Exhibit 10.2
EMPLOYMENT AGREEMENT
between
FEDDERS CORPORATION
and
XXX XXXXXXXX, XX.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, by and between FEDDERS CORPORATION,
a Delaware corporation having its principal place of business at 000
Xxxxxxxxxxxx Xxxx, X.X. Xxx 000, Xxxxxxx Xxxxxx, Xxx Xxxxxx 00000 (the
"Corporation") and XXX XXXXXXXX, XX., an individual residing at 00 Xxxxxxxxxx
Xxxxx, Xxxxxxxxxxxxx, XX 00000 (the "Executive"),
WITNESSETH THAT:
WHEREAS, effective September 30, 2006, the expiration of
Executive's employment agreement with the Corporation (the "Employment
Agreement") dated December 14, 2001, the Executive shall step down as the Chief
Executive Officer of the Corporation and as mutually agreed between the
Corporation and the Executive, such Employment Agreement shall be amended;
WHEREAS, the Corporation has determined that is in the best
interests of the Corporation and its shareholders for Executive to continue to
be employed with the Corporation as the Executive Chairman of the Board;
WHEREAS, the Corporation desires to amend the Employment
Agreement to provide certain benefits to the Executive as the Executive Chairman
of the Board;
NOW THEREFORE, in consideration of the mutual promises and
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to the following terms and conditions:
ARTICLE I. Term and Duties
Section 1.1 Term. This Agreement shall become effective October 1, 2006
and shall continue for a period of one year. Thereafter, if not terminated
earlier pursuant to the terms of this Agreement, the term of this Agreement
shall be extended so that at each and every remaining moment of time thereafter,
the remaining term of this Agreement shall be one year.
Section 1.2 Duties. During the term of this Agreement, Executive shall
serve as the Executive Chairman of the Corporation. The Executive shall perform
such duties as are reasonable, customary for an individual holding such office
to perform, and such other duties as are set forth in the Bylaws of the
Corporation or as may be agreed to from time to time by Executive.
ARTICLE II. Compensation
Section 2.1 Basic Compensation
(a) During the term of this Agreement, the Corporation shall continue
to pay to the Executive an annual base salary (which shall accrue
proportionately from day to day) of $625,000 payable in accordance with the
Corporation's usual payroll practices with respect to officers of the
Corporation. The Executive's base annual salary payable pursuant to this Section
2.1 (including any increases thereof pursuant to Section 2.1(b)) is hereinafter
referred to as the Executive's "Basic Compensation." In the event the Board of
Directors of the Corporation requests the Executive to serve as an officer or
director of a subsidiary, the Executive shall do so without additional
compensation.
(b) The Corporation and the Executive acknowledge that the Board of
Directors of the Corporation (or a duly authorized committee of the Board)
shall, from time to time, but no less frequently than approximately annually,
review the Executive's Basic Compensation and may increase (but in no event
decrease) such compensation by such amounts as the Board (or the authorized
committee) deems proper. The criteria which the Board (or the authorized
committee) may take into consideration in providing for any such increases are
the basic compensation payable to the individuals holding like offices of
comparable companies, the Executive's ability and performance, the success
achieved by the Corporation, the total economic return to the Corporation's
shareholders, increases in the cost of living, and such other criteria as the
Board (or the authorized committee) may deem relevant.
Section 2.2 Loan.
Pursuant to the Employment Agreement, the Corporation made two
loans to the Executive. One loan is in the amount of $2 million and a second
loan is in the amount of $4 million. Both of these loans shall continue in
effect and continue to be governed by the original terms of such loans outlined
in Section 2.6 (a) and (b) of the Employment Agreement.
No payments by the Executive on the loans shall come due while
the Executive remains employed by the Corporation. Unless Section 3.3(a)(ii)(5)
of the Agreement applies, the Executive shall repay the principal amounts of the
loans (but not any interest that may have been imputed during the employment
period) in six equal yearly installments (calculated in a commercially
reasonable manner at the time of his termination of employment) over the
six-year period immediately following the termination of the Executive's
employment. Each yearly installment payment shall be due on the anniversary date
of the Executive's termination of employment which occurs in such year.
Section 2.3 Incentive, Savings and Retirement Plans. During the term of
this Agreement, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other executives of the Corporation.
Section 2.4 Welfare Benefit Plans. During the term of this Agreement,
the Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Corporation
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life (including continuation throughout the term of
this Agreement of the life insurance policy maintained on the Executive's life
for the benefit of his family as of the date of the execution of this
Agreement), group life, accidental death and travel accident insurance plans and
programs to the extent applicable generally to other executives of the
Corporation. The Corporation also shall be required, during the term of this
Agreement, to continue its performance obligations under any split dollar life
insurance policies maintained with respect to the Executive which are in effect
as of the date of the execution of this Agreement.
Section 2.5 Retiree Medical Benefits. For the remainder of the
Executive's lifetime and his spouse's lifetime following the term of this
Agreement, the Corporation shall provide the Executive and his spouse with
medical and disability benefits, which benefits shall be substantially similar
to those provided to executives who are active employees of the Corporation
during the time these retiree medical benefits are provided. Such medical and
disability benefits shall be provided to the Executive and his spouse through
the purchase of one or more insurance policies. To the extent that such benefits
result in taxable income to the Executive, the Executive shall receive a tax
gross-up from the Corporation for these amounts.
Section 2.6 Expenses. During the term of this Agreement, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Corporation as in effect generally with respect
to other executives of the Corporation.
Section 2.7 Fringe Benefits. During the term of this Agreement, the
Executive shall be entitled to fringe benefits, including, but not limited to,
tax and financial planning services, payment of club dues and use of an
automobile and payment of related expenses, in a manner that shall not be less
than in accordance with the most favorable plans, practices, programs and
policies of the Corporation as in effect on the date of execution of this
Agreement and available to the Executive.
Section 2.8 Office and Support Staff. During the term of the Agreement
and for the remainder of the Executive's lifetime, the Corporation shall provide
the Executive with an office or offices at the Corporation's headquarters or at
a comparable location with similar office facilities at the Executive's
convenience. Such office shall be of a size and with the furnishings and other
appointments, and secretarial and other assistance, at least equal to the most
favorable of the foregoing as provided at such time with respect to any
executive of the Corporation.
Section 2.9 Total Compensation. The Executive's "Total Compensation"
means the total of (i) Basic Compensation, including amounts the Executive has
electively deferred under an arrangement qualified under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Fedders Supplemental
Retirement Plan, or any cafeteria plan under Section 125 of the Code or
otherwise, plus (ii) an amount equal to the aggregate cash amounts paid to the
Executive as bonuses over the three most recent fiscal years of the Corporation
divided by three.
ARTICLE III. Termination of Employment
Section 3.1 Events of Termination
Notwithstanding any other provision of this Section 3.1 or any
other provision of this Agreement, a termination of employment shall only occur
if the Executive actually experiences a "separation from service" in accordance
with Section 409A of the Internal Revenue Code. There shall be no separation
from service, and therefore no right to any Severance Payment (as defined
below), if the Executive continues to provide services as an employee to the
Corporation after a purported termination of employment at an annual rate of 20%
of the services rendered on average during the immediately preceding three full
calendar years of employment and the annual remuneration for such services is at
least equal to 20% of the average annual remuneration earned during the final
three calendar years of employment. In addition, there also shall be no
separation from service if the Executive continues to provide services to the
Corporation in a capacity other than as an employee, if the Executive is
providing services at an annual rate of 50% of the services rendered on average
during the immediately preceding three full calendar years of employment and the
annual remuneration for such services is at least equal to 50% of the average
annual remuneration earned during the final three calendar years of employment.
(a) Death. The Executive's employment shall terminate automatically
upon the Executive's death.
(b) Disability. If the Corporation determines in good faith that the
Disability of the Executive has occurred during the term of the Agreement
(pursuant to the definition of Disability set forth below), it may give the
Executive written notice in accordance with Section 5.7 of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Corporation shall terminate effective on the
30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the thirty (30) days after such receipt,
the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean (i)
the Executive's inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, or (ii) the Executive is, by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than 3
months under an accident and health plan covering employees of Corporation.
(c) Without Cause. Notwithstanding any other provision hereunder, the
Corporation shall have the right to terminate the Executive's employment
hereunder without "Cause" (as defined in Section 3.1(d)) at any time during the
term of this Agreement for any reason in the sole discretion of the Corporation
upon not less than ninety (90) days' prior written notice to the Executive.
(d) Cause. The Corporation may terminate the Executive's employment
during the term of this Agreement for Cause at any time. For purposes of this
Agreement, "Cause" shall mean:
(i) The willful and continued failure of the Executive to
perform substantially the Executive's duties with the Corporation (other than
any such failure resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to the Executive
by the Corporation's Board, which demand shall specifically identify the manner
in which the Board believes that the Executive has not substantially performed
the Executive's duties, or
(ii) The willful engaging by the Executive in illegal conduct
or gross misconduct in connection with the performance of his duties hereunder
which is materially injurious to the Corporation.
For purposes of this provision, no act or failure to act, on
the part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Corporation. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Corporation's Board, upon the instructions of
any senior officer of the Corporation or based upon the advice of counsel for
the Corporation shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the
Corporation. The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Corporation's Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above and specifying the particulars thereof in detail.
(e) Good Reason. The Executive may terminate his employment during the
term of this Agreement for Good Reason at any time upon thirty (30) days' notice
to the Corporation. For purposes of this Agreement, "Good Reason" shall mean the
occurrence, without the Executive's express written consent, of any one or more
of the following events:
(i) A change in the Executive's titles or duties described in
Section 1.2, or any removal of the Executive from, or any failure to re-elect
the Executive to, any of such positions, except with the Executive's written
consent.
(ii) A reduction in the Executive's Basic Compensation or the
failure by the Corporation to increase such compensation each year by an amount
which at least equals, on a percentage basis, the mean average percentage
increase in base salary for all senior officers of the Corporation (other than
the Executive) during such year, or the failure by the Corporation to continue
to provide prompt payment (or reimbursement to the Executive) of all reasonable
expenses incurred by the Executive in connection with the Executive's
professional and business activities;
(iii) A failure by the Corporation to waive any and all
restrictions that might exist on the exercise of any stock options or with
respect to the Restricted Stock Awards as of the date of a Change of Control (as
defined below);
(iv) The failure by the Corporation to include the Executive
as a participant in any benefit or compensation plan or arrangement generally
available to executives of the Corporation, or the failure by the Corporation to
provide the Executive with the number of paid vacation days, holidays and
personal days to which the Executive is entitled in accordance with the
Corporation's normal leave policy, or the failure of the Corporation to continue
its performance obligations under any split dollar life insurance policies
maintained with respect to the Executive on the execution date of this
Agreement;
(v) The failure of the Corporation to obtain the assumption of
this Agreement, without limitation or reduction, by any successor to the
Corporation;
(vi) Any purported termination of the Executive's employment
by the Corporation which is not effected pursuant to the express terms of this
Agreement, including the Notice of Termination requirements of Section 3.2(a);
(vii) The failure of the Corporation to maintain for the
benefit and use by the Executive of an office and support staff as contemplated
by Section 2.9; (
viii) The failure of the Corporation to pay or reimburse the
Executive for any expenses incurred by the Executive as provided in this
Agreement; or
(ix) The filing of a voluntary or involuntary petition of
bankruptcy by or against the Corporation or the insolvency of the Corporation.
(f) Voluntary Termination. The Executive shall have the right at any
time after one year from the Effective Date to voluntarily terminate his
employment by the Corporation (a "Voluntary Termination") for any reason in the
sole discretion of the Executive by not less than one year's prior written
notice to the Corporation; provided however, a termination by reason of Death,
Disability or Good Reason shall not be treated for any purpose hereunder as a
Voluntary Termination.
Section 3.2 Termination Procedures and Certain Definitions
(a) Notice of Termination. Any termination by the Corporation for
Cause, without Cause, by reason of Disability or by the Executive for Good
Reason or in a Voluntary Termination, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 5.7 of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date. The failure by the Executive or the
Corporation to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Corporation, respectively, hereunder or preclude the
Executive or the Corporation, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Corporation's rights hereunder.
The Executive's continued employment with the Corporation after a Notice of
Termination is provided shall not constitute consent to, or a waiver of any
rights with respect to, any circumstance constituting Good Reason hereunder.
(b) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Corporation for Cause, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the Corporation
other than for Cause or Disability, the Date of Termination shall be the date
not less than ninety (90) days after the date on which the Corporation notifies
the Executive of such termination, (iii) if the Executive terminates his
employment for Good Reason, the Date of Termination shall be the date, not less
than thirty (30) days after the date on which the Executive notifies the
Corporation of such termination, (iv) if the Executive terminates his employment
voluntarily in accordance with and subject to the provisions of Section 3.1(f),
the Date of Termination shall be the date, not less than one year after the date
on which the Executive notifies the Corporation of such termination, and (v) if
the Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be. In the case of a Voluntary
Termination, the Corporation shall have the option, exercisable by written
notice to the Executive within ten (10) days after the Executive's Notice of
Termination is provided to the Corporation, to designate any date prior to the
expiration of the aforesaid notice as the date on which the Executive shall
cease to be an officer of the Corporation, and the effective Date of Termination
hereunder shall be any earlier date so designated by the Corporation.
(c) Change of Control. A "Change of Control" shall have occurred if:
(i) any "person" within the meaning of Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the
Corporation, a subsidiary of the Corporation, or any employee benefit plan
sponsored by the Corporation or any subsidiary of the Corporation, becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 25% or more of the combined voting power of the class of common
equity of the Corporation denominated as Common Stock;
(ii) a merger or equivalent combination occurs after which 49%
or more of the voting stock of the surviving corporation is held by persons
other than former stockholders of the Corporation; or
(iii) 20% or more of the Board of Directors are replaced
during any 12-month period by directors who were not nominated in the most
recent proxy statement of the Corporation's Board of Directors; provided,
however, that none of the foregoing events shall be deemed to constitute a
Change of Control if such event has been approved by a majority of the Incumbent
Board; for purposes of this section, "Incumbent Board" shall mean (a) the
individuals who constitute the Board of Directors of the Corporation on October
1, 2006, and (b) any individual elected as a director of the Corporation after
October 1, 2006 whose election was approved by a vote of at least three-quarters
of the directors then comprising the Incumbent Board, either by specific vote or
by approval of the proxy statement of the Corporation in which such individual
is named as a nominee for director without objection to such nomination.
Section 3.3 Obligations of the Corporation on Termination
(a) Termination Upon Death or Disability,
Without Cause or for Good Reason.
If the Executive's employment is terminated upon his death or
Disability, without Cause, for Good Reason or following a Change in Control for
any reason:
(i) In general.
The Corporation shall immediately pay the Executive in cash
the amount of Basic Compensation previously earned but not yet paid.
(ii) Severance benefits.
(1) All stock options and shares of restricted stock
granted under the Restricted Stock Awards, which have not already vested, shall
immediately vest and any other awards under any other compensatory plan, program
or arrangement, if any, shall vest and be paid in full, computed on the
assumption that all applicable performance goals for the Executive and the
Corporation have been met, using the Date of Termination as the valuation date;
(2) The period during which any stock options granted to
the Executive under the Stock Compensation Plans may be exercised shall be
extended for an additional six months following the end of the exercise period
otherwise applicable to such options;
(3) The Executive shall be reimbursed for (i) any COBRA
payments made by Executive to maintain medical and dental insurance up to 6
additional months for said coverage and (b) the use of one or more executive
out-placement services, designated by the Executive and paid for by the
Corporation;
(4) If the termination does not arise from the Executive's
death or Disability, the Corporation shall pay the Executive in a lump sum a
"Severance Benefit" in cash equal to 2.9 times the Executive's Total
Compensation as of the time of such termination. Payment of such Severance
Benefit would ordinarily be made 30 days following Executive's Date of
Termination. However, in order to comply with applicable law, including Section
409A of the Internal Revenue Code, such payment shall be deferred and paid 180
days following the applicable Date of Termination. The deferred Severance
Payment will be paid with interest for the 180-day payment delay and will be
calculated using an annualized rate of 7%. If the termination arises from the
Disability of the Executive, the Corporation shall pay the beneficiary (or
beneficiaries) designated under the Fedders Supplemental Retirement Plan an
amount equal to 2.9 times the Executive's Total Compensation as of the time of
such termination in six annual installments with the first installment
commencing 180 days following said termination. The remaining five annual
installment payments shall be made on the second, third, fourth, fifth and sixth
anniversaries of the Executive's Date of Termination. The Severance Payment
shall be calculated using a 7% annualized interest rate to reflect the initial
six-month delay in payment and that such payments will be made in installments
over a period of six years. If the termination arises from the death of the
Executive, the Corporation shall pay the beneficiary (or beneficiaries)
designated under the Fedders Supplemental Retirement Plan an amount equal to 2.9
times the Executive's Total Compensation as of the time of such termination in
six annual installments with the first installment commencing 30 days following
said termination. The remaining five annual installment payments shall be made
on the second, third, fourth, fifth and sixth anniversaries of the Executive's
Date of Termination. The Severance Payment shall be calculated using a 7%
annualized interest rate to reflect that such payments will be made in
installments over a period of six years.
(5) The Corporation shall release the Executive from his
obligations to the Corporation under the loans described in Section 2.3.
In the event of the Executive's death, any amounts payable under this
Agreement shall be paid to the beneficiary (or beneficiaries) designated by the
Executive under the Fedders Supplemental Retirement Plan and in such amounts or
proportions as the Executive shall so designate. If no beneficiary is designated
by the Executive or if none shall survive the Executive, then any amounts
payable under this Agreement shall be paid to the Executive's surviving spouse,
if any, or, if no such surviving spouse exists, to the Executive's estate.
(iii) Disability.
(1) If, following a Disability termination, the Executive
becomes entitled to and receives disability benefits under any disability
payment plan sponsored and maintained by the Corporation, the amount otherwise
payable by the Corporation to the Executive pursuant to Section 3.3(a) shall be
reduced, on a dollar-for-dollar basis, but not below zero, by the amount of any
such disability benefits received by him, but only to the extent such benefits
are attributable to payments made by the Corporation.
(2) The Executive shall have the right in his sole
discretion after the Disability Effective Date to engage in regular employment
(whether as an employee of another entity or as a self-employed person) and
shall have no obligation to perform further services for the Corporation.
(b) Voluntary Termination or Termination for Cause
In case of a Voluntary Termination or a Termination for Cause, the
Executive shall be entitled to his Basic Compensation accrued to the Date of
Termination, and any other benefits under the Corporation's employee benefit
plans, including the Supplemental Retirement Plan, or awards vested prior to
such date, including, without limitation, his right to exercise any vested stock
options. Except as otherwise provided in this Agreement or under any employee
benefit plan maintained by the Corporation, the Corporation shall have no
further obligations to the Executive.
(c) Gross Up Payments.
(i) If, on account of the termination of the Executive
following a Change in Control, the "Severance Payment" (as defined below) paid
by the Corporation to the Executive pursuant to this Agreement constitutes an
"excess parachute payment" within the meaning of Section 280G of the Code
subject to the tax imposed by Section 4999 of the Code (the "Excise Tax"), then
the Corporation shall pay to the Executive an additional amount (the "Gross Up
Payment") such that the amount paid or transferred to the Executive after
deduction of any Excise Tax on the Severance Payment, and any federal, state and
local income tax, employment tax and Excise Tax upon the Gross Up Payment, shall
be equal to the Severance Payment. For purposes of this Section 3.3(c) only,
"Severance Payment" shall mean any payment or other benefit paid pursuant to
this Agreement, including all payments made from the Fedders Supplemental
Retirement Plan. Any Gross Up Payment shall not be made to the Executive earlier
than 180 days from the Executive's Date of Termination.
(ii) For purposes of determining whether any portion of a
Severance Payment will be subject to the Excise Tax and the amount of such
Excise Tax, (A) the Severance Payment and payments provided for in Section
3.3(c)(i) shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280(G)(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless and to the extent that tax counsel selected by the Corporation's
independent auditors and acceptable to the Executive is of the opinion that the
Severance Payment (in whole or in part) does not constitute a "parachute
payment" or such "excess parachute payment" (in whole or in part) represents
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the allocable base amount within the
meaning of Section 280G(b)(3) of the Code, or the Severance Payment is otherwise
not subject to the Excise Tax, (B) the amount of the Severance Payment that is
treated as subject to the Excise Tax shall be equal to the lesser of (X) the
total amount of the Severance Payment and (Y) the amount of "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code (after applying
clause (A) above), (C) any Gross Up Payment pursuant to Section 3.3(c)(i) shall
be treated as subject to the Excise Tax in its entirety and (D) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Corporation's independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
(iii) If in circumstances described in Section 3.3(c)(i), by
reason of the filing by the Executive of an amended tax return, an audit by the
Internal Revenue Service or other taxing authority, or a final determination by
a court of competent jurisdiction, it is determined that "excess parachute
payments" exceeding those previously reported in his tax returns were received
by the Executive and as a result an additional Excise Tax (the "Additional
Excise Tax") shall become due, the Corporation shall pay the Executive an
additional amount (the "Subsequent Gross Up Payment") such that the amount paid
or transferred to the Executive, after deduction of (A) any Additional Excise
Tax and (B) on an after tax basis, any interest, additions and penalties with
respect to the Additional Excise Tax and (C) any federal, state and local income
tax, employment tax and Excise Tax upon the Subsequent Gross Up Payment and (D)
the payments provided for in Section 3.3(c)(i), shall be equal to the Severance
Payment.
(iv) Any Gross Up Payment required hereunder shall be made at
least ten days prior to the due date (without regard to extensions) of the
Executive's federal income tax return for the year with respect to which the
"excess parachute payment" is deemed made under the Code. Any Subsequent Gross
Up Payment required hereunder shall be made to the Executive within 30 days
after the amount thereof is determined. Notwithstanding the two immediately
preceding sentences, the Executive shall pay any federal, state and local tax or
taxes and employment taxes required to be withheld from the Executive's wages
(within the meaning of Section 3121 and 3402 of the Code) with respect to the
"excess parachute payment" and any such tax or taxes paid by the Corporation to
the Internal Revenue Service or state or local taxing authority shall constitute
payment to the Executive.
(v) If the Excise Tax is finally determined (whether by the
filing of an amended tax return by the Executive, by audit of the Internal
Revenue Service or other taxing authority, or by a final determination of a
court of competent jurisdiction) to be less than the amount paid to or on behalf
of the Executive under the provisions of Sections 3.3(c)(i)-(iv) and the
overpayment is refunded to the Executive, the Executive shall repay to the
Corporation, promptly following the receipt of the refund, the portion of the
Gross Up Payment (and/or Subsequent Gross Up Payment) attributable to such
reduction of the Excise Tax (plus the portion attributable to federal, state and
local income tax and employment taxes imposed on the portion being repaid by the
Executive but only to the extent that the repayment may result in a tax benefit
to the Executive under Section 1341 of the Code and similar provisions of
applicable state and local law).
(vi) The provisions of this Section 3.3(c) shall inure to the
benefit of the Executive during the Term of this Agreement regardless of whether
or not his employment is terminated, and if the Executive's employment is
terminated, the rights and obligations of the Executive and the Corporation
under this Section 3.3(c) shall survive the termination of this Agreement.
ARTICLE IV. Purpose
Section 4.1 Purpose. The Corporation recognizes that the Executive is a
key executive of the Corporation and is expected to be a factor in the growth
and success of the Corporation. The Corporation also recognizes that the
continued success of the Corporation depends, to a significant degree, upon the
effective performance of the Executive's duties as set forth in this Agreement.
Therefore, one of the primary purposes of this Agreement is to provide for the
long-term financial security of the Executive and his family so that he will be
better able to direct his undivided attention to the successful performance of
his duties on behalf of the Corporation.
Section 4.2 Corporate Opportunity. Except as to such actions within the
ordinary course of the Executive's employment by the Corporation which the
Executive in good faith believes to be in the best interests of the Corporation,
the Executive shall not at any time during the term of the Agreement or two
years thereafter, without the prior written consent of the Corporation: (i)
request or advise any supplier, or other person, firm, partnership, association,
corporation or business organization, entity or enterprise having business
dealings with the Corporation or any subsidiary or affiliate of the Corporation
to withdraw, curtail or cancel such business dealings; or (ii) disclose to any
competitor or potential competitor of the Corporation or any subsidiary or
affiliate of the Corporation, any trade secret, know-how or knowledge relating
to costs, products, equipment, merchandising and marketing methods, business
plans, or research results used by, or useful to, the Corporation or any
subsidiary or affiliate of the Corporation; (iii) induce or attempt to influence
any executive of the Corporation or any subsidiary or affiliate of the
Corporation to terminate, or in any way violate the terms of, his or her
employment; or (iv) directly or indirectly engage in any business in competition
with the business of the Corporation or its subsidiaries.
ARTICLE V. Miscellaneous
Section 5.1 Enforceability.
If the scope of any provision of this Agreement is too broad
to permit enforcement of such provision to its fullest extent, then such
provision shall be enforced to the maximum extent permitted by applicable law,
and, if necessary, the scope of any such provision may be judicially modified
(to the extent necessary in any proceeding brought to enforce such provision)
and thereafter fully enforced.
Section 5.2 Remedies
The parties acknowledge that the remedy at law for any breach
of any party's obligations hereunder would be inadequate and consent to the
granting of temporary and permanent injunctive relief in any proceeding brought
to enforce any of such provisions without the necessity of proof of actual
damages; provided, however, that the foregoing shall not be construed to limit
any other right or remedy available to the Corporation or the Executive at law
or in equity, and all such rights and remedies shall be cumulative to the extent
permitted by applicable law, and the exercise of any one or more of such rights
or remedies shall be without prejudice to the exercise of any other such right
or remedy.
Section 5.3 Resignation as Board Member
Upon the termination of his employment for any reason, the
Executive hereby agrees that he shall simultaneously submit his resignation as a
member of the Board of Directors of the Corporation in writing on or before the
date he ceases to be an Executive of the Corporation. If the Executive fails or
neglects to submit such resignation in writing, the Corporation shall be
permitted to deem the Executive to have submitted his written resignation as
such member effective on the same date that the Executive ceases to be an
executive of the Corporation. If the Executive continues to serve as a member of
the Board at the request of the Board after his termination of employment, the
Executive shall be entitled to all benefits provided to other Board members who
are not employees of the Corporation; provided that Severance Payments, if any,
shall only be paid to Executive if his termination of employment is considered a
separation from service as described in Section 3.1 of this Agreement.
Section 5.4 No Offset; Enforcement of Agreement
The Corporation's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Corporation may have against the Executive or others,
except as provided in Section 3.3(a)(iii). In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment. The Corporation agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Corporation, the Executive or others of the validity or enforceability
of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive about
the amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable federal rate provided for in
Section 7872(f)(2) of the Code and amounts sufficient to reimburse the Executive
for all tax liabilities due in respect of such payments of legal fees and
expenses; provided however, if an action brought by the Executive, or if the
Executive's defense of an action brought by the Corporation, is finally
determined adversely to the Executive by a court of competent jurisdiction, the
Executive shall refund amounts paid by the Corporation for legal fees, taxes and
interest pursuant to this Section 5.4.
Section 5.5 Assignment by the Executive; Successors
(a) This Agreement is personal to the Executive and without
the prior written consent of the Corporation shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) Except as is otherwise herein expressly provided, this
Agreement shall inure to the benefit of and be binding upon the Corporation, its
successors and assigns, and upon the Executive, his spouse, heirs, executors and
administrators, provided, however, that the obligations of the Executive
hereunder shall not be delegated.
(c) The Corporation will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
Corporation as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
Section 5.6 Waiver
Failure of either party hereto to insist upon strict
compliance by the other party with any term, covenant or condition hereof shall
not be deemed a waiver of such term, covenant or condition, nor shall any waiver
or relinquishment or failure to insist upon strict compliance with any right or
power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
Section 5.7 Notice
Any notice required or desired to be given pursuant to this
Agreement shall be sufficient if in writing sent by registered or certified mail
to the addresses set forth above or to such other address as any party hereto
may designate in writing, transmitted by hand delivery or by registered or
certified mail to the other; provided, the failure by the Executive to observe
the notice provisions hereof shall not in any way limit, reduce or affect the
Executive's rights and benefits hereunder.
Section 5.8 Applicable Law
This Agreement shall be governed by the laws of the State of
New Jersey.
Section 5.9 Taxes
The Corporation may deduct from all amounts paid under this
Agreement all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
Section 5.10 Entire Agreement
The parties hereto agree that this Agreement (together with,
to the extent benefits or rights are otherwise affected by this Agreement, any
employee benefit plan maintained or sponsored by the Corporation) contains the
entire understanding and agreement between them and superseded all previous
agreements and arrangements, if any, relating to the employment of the
Executive, including, but not limited to the employment agreement, dated October
1, 1997 between the Executive and the Corporation and the Employment Agreement
(except with respect to Sections 2.6 (a) and 2.6(b) which shall continue to
apply to the outstanding loans referenced in Section 2.3 of this Agreement),
between the Executive and the Corporation. This Agreement shall not be amended,
modified or supplemented in any respect except by an agreement in writing signed
by the Executive and the Corporation.
IN WITNESS WHEREOF, the Corporation and the Executive have
duly executed this Agreement.
ON BEHALF OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS OF
FEDDERS CORPORATION
Witness:
/s/ Xxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxx
---------------------- ----------------------------------
Xxxxxx X. Xxxxxx
Date: July 28, 2006 Date: July 28, 2006
Witness: EXECUTIVE
/s/ Xxxxxx Xxxxxx /s/ Xxx Xxxxxxxx, Xx.
---------------------- --------------------------------------
Xxx Xxxxxxxx, Xx.
Date: July 28, 2006 Date: July 28, 2006
