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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 22, 1996
REGISTRATION NO. 333-00483
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FEDDERS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3585 22-2572390
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938-0813
(908) 604-8686
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
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ROBERT N. EDWARDS, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938-0813
(908) 604-8686
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
with a copy to:
PAUL G. HUGHES, ESQ.
CUMMINGS & LOCKWOOD
FOUR STAMFORD PLAZA
P.O. BOX 120
STAMFORD, CT 06904
(203) 327-1700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CROSS-REFERENCE SHEET
LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY
PART I OF FORM S-4
Item 1 Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Facing Page of Registration Statement; Cross-
Reference Sheet; Outside Front and Inside
Front Cover Page of Prospectus
Item 2 Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page of Prospectus;
Available Information
Item 3 Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................ Summary; Selected Financial Data; Unaudited
Pro Forma Financial Statements
Item 4 Terms of the Transaction....................... Summary; The Merger; The Merger -- Description
of Fedders Capital Stock; Annex A
Item 5 Pro Forma Financial Information................ Summary; Unaudited Pro Forma Financial
Statements
Item 6 Material Contacts with the Company Being
Acquired..................................... The Merger
Item 7 Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters................................. Not Applicable
Item 8 Interests of Named Experts and Counsel......... Not Applicable
Item 9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
Item 10 Information with Respect to S-3 Registrants.... Incorporation of Certain Documents by
Reference
Item 11 Incorporation of Certain Information by
Reference.................................... Incorporation of Certain Documents by
Reference
Item 12 Information with Respect to S-2 or
S-3 Registrants.............................. Not Applicable
Item 13 Incorporation of Certain Information
by Reference................................. Not Applicable
Item 14 Information with Respect to Registrants Other
Than S-3 or S-2 Registrants.................. Not Applicable
Item 15 Information with Respect to S-3 Companies...... Not Applicable
Item 16 Information with Respect to S-2 or
S-3 Companies................................ Incorporation of Certain Documents by
Reference; Annexes B, C, D and E
Item 17 Information with Respect to Companies Other
Than S-2 or S-3 Companies.................... Not Applicable
Item 18 Information if Proxies, Consents or
Authorizations Are to be Solicited........... The Fedders Annual Meeting; The NYCOR Special
Meeting; Security Ownership of Directors and
Executive Officers of Fedders; Principal
Stockholders of Fedders; Security Ownership
of Directors and Executive Officers of
NYCOR; Principal Stockholders of NYCOR; The
Merger -- Interests of Certain Persons in
the Merger; Election of Directors of
Fedders; Executive Compensation
Item 19 Information if Proxies, Consents or
Authorizations Are not to be Solicited, or in
an
Exchange Offer............................... Not Applicable
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FEDDERS CORPORATION NYCOR, INC.
WESTGATE CORPORATE CENTER 287 CHILDS ROAD
505 MARTINSVILLE ROAD BASKING RIDGE, NEW JERSEY 07920
LIBERTY CORNER, NEW JERSEY 07938 (908) 953-8200
(908) 604-8686
PROXY STATEMENT-PROSPECTUS
CONVERTIBLE PREFERRED STOCK OF FEDDERS CORPORATION
OR
CLASS A STOCK OF FEDDERS CORPORATION
This Proxy Statement-Prospectus is being furnished to the stockholders of
Fedders Corporation ("Fedders" or the "Company") in connection with the
solicitation by the Board of Directors of Fedders of proxies in the accompanying
form to be used at the Annual Meeting of Stockholders of the Company (the
"Fedders Annual Meeting") to be held on Friday, May 31, 1996, and at all
adjournments thereof, for the purposes set forth below.
This Proxy Statement-Prospectus is being furnished to the stockholders of
NYCOR, Inc. ("NYCOR") in connection with the solicitation by the Board of
Directors of NYCOR of proxies in the accompanying form to be used at the Special
Meeting of Stockholders of NYCOR (the "NYCOR Special Meeting") to be held on
Friday, May 31, 1996, and at all adjournments thereof, for the purpose of voting
on the Merger (as defined below). This document also constitutes a prospectus of
Fedders relating to the shares of Convertible Preferred Stock of Fedders (the
"Fedders Convertible Preferred Stock") or shares of Class A Stock, par value
$1.00 (the "Fedders Class A Stock"), that are issuable upon consummation of the
Merger or upon conversion of any Fedders Convertible Preferred Stock issued upon
consummation of the Merger. See, "Description of Fedders Capital Stock" and
"Certain Differences in the Rights of Fedders and NYCOR Stockholders."
This Proxy Statement-Prospectus, the accompanying Notice of Annual Meeting
and form of proxy are first being mailed to the stockholders of Fedders on or
about April 3, 1996. This Proxy Statement-Prospectus, the accompanying Notice of
Special Meeting and form of proxy are first being mailed to the stockholders of
NYCOR on or about April 3, 1996.
At the Fedders Annual Meeting, the stockholders of Fedders will be asked to
consider and act on proposals (i) to approve and adopt the Agreement and Plan of
Merger dated November 30, 1995 and amended on March 15, 1996 (as amended, the
"Merger Agreement") between Fedders and NYCOR and the transactions contemplated
by the Merger Agreement pursuant to which NYCOR will merge with and into Fedders
(the "Merger"), (ii) to adopt amendments (the "Amendments") to the Restated
Certificate of Incorporation of Fedders (the "Fedders Charter") (a) to increase
the number of the authorized shares of Common Stock, par value $1.00 (the
"Fedders Common Stock"), from 60,000,000 to 80,000,000; (b) to increase the
number of authorized shares of Fedders Class A Stock from 30,000,000 to
60,000,000; and (c) to increase the number of the authorized shares of the
Preferred Stock of the Company from 5,000,000 to 15,000,000; (iii) to elect
three (3) directors; (iv) to adopt the Company's Stock Option Plan VIII; and (v)
to ratify the appointment of the Company's independent auditors.
At the NYCOR Special Meeting, the stockholders of NYCOR will be asked to
consider and act upon a proposal to approve and adopt the Merger Agreement and
the Merger.
Upon consummation of the Merger, each share of Fedders Common Stock, Fedders
Class A Stock and Class B Stock, par value $1.00 of Fedders (the "Fedders Class
B Stock"), would remain outstanding and unchanged (other than shares of Fedders
Class B Stock the holders of which exercise their dissenters' rights under the
Delaware General Corporation Law (the "DGCL")). The stock of Fedders to be
received by the stockholders of NYCOR (other than holders of Class B Stock of
NYCOR who exercise their dissenters' rights under the DGCL) upon consummation of
the Merger will depend upon the average closing price per share of Fedders Class
A Stock for the 15 trading days ending five business days before the date of the
NYCOR Special Meeting (the "Fedders Average Price"). If the Fedders Average
Price is at or above $6.25, each share of Common Stock, Class A Stock and Class
B Stock of NYCOR will be converted into the right to receive a number of shares
of Fedders Class A Stock determined by dividing $6.25 by the Fedders Average
Price. If the Fedders Average Price is below $6.25, each share of Common Stock,
Class A Stock and Class B Stock of NYCOR will be converted into the right to
receive one share of Fedders Convertible Preferred Stock with terms expected to
support an initial market value of $6.25. While Fedders and NYCOR expect that
the terms of the Fedders Convertible Preferred Stock will support a market value
of $6.25 per share, there is currently no market for such stock and there can be
no guarantee that Fedders Convertible Preferred Stock, when issued, will trade
at that price or, if it does, for how long, as matters beyond the control of
Fedders and NYCOR may impact its market value. Each of the shares of Fedders
Convertible Preferred Stock will be convertible into one share of Fedders Class
A Stock. See, "Summary," "The Merger" and Annex A to this Proxy
Statement-Prospectus.
Stockholders of Fedders or NYCOR who wish to be advised of the Fedders
Average Price and of the consideration to be paid per share of Common Stock,
Class A Stock and Class B Stock of NYCOR upon consummation of the Merger may
obtain such information by calling (800) during normal business hours
beginning on May 23, 1996 and ending on the date of the Fedders Annual Meeting
and the NYCOR Special Meeting.
The Fedders Convertible Preferred Stock, if issued, would have cumulative
dividends, payable quarterly (currently estimated to be 2.5%) and would have a
liquidation preference of $6.25 per share. Except as otherwise required by
Delaware law, the Fedders Convertible Preferred Stock would have no voting
rights. The Fedders Convertible Preferred Stock would be convertible on a share
for share basis into Fedders Class A Stock at the option of the holder, or
redeemable by the Company at any time for $6.25 in cash or in equivalent value
of Fedders Class A Stock. The Fedders Class A Stock ranks equally with the
Fedders Common Stock except that the holders of the Fedders Class A Stock have
no voting rights other than as required under Delaware law and, under certain
circumstances, each share of Fedders Class A Stock will be converted into one
share of Fedders Common Stock. See, "Proposal 1 -- Description of Fedders
Capital Stock."
The Fedders Common Stock and Fedders Class A Stock are listed and traded on
the New York Stock Exchange ("NYSE") and the Common Stock and Class A Stock of
NYCOR are listed on the National Association of Securities Dealers Automated
Quotation System, National Market System ("NASDAQ/NMS"). It is a condition to
Fedders' and NYCOR's obligation to consummate the Merger that any Fedders
Convertible Preferred Stock issuable in the Merger be authorized for listing on
the NYSE.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Proxy Statement-Prospectus is March 29, 1996.
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AVAILABLE INFORMATION
Fedders and NYCOR are subject to the information requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by Fedders and NYCOR can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661 and copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports, proxy
statements and other information concerning Fedders are available for inspection
and copying at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
This Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4, of which this Proxy
Statement-Prospectus is a part, and the exhibits thereto (together with any
amendments or supplements thereto, the "Registration Statement"), which has been
filed by Fedders with the Commission under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"),
certain portions of which have been omitted pursuant to the rules and
regulations of the Commission and to which portions reference is hereby made for
further information.
No person has been authorized to give any information or to make any
representations other than those contained in this Proxy Statement-Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by Fedders or NYCOR. Neither the delivery of this
Proxy Statement-Prospectus nor any distribution of Fedders Convertible Preferred
Stock or Fedders Class A Stock pursuant to the Merger Agreement (or of Fedders
Class A Stock issuable upon conversion of any Fedders Convertible Preferred
Stock distributed pursuant to the Merger Agreement) shall, under any
circumstances, create any implication that there has been no change in the
affairs of Fedders or NYCOR since the date hereof or that the information
contained herein is correct as of any time subsequent to its date. This Proxy
Statement-Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities other than the Fedders Convertible Preferred
Stock or Fedders Class A Stock to be issued pursuant to the Merger Agreement (or
of Fedders Class A Stock issuable upon conversion of any Fedders Convertible
Preferred Stock distributed pursuant to the Merger Agreement) or an offer to
sell or solicitation of an offer to buy such securities in any circumstances in
which such an offer or solicitation is not lawful.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Fedders and NYCOR, respectively, with the
Commission (Fedders File No. 1-8831; NYCOR File No. 0-15299) under Section 13(a)
or 15(d) of the Exchange Act are hereby incorporated by reference in this Proxy
Statement-Prospectus:
Fedders documents:
(i) Fedders Annual Report on Form 10-K for the fiscal year ended
August 31, 1995; and
(ii) Fedders Quarterly Report on Form 10-Q for the period ended
November 30, 1995.
NYCOR documents:
(i) NYCOR's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as amended;
(ii) NYCOR's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1995, June 30, 1995 and September 30, 1995;
(iii) NYCOR's definitive Proxy Statement dated March 27, 1995 in
connection with its Annual Meeting of Stockholders held on April 28, 1995;
and
(iv) NYCOR's Current Reports on Form 8-K dated May 30, 1995, as
amended, August 15, 1995 and October 31, 1995.
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All documents filed by Fedders or NYCOR pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
earlier of the effective date of the Merger or the termination of the Merger
Agreement (or prior to the date the Registration Statement is withdrawn in the
event Fedders Convertible Preferred Stock is issued upon consummation of the
Merger) are hereby incorporated by reference into this Proxy
Statement-Prospectus and shall be deemed a part hereof from the date of filing
of such documents
All information contained or incorporated by reference in this Proxy
Statement-Prospectus with respect to Fedders was supplied by Fedders, and all
information contained or incorporated by reference in this Proxy
Statement-Prospectus with respect to NYCOR was supplied by NYCOR.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF SUCH DOCUMENTS IS
AVAILABLE WITHOUT CHARGE (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A PROXY STATEMENT-PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST. ANY SUCH REQUEST SHOULD BE MADE TO
FEDDERS CORPORATION, WESTGATE CORPORATE CENTER, 505 MARTINSVILLE ROAD, LIBERTY
CORNER, NEW JERSEY 07938, ATTENTION: ROBERT N. EDWARDS, ESQ. (TELEPHONE NUMBER
(908) 604-8686) AS TO FEDDERS DOCUMENTS AND TO NYCOR, INC., 287 CHILDS ROAD,
BASKING RIDGE, NEW JERSEY 07920, ATTENTION: KENT E. HANSEN, ESQ. (TELEPHONE
NUMBER (908) 953-8200) AS TO NYCOR DOCUMENTS. IN ORDER TO ENSURE TIMELY DELIVERY
OF SUCH DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY MAY 23, 1996.
Any statement contained herein, in any supplement hereto or in a document
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of the Registration Statement and this
Proxy Statement-Prospectus to the extent that a statement contained herein, in
any supplement hereto or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Proxy Statement-Prospectus or any supplement hereto.
INCLUSION OF ANNUAL REPORT, QUARTERLY REPORTS,
DEFINITIVE PROXY STATEMENT AND CURRENT REPORTS
NYCOR's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, as amended, its Quarterly Report on Form 10-Q for the period ended
September 30, 1995, its definitive Proxy Statement dated March 27, 1995 and its
Current Reports on Form 8-K dated May 30, 1995, as amended, August 15, 1995 and
October 31, 1995 are attached to this Proxy Statement-Prospectus, respectively,
as Annexes B, C, D, and E, respectively.
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TABLE OF CONTENTS
PAGE
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AVAILABLE INFORMATION................................................................. i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... i
INCLUSION OF ANNUAL REPORT, QUARTERLY REPORTS, DEFINITIVE PROXY STATEMENT AND CURRENT
REPORTS............................................................................. ii
SUMMARY............................................................................... 1
Parties to the Merger............................................................... 1
Fedders.......................................................................... 1
NYCOR............................................................................ 1
The Fedders Annual Meeting; Record Date............................................. 1
The NYCOR Special Meeting; Record Date.............................................. 1
The Merger; Exchange Ratio.......................................................... 2
Votes Required...................................................................... 2
Fedders Annual Meeting........................................................... 2
NYCOR Special Meeting............................................................ 2
Effective Date...................................................................... 3
Recommendation of the Boards of Directors........................................... 3
Board of Directors of Fedders.................................................... 3
Board of Directors of NYCOR...................................................... 3
Opinions of Financial Advisors...................................................... 3
Fedders.......................................................................... 3
NYCOR............................................................................ 3
Interests of Certain Persons in the Merger.......................................... 4
Certain Federal Income Tax Consequences of the Merger............................... 4
Dissenting Stockholders' Rights..................................................... 4
Resale of Fedders Convertible Preferred Stock or Fedders Class A Stock.............. 4
Business Pending Consummation....................................................... 5
Exchange of NYCOR Preferred Shares.................................................. 5
Conditions to Consummation; Termination............................................. 5
Breakup Fee......................................................................... 6
Comparative Stock Price Information................................................. 6
Market Prices -- Fedders......................................................... 6
Market Prices -- NYCOR........................................................... 7
Comparison of Certain Unaudited Per Share Data...................................... 8
Selected Financial Information...................................................... 10
Pro Forma Financial Data............................................................ 13
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends........... 19
INTRODUCTION.......................................................................... 20
RISK FACTORS.......................................................................... 20
THE FEDDERS ANNUAL MEETING............................................................ 21
THE NYCOR SPECIAL MEETING............................................................. 22
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF FEDDERS..................... 24
PRINCIPAL STOCKHOLDERS OF FEDDERS..................................................... 26
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF NYCOR....................... 27
PRINCIPAL STOCKHOLDERS OF NYCOR....................................................... 28
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PROPOSAL NO. 1 -- THE MERGER.......................................................... 30
General............................................................................. 30
Reasons for the Merger.............................................................. 30
Background of the Merger............................................................ 32
Opinion of Financial Advisor to Fedders............................................. 33
Opinion of Financial Advisor to NYCOR............................................... 38
The Merger Agreement................................................................ 41
The Merger....................................................................... 41
Exchange of NYCOR Preferred Shares............................................... 42
Exchange Procedures.............................................................. 42
Representations and Warranties................................................... 42
Conduct of Business Pending the Merger........................................... 43
Indemnification.................................................................. 43
Conditions to the Consummation of the Merger..................................... 43
Directors, Officers, and Employees............................................... 44
Amendment of the Merger Agreement................................................ 45
Responses to Other Acquisition Proposals......................................... 45
Termination of the Merger Agreement.............................................. 45
Breakup Fee...................................................................... 45
Dissenting Stockholders' Rights..................................................... 46
Interests of Certain Persons in the Merger.......................................... 46
Certain Federal Income Tax Consequences of the Merger............................... 47
Accounting Treatment................................................................ 49
Directors of Fedders................................................................ 49
Executive Compensation of Management of Fedders..................................... 49
COMPARATIVE STOCK PRICE INFORMATION................................................... 50
DESCRIPTION OF FEDDERS CAPITAL STOCK.................................................. 52
Authorized Capital.................................................................. 52
Fedders Convertible Preferred Stock................................................. 52
Dividend Rights.................................................................. 52
Voting Rights.................................................................... 53
Liquidation Rights............................................................... 53
Conversion Rights................................................................ 53
Optional Redemption.............................................................. 54
Listing and Transfer Agent....................................................... 54
Fedders Common Stock................................................................ 54
Dividend Rights.................................................................. 54
Voting Rights.................................................................... 54
Liquidation Rights............................................................... 55
Listing and Transfer Agent....................................................... 55
Fedders Class A Stock............................................................... 55
Dividend Rights.................................................................. 55
Voting Rights.................................................................... 55
Liquidation Rights............................................................... 55
Change of Control................................................................ 55
Conversion....................................................................... 55
Listing and Transfer Agent....................................................... 55
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Fedders Class B Stock............................................................... 56
Voting Rights.................................................................... 56
Dividend Rights.................................................................. 56
Liquidation Rights............................................................... 56
Restrictions on Transfer......................................................... 56
Conversion Rights................................................................ 56
Listing and Transfer Agent....................................................... 56
CERTAIN DIFFERENCES IN THE RIGHTS OF FEDDERS AND NYCOR STOCKHOLDERS................... 57
PROPOSAL NO. 2 -- ELECTION OF DIRECTORS OF FEDDERS.................................... 57
Meetings of the Board of Directors and Certain Committees........................... 58
EXECUTIVE COMPENSATION................................................................ 59
Summary Compensation Table.......................................................... 59
Options/SAR Grant Table............................................................. 60
Aggregate Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table........... 60
Compensation Committee Interlocks and Insider Participation......................... 61
Report of the Compensation Committee on Executive Compensation...................... 61
Employment Contract................................................................. 61
Performance Graph................................................................... 62
PROPOSAL NO. 3 -- AMENDMENTS OF FEDDERS' CHARTER TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF FEDDERS COMMON STOCK, CLASS A STOCK, AND PREFERRED STOCK.................. 62
PROPOSAL NO. 4 -- APPROVAL OF FEDDERS STOCK OPTION PLAN VIII.......................... 64
Summary of Plan..................................................................... 64
Federal Income Tax Consequences..................................................... 65
Incentive Stock Options.......................................................... 65
Non-Qualified Stock Options...................................................... 65
Stock Appreciation Rights........................................................ 66
Eligible Employees and Non-Employees................................................ 66
PROPOSAL NO. 5 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS OF FEDDERS........ 66
RESALE OF FEDDERS CONVERTIBLE PREFERRED STOCK OR FEDDERS CLASS A STOCK................ 67
LEGAL OPINIONS........................................................................ 67
EXPERTS............................................................................... 67
STOCKHOLDER PROPOSALS -- NEXT FEDDERS ANNUAL MEETING.................................. 67
COST OF SOLICITATION.................................................................. 67
ANNEX A -- Agreement and Plan of Merger between Fedders and NYCOR dated
November 30, 1995.
ANNEX B -- NYCOR's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as amended;
ANNEX C -- NYCOR's Quarterly Report on Form 10-Q for the period ended
September 30, 1995;
ANNEX D -- NYCOR's definitive Proxy Statement dated March 27, 1995 in
connection with its Annual Meeting of Stockholders held on April 28, 1995; and
ANNEX E -- NYCOR's Current Reports on Form 8-K dated May 30, 1995, as
amended, August 15, 1995 and October 31, 1995.
ANNEX F -- Opinion of Fedders Financial Advisor
ANNEX G -- Opinion of NYCOR Financial Advisor
ANNEX H -- Section 262 of the Delaware General Corporation Law
ANNEX I -- Stock Option Plan VIII
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SUMMARY
The following is a brief summary of certain information relating to the
actions to be taken at the Fedders Annual Meeting and the NYCOR Special Meeting
contained elsewhere in this Proxy Statement-Prospectus. This summary is not
intended to be a summary of all material information relating to such actions
and is qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement-Prospectus, including the Annexes
hereto and in the documents incorporated by reference in this Proxy
Statement-Prospectus. A copy of the Merger Agreement is set forth in Annex A to
this Proxy Statement-Prospectus and reference is made thereto for a complete
description of the terms of the Merger. Stockholders are urged to read carefully
the entire Proxy Statement-Prospectus, including the Annexes.
PARTIES TO THE MERGER
Fedders
Fedders is a holding company which, through its wholly owned operating
subsidiaries and through a joint venture in China, is engaged in the manufacture
and sale of a complete line of room air conditioners and dehumidifiers,
principally for the residential market. Based upon industry statistics compiled
by a trade association, Fedders believes it is the largest manufacturer of room
air conditioners in North America. The principal executive offices of Fedders
are located at Westgate Corporate Center, 505 Martinsville Road, Liberty Corner,
New Jersey 07938; telephone (908) 604-8686.
NYCOR
NYCOR is also a holding company which currently owns two operating
companies, Rotorex Company, Inc. ("Rotorex") and Melcor Corporation ("Melcor").
Rotorex manufactures rotary compressors principally for use in room air
conditioners. Melcor produces thermoelectric heating and cooling modules used in
a variety of applications in which space and weight are considerations or
precise temperature control is required. Fedders has been the major customer for
Rotorex compressors for more than 20 years. The principal executive offices of
NYCOR are located at 287 Childs Road, Basking Ridge, New Jersey 07920; telephone
(908) 953-8200.
THE FEDDERS ANNUAL MEETING; RECORD DATE
The Fedders Annual Meeting will be held at 2:00 p.m. on Friday, May 31,
1996 at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, New Jersey
07060. The close of business on April 1, 1996 has been fixed as the record date
for the determination of the stockholders of Fedders entitled to notice of, and
to vote at, the Fedders Annual Meeting. At the Fedders Annual Meeting, holders
of shares of Fedders Common Stock and Fedders Class B Stock will be asked to
consider and act on proposals to approve the actions of the Board of Directors
of Fedders (i) to adopt the Merger Agreement and the transactions contemplated
by the Merger Agreement, (ii) to elect three (3) directors, (iii) to adopt the
Stock Option Plan VIII of Fedders and (iv) to ratify the appointment of Fedders'
independent auditors. In addition, at the Fedders Annual Meeting, holders of
shares of Fedders Common Stock, Fedders Class A Stock and Fedders Class B Stock
will be asked to consider and act on a proposal to increase the authorized
number of shares of Fedders Common Stock, Fedders Class A Stock and Preferred
Stock of Fedders. See, "The Fedders Annual Meeting."
THE NYCOR SPECIAL MEETING; RECORD DATE
The NYCOR Special Meeting will be held at 10:30 a.m. on Friday, May 31,
1996 at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, NJ 07060. The
close of business on April 1, 1996 has been fixed as the record date for the
determination of the stockholders of NYCOR entitled to notice of, and to vote
at, the NYCOR Special Meeting.
The only matter to be presented at the NYCOR Special Meeting is the
proposal to approve the Merger Agreement and the Merger. See, "The NYCOR Special
Meeting."
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THE MERGER; EXCHANGE RATIO
Upon consummation of the Merger, each share of Fedders Common Stock,
Fedders Class A Stock and Fedders Class B Stock would remain outstanding and
unchanged, except to the extent that holders of Fedders Class B Stock exercise
their dissenters' rights.
Upon consummation of the Merger, stockholders of NYCOR will receive stock
of Fedders with a market value of $6.25 on the effective date of the Merger. If
the Fedders Average Price is at or above $6.25, each share of Common Stock,
Class A Stock and Class B Stock of NYCOR will be converted into the right to
receive Fedders Class A Stock having a market value equal to $6.25. The Fedders
Class A Stock ranks equally with the Fedders Common Stock except that the
holders of the Fedders Class A Stock have no voting rights other than as
required under Delaware law and, under certain circumstances, each share of
Fedders Class A Stock will be converted into one share of Fedders Common Stock.
See "Proposal 1 -- Description of Fedders Capital Stock." If the Fedders Average
Price is below $6.25, each share of Common Stock, Class A Stock and Class B
Stock of NYCOR will be converted into the right to receive one share of Fedders
Convertible Preferred Stock with terms expected to support an initial market
value of $6.25. Each share of Fedders Convertible Preferred Stock would be
convertible into one share of Fedders Class A Stock. The Fedders Convertible
Preferred Stock will be a new issue of Fedders equity securities, will be listed
on the NYSE, and will have no trading history when issued. While Fedders and
NYCOR expect that the terms of the Fedders Convertible Preferred Stock will
support an initial market value of $6.25 per share, with no market for such
stock there can be no guarantee that Fedders Convertible Preferred Stock, when
issued, will trade at that price or, if it does, for how long, as matters beyond
the control of Fedders and NYCOR may impact its market value.
See, "The Merger -- The Merger Agreement" and " -- Dissenting Stockholders'
Rights."
VOTES REQUIRED
Fedders Annual Meeting
Under the terms of the Fedders Charter, approval of the Merger requires an
affirmative vote of a majority of the outstanding shares of the Fedders Common
Stock and Fedders Class B Stock, each voting separately as a class, and
two-thirds of the outstanding Fedders Common Stock and Fedders Class B Stock
voting together as a single class.
Under the DGCL, approval of the amendments to the Fedders Charter requires
the affirmative vote of a majority of the outstanding Fedders Common Stock and
Fedders Class B Stock, voting together as a single class, and, under the DGCL
and the provisions set forth in the Fedders Charter, approval of the proposed
amendments requires the affirmative vote of a majority of the outstanding shares
of Fedders Common Stock, Fedders Class B Stock and Fedders Class A Stock (on the
proposal to increase the number of authorized shares of Fedders Class A Stock),
each voting separately as a class.
Approval of the Fedders Stock Option Plan VIII and ratification of the
appointment of independent auditors requires the affirmative vote of a majority
of the shares of Fedders Common Stock and Fedders Class B Stock voted on such
Proposals at the Fedders Annual Meeting so long as at least a majority of the
Fedders Common Stock and Fedders Class B Stock are voted on such Proposals.
A plurality of the votes of the shares of Fedders Common Stock and Fedders
Class B Stock present in person or represented by proxy at the Fedders Annual
Meeting shall be needed for the election of directors, provided those shares
present in person or represented by proxy at the Fedders Annual Meeting
constitute a quorum. See, "The Fedders Annual Meeting."
NYCOR Special Meeting
Approval of the Merger Agreement and the Merger by the stockholders of
NYCOR requires the affirmative vote of a majority of the outstanding shares of
NYCOR Common Stock and NYCOR Class B Stock, each voting separately as a class.
See, "The NYCOR Special Meeting."
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EFFECTIVE DATE
The Merger will become effective within five business days following the
satisfaction or waiver of the conditions to closing set forth in the Merger
Agreement or on such other date as Fedders and NYCOR may agree. It is currently
anticipated that the Merger will become effective promptly following the Fedders
Annual Meeting and the NYCOR Special Meeting.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
Board of Directors of Fedders
The Board of Directors of Fedders has determined that the Merger is in the
best interests of Fedders and its stockholders and recommends that the Merger
Agreement and the Merger be approved by the stockholders of Fedders. In making
its determination to recommend approval of the Merger, the Board of Directors of
Fedders considered that (i) in the last three years, Fedders has increased its
sales and market share and expanded its customer base in North America due, in
part, to its ability to meet retailers' delivery requirements, which is in large
part dependent upon Rotorex; (ii) Fedders' compressor requirements already
surpass, by more than 600,000 units, what Rotorex is committed to provide
Fedders under the terms of the supply agreement between Fedders and Rotorex;
(iii) it is expected that the recently completed joint venture in China will
require 500,000 compressors annually within three years; and (iv) there is a
worldwide shortage of compressors, and if Rotorex was going to be sold, it would
be critically important to regain ownership of Rotorex. See, "The Fedder Annual
Meeting" and "The Merger -- Background of the Merger." The Board of Directors of
Fedders also recommends that the stockholders of Fedders vote in favor of the
election of the nominees for director of Fedders named herein, the approval of
the proposed amendments to the Fedders Charter, the adoption of the Stock Option
Plan VIII of Fedders and the ratification of the selection of independent
auditors.
Board of Directors of NYCOR
The Board of Directors of NYCOR has determined that the Merger is in the
best interests of NYCOR and its stockholders and recommends that the Merger
Agreement and the Merger be approved by the stockholders of NYCOR. In making its
determination, the Board of Directors of NYCOR considered (i) the value of the
consideration to be received by its stockholders compared to the then current
market value of the Common Stock and Class A Stock of NYCOR; (ii) the impact on
NYCOR of the concentration of its sales to one customer, including its access to
capital necessary to take advantage of business opportunities that may arise;
and (iii) the benefits that Rotorex may realize as part of a larger, major
participant in the world-wide air conditioner market such as Fedders. See, "The
NYCOR Special Meeting" and "The Merger -- Background of the Merger."
OPINIONS OF FINANCIAL ADVISORS
Fedders
On January 31, 1996, TM Capital Corp. delivered its oral opinion and on
February 12, 1996 delivered its written opinion and on March 20, 1996 delivered
its substantially identical additional written opinion that the consideration to
be paid by Fedders in the Merger is fair to Fedders from a financial point of
view. TM Capital's opinion related only to the consideration to be paid by
Fedders in connection with the Merger and does not constitute a recommendation
to any stockholder of Fedders as to how such stockholder should vote at the
Fedders Annual Meeting. The full text of the written opinion of TM Capital which
sets forth the assumptions made, the matters considered and the limitations of
the review undertaken in rendering such opinion is attached as Annex F to this
Proxy Statement-Prospectus and is incorporated herein by reference. See,
"Proposal No. 1 -- The Merger -- Opinion of Financial Advisor to Fedders."
NYCOR
On February 1, 1996, Laidlaw Equities, Inc. delivered its oral opinion,
which was subsequently confirmed in writing as of such date, that the
consideration to be paid in the Merger is fair to NYCOR from a financial point
of view. Laidlaw's opinion related only to the consideration to be paid by
Fedders in connection with the Merger and does not constitute a recommendation
to any stockholder of NYCOR as to how such
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stockholder should vote at the NYCOR Special Meeting. The full text of the
written opinion of Laidlaw which sets forth the assumptions made, the matters
considered and the limitations of the review undertaken in rendering such
opinion is attached as Annex G to this Proxy Statement-Prospectus and is
incorporated herein by reference. See, "Proposal No. 1 -- The Merger -- Opinion
of Financial Advisor to NYCOR."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreement provides that the employees, officers and directors of
NYCOR shall be placed in the same economic position following the Merger as they
were immediately prior to the date of the execution of the Merger Agreement with
respect to stock options, directors fees, salaries and employee benefits
provided by NYCOR. Certain persons serve as directors and executive officers of,
and have significant stockholdings in, both Fedders and NYCOR. See, "Proposal
No. 1 -- Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986 (the "Code"),
as amended, and, accordingly, for Federal income tax purposes (i) no gain or
loss will be recognized by Fedders, NYCOR or the stockholders of Fedders as a
result of the Merger except to the extent that holders of Fedders Class B Stock
may receive cash upon exercise of dissenters' rights and (ii) stockholders of
NYCOR will not recognize gain or loss upon the receipt of Fedders Convertible
Preferred Stock or Fedders Class A Stock in exchange for their shares of capital
stock of NYCOR, except to the extent of any cash received in lieu of fractional
shares or cash received upon exercise of any dissenters' rights. Fedders and
NYCOR have received an opinion of McCarter & English, Special Tax Counsel to
Fedders, substantially to this effect. See, "The Merger -- Certain Federal
Income Tax Consequences of the Merger."
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH STOCKHOLDER OF NYCOR, IT IS RECOMMENDED THAT STOCKHOLDERS
OF NYCOR CONSULT THEIR TAX ADVISERS CONCERNING THE FEDERAL (AND ANY STATE AND
LOCAL) TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
DISSENTING STOCKHOLDERS' RIGHTS
Under the DGCL, a stockholder owning shares of Fedders Class B Stock is
entitled to dissent from the Merger and to receive cash from Fedders equal to
the fair value of such stockholder's shares of Fedders capital stock. Under the
DGCL, the holders of the Fedders Common Stock and the Fedders Class A Stock do
not have dissenters' rights.
Under the DGCL, a stockholder owning shares of NYCOR Class B Stock is
entitled to dissent from the Merger and to receive cash from Fedders as the
surviving corporation in the Merger equal to the fair value of such
stockholder's shares of NYCOR capital stock. Under the DGCL, the holders of
NYCOR Common Stock and NYCOR Class A Stock do not have dissenters' rights.
See, "The Merger -- Dissenting Stockholders' Rights."
RESALE OF FEDDERS CONVERTIBLE PREFERRED STOCK OR FEDDERS CLASS A STOCK
The Fedders Convertible Preferred Stock or Fedders Class A Stock received
in the Merger will be freely transferable by the holders of such shares, except
for those shares held by holders who may be deemed to be "affiliates" (generally
including directors, certain executive officers and ten percent or more
stockholders) of NYCOR or Fedders under applicable federal securities laws. If
issued, the Fedders Convertible Preferred Stock will be a new issue of Fedders
equity securities and thus will have no trading history when issued. While
Fedders and NYCOR expect that the terms of the Fedders Convertible Preferred
Stock will support an initial market value of $6.25 per share, with no market
for such stock there can be no guarantee that Fedders Convertible Preferred
Stock, when issued, will trade at that price or, if it does, for how long, as
matters beyond
4
13
the control of Fedders and NYCOR may impact its market value. It is a condition
to consummation of the Merger that the Fedders Convertible Preferred Stock be
authorized for listing on the NYSE. See, "Resale of Fedders Convertible
Preferred Stock or Fedders Class A Stock."
BUSINESS PENDING CONSUMMATION
In general, Fedders and NYCOR have agreed in the Merger Agreement that each
will conduct its business in the ordinary course consistent with past practice
between the date of the Merger Agreement and the consummation of the Merger.
Both Fedders and NYCOR have agreed that they will not take certain actions
during such period, including not paying dividends (other than as required by
the terms of NYCOR's Preferred Stock and Fedders' normal quarterly dividend of
two cents per share) and not issuing, selling or otherwise disposing of any of
its capital stock, except upon the conversion or exercise of options, warrants
and other rights outstanding or granted to employees or directors as allowed by
the Merger Agreement. NYCOR has also agreed that it will not enter into or
modify the employment terms of any of its directors, officers or employees
except that it may make changes for non-executive employees in the ordinary
course of business. See, "The Merger -- Conduct of Business Pending the Merger."
EXCHANGE OF NYCOR PREFERRED SHARES
In accordance with the Merger Agreement, on March 15, 1996, NYCOR exchanged
all of the then outstanding shares of NYCOR Preferred Stock for its 8 1/2%
convertible subordinated debentures due 2012 in accordance with the terms of the
NYCOR Preferred Stock. Any such subordinated debentures issued by NYCOR would,
as a result of the Merger, become obligations of Fedders.
CONDITIONS TO CONSUMMATION; TERMINATION
Consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions including (i) the approval of the Merger Agreement and the
Merger by the stockholders of Fedders and NYCOR; (ii) the approval by the
stockholders of Fedders of the proposed increases in the number of authorized
shares of Fedders Common Stock, Fedders Class A Stock and Preferred Stock of
Fedders; (iii) the continued accuracy of the representations and warranties of
Fedders and NYCOR; (iv) the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act; (v) the effectiveness of the
Registration Statement of which this Proxy Statement-Prospectus is a part; (vi)
the compliance by Fedders and NYCOR with its respective obligations under the
Merger Agreement; (vii) the receipt by NYCOR of an opinion of its investment
banker to the effect that the terms of the Fedders Convertible Preferred Stock
(if such stock is to be issued in the Merger) will support an initial market
value of $6.25; (viii) the receipt of certain certificates and opinions of
counsel including an opinion to the effect that the Merger will constitute a
tax-free reorganization; and (ix) the authorization for listing on the NYSE of
the Fedders Convertible Preferred Stock or Fedders Class A Stock to be issued in
the Merger. Under the terms of the Merger Agreement, either party is deemed to
waive any condition precedent to its obligation to consummate the Merger if,
with respect to such condition, it has complete knowledge of the actual facts
and circumstances relating to such condition as of the closing and proceeds to
consummate the Merger. Neither Fedders nor NYCOR currently intends to waive any
of the conditions to its obligations to consummate the Merger.
The Merger Agreement may be terminated (i) by mutual written consent of
Fedders and NYCOR (whether before or after stockholder approval); (ii) by either
party if the other party has breached any material representation, warranty or
covenant in any material respect and such breach is not cured within 30 days
after notice; (iii) by either party after June 30, 1996 if the Merger has not
become effective unless the failure of the Merger to become effective results
primarily from the breach by the party seeking to terminate the Merger
Agreement; or (iv) by either party if the Merger Agreement and the Merger is not
approved by the stockholders of Fedders at the Fedders Annual Meeting or by the
stockholders of NYCOR at the NYCOR Special Meeting.
See, "The Merger -- Conditions to Consummation of the Merger" and
"-- Termination of the Merger Agreement."
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BREAKUP FEE
Other than as permitted by the terms of the Merger Agreement, if the Board
of Directors of NYCOR terminates the Merger for any reason within its control,
then NYCOR must pay Fedders the sum of $20,000,000 plus expenses in cash or by
delivery to Fedders of that number of shares of NYCOR Common Stock and/or NYCOR
Class A Stock and/or NYCOR Class B Stock that would equal $20,000,000, the
choice between cash and NYCOR Common Stock being solely that of Fedders. See,
"The Merger -- Breakup Fee."
COMPARATIVE STOCK PRICE INFORMATION
The Fedders Common Stock and the Fedders Class A Stock are listed on the
NYSE (symbols: FJC and FJA, respectively). It is a condition to the obligation
of NYCOR to consummate the Merger that the Fedders Convertible Preferred Stock
or Fedders Class A Stock to be issued in the Merger be authorized for listing on
the NYSE upon official notice of issuance. The Fedders Convertible Preferred
Stock will constitute a new class of capital stock of Fedders and there has been
no trading market for such shares. The NYCOR Common Stock, the NYCOR Class A
Stock and the NYCOR Preferred Stock are included for quotation on the NASDAQ
National Market System ("NASDAQ/NMS") (symbols: NYCO, NYCOA and NYCOP,
respectively).
The following tables set forth the high and low reported last sale prices
per share of Fedders Common Stock and Fedders Class A Stock as reported on the
NYSE Composite Transactions Tape and per share of NYCOR Common Stock, NYCOR
Class A Stock and NYCOR Preferred Stock as reported on the NASDAQ/NMS during the
first three fiscal quarters of Fedders' 1996 fiscal year (through March 15,
1996) and on a quarterly basis for the two fiscal years ended August 31, 1995
and 1994. If the Fedders Average Price is less than $6.25, shares of Fedders
Convertible Preferred Stock will be issued in the Merger and the equivalent
value thereof per share of NYCOR Common Stock, NYCOR Class A Stock and NYCOR
Class B Stock will depend on market conditions, although it is anticipated that
the features of the Fedders Convertible Preferred Stock will be fixed to support
an initial market value of $6.25 per share. If the Fedders Average Price is at
or above $6.25, each share of NYCOR Common Stock, NYCOR Class A Stock and NYCOR
Class B Stock will be converted into the right to receive shares of Fedders
Class A Stock determined by dividing $6.25 by the Fedders Average Price and, in
that circumstance, the equivalent value per share of NYCOR Common Stock, NYCOR
Class A Stock and NYCOR Class B Stock would be $6.25.
MARKET PRICES -- FEDDERS
COMMON CLASS A
------------ ------------
HIGH LOW HIGH LOW
---- --- ---- ---
FISCAL 1994
First Quarter.......................................... 35/16 2 1/2 -- --
Second Quarter......................................... 4 1/8 3 1/8 -- --
Third Quarter.......................................... 4 3/4 3 1/2 -- --
Fourth Quarter......................................... 4 3/8 3 1/2 -- --
FISCAL 1995
First Quarter.......................................... 6 1/4 3 7/8 4 3/8 3 1/4
Second Quarter......................................... 6 1/8 5 4 3/4 3 5/8
Third Quarter.......................................... 6 1/8 5 3/8 4 3/4 4
Fourth Quarter......................................... 7 7/8 5 3/8 5 3/8 4 1/8
FISCAL 1996
First Quarter.......................................... 6 3/4 5 1/4 5 3 3/4
Second Quarter......................................... 6 3/4 5 5 5/8 3 7/8
Third Quarter (through March 15, 1996)................. 7 6 3/8 6 1/4 5 1/2
6
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MARKET PRICES -- NYCOR
COMMON CLASS A
------------ ------------
HIGH LOW HIGH LOW
---- --- ---- ---
1994
First Quarter............................................ 5 1/2 3 7/8 4 3/4 3 1/4
Second Quarter........................................... 4 3/4 3 1/2 4 1/2 3 1/8
Third Quarter............................................ 5 1/8 2 3/4 5 2 1/2
Fourth Quarter........................................... 3 2 1/8 2 7/8 2
1995
First Quarter............................................ 3 1/4 2 5/8 2 7/8 2 1/4
Second Quarter........................................... 215/16 2 3/8 2 3/4 2 3/8
Third Quarter............................................ 3 1/8 2 3/8 3 1/8 2 3/8
Fourth Quarter........................................... 5 7/8 2 1/8 5 1/2 2 1/8
1996
First Quarter (through March 15, 1996)................... 57/16 4 7/8 5 1/2 4 7/8
The Board of Directors of Fedders reinstated its regular quarterly cash
dividend of two cents per share of Fedders Common Stock and Fedders Class A
Stock and 1.8 cents per share of Fedders Class B Stock on June 27, 1995, and
intends to continue paying quarterly dividends at this level. When appropriate,
the Board of Directors of Fedders will also consider extra year-end dividends
commencing December, 1996. NYCOR has not paid dividends on the NYCOR Common
Stock, NYCOR Class A Stock, or NYCOR Class B Stock since 1992 and does not have
a current program for the payment of dividends.
On (i) October 30, 1995, the last business day preceding announcement that
Fedders and NYCOR had reached an agreement in principle to merge, (ii) November
30, 1995, the last business day preceding public announcement of the signing of
the Merger Agreement and (iii) March 14, 1996, a date shortly prior to the
mailing of this Proxy Statement-Prospectus, the closing price per share of
Fedders Class A Stock was $4 3/8, $4 1/8 and $6 1/8, respectively. Based on such
closing prices and the provisions of the Merger Agreement, each share of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock would have been
converted into the right to receive one share of Fedders Preferred Stock. On
such dates, the closing prices per share of NYCOR Common Stock and NYCOR Class A
Stock as reported by NASDAQ/NMS were as follows:
NYCOR COMMON NYCOR CLASS A
------------ -------------
October 30, 1995....................................... $2 1/8 $ 29/32
November 30, 1995...................................... 4 7/8 4 3/4
March 15, 1996......................................... 5 1/8 5 1/8
The stockholders of Fedders and of NYCOR are advised to obtain current
market quotations for Fedders Common Stock, Fedders Class A Stock, NYCOR Common
Stock, NYCOR Class A Stock.
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COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following table summarizes certain unaudited selected financial
information on a historical, pro forma and pro forma equivalent per share basis
and is derived from, should be read in conjunction with and is qualified in its
entirety by reference to, the unaudited pro forma condensed consolidated
financial data of Fedders that is included elsewhere in this Proxy
Statement-Prospectus and the historical financial statements of Fedders and
NYCOR which are incorporated in this Proxy Statement-Prospectus by reference.
The information presented in this table is for informational purposes only and
is not necessarily indicative of future consolidated earnings or financial
position or of consolidated earnings or financial position that would have been
reported had the Merger been completed at the beginning of the respective
periods or as of the dates for which such unaudited pro forma information is
presented.
PRO FORMA CONSOLIDATED(B) HISTORICAL
------------------------------- -------------------------------
QUARTER YEAR QUARTER YEAR
ENDED ENDED ENDED ENDED
NOV. 30, 1995 AUG. 31, 1995 NOV. 30, 1995 AUG. 31, 1995
------------- ------------- ------------- -------------
FEDDERS:
Book value per share at end of
period(a)........................... $ 2.05 $ 2.06 $ 2.05 $ 2.06
Tangible book value per share
at end of period.................... 1.08 1.08 1.89 1.90
Cash dividends declared per share:
Preferred (estimated)............... 0.039 $ 0.156 -- --
Common.............................. 0.020 0.020 0.020 0.020
Class A............................. 0.020 0.020 0.020 0.020
Class B............................. 0.018 0.018 0.018 0.018
Primary earnings (loss) per share..... (0.02) 0.55 0.01 0.72
PRO FORMA EQUIVALENT(c) HISTORICAL
------------------------------- --------------------------------
QUARTER YEAR NINE MONTHS YEAR
ENDED ENDED ENDED ENDED
NOV. 30, 1995 AUG. 31, 1995 SEPT. 30, 1995 DEC. 31, 1994
------------- ------------- -------------- -------------
NYCOR:
Book value per share at end of
period(a)........................... $ 2.05 $ 2.06 $ 6.76 $ 7.37
Tangible book value per share
at end of period.................... 1.08 1.08 1.06 1.52
Cash dividends declared per share:
Preferred........................... 0.039 $ 0.156 1.275 2.980
Common.............................. 0.020 0.020 -- --
Class A............................. 0.020 0.020 -- --
Class B............................. 0.018 0.018 -- --
Primary earnings (loss) per share..... (0.02) 0.55 (0.60) (0.17)
- ---------------
(a) Historical book value per share is calculated as the net book value
reflected in the consolidated financial statements at the end of the period,
less the liquidation preference of outstanding preferred stock ($0 for
Fedders and $23,000,000 for NYCOR), divided by the number of outstanding
Common, Class A and Class B shares. Pro forma book value per share is
calculated as the net book value reflected in the pro forma condensed
consolidated financial statements as of November 30, 1995, less the
liquidation preference of outstanding preferred stock ($47,275,000), divided
by the number of Common, Class A and Class B shares outstanding on a pro
forma basis.
(b) If the Fedders Average Price is at or above $6.25, the new Convertible
Preferred Stock of Fedders will not be issued. Instead, Fedders Class A
Stock will be issued in a ratio determined by dividing $6.25 by the Fedders
Average Price per share of NYCOR Common, Class A and Class B shares
outstanding. In that case there would be no pro forma cash dividend declared
on preferred stock and the pro forma
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amounts for book value per share, tangible book value per share and earnings
(loss) per share would vary as the assumed Fedders Average Price changed. If
the Fedders Average Price was $6.25, the pro forma book value per share and
tangible book value per share as of November 30, 1995 would be $2.72 and
$1.89, respectively, and the loss per share for the quarter ended November
30, 1995 would be $(.01). For each increment of $.50 in the assumed Fedders
Average Price above $6.25, the pro forma amounts for book value per share
and tangible book value per share would increase by a further $0.03 and
$0.02, respectively, the loss per share for the quarter ended November 30,
1995 would increase by less than $.001, and earnings per share for the year
ended August 31, 1995 would increase from the pro forma amounts shown above
by approximately $0.006.
(c) Pro forma equivalent amounts for NYCOR are computed by multiplying the pro
forma consolidated amounts by the exchange ratio of 1:1. If the Fedders
Average Price is at or above $6.25, Fedders Class A Stock will be issued in
a ratio determined by dividing $6.25 by the Fedders Average Price per share
of NYCOR Common, Class A and Class B shares outstanding. In that case the
pro forma equivalent amounts of NYCOR for book value per share, tangible
book value per share, cash dividends declared per share, and primary
earnings (loss) per share would be the amounts presented above on a pro
forma basis, as applicable, multiplied by the ratio that the Fedders Average
Price is to $6.25. Assuming the Fedders Average Price was $6.75, then the
multiple used in determining pro forma equivalent amounts for NYCOR would be
1.08 ($6.75/$6.25).
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SELECTED FINANCIAL INFORMATION
Fedders Historical Consolidated Financial Information
The following table sets forth summary historical consolidated financial
information of Fedders and has been derived from and should be read in
conjunction with Fedders' audited consolidated financial statements and
unaudited interim consolidated financial statements, including the notes
thereto, which are incorporated by reference in this Proxy Statement-Prospectus.
Unaudited interim data reflects, in the opinion of Fedders' management, all
adjustments (consisting solely of normal recurring adjustments) considered
necessary for a fair presentation of results for such interim periods. Results
of operations for the unaudited interim periods are not necessarily indicative
of the results that may be expected for any other interim or annual period.
QUARTER ENDED
NOVEMBER 30,(a) YEAR ENDED AUGUST 31,(a)
------------------- ---------------------------------------------
1995 1994 1995 1994 1993 1992 1991(e)
-------- -------- -------- -------- -------- -------- --------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales................ $ 27,809 $ 20,125 $316,494 $231,572 $158,602 $192,365 $191,423
Gross profit............. 6,777 4,306 67,125 49,263 27,744 25,607 27,750
Percent of net sales..... 24.4 21.4 21.2 21.3 17.5 13.3 14.5
Operating income
(loss)................. (2) (1,297) 37,653 23,905 1,907 (9,392) (1,883)
Percent of net sales..... (0.0) (6.4) 11.9 10.3 1.2 (4.9) (.01)
Pre-tax income (loss).... 554 (1,440) 35,691 19,803 (2,340) (24,965) (13,666)
Percent of net sales..... 2.0 (7.2) 11.3 8.6 (1.5) (12.7) (7.1)
Net income (loss)........ $ 343 $ (1,217) $ 29,504 $ 20,989(c) $ (1,775) $(24,931)(d) $(11,178)(f)
Net income (loss) per
share.................. $ 0.01 $ (0.03) $ 0.72 $ 0.53(c) $ (0.05) $ (0.67) $ (0.32)
Cash dividends declared
per share:
Common................. $ 0.020 -- $ 0.020 -- -- -- $ 0.360
Class A................ 0.020 -- 0.020 -- -- -- --
Class B................ 0.018 -- 0.018 -- -- -- 0.324
Cash..................... $ 15,378 $ 4,270 $ 57,707 $ 34,869 $ 8,553 $ 8,738 $ 2,908
Total assets............. 175,458 113,776 136,775 100,653 81,285 179,249 197,243
Long-term debt (including
current portion)....... 15,186 17,926 5,106 17,943 25,590 49,588 65,075
Stockholders' equity..... 82,510 48,109 82,542 49,317 24,229 19,039 44,181
Capital expenditures..... 1,678 1,636 9,041(b) 2,634 2,379 3,599 3,607
Depreciation and
amortization........... 973 1,059 7,519 9,374 5,646 14,876 10,580
- ---------------
(a) The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
and the consolidated financial statements and the notes thereto.
(b) Includes buyout of $1,750,000 of equipment under lease.
(c) In 1994, the Company adopted SFAS 109, Accounting for Income Taxes, which
resulted in income of $1,780,000 or $0.04 per share from the cumulative
effect of an accounting change.
(d) Includes a net restructuring charge of $3,300,000 for costs associated with
the shutdown of the Company's New Jersey production facilities offset, in
part, by the benefit from the sale of its compressor business.
(e) Information presented is for the eight months ended August 31, 1991.
(f) Includes a pre-tax provision of $5,000,000 for a product recall.
10
19
NYCOR Historical Consolidated Financial Information
The following table sets forth summary historical consolidated financial
information of NYCOR and has been derived from and should be read in conjunction
with NYCOR's audited consolidated financial statements and unaudited interim
consolidated financial statements, including the notes thereto, which are
incorporated by reference in this Proxy Statement-Prospectus. Unaudited interim
data reflects, in the opinion of NYCOR's management, all adjustments,
(consisting solely of normal recurring adjustments) considered necessary for a
fair presentation of results for such interim periods. Results of operations for
unaudited interim periods are not necessarily indicative of the results that may
be expected for any other interim or annual period.
NINE MONTHS ENDED
SEPTEMBER 30,(a) YEAR ENDED DECEMBER 31,(a)
------------------- -------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- ------- -------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.................... $56,587 $56,115 $75,237 $59,226 $ 4,624 -- --
Interest and other income.... -- -- -- -- 9,586 $ 6,380 $ 5,984
Net income (loss)............ (3,114) 575 635 4,244(b) 5,240 4,065 5,422(c)
Net income (loss)
attributable to common
stockholders............... (4,580) (891) (1,320) 2,289(b) 3,285 2,110 3,467(c)
Net income (loss) per
share...................... (0.60) (0.12) (0.17) 0.30(b) 0.48 0.30 0.49(c)
Cash dividends declared per
share:
Preferred Stock............ 1.275 2.55 2.98 0.850 1.275 1.700 1.700
Common Stock............... -- -- -- -- 0.120 0.160 0.160
Class A Stock.............. -- -- -- -- 0.120 0.160 --
Class B Stock.............. -- -- 0.108 0.144 0.144
Cash and cash equivalents.... 1,117 1,847 1,981 1,336 1,495 12,214 62,871
Total assets................. 95,179 87,266 88,994 90,956 89,073 75,642 75,297
Long-term debt (including
current portion)........... 7,127 39 33 26 546 -- --
Stockholders' equity......... 74,163 79,174 78,746 81,565 76,524 74,056 73,971
Capital expenditures......... 2,334 1,358 1,707 957 430 35 1,168
Depreciation and
amortization............... 3,394 3,200 4,523 4,242 1,033 36 18
- ---------------
(a) The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the consolidated financial statements and the notes thereto.
(b) In 1993, NYCOR adopted SFAS No. 109, Accounting for Income Taxes, which
resulted in income of $627,000 or $0.09 per share from the cumulative
effect of an accounting change.
(c) Includes income from discontinued operations of $1,176,000 or $0.16 per
share.
11
20
Fedders Unaudited Pro Forma Condensed Financial Information
The following summary unaudited pro forma condensed financial information
of Fedders has been derived from the unaudited pro forma condensed financial
statements included elsewhere in this Proxy Statement-Prospectus. This data is
presented for illustrative purposes only and is not necessarily indicative of
the combined results of operations or financial position that would have
occurred if the Merger had occurred at the beginning of each period presented or
on the dates indicated, nor is it necessarily indicative of the future operating
results or financial position of Fedders.
QUARTER ENDED YEAR ENDED
NOVEMBER 30, 1995(a) AUGUST 31, 1995(a)
-------------------- ------------------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
Net sales(b)..................................... $ 32,835 $329,516
Gross profit..................................... 7,950 74,315
Percent of net sales............................. 24.2 22.6
Operating income (loss).......................... (929) 36,290
Percent of net sales............................. (2.8) 11.0
Pre-tax income (loss)............................ (1,072) 32,255
Percent of net sales............................. (3.3) 9.8
Net income (loss)................................ (665) 26,809
Net income (loss) attributable to common
stockholders................................... $ (960) $ 25,627
Primary earnings (loss) per share................ $ (0.02) $ 0.55
Cash dividends declared per share:
Preferred(c)................................... $ 0.039 $ 0.156
Common......................................... 0.020 0.020
Class A........................................ 0.020 0.020
Class B........................................ 0.018 0.018
Cash............................................. $ 16,495 --
Total assets..................................... 265,696 --
Long-term debt (including current portion)(d).... 45,313 --
Stockholders' equity............................. 129,785 --
- ---------------
(a) The pro forma selected financial data should be read in conjunction with pro
forma condensed consolidated financial statements and notes thereto.
(b) Includes the elimination of intercompany sales of compressors by NYCOR to
Fedders.
(c) Includes dividend related to the issuance of 7,565,000 shares of the new
Fedders Convertible Preferred Stock with an estimated dividend rate of 2.5%
based on the market value of Fedders Class A Stock of $6.125 on March 14,
1996. If such Preferred Stock is issued it would be convertible into
Fedders Class A on a 1:1 basis.
(d) Includes $23,000,000 related to the exchange of 1,150,000 shares of
outstanding NYCOR Preferred Stock for NYCOR's 8 1/2% Convertible
Subordinated Debentures due 2012.
12
21
PRO FORMA FINANCIAL DATA
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited pro forma condensed consolidated financial
statements are based upon the consolidated financial statements of Fedders and
NYCOR, adjusted to give effect to the Merger. Under the terms of the Merger, if
the Fedders Average Price is at or above $6.25, the Company will issue shares of
Class A Stock for each share of NYCOR Common, Class A and Class B Stock in a
ratio, determined by dividing $6.25 by the Fedders Average Price with fractional
share amounts being paid in cash. If the Fedders Average Price is lower than
$6.25, the Company will issue one share of a new Fedders Convertible Preferred
Stock, with an expected initial market value of $6.25 per share for each share
of NYCOR Common, Class A and Class B Stock. Each share of Fedders Convertible
Preferred Stock will be convertible into one share of Fedders Class A Stock and
will entitle the holder to a cumulative dividend at an annual rate which is
expected to support an initial market value of $6.25 per share (currently
estimated to be $0.156). The dividend rate to be set for the Preferred Stock is
therefore dependent upon the Fedders Average Price.
The accompanying unaudited pro forma condensed financial statements give
effect to the Merger accounted for as a purchase, are based upon an allocation
of the expected purchase price of $47,275,000 and include the adjustments
described in the notes attached hereto. Such information assumes the issuance of
Fedders Convertible Preferred Stock based on the trading price of Fedders Class
A Stock of $6.125 on March 14, 1996, and an estimate of the corresponding
Preferred Stock dividend rate of 2.5%. The pro forma condensed consolidated
financial statements also give effect to NYCOR's exchange of $23,000,000 in face
value of outstanding Preferred Stock for 8 1/2% Convertible Subordinated
Debentures due 2012. Final adjustments, other than as described in Note 4, are
not expected to be material to the depicted pro forma financial statements.
The accompanying unaudited pro forma condensed consolidated balance sheet
of the Company combines the historical consolidated balance sheet of Fedders as
of November 30, 1995 with the historical consolidated balance sheet of NYCOR as
of September 30, 1995 as if the Merger had occurred on November 30, 1995. The
accompanying unaudited pro forma condensed consolidated statements of operations
for the three months ended November 30, 1995 and the year ended August 31, 1995
combine the historical consolidated statements of operations of Fedders for
those periods, with the historical consolidated statements of operations of
NYCOR for the three months ended September 30, 1995 and the twelve months ended
September 30, 1995, respectively, all as if the Merger had occurred on August
31, 1994. NYCOR's results for the quarter ended September 30, 1995 reflect
NYCOR's normal seasonal shutdown for the month of August, while Fedders results
for the three months ended November 30, 1995 do not include a seasonal shutdown
which normally occurs in the month of August.
The pro forma condensed consolidated financial statements are not
necessarily indicative of the results that would have been obtained if the
Merger had occurred on the dates indicated or for any future period or date. The
pro forma adjustments give effect to available information and assumptions that
the Company believes are reasonable. The pro forma condensed consolidated
financial statements should be read in conjunction with the Company's historical
consolidated financial statements and notes thereto and the historical
consolidated financial statements of NYCOR and the notes thereto, all of which
are incorporated herein by reference. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
13
22
FEDDERS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
PRO FORMA PRO FORMA
FEDDERS NYCOR ADJUSTMENTS ---------
AUGUST 31, SEPTEMBER 30, -----------
1995 1995 (NOTE 4)
---------- ------------- (NOTE 1)
Net sales................................. $ 316,494 $75,709 $ (62,687)(a) $ 329,516
Costs and expenses
Cost of sales........................... 249,369 68,984 (63,152)(a,b) 255,201
Selling, general and administrative..... 29,472 9,056 (503)(c) 38,025
-------- -------- -------- --------
278,841 78,040 (63,655) 293,226
Operating income (loss)................... 37,653 (2,331) 968 36,290
Net interest expense...................... (1,962) (118) (1,955)(d) (4,035)
-------- -------- -------- --------
Income (loss) before income taxes......... 35,691 (2,449) (987) 32,255
Federal, state and foreign income tax
(benefit)............................... 6,187 565 (1,306)(e,f) 5,446
-------- -------- -------- --------
Net income (loss)......................... 29,504 (3,014) 319 26,809
Less: Preferred Stock
Dividend requirements................... -- (1,955) 1,955(d) --
-- -- (1,182)(g) (1,182)
-------- -------- -------- --------
Income (loss) attributable to common
stockholders............................ $ 29,504 $(4,969) $ 1,092 $ 25,627
======== ======== ======== ========
Primary earnings (loss) per share (Note
3)...................................... $ 0.72 $ (0.66) $ 0.55
======== ======== ========
See accompanying notes.
14
23
FEDDERS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED NOVEMBER 30, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
PRO FORMA PRO FORMA
FEDDERS NYCOR ADJUSTMENTS ---------
NOVEMBER 30, SEPTEMBER 30, ---------
1995 1995 (NOTE 4)
------------- -------------- (NOTE 1)
Net sales................................ $27,809 $ 15,844 $ (10,818)(a) $32,835
Costs and expenses
Cost of sales.......................... 21,032 15,086 (11,233)(a,b) 24,885
Selling, general and administrative.... 6,779 2,226 (126)(c) 8,879
------ ------ ------- ------
27,811 17,312 (11,359) 33,764
Operating income (loss).................. (2) (1,468) 541 (929)
Net interest income (expense)............ 556 (210) (489)(d) (143)
------ ------ ------- ------
Income (loss) before income taxes........ 554 (1,678) 52 (1,072)
Federal, state and foreign income tax
(benefit).............................. 211 209 (827)(e,f) (407)
------ ------ ------- ------
Net income (loss)........................ 343 (1,887) 879 (665)
Less: Preferred Stock Dividend
requirements........................... -- (489) 489(d) --
(295)(g) (295)
------ ------ ------- ------
Income (loss) attributable to Common
Stockholders........................... $ 343 $ (2,376) $ 1,073 $ (960)
====== ====== ======= ======
Primary earnings (loss) per share (Note
3)..................................... $ 0.01 $ (0.31) $ (0.02)
====== ====== ======
See accompanying notes.
15
24
FEDDERS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
PRO FORMA PRO
FEDDERS NYCOR ADJUSTMENTS FORMA
NOVEMBER 30, SEPTEMBER 30, ----------- --------
1995 1995
------------ ------------- (NOTE 2) (NOTE 4)
ASSETS
Current assets:
Cash and cash equivalents............ $ 15,378 $ 1,117 -- $ 16,495
Accounts receivable.................. 19,511 7,638 $ (1,053)(e) 26,096
Inventories.......................... 93,025 9,986 (63)(f) 102,948
Deferred income taxes................ 2,954 -- 1,788(c) 4,742
Other current assets................. 2,076 1,918 -- 3,994
-------- ------- ------- --------
Total current assets................... 132,944 20,659 672 154,275
Net property, plant and equipment...... 34,857 31,338 -- 66,195
Deferred income taxes.................. 1,277 -- 4,672(c,d) 5,949
Other assets........................... 6,380 43,182 (10,285)(b) 39,277
-------- ------- ------- --------
$175,458 $95,179 $ (4,941) $265,696
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowing................. $ 9,469 -- -- $ 9,469
Current portion of long-term debt.... 590 $ 1,133 -- 1,723
Accounts payable..................... 27,374 7,548 $ (1,053)(e) 33,869
Accrued expenses..................... 23,999 5,741 -- 29,740
Income taxes payable................. 4,797 32 -- 4,829
-------- ------- ------- --------
Total current liabilities.............. 66,229 14,454 (1,053) 79,630
Long-term debt......................... 14,596 5,994 23,000(g) 43,590
Other long-term liabilities............ 6,461 568 -- 7,029
Minority interest in joint venture..... 5,662 -- -- 5,662
Stockholders' equity:
Fedders Preferred Stock.............. -- -- 47,275(a) 47,275
NYCOR Preferred Stock................ -- 23,000 (23,000)(g) --
Fedders Common Stock, Class A Stock,
Class B Stock and cumulative
translation adjustment............ 87,007 -- -- 87,007
Accumulated deficit.................. (4,497) -- -- (4,497)
Net assets acquired.................. -- 51,163 (51,163)(c,d,f,h) --
-------- ------- ------- --------
Total stockholders' equity............. 82,510 74,163 (26,888) 129,785
-------- ------- ------- --------
17$5,458... $95,179 $ (4,941) $265,696
======== ======= ======= ========
See accompanying notes.
16
25
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Pro forma adjustments giving effect to the Merger in the unaudited pro
forma condensed statements of operations reflect the following:
(a) The elimination of intercompany sales of compressors by NYCOR to
Fedders including the decrease in unrealized intercompany profit between
the beginning and the end of the periods presented, which amounted to
$208,000 for the year ended August 31, 1995 and $351,000 for the quarter
ended November 30, 1995.
(b) The reduction of amortization expense resulting from a reduction
in goodwill (assuming amortization over 40 years) which amounted to
$257,000 for the year ended August 31, 1995 and $64,000 for the quarter
ended November 30, 1995.
(c) The reduction of administrative expenses resulting from the
elimination of redundant costs related to the existence of a separate
public company. Such redundant costs include franchise taxes, reports to
stockholders, audit fees, bank fees and others.
(d) The increase in interest expense and decrease in Preferred Stock
dividends related to NYCOR's exchange of Preferred Stock for 8 1/2%
Convertible Subordinated Debentures due 2012.
(e) The tax effect on adjustments (a), (b), (c) and (d), above,
calculated at the Company's marginal effective tax rate of 38% which
amounted to a benefit of $375,000 for the fiscal year ended August 31, 1995
and an expense of $20,000 for the quarter ended November 30, 1995.
(f) The reduction in the Company's tax provision as a result of
NYCOR's losses offsetting Fedders' income, calculated at Fedders' marginal
effective tax rate of 38%, which amounted to $931,000 for the year ended
August 31, 1995 and $847,000 for the quarter ended November 30, 1995.
(g) The increase in Preferred Stock dividends related to the assumed
issuance of Fedders Convertible Preferred Stock with an estimated annual
dividend rate of 2.5% issued in connection with the Merger based on the
market value of Fedders Class A Stock of $6.125 on March 14, 1996.
(h) The results of operations of NYCOR for the quarter ended September
30, 1995 are included in both the unaudited pro forma condensed statements
of operations for the year ended August 31, 1995 and the quarter ended
November 30, 1995.
2. Pro forma adjustments giving effect to the Merger in the unaudited pro
forma condensed balance sheet reflect the following:
(a) Based upon the March 14, 1996 closing price of Fedders Class A
Stock of $6.125 per share, the issuance of approximately 7,565,000 shares
of Fedders Convertible Preferred Stock, with a value of $6.25 per share,
for all the outstanding Common, Class A and Class B shares of NYCOR.
(b) The net reduction of NYCOR goodwill resulting from the allocation
of total expected consideration from the Merger.
(c) The reduction of NYCOR's deferred tax asset valuation allowance by
$2,960,000 resulting from certain net operating loss carryforwards and
reversing temporary differences of NYCOR becoming available to the Company
in future years, and their utilization being more likely than not.
(d) The further increase in NYCOR's deferred tax asset by $3,500,000
resulting from the reduction in the book basis of NYCOR's deductible
goodwill referred to in 2(b) above.
(e) The elimination of the intercompany receivable and payable
resulting from compressor sales by NYCOR to Fedders.
(f) The elimination of unrealized intercompany profit in ending
inventory related to compressor sales by NYCOR to Fedders.
17
26
(g) The exchange of 1,150,000 shares of outstanding NYCOR Preferred
Stock for NYCOR's 8 1/2% Convertible Subordinated Debentures due 2012, at
the rate of $20 principal amount of Debentures for each share of Preferred
Stock.
(h) The elimination of the NYCOR net assets acquired.
3. Pro Forma earnings (loss) per share
Pro forma earnings per share for the year ended August 31, 1995 has been
computed by dividing pro forma consolidated net income, before Preferred Stock
dividends, by the weighted average number of shares of Common, Class A, and
Class B and other common stock equivalents (including the Fedders Convertible
Preferred Stock) outstanding during the period, which amounted to 48,565,000.
Pro forma (loss) per share for the quarter ended November 30, 1995 has been
computed by dividing pro forma consolidated net (loss), less Preferred Stock
dividends, by the weighted average number of shares of Common, Class A, and
Class B and other common stock equivalents (excluding the Fedders Convertible
Preferred Stock, which is anti-dilutive) outstanding during the period, which
amounted to 41,039,000. Fully diluted pro forma earnings (loss) per share was
not materially dilutive and, accordingly, is not presented.
4. Shares issued as consideration in the Merger
If the Fedders Average Price is at or above $6.25, the Fedders Convertible
Preferred Stock will not be issued. Instead, Fedders Class A Stock with a total
value of $47,275,000 will be issued for NYCOR Common, Class A and Class B shares
outstanding in a ratio determined by dividing $6.25 by the Fedders Average
Price. In that case there would be no preferred stock dividend and pro forma
consolidated income (loss) attributable to common stockholders for the year
ended August 31, 1995 and the quarter ended November 30, 1995 would be equal to
net income (loss). If the Fedders Average Price was $6.25, the pro forma loss
per share for the quarter ended November 30, 1995 would be $(.01) and the pro
forma earnings (loss) per share for the year ended August 31, 1995 would not
change. As the assumed Fedders Average Price is increased above $6.25, pro forma
earnings (loss) per share would also increase. For each increment of $.50 in the
assumed Fedders Average Price above $6.25, the pro forma earnings per share for
the year ended August 31, 1995 and the pro forma loss per share for the quarter
ended November 30, 1995 would increase by approximately $0.006 and less than
$0.001, respectively.
18
27
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges of Fedders for the fiscal years
ended August 31, 1995 and 1994 and for the three months ended November 30, 1995
were 12.4, 5.2 and 3.8, respectively. The actual deficiency of earnings versus
fixed charges for the years ended August 31, 1993 and 1992 and the eight months
ended August 31, 1991 were $2,340,000, $24,965,000 and $13,666,000,
respectively. If Fedders Convertible Preferred Stock is issued upon consummation
of the Merger, the ratio of earnings to combined fixed charges and preferred
stock dividends of Fedders on a pro forma basis for the year ended August 31,
1995 would have been 5.3. The pro forma deficiency of earnings versus combined
fixed charges and preferred stock dividends for the quarter ended November 30,
1995 would have been $1,547,000. For purposes of computing the foregoing pro
forma ratios, Fedders has assumed that the number of shares of Fedders
Convertible Preferred Stock issued in the Merger will equal the aggregate number
of shares of Common Stock, Class A Stock and Class B Stock of NYCOR outstanding.
If the Fedders Average Price is at or above $6.25, the new Convertible
Preferred Stock of Fedders will not be issued. Instead, Fedders Class A Stock
will be issued in a ratio determined by dividing $6.25 by the Fedders Average
Price per share of NYCOR Common, Class A and Class B shares outstanding. In that
case the pro forma ratio of earnings to combined fixed charges and preferred
stock dividends would no longer be applicable, and the pro forma ratio of
earnings to fixed charges would be computed instead. If the Fedders Average
Price is at or above $6.25, the pro forma ratio of earnings to fixed charges of
Fedders for the year ended August 31, 1995 would have been 7.2, and the pro
forma deficiency of earnings versus fixed charges for the quarter ended November
30, 1995 would have been $1,072,000.
The ratio of earnings to combined fixed charges and preferred stock
dividends of NYCOR for the fiscal years ended December 31, 1993, 1992, 1991 and
1990 were 1.42, 1.81, 1.40, and 1.46, respectively. The deficiency of earnings
to combined fixed charges and preferred stock dividends of NYCOR for the fiscal
year ended December 31, 1994 and the nine months ended September 30, 1995 were
$2,272,000 and $5,215,000, respectively.
19
28
INTRODUCTION
This Proxy Statement-Prospectus is being furnished by the Board of
Directors of Fedders to the stockholders of Fedders for the purpose of
soliciting proxies to be voted at the Fedders Annual Meeting. Information about
the Fedders Annual Meeting is set forth below under "The Fedders Annual
Meeting."
This Proxy Statement-Prospectus is being furnished by the Board of
Directors of NYCOR to the holders of Common Stock and Class B Stock of NYCOR for
the purpose of soliciting proxies to be voted at the NYCOR Special Meeting.
Information about the NYCOR Special Meeting is set forth below under "The NYCOR
Special Meeting." When delivered to the stockholders of NYCOR, this document
also constitutes the prospectus of Fedders with respect to the Fedders
Convertible Preferred Stock or Fedders Class A Stock to be issued by Fedders
upon consummation of the Merger (and to the Fedders Class A Stock issuable upon
conversion of any Fedders Convertible Preferred Stock issued upon consummation
of the Merger).
The principal executive offices of Fedders are located at Westgate
Corporate Center, 505 Martinsville Road, Liberty Corner, New Jersey 07938;
telephone: (908) 604-8686, and the principal executive offices of NYCOR are
located at 287 Childs Road, Basking Ridge, New Jersey 07920; telephone: (908)
953-8200.
RISK FACTORS
In evaluating the proposed Merger, the stockholders of Fedders and NYCOR
should carefully consider the following factors, as well as all the information
included in this Proxy-Statement Prospectus.
LACK OF AN ESTABLISHED TRADING MARKET FOR THE FEDDERS CONVERTIBLE PREFERRED
STOCK
If the Fedders Average Price (which will be calculated 5 business days
prior to the Fedders Annual Meeting and NYCOR Special Meeting) is below $6.25,
each share of Common Stock, Class A Stock and Class B Stock of NYCOR will be
converted into the right to receive one share of Fedders Convertible Preferred
Stock with terms expected to support an initial market value of $6.25. The
Fedders Convertible Preferred Stock will be a new issue of Fedders equity
securities and thus will have no trading history when issued. The Fedders
Convertible Preferred Stock will, however, be listed on the NYSE where the
Fedders Common Stock and Fedders Class A Stock are currently listed. While
Fedders and NYCOR expect that the terms of the Fedders Convertible Preferred
Stock will support an initial market value of $6.25 per share, there can be no
assurance that Fedders Convertible Preferred Stock, if issued in the Merger,
will trade at that price or, if it does, for how long, as matters beyond the
control of Fedders and NYCOR may impact its market value.
INCREASED LEVERAGE FROM NYCOR PREFERRED STOCK CONVERSION
At August 31, 1995, Fedders had $5.1 million of debt with an average
interest rate of 1.9%. Most of this debt is the result of a 1.0% loan with the
State of Illinois relating to a factory located in that State. At February 29,
1996, total debt of $49.2 million included seasonal working capital borrowing of
$34.4 million and $10.4 million related to Fedders' Chinese joint venture,
Fedders Xinle. The $10.4 million (RMB 86 million), 15% loan matures in twelve
years and is not guaranteed by Fedders.
On March 15, 1996, NYCOR exchanged its Preferred Stock for debentures
totaling $23,000,000 with an 8.5% rate of interest. On the effective date of the
Merger, Fedders will assume this additional debt.
RECENT HISTORY OF NYCOR'S LOSSES
For the year ended December 31, 1994, NYCOR had a loss of 17 cents per
share of Common Stock, Class A Stock and Class B Stock of NYCOR on earnings of
$0.64 million. The per-share loss in 1994 gives effect to dividends paid on
NYCOR's $1.70 Convertible Exchangeable Preferred Stock. For the nine-month
period ended September 30, 1995, NYCOR experienced a loss of 60 cents per share
on a net loss of $3.1 million. The year to date losses NYCOR has experienced in
fiscal 1995 resulted principally from manufacturing inefficiencies of its
compressor operations as efforts continue to bring on line an automated
20
29
assembly system delivered in the third quarter of 1995. Labor overtime also
increased to meet manufacturing demands under its supply agreement with Fedders.
If these inefficiencies were to continue, it would negatively affect earnings
potential.
RISKS INHERENT TO THE AIR CONDITIONER BUSINESS
Although Fedders is rapidly expanding on a global basis, which should have
the effect of smoothing out the seasonality of its business and provide more
level sales activity year-round, its business is still weather dependent, and a
cooler than normal summer season in any of its markets can negatively affect its
earning potential for such season.
THE FEDDERS ANNUAL MEETING
The Fedders Annual Meeting will be held at 2:00 p.m. on Friday, May 31,
1996 at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, NJ 07060, for
the purposes set forth below.
A stockholder who shall sign and return a proxy in the form enclosed with
this Proxy Statement-Prospectus has the power to revoke it at any time before it
is exercised by giving written notice to the Secretary of the Company to such
effect or by delivering to the Company an executed proxy bearing a later date.
Any stockholder who has given a proxy may still attend the Fedders Annual
Meeting, revoke his or her proxy, and vote in person.
The Company's Annual Report to Stockholders for the period from September
1, 1994 to August 31, 1995 (the "Fiscal Year"), including financial statements,
was previously mailed to stockholders of Fedders.
At the Fedders Annual Meeting, holders of shares of Fedders Common Stock
and Fedders Class B Stock will be asked to consider and act on proposals to
approve the actions of the Board of Directors to (i) adopt the Merger Agreement
and the Merger, (ii) elect three (3) directors, (iii) adopt the Company's Stock
Option Plan VIII; and (iv) ratify the appointment of the Company's independent
auditors. In addition, at the Fedders Annual Meeting, holders of shares of
Fedders Common Stock, Fedders Class A Stock and Fedders Class B Stock will be
asked to consider and act on a proposal to adopt the Amendments to the Fedders
Charter (i) to increase the number of the authorized shares of Fedders Common
Stock from 60,000,000 to 80,000,000; (b) to increase the number of the
authorized shares of Fedders Class A Stock from 30,000,000 to 60,000,000; and
(c) to increase the number of the authorized shares of the Preferred Stock of
Fedders from 5,000,000 to 15,000,000.
The close of business on April 1, 1996 has been fixed as the record date
for the determination of the stockholders entitled to notice of, and to vote at,
the Fedders Annual Meeting. As of such date, shares of Fedders Common
Stock and shares of Fedders Class B Stock were outstanding and
entitled to be voted at the Fedders Annual Meeting. On the record date, there
were also issued and outstanding shares of Fedders Class A Stock
entitled to vote on that portion of the proposal to adopt the Amendments that
proposes to increase the number of authorized shares of Fedders Class A Stock
from 30,000,000 to 60,000,000. The holders of Fedders Class B Stock are entitled
to ten votes per share in any election of directors if more than 15% of the
shares of Fedders Common Stock outstanding on the record date are owned
beneficially by a person or a group of persons acting in concert, or if a
nomination for the Board of Directors is made by a person or a group of persons
acting in concert (other than the Board) provided such nomination is not made by
one or more of the holders of Fedders Class B Stock, acting in concert with each
other, who beneficially own more than 15% of the shares of Fedders Class B Stock
outstanding on such record date. The Board of Directors is not presently aware
of any circumstance that would give holders of Fedders Class B Stock the right
to ten votes per share in the election of directors at the Fedders Annual
Meeting.
A plurality of the votes of the shares of Fedders Common Stock and Fedders
Class B Stock present in person or represented by proxy at the Fedders Annual
Meeting shall be needed for the election of directors, provided those shares
present in person or represented by proxy at the Fedders Annual Meeting
constitute a quorum. Approval of the Fedders Stock Option Plan VIII and
ratification of the appointment of independent auditors requires the affirmative
vote of a majority of the shares of Fedders Common Stock and Fedders
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Class B Stock voted on such Proposals at the Fedders Annual Meeting so long as
at least a majority of the Fedders Common Stock and Fedders Class B Stock are
voted on such Proposals. Under the DGCL, approval of the Amendments to the
Fedders Charter requires the affirmative vote of a majority of the outstanding
Fedders Common Stock and Fedders Class B Stock voting together as a single
class, and, under the DGCL and the provisions set forth in the Fedders Charter,
approval of the Amendments requires the affirmative vote of a majority of the
outstanding shares of (i) Fedders Common Stock, (ii) Fedders Class B Stock, and
(iii) Fedders Class A Stock (on the portion of the proposal to increase the
number of authorized shares of Fedders Class A Stock only), each voting
separately as a class. Under the terms of the Fedders Charter, approval of the
Merger requires an affirmative vote of a majority of the outstanding shares of
the Fedders Common Stock and Fedders Class B Stock, each voting separately as a
class, and two-thirds ( 2/3) of the outstanding Fedders Common Stock and Fedders
Class B Stock voting together as a single class The executive officers and
directors of Fedders, who together hold 2,262,566 shares, or 99.8% of the
outstanding Fedders Class B Stock, are expected to vote in favor of the
proposals. The executive officers and directors of Fedders, by themselves,
cannot assure passage of any of the proposals, since they hold less than a
majority of the combined Fedders Common Stock and Fedders Class B Stock. In the
case of the Amendments to the Fedders Charter the holders of Fedders Common
Stock or Fedders Class A Stock can offset the separate vote of the Fedders Class
B Stock. In the case of the Merger, the holders of the Fedders Common Stock can
offset the separate vote of the Fedders Class B Stock. Approval of the
Amendments to the Fedders Charter is required in order for Fedders to complete
the Merger, if approved. Approval of such Amendments is also required in order
for there to be a sufficient number of authorized but unissued and unreserved
shares of Fedders Class A Stock available for issuance under the Fedders Stock
Option Plan VIII, if approved.
THE BOARD OF DIRECTORS OF THE COMPANY (INCLUDING ALL OF THE INDEPENDENT
DIRECTORS) HAS UNANIMOUSLY CONCLUDED THAT THE MERGER IS IN THE BEST INTEREST OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER AND THE OTHER
PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
The proxies in the accompanying form will be voted as specified, but if no
specification is made they will be voted in favor of (i) the approval of the
Merger Agreement and the Merger, (ii) the adoption of the Amendments, (iii) the
election of the nominees for director set forth herein, (iv) the adoption of the
Company's Stock Option Plan VIII, and (v) ratification of the appointment of BDO
Seidman, LLP as the Company's independent auditors for the ensuing fiscal year.
In the discretion of the proxyholders, the proxies will also be voted for or
against such other matters as may properly come before the Fedders Annual
Meeting. The Board of Directors is not aware that any other matters are to be
presented for action at the Fedders Annual Meeting.
The shares represented by a proxy which is timely returned and marked
"Abstain" as to any matter as well as broker non-votes will be considered
present at the Fedders Annual Meeting and will be included in the calculation of
those shares needed to constitute a quorum. The shares represented by such
proxies, although considered present for quorum purposes, will not be considered
a part of the voting power present with respect to any proposal which is
abstained from or to which the broker non-vote relates. With respect to the
proposals to approve the Merger Agreement and the Merger and to adopt the
Amendments, an abstention or a broker non-vote is the equivalent of a negative
vote on such proposal.
THE NYCOR SPECIAL MEETING
The NYCOR Special Meeting will be held at 10:30 a.m. on Friday, May 31,
1996 at the Somerset Hills Hotel, 200 Liberty Corner Road, Warren, NJ 07060 for
the purpose of considering and acting on a proposal to approve the Merger
Agreement and the Merger.
A stockholder of NYCOR who shall sign and return a proxy in the form
enclosed with this Proxy Statement-Prospectus has the power to revoke it at any
time before it is exercised by giving written notice to the Secretary of NYCOR
to such effect or by delivering to NYCOR an executed proxy bearing a later date.
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Any stockholder of NYCOR who has given a proxy may still attend the NYCOR
Special Meeting, revoke his or her proxy, and vote in person.
The close of business on April 1, 1996 has been fixed as the record date
for the determination of the stockholders of NYCOR entitled to notice of, and to
vote at, the NYCOR Special Meeting. As of such date, shares of NYCOR
Common Stock and shares of NYCOR Class B Stock were outstanding and
entitled to be voted at the NYCOR Special Meeting. The holders of shares of
NYCOR Class A Stock, of which there were outstanding as of
the record date, are not entitled to vote at the NYCOR Special Meeting. As of
the record date, there were approximately holders of record
of NYCOR Common Stock, holders of record of NYCOR Class A
Stock and holders of record of NYCOR Class B Stock.
The Board of Directors of NYCOR believes that the Merger is the best method
to create value for NYCOR's stockholders. The Board of Directors has concluded
that, although the current strategies of its operating units are sound, the
potential for growth of its businesses, particularly Rotorex, will be enhanced
as part of a larger, financially sound company such as Fedders. As a result of
the Merger, NYCOR's stockholders will recognize value in their stock and have
the opportunity to participate in that growth as stockholders of Fedders.
Therefore, the Board of Directors has concluded that the Merger is in the best
interests of NYCOR's stockholders. Approval of the Merger by the stockholders of
NYCOR requires the affirmative vote of a majority of the outstanding shares of
NYCOR Common Stock and NYCOR Class B Stock each voting separately as a class.
The executive officers and directors of NYCOR, who together hold 640,352 shares,
or 89.7% of the outstanding NYCOR Class B Stock, are expected to vote in favor
of the proposal. The executive officers and directors of NYCOR, by themselves,
cannot assure passage of the proposal, as the holders of the NYCOR Common Stock
can offset the separate vote of the NYCOR Class B Stock.
THE BOARD OF DIRECTORS OF NYCOR HAS UNANIMOUSLY CONCLUDED THAT THE MERGER
IS IN THE BEST INTEREST OF NYCOR AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE
STOCKHOLDERS OF NYCOR VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER.
The proxies in the accompanying form will be voted as specified, but if no
specification is made, they will be voted in favor of the adoption of the Merger
Agreement and the Merger. In the discretion of the proxyholders, the proxies
will also be voted for or against such other matters as may properly come before
the NYCOR Special Meeting.
The shares represented by a proxy which is timely returned and marked
"Abstain" as well as broker non-votes will be considered present at the NYCOR
Special Meeting and will be included in the calculation of those shares needed
to constitute a quorum. With respect to the proposal to approve the Merger
Agreement and the Merger, an abstention or a broker non-vote is the equivalent
of a negative vote on such proposal.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF FEDDERS
As of December 31, 1995, each director of the Company and all directors and
executive officers of the Company owned beneficially the number of shares of the
Company's equity securities set forth in the following table. Shares subject to
acquisition within 60 days pursuant to stock options are shown separately.
Unless otherwise indicated, the owners listed have sole voting and investment
power. Fedders Class A Stock has no voting rights except as provided under the
DGCL.
SHARES
AMOUNT AND SUBJECT TO
NATURE OF ACQUISITION PERCENT
TITLE OF NAME OF INDIVIDUAL BENEFICIAL WITHIN 60 OF CLASS
CLASS OR PERSONS IN GROUP OWNERSHIP DAYS(15) OWNED(16)
- ------------------- --------------------------------------------------- ----------- -------------
Common Stock Salvatore Giordano..................... 1,100(1) 0 Less than 1%
Sal Giordano, Jr....................... 1,100(1) 0 Less than 1%
Joseph Giordano........................ 13,910(1) 0 Less than 1%
Howard S. Modlin....................... 256,800(2) 0 1.35%
Clarence Russel Moll................... 61,400(3) 0 Less than 1%
William J. Brennan..................... 5,000 0 Less than 1%
Anthony E. Puleo....................... 2,000(4) 0 Less than 1%
Robert L. Laurent, Jr.................. 115,000 0 Less than 1%
S. A. Muscarnera....................... 55,000 0 Less than 1%
All directors and executive officers as
a group................................ 514,610 0 2.71%
Class A Stock Salvatore Giordano..................... 2,378,740(5)(6) 487,500 14.76%
Sal Giordano, Jr....................... 1,521,509(5)(7)(8) 487,500 10.34%
Joseph Giordano........................ 1,710,170(5)(8) 234,375 10.14%
Howard S. Modlin....................... 224,701(9) 164,064 2.04%
Clarence Russel Moll................... 34,725(10) 96,563 Less than 1%
William J. Brennan..................... 4,375 121,876 Less than 1%
Anthony E. Puleo....................... 0 9,375 Less than 1%
Robert L. Laurent, Jr.................. 100,625 325,000 2.21%
S. A. Muscarnera....................... 48,125 243,750 1.52%
Gordon Newman.......................... 0(11) 14,063 Less than 1%
All directors and executive officers as
a group................................ 2,008,142 2,225,317 20.0%
Class B Stock(16) Salvatore Giordano..................... 1,866,476(12) 0 82.31%
Sal Giordano, Jr....................... 2,153,746(12)(13)(14) 0 94.98%
Joseph Giordano........................ 2,150,296(12)(14) 0 94.83%
All directors and executive officers as
a group................................ 2,262,566 0 99.78%
Ownership of Common Stock, Class A
Stock and Class B Stock combined, by
all directors and executive officers as
a group................................ 4,785,318 2,225,317 16.53%
- ---------------
(1) The amount shown includes 1,100 shares as to which Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment
power.
(2) Includes 3,100 shares owned by members of Mr. Modlin's family as to which
Mr. Modlin disclaims beneficial ownership.
(3) Includes 15,000 shares owned by Dr. Moll's wife, as to which Dr. Moll
disclaims beneficial ownership.
(4) Through inadvertence, Mr. Puleo reported, in an untimely manner, one
transaction on Form 4 covering the purchase of shares of Fedders Common
Stock during the Fiscal Year. The Company is not aware of any failure of
Mr. Puleo to file any required Form.
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(5) Includes 825 shares as to which Messrs. Salvatore Giordano, Sal Giordano,
Jr. and Joseph Giordano share voting and investment power; 502,025 shares
as to which the same individuals also share voting and investment power;
102,150 are shares held by the Salvatore Giordano Foundation; and 35,817
are shares held by the Giordano Foundation, for both of which foundations
these individuals are officers, directors and stockholders.
(6) Includes 117,548 shares held of record by Mr. Giordano's wife, and 170,170
shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(7) Includes 9,197 shares held of record by Mr. Giordano's wife, as to which
Mr. Giordano disclaims beneficial ownership.
(8) Includes 153,125 shares held in trust, as to which Messrs. Sal Giordano,
Jr. and Joseph Giordano share voting and investment power.
(9) Includes 2,713 shares owned by members of Mr. Modlin's family as to which
Mr. Modlin disclaims beneficial ownership.
(10) Includes 13,125 shares owned by Dr. Moll's wife as to which Dr. Moll
disclaims beneficial ownership.
(11) Through inadvertence, Mr. Newman reported, in an untimely manner, two
transactions on Form 4 for the month of August, 1995 covering the sale of
Fedders Common Stock and Fedders Class A Stock during the Fiscal Year. The
Company is not aware of any failure of Mr. Newman to file any required
Form.
(12) The amount shown includes 1,810,186 shares as to which Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment
power; 52,500 are shares held by the Salvatore Giordano Foundation, and
3,790 are shares held by the Giordano Foundation, for both of which they
are officers, directors and stockholders.
(13) The amount shown includes 1,150 shares held of record by Mr. Giordano's
wife, as to which Mr. Giordano disclaims beneficial ownership.
(14) The amount shown includes 175,000 shares held in trust, as to which Messrs.
Sal Giordano, Jr. and Joseph Giordano share voting and investment power.
(15) The amounts shown are the number of shares held under options exercisable
within 60 days.
(16) The Fedders Class B Stock is convertible into Fedders Common Stock at any
time on a share-for-share basis. In the event that the individuals named as
owning Fedders Class B Stock converted their shares into Fedders Common
Stock, less than 5% of the class would remain outstanding, and pursuant to
the terms of the Fedders Charter, all remaining Fedders Class B Stock and
all outstanding Fedders Class A Stock would automatically be converted into
Fedders Common Stock. If such conversion took place, and the named
individuals exercised all of the options indicated, such individuals and
the group would beneficially own the following number of shares
constituting the indicated percentage of Fedders Common Stock outstanding:
Mr. Salvatore Giordano, 4,733,816 shares (of which 2,314,136 are shares as
to which Mr. Giordano shares voting and investment power with Messrs.
Joseph Giordano and Sal Giordano, Jr.; 154,650 are shares held by the
Salvatore Giordano Foundation, and 39,607 are shares held by the Giordano
Foundation, for both of which he is an officer, director and shareholder)
constituting 11.64%; Mr. Sal Giordano, Jr., 4,163,855 shares (of which
2,314,136 are shares as to which Mr. Giordano shares voting and investment
power with Messrs. Salvatore Giordano and Joseph Giordano; 154,650 are
shares held by the Salvatore Giordano Foundation, and 39,607 are shares
held by the Giordano Foundation, for both of which he is an officer,
director and shareholder) constituting 10.24%; Mr. Joseph Giordano,
4,108,751 shares (of which 2,214,136 are shares as to which Mr. Giordano
shares voting and investment power with Messrs. Salvatore Giordano and Sal
Giordano, Jr.; 154,650 are shares held by the Salvatore Giordano
Foundation, and 39,607 are shares held by the Giordano Foundation, for both
of which he is an officer, director and shareholder) constituting 10.16%;
and all directors and executive officers as a group 7,010,635 shares
constituting 16.53%.
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PRINCIPAL STOCKHOLDERS OF FEDDERS
The following table sets forth information at December 31, 1995 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.
AMOUNT
TITLE OF NAME AND ADDRESS BENEFICIALLY PERCENT
CLASS OF BENEFICIAL OWNER OWNED OF CLASS
- -------------- ---------------------------------------------- ------------ --------
Class B Stock Salvatore Giordano(1)......................... 2,262,566 99.78%
Joseph Giordano and
Sal Giordano, Jr.
c/o Fedders Corporation
Liberty Corner, NJ 07938
Common Stock Strong Capital Management, Inc.(2)............ 2,185,500 11.6%
100 Heritage Reserve
P.O. Box 2936
Milwaukee, WI 53201
- ---------------
(1) In the event that the named individuals converted their shares of Fedders
Class B Stock into Fedders Common Stock, less than 5% of the class would
remain outstanding, and pursuant to the terms of the Fedders Charter, all
remaining Fedders Class B Stock and all outstanding Fedders Class A Stock
would automatically be converted into Fedders Common Stock. If such
conversion took place, and the named individuals exercised all of their
currently exercisable stock options, they would own 5,076,629 shares of
Fedders Common Stock constituting 12.26% of the Fedders Common Stock which
would then be outstanding.
See the previous table and the notes thereto for more detailed information
with respect to the security ownership of the named individuals.
(2) Strong Capital Management, Inc. is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF NYCOR
As of December 29, 1995 each director of NYCOR and all directors and
executive officers of NYCOR owned beneficially the number of shares of NYCOR's
equity securities set forth in the following table. As of such date, no director
or executive officer of NYCOR owns beneficially any shares of NYCOR Preferred
Stock. Shares subject to acquisition within 60 days pursuant to stock options
are shown separately. Unless otherwise indicated, the owners listed have sole
voting and investment power. NYCOR Class A Stock has no voting rights except as
provided under the DGCL.
SHARES
AMOUNT AND SUBJECT TO
NATURE OF ACQUISITION PERCENT
TITLE OF NAME OF INDIVIDUAL BENEFICIAL WITHIN 60 OF CLASS
CLASS OR PERSONS IN GROUP OWNERSHIP DAYS(8) OWNED(9)
- ------------- -------------------------------------- ---------- ----------- ------------
Common Stock Salvatore Giordano.................... 12,816 (1) 0 Less than 1%
Sal Giordano, Jr...................... 83,917 (1)(2) 0 3%
Joseph Giordano....................... 47,528 (1) 0 1.7%
William J. Brennan.................... 58,529 (3) 0 2.1%
S. A. Muscarnera...................... 16,250 0 Less than 1%
All directors and executive officers
as a
group................................. 213,102 7.6%
Class A Stock Salvatore Giordano.................... 587,850 (4)(5) 90,000 16.4%
Sal Giordano, Jr...................... 368,988 (4)(6) 90,000 11.1%
Joseph Giordano....................... 141,942 (4) 75,000 5.3%
William J. Brennan.................... 63,373 (3) 22,500 2.1%
S. A. Muscarnera...................... 35,903 22,500 1.4%
C. A. Keen............................ 14,250 22,500 Less than 1%
Kent E. Hansen........................ 25,000 75,000 2.4%
All directors and executive officers
as a
group................................. 1,016,944 397,500 31.8%
Class B Stock Salvatore Giordano.................... 640,352 (7) 0 89.7%
Sal Giordano, Jr...................... 640,352 (7) 0 89.7%
Joseph Giordano....................... 640,352 (7) 0 89.7%
All directors and executive officers
as a
group................................. 640,352 (7) 0 89.7%
Ownership of Common Stock, Class A
Stock and Class B Stock combined,
by all directors and executive
officers
as a group............................ 1,870,248 397,500 28.5%
- ---------------
(1) The amount shown includes 2,969 shares as to which Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano share voting and investment
power.
(2) The amount shown includes 2,500 shares held of record by Mr. Giordano's wife
and 20,201 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(3) The amount shown includes 250 shares as to which Mr. Brennan shares voting
and investment power.
(4) The amount shown includes 110,256 shares as to which Messrs. Salvatore
Giordano, Joseph Giordano and Sal Giordano, Jr. share voting and investment
power.
(5) The amount shown includes 80,201 shares held of record by Mr. Giordano's
wife in trust for their grandchildren, as to which Mr. Giordano disclaims
beneficial ownership.
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36
(6) The amount shown includes 4,991 shares held of record by Mr. Giordano's wife
and 8,610 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(7) The amount shown is held by Giordano Holding Corp. Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano are officers and directors
of such corporation and share voting and investment power over these shares.
(8) The amounts shown are the number of shares held under options exercisable
within 60 days.
(9) The NYCOR Class B Stock is convertible into NYCOR Common Stock at any time
on a share-for-share basis. In the event that the individuals named as
owning NYCOR Class B Stock converted their shares into NYCOR Common Stock
less than 5% of the class would remain outstanding, and pursuant to the
terms of the Certificate of Incorporation of NYCOR, all remaining NYCOR
Class B Stock and all outstanding NYCOR Class A Stock would automatically be
converted into NYCOR Common Stock. In such event, and assuming exercise of
all options, such individuals and the group would beneficially own the
following number of shares constituting the indicated percentage of NYCOR
Common Stock which would then be outstanding: Mr. Salvatore Giordano,
1,241,018 shares (of which 753,577 are shares as to which Mr. Giordano
shares voting and investment power with Messrs. Joseph Giordano and Sal
Giordano, Jr.) constituting 17.4%; Mr. Sal Giordano, Jr., 1,093,257 shares
(of which 753,577 are shares as to which Mr. Giordano shares voting and
investment power with Messrs. Salvatore Giordano and Joseph Giordano)
constituting 15.5%; Mr. Joseph Giordano, 829,822 shares (of which 753,577
are shares as to which Mr. Giordano shares voting and investment power with
Messrs. Salvatore Giordano and Sal Giordano, Jr.) constituting 11.9%; and
all directors and executive officers as a group 1,649,886 shares
constituting 25.7%.
PRINCIPAL STOCKHOLDERS OF NYCOR
The following table sets forth information at December 31, 1995 with
respect to the beneficial ownership of NYCOR's voting securities by all persons
known by NYCOR to own more than 5% of NYCOR's outstanding voting securities.
Unless otherwise indicated, the owners listed have sole voting and investment
power.
AMOUNT
TITLE OF NAME AND ADDRESS BENEFICIALLY PERCENT
CLASS OF BENEFICIAL OWNER(1) OWNED OF CLASS
- ------------- ------------------------------------------------ ------------ ---------
Common Stock Heartland Advisors, Inc......................... 524,146 18.9%
790 North Milwaukee Street
Milwaukee, WI 53202
Lindner Investment Series Trust................. 380,432(2) 12.1%
Ryback Management Corporation
7711 Carondelet Ave., Box 16900
St. Louis, MO 63105
Class B Stock Salvatore Giordano.............................. 640,352 89.7%
Joseph Giordano and
Sal Giordano, Jr.
c/o NYCOR, Inc.
287 Childs Road
Basking Ridge, NJ 07920
Dimensional Fund Advisors, Inc.................. 67,515(1) 9.5%
1299 Ocean Avenue 11th Floor
Santa Monica, CA 90901
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- ---------------
(1) The following statement has been provided by Dimensional Fund Advisors,
Inc.: "Dimensional Fund Advisors, Inc. ("Dimensional") a registered
investment advisor, is deemed to have beneficial ownership of 67,515 shares
of NYCOR, Inc., all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional Fund
Advisors, Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares."
(2) Includes 345,432 shares which would be held upon conversion of $1.70
Convertible Exchangeable Preferred Stock.
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PROPOSAL NO. 1
THE MERGER
GENERAL
Pursuant to the Merger Agreement, NYCOR would be merged with and into
Fedders, with Fedders as the surviving corporation. Upon the effectiveness of
the Merger, each share of Fedders Common Stock, Fedders Class A Stock and
Fedders Class B Stock would remain outstanding and unchanged except to the
extent holders of Fedders Class B Stock exercise dissenters' rights. Upon the
effectiveness of the Merger, stockholders of NYCOR will receive stock of
Fedders. If the Fedders Average Price is at or above $6.25, each share of Common
Stock, Class A Stock and Class B Stock of NYCOR (other than Class B Stock the
holders of which exercise dissenters' rights) will be converted into the right
to receive a number of shares of Fedders Class A Stock determined by dividing
$6.25 by the Fedders Average Price. If the Fedders Average Price is below $6.25,
each share of Common Stock, Class A Stock and Class B Stock of NYCOR (other than
Class B Stock the holders of which exercise dissenters' rights) will be
converted into the right to receive one share of Fedders Convertible Preferred
Stock. While Fedders and NYCOR expect that the terms of the Fedders Convertible
Preferred Stock will support an initial market value of $6.25 per share, there
is currently no market for such stock and there can be no guarantee that Fedders
Convertible Preferred Stock, when issued, will trade at that price or, if it
does, for how long, as matters beyond the control of Fedders and NYCOR may
impact its market value.
Stockholders of Fedders or NYCOR who wish to be advised of the Fedders
Average Price and of the consideration to be paid per share of Common Stock,
Class A Stock and Class B Stock of NYCOR upon consummation of the Merger may
obtain such information by calling (800) [INSERT NUMBER] during normal business
hours beginning on May 23, 1996 and ending on the date of the Fedders Annual
Meeting and the NYCOR Special Meeting.
REASONS FOR THE MERGER
Fedders is a holding company which, through its wholly owned operating
subsidiaries, is engaged in the manufacture and sale of a complete line of room
air conditioners and dehumidifiers, principally for the residential market.
Based upon industry statistics compiled by a trade association, Fedders believes
it is the largest manufacturer of room air conditioners in North America. In
November 1995, Fedders and Ningbo General Air Conditioner Factory of Ningbo,
China formed a joint venture to manufacture and market ductless split room air
conditioners as well as window type air conditioners.
NYCOR currently comprises two operating companies, Rotorex Company, Inc.
("Rotorex") and Melcor Corporation ("Melcor"). Rotorex manufactures rotary
compressors principally for use in room air conditioners. Melcor produces
thermoelectric heating and cooling modules used in a variety of applications in
which space and weight are considerations or precise temperature control is
required. Both operations were acquired by NYCOR in 1992. Rotorex was acquired
from Fedders and Melcor was acquired from its stockholders. As more fully
discussed below, the underlying basis for the Merger is Fedders' desire to
ensure a guaranteed supply of compressors to support its growth in global
markets by acquiring Rotorex.
Rotorex has supplied Fedders' wholly owned subsidiary, Fedders North
America, Inc. ("Fedders NA"), with a substantial portion of its requirements for
rotary compressors for more than 20 years. Previously, Rotorex was a subsidiary
of Fedders. Currently, Rotorex supplies rotary compressors to Fedders NA under a
ten-year supply agreement effective as of September 28, 1992 ( the "Supply
Agreement"). The provisions of the Supply Agreement require Fedders NA to
purchase 80% of its requirements for rotary compressors from Rotorex, to a
maximum of 800,000 units annually and require Rotorex to supply such number of
rotary compressors if ordered by Fedders NA. In the last three years, Fedders
has increased its sales and market share and expanded its customer base in North
America due, in part, to its ability to meet retailers' delivery requirements,
which is in large part dependent upon Rotorex. Fedders' compressor requirements
already surpass, by more than 600,000 units, what Rotorex is committed to
provide Fedders under the terms of the
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Supply Agreement. Additionally, it is expected that the recently completed joint
venture in China will require 500,000 compressors annually within three years.
These factors, coupled with a worldwide shortage of compressors, caused Fedders
to conclude, upon learning that Rotorex might be for sale, that it would be
important to regain ownership of Rotorex.
Since it was acquired by NYCOR in September 1992, Rotorex has sought to
fulfill its requirements to Fedders NA under the Supply Agreement and, at the
same time, increase its sales in the growing international market. Rotorex's
strategy is to participate in the domestic market through sales to Fedders NA
under the Supply Agreement and to concentrate its efforts to build its customer
base in the growing international markets.
In order to implement its strategy, Rotorex has invested approximately $14
million in its facilities, equipment and engineering capabilities in 1995. These
investments include an automated assembly system, automated gauging, plantwide
air conditioning necessary to maintain tolerances on parts and design
engineering lab facilities. In order to remain competitive in the market for
rotary compressors from a quality and efficiency perspective and to improve its
profitability, it is likely that Rotorex would be required to make additional
investments in the coming years.
NYCOR believes that Rotorex's strategy is sound, but while the Supply
Agreement with Fedders NA provides significant advantages and opportunities to
Rotorex, the fact that, as a result of its obligations under the Supply
Agreement, and despite successfully implementing its strategy in the
international markets, a substantial amount of NYCOR's sales will continue to be
concentrated to one customer. Many lending institutions have policies that make
it difficult for prospective borrowers that have significant concentration of
business with one customer. While NYCOR has been successful in financing its
operations and capital programs to date, and expects to be able to finance its
currently anticipated future requirements, in order for Rotorex to take
advantage of business opportunities that may arise and respond rapidly to
competitive requirements, access to capital will be important. In addition, in
order to participate to the greatest possible extent in the growing China
market, Rotorex may choose to explore joint venture or other opportunities that
would require greater access to capital. Rotorex recently signed a letter of
intent to form a joint venture to manufacture rotary compressors in Ningbo,
China. Based upon these factors, NYCOR believes that the ability for Rotorex to
grow and achieve its full capability will be enhanced as part of a larger, major
participant in the world-wide air conditioner market such as Fedders.
As a result of considering alternatives available to increase stockholder
value, the Board of Directors of NYCOR (the "NYCOR Board") began considering a
possible sale of Rotorex. Upon learning that the NYCOR Board was considering
such a transaction, the Board of Directors of Fedders (the "Fedders Board")
communicated to NYCOR its interest in acquiring Rotorex.
In light of Rotorex's contractual obligations to Fedders NA, the NYCOR
Board concluded that Fedders would be the only viable purchaser for Rotorex. The
NYCOR Board believed that, because of the constraints imposed on Rotorex by the
contractual relationship between Rotorex and Fedders NA, it was unlikely that
any other potential purchaser of Rotorex would offer as much for Rotorex as
Fedders would be willing to offer. The NYCOR Board believed that the most likely
potential purchasers for Rotorex would be air conditioner manufacturers or
compressor companies. The NYCOR Board did not believe that competitors of
Fedders would be viable candidates. Many compressor companies are part of a
larger organization that manufactures air conditioners. Nor did the NYCOR Board
believe that a company in an unrelated business would be willing to offer as
much as Fedders for Rotorex, since more than half of Rotorex's capacity was
committed to one customer, Fedders, for the next seven years. While Rotorex
still has the capacity to possibly sell a substantial quantity of compressors to
other customers, more than one-half of its total sales would be to one company.
As discussed above, such concentration of sales in one customer is viewed
unfavorably by most lending institutions. As a result, the NYCOR Board did not
solicit bids from any other potential purchasers and, therefore, could not be
certain how much another purchaser may be willing to pay for Rotorex. Upon
receiving a specific offer from the Fedders Board at a price per share that the
NYCOR Board deemed acceptable, the NYCOR Board accepted the offer to merge NYCOR
into Fedders.
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NYCOR has agreed not to solicit other Acquisition Proposals (as that term
is defined in the Merger Agreement). Additionally, NYCOR has agreed that if it
terminates the Merger for any reason within its control, other than as permitted
in the Merger Agreement, it will pay to Fedders the sum of $20 million plus all
expenses incurred by Fedders involving the Merger. See "The Merger
Agreement -- Termination."
BACKGROUND OF THE MERGER
At its regular meeting on July 27, 1995, as part of its regular review of
the business and prospects of NYCOR, the NYCOR Board discussed in a general way
options that might be available to enhance stockholder value. The possibility of
a transaction involving Rotorex was discussed. The NYCOR Board believed that
there might not be a better time to consider such a transaction, in light of the
strong market for Rotorex compressors and the improvements that had been made to
the Rotorex facility during 1995. The NYCOR Board did not discuss or otherwise
address the issue of enhancement of stockholder value until its next regular
meeting in October 1995.
At a regular meeting of the Fedders Board on October 24, 1995, the Vice
Chairman of the Fedders Board (who is also the Vice Chairman of the NYCOR Board)
notified the Fedders Board that he was going to recommend to the NYCOR Board at
its upcoming meeting, that Rotorex be sold. The Fedders Board considered the
effect a sale of Rotorex could have on its supply of compressors, particularly
the impact on its ability to respond quickly to its customers' changing
requirements during the air conditioner season, and concluded that it would be
in the best interests of Fedders and its stockholders to seek to regain control
of Rotorex. The Fedders Board further concluded that the most advantageous
structure for a transaction would be a merger of NYCOR into Fedders.
Fedders' interest in a merger transaction was communicated to the NYCOR
Board at its regular meeting on October 27, 1995. At this meeting, the NYCOR
Board considered the options available to it for enhancing stockholder value and
concluded that a transaction involving the entire company at an acceptable value
would be in the best interests of the NYCOR stockholders. The NYCOR Board
believed that it had only limited options available to it, principally related
to a transaction involving Rotorex. The NYCOR Board also concluded that selling
Rotorex and remaining an independent company with one small operation and the
balance of its assets in cash would not be the most effective method to enhance
stockholder value, as the market would not fully value NYCOR's stock until NYCOR
invested its cash in another business. The NYCOR Board considered a number of
factors in its deliberations regarding a transaction with Fedders including: (i)
capital expenditures made during 1995 at Rotorex, (ii) capital expenditures that
could be required in the next several years, (iii) potential sources of
financing for capital expenditures and offshore production and (iv) the impact
of these and other factors on the rate of growth of Rotorex's business.
On October 30, 1995, the Fedders Board was advised that NYCOR would
consider a transaction for the entire company and was given an indication of the
minimum value at which a transaction might be concluded. This minimum value was
$6.25 per share of NYCOR Common, Class A and Class B Stock. The value was
determined by the NYCOR Board applying its judgment as to the current values of
NYCOR's operating subsidiaries and reducing such value by the liquidation value
of the NYCOR Preferred Stock and by an assumed discount that would be expected
to be applied to the market value of the stock of a company whose assets consist
totally of cash. The resulting amount was divided by the number of outstanding
shares of NYCOR Common Stock, NYCOR Class A Stock and NYCOR Class B Stock. The
Fedders Board considered a number of factors in its deliberations in determining
how to respond to this invitation to make an offer, including (i) the importance
of assuring its supply of compressors, (ii) the projected growth of the Fedders
business and the availability of compressors to support that growth and (iii)
the values that had been communicated by the NYCOR Board, particularly the value
that had been expressed as the lowest acceptable price. As a result of these
deliberations, the Fedders Board determined that it would propose a merger to
the NYCOR Board, whereby NYCOR would be merged into Fedders and each share of
NYCOR Common, Class A and Class B Stock would receive $6.25 in value of Fedders
Class A Stock, such value to be determined at the time of the merger. The
proposal was approved unanimously by the Fedders Board and also, separately,
unanimously by the independent members of the Fedders Board.
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The NYCOR Board, having previously arranged to meet on October 30, 1995 in
the event an offer from Fedders was forthcoming, received the offer from the
Fedders Board. Since the offer met the minimum price indicated, the full NYCOR
Board considered and unanimously accepted the proposal. The agreement reached in
principle to merge NYCOR into Fedders was subject to negotiation as to specific
terms and conditions, execution of a definitive agreement, and approval of the
stockholders and lenders of both companies as well as any required government
approvals.
After reaching the agreement in principle, representatives of Fedders and
NYCOR commenced negotiation of a definitive agreement. Officers of Fedders and
NYCOR who did not hold positions as officers or directors of the other company
were delegated responsibility to negotiate the terms of the agreement. On
November 16, 1995, the NYCOR Board met to consider a proposal by Fedders to
modify the agreement in principle to provide that if, on the day prior to the
merger, Fedders Class A Stock closed at less than $6.25 per share, NYCOR
stockholders would receive one share of a new Fedders Convertible Preferred
Stock which would be convertible into one share of Fedders Class A Stock and
have terms consistent with a security having a value of $6.25. The new preferred
stock would be listed on the New York Stock Exchange. If Fedders Class A Stock
closed on such date at a price of $6.25 or more, NYCOR stockholders would
receive $6.25 in market value of Fedders Class A Stock for each share of NYCOR
Common, Class A and Class B Stock which they own. The purpose of the proposal
was to limit the number of shares of Fedders Class A Stock which Fedders would
be required to issue in the Merger.
The NYCOR Board discussed the proposal at length without reaching a
decision and agreed to re-convene on November 20, 1995. On November 20, 1995,
the Fedders Board and the NYCOR Board agreed to modify the agreement in
principle with the additional provision that NYCOR receive an opinion from an
investment banking firm that the terms of the new preferred stock were
consistent with a security having an initial market value of $6.25.
As of November 20, 1995, the NYCOR Board had not retained a financial
advisor or received a fairness opinion as to the consideration to be paid to
NYCOR stockholders in the transaction. While the NYCOR Board did not receive an
opinion from its financial advisor regarding the fairness of the consideration
to the unaffiliated stockholders of NYCOR prior to entering into the Merger
Agreement, the obligation of NYCOR to consummate the Merger is conditioned upon
the receipt of such an opinion. Such an opinion from Laidlaw & Co., NYCOR's
financial advisor, has been received by NYCOR and is attached hereto as Annex G.
Representatives of Fedders and NYCOR continued to negotiate the terms of a
definitive agreement and, on November 30, 1995, the parties signed the Merger
Agreement.
On March 15, 1996, the Boards of Directors of Fedders and NYCOR amended the
Merger Agreement to provide that the stock of Fedders to be received by the
stockholders of NYCOR (other than holders of Class B Stock of NYCOR who exercise
their dissenters' rights under the DGCL) upon consummation of the Merger will
depend upon the Fedders Average Price.
OPINIONS OF FINANCIAL ADVISOR TO FEDDERS
On January 31, 1996, TM Capital Corp. ("TM Capital"), Fedders' financial
advisor, delivered its oral opinion, on February 12, 1996 delivered its written
opinion and on March 20, 1996 delivered its substantially identical additional
written opinion that the consideration to be paid by Fedders in the Merger is
fair to Fedders from a financial point of view. TM Capital's opinion related
only to the consideration to be paid by Fedders in connection with the Merger
and does not constitute a recommendation to any stockholder of Fedders as to how
such stockholder should vote at the Fedders Annual Meeting. The full text of the
written opinion of TM Capital which sets forth the assumptions made, the matters
considered and the limitations of the review undertaken in rendering such
opinion is attached as Annex F to this Proxy Statement-Prospectus and is
incorporated herein by reference.
As set forth in its opinion, TM Capital relied on the accuracy and
completeness of publicly available information and such other information
provided to it regarding Fedders and NYCOR, including the views of management of
Fedders and NYCOR, and has not assumed any responsibility for the independent
verification
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of such information. TM Capital further relied upon the assurance of management
of Fedders and NYCOR that they were unaware of any facts that would make such
information incomplete or misleading. In arriving at its opinion, TM Capital did
not perform nor obtain any independent evaluation or appraisal of the assets of
Fedders or NYCOR. TM Capital's opinion is necessarily based on the economic,
market and other conditions existing on the date of the opinion.
In rendering its opinion, TM Capital, among other things, (i) reviewed the
Merger Agreement, (ii) reviewed publicly available information relating to
Fedders and NYCOR, including Fedders' annual reports on Form 10-K and annual
reports to stockholders for the five fiscal years ended August 31, 1995 and
report on Form 10-Q for the quarter ended November 30, 1995, and NYCOR's annual
reports on Form 10-K and annual reports to stockholders for the five fiscal
years ended December 31, 1994 and reports on Form 10-Q for the three quarters
ended September 30, 1995, (iii) discussed with senior management of Fedders and
NYCOR their respective company's historical and current operations, financial
condition and future prospects and reviewed certain internal financial
information, business plans and forecasts prepared by their respective
managements, (iv) visited the headquarters of both Fedders and NYCOR, as well as
the manufacturing facility of Rotorex, (v) reviewed the historical prices and
trading volumes of the Common Stock and Class A Stock of Fedders and NYCOR, (vi)
reviewed certain financial and market data for Fedders and NYCOR and compared
such information with similar information for certain publicly traded companies
which TM Capital deemed comparable, (vii) reviewed certain mergers and
acquisitions of businesses which TM Capital deemed comparable, (viii) analyzed
the pro forma contributions of Fedders and NYCOR to the combined business, and
(ix) performed such other analyses and investigations and considered such other
factors as TM Capital deemed appropriate.
In rendering its opinion and making its presentation to the Board of
Directors, TM Capital discussed various financial analyses and certain other
factors it deemed relevant in rendering its opinion. Certain valuation
methodologies and certain other factors discussed and considered by the Board of
Directors are summarized below. The summary set forth below does not purport to
be a complete description of the analyses performed and the assumptions made by
TM Capital in reaching its opinion.
TM Capital considered the financial and stock market performance of a group
of selected publicly traded companies for both Fedders and NYCOR, and reviewed
selected groups of recent transactions involving acquisitions of companies
deemed reasonably comparable to NYCOR. The companies and transactions analyzed
were deemed by TM Capital to be reasonably comparable in certain relevant
respects to Fedders and NYCOR for the purpose of this analysis. However, an
analysis of these results is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and transactions and other factors
that could affect the valuation of the companies to which they are being
compared.
Analysis of Selected Publicly Traded Comparable Companies. TM Capital
compared selected historical operating financials and financial ratios with
similar data as well as stock market data for a group of selected publicly
traded companies for both Fedders (the "Fedders Public Comparables") and NYCOR
(the "NYCOR Public Comparables"). The NYCOR Public Comparables included: Baldor
Electric Company; Franklin Electric, Inc.; MagneTek, Inc.; Tecumseh Products
Company; and Watsco, Inc. TM Capital considered these companies to be reasonably
similar to NYCOR because they compete in the same general industry.
The Fedders Public Comparables included Duracraft Corporation; Maytag
Corporation; Mestek, Inc.; Whirlpool Corporation; and York International. TM
Capital considered these companies to be reasonably similar to Fedders because
they compete in the same general industry. However, TM Capital noted that both
the Fedders Public Comparables and the NYCOR Public Comparables possess a wide
range of revenues, market values and profitability.
For the NYCOR Public Comparables, TM Capital calculated the multiples of
market capitalization and debt-free market value for a variety of financial
parameters including net sales, earnings before interest expense, depreciation
and amortization ("EBITDA"), operating income, and net income for the latest
twelve months ("LTM") and the three most recent fiscal years, and book value as
of the end of the latest fiscal
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quarter. The analysis of NYCOR Public Comparables (excluding certain companies
where multiples were not considered meaningful because the denominator was
negative or minimal or where information regarding that statistic was not
available) yielded the following ranges of debt-free market value multiples of
LTM and Historical (defined as the average of LTM and latest three fiscal years)
net sales, EBITDA and operating income. With respect to debt-free market value
multiples to net sales, the range was from 0.5x to 1.2x for LTM net sales and
0.5x to 1.4x for Historical net sales; the Merger (in all cases based upon
consideration of $6.25 per share) results in multiples of 1.0x for LTM net sales
and 1.1x for Historical net sales. With respect to debt-free market value
multiples to EBITDA, the range was from 3.3x to 8.5x for LTM EBITDA and 4.1x to
10.8x for Historical EBITDA; the Merger results in 31.3x LTM EBITDA and 13.9x
Historical EBITDA. With respect to debt-free market value multiples to operating
income, the range was from 4.7x to 10.5x for LTM operating income and 5.6x to
14.2x for Historical operating income; the Merger results in multiples of
operating income that are not meaningful. The analysis of this group of
companies yielded a range of market capitalization multiples of 9.7x to 18.6x
for LTM net income and 14.1x to 32.7x for Historical net income; the Merger
results in multiples that are not meaningful. The analysis of these companies
also resulted in market capitalization multiples of 10.1x to 18.0x for current
fiscal year forecast net income and 6.8x to 15.7x for next fiscal year forecast
net income; the Merger results in multiples for current fiscal year forecast net
income that are not meaningful and 16.0x for next fiscal year forecast net
income. The analysis of this group of companies yielded a range of multiples for
book value as of the latest fiscal quarter of 1.4x to 3.0x; the Merger results
in a multiple of 0.9x.
For the Fedders Public Comparables, TM Capital calculated the multiples of
market capitalization and debt-free market value for a variety of financial
parameters including net sales, EBITDA, operating income, and net income for the
LTM and the three most recent fiscal years, and book value as of the end of the
latest fiscal quarter. The analysis of Fedders Public Comparables (excluding
certain companies where multiples were not considered meaningful because the
denominator was negative or minimal or where information regarding that
statistic was not available) yielded the following ranges of debt-free market
value multiples of LTM and Historical net sales, EBITDA and operating income.
With respect to the debt-free market value multiple to net sales, the range was
from 0.6x to 0.9x for LTM net sales and 0.6x to 1.3x for Historical net sales;
the Fedders multiple was 0.7x for LTM net sales and 0.9x for Historical net
sales. With respect to debt-free market value multiples to EBITDA, the range was
from 5.0x to 12.5x for LTM EBITDA and from 5.7x to 10.4x for Historical EBITDA;
the Fedders multiple was 4.8x for LTM EBITDA and 6.8x for Historical EBITDA.
With respect to debt-free market value multiples to operating income, the range
was from 5.9x to 25.7x for LTM operating income and from 7.6x to 16.3x for
Historical operating income; the Fedders multiple was 5.7x for LTM operating
income and 8.8x for Historical operating income. The analysis of this group of
companies yielded a range of market capitalization multiples of 10.9x to 38.1x
for LTM net income and 14.4x to 22.2x for Historical net income; the Fedders
multiple was 7.7x for Fedders Common Stock and 6.4x for Fedders Class A Stock
for LTM net income and 12.2x and 10.2x, respectively, for Historical net income.
The analysis of these companies also resulted in market capitalization multiples
of 14.1x to 16.6x for current fiscal year forecast net income and 10.1x to 14.1x
for next fiscal year forecast net income; the Fedders multiples were 8.2x and
6.8x for Fedders Common Stock and Fedders Class A Stock, respectively, for
current fiscal year forecast and 8.0x and 6.7x for Fedders Common Stock and
Fedders Class A Stock, respectively, for next fiscal year forecast. The analysis
of this group of companies yielded a range of multiples for book value as of the
latest fiscal quarter of 1.3x to 3.0x; the Fedders multiples for book value were
2.9x for Fedders Common Stock and 2.4x for Fedders Class A Stock.
Analysis of Selected Acquisitions. TM Capital also reviewed acquisitions
of businesses (the "Merger Comparables") in the electrical components
manufacturing industry over the past three (3) years. TM Capital reviewed recent
transactions involving the purchase of the following businesses: Welbilt
Corporation; Rexnord Corporation; Designatronics, Inc.; Mr. Coffee, Inc.; and
Reliance Electric Corporation. These five (5) transactions were selected by TM
Capital because their products, markets and/or customers are broadly similar to
those of NYCOR.
For the Merger Comparables, TM Capital calculated the multiples of
acquisition price for a variety of financial parameters including net sales,
EBITDA, and operating income for the LTM and the three most
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recent fiscal years, and book value as of the end of the latest fiscal quarter.
The analysis of Merger Comparables (excluding certain companies where multiples
were not considered meaningful because the denominator was negative or minimal
or where information regarding that statistic was not available) yielded the
following ranges of acquisition price multiples of LTM and Historical net sales,
EBITDA and operating income. With respect to the acquisition price multiple to
net sales, the range was from 0.6x to 1.5x for LTM net sales and from 0.7x to
1.5x for Historical net sales; the NYCOR multiple was 1.0x for LTM net sales and
1.1x Historical net sales. With respect to acquisition price multiples to
EBITDA, the range was from 5.6x to 12.0x for LTM EBITDA and from 7.7x to 11.3x
for Historical EBITDA; the NYCOR multiple was 31.3x for LTM EBITDA and 13.9x for
Historical EBITDA. With respect to acquisition price multiples to operating
income, the range was from 6.7x to 17.8x for LTM operating income and from 10.0x
to 15.8x for Historical operating income; the NYCOR multiple to operating income
was not meaningful in the LTM or the Historical period. The analysis of this
group of mergers yielded a range of acquisition price to net income multiples of
9.8x to 38.3x for the LTM period and 18.6x to 51.4x for the Historical period;
the NYCOR multiples were not meaningful for the LTM and Historical periods. The
analysis of this group of mergers yielded a range of multiples for book value as
of the latest fiscal quarter of 1.4x to 7.5x; the NYCOR multiple for book value
was 3.1x.
TM Capital also analyzed the acquisition premiums inherent in the Merger
over the prices at which NYCOR Common Stock had traded prior to the announcement
of the Offer and compared such premiums to those paid in the Merger Comparables.
The Merger Comparables yielded a range of premiums of 23.3% to 56.0% and 20.8%
to 51.2% relative to the target companies' stock prices one day and one month
prior to announcement, respectively; the Merger results in premiums of 194.1%
and 163.2%, respectively. The multiples paid in an acquisition depend heavily
upon the timing of the acquisition relative to a variety of criteria, including
the trading conditions in the target's common stock and the overall market, and
thus may be considered only on a limited basis.
Stock Trading History. TM Capital examined the historical price and
trading volume of the Common and Class A Shares of Fedders and NYCOR. TM Capital
also compared the share price performance of NYCOR to an index of the NYCOR
Comparables and the S&P 500, and compared the share price performance of Fedders
to an index of the Fedders Comparables and the S&P 500.
Discounted Cash Flow Analysis. TM Capital also analyzed, through the use
of a discounted cash flow analysis, the present value of the future unleveraged
after-tax cash flow streams that NYCOR could produce over a five-year period
ending December 31, 2000, if NYCOR performed in accordance with forecasts and
other information provided by management. After-tax cash flow was calculated by
taking projected operating income, adding depreciation, amortization and other
non-cash items, and then subtracting income taxes, increases in working capital
and capital expenditures. TM Capital estimated the terminal value for NYCOR at
the end of the five-year period by applying a range of multiples to the
terminal-year EBITDA. In performing this analysis, TM Capital utilized discount
rates ranging from 15% to 20% and EBITDA multiples ranging from 5.5x to 6.5x,
which resulted in common equity values for NYCOR ranging from $37.3 million to
$58.9 million; the Merger results in a common equity value of $47.3 million.
Pro Forma Contribution Analysis. TM Capital reviewed the pro forma
contributions of certain historical and projected operating information and
certain historical balance sheet information of Fedders and NYCOR to the
combined business as it compared to the pro forma contribution of the market
value of common and the debt-free market value of the proposed Merger. This
review included an analysis of operating data, including net sales, gross
profit, EBITDA, operating income, pre-tax income and net income for the three
fiscal years ended 1995 and the projected fiscal year ending 1996 for both
Fedders and NYCOR. Fiscal year end information reflects Fedders' August 31 year
end and NYCOR's December 31 year end. In fiscal 1993, the operating data pro
forma contributions by NYCOR ranged from 27.2% to 69.7%, with two data points
not meaningful. In fiscal 1994, the operating data pro forma contributions by
NYCOR ranged from 3.5% to 24.5%, with one data point not meaningful. In fiscal
1995, the operating data pro forma contributions by NYCOR ranged from 4.6% to
19.9%, with three data points not meaningful. For the projected fiscal 1996
period, the operating data pro forma contributions by NYCOR ranged from 9.0% to
20.0%. This review also included an analysis of certain balance sheet data,
including cash and equivalents, total assets, total debt, total
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liabilities, preferred equity, common equity and total equity which reflect
Fedders' November 30, 1995 balance sheet and NYCOR's September 30, 1995 balance
sheet. The balance sheet pro forma contributions by NYCOR ranged from 6.8% to
47.3%. By way of comparison, the pro forma contributions by NYCOR of the market
value of common and the debt-free market value based upon the proposed Merger
were 17.9% and 25.2%, respectively.
Pro Forma Equity Ownership Analysis. TM Capital performed an analysis of
the Merger which considered various Fedders Class A Stock prices above and below
the $6.25 per share in the proposed Merger, and the resulting relative pro forma
ownership in the combined company. At a Fedders Average Price below $6.25 per
share, NYCOR stockholders would receive Fedders Convertible Preferred Stock, and
ownership by existing Fedders common stockholders would be 84.2% of the combined
equity, and ownership by former NYCOR stockholders upon conversion would be
15.8%. At a Fedders Average Price of $6.25 per share or higher, NYCOR
stockholders would receive Fedders Class A Stock. At a Fedders Average Price of
$6.25 per share, ownership by existing Fedders common shareholders would be
84.2% of the combined equity, and ownership by former NYCOR stockholders would
be 15.8%; at a Fedders Average Price of $7.00 per share, ownership by Fedders
common stockholders and NYCOR stockholders would be 85.6% and 14.4%,
respectively; at a Fedders Average Price of $8.00 per share, ownership by
Fedders common stockholders and NYCOR stockholders would be 87.2% and 12.8%,
respectively.
In reaching its conclusion, TM Capital broadly considered all of the above
discussed analyses and did not assign specific weights to any analysis. TM
Capital did not consider any single analysis as a threshold measurement for
rendering its opinion. Ranges of fairness within each analysis and with respect
to the consideration to be paid in the Merger were not established. In addition,
TM Capital considered other factors, as discussed above, including historical
market and trading volume of Fedders and NYCOR Common Stock and Class A Stock,
past and current business prospects and management's prepared projections. Based
on the foregoing, TM Capital concluded that the consideration to be paid by
Fedders in the proposed Merger was within the fair values indicated by the above
analyses considered in the aggregate.
The analysis conducted by TM Capital in arriving at its opinion included
numerous macroeconomic, operating and financial assumptions and involved the
application of complex methodologies and educated judgment. Such analysis
involves complex considerations and judgments concerning differences in
financial operating characteristics of the comparable companies and transactions
and other factors that could affect the valuations of the companies to which
they are being compared. As indicated above, in preparing its opinion, TM
Capital relied on the accuracy and the completeness of all information supplied
or otherwise made available to it by Fedders and NYCOR and assumed, without
independent verification, that financial projections had been reasonably
prepared and reflected the best currently available estimates and judgments of
Fedders' and NYCOR's managements as to the expected future financial performance
of Fedders and NYCOR. TM Capital also made numerous assumptions regarding
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Fedders or NYCOR. Any estimates
incorporated in the analyses performed by TM Capital are not necessarily
indicative of the actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimates of values do
not purport to be appraisals and do not necessarily reflect the prices at which
companies may be sold in the future.
Fedders has paid TM Capital a fee of $90,000 for its opinion. In addition,
Fedders has also agreed to reimburse TM Capital for its reasonable out-of-pocket
expenses, and to indemnify TM Capital against certain liabilities, including
liabilities under federal securities laws.
TM Capital is an investment banking firm engaged on a regular basis to
provide a range of investment banking and financial advisory services, including
the valuation of businesses and their securities in connection with mergers and
acquisitions. Fedders selected TM Capital as its financial advisor on the basis
of the background, experience and reputation of TM Capital.
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OPINION OF FINANCIAL ADVISOR TO NYCOR
NYCOR retained Laidlaw Equities, Inc. ("Laidlaw") and its affiliates as of
January 16, 1996 to act as its financial advisor with respect to NYCOR's
proposed Merger with Fedders. On February 1, 1996, Laidlaw delivered to NYCOR's
Board of Directors its written opinion to the effect that, based upon and
subject to certain matters stated therein, as of such date, the consideration
proposed to be paid by Fedders in the Merger was fair to NYCOR from a financial
point of view. Laidlaw subsequently confirmed its opinion by delivery of written
opinions dated March 19, 1996 and the date of this Proxy Statement-Prospectus,
to the effect that, based upon and subject to certain matters stated therein, as
of such dates, the consideration proposed to be paid by Fedders in the Merger
was fair to NYCOR from a financial point of view. The text of the written
opinion of Laidlaw dated February 1, 1996 is substantially identical to the text
of the written opinions of Laidlaw dated March 19, 1996 and the date of this
Proxy Statement-Prospectus.
THE FULL TEXT OF LAIDLAW'S WRITTEN OPINION DATED THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS OF THE REVIEW UNDERTAKEN IN RENDERING SUCH AN OPINION, IS
ATTACHED AS ANNEX G TO THE PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN
BY REFERENCE. NYCOR STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY.
THE SUMMARY OF THE OPINION SET FORTH IN THIS PROXY STATEMENT-PROSPECTUS IS
QUALIFIED BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
Laidlaw's opinion is addressed to NYCOR's Board of Directors and addresses
only the fairness to NYCOR from a financial point of view of the consideration
proposed to be paid by Fedders pursuant to the Merger and does not constitute a
recommendation to any NYCOR stockholder as to how such stockholder should vote
at the NYCOR Special Meeting. The consideration was determined through
negotiations between NYCOR and Fedders and was approved by the Board of
Directors of NYCOR, and Laidlaw did not make a recommendation with respect to
the amount of the consideration. The Laidlaw opinion does not address the
fairness of the transaction from a financial point of view or otherwise to
Fedders or Fedders stockholders and, consequently, does not constitute a
recommendation to any Fedders stockholder as to how such stockholder should vote
at the Fedders Annual Meeting.
For purposes of its opinion, Laidlaw defined the consideration to be paid
for each share of NYCOR Common Stock, Class A Stock or Class B Stock as either
(i) such number of shares of Fedders Class A Stock representing $6.25 if the
Fedders Average Price is equal to or greater than $6.25 per share; or (ii) one
share of newly issued Fedders Convertible Preferred Stock. If issued, each share
of Fedders Convertible Preferred Stock (i) will be convertible into one share of
Fedders Class A Stock; (ii) may be called for redemption by Fedders at any time
at the redemption price of $6.25, plus unpaid dividends to the dividend payment
date next preceding the date of redemption, in cash or in equivalent value of
Fedders Class A Stock; and (iii) shall have such other rights and preferences
expected to support an initial market value of $6.25 per share. Although the
precise terms of the Fedders Convertible Preferred Stock if issued, will not be
set until five business days before the NYCOR Special Meeting, and only if
Fedders Average Price is below $6.25, Laidlaw was informed that it is currently
contemplated that the Fedders Convertible Preferred Stock will have (i) an
annual dividend rate of 2.5%; and (ii) a liquidation preference of $6.25 per
share, plus unpaid dividends to the dividend payment date next preceding such
liquidation (the "Proposed Terms"), and Laidlaw's opinion is based on the
Proposed Terms. In aggregate, the purchase price for the Common Stock, Class A
Stock and Class B Stock of NYCOR is assumed to be $47,275,000. Total transaction
value is assumed to be $70,275,000, including the conversion of NYCOR Preferred
Stock at $20.00 per share into $23,000,000 face amount of NYCOR 8 1/2%
convertible subordinated debentures due 2012.
In arriving at its opinion, Laidlaw (1) reviewed certain publicly available
business and financial information relating to NYCOR and Fedders, (2) reviewed
the Merger Agreement, (3) reviewed certain other information, including
financial forecasts for fiscal 1996 for NYCOR and Fedders, provided by each
company, (4) met with management of both companies to discuss the businesses and
prospects of NYCOR and Fedders, their respective projected performance, the
strategic importance of NYCOR to Fedders, and the benefits expected to be
achieved through the combination of the operations of NYCOR and Fedders, (5)
considered certain financial and stock market data of NYCOR and Fedders and
compared such data with similar data for other publicly held companies in
businesses similar to those of NYCOR and Fedders,
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(6) considered the financial terms of certain other business combinations and
other transactions which recently have been effected, and (7) considered such
other information, financial studies, analyses and investigations and financial,
economic and market criteria which Laidlaw deemed relevant.
In connection with its review, Laidlaw did not assume any responsibility
for independent verification of the foregoing information and relied on its
being complete and accurate in all material respects. With respect to the
financial forecasts, Laidlaw assumed that such forecasts were reasonably
prepared on bases reflecting the best currently available estimates and
judgements of management of NYCOR and Fedders as to the future financial
performance of NYCOR and Fedders. In addition, Laidlaw did not make an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of NYCOR or Fedders, nor was Laidlaw furnished with any such
evaluations or appraisals. Laidlaw's opinion is necessarily based upon
financial, economic, market and other conditions as they existed and could be
evaluated on the date of its opinion. Laidlaw does not express any opinion as to
the prices at which Fedders Class A Stock or Fedders Convertible Preferred Stock
will trade subsequent to the Merger.
Laidlaw estimated NYCOR's value using the following methodologies:
Stock Price History. Laidlaw compared the historic weekly closing per
share market price of NYCOR Common Stock and Class A Stock to the price per
share contemplated in the Merger Agreement. During the period beginning January
1, 1995 and ending October 31, 1995, the date of the announcement of the
transaction, NYCOR Common Stock closed at a high of $3.00 on February 24, 1995
and a low of $2.25 on October 27, 1995. The per share purchase price of $6.25
contemplated in the Merger Agreement represents a significant premium over the
trading prices during this period.
Stock Price Premium Analysis. Laidlaw compared the market premium for
NYCOR Common Stock and Class A Stock for 1 day, 1 week and 4 weeks prior to the
announcement of the Merger to stock premiums for other public merger and
acquisitions transactions effected within the last year. The amount offered by
Fedders was a premium of approximately 195%, 178% and 163% over the trading
price of the NYCOR Common Stock and Class A Stock for 1 day, 1 week and 4 weeks
prior to the announcement of the Merger, respectively, compared to an average
premium of 31%, 37% and 45%, respectively, for 20 mergers announced during 1995
involving public companies.
Comparable Trading Valuation. Valuations of publicly traded comparable
companies as multiples of operating results were compared to the market
valuation of NYCOR as a multiple of its operating results. Laidlaw reviewed and
compared certain actual and forecasted financial and operating information of
NYCOR with comparable information for other publicly traded companies in the
refrigeration, heating and cooling industries, including Aaon, Inc.; Fedders
Corporation; Kysor Industrial; Mestek, Inc.; Modine Manufacturing; Tecumseh
Products; and York International. Laidlaw selected these companies based on the
companies' primary line of business, size relative to NYCOR and relative
financial performance, and it calculated recent trading multiples of net
earnings, EBIT and revenues to equity value. All forecasted multiples for the
comparable companies were based on information contained in equity research
reports. The equity values of the comparable companies used in the foregoing
analyses were based on stock prices as of January 23, 1996. All financial
estimates for NYCOR for the 1996 fiscal year were based on certain operating and
financial forecasts provided by NYCOR management. Laidlaw determined that the
ranges of multiples for the comparable companies are: (i) LTM (last twelve
months results) revenues 0.3x - 0.8x (ii) LTM EBIT (earnings before interest and
taxes) 4.3x - 8.5x (iii) LTM net income 8.1x - 16.6x (iv) 1996 projected net
income 8.3x - 13.3x.
The purchase price of $47,275,000 for the common equity and $23,000,000 for
the preferred equity of NYCOR implies an equity value of 0.9x LTM revenues,
above the comparable public companies. Multiples of LTM results for net income
and EBIT for NYCOR are not meaningful due to losses. The purchase price of
$47,275,000 for the common equity of NYCOR implies a purchase price multiple of
16.1x forecast 1996 net income attributable to the common stock of NYCOR,
representing a premium compared to other similar public companies.
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Comparable Transaction Valuation. Multiples of operating results to
transaction value for recent transactions of comparable companies were compared
to multiples of NYCOR operating results to the consideration contemplated in the
Merger Agreement. Laidlaw examined recent transactions in the refrigeration, air
conditioning, compressor and pump industries to select a sample of comparable
transactions. Using publicly available information, Laidlaw analyzed purchase
prices and multiples paid in the following transactions: the acquisition of
Imeco by Frick Co.; the acquisition of Revco Scientific by General Signal; the
acquisition of Evcon Holdings by York International; the acquisition of Byron
Valve & Machine by Parker Hannifin; the acquisition of Western Co. of North
America by B.J. Services; the acquisition of Flair Corp. by United Dominion
Industries; the acquisition of Shannon Group by Manitowoc Corp.; and the
proposed acquisition of Crown Anderson by Astec Industries, Laidlaw determined
that the average of multiples for recent transactions involving these eight
companies in the refrigeration, pump and compressor industries are: (i) LTM
revenues 0.9x (ii) LTM EBITDA (earnings before interest, taxes, depreciation and
amortization) 9.7x (iii) LTM EBIT 19.0x (iv) LTM net income 43.2x. In the case
of revenues and EBITDA, the consideration offered for NYCOR was equal or greater
than the average of the range of consideration offered in comparable recent
transactions. NYCOR did not have positive EBIT or net income during the last
twelve months, and therefore no comparison could be made for these multiples.
Summary Stand-Alone Discounted Cash Flow. Laidlaw analyzed the ongoing
businesses of NYCOR using discounted cash flow analysis to estimate the
enterprise value of NYCOR for comparison to the value of the proposed
transaction with Fedders. Due to the volatility of air conditioner demand,
neither Fedders nor NYCOR management believes that accurate forecasts of demand
and pricing can be made beyond the period of one year. This volatility of demand
is due in large part to variation in weather; unseasonably hot weather spurs
excess demand for air conditioners while unseasonably cool weather reduces
demand. This climatic variability is offset, to some extent, by recent growth in
sales to markets outside the United States.
To determine the present value of potential future cash flows for NYCOR
without the benefit of long-range management forecasts, Laidlaw used historic
operating results and one-year forecasts provided by the management of NYCOR as
a predictor for future operating results to develop a discounted cash flow
scenario. Therefore, operating assumptions for long term forecasts used by
Laidlaw in its discounted cash flow analysis may not accurately reflect the
operations of NYCOR. Actual results achieved by the combined company may vary
from forecasted results, and the variations may be material.
Laidlaw calculated an equity value for NYCOR based upon the present value
of NYCOR's 10-year stream of forecasted free cash flows and fiscal year 2006
terminal value. The fiscal year 2006 terminal value was calculated as a
perpetuity of the estimated rate of return on invested capital.
In conducting its analysis, Laidlaw relied on certain assumptions relating
to sales growth, operating margins and capital expenditures of NYCOR's
businesses provided by NYCOR management. For the 10-year forecast, Laidlaw
applied a discount rate of 13% to future cash flows. This analysis resulted in a
per share valuation of $5.99 for NYCOR Common Stock and Class A Stock based on
Laidlaw operating assumptions, which may or may not reflect actual future
operations.
Other Considerations. Laidlaw considered employing other methodologies in
its valuation of NYCOR but chose to use only those methodologies listed above
for several reasons. Several unique characteristics of NYCOR render certain
analyses, such as a pro forma projected earnings analysis or leveraged buyout
analysis, less insightful in developing a valuation. These factors include:
- - an extremely high level of sales under a long-term contract with one customer
(Fedders), which increases business risk and reduces the attractiveness of
NYCOR to potential suitors, who might currently compete with Fedders, or to
potential lenders.
- - high volatility of demand for air conditioners due to climatic variations and
seasonality, which might reduce the attractiveness of NYCOR to potential
suitors in other industries.
- - difficulty in obtaining financing for NYCOR operations due to the
concentration and volatility of sales, which would make a leveraged buyout of
NYCOR impractical.
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Convertible Preferred Stock. Laidlaw compared the terms and market values
of a sample of ninety-eight publicly-traded convertible preferred stocks with
investment grade credit ratings to the Proposed Terms. The purpose of the
analysis was to determine whether the Proposed Terms would support a market
value of $6.25 per share based on the trading price of Fedders Class A Stock at
the date of the analysis and market valuation of similar convertible preferred
stocks, should the Fedders Preferred Stock be issued. Laidlaw compared the
current trading price, the current dividend yield, the current conversion
premium over common stock, the rating of the issue and other aspects of each of
the ninety-eight convertible preferred stocks to the terms contemplated for the
Fedders Preferred Stock at the date of the Proxy Statement - Prospectus. Based
on the analysis described above, Laidlaw believes that the Proposed Terms for
the Fedders Preferred Stock taken as a whole are within the range of terms for
other publicly-traded convertible preferred stocks.
Laidlaw believes that its analyses must be considered as a whole and that
selecting portions of its analyses or portions of the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinion. In its analysis, Laidlaw made
numerous assumptions with respect to NYCOR and Fedders, industry performance,
general business, regulatory, economic, market and financial condition and other
matters, many of which are beyond the control of NYCOR and Fedders. The
estimates contained in such analyses are not necessarily indicative of actual
values or of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, because such estimates of actual values or future results or values
are inherently subject to substantial uncertainty, Laidlaw assumes no
responsibility for their accuracy.
NYCOR has paid Laidlaw a fee of $85,000 for its opinion. In addition, NYCOR
has also agreed to reimburse Laidlaw for its reasonable out-of-pocket expenses,
and to indemnify Laidlaw against certain liabilities, including liabilities
under federal securities laws.
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement. This summary is qualified in its entirety by reference to the full
text of the Merger Agreement which is attached hereto as Annex A and which is
incorporated herein by reference.
The Merger
Subject to the terms and conditions of the Merger Agreement, at the time
the Company and NYCOR have filed the certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware, or such later
time or date as may be specified in the Certificate of Merger (the "Effective
Time"), NYCOR will be merged with and into the Company, and the separate
existence of NYCOR will cease. The Company will be the surviving corporation in
the Merger and will continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the Company and all of its,
rights and liabilities as a corporation organized under the laws of the State of
Delaware will continue.
The closing of the Merger is to be held at the offices of the Company, in
Liberty Corner, New Jersey, within five business days following the satisfaction
or waiver of the conditions to closing set forth in the Merger Agreement (the
"Closing Date") at 9:00 a.m., Eastern Time, or at any other place and date as
the parties fix by mutual consent.
At the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of NYCOR, all of the shares of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock (collectively, the
"NYCOR Shares") other than NYCOR Shares held by dissenting NYCOR stockholders,
will be converted into, and become exchangeable for, one Fedders Convertible
Preferred Share with dividend and other features reasonably necessary to support
an initial market value of $6.25, if required, unless the Fedders Average Price
is $6.25 or greater, in which case each NYCOR Share (other than any share of
NYCOR Class B Stock the holder of which exercises dissenters' rights) shall be
converted into the right to receive a number of shares of Fedders Class A Stock
determined by dividing $6.25 by the Fedders Average Price and rounding the
quotient to the third decimal place, together with cash in lieu of fractional
shares. The Merger consideration payable to the holders of NYCOR Shares was
determined through discussions and mutual compromise between the Company and
NYCOR.
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Exchange of NYCOR Preferred Shares
On or about February 2, 1996, NYCOR gave written notice to the holders of
the NYCOR $1.70 Convertible Exchangeable Preferred Stock the ("NYCOR Preferred
Stock") in accordance with the notice provisions contained in the prospectus for
the NYCOR Preferred Stock, that the NYCOR Preferred Stock would be exchanged for
debt on March 15, 1996 in accordance with the terms of the NYCOR Preferred
Stock. On such date, NYCOR exchanged all of the outstanding NYCOR Preferred
Stock for NYCOR's 8 1/2% Convertible Subordinated Debentures due 2012.
Exchange Procedure
Within a reasonable time after the Effective Time, Fedders shall furnish to
each of the NYCOR stockholders a letter of transmittal setting forth the
procedure to follow for each of them to surrender their NYCOR Shares, for one or
more stock certificates representing that number of shares of Fedders
Convertible Preferred Stock or Fedders Class A Stock (collectively, the "Fedders
Shares"), together, in the case of the issuance of Fedders Class A Stock, with
cash in lieu of the issuance of fractional shares of Fedders Class A Stock to
which such holder is entitled under the Merger Agreement. The Company will not
pay any dividend or make any distribution on Fedders Shares (with a record date
at or after the Effective Time) to any record holder of outstanding NYCOR Shares
until the holder surrenders for exchange his certificates which represented
NYCOR Shares. In the event that any stock certificate representing NYCOR Shares
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate to be lost, stolen or
destroyed, the Company will issue or cause to be issued in exchange for such
lost, stolen or destroyed certificate the number of Fedders Shares into which
such shares are converted and a check for any fractional shares. The Board of
Directors of the Company may, in its discretion and as a condition precedent to
the issuance of such certificate and check, require the owner of such lost,
stolen or destroyed certificate to give the Company a bond in such sum as it may
direct as indemnity or such other form of indemnity as it shall direct, against
any claims that may be made against the Company with respect to the certificate
alleged to have been lost, stolen or destroyed. No certificates or scrip for
fractional shares of Fedders Class A Stock will be issued but each holder of
NYCOR Shares who would otherwise be entitled to receive a fractional share shall
be entitled to receive, in lieu thereof, cash in an amount equal to such
fraction multiplied by the closing price of Fedders Class A Stock on the NYSE on
the trading day immediately prior to the Closing Date.
Representations and Warranties
The Merger Agreement contains certain representations and warranties to the
Company by NYCOR relating to: (i) NYCOR's due organization, qualification, power
and standing; (ii) the enforceability of the Merger Agreement; (iii) NYCOR's
capital structure; (iv) the absence of conflicts with NYCOR's governing
documents or any governmental regulation or order or any agreement to which it
is subject; (v) the accuracy of NYCOR's financial statements; (vi) the absence
of undisclosed liabilities or material adverse changes in the business or future
prospects of NYCOR since September 30, 1995; (vii) liabilities for taxes; (viii)
liabilities for finders' fees with respect to the Merger; (ix) the existence of
all necessary licenses, certificates and permits to run the business; (x) the
status or absence of pending or threatened litigation; (xi) the status of
material contracts; (xii) the accuracy and completeness of disclosure contained
in this Proxy Statement-Prospectus; and (xiii) the actions of NYCOR to comply
with all federal, state and local environmental laws.
The Merger Agreement contains certain representations and warranties by the
Company to NYCOR relating to: (i) the Company's due organization, qualification,
power and standing; (ii) the Company's capital structure; (iii) the
enforceability of the Merger Agreement; (iv) the absence of conflicts with the
Company's governing documents or any governmental regulation or order or any
agreement to which it is subject; (v) the filing of required reports with the
Commission; (vi) the accuracy of the Company's financial statements; (vii) the
absence of undisclosed liabilities or material adverse changes in the business
or future prospects of the Company since August 31, 1995; (viii) liabilities for
taxes; (ix) liabilities for finders' fees with respect to the Merger; (x) the
status or absence of pending or threatened litigation; (xi) the status of
licenses and
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regulatory matters; (xii) the status of material contracts; and (xiii) the
accuracy and completeness of disclosure contained in this Proxy
Statement-Prospectus.
Conduct of Business Pending the Merger
NYCOR and the Company have each agreed, among other things, prior to the
consummation of the Merger, to conduct its operations in the ordinary course of
business consistent with past custom and practice in substantially the same
manner as theretofore conducted. Unless the following restrictions are
specifically limited to one party, neither party will: (i) make any change in
its governing documents except that at the Fedders Annual Meeting, Fedders may
ask Fedders stockholders to approve the Amendments; (ii) grant any options,
warrants or other rights to purchase any of its capital stock, except for grants
of options to employees or directors under existing stock incentive plans,
provided that the Company or NYCOR may not grant more than an aggregate of
100,000 options; (iii) issue, sell or otherwise dispose of any of its capital
stock, except upon the conversion or exercise of options, warrants and other
rights currently outstanding or granted to employees or directors as allowed by
the Merger Agreement; (iv) declare, set aside or pay any dividend or
distribution with respect to its capital stock (whether in cash or in kind) or
purchase or redeem any of its capital stock, except as required by the terms of
the NYCOR Preferred Stock, Fedders' normal quarterly dividend of two cents per
share to the record date holders of Fedders Common Stock, Fedders Class A Stock,
and Fedders Class B Stock (who receive 90% of the two cent dividend); (v) issue
or guarantee any indebtedness outside the ordinary course of business, except to
refinance existing debt; (vi) impose any security interest upon any of its
assets, outside the ordinary course of business; (vii) make any capital
investment in, make any loan to, or acquire the securities or assets of any
other person outside the ordinary course of business, except that either party
can fund up to $5,000,000 in capital investments or acquisitions without the
written consent of the other party; provided, however, that NYCOR and Fedders
will discuss the terms and conditions of all acquisitions prior to closing such
acquisitions; (viii) NYCOR or its Subsidiaries will not make any change in
employment terms of any of its directors, officers and employees, except that it
may make changes for non-executive employees in the ordinary course of business;
or (ix) merge, consolidate, combine with another party or agree to be acquired
by or to sell all or substantially all of its assets to another party.
NYCOR and the Company have each agreed to afford the officers and
representatives of the other party, until consummation of the Merger, full
access to their business records and to use their best efforts to consummate the
transactions contemplated by the Merger Agreement.
Indemnification
The Company, as the surviving corporation in the Merger, will observe any
indemnification provisions now existing in the certificate of incorporation or
bylaws of NYCOR, to the extent allowable under Delaware law and the Fedders
Charter, for the benefit of any individual who served as a director or officer
of NYCOR at any time prior to the Effective Time until the statute of
limitations relating thereto has expired.
Conditions to the Consummation of the Merger
The obligations of the Company and/or NYCOR under the Merger Agreement are
subject to satisfaction of the following conditions on or prior to the Closing
Date, unless waived: (i) the Merger Agreement and the Merger shall have received
the requisite NYCOR stockholder approval, the requisite Fedders stockholder
approval, approval of any lenders who require prior approval, and the number of
Dissenting Shares shall not exceed 5% of the number of outstanding NYCOR Class B
and/or Fedders Class B Shares; (ii) the proposal at the Fedders Annual Meeting
to approve the Amendments shall have received the required Fedders stockholder
approval; (iii) there shall be no litigation seeking injunctive or other relief
against any party to the Merger in connection with the Merger and NYCOR shall
have provided information reasonably satisfactory to Fedders concerning its
compliance with environmental regulations; and (iv) all of the material third
party consents required by the Merger Agreement shall have been obtained.
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The obligations of the Company under the Merger Agreement are subject to
satisfaction of the following additional conditions on or prior to the Closing
Date, unless waived: (i) the supplemental disclosure schedules to the Merger
Agreement shall reflect that there shall have been no material adverse change
with respect to NYCOR which would render the representations and warranties of
NYCOR untrue or inaccurate in any material respect, and the Company shall have
received from NYCOR a certificate, dated as of the Closing Date, of the
president and chief financial officer of NYCOR, to such effect; (ii) there shall
have been no event, condition or act of God that shall have caused a material
adverse change of NYCOR which would render the representations and warranties of
NYCOR untrue or inaccurate in any material respect; (iii) NYCOR shall have
performed and complied with all of its covenants set forth in the Merger
Agreement in all material respects through the Closing Date; (iv) NYCOR shall
have delivered to the Company a certificate to the effect that each of the
conditions specified in the Merger Agreement is satisfied in all respects; (v)
the Company shall have received the Fedders Fairness Opinion and an opinion from
its tax advisors, which shall be reasonably satisfactory to its Board of
Directors, that the Merger will be a tax free transaction as to the Company;
(vi) the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
shall have expired; (vii) the Registration Statement shall have become effective
and shall provide for the legal and valid issuance of the Fedders Shares for the
NYCOR Shares, and the Fedders Shares shall have been accepted for listing on the
NYSE; (viii) the Company shall have received from counsel to NYCOR an opinion
addressed to the Company, and dated as of the Closing Date in form and substance
reasonably acceptable to Fedders; (ix) all actions to be taken by NYCOR in
connection with consummation of the transactions contemplated by the Merger
Agreement and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated by the Merger Agreement will be
reasonably satisfactory in form and substance to the Company; (x) NYCOR shall
have exchanged the NYCOR Preferred Shares for debentures in accordance with the
provisions of the Merger Agreement and (xi) nothing shall have occurred to
affect the tax-free status of the Merger.
The obligations of NYCOR under the Merger Agreement are subject to the
satisfaction of the following additional conditions on or prior to the Closing
Date, unless waived: (i) the Registration Statement shall have become effective
under the Securities Act and the Fedders Shares issuable in the Merger shall
have been accepted for listing on the NYSE; (ii) NYCOR shall have received the
NYCOR Fairness Opinion reasonably satisfactory to its Board of Directors,
including an opinion prior to the Closing Date, that the terms of the Fedders
Convertible Preferred Stock will support an initial market value of $6.25; (iii)
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act shall
have expired; (iv) the supplemental disclosure schedules to the Merger Agreement
shall reflect that there shall have been no material adverse change with respect
to the Company which would render the representations and warranties of the
Company untrue or inaccurate in any material respect, and NYCOR shall have
received from the Company a certificate, dated as of the Closing Date, of the
president and chief financial officer of the Company, to such effect; (v) there
shall have been no event, condition or act of God that shall have caused a
material adverse change with respect to the Company which would render the
representations and warranties of the Company untrue or inaccurate in any
material respect; (vi) the Company shall have performed and complied with all of
its covenants set forth in the Merger Agreement in all material respects through
the Closing Date; (vii) the Company shall have delivered to NYCOR a certificate
to the effect that each of the conditions specified in the Merger Agreement is
satisfied in all respects; (viii) NYCOR shall have received from counsel to the
Company an opinion addressed to NYCOR, and dated as of the Closing Date in form
and substance reasonably acceptable to NYCOR; and (ix) all actions to be taken
by the Company in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to NYCOR.
Directors, Officers and Employees
At or prior to the Effective Time, the parties shall take all necessary
action such that, at the Effective Time, the Company's Board of Directors shall
be the directors then serving on the Fedders Board.
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The officers of the Company, as the surviving corporation, shall be the
same as the officers of Fedders at and as of the Effective Time.
The employees and directors of NYCOR shall be placed in the same economic
position following the Merger as they were immediately prior to the date of the
execution of the Merger Agreement with respect to stock options, directors fees,
salaries and employee benefits provided by NYCOR.
Amendment of the Merger Agreement
The Merger Agreement may be amended by a written agreement between the
parties, provided that any amendment effected subsequent to stockholder approval
will be subject to the rights of the stockholders of both parties to approve any
such amendment.
Responses to Other Acquisition Proposals
The Merger Agreement provides that each party to the Merger Agreement and
its respective subsidiaries will not, and will use their best efforts to cause
their respective directors, officers, employees, financial advisors, legal
counsel, accountants and other agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, or take any other action to
facilitate any inquiries or the making of any proposal with respect to, or
except to the extent required in the exercise of the fiduciary duties of its
Board of Directors under applicable law as advised in writing by independent
counsel, engage or participate in negotiations concerning, provide any nonpublic
information or data to or have any discussions with any person other than a
party to the Merger Agreement or their affiliates relating to, any acquisition,
tender offer (including a self-tender offer), exchange offer, merger,
consolidation, acquisition of beneficial ownership of or the right to vote
securities representing 10% or more of the total voting power of such party or
any of its subsidiaries, dissolution, business combination, purchase of all or
any significant portion of the assets or any division of, or any equity interest
in, such party or any subsidiary, or similar transaction other than the Merger.
Each party to the Merger Agreement will promptly notify the other orally and in
writing if any such acquisition proposal (including the terms thereof and
identity of the persons making such proposal) is received, and furnish to the
other party to the Merger Agreement a copy of any written proposal.
Termination of the Merger Agreement
Either of the Company or NYCOR may terminate the Merger Agreement with the
prior authorization of its Board of Directors (whether before or after
stockholder approval): (i) by mutual written consent at any time prior to the
Effective Time; (ii) by giving written notice to the other party at any time
prior to the Effective Time (A) in the event the other party has breached any
material representation, warranty or covenant contained in the Merger Agreement
in any material respect, the non-breaching party has notified the other party of
the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach or (B) if the closing has not occurred on or before
June 30, 1996 unless the failure results primarily from the other party
breaching any representation, warranty or covenant contained in the Merger
Agreement; or (iii) by giving written notice to the other of its intent to do so
at any time after the Fedders Annual Meeting or the NYCOR Special Meeting in the
event the Merger Agreement and the Merger fail to receive the requisite
stockholder approval(s).
Breakup Fee
Other than as permitted by the terms of the Merger Agreement, if the NYCOR
Board terminates the Merger for any reason within its control, then NYCOR must
pay the Company the sum of $20,000,000 plus expenses in cash or by delivery to
the Company of that number of shares of NYCOR Common Stock, and/or NYCOR Class A
Stock and/or NYCOR Class B Stock that would equal $20,000,000, the choice being
solely that of the Company. This termination fee is payable within 30 days of
demand therefor by the Company.
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DISSENTING STOCKHOLDERS' RIGHTS
Under the DGCL, the holders of Fedders Common Stock, Fedders Class A Stock,
NYCOR Preferred Stock, NYCOR Common Stock and NYCOR Class A Stock do not have
dissenters' rights.
Under the DGCL, stockholder's owning shares of the Fedders Class B Stock
are entitled to dissent from the Merger and to receive cash from the Company
equal to the fair value of such stockholder's shares of Fedders capital stock.
The executive officers and directors of Fedders own 99.8% of the outstanding
Fedders Class B Stock, and have indicated their intention to vote in favor of
the Merger, thus reducing the potential population of those who might exercise
appraisal rights to approximately 0.2%. The executive officers and directors of
NYCOR have the same appraisal rights under the DGCL, and own 89.7% of the
outstanding NYCOR Class B Stock. It is expected that NYCOR's executive officers
and directors will vote in favor of the Merger and thus reduce the potential for
the exercise of appraisal rights on NYCOR Class B Stock to the holders of 10.3%
of the NYCOR Class B Stock.
Pursuant to Section 262 of the DGCL (a copy of which is attached hereto as
Annex H), a holder of Fedders Class B Stock or NYCOR Class B Stock who complies
with the statutory provisions thereof shall be entitled to an appraisal by the
Delaware Court of Chancery of the fair value of his or her capital stock and to
receive payment of such amount in lieu of the consideration provided for in the
Merger Agreement. Such amount may be more or less than the value of the
consideration provided for in the Merger Agreement. Any holder of Fedders Class
B Stock or NYCOR Class B Stock desiring to exercise dissenters' rights of
appraisal should refer to the statute in its entirety and should consult with
legal counsel prior to taking any action to insure that such holder complies
strictly with the applicable statutory provisions.
To exercise dissenter's rights, a holder of Fedders Class B Stock or NYCOR
Class B Stock must:
(i) hold shares of Fedders Class B Stock or NYCOR Class B Stock, as
the case may be, on the date of the making of a demand for appraisal of
such shares and continuously hold such shares through the Effective Time;
(ii) before the taking of the vote on the Merger, deliver to Fedders
or NYCOR, as the case may be, written demand for appraisal of his or her
shares;
(iii) not have voted in favor of the Merger nor consented thereto in
writing pursuant to Section 228 of the DGCL; and
(iv) make a demand to Fedders for appraisal of such shares in writing
within twenty days after the mailing of a notice by Fedders to such holder,
which notice by Fedders shall state the Effective Time, that appraisal
rights are available and be accompanied by a copy of Section 262 of the
DGCL.
Thereafter, within 120 days after the Effective Time, any stockholder who
has met such requirements, or Fedders, may file a petition with the Delaware
Court of Chancery seeking a determination of the value of the stock of all
dissenting stockholders. The Court of Chancery must hold a hearing and determine
the fair value (exclusive of any element of value arising from the Merger),
together with a fair rate of interest to be paid on the fair value. Fedders, as
the surviving corporation, will pay the fair value of the stock held by
dissenting stockholders and the interest determined by the Court.
Notwithstanding the foregoing, at any time within 60 days after the Effective
Time, any stockholder shall have the right to withdraw his demand for appraisal
rights and accept the terms offered in the Merger.
The failure of a holder of Fedders Class B Stock or NYCOR Class B Stock to
vote against the proposal to approve the Merger Agreement and the Merger will
not constitute a waiver of such holder's appraisal rights under the DGCL. A vote
against approval of the Merger Agreement and the Merger will not satisfy the
obligation of a dissenting stockholder to give notice pursuant to Section 262 of
the DGCL.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreement provides that the employees, officers and directors of
NYCOR shall be placed in the same economic position following the Merger as they
were immediately prior to the date of the execution of the Merger Agreement with
respect to stock options, directors fees, salaries and employee benefits
provided
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by NYCOR. The Merger Agreement does not specify the period during which such
economic position must be maintained. For certain information concerning
compensation and directors fees paid by NYCOR, employment agreements with NYCOR
and options outstanding from NYCOR, reference is made to "Executive
Compensation" in NYCOR's definitive Proxy Statement dated March 27, 1995, a copy
of which is attached hereto as Annex D. Certain persons serve as directors and
executive officers of, and have significant stockholdings in, both Fedders and
NYCOR. For certain information concerning compensation and directors fees paid
by, employment agreements with and options outstanding from Fedders, see
"Proposal No. 2 -- Executive Compensation."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general summary of the material Federal income tax
consequences under the Code of the Merger to Fedders, NYCOR and the stockholders
of Fedders and NYCOR. This discussion does not deal with all the tax
consequences of the Merger that may be relevant to the particular circumstances
of any individual NYCOR or Fedders stockholder. This summary is based on certain
provisions of the Code, the final, temporary, and proposed Treasury Regulations
promulgated thereunder (the "Regulations") and administrative and judicial
interpretations thereof, all in effect as of the date hereof and all subject to
change (possibly on a retroactive basis). Legislative, judicial or
administrative actions or interpretations could alter or modify the tax analysis
of the issues set forth below at any time.
Neither Fedders nor NYCOR will seek a private letter ruling from the
Internal Revenue Service (the "IRS") as to the tax consequences of the Merger.
Fedders and NYCOR have received an opinion of Fedders' special tax counsel,
McCarter & English, with respect to certain Federal income tax consequences of
the Merger to Fedders, NYCOR and the stockholders of Fedders and NYCOR. This
opinion, which is referred to herein as the "Tax Opinion," is not binding on the
IRS. In rendering the Tax Opinion, special tax counsel relied on certain
representations made by the principal stockholders of NYCOR and certain
corporate officers of Fedders and NYCOR, including representations that (i) the
fair market value of the shares of Fedders Class A Stock or Fedders Convertible
Preferred Stock, as the case may be, to be received by each stockholder of NYCOR
in connection with the Merger will be approximately equal to the fair market
value of the shares of NYCOR Common Stock, NYCOR Class A Stock and NYCOR Class B
Stock, as the case may be, surrendered in exchange therefor in the Merger, (ii)
there is no plan or intention on the part of the stockholders of NYCOR who own
one percent (1%) or more of the stock of NYCOR, and to the best of the knowledge
of the management of NYCOR, there is no plan or intention on the part of the
remaining stockholders of NYCOR, to sell, exchange, or otherwise dispose of a
number of shares of the Fedders Class A Stock or Fedders Convertible Preferred
Stock to be received in the Merger that would reduce the aggregate value of the
shares of the Fedders Class A Stock or Fedders Convertible Preferred Stock
received by the stockholders of NYCOR in the Merger to less than fifty percent
(50%) of the aggregate value of all of the outstanding shares of NYCOR Common
Stock, NYCOR Class A Stock and NYCOR Class B Stock immediately prior to the
Merger, (iii) no stockholder of NYCOR will directly or indirectly receive from
Fedders any consideration in the Merger in respect of such stockholder's shares
of NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock other than
shares of Fedders Class A Stock or Fedders Convertible Preferred Stock,
excluding payments of cash to NYCOR stockholders in lieu of fractional shares of
Fedders Class A Stock or payments of cash to holders of NYCOR Class B Stock who
exercise dissenters' rights, (iv) Fedders has no plan or intention to reacquire
any of the shares of Fedders Class A Stock or Fedders Convertible Preferred
Stock to be issued to the stockholders of NYCOR pursuant to the Merger and
Fedders is under no contractual obligation and has no contractual right to
acquire any of such shares of Fedders Class A Stock or Fedders Convertible
Preferred Stock from such holders, (v) Fedders intends to continue the historic
business of NYCOR after the Merger in a substantially unchanged manner and has
no plan or intention to dispose of any of NYCOR's assets after the Merger other
than in the ordinary course of business, (vi) the liabilities of NYCOR assumed
by Fedders to which the assets transferred to Fedders in the Merger are subject
were incurred by NYCOR in the ordinary course of business, (vii) the payment of
cash in lieu of fractional shares of Fedders Class A Stock is solely for the
purpose of avoiding the expense and inconvenience to Fedders of issuing
fractional shares and does not represent separately bargained for consideration,
(viii) the total cash consideration that will be paid in the Merger to NYCOR
stockholders in
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lieu of fractional shares of Fedders Class A Stock will not exceed one percent
(1%) of the aggregate consideration that will be issued to NYCOR stockholders
with respect to their shares of NYCOR Common Stock, NYCOR Class A Stock and
NYCOR Class B Stock surrendered in the Merger, (ix) none of the compensation for
services rendered to be received by any employee of NYCOR who is also a
stockholder of NYCOR is consideration for, or allocable to, such employee's
shares of NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock
exchanged in the Merger, (x) there is no intercorporate indebtedness existing
between NYCOR and Fedders that was issued, acquired or will be settled at a
discount in connection with the Merger, (xi) no two parties to the transaction
are investment companies as defined in Code Section 368(a)(2)(F)(iii), (xii)
NYCOR is not under the jurisdiction of a court in a title 11 or similar case
within the meaning of Code Section 368 (a)(3)(A), (xiii) the fair market value
of the assets of NYCOR transferred to Fedders will equal or exceed the sum of
NYCOR liabilities assumed by Fedders in the Merger, plus the amount of
liabilities, if any, to which the transferred assets are subject, and (xiv) the
Merger is based upon valid business purposes unrelated to the avoidance of
Federal income taxes and will comply in all respects with the laws of the states
of incorporation of Fedders and NYCOR.
The Tax Opinion, rendered by Fedder's tax advisor, McCarter & English, is
limited to only the Federal income tax consequences enumerated below, and is in
the following general form:
1. The Merger will be a reorganization within the meaning of Code
Section 368 (a) (1) (A) of the Code, and Fedders and NYCOR will be parties
to such reorganization within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized for Federal income tax purposes
by NYCOR on the transfer of its assets to Fedders and the assumption by
Fedders of NYCOR's liabilities pursuant to the Merger. Code Section 361(a)
and 357(a).
3. Fedders will recognize no gain or loss for Federal income tax
purposes upon the receipt by Fedders of NYCOR's assets in exchange for
Fedders Class A Stock or Fedders Convertible Preferred Stock, the
assumption by Fedders of the liabilities of NYCOR pursuant to the Merger
and payments by Fedders to stockholders of NYCOR in lieu of issuing
fractional shares of Fedders Class A Stock. Code Section 1032.
4. No gain or loss will be recognized by the stockholders of NYCOR
whose shares of NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B
Stock are converted solely into shares of Fedders Class A Stock or Fedders
Convertible Preferred Stock, as the case may be, in connection with and
pursuant to the Merger. Code Section 354(a). No gain or loss will be
recognized by the stockholders of Fedders as a consequence of the Merger,
with the exception of those holders of Fedders Class B Stock who exercise
dissenters' rights with respect to the Merger and receive cash pursuant
thereto. Whether the cash received by the holders of Fedders Class B Stock
who exercise their dissenters' rights with respect to the Merger is
characterized and taxable as a dividend (ordinary income) or as a payment
in exchange for shares of Fedders Class B Stock (capital gain or loss) will
depend on whether the cash received by such stockholders is treated as part
or full payment for such shares under Code Section 302.
5. The tax basis of the shares of Fedders Class A Stock or Fedders
Convertible Preferred Stock received by the stockholders of NYCOR in the
Merger will be equal, in each instance, to the tax basis of the shares of
NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock, as the case
may be, surrendered by such stockholders in exchange therefor. Code Section
358(a).
6. Fedder's tax basis in the assets of NYCOR received by Fedders in
connection with the Merger will be, in each instance, the same as the
adjusted basis of NYCOR in such assets immediately prior to the Merger.
Code Section 362(b).
7. The holding period of the shares of Fedders Class A Stock or
Fedders Convertible Preferred Stock received by the stockholders of NYCOR
in the Merger will include, in each instance, the period during which the
shares of NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock,
as the case may be, surrendered therefor were held by such stockholders,
provided that, in each instance, the shares of NYCOR Common Stock, NYCOR
Class A Stock or NYCOR Class B Stock, as
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the case may be, were capital assets in the hands of the NYCOR stockholders
on the effective date of the Merger. Code Section 1223(1).
8. The holding period of the assets of NYCOR received by Fedders in
the Merger shall include the period during which NYCOR held such assets.
Code Section 1223(2).
9. The NYCOR stockholders receiving cash in lieu of fractional shares
of Fedders Class A Stock will be treated as if such fractional shares had
been issued by Fedders and then subsequently redeemed by Fedders and will
be taxed on any resulting gain in an amount which shall not exceed the
amount of the cash received. Code Section 356(a). Whether the cash received
by NYCOR stockholders in lieu of fractional shares or by the holders of
NYCOR Class B Stock who exercise dissenters' rights is characterized as a
dividend or as a payment in exchange for the shares of NYCOR Common Stock,
NYCOR Class A Stock and/or NYCOR Class B Stock, as the case may be, will
depend on whether the distribution of cash to such stockholders, when
viewed as part of the reorganization as a whole and as a redemption by
Fedders, and in light of tax principles analogous to those under Code
Section 302(b), more closely resembles a dividend distribution or a payment
in exchange for shares of NYCOR Common Stock, NYCOR Class A Stock or NYCOR
Class B Stock, as the case may be, surrendered in exchange therefor.
A successful IRS challenge to the status of the Merger as a tax-free
reorganization within the meaning of Section 368 of the Code would result in
each NYCOR stockholder recognizing gain or loss with respect to each share of
NYCOR Common Stock, NYCOR Class A Stock or NYCOR Class B Stock surrendered in
the Merger equal to the difference between the stockholder's tax basis in such
share and the fair market value, as of the time of the Merger, of the Fedders
Class A Stock or Fedders Convertible Preferred Stock received in exchange
therefor. Even if the Merger qualifies as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, a recipient of Fedders Class A Stock or
Fedders Convertible Preferred Stock may recognize income, gain or loss to the
extent such shares are considered to have been received in exchange for services
or property (i.e., for consideration other than solely shares of NYCOR Common
Stock, NYCOR Class A Stock or NYCOR Class B Stock).
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND DOES NOT SET FORTH ALL THE ASSUMPTIONS, QUALIFICATIONS AND
LIMITATIONS REFERENCED IN THE TAX OPINION. STOCKHOLDERS OF NYCOR SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS REGARDING THE POTENTIAL TAX CONSEQUENCES OF THE
MERGER WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE
APPLICABILITY OF FOREIGN, STATE AND/OR LOCAL LAWS.
ACCOUNTING TREATMENT
The Merger transaction will be accounted for as a purchase.
DIRECTORS OF FEDDERS
For information concerning the directors of Fedders, including nominees for
election at the Fedders Annual Meeting and directors whose terms of office will
continue after the Fedders Annual Meeting, see "Proposal 2 -- Election of
Directors of Fedders."
EXECUTIVE COMPENSATION OF MANAGEMENT OF FEDDERS
For information concerning the compensation of the management of Fedders
for the three fiscal years ended August 31, 1995 and related information, see
"Proposal No. 2. -- Executive Compensation." For a description of Stock Option
Plan VIII of Fedders which will become effective if approved by the stockholders
of Fedders at the Fedders Annual Meeting, see "Proposal No. 4 -- Adoption of
Stock Option Plan VIII of Fedders."
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COMPARATIVE STOCK PRICE INFORMATION
The Fedders Common Stock and the Fedders Class A Stock are listed on the
NYSE (symbols: FJC and FJA, respectively). It is a condition to the obligation
of NYCOR to consummate the Merger that the Fedders Convertible Preferred Stock
or Fedders Class A Stock to be issued in the Merger be authorized for listing on
the NYSE upon official notice of issuance. The Fedders Convertible Preferred
Stock will constitute a new series of capital stock of Fedders and there has
been no trading market for such shares. The NYCOR Common Stock and the NYCOR
Class A Stock are included for quotation on the NASDAQ/NMS (symbols: NYCO and
NYCOA, respectively).
The following table sets forth the high and low reported last sale prices
per share of Fedders Common Stock and Fedders Class A Stock as reported on the
NYSE Composite Transactions Tape and per share of NYCOR Common Stock and NYCOR
Class A Stock as reported on the NASDAQ/NMS during the first three fiscal
quarters of Fedders' 1996 fiscal year (through March 15, 1996) and on a
quarterly basis for the two fiscal years ended August 31, 1995 and 1994. If the
Fedders Average Price is less than $6.25, shares of Fedders Convertible
Preferred Stock will be issued in the Merger and the market value thereof per
share of NYCOR Common Stock, NYCOR Class A Stock and NYCOR Class B Stock will
depend on market conditions, although it is expected that the features of the
Fedders Convertible Preferred Stock will be fixed to support an initial market
value of $6.25 per share. There can be no guarantee that the Fedders Convertible
Preferred Stock, when issued, will trade at that price or, if it does, for how
long, as matters beyond the control of Fedders or NYCOR may impact its market
value. If the Fedders Average Price is at or above $6.25, each share of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock will be converted into
the right to receive shares of Fedders Class A Stock determined by dividing
$6.25 by the Fedders Average Price and, in that circumstance, the equivalent
price per share of NYCOR Common Stock, NYCOR Class A Stock and NYCOR Class B
Stock would be $6.25.
MARKET PRICES
FEDDERS
COMMON CLASS A
---------------- ----------------
HIGH LOW HIGH LOW
---- --- ---- ---
FISCAL 1994
First Quarter...................................... 35/16 2 1/2 -- --
Second Quarter..................................... 4 1/8 3 1/8 -- --
Third Quarter...................................... 4 3/4 3 1/2 -- --
Fourth Quarter..................................... 4 3/8 3 1/2 -- --
FISCAL 1995
First Quarter...................................... 6 1/4 3 7/8 4 3/8 3 1/4
Second Quarter..................................... 6 1/8 5 4 3/4 3 5/8
Third Quarter...................................... 6 1/8 5 1/4 4 3/4 4
Fourth Quarter..................................... 7 7/8 5 3/8 5 3/8 4 1/8
FISCAL 1996
First Quarter...................................... 6 3/4 5 1/4 5 3 3/4
Second Quarter..................................... 6 3/4 5 5 5/8 3 7/8
Third Quarter (through March 15, 1996)............. 7 6 3/8 6 1/4 5 1/2
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NYCOR
COMMON CLASS A
---------------- ----------------
HIGH LOW HIGH LOW
---- --- ---- ---
1994
First Quarter........................................ 5 1/2 3 7/8 4 3/4 3 1/4
Second Quarter....................................... 4 3/4 3 1/2 4 1/2 3 1/8
Third Quarter........................................ 5 1/8 2 3/4 5 2 1/2
Fourth Quarter....................................... 3 2 1/8 2 7/8 2
1995
First Quarter........................................ 3 1/4 2 5/8 2 7/8 2 1/4
Second Quarter....................................... 2 15/16 2 3/8 2 3/4 2 3/8
Third Quarter........................................ 3 1/8 2 3/8 3 1/8 2 3/8
Fourth Quarter.......................................
1996
First Quarter (through March 15, 1996)............... 5 7/16 4 7/8 5 1/2 4 7/8
The Board of Directors of Fedders reinstated its regular quarterly cash
dividend of two cents per share of Fedders Common Stock and Fedders Class A
Stock and 1.8 cents per share of Fedders Class B Stock on June 27, 1995, and
intends to continue paying quarterly dividends at this level. When appropriate,
the Board of Directors of Fedders will also consider extra year-end dividends
commencing December, 1996. NYCOR does not have a current program for the payment
of dividends.
On (i) October 30, 1995, the last business day preceding announcement that
Fedders and NYCOR had reached an agreement in principle to merge, (ii) November
30, 1995, the last business day preceding public announcement of the signing of
the Merger Agreement and (iii) March 14, 1996, a date shortly prior to the
mailing of this Proxy Statement-Prospectus, the closing price per share of
Fedders Class A Stock was $4 3/8, $4 1/8 and $6 1/8, respectively. Based on such
closing prices and the provisions of the Merger Agreement, each share of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock would have been
converted into one share of Fedders Convertible Preferred Stock. On such dates,
the closing prices per share of NYCOR Common Stock and NYCOR Class A Stock as
reported by NASDAQ/NMS were as follows:
NYCOR COMMON NYCOR CLASS A
------------ -------------
October 30, 1995..................................... $2 1/8 $ 2 9/32
November 30, 1995.................................... 4 7/8 4 3/4
March 15, 1996....................................... 5 1/8 5 1/8
The stockholders of Fedders and of NYCOR are advised to obtain current
market quotations for Fedders Common Stock, Fedders Class A Stock, NYCOR Common
Stock, and NYCOR Class A Stock.
The ratio of earnings to fixed charges of Fedders for the fiscal years
ended August 31, 1995 and 1994 and for the three months ended November 30, 1995
were 12.4, 5.2 and 3.8 respectively. The actual deficiency of earnings versus
fixed charges for the years ended August 31, 1993 and 1992 and the eight months
ended August 31, 1991 were $2,340,000, $24,965,000 and $13,666,000,
respectively. If Fedders Convertible Preferred Stock is issued upon consummation
of the Merger, the ratio of earnings to combined fixed charges and preferred
stock dividends of Fedders on a pro forma basis for the year ended August 31,
1995 would have been 5.3. The pro forma deficiency of earnings versus combined
fixed charges and preferred stock dividends for the quarter ended November 30,
1995 would have been $1,547,000. For purposes of computing the foregoing pro
forma ratios, Fedders has assumed that the number of shares of Fedders
Convertible Preferred Stock issued in the Merger would equal the aggregate
number of shares of Common Stock, Class A Stock and Class B Stock of NYCOR
outstanding.
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DESCRIPTION OF FEDDERS CAPITAL STOCK
The descriptive information supplied herein outlines certain provisions of
the Fedders Charter, the By-Laws of Fedders and the DGCL. The information does
not purport to be complete and is qualified in all respects by reference to the
provisions of the Fedders Charter, the By-Laws of Fedders and of the DGCL.
AUTHORIZED CAPITAL
The authorized capital stock of Fedders currently consists of 102,500,000
shares consisting of 60,000,000 shares of Common Stock, par value $1.00 per
share (i.e., the Fedders Common Stock), 30,000,000 shares of Class A Stock, par
value $1.00 per share (i.e., the Fedders Class A Stock), 7,500,000 shares of
Class B Stock, par value $1.00 per share (i.e., the Fedders Class B Stock), and
5,000,000 shares of Preferred Stock, par value $1.00 per share. At the Fedders
Annual Meeting, the stockholders of Fedders will be asked to approve the
Amendments to the Fedders Charter increasing the authorized number of shares of
Fedders Common Stock, Fedders Class A Stock, and Preferred Stock to 80,000,000,
60,000,000 and 15,000,000, respectively. See "Proposal No. 3 -- Amendments of
Fedders Charter to Increase the Number of Authorized Shares of Fedders Common
Stock, Class A Stock and Preferred Stock". If the stockholders of Fedders do not
approve the Amendments increasing the authorized number of shares of Fedders
Common Stock, Fedders Class A Stock and Preferred Stock of Fedders, Fedders will
have the right to terminate the Merger Agreement.
As of February 29, 1996, 18,989,298 shares of Fedders Common Stock,
19,027,600 shares of Fedders Class A Stock and 2,267,206 shares of Fedders Class
B Stock were issued and outstanding. As of such date none of the Preferred Stock
of Fedders was issued. The Preferred Stock of Fedders is issuable in one or more
series and, with respect to any series, the Board of Directors of Fedders is
authorized to fix the numbers of shares, dividend rates, liquidation prices,
liquidation rights of holders, redemption, conversion and voting rights and
other terms of the series.
FEDDERS CONVERTIBLE PREFERRED STOCK
If Fedders Convertible Preferred Stock is issued upon consummation of the
Merger, the relative rights and preferences thereof will be as described below.
Dividend Rights
Subject to the prior rights of any additional series of Preferred Stock of
Fedders hereafter created, the holders of the shares of Fedders Convertible
Preferred Stock will be entitled to receive, when and as declared by the Board
of Directors of the Company out of funds of the Company legally available for
payment of cash dividends at the annual rate estimated to be $0.156 per share.
Dividends would be payable quarterly in arrears on April 1, July 1, October 1
and January 1 of each year, commencing July 1, 1996, except that if any such
date is not a business day in New York City then such dividend shall be payable
on the next such succeeding business day (each such date on which a dividend is
payable, a "Dividend Payment Date"). Dividends on the Fedders Convertible
Preferred Stock will be cumulative from the date of original issue and will be
payable to holders of record of the Fedders Convertible Preferred Stock as they
appear on the books of the Company on such respective dates as may be fixed by
the Board of Directors of the Company in advance of the payment of each
particular dividend. Accumulations of dividends will not bear interest.
So long as the Fedders Convertible Preferred Stock is outstanding, the
Company may not declare or pay any dividend on Fedders Common Stock, Fedders
Class A Stock or Fedders Class B Stock or other stock ranking junior to or on a
parity with the Fedders Convertible Preferred Stock (other than a dividend
payable in Fedders Common Stock or other junior stock), or acquire Fedders
Common Stock, Fedders Class A Stock or Fedders Class B Stock or any other stock
ranking junior to or on a parity with the Fedders Convertible Preferred Stock
(except by conversion into or exchange for stock of the Company ranking junior
to the Fedders Convertible Preferred Stock), unless the full cumulative
dividends on the Fedders Convertible Preferred Stock have been paid, or
contemporaneously are declared and paid, through the last Dividend Payment Date.
Should dividends not be paid in full on the Fedders Convertible Preferred Stock
and any other preferred stock ranking on a parity as to dividends with the
Fedders Convertible Preferred Stock, all dividends
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declared on the Fedders Convertible Preferred Stock and any other preferred
stock ranking on a parity as to dividends with the Fedders Convertible Preferred
Stock will be declared pro rata, so that the amount of dividends declared per
share on the Fedders Convertible Preferred Stock and such other preferred stock
will bear to each other the same ratio that accumulated dividends per share on
the shares of Fedders Convertible Preferred Stock and such other preferred stock
bear to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Fedders
Convertible Preferred Stock which may be in arrears.
Voting Rights
Except as indicated below or as required by the DGCL, the holders of the
Fedders Convertible Preferred Stock will not be entitled to vote.
Under the DGCL, the holders of the Fedders Convertible Preferred Stock have
certain voting rights, including the right to vote separately as a class on any
amendment to the Fedders Charter if such amendment would increase or decrease
the aggregate number of authorized shares of such class, increase or decrease
the par value of the shares of such class or alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely.
Liquidation Rights
In the event of any dissolution, liquidation or winding up of the affairs
of Fedders, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of Fedders, the holders of the
Fedders Convertible Preferred Stock would be entitled to receive (before any
distribution or payment is made to holders of Fedders Common Stock, Fedders
Class A Stock or Fedders Class B Stock), out of the net assets of Fedders, $6.25
per share, plus an amount equal to all dividends unpaid on shares of such series
to the Dividend Payment Date next preceding the date fixed for distribution, and
no more. After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of Fedders Convertible Preferred
Stock will not be entitled to any further participation in any distribution of
assets by the Company. A consolidation, merger or sale of all or substantially
all of the assets of the Company will not be considered a liquidation,
dissolution or winding-up for this purpose.
Conversion Rights
The holders of Fedders Convertible Preferred Stock would be entitled at any
time to convert the shares of Fedders Convertible Preferred Stock into Fedders
Class A Stock at the rate of one share of Fedders Class A Stock for each share
of Fedders Convertible Preferred Stock subject to adjustment as set forth below.
No adjustment with respect to dividends on Fedders Convertible Preferred
Stock or any dividend on the Fedders Class A Stock issued upon conversion will
be made upon conversion of shares of Fedders Convertible Preferred Stock. The
registered holder of shares of Fedders Convertible Preferred Stock at the close
of business on a dividend payment record date will be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof subsequent to such record date.
The conversion rate is subject to adjustment upon the occurrence of any of
the following events: the subdivision or combination of outstanding shares of
Fedders Class A Stock; the payment of dividends in shares of Fedders Class A
Stock; the issuance of rights or warrants to holders of Fedders Class A Stock
entitling them to acquire shares of Fedders Class A Stock (or securities
convertible into or exchangeable for such shares) at less than the current
market price per share (as defined) of Fedders Class A Stock; or the
distribution to holders of Fedders Class A Stock of evidences of indebtedness or
securities or assets (excluding cash dividends payable out of consolidated
earnings or retained earnings or dividends payable in shares of Fedders Class A
Stock) or rights or warrants to subscribe for securities of the Company or any
of its subsidiaries (other than those referred to above). In case of any
reclassification or change in the Fedders Class A Stock (other than a change in
par value or a subdivision or combination), any consolidation or merger of the
Company with or into any other corporation (other than a merger in which the
Company is the
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surviving corporation), or any sale or transfer of substantially all the assets
of the Company, any holder of the Fedders Convertible Preferred Stock would be
entitled, after the occurrence of any such event, to receive on conversion the
consideration which the holder would have received had he converted immediately
prior to the occurrence of the event. No adjustment in the conversion rate is
required unless it would result in at least a 1% increase or decrease in that
rate; however, any adjustment not made is carried forward.
Optional Redemption
The Fedders Convertible Preferred Stock is redeemable in whole or in part,
at the sole option of the Company, at the redemption price of $6.25, plus unpaid
dividends to the Dividend Payment Date next preceding the date of such
redemption, in cash or in equivalent value of Fedders Class A Stock, at any
time. If less than all the outstanding shares of Fedders Convertible Preferred
Stock are to be redeemed, the Company will select those to be redeemed by lot or
by such other equitable method as the Board of Directors may direct.
Notice of redemption will be mailed to each holder of Fedders Convertible
Preferred Stock to be redeemed at the address of such holder shown on the books
of the Company not less than 30 days nor more than 60 days prior to the
redemption date. If the Company provides monies as specified in such notice, on
and after the redemption date, dividends will cease to accumulate on shares of
Fedders Convertible Preferred Stock called for redemption and all rights of the
holders thereof as stockholders of the Company (except the right to receive the
redemption price without interest) will cease.
Listing and Transfer Agent
Application will be made to list the Fedders Convertible Preferred Stock on
the New York Stock Exchange.
Bank of Boston, P.O. Box 644, Boston, Massachusetts 02102-0644, has been
appointed as the transfer agent and registrar for the Fedders Convertible
Preferred Stock.
FEDDERS COMMON STOCK
Dividend Rights
Subject to the prior rights of the holders of the Fedders Convertible
Preferred Stock and any additional series of Preferred Stock of Fedders
hereafter issued, holders of Fedders Common Stock, Fedders Class A Stock and
Fedders Class B Stock are entitled to receive such dividends and other
distributions in cash, stock or property of Fedders as may be declared thereon
by the Board of Directors of Fedders from time to time out of assets or funds of
Fedders legally available therefor, provided, that in the case of cash
dividends, if at any time a cash dividend is paid on the Fedders Common Stock, a
cash dividend of equal amount must be paid on the Fedders Class A Stock and a
cash dividend must also be paid on the Fedders Class B Stock in an amount per
share of Fedders Class B Stock equal to 90% of the amount of the cash dividend
paid on each share of Fedders Common Stock. In the case of a dividend or other
distribution payable in stock of Fedders other than Preferred Stock of Fedders,
unless the dividend or distribution is solely of shares of Fedders Class A
Stock, in which case a dividend or distribution payable solely in shares of
Fedders Class A Stock may be made with respect to shares of Fedders Common
Stock, Fedders Class A Stock and Fedders Class B Stock, only shares of Fedders
Common Stock may be distributed with respect to Fedders Common Stock, only
shares of Fedders Class A Stock may be distributed with respect to Fedders Class
A Stock and only shares of Fedders Class B Stock may be distributed with respect
to Fedders Class B Stock, in each case, in an amount per share equal to the
amount per share paid with respect to the Fedders Common Stock.
Voting Rights
Each share of Fedders Common Stock is entitled to one vote per share on all
matters submitted to the stockholders of Fedders. In most cases, including the
election of directors, the holders of the Fedders Common Stock vote together
with the holders of Fedders Class B Stock. However, under certain circumstances,
including any amendment to the Fedders Charter, any merger or consolidation of
Fedders, the sale of all or
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substantially all of the assets of Fedders or the dissolution of Fedders, the
holders of the Fedders Common Stock have the right to approve such action voting
separately as a class.
Liquidation Rights
After payment in full of amounts payable to the holders of the Preferred
Stock of Fedders of all series, the remaining assets and funds of Fedders would
be divided among and paid ratably to the holders of the Fedders Common Stock and
Fedders Class A Stock (including those persons who become holders of Fedders
Common Stock by reason of converting their shares of Fedders Class B Stock).
Listing and Transfer Agent
The Fedders Common Stock is listed on the New York Stock Exchange under the
symbol FJC.
Bank of Boston, P.O. Box 644, Boston, Massachusetts 02102-0644, is the
transfer agent and registrar for the Fedders Common Stock.
FEDDERS CLASS A STOCK
Dividend Rights
For a description of the dividend rights of the holders of Fedders Class A
Stock, see "Fedders Common Stock -- Dividend Rights."
Voting Rights
The holders of Fedders Class A Stock have no voting rights other than as
required under the DGCL. Under the DGCL, the holders of Fedders Class A Stock
would have the right to vote separately as a class on any amendment to the
Fedders Charter if such amendment would increase or decrease the aggregate
number of authorized shares of Fedders Class A Stock, increase or decrease the
par value of Fedders Class A Stock or alter or change the powers, preferences or
special rights of the shares of Fedders Class A Stock so as to affect them
adversely.
Liquidation Rights
For a description of the liquidation rights of the holders of Fedders Class
A Stock, see "Fedders Common Stock -- Liquidation Rights."
Change of Control
In the event of a merger or consolidation of Fedders with or into another
entity (whether or not Fedders is the surviving entity), the holders of Fedders
Class A Stock are entitled to receive the same per share consideration in such
merger or consolidation as is received by the holders of Fedders Common Stock,
if any.
Conversion
All outstanding shares of Fedders Class A Stock will be converted into
fully paid and nonassessable shares of Fedders Common Stock, immediately and
without any action on the part of the holders thereof, in the event the Fedders
Class B Stock is converted into Fedders Common Stock in accordance with the
provisions of the Fedders Charter. See, "Fedders Class B Stock -- Conversion."
Listing and Transfer Agent
The Fedders Class A Stock is listed on the New York Stock Exchange under
the symbol FJA.
Bank of Boston, P.O. Box 644, Boston, Massachusetts 02102-0644, is the
transfer agent and registrar for Fedders Class A Stock.
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FEDDERS CLASS B STOCK
Voting Rights
Each share of Fedders Class B Stock is entitled to one vote on all matters
submitted to the stockholders of Fedders, provided that each share of Fedders
Class B Stock is entitled to ten votes per share in any election of directors if
more than 15% of the shares of Fedders Common Stock outstanding on the record
date are owned beneficially by a person or group of persons acting in concert
(other than the Board of Directors of Fedders) provided such nomination is not
made by one or more of the holders of Fedders Class B Stock, acting in concert
with each other, who beneficially own more than 15% of the shares of Fedders
Class B Stock outstanding on such record date.
In addition, under the Fedders Charter, the holders of the Fedders Class B
Stock have the right to vote separately as a class on certain matters. These
matters include any amendment to the Fedders Charter, any merger or
consolidation of Fedders, any sale of all or substantially all of the assets of
Fedders, any dissolution of Fedders and any additional issuance of Fedders Class
B Stock (except in connection with stock splits and stock dividends).
Dividend Rights
The dividend rights of the holders of Fedders Class B Stock are described
herein under "Fedders Common Stock -- Dividend Rights."
Liquidation Rights
In the event of any liquidation or winding up of Fedders, the holders of
Fedders Class B Stock are not entitled to receive any distribution; provided,
that, if Fedders Class B Stock is converted into Fedders Common Stock, the
holder of Fedders Common Stock so issued would have the rights described herein
under "Fedders Common Stock -- Liquidation Rights."
Restrictions on Transfer
Under the provisions of the Fedders Charter, the ability of a holder of
Fedders Class B Stock to transfer such stock whether by sale, assignment, gift,
bequest, appointment or otherwise, can only be made to a Permitted Transferee
(as defined in the Fedders Charter).
Conversion Rights
Each share of Fedders Class B Stock is convertible at any time by the
holder thereof into one share of Fedders Common Stock, with no payment or
adjustment on account of dividends accrued or in arrears on Fedders Class B
Stock surrendered for conversion or on account of any dividends on Fedders
Common Stock issuable on such conversion. Any conversion of Fedders Class B
Stock is deemed to occur on the date the certificate therefor is surrendered,
and the person or persons entitled to receive Fedders Common Stock issuable upon
conversion of Fedders Class B Stock shall be treated for all purposes as the
record holder of such Fedders Common Stock on such date.
At any time when the number of outstanding shares of Fedders Class B Stock
falls below 5% of the aggregate number of the issued and outstanding shares of
Fedders Common Stock and Fedders Class B Stock, or the Board of Directors of
Fedders and the holders of a majority of the outstanding shares of Fedders Class
B Stock approve the conversion of all of Fedders Class B Stock into Fedders
Common Stock, then, immediately upon the occurrence of either such event, the
outstanding shares of Fedders Class B Stock will be converted into shares of
Fedders Common Stock.
Listing and Transfer Agent
Fedders Class B Stock is not actively traded. Fedders acts as the transfer
agent and registrar for Fedders Class B Stock.
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CERTAIN DIFFERENCES IN THE RIGHTS OF FEDDERS AND NYCOR STOCKHOLDERS
As corporations organized under Delaware law, both Fedders and NYCOR are
corporations subject to the provisions of the DGCL. Upon consummation of the
Merger, stockholders of NYCOR will become stockholders of Fedders, and their
rights will then be governed by the Fedders Charter and its By-Laws. The
provisions of the Fedders Charter and its By-Laws are substantially the same as
the provisions of the Certificate of Incorporation and By-Laws of NYCOR insofar
as the provisions thereof affect the rights of the stockholders of the
respective corporation.
The most significant differences in the rights of the holders of NYCOR
Common Stock, NYCOR Class A Stock and NYCOR Class B Stock following the Merger
are:
1. The holders of NYCOR Common Stock and NYCOR Class B Stock will have
no voting rights as holders of Fedders Convertible Preferred Stock or
Fedders Class A Stock issued in the Merger or if such holders convert any
Fedders Convertible Preferred Stock issued in the Merger into Fedders Class
A Stock, except as such voting rights are otherwise required by law; and
2. If Fedders Convertible Preferred Stock is issued in the Merger, the
holders will have a preferential right to receive dividends at the annual
rate estimated to be $0.156 per share payable quarterly and will, in the
event of any voluntary or involuntary liquidation of Fedders be entitled to
receive $6.25 plus unpaid dividends to the Dividend Payment Date next
preceding the date fixed for distribution before the holders of Fedders
Common Stock, Fedders Class A Stock and Fedders Class B Stock would be
entitled to receive any distribution.
PROPOSAL NO. 2
ELECTION OF DIRECTORS OF FEDDERS
Stockholders of Fedders may vote for a maximum of three directors at the
Fedders Annual Meeting. The nominees for election as directors are Messrs.
Salvatore Giordano, Howard S. Modlin and William J. Brennan. Messrs. Giordano,
Modlin and Brennan were elected directors at the March 23, 1993 Annual Meeting
and are now serving as such. Set forth opposite the name of each nominee and
each director is his age, principal occupation for the past five years, the name
and principal business of any corporation or other organization in which such
employment is carried on and other business directorships held by the nominee or
director. The Company is not presently aware of any circumstance which would
prevent any nominee from fulfilling his duties as a director of the Company.
DIRECTOR
NAME PRINCIPAL OCCUPATION AND AGE SINCE
- ---------------------- ----------------------------------------------------------- --------
NOMINEES -- THREE YEAR TERM
Salvatore Giordano Chairman of the Board of the Company(1)(2); 85 1945
Howard S. Modlin Partner, Weisman, Celler, Spett & Modlin(3); 64 1977
William J. Brennan Financial Consultant(1)(4); 67 1980
DIRECTORS -- TWO YEAR REMAINING TERM
Joseph Giordano President, NYCOR, Inc.(1)(5); 62 1961
Clarence Russel Moll President Emeritus, Widener University(6); 82 1967
Anthony E. Puleo President, Puleo Tree Co.(7); 60 1994
DIRECTORS -- ONE YEAR REMAINING TERM
Sal Giordano, Jr. Vice Chairman, President and Chief Executive Officer of the 1965
Company(1)(2); 57
S. A. Muscarnera Senior Vice President and Secretary of the Company(1)(2); 1982
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- ---------------
(1) Messrs. Sal Giordano, Jr. and Joseph Giordano are sons, and Mr. Muscarnera
is the nephew, of Mr. Salvatore Giordano. Messrs. Salvatore Giordano and Sal
Giordano, Jr. are also executive officers and (along with Joseph Giordano,
William J. Brennan and S. A. Muscarnera) directors of NYCOR.
(2) Messrs. Salvatore Giordano, Sal Giordano, Jr. and S.A. Muscarnera, have been
associated in executive capacities with the Company for more than five
years.
(3) Principal occupation during the past five years. The law firm of Weisman,
Celler, Spett & Modlin renders legal services to the Company. Mr. Modlin is
also a director of General DataComm Industries, Inc. and Trans-Lux
Corporation.
(4) Principal occupation during the past five years. Mr. Brennan served as a
director of the Company from 1980 to 1987, and was again elected a director
in 1989. He is also on the board of directors of CSM Environmental Systems,
Inc.
(5) Principal occupation during the past three years. NYCOR is a holding company
currently comprising two operating companies, one manufacturing rotary
compressors and the other thermoelectric heating and cooling modules. Mr.
Giordano was a Senior Vice President of the Company for more than five years
prior to his retirement August 31, 1992.
(6) Principal occupation during the past five years. Dr. Moll is also a director
of Ironworkers' Savings Bank.
(7) Principal occupation during the past two and one half years. Puleo Tree Co.
is an importer of Christmas items and garden furniture. Prior to that Mr.
Puleo was President of Boulderwood Corporation.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During the Fiscal Year, the Board of Directors of the Company held 9
meetings. All of the present directors attended 75% or more of such meetings and
of meetings of committees of which they were members. Directors who are not
employees receive an annual fee of $20,000.
The Board of Directors has an Audit Committee consisting of Messrs.
Clarence Russel Moll, William J. Brennan and Howard S. Modlin. During the Fiscal
Year, this committee held 5 meetings. The Audit Committee reviews the audit
function with the Company's independent auditors. The Chairman and other members
of the Audit Committee receive a fee of $1,000 and $500, respectively, for each
meeting they attend.
The Board of Directors has a Compensation Committee consisting of Messrs.
Howard S. Modlin, William J. Brennan and Anthony E. Puleo. During the Fiscal
Year, this committee held 2 meetings. The Compensation Committee develops
compensation plans for the executive officers of the Company, subject to
approval by the Board of Directors. Members of the Compensation Committee serve
without remuneration.
The Company does not have a nominating committee.
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EXECUTIVE COMPENSATION
The following information is furnished as to all cash compensation paid by
the Company and its subsidiaries during the Fiscal Year to each of the five
highest paid executive officers of the Company whose aggregate direct
compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------- ------------
(A) (B) (C) (D) (G) (I)
ALL OTHER
FISCAL SALARY BONUS OPTIONS COMPENSATION(1)
NAME AND PRINCIPAL POSITION YEAR $ $ (#) $
- ------------------------------------------- ------ ------- ------- ------------ ---------------
Salvatore Giordano......................... 1993 237,133 -- 120,000 7,114
Chairman of the Board of Directors 1994 252,150 282,045 150,000 15,753
1995 245,354 520,365 77,314 3,097,691(2)
Sal Giordano, Jr........................... 1993 307,800 -- 590,000 9,234
Vice Chairman, President and 1994.. 335,375 282,045 180,000 17,548
Chief Executive Officer 1995 352,902 520,365 139,066 32,424
Robert L. Laurent , Jr..................... 1993 186,101 -- 85,000 5,583
Executive Vice President-Finance and 1994 209,725 141,023 95,000 8,425
Administration, and Chief Financial
Officer 1995 226,489 260,183 50,590 15,281
S. A. Muscarnera........................... 1993 173,633 -- 120,000 5,209
Senior Vice President and 1994 181,875 141,023 15,000 7,641
Secretary 1995 191,144 260,183 18,750 16,726
Gordon E. Newman........................... 1993 61,990 -- 14,063 1,860
Senior Vice President, 1994 100,016 21,456 -- 3,205
Supply Chain 1995.. 122,498 48,072 22,782 5,123
- ---------------
(1) Includes the Company contribution to savings and investment retirement plans
up to the 3% offered to all employees of the Company and in 1995, the dollar
value of the benefit of premiums paid for split-dollar life insurance
policies projected on an actuarial basis, which cost will be recovered by
the Company from the proceeds of such policies (Mr. Sal Giordano, Jr.
$6,226; Mr. Robert L. Laurent, Jr. $681; and Mr. S. A. Muscarnera $3,186).
(2) Includes a special award granted to Mr. Giordano in recognition of over
fifty years of extraordinary and exemplary service to the Company as its
President or Chairman, overseeing the growth of the Company from a
$7,000,000 radiator manufacturer to the leading manufacturer of room air
conditioners in North America.
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OPTIONS/SAR GRANTS TABLE
The following table sets forth information concerning the grant of stock
options and/or stock appreciation rights (SAR's) during the Fiscal Year to the
individual executive officers named in the Summary Compensation Table.
The table shows the number of options granted to each named executive
officer, the number of options granted as a percentage of options granted to all
employees during the Fiscal Year, the exercise price of each option, the
expiration date for each option, and a presentation of the potential realizable
value for each option assuming annual rates of stock appreciation of 5% and 10%
over each option term.
OPTIONS/SAR GRANTS LAST FISCAL YEAR
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
--------------------------------------------------------- AT ASSUMED ANNUAL
% OF RATES OF STOCK
TOTAL OPTIONS EXERCISE PRICE APPRECIATION
OPTIONS GRANTED TO OR BASE FOR OPTION TERM
GRANTED EMPLOYEES IN PRICE ------------------
NAME (#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
- --------------------------- ------- ------------- ------------- --------------- ------- --------
Salvatore Giordano......... 37,500 $3.30 Dec. 31, 1999 $42,478 $ 93,866
39,814 4.50 Aug. 31, 2000 49,499 109,381
-------
77,314 19.2%
Sal Giordano, Jr........... 37,500 3.30 Dec. 31, 1999 34,190 75,551
101,566 4.50 Aug. 31, 2000 126,274 279,032
-------
139,066 34.5%
Robert L. Laurent, Jr...... 25,000 3.30 Dec. 31, 1999 22,793 50,367
25,590 4.50 Aug. 31, 2000 31,815 70,303
-------
50,590 12.6%
S. A. Muscarnera........... 18,750 4.7% 3.30 Dec. 31, 1999 17,095 37,945
Gordon E. Newman........... 22,782 5.7% 4.50 Aug. 31, 2000 28,324 62,589
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
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT OPTIONS
SHARES FY-END(#) AT FY-END($)
ACQUIRED ON VALUE ------------- -------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------------------- ----------- -------- ------------- -------------
Salvatore Giordano.......................... -- -- 450,000E $ 440,257E
120,000U 54,278U
Sal Giordano, Jr............................ -- -- 459,000E 447,761E
1,076,066U 1,892,024U
Robert L. Laurent, Jr....................... -- -- 300,000E 312,877E
50,590U 36,071U
S. A. Muscarnera............................ -- -- 225,000E 233,246E
18,750U 24,750U
Gordon E. Newman............................ -- -- 14,063E 24,432E
22,782U 2,734U
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of three directors who are not
officers or employees of the Company (Howard S. Modlin, William J. Brennan and
Anthony E. Puleo). The Committee submitted a plan to the Fedders Board for the
Fiscal Year which was approved by the Fedders Board on October 25, 1994.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
In determining the total compensation package for the chief executive
officer and all other executive officers for the Fiscal Year, the Committee
considered several factors including: the performance of the Company; the
individual contribution of each executive officer; the need to attract and
retain highly qualified executives in the air conditioning industry necessary to
build long-term stockholder value; and the need to link a portion of each
executive officer's long-term capital accumulation to the growth in the market
value of the Fedders Common Stock. Executive compensation was broken down into
three major components; (i) cash compensation, (ii) incentive bonuses, and (iii)
stock options.
Cash compensation for the Fiscal Year is shown on the Summary Compensation
Table. For the Fiscal Year, the Committee recommended and the Fedders Board
adopted the same incentive plan used for the Company's executive officers for
the past three fiscal years. The awards under the plan (the "Executive Plan")
are based heavily upon the performance of the Company. In accordance with the
terms of the Executive Plan, the executive officers designated by the Fedders
Board may receive incentive awards based upon a prescribed formula. The amount
of the award ranges from 0.5% to 1.5% of an amount equal to consolidated pre-tax
income of the Company minus $1,000,000 ("Adjusted Pre-Tax Income"). With respect
to the individuals named in the Summary Compensation Table, the following
percentages of Adjusted Pre-Tax Income have been designated: Mr. Salvatore
Giordano, 1.5%; Mr. Sal Giordano, Jr., 1.5%; Mr. Robert L. Laurent, Jr., 0.75%;
and Mr. S. A. Muscarnera, 0.75%. Under the Executive Plan, the following awards
were made for Fiscal Year 1995 performance: Mr. Salvatore Giordano, $520,365,
Mr. Sal Giordano, Jr., $520,365, Mr. Robert L. Laurent, Jr. $260,183, and Mr.
S.A. Muscarnera, $260,183. Mr. Gordon E. Newman, as Vice President, Supply
Chain, qualifies for incentive remuneration under a separate plan. Applying the
formula, Mr. Newman earned an incentive award of $48,072.
Respectfully submitted,
COMPENSATION COMMITTEE
Howard S. Modlin -- Chairman
William J. Brennan
Anthony E. Puleo
EMPLOYMENT CONTRACT
Mr. Salvatore Giordano has an Employment Agreement with the Company, which
became effective on March 23, 1993. The material provisions of the Agreement
include: (1) an annual base salary of at least $238,000, payable in equal
semi-monthly installments; (2) annual participation in all compensatory plans
and arrangements of the Company no less favorable than the fiscal year 1993
plans including, but not limited to, a bonus not less than the amount of the
fiscal year 1993 bonus (none was paid), and continuing eligibility to be awarded
stock options; (3) reimbursement for all expenses incurred while on Company
related business; and (4) annual consideration for base salary and plan
participation increases, if deemed justified by the Company. The Agreement has a
stated expiration date of March 23, 2003, but the term of the Agreement
automatically extends and has a remaining term of ten years from any point in
time, until the term is finally fixed at a period of ten years from an
intervening event, as provided in the Agreement, such as permanent disability or
death. During the Fiscal Year, the Company amortized the estimated present value
of future non-salary benefits payable under the Agreement based upon certain
assumptions, in the amount of $468,000.
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PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
stockholder return on the Company's Common Stock with returns on the New York
Stock Exchange Composite Index, and stocks included in the "Home Appliance"
category by The Value Line Investment Survey.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG FEDDERS CORPORATION, NYSE COMPOSITE INDEX,
AND HOME APPLIANCE STOCKS
ASSUMES $100 INVESTED ON JANUARY 1, 1990 WITH DIVIDENDS REINVESTED.
FISCAL YEARS ENDED AUGUST 31 THEREAFTER.
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) FEDDERS CP PEER GROUP BROAD MARKET
1990 100 100 100
1991 109.81 154.30 121.37
1992 58.69 151.07 130.74
1993 81.41 232.34 152.29
1994 115.49 222.93 162.42
1995 159.79 239.32 185.07
PROPOSAL NO. 3
AMENDMENTS OF FEDDERS' CHARTER TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF FEDDERS COMMON STOCK, CLASS A STOCK, AND PREFERRED STOCK
Subject to the approval of the stockholders of Fedders, the Fedders Board
has unanimously adopted the Amendments to the Fedders Charter which will (a)
increase the number of the authorized shares of Fedders Common Stock from
60,000,000 to 80,000,000; (b) increase the number of the authorized shares of
Fedders Class A Stock from 30,000,000 to 60,000,000; and (c) increase the number
of the authorized shares of the Preferred Stock of the Company from 5,000,000 to
15,000,000. The authorized number of shares of Fedders Class B Stock will remain
at 7,500,000. Thus, the total number of shares of all classes of capital stock
which the Company is authorized to issue will be increased from 102,500,000 to
162,500,000. The Fedders Board approved the Amendments on October 30, 1995 and
November 20, 1995.
The Amendments are necessary to (i) provide additional shares of Fedders
Class A Stock for use with the proposed Stock Option Plan VIII, (ii) provide
additional shares of Fedders Class A Stock and Preferred Stock for the
conversion of the NYCOR Shares to take place as of the Effective Time of the
Merger, and (iii) provide additional shares of Fedders Common Stock to be
available upon conversion of the Fedders Class A Stock and/or Fedders Class B
Stock under limited circumstances, as provided in the Fedders Charter.
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The proposed increase in the number of authorized shares of Fedders Class A
Stock by 30,000,000 shares is needed to have an adequate supply of Fedders Class
A Stock available to issue to holders of the Common Stock, Class A Stock and
Class B Stock of NYCOR upon consummation of the Merger if the Fedders Average
Price is at or above $6.25, to issue upon conversion of the Fedders Convertible
Preferred Stock which would be issued upon consummation of the Merger if the
Fedders Average Price is less than $6.25, and to optionees upon exercise of
options which might be granted under the Fedders Stock Option Plan VIII if such
Plan is approved. The proposed increase in the number of authorized shares of
the Preferred Stock of Fedders by 10,000,000 shares is needed to be able to
issue a new series of Preferred Stock (the Fedders Convertible Preferred Stock)
to holders of the Common Stock, Class A Stock and Class B Stock of NYCOR upon
approval of the Merger, if the Fedders Average Price is below $6.25. Finally,
the proposed increase in the number of authorized shares of Fedders Common Stock
by 20,000,000 shares is needed to assure an adequate reserve of Fedders Common
Stock in the event the shares of Fedders Class A Stock issued in the Merger or
issued upon conversion of Fedders Convertible Preferred Stock issued in the
Merger or upon exercise of options which might be granted under the Fedders
Stock Option Plan VIII are converted into Fedders Common Stock as provided in
the Fedders Charter.
The Fedders Board would be authorized to provide for the issue from time to
time of the authorized but unissued shares of the Preferred Stock of Fedders,
Fedders Common Stock and Fedders Class A Stock without further stockholder
approval. The Fedders Board would continue to have the right to fix the relative
rights and preferences, including voting, dividend and liquidation rights, of
any additional series of Preferred Stock of Fedders created after approval of
the Amendments and the filing of an amendment to the Fedders Charter with the
Secretary of State of Delaware. Such uses might include additional stock option
plans, dividends, acquisitions, financing, and other general corporate purposes.
The relative rights and preferences of the Fedders Common Stock, Fedders
Class A Stock, Fedders Class B Stock and the Fedders Convertible Preferred Stock
which might be issued upon consummation of the Merger, as well as the
circumstances under which additional shares of Fedders Common Stock would be
issued upon conversion of the Fedders Class A Stock following the conversion of
the Fedders Class B Stock, are described herein under "Proposal No.
1 -- Description of Fedders Capital Stock." Other than the shares of Fedders
Convertible Preferred Stock or Fedders Class A Stock to be issued in the Merger,
the conversion of any Fedders Convertible Preferred Stock into Fedders Class A
Stock and the exercise of outstanding options or options which may be granted
under Fedders' Stock Option Plan VIII described herein under "Proposal No.
4 -- Approval of Fedders' Stock Option Plan VIII," the Fedders Board does not
have any current intention of issuing additional shares of capital stock. If the
Amendments are approved, the Fedders Board would have the authority to authorize
the issuance of the additional shares of Fedders Common Stock, Fedders Class A
Stock and Preferred Stock of Fedders without the approval of the stockholders of
Fedders.
The issuance of additional shares of either Fedders Convertible Preferred
Stock or Fedders Class A Stock, would, if converted to Fedders Common Stock
dilute the voting power of existing holders of Fedders Common Stock. The
additional shares could also dilute earnings per share of existing Fedders
Common Stock and Fedders Class A Stock if NYCOR's operations do not contribute
sufficient earnings to offset the dividends on the Fedders Convertible Preferred
Stock, if issued, or the increase in the number of shares of Fedders Class A
Stock outstanding.
If the Amendments are not authorized, Fedders will not have sufficient
authorized but unissued and unreserved shares of capital stock to consummate the
Merger. If the stockholders approve the adoption of the Amendments to the
Fedders Charter, the Company will file a certificate with the Secretary of State
of the State of Delaware as soon as reasonably practicable after the Fedders
Annual Meeting reflecting the changes resulting from the Amendments, such
changes to become effective on the filing thereof.
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PROPOSAL NO. 4
APPROVAL OF FEDDERS' STOCK OPTION PLAN VIII
On October 24, 1995, the Fedders Board adopted the Fedders Stock Option
Plan VIII (the "Plan") and directed that adoption of the Plan be submitted for
approval of the Company's stockholders at the Fedders Annual Meeting. The Plan
is intended as a means of rewarding outstanding performance and to enable the
Company to maintain a competitive position in attracting and retaining key
personnel necessary for growth and profitability. Under the Plan, the Fedders
Board may grant options to key employees, other eligible employees, non-employee
directors, consultants, and employees of companies with which the Company has
entered or enters into a joint venture or similar business relationship
(collectively, the "Optionees"), who contribute and are expected to contribute
materially to the success of the Company. The Fedders Board may also grant
options to purchase a limited number of shares to all other employees of the
Company. The Fedders Board recommends that the stockholders approve the adoption
of Stock Option Plan VIII, in order that this broad-based incentive program can
continue.
SUMMARY OF PLAN
The basic provisions of the Plan are described below. This description is
qualified in its entirety by reference to the full text of the Plan, which is
set forth in Annex I attached hereto.
1. 5,000,000 shares of Fedders Common Stock, and 5,000,000 shares of
Fedders Class A Stock, are to be reserved for issuance under the Plan.
Notwithstanding the duplicate reservation of shares, the total aggregate number
of shares available under the Plan is 5,000,000 which may be issued as either
Fedders Common Stock or Fedders Class A Stock at the discretion of the Fedders
Board. The number of shares reserved is subject to adjustment by reason of
certain specified changes in the capitalization of the Company. As of December
31, 1995, the fair market value of 5,000,000 shares of Fedders Common Stock was
$28,750,000, and the fair market value of 5,000,000 shares of Fedders Class A
Stock was $21,250,000. As noted above, no more than 5,000,000 shares may be
issued upon exercise of options granted under the Plan.
2. Both non-qualified options and "incentive stock options" as defined in
Section 422A of the Code, may be granted under the Plan. Incentive stock options
may be granted only to employees, while non-qualified stock options may be
granted to all Optionees. The Plan shall be administered by the Fedders Board,
who shall select the Optionees to be granted stock options, the appropriate type
of option to be granted (incentive or non-qualified), the class of the Company's
stock in which the option will be granted, and the number of shares covered by
each option.
3. The granting of an option under the Plan shall take place whenever the
Fedders Board shall make such grant and designate the person to receive the
option. Each option shall be evidenced by the execution of the Company's
standard "Stock Option Contract," as amended by the Fedders Board from
time-to-time.
4. The Plan shall terminate on October 24, 2005, and no option shall be
granted under the Plan after that date.
5. The option price at which options may be granted shall not be less than
the fair market value of the Fedders Common Stock or Fedders Class A Stock, as
applicable, on the date the option is granted, except that if the Optionee would
own more than 10% of the outstanding shares of voting stock if the option were
to be exercised on the date of grant, the exercise price of such option which is
an incentive stock option shall be not less than 110% of the market price for
such shares on the date of grant.
6. The term of each option shall be for a period not exceeding ten years
from the date of grant thereof (but only five years if the Optionee owns more
than 10% of the voting power).
7. Except as expressly provided in the Plan, which includes the right to
grant options to non-employee directors, consultants and employees of companies
with which the Company has entered or enters into a joint venture or similar
business relationship, no option granted under the Plan may be exercised during
the life of the Optionee unless the Optionee remains in the continuous employ of
the Company or one of its subsidiaries from the date of grant to the date of
exercise. The options shall be exercisable in whole or in part from time to
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time during the term thereof as may be determined by the Fedders Board and
stated in the option; provided, however, that unless otherwise provided by the
Fedders Board, no option may be exercised prior to the first anniversary of the
date of the grant of such option.
8. Payment for shares purchased must be made in full in cash or by the
surrender of previously owned shares of Fedders Common Stock or Fedders Class A
Stock, as applicable, valued at the market price for such shares at the time of
exercise of the option under the Plan.
9. The Fedders Board may grant stock appreciation rights to Optionees,
subject to terms set by the Fedders Board. Each right will relate to a specific
option granted under the Plan and may be granted simultaneously with or
subsequent to the grant of the option. A right will entitle the recipient
thereof to elect to receive, as an alternative to exercising a related option
and without payment of cash to the Company, that number of shares of Fedders
Common Stock, or Fedders Class A Stock, as applicable, having an aggregate fair
market value which is equal to the difference between the aggregate fair market
value of the shares of Fedders Common Stock or Fedders Class A Stock, as
applicable, subject to the related option on the exercise date and on the date,
as determined by the Fedders Board, that the related option or right was granted
to the Optionee. In lieu of paying any such right totally in shares of Fedders
Common Stock or Fedders Class A Stock, as applicable, the Fedders Board may
elect to pay the right totally in cash or partly in cash and partly in shares of
Fedders Common Stock or Fedders Class A Stock, as applicable. A right may be
exercisable only during the period the related option is exercisable. The number
of shares that may be purchased pursuant to an exercise of a related option will
be reduced to the extent such shares are used in calculating the number of
shares or cash to be received pursuant to an exercise of a related right. In
addition, each share subject to the related option may be used only once to
calculate the number of shares or cash to be received pursuant to exercise of a
right. No options or stock appreciation rights have been granted under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of stock options under present law are
generally as follows:
Incentive Stock Options
The Optionee will recognize no income, for regular income tax purposes,
upon either the grant or the exercise of an incentive stock option, and the
Company will not be allowed a deduction for federal income tax purposes upon
either the grant or the exercise of an incentive stock option. Although the
Optionee will not recognize income, for regular income tax purposes, upon the
exercise of an incentive stock option, the amount by which the fair market value
of the shares on the date of exercise exceeds the option price will be an item
of tax preference for purposes of the alternative minimum tax. If the Optionee
holds the shares acquired upon exercise of an incentive stock option for at
least two years from the date the option was granted and for at least one year
from the date the shares were transferred to the Optionee, any gain or loss
recognized upon a subsequent sale of the shares will, for regular income tax
purposes, constitute capital gain or loss. The amount of the capital gain or
loss will be the difference between the sales proceeds and the option price. If
the Optionee sells the shares acquired upon exercise of an incentive stock
option before satisfying the applicable two-year and one-year periods, special
rules apply. For example, if the shares have not changed in value after the date
of exercise and if the Optionee is not subject to the requirements of Section
16(b) of the Exchange Act, the Optionee will, in the year of the sale, recognize
additional compensation equal to the difference between the fair market value of
the shares on the date of exercise and the exercise price. The Company will be
entitled to a deduction for federal income tax purposes at the same time that
the Optionee recognizes this additional compensation and in the same amount.
Non-Qualified Stock Options
With respect to options which do not qualify as incentive stock options,
the Optionee will recognize no income upon the grant of the option and, upon
exercise, will recognize additional compensation equal to the difference between
the option price and the fair market value of the shares on the date of
exercise. The Company will be entitled to a deduction for federal income tax
purposes at the same time and for the same
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amount which the Optionee is required to recognize as additional compensation.
Upon a subsequent disposition of the shares received under the option, the
Optionee will recognize capital gain or loss, as the case may be, equal to the
difference between the fair market value of the shares at the time of exercise
and the amount realized on the disposition. Special rules apply if the Optionee
is subject to the requirements of Section 16(b) of the Exchange Act.
Stock Appreciation Rights
The Optionee will recognize additional compensation upon the exercise of a
stock appreciation right in an amount equal to the cash received or the fair
market value of the shares received on the exercise date. Special rules apply if
the Optionee is subject to the requirements of Section 16(b) of the Exchange
Act.
ELIGIBLE EMPLOYEES AND NON-EMPLOYEES
Approximately 85 employees and three non-employee directors have been
granted options under similar prior option plans. Approximately 1,200 employees
may be granted options to purchase a limited number of shares under the Plan. In
addition, non-employee consultants and employees of companies with which the
Company has entered or enters into joint venture or similar business
relationships, are also eligible to receive options under the Plan.
The Fedders Board unanimously recommends the approval of the Plan.
PROPOSAL NO. 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS OF FEDDERS
Pursuant to the recommendations of its Audit Committee, the Board of
Directors of Fedders selected the firm of Ernst & Young, LLP ("E&Y") independent
auditors, to audit the consolidated financial statements of the Company for the
year ended August 31, 1995. The Company's stockholders ratified that selection
at their Annual Meeting on December 20, 1994. On May 23, 1995, the Company
dismissed E&Y as its independent auditors. The reports of E&Y on the Company's
financial statements for the years ended August 31, 1994 and 1993 did not
contain an adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principle. The Fedders
Board approved the decision to change independent auditors upon the
recommendation of the Company's Audit Committee. During the last two fiscal
years, the Company has not had any disagreement with E&Y on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure that would require disclosure in this Proxy
Statement-Prospectus. There have been no reportable events (as defined in
Regulation S-K Item 304(a) (1) (v)). At the Company's request, E&Y furnished a
letter addressed to the Commission as required by Item 304 (a) of Regulation
S-K. A copy of such letter was attached to the Company's report to the
Commission on Form 8-K, dated May 24, 1995 and incorporated herein in its
entirety by reference.
The Company has engaged BDO Seidman, LLP ("BDO") as its new independent
auditors as of May 23, 1995. Prior to this engagement, BDO performed audits on
the Company's pension plans for the plan years ended October 31 and December 31,
1993. In 1995, BDO provided various services for the Company's foreign
subsidiaries, Fedders de Mexico S.A. de C.V. and Fedders Asia Pte. Ltd. BDO has
been assisting the Company with work related to prospective foreign investments.
On recommendation of the Audit Committee, the Board of Directors appointed
the firm of BDO, independent auditors, to audit the consolidated financial
statements of the Company and its subsidiaries for the fiscal year ending August
31, 1996, subject to ratification by the Company's stockholders at the Fedders
Annual Meeting. BDO does not have any direct financial interest in the Company.
Representatives of BDO are expected to be at the Fedders Annual Meeting and
will be available to respond to any appropriate questions by stockholders and
may make a statement, if they so choose.
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RESALE OF FEDDERS CONVERTIBLE PREFERRED STOCK OR FEDDERS CLASS A STOCK
The shares of Fedders Convertible Preferred Stock or Fedders Class A Stock
to be issued upon consummation of the Merger have been registered under the
Securities Act, thereby allowing such shares to be traded freely and without
restriction by those holders of NYCOR Common Stock, NYCOR Class A Stock or NYCOR
Class B Stock who receive such shares following consummation of the Merger and
who are not deemed to be "affiliates" (as defined under the Securities Act, but
generally including directors, certain executive officers and ten percent or
more stockholders) of NYCOR or Fedders. Each holder of NYCOR Common Stock, NYCOR
Class A Stock or NYCOR Class B Stock who is deemed by NYCOR to be an affiliate
will not transfer any Fedders Convertible Preferred Stock or Fedders Class A
Stock received by such holder in the Merger except in compliance with the
Securities Act. This Proxy Statement-Prospectus does not cover any resales of
Fedders Convertible Preferred Stock or Fedders Class A Stock received by
affiliates of NYCOR or Fedders.
LEGAL OPINIONS
The validity of the Fedders Convertible Preferred Stock or the Fedders
Class A Stock being offered hereby is being passed upon for Fedders by Cummings
& Lockwood, Stamford, CT.
EXPERTS
The consolidated balance sheet of Fedders as of August 31, 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended August 31, 1995, included in Fedders Annual Report on
Form 10-K for the fiscal year ended August 31, 1995, which is incorporated
herein, have been audited by BDO, independent certified public accountants, and
are incorporated herein in reliance upon such report given upon the authority of
such firm as experts in auditing and accounting. The consolidated balance sheet
of Fedders as of August 31, 1994 and the related consolidated statement of
operations, stockholders equity and cash flows for the years ending August 31,
1994 and 1993 appearing in Fedders Corporation Annual Report (Form 10-K) for the
year ended August 31, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of NYCOR incorporated by reference in
NYCOR's Annual Report (Form 10-K) for the year ended December 31, 1994, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
STOCKHOLDER PROPOSALS -- NEXT FEDDERS ANNUAL MEETING
Fedders anticipates that its next annual meeting of stockholders will be
held in December 1996. If any stockholder of Fedders desires to submit a
proposal for action at such meeting of stockholders of Fedders, it must be
received by Fedders, P.O. Box 813, Liberty Corner, New Jersey 07938 within a
reasonable time before its solicitation for that meeting.
COST OF SOLICITATION
The cost of preparing and mailing material in connection with the
solicitation of proxies is to be borne by Fedders with respect to the
stockholders of Fedders and by NYCOR with respect to the stockholders of NYCOR,
except that Fedders and NYCOR have agreed to divide equally the costs of
printing the proxy material. To the extent necessary in order to assure
sufficient representation at the Fedders Annual Meeting and the NYCOR Special
Meeting, such solicitation will be made by the regular employees of Fedders or
NYCOR, as the case may be, in the total approximate number of five and four,
respectively. Solicitations will
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be made by mail and may also be made by telegram, telephone and in person. The
firm of William F. Doring, Inc. ("Doring") will act as professional proxy
solicitators for Fedders and NYCOR. Doring will forward the solicitation
materials to brokers, firms, nominees, fiduciaries and other custodians for
forwarding to the beneficial owners of shares held in "street name". Doring will
also follow up with such brokers, firms, nominees, fiduciaries and custodians to
obtain the maximum number of votes of the street name stockholders of Fedders
and NYCOR as possible.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
FEDDERS CORPORATION
AND
NYCOR, INC.
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ANNEX A
[COMPOSITE CONFORMED COPY]
AGREEMENT AND PLAN OF MERGER
Agreement entered into this 30th day of November, 1995, [as amended by
Amendment No. 1 dated March 15, 1996] between NYCOR, Inc., a Delaware
corporation ("NYCOR") and Fedders Corporation, a Delaware corporation
("FEDDERS"). NYCOR and FEDDERS are sometimes referred to individually as a
"Party" and collectively as the "Parties."
This Agreement contemplates a tax-free merger of NYCOR with and into
FEDDERS in a reorganization pursuant to Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"). The NYCOR Stockholders will
receive capital stock of FEDDERS in exchange for their capital stock of NYCOR.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Annual FEDDERS Meeting" has the meaning set forth in Section 5(c)(ii)
below.
"Breakup Fee" has the meaning set forth in Section 7(c) below.
"FEDDERS" has the meaning set forth in the preface above.
"FEDDERS Average Price" means the average closing price of a FEDDERS Class
A Share as reported on the Composite Transactions Tape of the New York Stock
Exchange for the 15 trading days ending five business days before the date of
the Special NYCOR Meeting.
"FEDDERS Fairness Opinion" has the meaning set forth in Section 5(d) below.
"FEDDERS Preferred Share" means any share of the Convertible Preferred
Stock, $1.00 par value per share of FEDDERS, convertible into a FEDDERS Class A
Share at a price of $6.25 per share.
"FEDDERS Common Share" means any share of the Common Stock, $1.00 par value
per share, of FEDDERS.
"FEDDERS Class A Share" means any share of the Class A Stock, $1.00 par
value per share, of FEDDERS.
"FEDDERS Class B Share" means any share of the Class B Stock, $1.00 par
value per share, of FEDDERS.
"FEDDERS Share" means any share of the FEDDERS Preferred Shares or FEDDERS
Class A Shares.
"Certificate of Merger" has the meaning set forth in Section 2(d)(iii)
below.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Confidential Information" means any information concerning the businesses
and affairs of FEDDERS or NYCOR and their respective Subsidiaries, and all
analyses, compilations, studies or other documents prepared by either Party that
contain or otherwise reflect or are generated from such information, but does
not include any information that (i) is on the date hereof or hereafter becomes
generally available to the public other than as a result of a disclosure in
violation of Section 5(f) hereof; or (ii) was available to the other Party on a
nonconfidential basis or becomes available to the other Party on a
nonconfidential basis from a source not bound by a confidentiality agreement.
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"Definitive FEDDERS Proxy Materials" means the definitive proxy materials
relating to the Annual FEDDERS Meeting.
"Definitive NYCOR Proxy Materials" means the definitive proxy materials
relating to the Special NYCOR Meeting.
"Delaware General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended, from time to time.
"Disclosure Schedule" means the disclosure schedule accompanying this
Agreement and initialed by the Parties.
"Dissenting Share" means any NYCOR Share, the holder of record of which is
entitled to and has exercised appraisal rights under the Delaware General
Corporation Law.
"Effective Time" has the meaning set forth in Section 2(e)(i) below.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as in effect from time to time in the United States of
America.
"IRS" means the Internal Revenue Service.
"ISRA" means the Industrial Site Recovery Act.
"Knowledge" means actual knowledge after reasonable investigation.
"Material Adverse Change" means any developments or changes which would
have a Material Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, results of operation or financial condition of a Party and its
Subsidiaries taken as a whole or (ii) the ability of such Party to perform its
obligations under this Agreement.
"Merger" has the meaning set forth in Section 2(a) below.
"NYCOR" has the meaning set forth in the preface above.
"NYCOR Fairness Opinion" has the meaning set forth in Section 5(d) below.
"NYCOR Preferred Share " means any share of the $1.70 Convertible
Exchangeable Preferred Stock, par value $1.00 per share, of NYCOR.
"NYCOR Common Share" means any share of the Common Stock, $1.00 par value
per share, of NYCOR.
"NYCOR Class A Share" means any share of the Class A Stock, $1.00 par value
per share, of NYCOR.
"NYCOR Class B Share" means any share of the Class B Stock, $1.00 par value
per share, of NYCOR.
"NYCOR Prospectus" has the meaning set forth in Section 2(c) below.
"NYCOR Share" shall mean any NYCOR Common Share, NYCOR Class A Share or
NYCOR Class B Share.
"NYCOR Stockholder" means any person who or which holds any NYCOR Common
Shares, NYCOR Class A Shares, or NYCOR Class B Shares.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
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"Prospectus" means the final prospectus relating to the registration of
FEDDERS Shares under the Securities Act.
"Public Report" has the meaning set forth in Section 4(e) below.
"Registration Statement" has the meaning set forth in Section 5(c)(i)
below.
"Replacement Options" has the meaning set forth in Section 2(d)(iv).
"Requisite FEDDERS Stockholder Approval" means the affirmative vote of the
holders of a majority of the outstanding FEDDERS Common Shares and Class B
Shares, voting separately as a class, in favor of this Agreement and the Merger.
"Requisite NYCOR Stockholder Approval" means the affirmative vote of the
holders of a majority of the outstanding NYCOR Common Shares and Class B Shares,
voting separately as a class, in favor of this Agreement and the Merger.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease or
operating lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Special NYCOR Meeting" has the meaning set forth in Section 5(c)(ii)
below.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation" has the meaning set forth in Section 2(a) below.
2. BASIC TRANSACTION
(a) The Merger. On and subject to the terms and conditions of this
Agreement, NYCOR will merge with and into FEDDERS (the "Merger") at the
Effective Time. FEDDERS shall be the corporation surviving the Merger (the
"Surviving Corporation") and the separate existence of NYCOR shall thereupon
cease. The Merger shall have the effects set forth in Section 251 of the
Delaware General Corporation Law.
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of FEDDERS, commencing
at 9:00 a.m. local time within five business days following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than the actions referred to in
paragraphs (c) and (d) below) or such other date as the Parties may mutually
determine (the "Closing Date").
(c) Actions Prior to the Closing. Sixty (60) days prior to March 15, 1996,
NYCOR will give written notice to the holders of the NYCOR Preferred Shares in
accordance with the notice provisions set forth in the prospectus for the NYCOR
Preferred Shares (the "NYCOR Prospectus") notifying such stockholders that the
NYCOR Preferred Shares will be exchanged for debt on March 15, 1996, in
accordance with the terms of the NYCOR Prospectus. On March 15, 1996, NYCOR,
pursuant to the terms of the NYCOR Prospectus, shall exchange all of the then
outstanding shares of the NYCOR Preferred Shares for NYCOR's 8 1/2% convertible
subordinated debentures due 2012.
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(d) Actions at the Closing. At the Closing:
(i) NYCOR will deliver to FEDDERS the various certificates,
instruments, and documents referred to in Section 6(a) below;
(ii) FEDDERS will deliver to NYCOR the various certificates,
instruments, and documents referred to in Section 6(b) below;
(iii) FEDDERS and NYCOR will file with the Secretary of State of the
State of Delaware, a Certificate of Merger in a form agreed to by the
Parties (the "Certificate of Merger").
(iv) FEDDERS will replace all outstanding stock options held by NYCOR
employees, officers, directors, non-employee directors and consultants (the
"Replacement Options"), under the following terms:. (1) the option price of
the Replacement Option and the number of shares of FEDDERS Class A Shares
covered by the Replacement Option shall be determined so that the excess of
the aggregate fair market value of Class A Shares for which the Replacement
Option is granted over the aggregate option price of the Replacement Option
shall not be more than the excess of the aggregate fair market value of the
stock covered by the former option over the aggregate exercise price of the
former option, with fair market value being determined on the date of grant
of the Replacement Option; and (2) with respect to a Replacement Option
that is an incentive stock option, the ratio of the option price of the
Replacement Option for each FEDDERS Class A Share to the fair market value
of each FEDDERS Class A Share shall not be less than the ratio of the
exercise price of the former option for each share of stock to the fair
market value of each share of stock, with fair market value being
determined on the date of grant of the Replacement Option. Aside from price
and the number of FEDDERS Class A Shares covered, the Replacement Option
shall contain terms and conditions identical to those contained in the
former option (irrespective of whether those terms and conditions are
inconsistent with the provisions of the FEDDERS stock option plan) or such
different terms and conditions as the Board of Directors shall, in its sole
discretion, determine, provided that if the Replacement Option is an
incentive stock option, it shall not contain any terms or conditions that
would cause it to fail to meet the requirements of Section 424 of the
Internal Revenue Code. Upon issuance of the Replacement Options, the NYCOR
option agreements shall be cancelled and be of no further force or effect.
(e) Effect of Merger.
(i) General. The Merger shall become effective at the time (the
"Effective Time") FEDDERS and NYCOR have filed the Certificate of Merger
with the Secretary of State of the State of Delaware. The Merger shall have
the effect set forth in the Delaware General Corporation Law. The Surviving
Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf
of either FEDDERS or NYCOR in order to carry out and effectuate the Merger
and the transactions contemplated by this Agreement.
(ii) Charter. The Charter of FEDDERS in effect at and as of the
Effective Time shall remain the Charter of the Surviving Corporation
without any modification or amendment in the Merger except that FEDDERS
will ask the FEDDERS Stockholders to approve a proposal to amend its
articles of incorporation to increase the number of authorized FEDDERS
Preferred Shares from 5,000,000 to 15,000,000, FEDDERS Common Shares from
60,000,000 to 80,000,000 and the number of authorized FEDDERS Class A
Shares from 30,000,000 to 60,000,000. The name of the Surviving Corporation
shall be FEDDERS CORPORATION.
(iii) Bylaws. The Bylaws of FEDDERS in effect at and as of the
Effective Time will remain the Bylaws of the Surviving Corporation without
modification or amendment as a result of the Merger.
(iv) Directors, Officers and Employees.
(A) At or prior to the Effective Time, the Parties shall take or
cause to be taken all necessary action at the Annual FEDDERS Meeting and
otherwise such that, at the Effective Time, the Surviving Corporation's
Board of Directors shall be the directors then serving on the FEDDERS
Board of Directors.
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(B) The officers of the Surviving Corporation shall be the same as
the officers of FEDDERS at and as of the Effective Time.
(C) The employees and directors of NYCOR shall be placed in the
same economic position following the Merger as they were immediately
prior to the date of the execution of this Agreement with respect to
stock options, directors fees, salaries and employee benefits provided
by NYCOR.
(v) Conversion of NYCOR Shares. At and as of the Effective Time, (A)
each NYCOR Common Share, NYCOR Class A Share and NYCOR Class B Share (other
than any Dissenting Share) shall be converted into the right to receive one
FEDDERS Preferred Share with dividend or other features reasonably
necessary to support an initial market value of $6.25, if required, unless
the FEDDERS Average Price is $6.25 per share or greater, in which case each
NYCOR Common Share, NYCOR Class A Share and NYCOR Class B Share (other than
any Dissenting Share) shall be converted into the right to receive a number
of shares of FEDDERS Class A Shares determined by dividing $6.25 by the
FEDDERS Average Price and rounding the quotient to the third decimal place,
with fractional Shares being paid in cash and (B) each Dissenting Share
shall be converted into the right to receive payment from the Surviving
Corporation with respect thereto in accordance with the provisions of the
Delaware General Corporation Law; provided, however, that the conversion
ratio shall be subject to equitable adjustment in the event of any stock
split, stock dividend, reverse stock split, or other change in the
capitalization of FEDDERS. No NYCOR Share shall be deemed to be outstanding
or to have any rights other than those set forth above in this Section 2(e)
(v) after the Effective Time.
(vi) Stock Certificates. At the Effective Time, each certificate
previously representing any NYCOR Shares (other than Dissenting Shares)
shall thereafter represent FEDDERS Shares into which such NYCOR Shares have
been converted. Certificates representing NYCOR Shares shall be exchanged
for certificates representing whole FEDDERS Shares issued in consideration
therefor upon the surrender of such certificate in accordance with the
provisions hereof.
(vii) At and after the Effective Time, the holders of certificates
representing NYCOR Shares (other than Dissenting Shares) exchanged for
FEDDERS Shares pursuant to this Agreement shall cease to have any rights as
stockholders of NYCOR except for the right to surrender such stock
certificates in exchange for FEDDERS Shares as provided hereunder.
(viii) FEDDERS Shares. Each FEDDERS Share issued and outstanding at
and as of the Effective Time will remain issued and outstanding.
(f) Procedure for Payment.
(i) Within a reasonable time after the Effective Time, (A) FEDDERS
shall furnish to each of the NYCOR Stockholders a letter of transmittal
setting forth the procedure to follow for each of them to surrender their
NYCOR Shares and receive one or more stock certificates (issued in the name
of the NYCOR Stockholders or their nominees) representing that number of
FEDDERS Shares specified in Section 2(e) (v) (A) above.
(ii) FEDDERS will not pay any dividend or make any distribution on
FEDDERS Shares (with a record date at or after the Effective Time) to any
record holder of outstanding NYCOR Shares until the holder surrenders for
exchange his or its certificates which represented NYCOR Shares.
(iii) In the event that any stock certificate representing NYCOR
Shares shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed, FEDDERS will issue or cause to be issued in exchange
for such lost, stolen or destroyed certificate the number of FEDDERS Shares
into which such shares are converted in the Merger in accordance with this
Section 2(f). When authorizing such issuance in exchange therefor, the
Board of Directors of FEDDERS may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen
or destroyed certificate to give FEDDERS a bond in such sum as it may
direct as indemnity, or such other form of indemnity, as it shall direct,
against any claim
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that may be made against FEDDERS with respect to the certificate alleged to
have been lost, stolen or destroyed.
(iv) No certificates or scrip for fractional FEDDERS Shares will be
issued but each holder of NYCOR Shares who would otherwise be entitled to
receive a fractional share (if the FEDDERS Average Price is $6.25 or
higher) shall be entitled to receive, in lieu thereof, cash in an amount
equal to such fraction multiplied by the closing price of FEDDERS Class A
Shares on The New York Stock Exchange on the trading day immediately prior
to the Closing Date.
(g) Closing of Transfer Records. After the close of business on the
Closing Date, transfers of NYCOR Shares outstanding prior to the Effective Time
shall not be made on the stock transfer books of the Surviving Corporation.
3. REPRESENTATIONS AND WARRANTIES OF NYCOR
NYCOR represents and warrants to FEDDERS that the statements contained in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as the Disclosure Schedule
is amended pursuant to Section 5(g) hereof). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization, Qualification, and Corporate Power. Each of NYCOR and
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of NYCOR
and its Subsidiaries is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a Material
Adverse Effect. Each of NYCOR and its Subsidiaries has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
(b) Capitalization. The entire authorized capital stock of NYCOR consists
of:
(i) 115,000,000 NYCOR Common Shares, 2,800,019 of which are issued and
outstanding; 1,276,500 of which are reserved for issuance upon the
conversion of NYCOR Preferred Shares; 4,051,375 of which are reserved for
issuance upon the conversion of NYCOR Class A Shares; 713,675 of which are
reserved for issuance upon the conversion of NYCOR Class B Shares; and
82,561 of which are held in treasury;
(ii) 5,000,000 NYCOR Preferred Shares, 1,150,000 of which are issued
and outstanding;
(iii) 100,000,000 NYCOR Class A Shares, 4,051,375 of which are issued;
1,276,500 of which are reserved for issuance upon the conversion of the
NYCOR Preferred Shares; 472,500 of which are reserved for issuance upon the
exercise of outstanding options; and 178,596 of which are held in treasury;
and
(iv) 7,500,000 NYCOR Class B Shares, 713,675 of which are issued and
outstanding.
All of the issued and outstanding NYCOR Shares have been duly authorized
and validly issued and are fully paid and nonassessable. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require NYCOR to issue, sell, or otherwise cause to become
outstanding any of its capital stock except as set forth in the Disclosure
Schedule. There are no outstanding stock appreciation rights and there are no
outstanding or authorized, phantom stock, profit participation, or similar
rights with respect to NYCOR's capital stock.
(c) Authorization of Transaction. NYCOR has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder; provided, however, that
NYCOR cannot consummate the Merger unless and until it receives the Requisite
NYCOR Stockholder Approval, approval of any lenders who require prior approval,
and the requisite governmental approvals. This Agreement constitutes the valid
and legally binding obligation of NYCOR, enforceable in accordance with its
terms and conditions.
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(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which NYCOR or any of its Subsidiaries is
subject or any provision of the articles of incorporation or bylaws of NYCOR or
any of its Subsidiaries or (ii) conflict with, result in a breach of or
constitute a default under, result in the acceleration of, create in any person
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which NYCOR or any of its Subsidiaries is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets), except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, or
failure to give notice would not have a Material Adverse Effect on NYCOR and
except as set forth in the Disclosure Schedule. Other than in connection with
the provisions of the Hart-Scott-Rodino Antitrust Improvements Act, required
filings with the SEC, and the provisions of the Delaware General Corporation
Law, or as described in the Disclosure Schedule, none of NYCOR and its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(e) Financial Statements. The consolidated balance sheets of NYCOR at
December 31, 1995 and December 31, 1994, and the consolidated statements of
operations, consolidated statements of stockholders' equity and consolidated
statements of cash flows of NYCOR for the three years ended December 31, 1995,
and the consolidated balance sheet and statement of operations of NYCOR for the
three months ended September 30, 1995 (including the related notes and
schedules) (the "NYCOR Financials"), have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, and fairly
present the financial condition of NYCOR and its Subsidiaries as of the
indicated dates, and the results of operations of NYCOR and its Subsidiaries for
the indicated periods, are correct and complete in all material respects, and
are consistent with the books and records of NYCOR and its Subsidiaries;
provided, however, that the unaudited interim statements are subject to normal
year-end adjustments.
(f) Events Subsequent to Most Recent Financial Statements. Except as set
forth in the Disclosure Schedule, since September 30, 1995, there has not been
any Material Adverse Change in the business, financial condition, operations,
results of operations, or future prospects of NYCOR and its Subsidiaries taken
as a whole.
(g) Undisclosed Liabilities. Except as set forth in the Disclosure
Schedule, none of NYCOR and its Subsidiaries has any material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any material liability for taxes,
except for (i) liabilities set forth on the balance sheet at September 30, 1995
(or in the notes thereto), and (ii) liabilities which have arisen after
September 30, 1995, in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of or was caused by breach of
any material contract, breach of warranty, tort, infringement, or material
violation of law).
(h) Taxes. NYCOR and its Subsidiaries have filed, within the time and in
the manner required by law, all returns, declarations, information, and
statements required to be filed with any federal, state or local tax authority
("Returns"), except for such state and local tax Returns, of which the failure
to file would not have a Material Adverse Effect on NYCOR, and all such Returns
are correct and complete in all material respects. NYCOR has paid all taxes and
assessments that are due and payable and no deficiency has been proposed,
asserted or assessed. Except as set forth in the Disclosure Schedule, no
examination or audit of any Returns by any governmental agency is currently in
progress or, to the knowledge of NYCOR, contemplated. NYCOR is not a party to
any tax sharing or allocation agreement and has no actual or potential liability
for any tax obligation of any other taxpayer.
(i) Brokers' Fees. None of NYCOR and its Subsidiaries has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement except as set forth
in the Disclosure Schedule.
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(j) Litigation. Except as set forth in the Disclosure Schedule, there are
no material actions, suits or proceedings involving claims by or against NYCOR,
either pending or to the knowledge of NYCOR threatened, at law or in equity or
before any governmental agency; and there are no writs, judgments, injunctions
or decrees of any court or governmental agency binding upon NYCOR.
(k) Licenses. Except as set forth in the Disclosure Schedule, NYCOR and
each of its Subsidiaries has, and is operating in material compliance with, all
necessary licenses, certificates and permits from governmental authorities that
are material to the conduct of its business. There is no proceeding pending or,
to the knowledge of NYCOR, threatened (or any basis therefor) which may cause
any such license, certificate or permit that is material to the conduct of the
business of NYCOR or any of its Subsidiaries as presently conducted to be
revoked, withdrawn, canceled, suspended or not renewed. NYCOR and each of its
Subsidiaries are conducting their business in compliance with all laws, rules
and regulations applicable thereto, the violation of which would have a Material
Adverse Effect on NYCOR and its Subsidiaries, taken as a whole.
(l) Contracts. The Disclosure Schedule has attached thereto NYCOR's
material contracts. Except as set forth in the Disclosure Schedule, each
material contract to which NYCOR or any of its Subsidiaries is a party is,
valid, binding and in full force and effect. Except to the extent that the
consummation of the transactions contemplated by this Agreement may require the
consent of third parties, (i) there are no existing defaults by NYCOR and its
Subsidiaries and, to the knowledge of NYCOR, by any other party to any of the
material revenue producing contracts, and (ii) except as set forth in the
Disclosure Schedule, there are no disputes between NYCOR and any other party
with respect to the foregoing contracts outside the Ordinary Course of Business.
(m) Disclosure. The Definitive NYCOR Proxy Materials will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they will be made not misleading; providing, however, that NYCOR
makes no representation or warranty with respect to any information that FEDDERS
will supply specifically for use in the Definitive NYCOR Proxy Materials. None
of the information that NYCOR has supplied or will supply to FEDDERS for use in
the Registration Statement, the Prospectus, or the Definitive FEDDERS Proxy
Materials, will contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they have been or will be made, not
misleading.
(n) Environmental. NYCOR will take all reasonable actions to comply with
all obligations imposed upon it under ISRA and any other federal, state or local
environmental laws.
4. REPRESENTATIONS AND WARRANTIES OF FEDDERS.
FEDDERS represents and warrants to NYCOR that the statements contained in
this Section 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as the Disclosure Schedule
is amended pursuant to Section 5 (g) hereof). The Disclosure Schedule will be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Section 4.
(a) Organization, Qualification and Corporate Power. Each of FEDDERS and
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of
FEDDERS and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a Material
Adverse Effect. Each of FEDDERS and its Subsidiaries has full corporate power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it.
(b) Capitalization. The entire authorized capital stock of FEDDERS
consists of (i) 60,000,000 shares of FEDDERS Common Shares 18,908,598 of which
are issued and outstanding, 1,050,000 of which are reserved for issuance upon
the exercise of currently outstanding options, and none of which are held in
treasury; (ii) 30,000,000 shares of FEDDERS Class A Shares, 18,831,376 of which
are issued and
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outstanding and 6,253,000 of which are reserved for issuance upon the exercise
of currently outstanding options, (iii) 7,500,000 shares of FEDDERS Class B
Shares, 2,267,206 of which are outstanding, and (iv) 5,000,000 shares of Fedders
Preferred Shares, 1,718,200 of which were previously issued and none of which
are currently outstanding. All of the issued and outstanding FEDDERS Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
Subject to the outcome of the vote of the FEDDERS stockholders to approve a
proposed increase in the number of authorized FEDDERS Common Shares, Class A
Shares and Preferred Shares as set forth in Section 6 (a) (ii), all FEDDERS
Shares to be issued in the Merger have been duly authorized and, upon
consummation of the Merger, will be validly issued, fully paid, and
nonassessable. There are no outstanding or authorized options, warrants,
purchase rights, conversion rights, exchange rights, or other contracts or
commitments that would require FEDDERS to issue, sell or otherwise cause to
become outstanding any of its capital stock except as set forth in the
Disclosure Schedule. There are no outstanding stock appreciation rights, and
there are no outstanding or authorized phantom stock, profit participation or
similar rights with respect to FEDDERS's capital stock.
(c) Authorization of Transaction. FEDDERS has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement, and to perform its obligations hereunder; provided, however, that
FEDDERS cannot consummate the Merger unless and until it receives the Requisite
FEDDERS Stockholder Approval, the approval described in Section 6 (a) (ii)
below, approval of any lenders who require prior approval, and the requisite
governmental approvals. This Agreement constitutes the valid and legally binding
obligation of FEDDERS, enforceable in accordance with its terms and conditions.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transaction contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which FEDDERS or any of its Subsidiaries is
subject or any provision of the charter or bylaws of FEDDERS or any of its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any Person the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
FEDDERS or any of its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject, except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, or
failure to give notice would not have a Material Adverse Effect on FEDDERS and
except as disclosed in the Disclosure Schedule. Other than in connection with
the provisions of the Hart-Scott-Rodino Antitrust Improvements Act, required
filings with the SEC, and the provisions of the Delaware General Corporation
Law, or as described in the Disclosure Schedule, FEDDERS does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(e) Filings with the SEC. Except as disclosed in the Disclosure Schedule,
FEDDERS has timely made all filings with the SEC that it has been required to
make under the Securities Act and the Securities Exchange Act (collectively the
"Public Reports"). Except as set forth in the Disclosure Schedule, each of the
Public Reports has complied with the Securities Act and the Securities Exchange
Act in all material respects. Except as set forth in the Disclosure Schedule,
none of the Public Reports, as of their respective dates (as amended through the
date hereof), contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading on the
date filed and the date hereof. FEDDERS has delivered to NYCOR a correct and,
complete copy of each Public Report (together with all exhibits and schedules
thereto, and as amended through the date hereof).
(f) Financial Statements. The financial statements included in or
incorporated by reference into the Public Reports (including the related notes
and schedules), have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, and fairly present the
financial condition of FEDDERS and its Subsidiaries as of the indicated dates
and the results of operations of FEDDERS and its Subsidiaries for the indicated
periods, are correct and complete in all material respects, and are consistent
with the books and records of FEDDERS and its Subsidiaries; provided, however,
that the unaudited interim statements are subject to normal year-end
adjustments.
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(g) Events Subsequent to Most Recent Financial Statements. Except as set
forth in the Disclosure Schedule, since August 31, 1995, there has not been any
Material Adverse Change in the business, financial condition, operations,
results of operations, or future prospects of FEDDERS and its Subsidiaries taken
as a whole.
(h) Undisclosed Liabilities. None of FEDDERS and its Subsidiaries has any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due), including any material
liability for taxes, except for (i) liabilities set forth on the balance sheet
dated as of August 31, 1995 (or in the notes thereto), and (ii) liabilities
which have arisen after August 31, 1995 in the Ordinary Course of Business (none
of which results from, arises out of, relates to, is in the nature of, or was
caused by breach of any material contract, breach of warranty, tort,
infringement, or violation of law).
(i) Taxes. FEDDERS and its Subsidiaries have filed, within the time and in
the manner required by law, all returns, declarations, information, and
statements required to be filed with any federal, state or local tax authority
except for such state and local tax returns, of which the failure to file would
not have a Material Adverse Effect on FEDDERS ("Returns") and all such Returns
are correct and complete in all material respects. FEDDERS has paid all taxes
and assessments that are due and payable and no deficiency has been proposed,
asserted or assessed. No examination or audit of any Returns by any governmental
agency is currently in progress or, to the knowledge of FEDDERS, contemplated.
FEDDERS is not a party to any tax sharing or allocation agreement and has no
actual or potential liability for any tax obligation of any other taxpayer.
(j) Brokers' Fees. FEDDERS does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of NYCOR and its
Subsidiaries could become liable or obligated.
(k) Litigation. Except as set forth in the Disclosure Schedule, there are
no material actions, suits or proceedings involving claims by or against
FEDDERS, either pending or to the knowledge of FEDDERS threatened, at law or in
equity or before any governmental agency; and there are no writs, judgments,
injunctions or decrees of any court or governmental agency binding upon FEDDERS.
(l) Licenses. Except as set forth in the Disclosure Schedule, FEDDERS and
each of its Subsidiaries has, and is operating in material compliance with, all
necessary licenses, certificates and permits from governmental authorities that
are material to the conduct of its business. There is no proceeding pending or,
to the knowledge of FEDDERS, threatened (or any basis therefor) which may cause
any such license, certificate or permit that is material to the conduct of the
business of FEDDERS or any of its Subsidiaries as presently conducted to be
revoked, withdrawn, canceled, suspended or not renewed. FEDDERS and each of its
Subsidiaries is conducting its business in compliance with all laws, rules and
regulations applicable thereto, the violation of which, would have a Material
Adverse Effect on FEDDERS and its Subsidiaries, taken as a whole.
(m) Contracts. Except as set forth in the Disclosure Schedule, each
material contract to which FEDDERS is a party, is to FEDDER's knowledge valid,
binding and in full force and effect. Except to the extent that the consummation
of the transactions contemplated by this Agreement may require the consent of
third parties (i) there are no existing defaults by FEDDERS and, to the
knowledge of FEDDERS, by any other party to any of the foregoing contracts, and
(ii) except as set forth in the Disclosure Schedule, there are no disputes
between FEDDERS and any other party with respect to the foregoing contracts
outside the Ordinary Course of Business.
(n) Disclosure. The Registration Statement, the Prospectus, and the
Definitive FEDDERS Proxy Materials will comply with the Securities Act and the
Securities Exchange Act in all material respects. The Registration Statement,
the Prospectus, and the Definitive FEDDERS Proxy Materials will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they will be made, not misleading; provided, however, that FEDDERS
makes no representation or warranty with respect to any information that NYCOR
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will supply specifically for use in the Registration Statement, the Prospectus,
and the Definitive FEDDERS Proxy Materials. None of the information that FEDDERS
has supplied or will supply to NYCOR in connection with this Agreement, whether
specifically for use in the Definitive NYCOR Proxy Materials or otherwise, will
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they have been or will be made, not misleading.
5. COVENANTS.
The Parties agree as follows with respect to the period from and after the
execution of this Agreement until the Closing Date:
(a) General. Each of the Parties will use all reasonable efforts to
take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the transactions contemplated by
this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in Section 6 below).
(b) Notices and Consents. NYCOR and FEDDERS will each give any
notices (and will cause each of its Subsidiaries to give any notices) to
third parties, and will use its reasonable best efforts to obtain (and will
cause each of its Subsidiaries to use its reasonable best efforts to
obtain) any third party consents, that the other Party may request in
connection with the agreements referred to in Section 3(d) and Section 4(d)
above.
(c) Regulatory Matters and Approvals. Each of the Parties will (and
will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use all reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3(d) and
Section 4(d) above. Without limiting the generality of the foregoing:
(i) Securities Act, Securities Exchange Act and State Securities
Laws. As promptly as practicable after the date hereof, FEDDERS will
prepare and file with the SEC a registration statement on Form S-4 under
the Securities Act relating to the offering and issuance of FEDDERS
Shares pursuant to the Merger (the "Registration Statement") and
preliminary proxy materials under the Securities Exchange Act relating
to the Annual FEDDERS Meeting. FEDDERS will use its reasonable best
efforts to respond to the comments of the SEC thereon and will make any
further filings (including amendments and supplements) in connection
therewith that may be necessary, proper, or advisable. NYCOR will
provide FEDDERS with whatever information and assistance in connection
with the foregoing filings that FEDDERS may reasonably request. FEDDERS
will take all actions that may be necessary, proper, or advisable under
state securities laws in connection with the offering and issuance of
FEDDERS Shares pursuant to the Merger.
(ii) Delaware General Corporation Law. NYCOR will call a special
meeting of its stockholders (the "Special NYCOR Meeting") as soon as
practicable in order that stockholders may consider and vote upon the
adoption of this Agreement and the approval of the Merger in accordance
with the Delaware General Corporation Law. FEDDERS will call its annual
meeting of stockholders (the "Annual FEDDERS Meeting") as soon as
practicable in order that its stockholders may consider and vote, among
other things, upon the adoption of this Agreement and the approval of
the Merger.
(iii) [NOT APPLICABLE]
(d) Fairness Opinions. NYCOR will use its best efforts to deliver to
FEDDERS on or before the date the Definitive FEDDERS Proxy is mailed to
their respective stockholders (i) a copy of an opinion of an investment
banker addressed to the Board of Directors of NYCOR as to the fairness of
the Merger to NYCOR Stockholders from a financial point of view (the "NYCOR
Fairness Opinion"). FEDDERS will use its best efforts to deliver to NYCOR
on or before the date the Definitive FEDDERS Proxy is mailed to their
respective stockholders (i) a copy of an opinion of an investment banker
addressed to the
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Board of Directors of FEDDERS as to the fairness of the Merger to FEDDER's
stockholders from a financial point of view (the "FEDDER's Fairness
Opinion"). The NYCOR Fairness Opinion shall be reasonably satisfactory to
NYCOR in form and substance. The FEDDERS Fairness Opinion shall be
reasonably satisfactory to FEDDERS in form and substance; provided that
nothing herein shall require the Parties to put the NYCOR Fairness Opinion
in the FEDDERS Proxy unless required by law.
(e) Operation of Business. Each Party will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business
except with the prior written consent of the other Party. Without limiting
the generality of the foregoing, without the prior written consent of the
other Party:
(i) Neither Party or its Subsidiaries will authorize or effect any
change in its articles of incorporation or charter or its bylaws, except
that at the Annual FEDDERS Meeting, FEDDERS may ask the FEDDERS
Stockholders to approve a proposal to amend its articles of
incorporation to increase the number of authorized FEDDERS Preferred
Shares from 5,000,000 to 15,000,000, FEDDERS Common Shares from
60,000,000 to 80,000,000 and the number of authorized FEDDERS Class A
Shares from 30,000,000 to 60,000,000, and as otherwise contemplated
hereby;
(ii) Neither Party or its Subsidiaries will (A) grant any options,
warrants, other rights to purchase or obtain any of its capital stock,
except for grants of options to employees, consultants or non-employee
directors under existing stock incentive plans provided that FEDDERS or
NYCOR shall not grant more than an aggregate of 100,000 options to its
employees, consultants or non-employee directors under any such plans or
(B) issue, sell, or otherwise dispose of any of its capital stock
(except upon the conversion or exercise of options, warrants, and other
rights currently outstanding or granted to employees, consultants or
non-employee directors as allowed by clause (A));
(iii) Neither Party or its Subsidiaries will declare, set aside, or
pay any dividend or distribution with respect to its capital stock
(whether in cash or in kind), or redeem, repurchase, or otherwise
acquire any of its capital stock, except as required by the terms of the
NYCOR Preferred Shares, FEDDERS' normal quarterly dividend of two cents
per share to the record date holders of FEDDERS Common Shares, FEDDERS
Class A Shares, and FEDDERS Class B Shares, and as specifically provided
herein;
(iv) Neither Party or its Subsidiaries will issue any note, bond,
or other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside
the Ordinary Course of Business except to refinance existing debt;
(v) Neither Party or its Subsidiaries will impose any Security
Interest upon any of its assets outside the Ordinary Course of Business;
(vi) Neither Party or its Subsidiaries will make any capital
investment in, make any loan to, or acquire the securities or assets of
any other Person outside the Ordinary Course of Business except that
either Party can fund up to $5,000,000 in capital investments or
acquisitions without the written consent of the other Party; provided,
however, that NYCOR and FEDDERS will discuss the terms and conditions of
all acquisitions prior to closing such acquisitions;
(vii) NYCOR or its Subsidiaries will not make any change in
employment terms for any of its directors, officers, and employees,
except that it may make changes for non-executive employees if in the
Ordinary Course of Business;
(viii) Neither Party or its Subsidiaries will merge, consolidate,
combine with another Party or agree to be acquired by or agree to sell
all or substantially all of its assets to another person; and
(ix) Neither Party or its Subsidiaries will commit to any of the
foregoing.
(f) Full Access; Confidentiality. FEDDERS and NYCOR will each (and
will cause each of its Subsidiaries to) permit representatives of the other
Party to have full access, at all reasonable times and
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in a manner so as not to interfere with the normal business operations of
the other Party and its Subsidiaries, to all premises, properties,
personnel, books, records (including but not limited to tax records),
contracts, and documents of or pertaining to it and its Subsidiaries and,
during such period, each shall furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request. Each Party will (i) treat and hold as
confidential any Confidential Information relating to the other Party and
its Subsidiaries; (ii) inform all of its representatives of the
confidential nature of such information and direct all such representatives
not to use any of the Confidential Information except in connection with
this Agreement; (iii) make all reasonable, necessary and appropriate
efforts to safeguard the Confidential Information from disclosure to anyone
other than as permitted hereby; (iv) keep a record of the Confidential
Information furnished by the other Party and the location thereof; and (v)
if this Agreement is terminated for any reason whatsoever, return to the
other Party all tangible embodiments of Confidential Information (and all
copies thereof) that are in its possession. Notwithstanding anything herein
to the contrary, NYCOR authorizes FEDDERS to use any information relating
to NYCOR necessary to comply with the Securities Act, the Securities
Exchange Act and the requirements of the SEC thereunder in the Registration
Statement and the Definitive FEDDERS Proxy Materials.
(g) Notice of Developments. Each Party will give prompt written
notice to the other of any material adverse development which would result
in a breach of any of its own representations and warranties in Section 3
and Section 4 above. At least two business days prior to Closing, each
Party shall deliver to the other Party an amended or supplemented
Disclosure Schedule reflecting any modifications thereto necessary to make
its representations and warranties true and complete as of the Closing
Date. If the Disclosure Schedule reflects adverse changes or developments
that exceed an aggregate of $250,000 with respect to such Party, then such
changes or developments shall be deemed to be a Material Adverse Change.
The Party receiving the Disclosure Schedule reflecting a Material Adverse
Change shall have the right to either (i) accept the Disclosure Schedule
and close the Merger subject to such disclosures or (ii) reject the
Disclosure Schedule and exercise its right to terminate this Agreement
pursuant to Section 7 of this Agreement.
(h) Exclusivity. Each Party and its respective Subsidiaries will not,
and will use their best efforts to cause their respective directors,
officers, employees, financial advisors, legal counsel, accountants and
other agents and representatives not to, initiate, solicit or encourage,
directly or indirectly, or take any other action to facilitate any
inquiries or the making of any proposal with respect to, or except to the
extent required in the exercise of the fiduciary duties of its Board of
Directors under applicable law as advised in writing by independent
counsel, engage or participate in negotiations concerning, provide any
nonpublic information or data to or have any discussions with any Person
other than a Party hereto or their Affiliates relating to, any acquisition,
tender offer (including a self-tender offer), exchange offer, merger,
consolidation, acquisition of beneficial ownership of or the right to vote
securities representing 10% or more of the total voting power of such Party
or any of its Subsidiaries, dissolution, business combination, purchase of
all or any significant portion of the assets or any division of, or any
equity interest in, such Party or any Subsidiary, or similar transaction
other than the Merger (such proposals, announcements, or transactions being
referred to as "Acquisition Proposals"). Each Party will promptly notify
the other orally and in writing if any such Acquisition Proposal (including
the terms thereof and identity of the Persons making such proposal) is
received and furnish to the other Party hereto a copy of any written
proposal.
(i) Indemnification. FEDDERS, as the Surviving Corporation in the
Merger, will observe any indemnification provisions now existing in the
articles of incorporation or bylaws of NYCOR, to the extent allowable under
Delaware law and the Amended and Restated Charter of FEDDERS, for the
benefit of any individual who served as a director or officer of NYCOR at
any time prior to the Effective Time until the statute of limitation
relating thereto has expired.
(j) Transactions. Prior to Closing, each of FEDDERS and NYCOR shall
deliver to the other a summary of any material transactions that it is
currently pursuing.
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(k) [RESERVED]
(l) Exchange of NYCOR Preferred Shares. On March 15, 1996, NYCOR,
pursuant to the terms of the NYCOR Prospectus, shall exchange all of the
then outstanding shares of NYCOR Preferred Shares for NYCOR's 8 1/2%
convertible subordinated debentures due 2012.
(m) [RESERVED]
6. CONDITIONS TO OBLIGATIONS TO CLOSE.
(a) Conditions to Obligation of FEDDERS. The obligation of FEDDERS to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the Requisite
NYCOR Stockholder Approval, approval of any lenders who require prior
approval, and the number of Dissenting Shares shall not exceed 5% of the
number of outstanding NYCOR Class B Shares and/or FEDDERS Class B Shares;
(ii) the proposal to be presented by FEDDERS to its stockholders at
the Annual FEDDERS Meeting to increase the number of authorized FEDDERS
Preferred Shares from 5,000,000 to 15,000,000, FEDDERS Common Shares from
60,000,000 to 80,000,000 and the number of authorized FEDDERS Class A
Shares from 30,000,000 to 60,000,000, shall have received the required
FEDDERS stockholder approval;
(iii) NYCOR and its Subsidiaries shall have procured all of the third
party consents specified in Section 5(b) above which, the failure to
receive, would have a Material Adverse Effect on the Surviving Corporation;
(iv) NYCOR shall have provided information reasonably satisfactory to
FEDDERS concerning the status of its compliance with ISRA and other
federal, state and local environmental obligations;
(v) the supplemented Disclosure Schedule shall reflect that there
shall have been no Material Adverse Change of NYCOR which would render the
representations and warranties of NYCOR untrue or inaccurate in any
material respect without giving effect to the disclosures contained in any
such supplement, and FEDDERS shall have received from NYCOR a certificate
to such effect, dated as of the Closing Date, of the president and chief
financial officer of NYCOR, to such effect in a form acceptable to the
counsel for FEDDERS;
(vi) there shall have been no event, condition or act of God that
shall have caused a Material Adverse Change of NYCOR which would render the
representations and warranties of NYCOR untrue or inaccurate in any
material respect;
(vii) NYCOR shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(viii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) materially and adversely affect
the right of the Surviving Corporation to own the former assets, to operate
the former businesses, and to control the former Subsidiaries of NYCOR, or
(D) materially and adversely affect the right of any of the former
Subsidiaries of NYCOR to own its assets and to operate its businesses (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect); there shall not be any judgment, order, decree, stipulation,
injunction, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
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92
(ix) NYCOR shall have delivered to FEDDERS a certificate of its
president and its chief financial officer to the effect that each of the
conditions specified above in Section 6(a) (i)-(vi) is satisfied in all
respects;
(x) this Agreement and the Merger shall have received the Requisite
FEDDERS Stockholder Approval, and approval of any lenders who require prior
approval;
(xi) FEDDERS shall have received the FEDDERS Fairness Opinion which
shall be reasonably satisfactory to its board of directors, and an opinion,
from its tax advisors, reasonably satisfactory to its board of directors,
that the Merger will be a tax free transaction as to FEDDERS;
(xii) the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act shall have expired;
(xiii) the Registration Statement shall have become effective under
the Securities Act and all applicable state securities laws and shall
provide for the legal and valid issuance of the FEDDERS Shares for the
NYCOR Shares, and the FEDDERS Shares shall have been accepted for listing
on The New York Stock Exchange;
(xiv) FEDDERS shall have received from counsel to NYCOR an opinion in
form and substance reasonably acceptable to FEDDERS to be attached hereto
as Exhibit A, addressed to FEDDERS, and dated as of the Closing Date;
(xv) all actions to be taken by NYCOR in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to FEDDERS;
(xvi) NYCOR shall have exchanged the NYCOR Preferred Shares for
debentures in accordance with the terms set forth in Section 2 (c); and
(xvii) nothing shall have occurred to effect the tax-free status of
the Merger.
FEDDERS shall be deemed to have waived any condition specified in this Section
6(a) upon the Closing of the Merger if, with respect to such condition, it has
complete knowledge of the actual facts and circumstances relating to such
condition as of the Closing.
(b) Conditions to Obligation of NYCOR. The obligation of NYCOR to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the Requisite
FEDDERS Stockholder Approval, and the approval of any lenders who require
prior approval;
(ii) the Registration Statement shall have become effective under the
Securities Act and all applicable state securities laws and shall provide
for the legal and valid issuance of the FEDDERS Shares for the NYCOR
Shares, and the FEDDERS Shares shall have been accepted for listing on The
New York Stock Exchange;
(iii) NYCOR shall have received the NYCOR Fairness Opinion which shall
be reasonably satisfactory to its Board of Directors, including an opinion,
prior to the Closing Date, that the terms of the FEDDERS Preferred Shares
will support an initial market value of $6.25;
(iv) the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act shall have expired;
(v) [RESERVED];
(vi) [RESERVED];
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(vii) NYCOR and its subsidiaries shall have procured all of the third
party consents specified in Section 5(b) above, which, the failure to
receive would have a Material Adverse Effect on the Surviving Corporation;
(viii) the supplemented Disclosure Schedule shall reflect that there
shall have been no Material Adverse Change of FEDDERS which would render
the representations and warranties of FEDDERS untrue or inaccurate in any
material respect without giving effect to the disclosures contained in any
such supplement, and NYCOR shall have received from FEDDERS a certificate
to such effect, dated as of the Closing Date, of the president and chief
financial officer of FEDDERS to such effect, in a form acceptable to
counsel of NYCOR;
(ix) there shall have been no event, condition or act of God that
shall have caused a Material Adverse Change of FEDDERS which would render
the representations and warranties of FEDDERS untrue or inaccurate in any
material respect;
(x) FEDDERS shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(xi) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) materially and adversely affect
the right of the Surviving Corporation to own the former assets, to operate
the former businesses, and to control the former Subsidiaries of NYCOR, or
(D) materially and adversely affect the right of any of the Subsidiaries of
FEDDERS to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
there shall not be any judgment, order, decree, stipulation, injunction, or
charge in effect preventing consummation of any of the transactions
contemplated by this Agreement;
(xii) FEDDERS shall have delivered to NYCOR a certificate of its
president and its chief financial officer to the effect that each of the
conditions specified above in Section 6(b)(i), (iii), (v), (vii)-(ix) is
satisfied in all respects;
(xiii) this Agreement and the Merger shall have received the Requisite
NYCOR Stockholder Approval, and the approval of any lenders who require
prior approval;
(xiv) [RESERVED];
(xv) [RESERVED];
(xvi) [RESERVED];
(xvii) NYCOR shall have received from counsel to FEDDERS an opinion in
form and substance reasonably acceptable to NYCOR to be attached hereto as
Exhibit B, addressed to NYCOR, and dated as of the Closing Date;
(xviii) all actions to be taken by FEDDERS in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to NYCOR. NYCOR shall be deemed to have waived any condition
specified in this Section 6(b) upon the Closing of the Merger if, with
respect to such condition, it has complete knowledge of the actual facts
and circumstances relating to such condition as of the Closing.
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7. TERMINATION.
(a) Termination of Agreement. Either of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether before
or after stockholder approval) as provided below:
(i) the Parties may terminate this Agreement by mutual written consent
at any time prior to the Effective Time;
(ii) FEDDERS may terminate this Agreement by giving written notice to
NYCOR at any time prior to the Effective Time (A) in the event NYCOR has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, FEDDERS has notified NYCOR of the
breach, and the breach has continued without cure for a period of 30 days
after the notice of breach or (B) if the Closing shall not have occurred on
or before June 30, 1996, by reason of the failure of any condition
precedent under Section 6(a) hereof other than Section 6(a) (iii), unless
the failure results primarily from FEDDERS breaching any representation,
warranty, or covenant contained in this Agreement;
(iii) NYCOR may terminate this Agreement by giving written notice to
FEDDERS at any time prior to the Effective Time (A) in the event FEDDERS
has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, NYCOR has notified FEDDERS of
the breach, and the breach has continued without cure for a period of 30
days alter the notice of breach, (B) if the Closing shall not have occurred
on or before June 30, 1996, by reason of the failure of any condition
precedent under Section 6(b) hereof other than Section 6(b) (vii), unless
the failure results primarily from NYCOR breaching any representation,
warranty, or covenant contained in this Agreement; or
(iv) either NYCOR or FEDDERS may terminate this Agreement by giving
written notice to the other at any time after the Annual FEDDERS Meeting or
the Special NYCOR Meeting in the event this Agreement and the Merger fail
to receive the Requisite FEDDERS Stockholder Approval or the Requisite
NYCOR Stockholder Approval, respectively.
(v) either NYCOR or FEDDERS may terminate this Agreement by giving
written notice to the other at any time after receiving written notice from
any of its lenders that require prior approval of the Merger, that such
approval will not be forthcoming;
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7 (a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of either Party to the other Party (except
for any liability of either Party then in breach); provided, however, that the
confidentiality provisions contained in Section 5(f) above and the obligation to
pay fees pursuant to Section 7(c) below shall survive any such termination.
(c) Breakup Fee. Other than as permitted by this Agreement, if, after the
date hereof, the Board of Directors of NYCOR terminates the Merger for any
reason within its control including, but not limited to, the acceptance of an
offer to merge with another entity, then NYCOR shall be obligated to make a
payment to FEDDERS of $20,000,000, plus all expenses incurred by FEDDERS
involving the Merger to the date of the termination, in cash or by delivery to
FEDDERS of that number of NYCOR Shares that would equal $20,000,000 calculated
as an average of the closing price of NYCOR Shares on the NASDAQ over the
20-trading day period prior to such termination, the choice of receiving cash or
NYCOR Shares being that solely of FEDDERS. The termination fee shall be paid
within 30 days of demand therefor by FEDDERS.
8. [RESERVED]
9. MISCELLANEOUS.
(a) [RESERVED]
(b) Press Releases and Public Announcements. Except for the press releases
to be issued announcing the execution of this Agreement, neither Party shall
issue any press release or make any public announcement
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relating to the subject matter of this Agreement without the prior written
approval of the other Party; provided, however, that either Party may make any
public disclosure that it believes in good faith to be required by applicable
law (in which case the disclosing Party will give the other Party a reasonable
opportunity to review and consent to the form of such disclosure prior to making
the disclosure).
(c) No Third Party Beneficiaries. Except as provided in Section 2 (e) (iv)
(C), this Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns;
provided, however, that (i) the provisions in Section 2 above concerning
issuance of FEDDERS Shares are intended for the benefit of NYCOR Stockholders
and (ii) the provisions in Section 5(i) above concerning insurance and
indemnification are intended for the benefit of the individuals specified
therein and their respective legal representatives.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to NYCOR:
NYCOR, Inc.
287 Childs road
Basking Ridge, NJ 07920
Attention: Kent E. Hansen
If to FEDDERS:
FEDDERS Corporation
505 Martinsville Road
Liberty Corner, NJ 07938
Attention: Robert N. Edwards
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(i) Governing Law. Except for matters of corporation law where the laws of
the State of Delaware must be applied, this Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New Jersey
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey.
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(j) Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the prior
authorization of their respective boards of directors; provided, however, that
any amendment effected subsequent to stockholder approval will be subject to the
restrictions contained in the Delaware General Corporation Law. No amendment of
any provision of this Agreement shall be valid unless the same shall be in
writing and signed by both of the Parties. No waiver by either Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear its own costs and expenses
(including the fees and expenses of its agents, advisors, attorneys and
accountants) incurred in connection with this Agreement and the transactions
contemplated hereby.
(m) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring either Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
INTENDING TO BE LEGALLY BOUND, the Parties hereto have executed this
Agreement on the date first above written.
FEDDERS CORPORATION
By: /s/ Robert L. Laurent, Jr.
--------------------------------------
Title: Executive Vice President
NYCOR, INC.
By: /s/ Kent E. Hansen
--------------------------------------
Title: Vice President
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ANNEX B
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
AMENDMENT NO. 2
TO
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-15299
NYCOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2748564
(State of Incorporation) (I.R.S. Employer Identification No.)
287 CHILDS ROAD, BASKING RIDGE, NEW JERSEY 07920
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 953-8200
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- --------------------
None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
Common Stock, $1 par value
Class A Stock, $1 par value
Class B Stock, $1 par value
$1.70 Convertible Exchangeable Preferred Stock, $1 par value
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 and Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
As of the close of business on March 15, 1995, there were outstanding
2,799,594 shares of registrant's Common Stock, 4,051,376 shares of its Class A
Stock and 714,100 shares of its Class B Stock. The approximate aggregate market
value (based upon the closing sale price of such stock) of these shares held by
non-affiliates of the registrant as of March 15, 1995 was $15,768,407. (The
value of a share of Common Stock is used as the value of a share of Class B
Stock as there is no established market for Class B Stock and it is convertible
into Common Stock on a share-for-share basis.)
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1994 ARE INCORPORATED BY REFERENCE INTO PARTS I AND II.
PORTIONS OF THE COMPANY'S PROXY STATEMENT FILED IN CONNECTION WITH THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 1995 ARE INCORPORATED BY
REFERENCE INTO PART III.
================================================================================
98
NYCOR, INC.
FORM 10-K ANNUAL REPORT -- 1994
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business...........................................................
Item 2. Properties.........................................................
Item 3. Legal Proceedings..................................................
Item 4. Submission of Matters to a Vote of Security Holders................
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters............................................................
Item 6. Selected Financial Data............................................
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................
Item 8. Financial Statements and Supplementary Data........................
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................
PART III
Item 10. Directors and Executive Officers of the Registrant.................
Item 11. Executive Compensation.............................................
Item 12. Security Ownership of Certain Beneficial Owners and Management.....
Item 13. Certain Relationships and Related Transactions.....................
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....
99
ITEM 1. BUSINESS
(a) General Development of Business
NYCOR, Inc. (the "Company" or the "Registrant") is a holding company
currently comprising two operating companies, Rotorex Company, Inc. ("Rotorex")
and Melcor Corporation ("Melcor"). Rotorex manufactures rotary compressors
principally for use in room air conditioners. Melcor produces thermoelectric
heating and cooling modules used in a variety of applications in which space and
weight are considerations or precise temperature control is required. The
Company acquired both Rotorex and Melcor in September 1992. Unless otherwise
indicated, all references herein to the Company or the Registrant are to NYCOR,
Inc. and its subsidiaries.
(c) Narrative Description Of Business
Rotorex and Melcor manufacture and sell components for use in cooling and
heating applications to original equipment manufacturers in the air conditioning
and refrigeration industries. Rotorex compressors use vapor compression to
create a cooling effect while Melcor's thermoelectric modules utilize
electricity, the Peltier effect, to perform cooling and heating functions.
ROTOREX
Products
Rotorex manufactures and sells a broad line of rotary compressors,
principally for the air conditioning and refrigeration markets.
Compressors are used as a principal component in a variety of cooling and
heating applications. Their function is to compress gas which is introduced into
the compressor, causing the temperature of the gas to rise. The change in
temperature of the gas permits a heat transfer to occur within the cooling and
heating system. Rotary compressors are characterized by a circular, or rotary,
motion and are generally smaller, quieter and more energy efficient than the
traditional reciprocating compressors.
Rotorex's product line consists of two basic series of compressors,
designated as the 39 Frame and 48 Frame, with capacities ranging from 5,100 to
18,500 BTUs. Models within each series, with specific cooling capacities within
the indicated range, are produced by varying the mechanical pump assembly and
motor. By varying the motors, Rotorex also creates compressors capable of
operating with different voltages for applications in various parts of the
world.
The air conditioners in which Rotorex's compressors are used are subject to
regulations providing for minimum energy efficiency rating ("EER") requirements.
Achieving required EERs results from a combination of an efficient compressor
and the design of the air conditioning system in which the compressor is
installed. Current proposed rulemaking by the Energy Department under the
National Appliance Energy Conservation Act would have the effect of increasing
minimum required EERs. Rotorex's compressors currently provide efficiencies
which enable its customers to meet EER requirements applicable to their air
conditioners. In the event that the new regulations are adopted, the efficiency
of certain models of Rotorex's compressors would have to be improved. It is not
certain at present if the proposed regulations will be adopted and, if they are,
when the requirements would become effective. Regardless of the adoption of
these proposed regulations, Rotorex is continually seeking to improve the
efficiency of its compressors in order to remain competitive in the markets it
serves. Investments have been made in 1995 to upgrade its laboratory facilities.
These investments, which totaled approximately $1.6 million, coupled with a
strong design staff with many years of compressor experience, give Rotorex the
design capability necessary to make such improvements. Investments in an
automated assembly system are expected to help improve mechanical efficiency and
an ongoing motor design program further enhances Rotorex's ability to improve
the efficiency of its compressors.
Freon is used as a refrigerant in air conditioning systems. Freon is one of
the ozone-depleting chemicals that are currently being phased out of use. The
type of freon used in room air conditioners is an HCFC which is currently an
acceptable substitute for the CFC refrigerants which have a much more harmful
effect on the
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environment. Rotorex does not expect that requirements to ultimately phase out
the use of HCFC refrigerants will have a material effect on its operations or
expenditures.
Marketing
Rotorex compressors are currently sold in the United States principally to
the residential room air conditioning market, with sales concentrated to Fedders
Corporation ("Fedders"). Fedders has been the major customer for Rotorex
compressors for approximately 20 years. Rotorex expects that, with the
implementation of programs designed to capitalize on the growing international
market, international sales may become a greater percentage of Rotorex's overall
sales; however, there can be no assurance as to the extent of such sales.
Rotorex has entered into a supply agreement (the "Supply Agreement") with
Fedders, pursuant to which Rotorex is required to sell to Fedders up to 800,000
rotary compressors annually and Fedders is required to purchase 80% of its
requirements for rotary compressors from Rotorex up to 800,000 compressors,
subject to certain exceptions. The terms of sales to Fedders under the Supply
Agreement are negotiated annually and must be no less favorable than sales to
other customers. This requirement for sales to Fedders leaves Rotorex with
substantial capacity to expand its markets and customer base. Rotorex believes
that its agreement with Fedders provides it with a substantial base of sales
from which to expand its sales in the international markets for room air
conditioners. Rotorex participates in a substantial portion of the relatively
mature United States market for room air conditioners and it intends to
capitalize on this base to increase its sales in the more rapidly growing
international markets. In 1994, Rotorex's sales were favorably impacted as a
result of back-to-back successful years enjoyed by the domestic air conditioning
industry. As previously indicated, as Rotorex's efforts in the international
markets continue, sales in these markets may represent a greater percentage of
Rotorex's overall sales.
Rotorex believes that significant growth opportunities exist in the
international market, particularly in Asia. Rotorex has been active in the
international market for a number of years through its technology licensing
program. Currently, Rotorex has three licensees in mainland China and one each
in Taiwan and South Korea. The license agreements require Rotorex to provide
technology to the licensees and the licensees to pay royalties to Rotorex based
upon sales of finished compressors. In early 1995, Rotorex established a
representative office in Beijing which is expected to enhance Rotorex's presence
in the important China market. Rotorex has also opened a branch office in
England to serve the European, Middle Eastern and North African markets and
expects to establish a sales office in Singapore. Rotorex will continue to
assess the international markets to determine how best to participate in those
markets.
A number of countries in which Rotorex is pursuing sales opportunities,
including China, impose tariffs on imported compressors. At present, Rotorex
believes that the demand for compressors in these markets will continue to
provide opportunities to increase sales in these markets. Rotorex will
continually assess the impact of tariffs on its markets to determine how best to
effectively serve such markets.
Rotorex promotes its products through the use of product literature,
catalogs and advertising in industry publications and exhibits its products at
industry and target market trade shows.
Production
Rotorex currently manufactures all of its compressors and pump assemblies
in a 200,000 square foot facility owned by Rotorex in Frederick, Maryland.
Efforts to improve efficiency and productivity at this facility and the quality
of the products manufactured are ongoing. In early 1995, Rotorex obtained the
highest level of certification, ISO 9001, for its quality management system
under the International Standards Organization. The ISO 9000 program is an
internationally recognized benchmark of quality management systems within a
production facility.
During 1995, Rotorex will complete several investments which are expected
to enhance manufacturing efficiencies. An automated compressor assembly system
is expected to increase capacity and improve quality and efficiency. New gauging
systems will automate gauging of parts prior to their assembly in the pump
component of the compressor. Plant wide air conditioning will provide better
temperature and humidity control which is beneficial in the manufacture of high
tolerance parts. It is expected that these investments
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which along with site preparation, will be approximately $10.3 million will be
substantially completed by October 1995.
MELCOR
Products
Melcor manufactures solid state heat pump modules that utilize the Peltier
effect to perform the same cooling and heating functions as freon-based
compressors and absorption refrigerators.
Melcor's modules are typically used in spaces with special requirements,
such as limited space, lightweight cooling requirements or a space existing
under special environmental conditions. They are also used for precise
temperature control by reversing the electric current to cycle from cooling to
heating.
Melcor's customers are original equipment manufacturers that primarily use
the modules for cooling purposes in applications such as portable beverage
coolers and refrigerators, laboratory, scientific, medical and restaurant
equipment and telecommunications and computer equipment.
Melcor's products are sold under the trademark FRIGICHIP.
Marketing
Melcor's modules are currently sold by salaried salespeople and a network
of sales representative firms located throughout the world. The representative
firms purchase products from Melcor and resell them to their own customers. The
sales representatives provide all technical support and engineering design
required by their customers.
Over the past two years, softness in the Japanese and European economies
has impacted Melcor's sales in those markets. Additionally, Melcor has begun to
experience increased competition in certain product markets it serves. This
increased competition is being addressed by an aggressive sales effort.
Melcor advertises its products in a variety of national and international
technical and trade publications, principally in the electronics and
electro-optical industries, and participates in international trade exhibitions.
Production
Melcor manufactures its modules in facilities near Lawrence Township, New
Jersey, comprising 53,000 square feet. The Company believes that the production
capacity available at Melcor's facilities is sufficient for its needs for the
foreseeable future.
Melcor designs and builds internally certain module producing equipment.
Melcor has a program in place to maintain, upgrade and replace equipment as
necessary and seeks to selectively automate its processes on an ongoing basis to
improve productivity.
SEASONALITY
Rotorex's results of operations and financial condition currently are
substantially dependent on its sales to the domestic room air conditioner
market, which is highly seasonal. In addition, Rotorex's working capital needs
are seasonal, with its greatest utilization of lines of credit early in the
calendar year. Melcor's sales are moderately seasonal. Demand for its products
is lowest in the third calendar quarter.
RAW MATERIALS AND PURCHASED COMPONENTS
The most important material purchased by Rotorex is steel. However, steel
is a relatively small part of the overall cost of a compressor and increases in
its cost have not had a material impact on Rotorex's cost of production. Rotorex
also purchases from other domestic and foreign manufacturers certain components,
the most important of which is motors. Melcor's primary purchases of materials
are the elements that comprise the metal ingots, ceramic plates, stampings and
plating.
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102
Neither Rotorex nor Melcor is dependent upon any one source for major
components of its manufactured products, except that General Electric Company
and Rotomatika are major suppliers of motors used by Rotorex in manufacturing
compressors.
COMPETITION
Rotorex competes against approximately eight domestic and foreign
companies, many of which are substantially larger and have greater resources
than Rotorex. Competition in the market for Rotorex compressors is generally on
the basis of price and quality. The Company believes that its pricing and
warranty policies are competitive with those of similar manufacturers. In the
markets in which Rotorex competes, it faces competition from large manufacturers
from the United States, Japan and Korea. The Company believes that its pricing,
design and quality allow it to be competitive in these markets. In addition, the
investments previously described are expected to allow Rotorex to remain
competitive while improving operating margins. Purchasers of rotary compressors
generally require high efficiency, low noise and long-term reliability. The
Company believes that Rotorex is generally competitive based on these criteria.
A new design engineering laboratory and the other investments previously
described herein will allow Rotorex to continually improve its compressors to
remain competitive.
Melcor competes against several other manufacturers of thermoelectric
modules and believes it is one of the world's leading producers of
thermoelectric heat pump modules, in terms of unit sales and revenues, and
maintains this position on the basis of the price and quality of its products.
The quality of thermoelectric heat pump modules is measured by, among other
things, the change in temperature which can be produced by the modules and the
long-term reliability of the modules, which do not contain any moving parts.
BACKLOG
Orders for the Company's products are entered into the production sequence
as they are received. Generally, there is only a short production time necessary
to satisfy customer orders. Based on the foregoing, the Company does not believe
that recorded order backlog is a significant factor in understanding or
evaluating its business.
RESEARCH AND DEVELOPMENT
Information with respect to amounts spent on research and development by
the Company is included in Note 1 of the Notes to Consolidated Financial
Statements at page 8 of the Company's 1994 Annual Report to Stockholders (the
"Annual Report"), which note is incorporated herein by reference. During the
past two years, the expenses for research and development have increased
significantly, primarily as a result of increased expenditures at Rotorex
necessary to staff and equip its design engineering group in a manner
appropriate to Rotorex's operations following the Company's acquisition of
Rotorex in September 1992. It is expected that these costs will continue to
increase but on a more moderate scale. At Melcor, there is also a strong
research and development effort and certain costs previously otherwise
classified were reclassified to research and development in 1994.
TRADEMARKS
Rotorex sells its compressors under the trademark ROTOREX. Melcor's modules
are sold under the trademark FRIGICHIPS. While the Company believes that these
trademarks are well known and enhance the marketing of Rotorex's and Melcor's
products, the Company does not consider that the successful conduct of either
operation is dependent upon such trademarks.
WORKING CAPITAL PRACTICES
The Company regularly reviews working capital components with a view to
maintaining the lowest level consistent with requirements of anticipated levels
of operations. Sales of both Rotorex compressors and Melcor modules are
currently weighted toward the first half of the calendar year, and the Company's
working capital requirements are greatest during this period. Information with
respect to the Company's warranty and
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return policies is included in Note 1 of the Notes to Consolidated Financial
Statements at page 8 of the Annual Report, which note is incorporated herein by
reference.
ENVIRONMENTAL MATTERS
It is the Company's policy to take all practicable measures to minimize air
and water pollution resulting from its operations. Neither Rotorex nor Melcor
made capital expenditures on environmental protection related items during 1994
which were material to their total capital expenditures, earnings and
competitive position or anticipate making material capital expenditures on such
items in 1995.
EMPLOYEES
The Company has approximately 812 employees. The contract with the union
representing Rotorex employees expires in August 1997. The current agreement,
which was negotiated in 1994, created a new classification for employees who
work in operations in which high precision is a requirement and which are most
important from a quality standpoint. This and certain other work-rules changes,
are expected to be a factor in improving efficiency at the Rotorex facility.
Melcor's employees are non-union. The Company considers its relations with its
employees to be satisfactory.
ITEM 2. PROPERTIES
The Company's executive offices are located in facilities owned by the
Company in Basking Ridge, New Jersey. Rotorex and Melcor own or lease the
following facilities:
APPROXIMATE
SQUARE FEET
LOCATION PRINCIPAL FUNCTION OF FLOOR AREA
-------------------------------------------------- ---------------------- -------------
Frederick, Maryland manufacture of rotary 200,000
(owned by Rotorex) compressors
780 North Clinton Ave. manufacture of 15,000
Trenton, New Jersey components
(leased by Melcor)
990 Spruce Street manufacture of 15,000
Lawrence Twp, New Jersey components
(owned by Melcor)
1040 Spruce Street assembly of modules 22,400
Lawrence Twp, New Jersey and executive offices
(leased by Melcor)
The Company believes that Rotorex's and Melcor's machinery, equipment and
facilities are in good operating condition. Certain of the investments at the
Rotorex facility described previously coupled with additional selected
investments and process changes are expected to increase Rotorex's capacity by
the fourth quarter of 1995, enabling Rotorex to support growing international
sales opportunities. Melcor has sufficient capacity to support sales growth for
the foreseeable future and continually seeks to selectively automate processes
at its facilities.
ITEM 3. LEGAL PROCEEDINGS
On June 28, 1989, Rotorex received notice that it was named as a
potentially responsible party in a proceeding pending before the United States
Environmental Protection Agency captioned In the Matter of Spectron, Inc. Site.
This proceeding involves a Superfund site in Elkton, Maryland which is currently
being remediated. Rotorex, without admitting liability, has agreed to
participate in the removal of materials from the site. Under this agreement,
Rotorex's share of the remediation costs at this site is 0.0023793, based upon
the relatively small quantity of material at the site attributable to Rotorex.
The estimate cost of removal of materials is $9 million. Therefore, the Company
does not anticipate that its liability in this matter will exceed $25,000. The
Company is currently on appeal in the United States Court of Appeals for the
Second Circuit from a judgment, in the amount of $1.2 million, exclusive of
interests and costs rendered against Rotorex in
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the United States District Court for the Northern District of New York in a case
captioned Delchi Carrier SpA v Rotorex Corporation. The appeal was filed in
October 1994 and seeks to overturn a judgment for lost profits and certain costs
arising out of a contract to supply compressors in 1988. For additional
information on legal proceedings, see Note 10 of the Notes to Consolidated
Financial Statements at Page 11 of the Annual Report, which note is incorporated
herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information as of March 1, 1995 with
respect to each person who is an executive officer of the Company. Officers are
elected annually for a term of one year and until their successors have been
elected and qualified.
NAME AGE POSITION HELD
------------------------------------------- --- -------------------------------------
Salvatore Giordano......................... 84 Chairman of the Board
Sal Giordano, Jr........................... 56 Vice Chairman and Chief Executive
Officer
Joseph Giordano............................ 62 President
Kent E. Hansen............................. 47 Vice President-Finance and General
Counsel, Chief Financial Officer;
Secretary
Edwin Diaz................................. 32 Controller
Messrs. Salvatore Giordano and Sal Giordano, Jr. have held their present
positions since November 1986. Mr. Joseph Giordano has been President of the
Company since May 1990 and, prior thereto, Senior Vice President of the Company
from November 1986. Messrs. Salvatore Giordano and Sal Giordano, Jr. are
executive officers of Fedders and they and Mr. Joseph Giordano are directors and
stockholders of Fedders. Messrs. Sal Giordano, Jr. and Joseph Giordano are sons
of Mr. Salvatore Giordano.
Mr. Hansen has held his present position since August 1992. Previously, he
was Vice President and General Counsel of Fedders from October 1989 and, prior
thereto, Associate General Counsel of Fedders from September 1985.
Mr. Diaz was elected Controller of the Company in October 1994. Prior to
joining the Company, Mr. Diaz was Controller of Lancer Industries, Inc. from
October 1990 and Assistant Controller of The Alfieri Organization from May 1988.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock and Class A Stock trade on the Nasdaq Stock
Market. There is no established public trading market for the Company's Class B
Stock, as there are restrictions on its transfer. As of March 15, 1995, there
were 2,783 record holders of Common Stock, 2,785 record holders of Class A Stock
and 44 record holders of Class B Stock. For information with respect to the
Company's Common Stock, Class A Stock and Class B Stock, see Notes 4, 5 and 11
of the Notes to Consolidated Financial Statements at pages 10 and 12 of the
Annual Report, which notes are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
See the table entitled "Selected Financial Data" at page 9 herein.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion addresses factors which influenced the financial
position and operating results of NYCOR, Inc. (the "Company") during the periods
included in the accompanying consolidated financial statements. Results of
operations for 1994 and 1993 are not comparable to the 1992 results as the
Company did not have revenues from operations in the first nine months of 1992
and its earnings were from investments. The Company acquired Rotorex Company,
Inc. ("Rotorex") and Melcor Corporation ("Melcor") in September 1992.
Results of Operations. The Company's revenues increased by $16,011,000 to
$75,237,000 in 1994. The net growth in revenue was due to higher sales of rotary
compressors under Rotorex's ten year supply agreement with Fedders Corporation
resulting from increased demand for room air conditioners (see note 2).
Management believes the agreement with Fedders to provide rotary compressors at
negotiated market prices continues to provide a substantial base of sales from
which its presence in the international market can be expanded. Growth in
compressor sales was offset by lower sales of thermoelectric heating and cooling
modules caused by increased competition in certain of Melcor's markets. Melcor's
management team, which collectively has many years of experience in
thermoelectrics, is addressing this new marketplace reality. The Company had
revenues of $59,226,000 in 1993, its first full year of operations with Rotorex
and Melcor. Revenues in 1992 of $14,210,000 included interest and other income
of $9,586,000 and net sales of $4,624,000 for the last three months of the year
for the acquired companies.
The gross profit margin decreased in 1994 due to manufacturing
inefficiencies in the production of rotary compressors as a result of ramping up
to and sustaining a higher level of production than has been required at Rotorex
in more than five years. During 1995, Rotorex will complete investments in
automated parts gauging and compressor assembly systems, and improved plant wide
air conditioning which are expected to increase capacity and improve production
quality and efficiency. Gross margin was also impacted by severe winter weather,
which affected production at both subsidiaries, and by lower sales of
thermoelectric heating and cooling modules in 1994.
Selling, general and administrative expense of $9,460,000 in 1994
represents an increase over 1993, primarily due to an increase in a provision
for certain litigation resulting from a judgement rendered against the Company
for approximately $1,200,000, exclusive of interest and costs (see note 10).
Also contributing to this increase were $1,444,000 in research and development
costs (($745,000 in 1994) primarily attributable to staffing and equiping
Rotorex's design engineering group) to an annual level which management believes
is necessary and will be moderately increased in the future. Selling, general
and administrative expense of $3,384,000 in 1992 reflects the inclusion of the
acquired companies' administrative expense in the fourth quarter of 1992.
The 1994 earnings of $635,000 were influenced by the factors described
above. In 1993, the Company produced earnings of $4,244,000 in the first full
year of operations with Rotorex and Melcor. The Company's earnings for 1992 of
$5,240,000 were primarily from high yields on certain investments (see note 2)
and the gain on the sale of Zenith Electronics Corporation stock.
The Company adopted Statement of Financial Accounting Standard No. 109
"Accounting for Income Taxes" as of January 1, 1993. The cumulative effect of
accounting change reflects the utilization of tax loss carryforwards in the
first quarter of 1993.
Liquidity and Capital Resources. The Company's working capital
requirements are currently heaviest in the first three months of the year as
operations reflect the seasonal demands of the air conditioner market. Accounts
receivable increased to $7,323,000 at December 31, 1994 from $4,946,000 a year
earlier, reflecting increased sales at Rotorex. Inventories decreased from
$12,979,000 to $10,745,000, primarily due to increased sales in the fourth
quarter of 1994.
The Company has a $3,000,000 working capital facility with a commercial
bank, which bears interest at the prime rate plus one percent. The facility
expires April 30, 1995. The line was last used in April 1994. In management's
opinion, the Company's cash flow form operations and financing arrangements are
adequate to meet its future requirements. At Rotorex, investment in plant
improvements during 1995 will be approximately $10,300,000 and will be financed
primarily by operating leases.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company at December 31, 1994
and 1993 and for each of the three years in the period ended December 31, 1994,
the notes thereto and the report of the Company's independent auditors thereon
are included at pages 10 through 22 herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the Company's directors, see the section
entitled "Election of Directors" in the Company's Proxy Statement, filed in
connection with the Annual Meeting of Stockholders of the Company to be held on
April 28, 1995, which section is incorporated herein by reference. For
information with respect to the Company's executive officers, see Part I herein.
ITEM 11. EXECUTIVE COMPENSATION
See the section entitled "Executive Compensation" in the Company's Proxy
Statement, filed in connection with the Annual Meeting of Stockholders of the
Company to be held on April 28, 1995, which section is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the sections entitled "Security Ownership of Directors and Executive
Officers" and "Principal Stockholders" in the Company's Proxy Statement, filed
in connection with the Annual Meeting of Stockholders of the Company to be held
on April 28, 1995, which sections are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the section entitled "Election of Directors" in the Company's Proxy
Statement, filed in connection with the Annual Meeting of Stockholders of the
Company to be held on April 28, 1995, which section is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Index to Financial Statements and Financial Statement Schedules
(a) 1. Financial Statements
The following Consolidated Financial Statements of the Company are
included at pages 10 through 22 herein:
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Operations for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
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(a) 2. Financial Statement Schedules
Consolidated Schedules as of and for each of the years ended December
31, 1994, 1993 and 1992.
FORM 10-K
PAGE
---------
II. Valuation and Qualifying Accounts............................. S-1
All other schedules have been omitted because of the absence of the
conditions under which they are required or because the required information is
included in the Consolidated Financial Statements or the notes thereto.
SELECTED FINANCIAL DATA(A)
YEARS ENDED DECEMBER 31
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
Net sales................................ $75,237 $59,226 $ 4,624 -- --
Interest and other income................ -- -- $ 9,586 $ 6,380 $ 5,984
Net income............................... $ 635 $ 4,244(b) $ 5,240 $ 4,065 $ 5,422(c)
Net income (loss) per share.............. $ (0.17) $ 0.30 $ 0.48 $ 0.30 $ 0.49
Cash dividends per share declared:
Preferred Stock........................ $ 2.98 $ 0.850 $ 1.275 $ 1.700 $ 1.700
Common Stock........................... -- -- 0.120 0.160 0.160
Class A Stock.......................... -- -- 0.120 0.160 --
Class B Stock.......................... -- -- 0.108 0.144 0.144
AT DECEMBER 31
Cash and cash equivalents................ $ 1,981 $ 1,336 $ 1,495 $12,214 $62,871
Total assets............................. 88,994 90,956 89,073 75,642 75,297
Long-term debt........................... 23 13 369 -- --
Stockholders equity...................... 78,746 81,565 76,524 74,056 73,971
- ---------------
(a) The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the notes
thereto.
(b) In 1993, the Company adopted SFAS No. 109, Accounting for Income Taxes,
which resulted in income of $627,000 or $0.09 per share from the cumulative
effect of an accounting change.
(c) Includes income from discontinued operations of $1,176,000 or $0.16 per
share.
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NYCOR, INC.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31,
-------------------
1994 1993
------- -------
(AMOUNTS IN
THOUSANDS, EXCEPT
PER SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 1,981 $ 1,336
Accounts receivable, net of allowance for doubtful accounts of $409 and
$336 in 1994 and 1993, respectively................................. 1,353 1,963
Accounts receivable from Fedders Corporation........................... 5,970 2,983
Inventories............................................................ 10,745 12,979
Other current assets................................................... 820 408
------- -------
Total current assets........................................... 20,869 19,669
Property, plant and equipment, net....................................... 23,854 25,532
Goodwill................................................................. 42,240 43,363
Other assets............................................................. 2,031 2,392
------- -------
Total assets................................................... $88,994 $90,956
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 4,364 $ 3,855
Accrued expenses....................................................... 5,164 4,418
Current portion of long-term debt...................................... 10 13
Other current liabilities.............................................. 71 55
------- -------
Total current liabilities...................................... 9,609 8,341
Long-term debt........................................................... 23 13
Non-current portion of warranty expense.................................. 616 1,037
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1 par value, 5,000,000 shares authorized, 1,150,000
issued and outstanding at December 31, 1994 and 1993 with a
liquidation preference of $23,000,000............................... 1,150 1,150
Common Stock, $1 par value, 115,000,000 shares authorized, 2,882,155
and 2,834,005 issued at December 31, 1994 and 1993, respectively.... 2,882 2,834
Class A Stock, $1 par value, 100,000,000 shares authorized, 4,229,971
and 4,154,885 issued at December 31, 1994 and 1993, respectively.... 4,230 4,155
Class B Stock, $1 par value, 7,500,000 shares authorized, 714,100 and
714,750 issued and outstanding at December 31, 1994 and 1993,
respectively........................................................ 714 715
Additional paid-in capital............................................. 37,779 37,091
Retained earnings from January 1, 1988................................. 33,144 36,412
Less-treasury stock, at cost:
82,561 and 77,900 shares of Common Stock and 178,596 and 79,382
shares of Class A Stock at December 31, 1994 and 1993,
respectively........................................................ (1,153) (792)
------- -------
Total stockholders' equity..................................... 78,746 81,565
Total liabilities and stockholders' equity..................... $88,994 $90,956
======= =======
See accompanying notes
10
109
NYCOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
---- ---- ----
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Revenue:
Net sales................................................... $75,237 $59,226 $ 4,624
Interest and other income................................... -- -- 9,586
------- ------- -------
75,237 59,226 14,210
Cost of goods sold............................................ 64,921 46,554 5,437
Selling, general and administrative expense................... 9,460 8,293 3,384
------- ------- -------
Income before income taxes and cumulative effect of an
accounting change........................................... 856 4,379 5,389
Federal, foreign and state income taxes....................... 221 762 149
------- ------- -------
Income before cumulative effect of an accounting change....... 635 3,617 5,240
Cumulative effect of an accounting change..................... -- 627 --
------- ------- -------
Net income.................................................... 635 4,244 5,240
Preferred Stock dividend requirement.......................... (1,955) (1,955) (1,955)
------- ------- -------
Net income (loss) attributable to common stockholders......... $(1,320) $ 2,289 $ 3,285
======= ======= =======
Primary earnings (loss) per share:
Income (loss) before cumulative effect of an accounting
change................................................... $ (0.17) $ 0.21 $ 0.48
Cumulative effect of an accounting change................... -- 0.09 --
------- ------- -------
Net income (loss) per share................................... $ (0.17) $ 0.30 $ 0.48
======= ======= =======
See accompanying notes
11
110
NYCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
---- ---- ----
(AMOUNTS IN THOUSANDS)
Cash flows from operations:
Net Income................................................. $ 635 $ 4,244 $ 5,240
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation.......................................... 2,966 2,877 705
Amortization.......................................... 1,557 1,365 328
Gain on sale of Zenith Electronics common stock....... -- -- (3,156)
Changes in operating assets and liabilities:
Increase in accounts receivable....................... (2,377) (2,074) (1,479)
Decrease (increase) in inventories.................... 2,234 (2,963) 567
Decrease (increase) in other current assets........... (412) (243) 115
Increase in other assets.............................. (73) (47) (2,047)
Increase (decrease) in accounts payable............... 509 (780) 202
Increase (decrease) in accrued expenses and other
current liabilities................................ 341 (969) 507
------- ------- --------
Net cash provided by operations.................... 5,380 1,410 982
------- ------- --------
Cash flows from investing activities:
Purchase of Melcor Corporation............................. -- -- (14,875)
Investment in Fedders note................................. -- -- (10,000)
Sale of Zenith Electronics common stock.................... -- -- 15,335
Proceeds from sale of equipment............................ 439 -- 4,500
Additions to property, plant and equipment................. (1,707) (957) (430)
------- ------- --------
Net cash used in investing activities.............. (1,268) (957) (5,470)
------- ------- --------
Cash flows from financing activities:
Dividends paid............................................. (3,421) (978) (2,285)
Payments on capital lease.................................. (13) (67) (4,245)
Proceeds from stock options exercised...................... 228 120 --
Proceeds from sale of stock................................ -- 1,166 --
Acquisition of treasury stock.............................. (261) -- --
Increase (decrease) in short-term borrowing................ -- (400) 400
Repayment of long-term debt................................ -- (453) (101)
------- ------- --------
Net cash used in financing activities.............. (3,467) (612) (6,231)
------- ------- --------
Net increase (decrease) in cash and cash equivalents......... 645 (159) (10,719)
Cash and cash equivalents, beginning of year................. 1,336 1,495 12,214
------- ------- --------
Cash and cash equivalents, end of year....................... $ 1,981 $ 1,336 $ 1,495
======= ======= ========
Supplemental disclosure:
Interest paid.............................................. $ 20 $ 30 $ 51
Income taxes paid.......................................... $ 226 $ 300 $ 194
See accompanying notes
12
111
NYCOR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL
PREFERRED COMMON CLASS A CLASS B PAID-IN TREASURY RETAINED
STOCK STOCK STOCK STOCK CAPITAL STOCK EARNINGS
--------- ------ ------- ------- ---------- -------- --------
(AMOUNTS IN THOUSANDS)
Balance at December 31, 1991...... $ 1,150 $2,807 $ 3,524 $ 716 $ 32,977 $ (792) $ 33,674
Net income........................ -- -- -- -- -- -- 5,240
Preferred Stock dividend.......... -- -- -- -- -- -- (1,955)
Common Stock dividend............. -- -- -- -- -- -- (328)
Class A Stock dividend............ -- -- -- -- -- -- (413)
Class B Stock dividend............ -- -- -- -- -- -- (77)
Conversion adjustment............. -- 2 -- (1) -- -- --
Reclassification of additional
paid-in capital................. -- -- -- -- 1,821 -- (1,821)
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1992...... $ 1,150 $2,809 $ 3,524 $ 715 $ 34,798 $ (792) $ 34,320
====== ====== ====== ==== ======= ======= =======
Net income........................ -- -- -- -- -- -- 4,244
Preferred Stock dividend.......... -- -- -- -- -- -- (489)
Reclassification of additional
paid-in capital................. -- -- -- -- 1,663 -- (1,663)
Limited stock offering............ -- -- 606 -- 560 -- --
Stock options exercised........... -- 25 25 -- 70 -- --
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1993...... $ 1,150 $2,834 $ 4,155 $ 715 $ 37,091 $ (792) $ 36,412
====== ====== ====== ==== ======= ======= =======
Net income........................ -- -- -- -- -- -- 635
Preferred Stock dividend.......... -- -- -- -- -- -- (3,421)
Conversion of stock............... -- 1 -- (1) -- -- --
Purchase of treasury stock........ -- -- -- -- -- (361) --
Stock issuance.................... -- -- 28 -- 72 -- --
Stock options exercised........... -- 47 47 -- 134 -- --
Reclassification of additional
paid-in capital................. -- -- -- -- 482 -- (482)
------ ------ ------ ---- ------- ------- -------
Balance at December 31, 1994...... $ 1,150 $2,882 $ 4,230 $ 714 $ 37,779 $ (1,153) $ 33,144
====== ====== ====== ==== ======= ======= =======
See accompanying notes
13
112
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: Until September 1992, NYCOR, Inc. (the
"Company"), had been solely engaged in a search for businesses to acquire. On
September 25, 1992, the Company acquired Melcor Corporation ("Melcor"), a
manufacturer of solid state thermoelectric heat pump modules, which are used for
special cooling and heating applications. On September 28, 1992, the Company
acquired Rotorex Company, Inc. ("Rotorex"), which manufactures compressors for
room air conditioners.
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
NET SALES: Sales are recorded at the time of shipment net of provisions
for sales allowances, warranty and similar items.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents are stated at cost,
which is equal to market, and include highly liquid debt instruments with
maturities of less than 90 days.
WARRANTY AND RETURN POLICY: Rotorex's warranty policy provides two-year
coverage for compressors. The Company's products may only be returned with the
consent of the Company. The Company's policy is to accrue the estimated cost of
warranty coverage and returns at the time the sale is recorded.
INVENTORIES: Inventories are stated at the lower of the first-in,
first-out (FIFO) cost or market. The Company periodically reviews inventory for
slow moving and obsolete items. Write downs, which have historically been
insignificant, are recorded in the period in which they are identified.
Inventories consist of the following at December 31:
1994 1993
---- ----
(IN THOUSANDS)
Finished goods................................................... $ 897 $ 5,245
Work in process.................................................. 4,660 3,194
Raw materials and supplies....................................... 5,188 4,540
------- -------
$10,745 $12,979
======= =======
PROPERTY, PLANT AND EQUIPMENT: Replacements, betterments and additions to
property, plant and equipment are capitalized at cost. Expenditures for
maintenance and repairs are charged to expense as incurred. Upon sale or
retirement of property, plant and equipment, the cost and related accumulated
depreciation are removed from the respective accounts and any gain or loss is
reflected in income. Property, plant and equipment consist of the following at
December 31:
1994 1993
---- ----
(IN THOUSANDS)
Land and improvements............................................ $ 2,664 $ 2,664
Buildings and improvements....................................... 7,951 7,947
Machinery and equipment.......................................... 19,622 18,556
------- -------
Property, plant and equipment at cost............................ 30,237 29,167
Accumulated depreciation......................................... (6,383) (3,635)
------- -------
$23,854 $25,532
======= =======
Depreciation is calculated using the straight-line method over the
estimated useful life of each asset which is 7 to 30 years for building and
improvements, and 3 to 20 years for machinery and equipment.
14
113
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
GOODWILL AND OTHER ASSETS: Other assets consist primarily of intangible
assets which, other than goodwill, are amortized over periods from 5 to 37 years
using the straight-line method. Goodwill is amortized over 40 years using the
straight-line method and is net of accumulated amortization of $2,536,000 and
$1,413,000 at December 31, 1994 and 1993, respectively. Other assets are net of
accumulated amortization of $714,000 and $280,000 at December 31, 1994 and 1993,
respectively, and consist of the following at December 31:
1994 1993
---- ----
(IN THOUSANDS)
License agreements................................................. $ 522 $ 674
Customer relationships............................................. 1,033 1,063
Other intangibles.................................................. 383 572
Other.............................................................. 93 83
------ ------
Total other assets............................................ $2,031 $2,392
====== ======
The recoverability of goodwill is evaluated periodically based upon the
expected, undiscounted net cash flows from the related businesses.
LONG-TERM INVESTMENTS: During 1992, the Company sold 2.2 million shares of
Zenith Electronics Corporation for $15,335,000, recording a gain of $4,352,000,
less $1,196,000 in deferred costs associated with the Company's 1991 proxy
contest, for a net gain of $3,156,000.
ACCRUED EXPENSES: Accrued expenses consist of the following at December
31:
1994 1993
---- ----
(IN THOUSANDS)
Employee compensation and benefits................................. $1,772 $1,634
Professional and consulting fees................................... 484 448
Income taxes payable............................................... 17 22
Current portion of warranty expense................................ 361 746
Litigation and contingencies....................................... 1,942 800
Other.............................................................. 588 768
------ ------
$5,164 $4,418
====== ======
RESEARCH AND DEVELOPMENT COSTS: All research and development costs are
charged to expense as incurred and amount to $1,444,000 in 1994, $745,000 in
1993 and $132,000 in 1992.
AMOUNTS PER SHARE: Primary earnings per share are computed by dividing net
income, less Preferred Stock dividends, by the weighted average number of shares
of Common Stock, Class A Stock, Class B Stock and other common stock equivalents
outstanding during the year: 7,583,000, 7,544,000, and 6,890,000 in 1994, 1993
and 1992, respectively (notes 4 and 5).
Fully diluted earnings per share are computed by dividing net income by the
weighted average number of shares of Common Stock, Class A Stock, Class B Stock
and other common stock equivalents (assuming conversion of Preferred Stock)
outstanding during the year: 10,136,000, 10,097,000, and 9,443,000 in 1994, 1993
and 1992, respectively. In 1994, 1993 and 1992, fully diluted earnings per share
were anti-dilutive.
15
114
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
2 -- TRANSACTIONS WITH FEDDERS
Certain officers and directors of the Company are also officers and
directors of Fedders Corporation ("Fedders") and have stockholdings in both
companies. The Company had significant transactions with Fedders, as follows:
On September 28, 1992, a $40,000,000 short-term note with Fedders, a
$20,000,000 long-term note with Emerson Quiet Kool, a subsidiary of
Fedders, and $1,226,000 in interest receivable were extinguished in
connection with the Company's acquisition of the assets of Rotorex. In
connection with these notes, the Company received $5,983,778 in interest in
1992.
Since being acquired Rotorex has supplied Fedders with rotary
compressors under a ten year supply agreement which requires Fedders to
purchase certain minimum quantities, up to 800,000 units, on an annual
basis. Sales to Fedders are at negotiated market prices and amount to
$60,381,000, $36,697,000 and $1,111,000 during 1994, 1993 and between the
date of acquisition and December 31, 1992, respectively.
3 -- INCOME TAXES
At December 31, 1994, the Company had tax operating loss carryforwards of
approximately $12,150,000, of which $10,912,000 expires in 1996 and the
remainder of which expires between 1997 and 2007. The Company also had
investment tax credit carryforwards of approximately $220,000 which expire in
the period from 1995 through 2000 and alternative minimum tax ("AMT") credit
carryforwards of approximately $1,373,000.
Deferred tax liabilities and assets, which reflect the net tax effects of
temporary differences between assets and liabilities for financial reporting and
income tax purposes, consist of the following at December 31:
1994 1993
------- -------
(IN THOUSANDS)
Deferred tax liabilities -- tax over book amortization.......... $ 1,082 $ 540
------- -------
Total deferred tax liabilities................................ $ 1,082 $ 540
------- -------
Deferred tax assets:
Net operating loss carryforwards.............................. 4,131 4,700
AMT carryforwards............................................. 1,373 1,300
Book over tax depreciation.................................... 709 359
Warranty...................................................... 332 136
Other......................................................... 816 --
Valuation allowance for deferred tax assets..................... (6,279) (5,955)
------- -------
Total deferred tax assets..................................... 1,082 540
------- -------
Net deferred tax assets.................................... $ -- $ --
======= =======
16
115
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
The reconciliation of the provision for income taxes, at the U.S. federal
statutory tax rates, to income tax expense is as follows:
1994 1993 1992
---- ---- ----
(IN THOUSANDS)
Federal income tax at statutory rate..................... $ 291 $1,531 $ 1,821
Goodwill amortization.................................... 87 87 132
Utilization of tax loss carryforwards.................... (362) (946) (1,953)
Alternative minimum tax.................................. 20 95 122
Refund of federal tax.................................... -- (91) --
Foreign tax.............................................. 155
State taxes, net of federal benefit...................... 30 86 27
----- ------ -------
$ 221 $ 762 $ 149
===== ====== =======
The provision for income taxes for 1994 consists of current federal, state
and foreign taxes of $20,000, $46,000 and $155,000, respectively. The provision
for income taxes for 1993 consists of deferred federal taxes of $627,000 and
current state taxes of $135,000. Federal taxes of $122,000 and state taxes of
$27,000 in 1992, are all current.
The Company adopted Statement of Financial Accounting Standard No. 109
("FAS 109") "Accounting for Income Taxes" as of January 1, 1993. The adoption of
FAS 109 did not have a material effect on pretax income. however, the cumulative
effect of adopting FAS 109 was to increase net income by $627,000.
At December 31, 1987, the Company adopted Statement of Financial Accounting
Standard No. 96, ("FAS 96") "Accounting for Income Taxes," which allows the
recognition of the tax benefits of net operating loss carryforwards in the
statement of operations as a reduction of income tax expense. In September 1989,
the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
("SAB") No. 86. In the SEC staff's view, tax benefits of net operating loss
carryforwards must be reported as an addition to additional paid-in capital
rather than being recorded in the statement of operations.
Based on the circumstances that existed when the Company reclassified its
accumulated deficit to additional paid-in capital in 1988 and adopted FAS 96,
the SEC staff has indicated that they would not object to the Company's
continued reporting of the tax benefit of its net operating loss carryforwards
in the statement of operations. If SAB No. 86 had been applied, net income for
1994, 1993, and 1992 would have been reduced by $362,000, $946,000, and
$1,953,000, respectively. There would have been no effect on the balance sheet.
4 -- STOCK OPTION PLANS
All stock option plans, as approved by the stockholders, provide for the
granting to employees and officers of incentive stock options (as defined under
current tax laws) and non-qualified stock options to directors who are not
employees. Stock options are exercisable at a price no less than the market
value on the date of grant. Existing stock option plans permit the granting of
options to purchase up to 571,890 shares of common stock and up to 721,890
shares of Class A stock.
Stock options are exercisable one year after the date of grant and, if not
exercised, will expire five years from the original date of grant. Most of the
stock options are exercisable only when the Company meets a specified earnings
target or at the end of five years.
17
116
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
EXERCISE
(IN THOUSANDS OF SHARES) # OPTIONS PRICE
--------- --------------
Options outstanding at December 31, 1991........................... 579 $2.94 to $3.31
Granted............................................................ 15
Cancelled.......................................................... 221
Exercised.......................................................... --
---
Options outstanding at December 31, 1992........................... 373 $2.31 to $2.50
Granted............................................................ 368
Cancelled.......................................................... 1
Exercised.......................................................... 50
---
Options outstanding at December 31, 1993........................... 690 $2.31 to $2.50
Exercised.......................................................... 95
---
Options outstanding at December 31, 1994........................... 595 $2.31 to $2.50
===
Options exercisable at December 31, 1994........................... 15
5 -- CAPITAL STOCK
PREFERRED STOCK: The Preferred Stock is convertible into Common Stock and
Class A Stock at a rate of 1.11 shares of Common Stock and 1.11 shares of Class
A Stock for each share of Preferred Stock. Accordingly, at December 31, 1994,
1,276,500 shares of Common Stock and 1,276,500 shares of Class A Stock are
reserved for issuance upon conversion. The Preferred Stock is also exchangeable
in whole, but not in part, at the option of the Company for the Company's
unissued 8 1/2% Convertible Subordinated Debentures due 2012 at the rate of $20
principal amount of Debentures for each share of Preferred Stock. The
Debentures, if issued, will be convertible into Common Stock and Class A Stock
at the conversion rate applicable to the Preferred Stock. The holders of
Preferred Stock are entitled to receive upon liquidation $20 per share, plus
accumulated and unpaid dividends to the date of distribution, before any
distribution is made on the Common Stock, Class A Stock or Class B Stock. The
Preferred Stock has an annual, cumulative dividend rate of $1.70 per share and
has no voting rights.
COMMON STOCK: Shares of Common Stock are reserved for the conversion of
Preferred Stock, Class A Stock and Class B Stock. At December 31, 1994, 571,890
shares are also reserved for issuance in connection with options not yet granted
or exercised under the Company's stock option plans (note 4).
CLASS A STOCK: Class A Stock has rights, including dividend rights,
substantially identical to Common Stock, except that the Class A Stock is not
entitled to vote except to the extent provided under Delaware law. Class A Stock
will automatically be converted into Common Stock on a share-for-share basis
whenever all of the Class B Stock converts into Common Stock and, accordingly,
at December 31, 1994, 4,229,971 shares are reserved for such conversion.
Additionally, 721,890 shares are reserved for issuance in connection with
options not yet granted or exercised under the Company's stock option plans
(note 4). In January 1993, the Company offered to sell to three non-employee
directors and 32 key employees of the Company, shares of the Company's Class A
Stock at discounts ranging from 5% to 10%. Twenty-eight of these directors and
employees purchased 606,129 shares pursuant to the offer. The Company received
$1,166,000 during the first quarter of 1993 from the sale of the shares, which
it used for working capital requirements. The shares purchased were not
registered under the Securities Act of 1933, as amended, and were, therefore,
restricted stock in the hands of the purchasers. The Company registered these
shares in May 1993.
18
117
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
CLASS B STOCK: Class B Stock is immediately convertible into Common Stock
on a share-for-share basis and accordingly, at December 31, 1994, 714,100 shares
of Common Stock are reserved for such conversion. Class B Stock has, in certain
circumstances, greater voting power in the election of directors (10 votes per
share) but receives a lower dividend (90%), if declared, than Common Stock and
Class A Stock, and has limited transferability.
6 -- SHORT-TERM BORROWING
The Company has a $3,000,000 revolving credit facility with a commercial
bank collateralized by all tangible and intangible assets, except for the
machinery and equipment of Rotorex, which expires April 30, 1995. The interest
rate on the credit facility is one percentage point above the bank s prime rate
(8.5% at December 31, 1994).
7 -- LONG TERM DEBT
Long-term debt consists of the following at December 31:
1994 1993
---- ----
(IN THOUSANDS)
Capital lease obligation............................................. $33 $26
Capital lease obligation, current portion............................ 10 13
--- ---
Long-term debt....................................................... $23 $13
=== ===
Aggregate amounts of long-term debt maturing in each of the three years
after December 31, 1995 are: 1996 -- $8,000, 1997 -- $8,000, 1998 -- $5,000, and
1999 -- $2,000.
8 -- COMMITMENTS AND CONTINGENCIES
The Company leases certain property and equipment under operating leases
which expire over the next seven years. Most of these operating leases contain
one of the following options: (a) the Company may, at the end of the initial
lease term, purchase the property at the then fair market value or (b) the
Company may renew its lease at the then fair market value for a period of one
month to seven years. The Company has granted the lessor under the lease at
Rotorex a security interest in machinery and equipment owned by Rotorex. Minimum
payments for operating leases having initial or remaining non-cancelable terms
in excess of one year are as follows: $1,159,000 in 1995, $1,135,000 in 1996,
$962,000 in 1997, $911,000 in 1998 and $829,000 in 1999. Minimum lease payments
total $4,994,000. Total rent expenses for all operating leases amounted to
$1,208,000 in 1994, $819,000 in 1993 and $195,000 in 1992.
As of December 31, 1994, the Company has contracted to acquire
approximately $8,800,000 of production equipment and building improvements,
which the Company intends to finance primarily with operating leases.
The Company has an employment agreement with an officer. The agreement has
a term of ten years from any point in time and provides for salary during the
employment period, a disability program, postretirement benefits and a death
benefit in an amount equal to ten times the prior year's compensation, payable
by the Company over ten years. The estimated present value of future non-salary
benefits payable under the agreement has been determined based upon certain
assumptions and is being amortized over the expected remaining years of service
to the Company.
19
118
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
9 -- ACQUISITIONS
On September 25, 1992, the Company acquired all of the outstanding shares
of Melcor. The shareholders of Melcor exchanged their shares for a cash payment
totaling $14,875,000. The acquisition was accounted for using the purchase
method, with the purchase price allocated to the assets acquired based on their
estimated fair market values. The excess of the purchase price over the fair
value of the tangible assets was allocated to goodwill and other intangible
items.
On September 28, 1992, the Company acquired the assets of Rotorex. The
purchase price for Rotorex was approximately $72,788,000, and was paid by the
assignment of two promissory notes due to the Company by Fedders and its
subsidiaries in the total principal amount of $60,000,000 plus interest
receivable of $1,226,000 and assumed liabilities of $11,562,000. The acquisition
was accounted for using the purchase method, with the purchase price allocated
to the assets acquired based on their estimated fair values at the date of
acquisition. The excess of the purchase price over the fair value of the
tangible assets was allocated to goodwill and other intangible items, including
license agreements.
The following unaudited pro forma combined results of operations for the
year ended December 31, 1992 account for the acquisitions as if they occurred on
January 1, 1992. Pro forma adjustments to the historical financial information
include adjustments to intangible amortization and adjustments to depreciation
to reflect purchase acquisition accounting. Adjustments were also made to
exclude interest expense on liabilities not assumed, interest income on
investments and to give effect to changes in financing arrangements resulting
from the acquisition. The pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would actually have
happened had the acquisitions been made as of such date, or of results which may
occur in the future.
PRO FORMA COMBINED RESULTS OF OPERATIONS
YEAR ENDED
DECEMBER 31, 1992
-----------------
(UNAUDITED)
Net sales.................................................... $57,187
Net income................................................... 4,221
Earnings per share........................................... $ 0.33
10 -- LITIGATION
The Company is involved in litigation incidental to the conduct of its
business. It is the opinion of management, after consultation with counsel, that
the outcome of such litigation will not have a materially adverse effect on the
financial statements. In 1994, a judgment for approximately $1,200,000,
exclusive of interest and costs, was rendered against the Company in a lawsuit
dating from 1987. The Company believes that the judgment should be overturned
and has filed an appeal.
20
119
NYCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
11 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
1994 QUARTERS 1993 QUARTERS
--------------------------------------- -------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH*
--- --- --- --- --- --- --- ---
(IN THOUSANDS, EXCEPT PER SHARE AND MARKET PRICE DATA)
Net sales....................... $21,457 $23,083 $11,575 $19,122 $15,566 $22,393 $7,374 $13,893
Net income (loss) before effect
of accounting change.......... $ 1,227 $ 660 $(1,312) $ 60 $ 970 $ 2,496 $ (679) $ 830
Cumulative effect of accounting
change........................ -- -- -- -- 627 -- -- --
------- ------- ------- ------- ------- ------- ------ -------
Net income (loss)............... $ 1,227 $ 660 $(1,312) $ 60 $ 1,597 $ 2,496 $ (679) $ 830
======= ======= ======= ======= ======= ======= ====== =======
Primary net income (loss) per
share before effect of
accounting change............. $ 0.10 $ 0.02 $ (0.24) $ (0.05) $ 0.06 $ 0.26 $(0.15) $ 0.04
Cumulative effect of accounting
change........................ -- -- -- -- 0.09 -- -- --
------- ------- ------- ------- ------- ------- ------ -------
Primary net income (loss) per
share......................... $ 0.10 $ 0.02 $(0.24) $ (0.05) $ 0.15 $ 0.26 $(0.15) $ 0.04
======= ======= ======= ======= ======= ======= ====== =======
Market price per share:
Common: High................ 5 1/2 4 3/4 5 1/8 3 3 3 3/8 6 3/4 6 1/4
Low................. 3 7/8 3 1/2 2 3/4 2 1/8 2 1/8 2 1/2 3 3 3/4
Class A: High............... 4 3/4 4 1/2 5 2 7/8 2 13/16 3 3/8 5 3/8 4 3/4
Low.................. 3 1/4 3 1/8 2 1/2 2 2 1/8 2 1/2 2 7/8 3 1/4
Preferred: High............. 19 3/4 18 3/4 18 1/2 16 13 15 18 3/4 18 3/4
Low................. 17 1/4 17 15 1/4 13 1/4 9 3/4 12 1/4 14 1/2 17
Cash dividends declared:
Preferred Stock............... $ 0.850 $ 0.850 $ 0.850 $ 0.425 -- -- $0.425 $ 0.425
Common Stock.................. -- -- -- -- -- -- -- --
Class A Stock................. -- -- -- -- -- -- -- --
Class B Stock................. -- -- -- -- -- -- -- --
- ---------------
* The 1993 4th Quarter results include a gain of approximately $400,000
associated with continued improvements from the Company's quality programs
21
120
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of NYCOR, Inc.
We have audited the accompanying consolidated balance sheets of NYCOR, Inc.
at December 31, 1994 and 1993 and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the three years in
the period ended December 31, 1994. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
NYCOR, Inc. at December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in note 3 to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes to conform with
Statement of Accounting Standard No. 109.
ERNST & YOUNG
January 20, 1995
Princeton, New Jersey
22
121
(A) 3. EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(3)(i) Certificate of Incorporation of NYCOR, Inc., included as Annex A to the
Information Statement forming a part of the Company's Registration Statement on
Form 10 and incorporated herein by reference.
(ii) Certificate of the Powers, Designation, Preference, Rights and Limitations of
$1.70 Convertible Exchangeable Preferred Stock of NYCOR, Inc., filed as Exhibit
(4) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1987 and incorporated herein by reference.
(iii) Certificate of Amendment of Certificate of Incorporation of NYCOR, Inc., filed as
Exhibit (3)(iii) to the Company's Annual Report on Form 10-K for 1992 and
incorporated herein by reference.
(iv) By-Laws of NYCOR, Inc., included as Annex B to the Information Statement forming a
part of the Company's Registration Statement on Form 10 and incorporated herein by
reference.
(10)(i) NYCOR, Inc. Stock Option Plan, included as Annex C to the Information Statement
forming a part of the Company's Registration Statement on Form 10 and incorporated
herein by reference.
(ii) NYCOR, Inc. Stock Option Plan I, filed as Exhibit (10)(ii) to the Company's Annual
Report on Form 10-K for 1987 and incorporated herein by reference.
(iii) NYCOR, Inc. Stock Option Plan II, filed as Exhibit (10)(iii) to the Company's
Annual Report on Form 10-K for 1988 and incorporated herein by reference.
(iv) NYCOR, Inc. Stock Option Plan III, filed as Exhibit (10)(iv) to the Company's
Annual Report on Form 10-K for 1989 and incorporated herein by reference.
(v) NYCOR, Inc. Stock Option Plan IV, filed as Exhibit (10)(v) to the Company's Annual
Report on Form 10-K for 1990 and incorporated herein by reference
(vi) Supply Agreement between Rotorex Company, Inc. and Fedders Nyorth America, Inc.
dated September 28, 1992, filed as Exhibit (10)(vi) to the Company's Annual Report
on Form 10-K for 1992 and incorporated herein by reference.
23
122
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to its
report to be signed on its behalf by the undersigned, thereunto duly autorized.
NYCOR, INC.
By /s/ Kent E. Hansen
------------------------------------
Kent E. Hansen
Vice President-Finance
and General Counsel
Date January 26, 1995
123
ANNEX C
- -----------------------------------------------------------------
- -----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
( X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended September 30, 1995 or
( ) Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
----------------------------------
Commission file number 0-15299
----------------------------------------
NYCOR, INC.
- ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2748564
-------- ---------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
287 CHILDS ROAD, BASKING RIDGE, NEW JERSEY 07920
- -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (908) 953-8200
--------------
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 (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
------- -------
The registrant has outstanding 2,800,019 shares of Common Stock,
4,051,375 shares of Class A Stock, and 713,675 shares of Class B
Stock (which is immediately convertible into Common Stock on a
share-for-share basis) as of November 9, 1995.
124
NYCOR, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Statements of Operations 3-4
Consolidated Balance Sheets 5-7
Consolidated Statements of Cash Flows 8
Notes to the Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
125
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
NYCOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share data)
(unaudited)
Third Quarter Ended
September 30
1995 1994
Revenues:
Net sales $15,844 $11,575
COGS 15,086 11,178
Selling, general and
administrative expense 2,226 1,948
-------- --------
Operating loss (1,468) (1,551)
Interest expense (240) -
Interest income 30 45
-------- --------
Loss before income taxes (1,678) (1,506)
Federal, state and foreign income
tax (benefit) 209 (194)
-------- --------
Net loss ($1,887) ($1,312)
======== ========
Primary earnings per share:
Loss per share ($0.31) ($0.24)
======== ========
Dividends per share declared:
Preferred Stock $0.425 $0.850
See accompanying notes
126
Nine Months Ended
September 30
1995 1994
Revenues:
Net sales $56,587 $56,115
COGS 52,365 49,512
Selling, general and
administrative expense 6,946 6,193
-------- --------
Operating income (loss) (2,724) 410
Interest expense (240) -
Interest income 96 67
-------- --------
Income (loss) before income taxes (2,868) 477
Federal, state and foreign
income tax (benefit) 246 (98)
-------- --------
Net income (loss) ($3,114) $575
======== ========
Primary earnings per share:
Loss per share ($0.60) ($0.12)
======== ========
Dividends per share declared:
Preferred Stock $1.275 $2.550
See accompanying notes
127
NYCOR, INC.
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
(unaudited)
September 30, December 31,
1995 1994
------------- -------------
ASSETS
- ------
Current assets:
Cash $1,117 $1,981
Accounts receivable (less allowance
of $421 at September 30, 1995 and 2,564 1,353
$409 at December 31, 1994)
Accounts receivable from
Fedders Corporation 5,074 5,970
Inventories:
Finished goods 597 897
Work in process 4,629 4,660
Raw materials and supplies 4,760 5,188
Other current assets 1,918 820
-------- --------
Total current assets 20,659 20,869
Property, plant and equipment:
Land 2,664 2,664
Buildings and improvements 10,592 7,951
Machinery & equipment 26,756 19,622
-------- --------
40,012 30,237
Less accumulated depreciation (8,674) (6,383)
-------- ---------
Net property, plant and equipment 31,338 23,854
Goodwill 41,403 42,240
Other assets 1,779 2,031
-------- ---------
Total assets $95,179 $88,994
======== =========
See accompanying notes
128
NYCOR, INC.
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
(unaudited)
September 30, December 31,
1995 1994
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities :
Accounts payable $7,548 $4,364
Accrued expenses 5,693 5,164
Current portion of obligations under
capital leases 1,133 10
Other current liabilities 80 71
-------- --------
Total current liabilities 14,454 9,609
Obligations under capital leases 5,994 23
Non-current portion of warranty expense 568 616
Stockholders' equity:
Preferred Stock, $1 par value,
5,000,000 shares authorized,
1,150,000 shares issued and
outstanding at September 30, 1995
and December 31, 1994 1,150 1,150
Common Stock, $1 par value,
115,000,000 shares authorized,
2,882,580 shares issued as of
September 30, 1995 and
December 31, 1994 2,882 2,882
Class A Stock, $1 par value,
100,000,000 shares authorized,
4,229,971 shares issued as of
September 30, 1995 and
December 31, 1994 4,230 4,230
Class B Stock, $1 par value,
7,500,000 shares authorized,
713,675 shares issued and
outstanding as of September 30, 1995
and December 31, 1994 714 714
Additional paid-in capital 37,779 37,779
Retained earnings from
January 1, 1988 28,561 33,144
Less-treasury stock at cost:
82,561 shares of Common
Stock; 178,596 shares of
Class A Stock (1,153) (1,153)
-------- --------
Total stockholders' equity 74,163 78,746
-------- --------
Total liabilities and
stockholders' equity $95,179 $88,994
======== ========
See accompanying notes
129
NYCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
(unaudited)
Nine Months Ended
September 30,
1995 1994
------ -------
Cash flows from operations:
Net income (loss) ($3,114) $ 575
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,394 3,200
Decrease (increase)in accounts receivable (315) 49
Decrease in inventories 759 1,838
Increase in other current assets (833) (47)
Decrease (increase) in other assets (280) 16
Increase (decrease) in accounts payable 3,184 (977)
Decrease (increase)in accrued expenses
and taxes payable 488 (316)
-------- --------
Net cash provided by operations 3,283 4,338
-------- --------
Cash flows from investing activities:
Proceeds from sale of equipment - 503
Additions to property, plant and
equipment (2,334) (1,358)
-------- --------
Net cash used in investing activities (2,334) (855)
-------- --------
Cash flows from financing activities:
Dividends paid (1,467) (2,933)
Proceeds from stock options - 329
Purchase of Treasury shares - (360)
Payments on capital lease obligations (346) (8)
-------- --------
Net cash used in financing activities (1,813) (2,972)
-------- --------
Net increase (decrease) in cash and
cash equivalents (864) 511
Cash and cash equivalents, beginning
of period 1,981 1,336
-------- --------
Cash and cash equivalents, end of period $1,117 $1,847
======== ========
Supplemental disclosure:
Leased asset additions and related obligations $7,441 -
130
NYCOR, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(a) Statement of information furnished
The accompanying unaudited consolidated financial
statements have been prepared in accordance with Form 10-Q
instructions and in the opinion of management contain all
adjustments (consisting of normal recurring accruals) necessary
to present fairly the financial position as of September 30, 1995
and December 31, 1994, the results of operations for the nine
months ended September 30, 1995 and 1994, and the cash flows for
the nine months ended September 30, 1995 and 1994.
(b) Earnings per share
Primary earnings per share are computed by dividing net
income less Preferred Stock dividends by the weighted average
number of shares of Common Stock, Class A Stock, Class B Stock
and other common stock equivalents outstanding: 7,580,000 in the
third quarter of 1995 and 1994. Fully diluted earnings per share
are computed by dividing net income by the weighted average
number of shares of Common Stock, Class A Stock, Class B Stock
and other common stock equivalents (assuming conversion of
Preferred Stock) outstanding during the year: 10,133,000 in the
third quarter of 1995 and 1994. (See Exhibit 11)
(c) Lease obligations
In June 1995, the Company entered into $7.4 million of new
capital leases reflecting investment in property, plant and
equipment at the Company's Rotorex operations. The obligations
extend through 2002. Minimum payments under the obligations will
be as follows: $464,000 in the fourth quarter 1995, $1,857,000 in
1996, 1997 and 1998, and $2,938,000 in total payments thereafter.
(d) Litigation
There has been no change in the status of the litigation
reported in Note 10 of the Company's 1994 Annual Report to
Stockholders. The Company continues to be adequately reserved
for the matters described therein.
(e) Subsequent event
On October 31, 1995 the Company and Fedders Corporation
jointly announced that they have reached agreement in principle
to merge. Under the terms of the agreement, stockholders of NYCOR
will receive shares of Fedders Corporation Class A Stock with a
value of $6.25 for each share of NYCOR Common Stock, Class A
Stock and Class B Stock which they own. No other terms of the
agreement were disclosed. The agreement is subject to the
approval of the stockholders and lenders of both companies in
addition to any required government approvals.
131
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have influenced the Company's financial
position and operating results during the periods included in the
accompanying consolidated financial statements.
RESULTS OF OPERATIONS
The third quarter is the seasonally weakest quarter of the year.
Net sales of $15.8 million for the quarter ended September 30,
1995 were $4.3 million higher than in the same period of 1994,
reflecting higher sales of rotary compressors as a result of
increased demand from Fedders Corporation and higher sales of
thermoelectric heating and cooling modules for special assembly
applications. Net sales include $1.3 million of royalty income
from rotary compressor licensing agreements for the quarter ended
September 30, 1995. There was no royalty income for the same
period in 1994.
Gross profit for the quarter ended September 30, 1995 compared to
the quarter ended September 30, 1994 increased from $0.4 million
to $0.8 million. The increase in gross profit is attributable to
increase in sales at both of the Company's operations offset by
continuing inefficiencies at the Company's rotary compressor
operations. The manufacturing inefficiencies at Rotorex are not
expected to show significant improvement until investments being
made at the Rotorex facility are completed and the related
equipment and systems are fully operational. Implementation of
those projects has been delayed but is expected to be completed
during the fourth quarter.
Selling, general and administrative expenses for the quarter
ended September 30, 1995 were $2.2 million, a $0.3 million
increase versus the same period in 1994. The increase was
primarily due to increased sales and marketing expense and
increased research and development cost. Increased sales and
marketing expense is attributable to international sales efforts
at Rotorex and increased activity domestically and
internationally at the Melcor operations. Research and
development cost increased as a result of Rotorex's efforts to
continue building its design engineering capabilities.
Interest expense of $0.2 million is a result of new capital
leases reflecting investment in property, plant and equipment at
the Company's Rotorex operations.
The net loss amounted to $1.9 million for the quarter ended
September 30, 1995 compared to a $1.3 million net loss in the
same period in 1994.
132
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital is $6.2 million at September 30,
1995 compared to $11.3 million at December 31, 1994. The decline
in the working capital is principally attributable to the current
portion of obligations under capital leases of $1.1 million and
increased accounts payable. In June 1995, the Company entered
into $7.4 million of new capital leases reflecting the Company's
investments in property, plant and equipment for projects
expected to increase efficiency and capacity. Management believes
that the Company's earnings and borrowing capacity are sufficient
to meet the needs of its operations and long-term requirements.
133
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit
(11) Statement re computation of per share earnings
b) Reports on Form 8-K
On August 16, 1995, the Company filed a Report on Form 8-K
reporting the appointment of BDO Seidman, LLP as its
independent accountants.
134
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NYCOR, INC.
By /s/ Kent E. Hansen
--------------
Vice President-Finance
and General Counsel
Date November 13, 1995 Signing both in his
----------------- capacity as Vice President
on behalf of the Registrant
and as Chief Financial
Officer of the Registrant
135
Exhibit 11
NYCOR, INC.
EARNINGS PER SHARE COMPUTATIONS
(amounts in thousands, except per share data)
Third Quarter Ended
September 30,
1995 1994
PRIMARY:
Average number of common and common
equivalent shares outstanding 7,580 7,580
======== =======
Net loss less preferred stock dividends ($2,376) ($1,801)
======== =======
Net loss per common share ($0.31) ($0.24)
======== =======
FULLY DILUTED:
Average number of common and common
equivalent shares outstanding 7,580 7,580
Additional average number of common
shares assuming conversion of the
preferred stock 2,553 2,553
-------- -------
Average number of common and common
equivalent shares outstanding assuming
conversion of the preferred stock
10,133 10,133
======== =======
Net loss ($1,887) ($1,312)
======== =======
Net loss per common share ($0.19) ($0.24)
======== =======
Nine Months Ended
September 30,
1995 1994
PRIMARY:
Average number of common and common
equivalent shares outstanding 7,580 7,584
======== =======
Net loss less preferred stock dividends ($4,581) ($891)
======== =======
Net loss per common share ($0.60) ($0.12)
======== =======
FULLY DILUTED:
Average number of common and common
equivalent shares outstanding 7,580 7,584
Additional average number of common
shares assuming conversion of the
preferred stock 2,553 2,553
-------- -------
Average number of common and common
equivalent shares outstanding assuming
conversion of the preferred stock
10,133 10,137
======== =======
Net income (loss) ($1,887) $575
======== =======
Net income (loss) per common share ($0.19) $0.06
======== =======
136
ANNEX D
NYCOR, INC.
287 Childs Road
Basking Ridge, New Jersey 07920
(908) 953-8200
March 27, 1995
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
the Company to be held at 10:30 a.m. on Friday, April 28, 1995 at the Somerset
Hills Hotel, 200 Liberty Corner Road, Warren, New Jersey.
Enclosed are the Notice of Meeting, Proxy Statement and proxy card. At the
meeting, action will be taken to elect directors and ratify the appointment of
independent auditors.
These matters are more particularly described in the Proxy Statement, which
we urge you to read carefully. It is important that your shares be represented
at the meeting whether or not you are personally able to be present. Please
sign, date and return your proxy as soon as possible. If you do attend and wish
to vote in person, your proxy can be revoked at your request. Your prompt
response in immediately returning the enclosed proxy card will be appreciated.
We look forward to seeing you on April 28.
Sincerely,
[SIG CUT] [SIG CUT]
Salvatore Giordano Sal Giordano, Jr.
Chairman of the Board Vice Chairman
137
NYCOR, INC.
BASKING RIDGE, NEW JERSEY 07920
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 1995
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
NYCOR, Inc. (the "Company") will be held at the Somerset Hills Hotel, 200
Liberty Corner Road, Warren, New Jersey, on Friday, April 28, 1995 at 10:30
a.m. for the following purposes:
1. To elect two directors to serve for a term of three years and until
their successors shall be elected and shall have qualified;
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the ensuing year; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on March 1, 1995 has been fixed as the record date
for the determination of the holders of shares of the Company's Common Stock and
Class B Stock entitled to notice of, and to vote at, the Annual Meeting. A list
of the stockholders entitled to vote at the Annual Meeting will be available
during the period ten days prior to the date of the Annual Meeting for
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours at the offices of the Company, 287 Childs Road, Basking
Ridge, New Jersey.
By order of the Board of Directors
KENT E. HANSEN
Secretary
Dated: March 27, 1995
Basking Ridge, New Jersey
IMPORTANT: YOUR VOTE IS IMPORTANT. THE BOARD OF DIRECTORS INVITES YOU TO ATTEND
THE MEETING IN PERSON, BUT IF YOU ARE UNABLE TO BE PERSONALLY PRESENT, PLEASE
DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. NO POSTAGE IS
REQUIRED IF THE PROXY IS RETURNED IN THE ENCLOSED ENVELOPE AND MAILED IN THE
UNITED STATES.
138
TABLE OF CONTENTS
PAGE
----
Proxy Statement....................................................................... 1
Election of Directors................................................................. 2
Meetings of the Board of Directors and Certain Committees........................ 2
Security Ownership of Directors and Executive Officers................................ 3
Principal Stockholders................................................................ 5
Executive Compensation................................................................ 6
Independent Auditors.................................................................. 9
Stockholder Proposals -- 1996 Annual Meeting.......................................... 10
Cost of Solicitation.................................................................. 10
139
NYCOR, INC.
287 CHILDS ROAD
BASKING RIDGE, NEW JERSEY 07920
(908) 953-8200
-------------------------------
PROXY STATEMENT
-------------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of NYCOR, Inc. (the "Company") of proxies in the
accompanying form to be used at the Annual Meeting of Stockholders of the
Company to be held on April 28, 1995, and at all adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting. It is intended
that this Proxy Statement and the proxies solicited hereby be mailed to
stockholders on March 27, 1995. A stockholder who shall sign and return a proxy
in the form enclosed with this Proxy Statement has the power to revoke it at any
time before it is exercised by giving written notice to the Secretary of the
Company to such effect or by delivering to the Company an executed proxy bearing
a later date. Any stockholder who has given a proxy may still attend the Annual
Meeting, revoke his or her proxy, and vote in person.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1994, including financial statements, is enclosed.
The close of business on March 1, 1995 has been fixed as the record date
for the determination of the stockholders entitled to notice of, and to vote at,
the Annual Meeting. As of such date, 2,799,594 shares of Common Stock and
714,100 shares of Class B Stock of the Company were outstanding and entitled to
be voted at the Annual Meeting. The holders of Class B Stock are entitled to ten
votes per share in any election of directors if more than 15% of the shares of
Common Stock outstanding on the record date are owned beneficially by a person
or a group of persons acting in concert, or if a nomination for the Board of
Directors is made by a person or a group of persons acting in concert (other
than the Board) provided such nomination is not made by one or more 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 Board of
Directors is not presently aware of any circumstance that would give holders of
Class B Stock the right to ten votes per share in the election of directors at
the Annual Meeting.
The affirmative vote of a majority of the shares of Common Stock and Class
B Stock, voting in person or by proxy together as a single class, is required to
elect directors and ratify the appointment of the independent auditors. As of
March 1, 1995, the executive officers and directors together held 853,634 shares
or 24.8% of the combined voting percentage of the outstanding shares of Common
Stock and Class B Stock voting as a single class. Such executive officers and
directors are expected to vote in favor of these proposals.
The proxies in the accompanying form will be voted as specified, but if no
specification is made they will be voted in favor of the election of directors
and ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the ensuing year. In the discretion of the
proxyholders, the proxies will also be voted for or against such other matters
as may properly come before the meeting. The Board of Directors is not aware
that any other matters are to be presented for action at the meeting.
The shares represented by a proxy which is timely returned and marked
"Abstain" as to any matter, as well as broker non-votes, will be considered
present at the Annual Meeting and will be included in the calculation of those
shares needed to constitute a quorum. The shares represented by such proxies,
although considered present for quorum purposes, will not be considered a part
of the voting power present with respect to any proposal which is abstained from
or to which the broker non-vote relates.
140
ELECTION OF DIRECTORS
Stockholders may vote for a maximum of two directors at the Annual Meeting
of Stockholders. The nominees for election as directors are Messrs. Sal
Giordano, Jr. and William J. Brennan. With the exception of Mr. Keen, each of
the individuals listed below has been a director since October 1986. Mr. Keen
was first elected a director of the Company in 1990. Set forth opposite the name
of each nominee and each director is his age, principal occupation for the past
five years, the name and principal business of any corporation or other
organization in which such employment is carried on and other business
directorships held by the nominee or director. The Company is not presently
aware of any circumstance which would prevent either nominee from fulfilling his
duties as a director of the Company.
PRINCIPAL OCCUPATION FOR THE PAST
NAME FIVE YEARS AND AGE
- ------------------------------ --------------------------------------------
NOMINEES -- THREE YEAR TERM
Sal Giordano, Jr.*............ Vice Chairman of the Company(1)(2); 56
William J. Brennan............ Retired (2); Director of Fedders Corporation
and CSM Environmental Systems, Inc.; 67
DIRECTORS -- TWO YEAR REMAINING TERM
Joseph Giordano*.............. President of the Company(1)(2); 62
S. A. Muscarnera**............ Director of Fedders Corporation(2); 55
DIRECTORS -- ONE YEAR REMAINING TERM
Salvatore Giordano............ Chairman of the Board of the Company(1)(2);
84
C. A. Keen.................... Retired(3); 70
- ---------------
* Son of Salvatore Giordano
** Nephew of Salvatore Giordano
(1) Messrs. Salvatore Giordano and Sal Giordano, Jr. are also executive officers
of, and they and Mr. Joseph Giordano are directors and stockholders of,
Fedders Corporation ("Fedders"), a manufacturer of room air conditioners.
Fedders purchases compressors from Rotorex Company, Inc., a subsidiary of
the Company, in the ordinary course of its business. In 1994, such
purchases totaled $60.4 million.
(2) Messrs. Salvatore Giordano, Joseph Giordano, Sal Giordano, Jr. and S. A.
Muscarnera have been associated in executive capacities with the Company
and Fedders for more than five years. Mr. Brennan was President and
Treasurer of the Company until his retirement on December 31, 1987.
(3) Mr. Keen was Vice President of Fedders for more than 20 years until his
retirement in August 1992, with responsibilities in a number of areas
during that time, including marketing, treasury and international sales and
sourcing.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During 1994, the Board of Directors of the Company held five meetings. All
of the present directors attended 75% or more of such meetings and of meetings
of committees of which they were members. Directors who are not employees
receive an annual fee of $16,000.
The Audit Committee of the Board of Directors, consisting of Messrs.
William J. Brennan and S.A. Muscarnera, held two meetings during 1994. The Audit
Committee reviews the audit function with the Company's independent auditors.
The chairman of the Audit Committee, Mr. Brennan, receives a fee of $1,000 for
each meeting he attends. Other members of the Audit Committee who are not
employees receive a fee of $500 for each meeting they attend.
The Company does not have a nominating or compensation committee.
2
141
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
As of March 1, 1995, each director of the Company, the executive officers
included in the Summary Compensation Table 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 sixty days pursuant to stock options are shown separately.
Unless otherwise indicated, the owners listed have sole voting and investment
power.
AMOUNT AND NATURE SHARES SUBJECT
TITLE OF NAME OF INDIVIDUAL OF BENEFICIAL TO ACQUISITION PERCENT
CLASS OR PERSONS IN GROUP OWNERSHIP WITHIN 60 DAYS(8) OWNED(9)
- ---------- ------------------------------------------------- ----------------- -------------
Common Salvatore Giordano 20,816(1) -- Less than 1%
Stock Sal Giordano, Jr. 83,917(1)(2) -- 3.0%
Joseph Giordano 39,528(1) -- 1.4%
William J. Brennan 58,529(3) -- 2.1%
S.A. Muscarnera 16,250 -- Less than 1%
All directors and executive
officers as a group 213,102 -- 7.8%
Class A Salvatore Giordano 592,525(4)(5) -- 14.5%
Stock Sal Giordano, Jr. 368,988(4)(6) -- 9.0%
Joseph Giordano 141,942(4) -- 3.5%
William J. Brennan 63,373(3) -- 1.6%
S.A. Muscarnera 35,903 -- Less than 1%
C.A. Keen 14,250 -- Less than 1%
Kent E. Hansen 25,000 15,000 Less than 1%
All directors and executive
officers as a group 1,021,469 15,000 25.2%
Class B Salvatore Giordano 640,532(7) -- 89.7%
Stock Sal Giordano, Jr. 640,532(7) -- 89.7%
Joseph Giordano 640,532(7) -- 89.7%
All directors and executive
officers as a group 640,532(7) -- 89.7%
Ownership of Common Stock, Class
A Stock and Class B Stock,
combined, by all directors and
executive officers as a group 1,875,103 15,000 24.8%
- ---------------
(1) The amount shown includes 2,969 shares as to which Messrs. Salvatore
Giordano, Joseph Giordano and Sal Giordano, Jr. share voting and investment
power.
(2) The amount shown includes 2,500 shares held of record by Mr. Giordano's wife
and 20,201 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(3) The amount shown includes 250 shares as to which Mr. Brennan shares voting
and investment power.
(4) The amount shown includes 110,256 shares as to which Messrs. Salvatore
Giordano, Joseph Giordano and Sal Giordano, Jr. share voting and investment
power.
(5) The amount shown includes 84,876 shares held of record by Mr. Giordano's
wife and 39,264 shares held of record by Mr. Giordano's wife in trust for
their grandchildren, as to which Mr. Giordano disclaims beneficial
ownership.
3
142
(6) The amount shown includes 4,991 shares held of record by Mr. Giordano's wife
and 8,610 shares held of record by Mr. Giordano's wife in trust for their
grandchildren, as to which Mr. Giordano disclaims beneficial ownership.
(7) The amount shown is held by Giordano Holding Corp. Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano are officers and directors
of such corporation and share voting and investment power over these
shares.
(8) The amounts shown are shares held under stock options exercisable within 60
days.
(9) The Class B Stock is convertible into Common Stock at any time on a
share-for-share basis. In the event that the individuals named as owning
Class B Stock converted their shares into Common Stock, such individuals
and the group would own the following number of shares constituting the
indicated percentage of Common Stock outstanding: Mr. Salvatore Giordano,
661,348 (of which 643,501 are shares as to which Mr. Giordano shares voting
and investment power with Messrs. Joseph Giordano and Sal Giordano, Jr.)
constituting 19.2%; Mr. Sal Giordano, Jr., 724,449 shares (of which 643,501
are shares as to which Mr. Giordano shares voting and investment power with
Messrs. Salvatore Giordano and Joseph Giordano) constituting 21.1%; Mr.
Joseph Giordano, 680,060 (of which 643,501 are shares as to which Mr.
Giordano shares voting and investment power with Messrs. Salvatore Giordano
and Sal Giordano, Jr.) constituting 19.8% and all directors and officers as
a group, 853,634 shares constituting 24.8%.
4
143
PRINCIPAL STOCKHOLDERS
The following table sets forth information at March 1, 1995 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 OWNED OF CLASS
- -------------- ------------------- ------------------- --------
Common Stock Heartland Advisors, Inc. 395,500 14.1%
790 North Milwaukee Street
Milwaukee, WI 53202
Class B Stock Salvatore Giordano 640,532 89.7%
Joseph Giordano
Sal Giordano, Jr.
NYCOR, Inc.
287 Childs Road
Basking Ridge, NJ 07920
Dimensional Fund 67,515(1) 9.5%
Advisors, Inc.
1299 Ocean Avenue
11th floor
Santa Monica, CA 90401
- ---------------
(1) The following statement has been provided by Dimensional Fund Advisors,
Inc.: "Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 67,515 shares
of NYCOR, Inc., all of which shares are held in portfolios of DFA
Investment Dimensions Group, Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participator Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors, Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares."
5
144
EXECUTIVE COMPENSATION
The following information is furnished as to all cash compensation paid by
the Company and its subsidiaries during the past three years to each of the
highest paid executive officers of the Company whose aggregate direct
compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
(A) ANNUAL COMPENSATION ------------
----------------------- (I)
(C) (D) (G) ALL OTHER
(B) SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
--------------------------- ---- ------- ------ ------------ ------------
Salvatore Giordano 1992 190,000 27,913 -- --
Chairman of the Board of Directors 1993 245,000 29,738 60,000 --
1994 265,506 29,738 -- --
Sal Giordano, Jr. 1992 175,000 27,913 -- --
Vice Chairman 1993 220,833 29,738 60,000 --
1994 237,660 -- -- 14,444
Joseph Giordano 1992 125,000 27,913 -- 939
President 1993 170,833 29,738 60,000 5,125
1994 181,866 29,738 -- 13,826
Kent E. Hansen 1992 44,595 15,000(2) -- --
Vice President-Finance 1993 170,910 29,738 60,000 5,125
and General Counsel 1994 181,866 29,738 -- 7,849
- ---------------
(1) Includes the Company contribution to savings and investment retirement plans
up to the 3% level permitted by the plans and, in 1994, the dollar value of
the benefit of premiums paid for split-dollar life insurance policies
projected on an actuarial basis, which cost is recovered by the Company from
the proceeds of such policies (Mr. Sal Giordano, Jr., $6,485; Mr. Joseph
Giordano, $7,478; and Mr. Hansen, $1,501).
(2) Represents four months' compensation.
6
145
AGGREGATED OPTION/SAR EXERCISES AND YEAR-END OPTION/SAR VALUE TABLE
The following table sets forth the number of shares exercised during 1994,
the value realized upon exercise, the number of unexercised options at the end
of 1994, and the value of unexercised in-the-money options at the end of 1994.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT OPTIONS
SHARES YEAR-END(#) YEAR-END($)
ACQUIRED ON VALUE
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------
Salvatore Giordano........................ 30,000 36,563 -- E -- E
120,000U 8,438U
Sal Giordano, Jr.......................... 30,000 36,563 -- E -- E
120,000U 8,438U
Joseph Giordano........................... 15,000 18,281 -- E -- E
90,000U 5,156U
Kent E. Hansen............................ -- -- 15,000E 938E
60,000U 1,875U
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no separate Compensation Committee, and matters concerning
executive compensation are considered by the entire Board of Directors, with
directors who are also officers of the Company abstaining from any vote
concerning their own proposed compensation. During 1994, Messrs. Salvatore
Giordano, Sal Giordano, Jr. and Joseph Giordano, were both directors and
executive officers of the Company.
BOARD COMPENSATION COMMITTEE REPORT
All matters concerning executive compensation for the chief executive
officer and other executive officers are considered by the Company's entire
Board of Directors (the "Board"). In determining the total compensation package
for the chief executive officer and all other executive officers for 1994, the
Board considered several factors, including the performance of the Company, the
relative compensation for chief executive officers and executive officers in
other companies of similar size and operations and the individual contribution
of each executive officer. Executive compensation was broken down into three
major components (i) cash compensation, (ii) incentive bonuses (based upon a
percentage of pre-tax income in excess of a specified amount), and (iii) stock
options.
For 1994, the Board adopted the same incentive plan used for its executive
officers in 1993. The awards under the plan (the "Executive Plan") are based
heavily upon the performance of the Company. In accordance with the terms of the
Executive Plan, the executive officers designated by the Board may receive
incentive awards based upon a prescribed formula. The amount of the award ranges
from 0.25% to 1.25% of an amount equal to consolidated pre-tax income of the
Company minus $2,000,000 ("Adjusted Pre-Tax
7
146
Income"). Two individuals named in the Summary Compensation Table were awarded
discretionary bonuses in recognition of their efforts on behalf of the Company
during 1994.
Cash compensation for 1994 is shown on the Summary Compensation Table.
Salvatore Giordano
Sal Giordano, Jr.
Joseph Giordano
S. A. Muscarnera
William J. Brennan
Constantine A. Keen
EMPLOYMENT CONTRACT
Mr. Salvatore Giordano has an Employment Agreement with the Company, which
became effective on October 26, 1993. The material provisions of the Agreement
include: (1) an annual base salary of at least $250,000, payable in equal
semi-monthly installments; (2) annual participation in all compensatory plans
and arrangements of the Company no less favorable than the fiscal year 1993
plans including, but not limited to, a bonus not less than the amount of the
fiscal year 1993 bonus, and continuing eligibility to be awarded stock options;
(3) reimbursement for all expenses incurred while on Company related business;
and (4) annual consideration for base salary and plan participation increases,
if deemed justified by the Company. The Agreement has a stated expiration date
of October 26, 2003, but the term of the Agreement automatically extends and has
a remaining term of ten years from any point in time, until the term is finally
fixed at a period of ten years from an intervening event, as provided for in the
Agreement, such as permanent disability or death. During 1994, the Company
amortized the estimated present value of future non-salary benefits payable
under the Agreement based upon certain assumptions, in the amount of $261,000.
8
147
PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
shareholder return on the Company's common stock with returns on the NASDAQ
Market Value Index and stocks included in the Air Conditioning and Heating
Industry (SIC code 3585). The data used in the graph were generated by Media
General Financial Services. Each line represents data points calculated using
dividends reinvested on ex-dividend dates and only includes companies trading
for six years or more.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
FOR THE YEARS ENDED DECEMBER 31, 1989 THROUGH 1994
AIR CONDI-
TIONING &
HEATING PER NASDAQ MARKET
MEASUREMENT PERIOD MEDIA GEN- INDEX PER
(FISCAL YEAR COVERED) NYCOR, INC. ERAL MEDIA GENERAL
1989 100 100 100
1990 94.25 78.84 81.12
1991 65.46 57.50 104.14
1992 38.91 51.52 105.16
1993 75.53 60.77 126.14
1994 50.35 61.13 132.44
INDEPENDENT AUDITORS
Pursuant to the recommendation of its Audit Committee, the Board of
Directors selected the firm of Ernst & Young LLP, independent auditors, to audit
the consolidated financial statements of the Company for the year ended December
31, 1994. The Company's stockholders ratified that selection at their Annual
Meeting on April 26, 1994.
On recommendation of the Audit Committee, the Board of Directors appointed
the firm of Ernst & Young LLP, independent auditors, to audit the consolidated
financial statements of the Company and its subsidiaries for the fiscal year
ending December 31, 1995, subject to ratification by the Company's stockholders
at the Annual Meeting. Ernst & Young LLP does not have any direct financial
interest or any material indirect financial interest in the Company.
Representatives of Ernst & Young LLP are expected to be at the Annual
Meeting and will be available to respond to any appropriate questions by
stockholders and may make a statement, if they so choose.
9
148
STOCKHOLDER PROPOSALS -- 1996 ANNUAL MEETING
If any stockholder desires to submit a proposal for action at next year's
Annual Meeting, it must be received by the Company, 287 Childs Road, Basking
Ridge, New Jersey 07920 on or before November 28, 1995.
COST OF SOLICITATION
The cost of preparing and mailing material in connection with the
solicitation of proxies is to be borne by the Company. To the extent necessary
in order to assure sufficient representation at the meeting, such solicitation
will be made by the Company's regular employees in the total approximate number
of four. Solicitations will be made by mail and may also be made by telegram,
telephone and in person.
By order of the Board of Directors
KENT E. HANSEN
Secretary
Dated: March 27, 1995
Basking Ridge, New Jersey
10
149
DIRECTIONS TO
SOMERSET HILLS HOTEL
200 LIBERTY CORNER ROAD
WARREN, NJ 07060
(908) 647-6700
The Somerset Hills Hotel is located directly off Interstate 78 at Exit 33.
Newark International Airport is less than 35 minutes away, and New York City is
within an hour's reach. The Bernardsville and Lyons railroad stations are
approximately seven minutes from the front door.
[PASTE-UP MAP]
150
- --------------------------------------------------------------------------------
NYCOR, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- APRIL 28, 1995
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P The undersigned stockholder of NYCOR, INC. hereby constitutes
R and appoints SALVATORE GIORDANO, SALVATORE GIORDANO, JR. and S. A.
O MUSCARNERA, and each of them, the attorneys and proxies of the
X undersigned, with full power of substitution, to vote for and in the
Y name, place and stead of the undersigned, at the Annual Meeting of
Stockholders of said Corporation, to be held at Somerset Hills Hotel,
200 Liberty Corner Road, Warren, New Jersey, on April 28, 1995 at 10:30
a.m. and at any adjournments thereof, the number of votes the
undersigned would be entitled to cast if present for the election of
directors and the other items as set forth on the reserve side of this
proxy and in their discretion, upon such other matters as may properly
come before the meeting or any adjournment thereof. The Board of
Directors recommends the following for Director -- Salvatore Giordano,
Jr. and William J.Brennan.
A majority of said attorneys and proxies, or their substitutes
at said meeting, or any adjournments thereof (or if only one, that
one) may exercise all of the power hereby given. Any proxy to vote
any of the shares with respect to which the undersigned is or would
be entitled to vote, heretofore given to any persons other than the
persons named above, is hereby revoked.
IN WITNESS WHEREOF, the undersigned has signed this proxy and
hereby acknowledges receipt of a copy of the notice of said meeting
and proxy statement in reference thereto both dated March 27, 1995.
IMPORTANT: THIS PROXY IS CONTINUED AND IS TO BE SIGNED ON OTHER SIDE.
- --------------------------------------------------------------------------------
151
- --------------------------------------------------------------------------------
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE.
UNLESS YOU SPECIFY, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
AS DIRECTORS AND ITEM 2.
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ITEMS 1 AND 2.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors. Nominees: Salvatore 2. Ratification of the appointment of
Giordano, Jr. and William J. Brennan as Ernst & Young LLP as the independent / / / / / /
Directors for a term of three years. auditors.
FOR WITHHELD
/ / / /
MARK HERE / /
- --------------------------------------- FOR ADDRESS
For all nominees except as CHANGE AND
noted above NOTE AT LEFT
NOTE: This Proxy, properly filed in, dated
and signed, should be returned immediately
in the enclosed postpaid envelope to
NYCOR, INC., c/o The First National Bank
of Boston, P.O. Box 1626, Boston,
Massachusetts 02105. If the signer is a
corporation, sign in full the corporate
name by a duly authorized officer.
Attorneys, executors, administrators,
trustees or guardians should sign full
title as such.
Signature: Date
----------------- ----------
Signature: Date
----------------- ----------
- --------------------------------------------------------------------------------
152
ANNEX E
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities and Exchange Act of 1934
DATE OF REPORT (Date of earliest event reported): May 30, 1995
NYCOR, INC.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- -----------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-9386 22-2748564
------ ----------
(Commission File Number) (IRS Employer Identification Number)
287 Childs Road
Basking Ridge, New Jersey 07920
------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 953-8200
153
Item 4. Change in Registrant's Certifying Accountant
(a) (i) On May 30, 1995, the Company was advised
by Ernst and Young LLP ("E&Y") that it was
resigning as the Company's independent
accountants.
(ii) The reports of E&Y on the Company's financial
statements for the years ended December 31,
1994 and 1993 did not contain an adverse
opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit
scope or accounting principle.
(iii) Not Applicable
(iv) (v) During the last two fiscal years and the period
from January 1, 1995 through May 30, 1995, the
Company has not had any disagreement with E&Y
on any matter of accounting principles or
practices, financial statement disclosure or
auditing scope or procedure that would require
disclosure in this Current Report on Form 8-K/A
There have been no reportable events (as
defined in Regulation S-K Item 304(a) (1) (v)).
(vi) The Registrant has requested that E&Y furnish a
letter addressed to the Securities and Exchange
Commission as required by Item 304(a) of
Regulation S-K. A copy of such letter is
attached as Exhibit 16.
154
Item 7. Exhibits
(c) Exhibit 16. Letter to the Securities and Exchange
Commission from Ernst & Young LLP dated June 12, 1995.
155
SIGNATURE
Pursuant to the requirements 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.
NYCOR, INC.
BY: /s/ Kent E. Hansen
Vice President-Finance
and General Counsel
Date: June 9, 1995 Signing both in his capacity as
Vice President of the Registrant
and as Chief Financial Officer of
the Registrant
156
EXHIBIT 16
June 12, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have read Item 4 of Form 8-K Amended dated June 9, 1995, of
NYCOR, Inc. and are in agreement with the statements contained in
paragraphs (i), (ii), (iv), (v) and (vi) on page 2 therein. We
have no basis to agree or disagree with the other statement of
the registrant contained therein.
Ernst & Young LLP
157
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
---------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 15, 1995
NYCOR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------------
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-15299 22-2748564
(COMMISSION FILE NUMBER)
(IRS EMPLOYER IDENTIFICATION NUMBER)
---------------------
287 CHILDS ROAD
BASKING RIDGE, NEW JERSEY 07920
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (908) 953-8200
158
ITEM 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
(b) On August 15, 1995, the Board of Directors of the Company engaged BDO
Seidman, LLP, independent accountants, as the principal accountant to audit the
Company's financial statements.
159
SIGNATURE
Pursuant to the requirements 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.
NYCOR, INC.
By: /s/ KENT E. HANSEN
Vice President-Finance and
General Counsel
Date: August 16, 1995 Signing both in his capacity as Vice
President of the Registrant and as
Chief Financial Officer of the
Registrant.
160
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities and Exchange Act of 1934
DATE OF REPORT (Date of earliest event reported): October 31,
1995
NYCOR, INC.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- -----------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-15299 22-2748564
------- ----------
(Commission File Number) (IRS Employer Identification Number)
287 Childs Road
Basking Ridge, New Jersey 07920
------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 953-8200
161
Item 5. Other Events
On October 31, 1995, the Registrant and Fedders
Corporation jointly announced that they have
reached agreement in principle to merge. The
agreement is subject to the approval of the
stockholders and lenders of both companies in
addition to any required government approvals.
Item 7. Financial Statements and Exhibits
(c) Exhibits
News Release dated October 31, 1995
162
SIGNATURE
Pursuant to the requirements 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.
NYCOR, INC.
BY: /s/ Kent E. Hansen
Vice President-Finance
and General Counsel
Date: November 10, 1995 Signing both in his capacity as
Vice President of the Registrant
and as Chief Financial Officer of
the Registrant
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
NYCOR AGREES TO MERGER WITH FEDDERS CORPORATION
- -----------------------------------------------
Basking Ridge, NJ -- October 31, 1995 -- Fedders Corporation
(NYSE: FJA) and NYCOR, Inc. (NASDAQ: NYCOA) today jointly
announced that they have reached agreement in principle to merge.
Under the terms of the agreement, stockholders of NYCOR will
receive shares of Fedders Corporation Class A Stock with a value
of $6.25 for each share of NYCOR Common Stock, Class A Stock and
Class B Stock which they own. No other terms of the agreement
were disclosed. The agreement is subject to the approval of the
stockholders and lenders of both companies in addition to any
required government approvals.
163
ANNEX F
March 20, 1996
Board of Directors
Fedders Corporation
Westgate Corporate Center
505 Martinsville Road
Liberty Corner, NJ 07938
Gentlemen:
You have requested our opinion as to the fairness, from a financial
point of view, to Fedders Corporation ("Fedders") of the proposed consideration
to be paid pursuant to the terms and conditions of the Agreement and Plan of
Merger (the "Merger Agreement") dated November 30, 1995, whereby NYCOR, Inc.
("NYCOR") would be merged with and into Fedders (the "Merger"), with Fedders as
the surviving corporation. The Merger Agreement provides, among other things,
that each share of NYCOR Common Stock, Class A Stock and Class B Stock shall be
converted into either (i) if the average daily closing price (the "Average
Price") of Fedders Class A Stock for the fifteen consecutive trading days ending
on the fifth day prior to the date of the NYCOR Special Meeting (the "Pricing
Date") is at or above $6.25, that number of shares of Fedders Class A Stock
equal to $6.25 divided by the Average Price; or (ii) if the Average Price is
less than $6.25, one share of Fedders Convertible Preferred Stock (the
"Preferred Stock") which shall be convertible into Fedders Class A Stock at a
conversion price of $6.25 per share. We understand that the terms of the
Preferred Stock will be determined at the Pricing Date; however, we also
understand that it is currently contemplated that the Preferred Stock will have
a liquidation preference of $6.25 per share and an annual dividend rate of 2.5%
(the "Proposed Terms"), and our opinion is based upon the Proposed Terms.
We also understand that (i) NYCOR shares were distributed as a dividend
to Fedders shareholders in 1986, and certain persons serve as directors and
executive officers of, and are significant shareholders of, both Fedders and
NYCOR; (ii) the business of Rotorex Company, Inc. ("Rotorex"), a subsidiary of
NYCOR, was acquired by Fedders from NYCOR in 1989, and was sold by Fedders to
NYCOR in 1992; and (iii) Fedders is the principal customer of Rotorex.
You have furnished us with the Proxy Statement-Prospectus of Fedders
and NYCOR for the Annual Meeting of Fedders Stockholders in substantially the
form to be sent to shareholders. The Merger Agreement appears as Annex A to the
Proxy Statement-Prospectus.
For the purpose of this opinion, we have undertaken certain reviews,
analyses and inquiries as we have deemed relevant and have, among other things:
(i) reviewed the Proxy Statement-Prospectus;
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Board of Directors
February 12, 1996
Page 2
(ii) reviewed publicly available information relating to both
Fedders and NYCOR, including Fedders' annual reports on Form
10-K and annual reports to shareholders for the five fiscal
years ended August 31, 1995 and report on Form 10-Q for the
quarter ended November 30, 1995, and
NYCOR's annual reports on Form 10-K and annual reports to
shareholders for the five fiscal years ended December 31, 1994
and reports on Form 10-Q for the three quarters ended
September 30, 1995;
(iii) discussed with senior management of both Fedders and NYCOR the
companies' historical and current operations, financial
condition and future prospects and reviewed certain internal
financial information, business plans and forecasts prepared
by their respective managements;
(iv) visited the headquarters of both Fedders and NYCOR, as well as
the principal manufacturing facility of Rotorex;
(v) reviewed the historical prices and trading volumes of the
Common Stock and Class A Stock of both Fedders and NYCOR;
(vi) reviewed certain financial and market data for both Fedders
and NYCOR and compared such information with similar
information for certain publicly traded companies which we
deemed comparable;
(vii) reviewed the financial terms of certain mergers and
acquisitions of businesses which we deemed comparable;
(viii) analyzed the pro forma contributions of Fedders and NYCOR to
the combined business; and
(ix) performed such other analyses and investigations and
considered such other factors as we deemed appropriate.
In rendering our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information provided to us
regarding both Fedders and NYCOR, and we have not assumed any responsibility for
the independent verification of such information. We have further relied upon
the assurance of management of both Fedders and NYCOR that they are unaware of
any facts that would make such information incomplete or misleading. In arriving
at our opinion, we have not performed any independent evaluation or appraisal of
the assets of Fedders and NYCOR. Our opinion is necessarily based on the
economic, market and other conditions existing on the date of our opinion.
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Board of Directors
February 12, 1996
Page 3
Based upon the foregoing, it is our opinion as of the date hereof that
the proposed consideration to be paid by Fedders pursuant to the Merger
Agreement is fair to Fedders from a financial point of view.
Very truly yours,
TM CAPITAL CORP.
166
ANNEX G
March 19, 1996
Board of Directors
NYCOR, Inc.
287 Childs Road
Basking Ridge, NJ 07920
Dear Members of the Board:
We understand that NYCOR, Inc. ("NYCOR") and Fedders Corporation ("Fedders")
have entered into the Agreement and Plan of Merger dated as of November 30, 1995
(the "Agreement"), pursuant to which NYCOR will be acquired by Fedders (the
"Merger"). If the average closing price per share of Fedders Class A Stock for
the 15 trading days ending five business days before the date of the meeting at
which NYCOR stockholders will vote upon the Merger (the "Fedders Average Price")
is at or above $6.25, each share of Common Stock, Class A Stock and Class B
Stock of NYCOR will be converted into the right to receive a number of shares of
Fedders Class A Stock determined by dividing $6.25 by the Fedders Average Price.
If the Fedders Average Price is below $6.25, each share of Common Stock, Class A
Stock and Class B Stock of NYCOR will be converted into the right to receive one
share of Fedders Convertible Preferred Stock ("Fedders Preferred") with terms
expected to support an initial market value of $6.25. If issued, each share of
Fedders Preferred (i) will be convertible into one share of Fedders Class A
Stock; and (ii) may be called for redemption by Fedders at any time at the
redemption price of $6.25, plus unpaid dividends to the dividend payment date
next preceding the date of redemption, in cash or in equivalent value of Fedders
Class A Stock. Although the precise dividend rate of the Fedders Preferred will
not be set until the fifth business day before the meeting of the stockholders
of NYCOR to be held to consider the Merger, and only if the Fedders Average
Price is below $6.25, we understand that, as of the date hereof, it is
contemplated that the Fedders Preferred will have (i) an annual dividend rate of
2.5% and (ii) a liquidation preference of $6.25 per share (the "Proposed Terms")
and our opinion is based on the Proposed Terms.
You have requested our opinion as to the fairness, from a financial point of
view, to NYCOR, of the consideration to be paid in the Merger. In connection
with this opinion, we have:
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Page 2
March 19, 1996
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information
relating to NYCOR, including its Annual Reports and Forms 10-K for
the three years ended December 31, 1994 and its Form 10-Q for the
quarter ended September 30, 1995;
(iii) Analyzed certain historical business and financial information
relating to Fedders, including financial statements for the three
years ended August 31, 1995 and the quarter ended November 30, 1995;
(iv) Reviewed various financial forecasts and other data provided to us by
NYCOR and Fedders relating to their respective businesses;
(v) Held discussions with members of the senior management of NYCOR and
Fedders with respect to the businesses and prospects of NYCOR and
Fedders, respectively, the strategic objectives of each and possible
benefits which might be realized following the Merger;
(vi) Analyzed the pro forma impact of the merger on NYCOR's financial
results and financial condition;
(vii) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to
NYCOR's businesses;
(viii) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be generally
comparable to those of NYCOR;
(ix) Reviewed the historical stock prices and trading volumes of NYCOR's
Common Stock and Class A Stock; and
(x) Conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and other
information provided to us by NYCOR and Fedders and have not assumed any
responsibility for any independent verification of such information or any
independent valuation or appraisal of any of the assets or liabilities of NYCOR
or Fedders. With respect to financial forecasts, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgements of management of NYCOR and Fedders as to the future
financial
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March 19, 1996
performance of NYCOR and Fedders, respectively. We assume no responsibility for
and express no view as to such forecasts or the assumptions on which they are
based. Further, our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof.
In rendering our opinion, we have noted in the Agreement that it is expected
that the Merger will be accounted for as a purchase. In addition, we have
assumed that the Merger will be consummated on the terms described in the
Agreement without any waiver of any material terms or conditions by NYCOR and
that obtaining the necessary regulatory approvals for the Merger will not have
an adverse effect on NYCOR.
Laidlaw Equities, Inc. is acting as financial advisor to NYCOR in connection
with the Merger, and we will receive a fee for our services. It is understood
that this letter may not be disclosed or otherwise referred to without our prior
consent, except as may otherwise be required by law or by a court of competent
jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
consideration to be paid in the Merger is fair to NYCOR from a financial point
of view.
Very truly yours,
LAIDLAW EQUITIES, INC.
By: /s/ CORNELIUS P. MCCARTHY
-------------------------------------------
Cornelius P. McCarthy
Managing Director
169
ANNEX H
262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec.228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to sec.sec.251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation or depository receipts in respect thereof:
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders:
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
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(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or 253
of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights or the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address at it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholders within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by
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171
publication shall be approved by the Court, and the costs thereof shall be borne
by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (c) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
3
172
ANNEX I
FEDDERS CORPORATION
STOCK OPTION PLAN VIII
SECTION 1. Purposes of the Plan
The purposes of the Fedders Corporation Stock Option Plan VIII are to
advance the interests of the Company by providing incentives to selected key
employees and non-employee directors, consultants, and employees of companies
with which the Company has entered or enters into a joint venture or similar
business relationship, who contribute and are expected to contribute materially
to the success of the Company, to provide a means of rewarding outstanding
performance and to enable the Company to maintain a competitive position in
attracting and retaining the key personnel necessary for growth and
profitability. Options to purchase a limited number of Shares may also be
granted to all other employees of the Company, at the discretion of the
Company's Board of Directors.
SECTION 2. Definitions
2.1 "Board of Directors" means the Board of Directors of Fedders
Corporation.
2.2 "Company" means Fedders Corporation, its subsidiaries.
2.3 "Fair Market Value" means the closing price regular way on the
principal national securities exchange on which the Stock is traded on
the relevant date, or if the Stock is not listed or admitted to
trading on any national securities exchange, the last trade price as
reported on the NASDAQ System on the relevant date, or, if not so
reported, the average of the closing bid and asked prices as reported
on the NASDAQ System on the relevant date. If no sales of the Stock
are reported for the relevant date, then Fair Market Value shall be
determined as of the most recent preceding date for which sales of the
Stock are reported.
2.4 "Option" or "Options" means a right granted to purchase Stock pursuant
to the Plan.
2.5 "Plan" means the Fedders Corporation Stock Option Plan VIII.
2.6 "Shares" means shares of the Company's Common Stock, $1 par value per
share, or Class A Stock $1 par value per share.
2.7 "Stock" means the Company's Common Stock, $1 par value per share, or
Class A Stock, $1 par value per share.
2.8 "Stock Appreciation Right" means the right defined in Section 6.1 of
the Plan.
SECTION 3. Number of Shares Authorized
The total number of Shares which may be issued and sold under the Plan
pursuant to Options or Stock Appreciation Rights shall not exceed 5,000,000
Shares. However, the Board of Directors may adjust this number in its discretion
to prevent dilution of enlargement of the Shares subject to the Plan by reason
of any Stock dividend, Stock split, combination of Shares, recapitalization or
other change in the capital structure of the Company. Furthermore, Shares
subject to Options which are granted but subsequently expire or are forfeited
prior to being exercised shall thereafter be available for the granting of
further Options under the Plan.
SECTION 4. Eligibility
Options may be granted only to salaried employees who are officers
(including officers who are members of the Board of Directors) as well as to
other key employees and non-employee directors, consultants of the Company, and
employees of companies with which the Company has entered or enters into a joint
venture or similar business relationship. Options to purchase a limited number
of Shares may also be granted to all other
173
employees of the Company, at the discretion of the Board of Directors. The Board
of Directors may, from time to time and upon such terms and conditions and for
such consideration as it may determine, authorize the granting to these
individuals of Options and may fix the number of Shares to be covered by each
such Option. Successive Options may be granted to the same persons whether or
not the Option or Options first granted to such persons remain unexercised.
Options granted may be (i) options which are intended to qualify under Section
422A of the Internal Revenue Code as Incentive Stock Options, (ii) options which
are not intended to so qualify, or (iii) combinations of the foregoing;
provided, however, that non-employee directors, consultants of the Company, and
employees of companies with which the Company has entered or enters into a joint
venture or similar business relationship, may only be granted non-qualified
Options. Each Option granted shall be identified as to its status, Incentive
Stock Option or non-qualified Stock Option, and such status shall not thereafter
be subject to change. Except as provided in Section 6 hereof, two Options shall
be granted together in such manner that the exercise of one affects the right to
exercise the other.
SECTION 5. Terms and Conditions
The Grant of an Option shall be evidenced by a written agreement to the
optionee of such grant signed on behalf of the Board of Directors, which
agreement shall describe such Option and state that such Option is subject to
all the terms and conditions of the Plan. In addition:
5.1 The Option price will not be less than the Fair Market Value of the
Stock on the date of the grant, adjusted for subsequent Stock splits,
dividends, distributions or combination of Shares. An amendment to an
outstanding Incentive Stock Option that constitutes a modification,
extension, or renewal of the Option pursuant to Section 425(h) of the
Internal Revenue Code, shall be considered as the grant of a new
Option on the date of such amendment and the Option price shall be
adjusted so that it shall not be less than the Fair Market Value of
the Stock on the date of such amendment. In the case of Incentive
Stock Options, if the optionee owns more than 10% of the total
combined voting power of the Company, the Option price shall not be
less than 110% of the Fair Market Value on the date of the grant.
5.2 With respect to Incentive Stock Options, the aggregate Fair Market
Value (determined as of the time Incentive Stock Options are granted)
of the Stock which may, for the first time, be acquired upon exercise
of Incentive Stock Options in any one calendar year, when added to
stock which is covered by Incentive Stock Options granted after
January 1, 1987 but prior to the option to be granted, cannot exceed
$100,000.
5.3 The number of Shares in a given Option will be adjusted for Stock
splits, dividends, distributions or combinations so that the total
value of the Option remains the same after such split or combination.
5.4 No Options may be granted after October 24, 2005.
5.5 No Option by its terms will be exercisable more than 10 years after
the date of grant, except that if the optionee owns more than 10% of
the total combined voting power of the Company, such period shall not
exceed 5 years from the date of grant with respect to Incentive Stock
Options.
5.6 The Option will, by its terms, not be transferable except by will or
the laws of descent and distribution and is exercisable only by the
optionee during his or her lifetime.
5.7 Any unexercised Options will expire one month after the date of
termination of employment of the optionee and, in the case of
non-employee directors, consultants, or employees of companies with
which the Company has entered or enters into a joint venture or
similar business relationship, one month after the date an optionee
ceases to be a director, consultant, or employee of such company,
except if such termination was for cause, in which case the Options
shall expire immediately. The exercise of any Option after termination
of employment or services as set forth above, shall be subject to the
condition precedent that the optionee neither takes other employment
or renders services to others without the prior written consent of the
Company, nor conducts himself in a manner adversely affecting the
Company. The Board of Directors may add such additional conditions
precedent to an optionee's Option agreement as it may deem necessary
or appropriate
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174
from time to time to protect the best interests of the Company. In the
case of death or permanent and total disability, the estate of the
deceased optionee or the disabled optionee has 12 months from date of
death or permanent and total disability to exercise any Option
unexercised on the date of termination because of death or disability.
In no event shall Options be exercisable after the expiration date
established in the grant.
For the purposes of this Section 5.7, an optionee shall be considered
permanently and totally disabled if he or she is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than twelve months. An optionee shall not be considered to
be permanently and totally disabled unless he or she furnishes proof of
the existence thereof in such form and manner, and at such time, as a
committee appointed by the Board of Directors may require.
5.8 An optionee or transferee of an Option by operation of law shall have
no rights with respect to any Shares covered by an Option until the
date of the issuance of a certificate for such Shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such Stock certificate
is issued, except as otherwise provided herein.
5.9 The Option shall be exercisable in whole or in part from time to time
during the term thereof as may be determined by the Board of Directors
and stated in the Option; provided, however that, unless otherwise
provided by the Board of Directors, no Option may be exercised prior
to the first anniversary of the date of granting of such Option.
5.10 The optionee may exercise Options by notifying the treasurer of the
Company that he or she is exercising the Option and by presenting
payment for the exercised Shares. Payment for the Shares may be in
the form of cash, previously owned, unencumbered Shares or any
combination of the foregoing. Upon notification of the amount due and
prior to, or concurrently with, delivery to the optionee of a
certificate representing any Shares purchased pursuant to the
exercise of an Option, the optionee shall promptly pay to the Company
any amount necessary to satisfy applicable federal, state, or local
tax requirements.
5.11 At the time of exercise of any Option, the Company may require the
optionee to execute any documents or take any action which may be
then necessary to comply with the Securities Act of 1933 and the
Rules and Regulations adopted thereunder, or any other applicable
federal or state laws regulating the sale and issuance of securities,
and the Company may, if it deems necessary, include provisions in the
Option agreements to assure such compliance with federal and state
securities laws, including the request for and enforcement of letters
of investment intent, such requirements to be determined by the
Company in its judgment as necessary to assure compliance with such
laws. Such changes may be made with respect to any particular Option
or Stock issued upon exercise thereof.
5.12 The Company shall not be obligated to sell or issue any Shares
pursuant to any Option unless:
5.12.1 the Shares with respect to which the Option is being exercised
have been registered under the Securities Act of 1933, as
amended, or are exempt from such registration;
5.12.2 the prior approval of such sale or issuance has been obtained
from any State regulatory body having jurisdiction; and
5.12.3 in the event the Stock has been listed on any stock exchange, the
Shares with respect to which the Option is being exercised have
been duly listed on such exchange in accordance with the
procedure specified by such exchange.
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175
SECTION 6. Stock Appreciation Rights
The Board of Directors may from time to time grant Stock Appreciation
Rights to recipients of Options under the Plan and may define the terms and
provisions of such Stock Appreciation Rights, all subject to the limitations and
provisions of the Plan. Each Stock Appreciation Right will relate to a specific
Option granted under the Plan and may be granted simultaneously with or
subsequent to the grant of the Option.
6.1 A Stock Appreciation Right shall be a right of the optionee to receive
from the Company, as an alternative to exercising the related Option
and upon surrender of the related Option, an amount (payable either in
Stock or in cash or in any combination thereof, as determined by the
Board of Directors) equal to the difference between the Fair Market
Value of the Stock subject to the underlying Option on the date of
exercise of the Stock Appreciation right and the Option price of the
underlying Option.
6.2 The grant of a Stock Appreciation Right shall be evidenced by a notice
to the optionee of such grant signed on behalf of the Board of
Directors, which notice shall describe such Stock Appreciation Right,
identify the related Option and state that such Stock Appreciation
Right is subject to all the terms and conditions of the Plan.
6.3 A Stock Appreciation Right shall be exercisable in whole or in part,
at any time and to the extent that the related Option may be
exercised, but only when the Fair Market Value of the Stock subject to
the Option exceeds the Option price. Payment to the optionee may, in
the discretion of the board of Directors, be made in the form of cash
or Stock and will be subject to federal and state income tax
withholding requirements. Exercises payable in cash shall be in
compliance with applicable laws, including Rule 16b-3 under the
Securities Exchange Act of 1934, as amended from time to time.
6.4 A Stock Appreciation Right may be exercised in whole or in part, only
by surrender to the Company, unexercised, of the related Option, in
whole or in part, and Shares covered by Options so surrendered shall
not be available for the granting of further options under any stock
option plan of the Company, anything in such stock option plan to the
contrary notwithstanding.
6.5 Stock Appreciation rights shall not be transferable other than by will
or the laws of descent and distribution and shall be exercisable
during the optionee's lifetime only by him or her.
6.6 A Stock Appreciation Right shall expire and can no longer be exercised
upon the earlier of (a) exercise or expiration of the related Option,
or (b) any termination date specified by the Board of Directors at the
time of grant of such Stock Appreciation Right.
SECTION 7. Administration
7.1 The Plan will be administered by the Board of Directors. The Board of
Directors shall hold meetings relative to the Plan at such times and
places as it may determine. The acts of a majority of the board of
Directors at a meeting at which a quorum is present, or such acts as
are reduced to or approved in writing by the majority of the members
of the board of Directors shall be the valid acts of the Board of
Directors. The Board of Directors shall from time to time at its
discretion determine which key employees shall be granted Options and
the amount of Stock covered by such Options.
7.2 Except as otherwise provided herein, the Board of Directors shall have
full and final authority, binding upon all who have an interest in the
Plan, to interpret the Plan and the Options or Stock Appreciation
Rights granted under the Plan and to make all determinations necessary
or advisable in administering the Plan. No member of the Board of
Directors shall have any liability to any person for anything done or
omitted to be done by the member or by any other member of the Board
of Directors in connection with the Plan, except for his own willful
misconduct or gross negligence.
SECTION 8. Replacement Options
If an individual is employed by a corporation other than the Company and
has an option entitling him to purchase shares of stock of the corporation
pursuant to specified terms and conditions (the "former option"),
4
176
and it as a result of a corporate merger, consolidation, purchase or acquisition
of stock or property, separation (including spin-off or other distribution of
stock or property), reorganization or liquidation, the individual becomes an key
employee or non-employee director of the Company, then the Board of Directors
may authorize the granting to the individual of an Option in substitution,
either in whole or in part, for the former option, provided that the former
option is, to the extent that it is replaced by the Option, canceled or
otherwise rendered unexercisable. The Option price of the replacement Option and
the number of Shares of Stock covered by the replacement Option shall be
determined so that: (i) the excess of the aggregate Fair Market Value of Stock
for which the replacement Option is granted over the aggregate Option price of
the replacement Option shall not be more than the excess of the aggregate Fair
Market Value of the stock covered by the former option (to the extent that it is
being replaced) over the aggregate exercise price of the former option (to the
extent that it is being replaced), with Fair Market Value being determined on
the date of grant of the replacement Option; and (ii) with respect to a
replacement Option that is an Incentive Stock Option, the ratio of the Option
price of the replacement Option for each Share of Stock to the Fair Market Value
of each Share of Stock shall not be less than the ratio of the exercise price of
the former option for each share of stock to the Fair Market Value of each share
of stock, with Fair Market Value being determined on the date of grant of the
replacement Option. Aside from price and the number of Shares covered, the
replacement Option shall contain terms and conditions identical to those
contained in the former option (irrespective of whether those terms and
conditions are inconsistent with the provisions of this Plan) or such different
terms and conditions as the Board of Directors shall, in its sole discretion,
determine, provided that if the replacement Option is an Incentive Stock Option,
it shall not contain any terms or conditions that would cause it to fail to meet
the requirements of Section 425 (a) of the Internal Revenue Code.
SECTION 9. Amendment, Suspension or Termination of Plan
The stockholders of the Company or the board of Directors may at any time,
without the consent of the optionee, alter, amend, revise, suspend, or
discontinue the Plan, provided that such action may not adversely affect Options
theretofore granted under the Plan, and provided that no such action of the
Board of Directors may, without the approval of the stockholders, alter the
provisions of the Plan so as to alter the total number of Shares which may be
issued under Options or change the class of employees eligible to receive
Options.
SECTION 10. Effective Date
The Plan is effective on the date it is adopted by the Board of Directors
subject to the approval by the stockholders at the next Annual Meeting within
the 12 months following the adoption by the Board of Directors. Options and
Stock Appreciation Rights may be granted under the Plan prior to such approval
by the stockholders, but no grants may be exercised until the stockholders have
approved the Plan.
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DIRECTIONS TO
SOMERSET HILLS HOTEL
200 LIBERTY CORNER ROAD
WARREN, NJ 07060
(908) 647-6700
The Somerset Hills Hotel is located directly north of Interstate 78 at Exit
33. Newark International Airport is less than 35 minutes away, and New York City
is within an hour's commute. The Bernardsville and Lyons railroad stations are
conveniently located approximately seven minutes from the Hotel.
[INSERT MAP]
178
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------
2 Agreement and Plan of Merger between Fedders Corporation and NYCOR, Inc. dated
November 30, 1995 as amended by Amendment No. 1 dated March 15, 1996 (included
as Annex A to the Proxy Statement-Prospectus).
99.1 Opinion of TM Capital Corp. (included as Annex F to the Proxy
Statement-Prospectus).
99.2 Opinion of Laidlaw Equities, Inc. (included as Annex G to the Proxy
Statement-Prospectus).
99.3 Letter of the Chairman of the Board and Vice Chairman, President and Chief
Executive Officer to the Stockholders of Fedders Corporation.
99.4 Notice of Annual Meeting of Stockholders of Fedders Corporation.
99.5 Letter of the Chairman of the Board and Vice Chairman and Chief Executive
Officer to the Stockholders of NYCOR, Inc.
99.6 Notice of Special Meeting of Stockholders of NYCOR, Inc.
99.7 Forms of Proxy for Annual Meeting of Stockholders of Fedders Corporation.
99.8 Form of Proxy for Special Meeting of Stockholders of NYCOR, Inc.
II-1
179
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Liberty
Corner, State of New Jersey, on March 22, 1996.
FEDDERS CORPORATION
By: /s/ ROBERT L. LAURENT, JR.
------------------------------------
Name: Robert L. Laurent, Jr.
Title: Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated, on March 22, 1996.
SIGNATURE TITLE
- ---------------------------------------- ---------------------
SALVATORE GIORDANO Chairman of the Board
SALVATORE GIORDANO, JR. Vice Chairman,
President and Chief
Executive Officer and
a Director (Principal
Executive Officer)
JOSEPH GIORDANO Director
HOWARD S. MODLIN Director
CLARENCE RUSSEL MOLL Director
WILLIAM J. BRENNAN Director
S. A. MUSCARNERA Director
ANTHONY E. PULEO Director
ROBERT L. LAURENT, JR. Executive Vice
President -- Finance
and Administration
(Principal Financial
and Accounting
Officer)
By /s/ Robert N. Edwards
------------------------
Robert N. Edwards
(Attorney-in-fact)
180
INDEX
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------
2 Agreement and Plan of Merger between Fedders Corporation and NYCOR, Inc.
dated November 30, 1995 as amended by amendment No. 1 dated March 15, 1996
(included as Annex A to the Proxy Statement-Prospectus)...................
99.1 Opinion of TM Capital Corp. (included as Annex F to the Proxy Statement-Prospectus)
99.2 Opinion of Laidlaw & Co. (included as Annex G to the Proxy Statement-Prospectus)..
99.3 Letter of the Chairman of the Board and Vice Chairman, President and Chief
Executive Officer to the Stockholders of Fedders Corporation..............
99.4 Notice of Annual Meeting of Stockholders of Fedders Corporation...........
99.5 Letter of the Chairman of the Board and Vice Chairman and Chief Executive
Officer to the Stockholders of NYCOR, Inc.................................
99.6 Notice of Special Meeting of Stockholders of NYCOR, Inc...................
99.7 Forms of Proxy for Annual Meeting of Stockholders of Fedders
Corporation...............................................................
99.8 Form of Proxy for Special Meeting of Stockholders of NYCOR, Inc. .........