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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8831
FEDDERS CORPORATION
(Exact name of Registrant as specified in its charter)
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Delaware 22-2572390
(State of Incorporation) (I.R.S. Employer Identification No.)
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505 Martinsville Road, Liberty Corner, NJ 07938-0813
(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (908) 604-8686
Securities registered pursuant to Section 12 (b) of the Act:
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Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $1 par value New York Stock Exchange, Inc.
Class A Stock, $1 par value New York Stock Exchange, Inc.
Convertible Preferred Stock,
$1 par value New York Stock Exchange, Inc.
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Securities registered pursuant to section 12 (g) of the Act:
Title of Each Class
None
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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 [ ].
As of the close of business on October 31, 1996, there were
outstanding 18,989,798 shares of the Registrant's Common Stock,
19,443,856 shares of Class A Stock, 2,266,706 shares of its Class B
Stock and 7,643,061 shares of its Convertible Preferred Stock. The
approximate aggregate market value (based upon the closing price on
the New York Stock Exchange) of these shares held by non-affiliates of
the Registrant as of October 31, 1996 was $228,597,399. (The value of
a share of Common Stock is used as the value for 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.)
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FEDDERS CORPORATION
FORM 10-K ANNUAL REPORT
SEPTEMBER 1, 1995 TO AUGUST 31, 1996
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business 1
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of
Security Holders 11
PART II
Item 5. Market for Registrant's Common Equity
and Related Matters 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 14
PART III
Item 10. Directors and Executive Officers of the
Registrant 15
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial
Owners and Management 22
Item 13. Certain Relationships and Related
Transactions 26
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 27
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PART I
ITEM 1. Business
(a) General Development of Business
Fedders Corporation (the "Company" or the "Registrant") 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. The Company also manufactures, through recently acquired
Rotorex Company, rotary compressors principally for use in room air
conditioners, and through Melcor Corporation, thermoelectric heating
and cooling modules used in a variety of applications in which space
and weight are considerations or precise temperature control is
required. Based upon industry statistics compiled by a trade
association, the Company believes it is the largest manufacturer of
room air conditioners in North America. Unless otherwise indicated,
all references herein to the "Company" or the "Registrant" include
Fedders Corporation and its principal operating subsidiaries, Fedders
North America, Inc. ("Fedders NA"), Emerson Quiet Kool Corporation
("EQK"), Columbia Specialties, Inc. ("CSI"), Fedders, Inc., Fedders
International, Inc. ("FI"), Rotorex Corporation ("Rotorex") and Melcor
Corporation ("Melcor"). EQK, CSI and Fedders, Inc. are wholly owned
subsidiaries of Fedders NA. Fedders International has a Mexican
sales subsidiary, Fedders de Mexico S.A. de C.V. and a Singapore
subsidiary, Fedders Asia Pte. Ltd. ("Fedders Asia").
In November 1995, the Company entered into a joint venture with the
Ningbo General Air Conditioner Factory of Ningbo, China, Fedders Xinle
Co., Ltd.("Fedders Xinle"), to manufacture and market ductless split
room air conditioners as well as window type air conditioners. The
Company owns 60% of the joint venture which and through Fedders
International, will export approximately 50% of its product to markets
outside of China. Fedders Xinle is a majority-owned subsidiary. See
note 12 of the Notes to Consolidated Financial statements on page F21
herein for a description of the terms of the transaction.
On August 13, 1996, NYCOR, Inc. ("NYCOR") was merged into the Company.
See note 13 of the Notes to the Consolidated Financial Statements on
page F22 for description of the merger. The Company purchased
compressors since 1992 from NYCOR, under a ten year supply agreement.
The agreement required NYCOR to provide up to 800,000 compressors per
year to the Company which would not allow for significant growth. The
merger will provide the Company with a guaranteed supply of
compressors to support international growth of room air conditioners.
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(b) Financial Information About Industry Segments
The Company operates in one industry segment. See Note 8 of the Notes
to Consolidated Financial Statements at page F19 herein.
(c) Narrative Description of Business
Room Air Conditioners and Dehumidifiers
Products
The Company manufactures a complete line of window and through-the-
wall room air conditioners, principally for the residential market in
models ranging in capacity from 5,000 BTU (British Thermal Units) per
hour to 32,000 BTU per hour. Fedders also manufactures through
Fedders Xinle, split ductless room air conditioners for international
residential and commercial markets from 7,000 to 40,000 BTU. These
models comprise product lines marketed by the Company under the brands
Fedders, Emerson Quiet Kool and Airtemp. The Company also
manufactures products under various private labels.
The Company manufactures under the EMERSON QUIET KOOL brand, a line of
household dehumidifiers ranging in capacity from 30 to 50 pints per
day.
Room air conditioners 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 using the compressor. Current
proposed rule-making by the Energy Department under the National
Appliance Energy Conservation Act would have the effect of increasing
minimum required EERs. In the event the new regulations are adopted,
the efficiency of certain air conditioner models would have to be
increased. It is not certain at present if the proposed regulations
would be adopted and, if they are, when the requirements would become
effective. Regardless of the adoption of these proposed regulations,
the Company is continually seeking to improve the efficiency of its
air conditioners and compressors in order to remain competitive in the
markets it serves.
HCFC22 is used as a refrigerant in the Company's air conditioners and
dehumidifiers. HCFC22 is currently an acceptable substitute for the
CFC refrigerants which have a much more harmful effect on the
environment and are currently being phased out of use. The Company
does not expect that requirements to ultimately phase out of HCFC
refrigerants will have a material effect on its operations or
expenditures, since substitutes are currently being developed.
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Marketing
In North America, the Company markets its products to retail chains,
retail buying groups and others representing over 10,000 retail
outlets. The distribution of appliances and electronics in North
America is now principally direct to retailers, in contrast to the
early 1980's when distributors accounted for the majority of the
Company's business.
In recent years the Company's customers have changed their purchasing
patterns to minimize inventories. In response, the Company has
increased its manufacturing flexibility, thereby improving its
capabilities, especially in the area of just-in-time delivery.
All Fedders North America sales, marketing, service management are
located in a Whitehouse, New Jersey headquarters location. Fedders
North America serves many of its customers through regional sales
offices and distribution centers.
To support and service its customers and ultimate consumer, the
Company has a network of third-party service centers throughout the
United States and regional parts depots to expedite repairs by local
service centers.
The Company promotes its Emerson Quiet Kool and Fedders brands of air
conditioners through advertising, primarily in trade publications.
The Company's future business development activities are focused
primarily outside of North America. The Company believes that the
market for room air conditioners outside of North America is
approximately four times the size of the North American market.
Demand for air conditioners outside of North American accelerated in
recent years and continues to grow rapidly with the increase in
disposable income of populous nations in hot weather climates. The
Company has participated in international markets for more than 30
years and has licensees in several countries.
The Company expects to increase its participation overseas through
strategic alliances primarily under production and joint venture
agreements in addition to Fedders Xinle established in Ningbo, China.
The Company plans to participate based in part on its expertise,
technological capability and well established global sourcing program.
The Company is accelerating development activities to further
penetrate international markets. This activity should establish
greater growth potential than is afforded by the mature U.S. market
while reducing its dependence on summer weather in North America.
Fedders International is headquartered in Liberty Corner, New Jersey.
Fedders International has sales offices in Singapore (Fedders Asia),
Miami, Mexico and the United Kingdom. Fedders Asia also does
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research, development and testing of product for the international
market. The Company believes it can compete cost-effectively abroad
based on its global sourcing network that currently delivers
components from around the world to two U.S. plants and to Fedders
Xinle. Fedders International exhibits its products at industry trade
shows.
Production
Fedders currently manufactures its air conditioners in two U.S. owned
facilities - a 650,000 square foot facility in Effingham, Illinois and
a 232,000 foot facility in Columbia, Tennessee. Both of these
factories have earned the highest level of certification, ISO 9001,
for their quality management systems under the International Standards
Organization. The ISO 9000 program is an internationally recognized
benchmark of quality management systems within a production facility.
Both factories have sufficient production capacity for domestic needs
for the foreseeable future.
Fedders also manufactures air conditioners, through Fedders Xinle, in
a facility owned by the joint venture in Ningbo, People's Republic of
China. Current capacity of the facility is approximately 200,000 air
conditioners. It is planned to increase the capacity to 500,000 units
over the next few years which will require modest capital
expenditures.
Rotorex
Products
Rotorex manufactures and sells a broad line of rotary compressors,
principally for use in Fedders room air conditioners, but also sold to
other manufacturers of air conditioners and refrigeration products.
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 18,5000 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, critical to
international growth.
Marketing
Rotorex compressors are primarily used by the Company. The Company
also believes that growth opportunities exist in the international
market, particularly in Asia. Currently, Rotorex has three licensees
in the People's Republic of China and one in Taiwan. The license
agreements require Rotorex to provide technology to the licensees and
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the licensees to pay royalties to Rotorex based upon sales of finished
compressors. Rotorex has a representative office in Beijing and sales
offices in Singapore, United Kingdom and United States.
Rotorex promotes its products through the use of product literature,
catalogs and advertising in the 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 the Company in Frederick, Maryland.
Rotorex has also obtained the highest level of certification, ISO
9001, for its quality management system. Rotorex recently made
several investments to enhance manufacturing efficiencies. Currently,
capacity is sufficient to meet compressor requirements of the Company
and compressor customers.
Melcor
Products
Melcor manufactures solid state heat pump modules that utilize the
Peltier effect to perform the same cooling and heating functions as
refrigerant-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
refrigerators, laboratory, scientific, medical and restaurant
equipment and telecommunications and computer equipment.
Melcor's products are sold under the trademarks MELCOR and FRIGICHIP.
Marketing
Melcor's modules are currently sold by salaried salespeople and a
network of sales representative firms located around the world.
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.
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Production
Melcor manufactures its modules in facilities near Lawrence Township,
New Jersey, comprising 53,000 square feet. The capacity available is
sufficient for its needs in the foreseeable future.
Sources and Availability of Raw Materials
The most important materials purchased by the Company are steel,
copper and aluminum, which are obtained from domestic and foreign
suppliers. The Company also purchases from other domestic and foreign
manufacturers certain components, including thermostats, compressors,
motors and electrical controls, used in its products. The Company
endeavors to obtain the lowest possible cost in its purchases of raw
materials and components, which must meet specified quality standards,
through an active global sourcing program. Following the merger of
NYCOR into Fedders, the Company is less dependent upon any one source
for major components of its manufactured products. See note 13 of the
Notes to the Consolidated Financial Statements on page F22.
Patents, Trademarks, Licenses and Concessions Held
The Company owns a number of trademarks. While the Company believes
that its trademarks, such as, FEDDERS, EMERSON QUIET KOOL, AIRTEMP,
ROTOREX, MELCOR and FRIGICHIPS are well known and enhance the
marketing of its products, the Company does not consider the
successful conduct of its business to be dependent upon such
trademarks. The Company aggressively protects its trademark and
intellectual property rights worldwide.
Seasonality of Business
The Company's results of operations and financial condition are almost
entirely dependent on the manufacture and sale of room air
conditioners and dehumidifiers, the demand for which is highly
seasonal. Seasonally low volume sales are not sufficient to offset
fixed costs, resulting in seasonal operating losses at certain times
of the year. In addition, the Company's working capital needs are
seasonal, with the Company's greatest utilization of its lines of
credit occurring early in the calendar year. See "Management`s
Discussion and Analysis of Results of Operations and Financial
Condition," at pages F1 through F3 herein.
See also the discussion under "Working Capital Practices."
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. The Company's sales are
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predominantly made directly to retailers, who typically require just-
in-time delivery, primarily in April through July. Production is
weighted towards the retail selling season to minimize borrowing
earlier in the fiscal year, although room air conditioners may be
produced throughout much of the rest of the year at a lower rate of
production.
Information with respect to the Company's warranty and return policy
is provided in Note 1 of the Notes to Consolidated Financial
Statements at page F12 herein.
See also the information entitled "Management's Discussion and
Analysis of Results of Operations and Financial Condition" at pages F1
through F3 herein.
Backlog
The Company's fiscal year end (August 31) coincides with the end of
the seasonal room air conditioner sales cycle. Accordingly, backlog
at this time of the year is insignificant.
Competition
The Company's competitors include a number of domestic and foreign
manufacturers of air conditioners and appliances, including Frigidaire
Company, Whirlpool Corporation, Matsushita Electric Industrial
Company, Ltd. and Sharp. Many of the Company's competitors are
substantially larger and have greater resources than the Company. The
Company competes principally on the basis of price, quality and its
ability to deliver product and service to its customers on a just-in-
time basis. Competitive factors could require price reductions or
increased spending on product development, marketing and sales that
could adversely affect the Company's profit margins.
Research and Development
Information with respect to amounts spent on research and development
is provided in Note 1 of the Notes to Consolidated Financial
Statements at page F12 herein. During fiscal 1996, the Company
established a research and design center in Princeton, New Jersey for
the development of innovative, non-vapor compression products, that
will take advantage of the Company's distribution strengths.
Environmental Protection
It is the Company's policy to take all practical measures to minimize
air and water pollution resulting from its operations. The Company
did not make capital expenditures on environmental protection-related
items during the year ended August 31, 1996 that are material to its
total capital expenditures, earnings and competitive position and does
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not anticipate making material capital expenditures on such items in
the fiscal year ending August 31, 1997.
Employees
The Company has approximately 3,000 employees, not including 500 joint
venture employees in Ningbo, China. The current contracts with two
unions representing employees of the Effingham, Illinois plant are
scheduled to expire in October 1998. Another union contract
representing Rotorex employees expires in August 1997. The Company
considers its relations with its employees to be generally
satisfactory.
International Sales
For information with respect to international sales of the Company's
products, see Note 8 of the Notes to Consolidated Financial Statements
at page F19 herein. Future sales are subject to the risks inherent in
such activities, such as foreign regulations, unsettled political
conditions and exchange rate fluctuations.
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Item 2. Properties
The Company owns or leases the following primary facilities:
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Approximate Square
Location Principal Function Feet of Floor Area
Liberty Corner, Corporate and 25,000
New Jersey International
(Leased) Headquarters
Effingham, Illinois Manufacturing of 650,000
(Owned) air conditioners
Columbia, Tennessee Manufacturing of 232,000
(Owned) air conditioners
Frederick, Maryland Manufacturing of 200,000
(Owned) rotary compressors
Orangeville, (1) 106,000
Ontario (Owned)
Whitehouse, Fedders NA 17,000
New Jersey (Leased) Headquarters
Singapore Research and Design 14,600
(Leased) Center
Basking Ridge, (2) 7,395
New Jersey (Owned)
Lawrence Township, Manufacture of Melcor 15,000
New Jersey (Owned) components
Lawrence Township, Assembly of Melcor modules 22,400
New Jersey (Leased)
Princeton, New Jersey Research and Design Center 6,000
(Leased)
(1) Facility available for sale and currently being leased.
(2) Facility available for sale.
The Effingham, Illinois facility is subject to a mortgage securing a
$4.2 million, 1% promissory note payable over the next 12 years to the
State of Illinois. The Company believes that productive capacity at
its major manufacturing facilities is adequate to meet production
needs in the foreseeable future.
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Item 3. Legal Proceedings
Not applicable.
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Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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Executive Officers of the Registrant
First Became an
Name and Age Position Held Executive Officer
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Salvatore Giordano, 86 Chairman of the Board 1945
Sal Giordano, Jr., Vice Chairman, President 1965
58 (1) and Chief Executive Officer
Robert L. Laurent, Jr., Executive Vice President, 1989
41 Finance and Administration
and Chief Financial Officer
Kent E. Hansen, 48 Senior Vice President and 1996
Secretary
Gordon Newman, 51 Senior Vice President, 1995
Supply Chain
Gary J. Nahai, 45 Vice President and 1993
President, Fedders
International, Inc.
Sal Giordano III, 37 Vice President and President, 1996
(2) Melcor Corporation
Thomas Kroll, 41 Controller 1995
________________________
(1) Son of Salvatore Giordano
(2) Grandson of Salvatore Giordano
Business Experience During Last Five Years
Messrs. Salvatore Giordano, Sal Giordano, Jr. and Robert L. Laurent,
Jr. have been associated in executive capacities with the Company for
more than five years.
Mr. Hansen was elected to his position in August 1996. Previously he
was Vice President, Finance and General Counsel, Chief Financial
Officer of NYCOR. Prior thereto, he was Vice President and General
Council of the Company from 1990 to 1991.
Mr. Newman was elected to his position in April 1995. He joined
Fedders Corporation in 1991 as Vice President, Corporate Quality.
Prior thereto Mr. Newman was Corporate Director of Quality for Welbilt
Corporation.
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Mr. Nahai was elected to his position in March 1993. Previously he
was Vice President of Sales - New York Metro Region and, prior
thereto, was Manager of International Sales and Licenses. Mr. Nahai
has been with the Company for more than five years.
Mr. Sal Giordano III was elected to his position in August 1996.
Previously he had the same position with NYCOR, Inc.
Mr. Kroll was elected to his position in April 1995. Previously he
was Controller of Fedders North America since 1992. Prior thereto he
was Controller of Emerson Quiet Kool.
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PART II
Item 5. Market for Registrant's Common Equity and
Related Matters
The Company's Common, Class A Stock and Convertible Preferred Stock
are listed on the New York Stock Exchange. There is no established
public trading market for the Company's Class B Stock, as there are
restrictions on its transfer. As of October 31, 1996, there were
4,595 holders of Common Stock, 4,625 holders of Class A Stock, 2,438
holders of Convertible Preferred Stock and 15 holders of Class B
Stock. For information with respect to the Company's Common Stock,
Class A Stock, Convertible Preferred Stock and Class B Stock, see
Notes 9 and 10 on pages F18 and F19, which Notes are incorporated herein by
reference.
Item 6. Selected Financial Data
See the table entitled "Selected Financial Data" at page F4, herein.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
See the information entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition" at pages F1 through F3,
herein.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements of the Company at August 31,
1996 and 1995, and for the years ended August 31, 1996, 1995 and 1994,
the notes thereto and the report of the Company's independent auditors
thereon are included at pages F5 through F23, herein.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
In May 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
year ended August 31, 1994 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
three 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
Set forth opposite the name of 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. For additional information with respect to
the Company's executive officers, see Page 12 herein.
Director
Name Principal Occupation and Age Since
NOMINEES - THREE YEAR TERM
Salvatore Giordano Chairman of the Board of the Company 1945
(1)(2); 86
Howard S. Modlin Partner, Weisman, Celler, Spett & Modlin 1977
(3); 65
William J. Brennan Financial Consultant(1)(4); 68 1980
DIRECTORS - TWO YEARS REMAINING TERM
Joseph Giordano President, NYCOR, Inc. (1)(5); 63 1961
Clarence Russel Moll President Emeritus, Widener University 1967
(6); 83
Anthony E. Puleo President, Puleo Tree Co. (7); 61 1994
DIRECTORS - ONE YEAR REMAINING TERM
Sal Giordano, Jr. Vice Chairman, President and Chief 1965
Executive Officer of the Company
(1)(2); 58
S. A. Muscarnera Retired (8); 56 1982
C. A. Keen Retired (9); 71 1996
(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., were also formerly
executive officers and (along with Joseph Giordano, William J. Brennan
and S. A. Muscarnera) directors of NYCOR, Inc.
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(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 Chairman of the Board of CSM
Environmental Systems, Inc.
(5) Principal occupation during the past two years. NYCOR, Inc. was
a holding company comprising two operating companies, one
manufacturing rotary compressors and the other thermoelectric heating
and cooling modules. NYCOR was merged into the Company on August 13,
1996. 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.
(8) Mr. Muscarnera was Senior Vice President of Fedders for many
years before his retirement on August 31, 1996, with responsibilities
in a number of areas during that time, including Secretary, human
resources and legal.
(9) Mr. Keen was a 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. Since his retirement he had been a
Director of NYCOR.
Item 11. 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.
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Long-Term
Compensation
Summary Compensation Table Annual Compensation Awards
(a) (b) (c) (d) (g) (i)
All Other
Fiscal Salary Bonus Options Compensation (1)
Name and Principal Position Year $ # $
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Salvatore Giordano 1994 252,150 282,045 150,000 15,753
Chairman of the 1995 245,354 520,365 77,314 3,097,691 (2)
Board of Directors 1996 268,258 492,660 120,000 22,827
Sal Giordano, Jr. 1994 335,375 282,045 180,000 17,548
Vice Chairman, 1995 341,530 520,365 139,066 32,424
President and 1996 352,007 492,660 120,000 42,514
Chief ExecutiveOfficer
Robert L. Laurent, Jr. 1994 209,725 141,023 95,000 8,425
Executive Vice President, 1995 226,489 260,183 50,590 15,281
Finance and Administration 1996 250,000 246,330 30,000 16,003
and Chief Financial Officer
S. A. Muscarnera 1994 181,875 141,023 15,000 7,641
Senior Vice President and 1995 191,144 260,183 18,750 16,726
Secretary 1996 186,000 153,956 35,000 13,590
Gordon Newman 1994 100,016 21,456 - 3,205
Senior Vice President, 1995 122,498 48,072 22,782 5,123
Supply Chain 1996 140,000 61,583 10,000 7,570
(1) Includes the Company contribution to savings and investment
retirement plans up to the 3% offered to all employees of the Company
in 1996, 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. $17,174; Mr. Robert L. Laurent, Jr. $1,114; Mr.
S. A. Muscarnera $3,391; Mr. Gordon Newman $1,523).
(2) Includes a special award granted to Mr. Giordano in fiscal 1995,
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 $7,000,000 radiator manufacturer to the
leading manufacturer of room air conditioners in North America.
Options/SAR Grant Tables
The following table sets forth information concerning the grant of
stock options and/or stock appreciation rights (SAR's) during the
Fiscal Year to the individual executive officers named in the Summary
Compensation Table.
The table shows the number of options granted to each named executive
officer, the number of options granted as a percentage of options
granted to all employees during the Fiscal Year, the exercise price of
each option, the expiration date for each option, and a presentation
of the potential realizable value for each option assuming annual
rates of stock appreciation of 5% and 10% over each option term.
<Page 18>
Options/SAR Grants Last Fiscal Year
% of Total
Options Granted Exercise or Expira-
Options to Employees Base Price tion
Name Granted # In Fiscal Year ($/SH) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Salvatore
Giordano 60,000 4.50 10/25/00 74,596 164,838
30,000 (1) 3.25 2/31/98 21,012 45,250
30,000 (1) 1.88 12/31/98 12,122 26,106
120,000 16.0%
Sal
Giordano, Jr.60,000 4.50 10/25/00 74,596 164,838
30,000 (1) 3.25 12/31/98 21,012 45,250
30,000 (1) 1.88 12/31/98 12,122 26,106
120,000 16.0%
Robert L.
Laurent, Jr. 30,000 4.0% 4.50 10/25/00 37,298 82,419
S. A.
Muscarnera 20,000 4.50 10/25/00 24,865 54,946
50,000 4.87 08/27/01 67,344 148,812
7,500 (1) 3.25 12/31/98 5,253 11,312
7,500 (1) 1.88 12/31/98 3,031 6,526
85,000 11.3%
Gordon
Newman 10,000 1.3% 4.50 10/25/00 12,433 27,473
(1) Replacement options were issued to take into account the
terms of the merger agreement which stated that the employees and
directors of NYCOR were to be placed in the same economic position
following the merger as they were immediately prior to the date of the
execution of the merger
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
Value of
Unexercised
Number of In-the-Money
Unexercised Options at
Shares Options at FY-end FY-end ($)(1)
Acquired on Value (#) Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Salvatore Giordano - - 587,314 E $ 841,165 E
102,686 U 30,000 U
Sal Giordano, Jr. - - 658,066 E 879,544 E
997,000 U 2,216,958 U
Robert L. Laurent, Jr. - - 350,590 E 482,171 E
30,000 U 15,000 U
S. A. Muscarnera - - 258,750 E 387,234 E
70,000 U 16,250 U
Gordon Newman - 35,050 22,782 E 11,391 E
10,000 U 5,000 U
<Page 19>
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
Company's Board of Directors (the "Board") for the Fiscal Year 1996
which was approved by the Board on October 25, 1995.
<PAGE>
<Page 20>
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
Company's 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 Board adopted a modified version of prior years' plans, by
establishing significantly lower percentages to apply against
consolidated pre-tax income of the Company minus $1,000,000 ("Adjusted
Pre-Tax Income"). The awards under the plan are based heavily upon
the performance of the Company (the "Executive Plan"). In accordance
with the terms of the Executive Plan, the executive officers designed
by the Board may receive incentive awards based upon a prescribed
formula. The amount of the awards for the Fiscal Year range from
0.13% to 1.0% of Adjusted Pre-Tax Income, compared to 0.5% to 1.5% in
prior years. With respect to the individuals named in the Summary
Compensation table, the following percentages of Fiscal 1996 Adjusted
Pre-Tax Income have been designated: Mr. Salvatore Giordano 1.0%
(previously 1.5%); Mr. Sal Giordano, Jr. 1.0% (previously 1.5%); Mr.
Robert L. Laurent, Jr. 0.5% (previously 0.75%); Mr. S. A. Muscarnera
0.31% (previously 0.75%); and Mr. Gordon Newman 0.13% (previously
under a separate plan). Under the Executive Plan, the following
awards were made for Fiscal Year performance: Mr. Salvatore Giordano
$492,660 (compared to $520,365 for fiscal 1995); Mr. Sal Giordano, Jr.
$492,660 (compared to $520,365 for fiscal 1995); Mr. Robert L.
Laurent, Jr. $246,330 (compared to $260,183 in fiscal 1995), Mr. S. A.
Muscarnera $153,956 (compared to $260,183 in fiscal 1995), and Mr.
Gordon Newman $61,583 (compared to $48,072 in fiscal 1995). As shown,
the actual bonus amounts were less in this fiscal year, which was a year of
record breaking performance.
Respectfully submitted,
Compensation Committee
Howard S. Modlin - Chairman
William J. Brennan
Anthony E. Puleo
<Page 21>
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 current fiscal year plans
including, but not limited to, a bonus not less than the amount of the
latest fiscal year 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 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 $356,000.
Following the merger of NYCOR into the Company on August 13, 1996, the
employment agreement was adjusted to take into account the terms of
the merger agreement which stated that the employees and directors of
NYCOR were to be placed in the same economic position with respect to
salaries and other benefits provided by NYCOR.
<PAGE>
<Page 22>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF FEDDERS
As of October 31, 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 Delaware Law.
Amount
Name of and Nature Shares Subject Percent
Title Individual or of Beneficial to Acquisition of Class
of Class Persons in Group Ownership Within 60 days (15) Owned (16)
<S> <C> <C> <C> <C>
Common Salvatore Giordano 1,100 (1) 0 Less than 1%
Stock 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 0 Less than 1%
S. A. Muscarnera 55,000 0 Less than 1%
C. A. Keen 10,700
Robert L. Laurent, Jr. 115,000 0 Less than 1%
All directors and executive
officers as a group 525,310 0 2.77%
Class A
Stock Salvatore Giordano 1,210,815 (4)(5) 647,314 9.25%
Sal Giordano, Jr. 694,864 (4)(6)(7) 709,066 6.97%
Joseph Giordano 879,689 (4)(7)(8) 301,875 5.98%
Howard S. Modlin 224,701 (9) 171,564 2.02%
Clarence Russel Moll 29,225 (10) 96,563 Less than 1%
William J. Brennan 4,375 144,376 Less than 1%
Anthony E. Puleo 0 9,375 Less than 1%
S. A. Muscarnera 48,125 278,750 1.66%
C. A. Keen 400 127,500 Less than 1%
Robert L. Laurent, Jr. 100,625 350,590 2.28%
Gordon Newman 0 46,845 Less than 1%
All directors and executive
officers as a group 2,470,257 3,179,335 24.97%
Class B
Stock Salvatore Giordano 2,262,566 (11) 0 99.82%
(16) Sal Giordano, Jr. 2,262,566 (11) 0 99.82%
Joseph Giordano 2,262,566 (11) 0 99.82%
All directors and executive
officers as a group 2,262,566 0 99.82%
Convertible
Preferred
Stock Salvatore Giordano 1,248,823 (12)(13) 0 16.34%
Sal Giordano, Jr. 1,107,317 (12)(14) 0 14.48%
Joseph Giordano 839,902 (12)(15) 0 10.99%
Howard S. Modlin 84,024 0 1.1%
Clarence Russel Moll 30,410 0 Less than 1%
William J. Brennan 129,402 0 1.7%
S. A. Muscarnera 56,500 0 Less than 1%
C. A. Keen 28,000 0 Less than 1%
All directors and executive
officers as a group 2,040,059 0 26.7%
Ownership of Common
Stock, Class A Stock,
Class B and Convertible
Preferred Stock combined,
by all directors and
executive officers as
a group 7,298,192 3,179,335 20.34%
</TABLE>
<Page 23>
(1) The amount shown includes 1,100 shares which are held by a
corporation in which Messrs. Salvatore Giordano, Sal Giordano, Jr. and
Joseph Giordano are officers, directors and stockholders, and share
voting and investment power over such shares.
(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) Includes 190,875 shares which are held by corporations in which
Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano are
officers, directors and stockholders, and share voting and investment
power.
(5) 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.
(6) Includes 10,462 shares held of record by Mr. Giordano's wife, as
to which Mr. Giordano disclaims beneficial ownership, and 56,328
shares held by Mr. Giordano in trust as trustee for himself.
(7) Includes 345,625 shares held in trust, as to which Messrs. Sal
Giordano, Jr. and Joseph Giordano share voting and investment power.
(8) Includes 56,328 shares held by Mr. Giordano in trust as trustee
for himself.
(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) Shares owned by Giordano Holding Corporation as to which Messrs.
Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano share voting
and investment power.
(12) Includes 753,757 shares which are held by corporation in which
Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano are
officers, directors and stockholders and share voting and investment
power over such shares.
(13) Includes 39,264 shares owned by Mr. Giordano's wife, as to which
he disclaims beneficial ownership, and 80,201 shares held of record by
Mr. Giordano's wife in trust for their grandchildren, as to which Mr.
Giordano disclaims beneficial ownership.
<Page 24>
(14) Includes 7,493 shares held of record by Mr. Giordano's wife;
28,811 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, for both of which Mr. Giordano disclaims beneficial
ownership, and 14,974 shares held by self as trustee for self. Also
includes 2,220 shares which would be realized upon conversion of
Fedders Convertible Subordinated Debentures held by Mr. Giordano.
(15) Includes 23,200 shares held in trust by Mr. Giordano for his
grandchildren for which he disclaims beneficial ownership, and 14,974
shares held by self as trustee for self.
(16) The amounts shown are the number of shares held under options
exercisable within 60 days.
(17) 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, 5,370,618 shares constituting 10.96%; Mr. Sal
Giordano, Jr., 4,774,913 shares constituting 9.73%; Mr. Joseph
Giordano, 4,297,942 shares constituting 8.84%; and all directors and
executive officers as a group 10,477,527 shares constituting 20.34%.
The share totals for Messrs. Salvatore Giordano, Sal Giordano, Jr. and
Joseph Giordano include 3,208,204 shares which are held by corporation
in which they are officers, directors and stockholders and share
voting and investment power over such shares. In the event that the
individuals named as owning Fedders Class B Stock also converted their
shares of Fedders Convertible Preferred Stock, they would receive
Common Stock, as the Class A Stock into which the Fedders Convertible
Preferred Stock is currently convertible would no longer exist, and
their percentage of ownership of Common Stock would increase in
proportion to their holdings of Fedders Convertible Preferred Stock.
The same would be true for the conversion of any Fedders Convertible
Subordinated Debentures.
<PAGE>
<Page 25>
PRINCIPAL STOCKHOLDERS
The following table sets forth information at October 31, 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.
Name and Address Amount Beneficially Percent
Title of Class of Beneficial Owner (1) Owned of Class
[S] [C] [C] [C]
Class B Stock Salvatore Giordano 2,262,566 99.82%
Joseph Giordano and
Sal Giordano, Jr.
c/o Fedders Corporation
Liberty Corner, NJ 07938
Common Stock Strong Capital 2,185,500 11.51%
Management, Inc. (2)
100 Heritage Reserve
P. O. Box 2936
Milwaukee, WI 53201
(1) See footnotes (11) and (17) to the previous table 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.
<PAGE>
<Page 26>
Item 13. Certain Relationships and Related Transactions
See the information included under Part III. Item 10 herein.
<PAGE>
<Page 27>
PART IV
Item 14. Exhibits, Financial Statement Schedule
and Reports on Form 8-K
Index to Financial Statements and Financial Statement Schedule
(a) 1. Financial Statements
The following Consolidated Financial Statements of the Company and its
subsidiaries are included:
Page #
Report of Independent Certified Public Accountants F5
Report of Independent Auditors F6
Consolidated Statements of Operations for the years F7
ended August
Consolidated Balance Sheets at August 31, 1996 and 1995 F8
Consolidated Statements of Cash Flows for the years ended
August 31, 1996, 1995 and 1994 F9-F10
Consolidated Statements of Stockholders' Equity for
the years ended August 31, 1996, 1995 and 1994 F11
Notes to Consolidated Financial Statements F12-F23
(a) 2. Financial Statement Schedule
Consolidated Schedule for the years ended August 31, 1996
Report of Independent Certified Public Accountants S-1
II. Valuation and Qualifying Accounts S-2
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.
<Page 28>
(a) 3. Exhibits
(Note: With respect to incorporation by reference to exhibits filed
by RTXX Corporation (formerly Rotorex Corporation), reference is
hereby made to Commission File No. 1-2150)
(3) (i) Restated Certificate of Incorporation, filed as Exhibit 3.1
to the Company's Annual Report on Form 10-K for 1984 and incorporated
herein by reference.
(ii) Amendment to Restated Certificate of Incorporation, filed as
Exhibit 4a to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1985 and incorporated herein by reference.
(iii) Correction of Restated Certificate of Incorporation, filed as
Exhibit 4b to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1985 and incorporated herein by reference.
(iv) Amendment of Certificate of Incorporation, filed as Exhibit
(3) (i) to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1987 and incorporated herein by reference.
(v) Amendment of Certificate of Incorporation, filed as Exhibit
(3) (ii) to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1987 and incorporated herein by reference.
(vi) Amendment to Certificate of Incorporation, filed as Exhibit
(3) (vi) to the Company's Annual Report on Form 10-K for the year
ended August 31, 1992 and incorporated herein by reference.
(vii) Amendments to Certificate of Incorporation dated August 13,
1996.
(viii) By-Laws, amended through January 16, 1988, filed as Exhibit
(3) (vii) to the Company's Annual Report on Form 10-K for 1987 and
incorporated herein by reference.
(10) (i) Stock Option Plan II, filed as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for 1984 and incorporated herein by
reference.
(ii) Stock Option Plan III, filed as Exhibit 10 (iv) to the
Company's Annual Report on Form 10-K for 1985 and incorporated herein
by reference.
(iii) Stock Option Plan IV, filed as Exhibit 10 (iv) to the
Company's Annual Report on Form 10-K for 1987 and incorporated herein
by reference.
<Page 29>
(iv) Stock Option Plan V, filed as Exhibit 10 (v) to the
Company's Annual Report on Form 10-K for 1988 and incorporated herein
by reference.
(v) Stock Option Plan VI, filed as Exhibit 10 (vi) to the
Company's Annual Report on Form 10-K for 1989 and incorporated herein
by reference.
(vi) Stock Option Plan VII, filed as Exhibit 10 (vi) to the
Company's Annual Report on Form 10-K for 1990 and incorporated herein
by reference.
(vii) Stock Option Plan VIII, filed as Annex F tot he Company's
Proxy Statement - Prospectus dated May 10, 1996 and incorporated
herein by reference.
(viii) Employment Contract between The Corporation and Salvatore
Giordano dated March 23, 1993 filed as Exhibit 10 (viii) to the
Company's Annual Report on Form 10-K 1993 and incorporated herein by
reference.
(ix) Joint Venture Contract between Ningbo General Air Conditioner
Factory and Fedders Investment Corporation for the establishment of
Fedders Xinle Co., Ltd., dated July 31, 1995 filed as Exhibit 10 (viii)
on the Form 10-K 1996 and incorporated herein by reference.
(x) Agreement and Plan of Merger Between Fedders Corporation and
NYCOR, Inc. filed as Annex A to the Company's Proxy Statement -
Prospectus dated May 10, 1996 and incorporated herein by reference.
(11) Statement re computation of per share earnings.
(16) (i) Letter referencing change in certifying accountants filed as
Exhibit 16 (i) to the Company's Annual Report on Form 10-K 1996 and
incorporated herein by reference.
(21) Subsidiaries.
(23) Consents of BDO Seidman, LLP and Ernst & Young.
(27) Financial data schedule.
(b) Reports on Form 8-K
A report on Form 8-K was filed on August 29, 1996, an 8-KA was
filed on October 25, 1996 and are incorporated herein by
reference.
<PAGE>
<Page 30>
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, hereunto duly authorized.
FEDDERS CORPORATION
By/s/Robert L. Laurent, Jr.
Robert L. Laurent, Jr.
Executive Vice President, Finance and Administration
and Chief Financial Officer November 27, 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.
Signature Title Date
/s/Salvatore Giordano Chairman of the Board November 27, 1996
Salvatore Giordano
/s/Salvatore Giordano, Jr. Vice Chairman, November 27, 1996
Salvatore Giordano, Jr. President and Chief
Executive Officer and a Director
(Principal Executive Officer)
/s/Joseph Giordano Director November 27, 1996
Joseph Giordano
/s/Howard S. Modlin Director November 27, 1996
Howard S. Modlin
/s/Clarence Russel Moll Director November 27, 1996
Clarence Russel Moll
/s/William J. Brennan Director November 27, 1996
William J. Brennan
/s/Anthony Puleo Director November 27, 1996
Anthony Puleo
/s/S.A. Muscarnera Director November 27, 1996
S.A. Muscarnera
/s/C.A. Keen Director November 27, 1996
C. A. Keen
/s/Robert L. Laurent, Jr. Executive Vice November 27, 1996
Robert L. Laurent, Jr. President, Finance
Administration
(Principal Financial & Accounting Officer)
<Page F1>
Management's Discussion and Analysis of Results of Operations and
Financial Condition
Fedders Corporation recognized record net sales and income in fiscal
1996 after also realizing significant revenue and earnings growth in
the two previous years. The growth trend reflects strong
relationships with retailers resulting from the Company's
concentration on flexible manufacturing to accommodate customers'
increasingly seasonal delivery requirements and in fiscal 1996,
additional international sales.
The Company has taken important steps to take strategic advantage of
its experience in room air conditioners within the rapidly growing,
international marketplace. In November 1995, the Company entered into
a joint venture in Ningbo, China to manufacture air conditioners for
sale in the Chinese market and for export.
In August 1996, following shareholder approval, NYCOR, Inc. ("NYCOR"),
a manufacturer of rotary compressors at Rotorex and thermoelectric
modules at Melcor, was merged into the Company. The supply of
compressors from Rotorex, as well as its four Asian compressor
licensees is strategically important to international growth.
Presently, the Company's business is still largely domestic and the
business is affected by summer weather in major markets, with product
shipped primarily in the second half of the fiscal year. Just-in-time
delivery is a requirement of retail leaders in the room air
conditioner industry. Cool summer weather in key U.S. markets in
fiscal 1996 has increased industry inventories entering fiscal 1997.
This is expected to result in a reduction in first half revenues,
offset in part by additional international sales of room air
conditioners and sales of compressors and thermoelectric modules.
This follows favorable weather in the prior three consecutive years
that depleted industry inventories at manufacturers and retailers
entering fiscal 1996. Manufacturers' shipments of room air
conditioners in the U.S. during Fedders' fiscal periods totaled 4.6
million units in 1996, 4.1 million units in 1995 and 3.8 million units
in 1994.
Results of Operations
With Fedders and U.S. industry inventories at minimal levels entering
each of the last three fiscal years, Fedders increased its domestic
unit sales by 22%, 30% and 55% in 1996, 1995 and 1994, respectively.
During these same periods, industry unit shipments in the U.S.,
excluding Fedders' increased by only 11%, 12% and 27%, respectively.
The Company's international sales increased by 90% and 56% in fiscal
1996 and 1995, respectively.
<Page F2>
The gross profit margin increased to 22.3% in fiscal 1996 from 21.2%
in 1995, primarily as a result of efficiency in plant utilization due
to higher sales and to somewhat lower commodity prices. The gross
profit margin changed little from fiscal 1994 to 1995. However,
fiscal 1995 included a favorable $3.5 million reduction in warranty
provisions, an outgrowth of continuing improvements in quality, offset
in part, by a $2.8 million write down of idle equipment and by
inflationary pressure, primarily related to copper. The gross profit
margin increased from 17.5% in fiscal 1993 to 21.3% in fiscal 1994 due
to efficiencies in plant utilization, due to higher sales and cost
reduction.
Selling, general and administrative expense decreased to 8.6% of net
sales in fiscal 1996 from 9.3% in fiscal 1995 and from 11.0% in fiscal
1994 due to higher sales volumes that was offset in part, in fiscal
1995, by a $2.0 million provision for the implementation of an early
retirement program.
Net interest expense decreased as a percent of sales to .3% from .6%
in fiscal 1995 and 1.8% in fiscal 1994 as long-term debt was decreased
and cash-on-hand increased.
In fiscal 1996, the Company returned to a full federal tax rate after
utilizing its net operating loss carryforwards during fiscal 1995. As
a result, the effective tax rate was 38.0% in fiscal 1996 compared
with 17.3% in fiscal 1995 and 3% in fiscal 1994. During 1994, the
Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which resulted in a one-time
cumulative effect of an accounting change amounting to $1.8 million.
Liquidity and Capital Resources
Working capital requirements of the Company historically are seasonal
with cash balances peaking in August and the greatest utilization of
its lines of credit occurring early in the calendar year. The
Company's cash flow in 1996 continued strong with cash increasing to
$90.3 million at August 31 from $57.7 million a year earlier.
Net cash provided by operations in fiscal 1996 amounted to $41.9
million. Accounts receivable changed little from year to year, even
with the increase in sales, as August 31 is the low point of the
fiscal year. Ending inventories increased by $24.4 million, with
$12.3 million of the increase related to the Chinese joint venture and
$13.3 million related to Rotorex and Melcor. Excluding the
inventories of these acquired entities, inventories decreased by $1.2
million, in a colder than normal summer. Accounts payable, excluding
accounts payables from acquired operations, changed little. Accrued
expenses increased in fiscal 1995 as a result of higher marketing
accruals related to higher sales and in 1996 from acquired operations.
<Page F3>
Net cash used in investing activities during 1996 included capital
expenditures of $7.0 million. Fedders also made an investment in a
joint venture to manufacture room air conditioners in Ningbo, China
with the Ningbo General Air Conditioner Factory. Fedders has a 60%
interest in Fedders Xinle Co., Ltd. which was initially capitalized on
November 7, 1995. Fedders' cash contribution to the venture was
approximately $8.4 million. The factory's present capacity is 200,000
units and is planned to be increased to 500,000 units by fiscal 1999.
The venture is expected to sell 50% of its product in China and export
50%.
As discussed, in August 1996, the Company merged with NYCOR. The
Company had a supply agreement with NYCOR for the supply of up to
800,000 compressors annually, through the year 2003 (note 2). The
Company's rotary compressor requirements were nearly 1.4 million in
fiscal 1996 and it will need many more to grow its international
business. The merger will provide a guaranteed supply of compressors
to support the Company's international growth which will lessen the
dependency on weather in the North American market.
Net cash used in financing activities amounted to $2.8 million.
Fedders Xinle borrowed $10.3 million from a People's Republic of China
bank for expansion. The long-term loan is not guaranteed by Fedders
or its subsidiaries. Fedders Xinle repaid $4.0 million during fiscal
1996. The Company assumed a total of $28.9 million of debt in its
merger with NYCOR.
The Company's revolving credit facility of $40.0 million is renewable
in December 1997. The credit facility is collateralized by
substantially all of the Company's assets. Management believes that
the Company's cash, earnings and borrowing capacity are adequate to
meet the needs of its operations and long-term credit requirements,
including capital expenditures and its debt maturities.
<PAGE>
<Page F4>
Selected Financial Data (a)
<TABLE>
(Amounts in thousands, except per share data)
<Captions> 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales $371,772 $316,494 $231,572 $158,602 $192,365
Gross profit 83,028 67,125 49,263 27,744 25,607
Percent of net sales 22.3 21.2 21.3 17.5 13.3
Operating income
(loss) 50,988 37,653 23,905 1,907 (9,392)
Percent of net sales 13.7 11.9 10.3 1.2 (4.9)
Pre-tax income
(loss) 50,266 35,691 19,803 (2,340) (24,965)
Percent of net sales 13.5 11.3 8.6 (1.5) (12.7)
Net income (loss) $31,158 $ 29,504 $ 20,989(c) $ (1,775) $(24,931)(d)
Net income attributable
to common
stockholders $ 31,007 $ 29,504 $ 20,989 $ (1,775) $(24,931)
Net income (loss)
per share $ 0.74 $ 0.72 $ 0.53(c) $ (0.05) $ (0.67)
Cash dividends declared per share:
Preferred $ 0.050 - - - -
Common 0.080 $ 0.020 - - -
Class A 0.080 0.020 - - -
Class B 0.072 0.018 - - -
Cash $ 90,295 $ 57,707 $ 34,869 $ 8,553 $ 8,738
Total assets 290,220 136,775 100,653 81,285 179,249
Long-term debt (including
current portion) 40,406 5,106 17,943 25,590 89,588
Stockholders'
equity 159,751 82,542 49,317 24,229 19,039
Capital
expenditures 7,043 9,041(b) 2,634 2,379 3,599
Depreciation and
amortization 6,578 7,519 9,374 5,646 14,876
Earnings before interest,
taxes, depreciation and
amortization 57,796 44,143 32,252 6,317 2,675
</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.
<PAGE>
<Page F5>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FEDDERS CORPORATION
We have audited the accompanying consolidated balance sheets of
Fedders Corporation as of August 31, 1996 and 1995, and the related
consolidated statements of operations, cash flows and stockholders'
equity for the years 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
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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Fedders Corporation as of August 31, 1996 and 1995, and
the consolidated results of its operations and its cash flows for
the years then ended, in conformity with generally accepted
accounting principles.
/s/BDO Seidman, LLP
Woodbridge, New Jersey
September 30, 1996
<PAGE>
<Page F6>
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FEDDERS CORPORATION
We have audited the accompanying consolidated statements of
operations, cash flows and stockholders' equity of Fedders
Corporation for the year ended August 31, 1994. Our audit also
included the financial statement schedule listed in the 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 audit.
We conducted our audit 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
results of operations and cash flow of Fedders Corporation for the
year ended August 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 1 to the consolidated financial statements, in 1994
the Company changed its method of accounting for income taxes.
/s/Ernst & Young, LLP
Metro Park, New Jersey
October 6, 1996
<PAGE>
<Page F7>
Fedders Corporation
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data)
Years Ended August 31, 1996 1995 1994
<S> <C> <C> <C>
Net sales $371,772 $316,494 $231,572
Costs and expenses:
Cost of sales 288,744 249,369 182,309
Selling, general and
administrative 32,040 29,472 25,358
320,784 278,841 207,667
Operating income 50,988 37,653 23,905
Minority interest in joint venture 230 - -
Interest expense (net of interest
income of $1,410, $751 and $223 in
1996, 1995 and 1994, respectively) (952) (1,962) (4,102)
Income before income taxes 50,266 35,691 19,803
Federal, state and foreign
income taxes 19,108 6,187 594
Income before cumulative
effect of an accounting change 31,158 29,504 19,209
Cumulative effect of an accounting
change - - 1,780
Net income 31,158 29,504 20,989
Preferred stock dividend
requirement 151 - -
Net income attributable to
common stockholders $ 31,007 $29,504 $20,989
Primary earnings per share:
Income before cumulative
effect of an accounting change $ 0.74 $ 0.72 $ 0.49
Cumulative effect of an accounting
change - - 0.04
Net income per share $ 0.74 $ 0.72 $ 0.53
Dividends per share declared:
Preferred $ 0.050 - -
Common 0.080 $ 0.020 -
Class A 0.080 0.020 -
Class B 0.072 0.018 -
</TABLE>
See accompanying notes
<Page F8>
Fedders Corporation - Consolidated Balance Sheets
(Amounts in thousands, except share data)
<TABLE> <CAPTION>
August 31, 1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 90,295 $57,707
Accounts receivable (less allowances of
$1,952 in 1996 and $872 in 1995) 7,975 8,847
Inventories 53,446 29,020
Deferred income taxes 3,584 2,954
Other current assets 3,366 893
Total current assets 158,666 99,421
Net property, plant and equipment 62,872 29,803
Deferred income taxes 7,364 1,277
Goodwill 58,556 5,517
Other assets 2,762 757
$290,220 $136,775
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,889 $ 590
Accounts payable 16,514 5,591
Income taxes payable 15,391 9,131
Accrued expenses 38,055 27,986
Total current liabilities 71,849 43,298
Long-term debt 38,517 4,516
Other long-term liabilities:
Warranty 3,679 3,962
Other 10,816 2,457
Minority interest in joint venture 5,608 -
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1 par value, 15,000,000
shares authorized, 7,643,061 issued
at August 31, 1996 7,643 -
Common Stock, $1 par value, 80,000,000
shares authorized, 18,989,798 and
18,988,598 issued at August 31, 1996
and 1995, respectively 18,990 18,989
Class A Stock, $1 par value, 60,000,000
shares authorized, 19,415,916 and
18,831,376 shares issued at August 31,
1996 and 1995, respectively 19,416 18,831
Class B Stock, $1 par value, 7,500,000
shares authorized, 2,266,706 and
2,267,206 issued and outstanding at
August 31, 1996 and 1995, respectively 2,267 2,267
Additional paid-in capital 87,728 46,481
Retained earnings (deficit) 23,865 (4,041)
Cumulative translation adjustments (158) 15
Total stockholders' equity 159,751 82,542
$290,220 $136,775
</TABLE> See accompanying notes
<Page F9>
Fedders Corporation - Consolidated Statements of Cash Flows
(Amounts in thousands)
<TABLE> <CAPTION>
Years Ended August 31, 1996 1995 1994
<S> <C> <C> <C>
Operating activities:
Net income $ 31,158 $29,504 $20,989
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 6,578 7,519 9,374
Tax benefit related to stock
options exercised 437 2,900 -
Deferred income taxes (1,717) (5,406) (962)
Changes in operating assets and
liabilities (excluding the effect of
the merger):
Accounts receivable, net 4,402 3,993 (3,939)
Inventories (7,856) (10,972) 1,222
Other current assets (628) (219) 243
Other assets (568) 175 (59)
Income taxes payable 6,243 8,373 573
Accounts payable (2,887) 276 141
Accrued expenses 3,784 6,617 4,370
Other long-term liabilities 3,151 1,643 1,687
Other (226) 184 (39)
Net cash provided by operations $ 41,871 44,587 33,600
Investing activities:
Additions to property, plant and
equipment (7,043) (9,041) (2,634)
Disposal of property, plant and
equipment 535 521 441
Net cash used in investing activities $ (6,508) (8,520) (2,193)
Financing activities:
Repayments of NYCOR
short-term borrowing (3,000) - -
Repayments of long-term debt (695) (13,866) (9,229)
Proceeds from stock options exercised 1,868 692 4,138
Net proceeds from Fedders Xinle
long-term financing 6,299 - -
Repayment of Fedders Xinle
short-term debt (3,396) - -
Cash dividends (3,252) (797) -
Expenses related to the NYCOR merger (599) - -
Proceeds from notes due on
common stock purchases - 742 -
Net cash used in
financing activities $ (2,775) (13,229) (5,091)
Net increase in cash and
cash equivalents 32,588 22,838 26,316
Cash and cash equivalents at
beginning of year 57,707 34,869 8,553
Cash and cash equivalents at end
of year $ 90,295 $57,707 $34,869
<Page F10>
Fedders Corporation - Consolidated Statements of Cash Flows
(Amounts in thousands)
</TABLE>
<TABLE>
<CAPTION>
Years Ended August 31, 1996 1995 1994
<S> <C> <C> <C>
Supplemental disclosure:
Cash paid (refunded) during the year for:
Interest $ 2,249 $ 1,904 $ 3,766
Net income taxes 13,513 492 (1,196)
Noncash investing and financing activities:
The issuance of 7,643 shares of
Convertible Preferred Stock
in exchange for all
the outstanding shares of Common,
Class A and Class B shares of NYCOR $ 47,769 - -
</TABLE>
See accompanying notes
<PAGE>
<Page F11>
Fedders Corporation
Consolidated Statements of Stockholders' Equity
(Amounts in thousands)
<TABLE>
<CAPTION>
Cumu- Notes
Add'l Retained lative Due on
Class Class Paid- Earnings Trans- Common Trea-
Preferred Common A B in (Deficit)Adjust- Stock sury
Stock Stock Stock Stock Capital ments Purchases Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
August 31,
1993 - $18,614 - $2,268 $47,571 $(35,128) $(130) - $(8,966)
Net income - - - - - 20,989 - - -
Stock
dividend - - $10,625 - - (10,625) - - -
Stock
options
exercised - 1,028 - - 3,852 - - $(742) -
Foreign
currency
translation - - - - - - (39) - -
August 31,
1994 - $19,642 $10,625 $2,268 $51,423 $(24,764) $(169) $(742) $(8,966)
Net income - - - - - 29,504 - - -
Stock
dividend - - 7,984 - - (7,984) - - -
Conversion
of Class B
to Common
Stock - 1 - (1) - - - - -
Dividends
declared - - - - - (797) - - -
Stock
options
exercised - - 222 - 470 - - - -
Tax benefit
related
to stock
options
exercised - - - - 2,900 - - - -
Repayment of
common stock
notes - - - - - - - 742 -
Retirement of
treasury
stock - (654) - - (8,312) - - - 8,966
Foreign
currency
translation - - - - - - 184 - -
August 31,
1995 - $18,989 $18,831 $2,267 $46,481 $(4,041) $ 15 - -
Net income - - - - - 31,158 - - -
Issuance of
Preferred
Stock $7,643 - - - 40,126 - - - -
Expenses
related
to NYCOR
merger - - - - (599) - - - -
Tax benefit
related
to stock
options
exercised - - - - 437 - - - -
Conversion of
Class B to
Common
Stock - 1 - - - - - - -
Dividends
declared - - - - - (3,252) - - -
Stock options
exercised - - 585 - 1,283 - - - -
Foreign currency
translation - - - - - - (173) - -
August 31,
1996 $7,643 $18,990 $19,416 $2,267 $87,728 $23,865 $(158) - -
</TABLE>
See accompanying notes
<Page F12>
Fedders Corporation
Notes to Consolidated Financial Statements
(Years ended August 31, 1996, 1995 and 1994; dollar and stock
option amounts in tables, except per share market data, are in
thousands)
1. Summary of Significant Accounting Policies
Principles of consolidation
The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly-owned and majority-
owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
Net sales
Sales are recorded, at time of shipment, net of provisions for
sales allowances, warranty and similar items.
Warranty and return policy
The Company's warranty policy generally provides five-year
coverage for sealed systems including compressors, two-year
coverage on motors and one-year coverage on all other parts and
labor related to air conditioners sold in North America. The
Company's policy is to accrue the estimated cost of warranty
coverage and returns at the time the sale is recorded. The policy
with respect to sales returns generally provides that a customer
may not return inventory except at the Company's option.
Foreign currency translation
Assets and liabilities of the Company's foreign subsidiaries are
translated at the rate of exchange in effect at the end of the
period. Net sales and expenses are translated at the average rate
of exchange for the period. Translation adjustments are reflected
as a separate component of stockholders' equity.
Cash and cash equivalents
The Company considers all highly liquid investments purchased
with an initial maturity of three months or less to be cash
equivalents.
Inventories
Inventories are stated at the lower of the first-in, first-out
(FIFO) cost or market. The Company reviews inventory periodically
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 August 31:
<Page F13>
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Finished goods $21,711 $14,592
Work in process 6,652 2,540
Raw materials and supplies 25,083 11,888
$53,446 $29,020
</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 at cost consist of the following at August 31:
<TABLE>
<CAPTION>
Estimated Useful Life 1996
1995
<S> <C> <C> <C>
Land and improvements - $ 3,830 $ 1,369
Buildings 20 to 30 years 23,915 12,888
Machinery and equipment 5 to 12 years 84,887 53,302
Machinery and equipment
under capital lease 12 years 8,191 -
Property, plant and equipment - 120,823 67,559
Accumulated depreciation - 57,951 37,756
- $ 62,872 $29,803
</TABLE>
Depreciation is provided on the straight-line basis over the
estimated useful life of each asset as noted above. Depreciation
expense includes a write down of certain idle fixed assets to
estimated realizable value amounting to $2,694,000 and $2,860,000
in 1996 and 1995, respectively. Accumulated depreciation
includes $297,000 of depreciation related to equipment under
capital leases.
Goodwill and other assets
Other assets consist primarily of intangible assets which, other
than goodwill, are amortized over periods from one to eight years
using the straight-line method. Goodwill is amortized over 40
years using the straight-line method and recoverability is
evaluated periodically based on the expected undiscounted net
cash flows of the related businesses. Goodwill and other assets
are net of accumulated amortization of $8,640,000 and $8,473,000
at August 31, 1996 and 1995, respectively. Goodwill included
$53,192,000 resulting from the merger with NYCOR, Inc. ("NYCOR")
on August 13, 1996 (note 13).
<Page F14>
Accrued expenses
Accrued expenses consist of the following at August 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Warranty $ 4,019 $ 3,442
Marketing programs 16,345 10,685
Salaries and benefits 7,964 7,143
Other 9,727 6,716
$38,055 $27,986
</TABLE>
Income taxes
During the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." The cumulative effect of adopting
the new standard as of September 1, 1993 resulted in a tax
benefit of $1,780,000. Deferred income taxes are provided to
reflect the tax effects of "temporary differences" between assets
and liabilities for financial reporting purposes and income tax
purposes. Provisions are also made for U.S. income taxes on
undistributed earnings of foreign subsidiaries not considered to
be indefinitely reinvested (note 7).
Research and development costs
All research and development costs are charged to expense as
incurred and amount to $3,891,000, $2,742,000 and $2,233,000 in
1996, 1995 and 1994, respectively.
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.
Risks and uncertainties
Approximately 15% of the Company's employees are covered by a
three year collective bargaining agreement, which expires in
August 1997. Another 34% of the employees are covered by
collective bargaining agreements which expire in October 1998.
Effect of new accounting pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," which
establishes accounting standards for, among other things, the
impairment of long-lived
<Page F15>
assets and certain identifiable intangibles. The Company believes
that this pronouncement will not have a material effect on the
Company's consolidated financial statements.
In October 1995, the FASB issued SFAS No. 123 "Accounting for
Stock-Based Compensation." The Company is studying SFAS No. 123
but does not currently plan to adopt the fair value based method
of accounting for stock options or similar equity instruments.
However, the adoption of SFAS No. 123 would not be expected to
have a material effect on the Company's consolidated financial
statements.
Amounts per share
Primary earnings per share are computed by dividing net income
attributable to common stockholders by the weighted average
number of shares of Common, Class A and Class B Stock and other
common stock equivalents outstanding during the year: 41,997,000,
41,001,000 and 39,386,000 in 1996, 1995, and 1994, respectively.
Fully diluted earnings per share were not materially dilutive
and, accordingly, are not presented.
Reclassifications
Certain items in the 1995 financial statements have been
reclassified to conform to the 1996 presentation.
2. Transactions With NYCOR
The Company had an agreement with NYCOR for the supply of up to
800,000 compressors annually through 2003 with two renewable
options. Purchases from NYCOR, at negotiated market prices,
amounted to $53,878,000, $52,381,000 and $52,108,000 in 1996,
1995 and 1994, respectively. Certain officers and directors of
the Company were also officers and/or directors of NYCOR and had
significant stockholdings in both companies. On August 13, 1996,
upon receiving over two-thirds majority approval of all Common
and Class B Stockholders, the Company merged with NYCOR. One
share of Fedders Convertible Preferred Stock was issued for each
share of NYCOR Common, Class A and Class B stock (note 13).
3. Litigation
The Company is involved in litigation, both as plaintiff and
defendant, 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 material adverse
effect on the accompanying financial statements.
4. Short-term Borrowing
At August 31, 1996 and 1995, the Company had no short-term
borrowing under its $40,000,000 revolving credit facility with a
<Page F16>
commercial finance company. Availability under the facility is
based on accounts receivable and inventory and requires
maintenance of certain financial covenants. The maximum amount
outstanding under the credit facility was $37,877,000 and
$21,512,000 during fiscal 1996 and 1995, respectively. The
average amount outstanding and average rate of interest charged
on outstanding borrowings under the credit facility were
$5,596,000 at 9.8% in fiscal 1996 and $4,602,000 at 11% in fiscal
1995. The credit facility is collateralized by substantially all
of the Company's assets and is in effect until December 1997. The
rate of interest on the facility is at the prime rate plus 1.5%.
5. Long-term Debt
The recorded value of long-term debt approximates the fair value
based on current rates available to the Company for debt of the
same remaining maturities and consists of the following at August
31:
<TABLE>
<CAPTION> 1996 1995
<S> <C> <C>
8.5% convertible subordinated debentures $22,806 -
Fedders Xinle 15.175% promissory note 6,299 -
Promissory note payable to the State of
Illinois, interest at 1% 4,196 $4,527
Capital lease obligations and other 7,105 579
40,406 5,106
Less current maturities 1,889 590
$38,517 $4,516
</TABLE>
Aggregate amounts of long-term debt, excluding capital leases and
other of $7,105,000, maturing in each of the years ended August
31 are: 1997-$335,000, 1998-$338,000, 1999-$342,000,
2000-$346,000, 2001 - $349,000, thereafter $31,591,000.
The 8.5% convertible subordinated debentures due in 2012, assumed
in connection with the NYCOR merger are convertible into the
Company's Convertible Preferred Stock at any time prior to
maturity at 2.22 shares per $20 principal amount of debenture
(note 13).
The $6,299,000 long-term promissory note of Fedders Xinle is
payable to a People's Republic of China bank and matures in 2008.
The loan is secured by certain joint venture assets and is not
guaranteed by the Company or its other subsidiaries.
The loan from the State of Illinois has an interest rate of 1%,
is to be paid over the next 12 years, and is collateralized by a
mortgage on the Illinois facility.
<Page F17>
6. Leases
Capital Leases
Aggregate future minimum rental payments under capital leases
assumed primarily in connection with the NYCOR merger (note 13)
for the years ended August 31 are as follows: 1997 - $2,288,000,
1998 - $2,017,000, 1999 - $2,139,000, 2000 - $2,162,000, 2001 -
$144,000 and thereafter $215,000. The present value of net
minimum lease payments is $7,105,000 excluding the interest
portion of $1,860,000.
Operating Leases
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 rental value for a period of one
month to four years. Minimum payments for operating leases having
initial or remaining non-cancelable terms are as follows:
$3,896,000, $3,507,000, $3,247,000, $2,016,000 and $1,752,000 in
1997, 1998, 1999, 2000 and 2001, respectively, and total
$14,418,000. Total rent expense for all operating leases amounted
to $2,025,000, $2,083,000 and $3,559,000 in 1996, 1995 and 1994,
respectively. In 1995, an equipment lease expiring in February
1996 was bought out by the Company for $3,000,000, of which
$1,250,000 related to the prepayment of rental and interest
expense.
7. Income Taxes
The provision for income tax (benefit) consists of the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $18,047 $6,258 $396
State 2,253 2,378 198
Foreign 88 57 -
20,388 8,693 594
Charge in lieu of income taxes 437 2,900 -
Deferred:
Federal (1,530) (4,392) -
State (187) (1,014) -
(1,717) (5,406) -
$19,108 $6,187 $594
</TABLE>
<Page F18>
In 1996 and prior years, the exercise of stock options to acquire
shares of the Company's Common and Class A Stock resulted in a
compensation deduction for income tax purposes for which no
corresponding expense was required for financial reporting
purposes. The tax benefits related to these deductions, which
were realized in 1996 and 1995, are reflected as a charge in lieu
of income taxes and a credit to additional paid-in capital.
Deferred income taxes result from "temporary differences" between
assets and liabilities for financial reporting purposes and
income tax purposes. The principal temporary differences and
carryforwards giving rise to deferred tax assets and liabilities
at August 31 are as follows:
<TABLE>
<CAPTION> 1996 1995
<S> <C> <C>
Warranty $ 3,065 $2,822
Depreciation 392 (1,826)
Employee benefit programs 3,525 1,550
Inventory 1,710 854
Net operating loss carryforwards 7,598 1,500
Other 1,683 1,556
17,973 6,456
Valuation allowance (7,025) (2,225)
$10,948 $4,231
</TABLE>
Net deferred tax assets include $5,000,000, net of a valuation
allowance of $6,584,000, attributable to temporary differences,
tax loss, and tax credit carryforwards of NYCOR which the Company
expects to utilize over the carryforward periods.
The decrease in the deferred tax asset valuation allowance in
1995 resulted from the utilization of net operating loss carry
forwards and a change in the Company's estimate of the
utilization of temporary differences based primarily on improved
operating results.
The difference between the United States statutory income tax
rate and the consolidated effective income tax rate is due to the
following items:
<TABLE>
<CAPTION> 1996 1995 1994
<S> <C> <C> <C>
Expected tax at statutory rate $17,593 $12,492 $6,733
Valuation allowance reflected
in current income (325) (7,851) (6,799)
Alternative minimum tax - - 396
State taxes, less federal income
tax benefit 1,343 887 198
Other 497 659 66
</TABLE> $19,108 $6,187 $594
<Page F19>
At August 31, 1996, the Company has Canadian net operating loss
carryforwards of approximately $726,000 that expire in the years
2002 through 2003, and U.S. net operating loss and tax credit
carryforwards related to NYCOR of approximately $17,000,000 and
$1,400,00, respectively, which are restricted as to use and
expire in the years 2001 through 2011. All prior U.S. net
operating loss and credit carryforwards were utilized at August
31, 1995.
8. Segment Information
The Company operates in one industry segment and sells its room
air conditioners primarily direct to retailers and also through
private label arrangements and distributors. One customer
accounted for 30% of net sales in 1996, 26% of net sales in 1995
and 28% in 1994. No other customer accounted for more than 10% of
net sales in 1996. Two other customers accounted for 10% and 11%
of net sales in 1995 and 1994, respectively.
International sales were approximately $24,458,000 in 1996,
$12,892,000 in 1995 and $8,250,000 in 1994 and were made
principally to Canada, Mexico and China.
9. Capital Stock
Preferred Stock: On August 13, 1996, 7,643,036 shares of
Convertible Preferred Stock ("Preferred Stock") were issued to
NYCOR's stockholders on a share-for-share basis in exchange for
their Common, Class A and Class B Stock to consummate the merger
with NYCOR (notes 2 and 13). The Preferred Stock is convertible
into Class A Stock on a share-for-share basis at any time subject
to certain adjustments. The Preferred Stock is redeemable in
whole or in part, at the sole option of the Company at the price
of $6.25 in cash or equivalent value of Class A Stock. The
holders of Preferred Stock are entitled to receive upon
liquidation, $6.25 per share, plus unpaid dividends to the date
of distribution, before any distribution is made on the Common,
Class A or Class B Stock. At August 31, 1996, 2,534,000 shares
of Preferred Stock are reserved for conversion of the convertible
subordinated debentures.
Common Stock: Shares of Common Stock are reserved for the
conversion of Class A and Class B Stock as indicated herein. At
August 31, 1996, 1,050,000 shares of Common Stock are reserved
under the Company's stock option plans.
Class A Stock: In 1995 and 1994, the Company issued 7,984,000 and
10,625,029 shares, respectively, of Class A Stock through a stock
dividend. At August 31, 1996, 10,177,036 shares are reserved for
<Page F20>
conversion of the Company's Preferred Stock and convertible
subordinated debentures. At August 31, 1996, 10,631,000 shares of
Class A Stock are reserved under the Company's stock option
plans. Class A Stock has rights, including dividend rights,
substantially identical to the Common Stock, except that the
Class A Stock will not be entitled to vote except to the extent
provided under Delaware law. Class A Stock is immediately
convertible into Common Stock on a share-for-share basis upon
conversion of all of the Class B Stock and accordingly, at August
31, 1996, 40,223,952 shares of Common Stock are reserved for such
conversion.
Class B Stock: Class B Stock is immediately convertible into
Common Stock on a share-for-share basis and accordingly, at
August 31, 1996, 2,266,706 shares of Common Stock are reserved
for such conversion. Class B Stock has greater voting power, in
certain circumstances, ten-to-one, in the election of directors
but receives a lower dividend, 90%, if declared, than Common
Stock and has limited transferability. Class B Stock also votes
separately, as a class, on certain significant issues.
10. 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. All of the plans provide for the granting of
non-qualified stock options to directors who are not employees.
Stock options are exercisable one year after the date of grant
and, if not exercised, will expire five years from the date of
grant. Certain options are only exercisable at the end of five
years.
The stock option plan summary is as follows:
<TABLE>
<CAPTION> 1996 1995 1994
<S> <C> <C> <C>
Options outstanding beginning of year 4,715 3,903 2,987
Granted 752 403 752
Canceled (30) (300) (109)
Exercised (585) (218) (1,028)
Options outstanding prior to
dividend-related adjustments 4,852 3,788 2,602
Stock dividend-related adjustments(a) - 927 1,301
Options outstanding at end of year 4,852 4,715 3,903
Options exercisable at end
of year 3,682 3,336 1,862
Exercise price $1.69 $2.33 $2.90
per share to 4.87 to 4.70 to 5.66
</TABLE>
<Page F21>
(a) In connection with stock dividends distributed in 1995 and
1994, all Class A options were adjusted to reflect a 25% and 50%
increase, respectively.
11. Pension Plans and Other Retirement Benefits
The Company maintains a 401(k) defined contribution plan covering
all U.S. employees. Company matching contributions under the plan
are based on the level of individual participant contributions
and amounted to $1,171,000 in 1996, $756,000 in 1995 and $726,000
in 1994. The Company terminated its defined pension plan, that
was curtailed in 1993, with no material gain or loss recognized.
The Company has an agreement with an officer that 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.
Following the merger of NYCOR into the Company on August 13, 1996
(note 13) the agreement was adjusted to take into account the
terms of the merger agreement which stated that the employees and
directors of NYCOR were to 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
salaries and all other benefits provided by NYCOR. The estimated
present value of future non-salary benefits payable under the
agreement has been determined based upon certain assumptions and
is being amortized over the expected remaining years of service
to the Company.
The Company provides a portion of health care and life insurance
benefits for retired employees who elect to participate in the
Company's plan. During fiscal 1994, the Company adopted SFAS
No.106, which requires accrual accounting for all postretirement
benefits other than pension. At August 31, 1996 and 1995
postretirement benefits were fully accrued. The effect of
adoption in 1994 of SFAS No. 106 was not material.
12. Joint Venture
On November 7, 1995, the Company entered into a joint venture
with the Ningbo General Air Conditioner Factory ("Ningbo"),
Ningbo City, Zheijang Province, People's Republic of China
("P.R.C.") to manufacture room air conditioners in China. The
joint venture, Fedders Xinle Co., Ltd., was capitalized with the
Company's contribution of approximately $8,400,000 of cash plus
know-how for a 60% interest in the joint venture. Ningbo
contributed the factory, equipment and other assets valued at
$5,600,000 for a 40% interest. The equivalent of approximately
$10,300,000 in long-term financing was provided by a P.R.C. bank
<Page F22>
for the joint venture which is not guaranteed by the Company. Of
this long-term financing, $4,000,000 was repaid during fiscal
1996. The financial statements of the joint venture are
consolidated herein.
13. Merger
On August 13, 1996, the Company merged with NYCOR, a manufacturer
of rotary compressors and thermoelectric heating and cooling
modules. Considerations consisted of 7,643,000 shares of
Convertible Preferred Stock with a total value of approximately
$47,769,000. The merger was accounted for using the purchase
method, with the consideration allocated to the assets acquired
based on their estimated fair values as of the merger date. The
purchase price plus the fair value of net liabilities assumed was
allocated to goodwill which is being amortized on a straight line
basis over 40 years.
The Company's consolidated financial statements include the
operating results of NYCOR since August 13, 1996. The following
table presents the unaudited pro forma results of operations as
if these transactions occurred on September 1, 1994. The pro
forma results have been prepared for comparative purposes only
and do not purport to be indicative of what would have actually
occurred had the merger been consummated at the beginning of
fiscal 1995 or of results which may occur in the future.
<TABLE>
<CAPTION>
(Unaudited) 1996 1995
<S> <C> <C>
Net sales $390,349 $329,516
Operating income 42,168 35,747
Net income 23,574 26,472
Income per share:
Primary 0.51 0.57
Fully diluted 0.47 0.54
</TABLE>
<PAGE>
<Page F23>
14. Quarterly Financial Data (unaudited)
(000's, except per share and market price data)
<TABLE>
<CAPTION>
First Second Third Fourth
1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $27,809 $20,125 $88,327 $72,357 $173,868 $145,869 $81,768 $78,143
Gross profit 6,777 4,306 18,005 13,686 37,859 30,489 20,387 18,644(a)
Income (loss)
before income
taxes 554 (1,440) 10,274 6,694 28,200 21,536 11,238 8,901
Net income
(loss) $ 343 $(1,217) $6,370 $5,567 $17,430 $17,806 $ 7,015 $7,348
Net income
(loss) per
share (b) $ 0.01 $ (0.03) $ 0.15 $ 0.13 $ 0.42 $ 0.44 $ 0.16 $ 0.18
Market price per share:
Preferred Stock (FJAPr)
High - - - - - - 5 7/8 -
Low - - - - - - 5 1/8 -
Common Stock (FJC)
High 6 3/4 6 1/4 6 3/4 6 1/8 7 6 1/8 7 1/4 7 7/8
Low 5 1/4 3 7/8 5 5 6 5 1/4 5 1/2 5 3/8
Class A Stock (FJA)
High 5 4 3/8 5 5/8 4 3/4 6 1/4 4 3/4 6 3/8 5 3/8
Low 3 3/4 3 1/4 3 7/8 3 5/8 5 3/8 4 4 7/8 4 1/8
</TABLE>
(a) Includes a $3.5 million reduction in warranty provision and a $2.8 million
write down of idle equipment.
(b) Quarterly earnings per share may not add to earnings per share for the year
due to rounding and changes in the number of weighted average shares
outstanding.
<PAGE>
<Page S1>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Directors
Fedders Corporation
The audit referred to in our report dated September 30, 1996,
relating to the consolidated financial statements of Fedders
Corporation, which is contained in Item 8 of this Form 10-K,
included the audit of the 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.
/s/BDO Seidman, LLP
Woodbridge, New Jersey
September 30, 1996
<PAGE>
<Page S2>
FEDDERS CORPORATION
VALUATION & QUALIFYING ACCOUNTS
SCHEDULE II
For The Years Ended August 31, 1995, 1994 and 1993
(Amounts in Thousands)
<TABLE>
<CAPTION>
Balance Additions Balance
Allowance for at beginning charged to at emd
Doubtful Accounts: of period expense Deductions Other of period
<S> <C> <C> <C> <C> <C>
Year ended:
August 31, 1996 $ 872 $580 - $500(1) $1,952
August 31, 1995 $ 744 $286 $ 158 - $ 872
August 31, 1994 $1,078 $666 1,000 - $ 744
</TABLE>
<PAGE>
<PAGE>
Exhibit Index
(3) (i) Restated Certificate of Incorporation, filed as
Exhibit 3.1 to the Company's Annual Report on Form 10-K for 1984
and incorporated hereby reference.
(ii) Amendment to Restated Certificate of
Incorporation, filed as Exhibit 4a to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1985 and
incorporated herein by reference.
(iii) Correction of Restated Certificate of
Incorporation, filed as Exhibit 4b to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1985 and
incorporated herein by reference.
(iv) Amendment of Certificate of Incorporation, filed
as Exhibit (3) (i) to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1987 and incorporated herein by
reference.
(v) Amendment of Certificate of Incorporation, filed
as Exhibit (3) (ii) to the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1987 and incorporated herein by
reference.
(vi) Amendment to Certificate of Incorporation, filed
as Exhibit (3) (vi) to the Company's Annual Report on Form 10-K
for the year ended August 31, 1992 and incorporated herein by
reference.
(vii) Amendments to Certification of Incorporation dated
August 13, 1996.
(viii) By-Laws, amended through January 16, 1988, filed
as Exhibit (3) (vii) to the Company's Annual Report on Form 10-K
for 1987 and incorporated herein by reference.
(10) (i) Stock Option Plan II, filed as Exhibit 10.4 to the
Company's Annual Report on Form 10-K for 1984 and incorporated
herein by reference.
(ii) Stock Option Plan III, filed as Exhibit 10 (iv) to
the Company's Annual Report on Form 10-K for 1985 and
incorporated herein by reference.
(iii) Stock Option Plan IV, filed as Exhibit 10 (iv) to
the Company's Annual Report on Form 10-K for 1987 and
incorporated herein by reference.
<PAGE>
(iv) Stock Option Plan V, filed as Exhibit 10 (v) to
the Company's Annual Report on Form 10-K for 1988 and
incorporated herein by reference.
(v) Stock Option Plan VI, filed as Exhibit 10 (vi) to
the Company's Annual Report on Form 10-K for 1989 and
incorporated herein by reference.
(vi) Stock Option Plan VII, filed as Exhibit 10 (vi) to
the Company's Annual Report on Form 10-K for 1990 and
incorporated herein by reference.
(vii) Stock Option Plan VIII, filed as Annex F to the
Company's Proxy Statement - Prospectus dated May 10, 1996 and
incorporated herein by reference.
(viii) Employment Contract between The Corporation and
Salvatore Giordano dated March 23, 1993, filed as Exhibit 10
(viii) to the Company's Annual Report on Form 10-K 1993 and
incorporated herein by reference.
(ix) Joint Venture contract between Ningbo General Air
Conditioner Factory and Fedders Investment Corporation for the
establishment of Fedders Xinle Co., Ltd., dated July 13, 1995 filed
as Exhibit 10 (viii) on Form 10-K 1996 and incorporated herein by
reference.
(11) Statement re computation of per share earnings.
(16) (i) Letter referencing change in certifying accountants
filed as Exhibit 16 (i) to the Company's Annual Report on Form 10-K
and incorporated herein by reference.
(21) Subsidiaries.
(23) Consent of BDO Seidman, LLP.
(27) Financial data schedule.
(b) Reports on Form 8-K
A report on Form 8-K was filed on August 29, 1996, an 8-KA was
filed on October 25, 1996 and incorporated herein by reference.
FEDDERS CORPORATION
COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11
For The Years Ended August 31, 1996, 1995 and 1994
(Amounts in thousand except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Average number of common and common
equivalent shares outstanding (1) 41,997 41,001 39,386
Net income $31,158 $29,504 $20,989
Preferred stock dividend 151 - -
Net income (loss attributable to
common stockholders 31,007 29,504 20,989
Net income (loss) per common share $0.74 $0.72 $0.53
Fully diluted:
Average number of common and common
equivalent shares outstanding 41,997 41,001 39,386
Additional average number of common
shares assuming the conversion of the
5% convertible subordinated
debentures due 1996(2) - 388
Additional average number of class A
shares assuming the conversion of
preferred stock and conversion of
the 8.5% subordinated debentures(3) 529 - -
Average common and common equivalent
shares outstanding 42,526 41,001 39,774
Net income $31,158 $29,504 $20,989
Interest relating to the 5% convertible
subordinated debentures due 1996 net
of applicable taxes and tax credits - 661
Interest related to the 8.5% convertible
subordinated debentures due 2012 63 - -
Net income attributable to common
stockholders assuming full dilution $31,221 $29,504 $20,328
Net income (loss) per common share $0.73 $0.72 $0.51
Fully diluted income (loss) per share
excluding anti-dilutive effect of
conversion of debentures $0.73 $0.72 $0.51
</TABLE>
(1) Average number of common and common stock equivalents
outstanding have been restated to reflect Class A Stock dividend
distributed in September 1994 and June 1995.
(2) The 5% convertible subordinated debentures due in May 1996 were
fully redeemed by the company (see note 5 of the Notes to
Consolidated Financial Statements).
(3) Average number of shares included in fully diluted calculation
are for the period August 13 through August 31, 1996.
Exhibit 21
SUBSIDIARIES
State or Other Jurisdiction
Name of Incorporation
Fedders North America, Inc. (1) Delaware
Fedders International, Inc. (1) Delaware
Fedders Exporting, Inc. (1) Barbados
Fedders Investment Corporation (1) Delaware
NYCOR North America (1) Delaware
Rotorex International, Inc. (1) Delaware
Rotorex Technologies, Inc. (1) Delaware
Fedders, Inc. (2) Ontario
Emerson Quiet Kool Corporation (2) Delaware
Columbia, Specialties, Inc. (2) Delaware
Fedders De Mexico S.A. de C.V. (2) Mexico
Rotorex Company, Inc. (3) Delaware
Melcor Corporation (3) New Jersey
Fedders Asia Pte. Ltd. (4) Singapore
Fedders Xinle Co. Ltd. (5) -
(1) Wholly owned subsidiary of Fedders Corporation
(2) Wholly owned subsidiary of Fedders North America, Inc.
(3) Wholly owned subsidiary of NYCOR North America
(4) Wholly owned subsidiary of Fedders International
(5) Majority owned subsidiary of Fedders Investment Corporation
Exhibit 23
Consent of Independent
Certified Public Accountants
Fedders Corporation
Liberty Corner, New Jersey
We hereby consent to the incorporation by reference in the
Registration Statements (Form S-8 No. 2098475, No. 33-4628, No. 33-
26740, No. 33-31332 and No. 33-55054) pertaining to the Employee
Stock Plans of Fedders Corporation of our reports dated September
30, 1996, with respect to the consolidated financial statements and
schedule of Fedders Corporation appearing in the Company's Annual
Report on Form 10-K for the year ended August 31, 1996.
/s/BDO Seidman, LLP
Woodbridge, New Jersey
November 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial data scedules should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto.
</LEGEND>
<CIK> 0000744106
<NAME> FEDDERS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 90,925
<SECURITIES> 0
<RECEIVABLES> 9,927
<ALLOWANCES> (1,952)
<INVENTORY> 53,446
<CURRENT-ASSETS> 158,666
<PP&E> 120,823
<DEPRECIATION> (57,951)
<TOTAL-ASSETS> 290,220
<CURRENT-LIABILITIES> 71,849
<BONDS> 38,517<F1>
0
7,643<F1><F2>
<COMMON> 40,673
<OTHER-SE> 111,435
<TOTAL-LIABILITY-AND-EQUITY> 290,220
<SALES> 371,772
<TOTAL-REVENUES> 371,772
<CGS> 288,744
<TOTAL-COSTS> 320,784
<OTHER-EXPENSES> (230)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 952
<INCOME-PRETAX> 50,266
<INCOME-TAX> 19,108
<INCOME-CONTINUING> 31,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,158
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0<F3>
<FN>
<F1>Please see Note 6 to the Notes to the Consolidated Financial Statements
filed with Form 10-K
<F2>Please see note 9 to the Notes of the Consolidated Financial Statements
filed with Form 10-K.
<F3>Fully-diluted earnings per share were not materially dilutive and,
accordingly, are not presented.
</FN>
</TABLE>
(3) (VII) 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 of
the Corporation at its meeting on July 9, 1996 duly adopted a
resolution providing for the designation of a series of 10,111,569
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
10,111,569 shares. Each share of this Series shall have a par
value of $1.00.
(B) DIVIDENDS
(1) The annual rate of dividends payable on each share of this
Series shall be $0.38125.
(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, 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.
(4) If notice shall have been given as provided in Section (C)(3)
and the Corporation shall have provided moneys or an equivalent
value of Class A Stock of the Corporation 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 except that, if the
Redemption Price is paid in an equivalent value of Class A Stock of
the Corporation, the holders of shares of this Series so redeemed
shall have rights as holders of Class A Stock of the Corporation.
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 as to
dividends 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 and such
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
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)(10), 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 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
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.
(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
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 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.
(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 Prefer red 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)(l)(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)(l)(c) or such other
place as is selected by such designated stockholder. 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)(l). Notwithstanding the
provisions of this Section (E)(l), no such special meeting shall be
called 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 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)(l) 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)(l)(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 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)(l), 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)(l)(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 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.
IN WITNESS WHEREOF, Fedders Corporation has caused this certificate
to be signed and attested this 13th day of August, 1996.
FEDDERS CORPORATION
By/s/S.A. Muscarnera
S. A. Muscarnera
Title: Senior Vice President
Attest:/s/Robert N. Edwards
Robert N. Edwards
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
FEDDERS CORPORATION
The undersigned hereby certifies as follows:
1. The name of the corporation is Fedders Corporation (the
"Corporation").
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking the first paragraph of Article THIRD thereof
and by substituting in lieu thereof the following:
THIRD. The authorized number of shares of stock of all classes
which the Corporation shall have authority to issue is 162,500,000,
consisting of 80,000,000 shares of Common Stock having a par value
of $1.00 per share, 60,000,000 shares of Class A Stock having a par
value of $1.00 per share, 7,500,000 shares of Class B Stock having
a par value of $1.00 per share and 15,000,000 shares of Preferred
Stock having a par value of $1.00 per share.
3. The amendment of the Certificate of Incorporation of the
Corporation herein certified was duly adopted pursuant to the
provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 13th day of August, 1996.
Attest
/s/Robert N. Edwards /s/S.A. Muscarnera
Robert N. Edwards S.A. Muscarnera
Assistant Secretary Senior Vice President
<PAGE>
CERTIFICATE OF MERGER OF NYCOR, INC. INTO FEDDERS CORPORATION
Pursuant to Section 251 of the General Corporation Law of the State
of Delaware, the undersigned corporation, which is organized and
existing under and by virtue of the General Corporation Law of the
State of Delaware (the General Corporation Law), DOES HEREBY
CERTIFY THAT:
FIRST: The constituent corporations are NYCOR, Inc., a Delaware
corporation, and Fedders Corporation, a Delaware corporation.
SECOND: The Agreement and Plan of Merger, dated November 30, 1995,
as amended by Amendment No. 1 dated March 15, 1996 and Amendment
No. 2 dated as of April 10, 1996 (as so amended, the Merger
Agreement), between NYCOR, Inc. and Fedders Corporation has been
approved, adopted, certified, executed and acknowledged by each of
the constituent corporations in accordance with the requirements of
Section 251 of the General Corporation Law of the State of
Delaware.
THIRD: The surviving corporation is Fedders Corporation, which
will continue its existence as said surviving corporation.
FOURTH: the Certificate of Incorporation of Fedders Corporation,
as now in force and effect, shall continue to be the Certificate of
Incorporation of said surviving corporation without any change
effected as a result of the merger, until such Certificate of
Incorporation may be amended and changed pursuant to the provisions
of the General Corporation Law.
FIFTH: The executed Merger Agreement is on file at the principal
place of business of Fedders Corporation, 505 Martinsville Road,
Liberty Corner, New Jersey 07938.
SIXTH: A copy of the Merger Agreement will be furnished by the
surviving corporation, on request and without cost, to any
stockholder of any constituent corporation.
SEVENTH: This Certificate of Merger shall be effective at 2:00
p.m. on August 13, 1996.
IN WITNESS WHEREOF, the undersigned has caused this instrument to
be duly executed by its authorized officers.
Dated August 13, 1996
FEDDERS CORPORATION
By:/s/S.A. Muscarnera
S. A. Muscarnera
Senior Vice President and
Secretary
[SEAL]
Attest:
By:/s/Robert N. Edwards
Robert N. Edwards
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
FEDDERS CORPORATION
The undersigned hereby certifies as follows:
1. The name of the corporation is Fedders Corporation (the
"Corporation").
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking Article THIRD thereof and by substituting in
lieu thereof the following:
THIRD. The aggregate number of shares of stock of all classes
which the Corporation shall have authority to issue is 102,500,000,
consisting of 60,000,000 shares of Common Stock having a par value
of $1.00 per share, 30,000,000 shares of Class A Stock having a par
value of $1,000 per share, 7,500,000 shares of Class B Stock having
a par value of $1.00 per share and 5,000,000 shares of Preferred
Stock having a par value of $1.00 per share.
The powers, preferences and the relative, participating, optional
and other rights and the qualifications, limitations and
restrictions thereof, of each class of stock, and the express grant
of authority to the Board of Directors to fix by resolution the
designations and the powers, preferences and rights of each share
of Preferred Stock and the qualifications, limitations and
restrictions thereof which are not fixed by this Certificate of
Incorporation, are as follows:
A. COMMON STOCK, CLASS A STOCK AND CLASS B STOCK.
I. Dividends, etc.
Subject to the rights of the holders of Preferred Stock, and
subject to any other provisions of this Certificate of
Incorporation, as amended from time to time, holders of Common
Stock, Class A Stock and Class B Stock shall be entitled to receive
such dividends and other distributions in cash, stock or property
of the Corporation as may be declared thereon by the Board of
Directors from time to timeout of assets or funds of the
Corporation legally available therefor, provided, that in the case
of cash dividends, if at any time a cash dividend is paid on the
Common Stock, a cash dividend of equal amount shall be paid on the
Class A Stock and a cash dividend will also be paid on the Class B
Stock in an amount per share of Class B Stock equal to 90% of the
amount of the cash dividend paid on each share of the Common Stock
(rounded down, if necessary, to the nearest one-hundredth of a
cent), and provided, further, that in the case of dividends or
other distributions payable in stock of the Corporation other than
Preferred Stock, including distributions pursuant to stock splits
or divisions of stock of the Corporation other than Preferred
Stock, which occur after the initial issuance of shares of Class A
Stock and Class B Stock by the Corporation, unless the dividend or
distribution is solely of shares of Class A Stock, in which case a
dividend or distribution payable solely in shares of Class A Stock
may be made with respect to shares of Common Stock, Class A Stock
and Class B Stock, only shares of Common Stock shall be distributed
with respect to Common Stock, only shares of Class A Stock and only
shares of Class B Stock shall be distributed with respect to Class
B Stock, in each case, in an amount per share equal to the amount
per share paid with respect to the Common Stock, and that, in the
case of any combination, reclassification or subdivision of the
Common Stock, the shares of Class A Stock and Class B Stock shall
also be combined, reclassified or subdivided so that the number of
shares of Class A Stock and Class B Stock outstanding immediately
following such combination, reclassification or subdivision shall
bear the same relationship to the number of shares outstanding
immediately prior to such combination, reclassification or
subdivision as the number of shares of Common Stock outstanding
immediately following such combination, reclassification or
subdivision bears to the number of shares of Common Stock
outstanding immediately prior to such combination, reclassification
or subdivision.
II. Voting.
(a) At every meeting of the stockholders, every holder of Common
Stock shall be entitled to one (1) vote in person or by proxy for
each share of Common Stock standing in his name on the transfer
books of the Corporation and every holder of Class B Stock shall be
entitled to one (1) vote in person or by proxy for each share of
Class B Stock standing in his name on the transfer books of the
Corporation, except that each holder of Class B Stock shall be
entitled to ten (10) votes per share on the election of any
directors of any stockholders' meeting (i) if more than 15% of the
shares of Common Stock outstanding on the record date for such
meeting are beneficially owned by a person or group of persons
acting in concert (unless such person or group is also the
beneficial owner of a majority of the shares of Class B Stock on
such record date), or (ii) if a nomination for the Board of
Directors is made by a person or group of persons acting in concert
(other than the Board of Directors), provided that such nomination
is not made by one or more holders of Class B Stock, acting in
concert with each other, who beneficially own more than 15% of the
shares of Class B Stock outstanding on such record date. The
holders of Class A Stock shall not be entitled to vote at any
meeting of the stockholders or otherwise, except as may be
specifically required by applicable law.
(b) The provisions of this Certificate of Incorporation shall not
be modified, revised, altered or amended, repealed or rescinded in
whole or in part, without (i) the affirmative vote of the holders
of a majority of the shares of the Common Stock and of a majority
of the shares of the Class B Stock, each voting separately as a
class, and (ii) additionally with respect to Article Eighth the
vote required by Article Eighth.
(c) The Corporation may not effect or consummate:
(1) any merger or consolidation of the Corporation with or into any
other corporation;
(2) any sale, lease, exchange or other disposition of all or
substantially all of the assets of the Corporation to or with any
other person; or
(3) any dissolution of the Corporation;
unless and until such transaction is authorized by the vote, if
any, required by Article Eighth of this Certificate of
Incorporation and by Delaware law; and unless and until such
transaction is authorized by a majority of the votes entitled to be
cast by the shares of Common Stock and of Class B Stock entitled to
vote, each voting separately as a class, but the foregoing shall
not apply to any merger or other transaction described in the
preceding subparagraphs (1) and (2) if the other party to the
merger or other transaction is a Subsidiary of the Corporation.
For purposes of this paragraph (c) a "Subsidiary" is any
corporation more than 50% of the voting securities of which are
owned directly or indirectly by the Corporation; and a "person" is
any individual, partnership, corporation or entity.
(d) Following the initial issuance of shares of Class B Stock, the
Corporation may not effect the issuance of any additional shares of
Class B Stock (except in connection with stock splits and stock
dividends) unless and until such issuance is authorized by the
holders of a majority of the voting power of the shares of Common
Stock and of Class B Stock entitled to vote, each voting separately
as a class.
(e) Every reference in this Certificate of Incorporation to a
majority or other proportion of shares of stock shall refer to such
majority or other proportion of the votes entitled to be cast by
such shares.
(f) Except as may be otherwise required by law or by this Article
Third the holders of Common Stock and Class B Stock shall vote
together as a single class, subject to any voting rights which may
be granted to holders of Preferred Stock.
III. Transfer.
(a) No person holding shares of Class B Stock of record
(hereinafter called a "Class B Holder") may transfer, and the
Corporation shall not register the transfer of, such shares of
Class B Stock, as Class B Stock, whether by sale, assignment, gift,
bequest, appointment or otherwise, except to a Permitted Transferee
and any purported transfer of shares not permitted hereunder shall
result in the conversion of such shares into Common Stock as
provided by subsection (d) of this Section III. A Permitted
Transferee shall mean, with respect to each person from time to
time shown as the record holder of shares of Class B Stock:
(i) In the case of a Class B Holder who is a natural person:
(A) The spouse of such Class B Holder, any lineal descendant of a
parent of such Class B Holder, and any spouse of such lineal
descendant (which lineal descendants, their spouses, the Class B
Holder, and his or her spouse are herein collectively referred to
as "Class B Holder's Family Members");
(B) The trustee of a trust (including a voting trust) principally
for the benefit of such Class B Holder and/or one or more of his or
her Permitted Transferees described in each subclause of this
clause (i) other than this subclause (B), provided that such trust
may also grant a general or special power of appointment to one or
more of such Class B Holder's Family Members and may permit trust
assets to be used to pay taxes, legacies and other obligations of
the trust or of the estates of one or more of such Class B Holder's
Family Members payable by reason of the death of any of such Class
B Holder's Family Members;
(C) Any organization contributions to which are deductible for
federal income, estate or gift tax purposes or any split-interest
trust described in Section 4947 of the Internal Revenue Code, as it
may from time to time be amended (hereinafter called a "Charitable
Organization");
(D) A corporation, if a majority of the beneficial ownership of
outstanding capital stock of such corporation which is entitled to
vote for the election of directors is owned by, or a partnership if
a majority of the beneficial ownership of the partnership is held
by, the Class B Holder or his or her Permitted Transferees
determined under this clause (i), provided that if by reason of any
change in the ownership of such stock or partnership interests,
such corporation or partnership would no longer qualify as a
Permitted Transferee, all shares of Class B Stock then held by such
corporation or partnership shall, upon the election of the
Corporation given by written notice to such corporation or
partnership, without further act on anyone's part, be converted
into shares of Common Stock effective upon the date of the giving
of such notice, and stock certificates formerly representing such
shares of Class B Stock shall thereupon and thereafter be deemed to
represent the like number of shares of Common Stock; and
(E) The estate of such Class B Holder.
(ii) In the case of a Class B Holder holding the share of Class B
Stock in question as trustee pursuant to a trust (other than a
Charitable Organization or a trust described in clause (iii)
below), "Permitted Transferee" means (A) any person transferring
Class B Stock to such trust and (B) any Permitted Transferee of any
such transferor determined pursuant to clause (i) above.
(iii) In the case of a Class B Holder holding the shares of Class
B Stock in question as trustee pursuant to a trust (other than a
Charitable Organization) which was irrevocable on the date of
initial issuance to such Class B Holder (hereinafter in this
Section III called the "Record Date"). "Permitted Transferee"
means (A) any person to whom or for whose benefit principal may be
distributed either during or at the end of the term of such trust
whether by power of appointment or otherwise and (B) any Permitted
Transferee of any such person determined pursuant to clause (i)
above.
(iv) In the case of a Class B Holder which is a Charitable
Organization holding record and beneficial ownership of the shares
of Class B Stock in question, "Permitted Transferee" means any
Class B Holder.
(v) In the case of a Class B Holder which is a corporation or
partnership (other than a Charitable Organization) acquiring record
and beneficial ownership of the shares of Class B Stock in question
upon its initial issuance by the Corporation, "Permitted
Transferee" means (A) any partner of such partnership, or
stockholder of such corporation, on the Record Date, (B) any person
transferring such shares of Class B Stock to such corporation or
partnership, and (C) any Permitted Transferee of any such person,
partner, or stockholder referred to in subclauses (A) and (B) of
this clause (v), determined under clause (i) above.
(vi) In the case of a Class B Holder which is a corporation or
partnership (other than a Charitable Organization or a corporation
or partnership described in clause (v) above) holding record and
beneficial ownership of the shares of Class B Stock in question,
"Permitted Transferee" means (A) any person transferring such
shares of Class B Stock to such corporation or partnership and (B)
any Permitted Transferee of any such transferor determined under
clause (i) above.
(vii) In the case of a Class B Holder which is the estate of a
deceased Class B Holder, or which is the estate of a bankrupt or
insolvent Class B Holder, which holds record and beneficial
ownership of the shares of Class B Stock in question, "Permitted
Transferee" means a Permitted Transferee of such deceased, bankrupt
or insolvent Class B Holder as determined pursuant to clause (i),
(ii), (iii), (iv), (v) or (vi) above, as the case may be.
(b) Notwithstanding anything to the contrary set forth herein, any
Class B Holder may pledge such Class B Holder's shares of Class B
Stock to a pledgee pursuant to a bona fide pledge of such shares as
collateral security for indebtedness due to the pledgee, provided
that such shares shall not be transferred to or registered in the
name of the pledgee and shall remain subject to the provisions of
this Section III. In the event of foreclosure or other similar
action by the pledgee, such pledged shares of Class B Stock may
only be transferred to a Permitted Transferee of the pledgor or
converted into shares of Common Stock, as the pledgee may elect.
(c) For purposes of this Section III:
(i) The relationship of any person that is derived by or through
legal adoption shall be considered a natural one.
(ii) Each joint owner of shares of Class B Stock shall be
considered a "Class B Holder" of such shares.
(iii) A minor for whom shares of Class B Stock are held pursuant to
a Uniform Gifts to Minors Act or similar law shall be considered a
Class B Holder of such shares.
(iv) Unless otherwise specified, the term "person" means both
natural persons and legal entities.
(v) Without derogating from the election conferred upon the
Corporation pursuant to subclause (D) of clause (i) above, each
reference to a corporation shall include any successor corporation
resulting from merger or consolidation and each reference to a
partnership shall include any successor partnership resulting from
the death or withdrawal of a partner.
(d) Any transfer of shares of Class B Stock not permitted hereunder
shall result in the conversion of the transferee's shares of Class
B Stock into shares of Common Stock, effective the date on which
certificates representing such shares are presented for transfer on
the books of the Corporation. The Corporation may, in connection
with preparing a list of stockholders entitled to vote at any
meeting of stockholders, or as a condition to the transfer or the
registration of shares of Class B Stock on the Corporation's books,
require the furnishing of such affidavits or other proof as it
deems necessary to establish that any person is the beneficial
owner of shares of Class B Stock or is a Permitted Transferee.
(e) At any time when the number of outstanding shares of Class B
Stock as reflected on the stock transfer books of the Corporation
falls below 5% of the aggregate number of the issued and
outstanding shares of the Common Stock and Class B Stock of the
Corporation, or the Board of Directors and the holders of a
majority of the outstanding shares of Class B Stock approve the
conversion of all of the Class B Stock into Common Stock, then,
immediately upon the occurrence of either such event, the
outstanding shares of Class B Stock shall be converted into shares
of Common Stock. In the event of such a conversion, certificates
formerly representing outstanding shares of Class B Stock shall
thereupon and thereafter be deemed to represent the like number of
shares of Common Stock.
(f) Shares of Class B Stock shall be registered in the names of the
beneficial owners thereof and not in "street" or "nominee" name.
For this purpose, a "beneficial owner" of any shares of Class B
Stock shall mean a person who, or an entity which, possesses the
power, either singly or jointly, to direct the voting or
disposition of such shares. The Corporation shall note on the
certificates for shares of Class B Stock the restrictions on
transfer and registration of transfer imposed by this Section III.
IV. Conversion Rights.
(a) Subject to the terms and conditions of this Section IV, all
outstanding shares of Class A Stock shall be converted into fully
paid and nonassessable shares of Common Stock, immediately and
without any action on the part of the holder of such stock, in the
event the Class B Stock is converted into Common Stock in
accordance with the provisions of subsection (e) of Section III of
this Article Third. Upon conversion, the shares of Common Stock
issued shall be subject to the same dividends or distributions
theretofore declared but not paid or issued on the Class A Stock
immediately prior to conversion but the Corporation shall not make
any payment or adjustment on account of any dividends or
distributions declared but not paid or issued on the Common Stock
on such conversion. In the event of such conversion, certificates
formerly representing shares of Class A Stock shall thereupon and
thereafter be deemed to represent the like number of shares of
Common Stock.
(b) Subject to the terms and conditions of this Section IV, each
share of Class B Stock shall be convertible at any time or from
time to time, at the option of the respective holder thereof, at
the office of any transfer agent for Class B Stock, and at such
other place or places, if any, as the Board of Directors may
designate, or, if the Board of Directors shall fail so to
designate, at the principal office of the Corporation (attention of
the Secretary of the Corporation), into one (1) fully paid and
nonassessable share of Common Stock. Upon conversion, the
Corporation shall make no payment or adjustment on account of
dividends accrued or in arrears on Class B Stock surrendered for
conversion or on account of any dividends on the Common Stock
issuable on such conversion. Before any holder of Class B Stock
shall be entitled to convert the same into Common Stock, he shall
surrender the certificate or certificates for such Class B Stock at
the office of said transfer agent (or other place as provided
above), which certificate or certificates, if the Corporation shall
so request, shall be duly endorsed to the Corporation or in blank
or accompanied by proper instruments of transfer to the Corporation
or in blank (such endorsements or instruments of transfer to be in
form satisfactory to the Corporation), and shall give written
notice to the Corporation at said office that he elects so to
convert said Class B Stock in accordance with the terms of this
Section IV, and shall state in writing therein the name or names in
which he wishes the certificate or certificates for Common Stock to
be issued. Every such notice of election to convert shall
constitute a contract between the holder of such Class B Stock and
the Corporation, whereby the holder of such Class B Stock shall be
deemed to subscribe for the amount of Common Stock which he shall
be entitled to receive upon such conversion, and, in satisfaction
of such subscription, to deposit the Class B Stock to be converted
and to release the Corporation from all liability thereunder, and
thereby the Corporation shall be deemed to agree that the surrender
of the certificate or certificates therefor and the extinguishment
of liability thereon shall constitute full payment of such
subscription for Common Stock to be issued upon such conversion.
The Corporation will as soon as practicable after such deposit of
a certificate or certificates for Class B Stock, accompanied by the
written notice and the statement above prescribed, issue and
deliver at the office of said transfer agent (or other place as
provided above) to the person for whose account such Class B Stock
was so surrendered, or to his nominee or nominees, a certificate or
certificates for the number of full shares of Common Stock to which
he shall be entitled as aforesaid. Subject to the provisions of
subsection (d) of this Section IV, such conversion shall be deemed
to have been made as of the date of such surrender of the Class B
Stock to be converted; and the person or persons entitled to
receive the Common Stock issuable upon conversion of such Class B
Stock shall be treated for all purposes as the record holder or
holders of such Common Stock on such date.
(c) The issuance of certificates for shares of Common Stock upon
conversion of shares of Class A Stock and Class B Stock shall be
made without charge for any stamp or other similar tax in respect
of such issuance. However, if any such certificate is to be issued
in a name other than that of the holder of the share or shares of
Class A Stock or Class B Stock converted, the person or persons
requesting the issuance thereof shall pay to the Corporation the
amount of any tax which may be payable in respect of any transfer
involved in such issuance or shall establish to the satisfaction of
the Corporation that such tax has been paid.
(d) The Corporation shall not be required to convert Class B Stock,
and no surrender of Class B Stock shall be effective for that
purpose, while the stock transfer books of the Corporation are
closed for any purpose; but the surrender of Class B Stock for
conversion during any period while such books are so closed shall
become effective for conversion immediately upon the reopening of
such books, as if the conversion had been made on the date such
Class B Stock was surrendered.
(e) The Corporation covenants that it will at all times reserve and
keep available, solely for the purpose of issue upon conversion of
the outstanding shares of Class A Stock and Class B Stock, such
number of shares of Common Stock as shall be issuable upon the
conversion of all such outstanding shares, provided that nothing
contained herein shall be construed to preclude the Corporation
from satisfying its obligations in respect of the conversion of the
outstanding shares of Class A Stock and Class B Stock by delivery
of shares of Common Stock which are held in the treasury of the
Corporation. The Corporation covenants that if any shares of
Common Stock required to be reserved for purposes of conversion
hereunder require registration with or approval of any governmental
authority under any federal or state law before such shares of
Common Stock may be issued upon conversion, the Corporation will
use its best efforts to cause such shares to be duly registered or
approved, as the case may be. The Corporation will endeavor to
list the shares of Common Stock required to be delivered upon
conversion prior to such delivery upon each national securities
exchange, if any, upon which the outstanding Common Stock is listed
at the time of such delivery. The Corporation covenants that all
shares of Common Stock which shall be issued upon conversion of the
shares of Class A Stock and Class B Stock, will, upon issue, be
fully paid and nonassessable and not entitled to any pre-emptive
rights.
V. Liquidation Rights.
In the event of any dissolution, liquidation or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities
of the Corporation, the holders of each series of Preferred Stock
shall be entitled to receive, out of the net assets of the
Corporation, an amount for each share equal to the amount fixed and
determined by the Board of Directors in any resolution or
resolutions providing for the issuance of any particular series of
Preferred Stock, plus an amount equal to all dividends accrued and
unpaid on shares of such series to the date fixed for distribution,
and no more, before any of the assets of the Corporation shall be
distributed or paid over to the holders of Common Stock or Class A
Stock. After payment in full of said amounts to the holders of
Preferred Stock of all series, the remaining assets and funds of
the Corporation shall be divided among and paid ratably to the
holders of Common Stock and Class A Stock (including those persons
who shall become holders of Common Stock by reason of converting
their shares of Class B Stock). If, upon such dissolution,
liquidation or winding up, the assets of the Corporation
distributable as aforesaid among the holders of Preferred Stock of
all series shall be insufficient to permit full payment to them of
said preferential amounts, then such assets shall be distributed
among such holders, first in the order of their respective
preferences, and second, as to such holders who are next entitled
to such assets and who rank equally with regard to such assets,
ratably in proportion to the respective total amounts which they
shall be entitled to receive as provided in this Section V. A
merger or consolidation of the Corporation with or into any other
corporation or a sale or conveyance of all or any part of the
assets of the Corporation (which shall not in fact result in the
liquidation of the Corporation and the distribution of assets to
stockholders) shall not be deemed to be a voluntary or involuntary
liquidation or dissolution or winding up of the Corporation within
the meaning of this Section V.
VI. Change of Control.
In the event of a merger or consolidation of the Corporation with
or into another entity (whether or not the Corporation is the
surviving entity), the holders of Class A Stock shall be entitled
to receive the same per share consideration in such merger or
consolidation as is received by the holders of Common Stock, if
any.
B. PREFERRED STOCK.
The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article Third, to
provide for the issuance of the preferred shares in series, and by
filing a certificate pursuant to the General Corporation Law of
Delaware, to establish the number of shares to be included in each
such series, and to fix the designations, relative rights,
preferences and limitations of the shares of each such series. The
authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) The number of shares constituting that series and the
distinctive designations of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of
dividends of shares of that series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law and, if so, the terms of such
voting rights;
(d) Whether that series shall have conversion privileges and, if
so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as
the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable
and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption
dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the
terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of
payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series.
Dividends on outstanding preferred shares shall be declared and
paid, or set apart for payment, before any dividends shall be
declared and paid, or set apart for payment, on the common shares
with respect to the dividend period.
Any and all such shares issued, and for which the full
consideration has been paid or delivered shall be deemed fully paid
stock and the holder of such shares shall not be liable for any
further call or assessment or any other payment thereon."
3. The amendment of the Certificate of Incorporation of the
Corporation herein certified was duly adopted pursuant to the
provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 21st day of April, 1992.
Attest
/s/ Kent E. Hansen /s/ S.A. Muscarnera
Kent E. Hansen S.A. Muscarnera
Assistant Secretary Senior Vice President
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FEDDERS CORPORATION
Fedders Corporation, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby
certify as follows:
1. The Certificate of Incorporation of the Corporation is hereby
amended by adding thereto a new Article ELEVENTH which reads in its
entirety as follows:
ELEVENTH. The Board of Directors of the Corporation shall have the
power to amend the By-Laws of the Corporation."
2. This Amendment was duly adopted by a vote of the stockholders of
the Corporation in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Fedders Corporation has caused this Certificate
to be signed and attested by its duly authorized officers this 31st
day of July, 1987.
FEDDERS CORPORATION
Attest:
/s/ Joseph Giordano By:/s/ C. A. Keen
Joseph Giordano C. A. Keen
Assistant Secretary Vice President and
Treasurer
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FEDDERS CORPORATION
Fedders Corporation, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby
certify as follows:
1. The Certificate of Incorporation of the Corporation is hereby
amended by adding thereto a new Article TENTH which reads in its
entirety as follows:
"TENTH. A director of the Corporation shall not personally be
liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i)
for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation
law, or (iv) for any transaction from which the director derived an
improper personal benefit."
2. This Amendment was duly adopted by a vote of the stockholders of
the Corporation in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Fedders Corporation has caused this Certificate
to be signed and attested by its duly authorized officers this 26th
day of June, 1987.
FEDDERS CORPORATION
Attest:
/s/ Joseph Giordano By:/s/ C.A. Keen
Joseph Giordano C. A. Keen
Assistant Secretary Vice President and Treasurer
<PAGE>
CERTIFICATE OF THE POWERS, DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS OF
$1.75 Convertible Exchangeable 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 of
the Corporation at its meeting on January 27, 1987 and the
Executive Committee of such board at its meeting on March 19, 1987
duly adopted a resolution providing for the issuance of a series of
1,725,000 shares of $1.75 Convertible Exchangeable 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 called the "Certificate of
Incorporation"), the Board of Directors does hereby authorize the
issuance of a series of Preferred Stock, par value $1.00 per share,
to be known as the $1.75 Convertible Exchangeable 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 "$1. 75
Convertible Exchangeable Preferred Stock" (hereinafter referred to
as this "Series"). The number of shares which shall constitute
this Series shall be 1,725,000 shares. Each share of this Series
shall have a par value of $1.00.
(B) DIVIDENDS
(1) The annual rate of dividends payable on each share of this
Series shall be $1.75.
(2) Dividends shall be payable in cash, quarterly on the first day
of March, June, September and December of each year, commencing
June 1, 1987 (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 March 27, 1987. 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 or
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 last Dividend Payment Date. 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,
subject to the provisions of Sections (C)(2) and (C)(8) hereof,
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 during the periods set
forth below shall be the amount set forth opposite such period.
If Redeemed During
the Twelve-Month Redemption
Period Beginning March 1, Price Per Share
1987 $26.750
1988 26.575
1989 26.400
1990 26.225
1991 26.050
1992 25.875
1993 25.700
1994 25.525
1995 25.350
1996 25.175
and $25 if redeemed on or after March 1, 1997 together in each case
with accumulated and unpaid dividends to the date fixed for
redemption.
(2) Notwithstanding the provisions of Section (C)(1) above, the
Corporation may not redeem any shares of this Series prior to March
1, 1990 unless the Closing Price (as determined in Section (C)(3))
of the Corporation's Common Stock shall have equaled or exceeded
140% of the then applicable conversion price per share (as fixed or
determined in accordance with Section (D)) for at least twenty (20)
Trading Days (as hereinafter defined) within thirty (30)
consecutive Trading Days ending within five Trading Days prior to
the date notice of redemption is given. For purposes of this
resolution, Trading Day means, so long as the Common Stock is
listed or admitted to trading on the New York Stock Exchange (or
any successor to such Exchange), a day on which the New York Stock
Exchange (or such successor) is open for the transaction of
business, or, if the Common Stock is not listed or admitted to
trading on such Exchange, a day on which the principal national
securities exchange on which the Common Stock is listed is open for
the transaction of business, or, if the Common Stock is not listed
or admitted to trading on any national securities exchange, a day
on which any New York Stock Exchange member firm is open for the
transaction of business.
(3) For purposes of this resolution, the Closing Price of the
Corporation's Common Stock shall be the last sale price as shown on
the Composite Tape of the New York Stock Exchange, or, in case no
such sale takes place on such day, the average of the closing bid
and asked prices on the New York Stock Exchange, or, if the Common
Stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Stock is
listed or admitted to trading, or, if it is not listed or admitted
to trading on any national securities exchange, the average of the
closing bid and asked prices as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of
Directors of the Corporation for such purpose (other than the
Corporation or a subsidiary thereof).
(4) 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.
(5) 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;
(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.
(6) If notice shall have been given as provided in Section (C)(5)
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 set forth in Section (C)(1). 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.
(7) 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.
(8) Notwithstanding the foregoing provisions of this Section (C),
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 last Dividend Payment Date, no shares of this
Series shall be redeemed, and the Corporation shall not purchase or
otherwise acquire any shares of this Series.
(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
or exchange, at any time prior to the close of business on the date
fixed for such redemption or exchange, to convert such share into
fully paid and nonassessable shares of Common Stock of the
Corporation at a rate of 2.632 shares of Common Stock for each
share of this Series, subject to adjustment as provided in this
Section (D). For purposes of this resolution, except as the
context may otherwise require, the relationship between the
"conversion rate" and the "conversion price" shall be established
by formula such that the conversion price shall equal $25 divided
by the conversion rate.
(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
dividends on shares surrendered for conversion or any dividend on
the Common 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 Common 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 of the Common 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 Common 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 Common 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)(2) and (D)(4); and the person entitled to
receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such Common Stock
on such date. The Corporation shall not be required to deliver
certificates for shares of its Common Stock while the stock
transfer books for such stock or for this Series are duly closed
for any purpose, but certificates for shares of Common 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 Common Stock, (ii) subdivide its
outstanding shares of Common Stock, or (iii) combine its
outstanding shares of Common Stock into a smaller number of shares,
the conversion price and 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 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 price and/or 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 Common Stock
entitling them to subscribe for or purchase shares of Common Stock
(or securities convertible into or exchangeable for Common Stock)
at a price per share less than the current market price per share
of Common 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 Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and the
denominator of which shall be the number of shares of Common 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 Common Stock shall be deemed to be the
issuance of rights or warrants to purchase the shares of Common
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 Common Stock;
provided, however, that if all of the shares of Common 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
been made on the basis of the actual number of shares of Common
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 Common 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 Common 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 Common Stock on the record date referred to
below, and the denominator of which shall be such current market
price per share of the Common 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
Common 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 Common 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.
(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 Common
Stock and other capital stock of the Corporation issuable upon such
conversion over and above (ii) the shares of Common 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
Administrative and Financial Officer, Chief Operating 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 "Common Stock" as used in this resolution means the
Corporation's Common 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 Common 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 Common 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 provisions
with respect to Common 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 Common 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 Common 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 Common 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 Common 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 Common 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
Common Stock which are held in the treasury of the Corporation.
(9) If any shares of Common 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 Common
Stock required to be delivered upon conversion of shares of this
Series prior to such delivery upon each national securities
exchange upon which the outstanding Common 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 Common 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 Common 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 Common 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 Common Stock at the conversion price.
(E) EXCHANGE FOR DEBENTURES
(1) The shares of this Series are exchangeable in whole, but not in
part, at the sole option of the Corporation, at any time on and
after March 1, 1989, on any Dividend Payment Date, into the
Corporation's 7% Convertible Subordinated Debentures Due 2012 (the
"Debentures") described in the Corporation's Registration Statement
on Form S-2 (Registration No. 33-12248) as filed with the
Securities and Exchange Commission (the "Registration Statement");
provided, that on or prior to the date fixed for exchange (the
"Exchange Date") the Corporation shall have paid to the holders of
outstanding shares of this Series and of Preferred Stock ranking on
a parity with this Series all accumulated and unpaid dividends to
the Exchange Date. Holders of outstanding shares of this Series
shall be entitled to receive $25 principal amount of Debentures in
exchange for each share of this Series held on the Exchange Date.
(2) In the event the Corporation shall exchange shares of this
Series, notice of such exchange shall be given by first class mail,
postage prepaid, mailed not less than thirty (30) nor more than
sixty (60) days prior to the Exchange Date, to each record holder
of shares of this Series, at such holder's address as the same
appears on the books of the Corporation. Each such notice shall
state: (a) the Exchange Date; (b) the place or places where
certificates for such shares are to be surrendered for exchange
into Debentures; (c) that dividends on the shares to be exchanged
will cease to accumulate on the Exchange Date; and (d) the period
within which conversion rights may be exercised and the conversion
rate at the time applicable. Prior to giving notice of intention to
exchange, the Corporation shall have executed and delivered with
The First National Bank of Boston, as trustee, shall have qualified
under the Trust Indenture Act of 1939, an Indenture (the
"Indenture") in substantially the form filed as an exhibit to the
Registration Statement with such changes therein as may be required
by law or usage and shall have caused to be delivered to the
Trustee an opinion of counsel acceptable to the Trustee to the
effect that (i) the Debentures have been duly authorized by the
Corporation; the Debentures (assuming that they bear the facsimile
signature of the Chief Executive Officer, the Chief Administrative
and Financial Officer, the Chief Operating Officer or a Senior Vice
President of the Corporation under its corporate seal reproduced
thereon and have been attested by the facsimile signature of its
Secretary, Assistant Secretary or Treasurer and have been
authenticated by the Trustee in accordance with the provisions of
the Indenture) have been duly issued and delivered by the
Corporation and constitute valid and binding obligations of the
Corporation entitled to the benefits of the Indenture, except as
the enforceability thereof may be limited by bankruptcy,
insolvency, or other similar laws relating to or affecting the
enforcement of creditors' rights generally and by general equitable
principles, regardless of whether such enforceability is considered
in a proceeding in equity or at law; (ii) the Indenture has been
authorized, executed and delivered by the Corporation and (assuming
due authorization, execution and delivery by the Trustee)
constitutes a legal, valid and binding agreement of the
Corporation, enforceable against the Corporation in accordance with
its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, or other similar laws relating to or
affecting the enforcement of creditors' rights generally and by
general equitable principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(iii) the Common Stock initially issuable upon conversion of the
Debentures has been duly authorized and such Common Stock has been
duly reserved for issuance upon such conversion; and (iv) the
issuance of the Debentures and the Common Stock initially issuable
upon conversion of the Debentures and the compliance by the
Corporation with all of the provisions of the Debentures and the
Indenture will not conflict with or result in any breach of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Corporation is a party or by which the Corporation is bound or to
which any of the property or assets of the Corporation is subject,
nor will such action result in any violation of the provisions of
the Certificate of Incorporation or the By-Laws of the Corporation
or of any applicable order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Corporation; and, to the best of such
counsel's knowledge, no consent, approval, authorization, order,
registration or qualification of or with any court or any such
regulatory authority or other governmental agency or body will be
required for the issuance on the part of the Corporation of the
Debentures or the shares of Common Stock issuable upon conversion
of the Debentures or the consummation by the Corporation of the
other transactions contemplated by the Indenture, except such as
have been obtained and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws. The Corporation shall cause the
Debentures to be authenticated on the Dividend Payment Date on
which the exchange is effective, and the Corporation shall pay
interest on the Debentures at the rate and on the dates specified
in the Indenture from the Exchange Date.
(3) Notice having been mailed as aforesaid, from and after the
Exchange Date (unless the Corporation shall default in issuing
debentures in exchange for shares of this Series or in making the
final dividend payment on the Exchange Date), dividends on the
shares of this Series shall cease to accumulate, 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 Debentures) shall cease.
Upon surrender (in accordance with the notice provided for above in
Section (E) (2)) of the certificates for any shares of this Series
so exchanged (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state),
such shares shall be exchanged by the Corporation into Debentures
as aforesaid.
(4) All shares of this Series which have been exchanged shall,
after such exchange, 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.
(F) 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.
(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
(F)(l)(a) shall terminate, subject to revesting on the basis set
forth in Section (F)(l)(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, it
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 (F)(l)(c) or such other
place as is selected by such designated stockholder. Any holder of
the Preferred Stock 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 (F)(1). Notwithstanding the
provisions of this Section (F)(1), no such special meeting shall be
called 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 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 (F)(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 (F)(l)(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 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
(F)(l), each share of Preferred Stock 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 (F)(l)(f), the issuance of
any shares of Preferred Stock.
(G) 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 Common Stock or on any other class of stock ranking junior to
this Series upon liquidation, the amount of $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 (G).
(3) After the payment to the holders of the shares of this Series
of the full preferential amounts provided for in this Section (G),
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
(G)(l), no such distribution shall be made on account of any shares
of any other class or series of Preferred Stock ranking on a 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.
(H) 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.
(I) CERTAIN RESTRICTIONS
(1) So long as any shares of this Series are outstanding, the
Corporation will not, and will not permit any Subsidiary to,
directly or indirectly, create, incur, assume or suffer to be
created, incurred, assumed or to exist or become effective any
consensual encumbrance or restrictions on the ability of any
Subsidiary to (i) pay any dividends or make any other distributions
on such Subsidiary's capital stock; (ii) pay any indebtedness owed
to the Corporation or any other Subsidiary; or (iii) make any loans
or advances or transfer any of its property or assets to the
Corporation or any other Subsidiary.
(2) So long as any shares of this Series are outstanding, the
Corporation will not, directly or indirectly, (a) declare or pay
any dividend or make any distribution in respect of Common Stock or
any other class of capital stock of the Corporation ranking junior
to shares of this Series as to dividends and upon liquidation
(other than a dividend or distribution payable in shares of capital
stock of the Corporation), or (b) make or permit any Subsidiary to
make any payment on account of the purchase, redemption or other
acquisition or retirement of any Common Stock or any other class of
capital stock of the Corporation ranking junior to shares of this
Series upon liquidation, dissolution or winding up of the
Corporation or warrants, rights or options to purchase or acquire
any such capital stock, unless after giving effect, as if paid, to
the proposed dividend, distribution or payment, the aggregate
amount of all such dividends, distributions and payments (the
amount of any such payment, if other than cash, to be determined by
the Board of Directors, whose determination shall be conclusive)
declared or made after the date hereof does not exceed the sum of
(w) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors
of the Corporation, whose determination shall be conclusive),
received by the Corporation from the issuance or sale after
December 31, 1986 of shares of its capital stock (other than the
shares of this Series) or of warrants, rights or options to
purchase or acquire any such capital stock; plus (x) the aggregate
principal amount of any indebtedness of the Corporation which is
converted into shares of its capital stock, subsequent to December
31, 1986 (other than any conversion of Debentures); plus (or minus,
in the case of a Consolidated Net Loss) (y) 75% of the Consolidated
Net Income (but 100% of a Consolidated Net Loss) of the Corporation
for the period (taken as one accounting period) from December 31,
1986 to the date of the proposed dividend, distribution or payment;
plus (z) $10,000,000. The provisions of this Section shall not be
deemed to prohibit (A) the payment of regular dividends on, or the
making of mandatory sinking fund payments in respect of, any shares
of capital stock of the Company issued in connection with the
acquisition, other than in the ordinary course of business, of any
property or assets (other than cash or securities of the Company or
its Subsidiaries) where such capital stock ranks senior to the
Company's Common Stock and junior to the shares of this Series as
to dividends or upon liquidation, but all payments made for such
purposes shall be taken into account in any computation under this
Section, (B) the payment of any dividend within 60 days after the
date of declaration thereof, if at such declaration date such
declaration complied with the provisions of this provision or (C)
the retirement of shares of any class of capital stock of the
Corporation in exchange for (including any such exchange pursuant
to exercise of a conversion right or privilege in connection with
which cash is paid in lieu of the issuance of fractional shares or
scrip), or out of the proceeds to be received from the
substantially concurrent sale of, other shares of capital stock of
the Corporation and no such retirement or the proceeds of any such
sale or exchange shall be included in any computation under this
Section. For purposes of this Section (I)(2), (i) "Consolidated
Net Income (Loss)" for any period means the consolidated net income
(loss) of the Corporation and its consolidated Subsidiaries as
determined in accordance with generally accepted accounting
principles adjusted by excluding (a) net extraordinary gains or net
extraordinary losses, as the case may be, during such period and
(b) net gains or losses in respect of dispositions of assets other
than in the ordinary course of business, and (ii) "Subsidiary"
means a corporation a majority of the voting stock of which is at
the time owned, directly or indirectly, by the Corporation.
IN WITNESS WHEREOF, Fedders Corporation has caused this certificate
to be signed and attested this 24th day of March, 1987.
FEDDERS CORPORATION
By:/s/ Salvatore Giordano
Salvatore Giordano
Title: Chairman
Attest:/s/ Joseph Giordano
Joseph Giordano
Asst. Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FEDDERS CORPORATION
FEDDERS CORPORATION, a corporation organized and existing under the
laws of the State of Delaware, does hereby certify as follows:
1. The present name of the corporation (hereinafter called the
"Corporation") is Fedders Corporation, which is the name under
which the Corporation was originally incorporated.
The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State on April 4, 1984. A Restated
Certificate of Incorporation was filed with the Secretary of State
of Delaware on January 2, 1985.
2. This Certificate of Amendment amends the Certificate of
Incorporation, as amended by the addition of 30,000,000 shares of
a new class of capital stock to be denominated Class B Stock.
3. The text of Article "THIRD" of the Certificate of Incorporation,
as heretofore amended, is further amended hereby as follows:
Article THIRD of the Certificate of Incorporation is hereby amended
to read in its entirety as follows:
THIRD: The aggregate number of shares of stock of all classes
which the Corporation shall have authority to issue is 65,000,000,
consisting of 30,000,000 shares of Common Stock having a par value
of $1.00 per share, 30,000,000 shares of Class B Stock having a par
value of $1.00 per share and 5,000,000 shares of Preferred Stock
having a par value of $1.00 per share.
The powers, preferences and the relative, participating, optional
and other rights and the qualifications, stock, and the express
grant of authority to the Board of Directors to fix by resolution
the designations and the powers, preferences and rights of each
share of Preferred Stock and the qualifications, limitations and
restrictions thereof which are not fixed by this Certificate of
Incorporation, are as follows:
A. COMMON STOCK AND CLASS B STOCK
I. Dividends, etc. Subject to the rights of the holders of
Preferred Stock, and subject to any other provisions of this
Certificate of Incorporation, as amended from time to time, holders
of Common Stock and Class B Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the
Corporation as may be declared thereon by the Board of Directors
from time to time out of assets or funds of the Corporation legally
available therefor, provided that in the case of cash dividends, if
at any time a cash dividend is paid on the Common Stock, a cash
dividend will also be paid on the Class B Stock in an amount per
share of Class B Stock equal to 90% of the amount of the cash
dividends paid on each share of the Common Stock (rounded down, if
necessary, to the nearest one-hundredth of a cent), and provided,
further, that in the case of dividends or other distributions
payable in stock of the Corporation other than Preferred Stock,
including distributions pursuant to stock splits or divisions of
stock of the Corporation other than Preferred Stock, which occur
after the initial issuance of shares of Class B Stock by the
Corporation, only shares of Common Stock shall be distributed with
respect to Common Stock and only shares of Class B Stock in an
amount per share equal to the amount per share paid with respect to
the Common Stock shall be distributed with respect to Class B
Stock, and that, in the case of any combination or reclassification
of the Common Stock, the shares of Class B Stock shall also be
combined or reclassified so that the number of shares of Class B
Stock outstanding immediately following such combination or
reclassification shall bear the same relationship to the number of
shares outstanding immediately prior to such combination or
reclassification as the number of shares of Common Stock
outstanding immediately following such combination or
reclassification bears to the number of shares of Common Stock
outstanding immediately prior to such combination or
reclassification.
II. Voting: (a) At every meeting of the stockholders every holder
of Common Stock shall be entitled to one (1) vote in person or by
proxy for each share of Common Stock standing in his name on the
transfer books of the Corporation and every holder of Class B Stock
shall be entitled to one (1) vote in person or by proxy for each
share of Class B Stock standing in his name on the transfer books
of the Corporation, except that each holder of Class B Stock shall
be entitled to ten (10) votes per share on the election of any
directors at any stockholders' meeting (i) if more than 15% of the
shares of Common Stock outstanding on the record date for such
meeting are beneficially owned by a person or group of persons
acting in concert (unless such person or group is also the
beneficial owner of a majority of the shares of Class B Stock on
such record date), or (ii) if a nomination for the Board of
Directors is made by a person or group of persons acting in concert
(other than the Board of Directors), provided that such nomination
is not made by one or more holders of Class B Stock, acting in
concert with each other who beneficially own more than 15% of the
shares of Class B Stock outstanding on such record date.
(b) The provisions of this Certificate of Incorporation shall not
be modified, revised, altered or amended, repealed or rescinded in
whole or in part, without (i) the affirmative vote of the holders
of a majority of the shares of the Common Stock and of a voting
majority of the shares of the Class B Stock, each voting separately
as a class, and (ii) additionally with respect to Article Eighth,
the vote required by Article Eighth.
(c) The Corporation may not effect or consummate:
(1) any merger or consolidation of the Corporation with or into any
other corporation;
(2) any sale, lease, exchange or other disposition of all or
substantially all of the assets of the Corporation to or with any
other person; or
(3) any dissolution of the Corporation;
unless and until such transaction is authorized by the vote, if
any, required by Articles Eighth and Ninth of this Certificate of
Incorporation and by Delaware law; and unless and until such
transaction is authorized by a majority of the voting power of the
shares of Common Stock and of Class B Stock entitled to vote, each
voting separately as a class, but the foregoing shall not apply to
any merger or other transaction described in the preceding
subparagraphs (1) and (2) if the other party to the merger or other
transaction is a Subsidiary of the Corporation.
For purposes of this paragraph (c) a "Subsidiary" is any
corporation more than 50% of the voting securities of which are
owned directly or indirectly by the Corporation; and a "person" is
any individual, partnership, corporation or entity.
(d) Following the initial issuance of shares of Class B Stock, the
Corporation may not effect the issuance of any additional shares of
Class B Stock (except in connection with stock splits and stock
dividends) unless and until such issuance is authorized by the
holders of a majority of the voting power of the shares of Common
Stock and of Class B Stock entitled to vote, each voting separately
as a class.
(e) Every reference in this Certificate of Incorporation to a
majority or other proportion of shares of stock shall refer to such
majority or other proportion of the votes of such shares of stock.
(f) Except as may be otherwise required by law or by this Article
Third the holders of Common Stock and Class B Stock shall vote as
a single class, subject to any voting rights which may be granted
to holders of Preferred Stock.
III. Transfer.
(a) No person holding shares of Class B Stock of record
(hereinafter called a "Class B Holder") may transfer, and the
Corporation shall not register the transfer of, such shares of
Class B Stock, as Class B Stock, whether by sale, assignment, gift,
bequest, appointment or otherwise, except to a Permitted Transferee
and any attempted transfer of shares not permitted hereunder shall
be converted into Common Stock as provided by subsection (d) of
this Section III. A Permitted Transferee shall mean, with respect
to each person from time to time shown as the record holder of
shares of Class B Stock:
(i) In the case of a Class B Holder who is a natural person;
(A) The spouse of such Class B Holder, any lineal descendant of a
parent of such Class B Holder, and any spouse of such lineal
descendant (which lineal descendants, their spouses, the Class B
Holder, and his or her spouse are herein collectively referred to
as "Class B Holder's Family Members");
(B) The trustee of a trust (including a voting trust) principally
for the benefit of such Class B Holder and/or one or more of his or
her permitted Transferees described in each subclause of this
clause (i) other than this subclause (B), provided that such trust
may also grant a general or special power of appointment to one or
more of such Class B Holder's Family Members and may permit trust
assets to be used to pay taxes, legacies and other obligations of
the trust or of the estates of one or more of such Class B Holder's
Family Members payable by reason of the death of any of such Family
Members;
(C) Any organization contributions to which are deductible for
federal income, estate or gift tax purposes or any split-interest
trust described in Section 4947 of the Internal Revenue Code, as it
may from time to time be amended (hereinafter called a "Charitable
Organization");
(D) A corporation if a majority of the beneficial ownership of
outstanding capital stock of such corporation which is entitled to
vote for the election of directors is owned by, or a partnership if
a majority of the beneficial ownership of the partnership is held
by, the Class B Holder of his or her Permitted Transferees
determined under this clause (i), provided that if by reason of any
change in the ownership of such stock or partnership interest, such
corporation or partnership would no longer qualify as a Permitted
Transferee, all shares of Class B Stock then held by such
corporation or partnership would no longer qualify as a Permitted
Transferee, all shares of Class B Stock then held by such
corporation or partnership shall, upon the election of the
Corporation given by written notice to such corporation or
partnership, without further act on anyone's part, be converted
into shares of Common Stock effective upon the date of the giving
of such notice, and stock certificates formerly representing such
shares of Class B Stock shall thereupon and thereafter be deemed to
represent the like number of shares of Common Stock; and
(E) The estate of such Class B Holder.
(ii) In the case of a Class B Holder holding the shares of Class B
Stock in question as trustee pursuant to a trust (other than a
Charitable Organization or a trust described in clause (iii)
below), "Permitted Transferee" means (A) any person transferring
Class B Stock to such trust and (B) any Permitted Transferee of any
such transferor determined pursuant to clause (i) above.
(iii) In the case of a Class B Holder holding the shares of Class
B Stock in question as trustee pursuant to a trust (other than a
Charitable Organization) which was irrevocable on the record date
(hereinafter in this Section III called the "Record Date") for
determining the persons to whom the Class B Stock is first issued
by the Corporation, "Permitted Transferee" means (A) any person to
whom or for whose benefit principal may be distributed either
during or at the end of the term of such trust whether by power of
appointment or otherwise and (B) any Permitted Transferee of any
such person determined pursuant to clause (i) above.
(iv) In the case of a Class B Holder which is a Charitable
Organization holding record and beneficial ownership of the shares
of Class B Stock in question, "Permitted Transferee" means any
Class B Holder.
(v) In the case of a Class B Holder which is a corporation or
partnership other than a Charitable Organization; acquiring record
and beneficiary ownership of the shares of Class B Stock in
question upon its in initial issuance by the Corporation,
"Permitted Transferee" means (A) any partner of such partnership,
or stockholder of such corporation, on the Record Date, (B) any
person transferring such shares of Class B Stock to such
corporation or partnership, and (C) any Permitted Transferee of any
such person, partner, or stockholder referred to in subclauses (A)
and (B) of this clause (v), determined under clause (i) above.
(vi) In the case of a Class B Holder which is a corporation or
partnership (other than a Charitable Organization or a corporation
or partnership described in clause (v) above) holding record and
beneficial ownership of the shares of Class B Stock in question,
"Permitted Transferee" means (a) any person transferring such
shares of Class B Stock to such corporation or partnership and (b)
any Permitted Transferee of any such transferor determined under
clause (i) above.
(vii) In the case of a Class B Holder which is the estate of a
deceased Class B Holder, or which is the estate of a bankrupt or
insolvent Class B Holder, which holds record and beneficial
ownership of the shares of Class B Stock in question, "Permitted
Transferee" means a Permitted Transferee of such deceased, bankrupt
or insolvent Class B Holder as determined pursuant to clause (i),
(ii), (iii), (iv), (v) or (vi) above, as the case may be.
(b) Notwithstanding anything to the contrary set forth herein, any
Class B Holder may pledge such Holder's share of Class B Stock to
a pledgee pursuant to a bona fide pledge of such shares as
collateral security for indebtedness due to the pledgee, provided
that such shares shall not be transferred to or registered in the
name of the pledgee and shall remain subject to the provisions of
this Section III. In the event of foreclosure of other similar
action by the pledgee, such pledged shares of Class B Stock may
only be transferred to a Permitted Transferee of the pledgor or
converted into shares of Common Stock, as the pledgee may elect.
(c) For purposes of this Section III:
(i) The relationship of any person that is derived by or through
legal adoption shall be considered a natural one.
(ii) Each joint owner of shares of Class B Stock shall be
considered a "Class B Holder" of such shares.
(iii) A minor for whom shares of Class B Stock are held pursuant to
a Uniform Gifts to Minors Act or similar law shall be considered a
Class B Holder of such shares.
(iv) Unless otherwise specified, the term "person" means both
natural persons and legal entities.
(v) Without derogating from the election conferred upon the
Corporation pursuant to subclause (D) of clause (i) above, each
reference to a corporation shall include any successor corporation
resulting from merger or consolidation and each reference to a
partnership shall include any successor partnership resulting from
the death or withdrawal of a partner.
(d) Any transfer of shares of Class B Stock not permitted hereunder
shall result in the conversion of the transferee's shares of Class
B Stock into shares of Common Stock, effective the date on which
certificates representing such shares are presented for transfer on
the books of the Corporation. The Corporation may, in connection
with preparing a list of stockholders entitled to vote at any
meeting of stockholders, or as a condition to the transfer or the
registration of shares of Class B Stock on the Corporation's books,
require the furnishing of such affidavits or other proof as it
deems necessary to establish that any person is the beneficial
owner of shares of Class B Stock or is a Permitted Transferee.
(e) At any time when the number of outstanding shares of Class B
Stock as reflected on the stock transfer books the Corporation
falls below 5% of the aggregate number of the issued and
outstanding shares of the Common Stock and Class B Stock of the
Corporation, or the Board of Directors and the holders of a
majority of the outstanding shares of Class B Stock approve the
conversion of all of the Class B Stock into Common Stock, then,
immediately upon the occurrence of either such event, the
outstanding shares of Class B Stock shall be converted into shares
of Common Stock. In the event of such a conversion, certificates
formerly representing outstanding shares of Class B Stock shall
thereupon and thereafter be deemed to represent the like number of
shares of Common Stock.
(f) Shares of Class B Stock shall be registered in the names of the
beneficial owners thereof and not in "street" or "nominee" name.
For this purpose, a "beneficial owner" of any shares of Class B
Stock shall mean a person who, or an entity which, possesses the
power, either singly or jointly, to direct the voting or
disposition of such shares. The Corporation shall note on the
certificates for shares of Class B Stock the restrictions on
transfer and registration of transfer imposed by this Section III.
IV. Conversion Rights.
(a) Subject to the terms and conditions of this Section IV, each
share of Class B Stock shall be convertible at any time or from
time to time, at the option of the respective holder thereof, at
the office of any transfer agent for Class B Stock, and at such
other place or places, if any, as the Board of Directors may
designate, or, if the Board of Directors shall fail so to
designate, at the principal office of the Corporation (attention of
the Secretary of the Corporation), into one (1) fully paid and
nonassessable share of Common Stock. Upon conversion, the
Corporation shall make no payment or adjustment on account of
dividends accrued or in arrears on Class B Stock surrendered for
conversion or on account of any dividends on the Common Stock
issuable on such conversion. Before any holder of Class B Stock
shall be entitled to convert the same into Common Stock, he shall
surrender the certificate or certificates for such Class B Stock at
the office of said transfer agent (or other place as provided
above), which certificate or certificates, if the Corporation shall
so request, shall be duly endorsed to the Corporation or in blank
or accompanied by proper instruments of transfer to the Corporation
or in blank) (such endorsements or instruments of transfer to be in
form satisfactory to the Corporation), and shall give written
notice to the Corporation at said office that he elects so to
convert said Class B Stock in accordance with the terms of this
Section IV, and shall state in writing therein the name or names in
which he wishes the certificate or certificates for Common Stock to
be issued. Every such notice of election to convert shall
constitute a contract between the holder of such Class B Stock and
the Corporation, whereby the holder of such Class B Stock shall be
deemed to subscribe for the amount of Common Stock which he shall
be entitled to receive upon such conversion, and, in satisfaction
of such subscription, to deposit the Class B Stock to be converted
and to release the Corporation from all liability thereunder, and
thereby the Corporation shall be deemed to agree that the surrender
of the certificate or certificates therefor and the extinguishment
of liability thereon shall constitute full payment of such
subscription for Common Stock to be issued upon such conversion.
The Corporation will as soon as practicable after such deposit of
a certificate or certificates for Class B Stock, accompanied by the
written notice and the statement above prescribed, issue and
deliver at the office of said transfer agent (or other place as
provided above) to the person for whose account such Class B Stock
was so surrendered, or to his nominee or nominees, a certificate or
certificates for the number of full shares of Common Stock to which
he shall be entitled as aforesaid. Subject to the provisions of
subsection (c) of this Section IV, such conversion shall be deemed
to have been made as of the date of such surrender of the Class B
Stock to be converted; and the person or persons entitled to
receive the Common Stock issuable upon conversion of such Class B
Stock shall be treated for all purposes as the record holder or
holders of such Common Stock on such date.
(b) The issuance of certificates for shares of Common Stock upon
conversion of shares of Class B Stock shall be made without charge
for any stamp or other similar tax in respect of such issuance.
However, if any such certificate is to be issued in a name other
than that of the holder of the share of shares of Class B Stock
converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax which may be
payable in respect of any transfer involved in such issuance or
shall establish to the satisfaction of the Corporation that such
tax has been paid.
(c) The Corporation shall not be required to convert Class B Stock,
and no surrender of Class B Stock shall be effective for that
purpose, while the stock transfer books of the Corporation are
closed for any purpose; but the surrender of Class B Stock for
conversion during any period while such books are so closed shall
become effective for conversion immediately upon the reopening of
such books, as if the conversion had been made on the date such
Class B Stock was surrendered.
(d) The Corporation covenants that it will at all times reserve and
keep available, solely for the purpose of issue upon conversion of
the outstanding shares of Class B Stock, such number of shares of
Common Stock as shall be issuable upon the conversion of all such
outstanding shares, provided that nothing contained herein shall be
construed to preclude the corporation from satisfying its
obligations in respect of the conversion of the outstanding shares
of Class B Stock by delivery of shares of Common Stock which are
held in the treasury of the Corporation. The Corporation covenants
that if any shares of Common Stock, required to be reserved for
purposes of conversion hereunder, required registration with or
approval of any governmental authority under any federal or state
law before such shares of Common Stock may be issued upon
conversion, the Corporation will use its best efforts to cause such
shares to be duly registered or approved, as the case may be. The
Corporation will endeavor to list the shares of Common Stock
required to be delivered upon conversion prior to such delivery
upon each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of such delivery.
The Corporation covenants that all shares of Common Stock which
shall be issued upon conversion of the shares of Class B Stock,
will, upon issue, be fully paid and nonassessable and not entitled
to any preemptive rights.
V. Liquidation Rights. In the event of any dissolution,
liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation, the
holders of each series of Preferred Stock shall be entitled to
receive, out of the net assets of the Corporation, an amount for
each share equal to the amount fixed and determined by the Board of
Directors in any resolution or resolutions providing for the
issuance of any particular series of Preferred Stock, plus an
amount equal to all dividends accrued and unpaid on shares of such
series to the date fixed for distribution, and no more, before any
of the assets of the Corporation shall be distributed or paid over
to the holders of Common Stock. After payment in full of said
amounts to the holders of Preferred Stock of all series, the
remaining assets and funds of the Corporation shall be divided
among and paid ratably to the holders of Common Stock (including
those persons who shall become holders of Common Stock by reasons
of converting their shares of Class B Stock). If, upon such
dissolution, liquidation or winding up, the assets of the
Corporation distributable as aforesaid among the holders of
Preferred Stock of all series shall be insufficient to permit full
payment to them of said preferential amounts, then such assets
shall be distributed among such holders, first in the order of
their respective preferences, and second, as to such holders who
are next entitled to such assets and who rank equally with regard
to such assets, ratably in proportion to the respective total
amounts which they shall be entitled to receive as provided in this
Section V. A merger or consolidation of the Corporation with or
into any other corporation or a sale or conveyance of all or any
part of the assets of the Corporation (which shall not in fact
result in the liquidation of the Corporation and the distribution
of assets to stockholders) shall not be deemed to be a voluntary or
involuntary liquidation or dissolution or winding up of the
Corporation within the meaning of this Section V.
B. Preferred Stock.
The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article Third, to
provide for the issuance of the preferred shares in series, and by
filing a certificate pursuant to the General Corporation Law of
Delaware, to establish the number of shares to be included in each
such series, and to fix the designations, relative rights,
preferences and limitations of the shares of each such series. The
authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) The number of shares constituting that series and the
distinctive designations of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of
dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law and, if so, the terms of such
voting rights;
(d) Whether that series shall have conversion privileges and, if
so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as
the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable
and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption
dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the
terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary of involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of
payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series.
Dividends on outstanding preferred shares shall be declared and
paid, or set apart for payment, before any dividends shall be
declared and paid, or set apart for payment, on the common shares
with respect to the dividend period.
Any and all such shares issued, and for which the full
consideration has been paid or delivered shall be deemed fully paid
stock and the holder of such shares shall not be liable for any
further call or assessment or any other payment thereon.
4. The capital of the Corporation will not be reduced under or by
reason of this amendment.
5. This amendment was duly adopted by a vote of the stockholders in
accordance with Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, said FEDDERS CORPORATION has caused this
certificate to be signed by its President and attested by its
Secretary, and its corporate seal to be hereunto affixed this 23rd
day of May, 1985.
/s/ S. Giordano, Jr.
S. Giordano, Jr.
President
/s/ Howard S. Modlin
Attest:
Howard S. Modlin
Secretary
[CORPORATE SEAL]
CERTIFICATE OF CORRECTION
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FEDDERS CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is FEDDERS CORPORATION.
2. The Restated Certificate of Incorporation of the Corporation,
which was filed by the Secretary of State of Delaware on January 2,
1985, is hereby corrected.
3. The inaccuracy to be corrected in said instrument is as follows:
The reinsertion of Article NINTH which was inadvertently omitted
from the Restated Certificate of Incorporation as previously filed.
4. The portion of the instrument in corrected form is as follows:
"NINTH: The affirmative vote of two-thirds (2/3) of the
outstanding stock of the Corporation entitled to vote for a merger
or consolidation shall be required for the approval of any merger
or consolidation to which the corporation is a party or for any
sale, lease, exchange or other disposition by the Corporation of
all or substantially all of its assets."
Signed and attested to on May 23, 1985.
/s/ S. Giordano, Jr.
S. Giordano, Jr.
President
Attest:
/s/ Howard S. Modlin
Howard S. Modlin
Secretary
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
of
FEDDERS CORPORATION
The name of the corporation (hereunder referred to as the
"Corporation") is FEDDERS CORPORATION. The certificate of
incorporation was filed in the office of the Secretary of State of
Delaware on the 4th day of April, 1984.
The 999 shares of common stock of the Corporation outstanding
immediately prior to the time this restated certificate of
incorporation is filed with the Secretary of State of Delaware
shall be and they hereby are, upon such filing, automatically split
and changed (without any further act of the Corporation or its
stockholders) into fully paid and non-assessable shares of common
stock of the Corporation, with a par value of $1.00 per share, and
the amount of capital of the Corporation is increased to an amount
equal to the aggregate par value of the shares of common stock of
the Corporation outstanding after giving effect to such stock split
and change. To reflect such stock split and change, each
certificate representing shares of common stock of Fedders
Corporation, a New York Corporation ("Fedders NY"), issued and
outstanding immediately prior to the effectiveness of the merger of
Fedders of Delaware, Inc. into Fedders NY shall represent a like
number of shares of common stock of the Corporation and the holder
of each such certificate shall be entitled to receive a new
certificate or certificates of the Corporation representing said
number of shares of common stock of the Corporation, so that upon
the filing of this restated certificate of incorporation each
holder or record of a certificate representing theretofore issued
and outstanding common stock of Fedders NY will have or be entitled
to new certificates representing in the aggregate a like number of
shares of common stock of the Corporation, with a par value of
$1.00 per share. The certificate for the 999 shares of common
stock of the Corporation owned of record by Fedders NY on the date
of the filing of this restated certificate of incorporation shall
thereupon be cancelled.
The certificate of incorporation is hereby restated to read as
follows:<PAGE>
CERTIFICATE OF INCORPORATION
of
FEDDERS CORPORATION
FIRST: The name of the corporation shall be FEDDERS CORPORATION.
SECOND: The purpose for which the Corporation is formed are as
follows:
(a) To design, manufacture, buy, sell, distribute, at wholesale or
retail, import and export, rent and lease, repair and maintain,
dispose of, and generally deal in all kinds of air-conditioning
apparatus, equipment and appliances, refrigeration apparatus,
equipment and appliances, heating apparatus, equipment and
appliances, gas and electric stoves and ranges, automatic clothes-
washing machines and clothes drying machines of all kinds and for
all purposes, automobile radiators and other components of all
kinds, sheetmetal specialties, and all other devices of any kind or
nature used in conjunction therewith, or incidental or accessory
thereto.
(b) To design, create, manufacture, product, export, import,
purchase, acquire, sell, dispose of, and generally deal in and with
materials, articles, machinery, apparatus, equipment, appliances,
supplies, goods and other personal property of every kind and
description, tangible or intangible, and to engage in any
mercantile, commercial manufacturing or trading business of any
character.
(c) To acquire, by purchase or otherwise, own, hold, lease,
mortgage, sell, or otherwise, dispose of, and generally deal in and
with rights and interests in real and personal property of every
kind and description.
(d) To acquire, sell or otherwise dispose of, deal in and with, and
grant and obtain licenses for all kinds of intangible property,
including patent rights, improvements thereon, inventions,
discoveries, formulas and processes, copyrights, trademarks, trade
names and designs.
(e) To the extent permitted by law, to promote, finance, underwrite
and assist, financially or otherwise, and to assume and guarantee
the obligations of any individual, corporation or other entity, and
to purchase or otherwise acquire, hold, own, sell or otherwise
dispose of securities and obligations of every nature and kind of
any issuer, whether or not incorporated.
(f) To do all and everything necessary, suitable or proper for the
accomplishment of any of the purposes or the attainment of any of
the objects hereinbefore set forth, either alone or in association
with other corporations, firms or individuals, and to do every
other act or acts, thing or things, incidental or appurtenant to or
arising out of or connected with the aforesaid businesses or any
part or parts thereof.
(g) To engage in any lawful act or activity for which Corporation
may be organized under the General Corporation Law of Delaware.
THIRD: The aggregate number of shares of stock which the
Corporation shall have authorized to issue is 35,000,000,
consisting of 30,000,000 shares of common stock having a par value
of $1.00 per share, and 5,000,000 shares of preferred stock having
a par value of $1.00 per share.
The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article THIRD, to
provide for the issuance of the preferred shares in series, and by
filing a certificate pursuant to the General Corporation Law of
Delaware, to establish the number of shares of be included in each
such series, and to fix the designations, relative rights,
preferences and limitations of the shares of each such series. The
authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) The number of shares constituting that series and the
distinctive designations of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of
dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law and, if so, the terms of such
voting rights;
(d) Whether that series shall have conversion privileges and, if
so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as
the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable
and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption
dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the
terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary of involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of
payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series. Dividends on outstanding preferred shares shall be declared
and paid, or set apart for payment, before any dividends shall be
declared and paid, or set apart for payment, on the common shares
with respect to the dividend period.
Any and all such shares issued, and for which the full
consideration has been paid or delivered shall be deemed fully paid
stock and the holder of such shares shall not be liable for any
further call or assessment or any other payment thereon.
FOURTH: The duration of such Corporation shall be perpetual.
FIFTH: The name and mailing address of the Corporation's
Registered Agent and Office in the State of Delaware are: The
Prentice-Hall Corporation System, Inc. 229 South State Street in
the City of Dover, County of Kent, Delaware 19901.
SIXTH: Directors shall be divided into three classes, each class
to be determined by the directors prior to the election of a
particular class. In the event that at any time or from time to
time the number of directors is increased, the newly created
directorships resulting therefrom shall be filled by a vote of the
majority of the directors in office immediately prior to such
increase and directors so elected shall serve until the term of
such class expires. In conformity with the statute, the initial
First Class directors shall be elected to a term of one year,
Second Class directors to a term of two years, and Third Class
directors to a term of three years, and at each subsequent annual
meeting, the successors to directors whose term shall expire that
year shall be elected to a term of three years.
SEVENTH: No holder of shares of the Corporation of any class, now
or hereafter authorized, shall have any preferential or preemptive
right to subscribed for, purchase or receive any shares of the
Corporation of any class, now or hereafter authorized, or any
options or warrants for such shares, or any rights to subscribe for
or purchase such shares, or any securities convertible into or
exchangeable for such shares, which may at any time be issued, sold
or offered for sale by the Corporation.
EIGHTH: The following provisions shall apply in addition to any
other affirmative vote required by law or this certificate of
incorporation:
SECTION I
CERTAIN BUSINESS COMBINATIONS
The affirmative vote of the holders of not less than four-fifths of
the outstanding shares of Voting Stock (as hereinafter defined)
held by stockholders other than the Acquiring Person (as
hereinafter defined) with which or by or on whose behalf, directly
or indirectly, a Business Combination (as hereinafter defined) is
proposed, voting as a single class, shall be required for the
approval or authorization of such Business Combination.
Notwithstanding the foregoing, the four-fifths voting requirement
shall not be applicable if such Business Combination is approved by
the Corporation's Board of Directors prior to the Acquiring Person
becoming such or if the cash or fair market value of the property,
securities or other consideration to be received per share by
holders of shares of each class of Voting Stock in such Business
Combination as of the date of consummation thereof is an amount not
less than the higher of (a) the Highest Per Share Price or the
Highest Equivalent Price (as these terms are hereinafter defined)
paid by such Acquiring Person in acquiring any of its holdings of
Voting Stock, and (b) the Fair Market Price (as hereinafter
defined) of such class of Voting Stock determined on the date the
proposal for such Business Combination was first publicly
announced, and such consideration shall be in the same form and of
the same kind as the consideration paid by such Acquiring Person in
acquiring the shares of the Voting Stock already acquired by it.
If the Acquiring Person had paid for shares of Voting Stock with
varying forms of consideration, the form of consideration to be
received by the holders of Voting Stock shall be the form used to
acquire the largest number of shares of Voting Stock acquired by
such Acquiring Person.
<PAGE>
SECTION II
DEFINITIONS
For purposes of this Article EIGHTH:
1. Business Combination. The term "Business Combination" shall
mean (a) any merger or consolidation of the Corporation or a
subsidiary of the Corporation with or into an Acquiring Person, (b)
any sale, lease, exchange, transfer or other disposition,
including, without limitation, a mortgage or any other security
device, in a single transaction or related series of transactions,
of all or any Substantial Part (as hereinafter defined) of the
assets either of the Corporation (including without limitation any
voting securities of a subsidiary) or of a subsidiary of the
Corporation to an Acquiring Person, (c) any merger or consolidation
of an Acquiring Person with or into the Corporation or a subsidiary
of the Corporation, (d) any sale, lease, exchange, transfer or
other disposition, including without limitation a mortgage or other
security device, in a single transaction or related series of
transactions, of all or any Substantial Part of the assets of an
Acquiring Person to the Corporation or a subsidiary of the
Corporation, (e) the issuance of any securities of the Corporation
or a subsidiary of the Corporation to an Acquiring Person, (f) any
recapitalization, merger or consolidation that would have the
effect of increasing the voting power of an Acquiring Person, (g)
the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed, directly or indirectly, by
or on behalf of an Acquiring Person, (h) any merger or
consolidation of the Corporation with a subsidiary of the
Corporation proposed by or on behalf of an Acquiring Person, unless
the surviving or consolidated corporation, as the case may be, has
a provision in its certificate of incorporation substantially
identical to this Article TWELFTH, (i) any agreement, contract or
other arrangement provided for any of the transactions described in
this definition of Business Combination, and (j) any other
transaction with an Acquiring Person which requires the approval of
the stockholders of the Corporation under the Business Corporation
Law of New York. A person who is an Acquiring Person as of (x) the
time any definitive agreement relating to a Business Combination is
entered into, (y) the record date for the determination of
stockholders entitled to notice of and to vote on a Business
Combination, or (z) immediately prior to the consummation of a
Business Combination, shall be deemed an Acquiring Person for
purposes of this definition.
2. Acquiring Person. The term "Acquiring Person" shall mean and
include any individual, corporation (other than the Corporation),
partnership or other person or entity which, together with its
Affiliates and Associates (as defined in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934 as
in effect at April 30, 1984, collectively, and as so in effect, the
"Exchange Act"), and with any other individual, corporation (other
than the Corporation), partnership or other person or entity with
which it or they have any agreement, arrangement or understanding
with respect to acquiring, holding, voting or disposing of Voting
Stock, Beneficially Owns (as described in Rule 13d-3 of the
Exchange Act) in the aggregate 5% or more of the outstanding Voting
Stock of the Corporation. A person or entity, its Affiliates and
Associates and all such other persons or entities with whom they
have any such agreement, arrangement or understanding shall be
deemed a single Acquiring Person for purposes of this Article
EIGHTH. For purposes of this Article, the Board of Directors shall
have the power to determine, on the basis of information known to
the Board, if and when there is an Acquiring Person. Any such
determination shall be conclusive and binding for all purposes of
this Article.
3. Substantial Part. The term "Substantial Part" shall mean an
amount equal to more than 10% of the fair market value of the total
consolidated assets of the Corporation and its subsidiaries taken
as a whole as of the end of its most recent fiscal year ended prior
to the time the determination is being made.
4. Rights to Acquire. Without limitation, any share of Voting
Stock of the Corporation that any Acquiring Person has the right to
acquire at any time (notwithstanding that Rule 13d-3 of the
Exchange Act deems such shares to be beneficially owned only if
such right may be exercised within 60 days) pursuant to any
agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, shall be deemed to be Beneficially Owned by
the Acquiring Person and to be outstanding for purposes of
Paragraph 2 of this Section II.
5. Other Consideration to be Received. For the purposes of
Section I of this Article EIGHTH, the term "other consideration to
be received" shall include, without limitation, Common Stock,
Preferred Stock or other capital of the Corporation retained by its
existing stockholders other than the Acquiring Person with which or
by or on whose behalf, directly or indirectly, a Business
Combination has been proposed or other parties to such Business
Combination in the event of a Business Combination in which the
Corporation is the surviving corporation.
6. Voting Stock. The term "Voting Stock" shall mean all of the
outstanding shares of capital stock of the Corporation entitled to
vote in elections of directors (considered for this purpose as one
class), and each reference to a percentage of shares of Voting
Stock shall refer to such percentage of the votes entitled to be
cast by such shares.
7. Time of Acquisition. An Acquiring Person shall be deemed to
have acquired shares of the Voting Stock of the Corporation at the
time when such Acquiring Person became the Beneficial Owner
thereof. The price paid by an Acquiring Person for such shares
held by a person or entity at the time it became part of such
Acquiring Person shall be deemed to be the higher of (a) the price
paid upon the acquisition thereof by such person or entity and (b)
the market price of the shares in question at the time when such
person or entity became part of such Acquiring Person.
8. Highest Per Share Price; Highest Equivalent Price. The terms
"Highest Per Share Price" and "Highest Equivalent Price" as used in
this Article EIGHTH shall mean the following: If there is only one
class of capital stock of the Corporation issued and outstanding,
the Highest Per Share Price shall mean the highest per share price
that can be determined to have been paid at any time by the
Acquiring Person by or on whose behalf, directly or indirectly, the
Business Combination has been proposed for any share or shares of
that class of capital stock. If there is more than one class of
capital stock of the Corporation issued and outstanding, the
Highest Equivalent Price shall mean, with respect to each class and
series of capital stock of the Corporation, the highest per share
price equivalent of the highest price that can be determined to
have been paid at any time by such Acquiring Person for any share
or shares of any class or series of capital stock of the
Corporation. In determining the Highest Per Share Price and
Highest Equivalent Price, all purchases by an Acquiring Person
shall be taken into account regardless of whether the shares were
purchased before or after the Acquiring Person became an Acquiring
Person. Also, the Highest Per Share Price and the Highest
Equivalent Price shall include any brokerage commissions, transfer
taxes and soliciting dealers' fees paid by the Acquiring Person
with respect to the shares of capital stock of the Corporation
acquired by the Acquiring Person. The Highest Per Share Price and
the Highest Equivalent Price shall be appropriately adjusted to
take into account stock dividends, subdivisions, combinations and
reclassifications.
9. Fair Market Price. The term "Fair Market Price" shall mean for
any class of Voting Stock the highest closing sale price during the
30-day period immediately preceding the date in question of a share
of such class of Voting Stock on the Composite Tape for New York
Stock Exchange-listed stocks, or, if such class of Voting Stock is
not quoted on the Composite Tape, on the New York Stock Exchange,
or, if such class of Voting Stock is not listed on such Exchange,
on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such class of Voting
Stock is listed, or, if such class of Voting Stock is not listed on
any such exchange, the highest closing bid quotation with respect
to a share of such class of Voting Stock during the 30-day period
preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system
then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock.
SECTION III
AMENDMENT
The provisions set forth in this Article EIGHTH may not be amended,
altered, changed or repealed in any respect unless such action is
approved by the affirmative vote of the holders of not less than
four-fifths of the outstanding shares of Voting Stock of the
Corporation at a meeting of the stockholders duly called for the
consideration of such amendment, alteration, change or repeal,
provided, however, that if such action has been proposed, directly
or indirectly, on behalf of an Acquiring Person, it must also be
approved by the affirmative vote of the holders of not less than
four-fifths of the outstanding shares of Voting Stock held by the
stockholders other than such Acquiring Person.
IN WITNESS WHEREOF, this restated certificate of incorporation
having been duly adopted by the Board of Directors and the sole
stockholder of Fedders Corporation entitled to vote in accordance
with sections 141(f), 228, 242 and 245 of the General Corporation
Law of Delaware, we have signed and attested this certificate this
31st day of December, 1984.
Fedders Corporation
By:/s/ Salvatore Giordano, Jr.
Salvatore Giordano, Jr.
President
/s/ S. A. Muscarnera
Secretary
STATE OF NEW JERSEY )
) ss.:
COUNTY OF SOMERSET )
BE IT REMEMBERED that, on December 31, 1984, before me, a Notary
Public duly authorized by law to take acknowledgment of deeds,
personally came Salvatore Giordano, Jr., of FEDDERS CORPORATION,
who duly signed the foregoing instrument before me and acknowledged
that such signing is his act and deed, that such instrument as
executed is the act and deed of said corporation, and that the
facts stated therein are true.
GIVEN under my hand on December 31st, 1984.
/s/ Marlene M. Volpe
Notary Public
Marlene M. Volpe
Notary Public of New Jersey
My Commission Expires April 15, 1989
