REGISTRATION NO. 333-58876
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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 OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938-0813
TELEPHONE: (908) 604-8686
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT N. EDWARDS, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
FEDDERS CORPORATION
505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938-0813
TELEPHONE: (908) 604-8686
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable following the date that this registration statement has
become effective and all other conditions to the merger of FC Merger Sub,
Inc. with and into Fedders Corporation pursuant to the merger agreement
described in the enclosed document have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
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 SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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PROXY STATEMENT/PROSPECTUS FOR FEDDERS CORPORATION
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SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ___________, 2001
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32,976,284 SHARES OF COMMON STOCK, PAR VALUE $.01
2,493,047 SHARES OF CLASS B STOCK, PAR VALUE $.01
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Dear Fellow Stockholder:
You are invited to attend a special meeting of stockholders at
10:30 a.m., local time, on _______, 2001, at 505 Martinsville Road, Liberty
Corner, New Jersey. A notice of the special meeting and the proxy statement
follow.
You are being asked to approve (i) a proposal to amend Fedders'
certificate of incorporation to delete Section VI of clause A of Article
Second which provides that in any merger or consolidation the holders of
Class A Stock are entitled to receive the same per share consideration as
is received by the holders of the Common Stock, (ii) a proposal to
recapitalize Fedders through a merger of FC Merger Sub, Inc., a wholly
owned subsidiary of Fedders, with and into Fedders, with Fedders as the
surviving corporation, and (iii) each of the changes to Fedders'
certificate of incorporation that will be made as a result of the
recapitalization.
In the recapitalization, Fedders voting Common Stock, par value
$1.00 per share, and non-voting Class A Stock, par value $1.00 per share,
will be combined into a single class of new voting Common Stock, par value
$.01 per share, and Fedders voting Class B Stock, par value $1.00 per
share, will be exchanged for a class of new voting Class B Stock, par value
$.01 per share. Each share of voting Common Stock will entitle its holder
to 1.1 shares of new voting Common Stock, and each share of non-voting
Class A Stock will entitle its holder to one share of new voting Common
Stock. Each share of voting Class B Stock will entitle its holder to 1.1
shares of new voting Class B Stock. Consummation of the recapitalization is
conditioned on approval of (i) the proposal to delete Section VI of clause
A of Article Second of Fedders' certificate of incorporation, (ii) the
recapitalization and (iii) each of the changes to Fedders' certificate of
incorporation that will be made as a result of the recapitalization.
In evaluating the recapitalization, the board of directors
received an opinion from its financial advisor, TM Capital Corp., as to the
fairness, from a financial point of view, of the proposed transaction. See
"Fairness Opinion of TM Capital Corp." beginning on page 25. Based on this
opinion as well as each board member's independent evaluation of the
recapitalization, the board of directors believes that this simplified
capital structure will enhance stockholder value by eliminating potential
investor confusion, administrative expense, and perceived negative impact
on the market price of our Common Stock and Class A Stock that results from
having a dual, voting and non- voting, class structure for our listed
stock. The board of directors also believes that the combination of our
Common Stock and Class A Stock may potentially increase the liquidity,
trading volume, and trading efficiencies of our listed stock, and
potentially increase our investor base.
The transactions contemplated in this proxy statement/prospectus
involve risks. See "Risk Factors" beginning on page 9.
The accompanying proxy statement/prospectus provides detailed
information about the recapitalization. Please read the entire proxy
statement/prospectus and the appendices carefully.
The board of directors strongly recommends that you vote, or
instruct your broker or nominee to vote, FOR approval of (i) the deletion
of Section VI of clause A of Article Second of Fedders' certificate of
incorporation, (ii) the recapitalization and (iii) each of the changes to
Fedders' certificate of incorporation that will be made as a result of the
recapitalization. Please sign, date and mail the enclosed proxy in the
postage-paid envelope or instruct us by telephone or via the Internet as to
how you would like your shares voted.
Sincerely,
/s/ Salvatore Giordano /s/ Sal Giordano, Jr.
Chairman Emeritus Chairman and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this document. Any representation
to the contrary is a criminal offense.
The date of this document is ________, 2001 and it is first being mailed to
stockholders on or about ________, 2001
FEDDERS CORPORATION
LIBERTY CORNER, NEW JERSEY 07938
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2001
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NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Fedders Corporation will be held at Fedders' corporate offices located at
505 Martinsville Road, Liberty Corner, New Jersey 07938 on __________ [day
of the week], ____________, 2001 at 10:30 a.m.
The purpose of the meeting is to consider and vote upon:
(i) a proposal to amend Fedders' certificate of incorporation to
delete Section VI of clause A of Article Second which provides that in any
merger or consolidation the holders of Class A Stock are entitled to
receive the same per share consideration as is received by the holders of
the Common Stock;
(ii) a proposal to recapitalize Fedders through a merger of FC
Merger Sub, Inc., a wholly owned subsidiary of Fedders, with and into
Fedders, with Fedders as the surviving corporation; and
(iii) each of the following changes to Fedders' certificate of
incorporation that will be made as a result of the recapitalization:
o The elimination of the Class A Stock;
o The par value of the new Common Stock and the new Class B
Stock will be $0.01, currently the par value of the
Common Stock and the Class B Stock is $1.00;
o The new Common Stock and the new Class B Stock will have
alternating preferences with respect to payments or
distributions in the event of any dissolution,
liquidation or winding up of Fedders, currently there is
no such liquidation preference;
o Each share of new Class B Stock will share equally with
each share of new Common Stock in the payment of
dividends, currently each share of Class B Stock receives
90% of the dividends paid to each share of Common Stock;
o The new Class B Stock will automatically be converted
into shares of new Common Stock if the number of
outstanding shares of new Class B Stock falls below 2.5%
of the aggregate number of issued and outstanding shares
of new Common Stock and new Class B Stock, currently the
Class B Stock will automatically be converted into shares
of Common Stock if the number of outstanding shares of
Class B Stock falls below 5% of the aggregate number of
issued and outstanding shares of Common Stock and Class B
Stock; and
o The restated certificate of incorporation will provide
that any action required or permitted to be taken by the
stockholders must be effected at a duly called annual or
special meeting of stockholders and the ability of the
stockholders to consent in writing to the taking of any
action will be specifically denied, currently Fedders'
certificate of incorporation does not contain any such
provision.
Consummation of the recapitalization is conditioned on approval of
(i) the proposal to delete Section VI of clause A of Article Second of
Fedders' certificate of incorporation, (ii) the recapitalization and (iii)
each of the changes to Fedders' certificate of incorporation that will be
made as a result of the recapitalization.
In the recapitalization, Fedders voting Common Stock, par value
$1.00 per share, and non-voting Class A Stock, par value $1.00 per share,
will be combined into a single class of new voting Common Stock, par value
$.01 per share, and Fedders voting Class B Stock, par value $1.00 per
share, will be exchanged for a new class of voting Class B Stock, par value
$.01 per share. Each share of voting Common Stock will entitle its holder
to 1.1 shares of new voting Common Stock, and each share of non-voting
Class A Stock will entitle its holder to one share of new voting Common
Stock. Each share of voting Class B Stock will entitle its holder to 1.1
shares of new voting Class B Stock.
By order of the board of directors
KENT E. HANSEN
Executive Vice President and Secretary
Dated: ________________, 2001
Liberty Corner, New Jersey
IMPORTANT: THE BOARD OF DIRECTORS INVITES YOU TO ATTEND THE
MEETING IN PERSON, BUT IF YOU ARE UNABLE TO BE PERSONALLY PRESENT, PLEASE
DATE, SIGN AND RETURN THE ENCLOSED PROXY IMMEDIATELY. NO POSTAGE IS
REQUIRED IF THE PROXY IS RETURNED IN THE ENCLOSED ENVELOPE AND MAILED IN
THE UNITED STATES. IF YOU PREFER, YOU MAY CAST YOUR VOTE TOLL-FREE BY
TELEPHONE OR ONLINE OVER THE INTERNET. SIMPLY FOLLOW THE INSTRUCTIONS
CONTAINED ON THE ENCLOSED PROXY CARD.
The accompanying proxy statement/prospectus incorporates important
business and financial information about Fedders that is not included in or
delivered with this document. Stockholders may obtain documents
incorporated by reference in this document free of charge by requesting
them orally or in writing from Fedders at the following address:
Mail: Telephone: (908) 604-8686
Fedders Corporation
505 Martinsville Road Facsimile: (908) 604-8576
Liberty Corner, NJ 07938-0813
E-mail: khansen@fedders.com
If you would like to request documents from us, please do so by
____________, 2001 to receive them before the special meeting.
TABLE OF CONTENTS
PAGE
SUMMARY TERM SHEET................................................................................................1
Description of Business..................................................................................1
The Recapitalization and Related Matters.................................................................1
Interests of Certain Persons in the Recapitalization.....................................................4
QUESTIONS AND ANSWERS ABOUT THE RECAPITALIZATION..................................................................5
RISK FACTORS......................................................................................................9
MARKET PRICES AND DIVIDENDS......................................................................................10
SELECTED CONSOLIDATED FINANCIAL DATA.............................................................................11
COMPARATIVE PER SHARE DATA.......................................................................................13
SELECTED UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA...............................................14
THE SPECIAL MEETING..............................................................................................17
Date, Place and Time....................................................................................17
Purpose of the Special Meeting..........................................................................17
Record Date; Stock Entitled to Vote; Vote Required; Quorum..............................................17
Voting of Proxies.......................................................................................18
Revocation of Proxies...................................................................................18
Matters to be Acted on at the Special Meeting...........................................................18
How to Vote Your Proxy..................................................................................18
Proxy Solicitation Information..........................................................................18
SPECIAL FACTORS..................................................................................................19
Background of the Proposed Recapitalization.............................................................19
Background of the Proposed Deletion of Section VI of Clause A of Article Second of the
Certificate of Incorporation...................................................................21
Board Review of the Recapitalization....................................................................21
Recommendations of the Fedders Board; Reasons for the Recapitalization..................................23
Review of the Recapitalization by Filing Parties........................................................24
Fairness Opinion of TM Capital Corp.....................................................................25
Effect of the Recapitalization..........................................................................28
Stockholder Vote........................................................................................29
Interests of Certain Persons in the Recapitalization....................................................30
Directors...............................................................................................33
Officers ...............................................................................................34
Financing the Recapitalization..........................................................................36
Material Federal Income Tax Consequences of the Recapitalization........................................36
INFORMATION ABOUT FEDDERS AND CERTAIN AFFILIATES.................................................................38
Fedders Corporation.....................................................................................38
FC Merger Sub, Inc......................................................................................38
Giordano Holding Corporation............................................................................38
Salvatore Giordano......................................................................................38
Sal Giordano, Jr........................................................................................39
Joseph Giordano.........................................................................................39
THE RECAPITALIZATION.............................................................................................40
General ...............................................................................................40
What Fedders Stockholders Will Receive..................................................................40
Conditions to Completion of the Recapitalization........................................................40
Amendment of the Recapitalization Agreement.............................................................41
Abandonment of the Recapitalization.....................................................................42
Estimated Fees and Expenses of the Recapitalization.....................................................42
Effective Time of the Recapitalization..................................................................42
Regulatory Matters......................................................................................42
Appraisal Rights........................................................................................42
Employee Benefit Plans..................................................................................44
Employee Stock Options..................................................................................44
New York Stock Exchange Listing.........................................................................44
RECENT TRANSACTIONS IN SECURITIES................................................................................46
FINANCIAL STATEMENTS.............................................................................................47
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA...............................................47
RATIO OF EARNINGS TO FIXED CHARGES......................................................................50
THE RECAPITALIZATION AGREEMENT...................................................................................60
General ...............................................................................................60
Effect on Capital Stock.................................................................................60
Fractional Shares.......................................................................................60
Closing ...............................................................................................60
Restated Certificate of Incorporation...................................................................60
By-Laws ...............................................................................................60
Directors and Officers..................................................................................60
Termination.............................................................................................60
Amendments and Waiver...................................................................................61
DESCRIPTION OF FEDDERS CAPITAL STOCK BEFORE AND AFTER THE RECAPITALIZATION.......................................62
General ...............................................................................................62
FEDDERS COMMON STOCK....................................................................................62
FEDDERS CLASS A STOCK...................................................................................63
FEDDERS CLASS B STOCK...................................................................................64
LEGAL MATTERS....................................................................................................65
EXPERTS ........................................................................................................65
STOCKHOLDER PROPOSALS FOR 2001...................................................................................65
OTHER MATTERS....................................................................................................65
WHERE YOU CAN FIND MORE INFORMATION..............................................................................65
FORWARD-LOOKING STATEMENTS.......................................................................................67
LIST OF ANNEXES
Annex A -- Recapitalization Agreement and Plan of Merger
Annex B -- Fairness Opinion of TM Capital Corp.
Annex C -- Section 262 of the General Corporation Law of the State of Delaware
SUMMARY TERM SHEET
This summary highlights the material information contained in this
document, but may not include all of the information that you, as a
stockholder, would like to know. To fully understand the recapitalization
and for a more complete description of the legal terms of the
recapitalization, you should carefully read this entire document, including
the appendices and the other documents we refer to in this document. See
"Where You Can Find More Information" beginning on page 65. The principal
executive offices of Fedders Corporation ("Fedders") are located at 505
Martinsville Road, Liberty Corner, New Jersey 07938-0813. Fedders'
telephone number is (908) 604-8686.
Description of Business
o Fedders Corporation. Fedders, a Delaware corporation, is a leading
global manufacturer of air treatment products, including air
conditioners, air cleaners, dehumidifiers and humidifiers, and
thermal technology products. Fedders was established more than 100
years ago and has been in the air treatment business for more than
50 years. Fedders has been expanding into a broad variety of air
treatment businesses. Fedders is a filing person for the
recapitalization.
o FC Merger Sub, Inc. FC Merger Sub, Inc., a wholly owned subsidiary
of Fedders, is a newly formed Delaware corporation created for the
sole purpose of implementing the recapitalization. It has not
conducted any business since its formation. At the time of the
recapitalization, FC Merger Sub, Inc. will merge into Fedders and
cease to exist. FC Merger Sub, Inc. is a filing person for the
recapitalization.
The Recapitalization and Related Matters
o Amendment of Certificate of Incorporation and Recapitalization.
You are being asked to adopt an amendment to Fedders' certificate
of incorporation to delete Section VI of clause A of Article
Second, which provides that in any merger or consolidation the
holders of Class A Stock are entitled to receive the same per
share consideration as is received by the holders of Common Stock.
You are also being asked to approve a recapitalization of Fedders
through a merger of FC Merger Sub, Inc., a wholly owned subsidiary
of Fedders, with and into Fedders, with Fedders as the surviving
corporation. In addition, you are being asked to approve each of
the changes to Fedders' certificate of incorporation that will be
made as a result of the recapitalization. Consummation of the
recapitalization is conditioned on approval of (i) the proposal to
delete Section VI of clause A of Article Second of Fedders'
certificate of incorporation, (ii) the recapitalization and (iii)
each of the changes to Fedders' certificate of incorporation that
will be made as a result of the recapitalization.
o Changes to be Made to the Certificate of Incorporation as a Result
of the Recapitalization. The changes that will be made to Fedders'
certificate of incorporation if the recapitalization is approved
are as follows:
o The Class A Stock will be eliminated;
o The par value of the new Common Stock and the new Class B
Stock will be $0.01, currently the par value of the Common
Stock and the Class B Stock is $1.00;
o The new Common Stock and the new Class B Stock will have
alternating preferences with respect to payments or
distributions in the event of any dissolution, liquidation or
winding up of Fedders, currently there is no such liquidation
preference;
o Each share of new Class B Stock will share equally with each
share of new Common Stock in the payment of dividends,
currently each share of Class B Stock receives 90% of the
dividends paid to each share of Common Stock;
o The new Class B Stock will automatically be converted into
shares of new Common Stock if the number of outstanding
shares of new Class B Stock falls below 2.5% of the aggregate
number of issued and outstanding shares of new Common Stock
and new Class B Stock, currently the Class B Stock will
automatically be converted into shares of Common Stock if the
number of outstanding shares of Class B Stock falls below 5%
of the aggregate number of issued and outstanding shares of
Common Stock and Class B Stock; and
o The restated certificate of incorporation will provide that
any action required or permitted to be taken by the
stockholders must be effected at a duly called annual or
special meeting of stockholders and the ability of the
stockholders to consent in writing to the taking of any
action will be specifically denied, currently Fedders'
certificate of incorporation does not contain any such
provision.
You are being asked to vote upon and approve each of these changes to
our certificate of incorporation. Consummation of the recapitalization
is conditioned on your approval of each of these changes.
o Treatment of the Common Stock in the Recapitalization. At the
effective time of the recapitalization, each outstanding share of
Common Stock will be exchanged for 1.1 shares of new Common Stock.
The new Common Stock will be entitled to one vote per share, and
will be listed for trading on the New York Stock Exchange under
the symbol "FJC." It will have a par value of $0.01 and the new
Common Stock and the new Class B Stock will have alternating
preferences with respect to payments or distributions in the event
of a liquidation of Fedders. See "Description of Fedders Capital
Stock Before and After the Recapitalization", beginning on page 62
of this document.
o Treatment of the Class A Stock in the Recapitalization. The
proposed deletion of Section VI of clause A of Article Second of
the certificate of incorporation will eliminate the right of the
holders of Class A Stock to receive the same per share
consideration as is received by the holders of Common Stock in any
merger or consolidation, which will allow the recapitalization to
be consummated on the terms described in this document. At the
effective time of the recapitalization, each outstanding share of
non-voting Class A Stock will be exchanged for one share of new
voting Common Stock. See "Description of Fedders Capital Stock
Before and After the Recapitalization", beginning on page 62 of
this document.
o Treatment of the Class B Stock in the Recapitalization. At the
effective time of the recapitalization, each outstanding share of
Class B Stock will be exchanged for 1.1 shares of new Class B
Stock. The new Class B Stock will have voting rights but will not
be listed for trading. The new Class B Stock will generally be
entitled to one vote per share, but will be entitled to the
special voting rights currently enjoyed by the holders of Class B
Stock. It will have a par value of $0.01 and the new Common Stock
and the new Class B Stock will have alternating preferences with
respect to payments or distributions in the event of a liquidation
of Fedders. To compensate the holders of new Class B Stock for the
decrease in voting power resulting from the ability of the former
Class A stockholders to vote their new Common Stock, a
modification will be made to the dividend rights of the Class B
Stock such that after the recapitalization, holders of the new
Class B Stock will share equally in the payment of dividends with
holders of the new Common Stock. After the recapitalization, the
new Class B Stock will automatically convert into new Common Stock
if the number of outstanding shares of new Class B Stock falls
below 2.5% of the aggregate number of outstanding shares of new
Common Stock and new Class B Stock. See "Description of Fedders
Capital Stock Before and After the Recapitalization", beginning on
page 62 of this document.
o Treatment of Stock Options in the Recapitalization. Employee
options to buy shares of Fedders' Common Stock outstanding at the
time of the recapitalization will be adjusted, resulting in
options to purchase a number of shares of new Common Stock
determined by multiplying the number of shares of Common Stock
subject to an option by 1.1. Employee options to buy shares of
Class A Stock outstanding at the time of the recapitalization will
be converted into options to buy an equivalent number of shares of
new Common Stock. See "Employee Stock Options" beginning on page
44.
o Stockholder Vote. The proposed amendment to the certificate of
incorporation to delete Section VI of clause A of Article Second
requires approval of at least a majority of the voting power of
the shares of Common Stock, Class A Stock and Class B Stock, each
voting separately as a class. Assuming the proposed deletion of
Section VI of clause A of Article Second of the certificate of
incorporation is approved, the recapitalization and each of the
changes to Fedders' certificate of incorporation that will be made
as a result of the recapitalization will require the approval of
at least a majority of the voting power of the shares of Common
Stock and Class B Stock, voting together as a single class.
Although the holders of Common Stock and Class B Stock will have a
separate vote on the recapitalization and each of the changes that
will be made to Fedders' certificate of incorporation as a result
of the recapitalization, approval of each of the items is
conditional upon approval of all of the items. Thus, a vote
against the recapitalization or any of the changes that will be
made to the certificate of incorporation will be deemed a vote
against all such proposals. See "Stockholder Vote" beginning on
page 29. As of July 31, 2001, in any vote of stockholders in which
the holders of the Common Stock, Class A Stock and Class B Stock
vote as separate classes and the holders of Class B Stock have one
vote per share, the directors and executive officers of Fedders
control approximately 0.7% of the aggregate voting power of the
Common Stock, 27.1% of the aggregate voting power of the Class A
Stock and 99.8% of the aggregate voting power of the Class B
Stock. In any vote of stockholders in which the holders of the
Common Stock and the Class B Stock vote together as a single class
and the holders of Class B Stock have one vote per share, the
directors and executive officers of Fedders control approximately
14.8% of the aggregate voting power. Approval of the
recapitalization is not conditioned upon the favorable vote of a
majority of Fedders' unaffiliated stockholders.
o Fairness Opinion of TM Capital Corp. In deciding to approve the
recapitalization of the Common Stock, Class A Stock and Class B
Stock, the board of directors considered an opinion from its
financial advisor, TM Capital Corp., as to the fairness, from a
financial point of view, to the Common stockholders and Class A
stockholders, of the exchange of each share of Common Stock for
1.1 shares of new Common Stock and each share of Class A Stock for
one share of new Common Stock. The opinion is summarized in the
section entitled "Fairness Opinion of TM Capital Corp." beginning
on page 25 of this document. In addition, the opinion is attached
as Annex B to this document. We encourage you to read both the
summary and the opinion in its entirety.
o Recommendation of Fedders' Board of Directors. Fedders' board of
directors has determined that (i) the proposed deletion of Section
VI of clause A of Article Second of Fedders' certificate of
incorporation, (ii) the recapitalization and (iii) each of the
changes that will be made to the certificate of incorporation as a
result of the recapitalization are procedurally and substantively
fair. It has unanimously approved the recapitalization, and
recommends that you vote FOR (i) the proposed deletion of Section
VI of clause A of Article Second of the certificate of
incorporation, (ii) the recapitalization and (iii) each of the
changes to be made to the certificate of incorporation as a result
of the recapitalization.
o Material Federal Income Tax Consequences of the Recapitalization.
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, which
is based upon the representations of Fedders, the recapitalization
should constitute a "recapitalization" within the meaning of
Section 368(a)(1)(E) of the Internal Revenue Code. Accordingly,
you should not recognize any gain or loss upon the receipt of new
Common Stock or Class B Stock in exchange for your old Common
Stock, Class A Stock or Class B Stock in the recapitalization
(except with respect to cash received in lieu of fractional
shares). See "Material Federal Income Tax Consequences of the
Recapitalization" beginning on page 36.
o Conditions to Completion of the Recapitalization. A number of
conditions must be met or waived before the recapitalization will
be completed. The most significant conditions are that:
o Fedders receives the required stockholder approval for the
proposed amendment to delete Section VI of clause A of
Article Second of the certificate of incorporation;
o Fedders receives the required stockholder approval for the
recapitalization;
o Fedders receives the required stockholder approval for each
of the changes to its certificate of incorporation that will
be made as a result of the recapitalization;
o the registration statement filed with the Securities and
Exchange Commission in connection with the issuance of the
shares of new Common Stock and new Class B Stock after the
recapitalization becomes effective;
o the New York Stock Exchange approves the listing of the
shares of the new Common Stock;
o if a filing becomes necessary under the Hart-Scott-Rodino
Antitrust Improvements Act, all waiting periods have expired
or terminated;
o Fedders receives all necessary material licenses, permits,
consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts
with Fedders and its subsidiaries; and
o Fedders files a certificate of merger with the Secretary of
State of Delaware.
o Appraisal Rights. Holders of Class B Stock, which is not listed on
any stock exchange, are entitled to appraisal rights in connection
with the recapitalization. Class B stockholders who do not vote
for the recapitalization proposal and who dissent by complying
with the procedures required by the Delaware General Corporation
Law ("DGCL") will have the right to receive payment for the fair
value of their shares as of the effective date of the
recapitalization, as determined by the Delaware Court of Chancery.
Any Class B stockholders who are entitled to appraisal rights
must, in order to exercise such rights, demand such rights BEFORE
the vote on the recapitalization at the special meeting of
stockholders. The Giordano Holding Corporation holds approximately
99.8% of the Class B Stock. Salvatore Giordano, Fedders' Chairman
Emeritus and a director, Sal Giordano, Jr., Fedders' Chairman and
Chief Executive Officer and Joseph Giordano, a director of
Fedders, exercise all the voting power of Giordano Holding
Corporation. They have unanimously indicated their intention not
to cause the Giordano Holding Corporation to exercise its
statutory appraisal rights. Holders of Common Stock or Class A
Stock are not entitled to appraisal rights by virtue of the
recapitalization because the Common Stock and the Class A Stock
are listed on the New York Stock Exchange and the Common Stock and
Class A Stock are being combined into new Common Stock in the
recapitalization. See "The Recapitalization - Appraisal Rights"
beginning on page 42.
Interests of Certain Persons in the Recapitalization.
o Voting Power. As of July 31, 2001, the directors and executive
officers of Fedders together controlled 101,036 shares of the
Common Stock, or approximately 0.7% of the Common Stock, 3,906,199
shares of Class A Stock, or approximately 26.4% of the Class A
Stock and 2,262,566 shares of the Class B Stock, or approximately
99.8% of the Class B Stock.
As of July 31, 2001, in any vote of stockholders in which the holders
of the Common Stock and the Class B Stock vote together as a
single class and the holders of Class B Stock have one vote per
share, the directors and executive officers of Fedders control
approximately 14.8% of the aggregate voting power. Fedders
estimates that after the recapitalization, in any such vote of
stockholders, the directors and executive officers will control
approximately 20.1% of the aggregate voting power.
As of July 31, 2001, in any vote of stockholders in which the
holders of the Common Stock and the Class B Stock vote together as
a single class and the holders of Class B Stock have ten votes per
share, the directors and executive officers of Fedders controlled
approximately 62.5% of the aggregate voting power. Fedders
estimates that after the recapitalization, in any such vote of
stockholders, the directors and executive officers will control
approximately 52.7% of the aggregate voting power.
o Beneficial Ownership. As of July 31, 2001, Fedders' directors and
executive officers beneficially owned 357,836 shares of Common
Stock, or approximately 2.6% of the Common Stock, 4,627,759 shares
of Class A Stock, or approximately 31.3% of the Class A Stock and
2,262,566 shares of the Class B Stock, or approximately 99.8% of
the Class B Stock. After the recapitalization, the directors and
executive officers will beneficially own approximately 16.9% of
the new Common Stock and 99.8% of the new Class B Stock.
QUESTIONS AND ANSWERS ABOUT THE RECAPITALIZATION
Q: What am I being asked to vote on?
A: We are asking the holders of Common Stock, Class A Stock and Class B
Stock to vote their shares for an amendment to Fedders' certificate
of incorporation to delete Section VI of clause A of Article Second,
which provides that in any merger or consolidation the holders of
Class A Stock are entitled to receive the same per share
consideration as is received by the holders of Common Stock.
We are asking the holders of Common Stock and Class B Stock to vote
their shares for (i) the recapitalization of Fedders Corporation,
through the merger of FC Merger Sub, Inc., a wholly owned subsidiary
of Fedders, with and into Fedders, with Fedders as the surviving
corporation, and (ii) each of the changes to Fedders' certificate of
incorporation that will be made as a result of the recapitalization.
In the proposed recapitalization, Fedders voting Common Stock, par
value $1.00 per share, and non-voting Class A Stock, par value $1.00
per share, will be combined into a single class of new voting Common
Stock, par value $.01 per share, and Fedders voting Class B Stock,
par value $1.00 per share, will be exchanged for a class of new
voting Class B Stock, par value $.01 per share. Each share of voting
Common Stock will entitle its holder to 1.1 shares of new voting
Common Stock, and each share of non-voting Class A Stock will entitle
its holder to one share of new voting Common Stock. Each share of
voting Class B Stock will entitle its holder to 1.1 shares of new
voting Class B Stock.
Q: Who is eligible to vote at the special meeting?
A: You are eligible to vote your shares of Common Stock, Class A Stock
and Class B Stock at the special meeting if you were a stockholder of
record of those shares on the record date. The record date for the
special meeting is the close of business on ____, 2001.
Q: Why should I vote in favor of the recapitalization, resulting in the
combination of Fedders Common Stock and Class A Stock into one class
of new voting Common Stock and the exchange of voting Class B Stock
for new voting Class B Stock?
A: The recapitalization will simplify Fedders' capital structure.
Fedders believes that its stock is undervalued, limiting, among other
things, its ability to use its stock for acquisitions and to attract,
retain or incentivize employees. We believe that the recapitalization
will benefit both Fedders and you as a stockholder of Fedders by,
among other things:
o eliminating potential investor confusion and additional
administrative expenses caused by having two classes of
listed stock, voting and non-voting;
o eliminating the perceived negative impact on the market
price of Fedders stock that results from dual listing;
and
o potentially increasing Fedders' investor base and the
liquidity, trading volume, and trading efficiencies of
Fedders' listed stock.
Q: What is the position of the board of directors regarding the
recapitalization and the amendments that will be made to Fedders'
certificate of incorporation?
A: The board of directors has unanimously approved the recapitalization,
and recommends that you vote FOR (i) the proposed deletion of Section
VI of clause A of Article Second of the certificate of incorporation,
(ii) the recapitalization and (iii) each of the changes to the
certificate of incorporation that will be made as a result of the
recapitalization.
Q: How many votes are needed to approve the proposed deletion of Section
VI of clause A of Article Second of the certificate of incorporation,
the recapitalization and each of the changes to the certificate of
incorporation that will be made as a result of the recapitalization?
A: The proposed deletion of Section VI of clause A of Article Second of
the certificate of incorporation requires approval of at least a
majority of the voting power of the shares of Common Stock, Class A
Stock and Class B Stock, each voting separately as a class.
Assuming the amendment to the certificate of incorporation is
approved, the recapitalization and each of the changes to the
certificate of incorporation that will be made as a result of the
recapitalization will require the approval of at least a majority of
the voting power of the shares of Common Stock and Class B Stock,
voting together as a single class.
Approval of the proposed deletion of Section VI of clause A of
Article Second of the certificate of incorporation, the
recapitalization and each of the changes to be made to the
certificate of incorporation as a result of the merger is not
conditioned upon the favorable vote of a majority of Fedders'
unaffiliated stockholders.
Fedders' directors and executive officers have indicated that they
intend to vote the shares they hold, and the shares over which they
exercise voting control, FOR (i) the proposed deletion of Section VI
of clause A of Article Second of the certificate of incorporation,
(ii) the recapitalization and (iii) each of the changes to the
certificate of incorporation that will be made as a result of the
recapitalization. The board of directors of Fedders unanimously
approved the recapitalization at a meeting held on Tuesday, February
27, 2001. As of July 31, 2001, these directors and executive officers
were entitled to vote, or exercised voting power over shares entitled
to vote, approximately 3,906,199 shares of Class A Stock, or 26.4% of
the outstanding Class A Stock, 101,036 shares of Common Stock, or
approximately 0.7% of the outstanding Common Stock and 2,262,566
shares of Class B Stock, or approximately 99.8% of the outstanding
Class B Stock, representing 14.8% of the aggregate outstanding Common
Stock and Class B Stock, voting together as a single class.
Q: What will I receive in the recapitalization if it is approved?
A: In exchange for each share of Common Stock that you own, you will
receive 1.1 shares of new Common Stock.
In exchange for each share of Class A Stock that you own, you will
receive one share of new Common Stock.
In exchange for each share of Class B Stock that you own, you will
receive 1.1 shares of new Class B Stock.
Q: Will I have any appraisal rights if I do not vote in favor of the
recapitalization?
A: Holders of Common Stock and Class A Stock are not entitled to
statutory appraisal rights.
Holders of Class B Stock will be entitled to statutory appraisal
rights if they do not vote in favor of the recapitalization, provided
that they demand such rights BEFORE the special meeting of
stockholders, by following the procedures described in this document.
As of July 31, 2001, the Giordano Holding Corporation held
approximately 99.8% of the Class B Stock. Salvatore Giordano,
Fedders' Chairman Emeritus and a director, Sal Giordano, Jr.,
Fedders' Chairman and Chief Executive Officer and Joseph Giordano, a
director of Fedders, exercise all the voting power of Giordano
Holding Corporation. They have unanimously indicated their intention
not to cause Giordano Holding Corporation to exercise its statutory
appraisal rights. See "The Recapitalization - Appraisal Rights"
beginning on page 42.
Q: What are my income tax consequences from the recapitalization?
A: Subject to the assumptions and qualifications set forth under the
heading "Material Federal Income Tax Consequences of the
Recapitalization" beginning on page 36, in the opinion of Skadden,
Arps, Slate, Meagher & Flom LLP, the exchange of your old Common
Stock and Class A Stock for new shares of Common Stock and the
exchange of your old Class B Stock for new shares of Class B Stock
should constitute a "recapitalization" under Section 368(a)(1)(E) of
the Internal Revenue Code. Accordingly, you should not recognize any
gain or loss upon the receipt of new Common Stock or new Class B
Stock in exchange for your old Common Stock, Class A Stock or Class B
Stock pursuant to the recapitalization (except with respect to cash
received in lieu of fractional shares).
We strongly encourage you to consult your tax advisor regarding the
material tax consequences of the recapitalization to you based on
your particular circumstances. See "Material Federal Income Tax
Consequences of the Recapitalization" beginning on page 36.
Q: How will my rights as a stockholder differ after the recapitalization?
A: After the recapitalization occurs, your rights as a holder of shares
of new Common Stock or shares of new Class B Stock will be governed
by the restated certificate of incorporation attached as Exhibit A to
the recapitalization agreement attached hereto as Annex A rather than
the current certificate of incorporation. The differences between the
current certificate of incorporation and the restated certificate of
incorporation that will govern Fedders following the recapitalization
are described beginning on page 62 of this document.
Generally, holders of new Common Stock and new Class B Stock will
have similar rights as they did before the recapitalization, although
they will hold 1.1 shares of new Common Stock and new Class B Stock,
respectively, for each share of Common Stock and Class B Stock they
held prior to the recapitalization. Class A stockholders will have
the right to one vote for each share of new Common Stock received.
The new Common Stock and the new Class B Stock will each have a par
value of $0.01. The Common Stock, Class A Stock and Class B Stock
currently each have a par value of $1.00. In addition, the new Common
Stock and the new Class B Stock will have alternating preferences
with respect to payments or distributions in the event of a
liquidation of Fedders. The new Common Stock will first have the
right to receive a payment of $0.25 per share before any payment or
distribution is made or set apart for the new Class B Stock. The new
Class B Stock will then have the right to receive a payment of $0.50
per share before any additional payment or distribution is set apart
for the new Common Stock. Finally, the new Common Stock will have the
right to receive an additional payment of $0.25 per share before any
additional payment or distribution is made or set apart for the new
Class B Stock. After payment of the liquidation preferences, holders
of the new Common Stock and the new Class B Stock will be entitled to
share in the remaining assets of Fedders on a pro rata basis.
Holders of the new Class B Stock will share equally in the payment of
dividends with holders of the new Common Stock. Currently, if a cash
dividend is paid on the Common Stock, a cash dividend of 90% of the
amount paid on each share of Common Stock is payable on each share of
Class B Stock. In addition, the new Class B Stock will automatically
convert into new Common Stock if the number of outstanding shares of
new Class B Stock falls below 2.5% of the aggregate number of
outstanding shares of new Common Stock and new Class B Stock.
Currently, the Class B Stock is convertible into Common Stock if the
number of outstanding shares of Class B Stock falls below 5% of the
aggregate number of outstanding shares of Common Stock and Class B
Stock.
The restated certificate of incorporation will provide that any
action required or permitted to be taken by stockholders must be
effected at a duly called annual or special meeting, and the ability
of stockholders of Fedders to consent in writing to the taking of any
action will be specifically denied. Fedders' current certificate of
incorporation does not currently provide for, or prohibit such
stockholder action by written consent. Under current Delaware law,
unless otherwise provided in the certificate of incorporation, any
action required or permitted to be taken by stockholders may be taken
without a meeting or notice to all stockholders and without a
stockholder vote if a written consent setting forth the action to be
taken is signed by the holders of shares of outstanding stock having
the requisite number of votes that would be necessary to authorize
such action if it were taken at a meeting of stockholders.
Q: What should I do now?
A: You should mail your signed and dated proxy card(s) in the enclosed
envelope as soon as possible so that your shares will be represented
and voted at the special meeting. No postage is required if the proxy
is returned in the enclosed envelope and mailed in the United States.
If you prefer, you may cast your vote toll-free by telephone or
online over the Internet. Simply follow the instructions contained on
the enclosed proxy card(s).
Q: If I am not going to attend the special meeting should I return my
proxy card(s)?
A: Yes. Returning your proxy card(s) ensures that your shares will be
represented at the special meeting, even if you are unable to attend
or do not want to attend.
Q: Can I change my vote after I mail my proxy card(s)?
A: Yes. You can change your vote by:
o sending a written notice to Fedders' Corporate Secretary
that is received prior to the special meeting that states
that you are revoking your proxy. If your broker holds
your shares, contact your broker;
o submitting another proxy by telephone or via the Internet;
o signing a new, later dated proxy card and delivering it
to Fedders' proxy solicitor prior to the special meeting;
or
o attending the special meeting, and voting in person.
Your presence at the special meeting will not, in and of itself,
revoke your proxy.
Q: What if my shares are held in "street name" by my broker?
A: Your broker will vote your shares with respect to the
recapitalization only if you provide written instructions to your
broker on how to vote, so it is important that you provide your
broker with instructions. If you do not provide your broker with
instructions, your shares will not be voted with respect to the
recapitalization and will not count toward approval of the
recapitalization. To ensure that your broker receives your
instructions, we suggest that you send them in the envelope enclosed
with the instructions. If you wish to vote in person at the meeting,
and hold your shares in your broker's name, you must contact your
broker and request a document called a "legal proxy." You must bring
this legal proxy to the meeting in order to vote in person.
Q: What if I do not vote or do not instruct my broker to vote my shares?
A: Abstentions and broker non-votes will be counted as votes against the
recapitalization.
Q: Do I need to send in my share certificates?
A: No. If you hold your own share certificates, you should not send in
your share certificates. If you hold Class B share certificates, you
will be required to surrender your old Class B certificates after the
recapitalization is approved in order to receive new Class B
certificates.
Your share certificates representing Common Stock and Class A Stock
will automatically represent new Common Stock following the
recapitalization. If the recapitalization is approved, the new Common
Stock will be represented only in book entry form and stock
certificates will not be delivered to stockholders.
A number of companies have adopted such a certificateless book entry
system, whereby stockholders' ownership and transfers are recorded on
the books of the company without the need for stockholders to
physically hold or, if they wish to transfer or sell their stock, to
deliver stock certificates.
However, following the recapitalization, new Common stockholders
will, if they so desire, be able to obtain physical certificates
representing the number of shares of new Common Stock they will
receive in the recapitalization.
If the recapitalization is approved, Class B stockholders will be
required to surrender their old Class B Stock certificates in order
to receive certificates representing new Class B Stock.
Q: Who can answer my questions?
A: If you have questions regarding the special meeting or need
assistance in voting your shares, please contact Fedders' proxy
solicitor:
[___________]
Telephone:
All other questions should be directed to:
Fedders Corporation
505 Martinsville Road,
Liberty Corner, New Jersey 07938
Attn: Kent E. Hansen
Telephone: (908) 604-8686
RISK FACTORS
The proposed recapitalization of Fedders involves significant risks.
In addition to reviewing other information in this proxy
statement/prospectus, you should carefully consider the following factors
before deciding to vote on the proposed recapitalization and related
matters.
The recapitalization may not benefit Fedders or our stockholders.
The combination of Fedders Common Stock and Class A Stock into a single
class of new voting Common Stock may not enhance stockholder value or
improve the liquidity and marketability of Fedders Common Stock. As of July
31, 2001, there were 13,727,159 shares of Common Stock outstanding. After
the recapitalization, there will be approximately 29,908,062 shares of new
Common Stock outstanding. This increase in the outstanding shares of new
Common Stock may result in an immediate decrease in the market value of the
new Common Stock compared with the Common Stock. In addition, factors
unrelated to our stock or our business, such as the general perception of
the recapitalization by the investment community, may cause a decrease in
the value of the new Common Stock and impair its liquidity and
marketability. Furthermore, securities markets worldwide have recently
experienced significant price and volume fluctuations. This market
volatility, as well as general economic, market or political conditions,
could cause a reduction in the market price and liquidity of new Common
Stock following the recapitalization, particularly if the recapitalization
is not viewed favorably by the investment community.
The recapitalization will not eliminate the special right of the Class B
Stock to ten votes per share on the election of directors.
The recapitalization will not eliminate the special rights of the Class B
Stock, and in particular, the right of the Class B Stock, to ten votes per
share in the election of directors if either:
o if more than 15% of the outstanding shares of Common Stock are
beneficially owned by a person or group of persons acting in
concert (unless such person or group is also the beneficial owner
of a majority of the shares of Class B Stock on such record date);
or
o if a nomination for the board of directors is made by a person or
group of persons acting in concert, other than the board of
directors (unless such nomination is made by one or more holders
of Class B Stock, acting in concert, who beneficially own more
than 15% of the outstanding shares of Class B Stock).
As of July 31, 2001, in any vote on the election of directors in which the
holders of the Class B Stock have ten votes per share, the holders of Class
B Stock controlled approximately 62.5% of the aggregate voting power. After
the recapitalization the holders of Class B Stock will control
approximately 52.7% of the aggregate voting power in any election of
directors in which the holders of the Class B Stock have ten votes per
share. Thus after the recapitalization the holders of new Class B Stock
will have the ability to elect the majority of our board of directors in
any election of directors in which the holders of the Class B Stock have
ten votes per share. As of July 31, 2001, 99.8% of the Class B Stock was
held by Giordano Holding Corporation, a holding company which also held 1%
of the Common Stock, and after the recapitalization will hold 9% of the new
Common Stock. Giordano Holding Corporation's voting and investment power is
shared by Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano.
Salvatore Giordano is the Chairman Emeritus of Fedders' board, has been a
director of Fedders since 1945, and has acted in a variety of executive
capacities for Fedders. Sal Giordano, Jr. is the Chairman and Chief
Executive Officer of Fedders and has been a directors since 1965. Joseph
Giordano has been a director of Fedders since 1961 and has retired from
executive responsibilities for the past five years. Giordano Holding
Corporation thus has, and after the recapitalization will continue to have,
sufficient representation on our board of directors and votes as a
stockholder to influence decisions that may adversely affect the market
price of our new Common Stock or otherwise be detrimental to Fedders or the
holders of new Common Stock. This could cause our business to suffer and
the trading price of our new Common Stock to decline. In addition, the
general perception of the recapitalization may be less favorable because
the recapitalization will not eliminate the special rights of the holders
of Class B Stock.
There was no negotiation of the terms of the proposed recapitalization on
behalf of the holders of Common Stock and Class A Stock.
The terms of the proposed recapitalization were determined by our
board of directors, upon review of an oral and written fairness opinion
prepared by TM Capital and review of the substantive and procedural
fairness of the proposed transaction. Because no one negotiated the terms
of the proposed recapitalization on behalf of the holders of our Common
Stock and Class A Stock, the terms described in this proxy
statement/prospectus may not be as favorable as those which may have been
obtained if such stockholders were represented in negotiations over terms.
MARKET PRICES AND DIVIDENDS
Fedders' Common Stock and Class A Stock are currently listed on the
New York Stock Exchange under the symbols "FJC" and "FJA," respectively.
The Class B Stock is not listed. The following table sets forth the high
and low sales prices and dividend amounts paid for the Common Stock and
Class A Stock as reported by the New York Stock Exchange Composite Tape and
the dividends paid on the Class B Stock for each quarterly period during
Fedders' last two fiscal years.
Common Stock Class A Stock Class B Stock
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
High Low Dividends High Low Dividends Dividends
-------------------------------------------------------------------------------------------
1999
Third Quarter $ 6 1/16 $ 5 $ 0.025 $ 5 13/16 $ 4 5/8 $ 0.025 $ 0.0225
Fourth Quarter 6 15/16 5 3/16 0.030 6 3/4 5 3/16 0.030 0.027
2000
First Quarter $ 6 9/16 $ 5 1/4 $ 0.030 $ 5 3/4 $ 4 5/8 $ 0.030 $ 0.027
Second Quarter 6 5 1/16 0.030 5 1/4 4 5/8 0.030 0.027
Third Quarter 6 1/4 5 1/4 0.030 5 7/8 4 7/8 0.030 0.027
Fourth Quarter 6 3/16 4 3/4 0.030 5 15/16 4 1/2 0.030 0.027
2001
First Quarter $ 5 3/16 $ 3 3/8 $ 0.030 $ 4 7/8 $ 3 1/4 $ 0.030 $ 0.027
Second Quarter 5.51 4.5 0.030 4.63 4.05 0.030 0.027
Third Quarter 5.60 4.06 0.030 5.02 4.05 0.030 0.027
The last reported sale price of shares of Common Stock as reported by
the New York Stock Exchange Composite Tape on Monday, February 26, 2001,
the last trading day immediately prior to the public announcement of the
recapitalization, was $5.15 per share. The last reported sale price of
shares of Class A Stock as reported by the New York Stock Exchange
Composite Tape on Monday, February 26, 2001, the last trading day
immediately prior to the public announcement of the proposed combination,
was $4.37 per share.
The last reported sale price of Common Stock as reported by the New
York Stock Exchange Composite Tape on August 22, 2001 was $4.97 per share.
The last reported sale price of Class A Stock as reported by the New York
Stock Exchange Composite Tape on August 22, 2001 was $4.20 per share.
SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected consolidated financial data
of Fedders as of and for each of the periods indicated. Fedders derived the
consolidated financial data as of and for each of the annual periods
presented from Fedders' audited consolidated financial statements. Fedders
derived the consolidated financial data as of and for the nine months ended
May 31, 2001 and 2000 from Fedders' unaudited consolidated financial
statements. This information is only a summary and you should read it in
conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical consolidated
financial statements, and the related schedules and notes, contained in
Fedders' annual report on Form 10-K, which is incorporated by reference
herein, and quarterly reports on Form 10-Q and other information that
Fedders has filed with the Securities and Exchange Commission. See "Where
You Can Find More Information" beginning on page 65.
Consolidated Statement of Operations Data
Nine months ended Fiscal Year Ended August 31,
-----------------------------------------------------------------
May 31, May 31,
2001 2000 2000 1999 1998 1997 1996
- --------------------------------- -------------------------- -------------------------- -------------------------- -----------
Net sales........................ $ 310,006 $ 310,249 $ 409,809 $ 355,956 $ 322,121 $ 314,100 $ 371,772
Gross profit..................... 61,124 79,660 104,956 84,591 69,770 70,076 83,028
Percent of net sales............ 19.7% 25.7% 25.6% 23.8% 21.7% 22.3% 22.3%
Operating income (loss) (1)...... 12,849 38,009 46,854 40,258 12,810 31,729 50,988
Percent of net sales............. 4.1% 12.3% 11.4% 11.3% 4.0% 10.1% 13.7%
Income (loss) before income taxes (1,276) 23,831 30,474 30,986 4,603 28,867 50,266
Percent of net sales............. (0.4%) 7.7% 7.4% 8.7% 1.4% 9.2% 13.5%
Net (loss) income................ (862) 16,086 20,401 20,724 2,992 18,764 31,158
Net (loss) income attributable to
common stockholders.............. (862) 16,086 20,401 20,724 2,992 16,344 31,007
Earnings (loss) per share:
Basic....................... $ (0.03) $ 0.45 $ 0.58 $ 0.56 $ 0.07 $ 0.42 $ 0.77
Diluted..................... (0.03) 0.45 0.57 0.56 0.07 0.39 0.74
Dividends per share declared:
Convertible Preferred (2)... -- -- -- -- -- $ 0.318 $ 0.050
Common/Class A.............. $ 0.090 $ 0.090 $ 0.120 $ 0.105 $ 0.085 0.080 0.080
Class B..................... 0.081 0.081 0.108 0.095 0.077 0.072 0.072
Other Financial Data:
Adjusted earnings before interest,
taxes, depreciation and
amortization (5)(6) 24,323 46,017 58,786 54,613 41,757 42,232 57,796
Capital expenditures........... 9,267 7,638 9,858 9,378 8,497 9,236 7,043
Depreciation and amortization.. 11,685 10,480 13,076 10,279 9,263 9,935 6,578
Cash flow provided by (used in):
Operating activities........... $ (30,293)$ (40,804) $ 4,619 $ 51,989 $ 39,302 $ (8,826) $ 41,871
Investing activities........... (28,716) (13,218) (15,037) (48,778) (6,650) (8,808) (6,508)
Financing activities........... (7,250) (8,941) (19,898) 23,312 (52,059) 37,732 (2,775)
Consolidated Balance Sheet Data
August 31,
May 31, -----------------------------------------------------------------
2001 2000 1999 1998 1997 1996
- ------------------------------------------- ---------------------------------------------------------------------------------
Cash and cash equivalents.................. $ 20,934 $ 87,193 $ 117,509 $ 90,986 $ 110,393 $ 90,295
Total assets............................... 404,636 378,957 382,342 304,629 329,014 290,220
Long-term debt (including current portion) (3) 169,205 166,434 161,363 111,013 115,380 40,406
Stockholders' equity (4)................... 97,851 112,260 108,933 104,792 145,687 159,751
- ------------
(1) In 1999, operating income reflects a $3,100 restructuring charge.
In 1998, operating income reflects a $16,750 restructuring charge
relating to actions taken by Fedders to enhance competitiveness in
global markets and a $2,891 provision for the implementation of an
early retirement program.
(2) In September 1997, Fedders redeemed each share of its Convertible
Preferred Stock for 1.022 shares of Class A Stock.
(3) In August 1999, a subsidiary of Fedders issued $50,000 of 9 3/8%
Senior Subordinated Notes, proceeds of which were utilized in
part, to replenish cash used to acquire Trion, Inc. In August
1997, the same subsidiary issued $100,000 of 9 3/8% Senior
Subordinated Notes, proceeds of which were utilized, in part, to
fully redeem $22,100 of 8.5% Convertible Subordinated Debentures,
including accrued interest.
(4) During the first nine months of fiscal 2001, Fedders repurchased
2,441 shares of Common and Class A Stock at an average price of
$4.33 per share for a total of $10,572. During fiscal 2000,
Fedders repurchased 2,768 shares of Common and Class A Stock at an
average price of $4.87 per share for a total of $13,484. During
fiscal 1999, Fedders repurchased 2,601 shares of Common and Class
A Stock at an average price of $5.08 per share for a total of
$13,215. During fiscal 1998, Fedders repurchased 7,720 shares of
Preferred, Common and Class A Stock at an average price of $5.93
per share for a total of $45,750. During fiscal 1997, Fedders
repurchased 4,335 shares of Class A Stock at an average price of
$5.78 per share for a total of $25,041 and 705 shares of
Convertible Preferred Stock at $6.25 per share for a total of
$4,408.
(5) For the nine months ended May 31, 2001, the amount shown excludes
a $1.1 million non-cash charge for the repricing of a majority of
unexercised stock options. In fiscal 1999, the amount shown
excludes a one- time charge for the restructuring ($3,100). For
fiscal 1998, the amount shown excludes a one-time charge for the
1998 restructuring ($16,750) and early retirement program
($2,891).
(6) Adjusted EBITDA represents income before income taxes plus net
interest expense, depreciation and amortization (excluding
amortization of debt discounts and deferred financing costs),
certain one-time charges, and a certain non-cash charge. Adjusted
EBITDA is presented because we believe it is an indicator of our
ability to incur and service debt and is used by our lenders in
determining compliance with financial covenants. However, Adjusted
EBITDA should not be considered as an alternative to cash flow
from operating activities, as a measure of liquidity or as an
alternative to net income as a measure of operating results in
accordance with generally accepted accounting principles. Our
definition of Adjusted EBITDA may differ from definitions of
Adjusted EBITDA used by other companies.
COMPARATIVE PER SHARE DATA
The following table sets forth book value per share, earnings per
share and dividends declared per share on a historical and pro forma basis
for the Fedders capital stock. Fedders derived the pro forma per share
information from the unaudited pro forma consolidated financial statements
presented elsewhere in this document. The table should be read in
conjunction with the selected consolidated financial data and historical
consolidated financial statements, and related schedules and notes thereto,
included, or incorporated by reference, in this document.
Nine Months Fiscal Year
Ended Ended
May 31, August 31,
2001 2000
----------------------------
Book value per common share:
Reported................................ $ 3.14 $ 3.35
Pro forma............................... 2.98 3.18
Cash dividends declared per share:
Common and Class A
Reported................... 0.09 0.12
Pro forma.................. 0.09 0.12
Class B
Reported................... 0.081 0.108
Pro forma.................. 0.090 0.120
Earnings (loss) per share - basic:
Reported .............................. (0.03) 0.58
Pro forma............................... (0.03) 0.55
Earnings (loss) per share - diluted:
Reported................................ (0.03) 0.57
Pro forma............................... (0.03) 0.55
SELECTED UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA
The unaudited pro forma consolidated condensed financial
data is derived from the application of pro forma adjustments to major
categories of Fedders' consolidated financial statements as of May 31, 2001
and for the nine months ended May 31, 2001 and for the fiscal year ended
August 31, 2000 to illustrate the effect of the transaction related to the
recapitalization of all of Fedders' outstanding shares of capital stock.
The pro forma adjustments are described in the accompanying notes and are
based upon available information that Fedders believes is reasonable. These
tables do not present all of Fedders' financial information.
The unaudited pro forma consolidated condensed financial
data do not purport to be indicative of what Fedders' operations would have
been had the recapitalization taken place on the dates indicated. In
addition, the results for the nine months ended May 31, 2001 are not
necessarily indicative of results that may be expected for the full year.
This information should be read together with Fedders' consolidated
financial statements and the notes thereto which are incorporated by
reference in this document, and the information under "Selected
Consolidated Financial Data" beginning on page 11.
The unaudited pro forma consolidated recapitalization
table represents the effect on stockholders' equity due to the
recapitalization of capital stock as if the recapitalization had been
completed on May 31, 2001. The unaudited recapitalization data is derived
from the unaudited Consolidated Balance Sheet of Fedders as of May 31,
2001. Information is presented to reflect pro forma adjustments for the
recapitalization of Fedders Common and Class A Stock into a single class of
new Common Stock and the exchange of Class B Stock for new Class B Stock.
The pro forma earnings per share calculations reflect the
effect of the recapitalization. The information is derived from the
unaudited Consolidated Statements of Operations and Comprehensive Income
for the nine months ended May 31, 2001 and the audited Consolidated
Statements of Operations and Comprehensive Income for the fiscal year ended
August 31, 2000. The information is presented to reflect the pro forma
effect on earnings per share as a result of the change in the weighted
average number of shares outstanding due to the recapitalization.
Pro Forma Consolidated Condensed Unaudited Recapitalization Table
(As of May 31, 2001)
(dollars in thousands, except per share amounts)
As of Pro Forma
May 31, 2001 Adjustments As Adjusted
Stockholders' Equity:
Common Stock, $1.00 par value,
80,000,000 shares authorized; 16,135,459
shares issued and 14,086,859 shares
outstanding, actual; no shares issued and
outstanding, as adjusted. $16,135 $(16,135)(a) -
New Common Stock, $0.01 par value,
70,000,000 shares authorized; no shares
issued and outstanding, actual; 37,736,622
shares issued and 30,335,141 outstanding,
as adjusted.
- 377(a) 377
Class A Stock, $1.00 par value,
60,000,000 shares authorized; 19,987,618
shares issued and 14,839,597
shares outstanding, actual;
no shares issued and outstanding, as
adjusted.
19,988 (19,988)(a) -
Class B Stock, $1.00 par value, 7,500,000
shares authorized; 2,266,406
shares issued and outstanding, actual;
no shares issued and
outstanding, as adjusted.
2,267 (2,267)(b) -
New Class B Stock, $0.01 par value,
5,000,000 shares authorized; no
shares issued and outstanding, actual;
2,493,047 shares issued and
outstanding, as adjusted.
- 25(b) 25
Paid-in capital 30,640 37,988 (c) 68,628
Retained earnings 65,819 - 65,819
Treasury stock, at cost, 7,196,621 shares
of Common and Class A Stock, actual;
7,401,481 shares of new Common Stock,
as adjusted. (33,952) - (33,952)
Deferred compensation (729) - (729)
Accumulated comprehensive loss (2,317) - (2,317)
--------------- ------------- --------------
--------------- ------------- --------------
Total stockholders' equity $97,851 - $ 97,851
=============== ============== ==============
Notes to the Pro Forma Consolidated Condensed Unaudited Recapitalization Table
(a) Pro forma adjustments as of May 31, 2001 assume all outstanding
shares of Fedders' Common and Class A Stock are exchanged for new
Common Stock at an exchange ratio of 1.1 shares of new Common
Stock for each share of Common Stock exchanged and one share of
new Common Stock for each share of Class A Stock exchanged. On a
pro forma basis, 37,736,622 shares of the new Common Stock would
be issued after the merger. The Class A Stock ceases to exist
after the merger. The par value of the new Common Stock is $.01
per share.
(b) Pro forma adjustments reflect the Fedders Class B Stock exchanged
for new Class B Stock on a pro forma basis. 2,493,047 shares of
new Class B Stock are issued at a par value of $.01 per share.
(c) Reflects the net effect of the recapitalization on paid-in capital
as a result of the pro forma adjustments due to the exchange of
shares and the reduction in the par value to $.01 per share of
both the new class of Common and Class B Stock.
Pro Forma Unaudited Comparative Condensed Consolidated Earnings Per Share
Nine Months Ended Fiscal Year Ended
May 31, August 31,
2001 2000
---- ----
Net income (loss) (a):
As reported $(862) $20,401
Pro forma $(862) $20,401
Earnings (loss) per share (b):
Basic as reported $(0.03) $0.58
Basic pro forma $(0.03) $0.55
Diluted as reported $(0.03) $0.57
Diluted pro forma $(0.03) $0.55
Weighted average shares (c):
Basic as reported 32,093 35,325
Basic pro forma 33,798 37,176
Diluted as reported 32,093 35,490
Diluted pro forma 33,798 37,341
Cash dividends per share (d):
As reported:
Common and Class A $0.090 $0.120
Class B 0.081 0.108
Pro forma:
New Common and Class B 0.090 0.120
Notes to the Pro Forma Unaudited Comparative Condensed Consolidated
Earnings Per Share
(a) Pro forma net income remains unchanged for the period.
(b) Pro forma earnings per share reflect the recapitalization assuming
all outstanding shares are exchanged at the beginning of the
fiscal year for the years being reported. Basic and diluted
earnings per share are computed by dividing net income by the
respective weighted average shares outstanding for the periods
presented. Basic and diluted pro forma earnings per share are
adjusted to reflect the impact of the recapitalization on the
number of weighted average shares outstanding.
(c) Pro forma weighted average shares reflect an increase in the
number of shares outstanding due to the recapitalization and
exchange of all Common and Class A Stock into new Common Stock,
and Class B Stock into new Class B Stock.
(d) Pro forma cash dividends per share reflect the impact of the
recapitalization on the weighted average number of shares
outstanding and the result of both the new Common and new Class B
Stock sharing equally in the payment of dividends.
THE SPECIAL MEETING
The matters to be considered at the special meeting are of great
importance to Fedders stockholders. Accordingly, stockholders are urged to
read carefully and consider the information presented in this proxy
statement/prospectus and its attachments. Stockholders are also urged to
give a proxy to be voted at the special meeting either (i) over the
telephone by calling a toll-free number, (ii) electronically, using the
Internet, or (iii) by mailing in the enclosed proxy card.
Date, Place and Time
The special meeting is scheduled to be held at 10:30 a.m., local
time, at Fedders' corporate offices located at 505 Martinsville Road,
Liberty Corner, New Jersey 07938.
Purpose of the Special Meeting
The purpose of the special meeting is to consider and take action
upon (i) the proposed amendment to Fedders' certificate of incorporation
deleting Section VI of clause A of Article Second which provides that in
any merger or consolidation the holders of Class A Stock are entitled to
receive the same per share consideration as is received by the holders of
the Common Stock, (ii) the recapitalization agreement and plan of merger,
dated______, 2001, between Fedders Corporation and FC Merger Sub, Inc., a
wholly owned subsidiary of Fedders Corporation, and (iii) each of the
changes to Fedders' certificate of incorporation that will be made as a
result of the recapitalization.
Record Date; Stock Entitled to Vote; Vote Required; Quorum
Owners of record of shares of Fedders Common Stock, Class A Stock
and Class B Stock on the close of business on ________, 2001, the record
date for the special meeting, are entitled to receive notice of and vote at
the special meeting. Such holders will be entitled to one vote per share of
Common Stock, Class A Stock or Class B Stock held as of the record date.
A quorum of stockholders is necessary for a valid meeting. The
required quorum for the transaction of business at the special meeting, in
person or by proxy, is a majority of the total voting power of all the
outstanding shares of Common Stock and Class B Stock and a majority of the
total voting power of all the outstanding shares of Class A Stock entitled
to vote on the record date.
Under the terms of the certificate of incorporation, the proposed
deletion of Section VI of clause A of Article Second of the certificate of
incorporation requires approval of at least a majority of the voting power
of the shares of Common Stock, Class A Stock and Class B Stock, each voting
separately as a class.
Assuming the proposed deletion is approved, the recapitalization
and each of the changes to the certificate of incorporation that will be
made as a result of the merger will require the approval of at least a
majority of the voting power of the shares of Common Stock and Class B
Stock, voting together as a single class.
Abstentions and broker non-votes each will be included in
determining the number of shares present at the special meeting for the
purpose of determining the presence of a quorum. Because Fedders is seeking
the affirmative vote of the holders of Common Stock, Class A Stock and
Class B Stock to approve the proposed deletion of Section VI of clause A of
Article Second of the certificate of incorporation and the affirmative vote
of the holders of Common Stock and Class B Stock to approve the
recapitalization and each of the changes to the certificate of
incorporation that will be made as a result of the recapitalization,
abstentions and broker non-votes will have the same effect as votes against
such matters.
A broker non-vote occurs when a broker is not permitted to vote on
a matter without instructions from the beneficial owner of the shares and
no instruction is given. Under New York Stock Exchange rules, if your
broker holds your shares in its name, your broker may not vote your shares
on the recapitalization proposal absent instructions from you. Therefore,
without your voting instructions, a broker non-vote will occur.
Voting of Proxies
Stockholders of record can give a proxy to be voted at the special
meeting either (i) over the telephone by calling a toll-free number, (ii)
electronically, using the Internet, or (iii) by mailing in the enclosed
proxy card. Stockholders who hold their shares in "street name" must vote
their shares in the manner prescribed by their brokers.
The telephone and Internet voting procedures have been set up for
your convenience and have been designed to authenticate your identity, to
allow you to give voting instructions, and to confirm that those
instructions have been recorded properly. If you are a stockholder of
record and you would like to vote by telephone or by using the Internet,
please refer to the specific instructions set forth on the enclosed proxy
card. If you wish to vote using a paper format and you return your signed
proxy to us before the special meeting, we will vote your shares as you
direct.
If you do not specify on your proxy card (or when giving your
proxy by telephone or over the Internet) how you want to vote your shares,
Fedders will vote them in favor of the recapitalization.
Revocation of Proxies
You can revoke your proxy at any time before it is exercised at
the special meeting in any of four ways:
o sending a written notice to Fedders' Corporate Secretary
that is received prior to the special meeting that states
that you are revoking your proxy. If your broker holds
your shares, contact your broker;
o submitting another proxy by telephone or via the
Internet;
o signing a new, later dated proxy card and delivering it
to Fedders' proxy solicitor prior to the special meeting;
or
o attending the special meeting, and voting in person.
Your presence at the special meeting will not, in and of itself, revoke
your proxy.
Matters to be Acted on at the Special Meeting
Amendment of the certificate of incorporation, adoption of the
recapitalization agreement and approval of the changes to Fedders'
certificate of incorporation that will be made as a result of the
recapitalization are the only matters to be presented or acted upon at the
special meeting. The actions proposed in this proxy statement/prospectus
are not matters that can be voted on by brokers holding shares for
beneficial owners without the owner's specific instructions. Accordingly,
all beneficial owners of Fedders stock are urged to return the enclosed
proxy card marked to indicate their votes or to contact their brokers to
determine how to vote.
How to Vote Your Proxy
Stockholders should NOT send any stock certificates with their
proxy cards. You should mail your signed and dated proxy card(s) in the
enclosed envelope as soon as possible so that your shares will be
represented and voted at the special meeting. No postage is required if the
proxy is returned in the enclosed envelope and mailed in the United States.
Proxy Solicitation Information
Fedders is furnishing this document to you in connection with the
solicitation by Fedders' board of directors of the enclosed form of proxy
for the ____________, 2001 special meeting. All costs of soliciting
proxies, including reimbursement of fees of certain brokers, fiduciaries
and nominees in obtaining voting instructions from beneficial owners, will
be paid by Fedders. In addition, Fedders has retained [__________________]
to assist in the distribution and solicitation of proxies and will pay
[___________________] a fee estimated not to exceed $_______ plus $____ per
minute per telephone call, plus reimbursement of reasonable expenses.
SPECIAL FACTORS
Background of the Proposed Recapitalization
Fedders authorized its Class A Stock in February 1992, adding it
to the existing Common Stock and Class B Stock. At the time the three class
capital structure was implemented, the board of directors considered
potential advantages and disadvantages of the structure and determined that
the structure would be in the best interests of Fedders and all of its
stockholders for numerous reasons including the following:
o Financing Flexibility and Employee Benefit Plans. The
board of directors believed that implementing the three
class structure would provide Fedders with increased
flexibility in the future to utilize the Class A Stock to
fund employee benefit plans and to raise equity capital
or to issue convertible preferred stock as a means to
finance future growth without diluting the voting power
of Fedders' existing stockholders, including the Giordano
family.
o Continuity. Because the three class structure would allow
the Giordano family to maintain their voting power, the
board of directors believed that the three class
structure might reduce the risk of a disruption in the
continuity of Fedders' long-term plans and objectives
that could otherwise result from the issuance of Common
Stock. The board also believed that this reduced risk of
disruption in Fedders' business might enhance the ability
of Fedders to attract and retain highly qualified key
employees. The board of directors thought that the three
class structure would allow employees to continue to
concentrate on their responsibilities without undue
concern that the future of Fedders could be affected by
real or perceived succession issues or an unwanted
takeover that might be triggered by any substantial
divestiture by the Giordano family or their estates of
their Class B Stock. Furthermore, by reducing the risk of
succession issues or unwanted takeover, the board of
directors believed that the three class structure would
strengthen existing and potential business relationships,
including banking arrangements, with parties who may in
the future become concerned about changes in control of
Fedders.
At various times since adoption of Fedders' capital structure with
three classes of stock, two classes of which were listed, the board of
directors has considered the possibility that, in practice, the
disadvantages of Fedders' capital structure outweighed its potential
advantages. The board noted that the Class A Stock has, since the time of
its listing, traded at a discount to the Common Stock. The board has also
noted that Fedders has not been able to use the Class A Stock in its
acquisition program or to raise equity capital to fund future growth. Given
that Fedders has not enjoyed the intended benefits of the Class A Stock, it
has felt the disadvantages of the its three-class capital structure more
strongly, especially in light of the prevalence of single class capital
structures among publicly held companies. The disadvantages of the capital
structure that have been noted by the board of directors include, among
others, the following:
o potential confusion due to the complicated nature of
Fedders' capital structure, which may diminish investor
interest, analyst coverage, and the size of Fedders'
investor base;
o additional administrative expenses; and
o impaired liquidity, trading volume, and trading
efficiencies.
The board of directors determined that its primary objective was
to increase stockholder value by simplifying Fedders' capital structure. In
May 2000, the board began informally discussing with TM Capital Corp. the
possibility of combining Fedders' three classes of stock into one class as
a means of increasing the trading price of the Common Stock and enhancing
stockholder value together with a number of possible reclassification or
restructuring transactions by which Fedders could enhance stockholder
value, including the possible repurchase of a significant number of shares
of Fedders' outstanding Class A Stock and/or the possible recapitalization
of the Common Stock and Class A Stock into one class of common shares. In
June 2000, the board of directors engaged TM Capital as its financial
advisor to analyze transactions that involved a recapitalization of
Fedders' Common Stock and Class A Stock. The board of directors reviewed
the available transaction alternatives and the relative economic benefits
of those alternatives to Fedders and its stockholders. The transaction
alternatives discussed by the board included the following:
o an increase in Fedders' existing open market share
repurchase program, which was implemented in August 1998;
o a self-tender offer for a significant percentage of the
Class A Stock;
o an exchange offer for a significant percentage of the
Class A Stock;
o a purchase of or exchange offer for the Class B Stock,
which would result in the exchange of the Class A Stock
for Common Stock;
o a recapitalization of the Common Stock and Class A Stock
through a merger of a newly formed, wholly owned
subsidiary of Fedders with and into Fedders, in which
voting Common Stock and non-voting Class A Stock would be
exchanged for shares of a new single class of voting
Common Stock; and
o a combination of a self-tender or exchange offer and the
recapitalization transaction described in the previous
bullet.
After reviewing the possible transaction alternatives, the board
decided that neither a self-tender offer, an exchange offer for Common
Stock, Class A Stock and/or Class B Stock, nor an increase in the existing
open market share repurchase program would meet its objectives in a
satisfactory way. The board's view was based on the fact that:
o none of those transactions, by itself, would eliminate
Fedders' dual class capital structure;
o a transaction with the holders of Class B Stock did not
appear likely to be structured on terms acceptable to
such holders, given the then current trading price of
Fedders' stock; and
o a tender offer, exchange offer or increased open market
repurchase program, without a combination of the Common
Stock and Class A Stock into a single class, could
adversely affect the liquidity of the Common Stock and/or
Class A Stock by significantly decreasing the number of
shares outstanding. Additionally, it would be difficult
to structure an exchange offer in a way that would not
have adverse tax consequences for the holders of the
Class A Stock.
During the summer of 2000, the board concentrated on structures
that involved exchanging the Class B Stock for Common Stock. Under the
Company's certificate of incorporation, when the number of outstanding
shares of Class B Stock falls below 5% of the aggregate number of the
issued and outstanding shares of Common Stock and Class B Stock, each share
of Class B Stock is automatically converted into one share of Common Stock
and each share of Class A Stock is automatically converted into one share
of Common Stock. Accordingly, under the Company's certificate of
incorporation, an exchange of the Class B Stock for Common Stock would
reduce the Company's three classes of stock to one. A conversion of the
Class B Stock into Common Stock would, however, deprive the Class B
stockholders of certain special rights, including super majority voting
power in certain circumstances. The voting power of the Class B Stock would
be further diluted by the conversion of the non-voting Class A Stock into
voting Common Stock. The holders of the Class B Stock believed, and the
board agreed, that the Class B stockholders should be compensated for the
loss of the Class B Stock's special rights and the dilution of its voting
power, principally through the issuance of a greater number of shares of
Common Stock to the holders of the Class B Stock than the one for one ratio
provided for in the certificate of incorporation. A proposal was presented
to the board for discussion regarding a ratio of 1.5 shares of Common Stock
for each share of Class B Stock. TM Capital prepared a preliminary analysis
of the transaction and the proposed ratio but was not requested to and did
not prepare a fairness opinion. TM Capital's analysis was reviewed with the
board and with the Class B stockholders, and following this review, the
Class B stockholders determined not to proceed with this proposal.
In February 2001, the board began to reconsider recapitalization
transactions, this time concentrating only on transactions that combined
the Class A Stock and the Common Stock. The board believed that combining
Fedders' two classes of listed stock into one would achieve most of its
objectives in simplifying its capital structure and, by leaving the Class B
Stock outstanding, could be structured in a way acceptable to the Class B
stockholders. In February 2001, a proposed transaction was again discussed
with TM Capital, which undertook an analysis of the proposal as to its
fairness to Fedders' stockholders. TM Capital and the board discussed
proposing to the Class B stockholders a recapitalization transaction in
which each share of Class A Stock would be converted into one share of a
new class of voting Common Stock, each share of Common Stock would be
converted into 1.1 shares of the new class of Common Stock and each share
of Class B Stock would be converted into 1.1 shares of a new class of Class
B Stock. The board made this proposal to the Class B stockholders who
indicated that they would support this transaction.
At the regular meeting of the board of directors held on February
27, 2001, the board, together with Fedders' financial advisors, presented
for consideration the proposed recapitalization and combination of the
Common Stock and Class A Stock pursuant to a merger. At that meeting, TM
Capital delivered its oral opinion to the directors, which was subsequently
confirmed in writing, that the exchange of each share of Common Stock for
1.1 shares of new Common Stock, each share of Class A Stock for one share
of new Common Stock and each share of Class B Stock for 1.1 shares of new
Class B Stock was fair, from a financial point of view, to holders of the
Common Stock and Class A Stock. Based on the advice of TM Capital, the
board of directors determined that it was in the best interests of the
stockholders as a whole to complete the recapitalization.
At that meeting, the board determined that the proposed
recapitalization was in the best interests of Fedders and its stockholders
and formally approved the recapitalization and related merger by the
unanimous vote of the directors present at the meeting.
The board of directors determined that a recapitalization of the
Common Stock and Class A Stock through a merger would best meet its
objectives because the recapitalization, subject to approval of the
proposed deletion of Section VI of clause A of Article Second of the
certificate of incorporation, is a one-step transaction that would not
require Fedders to incur new indebtedness and could qualify as a tax-free
reorganization under the Internal Revenue Code. Furthermore, it would best
serve the objectives of the board to:
o enhance stockholder value; and
o improve liquidity and marketability of the Common Stock
by combining Fedders' two classes of listed stock into
one class.
The directors at the February 27, 2001 meeting also approved the
ratios proposed by TM Capital upon which the Common Stock and Class A Stock
would be exchanged for new Common Stock and the Class B Stock exchanged for
new Class B Stock. After this decision, the board of directors unanimously
recommended that the recapitalization be submitted to a vote of the
stockholders. Thereafter, a preliminary version of this document was
prepared by the board of directors and filed with the Securities and
Exchange Commission.
Background of the Proposed Deletion of Section VI of Clause A of Article
Second of the Certificate of Incorporation
In deciding to pursue a recapitalization of Fedders through a
merger, the board of directors recognized that an amendment would be
required to the current certificate of incorporation as a condition to
consummation of the recapitalization. Under Article Second, clause A,
Section VI of the current certificate of incorporation of Fedders, in the
event of a merger or consolidation of Fedders with or into another entity,
the holders of the Class A Stock are entitled to the same per share
consideration in such transaction as is received by the holders of the
Common Stock. However, under the terms of the proposed recapitalization,
the holders of Common Stock will receive 1.1 shares of new Common Stock
while the holders of Class A Stock will only receive one share of Common
Stock. Thus, in order to proceed with the recapitalization as contemplated,
the provision in the current certificate of incorporation must be deleted
or amended. The board decided that the provision should be deleted in its
entirety.
In reviewing the fairness of the proposed deletion of Section VI
of clause A of Article Second of the certificate of incorporation and the
recapitalization, the board of directors looked at all of the consequences
of eliminating the right of holders of the Class A Stock to receive the
same per share consideration as holders of Common Stock in a merger or
consolidation of Fedders. Despite losing this right, as a result of the
recapitalization, the exchange of the non-voting Class A Stock for voting
new Common Stock will result in the holders of Class A Stock gaining the
right to vote their shares. Furthermore, the different exchange ratios for
the Common Stock and the Class A Stock compensate the holders of Common
Stock, who already enjoy voting rights, for the dilution in voting power
that will be caused as a result of the exchange of the non-voting Class A
Stock for voting new Common Stock. Based on these considerations, the board
of directors concluded that the proposed amendment deleting Section VI of
clause A of Article Second of the certificate of incorporation was fair to
all stockholders of Fedders and recommends that you vote FOR such
amendment.
Under the terms of the certificate of incorporation, the proposed
deletion of Section VI of clause A of Article Second of the certificate of
incorporation requires approval of at least a majority of the voting power
of the shares of Common Stock, Class A Stock and Class B Stock, each voting
separately as a class.
Board Review of the Recapitalization
The board of directors reviewed certain steps which it felt were
necessary to facilitate the proposed recapitalization.
The board decided to modify the par value of the new Common Stock
and the new Class B Stock to be issued in the recapitalization and to add
an alternating liquidation preference for the new Common Stock and the new
Class B Stock. See "Description of Fedders Capital Stock Before and After
the Recapitalization" beginning on page 62 for a more complete description
of these changes.
The board of directors believed it was necessary to make certain
changes to the new Class B Stock to take into account the impact the
recapitalization will have on the special rights enjoyed by the Class B
Stock, including the right of the Class B Stock to ten votes per share on
the election of directors. As of July 31, 2001, in any vote of stockholders
in which the holders of the Common Stock and the Class B Stock vote
together as a single class and the holders of Class B Stock have ten votes
per share, the directors and executive officers of Fedders control
approximately 62.5% of the aggregate voting power. The board of directors
estimates that after the recapitalization, in any such vote of
stockholders, the directors and executive officers will control
approximately 52.7% of the aggregate voting power. To compensate the
holders of new Class B Stock for this decrease, the board decided to modify
the dividend rights of the Class B Stock. Currently, if a cash dividend is
paid on the Common Stock a cash dividend of 90% of the amount paid on each
share of Common Stock is payable on each share of Class B Stock. After the
recapitalization, the new Class B Stock will share equally in the payment
of dividends with the new Common Stock. See "Description of Fedders Capital
Stock Before and After the Recapitalization" beginning on page 62 for a
more complete description of the special voting rights of the Class B Stock
and the changes to the dividends rights of the Class B Stock.
The board of directors considered, more generally, that the
recapitalization would reduce the relative voting power of holders of
Common Stock and Class B Stock as a result of the exchange of currently
non-voting Class A Stock for new Common Stock.
The board also took into account the fact that the
recapitalization will cause the number of outstanding shares of new Class B
Stock to decrease as a percentage of the aggregate number of outstanding
shares of new Common Stock and new Class B Stock. Because of this, the
board of directors decided to modify the automatic conversion rights of the
Class B Stock. Currently, the Class B Stock is automatically converted into
Common Stock if the number of outstanding shares of Class B Stock falls
below 5% of the aggregate number of outstanding shares of Common Stock and
Class B Stock. The number of shares of Class B Stock outstanding as of July
31, 2001, represent approximately 14.2% of the aggregate number of
outstanding shares of Class B Stock and Common Stock. After the
recapitalization, the number of shares of Class B Stock outstanding will
represent approximately 7.7% of the aggregate number of shares of Class B
Stock and Common Stock. To adjust for this percentage reduction, the board
of directors decided that the new Class B Stock will automatically convert
into new Common Stock if the number of outstanding shares of new Class B
Stock falls below 2.5% of the aggregate number of outstanding shares of new
Common Stock and new Class B Stock.
The board also determined that the restated certificate of
incorporation should specifically provide that any action required or
permitted to be taken by stockholders must be effected at a duly called
annual or special meeting of stockholders, and the ability of the
stockholders to consent in writing to the taking of any action would be
specifically denied. The current certificate of incorporation does not
currently provide for, or prohibit such stockholder action by written
consent. Under current Delaware law, unless otherwise provided in the
certificate of incorporation, any action required or permitted to be taken
by Fedders' stockholders may be taken without a meeting, without notice to
all stockholders and without a stockholder vote if a written consent
setting forth the action to be taken is signed by the holders of shares of
outstanding stock having the requisite number of votes that would be
necessary to authorize such action if it were taken at a meeting of
stockholders.
Proposals for stockholder action typically involve issues
important to all stockholders relating to Fedders and its future.
Consequently, the board of directors determined that such proposals should
be considered at an annual or special meeting of stockholders, following
notice to all stockholders, where the issues can be discussed by all
interested persons. The restated certificate of incorporation is designed
to achieve this result by requiring all actions that require the approval
of stockholders to be considered at a meeting of stockholders. The notice
provisions currently provided in Article I, Section 4 of Fedders' by-laws
together with the restated certificate of incorporation provide the board
of directors with the opportunity to inform stockholders of a proposed
action, together with the board's recommendation or position with respect
to a proposed stockholder action, thereby enabling stockholders to
better determine whether they desire to attend the stockholder meeting or
grant a proxy to the board of directors in connection with the disposition
of any such business.
The board of directors unanimously approved the restated
certificate of incorporation because it believes it is in the best
interests of all stockholders to be informed of any action to be taken by
the stockholders, including approval of a merger or sale of assets.
Transactions such as mergers or sales of assets that have not been
negotiated or approved by the board could seriously disrupt the business
and management of Fedders and result in terms which may be less favorable
to the stockholders as a whole than would be available in transactions
approved by the board. Board-approved transactions may be carefully planned
and undertaken at an opportune time in order to obtain maximum value for
all of Fedders' stockholders.
Conversely, the restated certificate of incorporation may be
disadvantageous to stockholders because it may limit their ability to amend
the by-laws or remove directors pursuant to a written consent. Any such
holder or group of holders would have to wait until the special meeting of
stockholders to seek approval for such action. It may also be perceived to
be disadvantageous because it could discourage future attempts to acquire
control of Fedders even though a majority of stockholders may believe it is
in their best interests or that they might receive a substantial premium.
Recommendations of the Fedders Board; Reasons for the Recapitalization
Fedders' board of directors has determined that the benefits of
the recapitalization outweigh any disadvantages that may result from the
recapitalization, and recommends that you vote FOR the proposed
recapitalization and each of the changes to the certificate of
incorporation that will be made as a result of the recapitalization. The
recapitalization as currently contemplated cannot be completed unless at
least a majority of the voting power of the shares of Common Stock, Class A
Stock and Class B Stock, each voting separately as a class, approve the
proposed deletion of Section VI of clause A of Article Second of the
certificate of incorporation. Assuming the proposed deletion is approved,
the recapitalization and each of the changes to the certificate of
incorporation that will be made as a result of the recapitalization will
require the approval of at least a majority of the voting power of the
outstanding Common Stock and Class B Stock, voting together as a single
class. Approval of the recapitalization is not conditioned upon the
favorable vote of a majority of Fedders' unaffiliated stockholders.
The board of directors noted that directors and executive officers
beneficially owning, as of July 31, 2001 approximately 0.7% of the
outstanding voting power of the Common Stock, 26.4% of the outstanding
voting power of the Class A Stock and 99.8% of the outstanding voting power
of the Class B Stock have committed to vote their shares in favor of the
proposed deletion of Section VI of clause A of Article Second of the
certificate of incorporation. The board further noted that directors and
executive officers beneficially owning, as of July 31, 2001, approximately
14.8% of the outstanding voting power of the Common Stock and Class B
Stock, voting together as a single class, have committed to vote their
shares in favor of the recapitalization and each of the changes to the
certificate of incorporation that will be made as a result of the
recapitalization.
The board of directors considered that approval of the
recapitalization is not conditioned upon the favorable vote of a majority
of the unaffiliated stockholders of Fedders. Notwithstanding the absence of
a requirement that unaffiliated stockholders separately approve the
recapitalization, the board of directors believes that the procedure that
was followed in determining to approve the recapitalization was fair to all
stockholders of Fedders. As described above, the entire board of directors
of Fedders, including the independent, non-employee directors of Fedders,
unanimously approved the recapitalization. Also, as discussed above, the
recapitalization is conditioned upon the amendment of the restated
certificate of incorporation to delete Article Second, clause A, Section
VI. This proposed deletion requires, among other things, the approval of at
least a majority of the voting power of the shares of Common Stock voting
separately as a class. As of July 31, 2001, the directors and executive
officers of Fedders controlled only 0.7% of the aggregate voting power of
the Common Stock. The agreement that governs the recapitalization contains
provisions which allow the board of directors to terminate the
recapitalization at any time before the merger becomes effective for any
reason, including if the recapitalization would not be in the best
interests of the stockholders. Thus, although the recapitalization is not
structured to require approval of a majority of the unaffiliated
stockholders, the board of directors nevertheless believes that the
recapitalization is procedurally and substantively fair to the unaffiliated
stockholders of Fedders. The non-employee directors of Fedders have not
retained an unaffiliated representative to act solely on behalf of
unaffiliated stockholders for purposes of negotiating the terms of the
recapitalization and/or preparing a report concerning the fairness of the
recapitalization. The board of directors did not believe it necessary to,
and it did not, form a special committee in connection with its
consideration of the recapitalization.
In determining whether to approve the recapitalization and related
merger, and in the process of determining that the recapitalization is
substantively fair to all Fedders stockholders, the board of directors
considered a number of factors, and came to believe the recapitalization
will:
o eliminate potential investor confusion caused by having
two classes of listed stock with similar characteristics
except voting rights;
o simplify Fedders' capital structure, which may generate
increased investor interest, expanded analyst coverage,
and a larger investor base;
o eliminate additional administrative expenses caused by
Fedders' capital structure;
o potentially increase the liquidity, trading volume, and
trading efficiencies of the new Common Stock;
o increase efficiency and flexibility in raising capital
and issuing additional shares if, when, and to the extent
desired by Fedders; and
o eliminate perceived negative impact on the market price
of Fedders' stock that results from having two classes of
listed stock with similar characteristics except voting
rights.
In connection with its deliberations, the board of directors did
not consider, and did not request that TM Capital evaluate, Fedders' net
book value per share, going concern value, or liquidation value. The board
did not view these valuations to be relevant measures, because the
recapitalization does not contemplate either a sale of Fedders or an offer
to purchase Fedders stock. Instead, the recapitalization involves a
combination of Class A Stock and Common Stock into new Common Stock and
Class B Stock into new Class B Stock through a merger with FC Merger Sub,
Inc. As discussed above, the board considered the fairness of the ratios of
new Common Stock and new Class B Stock to holders of Class A Stock, Common
Stock and Class B Stock. However, the Fedders board did not believe that
evaluating Fedders' net book value per share, going concern value or
liquidation value would provide Fedders stockholders with material
information regarding the recapitalization.
After considering the foregoing, the board of directors determined
that the terms of the recapitalization are both procedurally and
substantively fair to the stockholders of Fedders, including the holders of
Class A Stock. In reaching its determination as to fairness, the board did
not assign specific weights to particular factors, but rather considered
all factors as a whole. This discussion of information and factors
considered by the board of directors is not intended to be exhaustive, but
includes all material factors considered by the board in approving the
proposed recapitalization. The board of directors also relied on the
experience and expertise of its financial advisor for quantitative analysis
of the exchange ratio for the recapitalization. See "Fairness Opinion of TM
Capital Corp." below.
The board of directors approved the recapitalization in principle
on February 27, 2001. TM Capital acted as financial advisor to Fedders in
connection with the recapitalization and assisted it in developing the
terms of the recapitalization. Fedders has agreed to pay TM Capital a fee
for its services and to indemnify it against certain liabilities, including
those under the federal securities laws. At a meeting held on February 27,
2001, the board of directors unanimously approved the detailed terms of the
recapitalization. At the February 27, 2001 meeting, the board of directors
received an oral opinion which was later confirmed in writing on March 1,
2001, from TM Capital that, as of that date and subject to the assumptions
and limitations set forth in such opinion, the consideration to be received
by the holders of Common Stock and Class A Stock in the recapitalization
was fair, from a financial point of view, to such holders. See "Fairness
Opinion of TM Capital Corp."
Review of the Recapitalization by Filing Parties
Each of FC Merger Sub, Inc., Salvatore Giordano, Sal Giordano, Jr.
and Joseph Giordano is (together with Fedders) a filing party for the
recapitalization. Each such filing party has reviewed the terms and
conditions of the recapitalization, including the factors reviewed by
Fedders' board of directors and the fairness opinion of TM Capital Corp.
and has determined that the recapitalization is both procedurally and
substantively fair to the unaffiliated stockholders of Fedders. See
"Fairness Opinion of TM Capital Corp." below.
Fairness Opinion of TM Capital Corp.
TM Capital has acted as financial advisor to Fedders and its board
of directors in connection with their examination of the fairness, from a
financial point of view, to the holders of all outstanding shares of
Fedders Class A Stock and Common Stock of the exchange of each share of
Class A Stock for one share of new Fedders Common Stock and each share of
Common Stock for 1.1 shares of new Fedders Common Stock. As part of the
proposed recapitalization transaction, holders of outstanding Class B Stock
will receive 1.1 shares of new Class B Stock. In providing its opinion, TM
Capital necessarily included the Class B Stock in certain analyses, but its
opinion is intended solely for holders of Class A and Common Stock.
TM Capital was retained by the board of directors:
(1) to advise Fedders and its board of directors on the
recapitalization of the Class A and Common Stock into a
new class of Fedders Common Stock; and
(2) to render a written opinion as to the fairness, from a
financial point of view, to the holders of outstanding
Fedders Class A and Common Stock, of the ratio at which
each share of Class A and Common Stock is exchanged for a
new class of Fedders Common Stock.
Fedders hired TM Capital based on its qualifications and expertise
in providing financial advice to companies and its reputation as a
nationally recognized investment banking firm. TM Capital was paid a fee of
$175,000 for the issuance of its opinion upon delivery of the written
opinion to the board of directors. Payment of the fee was not conditional
on the conclusion reached by TM Capital in its opinion. Fedders has also
agreed to indemnify TM Capital against potential liabilities arising out of
its engagement.
At the request of Fedders' board of directors, TM Capital
delivered to the board of directors an analysis of the proposed
recapitalization and its oral fairness opinion on February 27, 2001. The
fairness opinion was subsequently confirmed in writing on March 1, 2001.
The opinion stated that, based upon and subject to the matters set forth in
the opinion, the exchange of each share of Class A Stock for one share of
new Common Stock and each share of Common Stock into 1.1 shares of new
Common Stock was fair, from a financial point of view, to the holders of
all outstanding Fedders Class A and Common Stock. The full text of the
opinion is attached as Annex B to this document and describes the
assumptions made, matters considered, and limits on the scope of the review
undertaken by TM Capital. You are urged to read the opinion carefully and
in its entirety.
TM Capital's opinion addresses only the fairness, from a financial
point of view, to the holders of all outstanding Fedders Class A and Common
Stock of the exchange of each share of Class A Stock for one share of new
Fedders Common Stock and each share of Common Stock for 1.1 shares of new
Fedders Common Stock. The opinion does not address the merits of the
underlying decision by Fedders to approve the proposed recapitalization and
does not constitute a recommendation to any stockholder as to how he or she
should vote with respect to the proposed recapitalization.
In determining the appropriate analyses to conduct, and when
performing those analyses, TM Capital made numerous assumptions with
respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control
of Fedders. The analyses which TM Capital performed are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by the analyses. The
analyses were prepared solely as part of TM Capital's analysis of the
fairness, from a financial point of view, of the recapitalization to the
holders of the Class A and Common Stock.
TM Capital did not express any opinion as to the price at which
the Class A Stock, Common Stock, or the new Fedders Common Stock to be
issued in the recapitalization will trade at any future time. Those trading
prices may be affected by a number of factors, including:
(1) dispositions of shares of the new Fedders Common Stock
within a short period of time after the completion of the
recapitalization;
(2) changes in prevailing interest rates and other factors
which generally influence the price of securities;
(3) adverse changes in the capital markets;
(4) the occurrence of adverse changes in the financial
condition, business, assets, results of operations, or
prospects of Fedders or the markets in which it
participates;
(5) any necessary actions by or restrictions of federal,
state, or other governmental agencies or regulatory
authorities; and
(6) completion of the recapitalization on the terms and
conditions described in this document and the Annexes
attached hereto.
In connection with its review of the proposed recapitalization and
in the preparation of its opinion, TM Capital reviewed and analyzed:
(1) Fedders' Forms 10-K and related financial information for
the years ended August 31, 1996 to 2000 and Form 10-Q and
the related unaudited financial information for the three
months ended November 30, 2000;
(2) Fedders' Schedule 14A filed in connection with its Annual
Meeting held December 19, 2000 and subsequent Forms 4 and
Forms 13-F;
(3) The historical market prices and trading activity for the
Class A Stock and the Common Stock for the period from
January 2, 1998 to February 22, 2001;
(4) The historical market prices and trading activity for the
Class A Stock and the Common Stock compared to that of
certain publicly traded companies which TM Capital deemed
to be relevant;
(5) The financial position and results of operations of
Fedders compared to that of certain companies which TM
Capital deemed to be relevant;
(6) The terms of transactions in which public companies with
two classes of common stock were combined into a single
class of stock;
(7) The terms of transactions in which public companies with
two classes of common stock were acquired;
(8) Premiums paid in relevant transactions in which the
purchaser acquired a substantial share of the target
company; and
(9) Other financial analyses and investigations as it deemed
necessary or appropriate in arriving at its opinion.
TM Capital performed the financial analyses described below, and
reviewed with Fedders' management and board of directors the assumptions
upon which its analyses were based, as well as other factors. The summary
set forth below is not a complete description of the analyses performed or
factors considered by TM Capital.
Summary of Analyses. In connection with its opinion, TM Capital
reviewed and analyzed:
(1) Similar historical recapitalization transactions;
(2) Dual class, publicly-traded companies;
(3) Historical acquisitions of dual class public companies;
(4) The historical trading activity of Fedders' Class A and
Common Stock;
(5) Premiums paid for significant ownership purchases; and
(6) The current and proposed terms, control and voting rights
of the Class A, Common and Class B Stock.
Analysis of Historical Recapitalization Transactions. TM Capital
identified and analyzed 16 recapitalization transactions occurring among
publicly-traded companies in 1998 to 2001. In each recapitalization
transaction, two publicly-traded classes of stock of a single company with
different voting rights were recapitalized as, and combined into, a single
class of common stock. For each of the companies identified for the
analysis, TM Capital examined the number of new shares received in the
recapitalization for each share of the stock that had more votes per share
(the "Control Voting Stock") and the number of new shares received in the
recapitalization for each share of the stock that had fewer (or no) votes
per share (the "Non-Control Stock").
Of the 16 transactions examined, 11 were transactions that used a
one-for-one exchange ratio for each share exchanged. The remaining five
transactions provided greater consideration for the Control Voting Stock
than for the Non-Control Stock. In three transactions this was accomplished
through an exchange ratio for the Control Voting Stock greater than 1.0. In
one case this was accomplished through an exchange ratio for the
Non-Control Stock of less than 1.0, and in another case this was
accomplished through the payment of additional cash consideration to the
holder of the Control Stock. For comparability, TM Capital calculated on a
pro forma basis the equivalent exchange ratio for each of these
transactions if they had achieved the same economic result through the
exchange ratio for the Control Voting Stock.
Based upon this methodology, the exchange ratio for the Control
Voting Stock in the five transactions ranged from 1.01 to 1.32, with an
average of 1.14, as compared to the ratio of 1.10 in the proposed Fedders
recapitalization. The dilution of the ownership interest of the Non-Control
Stock in these transactions ranged from 1.63% to 5.67%, with an average of
3.01%, as compared to the dilution of 5.04% in the proposed Fedders
recapitalization. TM Capital then calculated on a pro forma basis the
exchange ratio for each transaction if the dilution percentage from each
transaction were applied to the 46.88% ownership proportion represented by
Fedders' Non-Control Stock. These adjusted exchange ratios ranged from 1.03
to 1.11, with an average of 1.06, as compared to the ratio of 1.10 in the
proposed Fedders recapitalization.
TM Capital also calculated the ratio of the share prices of the
Control Voting Stock to the Non-Control Stock as of the day prior to the
announcement of each of these five transactions. These ratios ranged from
0.93 to 1.21, with an average of 1.02, as compared to a ratio of 1.13 for
Fedders. TM Capital then compared the exchange ratio in each transaction to
the prior trading ratio of the Control Voting Stock to the Non-Control
Stock. The difference in these ratios ranged from 0.32 higher than the
trading ratio to 0.20 lower than the trading ratio. On average the exchange
ratio in these five transactions was 0.12 higher than the trading ratio. In
the proposed Fedders recapitalization, the exchange ratio was calculated to
be 0.03 lower than the trading ratio of the Control Voting Stock to the
Non-Control Stock prior to the transaction.
Analysis of Dual Class Publicly Traded Companies. TM Capital
identified and analyzed a group of 52 publicly traded U.S. companies with a
minimum market capitalization of $50 million that had two classes of
publicly traded common stock with different voting rights. TM Capital
analyzed the discount or premium at which the lesser voting shares trade
relative to greater voting shares. As of the date of this analysis, the
trading spread between the dual class shares of those companies averaged a
discount of 4.11%, while the trading spread between Fedders Common Stock
and Fedders Class A Stock was a discount of 11.76%.
Analysis of Historical Acquisitions of Dual Class Public
Companies. TM Capital identified and analyzed 24 acquisitions occurring in
1998 to 2001 of companies with two classes of common stock with different
voting rights. Out of those 24 transactions, 21 used a one-for-one exchange
ratio and three had exchange ratios in which an additional premium was paid
to the control shareholders. For each of these three transactions the
consideration paid to the holders of each class of stock was examined to
determine the percentage by which the price per share paid to holders of
the higher voting shares exceeded the price per share paid to holders of
lower voting shares. In the three transactions, the additional premium paid
to the control shareholders ranged from 9.1% to 30.0% and averaged 16.4%.
TM Capital considered it useful to review such acquisition premiums as an
indication of the premium which control shareholders may forego if an
acquisition were to follow the recapitalization; however, as the proposed
recapitalization is not an acquisition, TM Capital did not consider it
meaningful to directly compare such premium to the premium paid in the
recapitalization.
Analysis of the Historical Trading Activity of Fedders' Class A
and Common Shares. TM Capital reviewed and analyzed the historical trading
activity of Fedders' Class A and Common Stock. This analysis included an
examination of the average trading discount at which the Class A Stock
traded as compared to the Common Stock. Based on daily closing prices from
January 2, 1998 to February 22, 2001, the discount between the Class A and
Common Stock averaged 6.9%. The discount for the period from January 2,
2001 to February 22, 2001 averaged 13.2%. For similar periods, the average
daily trading volumes of the shares of Class A Stock as a percentage of the
average daily trading volumes of the shares of Class A Stock and Common
Stock combined were 39.8% and 22.3% respectively.
Analysis of Premiums Paid for Significant Ownership Purchases. TM
Capital reviewed 98 transactions from 1998 to the present and analyzed the
premiums paid in those transactions for significant positions of equity
ranging from 10% to 50%. The corresponding premiums ranged from less than
- -51% to as much as 386% with an average premium of 40.9%. TM Capital
considered it useful to review such share purchase premiums as an
indication of the premium which control shareholders may forego if a share
purchase were to follow the recapitalization; however, as the proposed
recapitalization is not a share purchase, TM Capital did not consider it
meaningful to directly compare such premium to the premium paid in the
recapitalization.
Current and Proposed Terms, Control and Voting Rights of Class A,
Common and Class B Shares. TM Capital analyzed the current and proposed
control and voting rights of each of the classes of stock. Under the
current capitalization, Class A, Common and Class B shareholders have
46.88%, 46.02% and 7.09% of the economic ownership and 0.00%, 86.65% and
13.35% of the votes, respectively. Additionally, under the current
capitalization, in the event of a 15% share purchase or a proxy contest the
Class B shareholders have 60.65% of the votes, the Common shareholders have
39.35% of the votes, while the Class A shareholders have no votes. Under
the proposed recapitalization, the former Class A, former Common and Class
B shareholders would have 44.52%, 48.07% and 7.41% of the economic
ownership and 44.52%, 48.07% and 7.41% of the votes, respectively.
Additionally, under the proposed recapitalization, in the event of a 15%
share purchase or a proxy contest the Class B shareholders would have
44.45% of the votes, the former Common shareholders would have 28.84% of
the votes, and the former Class A shareholders would have 26.71%.
Conclusion. The foregoing description is only a summary of the
material aspects of the financial analyses used by TM Capital in connection
with rendering its opinion. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analyses or of the summary
set forth above, without considering the analyses as a whole, could create
an incomplete view of the processes underlying TM Capital's opinion.
In arriving at its opinion, TM Capital considered the results of
all these analyses. The analyses were prepared solely for the purposes of
TM Capital providing its opinion as to the fairness, from a financial point
of view, to the holders of all outstanding Fedders Class A and Common Stock
of the exchange of each share of Class A Stock for one share of new Common
Stock and each share of Common Stock for 1.1 shares of new Common Stock,
and do not purport to be appraisals or necessarily reflect the prices at
which securities actually may be sold. Any analysis of the fairness, from a
financial point of view, to the stockholders of Fedders, involves complex
considerations and judgments. TM Capital's opinion and the related
presentation to Fedders' board on February 27, 2001 was one of many factors
taken into consideration by Fedders' board of directors in approving the
recapitalization.
TM Capital's opinion was for the use and benefit of Fedders' board
of directors in its consideration of the proposed recapitalization. TM
Capital was not requested to opine as to, and its opinion does not in any
manner address, Fedders' underlying business decision to proceed with or
effect the recapitalization, or the relative merits of the recapitalization
as compared to any alternative business strategies which might exist for
Fedders or the effect of any other transaction in which Fedders might
engage.
TM Capital advised Fedders in its August 1999 acquisition of
Trion, Inc., for which TM Capital received a fee of $525,000, and TM
Capital advised Fedders in its March 2001 acquisition of Polenz GmbH, for
which TM Capital received a fee of $270,000.
Effect of the Recapitalization
Business and Operations; Officers and Directors. Fedders expects
that the recapitalization will have no impact on its operations. Following
the recapitalization, Fedders will continue its current businesses under
the Fedders Corporation name. The Fedders board of directors and executive
officers at the effective time of the recapitalization, will remain in
office following the recapitalization. Pro forma consolidated financial
statements are included elsewhere in this document to reflect the material
changes in the consolidated financial statements following completion of
the recapitalization.
Number of Outstanding Shares. After the recapitalization, Fedders
will have only two classes of stock, both of which will be voting. The
recapitalization will increase the total number of shares of Common Stock
and Class B Stock. As of July 31, 2001, approximately 13,727,159 shares of
Common Stock, 14,808,188 shares of Class A Stock and 2,266,406 shares of
Class B Stock, or a total of approximately 30,801,753 shares, were
outstanding. Following the recapitalization, approximately 29,908,062
shares of new Fedders Common Stock and approximately 2,493,047 shares of
new Fedders Class B Stock will be outstanding. Following the
recapitalization, Fedders Class A Stock will no longer be listed on the New
York Stock Exchange and will be eligible for termination of registration
under the Securities Exchange Act of 1934. The new Fedders Common Stock
will be listed on the New York Stock Exchange and registered under the
Securities Exchange Act of 1934.
Effect on Share Prices. No assurances can be given as to the
market price of new Common Stock after the recapitalization. It is expected
that the market price of new Common Stock after the recapitalization will
reflect both a greater number of shares of new Common Stock outstanding and
the cancellation of the Class A Stock. The post- recapitalization price of
new Common Stock may be lower than the pre-recapitalization price of Common
Stock.
Changes to be Made to the Certificate of Incorporation as a Result
of the Recapitalization. The changes that will be made to Fedders'
certificate of incorporation if the recapitalization is approved are as
follows:
o The Class A Stock will be eliminated;
o The par value of the new Common Stock and the new Class B
Stock will be $0.01, currently the par value of the
Common Stock and the Class B Stock is $1.00;
o The new Common Stock and the new Class B Stock will have
alternating preferences with respect to payments or
distributions in the event of any dissolution,
liquidation or winding up of Fedders, currently there is
no such liquidation preference;
o Each share of new Class B Stock will share equally with
each share of new Common Stock in the payment of
dividends, currently each share of Class B Stock receives
90% of the dividends paid to each share of Common Stock;
o The new Class B Stock will automatically be converted
into shares of new Common Stock if the number of
outstanding shares of new Class B Stock falls below 2.5%
of the aggregate number of issued and outstanding shares
of new Common Stock and new Class B Stock, currently the
Class B Stock will automatically be converted into shares
of Common Stock if the number of outstanding shares of
Class B Stock falls below 5% of the aggregate number of
issued and outstanding shares of Common Stock and Class B
Stock; and
o The restated certificate of incorporation will provide
that any action required or permitted to be taken by the
stockholders must be effected at a duly called annual or
special meeting of stockholders and the ability of the
stockholders to consent in writing to the taking of any
action will be specifically denied, currently Fedders'
certificate of incorporation does not contain any such
provision.
Stockholder Vote
Under the terms of the certificate of incorporation, the proposed
amendment to the certificate of incorporation to delete Section VI of
clause A of Article Second requires approval of at least a majority of the
voting power of the shares of Common Stock, Class A Stock and Class B
Stock, each voting separately as a class.
Assuming the proposed deletion of Section VI of clause A of
Article Second of the certificate of incorporation is approved, the
recapitalization and each of the changes to Fedders' certificate of
incorporation that will be made as a result of the recapitalization will
require the approval of at least a majority of the voting power of the
shares of Common Stock and Class B Stock, voting together as a single
class. Although the holders of Common Stock and Class B Stock will have a
separate vote on the recapitalization and each of the changes that will be
made to Fedders' certificate of incorporation as a result of the
recapitalization, approval of each of the items is conditional upon
approval of all of the items. Thus, a vote against the recapitalization or
any of the changes that will be made to the certificate of incorporation as
a result of the recapitalization will be deemed a vote against all such
proposals.
As of July 31, 2001, in any vote of stockholders in which the
holders of the Common Stock, Class A Stock and Class B Stock vote as
separate classes and the holders of Class B Stock have one vote per share,
the directors and executive officers of Fedders controlled approximately
0.7% of the aggregate voting power of the Common Stock, 26.4% of the
aggregate voting power of the Class A Stock and 99.8% of the aggregate
voting power of the Class B Stock. As of July 31, 2001, in any vote of
stockholders in which the holders of the Common Stock and the Class B Stock
vote together as a single class and the holders of Class B Stock have one
vote per share, the directors and executive officers of Fedders controlled
approximately 14.8% of the aggregate voting power.
Under the terms of the certificate of incorporation, certain
important transactions, including mergers (except where the other party to
the merger is a majority-owned subsidiary of Fedders), require a separate
vote of shares of the Class B Stock, voting separately as a class. However,
the recapitalization does not require a separate vote of the Class B Stock
because the merger is being completed with a wholly-owned subsidiary of
Fedders, FC Merger Sub, Inc. Fedders' certificate of incorporation provides
that the holders of Class A Stock are not entitled to vote at any meeting
of the stockholders or otherwise, except as may be specifically required by
applicable law. The DGCL requires the vote of the holders of the Class A
Stock, voting as a separate class, for the proposed deletion of Section VI
of clause A of Article Second of the certificate of incorporation but does
not require the vote of the holders of Class A Stock for the
recapitalization and each of the changes to the certificate of
incorporation that will be made as a result of the recapitalization. In
addition, approval of the recapitalization is not conditioned upon the
favorable vote of a majority of Fedders' unaffiliated stockholders.
Interests of Certain Persons in the Recapitalization
You should be aware of the interests that directors and executive
officers who are also stockholders of Fedders, including Salvatore
Giordano, the Chairman Emeritus and a director, Sal Giordano, Jr., the
Chairman and Chief Executive Officer, and Joseph Giordano, a director of
Fedders, have in the recapitalization. These interests may be different
than the interests of other stockholders.
Effect on Voting Power.
As of July 31, 2001, the directors and executive officers of
Fedders together controlled 101,036 shares of the Common Stock, or
approximately 0.7% of the Common Stock, 3,906,199 shares of Class A Stock,
or approximately 26.4% of the Class A Stock and 2,262,566 shares of the
Class B Stock, or approximately 99.8% of the Class B Stock.
As of July 31, 2001, in any vote of stockholders in which the
holders of the Common Stock and the Class B Stock vote together as a single
class and the holders of Class B Stock have one vote per share, the
directors and executive officers of Fedders controlled approximately 14.8%
of the aggregate voting power. The board of directors estimates that after
the recapitalization, in any such vote of stockholders, the directors and
executive officers will control approximately 20.1% of the aggregate voting
power.
As of July 31, 2001, in any vote of stockholders in which the
holders of the Common Stock and the Class B Stock vote together as a single
class and the holders of Class B Stock have ten votes per share, the
directors and executive officers of Fedders control led approximately 62.5%
of the aggregate voting power. The board of directors estimates that after
the recapitalization, in any such vote of stockholders, the directors and
executive officers will control approximately 52.7% of the aggregate voting
power.
Effect on Beneficial Interest.
As of July 31, 2001, the directors and executive officers
beneficially owned approximately 2.6% of the Common Stock, 31.3% of the
Class A Stock and 99.8% of the Class B Stock. After the recapitalization,
the directors and executive officers will beneficially own approximately
16.8% of the new Common Stock and 99.8% of the new Class B Stock. As of
July 31, 2001, each director and executive officer owned beneficially the
number of shares of Common Stock, Class A Stock and Class B Stock set forth
in the following table. Shares subject to acquisition are included and
noted appropriately. Unless otherwise indicated, the owners listed have
sole voting and investment power.
Effect on Filing Parties' Interest in Net Book Value and Net
Earnings of Fedders.
As of July 31, 2001, Salvatore Giordano beneficially owned, in the
aggregate, 3,604,425 shares of Common Stock, Class A Stock and Class B
Stock, including shares held by corporations with respect to which he
shares voting and investment power, or 11.7% of the total outstanding stock
of Fedders. As of July 31, 2001, 11.7% of the total outstanding capital
stock of Fedders represented an interest in (i) approximately $11,449 of
Fedders' net book value at May 31, 2001 and (ii) approximately $101 of
Fedders' net loss for the nine months ended May 31, 2001. After the
recapitalization, Salvatore Giordano will beneficially own, in the
aggregate, 3,830,791 shares of Common Stock and Class B Stock, or 11.8% of
the capital stock of Fedders to be outstanding following the
recapitalization. Assuming the recapitalization had been consummated on May
31, 2001, 11.8% of the total outstanding capital stock of Fedders would
have represented an interest in (i) approximately $11,546 of Fedders' net
book value at May 31, 2001 and (ii) approximately $102 of Fedders' net loss
for the nine months ended May 31, 2001.
As of July 31, 2001, Sal Giordano, Jr. beneficially owned, in the
aggregate, 4,145,108 shares of Common Stock, Class A Stock and Class B
Stock, including shares held by corporations with respect to which he
shares voting and investment power, or 13.5% of the total outstanding stock
of Fedders. As of July 31, 2001, 13.5% of the total outstanding capital
stock of Fedders represented an interest in (i) approximately $13,210 of
Fedders' net book value at May 31, 2001 and (ii) approximately $116 of
Fedders' net loss for the nine months ended May 31, 2001. After the
recapitalization, Sal Giordano, Jr. will beneficially own, in the
aggregate, 4,371,474 shares of Common Stock and Class B Stock, or 13.5% of
the capital stock of Fedders to be outstanding following the
recapitalization. Assuming the recapitalization had been consummated on May
31, 2001, 13.5% of the total outstanding capital stock of Fedders would
have represented an interest in (i) approximately $13,210 of Fedders' net
book value at May 31, 2001 and (ii) approximately $116 of Fedders' net loss
for the nine months ended May 31, 2001.
As of July 31, 2001, Joseph Giordano beneficially owned, in the
aggregate, 3,595,423 shares of Common Stock, Class A Stock and Class B
Stock, including shares held by corporations with respect to which he
shares voting and investment power, or 11.7% of the total outstanding stock
of Fedders. As of July 31, 2001, 11.7% of the total outstanding capital
stock of Fedders represented an interest in (i) approximately $11,449 of
Fedders' net book value at May 31, 2001 and (ii) approximately $101 of
Fedders' net loss for the nine months ended May 31, 2001. After the
recapitalization, Joseph Giordano will beneficially own, in the aggregate,
3,823,070 shares of Common Stock and Class B Stock, or 11.8% of the capital
stock of Fedders to be outstanding following the recapitalization. Assuming
the recapitalization had been consummated on May 31, 2001, 11.8% of the
total outstanding capital stock of Fedders would have represented an
interest in (i) approximately $11,546 of Fedders' net book value at May 31,
2001 and (ii) approximately $102 of Fedders' net loss for the nine months
ended May 31, 2001.
As of July 31, 2001, FC Merger Sub, Inc. beneficially owned no
Common Stock, Class A Stock or Class B Stock of Fedders and the
recapitalization will have no impact on its interest in the net book value
and net earnings of Fedders.
Prior to the Recapitalization (1)
Common Stock Class A Stock Class B Stock Total of All Classes
Beneficially Percent of Beneficially Percent of Beneficially Percent of Beneficially Percent of Total
Owned Class Owned Class Owned Class Owned Outstanding
Name of beneficial
owner
Directors
- ---------
Salvatore Giordano 1,100(2) Less than 1% 1,340,759(4)(5) 9.1% 2,262,566(9) 99.8% 3,604,425 11.7%
Sal Giordano, Jr. 1,100(2) Less than 1% 1,881,442(4)(6) 12.7% 2,262,566(9) 99.8% 4,145,108 13.5%
William J. Brennan 5,000 Less than 1% 66,207 Less than 1% __ 0.0% 71,207 Less than 1%
David C. Chang __ 0.0% 9,908 Less than 1% __ 0.0% 9,908 Less than 1%
Michael L. Ducker __ 0.0% __ 0.0% __ 0.0% __ 0.0%
Joseph Giordano 13,910(2) Less than 1% 1,318,947(4)(7) 8.9% 2,262,566(9) 99.8% 3,595,423 11.7%
C.A. Keen __ 0.0% 85,273 Less than 1% __ 0.0% 85,273 Less than 1%
Howard S. Modlin 256,800(3) 1.9% 407,038 (8) 2.7% __ 0.0% 663,838 2.2%
S.A. Muscarnera 55,000 Less than 1% 123,055 Less than 1% __ 0.0% 178,055 Less than 1%
Anthony E. Puleo 2,000 Less than 1% 37,385 Less than 1% __ 0.0% 39,385 Less than 1%
Officers
- --------
Jordan Bruno __ 0.0% 5,000 Less than 1% __ 0.0% 5,000 Less than 1%
Nancy DiGiovanni __ 0.0% 3,005 Less than 1% __ 0.0% 3,005 Less than 1%
Robert N. Edwards __ 0.0% 15,000 Less than 1% __ 0.0% 15,000 Less than 1%
Daryl G. Erbs __ 0.0% 30,769 Less than 1% __ 0.0% 30,769 Less than 1%
Michael B. Etter __ 0.0% 10,000 Less than 1% __ 0.0% 10,000 Less than 1%
Michael Giordano __ 0.0% 70,088 Less than 1% __ 0.0% 70,088 Less than 1%
Sal Giordano III 100 Less than 1% 3,719 Less than 1% __ 0.0% 3,819 Less than 1%
Kent E. Hansen __ 0.0% 25,593 Less than 1% __ 0.0% 25,593 Less than 1%
Judy Katz 26 Less than 1% 3,474 Less than 1% __ 0.0% 3,500 Less than 1%
Robert L. Laurent,
Jr 20,000 Less than 1% 442,419 3.0% __ 0.0% 462,419 1.5%
Joseph B. Noselli __ 0.0% __ 0.0% __ 0.0% __ 0.0%
Marlene M. Volpe 5,000 Less than 1% 35,296 Less than 1% __ 0.0% 40,296 Less than 1%
Total Officers and 357,836 2.5% 4,627,759 32.0% 2,262,566 99.8% 7,278,161 23.6%
Directors
(1) All amounts shown include shares which the named individuals have
the right to acquire beneficial ownership of within 60 days as a
result of the transactions described in Rule 13d-3(d) of the
Securities Exchange Act of 1934, as amended.
(2) The amount shown includes 1,100 shares which are held by a
corporation in which Messrs. Salvatore Giordano, Sal Giordano, Jr.
and Joseph Giordano are officers, directors and stockholders and
share voting and investment power over such shares.
(3) Shares owned by members of Mr. Modlin's family, as to which Mr.
Modlin disclaims beneficial ownership.
(4) Includes 643,309 shares which are held by corporations in which
Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano
are officers, directors and stockholders, and share voting and
investment power over such shares.
(5) Includes 204,292 shares held of record by Mr. Giordano's wife, and
78,861 shares held of record by Mr. Giordano's wife in trust for
their grandchildren, as to which Mr. Giordano disclaims beneficial
ownership.
(6) Includes 18,119 shares held of record by Mr. Giordano's wife,
258,659 shares held of record by Mr. Giordano's wife in trust for
their grandchildren, as to which Mr. Giordano disclaims beneficial
ownership, and 71,630 shares held by Mr. Giordano in trust as
trustee for himself.
(7) Includes 71,630 shares held by Mr. Giordano in trust as trustee
for himself and 186,319 shares held by Mr. Giordano in trust for
his grandchildren.
(8) Includes 384,040 shares owned by members of Mr. Modlin's family,
as to which Mr. Modlin disclaims beneficial ownership.
(9) Shares are owned by Giordano Holding Corporation, as to which
Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano
share voting and investment power.
If the recapitalization had occurred on July 31, 2001, each
director and executive officer would beneficially own the number of shares
of new Common Stock and new Class B Stock set forth on the following table.
After the Recapitalization (1)
Common Stock Class B Stock Total of All Classes
Beneficially Percent of Beneficially Percent of Beneficially Percent of Total
Owned Class Owned Class Owned Outstanding
Name of beneficial
owner
Directors
- ---------
Salvatore Giordano 1,341,969(2)(4)(5) 4.5% 2,488,822(8) 99.8% 3,830,791 11.8%
Sal Giordano, Jr. 1,882,652(2)(4)(6) 6.3% 2,488,822(8) 99.8% 4,371,474 13.5%
William J. Brennan 66,207 Less than 1% __ 0.0% 71,707 Less than 1%
David C. Chang 9,908 Less than 1% __ 0.0% 9,908 Less than 1%
Michael L. Ducker __ 0.0% __ 0.0% __ 0.0%
Joseph Giordano 1,334,248(2)(4)(7) 4.5% 2,488,822(8) 99.8% 3,823,070 11.8%
C.A. Keen 85,273 Less than 1% __ 0.0% 85,273 Less than 1%
Howard S. Modlin 689,518(3) 2.3% __ 0.0% 689,518 2.1%
S.A. Muscarnera 183,555 Less than 1% __ 0.0% 183,555 Less than 1%
Anthony E. Puleo 39,585 Less than 1% __ 0.0% 39,585 Less than 1%
Officers
- --------
Jordan Bruno 5,000 Less than 1% __ 0.0% 5,000 Less than 1%
Nancy DiGiovanni 3,005 Less than 1% __ 0.0% 3,005 Less than 1%
Robert N. Edwards 15,000 Less than 1% __ 0.0% 15,000 Less than 1%
Daryl G. Erbs 30,769 Less than 1% __ 0.0% 30,769 Less than 1%
Michael B. Etter 10,000 Less than 1% __ 0.0% 10,000 Less than 1%
Michael Giordano 70,088 Less than 1% __ 0.0% 70,088 Less than 1%
Sal Giordano III 3,829 Less than 1% __ 0.0% 3,829 Less than 1%
Kent E. Hansen 25,593 Less than 1% __ 0.0% 25,593 Less than 1%
Judy Katz 3,502 Less than 1% __ 0.0% 3,502 Less than 1%
Robert L. Laurent, Jr. 464,419 1.6% __ 0.0% 464,419 1.4%
Joseph B. Noselli __ 0.0% __ 0.0% __ 0.0%
Marlene M. Volpe 40,796 Less than 1% __ 0.0% 40,796 Less than 1%
Total Officers and 5,015,878 16.8% 2,488,822 99.8% 7,510,200 23.2%
Directors
(1) All amounts shown include shares which the named individuals have
the right to acquire beneficial ownership of within 60 days as a
result of the transactions described in Rule 13d-3(d) of the
Securities Exchange Act of 1934, as amended.
(2) The amount shown includes 1,210 shares held by a corporation in
which Messrs. Salvatore Giordano, Sal Giordano, Jr. and Joseph
Giordano are officers, directors and stockholders and share voting
and investment power over such shares.
(3) Includes 666,520 shares owned by members of Mr. Modlin's family,
as to which Mr. Modlin disclaims beneficial ownership.
(4) Includes 643,309 shares held by corporations in which Messrs.
Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano are
officers, directors and stockholders, and share voting and
investment power over such shares.
(5) Includes 204,292 shares held of record by Mr. Giordano's wife, and
78,861 shares held of record by Mr. Giordano's wife in trust for
their grandchildren, as to which Mr. Giordano disclaims beneficial
ownership.
(6) Includes 18,119 shares held of record by Mr. Giordano's wife,
258,659 shares held of record by Mr. Giordano's wife in trust for
their grandchildren, as to which Mr. Giordano disclaims beneficial
ownership, and 71,630 shares held by Mr. Giordano in trust as
trustee for himself.
(7) Includes 71,630 shares held by Mr. Giordano in trust as trustee
for himself and 186,319 shares held by Mr. Giordano in trust for
his grandchildren.
(8) Shares owned by Giordano Holding Corporation, as to which Messrs.
Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano share
voting and investment power.
Directors
This section sets forth the names, ages, addresses and principal
occupations of the members of the board of directors of Fedders. Only one
of the current ten members of the board of directors hold positions with
Fedders and the remaining nine individuals are independent, non-employee
directors.
None of the individuals named in this section have been convicted
in a criminal proceeding during the past five years (excluding traffic
violations or similar misdemeanors) nor were any of such individuals a
party to any judicial or administrative proceeding during the past five
years (except for matters that were dismissed without sanction or
settlement) that resulted in a judgment, decree, or final order enjoining
the person from future violations of, or prohibiting activities subject to,
federal or state securities laws, or a finding of any violation of federal
or state securities laws.
Each of the individuals named below is a citizen of the United
States of America.
Salvatore Giordano, age 90, the Chairman, Emeritus and a director,
has been a director of Fedders since 1945. Mr. Giordano has been associated
with Fedders in an executive capacity for more than five years. He is a
member of the Executive Committee of Fedders.
Sal Giordano, Jr., age 62, the Chairman and Chief Executive
Officer of Fedders, has been a director since 1965. Mr. Giordano has been
associated with Fedders in an executive capacity for more than five years.
He is also currently the Chairman of the Nominating Committee and a member
of the Executive Committee of Fedders. Mr. Giordano is the son of Salvatore
Giordano.
William J. Brennan, age 73, has been a director since 1980. He has
been a financial consultant since 1989. He previously served as a director
of Fedders from 1980 to 1987, and was again elected as a director in 1989.
Mr. Brennan is also currently the Chairman of the Audit Committee of
Fedders.
David C. Chang, age 59, has been a director since 1998. For the
past five years, Dr. Chang has been the President of Polytechnic University
located at Six Metrotech Center, Brooklyn, New York 11201. Prior to that,
Dr. Chang was the Dean of the College of Engineering and Applied Sciences
at Arizona State University. Dr. Chang is currently a member of the Finance
and Nominating Committees of Fedders.
Michael L. Ducker, age 47, has been a director since 2000. From
1999 to present, Mr. Ducker has been Executive Vice President,
International of Federal Express Corporation located at 3610 Hacks Cross
Road, Memphis, Tennessee 38125. Previously, he was President and Division
Head, Asia Pacific Region from 1998 and Senior Vice President of that
division from 1995. He has been with Federal Express Corporation since
1975. Mr. Ducker is a member of the Audit and Compensation Committees of
Fedders.
Joseph Giordano, age 68, has been a director since 1961. Mr.
Giordano has been retired for the past five years. He was a Senior Vice
President of Fedders until his retirement on August 31, 1992, and President
of NYCOR, Inc. until its merger into Fedders on August 13, 1996. Mr.
Giordano is currently a member of the Executive and Finance Committees. Mr.
Giordano is the son of Salvatore Giordano.
C.A. Keen, age 76, has been a director since 1996. Mr. Keen has
been retired for the past five years. He was a Vice President of Fedders
for more than 20 years until his retirement in August, 1992. He was also a
director of NYCOR, Inc. until its merger into Fedders on August 13, 1996.
Mr. Keen is currently a member of the Finance and Nominating Committees of
Fedders.
Howard S. Modlin, age 70, has been a director since 1977. For the
past five years, Mr. Modlin has been the President of the law firm of
Weisman, Celler Spett & Modlin, P.C. located at 445 Park Avenue, New York,
New York 10022. His law firm renders legal services to Fedders from time to
time. Mr. Modlin is also a director of General DataComm Industries, Inc.
and Trans-Lux Corporation. Mr. Modlin is currently Chairman of the
Compensation Committee and a member of the Executive and Audit Committees
of Fedders.
S.A. Muscarnera, age 61, has been a director since 1982. Mr.
Muscarnera has been retired for the past five years. He was Senior Vice
President and Secretary of Fedders prior to his retirement on August 31,
1996. Mr. Muscarnera served in various capacities with Fedders over 39
years, including human resources and legal. Mr. Muscarnera is currently
Chairman of the Finance Committee and a member of the Audit Committee of
Fedders. Mr. Muscarnera is the nephew of Salvatore Giordano.
Anthony E. Puleo, age 66, has been a director since 1994. For the
past two and one-half years Mr. Puleo has been the President of Puleo Tree
Co. located at 3620 Kennedy Road, South Plainfield, New Jersey 07080. Puleo
Tree Co. is an importer of Christmas items. Prior to that Mr. Puleo was
President of Boulderwood Corporation. Mr. Puleo is currently a member of
the Compensation and Nominating Committees.
Officers
This section sets forth the names, ages, addresses and positions
of the current executive officers of Fedders. The following discussion
summarizes any material occupations of the current executive officers of
Fedders over the past five years and family relations.
None of the individuals named below have been convicted in a
criminal proceeding during the past five years (excluding traffic
violations or similar misdemeanors) nor were any of such individuals a
party to any judicial or administrative proceeding during the past five
years (except for matters that were dismissed without sanction or
settlement) that resulted in a judgment, decree, or final order enjoining
the person from future violations of, or prohibiting activities subject to,
federal or state securities laws, or a finding of any violation of federal
or state securities laws.
Each of the individuals named below is a citizen of the United
States of America.
Sal Giordano, Jr., age 62, has been the Vice Chairman and Chief
Executive Officer of Fedders for more than five years.
Jordan Bruno, age 50, was elected Vice President, Taxes of Fedders
in December 2000. Previously, Mr. Bruno was an appointed officer of Fedders
from 1999 to December 2000 and prior thereto, Director of Taxes since 1995.
Mr. Bruno has been employed by Fedders since September 1991.
Nancy DiGiovanni, age 49, was elected Treasurer of Fedders in
October 1998. Prior to her election, she served as Assistant Treasurer of
Fedders since 1989.
Robert N. Edwards, age 55, was elected Vice President and General
Counsel of Fedders in June 2000. Mr. Edwards has been General Counsel of
Fedders since 1995. Mr Edwards has been employed by Fedders since November
1992.
Daryl G. Erbs, age 43, has been Senior Vice President,
International since March 2001. Previously he was Senior Vice President,
Technology and Vice President, Technology of Fedders since August 1999.
Prior to joining Fedders in February 1999, Mr. Erbs worked for Carrier
Corporation for many years, serving in a variety of engineering management
positions.
Michael B. Etter, age 46, was elected President and Chief
Operating Officer in June 2000. Previously, Mr. Etter was Senior Vice
President of Fedders and Chairman and Chief Executive Officer of Fedders
Air Conditioning since May 1, 1999. Mr. Etter served as Vice President of
Materials Management and Global Purchasing for Fedders from December 1997
to May 1999 and, prior thereto, Vice President, Materials Management since
1995. Mr. Etter has been employed by Fedders since May 1977.
Michael Giordano, age 37, was elected Executive Vice President,
Finance and Administration and Chief Financial Officer in June 2000.
Previously, Mr. Giordano was Vice President, Finance and Chief Financial
Officer of Fedders since July 1, 1999. Mr. Giordano also served as Senior
Vice President of Fedders International, Inc. from 1998 until being elected
to his current position and, prior thereto, Managing Director of the
Singapore office of Fedders International since 1995. Mr. Giordano has been
employed by Fedders since June 1990. Mr Giordano is a grandson of Salvatore
Giordano.
Sal Giordano III, age 42, was elected Group Vice President,
Engineered Products in December 1999. Mr. Giordano was a Vice President of
Fedders since August 1996 and President of Melcor Corporation from 1995.
Mr. Giordano has been employed by Fedders since February 1983. Mr. Giordano
is a grandson of Salvatore Giordano.
Kent E. Hansen, age 54, was elected Executive Vice President and
Secretary in June 2000. Previously, Mr. Hansen was Senior Vice President
and Secretary from August 1996 and, prior thereto, Vice President, Finance
and General Counsel of NYCOR, Inc.
Judy A. Katz, age 49, was elected Vice President, Strategic
Planning in June 2000. Previously, Ms. Katz held the position of Vice
President, Communications and Planning since August 1998 and, prior
thereto, Director, Strategic Support since September 1995. Ms. Katz has
been employed by Fedders since September 1990.
Robert L. Laurent, Jr., age 46, is the Executive Vice President,
Acquisitions and Alliances of Fedders since January 1999. From 1995 to
January 1999, Mr. Laurent was the Executive Vice President, Finance and
Administration and Chief Financial Officers of Fedders. Mr. Laurent has
been employed by Fedders since August 1980.
Joseph B. Noselli, age 45, was elected Corporate Controller in
June 2000. Previously, Mr. Noselli was with Ingersoll-Rand Co. from 1980 to
2000, most recently as Vice President and Controller of its production
equipment group.
Marlene M. Volpe, age 65, was elected Vice President, Human
Resources in June 2000. Previously, Ms. Volpe was Vice President,
Recruitment and Leadership Development since 1995. She has been employed by
Fedders since October 1971.
Financing the Recapitalization
No outside financing is required in order to complete the proposed
recapitalization. Fedders will use existing cash to make any cash payments
payable in lieu of fractional shares upon the exchange of the Common Stock
and Class A Stock for new Common Stock and the Class B Stock for new Class
B Stock.
Material Federal Income Tax Consequences of the Recapitalization
The following discussion summarizes the material U.S. federal
income tax consequences of the recapitalization to holders of Common Stock,
Class A Stock and Class B Stock. This discussion assumes that such shares
are held as capital assets and does not address all of the U.S. federal
income tax consequences that may be relevant to particular stockholders in
light of their individual circumstances or to stockholders that are subject
to special rules, such as:
o financial institutions,
o mutual funds,
o tax-exempt organizations,
o insurance companies,
o dealers in securities or foreign currencies,
o persons (including traders in securities) using a
mark-to-market method of accounting,
o stockholders who hold such shares as a hedge against
currency risk or as part of a straddle, constructive sale
or conversion transaction or
o stockholders who acquired their shares upon the exercise
of employee stock options or otherwise as compensation.
The following discussion is based upon the Internal Revenue Code,
laws, regulations, rulings and decisions in effect as of the date of this
proxy statement, all of which are subject to change, possibly with
retroactive effect. Tax consequences under state, local and foreign laws
are not addressed herein. No ruling has been or will be sought from the
Internal Revenue Service as to the U.S. federal income tax consequences of
the recapitalization and the following discussion is not binding on the
Internal Revenue Service. YOU ARE STRONGLY URGED TO CONSULT YOUR TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE RECAPITALIZATION,
INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS BASED ON YOUR PARTICULAR FACTS AND CIRCUMSTANCES.
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, which
is based upon representations of Fedders, the recapitalization should
constitute a "recapitalization" within the meaning of Section 368(a)(1)(E)
of the Internal Revenue Code. Accordingly, you should not recognize any
gain or loss upon the receipt of new Common Stock or Class B Stock in
exchange for your old Common Stock, Class A Stock or Class B stock pursuant
to the recapitalization (except, as described below, with respect to cash
received in lieu of fractional shares).
A stockholder's aggregate adjusted tax basis in the new Common
Stock or new Class B Stock received in the recapitalization should be equal
to such stockholder's aggregate tax basis in its old Common Stock, Class A
Stock or Class B Stock surrendered in exchange therefor (adjusted with
respect to fractional shares). A stockholder's holding period for the new
Common Stock or new Class B Stock received in the recapitalization should
include such stockholder's holding period for its old Common Stock, Class A
Stock or Class B Stock surrendered in exchange therefor.
Stockholders that receive cash in lieu of fractional shares as a
result of the recapitalization will be treated as having received such
fractional shares as a result of the recapitalization and then as having
sold such fractional shares for cash. The amount of any capital gain or
loss attributable to such sale will be equal to the difference between the
cash received with respect to the fractional shares and the ratable portion
of such stockholder's tax basis of the Common Stock or Class B Stock
surrendered that is allocated to such fractional shares. Any such capital
gain or loss will be long-term capital gain or loss if such stockholder's
holding period for such Common Stock or Class B Stock exceeded 12 months
upon consummation of the recapitalization.
The preceding discussion is general in nature and does not
consider any particular stockholder's individual facts and circumstances.
Since the tax consequences of the recapitalization to you will depend on
your particular facts and circumstances, you are strongly urged to consult
your tax advisor as to the tax consequences to you of the recapitalization.
INFORMATION ABOUT FEDDERS AND CERTAIN AFFILIATES
Fedders Corporation
Fedders Corporation
505 Martinsville Road,
Liberty Corner, New Jersey 07938
Telephone: (908) 604-8686
Fedders, a Delaware corporation, is a leading global
manufacturer of air treatment products, including air conditioners, air
cleaners, dehumidifiers and humidifiers, and thermal technology products.
Fedders was established more than 100 years ago and has been in the air
treatment business for more than 50 years. Fedders has been expanding into
a broad variety of air treatment businesses. Fedders is a filing person for
the recapitalization.
FC Merger Sub, Inc.
FC Merger Sub, Inc.
505 Martinsville Road,
Liberty Corner, New Jersey 07938
Telephone: (908) 604-8686
FC Merger Sub, Inc., a wholly owned subsidiary of
Fedders, is a newly formed Delaware corporation created for the sole
purpose of implementing the recapitalization. It has not conducted any
business since its formation. At the time of the recapitalization, FC
Merger Sub, Inc. will merge into Fedders and cease to exist. FC Merger Sub,
Inc. is a filing person for the recapitalization.
FC Merger Sub, Inc. has not been convicted in a criminal
proceeding since its creation, nor has it been a party to any judicial or
administrative proceeding since its creation that resulted in a judgment,
decree, or final order enjoining it from future violations of, or
prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
Giordano Holding Corporation
505 Martinsville Road
P.O. Box 850
Liberty Corner, New Jersey 07938
Telephone: (908) 604-8686
Giordano Holding Corporation is a holding company as to
which Salvatore Giordano, Sal Giordano, Jr. and Joseph Giordano share
voting and investment power. Giordano Holding Corporation was created
solely for the purpose of holding certain investments, including Fedders
stock.
Giordano Holding Corporation has not been convicted in a
criminal proceeding since its creation, nor has it been a party to any
judicial or administrative proceeding since its creation that resulted in a
judgment, decree, or final order enjoining it from future violations of, or
prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
Salvatore Giordano
c/o Fedders Corporation
505 Martinsville Road,
Liberty Corner, New Jersey 07938
Telephone: (908) 604-8686
Salvatore Giordano is the Chairman Emeritus of Fedders'
board and has been a director of Fedders since 1945. Mr. Giordano had been
associated with Fedders in an executive capacity for more than five years.
He is currently a member of the Executive Committee of Fedders.
Sal Giordano, Jr.
c/o Fedders Corporation
505 Martinsville Road,
Liberty Corner, New Jersey 07938
Telephone: (908) 604-8686
Sal Giordano, Jr. is the Chairman and Chief Executive
Officer of Fedders and has been a director since 1965. Mr. Giordano has
been associated with Fedders in an executive capacity for more than five
years. He is also currently the Chairman of the Nominating Committee and a
member of the Executive Committee of Fedders. Mr. Giordano is the son of
Salvatore Giordano.
Joseph Giordano
c/o Fedders Corporation
505 Martinsville Road,
Liberty Corner, New Jersey 07938
Telephone: (908) 604-8686
Joseph Giordano has been a director of Fedders since
1961. Mr. Giordano has been retired for the past five years. He was a
Senior Vice President of Fedders until his retirement on August 31, 1992,
and President of NYCOR, Inc. until its merger into Fedders on August 13,
1996. Mr. Giordano is currently a member of the Executive and Finance
Committees. Mr. Giordano is the son of Salvatore Giordano.
THE RECAPITALIZATION
If you are a holder of record of Fedders Common Stock or Class B
Stock and you return a signed proxy or proxies in the enclosed form(s), the
shares represented by your proxy or proxies will be voted for approval of
the recapitalization and for the adoption of the recapitalization agreement
described in this document, unless you instruct otherwise. Fedders' board
of directors has unanimously approved and adopted the recapitalization
agreement, a copy of which is attached as Annex A and incorporated in this
document by reference. The following discussion highlights the material
information about the proposed recapitalization of the Fedders Common
Stock, Class A Stock and Class B Stock, but may not include all of the
information that you, as a stockholder, would like to know. The board of
directors urges you to read the agreement attached to this document as
Annex A in its entirety.
General
Subject to the satisfaction of the conditions to completion of the
recapitalization, including the approval of the proposed deletion of
Section VI of clause A of Article Second of the certificate of
incorporation and the recapitalization and each of the changes to the
certificate of incorporation that will be made as a result of the
recapitalization and adoption of the merger agreement by the stockholders
of Fedders, FC Merger Sub, Inc. will be merged with and into Fedders at the
effective time. The "effective time" is the time at which the merger will
become effective under Delaware law. Fedders will be the surviving
corporation and will continue to do business under the name Fedders
Corporation.
What Fedders Stockholders Will Receive
In the recapitalization, Fedders Common Stock and Class A Stock
will be exchanged for new Common Stock and Fedders Class B Stock will be
exchanged for new Class B Stock. As a result of this recapitalization:
o Each share of Common Stock will be exchanged for 1.1
shares of new Common Stock;
o Each share of Class A Stock will be exchanged for one
share of new Common Stock; and
o Each share of Class B Stock will be exchanged for 1.1
shares of new Class B Stock.
Any stockholder who would in the aggregate hold less than one
share of new Common Stock or new Class B Stock after the exchange will not
receive fractional shares. In lieu of any such fractional shares, each
holder of Common Stock or Class B Stock who would otherwise have been
entitled to a fraction of a share of new Common Stock or new Class B Stock,
as the case may be, upon surrender of their Common Stock or Class B Stock
will be paid cash upon such surrender in an amount equal to the product of
such fraction multiplied by the closing sale price of the new Common Stock
on the New York Stock Exchange on the date upon which the merger becomes
effective, or, if the new Common Stock is not so traded on such day, the
closing sale price on the next day on which such stock is traded on the New
York Stock Exchange.
As of July 31, 2001, there were 13,727,159 shares of Common Stock
outstanding, 14,808,188 shares of Class A Stock outstanding and 2,266,406
shares of Class B Stock outstanding.
Conditions to Completion of the Recapitalization
Completion of the recapitalization is subject to various
conditions that must be satisfied or waived prior to the recapitalization.
These conditions include that:
o Fedders receives the required stockholder approval for
the proposed amendment to delete Section VI of clause A
of Article Second of the certificate of incorporation;
o Fedders receives the required stockholder approval for
the recapitalization;
o Fedders receives the required stockholder approval for
each of the changes to its certificate of incorporation
that will be made as a result of the recapitalization;
o the registration statement filed with the Securities and
Exchange Commission in connection with the issuance of
the new Common Stock and new Class B Stock becomes
effective;
o the New York Stock Exchange approves the listing of the
new Fedders Common Stock;
o if a filing becomes necessary under the Hart-Scott-Rodino
Antitrust Improvements Act, all waiting periods have
expired or terminated;
o Fedders receives all necessary material licenses,
permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and
parties to contracts with Fedders and its subsidiaries;
and
o Fedders files a certificate of merger with the Secretary
of State of Delaware.
The only material United States regulatory approvals that may be
required are certain filings under the Hart- Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and its associated rules. Under this
act, certain existing holders of Fedders Common Stock, Class A Stock and/or
Class B Stock may be required to furnish certain information to the
Antitrust Division of the United States Department of Justice and the
Federal Trade Commission. Based on the reported sale price of shares of
Common Stock and Class A Stock as of July 31, 2001, no filings will be
required under the Hart-Scott-Rodino Antitrust Improvements Act. If
circumstances change, the existing holders of Fedders Common Stock, Class A
Stock and/or Class B Stock will make any necessary filings. If such filings
become necessary, a condition to the completion of the recapitalization
will be that the required waiting periods under such act must have expired
or terminated.
Fedders does not anticipate that any of the conditions to the
recapitalization will be waived. Fedders expects that the recapitalization
will be completed as soon as practicable after the conditions to the
completion are satisfied, or at such later date as is, in the judgment of
Fedders' board of directors, in the best interests of the stockholders of
Fedders.
Under the terms of the certificate of incorporation, the proposed
amendment to the certificate of incorporation to delete Section VI of
clause A of Article Second requires approval of at least a majority of the
voting power of the shares of Common Stock, Class A Stock and Class B
Stock, each voting separately as a class.
Assuming the proposed deletion of Section VI of clause A of
Article Second of the certificate of incorporation is approved, the
recapitalization and each of the changes to Fedders' certificate of
incorporation that will be made as a result of the recapitalization will
require the approval of at least a majority of the voting power of the
shares of Common Stock and Class B Stock, voting together as a single
class.
Fedders' directors and executive officers have indicated that they
intend to vote FOR (i) the proposed deletion of Section VI of clause A of
Article Second of the certificate of incorporation, (ii) the
recapitalization and (iii) each of the changes to the certificate of
incorporation that will be made as a result of the recapitalization. As of
July 31, 2001, these directors and executive officers were entitled to vote
approximately: (i) 101,036 shares of Common Stock, representing
approximately 0.7% of the voting power of the Common Stock; (ii) 3,906,199
shares of Class A Stock, or approximately 26.4% of the outstanding Class A
Stock; (iii) 2,262,566 shares of Class B Stock, or approximately 99.8% of
the outstanding Class B Stock; and (iv) 2,363,602 shares of Common Stock
and Class B Stock representing approximately 14.4% of the voting power of
the Common Stock and Class B Stock, voting together as a single class.
Approval of the recapitalization will also constitute approval of:
o the restated certificate of incorporation attached as
Exhibit A to the recapitalization agreement attached
hereto as Annex A, which will be in effect upon
consummation of the recapitalization; and
o the conversion of outstanding stock options and rights
for Common Stock or Class A Stock into options or rights
to receive shares of new Common Stock.
Fedders would re-solicit the approval of its stockholders if (i)
the information contained in this proxy statement/prospectus contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements made in this proxy statement/prospectus
not misleading or (ii) Fedders desired to materially alter the terms of the
recapitalization.
Amendment of the Recapitalization Agreement
The agreement governing the transaction provides that the boards
of directors of Fedders and FC Merger Sub, Inc., by mutual written
agreement, may amend, modify, or supplement the agreement, at any time
prior to the effective time of the merger, notwithstanding any approval of
this Agreement by the stockholders of either or both of Fedders and FC
Merger Sub, Inc.
Abandonment of the Recapitalization
The agreement governing the transaction provides that the board of
directors may terminate the agreement or abandon the recapitalization in
its sole discretion, notwithstanding adoption and approval of the agreement
by the stockholders of either or both of Fedders and FC Merger Sub, Inc.
Estimated Fees and Expenses of the Recapitalization
The following table sets forth the estimated expenses incurred and
to be incurred by Fedders in connection with the combination. These fees
will be paid by Fedders.
Filing/registration fees......................................... $
NYSE listing fees................................................
Printing and engraving costs.....................................
Legal fees and expenses..........................................
Accounting fees and expenses.....................................
Financial advisory fees and expenses.............................
Depositary fees and expenses.....................................
Proxy solicitation fees and expenses.............................
Public relations fees and expenses...............................
Miscellaneous....................................................
-----------
-----------
Total............................................................ $
===========
===========
Effective Time of the Recapitalization
The recapitalization will become effective upon the date that the
certificate of merger is filed with the Secretary of State of the State of
Delaware. This is expected to occur on ________, 2001, following the
special meeting.
Regulatory Matters
To complete the recapitalization:
o Fedders must file a certificate of merger with the Secretary
of State of Delaware; and
o if a filing becomes necessary under the Hart-Scott-Rodino
Antitrust Improvements Act, all waiting periods must have
expired or terminated.
Fedders does not need to comply with any other federal or state regulatory
requirements or obtain any other regulatory approvals in order to effect
the combination.
Appraisal Rights
If the recapitalization is completed, the Class B stockholders
will be entitled to seek an appraisal of, and be paid in cash the "fair
value" of, their shares instead of receiving the stock or cash that they
would otherwise be entitled to under the recapitalization agreement. These
rights are commonly referred to as "appraisal rights." Section 262 of the
Delaware General Corporation Law sets forth the requirements that must be
satisfied and the procedures that must be followed to exercise appraisal
rights. Section 262 is reproduced in Annex C to this proxy
statement/prospectus. Because Fedders Common Stock and Class A Stock is
listed on the New York Stock Exchange, holders of Common Stock and Class A
Stock are not entitled to appraisal rights under Section 262.
Giordano Holding Corporation holds approximately 99.8% of the
Class B Stock. Salvatore Giordano, Fedders' Chairman Emeritus, Sal
Giordano, Jr., Fedders' Chairman and Chief Executive Officer, and Joseph
Giordano, a director of Fedders, collectively hold all of the voting power
of Giordano Holding Corporation. They have unanimously indicated their
intention not to cause the Giordano Holding Corporation to exercise its
statutory appraisal rights.
Any Class B stockholders who are entitled to appraisal rights
must, in order to exercise such rights, demand such rights BEFORE the vote
on the recapitalization at the special meeting of stockholders. Failure to
satisfy the requirements and follow the procedures set forth in Section 262
may result in a loss of appraisal rights. If a Class B stockholder demands
appraisal but is determined not to be entitled to such rights or otherwise
loses such rights, the Class B stockholder will be entitled to receive the
consideration that such stockholder would have been entitled to under the
terms of the recapitalization agreement as if such stockholder had not
sought to exercise appraisal rights. Appraisal rights are available only to
record holders of shares.
Section 262 requires Fedders to notify the Class B stockholders,
at least 20 days before the special meeting, as to the availability of
appraisal rights and to provide the Class B stockholders with a copy of
Section 262. This proxy statement/prospectus, including Annex C, serves as
the required notice.
To exercise statutory appraisal rights, a Class B stockholder
must:
o deliver to Fedders before the vote on the
recapitalization a written demand for an appraisal of the
shares of Class B Stock;
o continuously hold shares of Class B Stock from the date
the Class B stockholder delivers a written demand for an
appraisal through the effective date of the
recapitalization; and
o not vote in favor of the recapitalization agreement.
In addition, if neither any Class B stockholder who has demanded
appraisal rights nor Fedders has filed a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the shares for
which appraisal is sought within 120 days after the effective date of the
recapitalization, then all appraisal rights will be lost. Fedders has no
obligation and does not intend to file such an appraisal petition.
Accordingly, it is the obligation of the Class B stockholders seeking
appraisal to file an appropriate appraisal petition with the Court of
Chancery within the 120-day time period prescribed by Section 262 of the
DGCL.
Any demand for an appraisal must be in writing, signed and mailed
or delivered to:
Fedders Corporation
505 Martinsville Road
Liberty Corner, New Jersey 07938-0813
Attn: Corporate Secretary
A written demand must reasonably inform Fedders of the identity of
the Class B stockholder and of the Class B stockholder's intent to demand
appraisal of his, her or its shares of Class B Stock. Voting against the
recapitalization or otherwise failing to vote for the recapitalization will
not by itself constitute a demand for an appraisal or sufficient notice of
an election to exercise appraisal rights. If a Class B stockholder sells or
otherwise transfers or disposes of the shares of Class B Stock before the
effective time of the recapitalization, such stockholder will lose the
appraisal rights with respect to those shares.
A demand for appraisal should be signed by or on behalf of the
Class B stockholder exactly as the Class B stockholder's name appears on
the Class B stockholder's stock certificates. If the shares are owned of
record in a fiduciary capacity, such as by a trustee, guardian or
custodian, the demand should be executed in that capacity, and if the
shares are owned of record by more than one person, as in a joint tenancy
or tenancy in common, the demand should be executed by or on behalf of all
joint owners. An authorized agent, including one or more joint owners, may
execute a demand for appraisal on behalf of a record holder; however, in
the demand the agent must identify the record owner or owners and expressly
disclose that the agent is executing the demand as an agent for the record
owner or owners. A record holder such as a broker who holds shares as
nominee for several beneficial owners may exercise appraisal rights for the
shares held for one or more beneficial owners and not exercise appraisal
rights for the shares held for other beneficial owners. In this case, the
written demand should state the number of shares for which appraisal rights
are being demanded. When no number of shares is stated, the demand will be
presumed to cover all shares held of record by the broker or nominee.
If the recapitalization is completed, Fedders will send, within 10
days after the effective date of the recapitalization, notice of the
effective date of the recapitalization to each Class B stockholder who has
properly demanded appraisal rights under Section 262 and has not voted in
favor of the recapitalization agreement.
If a Class B stockholder has complied with the requirements for
exercising appraisal rights, then during the 120 days following the
effective date of the recapitalization, such stockholder may request from
Fedders a statement as to the aggregate number of shares not voted in favor
of the recapitalization agreement and with respect to which demands for
appraisal have been received and the number of holders of those shares.
Upon receiving any such request, which must be made in writing, Fedders
will mail a statement of that information to such Class B stockholder
within 10 days.
If a petition for an appraisal is filed within the 120 day period
prescribed by Section 262, the Delaware Court of Chancery will hold a
hearing on the petition to determine the stockholders entitled to appraisal
rights and the "fair value" of their shares as of the effective date of the
recapitalization. The determination of fair value will not include any
element of value arising from the accomplishment or expectation of the
recapitalization. The court will also determine a fair rate of interest, if
any, to be paid upon the amount determined to be the fair value of the
shares. The court may determine that the fair value of the shares is more
than, the same as or less than the value of the consideration that you
otherwise would have been entitled to receive under the recapitalization
agreement. The Delaware Supreme Court has stated that "proof of value by
any techniques or methods that are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered
in the appraisal proceedings.
The costs of the action may be determined by the Delaware Court of
Chancery and taxed upon the parties as the court deems equitable in the
circumstances. Upon application of a stockholder, the court may order that
all or a portion of the expenses incurred by any stockholder in an
appraisal proceeding, including, without limitation, reasonable attorneys'
fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all of the shares
entitled to appraisal.
If a Class B stockholder has duly demanded an appraisal of shares
of Class B Stock, such stockholder will not, after the effective date of
the recapitalization, be entitled to vote those shares for any purpose, nor
will such stockholder be entitled to the payment of dividends or other
distributions on those shares, except for dividends or other distributions
payable to stockholders as of a record date before the effective date of
the recapitalization.
A Class B stockholder may withdraw demand for appraisal within 60
days after the effective date of the recapitalization. Any attempt to
withdraw a demand more than 60 days after the effective date of the
recapitalization will require Fedders' written approval. Once a petition
for appraisal is filed with the Delaware Court of Chancery, the appraisal
proceeding may not be dismissed without court approval. If a demand for
appraisal rights has been effectively withdrawn, the Class B stockholder
will receive the consideration in the recapitalization which the Class B
stockholder would otherwise be entitled to under the terms of the
recapitalization agreement as if such stockholder had not sought to
exercise appraisal rights.
If a Class B stockholder is entitled to appraisal rights and
properly demands appraisal, but fails to perfect the appraisal rights,
otherwise loses the appraisal rights or effectively withdraws the demand
for an appraisal, the shares of Class B Stock will be converted into the
right to receive the consideration that the Class B stockholder would have
been entitled to under the terms of the recapitalization agreement if such
stockholder had not sought to exercise appraisal rights.
Employee Benefit Plans
Except as described below with respect to stock benefits, all of
Fedders' employee benefit and welfare plans, such as medical plans and
pension plans, are expected to continue substantially unchanged and
benefits under these plans are not expected to be substantially affected by
the recapitalization. Fedders expects that substantially all plans
providing stock benefits will continue in effect after the
recapitalization, adjusted to reflect shares of new Common Stock instead of
Common Stock or Class A Stock. Fedders, however, reserves the right to
modify any employee benefit or welfare plan.
Employee Stock Options
Each of the outstanding employee options to purchase shares of
Fedders Common Stock will be converted into options to purchase that number
of shares of new Common Stock determined by multiplying the number of
shares of Common Stock currently subject to such options by 1.1. Each of
the outstanding employee options to purchase shares of Fedders Class A
Stock will be converted into options to purchase that number of shares of
new Common Stock equal to the number of shares of Class A Stock currently
subject to such option.
New York Stock Exchange Listing
Fedders is in the process of obtaining the necessary approval from
the New York Stock Exchange in order to effect the recapitalization.
Fedders Common Stock is currently listed on the New York Stock Exchange
under the symbol "FJC". Following the recapitalization, the new Fedders
Common Stock will continue to be listed on the New York Stock Exchange
under the symbol "FJC". Fedders Class A Stock, which is currently listed on
the New York Stock Exchange under the symbol "FJA", will no longer be
listed after the recapitalization and will cease to exist. The new Class B
Stock will continue to be unlisted.
RECENT TRANSACTIONS IN SECURITIES
The following table indicates, with respect to any purchases of
Common Stock and/or Class A Stock made by Fedders or affiliates of Fedders
since August 1998, the range of prices paid for the shares, the amount of
shares purchased, and the average purchase price for the shares for each
quarterly period since August 1998:
SECURITIES AVERAGE
FISCAL YEAR PURCHASED RANGE OF PRICES PAID PURCHASE PRICE
- ------------------------ ------------------------------ ------------------------------------------- ---------------------------
Common Class A Common Class A Common Class A
------------- ------------- ------------------- -------------------- ------------ -----------
1999
------------- ------------- ------------------- -------------------- ------------ -----------
First Quarter...... 206,400 727,600 $ 3.94 to $ 5.00 $ 3.94 to $ 4.94 $ 4.96 $ 4.84
Second Quarter..... 419,300 674,000 4.75 to 4.94 4.50 to 4.94 4.89 4.62
Third Quarter...... 91,200 285,700 5.56 to 6.00 4.79 to 5.75 5.88 5.00
Fourth Quarter..... 186,500 75,300 5.31 to 6.24 5.25 to 5.94 5.86 5.88
2000
First Quarter...... -- 456,300 -- $ 4.62 to $ 4.9375 -- $ 4.77
Second Quarter..... -- 526,100 -- 4.68 to 4.93 -- 4.85
Third Quarter...... -- 40,900 -- 4.9314 to 4.9375 -- 4.93
Fourth Quarter..... 567,900 1,176,800 $ 4.93 to 5.00 4.50 to 4.93 $ 4.97 4.80
2001
First Quarter...... 666,500 655,900 $ 3.50 to $ 4.9375 $ 3.4375 to $ 4.9375 $ 4.10 $3.70
Second Quarter..... 293,000 235,500 4.6755 to 4.9657 4.05 to 4.625 4.84 4.41
Third Quarter...... 521,200 69,100 4.4902 to 4.9900 4.08 to 4.790 4.98 4.52
FINANCIAL STATEMENTS
Fedders' Annual Report on Form 10-K for the fiscal year ended
August 31, 2000 contains the Consolidated Balance Sheets of Fedders and its
subsidiaries at August 31, 2000 and 1999, and the Consolidated Statements
of Operations and Comprehensive Income, Consolidated Statements of
Stockholders' Equity, and Consolidated Statements of Cash Flows of Fedders
and its subsidiaries for the fiscal years ended August 31, 2000, 1999 and
1998, the financial statement schedule, and the related notes thereto.
Fedders' Quarterly Report on Form 10-Q for the period ended May 31, 2001
contains the unaudited Consolidated Balance Sheets, Consolidated Statements
of Operations and Comprehensive Income, and Consolidated Statements of Cash
Flows for Fedders for the periods ended May 31, 2001 and 2000. These
financial statements, the financial statement schedule, and the related
notes thereto, are incorporated in this document by reference.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA
The unaudited pro forma consolidated condensed financial data is
derived from the application of pro forma adjustments to major categories
of Fedders' consolidated financial statements as of May 31, 2001 and for
the nine months ended May 31, 2001 and for the fiscal year ended August 31,
2000 to illustrate the effect of the transaction related to the
recapitalization of all of Fedders' outstanding shares of capital stock.
The pro forma adjustments are described in the accompanying notes and are
based upon available information that Fedders believes is reasonable. These
tables do not present all of Fedders' financial information.
The unaudited pro forma consolidated condensed financial data do
not purport to be indicative of what Fedders' operations would have been
had the recapitalization taken place on the dates indicated. In addition,
the results for the nine months ended May 31, 2001 are not necessarily
indicative of results that may be expected for the full year. This
information should be read together with Fedders' consolidated financial
statements and the notes thereto which are incorporated by reference in
this document, and the information under "Selected Consolidated Financial
Data" beginning on page 11.
The unaudited pro forma consolidated recapitalization table
represents the effect on stockholders' equity due to the recapitalization
of capital stock as if the recapitalization had been completed on May 31,
2001. The unaudited recapitalization data is derived from the unaudited
Consolidated Balance Sheet of Fedders as of May 31, 2001. Information is
presented to reflect pro forma adjustments for the recapitalization of
Fedders Common and Class A Stock into a single class of new Common Stock
and the exchange of Class B Stock for new Class B Stock.
The pro forma earnings per share calculations reflect the effect
of the recapitalization. The information is derived from the unaudited
Consolidated Statements of Operations and Comprehensive Income for the nine
months ended May 31, 2001 and the audited Consolidated Statements of
Operations and Comprehensive Income for the fiscal year ended August 31,
2000. The information is presented to reflect the pro forma effect on
earnings per share as a result of the change in the weighted average number
of shares outstanding due to the recapitalization.
Pro Forma Consolidated Condensed Unaudited Recapitalization Table
(As of May 31, 2001)
(dollars in thousands, except per share amounts)
As of Pro Forma
May 31, 2001 Adjustments As Adjusted
Stockholders' Equity:
Common Stock, $1.00 par value,
80,000,000 shares authorized; 16,135,459
shares issued and 14,086,859 shares
outstanding, actual; no shares issued and
outstanding, as adjusted. $16,135 $(16,135)(a) -
New Common Stock, $0.01 par value,
70,000,000 shares authorized; no shares issued
and outstanding, actual; 37,736,622 shares
issued and 30,335,141 outstanding, as
adjusted. - 377(a) 377
Class A Stock, $1.00 par value,
60,000,000 shares authorized; 19,987,618
shares issued and 14,839,597 shares
outstanding, actual; no shares issued and
outstanding, as adjusted. 19,988 (19,988)(a) -
Class B Stock, $1.00 par value, 7,500,000 shares
authorized; 2,266,406 shares issued and
outstanding, actual; no shares issued and
outstanding, as adjusted. 2,267 (2,267)(b) -
New Class B Stock, $0.01 par value, 5,000,000
shares authorized; no shares issued and
outstanding, actual; 2,493,047 shares issued
and outstanding, as adjusted. - 25(b) 25
Paid-in capital 30,640 37,988 (c) 68,628
Retained earnings 65,819 - 65,819
Treasury stock, at cost, 7,196,621 shares of
Common and Class A Stock, actual; 7,401,481
shares of new Common Stock, as adjusted. (33,952) - (33,952)
Deferred compensation (729) - (729)
Accumulated comprehensive loss (2,317) - (2,317)
---------- -------------- --------------
---------- -------------- --------------
Total stockholders' equity $97,851 - $97,851
========== ============== ==============
Notes to the Pro Forma Consolidated Condensed Unaudited Recapitalization Table
(a) Pro forma adjustments as of May 31, 2001 assume all outstanding
shares of Fedders' Common and Class A Stock are exchanged for new
Common Stock at an exchange ratio of 1.1 shares of new Common
Stock for each share of Common Stock exchanged and one share of
new Common Stock for each share of Class A Stock exchanged. On a
pro forma basis, 37,736,622 shares of the new Common Stock would
be issued after the merger. The Class A Stock ceases to exist
after the merger. The par value of the new Common Stock is $.01
per share.
(b) Pro forma adjustments reflect the Fedders Class B Stock exchanged
for new Class B Stock on a pro forma basis. 2,493,047 shares of
new Class B Stock are issued at a par value of $.01 per share.
(c) Reflects the net effect of the recapitalization on paid-in capital
as a result of the pro forma adjustments due to the exchange of
shares and the reduction in the par value to $.01 per share of
both the new class of Common and Class B Stock.
Pro Forma Unaudited Comparative Condensed Consolidated Earnings Per Share
Nine Months Ended Fiscal Year Ended
May 31, August 31,
2001 2000
---- ----
Net income (loss) (a):
As reported $(862) $20,401
Pro forma $(862) $20,401
Earnings (loss) per share (b):
Basic as reported $(0.03) $0.58
Basic pro forma $(0.03) $0.55
Diluted as reported $(0.03) $0.57
Diluted pro forma $(0.03) $0.55
Weighted average shares (c):
Basic as reported 32,093 35,325
Basic pro forma 33,798 37,176
Diluted as reported 32,093 35,490
Diluted pro forma 33,798 37,341
Cash dividends per share (d):
As reported:
Common and Class A $0.090 $0.120
Class B 0.081 0.108
Pro forma:
New Common and Class B 0.090 0.120
Notes to the Pro Forma Unaudited Comparative Condensed Consolidated
Earnings Per Share
(a) Pro forma net income remains unchanged for the period.
(b) Pro forma earnings per share reflect the recapitalization assuming
all outstanding shares are exchanged at the beginning of the
fiscal year for the years being reported. Basic and diluted
earnings per share are computed by dividing net income by the
respective weighted average shares outstanding for the periods
presented. Basic and diluted pro forma earnings per share are
adjusted to reflect the impact of the recapitalization on the
number of weighted average shares outstanding.
(c) Pro forma weighted average shares reflect an increase in the
number of shares outstanding due to the recapitalization and
exchange of all Common and Class A Stock into new Common Stock,
and Class B Stock into new Class B Stock.
(d) Pro forma cash dividends per share reflect the impact of the
recapitalization on the weighted average number of shares
outstanding and the result of both the new Common and new Class B
Stock sharing equally in the payment of dividends.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed
charges for each of last two fiscal and most recent interim period.
Year ended
Year ended August 31, Nine Months
August 31, 2000 1999 ended May 31, 2001
-------------------------------------------------------
Ratio of earnings
to fixed charges 2.6x 3.6x -
The ratio of earnings to fixed charges equals earnings before fixed charges
divided by fixed charges. For purposes of calculating the ratio of earnings
to fixed charges, earnings before fixed charges reduced by capitalized
interest consist of income from continuing operations before income taxes
and cumulative effect of changes in accounting principles plus fixed
charges reduced by capitalized interest. Fixed charges consist of interest
expense, capitalized interest, amortization of debt issue costs and that
portion of rental expense representative of the interest factor. For the
nine months ended May 31, 2001, earnings were insufficient to cover fixed
charges by approximately $1,450.
Supplemental Condensed Consolidating Financial Statements
Fedders North America, Inc. or FNA is a wholly-owned subsidiary of
the Company. FNA and the Company are the Issuer and the Guarantor,
respectively, of the senior subordinated notes due 2007, of which 100 million
were issued in August 1997, and $50 million were issued in August, 1999.
The Company's guarantee is full and unconditional. The following
condensed consolidating financial statements present separate information
for FNA , the Company and its subsidiaries other than FNA, and should be
read in connection with the consolidated financial statements of the
Company in Form 10K referenced herein.
The amounts shown for FNA (presented under the caption "Fedders
North America") in the following historical condensed consolidating
financial statements include the accounts of Trion, Inc., which was
acquired by FNA by way of a cash tender offer totaling $39.4 million.
The amounts presented under the caption "Other Fedders" include
all non-guarantor subsidiaries. Certain prior year amounts have been
reclassified to conform to current year presentation.
Fedders Corporation
Supplemental Condensed Consolidating Financial Statements
Condensed Consolidating Statements of Operations and Comprehensive Income
For the Three Months Ended May 31, 2001
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net sales $ 155,058 $ 31,666 $ - $ - $ 186,724
Cost of sales 132,891 21,825 - - 154,716
Selling, general and
administrative expense 10,764 6,762 (707) - 16,819
------------- ----------- ----------- ----------- ------------
Operating income 11,403 3,079 707 - 15,189
Partners' net interest in
joint venture results - 205 - - 205
Equity income in investment - - 5,524 (5,524) -
Net interest (expense) income (5,884) (639) 1,287 - (5,236)
------------- ----------- ----------- ----------- ------------
Income (loss) before income taxes 5,519 2,645 7,518 (5,524) 10,158
Provision for income taxes 1,788 852 648 - 3,288
------------- ----------- ----------- ----------- ------------
Net income (loss) 3,731 1,793 6,870 (5,524) 6,870
Foreign currency translation,
net of tax 31 (387) - - (356)
------------- ----------- ----------- ----------- ------------
Comprehensive income (loss) $ 3,762 $ 1,406 $ 6,870 $ (5,524) $ 6,514
============= =========== =========== =========== ============
For the Three Months Ended May 31, 2000
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net sales $ 180,454 $ 14,741 $ - $ - $ 195,195
Cost of Sales 142,533 8,412 - - 150,945
Selling, general and
administrative expense 9,461 4,334 185 - 13,980
------------- ----------- ----------- ----------- ------------
Operating income (loss) 28,460 1,995 (185) - 30,270
Partners' net interest in
joint venture results - (489) - - (489)
Equity income in investment - - 17,126 (17,126) -
Net interest income (expense) (4,220) (376) (97) - (4,693)
-------------- ------------ ----------- ----------- ------------
Income (loss) before income taxes 24,240 1,130 16,844 (17,126) 25,088
Provision (benefit) for income taxes 7,866 378 (91) - 8,153
------------- ----------- ----------- ----------- ------------
Net income (loss) 16,374 752 16,935 (17,126) 16,935
Foreign currency translation,
net of tax (78) 137 - - 59
------------- ----------- ----------- ----------- ------------
Comprehensive income (loss) $16,296 $889 $16,935 $(17,126) $16,994
============= =========== =========== =========== ============
For the Nine Months Ended May 31, 2001
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net sales $ 242,110 $ 67,896 $ - $ - $ 310,006
Cost of sales 201,784 47,098 - - 248,882
Selling, general and
administrative expense 29,764 16,540 1,971 - 48,275
------------- ----------- ----------- ----------- ------------
Operating income (loss) 10,562 4,258 (1,971) - 12,849
Partners' net interest in
joint venture results - (462) - - (462)
Equity (loss) income in investment - - (380) 380 -
Net interest (expense) income (13,318) (1,602) 1,257 - (13,663)
------------- ----------- ----------- ----------- ------------
(Loss) income before income taxes (2,756) 2,194 (1,094) 380 (1,276)
(Benefit) provision for income taxes (896) 714 (232) (414)
------------- ----------- ----------- ----------- ------------
Net (loss) income (1,860) 1,480 (862) 380 (862)
Foreign currency translation,
net of tax (12) (791) - - (803)
------------- ----------- ----------- ----------- ------------
Comprehensive (loss) income $ (1,872) $ 689 $ (862) $ 380 $ (1,665)
============= =========== =========== =========== ============
For the Nine Months Ended May 31, 2000
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net sales $ 270,896 $ 39,353 $ - $ - $ 310,249
Cost of sales 206,191 24,398 - - 230,589
Selling, general and
administrative expense 30,344 11,087 220 - 41,651
------------- ----------- ----------- ----------- ------------
Operating income (loss) 34,361 3,868 (220) - 38,009
Partners' net interest in
joint venture results - (1,890) - - (1,890)
Equity income in investment - - 15,663 (15,663) -
Net interest (expense) income (12,439) (696) 847 - (12,288)
------------- ----------- ----------- ----------- ------------
Income (loss) before income taxes 21,922 1,282 16,290 (15,663) 23,831
Provision for income taxes 7,125 416 204 7,745
------------- ----------- ----------- ----------- ------------
Net income (loss) 14,797 866 16,086 (15,663) 16,086
Foreign currency translation,
net of tax 48 (192) - - (144)
------------- ----------- ----------- ----------- ------------
Comprehensive income (loss) $ 14,845 $ 674 $ 16,086 $ (15,663) $ 15,942
============= =========== =========== =========== ============
Fiscal Year Ended August 31, 2000
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net sales $ 355,077 $ 59,617 $ - $ (4,885) $ 409,809
Cost of sales 269,656 40,082 - (4,885) 304,853
Selling, general and
administrative expense 40,321 15,054 2,727 - 58,102
------------- ----------- ----------- ----------- ------------
Operating income (loss) 45,100 4,481 (2,727) - 46,854
Partners' net interest in
joint venture results - (796) - - (796)
Equity income in investment - - 20,801 (20,801) -
Net interest (expense) income (16,513) (1,142) 2,071 - (15,584)
------------- ----------- ----------- ----------- ------------
Income (loss) before income taxes 28,587 2,543 20,145 (20,801) 30,474
Provision (benefit) for income taxes 9,170 1,159 (256) - 10,073
------------- ----------- ----------- ----------- ------------
Net income (loss) 19,417 1,384 20,401 (20,801) 20,401
Foreign currency translation,
net of tax 62 (624) - - (562)
------------- ----------- ----------- ----------- ------------
Comprehensive income (loss) $ 19,479 $ 760 $ 20,401 $ (20,801) $ 19,839
============= =========== =========== =========== ============
Fiscal Year Ended August 31, 1999
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net sales $ 326,793 $ 29,163 $ - $ - $ 355,956
Cost of sales 247,158 24,207 - - 271,365
Selling, general and
administrative expense 31,282 7,168 2,783 - 41,233
Restructuring charge 3,100 - - - 3,100
------------- ----------- ----------- ----------- ------------
Operating income (loss) 45,253 (2,212) (2,783) - 40,258
Partners' net interest in
joint venture results - 412 - - 412
Equity income in investment - - 22,140 (22,140) -
Net interest (expense) income (10,121) (320) 757 - (9,684)
-
------------- ----------- ----------- ----------- ------------
Income (loss) before income taxes 35,132 (2,120) 20,114 (22,140) 30,986
Provision (benefit) for income taxes 11,512 (640) (610) - 10,262
------------- ----------- ----------- ----------- ------------
Net income (loss) 23,620 (1,480) 20,724 (22,140) 20,724
Foreign currency translation,
net of tax 42 55 - - 97
------------- ----------- ----------- ----------- ------------
Comprehensive income (loss) $ 23,662 $ (1,425) $ 20,724 $ (22,140) $ 20,821
============= =========== =========== =========== ============
Fiscal Year Ended August 31, 1998
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net sales $ 289,412 $ 32,709 $ - $ - $ 322,121
Cost of sales 226,805 25,546 - - 252,351
Selling, general and
administrative expense 25,768 13,115 1,327 - 40,210
Restructuring charge 15,360 1,390 - - 16,750
------------- ----------- ----------- ----------- ------------
Operating income (loss) 21,479 (7,342) (1,327) - 12,810
Partners' net interest in
joint venture results - 403 - - 403
Equity income in investment - - 2,460 (2,460) -
Netinterest (expense) income (10,354) (401) 2,145 - (8,610)
------------- ----------- ----------- ----------- ------------
Income (loss) before income taxes 11,125 (7,340) 3,278 (2,460) 4,603
Provision (benefit) for income taxes 3,894 (2,569) 286 1,611
------------- ----------- ----------- ----------- ------------
Net income (loss) 7,231 (4,771) 2,992 (2,460) 2,992
Foreign currency translation,
net of tax - (190) - - (190)
------------- ----------- ----------- ----------- ------------
Comprehensive income (loss) $ 7,231 $ (4,961) $ 2,992 $ (2,460) $ 2,802
============= =========== =========== =========== ============
Fedders Corporation
Supplemental Condensed Consolidating Financial Statements
Condensed Consolidating Balance Sheets
May 31, 2001
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
ASSETS:
Cash and cash equivalents $ 4,743 $ 5,715 $ 10,476 $ - $ 20,934
Net accounts receivable 72,218 17,650 - - 89,868
Inventories 58,709 26,140 - - 84,849
Other current assets 2,267 4,475 4,684 - 11,426
------------- ----------- ----------- ----------- ------------
Total current assets 137,937 53,980 15,160 - 207,077
Investments in subsidiaries - - 33,042 (33,042) -
Property, plant and equipment, net 58,570 19,439 1,230 - 79,239
Goodwill 66,621 27,084 - - 93,705
Other long-term assets 5,558 2,904 23,176 (7,023) 24,615
------------- ----------- ----------- ----------- ------------
Total Assets $ 268,686 $ 103,407 $ 72,608 $ (40,065) $ 404,636
============= =========== =========== =========== ============
LIABILITES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Short-term notes $ - $ 7,708 $ - $ - $ 7,708
Current portion of long-term debt 579 2,320 87 - 2,986
Accounts and income tax payable 40,913 24,140 4,022 - 69,075
Accrued expense 35,050 10,068 3,093 - 48,211
------------- ----------- ----------- ----------- ------------
Total current liabilities 76,542 44,236 7,202 - 127,980
Long-term debt 153,995 12,102 122 - 166,219
Other long-term liabilites 2,482 11,211 5,916 (7,023) 12,586
Net due to (from) affiliates - 38,483 (38,483) - -
Stockholders' equity: -
Common, Class A and Class B Stock 5 - 38,390 (5) 38,390
Additional paid in Capital 21,292 24,642 30,640 (45,934) 30,640
Retained earnings (deficit) 14,610 (25,190) 65,819 10,580 65,819
Deferred compensation and Treasury
Stock - - (34,681) - (34,681)
Accumulated other comprehensive
(loss) income (240) (2,077) (2,317) 2,317 (2,317)
------------- ----------- ----------- ----------- ------------
Total stockholders' equity 35,667 (2,625) 97,851 (33,042) 97,851
------------- ----------- ----------- ----------- ------------
Total liabilities and stockholders'
equity $ 268,686 $ 103,407 $ 72,608 $ (40,065) $ 404,636
============= =========== =========== =========== ============
May 31, 2000
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
ASSETS:
Cash and cash equivalents $ 32,641 $ 7,815 $ 14,090 $ - $ 54,546
Net accounts receivable 73,039 10,568 - - 83,607
Inventories 51,070 18,338 - - 69,408
Other current assets 3,017 2,744 14,895 (4,058) 16,598
------------- ----------- ----------- ----------- ------------
Total current assets 159,767 39,465 28,985 (4,058) 224,159
Investments in subsidiaries - - 38,930 (38,930) -
Property, plant and equipment, net 56,262 13,835 1,546 - 71,643
Goodwill 68,007 16,611 - - 84,618
Other long-term assets 8,497 3,185 14,140 - 25,822
------------- ----------- ----------- ----------- ------------
Total Assets $ 292,533 $ 73,096 $ 83,601 $ (42,988) $ 406,242
============= =========== =========== =========== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current Liabilities:
Short-term notes $ - $ 9,994 $ - $ - $ 9,994
Current portion of long-term debt 1,423 4 - - 1,427
Accounts and income tax payable 43,338 4,729 4,269 - 52,336
Accrued expenses 49,366 6,113 - (4,058) 51,421
------------- ----------- ----------- ----------- ------------
Total current liabilities 94,127 20,840 4,269 (4,058) 115,178
Long-term debt 153,732 4,634 - - 158,366
Other long-term liabilites 2,064 7,782 5,248 - 15,094
Net due to (from) affiliates - 43,520 (43,520) - -
Stockholders' equity:
Common, Class A and Class B Stock 5 - 38,075 (5) 38,075
Additional paid in Capital 21,292 23,764 28,938 (45,056) 28,938
Retained earnings (deficit) 21,558 (27,188) 66,285 5,630 66,285
Deferred compensation and Treasury
Stock - - (15,193) - (15,193)
Accumulated other Comprehensive
(loss) income (245) (256) (501) 501 (501)
------------- ----------- ----------- ----------- ------------
Total stockholders' equity 42,610 (3,680) 117,604 (38,930) 117,604
------------- ----------- ----------- ----------- ------------
Total liabilites and stockholders' equity $ 292,533 $ 73,096 $ 83,601 $ (42,988) $ 406,242
============= =========== =========== =========== ============
August 31, 2000
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
ASSETS:
Cash and cash equivalents $ 59,716 $ 6,319 $ 21,158 $ - $ 87,193
Net accounts receivable 15,352 10,042 2,720 (2,720) 25,394
Inventories 56,027 19,144 - - 75,171
Other current assets 2,623 3,386 4,370 - 10,379
------------- ----------- ----------- ----------- ------------
Total current assets 133,718 38,891 28,248 (2,720) 198,137
Investments in subsidiaries - - 33,733 (33,733) -
Property, plant and equipment, net 56,686 14,092 1,490 - 72,268
Goodwill 68,267 17,041 - - 85,308
Other long-term assets 5,635 1,926 15,683 - 23,244
------------- ----------- ----------- ----------- ------------
Total Assets $ 264,306 $ 71,950 $ 79,154 $ (36,453) $ 378,957
============= =========== =========== =========== ============
LIABILITES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current portion of long-term debt $ 527 $ 5,748 $ - $ - $ 6,275
Accounts and income tax payable 44,762 5,352 - (2,720) 47,394
Accrued expenses 25,284 6,305 5,720 - 37,309
------------- ----------- ----------- ----------- ------------
Total current liabilities 70,573 17,405 5,720 (2,720) 90,978
Long-term debt 153,676 10,236 - - 163,912
Other long-term liabilites 2,513 3,768 5,526 - 11,807
Net due to (from) affiliates - 44,352 (44,352) - -
Stockholders' equity -
Common, Class A and Class B Stock 5 - 38,227 (5) 38,227
Additional paid in Capital 21,292 23,764 29,591 (45,056) 29,591
Retained earnings (deficit) 16,470 (26,670) 69,575 10,200 69,575
Deferred compensation and Treasury
Stock - - (24,005) - (24,005)
Accumulated other Comprehensive
(loss) income (223) (905) (1,128) 1,128 (1,128)
------------- ----------- ----------- ----------- ------------
Total stockholders' equity 37,544 (3,811) 112,260 (33,733) 112,260
------------- ----------- ----------- ----------- ------------
Total liabilities and stockholders'
equity $ 264,306 $ 71,950 $ 79,154 $ (36,453) $ 378,957
============= =========== =========== =========== ============
August 31, 1999
----------------------------------------------------------------------
Fedders
North Other Eliminating Fedders
America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
ASSETS:
Cash and cash equivalents $ 76,092 $ 6,465 $ 34,952 $ - $ 117,509
Net accounts receivable 13,655 7,373 7,515 (7,515) 21,028
Inventories 46,991 14,623 - - 61,614
Other current assets 5,714 5,782 161 - 11,657
------------- ----------- ----------- ----------- ------------
Total current assets 142,452 34,243 42,628 (7,515) 211,808
Investments in subsidiaries - - 23,480 (23,480) -
Property, plant and equipment, net 60,226 9,305 1,240 - 70,771
Goodwill 67,228 6,771 - - 73,999
Other long-term assets 9,835 2,494 13,435 - 25,764
------------- ----------- ----------- ----------- ------------
Total Assets $ 279,741 $ 52,813 $ 80,783 $ (30,995) $ 382,342
============= =========== =========== =========== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current Liabilities:
Current portion of long-term debt $ 2,188 $ 2,410 $ - $ - $ 4,598
Accounts and income tax payable 52,436 3,560 - (7,515) 48,481
Accrued expenses 40,960 3,761 1,742 - 46,463
------------- ----------- ----------- ----------- ------------
Total current liabilities 95,584 9,731 1,742 (7,515) 99,542
Long-term debt 154,114 2,651 - - 156,765
Other long-term liabilites 2,301 8,445 6,356 - 17,102
Net due to (from) affiliates - 36,248 (36,248) - -
Stockholders' equity -
Common, Class A and Class B Stock 5 - 37,802 (5) 37,802
Additional paid in Capital 21,292 23,764 28,069 (45,056) 28,069
Retained earnings (deficit) 6,761 (28,054) 53,379 21,293 53,379
Deferred compensation and treasury
Stock - - (10,029) - (10,029)
Accumulated other comprehensive
(loss) income (316) 28 (288) 288 (288)
------------- ----------- ----------- ----------- ------------
Total stockholders' equity 27,742 (4,262) 108,933 (23,480) 108,933
------------- ----------- ----------- ----------- ------------
Total liabilities and stockholders'
equity $ 279,741 $ 52,813 $ 80,783 $ (30,995) $ 382,342
============= =========== =========== =========== ============
Fedders Corporation
Supplemental Condensed Consolidating Financial Statements
Condensed Consolidating Cash Flows
For the Nine Months Ended May 31, 2001
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
operating activities (47,472) $ 19,965 $ (2,786) $ - $ (30,293)
------------- ----------- ----------- ----------- ------------
Net additions to property, plant
and equipment (7,111) (1,897) (259) - (9,267)
Acquisition of businesses - (19,449) - - (19,449)
------------- ----------- ----------- ----------- ------------
Net cash used in investing activities (7,111) (21,346) (259) - (28,716)
------------- ----------- ----------- ----------- ------------
Net proceeds from of short-term borrowings - 3,955 - - 3,955
Net (repayments of) proceeds from
long-term debt (390) 2,691 209 - 2,510
Cash dividends - - (2,976) - (2,976)
Proceeds from stock options exercised - - 275 - 275
Repurchase of capital stock - - (10,573) - (10,573)
Other - - (441) - (441)
Change in net due to (from) affiliate - (5,869) 5,869 - -
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by financing
activities (390) 777 (7,637) - (7,250)
------------- ----------- ----------- ----------- ------------
Net decrease in cash and cash equivalents (54,973) (604) (10,682) - (66,259)
Cash and cash equivalents at
beginning of year 59,716 6,319 21,158 - 87,193
------------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end of year $ 4,743 $ 5,715 $ 10,476 $ - $ 20,934
============= =========== =========== =========== ============
For the Nine Months Ended May 31, 2000
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
operating activities $ (38,731) $ 3,676 $ (5,749) $ - $ (40,804)
------------- ----------- ----------- ----------- ------------
Net additions to property, plant and
equipment (3,321) (1,938) (543) - (5,802)
Acquisition of businesses - (7,416) - - (7,416)
------------- ----------- ----------- ----------- ------------
Net cash used in investing activities (3,321) (9,354) (543) - (13,218)
------------- ----------- ----------- ----------- ------------
Net proceeds from short-term borrowings - 448 - - 448
Net repayments of long-term debt (1,399) (692) - - (2,091)
Cash dividends - - (3,180) - (3,180)
Proceeds from stock options exercised - - 839 - 839
Repurchase of capital stock - - (4,957) - (4,957)
Change in net due to (from) affiliate - 7,272 (7,272) - -
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
financing activites (1,399) 7,028 (14,570) - (8,941)
------------- ----------- ----------- ----------- ------------
Net (decrease) increase in cash
and cash equivalents (43,451) 1,350 (20,862) - (62,963)
Cash and cash equivalents at
beginning of year 76,092 6,465 34,952 - 117,509
------------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end of year $ 32,641 $ 7,815 $ 14,090 $ - $ 54,546
============= =========== =========== =========== ============
Fiscal Year Ended August 31, 2000
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
operating activities $ (699) $ 3,475 $ 1,843 $ - $ 4,619
------------- ----------- ----------- ----------- ------------
Net additions to property, plant and
equipment (3,870) (3,140) (611) - (7,621)
Acquisition of businesses - (7,416) - (7,416)
Dividend received from affiliate - 9,708 (9,708) -
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
investing activities (3,870) (10,556) 9,097 (9,708) (15,037)
------------- ----------- ----------- ----------- ------------
Net repayments of short and long-term
borrowings (2,099) (1,169) - - (3,268)
Cash dividends (9,708) - (4,205) 9,708 (4,205)
Proceeds from stock options exercised - - 1,059 - 1,059
Repurchase of capital stock - - (13,484) - (13,484)
Change in net due to (from) affiliate - 8,104 (8,104) - -
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
financing activities (11,807) 6,935 (24,734) 9,708 (19,898)
Net (decrease) increase in cash and cash
equivalents (16,376) (146) (13,794) - (30,316)
Cash and cash equivalents at beginning
of year 76,092 6,465 34,952 - 117,509
------------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end
of year $ 59,716 $ 6,319 $ 21,158 $ - $ 87,193
============= =========== =========== =========== ============
Fiscal Year Ended August 31, 1999
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net cash provided by (used in)
operating activities $ 56,243 $ 1,266 $ (5,520) $ - $ 51,989
------------- ----------- ----------- ----------- ------------
Net additions to property, plant
and equipment (5,713) (3,574) (91) - (9,378)
Purchase of Trion, Inc. (39,400) - - - (39,400)
Dividend received from affiliate - - 25,714 (25,714) -
-
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
investing activities (45,113) (3,574) 25,623 (25,714) (48,778)
------------- ----------- ----------- ----------- ------------
Net repayments of short and long-term
borrowings (6,300) (2,685) - - (8,985)
Net proceeds from senior subordinated notes 47,652 - - - 47,652
Net proceeds from xinle financing - 1,447 - - 1,447
Cash dividends (25,714) - (3,841) 25,714 (3,841)
Proceeds from stock options exercised - - 254 - 254
Repurchase of capital stock - - (13,215) - (13,215)
Change in net due to (from) affiliate 43,310 6,398 (49,708) - -
------------- ----------- ----------- ----------- ------------
Net cash provided by financing activites 58,948 5,160 (66,510) 25,714 23,312
------------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents 70,078 2,852 (46,407) - 26,523
Cash and cash equivalents at beginning
of year 6,014 3,613 81,359 - 90,986
------------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end of year $ 76,092 $ 6,465 $ 34,952 $ - $ 117,509
============= =========== =========== =========== ============
Fiscal Year Ended August 31, 1998
----------------------------------------------------------------------
Fedders Other Eliminating Fedders
North America Fedders Corporate Entries Corporation
------------- ----------- ----------- ----------- ------------
Net cash provided by (used in)
operating activities $ 43,320 $ (4,733) $ 715 $ - $ 39,302
------------- ----------- ----------- ----------- ------------
Net additions to property, plant
and equipment (5,351) (1,087) (212) - (6,650)
------------- ----------- ----------- ----------- ------------
Net cash used in investing activities (5,351) (1,087) (212) - (6,650)
------------- ----------- ----------- ----------- ------------
Net repayments of short and long-term
borrowings (1,822) (2,598) - - (4,420)
Cash dividends - - (3,520) - (3,520)
Proceeds from stock options exercised - - 5,289 - 5,289
Repurchase of capital stock - - (49,408) - (49,408)
Change in net due to (from) affiliate (30,133) 12,031 18,102 - -
------------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
financing activities (31,955) 9,433 (29,537) - (52,059)
------------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents 6,014 3,613 (29,034) - (19,407)
Cash and cash equivalents at beginning
of year - - 110,393 - 110,393
------------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end of year $ 6,014 $ 3,613 $ 81,359 $ - $ 90,986
============= =========== =========== =========== ============
Intercompany transactions
The historical condensed consolidating financial statements
presented above include the following transactions between FNA and the
Company;
a) The Company charges corporate overhead to FNA essentially on a cost
basis allocated in proportion to sales. Such charges to FNA amounted
to approximately $4.4 million and $3.5 million for the three months
ended May 31, 2001 and May 31, 2000, respectively, and approximately
$10.5 million and $10.9 million for the nine months ended May 31, 2001
and May 31, 2000, respectively. Such charges to FNA amounted to $13.5
million, $14.1 million and $9.4 million for the years ended August 31,
2000, 1999 and 1998, respectively.
b) FNA's interest expense reflects actual interest charges on the 9 3/8%
Senior Subordinated Notes due 2007, State of Illinois Promissory Note,
capital lease obligations, and a revolving line of credit.
c) FNA's depreciation and amortization for the three months ended May 31,
2001 and May 31, 2000 amounted to $2.5 million and $2.2 million,
respectively. Capital expenditures amounted to $1.3 million and $ 1.7
million in the three-month period of 2001 and 2000, respectively.
FNA's depreciation and amortization for the nine months ended May 31,
2001 and May 31, 2000 amounted to $8.4 million and $7.9 million,
respectively. Capital expenditures amounted to $7.1 million and $5.2
million in the nine-month period of 2001 and 2000, respectively. FNA's
depreciation and amortization for the years ended August 31, 2000,
1999 and 1998 amounted to $7.4 million, $7.0 million and $7.5 million,
respectively. Capital expenditures of FNA for the same periods
amounted to $9.4 million, $5.7 million and $8.1 million, respectively.
d) Corporate's selling, general and administrative expense for the nine
months ended May 31, 2001 includes a $1.1 million non- cash charge for
the repricing of a majority of unexercised stock options. For the
three months ended May 31, 2001, the non-cash charge was $36 thousand
to reflect changes in the market price of the Company's Class A Stock.
e) The Company guarantees FNA's obligations under FNA's revolving credit
facility.
f) The Company's stock option plans include FNA's employees.
g) On August 31, 2000 and 1999, FNA declared a dividend of $9.8 million
and $25.7 million to the Company.
THE RECAPITALIZATION AGREEMENT
The following is a summary of the material terms of the
recapitalization agreement and plan of merger, dated ____, 2001. This
summary does not purport to describe all the terms of the recapitalization
agreement and is qualified by the complete recapitalization agreement which
is attached as Annex A to this proxy statement/prospectus and incorporated
herein by reference. All stockholders are urged to read carefully the
recapitalization agreement in its entirety.
General
Under the recapitalization agreement, FC Merger Sub, Inc. will
merge with and into Fedders, with Fedders continuing as the surviving
corporation.
Effect on Capital Stock
Under the terms of the recapitalization agreement, Fedders Common
Stock, par value $1.00 per share, and Class A Stock, par value $1.00 per
share, will be exchanged for new Common Stock, par value $0.01 per share
and Fedders Class B Stock, par value $1.00 per share, will be exchanged for
new Class B Stock, par value $0.01 per share. As a result of the
recapitalization, each share of Common Stock, Class A Stock and Class B
Stock will be exchanged as follows:
o Each share of Common Stock will be exchanged for 1.1
shares of new Common Stock;
o Each share of Class A Stock will be exchanged for one
share of new Common Stock; and
o Each share of Class B Stock will be exchanged for 1.1
shares of new Class B Stock.
For a more complete description of the effect of the recapitalization on
the capital stock of Fedders, see "Description of Fedders Capital Stock
Before and After the Recapitalization" herein.
Fractional Shares
No fractional shares will be issued in the recapitalization to any
stockholder who would in the aggregate hold less than one share of new
Common Stock or new Class B Stock. In lieu of any such fractional shares,
each holder of Common Stock or Class B Stock who would otherwise have been
entitled to a fraction of a share of new Common Stock or new Class B Stock,
as the case may be, upon surrender of their Common Stock or Class B Stock
will be paid cash upon such surrender in an amount equal to the product of
such fraction multiplied by the closing sale price of the new Common Stock
on the New York Stock Exchange on the date upon which the merger becomes
effective, or, if the new Common Stock is not so traded on such day, the
closing sale price on the next day on which such stock is traded on the New
York Stock Exchange.
Closing
Subject to the satisfaction or waiver of the conditions set forth
in the recapitalization agreement, the closing of the recapitalization will
take place at such place as Fedders shall determine, at such time as is, in
the judgment of Fedders, as soon as reasonably practicable following the
special meeting of stockholders; unless another time or place is
established by Fedders.
Restated Certificate of Incorporation
If the recapitalization and each of the changes to Fedders'
certificate of incorporation that will be made as a result of the
recapitalization are approved, the restated certificate of incorporation,
in substantially the form attached as Exhibit A to the recapitalization
agreement attached hereto as Annex A, will govern Fedders.
By-Laws
If the recapitalization is approved, at the effective time of the
recapitalization, the by-laws of Fedders will be the by-laws of the
surviving corporation.
Directors and Officers
The directors and officers of Fedders at the effective time of the
recapitalization will continue to be the directors and officers of Fedders
after the effective time of the recapitalization.
Termination
To the extent permitted by law, the board of directors may decide
to terminate the recapitalization agreement and abandon the
recapitalization at any time before the effective time in its sole
discretion, including by reason of the number of shares seeking appraisal
rights. If the recapitalization agreement is terminated, it shall become
void and of no effect without any liability on the part of any party to the
agreement.
Amendments and Waiver
The recapitalization agreement may be amended by mutual consent of
the boards of directors of Fedders and FC Merger Sub, Inc. at any time
before the effective time of the recapitalization, even if the
recapitalization proposal has received stockholder approval. To the fullest
extent permitted by law, any provision of the recapitalization agreement
may be waived prior to the effective time of the recapitalization.
DESCRIPTION OF FEDDERS CAPITAL STOCK BEFORE AND AFTER THE RECAPITALIZATION
General
This section contains a description of Fedders' capital stock.
This description includes terms of the Common Stock, Class A Stock and
Class B Stock, and the new Common Stock and new Class B Stock. The express
terms of the new Common Stock and new Class B Stock are set forth in full
in the restated certificate of incorporation attached as Exhibit A to the
recapitalization agreement attached hereto as Annex A and incorporated in
this document by reference, which will be the restated certificate of
incorporation of Fedders following the recapitalization. You should read
the following summary in conjunction with, and it is qualified in its
entirety by reference to, Exhibit A to the recapitalization agreement
attached hereto as Annex A .
Fedders' authorized capital stock currently consists of 80,000,000
shares of Common Stock, 60,000,000 shares of Class A Stock, 7,500,000
shares of Class B Stock, and 15,000,000 shares of Preferred Stock.
Following the recapitalization, Fedders will have authorized 70,000,000
shares of Common Stock, 5,000,000 shares of Class B Stock and 15,000,000
shares of Preferred Stock. The Class A Stock will cease to exist. As of
July 31, 2001, Fedders had outstanding 13,727,159 shares of Common Stock,
14,808,188 shares of Class A Stock, 2,266,406 shares of Class B Stock and
no shares of Preferred Stock.
The Common Stock, Class A Stock and Class B Stock each have a par
value of $1.00. The new Common Stock and new Class B Stock will each have a
par value of $0.01.
The restated certificate of incorporation will provide that any
action required or permitted to be taken by the stockholders must be
effected at a duly called annual or special meeting of stockholders, and
the ability of the stockholders to consent in writing to the taking of any
action will be specifically denied. The current certificate of
incorporation does not currently provide for, or prohibit such stockholder
action by written consent. Under current Delaware law, unless otherwise
provided in the certificate of incorporation, any action required or
permitted to be taken by the stockholders may be taken without a meeting,
without notice to all stockholders and without a stockholder vote if a
written consent setting forth the action to be taken is signed by the
holders of shares of outstanding stock having the requisite number of votes
that would be necessary to authorize such action if it were taken at a
meeting of stockholders.
FEDDERS COMMON STOCK
Dividend Rights
Prior to the recapitalization, subject to the prior rights of the
holders of the Preferred Stock, holders of Common Stock, Class A Stock and
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
Common Stock, a cash dividend of equal amount must be paid on the Class A
Stock and a cash dividend must also be paid on the Class B Stock in an
amount per share of Class B Stock equal to 90% of the amount of the cash
dividend paid on each share of Common Stock. In the case of a dividend or
other distribution payable in stock of Fedders other than Preferred Stock,
unless the dividend or distribution is solely of shares of Class A Stock,
in which case a dividend or distribution payable solely in shares of Class
A Stock may be made with respect to shares of Common Stock, only shares of
Common Stock may be distributed with respect to Common Stock.
After the recapitalization, the dividend rights of the holders of
new Common Stock will generally be similar, except that if at any time a
cash dividend is paid on the new Common Stock, a cash dividend of equal
amount will be paid on the new Class B Stock.
Voting Rights
Prior to the recapitalization, each share of Common Stock is
entitled to one vote per share on all matters submitted to the stockholders
of Fedders, including election of directors. The holders of the Common
Stock generally vote together with the holders of Class B Stock as a single
class. However, any amendment to the certificate of incorporation, any
merger or consolidation of Fedders or any sale or disposition of all or
substantially all of the assets of Fedders (except where the other party to
such transaction is a majority-owned subsidiary of Fedders) or the
dissolution of Fedders, requires the approval of a majority of the shares
of Common Stock and Class B Stock voting as separate classes.
After the recapitalization, the voting rights of the new Common
Stock will be the same as the voting rights of the Common Stock.
Liquidation Rights
Prior to the recapitalization, in the event of any dissolution,
liquidation or winding up of the affairs of Fedders, after payment or
provision of payment of the debts and other liabilities of Fedders and any
amounts to which the holders of the Preferred Stock are entitled, the
remaining assets and funds of Fedders are divided among and paid ratably to
the holders of the Common Stock and Class A Stock (including those persons
who become holders of Common Stock by reason of converting their shares of
Class B Stock).
After the recapitalization, in the event of any dissolution,
liquidation or winding up of the affairs of Fedders, after payment or
provision of payment of the debts and other liabilities of Fedders and any
amounts to which the holders of the Preferred Stock are entitled, the
remaining assets and funds of Fedders will be divided among the holders of
the new Common Stock and new Class B Stock as follows:
(i) first, before any payment or distribution of the assets of
Fedders is made to or set apart for the holders of new Class B Stock, the
holders of the shares of new Common Stock (including those persons who will
become holders of new Common Stock by reason of converting their shares of
new Class B Stock) will be entitled to receive $0.25 per share;
(ii) second, before any additional payment or distribution of the
assets of Fedders is made to or set apart for the holders of new Common
Stock following the initial $0.25 per share payment to the new Common
stockholders, the holders of new Class B Stock will be entitled to receive
$0.50 per share;
(iii) third, before any additional payment or distribution of the
assets of Fedders is made to or set apart for the holders of new Class B
Stock following the $0.25 per share payment to the holders of new Common
Stock and the $0.50 per share payment to the holders of new Class B Stock,
the holders of new Common Stock (including those persons who shall become
holders of new Common Stock by reason of converting their shares of new
Class B Stock) will be entitled to receive an additional $0.25 per share;
and
(iv) fourth, following the payment or setting apart for payment of
the amounts in items (i) through (iii) above, the holders of new Common
Stock and new Class B Stock will participate pari passu and be entitled to
receive, on a pro rata basis, the remaining assets of Fedders or proceeds
therefrom available for distribution to the holders of new Common Stock and
new Class B Stock.
Listing and Transfer Agent
The Fedders Common Stock is listed on the New York Stock Exchange
under the symbol "FJC".
American Stock Transfer and Trust, is the transfer agent and
registrar for the Fedders Common Stock.
FEDDERS CLASS A STOCK
Dividend Rights
Prior to the recapitalization, subject to the prior rights of the
holders of the Preferred Stock, holders of Common Stock, Class A Stock and
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. In the case of a
dividend or other distribution payable in stock of Fedders other than
Preferred Stock, only shares of Class A Stock may be distributed with
respect to Class A Stock.
Voting Rights
Prior to the recapitalization, the holders of Class A Stock have
no voting rights other than as required under the DGCL.
Liquidation Rights
Prior to the recapitalization, in the event of any dissolution,
liquidation or winding up of the affairs of Fedders, after payment or
provision of payment of the debts and other liabilities of Fedders and any
amounts to which the holders of the Preferred Stock are entitled, the
remaining assets and funds of Fedders are divided among and paid ratably to
the holders of the Common Stock and Class A Stock (including those persons
who become holders of Common Stock by reason of converting their shares of
Class B Stock).
Conversion
Prior to the recapitalization, all outstanding shares of Class A
Stock are convertible into fully paid and nonassessable shares of Common
Stock, immediately and without any action on the part of the holders
thereof, in the event the Class B Stock is converted into Common Stock in
accordance with the provisions of the certificate of incorporation.
Change of Control
Prior to (i) the proposed deletion of Section VI of clause A of
Article Second of the certificate of incorporation and (ii) the
recapitalization, in any merger or consolidation, the holders of Class A
Stock are entitled to receive the same per share consideration as is
received by the holders of the Common Stock.
Listing and Transfer Agent
The Fedders Class A Stock is listed on the New York Stock Exchange
under the symbol "FJA".
American Stock Transfer and Trust, is the transfer agent and
registrar for Fedders Class A Stock.
Post Recapitalization Rights
After the recapitalization, the Class A Stock will cease to exist
and have no rights, preferences or privileges under the restated
certificate of incorporation. It will no longer be listed on the New York
Stock Exchange and will be eligible for termination of registration under
the Securities Exchange Act of 1934.
FEDDERS CLASS B STOCK
Dividend Rights
Prior to the recapitalization, subject to the prior rights of the
holders of the Preferred Stock, holders of Common Stock, Class A Stock and
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
Common Stock, a cash dividend of equal amount must be paid on the Class A
Stock and a cash dividend must also be paid on the Class B Stock in an
amount per share of Class B Stock equal to 90% of the amount of the cash
dividend paid on each share of Common Stock. In the case of a dividend or
other distribution payable in stock of Fedders other than Preferred Stock,
unless the dividend or distribution is solely of shares of Class A Stock,
in which case a dividend or distribution payable solely in shares of Class
A Stock may be made with respect to shares of Class B Stock, only shares of
Class B Stock may be distributed with respect to Class B Stock.
After the recapitalization, the dividend rights of the holders of
new Class B Stock will generally be similar, except that if at any time a
cash dividend is paid on the new Common Stock, a cash dividend of equal
amount will be paid on the new Class B Stock.
Voting Rights
Prior to the recapitalization, each share of Class B Stock is
entitled to one vote on all matters submitted to the stockholders of
Fedders, provided that each share of Class B Stock is entitled to ten votes
per share in any election of directors if either:
o if more than 15% of the shares of Common Stock
outstanding on the record date for such meeting are
beneficially owned by a person or group of persons acting
in concert (unless such person or group is also the
beneficial owner of a majority of the shares of Class B
Stock on such record date); or
o if a nomination for the board of directors is made by a
person or group of persons acting in concert, other than
the board of directors (unless such nomination is made by
one or more holders of Class B Stock, acting in concert,
who beneficially own more than 15% of the shares of Class
B Stock outstanding on such record date).
In addition, under the certificate of incorporation, the holders
of the Class B Stock have the right to vote separately as a class on
certain matters. These matters include any amendment to the certificate of
incorporation, any merger or consolidation of Fedders or any sale or
disposition of all or substantially all of the assets of Fedders (except
where the other party to such transaction is a majority-owned subsidiary of
Fedders), any dissolution of Fedders and any additional issuance of Class B
Stock (except in connection with stock splits and stock dividends). The
holders of the Class B Stock do not have the right to vote separately as a
class on the recapitalization because the merger contemplated by the
recapitalization is with a wholly-owned subsidiary of Fedders, FC Merger
Sub, Inc.
After the recapitalization, the voting rights of the new Class B
Stock under the restated certificate of incorporation will be the same as
the voting rights of the Class B Stock.
Liquidation Rights
Prior to the recapitalization, in the event of any liquidation or
winding up of Fedders, the holders of 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."
After the recapitalization, the new Class B Stock will have the
liquidation rights described herein under "Fedders Common Stock -
Liquidation Rights."
Restrictions on Transfer
Prior to the recapitalization, under the provisions of the
certificate of incorporation, the ability of a holder of 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
certificate of incorporation).
After the recapitalization, the new Class B Stock will be subject
to the same transfer restrictions.
Conversion Rights
Prior to the recapitalization, each share of Class B Stock is
convertible at any time by the holder thereof into one share of Common
Stock, with no payment or adjustment on account of dividends accrued or in
arrears on Class B Stock surrendered for conversion or on account of any
dividends on the Common Stock issuable on such conversion. Any conversion
of Class B Stock is deemed to occur on the date the certificate therefor is
surrendered, and the person or persons entitled to receive Common Stock
issuable upon conversion of Class B Stock are treated for all purposes as
the record holder or holders of such Common Stock on such date. In
addition, at any time when the number of outstanding shares of Class B
Stock falls below 5% of the aggregate number of the issued and outstanding
shares of Common Stock and Class B Stock, or the board of directors of
Fedders and the holders of a majority of the outstanding shares of Class B
Stock approve the conversion of all of the Class B Stock into Common Stock,
then, immediately upon the occurrence of either such event, the outstanding
shares of Fedders Class B Stock are converted into shares of Fedders Common
Stock.
After the recapitalization, the conversion rights of the new Class
B Stock will be the same as the Class B stock, except that the outstanding
shares of new Class B Stock will be converted into shares of new Common
Stock if the number of outstanding shares of new Class B Stock falls below
2.5% of the aggregate number of the issued and outstanding shares of new
Common Stock and new Class B Stock.
Listing and Transfer Agent
Fedders Class B Stock is not actively traded. Fedders acts as the
transfer agent and registrar for the Class B Stock.
LEGAL MATTERS
Robert N. Edwards, the Vice President and General Counsel of
Fedders, c/o Fedders Corporation, 505 Martinsville Road, Liberty Corner New
Jersey 07938-0813, will pass upon the validity of the new Fedders Common
Stock and the new Fedders Class B Stock to be issued under this proxy
statement/prospectus.
EXPERTS
The consolidated financial statements and the related financial
statement schedule as of and for the fiscal year ended August 31, 2000
incorporated in this prospectus by reference from the Fedders' Annual
Report on Form 10-K for the fiscal year ended August 31, 2000 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements incorporated by reference in this
registration statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth
in their reports incorporated herein by reference, and are incorporated
herein in reliance upon such reports given upon the authority of said firm
as experts in auditing and accounting.
OTHER MATTERS
As of the date of this proxy statement/prospectus, Fedders' board
of directors knows of no matters that will be presented for consideration
at the special meeting other than as described in this proxy
statement/prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any reports,
statements or other information filed by us at the Commission's Public
Reference Room located at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. Fedders Common Stock and Class A Stock is listed on
the NYSE under the symbols "FJC" and "FJA," respectively, and such material
relating to Fedders may also be inspected at the offices of the NYSE, 20
Broad Street, New York, NY 10005. Certain of such reports, statements and
other information filed by Fedders are also available on the Internet at
the SEC's World Wide Web site at http://www.sec.gov.
We have filed a Form S-4 with the SEC to register the new Common
Stock and new Class B Stock to be issued in the recapitalization. This
document is part of the Form S-4 and constitutes part of a prospectus in
addition to being a proxy statement of Fedders for the special meeting. As
allowed by SEC rules, this document does not contain all the information
you can find in the Form S-4 or the exhibits to the Form S-4.
The SEC allows us to "incorporate by reference" information into
this document, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this
document, except for any information superseded by information in this
document. This document incorporates by reference the documents set forth
below that we have previously filed with the SEC. These documents contain
important information about Fedders and its finances.
Fedders SEC Filings (File No. 1-8831) Period/as of Date
- -------------------------------------- --------------------------------
Annual Report on Form 10-K Year ended August 31, 2000
Quarterly Report on Form 10-Q Quarter ended November 30, 2000
Quarterly Report on Form 10-Q Quarter ended February 28, 2001
Quarterly Report on Form 10-Q Quarter ended May 31, 2001
We are also incorporating by reference additional documents that
we file with the SEC after the date of this document and before the date of
the special meeting.
If you are a stockholder, we may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
us or the SEC. Documents incorporated by reference are available from us
without charge, excluding all exhibits unless we have specifically
incorporated by reference an exhibit in the document. Stockholders may
obtain documents incorporated by reference in this document by requesting
them in writing or by telephone from Fedders at the following address:
Mail: Telephone: (908) 604-8686
Fedders Corporation
505 Martinsville Road Facsimile: (908) 604-8576
Liberty Corner, NJ 07938-0813
E-mail: khansen@fedders.com
If you would like to request documents from us, please do so by
____________, 2001 to receive them before the special meeting.
We have not authorized anyone to give any information or make any
representation about the recapitalization of Fedders that differs from, or
adds to, the information in this document or in Fedders' documents that are
publicly filed with the SEC. Therefore, if anyone does give you different
or additional information, you should not rely on it.
The information contained in this document speaks only as to its
date unless the information specifically indicates that another date
applies. Information in this document about Fedders has been supplied by
Fedders.
FORWARD-LOOKING STATEMENTS
Statements included or incorporated by reference herein may
constitute forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially,
including the uncertainties relating to the actual liquidity of Fedders'
shares, Fedders' operating performance and other factors affecting share
prices generally. Actual results may differ materially from those stated
depending on a number of factors, including, without limitation:
o greater price competition resulting from industry
overcapacity or other factors;
o a significant decline in industry sales resulting from
slowing economic growth;
o seasonal fluctuations in sales of air conditioning units
and other climate-related products;
o climatic conditions, particularly cool summer conditions;
and
o varying costs of electricity.
Fedders undertakes no obligation to update or revise forward-looking
statements to reflect changes in assumptions, the occurrence of
unanticipated events, or changes in future operating results over time. For
more information as to various risks relevant to Fedders' business and
results of operations see Fedders' other filings with the Securities and
Exchange Commission. See "Where You Can Find More Information."
ANNEX A
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
Dated as of , 2001
between
FEDDERS CORPORATION
and
FC MERGER SUB, INC.
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER, dated as of , 2001
(this "Agreement"), between Fedders Corporation, a Delaware corporation
(the "Company") and FC Merger Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company ("Merger Sub").
WHEREAS, the total number of shares of all classes of stock that
the Company has authority to issue is 162,500,000, consisting of 80,000,000
shares of Common, par value $1.00 per share (the "Common Stock"), of which
13,727,159 are outstanding, 60,000,000 shares of Class A Stock, par value
$1.00 per share (the "Class A Stock"), of which 14,808,188 are outstanding,
7,500,000 shares of Class B Stock, par value $1.00 per share (the "Class B
Stock"), of which 2,266,406 are outstanding, and 15,000,000 shares of
Preferred Stock, par value of $1.00 per share (the "Preferred Stock") none
of which are outstanding; and the total number of shares of all classes of
stock that Merger Sub has authority to issue is 100 shares of common stock,
par value $.01 per share (the "Merger Sub Common Stock"), of which 10 are
issued and outstanding;
WHEREAS, the Company desires that Merger Sub merge with and into
the Company (hereinafter, in such capacity, sometimes referred to as the
"Surviving Corporation"), upon the terms and subject to the conditions set
forth in this Agreement (the "Merger"), in accordance with the General
Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, pursuant to this Agreement and as a result of the Merger:
(i) each share of Common Stock issued and outstanding immediately prior to
the effective time of the Merger will, upon the terms and subject to the
conditions and limitations set forth herein, be converted into the right to
receive 1.1 shares of a new class of common stock, par value $0.01 per
share, of the Surviving Corporation ("New Common Stock"); (ii) each share
of Class A Stock issued and outstanding immediately prior to the effective
time of the Merger, will, upon the terms and subject to the conditions and
limitations set forth herein, be converted into the right to receive one
share of New Common Stock; and (iii) each share of Class B Stock issued and
outstanding immediately prior to the effective time of the Merger, other
than any Dissenting Shares (as such term is defined in Section 1.5 hereof),
will, upon the terms and subject to the conditions and limitations set
forth herein, be converted into the right to receive 1.1 shares of a new
class of Class B Stock, par value $0.01 per share, of the Surviving
Corporation ("New Class B Stock").
WHEREAS, the Boards of Directors of the Company and Merger Sub by
resolutions duly adopted have approved the terms of this Agreement and of
the Merger, have declared the advisability of this Agreement and of the
Merger and determined them to be fair to and in the best interests of the
Company and Merger Sub, and have directed the submission of this Agreement
to their respective stock holders for approval; and
WHEREAS, the Merger is intended to constitute a reorganization of
the Company within the meaning of Section 368(a)(1)(E) of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE in consideration of the premises and the mutual
agreements and provisions herein contained, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. (a) Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined below),
Merger Sub shall be merged with and into the Company in accordance with the
DGCL, the separate corporate existence of Merger Sub shall cease, and the
Company shall be the Surviving Corporation of the Merger.
(b) Following satisfaction or waiver of all conditions to the
Merger, the Company and Merger Sub shall file a certificate of merger with
the Secretary of State of the State of Delaware and make all other filings
or recordings required by the DGCL in connection with the Merger. The
Merger shall become effective at such time as the certificate of merger is
duly filed with the Secretary of State of the State of Delaware or at such
later time as is specified in the certificate of merger (the "Effective
Time").
(c) At and after the Effective Time, the Merger shall have the
effects set forth in the DGCL. Without limiting the foregoing and subject
thereto, from and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to
all of the restrictions, disabilities and duties of the Company and Merger
Sub, all as provided under the DGCL.
SECTION 1.2 Effect on Capital Stock. At the Effective Time:
-----------------------
(a) Each share of Merger Sub Common Stock outstanding immediately
prior to the Effective Time shall, by virtue of the Merger, be cancelled
and retired and cease to exist, without any conversion thereof.
(b) Except as otherwise provided in this Agreement, each share of
Common Stock, each share of Class A Stock and each share of Class B Stock
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares (as defined in Section 1.5(a) hereof)) shall, by virtue
of the Merger, be converted into and become exchangeable for the right to
receive the following (the "Exchange Consideration"):
(i) for each share of Common Stock, 1.1 shares of New
Common Stock;
(ii) for each share of Class A Stock, one share of New
Common Stock; and
(iii) for each share of Class B Stock, 1.1 shares of New
Class B Stock.
(c) Each share of Common Stock and Class B Stock, if any, held in
the treasury of the Company or by any wholly owned subsidiary of the
Company shall be converted into and exchanged for 1.1 shares of New Common
Stock or New Class B Stock, as the case may be, by virtue of the Merger.
(d) Each share of Class A Stock, if any, held in the treasury of
the Company or by any wholly owned subsidiary of the Company shall be
converted into and exchanged for one share of New Common Stock by virtue of
the Merger.
(e) All shares of Common Stock, Class A Stock and Class B Stock to
be converted into the Exchange Consideration pursuant to this Section 1.2
shall, by virtue of the Merger and without any action on the part of the
holders thereof, cease to be outstanding, be cancelled and retired and
cease to exist; and each holder of a certificate representing prior to the
Effective Time any such shares of Common Stock, Class A Stock or Class B
Stock shall thereafter cease to have any rights with respect to such
shares, except the right to receive (i) the Exchange Consideration and (ii)
any dividends and other distributions in accordance with Section 1.3(c)
hereof.
SECTION 1.3 Exchange of Certificates.
------------------------
(a) As of the Effective Time, the Company shall deposit, or cause
to be deposited with [___________________] or another bank, trust company,
Person or Persons designated by the Company to act as exchange agent (the
"Exchange Agent) for the benefit of the holders of shares of Common Stock,
Class A Stock and Class B Stock, a certificate or certificates representing
the Exchange Consideration such that the Exchange Agent may issue: (i)
shares of New Common Stock in the form of book entry credits to holders of
Common Stock and Class A Stock that receive shares of New Common Stock in
the Merger; and (ii) shares of New Class B Stock in the form of book entry
credits to holders of Class B Stock that receive shares of New Class B
Stock in the Merger. For purposes of this Agreement, "Person" means any
natural person, firm, individual, corporation, limited liability company,
partnership, association, joint venture, company, business trust, trust or
any other entity or organization whether incorporated or unincorporated,
including a government or political subdivision or any agency or
instrumentality thereof.
(b) As of or promptly following the Effective Time, the Company
shall cause the Exchange Agent to mail (and to make available for
collection by hand) to (A) each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding shares of Common Stock, Class A Stock or Class B Stock (the
"Certificates") (i) a letter of transmittal or similar transmittal form
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and which shall be in the form and have
such other provisions as the Company may specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for (A) a
confirmation of book entry credit for that number of shares of New Common
Stock into which the number of shares of Common Stock or Class A Stock, as
the case may be, previously represented by such Certificate shall have been
converted pursuant to this Agreement, and (B) a confirmation of book entry
credit for that number of shares of New Class B Common Stock into which the
number of shares of Class B Stock shall have been converted pursuant to
this Agreement. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with a letter of transmittal or similar
transmittal form duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant
to such instructions, the holder of such Certificate shall, subject to
consummation of the Merger, be entitled to receive in exchange therefor the
Exchange Consideration for each share of Common Stock, Class A Stock or
Class B Stock formerly represented by such Certificate, and the Certificate
so surrendered shall be forthwith cancelled. The Exchange Agent shall
accept such Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
therefor in accordance with normal exchange practices. No interest on the
cash payable pursuant to subsection (c) below upon the surrender of the
Certificates shall be paid or accrued for the benefit of holders of the
Certificates.
(c) No dividends or other distributions with respect to shares of
New Common Stock or New Class B Stock with a record date on or after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of New Common Stock or New Class B Stock
represented thereby by reason of the conversion of shares of Common Stock,
Class A Stock and Class B Stock pursuant to Sections 1.2(b) and 1.3 hereof
until such Certificate is surrendered in accordance with this Article I.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid, without interest, to the Person in whose
name the shares of New Common Stock or New Class B Stock representing such
securities are registered (i) at the time of such surrender, the
proportionate amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to shares of New
Common Stock or New Class B Stock issued upon conversion of the Common
Stock, Class A Stock and Class B Stock and (ii) at the appropriate payment
date or as promptly as practicable thereafter, the proportionate amount of
dividends or other distributions with a record date after the Effective
Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such shares of New Common Stock and New
Class B Stock.
(d) Any portion of the Exchange Consideration deposited with the
Exchange Agent pursuant to this Section 1.3 (the "Exchange Fund") which
remains undistributed to the holders of Certificates for six months after
the Effective Time shall be delivered to the Company, upon demand, and any
holders of shares of Common Stock, Class A Stock or Class B Stock prior to
the Merger who have not theretofore complied with this Article I shall
thereafter look for payment of their claim, as general creditors thereof,
only to the Company for their claim for (1) shares of New Common Stock, if
any, (2) shares of New Class B Stock, if any and (3) any dividends or other
distributions with respect to shares of New Common Stock or New Class B
Stock to which such holders may be entitled.
(e) None of the Company, Merger Sub or the Exchange Agent shall be
liable to any Person in respect of any shares of New Common Stock or New
Class B Stock held in the Exchange Fund (and any dividends and other
distributions payable in respect thereof) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by the Company on a daily basis. Any interest
and other income resulting from such investments shall be paid to the
Company.
(g) No certificate representing fractional shares of New Common
Stock or New Class B stock shall be issued or book entry credit shall be
made upon the surrender for exchange of Certificates pursuant to this
Section 1.3 and no dividend, stock split-up or other change in the capital
structure of the Company shall relate to any fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. In lieu of any such fractional securities,
each holder of Common Stock, Class A Stock or Class B Stock who would
otherwise have been entitled to a fraction of a share of New Common Stock
or New Class B Stock, as the case may be, upon surrender of the
Certificates pursuant to this Section 1.3 will be paid cash upon such
surrender in an amount equal to the product of such fraction multiplied by
(i) in the case of New Common Stock, the closing sale price of the New
Common Stock on the New York Stock Exchange on the day of the Effective
Time, or, if the New Common Stock is not so traded on such day, the closing
sale price on the next day on which such stock is traded on the New York
Stock Exchange; or (ii) in the case of the New Class B Stock, the closing
sale price of the New Common Stock on the New York Stock Exchange on the
day of the Effective Time, or, if the New Common Stock is not so traded on
such day, the closing sale price on the next day on which such stock is
traded on the New York Stock Exchange.
(h) If between the date hereof and the Effective Time, the
outstanding shares of Common Stock, Class A Stock or Class B Stock shall be
changed into a different number of shares by reason of reclassification,
recapitalization, split-up, combination or exchange of shares, or any
dividend payable in stock or other securities shall be declared thereon
with a record date within such period, the Exchange Consideration shall be
adjusted accordingly to provide the holders of the Common Stock, Class A
Stock or Class B Stock, as the case may be, the same economic effect as
contemplated by this Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange or dividend.
SECTION 1.4 Stock Options; Other Equity Benefit Plans and Awards.
----------------------------------------------------
(a) At the Effective Time, each of the then outstanding Options
(as defined below) shall be converted into (i) in the case of an Option to
purchase Common Stock, that number of shares of New Common Stock determined
by multiplying the number of shares of Common Stock subject to such Option
at the Effective Time by 1.1; and (ii) in the case of an Option to purchase
Class A Stock, that number of shares of New Common Stock equal to the
number of shares of Class A Stock subject to such Option at the Effective
Time.
"Options" means any option granted, and not exercised, expired or
terminated, to a current or former employee, director or independent
contractor of the Company or any of its subsidiaries or any predecessor
thereof to purchase shares of Common Stock or Class A Stock pursuant to the
Company's Stock Option Plans I through VIII or any other stock option,
stock bonus, stock award, or stock purchase plan, program, or arrangement
of the Company or any of its subsidiaries or any predecessor thereof or any
other contract or agreement entered into by the Company or any of its
subsidiaries.
(b) Each phantom stock or similar award (whether
denominated in shares of Common Stock, Class A Stock, phantom units in a
Company Common Stock fund or a Company Class A Stock fund or otherwise)
which is outstanding immediately prior to the Effective Time under any
deferred compensation, incentive compensation or similar plan, program or
arrangement of the Company or any of its subsidiaries shall be adjusted by
the committee or other entity responsible for the administration of such
plan, program or arrangement so that the number of shares or units to which
such awards relate is treated in a manner consistent with the treatment of
shares of Common Stock and Class A Stock held by a stockholder at the
Effective Time.
SECTION 1.5 Dissenting Shares.
-----------------
(a) Notwithstanding anything in this Agreement to the contrary,
each share of Class B Stock issued and outstanding immediately prior to the
Effective Time and held by a person (a "Dissenting Stockholder") who is
entitled to seek an appraisal of such shares under Delaware law and who
complies with all the requirements of Delaware law to exercise and perfect
appraisal rights ("Dissenting Shares") shall not be converted into the
right to receive the Exchange Consideration but shall instead become the
right to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to Section 262 of the DGCL. If, after the
Effective Time, such Dissenting Stockholder withdraws his or her demand for
appraisal or fails to perfect or otherwise loses his or her right of
appraisal, in any case pursuant to the DGCL, the shares of such Dissenting
Stockholder shall be deemed to be converted as of the Effective Time into
the right to receive the Exchange Consideration (without any interest
thereon).
(b) Nothing contained in this Agreement, including Section 1.5(a)
hereof shall limit the right of the Company to take the position at any
time, including in any litigation or appraisal or other proceeding, and in
any manner (including in its sole discretion by filing a declaratory
judgment action), that stockholders, or that particular groups of
stockholders, are not entitled to appraisal rights under Section 262 of the
DGCL.
SECTION 1.6 Closing. Subject to the satisfaction or waiver of the
conditions set forth in Article III hereof, the closing of the Merger ("the
Closing") shall take place at such place as the Company shall determine, at
such time as is, in the judgment of the Company, as soon as reasonably
practicable following the Special Meeting of Stockholders; unless another
time, or place is established by the Company (the actual time and date of
the Closing being referred to herein as the "Closing Date").
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Certificate of Incorporation. The Certificate of
Incorporation of the Company will, upon the Effective Time and as a result
of the Merger, be amended and restated in substantially the form attached
hereto as Exhibit A (the "Restated Certificate"). Upon the Effective Time,
the Restated Certificate of the Company will become the certificate of
incorporation of the Surviving Corporation.
SECTION 2.2 By-Laws. At the Effective Time, the By-Laws of the
Company as in effect immediately prior to the Effective Time will be the
By-Laws of the Surviving Corporation.
SECTION 2.3 Directors and Officers. From and after the Effective
Time, the directors and officers of the Company at the Effective Time shall
be the directors and officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and
qualified in accordance with applicable law.
ARTICLE III
CONDITIONS TO THE MERGER
SECTION 3.1 Conditions to the Obligations of the Company and
Merger Sub. The respective obligations of the Company and Merger Sub to
consummate the Merger are subject to the satisfaction of, or to the extent
permitted by applicable law, the waiver by the Company on or prior to the
Effective Time of each of the following conditions:
(a) a proposal to delete Section VI of clause A of Article Second
of the certificate of incorporation of Fedders has been approved by the
holders of the shares of Common Stock, Class A Stock and Class B stock
representing a majority of the votes entitled to be cast thereon, each
voting separately as a class.
(b) a proposal to adopt this Agreement has been approved by the
holders of the shares of Common Stock and Class B Stock representing a
majority of the votes entitled to be cast thereon, voting together as a
single class.
(c) proposals to adopt each of the changes to Fedders' certificate
of incorporation that will be made as a result of the recapitalization have
been approved by the holders of the shares of Common Stock and Class B
Stock representing a majority of the votes entitled to be cast thereon,
voting together as a single class.
(d) no laws shall have been adopted or promulgated, and no
temporary restraining order, preliminary or permanent injunction or other
order issued by a court or other supranational, national, state, municipal,
local or foreign government, any instrumentality, subdivision,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing,
importing or other governmental or quasi-governmental authority (a
"Governmental Entity") of competent jurisdiction shall be in effect having
the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger and no proceeding challenging this Agreement or
the transactions contemplated hereby or seeking to prohibit, alter, prevent
or materially delay the Merger shall have been instituted by any or before
any court, arbitrator or governmental body, agency or official and be
pending which would cause the Board of Directors of the Company to
determine that the consummation of the Merger is no longer advisable;
(e) (i) all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the Merger shall have
expired or been terminated and (ii) all actions by or in respect of or
filings with any Governmental Entity required to permit the consummation of
the Merger shall have been obtained, except those that would not reasonably
be expected to have a material adverse affect on the Company or its ability
to consummate the transactions contemplated by this Agreement;
(f) the New Common Stock to be issued pursuant to the Merger and
upon exercise of Options and other equity based awards shall have been
approved for listing on the New York Stock Exchange, subject to official
notice of issuance;
(g) the registration statement on Form S-4 to be filed in
connection with the issuance of shares in the Merger (the "Form S-4") shall
have been declared effective by the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the
SEC; and
(h) the Company shall have received evidence in form and substance
reasonably satisfactory to it, that all material licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company and its
subsidiaries as are necessary for consummation of the transactions
contemplated by this Agreement have been obtained and are in full force and
effect, other than those which, if not obtained, would not have a material
adverse effect on the Company.
ARTICLE IV
TERMINATION
SECTION 4.1 Termination. To the fullest extent permitted by
Delaware law, this Agreement may be terminated, and the Merger and other
actions herein provided for may be abandoned, by the Board of Directors of
the Company in its sole discretion at any time prior to the Effective Time,
notwithstanding any approval of this Agreement by the stockholders of
either or both of the Company or Merger Sub.
SECTION 4.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 4.1, this Agreement shall become void and of no effect
with no liability on the part of any party hereto.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Notices. All notices and other communications
hereunder shall be in writing and hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of
electronic message transmission with delivery confirmed (by voice or
otherwise) to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice) and will be
deemed given on the date on which such notice is received:
To the Company or Merger Sub:
Fedders Corporation
505 Martinsville Road
Liberty Corner, New Jersey 07938-0813
Telecopy: 908-604-07156
Attn: Kent E. Hansen
SECTION 5.2 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party hereto.
SECTION 5.3 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
SECTION 5.4 Amendment and Waiver. To the fullest extent permitted
by Delaware law, this Agreement may be amended by mutual consent of the
Boards of Directors of the Company and Merger Sub, and any provision hereof
may be waived, at any time prior to the Effective Time, notwithstanding any
approval of this Agreement by the stockholders of either or both of the
Company and Merger Sub.
SECTION 5.5 Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by the other party
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day
and year first above written.
FEDDERS CORPORATION
By:_____________________________________
Name:
Title:
FC MERGER SUB, INC.
By:_____________________________________
Name:
Title:
EXHIBIT A
RESTATED
CERTIFICATE OF INCORPORATION
OF
FEDDERS CORPORATION
The undersigned, Kent E. Hansen, certifies that he is the
Executive Vice President and Secretary of Fedders Corporation, a
corporation organized and existing under the laws of the State of Delaware
(the "Corporation"), and does hereby further certify as follows:
(1) The name of the Corporation is Fedders Corporation.
(2) The name under which the Corporation was originally
incorporated was Fedders Corporation and the original Certificate
of Incorporation of the Corporation was filed with the Secretary
of State of the State of Delaware on April 4, 1984.
(3) This Restated Certificate of Incorporation was duly
adopted by in accordance with the provisions of Sections 242 and
245 of the General Corporation Law of the State of Delaware.
(4) The text of the Restated Certificate of Incorporation
of the Corporation as amended hereby is restated to read in its
entirety, as follows:
FIRST: The name of the corporation shall be FEDDERS CORPORATION.
SECOND: The purposes for which the Corporation is formed are as follows:
(a) To design, manufacture, buy, sell, distribute, at wholesale or
retail, import and export, rent and lease, repair and maintain, dispose of,
and generally deal in all kinds of air-conditioning apparatus, equipment
and appliances; refrigeration apparatus, equipment and appliances; heating
apparatus, equipment and appliances; gas and electric stoves and ranges;
automatic clothes- washing machines and clothes-drying machines of all
kinds and for all purposes; automobile radiators and other components of
all kinds; sheetmetal specialties; and all other devices of any kind or
nature used in conjunction therewith, or incidental or accessory thereto.
(b) To design, create, manufacture, produce, export, import,
purchase, acquire, sell, dispose of, and generally deal in and with
materials, articles, machinery, apparatus, equipment, appliances, supplies,
goods and other personal property of every kind and description, tangible
or intangible, and to engage in any mercantile, commercial manufacturing or
trading business of any character.
(c) To acquire, by purchase or otherwise, own, hold, lease,
mortgage, sell, or otherwise dispose of, and generally deal in and with
rights and interests in real and personal property of every kind and
description.
(d) To acquire, sell or otherwise dispose of, deal in and with,
and grant and obtain licenses for all kinds of intangible property,
including patent rights, improvements thereon, inventions, discoveries,
formulas and processes, copyrights, trademarks, trade names and designs.
(e) To the extent permitted by law, to promote, finance,
underwrite and assist, financially or otherwise, and to assume and
guarantee the obligations of any individual, corporation or other entity,
and to purchase or otherwise acquire, hold, own, sell or otherwise dispose
of securities and obligations of every nature and kind of any issuer,
whether or not incorporated.
(f) To do all and everything necessary, suitable or proper for the
accomplishment of any of the purposes or the attainment of any of the
objectives hereinbefore set forth, either alone or in association with
other corporations, firms or individuals, and to do every other act or
acts, thing or things, incidental or appurtenant to or arising out of or
connected with the aforesaid businesses or any part or parts thereof.
(g) To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
THIRD: The aggregate number of shares of stock of all classes which the
Corporation shall have authority to issue is 90,000,000, consisting of
70,000,000 shares of Common Stock having a par value of $0.01 per share,
5,000,000 shares of Class B Stock having a par value of $0.01 per share and
15,000,000 shares of Preferred Stock having a par value of $0.01 per share.
The powers, preferences and the relative, participating, optional and other
rights and the qualifications, limitations and restrictions thereof, of
each class of stock, and the express grant of authority to the Board of
Directors to fix by resolution the designations and the powers, preferences
and rights of each share of Preferred Stock and the qualifications,
limitations and restrictions thereof which are not fixed by this
Certificate of Incorporation, are as follows:
A. COMMON STOCK AND CLASS B STOCK.
I. Dividends, etc.
Subject to the rights of the holders of Preferred Stock, and subject to any
other provisions of this Certificate of Incorporation, as amended from time
to time, holders of Common Stock and Class B Stock shall be entitled to
receive such dividends and other distributions in cash, stock or property
of the Corporation as may be declared thereon by the Board of Directors
from time to time out of assets or funds of the Corporation legally
available therefor; provided, that in the case of cash dividends, if at any
time a cash dividend is paid on the Common Stock, a cash dividend of equal
amount shall be paid on the Class B Stock; and provided, further, that in
the case of dividends or other distributions payable in stock of the
Corporation other than Preferred Stock, including distributions pursuant to
stock splits or divisions of stock of the Corporation other than Preferred
Stock, which occur after the initial issuance of shares of Class B Stock by
the Corporation, only shares of Common Stock shall be distributed with
respect to Common Stock and only shares of Class B Stock shall be
distributed with respect to Class B Stock, in each case, in an amount per
share equal to the amount per share paid with respect to the Common Stock,
and that, in the case of any combination, reclassification or subdivision
of the Common Stock, the shares of Class B Stock shall also be combined,
reclassified or subdivided so that the number of shares of Class B Stock
outstanding immediately following such combination, reclassification or
subdivision shall bear the same relationship to the number of shares
outstanding immediately prior to such combination, reclassification or
subdivision as the number of shares of Common Stock outstanding immediately
following such combination, reclassification or subdivision bears to the
number of shares of Common Stock outstanding immediately prior to such
combination, reclassification or subdivision.
II. Voting.
(a) At every meeting of the stockholders, every holder of Common
Stock shall be entitled to one (1) vote in person or by proxy for each
share of Common Stock standing in his name on the transfer books of the
Corporation and every holder of Class B Stock shall be entitled to one (1)
vote in person or by proxy for each share of Class B Stock standing in his
name on the transfer books of the Corporation, except that each holder of
Class B Stock shall be entitled to ten (10) votes per share on the election
of any directors at any stockholders' meeting (i) if more than 15% of the
shares of Common Stock outstanding on the record date for such meeting are
beneficially owned by a person or group of persons acting in concert
(unless such person or group is also the beneficial owner of a majority of
the shares of Class B Stock on such record date), or (ii) if a nomination
for the Board of Directors is made by a person or group of persons acting
in concert, other than the Board of Directors (unless such nomination is
made by one or more holders of Class B Stock, acting in concert, who
beneficially own more than 15% of the shares of Class B Stock outstanding
on such record date).
(b) The provisions of this Certificate of Incorporation shall not
be modified, revised, altered or amended, repealed or rescinded in whole or
in part, without the affirmative vote of the holders of a majority of the
shares of the Common Stock and of a majority of the shares of the Class B
Stock, each voting separately as a class.
(c) The Corporation may not effect or consummate:
(1) any merger or consolidation of the Corporation with
or into any other person;
(2) any sale, lease, exchange or other disposition of all
or substantially all of the assets of the Corporation
to or with any other person; or
(3) any dissolution of the Corporation;
unless and until such transaction is authorized by the vote, if any,
required by Delaware law; and unless and until such transaction is
authorized by a majority of the votes entitled to be cast by the shares of
Common Stock and of Class B Stock entitled to vote, each voting separately
as a class, but the foregoing shall not apply to any merger or other
transaction described in the preceding subparagraphs (1) and (2) if the
other party to the merger or other transaction is a Subsidiary of the
Corporation.
For purposes of this paragraph (c) a "Subsidiary" is any corporation more
than 50% of the voting securities of which are owned directly or indirectly
by the Corporation; and a "person" is any individual, partnership,
corporation or entity.
(d) Following the initial issuance of shares of Class B Stock, the
Corporation may not effect the issuance of any additional shares of Class B
Stock (except in connection with stock splits and stock dividends) unless
and until such issuance is authorized by the holders of a majority of the
voting power of the shares of Common Stock and of Class B Stock entitled to
vote, each voting separately as a class.
(e) Every reference in this Certificate of Incorporation to a
majority or other proportion of shares of stock shall refer to such
majority or other proportion of the votes entitled to be cast by such
shares.
(f) Except as may be otherwise required by law or by this Article
Third, the holders of Common Stock and Class B Stock shall vote together as
a single class, subject to any voting rights which may be granted to
holders of Preferred Stock.
III. Transfer.
(a) No person holding shares of Class B Stock of record
(hereinafter called a "Class B Holder") may transfer, and the Corporation
shall not register the transfer of, such shares of Class B Stock, as Class
B Stock, whether by sale, assignment, gift, bequest, appointment or
otherwise, except to a Permitted Transferee and any purported transfer of
shares not permitted hereunder shall result in the conversion of such
shares into Common Stock as provided by subsection (d) of this Section III.
A Permitted Transferee shall mean, with respect to each person from time to
time shown as the record holder of shares of Class B Stock:
(i) In the case of a Class B Holder who is a natural person:
(A)The spouse of such Class B Holder, any lineal
descendant of a parent of such Class B Holder, and
any spouse of such lineal descendant (which lineal descendants, their
spouses, the Class B Holder, and his or her spouse are herein collectively
referred to as "Class B Holder's Family Members");
(B)The trustee of a trust (including a voting
trust) principally for the benefit of such Class B Holder
and/or one or more of his or her Permitted Transferees described in each
subclause of this clause (i) other than this subclause (B), provided that
such trust may also grant a general or special power of appointment to one
or more of such Class B Holder's Family Members and may permit trust assets
to be used to pay taxes, legacies and other obligations of the trust or of
the estates of one or more of such Class B Holder's Family Members payable
by reason of the death of any of such Class B Holder's Family Members;
(C) Any organization, contributions to which are
deductible for federal income, estate or gift tax purposes or any
split-interest trust described in Section 4947 of the Internal Revenue
Code, as it may from time to time be amended (hereinafter called a
"Charitable Organization");
(D) A corporation, if a majority of the
beneficial ownership of outstanding capital stock of such corporation which
is entitled to vote for the election of directors is owned by, or a
partnership if a majority of the beneficial ownership of the partnership is
held by, the Class B Holder or his or her Permitted Transferees determined
under this clause (i), provided that if by reason of any change in the
ownership of such stock or partnership interests, such corporation or
partnership would no longer qualify as a Permitted Transferee, all shares
of Class B Stock then held by such corporation or partnership shall, upon
the election of the Corporation given by written notice to such corporation
or partnership, without further act on anyone's part, be converted into
shares of Common Stock effective upon the date of the giving of such
notice, and stock certificates formerly representing such shares of Class B
Stock shall thereupon and thereafter be deemed to represent the like number
of shares of Common Stock; and
(E) The estate of such Class B Holder.
(ii) In the case of a Class B Holder holding the shares
of Class B Stock in question as trustee pursuant to a trust (other than a
Charitable Organization or any trust described in clause (iii) below),
"Permitted Transferee" means (A) any person transferring Class B Stock to
such trust and (B) any Permitted Transferee of any such transferor
determined pursuant to clause (i) above.
(iii) In the case of a Class B Holder holding the shares
of Class B Stock in question as trustee pursuant to a trust (other than a
Charitable Organization) which was irrevocable on the date of initial
issuance to such Class B Holder (hereinafter in this Section III called the
"Record Date"), "Permitted Transferee" means (A) any person to whom or for
whose benefit principal may be distributed either during or at the end of
the term of such trust whether by power of appointment or otherwise and (B)
any Permitted Transferee of any such person determined pursuant to clause
(i) above.
(iv) In the case of a Class B Holder which is a
Charitable Organization holding record and beneficial ownership of the
shares of Class B Stock in question, "Permitted Transferee" means any Class
B Holder.
(v) In the case of a Class B Holder which is a
corporation or partnership (other than a Charitable Organization) acquiring
record and beneficial ownership of the shares of Class B Stock in question
upon its initial issuance by the Corporation, "Permitted Transferee" means
(A) any partner of such partnership, or stockholder of such corporation, on
the Record Date, (B) any person transferring such shares of Class B Stock
to such corporation or partnership, and (C) any Permitted Transferee of any
such person, partner, or stockholder referred to in subclauses (A) and (B)
of this clause (v), determined under clause (i) above.
(vi) In the case of a Class B Holder which is a
corporation or partnership (other than a Charitable Organization or a
corporation or partnership described in clause (v) above) holding record
and beneficial ownership of the shares of Class B Stock in question,
"Permitted Transferee" means (A) any person transferring such shares of
Class B Stock to such corporation or partnership and (B) any Permitted
Transferee of any such transferor determined under clause (i) above.
(vii) In the case of a Class B Holder which is the estate
of a deceased Class B Holder, or which is the estate of a bankrupt or
insolvent Class B Holder, which holds record and beneficial ownership of
the shares of Class B Stock in question, "Permitted Transferee" means a
Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder
as determined pursuant to clause (i), (ii), (iii), (iv), (v) or (vi) above,
as the case may be.
(b) Notwithstanding anything to the contrary set forth herein, any
Class B Holder may pledge such Class B Holder's shares of Class B Stock to
a pledgee pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that such shares
shall not be transferred to or registered in the name of the pledgee and
shall remain subject to the provisions of this Section III. In the event of
foreclosure or other similar action by the pledgee, such pledged shares of
Class B Stock may only be transferred to a Permitted Transferee of the
pledgor or converted into shares of Common Stock, as the pledgee may elect.
(c) For purposes of this Section III:
(i) The relationship of any person that is derived by or
through legal adoption shall be considered a natural one.
(ii) Each joint owner of shares of Class B Stock shall be
considered a "Class B Holder" of such shares.
(iii) A minor for whom shares of Class B Stock are held
pursuant to a Uniform Gifts to Minors Act or similar law shall be
considered a Class B Holder of such shares.
(iv) Unless otherwise specified, the term "person" means
both natural persons and legal entities.
(v) Without derogating from the election conferred upon
the Corporation pursuant to subclause (D) of clause (i) above, each
reference to a corporation shall include any successor corporation
resulting from merger or consolidation and each reference to a partnership
shall include any successor partnership resulting from the death or
withdrawal of a partner.
(d) Any transfer of shares of Class B Stock not permitted
hereunder shall result in the conversion of the transferee's shares of
Class B Stock into shares of Common Stock, effective the date on which
certificates representing such shares are presented for transfer on the
books of the Corporation. The Corporation may, in connection with preparing
a list of stockholders entitled to vote at any meeting of stockholders, or
as a condition to the transfer or the registration of shares of Class B
Stock on the Corporation's books, require the furnishing of such affidavits
or other proof as it deems necessary to establish that any person is the
beneficial owner of shares of Class B Stock or is a Permitted Transferee.
(e) At any time when the number of outstanding shares of Class B
Stock as reflected on the stock transfer books of the Corporation falls
below 2.5% of the aggregate number of the issued and outstanding shares of
the Common Stock and Class B Stock of the Corporation, or the Board of
Directors and the holders of a majority of the outstanding shares of Class
B Stock approve the conversion of all of the Class B Stock into Common
Stock, then, immediately upon the occurrence of either such event, the
outstanding shares of Class B Stock shall be converted into shares of
Common Stock. In the event of such a conversion, certificates formerly
representing outstanding shares of Class B Stock shall thereupon and
thereafter be deemed to represent the like number of shares of Common
Stock.
(f) Shares of Class B Stock shall be registered in the names of
the beneficial owners thereof and not in "street" or "nominee" name. For
this purpose, a "beneficial owner" of any shares of Class B Stock shall
mean a person who, or an entity which, possesses the power, either singly
or jointly, to direct the voting or disposition of such shares. The
Corporation shall note on the certificates for shares of Class B Stock the
restrictions on transfer and registration of transfer imposed by this
Section III.
IV. Conversion Rights.
(a) Subject to the terms and conditions of this Section IV, each
share of Class B Stock shall be convertible at any time or from time to
time, at the option of the respective holder thereof, at the office of any
transfer agent for Class B Stock, and at such other place or places, if
any, as the Board of Directors may designate, or, if the Board of Directors
shall fail so to designate, at the principal office of the Corporation
(attention of the Secretary of the Corporation), into one (1) fully paid
and nonassessable share of Common Stock. Upon conversion, the Corporation
shall make no payment or adjustment on account of dividends accrued or in
arrears on Class B Stock surrendered for conversion or on account of any
dividends on the Common Stock issuable on such conversion. Before any
holder of Class B Stock shall be entitled to convert the same into Common
Stock, he shall surrender the certificate or certificates for such Class B
Stock at the office of said transfer agent (or other place as provided
above), which certificate or certificates, if the Corporation shall so
request, shall be duly endorsed to the Corporation or in blank or
accompanied by proper instruments of transfer to the Corporation or in
blank (such endorsements or instruments of transfer to be in form
satisfactory to the Corporation), and shall give written notice to the
Corporation at said office that he elects so to convert said Class B Stock
in accordance with the terms of this Section IV, and shall state in writing
therein the name or names in which he wishes the certificate or
certificates for Common Stock to be issued. Every such notice of election
to convert shall constitute a contract between the holder of such Class B
Stock and the Corporation, whereby the holder of such Class B Stock shall
be deemed to subscribe for the amount of Common Stock which he shall be
entitled to receive upon such conversion, and, in satisfaction of such
subscription, to deposit the Class B Stock to be converted and to release
the Corporation from all liability thereunder, and thereby the Corporation
shall be deemed to agree that the surrender of the certificate or
certificates therefor and the extinguishment of liability thereon shall
constitute full payment of such subscription for Common Stock to be issued
upon such conversion. The Corporation will as soon as practicable after
such deposit of a certificate or certificates for Class B Stock,
accompanied by the written notice and the statement above prescribed, issue
and deliver at the office of said transfer agent (or other place as
provided above) to the person for whose account such Class B Stock was so
surrendered, or to his nominee or nominees, a certificate or certificates
for the number of full shares of Common Stock to which he shall be entitled
as aforesaid. Subject to the provisions of subsection (d) of this Section
IV, such conversion shall be deemed to have been made as of the date of
such surrender of the Class B Stock to be converted; and the person or
persons entitled to receive the Common Stock issuable upon conversion of
such Class B Stock shall be treated for all purposes as the record holder
or holders of such Common Stock on such date.
(b) The issuance of certificates for shares of Common Stock upon
conversion of shares of Class B Stock shall be made without charge for any
stamp or other similar tax in respect of such issuance. However, if any
such certificate is to be issued in a name other than that of the holder of
the share or shares of Class B Stock converted, the person or persons
requesting the issuance thereof shall pay to the Corporation the amount of
any tax which may be payable in respect of any transfer involved in such
issuance or shall establish to the satisfaction of the Corporation that
such tax has been paid.
(c) The Corporation shall not be required to convert Class B
Stock, and no surrender of Class B Stock shall be effective for that
purpose, while the stock transfer books of the Corporation are closed for
any purpose; but the surrender of Class B Stock for conversion during any
period while such books are so closed shall become effective for conversion
immediately upon the reopening of such books, as if the conversion had been
made on the date such Class B Stock was surrendered.
(d) The Corporation covenants that it will at all times reserve
and keep available, solely for the purpose of issue upon conversion of the
outstanding shares of Class B Stock, such number of shares of Common Stock
as shall be issuable upon the conversion of all such outstanding shares,
provided that nothing contained herein shall be construed to preclude the
Corporation from satisfying its obligations in respect of the conversion of
the outstanding shares of Class B Stock by delivery of shares of Common
Stock which are held in the treasury of the Corporation. The Corporation
covenants that if any shares of Common Stock required to be reserved for
purposes of conversion hereunder require registration with or approval of
any governmental authority under any federal or state law before such
shares of Common Stock may be issued upon conversion, the Corporation will
use its best efforts to cause such shares to be duly registered or
approved, as the case may be. The Corporation will endeavor to list the
shares of Common Stock required to be delivered upon conversion prior to
such delivery upon each national securities exchange, if any, upon which
the outstanding Common Stock is listed at the time of such delivery. The
Corporation covenants that all shares of Common Stock which shall be issued
upon conversion of the shares of Class B Stock, will, upon issue, be fully
paid and nonassessable and not entitled to any pre-emptive rights.
V. Liquidation Rights.
In the event of any dissolution, liquidation or winding up of the affairs
of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the
Corporation, the holders of each series of Preferred Stock shall be
entitled to receive, out of the net assets of the Corporation, an amount
for each share equal to the amount fixed and determined by the Board of
Directors in any resolution or resolutions providing for the issuance of
any particular series of Preferred Stock, plus an amount equal to all
dividends accrued and unpaid on shares of such series to the date fixed for
distribution, and no more, before any of the assets of the Corporation
shall be distributed or paid over to the holders of Common Stock or Class B
Stock.
After payment in full of said amounts to the holders of Preferred Stock of
all series, the remaining assets and funds of the Corporation shall be
divided among and paid to the holders of Common Stock and Class B Stock as
follows: (i) before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for
the holders of Class B Stock, the holders of the shares of Common Stock
(including those persons who shall become holders of Common Stock by reason
of converting their shares of Class B Stock) shall be entitled to receive
$0.25 per share (the "Common Stock Initial Liquidation Amount"); (ii)
before any additional payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for
the holders of Common Stock following the payment of the Common Stock
Initial Liquidation Amount, the holders of Class B Stock shall be entitled
to receive $0.50 per share (the "Class B Liquidation Amount"); and (iii)
before any additional payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for
the holders of Class B Stock following the payment of the Class B
Liquidation Amount, the holders of Common Stock (including those persons
who shall become holders of Common Stock by reason of converting their
shares of Class B Stock) shall be entitled to receive $0.25 per share (the
"Common Stock Additional Liquidation Amount" and, together with the Common
Stock Initial Liquidation Amount, the "Common Stock Liquidation Amount").
Following the payment or setting apart for payment of the Common Stock
Liquidation Amount and the Class B Liquidation Amount, the holders of
Common Stock and Class B Stock shall participate pari passu and be entitled
to receive, on a pro rata basis, the remaining assets of the Corporation or
proceeds therefrom available for distribution to the holders of Common
Stock and Class B Stock. If, upon any liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation or proceeds thereof:
(i) distributable among the holders of the shares of Common Stock shall be
insufficient to pay in full the Common Stock Initial Liquidation Amount and
liquidating payments on any other shares of stock ranking, as to
liquidation, dissolution or winding up, on a parity with the Common Stock,
then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Common Stock and any such other stock ratably in
accordance with the respective amounts which would be payable on such
shares of Common Stock and any such other stock if all amounts payable
thereon were paid in full; (ii) distributable among the holders of the
shares of Class B Stock shall be insufficient to pay in full the Class B
Liquidation Amount and liquidating payments on any other shares of stock
ranking, as to liquidation, dissolution or winding up, on a parity with the
Class B Stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of shares of Class B Stock and any such other
stock ratably in accordance with the respective amounts which would be
payable on such shares of Class B Stock and any such other stock if all
amounts payable thereon were paid in full; (iii) distributable among the
holders of the shares of Common Stock shall be insufficient to pay in full
the Common Stock Additional Liquidation Amount and liquidating payments on
any other shares of stock ranking, as to liquidation, dissolution or
winding up, on a parity with the Common Stock, then such assets, or the
proceeds thereof, shall be distributed among the holders of shares of
Common Stock and any such other stock ratably in accordance with the
respective amounts which would be payable on such shares of Common Stock
and any such other stock if all amounts payable thereon were paid in full.
For the purposes of this Section V, (i) a consolidation or merger of the
Corporation with one or more corporations, (ii) a sale or transfer of all
or substantially all of the Corporation's assets or (iii) a statutory share
exchange shall not be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary.
B. PREFERRED STOCK
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article Third, to provide for the issuance
of the preferred shares in series, and by filing a certificate pursuant to
the General Corporation Law of Delaware, to establish the number of shares
to be included in each such series, and to fix the designations, relative
rights, preferences and limitations of the shares of each such series. The
authority of the Board with respect to each series shall include, but not
be limited to, determination of the following:
(a) The number of shares constituting that series and the
distinctive designations of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends of shares of
that series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law and, if so, the terms of such voting
rights;
(d) Whether that series shall have conversion privileges and, if
so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
(e) Whether or not the shares of that series shall be redeemable
and, if so, the terms and conditions of such redemption, including the date
or dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the terms and
amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series;
(h) Any other relative rights, preferences and limitations of that
series. Dividends on outstanding preferred shares shall be declared and
paid, or set apart for payment, before any dividends shall be declared and
paid, or set apart for payment, on the common shares with respect to the
dividend period. Any and all such shares issued, and for which the full
consideration has been paid or delivered shall be deemed fully paid stock
and the holder of such shares shall not be liable for any further call or
assessment or any other payment thereon.
FOURTH: The duration of such Corporation shall be perpetual.
FIFTH: The name and mailing address of the Corporation's Registered Agent
and Office in the State of Delaware are: The Prentice-Hall Corporation
System, Inc., 229 South State Street in the City of Dover, County of Kent,
Delaware 19901.
SIXTH: Each director shall be elected by the stockholders at each annual
meeting and shall hold office until the next annual meeting of stockholders
and until such director's successor shall have been elected and qualified.
The term of office of each director in office at the time this Article
SIXTH becomes effective shall expire at the annual meeting of stockholders
next held after the effectiveness of this Article SIXTH.
SEVENTH: No holder of shares of the Corporation of any class, now or
hereafter authorized, shall have any preferential or preemptive right to
subscribe for, purchase or receive any shares of the Corporation of any
class, now or hereafter authorized, or any options or warrants for such
shares, or any rights to subscribe for or purchase such shares, or any
securities convertible into or exchangeable for such shares, which may at
any time be issued, sold or offered for sale by the Corporation.
EIGHTH: A director of the Corporation shall not personally be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation law, or (iv) for any transaction from which the
director derived an improper personal benefit.
NINTH: Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation, and the ability of the stockholders to
consent in writing to the taking of any action is hereby specifically
denied.
TENTH: The Board of Directors of the Corporation shall have the power to
amend the By-Laws of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be executed on its behalf on this ___ day
of , 2001.
Fedders Corporation
By: __________________________
Kent E. Hansen
Executive Vice President and
Secretary
ANNEX B
FAIRNESS OPINION OF TM CAPITAL
March 1, 2001
Board of Directors
Fedders Corporation
Westgate Corporate Center
505 Martinsville Road
P.O. Box 813
Liberty Corner, NJ 07938
Gentlemen:
We understand that Fedders Corporation ("Fedders" or the
"Company") is undertaking a transaction whereby the Company intends to
combine its Class A Stock and Common Stock into a single class of Common
Stock (the "New Common Stock") in accordance with the Restated Certificate
of Incorporation. We further understand that each share of Class A Stock
would be exchanged for one share of New Common Stock, each share of Common
Stock would be exchanged for 1.1 shares of New Common Stock and each share
of Class B Stock would be exchanged for 1.1 shares of New Class B Stock
(the "Proposed Recapitalization"). We understand that the Proposed
Recapitalization will be submitted to the shareholders of the Class A Stock
and the shareholders of the Common Stock (collectively, the "Shareholders")
for approval at a special meeting of the Shareholders.
You have asked our written opinion as to the fairness, from a
financial point of view, of the Proposed Recapitalization to the
Shareholders of Fedders (our "Opinion").
In arriving at our Opinion set forth below, we have, among other
things:
(1) Reviewed the Company's Forms 10-K and related financial
information for the years ended August 31, 1996 to 2000
and the Company's Form 10-Q and the related unaudited
financial information for the three months ended November
30, 2000;
(2) Reviewed the Company's Schedule 14A filed in connection
with its Annual Meeting held December 19, 2000 and
subsequent Forms 4 and Forms 13-F;
(3) Reviewed the historical market prices and trading
activity for the Class A Stock and the Common Stock for
the period from January 2, 1998 to February 22, 2001;
(4) Reviewed the historical market prices for the Class A
Stock and the Common Stock and compared them with that of
certain publicly traded companies which we deemed to be
relevant;
(5) Compared the financial position and results of operations
of the Company with that of certain companies which we
deemed to be relevant;
(6) Reviewed and analyzed the terms of transactions in which
public companies with two classes of publicly traded
common stock were combined into a single class of stock;
(7) Reviewed and analyzed the terms of transactions in which
public companies with two classes of common stock were
acquired;
(8) Reviewed and analyzed premiums paid in relevant
transactions in which the purchaser acquired a
controlling share of the target company; and
(9) Conducted other financial analyses and investigations as
we deemed necessary or appropriate in arriving at our
Opinion.
In preparing our Opinion, we have relied on the accuracy and
completeness of all information that was available to us from public
sources, that was supplied or otherwise made available to us by the Company
or was otherwise reviewed by us and we have not assumed any responsibility
to independently verify such information. We have also relied upon
assurances of the management of the Company that they are unaware of any
facts that would make the information provided to us incomplete or
misleading. We have not made any independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of the Company nor have we
been furnished with any such evaluations or appraisals.
This opinion is directed to the Board of Directors of the Company
and does not constitute a recommendation to any shareholder of the Company
as to whether any such shareholder of Fedders should or should not vote to
approve the Proposed Recapitalization. This opinion does not address the
relative merits of the Proposed Recapitalization and any other transactions
or business strategies discussed by the Board of Directors of the Company.
Our opinion is based on economic, monetary and market conditions existing
on the date hereof.
TM Capital Corp. is currently acting as financial advisor to the
Company in connection with the Proposed Recapitalization and will be
receiving a fee in connection with the rendering of this opinion. TM
Capital Corp. is familiar with the Company having served as financial
advisor to Fedders and received customary compensation for the rendering of
such services.
On the basis of, and subject to the foregoing, we are of the
opinion as of the date hereof the Proposed Recapitalization is fair to the
shareholders of the Class A Stock and the shareholders of the Common Stock
from a financial point of view.
This opinion has been prepared for the information of the Board of
Directors of the Company in connection with the Proposed Recapitalization
and shall not be reproduced, summarized, described or referred to, provided
to any person or otherwise made public or used for any other purpose
without the prior written consent of TM Capital Corp., provided, however,
that this letter may be reproduced in full in the Form S-4 filed by the
Company related to the Proposed Recapitalization.
Very truly yours,
TM CAPITAL CORP.
Michael S. Goldman
Senior Vice President
ANNEX C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
(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 ss. 228 of this title shall be
entitled to an appraisal by the Court of Chancery of the fair value of the
stockholder's 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 ss. 251 (other than a merger
effected pursuant to ss. 251(g) of this title), ss. 252, ss. 254, ss. 257,
ss. 258, ss. 263 or ss. 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
stockholders of the surviving corporation as provided in
subsection (f) of ss. 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 ss.ss. 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 in respect thereof) 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 ss. 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.
(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 subsection (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 such
stockholder's shares shall deliver to the corporation, before the
taking of the vote on the merger or consolidation, a written
demand for appraisal of such stockholder's 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 such stockholder's 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 ss.
228 or ss. 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within
ten days thereafter, shall notify each of the holders of any class
or series of stock of such constituent corporation who are
entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall
be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's 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 such holder's shares.
If such notice did not notify stockholders of the effective date
of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date
of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that
are entitled to appraisal rights of the effective date of the
merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however,
that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who
has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given
shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders
entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10
days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on
the day next preceding the day on which the notice is given.
(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 such stockholder's 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 stockholder within 10
days after such stockholder's 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 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 such stockholder's certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that such stockholder 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 of 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 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 (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of such stockholder's 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.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of
Delaware or DGCL empowers a Delaware corporation to indemnify any
persons who are, or are threatened to be made, parties to any
threatened, pending or completed legal action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation), by reason
of the fact that such person was an officer or director of such
corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that
such officer or director acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the
corporation's best interests, and, for criminal proceedings, had
no reasonable cause to believe his or her conduct was illegal. A
Delaware corporation may indemnify officers and directors against
expenses (including attorneys' fees) in connection with the
defense or settlement of an action by or in the right of the
corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the
corporation must indemnify him or her against the expenses which
such officer or director actually and reasonably incurred.
In accordance with the DGCL, the restated certificate of
incorporation of Fedders contains a provision to limit the
personal liability of the directors of Fedders for violations of
their fiduciary duty. This provision eliminates each director's
liability to Fedders or its stockholders for monetary damages
except (i) for any breach of the director's duty of loyalty to
Fedders or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL providing
for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal
liability of directors for monetary damages for actions involving
a breach of their fiduciary duty of care, including any such
actions involving gross negligence.
Fedders is insured for liabilities it may incur pursuant to its
restated certificate of incorporation relating to the
indemnification of its directors, officers and employees. In
addition, directors, officers and certain key employees are
insured against certain losses which may arise out of their
employment and which are not recoverable under the indemnification
provisions of Fedders' restated certificate of incorporation.
Item 21(a). Exhibits
See Exhibit Index
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters in addition to the information called for by the other items
of the applicable form.
(b) The registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (a) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities Act
of 1933, and is used in connection with an offering of securities subject
to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such an amendment is effective, and
that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
of 1933, and is, therefore, unenforceable. In the event that a claim or
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933, and will be
governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally or more prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(e) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was not
the subject of and included in the registration statement when it became
effective.
(f) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed bo be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Fedders Corporation, certifies that it has reasonable grounds
to believe that it meets all the requirements for filing on Form S-4 and
has duly caused this Amendment No. 2 to Registration Statement (No.
333-58876) to be signed on its behalf by the undersigned, thereunto duly
authorized, in Liberty Corner, New Jersey, on the 24th day of August, 2001.
FEDDERS CORPORATION
By /s/ MICHAEL GIORDANO *
------------------------
Michael Giordano
Executive Vice President, Finance
and Administration
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ SALVATORE GIORDANO * Chairman Emeritus and a Director August 24, 2001
------------------------
Salvatore Giordano
/s/ SAL GIORDANO, JR. * Chairman and Chief Executive August 24, 2001
------------------------
Sal Giordano, Jr. Officer (Principal
Executive Officer)
/s/ WILLIAM J. BRENNAN * Director August 24, 2001
------------------------
William J. Brennan
/s/ DAVID C. CHANG * Director August 24, 2001
------------------------
David C. Chang
/s/ MICHAEL L. DUCKER * Director August 24, 2001
------------------------
Michael L. Ducker
/s/ JOSEPH GIORDANO * Director August 24, 2001
------------------------
Joseph Giordano
/s/ C.A. KEEN * Director August 24, 2001
------------------------
C.A. Keen
/s/ HOWARD S. MODLIN * Director August 24, 2001
------------------------
Howard S. Modlin
/s/ S.A. MUSCARNERA * Director August 24, 2001
------------------------
S.A. Muscarnera
/s/ ANTHONY PULEO * Director August 24, 2001
------------------------
Anthony Puleo
/s/ MICHAEL GIORDANO * Executive Vice President, August 24, 2001
------------------------
Michael Giordano Finance and Administration
(Principal Financial Officer)
- ---------------------------
* The undersigned, by signing his name hereto, does
sign and execute this Amendment No. 2 to Registration
Statement pursuant to the powers of attorney executed
by the above-named officers and directors of the
registrant, which have been previously filed with the
Securities and Exchange Commission on behalf of such
officers and directors.
By: /s/ Kent E. Hansen
-------------------------------
Kent E. Hansen
Executive Vice President and Secretary
EXHIBIT INDEX
Exhibit Number Description
Exhibit 2.1 Recapitalization Agreement and Plan of Merger, dated
as of _____________, 2001 between Fedders Corporation
and FC Merger Sub, Inc., which is attached as Annex A
to the proxy statement/prospectus contained in this
Registration Statement.
Exhibit 3.1 Restated Certificate of Incorporation of Fedders
Corporation which is attached as Exhibit A to the
Recapitalization Agreement and Plan of Merger
attached as Annex A to the proxy statement/prospectus
contained in this Registration Statement.
Exhibit 5** Opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
as to the legality of the securities registered
hereunder.
Exhibit 8.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
regarding tax matters.
Exhibit 12.1* Statement regarding computation of ratios.
Exhibit 23.1+ Consent of Deloitte & Touche LLP.
Exhibit 23.2** Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5).
Exhibit 23.3+ Consent of BDO Seidman LLP.
Exhibit 24* Powers of Attorney.
Exhibit 99.1* Form of Proxy for Class A stockholders.
Exhibit 99.2* Form of Proxy for Class B and Common stockholders.
Exhibit 99.3+ Proposed Recapitalization Analysis from TM Capital Corp.
prepared in February 2001.
* Previously filed.
+ Filed herewith.
** To be filed by amendment.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this
Amendment No. 2 to Registration Statement No. 333-58876 of Fedders
Corporation on Form S-4 of our reports dated October 13, 2000, appearing in
the Annual Report on Form 10-K of Fedders Corporation for the fiscal year
ended August 31, 2000 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
August 24, 2001
Exhibit 23.3
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Fedders Corporation
Liberty Corner, New Jersey
We hereby consent to the incorporation by reference
in the Prospectus constituting a part of this Registration Statement of our
reports dated October 12, 1999, relating to the consolidated financial
statements and schedule of Fedders Corporation appearing in the Company's
Annual Report on Form 10-K for the year ended August 31, 2000.
We also consent to the reference to us under the
caption "Experts" in the Prospectus.
/s/ BDO SEIDMAN, LLP
Woodbridge, New Jersey
Exhibit 99.3
FEDDERS
Proposed Recapitalization Analysis
TM Capital Corp.
February 2001
TABLE OF CONTENTS
TAB
---
Current Capitalization................................................ I
Historical Financial Summary.......................................... II
Stock Price & Volume History.......................................... III
Analysis of Selected Publicly Traded Companies........................ IV
Dual Class Stock Trading Analysis..................................... V
Recent Equity Recapitalization Transactions........................... VI
Control Voting Stock Proportion and Conversion Ratio Relationship..... VII
Stock Price and Transaction Conversion Ratio Analysis................. VIII
Recent Acquisitions Involving Dual Equity Class Companies............. IX
Premiums Paid for Significant Ownership Purchases..................... X
Proposed Recapitalization............................................. XI
Tab 1
==================================================================================================================================
Current Capitalization
==================================================================================================================================
Common Stock Class A Stock Class B Stock Total All Classes
---------------------- --------------------- -------------------- ------------------------
Percent Percent Percent Percent
Beneficially of Beneficially of Beneficially of Beneficially of Total
Shareholders Owned Class Owned Class Owned Class Owned Outstanding
- --------------------------------- ----------- -------- ----------- ------ ----------- ----- ----------- -----------
Total Officers and Directors (a):
Salvatore Giordano 1,100(b) 0.0% 1,435,259(b) 9.6% 2,262,566(b) 99.8% 3,698,925(b) 11.6%
Sal Giordano, Jr. -- 0.0% 1,065,768 7.1% -- 0.0% 1,065,768 3.3%
Howard S. Modlin 256,800 1.7% 392,038 2.6% -- 0.0% 648,838 2.0%
Joseph Giordano 12,810 0.1% 518,293 3.5% -- 0.0% 531,103 1.7%
Robert L. Laurent, Jr. 20,000 0.1% 302,482 2.0% -- 0.0% 322,482 1.0%
S.A. Muscarnera 55,000 0.4% 124,602 0.8% -- 0.0% 179,602 0.6%
Clarence R. Moll 61,400 0.4% 82,877 0.6% -- 0.0% 144,277 0.5%
C.A. Keen -- 0.0% 103,951 0.7% -- 0.0% 103,951 0.3%
William J. Brennan 5,000 0.0% 66,885 0.4% -- 0.0% 71,885 0.2%
Kent E. Hansen -- 0.0% 25,593 0.2% -- 0.0% 25,593 0.1%
Anthony E. Puleo 2,000 0.0% 22,385 0.1% -- 0.0% 24,385 0.1%
David C. Chang -- 0.0% 9,908 0.1% -- 0.0% 9,908 0.0%
Other Officers & Directors 5,126 0.0% 109,957 0.7% -- 0.0% 115,083 0.4%
------- ------ --------- ------ --------- ------ --------- -----
Total Officers and Directors 419,236 2.9% 4,259,998 28.4% 2,262,566 99.8% 6,941,800 21.7%
Institutional Investors (c):
Neuberger & Berman LLC 816,800 5.6% 1,399,000 9.3% -- 0.0% 2,215,800 6.9%
Gamco Investors Income 602,500 4.1% 497,000 3.3% -- 0.0% 1,099,500 3.4%
Tocqueville Asset Management 696,561 4.7% -- 0.0% -- 0.0% 696,561 2.2%
Brandywine Asset Management 640,800 4.4% -- 0.0% -- 0.0% 640,800 2.0%
Barclays Bank PLC 503,956 3.4% 113,815 0.8% -- 0.0% 617,771 1.9%
Dimensional Fund Advisors 446,400 3.0% 137,223 0.9% -- 0.0% 583,623 1.8%
First Pacific Advisors 244,800 1.7% 336,800 2.2% -- 0.0% 581,600 1.8%
Bear Stearns & Company -- 0.0% 444,904 3.0% -- 0.0% 444,904 1.4%
Vanguard Group Inc 333,745 2.3% 82,838 0.6% -- 0.0% 416,583 1.3%
Commonwealth of Pennsylvania 306,500 2.1% 100,000 0.7% -- 0.0% 406,500 1.3%
Avenir Corporation -- 0.0% 343,850 2.3% -- 0.0% 343,850 1.1%
TIAA-CREF Investment 184,370 1.3% 153,550 1.0% -- 0.0% 337,920 1.1%
STI Trust & Investment -- 0.0% 280,200 1.9% -- 0.0% 280,200 0.9%
Private Capital Management 245,200 1.7% -- 0.0% -- 0.0% 245,200 0.8%
Corner Cap Investment 236,300 1.6% -- 0.0% -- 0.0% 236,300 0.7%
Mellon Bank Corporation 235,199 1.6% -- 0.0% -- 0.0% 235,199 0.7%
Bank of America Corporation 232,475 1.6% -- 0.0% -- 0.0% 232,475 0.7%
State Street Corporation 208,531 1.4% -- 0.0% -- 0.0% 208,531 0.7%
Munder Capital Management 200,000 1.4% -- 0.0% -- 0.0% 200,000 0.6%
Towneley Capital Management 140,600 1.0% -- 0.0% -- 0.0% 140,600 0.4%
Texas Teacher Retirement 128,000 0.9% -- 0.0% -- 0.0% 128,000 0.4%
Other Institutional Investors 1,382,500 9.4% 189,012 1.3% -- 0.0% 1,571,512 4.9%
---------- ----- --------- ------ ----- ---- ---------- ------
Total Institutional 7,785,237 52.9% 4,078,192 27.2% -- 0.0% 11,863,429 37.1%
Other Shares Outstanding 6,500,186 44.2% 6,641,007 44.3% 3,840 0.2% 13,145,033 41.1%
--------- ----- --------- ----- ----- ----- ---------- ----
Total Shares Outstanding (d) 14,704,659 100.0% 14,979,197(e) 100.0% 2,266,406 100.0% 31,950,262(e) 100.0%
========== ===== ========== ===== ========= ====== ========== =====
- ----------------------------------------------------------------------------
(a) Source: Proxy Statement dated November 22, 2000 and subsequent Forms 4.
(b) Includes shares owned by Giordano Holding Corporation as to which
Salvatore Giordano, Sal Giordano Jr. and Joseph Giordano share voting
and investment power. Shares held by Sal Giordano, Jr. and Joseph Giordano
exclude shares held by the Giordano Holding Corporation.
(c) Source: Proxy Statement dated November 22, 2000 and subsequent Forms 13-F.
(d) Source: 10-Q for the Quarter Ended November 30, 2000. Share information
reflects outstanding balances as of December 31, 2000.
(e) Does not include approximately 768,144 exercisable Class A stock options
held by the Company's officers and directors.
=============================================================================================================================
Voting Rights
=============================================================================================================================
Classification Shares Percent of Total
of Stock Outstanding Outstanding Voting Rights
- -------------- ----------- ---------------- -------------------------------
Common Stock 14,704,659 46.0% The shares of Common Stock are entitled
to one vote per share on all matters
submitted to stockholders. Except as
otherwise required by law or the
Corporation's Restated Certificate of
Incorporation, the holders of the
Common Stock and Class B Stock vote
together as a single class. Holders of
the Common Stock are also entitled to
vote separately as a class (as are the
shares of Class B Stock) on amendments
to the Corporation's Restated
Certificate of Incorporation and the
issuance of additional shares of Class
B Stock, as well as on mergers,
consolidations and certain other
significant transactions for which
stockholder approval is required under
Delaware Law.
Class A Stock 14,979,197 46.9% The shares of Class A Stock are not entitled
(excluding exercisable to vote, except as specifically required
options) by law.
Class B Stock 2,266,406 7.1% The shares of Class B Stock are
entitled to one vote per share on all
matters submitted to stockholders,
except that they are entitled to ten
votes per share in the election of
directors if more than 15% of the
shares of Common Stock outstanding on
the record date are beneficially owned
by a person or 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, provided that such nomination
is not made by one or more of the
holders of Class B Stock. Except as
otherwise required by law or the
Corporation's Restated Certificate of
Incorporation, the holders of Common
Stock and Class B Stock vote together
as a single class. Holders of the Class
B Stock are also entitled to vote
separately as a class (as are the
shares of Common Stock) on all
amendments to the Corporation's
Restated Certificate of Incorporation
and the issuance of additional shares
of Class B Stock, as well as on
mergers, consolidations and certain
other significant transactions for
which stockholder approval is required
under Delaware Law.
==================================================================================================================
Voting Analysis
==================================================================================================================
Voting Analysis
-----------------------------------------------------
Upon 15% Stake Purchase
Total Shares Outstanding Ordinary or Proxy Contest (b)
------------------------ ---------------------- -------------------------
Percent of
Classification Beneficially Total Percent of Percent of
of Stock Owned Outstanding Votes Total Votes Total
- -------------------- ------------ ----------- --------- ----------- -------- -----------
Common Stock 14,704,659 46.0% 14,704,659 86.6% 14,704,659 39.4%
Class A Stock (a) 14,979,197 46.9% -- -- -- --
Class B Stock 2,266,406 7.1% 2,266,406 13.4% 22,664,060 60.6%
------------- -------- ----------- -------- ----------- -------
Total Shares
Outstanding 31,950,262 100.0% 16,971,065 100.0% 37,368,719 100.0%
============ ======== ========== ======= ========== =======
- -------------------------------
(a) Does not include approximately 768,144 exercisable Class A Stock options
held by the Company's officers and directors.
(b) The holders of Class B stock are entitled to ten votes per share in any
election of directors if more than 15% of the Common Stock outstanding on
the record date are owned beneficially by a person or group 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, provided that such nomination is
not made by one or more of the holders of Class B stock.
Tab 2
================================================================================================================================
Fedders Corp.
Consolidated Historical Income Statements
================================================================================================================================
Three Months
($s in thousands, except per share data) Year Ended August 31, Ended November 30,
----------------------------------------------------------- ------------------
1996 1997 1998 1999 2000 1999 2000
--------- ---------- -------- --------- ------------ --------- ------
Net Sales $371,772 $314,100 $322,121 $355,956 $409,809 $44,683 $39,948
Cost of Goods Sold 288,744 244,024 252,351 271,365 304,853 31,425 31,270
--------- ------------ ---------- -------- --------- -------- --------
Gross Profit 83,028 70,076 69,770 84,591 104,956 13,258 8,678
Selling, General and
Administrative Expenses 32,040 38,347 40,210 41,233 58,102 13,269 16,097
Restructuring -- -- 16,750 3,100 -- -- --
--------- ------------ ---------- -------- --------- -------- --------
Operating Income 50,988 31,729 12,810 40,258 46,854 (11) (7,419)
Minority Interest in Joint Venture 230 568 403 412 (796) (114) (130)
Interest Expense, Net 952 3,430 8,610 9,684 15,584 2,991 3,573
--------- ------------ ---------- -------- --------- -------- --------
Income before Provision
for Income Taxes 50,266 28,867 4,603 30,986 30,474 (3,116) (11,122)
Provision for Income Taxes 19,108 10,103 1,611 10,262 10,073 (983) (3,610)
-------- ------------ ---------- -------- --------- -------- --------
Net Income (Loss) $31,158 $18,764 $2,992 $20,724 $20,401 ($2,133) ($7,512)
======== ============ ========== ======== ========= ======== ========
Earnings Per Share (Diluted) $0.74 $0.39 $0.07 $0.56 $0.57 ($0.06) ($0.23)
Weighted Average Shares Outstanding 42,382 (a) 47,847 (a) 42,557 37,098 35,490 36,029 32,865
-----------------------------------------------------------------------------------------------------------------
EBITDA Calculation:
Operating Income $50,988 $31,729 $12,810 $40,258 $46,854 ($11) ($7,419)
Plus: Depreciation & Amortization 6,578 9,935 9,263 10,279 13,076 3,163 3,873
Other, Net 230 568 19,684 4,076 (1,144) 559 643
--------- ------------ --------- -------- ------- ------- --------
EBITDA $57,796 $42,232 $41,757 $54,613 $58,786 $3,711 ($2,903)
========= ============ ========= ======== ======= ======= ========
-----------------------------------------------------------------------------------------------------------------
Sales Growth (Decline) 17.5% (15.5%) 2.6% 10.5% 15.1% -- (10.6%)
Gross Margin 22.3% 22.3% 21.7% 23.8% 25.6% 29.7% 21.7%
SG&A as a Percentage of Net Sales 8.6% 12.2% 12.5% 11.6% 14.2% 29.7% 40.3%
EBITDA Margin 15.5% 13.4% 13.0% 15.3% 14.3% 8.3% (7.3%)
Operating Margin 13.7% 10.1% 4.0% 11.3% 11.4% (0.0%) (18.6%)
- ------------------------
(a) EPS for the years ended 8/31/97 and 8/31/96 were calculated after preferred
stock dividends of $2,420 and $151 respectively.
================================================================================================================================
Fedders Corp.
Consolidated Historical Balance Sheets
================================================================================================================================
($s in thousands, except per share data) As of August 31,
------------------------------------------------------------ As of
1996 1997 1998 1999 2000 11/30/00
-------- -------- ------- ------- -------- --------
ASSETS:
CURRENT ASSETS
Cash and Equivalents $90,295 $110,393 $ 90,986 $117,509 $87,193 $15,201
Accounts Receivable, Net 7,975 9,060 14,520 21,028 25,394 29,205
Inventories 53,446 62,887 52,261 61,614 75,171 116,964
Deferred Income Taxes 3,584 4,070 5,902 10,161 4,811 4,811
Other Current Assets 3,366 8,917 4,308 1,496 5,568 6,246
--------- --------- --------- ---------- --------- ---------
Total Current Assets 158,666 195,327 167,977 211,808 198,137 172,427
Property, Plant & Equipment, Net 62,872 63,994 56,318 70,771 72,268 79,448
Deferred Income Taxes 7,364 6,374 8,838 7,676 4,482 4,482
Goodwill 58,556 56,858 55,159 73,999 85,308 87,347
Other Assets 2,762 6,461 16,337 18,088 18,762 18,398
--------- --------- --------- --------- --------- ---------
Total Assets $290,220 $329,014 $304,629 $382,342 $378,957 $362,102
========= ========= ========= ========= ========= =========
LIABILITIES & STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
Short-Term Notes -- -- -- -- -- $9,277
Current Portion of Long-Term Debt $1,889 $1,891 $2,065 $4,598 $6,275 2,417
Accounts Payable 16,514 10,591 25,769 35,432 36,436 32,773
Income Taxes Payable 15,391 10,027 14,406 13,049 10,958 7,641
Accrued Expenses 38,055 31,082 32,101 46,463 37,309 35,260
--------- -------- --------- -------- --------- --------
Total Current Liabilities 71,849 53,591 74,341 99,542 90,978 87,368
Long-Term Debt 38,517 113,489 108,948 156,765 163,912 163,371
Other Long-Term Liabilities 14,495 11,207 11,911 13,240 9,828 10,218
Minority Interest in Joint Venture 5,608 5,040 4,637 3,862 1,979 1,821
-------- -------- --------- --------- --------- --------
Total Liabilities 130,469 183,327 199,837 273,409 266,697 262,778
Stockholders' Equity 159,751 145,687 104,792 108,933 112,260 99,324
--------- -------- --------- --------- --------- --------
Total Liabilities &
Stockholders' Equity $290,220 $329,014 $304,629 $382,342 $378,957 $362,102
======== ========= ======== ======== ======== =========
- ----------------------------------------------------------------------------------------------------------------------------------
Book Value Per Share $3.74 $3.75 $2.71 $3.02 $3.35 $3.08
Number of Shares Outstanding
Preferred Stock 7,643 6,809 -- -- --
Common Stock (less Treasury Stock) 18,990 18,990 16,972 16,135 15,568
Class A Stock (less Treasury Stock) 19,416 15,739 19,381 17,636 15,707
Class B Stock 2,267 2,267 2,267 2,267 2,266
-------- -------- --------- -------- --------
Total Number of Shares Outstanding 48,315 43,805 38,620 36,038 33,541 32,227
======== ======== ========= ======== ========= ========
==================================================================================================================================
Fedders Corp.
Consolidated Historical Cash Flow Statements
==================================================================================================================================
($s in thousands) Year Ended August 31,
-----------------------------------------------------------
1996 1997 1998 1999 2000
--------- --------- --------- --------- --------
Cash Flows From Operating Activities:
- -------------------------------------
Net Income $31,158 $18,764 $2,992 $20,724 $20,401
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 6,578 9,935 9,263 10,279 13,076
Deferred Income Taxes (1,717) 504 (4,296) 5,803 9,153
Minority Interest in Joint Venture -- -- (3,347) -- (1,883)
Tax Benefit Related to Stock Options Exercised -- -- 3,825 47 109
Restructuring Charge -- -- 5,590 -- --
Changes in Operating Assets & Liabilities:
(Increase) Decrease in Accounts Receivable 4,402 (1,085) (5,460) 2,811 (1,119)
(Increase) Decrease in Income Tax Receivable -- -- -- -- --
(Increase) Decrease in Inventories (7,856) (9,441) 10,626 1,115 (9,535)
(Increase) Decrease in Other Current Assets (628) (5,551) 6,263 3,399 (3,819)
(Increase) Decrease in Other Assets (568) (335) (7,281) 1,860 (1,210)
Increase (Decrease) in Income Taxes Payable 6,243 (5,364) 4,379 (1,357) (2,091)
Increase (Decrease) in Accounts Payable (2,887) (5,923) 15,178 8,085 (1,318)
Increase (Decrease) in Accrued Expenses 3,784 (6,973) 1,269 503 (12,893)
Increase (Decrease) in Other Long-Term Liabilities 3,151 (3,288) 704 (1,175) (3,412)
Increase (Decrease) in Other Liabilities (226) (548) (403) (105) (840)
---- ---- ---- ---- ----
Net Cash Provided by (Used in) Operating Activities 41,434 (9,305) 39,302 51,989 4,619
Cash Flows From Investing Activities:
Purchase of Trion, Inc. -- -- -- (39,400) --
Additions to Property, Plant and Equipment (7,043) (9,236) (8,497) (9,378) (9,858)
Disposal of Property, Plant and Equipment 535 428 1,847 -- 2,237
Acquisition of Businesses -- -- -- -- (7,416)
--------- --------- -------- --------- --------
Net Cash Provided by (Used in) Investing Activities (6,508) (8,808) (6,650) (48,778) (15,037)
Cash Flows From Financing Activities:
Proceeds from (Payments to) Senior Subordinated Notes -- 96,025 -- 47,652 --
Proceeds from (Payments to) Convertible Subordinated Debentures -- (22,806) -- -- --
Proceeds from (Payments to) Long-Term Debt (695) (1,992) (1,903) (2,685) (7,021)
Proceeds from (Payments to) Short-Term Borrowings -- -- -- -- 3,753
Proceeds from Stock Options Exercised 1,868 1,727 5,289 254 1,059
Proceeds from Tax Benefit Related to Stock Options Exercised 437 479 -- -- --
Proceeds from (Payments to) Fedders Xinle Financing 6,299 (168) (2,517) 1,447 --
Repayment of Trion, Inc. Debt -- -- -- (6,300) --
Repayment of NYCOR, Inc. Short-Term Borrowings (3,000) -- -- -- --
Repayment of Fedders Xinle Short-Term Debt (3,396) -- -- -- --
Expenses Related to NYCOR, Inc. Merger (599) -- -- -- --
Proceeds from Notes Due on Common Stock Purchases -- -- -- -- --
Cash Dividends (3,252) (5,605) (3,520) (3,841) (4,205)
Repurchase of Capital Stock -- (29,449) (49,408) (13,215) (13,484)
---------- ----------- --------- ----------- ---------
Net Cash Provided by (Used in) Financing Activities (2,338) 38,211 (52,059) 23,312 (19,898)
---------- ----------- --------- ----------- ---------
Net Increase (Decrease) in Cash 32,588 20,098 (19,407) 26,523 (30,316)
Net Cash at Beginning of Period 57,707 90,295 110,393 90,986 117,509
---------- ---------- --------- ---------- ---------
Net Cash at End of Period $90,295 $110,393 $90,986 $117,509 $87,193
======= ======== ======= ======== =======
Three Month
Ended November 30,
---------------------------
1999 2000
----------- ---------
Cash Flows From Operating Activities:
-------------------------------------
Net Income ($2,133) ($7,512)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 3,163 3,873
Deferred Income Taxes 1,284 --
Minority Interest in Joint Venture 366 (158)
Tax Benefit Related to Stock Options Exercised -- 1,246
Restructuring Charge -- --
Changes in Operating Assets & Liabilities:
(Increase) Decrease in Accounts Receivable 289 (2,431)
(Increase) Decrease in Income Tax Receivable 617 --
(Increase) Decrease in Inventories (35,597) (39,261)
(Increase) Decrease in Other Current Assets 844 (670)
(Increase) Decrease in Other Assets (176) 91
Increase (Decrease) in Income Taxes Payable (3,081) (3,317)
Increase (Decrease) in Accounts Payable (25,231) (4,284)
Increase (Decrease) in Accrued Expenses (840) (3,811)
Increase (Decrease) in Other Long-Term Liabilities (4,894) 390
Increase (Decrease) in Other Liabilities 117 (162)
--- ----
Net Cash Provided by (Used in) Operating Activities (65,272) (56,006)
Cash Flows From Investing Activities:
Purchase of Trion, Inc. -- --
Additions to Property, Plant and Equipment (619) (3,833)
Disposal of Property, Plant and Equipment -- --
Acquisition of Businesses -- (10,886)
--------- ---------
Net Cash Provided by (Used in) Investing Activities (619) (14,719)
Cash Flows From Financing Activities:
Proceeds from (Payments to) Senior Subordinated Notes -- --
Proceeds from (Payments to) Convertible Subordinated Debentures -- --
Proceeds from (Payments to) Long-Term Debt (354) (596)
Proceeds from (Payments to) Short-Term Borrowings 1,602 5,524
Proceeds from Stock Options Exercised 547 29
Proceeds from Tax Benefit Related to Stock Options Exercised -- --
Proceeds from (Payments to) Fedders Xinle Financing -- --
Repayment of Trion, Inc. Debt -- --
Repayment of NYCOR, Inc. Short-Term Borrowings -- --
Repayment of Fedders Xinle Short-Term Debt -- --
Expenses Related to NYCOR, Inc. Merger -- --
Proceeds from Notes Due on Common Stock Purchases -- --
Cash Dividends (1,073) (1,030)
Repurchase of Capital Stock (2,177) (5,194)
--------- -----------
Net Cash Provided by (Used in) Financing Activities (1,455) (1,267)
--------- -----------
Net Increase (Decrease) in Cash (67,346) (71,992)
Net Cash at Beginning of Period 117,509 87,193
--------- -----------
Net Cash at End of Period $50,163 $15,201
--------- -----------
Tab 3
Fedders Corp.: Daily Closing Stock Price - 1/2/98 to 2/22/01
[LINEGRAPH SHOWING THE DAILY CLOSING STOCK PRICE FOR THE PERIOD COMMENCING ON
1/2/98 AND ENDING ON 2/22/01 APPEARS HERE]
Fedders Corp.: Daily Trading Discount of Class A Stock from 1/3/98 - 2/22/01--
- -6.9% Average Trading Discount
1998 = -4.9%
1999 = -8.0%
2000 = -6.8%
2001 YTD = -13.2%
[GRAPH SHOWING THE DAILY TRADING DISCOUNT OF CLASS A STOCK FOR THE PERIOD
COMMENCING 1/3/98 AND ENDING ON 2/22/01 APPEARS HERE]
Fedders Corp.: Monthly Stock Trading Volume - 1/98 to 2/01
Average Class A Shares as a % of Total = 39.8%
[GRAPH SHOWING THE MONTHLY STOCK TRADING VOLUME FOR THE PERIOD OF 1/98 TO
2/01 APPEARS HERE]
1998 = 40.9%
1999 = 39.4%
2000 = 39.5%
2001 YTD = 22.3%
Tab 4
- ----------------------------------------------------------------------------------------------------------------------------
Analysis of Selected Publicly Traded Home Appliance Companies
- ----------------------------------------------------------------------------------------------------------------------------
($s in millions) Selected Publicly Traded Home Appliance Companies
--------------------------------------------------------------------------------
Applica Fedders
Incorporated Maytag Corp. Salton Inc. Whirlpool Corp. Average Corporation
------------ ------------ ----------- --------------- ------- -------------
Operating Data (Latest 12 months) 9/30/00 9/30/00 12/30/00 9/30/00 11/30/00
---------------------------------
Net Sales $763.6 $4,319.2 $817.6 $10,435.0 $4,083.8 $405.1
Five-Year Compound Sales Growth 34.3% 7.7% 59.7% 4.8% 26.6% 2.0%
Gross Profit $246.4 $1,200.2 $314.7 $2,579.0 $100.4
Gross Margin 32.3% 27.8% 38.5% 24.7% 30.8% 24.8%
EBITDA $99.6 $679.5 $180.6 $1,296.0 $52.2
EBITDA Margin 13.0% 15.7% 22.1% 12.4% 15.8% 12.9%
Operating Income $62.2 $522.4 $158.4 $881.0 $39.4
Operating Margin 8.1% 12.1% 19.4% 8.4% 12.0% 9.7%
Net Income $25.0 (a) $282.7 $78.4 $414.0 $15.0
Net Profit Margin 3.3% 6.5% 9.6% 4.0% 5.8% 3.7%
Balance Sheet Data
(Latest Available)
-------------------
Cash & Equivalents $9.8 $23.1 $20.3 $266.0 $42.0 (b)
Total Assets $772.5 $2,771.1 $673.5 $6,888.0 $2,776.3 $362.1
Current Debt $18.3 $492.9 $145.4 $1,185.0 $21.3 (b)
Long-Term Debt 309.0 453.9 229.5 785.0 161.2 (b)
------------ ------------ ----------- --------------- ------- -------------
Total Debt 327.4 946.8 375.0 1,970.0 182.6
Shareholders' Equity 350.1 283.2 245.5 1,664.0 99.3
------------ ------------ ----------- --------------- ------- -------------
Total Capital $677.4 $1,230.1 $620.4 $3,634.0 $281.9
Debt as a % of Total Capital 48.3% 77.0% 60.4% 54.2% 60.0% 64.8%
Operating Income/Total Assets 8.1% 18.9% 23.5% 12.8% 15.8% 10.9%
Return on Equity 7.1% 99.8% 32.0% 24.9% 40.9% 15.1%
--------------------------------------
NA - Not Available
NM - Not Meaningful
(a) Includes non-recurring items.
(b) Average as of the latest four quarters.
Analysis of Selected Publicly Traded Home Appliance Companies
($s in millions, except per share data) Selected Publicly Traded Home Appliance Companies
Applica Maytag Salton Whirlpool Fedders
Incorporated Corp. Inc. Corp. Average Corporation
------------ ------ ------- ---------- ------- -----------
Market Data (Latest Available)
Ticker Symbol APN MYG SFP WHR FJC/FJA
Stock Exchange NYSE NYSE NYSE NYSE NYSE
Closing Price (2/22/01) $6.05 $33.00 $19.10 $52.05 $4.93/$4.35
52-Week High $19.00 $42.44 $52.75 $68.31 $6.25/$5.94
52-Week Low $3.00 $25.00 $16.56 $31.50 $3.38/$3.25
Current as a % of High 31.8% 77.8% 36.2% 76.2% 55.5% 78.8%/73.2%
Market Capitalization $139.4 $2,538.4 $227.4 $3,463.2 $1,592.1 $148.8
Common Shares Outstanding (million) 23.0 76.9 11.9 66.5 32.0 (c)
Earnings per Share $1.07 (b) $3.37 $4.86 $5.68 $0.40
Price/Earnings Ratio 5.7x 9.8x 3.9x 9.2x 7.1x 12.3x/10.9x
Book Value per Share $15.20 $3.68 $20.61 $25.01 $3.08
Price/Book Value 0.4x 9.0x 0.9x 2.1x 3.1x 1.6x/1.4x
Market Capitalization $139.4 $2,538.4 $227.4 $3,463.2 $148.8
Plus: Total Debt 327.4 946.8 375.0 1,970.0 182.6 (d)
Plus: Preferred Stock -- -- -- -- --
Less: Cash & Equivalents 9.8 23.1 20.3 266.0 42.0 (d)
--------- ------------ -------- ----------- -------------
Enterprise Value $457.0 $3,462.1 $582.2 $5,167.2 $289.4
Enterprise Value/Operating Income 7.3x 6.6x 3.7x 5.9x 5.9x 7.3x
Enterprise Value/EBITDA 4.6x 5.1x 3.2x 4.0x 4.2x 5.5x
Enterprise Value/Gross Profit 1.9x 2.9x 1.8x 2.0x 2.1x 2.9x
Enterprise Value/Net Sales 0.6x 0.8x 0.7x 0.5x 0.7x 0.7x
Current Fiscal Year Estimated
Earnings per Share (a) $0.45 $2.66 $4.82 $5.41 $0.51
Price/Earnings Ratio 13.5x 12.4x 4.0x 9.6x 9.9x 9.7x/8.5x
Next Fiscal Year Estimated
Earnings per Share (a) $0.74 $3.00 $5.56 $5.92 $0.75
Price/Earnings Ratio 8.2x 11.0x 3.4x 8.8x 7.9x 6.7x/5.8x
--------------------------------------------
NA - Not Available
NM - Not Meaningful
(a) Source: I/B/E/S and Zacks Earnings Estimates - Bloomberg
(b) Includes non-recurring items.
(c) Includes 14.7 million shares of Common Stock, 15.0 million shares of
Class A Common Stock and 2.3 million shares of Class B Common Stock.
(d) Average as of the latest four quarters.
Description of Selected Publicly Traded Home Appliance Companies
Applica Incorporated
Applica Incorporated manufactures and markets a wide range of small
appliances for use in and outside the home. The Company markets its products
under licensed brand names such as "B1ack & Decker," as well as the Windmere
and private label brand names. Applica's customers include retailers and
appliance distributors primarily in North America and Latin America. The
Company changed its name from Windmere-Durable Holdings effective May 12,2000.
Maytag Corporation
Maytag Corporation produces major home appliances, floor
care products, commercial laundry and vending equipment. The Corporation's
brands include "Maytag," "Hoover," "Jenn-Air," "Magic Chef," "Admiral," and
"Dixie-Narco." On May 31, 2000, Maytag entered into a 10-year licensing
agreement with Fedders Corp. to market air-conditioners under the Maytag
brand in North America.
Salton, Inc.
Salton, Inc. designs and markets a broad range of kitchen and home
appliances, personal and beauty care products, and decorative quartz wall and
alarm clocks. The Company's products are sold under the "Salton," "Maxim,"
"Breadman," "Juiceman," "Toastmaster," "Salton Time," "White-Westinghouse,"
and "Farberware" names. The Company changed its name from Salton/Maxim
Housewares, Inc. effective January 27, 1999.
Whirlpool Corporation
Whirlpool Corporation manufactures and markets major home appliances. The
Company conducts manufacturing operations in 13 countries, and markets
products under 11 major brand names in approximately 140 countries.
Relative Share Price Performance - 1/2/98 to 2/2/01
[LINEGRAPH COMPARING THE RELATIVE SHARE PRICE PERFORMANCE OF THE S&P 500, THE
MEDIAN OF COMPARABLE HOME APPLIANCE COMPANIES, AND THE FEDDERS CORP. INDEX
APPEARS HERE]
Tab 5
- --------------------------------------------------------------------------------------------
Dual Class Trading Analysis (a)
- --------------------------------------------------------------------------------------------
% (Discount) % (Discount)
Company Premium (b) Company Premium (b)
- -------------------------- --------------- ------------------------- ---------------
Aaron Rents 6.65% Marsh Supermkt (31.71%)
Advanta Corp (13.96%) Meredith Corp 24.74%
Alberto-Culver (16.69%) Methode Elec (12.01%)
AT&T Corp-Liberty 9.42% Molex Inc (26.80%)
Baldwin & Lyon 17.84% Moog Inc (21.98%)
Bandag Inc (16.55%) Neiman Marcus (7.72%)
Bel Fuse Inc (0.66%) Nortek Inc --
Bio-Rad Labs (1.92%) Odetics Inc 3.26%
Brown-Forman 1.07% Oshkosh B'Gosh --
Constellation Brands 1.88% Oshkosh Truck --
Comcast Corp 1.01% Penn Engin & MF 12.00%
Conoco Inc (2.06%) Pilgrims Pride (29.11%)
Crown Central (0.38%) Playboy Ent 12.09%
Delhaize (0.10%) Readers Digest 13.11%
E-Z-EM Inc (3.28%) Saucony Inc (6.45%)
Forest City (0.33%) Seneca Foods 0.94%
Gen Comm 5.33% Sequa Corp (20.79%)
Gray Comm Sys -- Spinnaker Inds (40.94%)
Greif Bros 11.17% TCI Satellite (3.79%)
Heico Corp (25.03%) Tecumseh Prod 6.46%
Herbalife Intl (13.24%) Thomas Nelson 5.80%
Hubbell Inc 2.45% Viacom Inc (0.94%)
Intl Speedway -- Wackenhut Corp (33.36%)
Kelly Services (4.63%) Waddell & Reed 1.56%
KV Pharm 0.03% Wiley John & Son (0.79%)
Lee Enterprise (7.41%) Wrigley (WM.) (8.03%)
---------------------------------------------
Average Discount (4.11%)
---------------------------------------------
- ------------------------------------------------------------------------------
(a) Publicly traded companies with dual class common stock with different
voting rights where both classes are publicly traded (minimum market
value = $50 million).
(b) Discount at which lesser voting shares trade relative to greater voting
shares.
Tab 6
========================================================================================================================
Recent Equity Recapitalization Transactions with Conversion Ratios Greater than 1.0
========================================================================================================================
Dairy Mart Convenience
Company Name Continental Airlines, Inc. Stores, Inc.
---------------------------- --------------------------------------
Ticker Symbol CAL DMC
Date of Transaction 1/22/01 2/8/00
Market Capitalization at
Time of Transaction (millions) $2,600 $16
Closing Share Price One Day
Prior to Announcement:
Control Voting Stock $51.88 $4.13
Non-Control Stock $52.00 $4.13
Price Ratio of Control Voting
Stock to Non-Control Stock 0.998 1.000
-------------------------------------------------------------------------------------------------------------------
Conversion Ratio (a) 1.320 1.100
-------------------------------------------------------------------------------------------------------------------
Before Recapitalization:
Control Voting Stock 10,966,938 1,439,680
Non-Control Stock 47,397,247 3,307,730
---------------------------- ----------------------------
Total Shares Outstanding 58,364,185 4,747,410
Non-Control Stock
as a Percentage of
Total Shares Outstanding 81.21% 69.67%
After Recapitalization:
Previous Control Voting Stock 14,476,358 1,583,648
Previous Non-Control Stock 47,397,247 3,307,730
---------------------------- ----------------------------
Total Shares Outstanding 61,873,605 4,891,378
Non-Control Stock as a
Percentage of Total
Shares Outstanding 76.60% 67.62%
-------------------------------------------------------------------------------------------------------------------
Percentage Dilution to
Non-Control Stockholders 5.67% 2.94%
-------------------------------------------------------------------------------------------------------------------
Transaction Synopsis Each holder of control voting Each holder of control voting
stock receives 1.32 shares of stock receives 1.1 shares of
common stock. As part of the new common stock in conversion
transaction approximately 6.7 to a single class. This
million Class A shares owned restructuring also settled
by Northwest Airlines were outstanding litigation.
purchased for $67 per share or
approximately $450 million.
Adjusted Conversion Ratio (g) 1.113 1.057
- ---------------------------------------------------------------------------------------------------------------
(Chart Continued)
Pacificare Health
Company Name Systems, Inc. (b) Reinsurance Group of America
----------------------------- -----------------------------------
Ticker Symbol PHSY RGA
Date of Transaction 6/24/99 9/1/99
Market Capitalization at
Time of Transaction (millions) $3,263 $1,375
Closing Share Price One Day
Prior to Announcement:
Control Voting Stock $74.00 $35.88
Non-Control Stock $79.88 $29.63
Price Ratio of Control Voting
Stock to Non-Control Stock 0.926 1.211
--------------------------------------------------------------------------------------------------------------
Conversion Ratio (a) 1.127 (c) 1.010 (d)
--------------------------------------------------------------------------------------------------------------
Before Recapitalization:
Control Voting Stock 5,909,500 37,931,000
Non-Control Stock 40,037,357 7,417,000
----------------------- -----------------------------
Total Shares Outstanding 45,946,857 45,348,000
Non-Control Stock
as a Percentage of
Total Shares Outstanding 87.14% 16.36%
After Recapitalization:
Previous Control Voting Stock 37,931,000
Previous Non-Control Stock 7,194,490
-----------------------------
Total Shares Outstanding 45,125,490
Non-Control Stock as a
Percentage of Total
Shares Outstanding 15.94%
--------------------------------------------------------------------------------------------------------------
Percentage Dilution to
Non-Control Stockholders 1.63% 2.52%
--------------------------------------------------------------------------------------------------------------
Transaction Synopsis $60 million paid to UniHealth Each holder to receive 0.97 of
Foundation - owner of 39.8% of a share of voting stock for
Class A Stock, for approving one share of non-voting stock.
the proposed restructuring to
a single class of common
stock. UniHealth's shares to
be repurchased at market
prices in installments through
February 2001.
Adjusted Conversion Ratio (g) 1.031 1.049
- -------------------------------------------------------------------------------------------------------------------
(Chart Continued)
Remington Oil
Company Name and Gas Corporation Averages Fedders Corporation (e)
----------------------- --------------------- -----------------------------
Ticker Symbol ROIL FJC/FJA
Date of Transaction 12/23/98 Pending
Market Capitalization at
Time of Transaction (millions) $65 $1,464 $151
Closing Share Price One Day
Prior to Announcement:
Control Voting Stock $5.88 $4.93 (f)
Non-Control Stock $6.00 $4.35 (f)
Price Ratio of Control Voting
Stock to Non-Control Stock 0.979 1.023 1.133
---------------------------------------------------------------------------------------------------------------
Conversion Ratio (a) 1.150 1.141 1.100
---------------------------------------------------------------------------------------------------------------
Before Recapitalization:
Control Voting Stock 3,250,110 16,971,065
Non-Control Stock 17,553,010 14,979,197
---------------- -------------------------------
Total Shares Outstanding 20,803,120 31,950,262
Non-Control Stock
as a Percentage of
Total Shares Outstanding 84.38% 67.8% 46.88%
After Recapitalization:
Previous Control Voting Stock 3,737,627 18,668,172
Previous Non-Control Stock 17,553,010 14,979,197
---------------- -------------------------------
Total Shares Outstanding 21,290,637 33,647,369
Non-Control Stock as a
Percentage of Total
Shares Outstanding 82.44% 60.7% 44.52%
---------------------------------------------------------------------------------------------------------------
Percentage Dilution to
Non-Control Stockholders 2.29% 3.01% 5.04%
---------------------------------------------------------------------------------------------------------------
Transaction Synopsis Each holder of a control voting Each holder of Common Stock
share receives 1.15 new common shares and Class B Stock (control
pursuant to a restructuring to a voting stock) would receive
single class of common stock and 1.1 shares of New Common Stock
a simultaneous acquisition. and Class B Stock respectively
and each holder of Class A
Stock (non-control stock)
would receive 1.0 shares of
New Common Stock in connection
with the recapitalization of
the company's Class A and
Common Stock to a single class
of New Common Stock.
Adjusted Conversion Ratio (g) 1.044 1.059 1.100
- ------------------------------------------------------------------------------------------------------------------------
(a) Represents amount of new single class shares Control Voting Stock holders
receive per share upon exchange of their Control Voting Shares.
(b) Control Voting Stock and Non-Control Stock represents shares held by
Unihealth and Others respectively.
(c) Pro forma - represents value of Unihealth's stake after the Transaction
($532.02 million or $60 million + $472.02 million) divided by the initial
market value of Unihealth's stake in the Company ($472.02 million or
5,909,500 shares times $79.875 per share).
(d) Pro forma - reflects ratio if recapitalization had been accomplished by
issuing additional shares to Control Shareholders instead of by
decreasing the shares held by Non-Control Shareholders.
(e) Control Voting Stock represents Fedders Common Stock and Class B Stock
and Non-Control Stock represents Fedders Class A Stock.
(f) Reflects price of Fedders' Common Stock and Class A Stock as of February
22, 2001.
(g) Reflects pro forma conversion ratio if dilution factor were applied to
Fedders' 53.12% control position.
Comparable Share Reclassification Dilution to Non-Control Shareholders
Analysis
[THE FOLLOWING INFORMATION IS DEPICTED AS A VERTICAL BAR GRAPH IN THE
PRINTED MATERIAL] [Dilution to Non-Control Shareholders in percentages]
- ------------------- ----------------- ---------------- ---------------- ---------------- --------------------
Continental Dairy Mart Pacificare Reinsurance Remington Proposed
Airlines, Inc. Convenience Health Group of Oil & Gas Fedders
Stores, Inc. Systems, Inc. America Corporation Recapitalization
- ------------------- ----------------- ---------------- ---------------- ---------------- --------------------
5.67% 2.94% 1.63% 2.52% 2.29% 5.04%
- ------------------- ----------------- ---------------- ---------------- ---------------- --------------------
==============================================================================
Recent Equity Reclassification Transactions
with Conversion Ratios Equal to 1.0
==============================================================================
Date Company Ticker Symbol
- ---------------- ---------------------------------------- --------------
10/10/00 Florida East Coast Industries, Inc. FLA
8/29/00 J.M. Smucker Company SJM
6/30/00 Mitchell Energy & Development MND
4/24/00 PMA Capital Corporation PMACA
10/25/99 InfoUSA, Inc. IUSA
6/21/99 Republic Services, Inc. RSG
6/18/99 Cherry Corp. CHER
6/17/99 Network Solutions, Inc. NSOL
12/15/98 Scott Technologies, Inc. SCTT
5/21/98 Carnival Corp. CCL
5/1/98 Northwest Airlines Corp. NWAC
Tab 7
Relationship between Control Voting Stock Proportion and Conversion Ratio
[FOLLOWING INFORMATION IS DEPICTED AS A GRAPH IN THE PRINTED MATERIALS]
[This was a graphical representation comparing the conversion ratio and
control voting shares as a % of total shares outstanding of the Proposed
Fedders Recapitalization with those of other recent equity recapitalization
transactions with conversion ratios greater than 1.0]
Tab 8
Stock Price and Transaction Conversion Ratio Analysis
[THE FOLLOWING INFORMATION IS DEPICTED AS A VERTICAL BAR GRAPH IN THE
PRINTED MATERIAL]
- ---------------------- --------------- ----------------- -------------- ---------------- --------------- -------------
Continental Dairy Mart Pacificare Reinsurance Remington Proposed
Airlines, Inc. Convenience Health Group of Oil and Gas Fedders
Stores, Inc. Systems, Inc America Corporation Recap.
- ---------------------- --------------- ----------------- -------------- ---------------- --------------- -------------
Price Ratio 0.998 1.00 0.926 1.211 0.979 1.133
of Control Voting
Stock to Non-Control
Stock Prior to
Recap. Announcement
- ---------------------- --------------- ----------------- -------------- ---------------- --------------- -------------
Conversion 1.32 1.10 1.127 1.010 1.150 1.100
Ratio of
Transaction
- ---------------------- --------------- ----------------- -------------- ---------------- --------------- -------------
Tab 9
==================================================================================================================================
Recent Acquisitions Involving Dual Equity Class Companies with an
Additional Premium Received by Control Shareholders
==================================================================================================================================
Target Century Tele-
Communications Communications, SFX Broadcasting,
Corp. Inc. Inc. Average
-------------------- ----------------- ----------------- ---------
Acquiror Adelphia AT&T Corp. Capstar Broadcasting
Communications Corp. Partners
Date of Transaction 3/5/99 6/24/98 2/20/98
Transaction Value (millions) $5,201 $53,593 $1,927 $20,240
Target Control Voting Shares Outstanding 42,322,059 64,444,000 1,047,037
Target Non-Control Shares Outstanding 32,887,163 473,517,000 8,773,934
-------------------- ----------------- ----------------- ----------
Total Shares Outstanding 75,209,222 537,961,000 9,820,971
Control Voting Stock as a Percentage of
Total Shares Outstanding 56.3% 12.0% 10.7% 26.3%
- ----------------------------------------------------------------------------------------------------------------------------------
Additional Premium Paid to Control Shareholders 9.1% 10.0% 30.0% 16.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Synopsis Adelphia offered $9.16 AT&T offered 0.7757 Capstar offered $75
in cash and 0.6122 shares per TCI Class in cash per SFX
shares (valued at A share and 0.8533 Class A common share
$34.97 based on shares per TCI Class and $97.50 in cash
Adelphia's closing B share. per SFX Class B
stock price of $57.125 common share.
prior to announcement)
or $44.13 in aggregate,
for each Century Class
A share, and $11.81 in
cash and 0.6360 shares
(valued at $36.33) or
$48.14 in aggregate,
for each Century Class
B share.
================================================================================================================
Recent Acquisitions Involving Dual Equity Class Companies with No
Additional Premium Received by Control Shareholders
================================================================================================================
($s in millions)
Date Value of
Announced Target Name Acquiror Name Transaction
----------------- ---------------------------------- ----------------------------- ----------------
8/7/00 Central Newspapers, Inc. Gannett Co., Inc. $2,800.0
4/12/00 Ben & Jerry's Homemade Unilever $284.5
3/3/00 Jones Intercable, Inc. Comcast Corp. $4,944.7
2/15/00 Pittway Corp. Honeywell International Inc. $2,148.9
1/18/00 Associated Group Inc. AT&T - Liberty Media Group $3,090.7
9/24/99 United Foods Inc. Pictsweet LLC $3.6
7/15/99 Hach Co. Danaher Corp. $359.5
3/2/99 Genovese Drug Stores J.C. Penny Co. $255.5
11/2/98 Intl Manufacturing Svcs Inc. Celestica Inc. $173.2
6/22/98 NetVantage Inc. Cabletron Systems Inc. $94.0
10/21/97 International Dairy Queen Inc. Berkshire Hathaway Inc. $596.9
6/17/97 Hechinger Co. Leonard Green & Partners LP $127.0
6/16/97 Frederick's of Hollywood, Inc. Knightsbridge Capital Corp. $69.4
5/7/97 Reliable Life Insurance Co. Unitrin Inc. $261.1
5/5/97 Riser Foods Inc. Giant Eagle Inc. $468.5
4/30/97 Sinter Metals Inc. GKN PLC $469.7
4/22/97 International Family Entertainment Fox Kids Worldwide Inc. $1,862.9
3/10/97 Greenwich Air Services Inc. General Electric Co. $519.2
7/17/96 New World Communications News Corp Ltd. $2,173.0
6/3/96 Heftel Broadcasting Corp. Clear Channel Communications $315.3
8/30/95 Kentucky Medical Insurance Co. Michigan Physicians Mutual $25.0
Tab 10
==================================================================================================================================
Premiums Paid for Significant Ownership Purchases
==================================================================================================================================
($s in millions)
% of Four
Shares Value of Week
Date Announced Target Name Acquiror Name Acquired Transaction Premium
---------------- ----------------------------- ------------------------------ ------------- ------------- --------
10/25/2000 pcOrder.com Trilogy Software Inc 38.9% $48.3 55.7%
10/12/2000 Hexcel Corp Investor Group 39.3% $159.5 -17.0%
09/14/2000 General DataComm Industries State of WI Investment Board 11.3% $15.0 15.9%
09/01/2000 Minolta-QMS Inc(Minolta Co) Minolta Investments Co 42.9% $34.6 95.9%
08/30/2000 AXA Financial Inc AXA Group(AXA-UAP) 40.0% $11,189.3 34.3%
08/10/2000 Simon Transportation Services Jerry Moyes 14.5% $8.2 67.4%
07/24/2000 Phoenix Investment Partners Phoenix Home Life Mutual 41.0% $226.9 29.0%
07/11/2000 In Home Health Inc Manor Care Inc 43.0% $19.1 12.5%
07/06/2000 Dime Bancorp Inc Warburg Pincus Equity Partners 12.2% $244.8 -1.4%
07/06/2000 Z-Tel Technologies Inc Investor Group 12.4% $56.0 -17.2%
06/05/2000 Jenny Craig Inc SJF Enterprises Inc 33.0% $25.6 140.0%
05/09/2000 Alpharma Inc Donaldson Lufkin & Jenrette 16.8% $187.5 -1.0%
05/05/2000 Coventry Health Care Inc EM Warburg Pincus & Co Inc 16.9% $10.0 6.0%
04/25/2000 MPW Industrial Services Group Investor Group 47.6% $122.4 16.4%
04/24/2000 Cherry Corp Investor Group 48.9% $144.0 70.3%
04/24/2000 Netzero Inc Qualcomm Inc 10.0% $131.0 -31.5%
04/20/2000 Brookdale Living Communities Fortress Registered Investments 33.8% $58.8 20.6%
03/31/2000 Net2Phone Inc Investor Group 36.4% $1,417.5 32.7%
03/30/2000 EFTC Corp Investor Group 20.9% $33.0 88.2%
03/27/2000 Hartford Life Hartford Financial Services 19.6% $1,324.6 43.3%
03/27/2000 IDT Corp Liberty Media Group-AT&T Corp 11.1% $131.1 -6.1%
03/23/2000 Homestead Village Inc Security Capital Group Inc 27.7% $156.8 98.8%
03/21/2000 GelTex Pharmaceuticals Inc Investor Group 10.4% $35.0 -6.4%
03/17/2000 Vastar Resources Inc BP Amoco PLC 19.9% $1,575.7 69.4%
03/14/2000 Howmet International Inc Alcoa Inc 18.9% $349.3 14.3%
02/24/2000 Dusa Pharmaceuticals Inc Invesco Funds Group 13.4% $42.8 7.0%
02/22/2000 IXnet Inc Global Crossing Ltd 27.6% $876.9 25.9%
02/15/2000 7-Eleven Inc IYG Holding Co 21.7% $540.0 130.3%
02/14/2000 CareInsite Inc Healtheon/WebMD Inc 35.0% $1,883.8 -3.4%
01/31/2000 Metrika Systems Corp Thermo Instrument Systems Inc 21.7% $14.2 46.9%
01/31/2000 Sunrise Intl Leasing Inc King Management Corp 35.3% $17.0 120.5%
01/19/2000 Conning Corp Metropolitan Life Insurance Co 39.0% $73.5 52.1%
12/27/1999 S3 Inc VIA Technologies Ltd 12.4% $145.8 55.4%
11/05/1999 PEC Israel Economic Corp Discount Investment Corp 30.7% $320.0 2.8%
09/09/1999 Lifeway Foods Inc Danone Group 15.0% $5.7 31.1%
08/02/1999 Spacehab Inc DaimlerChrysler Aerospace AG 10.6% $12.0 70.4%
06/14/1999 SpeedUs.com Inc NextLink Communications Inc 11.7% $20.0 150.0%
06/04/1999 Intek Global Corp Securicor Communications 43.7% $51.9 22.0%
06/03/1999 Genentech Inc Roche Holding AG 33.0% $4,818.4 279.3%
06/03/1999 Triangle Pharmaceuticals Inc Abbott Laboratories 22.7% $118.3 25.8%
05/07/1999 J Ray McDermott SA McDermott International Inc 37.0% $514.5 19.2%
05/05/1999 Thermo Power Corp Thermo Electron Corp 22.0% $34.8 41.2%
04/29/1999 Boca Research Inc Infomatec Integrated Info Systems 19.9% $8.0 38.3%
04/12/1999 Meadowcraft Inc Investor Group 27.0% $53.2 77.8%
04/01/1999 Aqua Alliance Inc Vivendi SA 17.0% $117.1 101.7%
03/26/1999 Juno Lighting Inc Fremont Partners 17.8% $106.0 386.3%
03/24/1999 Knoll Inc. Warburg, Pincus Ventures Inc 41.8% $490.8 46.4%
03/21/1999 Spelling Entertainment Group Viacom Inc 19.1% $191.6 54.5%
03/15/1999 Go2Net Inc Vulcan Ventures Inc 10.2% $158.5 -6.7%
03/08/1999 ENStar Inc Investor Group 35.5% $13.2 51.5%
03/08/1999 LabOne Inc Lab Holdings Inc 19.5% $34.3 8.5%
01/22/1999 Treadco Inc Arkansas Best Corp 49.0% $22.7 24.1%
01/06/1999 ExecuStay Corp Marriott International Inc 43.8% $46.3 2.0%
12/24/1998 COHR Inc Investor Group 48.0% $15.8 70.8%
12/03/1998 Banner Aerospace Inc Fairchild Corp 30.8% $82.4 40.8%
12/03/1998 Visioneer Inc Xerox Corp 19.1% $10.5 174.7%
11/16/1998 Western Beef Inc Cactus Acquisitions Inc 28.0% $13.6 22.8%
11/12/1998 Aquila Gas Pipeline Corp UtiliCorp United Inc 18.4% $43.2 68.4%
11/04/1998 Hawthorne Financial Corp Portfolio II Investors 12.8% $0.6 13.0%
10/27/1998 Citizens Corp Allmerica Financial Corp 18.2% $212.4 20.9%
10/23/1998 MLC Holdings Inc Thayer Capital Partners 17.0% $12.0 25.7%
10/22/1998 BA Merchant Services Bank of America National Trust 32.8% $339.4 42.0%
10/21/1998 Capital Factors Holdings Inc Union Planters Bk Nat Assoc 12.7% $22.2 2.9%
10/16/1998 BRC Holdings Inc Affiliated Computer Services 49.0% $131.9 15.2%
10/14/1998 ASV Inc Caterpillar Inc 13.2% $18.0 7.5%
09/23/1998 J&L Specialty Steel Inc Usinor SA 46.5% $115.0 37.8%
09/23/1998 Ryerson Tull Inc Inland Steel Industries Inc 13.6% $61.2 -40.8%
09/08/1998 PEC Israel Economic Corp Investor Group 18.7% $125.0 50.5%
08/24/1998 Freeport-McMoRan Copper & Gold Investor Group 15.9% $12.6 30.2%
08/24/1998 Tele-Commun Intl Liberty Media 18.9% $379.1 -9.9%
08/21/1998 MetroTrans Corp Mayflower Corp PLC 40.0% $24.5 39.5%
08/20/1998 Bionutrics Inc AC HUMKO 10.9% $4.0 14.3%
08/19/1998 Metro-Goldwyn-Mayer Inc Tracinda Corp 25.0% $394.8 9.4%
08/14/1998 Bluegreen Corp Morgan Stanley Real Estate 14.0% $25.0 -12.8%
08/04/1998 American Industrial Properties Developers Diversified Realty 19.7% $43.6 24.0%
07/29/1998 Chaparral Resources Inc Investor Group 13.0% $10.0 -7.7%
07/10/1998 E*Trade Group Inc Softbank Corp 28.4% $398.7 21.7%
07/07/1998 Life Technologies Inc Dexter Corp 23.4% $215.8 19.0%
06/16/1998 Pepsi-Cola Puerto Rico Investor Group 28.8% $22.5 -51.6%
06/01/1998 Ortec International Inc Investor Group 10.3% $1.8 -2.8%
05/30/1998 Panavision Inc Mafco Holdings Inc 25.0% $154.4 1.7%
04/30/1998 Mycogen Corp Dow AgroSciences 31.7% $379.3 52.4%
04/29/1998 Group 1 Software Inc COMNET Corp 18.8% $11.8 71.6%
04/27/1998 Advanced Radio Telecom Corp WinStar Communications Inc 15.0% $57.6 7.8%
04/20/1998 Atria Communities Inc Kapson Senior Quarters Corp 37.6% $178.2 -0.3%
03/31/1998 Thermo Voltek Corp Thermedics 33.0% $43.9 40.0%
03/27/1998 Intl Specialty Prods ISP Holdings Inc 16.2% $324.5 14.5%
03/18/1998 NetSpeak Corp Motorola Inc 21.8% $80.6 35.6%
03/17/1998 BET Holdings Inc Investor Group 42.1% $462.3 58.2%
03/05/1998 XLConnect Solutions Inc Xerox Corp 20.0% $93.0 22.1%
03/02/1998 Coleman Co Inc Sunbeam Corp 18.0% $486.0 121.2%
02/25/1998 FAC Realty Trust Inc Prometheus Southeast Retail 29.5% $100.0 29.9%
02/25/1998 FAC Realty Trust Inc Prometheus Southeast Retail 22.8% $77.0 29.9%
02/11/1998 EarthLink Network Inc Sprint Corp 11.1% $56.3 57.9%
01/22/1998 BT Office Products Intl Inc Koninklijke KNP BT NV 30.0% $138.1 78.9%
01/20/1998 NACT Telecommunications World Access Inc 32.0% $53.1 16.7%
01/09/1998 Wandel & Goltermann Tech Inc Wandel & Goltermann Management 38.0% $34.2 31.1%
01/08/1998 Rayonier Timberlands LP Rayonier Inc 25.3% $65.8 17.5%
---------------------------------------------------------------------------
AVERAGE 25.5% $346.6 40.9%
All Purchases:
High 49.0% $11,189.3 386.3%
Low 10.0% $0.6 -51.6%
Excluding Highest and Lowest 20%
High 49.0% $11,189.3 67.4%
Low 10.9% $0.6 6.0%
---------------------------------------------------------------------------
Tab 11
==================================================================================================================================
Proposed Recapitalization
==================================================================================================================================
Before Recapitalization
-----------------------------------------------------------------------------------------------
Voting
----------------------------------------------------------
Upon 15% Stake Purchase
Total Shares Outstanding Ordinary or Proxy Contest
----------------------------- ----------------------------- -------------------------
Percent of
Benefically Total Percent of Percent of
Classification of Stock Owned Outstanding Votes Total Votes Total
- ------------------------------- ------------ ----------- -------------- ---------- ----------- ----------
Class A Stock (a) 14,979,197 46.88% -- -- -- --
Common Stock 14,704,659 46.02% 14,704,659 86.65% 14,704,659 39.35%
Class B Stock 2,266,406 7.09% 2,266,406 13.35% 22,664,060 60.65%
------------- --------- -------------- --------- ----------- ---------
Total Shares Outstanding 31,950,262 100.00% 16,971,065 100.00% 37,368,719 100.00%
============= ========= ============== ========= =========== =========
After Recapitalization (b)
-----------------------------------------------------------------------------------------------
Voting
----------------------------------------------------------
Upon 15% Stake Purchase
Total Shares Outstanding Ordinary or Proxy Contest
----------------------------- ----------------------------- -------------------------
Percent of
Beneficially Total Percent of Percent of
Classification of Stock Owned Outstanding Votes Total Votes Total
- ------------------------------- ------------ ----------- -------------- ---------- ----------- ----------
New Common Stock:
Former Class A Stock (a) 14,979,197 44.52% 14,979,197 44.52% 14,979,197 26.71%
Former Common Stock 16,175,125 48.07% 16,175,125 48.07% 16,175,125 28.84%
------------- --------- -------------- --------- ----------- ----------
Total New Common Stock 31,154,322 92.59% 31,154,322 92.59% 31,154,322 55.55%
Class B Stock 2,493,047 7.41% 2,493,047 7.41% 24,930,466 44.45%
------------- --------- -------------- --------- ----------- ----------
Total Shares Outstanding 33,647,369 100.00% 33,647,369 100.00% 56,084,788 100.00%
============= ========= ============== ========= =========== ==========
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Does not include approximately 768,144 exercisable Class A Stock
options held by the company's officers and directors.
(b) Assumes recapitalization in which each holder of Common Stock and Class
B Stock would receive 1.1 shares of New Common Stock and Class B Stock
respectively and each holder of Class A stock would receive 1.0 share of
New Common Stock.