and certain costs
arising out of a contract to supply compressors in 1988. The Company satisfied
the judgment in the first quarter of 1996. For additional information on legal
proceedings, see Note 9 of the Notes to Consolidated Financial Statements at
page 27 herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information as of March 26, 1996
with respect to each person who is an executive officer of the Company. Officers
are elected annually for a term of one year and until their successors have been
elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
------------------------------------------- --- -------------------------------------
<S> <C> <C>
Salvatore Giordano......................... 85 Chairman of the Board
Sal Giordano, Jr........................... 57 Vice Chairman and Chief Executive
Officer
Joseph Giordano............................ 63 President
Kent E. Hansen............................. 48 Vice President-Finance and General
Counsel, Chief Financial Officer;
Secretary
Edwin Diaz................................. 33 Controller
</TABLE>
Messrs. Salvatore Giordano and Sal Giordano, Jr. have held their present
positions since November 1986. Mr. Joseph Giordano has been President of the
Company since May 1990 and, prior thereto, Senior Vice President of the Company
from November 1986. Messrs. Salvatore Giordano and Sal Giordano, Jr. are
executive officers of Fedders and they and Mr. Joseph Giordano are directors and
stockholders of Fedders. Messrs. Sal Giordano, Jr. and Joseph Giordano are sons
of Mr. Salvatore Giordano.
Mr. Hansen has held his present position since August 1992. Previously, he
was Vice President and General Counsel of Fedders from October 1989 and, prior
thereto, Associate General Counsel of Fedders from September 1985.
Mr. Diaz was elected Controller of the Company in October 1994. Prior to
joining the Company, Mr. Diaz was Controller of Lancer Industries, Inc. from
October 1990 and Assistant Controller of The Alfieri Organization from May 1988.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock and Class A Stock trade on the Nasdaq Stock
Market. There is no established public trading market for the Company's Class B
Stock, as there are restrictions on its transfer. As of March 19, 1996, there
were 2,536 record holders of Common Stock, 2,542 record holders of Class A Stock
and 41 record holders of Class B Stock. For information with respect to the
Company's Common Stock, Class A Stock and Class B Stock, see Notes 4, 5 and 11
of the Notes to Consolidated Financial Statements at pages 24, 25 and 27 herein.
ITEM 6. SELECTED FINANCIAL DATA
See the table entitled "Selected Financial Data" at page 16 herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion addresses factors which influenced the financial
position and operating results of the Company during the periods included in the
accompanying consolidated financial statements. The Company acquired Rotorex and
Melcor in September 1992.
Results of Operations. The Company's revenues increased in 1995 by
$3,630,000 over 1994. The net growth in revenues in 1995 reflects higher sales
of rotary compressors under the Supply Agreement (see Note 2 of the Notes to
Consolidated Financial Statements) and an increase in international sales.
Melcor's revenues in 1995 remained unchanged versus 1994. The Company's revenue
growth in 1994 over 1993 of $16,011,000 was due to increased compressor sales to
Fedders, offset by lower sales of thermoelectric heating and cooling modules
caused by increased competition in certain of Melcor's markets. The Company had
revenues of $59,226,000 in 1993, its first full year of operations with Rotorex
and Melcor.
The gross profit margin decreased in 1995 as a result of continued
manufacturing inefficiencies at the Company's rotary compressor operations.
During 1995, manufacturing inefficiencies from sustaining high production
volumes and efforts to operate the newly purchased automated compressor assembly
system at specified levels have negatively impacted results. As of December 31,
1995, the assembly system was not operating as specified. The manufacturing
inefficiencies at Rotorex are not expected to show significant improvement until
the assembly system is fully operational at specified levels. The 1994 gross
profit margin was lower than 1993 due to manufacturing inefficiencies in the
production of rotary compressors as a result of ramping up to and sustaining a
higher level of production than had been required at Rotorex in more than 5
years.
Selling, general and administrative expense of $9,171,000 in 1995
represents a decrease over 1994, which included a one-time charge of $1,200,000
for certain litigation. Excluding the 1994 litigation charge, 1995 selling,
general and administrative expense increased over 1994 by $818,000, primarily
due to increased sales and marketing efforts at Rotorex and Melcor. Selling,
general and administrative expense of $9,553,000 in 1994 increased over 1993 due
to the provision for certain litigation and an increase in research and
development costs primarily attributable to staffing and equipping Rotorex's
design engineering group.
Interest expense in 1995 is related to capital lease obligations of Rotorex
incurred in 1995 (see Note 7 of the Notes to Consolidated Financial Statements).
The 1995 net loss of $4,061,000 reflects less favorable results than the
1994 earnings of $635,000 as a result of the factors described above. In 1993,
the Company produced earnings of $4,244,000 in the first full year of operations
with Rotorex and Melcor. During 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 "Accounting for Income Taxes" as of January 1, 1993.
The cumulative effect of accounting change reflects the utilization of tax loss
carryforwards in the first quarter of 1993.
Liquidity and Capital Resources. The Company's working capital
requirements are currently heaviest in the first three months of the year as
operations reflect the seasonal demands of the air conditioner market. The
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<PAGE> 111
Company's cash provided from operations in 1995, 1994, and 1993 was $5,104,000,
$5,380,000 and $1,410,000 respectively.
Accounts receivable of $4,075,000 at December 31, 1995 decreased from
$7,323,000 due to Fedders' taking advantage of Rotorex's cash discount terms.
Inventories at December 31, 1995 increased to $11,783,000 from $10,745,000 at
December 31, 1994 primarily from increased production requirements at the rotary
compressor operation. Other current assets increased $806,000 over 1994
primarily due to prepaid lease obligations and other miscellaneous manufacturing
supplies. The increase of $3,345,000 in accounts payable is due to the increased
production requirements at Rotorex.
Capital expenditures for the years ended December 31, 1995 and 1994 were
$2,977,000 and $1,707,000, respectively. During 1995, the Company entered into
$7,463,000 of new capital leases primarily for an automated compressor assembly
system and a plant wide air conditioning system (see Note 7 of the Notes to
Consolidated Financial Statements). These investments are primarily for projects
expected to enhance manufacturing efficiencies and capacity at Rotorex.
The Company has a $3,000,000 working capital facility with a commercial
bank, which bears interest at the prime rate plus one percent. The facility
expires April 30, 1996. Management believes that the facility will be extended
and the Company's cash flow from operations and financing arrangements are
adequate to meet the needs of its operations and its future requirements.
Management continues to assess the Company's ability to secure additional
financing to achieve the Company's growth objectives. The concentration of
Rotorex's sales to Fedders may make access to capital more difficult as many
lending institutions have policies that make it difficult for borrowers that
have a significant concentration of business with one customer. Management
believes the merger with Fedders, if completed, would improve the Company's
access to additional financing and its ability to grow and achieve its full
capacity.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company at December 31, 1995
and 1994 and for each of the three years in the period ended December 31, 1995,
the notes thereto and the report of the Company's independent auditors thereon
are included at pages 17 through 29 herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
In August 1995, the Company dismissed Ernst & Young LLP ("E & Y") as its
independent accountants. The Company has engaged BDO Seidman, LLP as its new
independent accountants.
The reports of E & Y on the Company's financial statements for the years
ended December 31, 1994 and 1993 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle. During the last two fiscal years, the
Company has not had any disagreements with E & Y on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Following is information with respect to the Company's directors. With the
exception of Mr. Keen, each of the individuals listed below has been a director
since October 1986. Mr. Keen was first elected a director of the Company in
1990. Set forth opposite the name of each nominee and each director is his age,
principal occupation for the past five years, the name and principal business of
any corporation or other organization in which such employment is carried on and
other business directorships held by the nominee or director. Two Directors are
elected annually for terms of three years.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR THE PAST
NAME FIVE YEARS AND AGE
-------------------------------------- ---------------------------------------------------
<S> <C>
Sal Giordano, Jr.*.................... Vice Chairman of the Company (1)(2); 57
William J. Brennan.................... Retired(2); Director of Fedders Corporation and
CSM Environmental Systems, Inc.; 68
Joseph Giordano*...................... President of the Company(1)(2); 63
S. A. Muscarnera**.................... Director of Fedders Corporation(2); 56
Salvatore Giordano.................... Chairman of the Board of the Company(1)(2); 85
C. A. Keen............................ Retired(3); 71
</TABLE>
- ---------------
* Son of Salvatore Giordano.
** Nephew of Salvatore Giordano.
(1) Messrs. Salvatore Giordano and Sal Giordano, Jr. are also executive officers
of, and they and Mr. Joseph Giordano are directors and stockholders of,
Fedders, a manufacturer of room air conditioners. Fedders purchases
compressors from Rotorex, in the ordinary course of its business. In 1995,
such purchases totaled $62 million.
(2) Messrs. Salvatore Giordano, Joseph Giordano, Sal Giordano, Jr. and S. A.
Muscarnera have been associated in executive capacities with the Company and
Fedders for more than five years. Mr. Brennan was President and Treasurer of
the Company until his retirement on December 31, 1987.
(3) Mr. Keen was Vice President of Fedders for more than 20 years until his
retirement in August 1992, with responsibilities in a number of areas during
that time, including marketing, treasury and international sales and
sourcing.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During 1995, the Board of Directors of the Company held eight meetings. All
of the present directors attended 75% or more of such meetings and of meetings
of committees of which they were members. Directors who are not employees
receive an annual fee of $16,000.
The Audit Committee of the Board of Directors, consisting of Messrs.
William J. Brennan and S.A. Muscarnera, held two meetings during 1995. The Audit
Committee reviews the audit function with the Company's independent auditors.
The chairman of the Audit Committee, Mr. Brennan, receives a fee of $1,000 for
each meeting he attends. Other members of the Audit Committee who are not
employees receive a fee of $500 for each meeting they attend.
The Company does not have a nominating or compensation committee.
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<PAGE> 113
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following information is furnished as to all cash compensation paid by
the Company and its subsidiaries during the past three years to each of the
highest paid executive officers of the Company whose aggregate direct
compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------ (I)
---------------------------
(C) (D) (G) ALL OTHER
(A) (B) SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
- -------------------------------------- ---- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Salvatore Giordano.................... 1993 245,000 29,738 60,000 --
Chairman of the Board of Directors 1994 265,506 29,738 -- --
1995 265,506 29,738 -- --
Sal Giordano, Jr. .................... 1993 220,883 29,738 60,000 --
Vice Chairman 1994 237,660 -- -- 14,444
1995 237,660 -- -- 13,724
Joseph Giordano....................... 1993 170,833 29,738 60,000 5,125
President 1994 181,866 29,738 -- 13,826
1995 185,503 -- -- 16,952
Kent E. Hansen........................ 1993 170,910 29,738 60,000 5,125
Vice President-Finance 1994 181,866 29,738 -- 7,849
and General Counsel 1995 185,503 -- -- 10,750
</TABLE>
- ---------------
(1) Includes the Company contribution to savings and investment retirement plans
up to the 3% level permitted by the plans and, in 1994 and 1995, the dollar
value of the benefit of premiums paid for split-dollar life insurance
policies projected on an actuarial basis, which cost is recovered by the
Company from the proceeds of such policies (Mr. Sal Giordano, Jr., $6,485
and $6,595, Mr. Joseph Giordano, $7,478 and $7,372 and Mr. Hansen, $1,501
and $3,686 in 1994 and 1995, respectively).
AGGREGATE OPTION/SAR EXERCISES AND YEAR-END OPTION/SAR VALUE TABLE
The following table sets forth the number of shares exercised during 1995,
the value realized upon exercise, the number of unexercised options at the end
of 1995, and the value of unexercised in-the-money options at the end of 1995.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT OPTIONS
SHARES YEAR-END(#) YEAR-END($)
ACQUIRED ON VALUE
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------ ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Salvatore Giordano........................ -- -- -- E -- E
-- -- 90,000U 178,125U
Sal Giordano, Jr.......................... -- -- -- E -- E
-- -- 90,000U 178,125U
Joseph Giordano........................... -- -- -- E -- E
-- -- 75,000U 139,688U
Kent E. Hansen............................ -- -- 15,000E 38,438E
-- -- 60,000U 101,250U
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no separate Compensation Committee, and matters concerning
executive compensation are considered by the entire Board of Directors, with
directors who are also officers of the Company abstaining from any vote
concerning their own proposed compensation. During 1995, Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano, were both directors and
executive officers of the Company.
EMPLOYMENT CONTRACT
Mr. Salvatore Giordano has an Employment Agreement with the Company, which
became effective on October 26, 1993. The material provisions of the Agreement
include; (1) an annual base salary of at least $250,000, payable in equal
semi-monthly installments; (2) annual participation in all compensatory plans
and arrangements of the Company no less favorable than the fiscal year 1993
plans including, but not limited to, a bonus not less than the amount of the
fiscal year 1993 bonus, and continuing eligibility to be awarded stock options;
(3) reimbursement for all expenses incurred while on Company related business;
and (4) annual consideration for base salary and plan participation increases,
if deemed justified by the Company. The Agreement has a stated expiration date
of October 26, 2003, but the term of the Agreement automatically extends and has
a remaining term of ten years from any point in time, until the term is finally
fixed at a period of ten years from an intervening event, as provided for in the
Agreement, such as permanent disability or death. During 1995, the Company
amortized the estimated present value of future non-salary benefits payable
under the Agreement based upon certain assumptions, in the amount of $306,000
11
<PAGE> 115
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF NYCOR
As of March 19, 1996 each director of NYCOR and all directors and executive
officers of NYCOR owned beneficially the number of shares of NYCOR's equity
securities set forth in the following table. As of such date, no director or
executive officer of NYCOR owns beneficially any shares of NYCOR Preferred
Stock. Shares subject to acquisition within 60 days pursuant to stock options
are shown separately. Unless otherwise indicated, the owners listed have sole
voting and investment power. NYCOR Class A Stock has no voting rights except as
provided under the Delaware law.
<TABLE>
<CAPTION>
SHARES
AMOUNT AND SUBJECT TO
NATURE OF ACQUISITION PERCENT
TITLE OF NAME OF INDIVIDUAL BENEFICIAL WITHIN 60 OF CLASS
CLASS OR PERSONS IN GROUP OWNERSHIP DAYS(8) OWNED(9)
- ------------- -------------------------------------- ---------- ----------- ------------
<C> <S> <C> <C> <C>
Common Stock Salvatore Giordano.................... 12,816 (1) 0 Less than 1%
Sal Giordano, Jr...................... 83,917 (1)(2) 0 3.0%
Joseph Giordano....................... 47,528 (1) 0 1.7%
William J. Brennan.................... 58,529 (3) 0 2.1%
S. A. Muscarnera...................... 16,250 0 Less than 1%
All directors and executive officers
as a
group................................. 213,102 0 7.6%
Class A Stock Salvatore Giordano.................... 587,850 (4)(5) 90,000 16.4%
Sal Giordano, Jr...................... 368,988 (4)(6) 90,000 11.1%
Joseph Giordano....................... 141,942 (4) 75,000 5.3%
William J. Brennan.................... 63,373 (3) 22,500 2.1%
S. A. Muscarnera...................... 35,903 22,500 1.4%
C. A. Keen............................ 14,250 22,500 Less than 1%
Kent E. Hansen........................ 25,000 75,000 2.4%
All directors and executive officers
as a
group................................. 1,016,944 397,500 31.8%
Class B Stock Salvatore Giordano.................... 640,352 (7) 0 89.7%
Sal Giordano, Jr...................... 640,352 (7) 0 89.7%
Joseph Giordano....................... 640,352 (7) 0 89.7%
All directors and executive officers
as a
group................................. 640,352 (7) 0 89.7%
Ownership of Common Stock, Class A
Stock and Class B Stock combined,
by all directors and executive
officers
as a group............................ 1,870,248 397,500 28.5%
</TABLE>
- ---------------
(1) The amount shown includes 2,969 shares as to which Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment
power.
(2) The amount shown includes 2,500 shares held of record by Mr. Giordano's wife
and 20,201 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(3) The amount shown includes 250 shares as to which Mr. Brennan shares voting
and investment power.
(4) The amount shown includes 110,256 shares as to which Messrs. Salvatore
Giordano, Joseph Giordano and Sal Giordano, Jr. share voting and investment
power.
(5) The amount shown includes 80,201 shares held of record by Mr. Giordano's
wife in trust for their grandchildren, as to which Mr. Giordano disclaims
beneficial ownership.
12
<PAGE> 116
(6) The amount shown includes 4,991 shares held of record by Mr. Giordano's wife
and 8,610 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(7) The amount shown is held by Giordano Holding Corp. Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano are officers and directors
of such corporation and share voting and investment power over these shares.
(8) The amounts shown are the number of shares held under options exercisable
within 60 days.
(9) The NYCOR Class B Stock is convertible into NYCOR Common Stock at any time
on a share-for-share basis. In the event that the individuals named as
owning NYCOR Class B Stock converted their shares into NYCOR Common Stock
less than 5% of the class would remain outstanding, and pursuant to the
terms of the Certificate of Incorporation of NYCOR, all remaining NYCOR
Class B Stock and all outstanding NYCOR Class A Stock would automatically be
converted into NYCOR Common Stock. In such event, and assuming exercise of
all options, such individuals and the group would beneficially own the
following number of shares constituting the indicated percentage of NYCOR
Common Stock which would then be outstanding: Mr. Salvatore Giordano,
1,241,018 shares (of which 753,577 are shares as to which Mr. Giordano
shares voting and investment power with Messrs. Joseph Giordano and Sal
Giordano, Jr.) constituting 17.4%; Mr. Sal Giordano, Jr., 1,093,257 shares
(of which 753,577 are shares as to which Mr. Giordano shares voting and
investment power with Messrs. Salvatore Giordano and Joseph Giordano)
constituting 15.5%; Mr. Joseph Giordano, 829,822 shares (of which 753,577
are shares as to which Mr. Giordano shares voting and investment power with
Messrs. Salvatore Giordano and Sal Giordano, Jr.) constituting 11.9%; and
all directors and executive officers as a group 1,649,886 shares
constituting 25.7%.
13
<PAGE> 117
PRINCIPAL STOCKHOLDERS OF NYCOR
The following table sets forth information at December 31, 1995 with
respect to the beneficial ownership of NYCOR's voting securities by all persons
known by NYCOR to own more than 5% of NYCOR's outstanding voting securities.
Unless otherwise indicated, the owners listed have sole voting and investment
power.
<TABLE>
<CAPTION>
AMOUNT
TITLE OF NAME AND ADDRESS BENEFICIALLY PERCENT
CLASS OF BENEFICIAL OWNER(1) OWNED OF CLASS
- ------------- ------------------------------------------------ ------------ ---------
<S> <C> <C> <C>
Common Stock Heartland Advisors, Inc......................... 524,146 18.9%
790 North Milwaukee Street
Milwaukee, WI 53202
Lindner Investment Series Trust................. 380,432(1) 12.1%
Ryback Management Corporation
7711 Carondelet Ave., Box 16900
St. Louis, MO 63105
Class B Stock Salvatore Giordano.............................. 640,352 89.7%
Joseph Giordano and
Sal Giordano, Jr.
c/o NYCOR, Inc.
287 Childs Road
Basking Ridge, NJ 07920
Dimensional Fund Advisors, Inc.................. 67,515(2) 9.5%
1299 Ocean Avenue 11th Floor
Santa Monica, CA 90901
</TABLE>
- ---------------
(1) Includes 345,432 shares which would be held upon conversion of $1.70
Convertible Exchangeable Preferred Stock.
(2) The following statement has been provided by Dimensional Fund Advisors,
Inc.: "Dimensional Fund Advisors, Inc. ("Dimensional") a registered
investment advisor, is deemed to have beneficial ownership of 67,515 shares
of NYCOR, Inc., all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional Fund
Advisors, Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 10 herein.
14
<PAGE> 118
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Index to Financial Statements and Financial Statement Schedules
(a) 1. Financial Statements
The following Consolidated Financial Statements of the Company are
included at pages 17 through 29 therein:
Consolidated Balance Sheets at December 31, 1995 and 1994.
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Report of Independent Certified Public Accountants.
Report of Independent Auditors.
15
<PAGE> 119
(a) 2. Financial Statement Schedules
Consolidated Schedules as of and for each of the years ended December
31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
FORM 10-K
PAGE
---------
<S> <C>
II. Valuation and Qualifying Accounts............................. S-1
Report of Independent Certified Public Accountants................ S-2
</TABLE>
All other schedules have been omitted because of the absence of the
conditions under which they are required or because the required information is
included in the Consolidated Financial Statements or the notes thereto.
SELECTED FINANCIAL DATA(A)
YEARS ENDED DECEMBER 31
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales................................ $78,867 $75,237 $59,226 $ 4,624 --
Interest and other income................ -- -- -- $ 9,586 $ 6,380
Net income (loss)........................ $(4,061) $ 635 $ 4,244(b) $ 5,240 $ 4,065
Net income (loss) per share.............. $ (0.79) $ (0.17) $ 0.30 $ 0.48 $ 0.30
Cash dividends per share declared:
Preferred Stock........................ $ 1.70 $ 2.98 $ 0.850 $ 1.275 $ 1.700
Common Stock........................... -- -- -- $ 0.120 $ 0.160
Class A Stock.......................... -- -- -- $ 0.120 $ 0.160
Class B Stock.......................... -- -- -- $ 0.108 $ 0.144
AT DECEMBER 31
Cash and cash equivalents................ $ 1,533 $ 1,981 $ 1,336 $ 1,495 $12,214
Total assets............................. $93,502 $88,994 $90,956 $89,073 $75,642
Long-term debt (including current
portion)............................... $ 6,877 $ 33 $ 26 $ 546 --
Stockholders equity...................... $72,730 $78,746 $81,565 $76,524 $74,056
</TABLE>
- ---------------
(a) The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the notes
thereto.
(b) In 1993, the Company adopted SFAS No. 109, Accounting for Income Taxes,
which resulted in income of $627,000 or $0.09 per share from the cumulative
effect of an accounting change.
16
<PAGE> 120
NYCOR, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1995 1994
------- -------
(AMOUNTS IN
THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 1,533 $ 1,981
Accounts receivable, net of allowance for doubtful accounts of $607 and
$409 in 1995 and 1994, respectively................................. 2,215 1,353
Accounts receivable from Fedders Corporation........................... 1,860 5,970
Inventories............................................................ 11,783 10,745
Other current assets................................................... 1,417 611
------- -------
Total current assets........................................... 18,808 20,660
Property, plant and equipment, net....................................... 31,179 23,854
Goodwill................................................................. 41,124 42,240
Other assets............................................................. 2,391 2,240
------- -------
Total assets................................................... $93,502 $88,994
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 7,709 $ 4,364
Accrued expenses....................................................... 4,724 4,798
Current portion of long-term debt...................................... 1,176 10
Other current liabilities.............................................. 81 71
------- -------
Total current liabilities...................................... 13,690 9,243
Long-term debt........................................................... 5,701 23
Other long-term liabilities:
Warranty expense....................................................... 577 616
Other.................................................................. 804 366
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1 par value, 5,000,000 shares authorized, 1,150,000
issued and outstanding at December 31, 1995 and 1994 with a
liquidation preference of $23,000,000............................... 1,150 1,150
Common Stock, $1 par value, 115,000,000 shares authorized, 2,882,580
and 2,882,155 issued at December 31, 1995 and 1994, respectively.... 2,882 2,882
Class A Stock, $1 par value, 100,000,000 shares authorized, 4,229,971
issued at December 31, 1995 and 1994................................ 4,230 4,230
Class B Stock, $1 par value, 7,500,000 shares authorized, 713,675 and
714,100 issued and outstanding at December 31, 1995 and 1994,
respectively........................................................ 714 714
Additional paid-in capital............................................. 37,779 37,779
Retained earnings from January 1, 1988................................. 27,128 33,144
Less-treasury stock, at cost:
82,561 shares of Common Stock and 178,596 shares of Class A Stock at
December 31, 1995 and 1994.......................................... (1,153) (1,153)
------- -------
Total stockholders' equity..................................... 72,730 78,746
------- -------
Total liabilities and stockholders' equity..................... $93,502 $88,994
======= =======
</TABLE>
See accompanying notes
17
<PAGE> 121
NYCOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales..................................................... $78,867 $75,237 $59,226
Cost of goods sold............................................ 73,210 64,921 46,554
Selling, general and administrative expense................... 9,171 9,553 8,366
------- ------- -------
Operating income (loss)....................................... (3,514) 763 4,306
Interest expense (income) (net of interest income of $115 in
1995)....................................................... 189 (93) (73)
------- ------- -------
Income (loss) before income taxes and cumulative effect of an
accounting change........................................... (3,703) 856 4,379
Federal, foreign and state income taxes....................... 358 221 762
------- ------- -------
Income (loss) before cumulative effect of an accounting
change...................................................... (4,061) 635 3,617
Cumulative effect of an accounting change..................... -- -- 627
------- ------- -------
Net income (loss)............................................. (4,061) 635 4,244
Preferred Stock dividend requirement.......................... (1,955) (1,955) (1,955)
------- ------- -------
Net income (loss) attributable to common stockholders......... $(6,016) $(1,320) $ 2,289
======= ======= =======
Primary earnings (loss) per share:
Income (loss) before cumulative effect of an accounting
change................................................... $ (0.79) $ (0.17) $ 0.21
Cumulative effect of an accounting change................... -- -- 0.09
------- ------- -------
Net income (loss) per share................................... $ (0.79) $ (0.17) $ 0.30
======= ======= =======
</TABLE>
See accompanying notes
18
<PAGE> 122
NYCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss)........................................... $(4,061) $ 635 $ 4,244
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation........................................... 3,100 2,966 2,877
Amortization........................................... 1,548 1,557 1,365
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable............. 3,248 (2,377) (2,074)
Decrease (increase) in inventories..................... (1,038) 2,234 (2,963)
Increase in other current assets....................... (806) (203) (243)
Increase in other assets............................... (583) (282) (47)
Increase (decrease) in accounts payable................ 3,345 509 (780)
Increase (decrease) in accrued expenses and other
current liabilities................................. 351 341 (969)
------- ------- --------
Net cash provided by operations..................... 5,104 5,380 1,410
------- ------- --------
Cash flows from investing activities:
Proceeds from sale of equipment............................. -- 439 --
Additions to property, plant and equipment.................. (2,977) (1,707) (957)
------- ------- --------
Net cash used in investing activities............... (2,977) (1,268) (957)
------- ------- --------
Cash flows from financing activities:
Dividends paid.............................................. (1,955) (3,421) (978)
Payments on capital lease................................... (620) (13) (67)
Proceeds from stock options exercised....................... -- 228 120
Proceeds from sale of stock................................. -- -- 1,166
Acquisition of treasury stock............................... -- (261) --
Increase (decrease) in short-term borrowing................. -- -- (400)
Repayment of long-term debt................................. -- -- (453)
------- ------- --------
Net cash used in financing activities............... (2,575) (3,467) (612)
------- ------- --------
Net increase (decrease) in cash and cash equivalents.......... (448) 645 (159)
Cash and cash equivalents, beginning of year.................. 1,981 1,336 1,495
------- ------- --------
Cash and cash equivalents, end of year........................ $ 1,533 $ 1,981 $ 1,336
======= ======= ========
Supplemental disclosure:
Interest paid............................................... $ 301 $ 20 $ 30
Income taxes paid........................................... $ 354 $ 226 $ 300
Non-cash investing and financing activities:
Leased asset additions and related obligations.............. $ 7,463 -- --
</TABLE>
See accompanying notes
19
<PAGE> 123
NYCOR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON CLASS A CLASS B PAID-IN TREASURY RETAINED
STOCK STOCK STOCK STOCK CAPITAL STOCK EARNINGS
--------- ------ ------- ------- ---------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992...... $ 1,150 $2,809 $ 3,524 $ 715 $ 34,798 $ (792) $ 34,320
Net income........................ -- -- -- -- -- -- 4,244
Preferred Stock dividend.......... -- -- -- -- -- -- (489)
Reclassification of additional
paid-in capital................. -- -- -- -- 1,663 -- (1,663)
Limited stock offering............ -- -- 606 -- 560 -- --
Stock options exercised........... -- 25 25 -- 70 -- --
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1993...... 1,150 2,834 4,155 715 37,091 (792) 36,412
Net income........................ -- -- -- -- -- -- 635
Preferred Stock dividend.......... -- -- -- -- -- -- (3,421)
Conversion of stock............... -- 1 -- (1) -- -- --
Purchase of treasury stock........ -- -- -- -- -- (361) --
Stock issuance.................... -- -- 28 -- 72 -- --
Stock options exercised........... -- 47 47 -- 134 -- --
Reclassification of additional
paid-in capital................. -- -- -- -- 482 -- (482)
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1994...... 1,150 2,882 4,230 714 37,779 (1,153) 33,144
Net loss.......................... -- -- -- -- -- -- (4,061)
Preferred Stock dividend.......... -- -- -- -- -- -- (1,955)
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1995...... $ 1,150 $2,882 $ 4,230 $ 714 $ 37,779 $ (1,153) $ 27,128
====== ====== ====== ==== ======= ======= =======
</TABLE>
See accompanying notes
20
<PAGE> 124
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The accompanying financial statements include
the accounts of NYCOR, Inc. (the "Company") and its two operating subsidiaries,
Melcor Corporation ("Melcor") and Rotorex Company, Inc. ("Rotorex"). All
significant intercompany accounts and transactions are eliminated in
consolidation. Melcor is a manufacturer of solid state thermoelectric heat pump
modules, which are used for special cooling and heating applications. Rotorex
manufactures compressors for room air conditioners.
NET SALES: Sales are recorded at the time of shipment net of provisions
for sales allowances, warranty and similar items.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents are stated at cost,
which is equal to market, and include highly liquid debt instruments with
initial maturities of less than 90 days.
WARRANTY AND RETURN POLICY: Rotorex's warranty policy provides two-year
coverage for compressors. The Company's products may only be returned with the
consent of the Company. The Company's policy is to accrue the estimated cost of
warranty coverage and returns at the time the sale is recorded.
INVENTORIES: Inventories are stated at the lower of the first-in,
first-out (FIFO) cost or market. The Company periodically reviews inventory for
slow moving and obsolete items. Write downs, which have historically been
insignificant, are recorded in the period in which they are identified.
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Finished goods................................................... $ 1,021 $ 897
Work in process.................................................. 5,689 4,660
Raw materials and supplies....................................... 5,073 5,188
------- -------
$11,783 $10,745
======= =======
</TABLE>
PROPERTY, PLANT AND EQUIPMENT: Replacements, betterments and additions to
property, plant and equipment are capitalized at cost. Expenditures for
maintenance and repairs are charged to expense as incurred. Upon sale or
retirement of property, plant and equipment, the cost and related accumulated
depreciation are removed from the respective accounts and any gain or loss is
reflected in income. Property, plant and equipment consist of the following at
December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements............................................ $ 2,666 $ 2,664
Buildings and improvements....................................... 10,414 7,951
Machinery and equipment.......................................... 27,534 19,622
------- -------
Property, plant and equipment at cost............................ 40,614 30,237
Accumulated depreciation......................................... (9,435) (6,383)
------- -------
$31,179 $23,854
======= =======
</TABLE>
Depreciation is calculated using the straight-line method over the
estimated useful life of each asset which is 7 to 30 years for building and
improvements, and 3 to 12 years for machinery and equipment.
GOODWILL AND OTHER ASSETS: Other assets consist primarily of intangible
assets which, other than goodwill, are amortized over periods from 5 to 37 years
using the straight-line method. Goodwill is amortized over 40 years using the
straight-line method and is net of accumulated amortization of $3,652,000 and
21
<PAGE> 125
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
$2,536,000 at December 31, 1995 and 1994, respectively. Other assets are net of
accumulated amortization of $1,146,000 and $714,000 at December 31, 1995 and
1994, respectively, and consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
License agreements................................................. $ 412 $ 522
Customer relationships............................................. 1,003 1,033
Other intangibles.................................................. 180 383
Other.............................................................. 796 302
------ ------
Total other assets............................................ $2,391 $2,240
====== ======
</TABLE>
The recoverability of goodwill and other intangibles are evaluated
periodically based upon the expected, undiscounted net cash flows from the
related businesses.
ACCRUED EXPENSES: Accrued expenses consist of the following at December
31:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Employee compensation and benefits................................. $1,074 $1,406
Professional and consulting fees................................... 773 484
Income taxes payable............................................... 6 17
Current portion of warranty expense................................ 385 361
Litigation and contingencies....................................... 1,852 1,942
Other.............................................................. 634 588
------ ------
$4,724 $4,798
====== ======
</TABLE>
RESEARCH AND DEVELOPMENT COSTS: All research and development costs are
charged to expense as incurred and amount to $1,592,000 in 1995, $1,444,000 in
1994 and $745,000 in 1993.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RISK AND UNCERTANTIES: Approximately 68% of the Company's employees are
covered by a three year collective bargaining agreement, which expires in August
1997.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS: In March 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards "FAS" No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." The Company believes that this
pronouncement will not have a material impact on the Company's results of
operations and financial condition. In October, 1995 the FASB issued FAS No. 123
"Accounting for Stock-Based Compensation." Management is evaluating the
implementation of FAS 123, but does not expect it to have a material impact on
the Company's results of operations or financial condition.
AMOUNTS PER SHARE: Primary earnings per share are computed by dividing net
income, less Preferred Stock dividends, by the weighted average number of shares
of Common Stock, Class A Stock, Class B Stock and other common stock equivalents
outstanding during the year: 7,580,000, 7,583,000 and 7,544,000 in 1995, 1994
and 1993, respectively (notes 4 and 5).
22
<PAGE> 126
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
Fully diluted earnings per share are computed by dividing net income by the
weighted average number of shares of Common Stock, Class A Stock, Class B Stock
and other common stock equivalents (assuming conversion of Preferred Stock)
outstanding during the year: 10,133,000, 10,136,000 and 10,097,000 in 1995, 1994
and 1993, respectively. In 1995, 1994 and 1993, fully diluted earnings per share
were anti-dilutive.
RECLASSIFICATIONS: Certain items in the 1994 financial statements have
been reclassified to conform to the 1995 presentation.
2 -- TRANSACTIONS WITH FEDDERS
Certain officers and directors of the Company are also officers and
directors of Fedders Corporation ("Fedders") and have stockholdings in both
companies. Since being acquired from Fedders in 1992, Rotorex has supplied
Fedders with rotary compressors under a ten year supply agreement which requires
Fedders to purchase certain minimum quantities, up to 800,000 units, on an
annual basis. Sales to Fedders are at negotiated market prices and amount to
$61,951,000, $60,381,000, and $36,697,000 during 1995, 1994 and 1993,
respectively.
In November 1995, the Company announced that a definitive agreement was
reached to merge with Fedders. Under the terms of the agreement, NYCOR
stockholders will receive Fedders Stock with a market value, as described in the
agreement, of $6.25 on the effective date of the merger, for each share of NYCOR
Common, Class A and Class B stock outstanding prior to the merger. Such
consideration will be Fedders Class A stock, if the market value of such stock,
as determined in accordance with the agreement, prior to the merger is $6.25 or
higher per share. If the market value of Fedders Class A stock, as determined in
accordance with the agreement, is less than $6.25 per share, NYCOR stockholders
will receive shares of a new Fedders Convertible Preferred Stock with terms
expected to support an initial market value of $6.25 per share.
3 -- INCOME TAXES
At December 31, 1995, the Company had tax operating loss carryforwards of
approximately $15,355,000, of which $10,912,000 expires in 1996 and the
remainder of which expires between 1997 and 2010. The Company also had
investment tax credit carryforwards of approximately $201,000 which expire in
the period from 1996 through 2000 and alternative minimum tax ("AMT") credit
carryforwards of approximately $1,373,000.
23
<PAGE> 127
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
Deferred tax liabilities and assets, which reflect the net tax effects of
temporary differences between assets and liabilities for financial reporting and
income tax purposes, consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities -- tax over book amortization........... $ 1,752 $ 1,082
------- -------
Total deferred tax liabilities................................. $ 1,752 $ 1,082
------- -------
Deferred tax assets:
Net operating loss carryforwards............................... 5,221 4,131
AMT carryforwards.............................................. 1,373 1,373
Book over tax depreciation..................................... 1,088 709
Warranty....................................................... 327 332
Other.......................................................... 836 816
Valuation allowance for deferred tax assets...................... (7,093) (6,279)
------- -------
Total deferred tax assets...................................... 1,752 1,082
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
The reconciliation of the provision for income taxes, at the U.S. federal
statutory tax rates, to income tax expense is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax at statutory rate..................... $(1,259) $ 291 $1,531
Goodwill amortization.................................... 87 87 87
Utilization of tax loss carryforwards.................... -- (362) (946)
Operating losses with no current tax benefit............. 1,195 -- --
Alternative minimum tax.................................. -- 20 95
Refund of federal tax.................................... -- -- (91)
Foreign tax.............................................. 292 155
State taxes, net of federal benefit...................... 43 30 86
----- ------ -------
$ 358 $ 221 $ 762
===== ====== =======
</TABLE>
The provision for income taxes for 1995 consists of current state and
foreign taxes of $66,000 and $292,000, respectively. The provision for income
taxes for 1994 consists of current federal, state and foreign taxes of $20,000,
$46,000 and $155,000, respectively. The provision for income taxes for 1993
consists of deferred federal taxes of $627,000 and current state taxes of
$135,000.
The Company adopted Statement of Financial Accounting Standard No. 109
("FAS 109") "Accounting for Income Taxes" as of January 1, 1993. The adoption of
FAS 109 did not have a material effect on pretax income. However, the cumulative
effect of adopting FAS 109 was to increase net income by $627,000.
At December 31, 1987, the Company adopted Statement of Financial Accounting
Standard No. 96, ("FAS 96") "Accounting for Income Taxes," which allows the
recognition of the tax benefits of net operating loss carryforwards in the
statement of operations as a reduction of income tax expense. In September 1989,
the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
("SAB") No. 86. In the SEC staff's view, tax benefits of net operating loss
carryforwards must be reported as an addition to additional paid-in capital
rather than being recorded in the statement of operations.
24
<PAGE> 128
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
Based on the circumstances that existed when the Company reclassified its
accumulated deficit to additional paid-in capital in 1988 and adopted FAS 96,
the SEC staff has indicated that they would not object to the Company's
continued reporting of the tax benefit of its net operating loss carryforwards
in the statement of operations. If SAB No. 86 had been applied, net income for
1994, and 1993 would have been reduced by $362,000, and $946,000, respectively.
There would have been no effect on the balance sheet.
4 -- STOCK OPTION PLANS
All stock option plans, as approved by the stockholders, provide for the
granting to employees and officers of incentive stock options (as defined under
current tax laws) and non-qualified stock options to directors who are not
employees. Stock options are exercisable at a price no less than the market
value on the date of grant. Existing stock option plans permit the granting of
options to purchase up to 571,890 shares of Common Stock and up to 721,890
shares of Class A Stock. Stock options are exercisable one year after the date
of grant and, if not exercised, will expire five years from the original date of
grant.
<TABLE>
<CAPTION>
EXERCISE
(IN THOUSANDS OF SHARES) # OPTIONS PRICE
--------- --------------
<S> <C> <C>
Options outstanding at December 31, 1992........................... 373 $2.31 to $2.50
Granted............................................................ 368
Cancelled.......................................................... 1
Exercised.......................................................... 50
---
Options outstanding at December 31, 1993........................... 690 $2.31 to $3.88
Exercised.......................................................... 95
---
Options outstanding at December 31, 1994........................... 595 $2.31 to $3.88
---
Cancelled.......................................................... (106)
---
Options outstanding at December 31, 1995........................... 489 $2.31 to $3.88
===
Options exercisable at December 31, 1995........................... 15
</TABLE>
5 -- CAPITAL STOCK
PREFERRED STOCK: The Preferred Stock is convertible into Common Stock and
Class A Stock at a rate of 1.11 shares of Common Stock and 1.11 shares of Class
A Stock for each share of Preferred Stock. Accordingly, at December 31, 1995,
1,276,500 shares of Common Stock and 1,276,500 shares of Class A Stock are
reserved for issuance upon conversion. The Preferred Stock is also exchangeable
in whole, but not in part, at the option of the Company for the Company's
unissued 8 1/2% Convertible Subordinated Debentures due 2012 at the rate of $20
principal amount of Debentures for each share of Preferred Stock. The
Debentures, if issued, will be convertible into Common Stock and Class A Stock
at the conversion rate applicable to the Preferred Stock. The holders of
Preferred Stock are entitled to receive upon liquidation $20 per share, plus
accumulated and unpaid dividends to the date of distribution, before any
distribution is made on the Common Stock, Class A Stock or Class B Stock. The
Preferred Stock has an annual, cumulative dividend rate of $1.70 per share and
has no voting rights. Subsequent to December 31, 1995 the Preferred Stock was
exchanged for 8 1/2% Convertible Subordinated Debentures (note 10).
COMMON STOCK: Shares of Common Stock are reserved for the conversion of
Preferred Stock, Class A Stock and Class B Stock. At December 31, 1995, 571,890
shares are also reserved for issuance in connection with options not yet granted
or exercised under the Company's stock option plans (note 4).
25
<PAGE> 129
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
CLASS A STOCK: Class A Stock has rights, including dividend rights,
substantially identical to Common Stock, except that the Class A Stock is not
entitled to vote except to the extent provided under Delaware law. Class A Stock
will automatically be converted into Common Stock on a share-for-share basis
whenever all of the Class B Stock converts into Common Stock and, accordingly,
at December 31, 1995, 4,229,971 shares are reserved for such conversion.
Additionally, 721,890 shares are reserved for issuance in connection with
options not yet granted or exercised under the Company's stock option plans
(note 4).
CLASS B STOCK: Class B Stock is immediately convertible into Common Stock
on a share-for-share basis and accordingly, at December 31, 1995, 714,100 shares
of Common Stock are reserved for such conversion. Class B Stock has, in certain
circumstances, greater voting power in the election of directors (10 votes per
share) but receives a lower dividend (90%), if declared, than Common Stock and
Class A Stock, and has limited transferability.
6 -- SHORT-TERM BORROWING
The Company has a $3,000,000 revolving credit facility with a commercial
bank collateralized by all tangible and intangible assets, except for the
machinery and equipment of Rotorex, which expires April 30, 1996. The interest
rate on the credit facility is one percentage point above the bank's prime rate
(8 1/2% at December 31, 1995).
7 -- LONG TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
------ ----
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligation........................................... $6,877 $33
Capital lease obligation, current portion.......................... 1,176 10
--- ---
Long-term debt..................................................... $5,701 $23
=== ===
</TABLE>
The Company has equipment which are under capital leases. The aggregate
future minimum lease payments for the years ending December 31, 1995 are as
follows: $1,176,000 in 1996, $1,308,000 in 1997, $1,449,000 in 1998, $1,405,000
in 1999, and $1,539,000 in 2000. The present value of minimum lease payments is
$6,877,000, excluding $2,011,000 of interest.
8 -- COMMITMENTS AND CONTINGENCIES
The Company leases certain property and equipment under operating leases
which expire over the next five years. Most of these operating leases contain
one of the following options: (a) the Company may, at the end of the initial
lease term, purchase the property at the then fair market value or (b) the
Company may renew its lease at the then fair market value for a period of one
month to seven years. The Company has granted the lessor under the lease at
Rotorex a security interest in machinery and equipment owned by Rotorex. Minimum
payments for operating leases having initial or remaining non-cancelable terms
in excess of one year are as follows: $2,042,000 in 1996, $1,876,000 in 1997,
$1,807,000 in 1998, $1,704,000 in 1999 and $735,000 in 2000, and $958,000
thereafter. Minimum lease payments total $9,122,000. Total rent expense for all
operating leases amounted to $1,408,000 in 1995, $1,208,000 in 1994, and
$819,000 in 1993.
The Company has an employment agreement with an officer. The agreement has
a term of ten years from any point in time and provides for salary during the
employment period, a disability program, postretirement benefits and a death
benefit in an amount equal to ten times the prior year's compensation, payable
by the Company over ten years. The estimated present value of future non-salary
benefits payable under the
26
<PAGE> 130
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
agreement has been determined based upon certain assumptions and is being
amortized over the expected remaining years of service to the Company.
9 -- LITIGATION
The Company is involved in litigation incidental to the conduct of its
business. It is the opinion of management, after consultation with counsel, that
the outcome of such litigation will not have a materially adverse effect on the
financial statements. In 1994, a judgment for approximately $1,200,000,
exclusive of interest and costs, was rendered against the Company in a lawsuit
dating from 1987. Subsequent to December 31, 1995 the Company paid $1,200,000
plus accrued interest in final settlement of this judgment. The amount of the
total settlement payment was fully accrued as of December 31, 1995.
10 -- SUBSEQUENT EXCHANGE OF PREFERRED STOCK
On March 15, 1996, the Company exchanged the Preferred Stock for 8 1/2%
Convertible Subordinated Debentures due 2012 at the rate of $20 principle amount
of Debenture for each share of Preferred Stock. As a result of this exchange
long-term debt increased by $23,000,000, and total stockholders equity was
reduced by a corresponding amount. Had this exchange occurred at the beginning
of 1995, interest expense and net loss would have increased by $1,955,000, no
Preferred Stock dividend would of been declared and net loss per share would not
have changed from the reported amount.
11 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995 QUARTERS 1994 QUARTERS
------------------------------------------- -------------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AND MARKET PRICE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $21,036 $19,707 $15,844 $22,280 $21,457 $23,083 $11,575 $19,122
======= ======= ======= ======= ======= ======= ====== =======
Net income (loss).............. $ (899) $ (328) $(1,887) $ (947) $ 1,227 $ 660 $(1,312) $ 60
======= ======= ======= ======= ======= ======= ====== =======
Primary net income (loss) per
share........................ $(0.18) $(0.11) $(0.31) $(0.19) $ 0.10 $ 0.02 $(0.24) $ (0.05)
======= ======= ======= ======= ======= ======= ====== =======
Market price per share:
Common: High............... 31/4 215/16 215/16 57/8 51/2 43/4 51/8 3
Low................ 25/8 23/8 23/8 21/8 37/8 31/2 23/4 21/8
Class A: High.............. 27/8 23/4 31/8 51/2 43/4 41/2 5 27/8
Low................. 23/8 23/8 23/8 21/8 31/4 31/8 21/2 2
Preferred: High............ 143/4 15 151/2 17 193/4 183/4 181/2 16
Low................ 13 12 121/4 131/2 171/4 17 151/4 131/4
Cash dividends declared:
Preferred Stock.............. $ 0.425 $ 0.425 $ 0.425 $ 0.425 $ 0.850 $ 0.850 $ 0.850 $ 0.425
Common Stock................. -- -- -- -- -- -- -- --
Class A Stock................ -- -- -- -- -- -- -- --
Class B Stock................ -- -- -- -- -- -- -- --
</TABLE>
27
<PAGE> 131
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of NYCOR, Inc.
We have audited the accompanying balance sheet of NYCOR, Inc., as of
December 31, 1995 and the related statements of operations, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NYCOR, Inc., as of December
31, 1995, and the results of its operations and cash flows for the year then
ended, in conformity with generally accepted accounting principles.
BDO Seidman, LLP
Woodbridge, New Jersey
January 23, 1996, except for note 10,
which is as of March 16, 1996
28
<PAGE> 132
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
NYCOR, Inc.
We have audited the accompanying balance sheets of NYCOR, Inc., as of
December 31, 1994 and 1993 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. Our audits also included the financial
statement schedule listed in Index at item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
NYCOR, Inc., at December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As discussed in note 3 to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes to conform with
Statement of Accounting Standard No. 109.
ERNST & YOUNG
Princeton, New Jersey
January 20, 1995
29
<PAGE> 133
(A) 3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
(3)(i) Certificate of Incorporation of NYCOR, Inc., included as Annex A to the
Information Statement forming a part of the Company's Registration Statement on
Form 10 and incorporated herein by reference.
(ii) Certificate of the Powers, Designation, Preference, Rights and Limitations of
$1.70 Convertible Exchangeable Preferred Stock of NYCOR, Inc., filed as Exhibit
(4) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1987 and incorporated herein by reference.
(iii) Certificate of Amendment of Certificate of Incorporation of NYCOR, Inc., filed as
Exhibit (3)(iii) to the Company's Annual Report on Form 10-K for 1992 and
incorporated herein by reference.
(iv) By-Laws of NYCOR, Inc., included as Annex B to the Information Statement forming a
part of the Company's Registration Statement on Form 10 and incorporated herein by
reference.
(10)(i) NYCOR, Inc. Stock Option Plan, included as Annex C to the Information Statement
forming a part of the Company's Registration Statement on Form 10 and incorporated
herein by reference.
(ii) NYCOR, Inc. Stock Option Plan I, filed as Exhibit (10)(ii) to the Company's Annual
Report on Form 10-K for 1987 and incorporated herein by reference.
(iii) NYCOR, Inc. Stock Option Plan II, filed as Exhibit (10)(iii) to the Company's
Annual Report on Form 10-K for 1988 and incorporated herein by reference.
(iv) NYCOR, Inc. Stock Option Plan III, filed as Exhibit (10)(iv) to the Company's
Annual Report on Form 10-K for 1989 and incorporated herein by reference.
(v) NYCOR, Inc. Stock Option Plan IV, filed as Exhibit (10)(v) to the Company's Annual
Report on Form 10-K for 1990 and incorporated herein by reference
(vi) Supply Agreement between Rotorex Company, Inc. and Fedders Nyorth America, Inc.
dated September 28, 1992, filed as Exhibit (10)(vi) to the Company's Annual Report
on Form 10-K for 1992 and incorporated herein by reference.
(vii) Agreement and Plan of Merger dated November 30, 1995 between Fedders Corporation
and NYCOR, Inc., filed as Annex A to Registration Statement on Form S-4 of Fedders
Corporation (Registration No. 333-00483) and incorporated herein by reference.
</TABLE>
30
<PAGE> 134
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NYCOR, Inc.
By: /s/ KENT E. HANSEN
------------------------------------
Kent E. Hansen
Vice President-Finance
and General Counsel
Date: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ SALVATORE GIORDANO Chairman of the Board March 29, 1996
- ---------------------------------------------
Salvatore Giordano
/s/ SALVATORE GIORDANO JR. Vice Chairman and a Director March 29, 1996
- --------------------------------------------- (Principal Executive Officer)
Salvatore Giordano Jr.
/s/ JOSEPH GIORDANO Director March 29, 1996
- ---------------------------------------------
Joseph Giordano
/s/ WILLIAM J. BRENNAN Director March 29, 1996
- ---------------------------------------------
William J. Brennan
/s/ S.A. MUSCARNERA Director March 29, 1996
- ---------------------------------------------
S.A. Muscarnera
/s/ C.A. KEEN Director March 29, 1996
- ---------------------------------------------
C.A. Keen
/s/ KENT E. HANSEN Vice President-Finance and March 29, 1996
- --------------------------------------------- General Counsel (Principal
Kent E. Hansen Financial Officer)
/s/ EDWIN DIAZ Controller (Principal March 29, 1996
- --------------------------------------------- Accounting Officer)
Edwin Diaz
</TABLE>
31
<PAGE> 135
SCHEDULE II
NYCOR, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO BALANCE AT
OF PERIOD EXPENSE DEDUCTIONS END OF PERIOD
------------ ----------- ---------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1995...................... $409 $ 493 $295 $ 607
========= ========= ======== =========
Year ended December 31, 1994...................... $336 $ 336 $263 $ 409
========= ========= ======== =========
Year ended December 31, 1993...................... $313 $ 54 $ 31 $ 336
========= ========= ======== =========
</TABLE>
S-1
<PAGE> 136
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Nycor, Inc.
The audit referred to in our report dated January 23, 1996 relating to the
consolidated financial statements of Nycor, Inc. which is contained in Item 8 of
this Form 10-K, included the audit of the December 31, 1995 financial statement
schedule listed in the accompanying index. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based upon our audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO Seidman, LLP
Woodbridge, New Jersey
January 23, 1996
S-2
<PAGE> 137
ANNEX C
March 20, 1996
Board of Directors
Fedders Corporation
Westgate Corporate Center
505 Martinsville Road
Liberty Corner, NJ 07938
Gentlemen:
You have requested our opinion as to the fairness, from a financial
point of view, to Fedders Corporation ("Fedders") of the proposed consideration
to be paid pursuant to the terms and conditions of the Agreement and Plan of
Merger (the "Merger Agreement") dated November 30, 1995, whereby NYCOR, Inc.
("NYCOR") would be merged with and into Fedders (the "Merger"), with Fedders as
the surviving corporation. The Merger Agreement provides, among other things,
that each share of NYCOR Common Stock, Class A Stock and Class B Stock shall be
converted into either (i) if the average daily closing price (the "Average
Price") of Fedders Class A Stock for the fifteen consecutive trading days ending
on the fifth day prior to the date of the NYCOR Special Meeting (the "Pricing
Date") is at or above $6.25, that number of shares of Fedders Class A Stock
equal to $6.25 divided by the Average Price; or (ii) if the Average Price is
less than $6.25, one share of Fedders Convertible Preferred Stock (the
"Preferred Stock") which shall be convertible into Fedders Class A Stock at a
conversion price of $6.25 per share. We understand that the terms of the
Preferred Stock will be determined at the Pricing Date; however, we also
understand that it is currently contemplated that the Preferred Stock will have
a liquidation preference of $6.25 per share and an annual dividend rate of 2.5%
(the "Proposed Terms"), and our opinion is based upon the Proposed Terms.
We also understand that (i) NYCOR shares were distributed as a dividend
to Fedders shareholders in 1986, and certain persons serve as directors and
executive officers of, and are significant shareholders of, both Fedders and
NYCOR; (ii) the business of Rotorex Company, Inc. ("Rotorex"), a subsidiary of
NYCOR, was acquired by Fedders from NYCOR in 1989, and was sold by Fedders to
NYCOR in 1992; and (iii) Fedders is the principal customer of Rotorex.
You have furnished us with the Proxy Statement-Prospectus of Fedders
and NYCOR for the Annual Meeting of Fedders Stockholders in substantially the
form to be sent to shareholders. The Merger Agreement appears as Annex A to the
Proxy Statement-Prospectus.
For the purpose of this opinion, we have undertaken certain reviews,
analyses and inquiries as we have deemed relevant and have, among other things:
(i) reviewed the Proxy Statement-Prospectus;
<PAGE> 138
Board of Directors
February 12, 1996
Page 2
(ii) reviewed publicly available information relating to both
Fedders and NYCOR, including Fedders' annual reports on Form
10-K and annual reports to shareholders for the five fiscal
years ended August 31, 1995 and report on Form 10-Q for the
quarter ended November 30, 1995, and
NYCOR's annual reports on Form 10-K and annual reports to
shareholders for the five fiscal years ended December 31, 1994
and reports on Form 10-Q for the three quarters ended
September 30, 1995;
(iii) discussed with senior management of both Fedders and NYCOR the
companies' historical and current operations, financial
condition and future prospects and reviewed certain internal
financial information, business plans and forecasts prepared
by their respective managements;
(iv) visited the headquarters of both Fedders and NYCOR, as well as
the principal manufacturing facility of Rotorex;
(v) reviewed the historical prices and trading volumes of the
Common Stock and Class A Stock of both Fedders and NYCOR;
(vi) reviewed certain financial and market data for both Fedders
and NYCOR and compared such information with similar
information for certain publicly traded companies which we
deemed comparable;
(vii) reviewed the financial terms of certain mergers and
acquisitions of businesses which we deemed comparable;
(viii) analyzed the pro forma contributions of Fedders and NYCOR to
the combined business; and
(ix) performed such other analyses and investigations and
considered such other factors as we deemed appropriate.
In rendering our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information provided to us
regarding both Fedders and NYCOR, and we have not assumed any responsibility for
the independent verification of such information. We have further relied upon
the assurance of management of both Fedders and NYCOR that they are unaware of
any facts that would make such information incomplete or misleading. In arriving
at our opinion, we have not performed any independent evaluation or appraisal of
the assets of Fedders and NYCOR. Our opinion is necessarily based on the
economic, market and other conditions existing on the date of our opinion.
<PAGE> 139
Board of Directors
February 12, 1996
Page 3
Based upon the foregoing, it is our opinion as of the date hereof that
the proposed consideration to be paid by Fedders pursuant to the Merger
Agreement is fair to Fedders from a financial point of view.
Very truly yours,
TM CAPITAL CORP.
<PAGE> 140
ANNEX D
March 19, 1996
Board of Directors
NYCOR, Inc.
287 Childs Road
Basking Ridge, NJ 07920
Dear Members of the Board:
We understand that NYCOR, Inc. ("NYCOR") and Fedders Corporation ("Fedders")
have entered into the Agreement and Plan of Merger dated as of November 30, 1995
(the "Agreement"), pursuant to which NYCOR will be acquired by Fedders (the
"Merger"). If the average closing price per share of Fedders Class A Stock for
the 15 trading days ending five business days before the date of the meeting at
which NYCOR stockholders will vote upon the Merger (the "Fedders Average Price")
is at or above $6.25, each share of Common Stock, Class A Stock and Class B
Stock of NYCOR will be converted into the right to receive a number of shares of
Fedders Class A Stock determined by dividing $6.25 by the Fedders Average Price.
If the Fedders Average Price is below $6.25, each share of Common Stock, Class A
Stock and Class B Stock of NYCOR will be converted into the right to receive one
share of Fedders Convertible Preferred Stock ("Fedders Preferred") with terms
expected to support an initial market value of $6.25. If issued, each share of
Fedders Preferred (i) will be convertible into one share of Fedders Class A
Stock; and (ii) may be called for redemption by Fedders at any time at the
redemption price of $6.25, plus unpaid dividends to the dividend payment date
next preceding the date of redemption, in cash or in equivalent value of Fedders
Class A Stock. Although the precise dividend rate of the Fedders Preferred will
not be set until the fifth business day before the meeting of the stockholders
of NYCOR to be held to consider the Merger, and only if the Fedders Average
Price is below $6.25, we understand that, as of the date hereof, it is
contemplated that the Fedders Preferred will have (i) an annual dividend rate of
2.5% and (ii) a liquidation preference of $6.25 per share (the "Proposed Terms")
and our opinion is based on the Proposed Terms.
You have requested our opinion as to the fairness, from a financial point of
view, to NYCOR, of the consideration to be paid in the Merger. In connection
with this opinion, we have:
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March 19, 1996
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information
relating to NYCOR, including its Annual Reports and Forms 10-K for
the three years ended December 31, 1994 and its Form 10-Q for the
quarter ended September 30, 1995;
(iii) Analyzed certain historical business and financial information
relating to Fedders, including financial statements for the three
years ended August 31, 1995 and the quarter ended November 30, 1995;
(iv) Reviewed various financial forecasts and other data provided to us by
NYCOR and Fedders relating to their respective businesses;
(v) Held discussions with members of the senior management of NYCOR and
Fedders with respect to the businesses and prospects of NYCOR and
Fedders, respectively, the strategic objectives of each and possible
benefits which might be realized following the Merger;
(vi) Analyzed the pro forma impact of the merger on NYCOR's financial
results and financial condition;
(vii) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to
NYCOR's businesses;
(viii) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be generally
comparable to those of NYCOR;
(ix) Reviewed the historical stock prices and trading volumes of NYCOR's
Common Stock and Class A Stock; and
(x) Conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and other
information provided to us by NYCOR and Fedders and have not assumed any
responsibility for any independent verification of such information or any
independent valuation or appraisal of any of the assets or liabilities of NYCOR
or Fedders. With respect to financial forecasts, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgements of management of NYCOR and Fedders as to the future
financial
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March 19, 1996
performance of NYCOR and Fedders, respectively. We assume no responsibility for
and express no view as to such forecasts or the assumptions on which they are
based. Further, our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof.
In rendering our opinion, we have noted in the Agreement that it is expected
that the Merger will be accounted for as a purchase. In addition, we have
assumed that the Merger will be consummated on the terms described in the
Agreement without any waiver of any material terms or conditions by NYCOR and
that obtaining the necessary regulatory approvals for the Merger will not have
an adverse effect on NYCOR.
Laidlaw Equities, Inc. is acting as financial advisor to NYCOR in connection
with the Merger, and we will receive a fee for our services. It is understood
that this letter may not be disclosed or otherwise referred to without our prior
consent, except as may otherwise be required by law or by a court of competent
jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
consideration to be paid in the Merger is fair to NYCOR from a financial point
of view.
Very truly yours,
LAIDLAW EQUITIES, INC.
By: /s/ CORNELIUS P. MCCARTHY
-------------------------------------------
Cornelius P. McCarthy
Managing Director
<PAGE> 143
ANNEX E
262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to section 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation or depository receipts in respect thereof:
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders:
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
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(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to section 228
or 253 of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights or the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address at it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholders within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by
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publication shall be approved by the Court, and the costs thereof shall be borne
by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (c) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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ANNEX F
FEDDERS CORPORATION
STOCK OPTION PLAN VIII
SECTION 1. Purposes of the Plan
The purposes of the Fedders Corporation Stock Option Plan VIII are to
advance the interests of the Company by providing incentives to selected key
employees and non-employee directors, consultants, and employees of companies
with which the Company has entered or enters into a joint venture or similar
business relationship, who contribute and are expected to contribute materially
to the success of the Company, to provide a means of rewarding outstanding
performance and to enable the Company to maintain a competitive position in
attracting and retaining the key personnel necessary for growth and
profitability. Options to purchase a limited number of Shares may also be
granted to all other employees of the Company, at the discretion of the
Company's Board of Directors.
SECTION 2. Definitions
2.1 "Board of Directors" means the Board of Directors of Fedders
Corporation.
2.2 "Company" means Fedders Corporation, its subsidiaries.
2.3 "Fair Market Value" means the closing price regular way on the
principal national securities exchange on which the Stock is traded on
the relevant date, or if the Stock is not listed or admitted to
trading on any national securities exchange, the last trade price as
reported on the NASDAQ System on the relevant date, or, if not so
reported, the average of the closing bid and asked prices as reported
on the NASDAQ System on the relevant date. If no sales of the Stock
are reported for the relevant date, then Fair Market Value shall be
determined as of the most recent preceding date for which sales of the
Stock are reported.
2.4 "Option" or "Options" means a right granted to purchase Stock pursuant
to the Plan.
2.5 "Plan" means the Fedders Corporation Stock Option Plan VIII.
2.6 "Shares" means shares of the Company's Common Stock, $1 par value per
share, or Class A Stock $1 par value per share.
2.7 "Stock" means the Company's Common Stock, $1 par value per share, or
Class A Stock, $1 par value per share.
2.8 "Stock Appreciation Right" means the right defined in Section 6.1 of
the Plan.
SECTION 3. Number of Shares Authorized
The total number of Shares which may be issued and sold under the Plan
pursuant to Options or Stock Appreciation Rights shall not exceed 5,000,000
Shares. However, the Board of Directors may adjust this number in its discretion
to prevent dilution of enlargement of the Shares subject to the Plan by reason
of any Stock dividend, Stock split, combination of Shares, recapitalization or
other change in the capital structure of the Company. Furthermore, Shares
subject to Options which are granted but subsequently expire or are forfeited
prior to being exercised shall thereafter be available for the granting of
further Options under the Plan.
SECTION 4. Eligibility
Options may be granted only to salaried employees who are officers
(including officers who are members of the Board of Directors) as well as to
other key employees and non-employee directors, consultants of the Company, and
employees of companies with which the Company has entered or enters into a joint
venture or similar business relationship. Options to purchase a limited number
of Shares may also be granted to all other
<PAGE> 147
employees of the Company, at the discretion of the Board of Directors. The Board
of Directors may, from time to time and upon such terms and conditions and for
such consideration as it may determine, authorize the granting to these
individuals of Options and may fix the number of Shares to be covered by each
such Option. Successive Options may be granted to the same persons whether or
not the Option or Options first granted to such persons remain unexercised.
Options granted may be (i) options which are intended to qualify under Section
422A of the Internal Revenue Code as Incentive Stock Options, (ii) options which
are not intended to so qualify, or (iii) combinations of the foregoing;
provided, however, that non-employee directors, consultants of the Company, and
employees of companies with which the Company has entered or enters into a joint
venture or similar business relationship, may only be granted non-qualified
Options. Each Option granted shall be identified as to its status, Incentive
Stock Option or non-qualified Stock Option, and such status shall not thereafter
be subject to change. Except as provided in Section 6 hereof, two Options shall
be granted together in such manner that the exercise of one affects the right to
exercise the other.
SECTION 5. Terms and Conditions
The Grant of an Option shall be evidenced by a written agreement to the
optionee of such grant signed on behalf of the Board of Directors, which
agreement shall describe such Option and state that such Option is subject to
all the terms and conditions of the Plan. In addition:
5.1 The Option price will not be less than the Fair Market Value of the
Stock on the date of the grant, adjusted for subsequent Stock splits,
dividends, distributions or combination of Shares. An amendment to an
outstanding Incentive Stock Option that constitutes a modification,
extension, or renewal of the Option pursuant to Section 425(h) of the
Internal Revenue Code, shall be considered as the grant of a new
Option on the date of such amendment and the Option price shall be
adjusted so that it shall not be less than the Fair Market Value of
the Stock on the date of such amendment. In the case of Incentive
Stock Options, if the optionee owns more than 10% of the total
combined voting power of the Company, the Option price shall not be
less than 110% of the Fair Market Value on the date of the grant.
5.2 With respect to Incentive Stock Options, the aggregate Fair Market
Value (determined as of the time Incentive Stock Options are granted)
of the Stock which may, for the first time, be acquired upon exercise
of Incentive Stock Options in any one calendar year, when added to
stock which is covered by Incentive Stock Options granted after
January 1, 1987 but prior to the option to be granted, cannot exceed
$100,000.
5.3 The number of Shares in a given Option will be adjusted for Stock
splits, dividends, distributions or combinations so that the total
value of the Option remains the same after such split or combination.
5.4 No Options may be granted after October 24, 2005.
5.5 No Option by its terms will be exercisable more than 10 years after
the date of grant, except that if the optionee owns more than 10% of
the total combined voting power of the Company, such period shall not
exceed 5 years from the date of grant with respect to Incentive Stock
Options.
5.6 The Option will, by its terms, not be transferable except by will or
the laws of descent and distribution and is exercisable only by the
optionee during his or her lifetime.
5.7 Any unexercised Options will expire one month after the date of
termination of employment of the optionee and, in the case of
non-employee directors, consultants, or employees of companies with
which the Company has entered or enters into a joint venture or
similar business relationship, one month after the date an optionee
ceases to be a director, consultant, or employee of such company,
except if such termination was for cause, in which case the Options
shall expire immediately. The exercise of any Option after termination
of employment or services as set forth above, shall be subject to the
condition precedent that the optionee neither takes other employment
or renders services to others without the prior written consent of the
Company, nor conducts himself in a manner adversely affecting the
Company. The Board of Directors may add such additional conditions
precedent to an optionee's Option agreement as it may deem necessary
or appropriate
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from time to time to protect the best interests of the Company. In the
case of death or permanent and total disability, the estate of the
deceased optionee or the disabled optionee has 12 months from date of
death or permanent and total disability to exercise any Option
unexercised on the date of termination because of death or disability.
In no event shall Options be exercisable after the expiration date
established in the grant.
For the purposes of this Section 5.7, an optionee shall be considered
permanently and totally disabled if he or she is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than twelve months. An optionee shall not be considered to
be permanently and totally disabled unless he or she furnishes proof of
the existence thereof in such form and manner, and at such time, as a
committee appointed by the Board of Directors may require.
5.8 An optionee or transferee of an Option by operation of law shall have no
rights with respect to any Shares covered by an Option until the date of
the issuance of a certificate for such Shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which
the record date is prior to the date such Stock certificate is issued,
except as otherwise provided herein.
5.9 The Option shall be exercisable in whole or in part from time to time
during the term thereof as may be determined by the Board of Directors
and stated in the Option; provided, however that, unless otherwise
provided by the Board of Directors, no Option may be exercised prior to
the first anniversary of the date of granting of such Option.
5.10 The optionee may exercise Options by notifying the treasurer of the
Company that he or she is exercising the Option and by presenting
payment for the exercised Shares. Payment for the Shares may be in the
form of cash, previously owned, unencumbered Shares or any combination
of the foregoing. Upon notification of the amount due and prior to, or
concurrently with, delivery to the optionee of a certificate
representing any Shares purchased pursuant to the exercise of an Option,
the optionee shall promptly pay to the Company any amount necessary to
satisfy applicable federal, state, or local tax requirements.
5.11 At the time of exercise of any Option, the Company may require the
optionee to execute any documents or take any action which may be then
necessary to comply with the Securities Act of 1933 and the Rules and
Regulations adopted thereunder, or any other applicable federal or state
laws regulating the sale and issuance of securities, and the Company
may, if it deems necessary, include provisions in the Option agreements
to assure such compliance with federal and state securities laws,
including the request for and enforcement of letters of investment
intent, such requirements to be determined by the Company in its
judgment as necessary to assure compliance with such laws. Such changes
may be made with respect to any particular Option or Stock issued upon
exercise thereof.
5.12 The Company shall not be obligated to sell or issue any Shares pursuant
to any Option unless:
5.12.1 the Shares with respect to which the Option is being exercised
have been registered under the Securities Act of 1933, as
amended, or are exempt from such registration;
5.12.2 the prior approval of such sale or issuance has been obtained
from any State regulatory body having jurisdiction; and
5.12.3 in the event the Stock has been listed on any stock exchange, the
Shares with respect to which the Option is being exercised have
been duly listed on such exchange in accordance with the
procedure specified by such exchange.
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SECTION 6. Stock Appreciation Rights
The Board of Directors may from time to time grant Stock Appreciation
Rights to recipients of Options under the Plan and may define the terms and
provisions of such Stock Appreciation Rights, all subject to the limitations and
provisions of the Plan. Each Stock Appreciation Right will relate to a specific
Option granted under the Plan and may be granted simultaneously with or
subsequent to the grant of the Option.
6.1 A Stock Appreciation Right shall be a right of the optionee to receive
from the Company, as an alternative to exercising the related Option
and upon surrender of the related Option, an amount (payable either in
Stock or in cash or in any combination thereof, as determined by the
Board of Directors) equal to the difference between the Fair Market
Value of the Stock subject to the underlying Option on the date of
exercise of the Stock Appreciation right and the Option price of the
underlying Option.
6.2 The grant of a Stock Appreciation Right shall be evidenced by a notice
to the optionee of such grant signed on behalf of the Board of
Directors, which notice shall describe such Stock Appreciation Right,
identify the related Option and state that such Stock Appreciation
Right is subject to all the terms and conditions of the Plan.
6.3 A Stock Appreciation Right shall be exercisable in whole or in part,
at any time and to the extent that the related Option may be
exercised, but only when the Fair Market Value of the Stock subject to
the Option exceeds the Option price. Payment to the optionee may, in
the discretion of the board of Directors, be made in the form of cash
or Stock and will be subject to federal and state income tax
withholding requirements. Exercises payable in cash shall be in
compliance with applicable laws, including Rule 16b-3 under the
Securities Exchange Act of 1934, as amended from time to time.
6.4 A Stock Appreciation Right may be exercised in whole or in part, only
by surrender to the Company, unexercised, of the related Option, in
whole or in part, and Shares covered by Options so surrendered shall
not be available for the granting of further options under any stock
option plan of the Company, anything in such stock option plan to the
contrary notwithstanding.
6.5 Stock Appreciation rights shall not be transferable other than by will
or the laws of descent and distribution and shall be exercisable
during the optionee's lifetime only by him or her.
6.6 A Stock Appreciation Right shall expire and can no longer be exercised
upon the earlier of (a) exercise or expiration of the related Option,
or (b) any termination date specified by the Board of Directors at the
time of grant of such Stock Appreciation Right.
SECTION 7. Administration
7.1 The Plan will be administered by the Board of Directors. The Board of
Directors shall hold meetings relative to the Plan at such times and
places as it may determine. The acts of a majority of the board of
Directors at a meeting at which a quorum is present, or such acts as
are reduced to or approved in writing by the majority of the members
of the board of Directors shall be the valid acts of the Board of
Directors. The Board of Directors shall from time to time at its
discretion determine which key employees shall be granted Options and
the amount of Stock covered by such Options.
7.2 Except as otherwise provided herein, the Board of Directors shall have
full and final authority, binding upon all who have an interest in the
Plan, to interpret the Plan and the Options or Stock Appreciation
Rights granted under the Plan and to make all determinations necessary
or advisable in administering the Plan. No member of the Board of
Directors shall have any liability to any person for anything done or
omitted to be done by the member or by any other member of the Board
of Directors in connection with the Plan, except for his own willful
misconduct or gross negligence.
SECTION 8. Replacement Options
If an individual is employed by a corporation other than the Company and
has an option entitling him to purchase shares of stock of the corporation
pursuant to specified terms and conditions (the "former option"),
4
<PAGE> 150
and it as a result of a corporate merger, consolidation, purchase or acquisition
of stock or property, separation (including spin-off or other distribution of
stock or property), reorganization or liquidation, the individual becomes an key
employee or non-employee director of the Company, then the Board of Directors
may authorize the granting to the individual of an Option in substitution,
either in whole or in part, for the former option, provided that the former
option is, to the extent that it is replaced by the Option, canceled or
otherwise rendered unexercisable. The Option price of the replacement Option and
the number of Shares of Stock covered by the replacement Option shall be
determined so that: (i) the excess of the aggregate Fair Market Value of Stock
for which the replacement Option is granted over the aggregate Option price of
the replacement Option shall not be more than the excess of the aggregate Fair
Market Value of the stock covered by the former option (to the extent that it is
being replaced) over the aggregate exercise price of the former option (to the
extent that it is being replaced), with Fair Market Value being determined on
the date of grant of the replacement Option; and (ii) with respect to a
replacement Option that is an Incentive Stock Option, the ratio of the Option
price of the replacement Option for each Share of Stock to the Fair Market Value
of each Share of Stock shall not be less than the ratio of the exercise price of
the former option for each share of stock to the Fair Market Value of each share
of stock, with Fair Market Value being determined on the date of grant of the
replacement Option. Aside from price and the number of Shares covered, the
replacement Option shall contain terms and conditions identical to those
contained in the former option (irrespective of whether those terms and
conditions are inconsistent with the provisions of this Plan) or such different
terms and conditions as the Board of Directors shall, in its sole discretion,
determine, provided that if the replacement Option is an Incentive Stock Option,
it shall not contain any terms or conditions that would cause it to fail to meet
the requirements of Section 425 (a) of the Internal Revenue Code.
SECTION 9. Amendment, Suspension or Termination of Plan
The stockholders of the Company or the board of Directors may at any time,
without the consent of the optionee, alter, amend, revise, suspend, or
discontinue the Plan, provided that such action may not adversely affect Options
theretofore granted under the Plan, and provided that no such action of the
Board of Directors may, without the approval of the stockholders, alter the
provisions of the Plan so as to alter the total number of Shares which may be
issued under Options or change the class of employees eligible to receive
Options.
SECTION 10. Effective Date
The Plan is effective on the date it is adopted by the Board of Directors
subject to the approval by the stockholders at the next Annual Meeting within
the 12 months following the adoption by the Board of Directors. Options and
Stock Appreciation Rights may be granted under the Plan prior to such approval
by the stockholders, but no grants may be exercised until the stockholders have
approved the Plan.
5
<PAGE> 151
DIRECTIONS TO
SOMERSET HILLS HOTEL
200 LIBERTY CORNER ROAD
WARREN, NJ 07060
(908) 647-6700
The Somerset Hills Hotel is located directly north of Interstate 78 at Exit
33. Newark International Airport is less than 35 minutes away, and New York City
is within an hour's commute. The Bernardsville and Lyons railroad stations are
conveniently located approximately seven minutes from the Hotel.
[MAP]
<PAGE> 152
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
2 Agreement and Plan of Merger between Fedders Corporation and NYCOR, Inc. dated
November 30, 1995 as amended by Amendment No. 1 dated March 15, 1996 and
Amendment No. 2 dated as of April 10, 1996 (included as Annex A to the Proxy
Statement-Prospectus).
4 Form of Certificate of Designation of Convertible Preferred Stock.
8 Opinion of McCarter & English as to certain tax matters.
12(i) Fedders Historical and Pro Forma Statement re Computation of Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends.
12(ii) NYCOR Historical Statement re Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
23(ii) Consent of McCarter & English (included in Exhibit 8).
23(iii) Consent of BDO Seidman, LLP as to the 1995 financial statements of Fedders
Corporation.
23(iv) Consent of Ernst & Young, LLP as to the 1994 and 1993 financial statements of
Fedders Corporation.
23(v) Consent of BDO Seidman, LLP as to the 1995 financial statements of NYCOR, Inc.
23(vi) Consent of Ernst & Young, LLP as to the 1994 and 1993 financial statements of
NYCOR, Inc.
99.1 Opinion of TM Capital Corp. (included as Annex C to the Proxy
Statement-Prospectus).
99.2 Opinion of Laidlaw Equities, Inc. (included as Annex D to the Proxy
Statement-Prospectus).
99.3 Letter of the Chairman of the Board and Vice Chairman, President and Chief
Executive Officer to the Stockholders of Fedders Corporation.
99.4 Notice of Annual Meeting of Stockholders of Fedders Corporation.
99.5 Letter of the Chairman of the Board and Vice Chairman and Chief Executive
Officer to the Stockholders of NYCOR, Inc.
99.6 Notice of Special Meeting of Stockholders of NYCOR, Inc.
99.7 Forms of Proxy for Annual Meeting of Stockholders of Fedders Corporation.
99.8 Form of Proxy for Special Meeting of Stockholders of NYCOR, Inc.
</TABLE>
II-1
<PAGE> 153
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Liberty
Corner, State of New Jersey, on April 15, 1996.
FEDDERS CORPORATION
By: /s/ ROBERT L. LAURENT,
JR.
------------------------------------
Name: Robert L. Laurent, Jr.
Title: Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated, on April 15, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ---------------------
<S> <C> <C>
SALVATORE GIORDANO Chairman of the Board
SALVATORE GIORDANO, JR. Vice Chairman,
President and Chief
Executive Officer and
a Director (Principal
Executive Officer)
JOSEPH GIORDANO Director
HOWARD S. MODLIN Director
CLARENCE RUSSEL MOLL Director
WILLIAM J. BRENNAN Director
S. A. MUSCARNERA Director
ANTHONY E. PULEO Director
ROBERT L. LAURENT, JR. Executive Vice
President -- Finance
and Administration
(Principal Financial
and Accounting
Officer)
</TABLE>
By /s/ Robert N. Edwards
------------------------
Robert N. Edwards
(Attorney-in-fact)
<PAGE> 154
INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------
<S> <C> <C>
2 Agreement and Plan of Merger between Fedders Corporation and NYCOR, Inc.
dated November 30, 1995 as amended by amendment No. 1 dated March 15, 1996
and Amendment No. 2 dated as of April 10, 1996 (included as Annex A to the
Proxy Statement-Prospectus)...............................................
4 Form of Certificate of Designation of Convertible Preferred Stock ........
8 Opinion of McCarter & English as to certain tax matters...................
12(i) Fedders Historical and Pro Forma Statement re Computation of Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividends. ........
12(ii) NYCOR Historical Statement re Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends. .............................
23(ii) Consent of McCarter & English (included in Exhibit 8) ....................
23(iii) Consent of BDO Seidman, LLP as to the 1995 financial statements of Fedders
Corporation. .............................................................
23(iv) Consent of Ernst & Young, LLP as to the 1994 and 1993 financial statements
of Fedders Corporation....................................................
23(v) Consent of BDO Seidman, LLP as to the 1995 financial statements of NYCOR,
Inc. .....................................................................
23(vi) Consent of Ernst & Young, LLP as to the 1994 and 1993 financial statements
of NYCOR, Inc.............................................................
99.1 Opinion of TM Capital
Corp. (included as Annex C to the Proxy Statement-Prospectus).............
99.2 Opinion of Laidlaw & Co. (included as Annex D to the Proxy
Statement-Prospectus).....................................................
99.3 Letter of the Chairman of the Board and Vice Chairman, President and Chief
Executive Officer to the Stockholders of Fedders Corporation..............
99.4 Notice of Annual Meeting of Stockholders of Fedders Corporation...........
99.5 Letter of the Chairman of the Board and Vice Chairman and Chief Executive
Officer to the Stockholders of NYCOR, Inc.................................
99.6 Notice of Special Meeting of Stockholders of NYCOR, Inc...................
99.7 Forms of Proxy for Annual Meeting of Stockholders of Fedders
Corporation...............................................................
99.8 Form of Proxy for Special Meeting of Stockholders of NYCOR, Inc. .........
</TABLE>
<PAGE> 1
Exhibit 4
CERTIFICATE OF THE POWERS, DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS OF
Convertible Preferred Stock
of
FEDDERS CORPORATION
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
FEDDERS CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
that, pursuant to the authority contained in Article Third of its Restated
Certificate of Incorporation, as amended, and in accordance with the provisions
of Section 151 of the General Corporation Law of the State of Delaware, the
Board of Directors o(pound) the Corporation at its meeting on [May 31, 1996]
duly adopted a resolution providing for the designation of a series of _________
shares of Convertible Preferred Stock, which resolution is as follows:
RESOLVED, that pursuant to authority conferred upon the Board
of Directors by the Restated Certificate of Incorporation, as amended,
of the Corporation (hereinafter referred to as the "Certificate of
Incorporation"), the Board of Directors does hereby authorize the
designation of a series of Preferred Stock, par value $1.00 per share,
to be known as the Convertible Preferred Stock and to the extent that
the voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations and restrictions thereof, are not set forth
in the Certificate of Incorporation, does hereby fix and herein state
and express such voting powers, designations, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof, as follows (all terms used herein
which are defined in the Corporation's Certificate of Incorporation
shall have herein the meanings provided therein):
(A) DESIGNATION AND SIZE OF ISSUE
The distinctive designation of the series shall be
"Convertible Preferred Stock" (hereinafter referred to as this "Series"). The
number of shares which shall constitute this Series shall be _________ shares.
Each share of this Series shall have a par value of $1.00.
<PAGE> 2
-2-
(B) DIVIDENDS
(1) The annual rate of dividends payable on each share of
this Series shall be $____.
(2) Dividends shall be payable in cash, quarterly on the
first day of April, July, October and January of each year, commencing October
1, 1996 (each such date hereinafter referred to as a "Dividend Payment Date"),
except that if such date is not a Business Day (as hereinafter defined), then
such dividend shall be payable on the next succeeding calendar day which is a
Business Day. The amount of dividends payable on shares of this Series for each
full quarterly dividend period shall be computed by dividing by four the annual
rate per share set forth in Section (B)(1). Dividends payable on shares of this
Series for any period less than a full quarterly period shall be computed on the
basis of a 360-day year of twelve 30-day months, Dividends shall be payable to
the record holders of shares of this Series as of the close of business on a
date, not more than sixty (60) days preceding the payment date thereof, fixed by
the Board of Directors of the Corporation. Dividends in arrears may be declared
and paid at any time, without reference to any regular Dividend Payment Date, to
record holders of shares of this Series as of the close of business on a date,
not more than sixty (60) days preceding the payment date thereof, fixed by the
Board of Directors of the Corporation. As used in this resolution, the term
"Business Day" means a day other than Saturday or Sunday and other than a day on
which banking institutions in New York, New York are authorized by law or
executive order to close.
(3) Dividends payable on shares of this Series shall be
cumulative and shall accumulate from the date of issuance of such shares.
Accumulations of dividends shall not bear interest.
(4) Except as hereinafter provided, so long as any shares
of this Series are outstanding, no dividend (other than a dividend in Common
Stock or in any other stock of the Corporation ranking junior to this Series as
to dividends and upon liquidation (collectively, the "Junior Stock")) shall be
declared or paid or set aside for payment, and no other distribution shall be
declared or made, upon the Junior Stock or upon any other stock of the
Corporation ranking on a parity with this Series as to dividends or upon
liquidation, nor shall any Junior Stock nor any other stock of the Corporation
ranking on a parity with this Series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any shares
of any such stock) by the Corporation (except by conversion into or exchange for
Junior Stock of the Corporation), unless, in each case, the full cumulative
dividends on all outstanding shares of this Series shall have been paid or
contemporaneously are declared and paid through the Dividend Payment Date next
preceding the payment date of such dividend or distribution or the date of such
redemption,
<PAGE> 3
-3-
purchase or acquisition. When dividends are not paid in full upon the shares of
this Series and any other stock of the Corporation ranking on a parity as to
dividends with this Series, all dividends declared upon shares of this Series
and any other stock of the Corporation ranking on a parity as to dividends with
this Series shall be declared pro rata so that the amount of dividends declared
per share on this Series and such other stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the shares of this
Series and such other stock bear to each other. Holders of shares of this Series
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as herein provided, on this
Series. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on this Series which may be in
arrears.
(C) REDEMPTION
(1) The Corporation, at the option of the Board of
Directors, may redeem at any time or from time to time all or any part of the
outstanding shares of this Series. The redemption price for each share of this
Series called for redemption shall be $6.25 plus unpaid dividends to the
Dividend Payment Date next preceding the date fixed for redemption (the
"Redemption Price"). At the option of the Corporation, the Redemption Price may
be paid, in whole or in part, in cash or in equivalent value of Class A Stock of
the Corporation.
(2) In the event that fewer than all the outstanding shares
of this Series are to be redeemed, the number of shares to be redeemed shall be
determined by the Board of Directors, and the shares to be redeemed shall be
determined by lot or by any other method as may be determined by the Board of
Directors in its sole discretion to be equitable.
(3) In the event the Corporation shall redeem shares of
this Series, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days
prior to the redemption date, to each record holder of the shares to be
redeemed, at such holder's address as the same appears on the books of the
Corporation. Each such notice shall state: (i) the redemption date; (ii) the
total number of shares of this Series to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the Redemption Price and the form in which the
Redemption Price is to be paid; (iv) the place or places where certificates for
such shares are to be surrendered for payment of the Redemption Price; (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the conversion rights of the shares to be redeemed, the period
within which conversion rights may be exercised, and the conversion rate at the
time applicable.
<PAGE> 4
-4-
(4) If notice shall have been given as provided in Section
(C)(3) and the Corporation shall have provided moneys at the time and place
specified for the payment of the Redemption Price pursuant to such notice, then
from and after the redemption date, dividends on the shares of this Series so
called for redemption shall cease to accrue, such shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
Redemption Price without interest) shall cease. Upon surrender (in accordance
with the notice) of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors of the Corporation
shall so require and the notice shall so state), such shares shall be redeemed
by the Corporation at the Redemption Price. In case fewer than all the shares
represented by any such certificate are to be redeemed, a new certificate shall
be issued representing the unredeemed shares, without cost to the holder
thereof.
(5) Any shares of this Series which have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series, until such shares are once
more designated as part of a particular series by the Board of Directors.
(6) Notwithstanding the foregoing provisions of this
Section (C), no shares of this Series shall be redeemed, and the Corporation
shall not purchase or otherwise acquire any shares of this Series, unless the
full cumulative dividends on all outstanding shares of this Series and any other
Preferred Stock ranking on a parity with this Series shall have been paid or
contemporaneously are declared and paid through the Dividend Payment Date next
preceding the date of such redemption, purchase or other acquisition.
(D) CONVERSION RIGHTS
(1) Each holder of a share of this Series shall have the
right, at any time, or, as to any share of this Series called for redemption, at
any time prior to the close of business on the date fixed for such redemption,
to convert such share into fully paid and nonassessable shares of Class A Stock
of the Corporation at a rate of one share of Class A Stock, subject to
adjustment as provided in this Section (D).
(2) If any shares of this Series are surrendered for
conversion subsequent to the record date preceding a Dividend Payment Date but
on or prior to such Dividend Payment Date (except shares called for redemption
on a redemption date between such record date or Dividend Payment Date), the
registered holder of such shares at the close of business on such record date
shall be entitled to receive the dividend payable on such shares on such
Dividend Payment Date notwithstanding the conversion thereof. Except as provided
in this Section (D)(2), no adjustments in respect of or payments of
<PAGE> 5
-5-
dividends on shares surrendered for conversion or any dividend on the Class A
Stock issued upon conversion shall be made upon the conversion of any shares of
this Series.
(3) The Corporation shall not be required, in connection
with any conversion of shares of this Series, to issue a fraction of a share of
its Class A Stock, but in lieu thereof the Corporation shall, subject to Section
(D)(6)(f), make a cash payment (calculated to the nearest cent) equal to such
fraction multiplied by the Closing Price per share of the Class A Stock on the
last Trading Day prior to the date of conversion.
(4) Any holder of shares of this Series electing to convert
such shares into Class A Stock shall surrender the certificate or certificates
for such shares at the office of the Transfer Agent therefor (or at such other
place as the Corporation may designate by notice to the holders of shares of
this Series) during regular business hours, duly endorsed to the Corporation or
in blank, or accompanied by instruments of transfer to the Corporation or in
blank, in form satisfactory to the Corporation, and shall give written notice to
the Corporation at such office that such holder elects to convert such shares of
this Series. The Corporation shall, as soon as practicable (subject to Section
(D)(6)(f) hereof) after such deposit of certificates for shares of this Series,
accompanied by the written notice above prescribed and the payment of cash in
the amount required by Section (D)(2), issue and deliver at such office to the
holder for whose account such shares were surrendered, or to his nominee,
certificates representing the number of shares of Class A Stock and the cash, if
any, to which such holder is entitled upon such conversion.
(5) Conversion shall be deemed to have been made as of the
date of surrender of certificates for the shares of this Series to be converted,
and the giving of written notice and payment, as prescribed in Section (D)(4);
and the person entitled to receive the Class A Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such Class
A Stock on such date. The Corporation shall not be required to deliver
certificates for shares of its Class A Stock while the stock transfer books for
such stock or for this Series are duly closed for any purpose, but certificates
for shares of Class A Stock shall be issued and delivered as soon as practicable
after the opening of such books.
(6) The conversion rate shall be adjusted from time to time
as follows:
(a) In case the Corporation shall, at any time or from
time to time while any of the shares of this Series are
outstanding, (i) pay a dividend in shares of its Class A
Stock, (ii) subdivide its outstanding shares of Class A Stock,
or (iii) combine its outstanding shares of Class A Stock into
a smaller number of shares, the conversion rate in effect
immediately prior to such action shall be adjusted so that the
holder of any shares of this Series thereafter surrendered for
conversion shall be entitled to receive the
<PAGE> 6
-6-
number of shares of capital stock of the Corporation which
such holder would have owned or have been entitled to receive
immediately following such action had such shares of this
Series been converted immediately prior thereto. An adjustment
made pursuant to this Section (D)(6)(a) shall become effective
retroactively to immediately after the opening of business on
the day following the record date in the case of a dividend
and shall become effective immediately after the opening of
business on the day following the effective date in the case
of a subdivision or combination. If, as a result of an
adjustment made pursuant to this Section (D)(6)(a), the holder
of any shares of this Series thereafter surrendered for
conversion shall become entitled to receive shares of two or
more classes of capital stock of the Corporation, the Board of
Directors (whose determination shall be conclusive) shall
determine the allocation of the adjusted conversion rate
between or among shares of such classes of capital stock.
(b) In case the Corporation shall, at any time or
from time to time while any of the shares of this Series are
outstanding, issue rights or warrants to all holders of shares
of its Class A Stock entitling them to subscribe for or
purchase shares of Class A Stock (or securities convertible
into or exchangeable for Class A Stock) at a price per share
less than the current market price per share of Class A Stock
(as defined in Section (D)(6)(d)), at such record date, the
conversion rate shall be adjusted so that it shall equal the
rate determined by multiplying the conversion rate in effect
immediately prior to the date of issuance of such rights or
warrants by a fraction, the numerator of which shall be the
number of shares of Class A Stock outstanding on the date of
issuance of such rights or warrants plus the number of
additional shares of Class A Stock offered for subscription or
purchase, and the denominator of which shall be the number of
shares of Class A Stock outstanding on the date of issuance of
such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so
offered would purchase at such current market price. For the
purposes of this Section (D)(6)(b), the issuance of rights or
warrants to subscribe for or purchase securities convertible
into Class A Stock shall be deemed to be the issuance of
rights or warrants to purchase the shares of Class A Stock
into which such securities are convertible at an aggregate
offering price equal to the aggregate offering price of such
securities plus the minimum aggregate amount (if any) payable
upon conversion of such securities into shares of Class A
Stock; provided, however, that if all of the shares of Class A
Stock subject to such rights or warrants have not been issued
when such rights or warrants expire, then the conversion price
shall promptly be readjusted to the conversion price which
would then be in effect had the adjustment upon the issuance
of such rights or warrants
<PAGE> 7
-7-
been made on the basis of the actual number of shares of Class
A Stock issued upon the exercise of such rights or warrants.
An adjustment made pursuant to this Section (D)(6)(b) shall
become effective retroactively immediately after the record
date for the determination of stockholders entitled to receive
such rights or warrants.
(c) In case the Corporation shall, at any time or
from time to time while any of the shares of this Series are
outstanding, distribute to all holders of shares of its Class
A Stock evidences of its indebtedness or securities or assets
(excluding cash dividends payable out of consolidated earnings
or retained earnings or dividends payable in shares of Class A
Stock) or rights or warrants to subscribe for securities of
the Corporation or any of its subsidiaries (excluding those
referred to in Section (D)(6)(b)), then in each such case the
conversion rate shall be adjusted so that it shall equal the
rate determined by multiplying the conversion rate in effect
immediately prior to the date of such distribution by a
fraction, the numerator of which shall be the current market
price per share (determined as provided in Section (D)(6)(d))
of the Class A Stock on the record date referred to below, and
the denominator of which shall be such current market price
per share of the Class A Stock less the then fair market value
(as determined by the Board of Directors of the Corporation,
whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness or securities or assets so
distributed or of such subscription rights or warrants
applicable to one share of Class A Stock. Such adjustment
shall become effective retroactively immediately after the
record date for the determination of stockholders entitled to
receive such distribution.
(d) For the purpose of any computation under Section
(D)(6)(b) and (D)(6)(c), the "current market price" of a share
of Class A Stock on any date shall be the average of the daily
Closing Prices for 10 consecutive Trading Days before the day
in question.
(e) The Corporation shall be entitled to make such
additional adjustments in the conversion price, in addition to
those required by subsections D(6)(a), D(6) (b) and D(6)(c),
as shall be necessary in order that any dividend or
distribution in shares of stock, subdivision or combination of
shares of Common Stock, issuance of rights or warrants,
evidences of indebtedness or assets (other than cash dividends
payable out of consolidated earnings or retained earnings)
referred to above, shall not be taxable to the Stockholders.
<PAGE> 8
-8-
(f) In any case in which this Section (D)(6) shall
require that an adjustment be made retroactively immediately
following a record date, the Corporation may elect to defer
(but only for five (5) Business Days following the filing of
the statement referred to in Section (D)(6)(h)) issuing to the
holder of any shares of this Series converted after such
record date (i) the shares of Class A Stock and other capital
stock of the Corporation issuable upon such conversion over
and above (ii) the shares of Class A Stock and other capital
stock of the Corporation issuable upon such conversion on the
basis of the conversion rate prior to adjustment.
(g) Notwithstanding any other provisions of this
Section (D)(6), the Corporation shall not be required to make
any adjustment of the conversion rate unless such adjustment
would require an increase or decrease of at least 1% in such
rate. Any lesser adjustment shall be carried forward and shall
be made at the time of and together with the next subsequent
adjustment which, together with any adjustment or adjustments
so carried forward, shall amount to an increase or decrease of
at least 1% in such rate.
(h) Whenever an adjustment in the conversion rate is
required, the Corporation shall forthwith place on file with
its Transfer Agent a statement signed by its Chief Executive
Officer, Chief Financial Officer or a Senior Vice President
and by its Secretary, Assistant Secretary or Treasurer,
stating the adjusted conversion rate determined as provided
herein. Such statements shall set forth in reasonable detail
such facts as shall be necessary to show the reason and the
manner of computing such adjustment. Promptly after the
adjustment of the conversion rate, the Corporation shall mail
a notice thereof to each holder of shares of this Series.
(i) The term "Class A Stock" as used in this
resolution means the Corporation's Class A Stock, $1.00 par
value, as the same exists at the date of filing of the
Certificate of Designation relating to this Series or any
other class of stock resulting from successive changes or
reclassifications of such Class A Stock consisting solely of
changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time
as a result of an adjustment made pursuant to Section
(D)(6)(a), the holder of any share of this Series thereafter
surrendered for conversion shall become entitled to receive
any shares of the Corporation other than shares of its Class A
Stock, the conversion rate of such other shares so receivable
upon conversion of any share shall be subject to adjustment
from time to time in a manner and on terms as nearly
equivalent as practicable to the
<PAGE> 9
-9-
provisions with respect to Class A Stock contained in
subparagraphs (a) through (g) of this Section (D)(6), and the
provisions of Section (D)(1) through (5) and (7) through (11)
with respect to the Class A Stock shall apply on like or
similar terms to any such other shares.
(7) In case of (a) any reclassification or change of
outstanding shares of Class A Stock issuable upon conversion of shares of this
Series (other than a change in par value or from par value to no par value or
from no par value to par value, or as a result of a subdivision or combination)
or (b) any consolidation or merger of the Corporation with one or more other
corporations (other than a consolidation or merger in which the Corporation is
the continuing corporation and which does not result in any reclassification or
change of outstanding shares of Class A Stock issuable upon conversion of shares
of this Series), or (c) any sale or conveyance to another corporation or other
entity of all or substantially all of the property of the Corporation, then the
Corporation, or such successor corporation or other entity, as the case may be,
shall make appropriate provision so that the holder of each share of this Series
then outstanding shall have the right to convert such share of this Series into
the kind and amount of shares of stock or other securities and property
receivable upon such consolidation, merger, sale, reclassification, change or
conveyance by a holder of the number of shares of Class A Stock into which such
shares of this Series might have been converted immediately prior to such
consolidation, merger, sale, reclassification, change or conveyance, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section (D). The provisions of this Section
(D)(7) shall apply similarly to successive consolidations, mergers, sales or
conveyances.
(8) Any shares of this Series which shall at any time have
been converted shall, after such conversion, have the status of authorized but
unissued shares of Preferred Stock, without designation as to series until such
shares are once more designated as part of a particular series by the Board of
Directors. The Corporation shall at all times reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of the shares of this Series, such number of its duly authorized shares of Class
A Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of this Series; provided, however, that nothing contained
herein shall preclude the Corporation from satisfying its obligations in respect
of the conversion of the shares by delivery of purchased shares of Class A Stock
which are held in the treasury of the Corporation.
(9) If any shares of Class A Stock required to be reserved
for purposes of conversion of shares of this Series hereunder require
registration with or approval of any governmental authority before such shares
may be issued upon conversion, the Corporation shall cause such shares to be
duly registered or approved, as the case may be. The Corporation will endeavor
to list the shares of Class A Stock required to be delivered upon
<PAGE> 10
-10-
conversion of shares of this Series prior to such delivery upon each national
securities exchange upon which the outstanding Class A Stock is listed at the
time of such delivery.
(10) The Corporation shall pay any and all issue or other
taxes that may be payable in respect of any issue or delivery of shares of Class
A Stock on conversion of shares of this Series pursuant hereto. The Corporation
shall not, however, be required to pay any tax which is payable in respect of
any transfer involved in the issue or delivery of Class A Stock in a name other
than that in which the shares of this Series so converted were registered, and
no such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of such tax, or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(11) Before taking any action that would result in the
conversion price being less than the then par value of the Class A Stock, the
Corporation shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Class A Stock at the conversion
price.
(12) In the event that all shares of Class A Stock are
converted into Common Stock of the Corporation in accordance with Article Third
(A)(IV) of the Certificate of Incorporation, all references in this Section (D)
to the Class A Stock shall from and after the date of such conversion be deemed
references to the Common Stock.
(E) VOTING
(1) The shares of this Series shall have the following
voting rights:
(a) If and whenever at any time or times dividends
payable on shares of this Series shall have been in arrears
and unpaid in an aggregate amount equal to or exceeding the
amount of dividends payable thereon for six quarterly dividend
periods, then the holders of shares of this Series shall have
the right, voting separately as a class with any other series
of Preferred Stock so entitled as provided in the certificate
of designation of such series, to elect two directors of the
Corporation, such directors to be in addition to the number of
directors constituting the Board of Directors immediately
prior to the accrual of such right, the remaining directors to
be elected by the other class or classes of stock entitled to
vote therefor at each meeting of stockholders held for the
purpose of electing directors. So long as the Corporation's
Board of Directors is divided into classes, the two directors
of the Corporation so elected by the holders of shares of this
Series and of such other series of Preferred Stock so entitled
shall be elected to the two classes with the longest remaining
terms.
<PAGE> 11
-11-
(b) Such voting right may be exercised initially
either at a special meeting of the holders of the Preferred
Stock having such voting right, called as hereinafter
provided, or at any annual meeting of stockholders held for
the purpose of electing directors, and thereafter at each such
annual meeting. The right of the holders of this Series to
vote for the election of such members of the Board of
Directors of the Corporation as aforesaid shall continue until
such time as all dividends accumulated on the shares of this
Series shall have been paid in full, at which time such voting
right of the holders of this Series shall terminate and, if
such voting right of the holders of this Series and all other
series of Preferred Stock so entitled shall have terminated,
subject to the requirements of the General Corporation Law of
Delaware, the term of the directors elected pursuant to
Section (E)(1)(a) shall terminate, subject to revesting on the
basis set forth in Section (E)(1)(a).
(c) At any time when such voting right shall have
vested in holders of this Series, and if such right shall not
already have been initially exercised, a proper officer of the
Corporation shall, upon the written request of the record
holders of 10% in number of shares of this Series then
outstanding, addressed to the Secretary of the Corporation,
call a special meeting of the holders of this Series and of
any other class or classes of stock having voting power with
respect to the election of such directors. Such meeting shall
be held at the earliest practicable date upon the notice
required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation or,
if none, at a place designated by the Board of Directors. If
such meeting is not called by the proper officers of the
Corporation within 30 days after the personal service of such
written request upon the Secretary of the Corporation, or
within 35 days after mailing the same within the United States
of America, by registered mail, addressed to the Secretary of
the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal
authorities), then the record holders of 10% in number of
shares of this Series then outstanding may designate in
writing one of their number to call such meeting at the
expense of the Corporation, and such meeting may be called by
such person so designated upon the notice required for annual
meetings of stockholders and shall be held at the same place
as is elsewhere provided for in this Section (E)(1)(c) or such
other place as is selected by such designated stockholders.
Any holder of shares of this Series who would be entitled to
vote at such meeting shall have access to the stock books of
the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this
Section(E)(1). Notwithstanding the provisions of this Section
(E)(1), no such special meeting shall be called
<PAGE> 12
-12-
during a period within 90 days immediately preceding the date
fixed for the next annual meeting of stockholders.
(d) At any meeting held for the purpose of electing
directors at which the holders of the Preferred Stock shall
have the right to elect directors as provided herein, the
presence in person or by proxy of the holders of fifty percent
(50%) of the then outstanding shares of Preferred Stock having
such right shall be required and shall be sufficient to
constitute a quorum of such class for the election of
directors by such class. At any such meeting or adjournment
thereof (i) the absence of a quorum of the holders of the
Preferred Stock having such right shall not prevent the
election of directors other than those to be elected by the
holders of the Preferred Stock, and the absence of a quorum or
quorums of the holders of capital stock entitled to elect such
other directors shall not prevent the election of directors to
be elected by the holders of the Preferred Stock entitled to
elect such directors and (ii) except as otherwise required by
law, in the absence of a quorum of the holders of any class of
stock entitled to vote for the election of directors, a
majority of the holders present in person or by proxy of such
class shall have the power to adjourn the meeting for the
election of directors which the holders of such class are
entitled to elect, from time to time, without notice other
than the announcement at the meeting, until a quorum is
present.
(e) Any vacancy in the Board of Directors in respect
of a director elected by holders of Preferred Stock pursuant
to the voting right created under this Section(E)(1) shall be
filled by vote of the remaining director so elected, or if
there be no such remaining director, by the holders of
Preferred Stock entitled to elect such director or directors
at a special meeting called in accordance with the procedures
set forth in Section (E)(1)(c), or, if no such special meeting
is called, at the next annual meeting of stockholders.
(f) So long as any shares of this Series remain
outstanding, the Corporation shall not, either directly or
indirectly or through merger or consolidation with any other
corporation, without the affirmative vote at a meeting or the
written consent with or without a meeting of the holders of
at least 66 2/3% in number of shares of this Series then
outstanding, (i) amend, alter or repeal any of the provisions
of the Certificate of Designation relating to this Series or
the Certificate of Incorporation, or authorize any
reclassification of the shares of this Series, so as in any
such case to affect adversely the preferences, special rights
or powers of the shares of this Series or (ii) authorize or
create any class of stock ranking prior to or on a
<PAGE> 13
-13-
parity with the Corporation's authorized class of Preferred
Stock as to dividends or distribution of assets on
liquidation, create any series of the Corporation's authorized
Preferred Stock ranking prior to the Preferred Stock as to
dividends or distributions on liquidation or increase the
authorized amount of the Corporation's Preferred Stock.
(g) In exercising the voting rights set forth in
this Section (E)(1), each share of this Series entitled to
such voting right shall have equal voting power,
notwithstanding any greater or lesser general voting powers of
one or more series of Preferred Stock.
(2) No consent of holders of shares of this Series shall
be required for (i) the creation of any indebtedness of any kind of the
Corporation, (ii) the authorization or issuance of any class of stock of the
Corporation junior to the shares of this Series as to dividends and upon
liquidation, dissolution or winding up of the Corporation or (iii) subject to
Section (E)(1)(f), the issuance of any shares of Preferred Stock.
(F) LIQUIDATION RIGHTS
(1) Upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of this
Series shall be entitled to receive out of the assets of the Corporation
available for distribution to stockholders, before any payment or distribution
shall be made on the Junior Stock, the amount of $6.25 per share, plus all
accumulated and unpaid dividends to the date of final distribution.
(2) Neither the sale, lease or exchange (for cash, shares
of stock, securities or other consideration) of all or substantially all the
property and assets of the Corporation nor the merger or consolidation of the
Corporation into or with any other corporation or the merger or consolidation of
any other corporation into or with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purposes of this Section (F).
(3) After the payment to the holders of the shares of this
Series of the full preferential amounts provided for in this Section (F), the
holders of this Series as such shall have no right or claim to any of the
remaining assets of the Corporation.
(4) In the event the assets of the Corporation available
for distribution to the holders of shares of this Series upon any dissolution,
liquidation or winding up of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to Section (F)(l), no such distribution shall be made on
account of any shares of any other class or series of Preferred Stock ranking
on a
<PAGE> 14
-14-
parity with the shares of this Series upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of this Series, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(G) PRIORITY
(1) For purposes of this resolution, any stock of any class
or series of the Corporation shall be deemed to rank:
(i) Prior to the shares of this Series, either as to
dividends or upon liquidation, if the holders of such class or
classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding
up of the Corporation, whether voluntary or involuntary, as
the case may be, in preference or priority to the holders of
shares of this Series;
(ii) On a parity with shares of this Series, either
as to dividends or upon liquidation, whether or not the
dividend rates, Dividend Payment Dates, or redemption or
liquidation prices per share or sinking fund provisions, if
any, are different from those of this Series, if the holders
of such stock are entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding
up of the Corporation, whether voluntary or involuntary, in
proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as
between the holders of such stock and the holders of shares of
this Series; and
(iii) Junior to shares of this Series, either as to
dividends or upon liquidation, if such class or series shall
be Common Stock or if the holders of shares of this Series
shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, as the case
may be, in preference or priority to the holders of shares of
such class or series.
<PAGE> 15
-15-
IN WITNESS WHEREOF, Fedders Corporation has caused this certificate to
be signed and attested this ___ day of ________, 1996.
FEDDERS CORPORATION
By
---------------------------
Title:
Attest:
-------------------------
Secretary
<PAGE> 1
EXHIBIT 12 (I)
FEDDERS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
--------------------- --------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED YEAR ENDED AUGUST 31,
FEB. 29, AUG. 31, FEB. 29, --------------------------------------
1996 1995 1996 1995 1994 1993 1992 1991(B)
---------- -------- ---------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from
continuing operations
before taxes,
extraordinary items and
cumulative effect of
accounting changes....... $6,882 $ 32,168 $ 10,828 $35,691 $19,803 $(2,340) $(24,965) $(13,666)
Add:
Portion of rent
representative of the
interest factor........ 414 -- 414 426 426 426 426
Interest expense......... 2,183 3,760 944 1,687 3,694 3,768 14,327 10,874
Amortization of debt
discount............... 1,026 -- 1,026 631 640 1,246 909
------ ------ ----- ------ ------ ------ ------- -------
Income (loss) as
adjusted................. $9,065 $ 37,368 $ 11,772 $38,818 $24,554 $ 2,494 $ (8,966) $ (1,457)
====== ====== ===== ====== ====== ====== ======= =======
Preferred dividend
requirements............. $ 591 $ 1,182 -- -- -- -- -- --
Ratio of income before
provision for income
taxes to net income(a)... 161% 161% -- -- -- -- -- --
Preferred dividend factor
on pretax basis.......... 952 1,903 -- -- -- -- -- --
Fixed charges
Interest expense......... 2,183 3,760 944 1,687 3,694 3,768 14,327 10,874
Amortization of debt
discount............... 1,026 -- 1,026 631 640 1,246 909
Portion of rent
representative of the
interest factor........ 414 -- 414 426 426 426 426
------ ------ ----- ------ ------ ------ ------- -------
Fixed charges and
preferred
dividends............ $3,135 $ 7,103 $ 944 $ 3,127 $ 4,751 $ 4,834 $ 15,999 $ 12,209
====== ====== ===== ====== ====== ====== ======= =======
Ratio of earnings to fixed
charges.................. -- -- 12.47 12.41 5.17 -- -- --
====== ====== ===== ====== ====== ====== ======= =======
Deficiency of earnings
versus fixed charges..... -- -- -- -- -- $ 2,340 $ 24,965 $ 13,666
====== ====== ===== ====== ====== ====== ======= =======
Ratio of earnings to
combined fixed charges
and preferred stock
dividends................ 2.89 5.26 -- -- -- -- -- --
====== ====== ===== ====== ====== ====== ======= =======
Deficiency of earnings
versus combined fixed
charges and preferred
stock dividends.......... $ -- -- -- -- -- -- -- --
====== ====== ===== ====== ====== ====== ======= =======
</TABLE>
- ------------------------
(a) To reflect the Company's expected future effective tax rate exclusive of the
impact of prior years' net operating loss carry forwards.
(b) Information presented is for the eight months ended August 31, 1991.
<PAGE> 1
EXHIBIT 12 (II)
NYCOR, INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1995 1994 1993 1992 1991
------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from continuing operations before taxes,
extraordinary items and cumulative effect of accounting
changes.................................................. ($3,703) $ 856 $4,379 $5,389 $4,157
Add:
Portion of rent representative of the interest factor.... -- -- -- -- --
Interest expense......................................... 304 -- -- -- --
------ ------ ----- ------ ------
Income (loss) as adjusted.................................. ($3,399) $ 856 $4,379 $5,389 $4,157
====== ====== ===== ====== ======
Preferred dividend requirements............................ $ 1,955 $1,955 $1,955 $1,955 $1,955
Ratio of income before provision for income taxes to net
income(a)................................................ 160% 160% 158% 152% 152%
Preferred dividend factor on pretax basis.................. 3,128 3,128 3,089 2,972 2,972
Fixed charges
Interest expense......................................... 304 -- -- -- --
Portion of rent representative of the interest factor.... -- -- -- -- --
------ ------ ----- ------ ------
Fixed charges and preferred dividends.................. $ 3,432 $3,128 $3,089 $2,972 $2,972
====== ====== ===== ====== ======
Ratio of earnings to combined fixed charges and preferred
stock dividends.......................................... -- -- 1.42 1.81 1.40
====== ====== ===== ====== ======
Deficiency of earnings versus combined fixed charges and
preferred stock dividends................................ $ 6,831 $2,272 -- -- --
====== ====== ===== ====== ======
</TABLE>
- ------------------------
(a) To reflect the Company's actual or expected marginal effective tax rate, as
applicable.
<PAGE> 1
EXHIBIT 23(III)
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Fedders Corporation
Liberty Corner, New Jersey
We hereby consent to the incorporation by reference in the Proxy
Statement-Prospectus constituting a part of this Registration Statement of our
report dated October 2, 1995, except for Note 13, which is as of November 30,
1995, relating to the consolidated financial statements of Fedders Corporation
appearing in the Company's Annual Report on Form 10-K for the year ended August
31, 1995, which is incorporated by reference in that Proxy Statement-Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Proxy Statement-Prospectus.
/s/ BDO SEIDMAN, LLP
------------------------------------------------------------------
Woodbridge, New Jersey
April 12, 1996
<PAGE> 1
EXHIBIT 23(IV)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-00483), and related Prospectus of
Fedders Corporation for the registration of 7,580,069 shares each of its
Convertible Preferred and Class A stock and to the incorporation by reference
therein of our report dated October 6, 1994, with respect to the consolidated
financial statements and schedules of Fedders Corporation for the years ended
August 31, 1994 and 1993 included in its Annual Report (Form 10-K) for the year
ended August 31, 1995, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG, LLP
------------------------------------------------------------------
Princeton, New Jersey
April 12, 1996
<PAGE> 1
EXHIBIT 23(V)
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Fedders Corporation
Liberty Corner, New Jersey
We hereby consent to the incorporation by reference in the Proxy
Statement-Prospectus constituting a part of this Registration Statement of our
report dated January 23, 1996, except for Note 10, which is as of March 16,
1996, relating to the consolidated financial statements of NYCOR, Inc. appearing
in NYCOR Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995,
which is included in that Proxy Statement-Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Proxy Statement-Prospectus.
/s/ BDO SEIDMAN, LLP
------------------------------------------------------------------
Woodbridge, New Jersey
April 12, 1996
<PAGE> 1
EXHIBIT 23(VI)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-00483) and related Prospectus of
Fedders Corporation for the registration of 7,580,069 shares each of its
Convertible Preferred and Class A stock and to the inclusion of our report dated
January 20, 1995, with respect to the consolidated financial statements and
schedules of NYCOR, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG, LLP
------------------------------------------------------------------
Princeton, New Jersey
April 12, 1996
<PAGE> 1
FEDDERS CORPORATION
WESTGATE CORPORATE CENTER
505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938
(908) 604-8686
April 26, 1996
Dear Fellow Stockholder:
On behalf of the Board of Directors, we cordially invite you to attend the
Annual Meeting of Stockholders of Fedders Corporation ("Fedders") to be held at
2:00 p.m. on Monday, June 24, 1996 at the Somerset Hills Hotel, 200 Liberty
Corner Road, Warren, NJ 07060.
One of the most important purposes of the meeting is to vote on a proposal
to approve the merger of NYCOR, Inc. ("NYCOR") into Fedders. You will also be
asked (i) to approve an amendment to the Certificate of Incorporation of Fedders
to increase the number of authorized shares of Fedders Common Stock, Fedders
Class A Stock and Fedders Preferred Stock from 60,000,000, 30,000,000 and
5,000,000 shares, respectively, to 80,000,000, 60,000,000 and 15,000,000 shares,
respectively, (ii) to elect three directors, (iii) to adopt a new stock option
plan and (iv) to ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending August 31, 1996.
THE PROPOSAL FOR THE MERGER OF NYCOR INTO FEDDERS IS OF SUCH IMPORTANCE TO
THE CONTINUED GROWTH OF FEDDERS, AS TO REQUIRE ADDITIONAL COMMENT. YOUR APPROVAL
OF THE MERGER IS NECESSARY TO HELP ASSURE THAT FEDDERS HAS A CONTINUAL AND
RELIABLE SOURCE OF COMPRESSORS TO SUPPORT ITS TRADITIONAL BASE OF CUSTOMERS IN
NORTH AMERICA AND ITS GROWTH INTO THE GLOBAL MARKETPLACE, INCLUDING ITS RECENTLY
COMPLETED JOINT VENTURE IN CHINA WHICH WILL REQUIRE 500,000 COMPRESSORS ANNUALLY
WITHIN THREE YEARS. IN RECENT YEARS, FEDDERS HAS SIGNIFICANTLY INCREASED SALES
AND MARKET SHARE AND EXPANDED ITS CUSTOMER BASE IN NORTH AMERICA DUE TO ITS
ABILITY TO MEET RETAILERS' JUST-IN-TIME NEEDS WHICH, IN LARGE PART, IS DEPENDENT
UPON THE ROTOREX SUBSIDIARY OF NYCOR. FEDDERS COMPRESSOR REQUIREMENTS ALREADY
SURPASS, BY SOME 600,000 UNITS, WHAT ROTOREX IS COMMITTED TO PROVIDE TO FEDDERS
UNDER THE TERMS OF A SUPPLY AGREEMENT. ROTOREX, WHICH HAS THREE ROTARY AIR
CONDITIONER COMPRESSOR LICENSE AGREEMENTS IN CHINA, HAS SIGNED A LETTER OF
INTENT TO FORM A JOINT VENTURE IN CHINA TO MANUFACTURE ROTARY COMPRESSORS. THESE
FACTORS, COUPLED WITH A WORLDWIDE SHORTAGE OF ROTARY COMPRESSORS FOR ROOM AIR
CONDITIONERS, MAKE IT IMPORTANT FOR FEDDERS TO REGAIN OWNERSHIP OF ROTOREX, ITS
PRINCIPAL COMPRESSOR SOURCE. THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AS DISCUSSED IN THE ACCOMPANYING JOINT PROXY STATEMENT,
AND STRONGLY RECOMMENDS THAT YOU VOTE, OR INSTRUCT YOUR BROKER OR NOMINEE TO
VOTE, FOR THIS PROPOSAL.
IF YOUR SHARES ARE HELD IN THE NAME OF YOUR BROKER OR A NOMINEE, THEY CAN
ONLY BE VOTED ON THE PROPOSAL TO MERGE NYCOR INTO FEDDERS WITH YOUR SPECIFIC
INSTRUCTIONS.
Your Board of Directors recommends that you also vote FOR approval of the
amendments to the Certificate of Incorporation, the election of the three named
director nominees, approval of the new stock option plan and ratification of the
appointment of BDO Seidman, LLP.
The accompanying Notice of Annual Meeting and Proxy Statement-Prospectus
contain information about the merger and the meeting. We urge you to review
carefully such information, and the information in the appendices to the Proxy
Statement-Prospectus. Certain information about Fedders is incorporated by
reference to filings made by Fedders under the Securities Exchange Act of 1934.
Copies of such materials are available as indicated in the accompanying Proxy
Statement-Prospectus under "Available Information."
EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE THE
ENCLOSED PROXY, SIGN, DATE AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID,
RETURN ADDRESSED ENVELOPE. IF YOU DO ATTEND THE MEETING AND WISH TO VOTE IN
PERSON, YOUR PROXY CAN BE REVOKED AT YOUR REQUEST.
Sincerely,
SALVATORE GIORDANO SAL GIORDANO, JR.
Chairman of the Board Vice Chairman, President and
Chief Executive Officer
<PAGE> 1
FEDDERS CORPORATION
LIBERTY CORNER, NEW JERSEY 07938
------------------------
NOTICE OF ANNUAL MEETING OF FEDDERS STOCKHOLDERS
TO BE HELD ON JUNE 24, 1996
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Fedders
Corporation (the "Company") will be held at the Somerset Hills Hotel, 200
Liberty Corner Road, Warren, NJ 07060 on Monday, June 24, 1996 at 2:00 p.m. for
the following purposes:
1. To consider and act upon a proposal to approve the agreement and
plan of merger between the Company and NYCOR, Inc. and the merger of NYCOR,
Inc. into the Company;
2. To elect three (3) directors to serve for a term of three (3) years
and until their successors shall be elected and shall have qualified;
3. To consider and act upon a proposal to amend the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
the Company's Common, Class A and Preferred Stock;
4. To consider and act upon a proposal to approve the adoption of the
Company's Stock Option Plan VIII;
5. To ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for the ensuing fiscal year; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on April 25, 1996 has been fixed as the record date
for the determination of the holders of shares of the Company's Common Stock,
Class B Stock and Class A Stock (on the proposal to increase the number of
authorized shares of Class A Stock) entitled to notice of, and to vote at, the
Annual Meeting. A list of the stockholders entitled to vote at the Annual
Meeting will be available during the period ten (10) days prior to the date of
the Annual Meeting for examination by any stockholder, for any purpose germane
to the Annual Meeting, during ordinary business hours at the offices of the
Company, Westgate Corporate Center, 505 Martinsville Road, Liberty Corner, New
Jersey 07938.
By order of the Board of Directors
S. A. MUSCARNERA
Secretary
Dated: April 26, 1996
Liberty Corner, New Jersey
IMPORTANT: THE BOARD OF DIRECTORS INVITES YOU TO ATTEND THE MEETING IN
PERSON, BUT IF YOU ARE UNABLE TO BE PERSONALLY PRESENT, PLEASE DATE, SIGN AND
RETURN THE ENCLOSED PROXY IMMEDIATELY. NO POSTAGE IS REQUIRED IF THE PROXY IS
RETURNED IN THE ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES.
<PAGE> 1
NYCOR, INC.
287 CHILDS ROAD
BASKING RIDGE, NEW JERSEY 07920
(908) 953-8200
April 26, 1996
Dear Fellow Stockholder:
On behalf of the Board of Directors, we cordially invite you to attend a
Special Meeting of Stockholders of NYCOR, Inc. ("NYCOR") to be held at 10:30
a.m. on Monday, June 24, 1996 at the Somerset Hills Hotel, 200 Liberty Corner
Road, Warren, NJ 07060.
The purpose of the meeting is to vote on a proposal to approve the merger
of NYCOR into Fedders Corporation ("Fedders").
THE BOARD OF DIRECTORS OF NYCOR BELIEVES THAT THE MERGER IS THE BEST METHOD
TO CREATE VALUE FOR NYCOR'S STOCKHOLDERS. THE BOARD OF DIRECTORS HAS CONCLUDED
THAT, ALTHOUGH THE CURRENT STRATEGIES OF ITS OPERATING UNITS ARE SOUND, THE
POTENTIAL FOR GROWTH OF ITS BUSINESSES, PARTICULARLY ROTOREX, WILL BE ENHANCED
AS PART OF A LARGER, FINANCIALLY SOUND COMPANY SUCH AS FEDDERS. AS A RESULT OF
THE MERGER, NYCOR'S STOCKHOLDERS WILL RECOGNIZE VALUE IN THEIR STOCK AND HAVE
THE OPPORTUNITY TO PARTICIPATE IN THAT GROWTH AS STOCKHOLDERS OF FEDDERS, THE
LARGEST MANUFACTURER OF ROOM AIR CONDITIONERS IN NORTH AMERICA AND A MAJOR
PARTICIPANT IN THE WORLD-WIDE AIR CONDITIONER MARKETS. THEREFORE, THE BOARD OF
DIRECTORS HAS CONCLUDED THAT THE MERGER IS IN THE BEST INTERESTS OF NYCOR'S
STOCKHOLDERS AND STRONGLY RECOMMENDS THAT YOU VOTE, OR INSTRUCT YOUR BROKER OR
NOMINEE TO VOTE, FOR THIS PROPOSAL.
IF YOUR SHARES ARE HELD IN THE NAME OF YOUR BROKER OR A NOMINEE, THEY CAN
ONLY BE VOTED ON THIS PROPOSAL WITH YOUR SPECIFIC INSTRUCTIONS.
The accompanying Notice of Special Meeting and Proxy Statement-Prospectus
contain information about the merger. We urge you to review carefully such
information, and the information in the appendices to the Proxy
Statement-Prospectus. Certain information about Fedders and NYCOR is
incorporated by reference to filings made under the Securities Exchange Act of
1934. Copies of such materials are available as indicated in the accompanying
Proxy Statement-Prospectus under "Available Information."
EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE THE
ENCLOSED PROXY, SIGN, DATE AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID,
RETURN ADDRESSED ENVELOPE. IF YOU DO ATTEND THE MEETING AND WISH TO VOTE IN
PERSON, YOUR PROXY CAN BE REVOKED AT YOUR REQUEST.
Sincerely,
SALVATORE GIORDANO SAL GIORDANO, JR.
Chairman of the Board Vice Chairman
<PAGE> 1
NYCOR, INC.
BASKING RIDGE, NEW JERSEY 07920
------------------------
NOTICE OF SPECIAL MEETING OF NYCOR STOCKHOLDERS
TO BE HELD JUNE 24, 1996
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of NYCOR,
Inc. ("NYCOR") will be held at the Somerset Hills Hotel, 200 Liberty Corner
Road, Warren, NJ 07060 on Monday, June 24, 1996 at 10:30 a.m. for the following
purposes:
1. To consider and act upon a proposal to approve the agreement and plan of
merger between NYCOR and Fedders Corporation and the merger of NYCOR into
Fedders Corporation; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The close of business on April 25, 1996 has been fixed as the record date
for the determination of the holders of shares of NYCOR Common Stock and Class B
Stock entitled to notice of, and to vote at, the Special Meeting. A list of the
stockholders entitled to vote at the Special Meeting will be available during
the period ten (10) days prior to the date of the Special Meeting for
examination by any stockholder, for any purpose germane to the Special Meeting,
during ordinary business hours at the offices of NYCOR, 287 Childs Road, Basking
Ridge, New Jersey 07920.
By order of the Board of Directors
KENT E. HANSEN
Secretary
Dated: April 26, 1996
Basking Ridge, New Jersey
IMPORTANT: THE BOARD OF DIRECTORS INVITES YOU TO ATTEND THE MEETING IN
PERSON, BUT IF YOU ARE UNABLE TO BE PERSONALLY PRESENT, PLEASE DATE, SIGN AND
RETURN THE ENCLOSED PROXY IMMEDIATELY. NO POSTAGE IS REQUIRED IF THE PROXY IS
RETURNED IN THE ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES.
<PAGE> 1
Exhibit 99.7
<TABLE>
<S> <C> <C>
FEDDERS CORPORATION
P PROXY - Annual Meeting of Stockholders - June 24, 1996 C
R Solicited on Behalf of the Board of Directors L
O A
X The undersigned stockholder of FEDDERS CORPORATION (the "Company") S
Y hereby constitutes and appoints SALVATORE GIORDANO, SAL GIORDANO, JR. and S
S.A. MUSCARNERA, and each of them, the attorneys and proxies of the
undersigned, with full power of substitution, to vote for and in the name, A
place and stead of the undersigned, at the Annual Meeting of Stockholders
of the Company, to be held at the Somerset Hills Hotel, 200 Liberty Corner
Road, Warren, New Jersey, on June 24, 1996 at 2:00 p.m., and at any
adjournments thereof, the number of votes the undersigned would be entitled
to cast if present, for an increase in the number of authorized shares of
Class A Stock.
A majority of said attorneys and proxies, or their substitutes at
said meeting, (or any adjournments thereof for if only one, that one) may
exercise all of the power hereby given. Any proxy to vote any of the shares
with respect to which the undersigned is or would be entitled to vote,
heretofore given to any persons other than the persons named above, is
hereby revoked.
IN WITNESS WHEREOF, the undersigned has signed this proxy and
hereby acknowledges receipt of a copy of the notice of said meeting and
proxy statement in reference thereto both dated April 26, 1996.
</TABLE>
-----------
IMPORTANT: This proxy is continued and is to be signed SEE REVERSE
on the reverse side. SIDE
-----------
<PAGE> 2
[X] Please mark
votes as in
this example
Unless you specify, the Proxy will be voted FOR Item 1.
- --------------------------------------------------------
Directors recommended a vote FOR Item 1.
- --------------------------------------------------------
FOR AGAINST ABSTAIN
1. Approval of an amendment to the Company's certificate [ ] [ ] [ ]
of incorporation to increase the number of authorized
shares of Class A Stock from 30,000,000 to 60,000,000.
NOTE: This Proxy, properly filled in, dated
and signed, should be returned immediately in
the enclosed post-paid envelope to Proxy
Department, Bank of Boston, P.O. Box 1528,
Boston, Massachusetts 02105. If the signer
is a corporation, sign in full the corporate
name by a duly authorized officer. Attorneys,
executors, administrators, trustees or
guardians should sign full title as such.
Signature: __________________ Date _______
Signature: __________________ Date _______
<PAGE> 3
<TABLE>
<S> <C> <C>
FEDDERS CORPORATION
P PROXY - Annual Meeting of Stockholders - June 24, 1996 C
R Solicited on Behalf of the Board of Directors O
O M
X The undersigned stockholder of FEDDERS CORPORATION (the "Company") M
Y hereby constitutes and appoints SALVATORE GIORDANO, SAL GIORDANO, JR. and O
S.A. MUSCARNERA, and each of them, the attorneys and proxies of the N
undersigned, with full power of substitution, to vote for and in the name,
place and stead of the undersigned, at the Annual Meeting of Stockholders &
of the Company, to be held at the Somerset Hills Hotel, 200 Liberty Corner
Road, Warren, New Jersey, on June 24, 1996 at 2:00 p.m., and at any C
adjournments thereof, the number of votes the undersigned would be entitled L
to cast if present, for the approval of the agreement and plan of merger, A
and the Merger of NYCOR, Inc. into the Company, the election of directors S
and the other items as set forth on the reverse side of this proxy and in S
their discretion, upon such other matters as may properly come before the
meeting or any adjournment thereof. The Board of Directors recommends the B
following for Director -- Salvatore Giordano, Howard S. Modlin and
William J. Brannon.
A majority of said attorneys and proxies, or their substitutes at
said meeting, (or any adjournments thereof for if only one, that one) may
exercise all of the power hereby given. Any proxy to vote any of the shares
with respect to which the undersigned is or would be entitled to vote,
heretofore given to any persons other than the persons named above, is
hereby revoked.
IN WITNESS WHEREOF, the undersigned has signed this proxy and
hereby acknowledges receipt of a copy of the notice of said meeting and
proxy statement in reference thereto both dated April 26, 1996.
</TABLE>
-----------
IMPORTANT: This proxy is continued and is to be signed SEE REVERSE
on the reverse side. SIDE
-----------
<PAGE> 4
[X] Please mark
votes as in
this example
Unless you specify, the Proxy will be voted FOR Items 1 through 5.
- --------------------------------------------------------------------------------
Directors recommended a vote FOR Items 1 through 5.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
1. Approval of the agreement and 2. Election of Directors for a 3. Approval of the amendments FOR AGAINST ABSTAIN
plan of merger, and the merger term of three years. Nominees: of the Company's certificate [ ] [ ] [ ]
of NYCOR, Inc. into the Company. Salvatore Giordano, Howard S. of incorporation to all
Modlin and William J. Brennen. increases in the number of
authorized shares of Common
Stock from 60,000,000 to
FOR AGAINST ABSTAIN FOR WITHHELD 80,000,000 increases the
[ ] [ ] [ ] ALL [ ] FROM ALL [ ] the number authorized shares
NOMINEES NOMINEES of Class A Stock from
90,000,000 to 60,000,000,
[ ]____________________________ and will increase the number
For the nominees except as of Preferred Stock from
noted above 5,000,000 to 15,000,000.
4. Approval of the Company's FOR AGAINST ABSTAIN
Stock Option Plan VIII. [ ] [ ] [ ]
5. Ratification of the FOR AGAINST ABSTAIN
appointment of BDO [ ] [ ] [ ]
Seidman, LLP as the
Company's independent
auditors.
</TABLE>
<TABLE>
<S> <C>
NOTE: This Proxy, properly filled in, dated and signed, should be
returned immediately in the enclosed post-paid envelope to Proxy Signature: ______________________________ Date _________
Department, Bank of Boston, P.O. Box 1628, Boston, Massachusetts
02105. If the signer is a corporation, sign in full the corporate Signature: ______________________________ Date _________
name by a duly authorized officer. Attorneys, executors, administrators,
trustees or guardians should sign full on the mark as such.
</TABLE>
<PAGE> 1
Exhibit 99.8
NYCOR, INC.
P PROXY -- SPECIAL MEETING OF STOCKHOLDERS -- JUNE 24, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
The undersigned stockholder of NYCOR, INC. hereby constitutes and
O appoints SALVATORE GIORDANO, SAL GIORDANO, JR. and S.A. MUSCARNERA, and
each of them, the attorneys and proxies of the undersigned, with full
X power of substitution, to vote for and in the name, place and stead of the
undersigned, at the Special Meeting of Stockholders of said Corporation, to
Y be held at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, New
Jersey, on June 24, 1996 at 10:30 a.m. and at any adjournments thereof, the
number of votes the undersigned would be entitled to cast if present, for
the proposal set forth on the reverse side of this proxy or any adjournment
thereof. The Board of Directors recommends that you vote FOR the proposal.
A majority of said attorneys and proxies, or their substitutes at said
meeting, or any adjournments thereof (or if only one, that one) may
exercise all of the power hereby given. Any proxy to vote any of the shares
with respect to which the undersigned is or would be entitled to vote,
heretofore given to any persons other than the persons named above, is
hereby revoked.
IN WITNESS WHEREOF, the undersigned has signed this proxy and hereby
acknowledges receipt of a copy of the notice of said meeting and proxy
statement in reference thereto both dated April 26, 1996.
IMPORTANT: This proxy is continued and is to be -----------
signed on the reverse side. SEE REVERSE
SIDE
-----------
<PAGE> 2
Please mark
/X/ votes as in
this example.
Unless you specify, the Proxy will be voted FOR the proposal.
- --------------------------------------------
Directors recommend a vote FOR the proposal.
- --------------------------------------------
FOR AGAINST ABSTAIN
1. Proposal to approve the Agreement and Plan of / / / / / /
Merger between NYCOR, Inc. and Fedders
Corporation and the merger of NYCOR, Inc. into
Fedders Corporation.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
NOTE: This Proxy, properly filled in, dated and
signed, should be returned immediately in the
enclosed post-paid envelope to Proxy Department,
Bank of Boston, P.O. Box 1028, Boston,
Massachusetts 02306. If the signer is a
corporation, sign in full the corporate name by
a duly authorized officer. Attorneys, executors,
administrators, trustees or guardians should
sign full title as such.
Signature ________________________ Date ________
Signature ________________________ Date ________
