Exhibit (10)(ii)
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, the Corporation has determined that it is in the best interest
of the Corporation and its shareholders to continue to employ the Executive;
WHEREAS, the Corporation previously entered into an employment
agreement with the Executive; and
WHEREAS, the Corporation continues to desire to employ the Executive on
the terms and conditions set forth in this new Agreement; and
WHEREAS, the Executive desires to continue to be employed by the
Corporation on the terms and conditions set forth in this new Agreement;
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 an extension of the Executive's prior employment
agreement (which terms originally expired on September 30, 2003), in accordance
with the following terms and conditions:
ARTICLE I. TERM AND DUTIES
SECTION 1.1 TERM. The Corporation hereby agrees to employ the
Executive, and the Executive hereby agrees to accept such employment, upon the
terms and conditions herein
contained. The term of this new Agreement shall commence on the date of
execution (the "Effective Date") and shall continue until September 30, 2006.
Thereafter, this Agreement may be renewed for such term as the parties so agree.
SECTION 1.2 DUTIES. During the term of this Agreement, the Executive shall
serve as the Chairman and Chief Executive Officer of the Corporation. The
Executive shall perform such duties as are reasonable and customary for an
individual holding such offices to perform and such other duties as are set
forth in the Bylaws of the Company or as may be agreed to from time to time by
the 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 $591,345 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
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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 ANNUAL BONUS. In addition to Basic Compensation, for each
fiscal year ending during the term of this Agreement, the Executive shall be
eligible to receive a bonus which shall be no less than 1% of the Corporation's
EBITDA1 in excess of $1 million for such fiscal year (the "Annual Bonus") in
accordance with the terms of the incentive bonus plan adopted by the
Corporation. Each such Annual Bonus shall be paid within a reasonable time after
the end of the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
SECTION 2.3 RESTRICTED STOCK.
(A) On October 1, 2003, or as soon as practicable thereafter, the
Corporation shall grant the Executive an award of 150,000 shares of restricted
common stock of the Corporation ("2001 Restricted Stock Award"), which shall be
subject to the terms and conditions contained in this Section 2.3. The shares
granted under the 2001 Restricted Stock Award shall have all the attributes of
outstanding shares of the Corporation's common stock, including the right to
receive dividends and distributions, except that the certificates for such
shares shall be delivered to and held by the Corporation until January 1, 2007.
The Executive shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber shares granted under the 2001 Restricted Stock Award prior to
January 1, 2007. If, prior to the expiration of the term of this
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(1) EBITDA shall mean the Corporation's income before income taxes plus net
interest expense and depreciation and amortization (excluding amortization of
debt discounts and deferred financing costs).
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Agreement, the Executive terminates his employment with the Corporation without
Good Reason (as defined below), or the Corporation terminates the Executive's
employment for Good Cause (as defined below), the Executive shall forfeit the
entire 2001 Restricted Stock Award. On January 1, 2007, provided the Executive
has not forfeited the 2001 Restricted Stock Award, the certificates therefor
held by the Corporation pursuant to this Section 2.3(a) shall be delivered to
the Executive, and all restrictions on the Executive's ability to sell, assign,
transfer, pledge or otherwise encumber such shares shall cease.
(B) In addition, the award of 300,000 shares of restricted Class A
common stock of the Corporation which was granted to the Executive on October 1,
1997 (the "1997 Restricted Stock Award" and, together with the 2001 Restricted
Stock Award, the "Restricted Stock Awards") shall be subject to the terms and
conditions in this Section 2.3. The shares granted under the 1997 Restricted
Stock Award shall have all the attributes of outstanding shares of the
Corporation's Class A common stock, including the right to receive dividends and
distributions, except that the certificates for such shares shall be delivered
to and held by the Corporation until January 1, 2004. The Executive shall not be
permitted to sell, assign, transfer, pledge or otherwise encumber shares granted
under the 1997 Restricted Stock Award prior to January 1, 2004 If, prior to
October 1, 2003, the Executive terminates his employment with the Corporation
without Good Cause (as defined below), or the Corporation terminates the
Executive's employment for Good Cause (as defined below), the Executive shall
forfeit the entire 1997 Restricted Stock Award. On January 1, 2004, provided the
Executive has not forfeited the 1997 Restricted Stock Award, the certificates
therefor held by the Corporation pursuant to this Section 2.3(b) shall be
delivered to the Executive, and all restrictions on the Executive's ability to
sell, assign, transfer, pledge or otherwise encumber such shares shall cease.
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(C) Upon the request of the Executive, the Corporation shall use its
best efforts to effect the registration of the shares granted to the Executive
under the Restricted Stock Awards in accordance with the intended method of
disposition thereof as quickly as practicable. In connection with any such
request, the Corporation shall as expeditiously as possible prepare and file
with the Securities and Exchange Commission a registration statement on any form
for which the Corporation qualifies or which counsel for the Corporation deems
appropriate and which form shall be available for the sale of the shares to be
registered thereunder in accordance with the intended method of distribution
thereof, and use its best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 90 days.
(D) The Corporation shall use its best efforts to obtain any other
necessary approvals (including shareholder approval, if required) for the grant
of the Restricted Stock Awards and/or the sale or transfer by the Executive of
the shares granted thereunder.
(E) The Corporation shall undertake to assume any and all consideration
requirements that may arise under state law with respect to the Restricted Stock
Awards.
SECTION 2.4 SIGNING BONUS. (A) To induce the Executive into entering this
Agreement, and in consideration of his entering into this Agreement, the
Corporation will be obligated to pay the Executive a one-time additional bonus
of $1,000,000 (the "2001 Signing Bonus"). The payment of the 2001 Signing Bonus
will be deferred by the Corporation, and during the period of such deferral, the
full amount of the 2001 Signing Bonus shall be deemed credited with earnings and
losses as if the 2001 Signing Bonus was credited to the Executive's account
under the Fedders Supplemental Retirement Plan on the Effective Date. The 2001
Signing Bonus (and the earnings and losses thereon) shall be deemed to vest in
accordance with the following graduated schedule: on October 1st of each year
beginning in 2003 and thereafter
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during the term of this Agreement, one-third of the 2001 Signing Bonus, credited
with all earnings and losses accumulated on such portion of the Signing Bonus
since the Effective Date, shall vest. The vested portion of the 2001 Signing
Bonus (credited with earnings and losses thereon) shall be paid to the Executive
in a manner similar to the distribution provisions under the Fedders
Supplemental Retirement Plan, provided that: (i) payment shall commence no later
than the first Plan Year (as defined in the Fedders Supplemental Retirement
Plan) after the Plan Year during which the Executive attains age 65 (or if the
Executive does not terminate Employment until after attaining age 65, the first
Plan Year after the Plan Year during which the Executive terminates employment)
and (ii) the Executive must irrevocably choose with respect to such 2001 Signing
Bonus, among the available payment options (e.g., lump-sum or installments)
under such plan at a date that is not less than 36 months prior to the Date of
the Executive's Termination of Employment except for a Termination arising from
Death or Disability. The Corporation agrees to pay all Medicare/FICA taxes
(including the employee portion) that become due on the vested portion of the
2001 Signing Bonus (and any earnings thereon) during the term of this Agreement.
The Corporation further agrees to pay any taxes that the Executive incurs due to
the payment required in the preceding sentence.
(B) The payment of the $2,000,000 signing bonus that the Corporation was
obligated to pay the Executive under his October 1, 1997 Employment Agreement
with the Corporation (the "1997 Signing Bonus") will continue to be deferred by
the Corporation, and during the period of such deferral, the full amount of the
1997 Signing Bonus shall be deemed credited with earnings and losses as if the
1997 Signing Bonus was credited to the Executive's account under the Fedders
Supplemental Retirement Plan on October 1, 1997. The 1997 Signing Bonus (and the
earnings and losses thereon) shall continue to be deemed to vest in accordance
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with the following graduated schedule: on October 1st of each year, one-sixth of
the 1997 Signing Bonus, credited with all earnings and losses accumulated on
such portion of the Signing Bonus since October 1, 1997, shall vest. The vested
portion of the 1997 Signing Bonus (credited with earnings and losses thereon)
shall be paid to the Executive in a manner similar to the distribution
provisions under the Fedders Supplemental Retirement Plan, provided that: (i)
payment shall commence no later than the first Plan Year (as defined in the
Fedders Supplemental Retirement Plan) after the Plan Year during which the
Executive attains age 65 (or if the Executive does not terminate Employment
until after attaining age 65, the first Plan Year after the Plan Year during
which the Executive terminates employment) and (ii) the Executive must
irrevocably choose with respect to such 1997 Signing Bonus, among the available
payment options (e.g., lump-sum or installments) under such plan at a date that
is not less than 36 months prior to the Date of the Executive's Termination of
Employment except for a Termination arising from Death or Disability. The
Corporation agrees to pay all Medicare/FICA taxes (including the employee
portion) that become due on the vested portion of the 1997 Signing Bonus (and
any earnings thereon) during the term of this Agreement. The Corporation further
agrees to pay any taxes that the Executive incurs due to the payment required in
the preceding sentence.
SECTION 2.5 USE OF COMPANY AIRPLANE. The Corporation maintains and shall
maintain throughout the term of this Agreement a company airplane, which shall
be made available to the Executive at any time (including, without limitation,
weekends, and including, without limitation, travel to and from the Executive's
family residences) that the airplane is not being used or otherwise required for
purposes of Corporation business. To the extent that the Company continues to
maintain a company plane after the term of this Agreement, such plane shall be
made available to the Executive for the remainder of his lifetime at any time
(including,
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without limitation, weekends, and including, without limitation, travel to and
from the Executive's family residences) that the airplane is not being used or
otherwise required for purposes of Corporation business. To the extent that the
Executive's use of the company airplane causes him to receive additional income
for federal or state income taxation purposes (whether prior to or after the
term of this Agreement), the Corporation agrees to reimburse the Executive for
the amount of such taxes. The Corporation further agrees to pay any such taxes
that the Executive incurs due to the payment required in the preceding sentence.
SECTION 2.6 LOAN.
(A) The Corporation shall provide the Executive with a loan of up to $2
million. At its own option and expense, the Corporation may purchase an
insurance policy to cover its potential liabilities with respect to such loan
and the Executive shall reasonably cooperate with the Corporation for such
purpose. To the extent that the Corporation's payments pursuant to this Section
2.6(a) (including any imputed interest) cause the Executive to receive
additional income for federal or state income taxation purposes, the Corporation
agrees to reimburse the Executive for the amount of such taxes. The Corporation
further agrees to pay any such taxes that the Executive incurs due to the
payment required in the preceding sentence. The Executive agrees to execute any
documentation deemed necessary by the Corporation with respect to the loan
described in this Section 2.6(a).
(B) The $4 million loan provided by the Corporation to the Executive
pursuant to his October 1, 1997 Employment Agreement with the Corporation shall
continue in effect. At its own option and expense, the Corporation may purchase
an insurance policy to cover its potential liabilities with respect to such
loan, and Executive shall reasonably cooperate with the Corporation for such
purpose. To the extent that the Corporation's payments pursuant to this
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Section 2.6(b) (including any imputed interest) cause the Executive to receive
additional income for federal or state income taxation purposes, the Corporation
agrees to pay any such taxes that the Executive incurs due to the preceding
sentence. The Executive agrees to execute any documentation deemed necessary by
the Corporation with respect to the loan described in this Section 2.6(b).
(C) No payments by the Executive on the loans described in subsections
(a) and (b) above shall come due while the Executive remains in the employ of
the Corporation. The Executive shall repay the principal amounts of the loans
described in subsections (a) and (b) above (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 following the Executive's termination of
employment. Each yearly installment payment shall be due on the anniversary date
of the Executive's termination of employment which occurs in such year. The
Executive agrees to execute any documentation deemed necessary by the
Corporation with respect to the loan repayment requirements described in this
Section 2.6(c)
SECTION 2.7 RIGHTS UNDER STOCK COMPENSATION PLANS NOW IN EFFECT. All stock
options heretofore granted to the Executive under any stock compensation or
employee benefit plan maintained at any time by the Corporation (collectively,
all such plans are herein referred to as the "Stock Compensation Plans") as of
the Effective Date of this Agreement shall continue in effect, vesting as
therein or otherwise herein provided, and the Executive shall have the right to
exercise any vested stock option, whenever granted, until it expires by its
terms under the applicable option agreement, regardless of whether the Executive
is employed by the Corporation at the time of such exercise.
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SECTION 2.8 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 2.9 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. In addition, for the remainder of 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 are substantially similar to those provided to
executives of the Corporation at such time. To the extent such benefits result
in taxable income to the Executive, the Executive shall receive a tax gross-up
from the Corporation for these amounts.
SECTION 2.10 EXPENSES. During the term of this Agreement, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive
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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 2.11 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 2.12 OFFICE AND SUPPORT STAFF. During the term of this Agreement,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and secretarial and other assistance, at
least equal to the most favorable of the foregoing as provided at the Effective
Date with respect to any executive of the Corporation. Following the term of
this Agreement and for the remainder of the Executive's lifetime, 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 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 2.13 VACATION. During the term of the Agreement, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Corporation as in effect generally with
respect to other executives of the Corporation.
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SECTION 2.14 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
(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 the
absence of the Executive from the Executive's duties with the Corporation on a
full-time basis for 180 consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be total and permanent by a
physician selected by the Corporation or its insurers and acceptable to the
Executive or the Executive's legal representative.
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(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. 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
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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;
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(III) The payment by the Corporation to the Executive of an
Annual Bonus which is calculated pursuant to a formula that is less favorable to
the Executive than the formula under the bonus program in effect on the date
this Agreement is executed;
(IV) The failure by the Corporation to (a) grant the Executive
the Restricted Stock Awards in accordance with and subject to the terms of this
Agreement, (b) pay the Executive the vested portion of the 1997 Signing Bonus
(credited with earnings and losses accumulated on such vested amount since
October 1, 1997) or the 2001 Signing Bonus (credited with earnings and losses
accumulated on such vested amount since October 1, 2001) in accordance with and
subject to the terms of this Agreement, (c) allow the Executive use of the
Company airplane in accordance with and subject to the terms and conditions of
this Agreement, or (d) provide the Executive with loans in accordance with and
subject to the terms and conditions of this Agreement;
(V) 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);
(VI) 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;
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(VII) The failure of the Corporation to obtain the assumption
of this Agreement, without limitation or reduction, by any successor to the
Corporation;
(VIII) 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);
(IX) 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 2.12;
(X) The failure of the Corporation to pay or reimburse the
Executive for any expenses incurred by the Executive as provided in this
Agreement; or
(XI) 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
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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
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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 directors elected by stockholders to the
Board of Directors of the Corporation consist of individuals who were not
nominated in the most recent proxy statement of the Corporation; provided,
however, that none of the foregoing events shall be deemed to constitute a
Change in 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, 2001, and (b) any
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individual elected as a director of the Corporation after October 1, 2001 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) Except as otherwise determined by the Executive, 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;
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(3) The Executive shall continue to participate in all the Executive
welfare benefit plans, including health and medical plans, for six months after
termination and shall be entitled to (a) reimbursement of COBRA payments to
maintain medical and dental insurance up to 18 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. Such payment shall be made within thirty (30) days
following said termination. If the termination arises from the death or
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 (plus a reasonable amount of interest to reflect that such an
amount will be paid in installments as hereinafter provided) in six annual
installments with the first installment commencing within thirty (30) days
following said termination.
(5) The Corporation shall release the Executive from his obligations
to the Corporation under the loans described in Section 2.6(a) and (b).
(6) The unvested portion of the 1997 Signing Bonus and the 2001
Signing Bonus (credited with earnings and losses accumulated on such unvested
amount to the Date of Termination) shall be deemed to immediately vest and, to
the extent that payment of the entire 1997 Signing Bonus and 2001 Signing Bonus
(as credited with earnings and losses thereon) continues to be deferred in
accordance with Section 2.4 of this Agreement, all future earnings shall be
deemed immediately vested.
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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, the vested portion of the 1997 Signing Bonus and 2001 Signing Bonus
(credited with earnings and losses accumulated on such vested amount to the Date
of Termination), and any other benefits or awards vested prior to such date,
including, without limitation, his right to exercise any vested
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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.
(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
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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
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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
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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
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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
Unless otherwise requested by the Board, 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
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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.
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
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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
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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 supersedes 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. This Agreement shall not be amended,
modified or
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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
Attest:
______________________ By:_________________________________
Xxxxxx X. Xxxxxx
Date: Date:
Witness: EXECUTIVE
______________________ ____________________________________
Xxx Xxxxxxxx, Xx.
Date Date:
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