Exhibit 10.1
SEVERANCE AGREEMENT
EFFECTIVE FOLLOWING A CHANGE IN CONTROL
THIS AGREEMENT, dated July 31, 2006, is made by and between
Fedders Corporation, a Delaware corporation (the "Company"), and ________ (the
"Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to xxxxxx the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in
this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect through December 31,
2007; provided, however, that commencing on January 1, 2008 and each January 1
thereafter, the Term shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend the Term; and further
provided, however, that if a Change in Control shall have occurred during the
Term, the Term shall expire no earlier than twenty-four (24) months beyond the
month in which such Change in Control occurred.
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments
and the other payments and benefits described herein. Except as provided in
Section 9.1 hereof, no Severance Payments shall be payable under this
Agreement unless there shall have been (or, under the terms of the second
sentence of Section 6.1 hereof, there shall be deemed to have been) a
termination of the Executive's employment with the Company following a Change
in Control and during the Term. This Agreement shall not be construed as
creating an express or implied contract of employment and, except as otherwise
agreed in writing between the Executive and the Company, the Executive shall
not have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) the last day of the Potential
Change in Control Period, (ii) the date of a Change in Control, (iii) the date
of termination by the Executive of the Executive's employment for Good Reason
or by reason of death, Disability or Retirement, or (iv) the termination by
the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time
duties with the Company as a result of a Disability, the Company shall pay the
Executive's full salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation and benefits
payable to the Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period (other
than any disability plan), until the Executive's employment is terminated by
the Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall
pay the Executive's full salary to the Executive earned but not yet paid
through the Date of Termination at the rate in effect immediately prior to the
Date of Termination or, if higher, the rate in effect immediately prior to the
first occurrence of an event or circumstance constituting Good Reason,
together with all compensation and benefits payable to the Executive through
the Date of Termination under the terms of the Company's compensation and
benefit plans, programs or arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall
pay to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, if (i) the Executive's
employment is terminated following a Change in Control and during the Term,
other than (A) by the Company for Cause, (B) by reason of death or Disability,
or (C) by the Executive without Good Reason, then the Company shall pay the
Executive the amounts, and provide the Executive the benefits, described in this
Section 6.1 ("Severance Payments"), in addition to any payments and benefits to
which the Executive is entitled under Section 5 hereof. For purposes of this
Agreement, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason, if (i) the Executive's employment is terminated by the Company
without Cause prior to a Change in Control (whether or not a Change in Control
ever occurs) and such termination was at the request or direction of a Person
who has entered into an agreement with the Company the consummation of which
would constitute a Change in Control, (ii) the Executive terminates his
employment for Good Reason prior to a Change in Control (whether or not a Change
in Control ever occurs) and the circumstance or event which constitutes Good
Reason occurs at the request or direction of such Person, or (iii) the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance or event
which constitutes Good Reason is otherwise in connection with or in anticipation
of a Change in Control (whether or not a Change in Control ever occurs). For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be presumed to be
correct unless the Company establishes to the Board by clear and convincing
evidence that such position is not correct.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to 2.9 times the sum of
(i) the Executive's base salary as in effect immediately prior to the Date of
Termination or, if higher, in effect immediately prior to the first occurrence
of an event or circumstance constituting Good Reason, and (ii) the average
annual bonus earned by the Executive pursuant to any annual bonus or annual
incentive plan maintained by the Company in respect of the three fiscal years
ending immediately prior to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the fiscal year in which
occurs the first event or circumstance constituting Good Reason. In order to
comply with Section 409A, the Severance Payments shall be paid in a lump sum
six months and one day following the applicable Date of Termination. The
deferred Severance Payments will be paid with interest for the period
commencing on the Date of Termination and ending on the actual payment date
and will be calculated using an annual rate of 7%.
(B) For the eighteen (18) month period immediately following
the Date of Termination and in lieu of COBRA continuation health coverage, the
Company shall arrange to provide the Executive and his dependents life,
accident and health insurance benefits substantially similar to those provided
to the Executive and his dependents immediately prior to the Date of
Termination or, if more favorable to the Executive, those provided to the
Executive and his dependents immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, at no greater after-tax cost
to the Executive than the after-tax cost to the Executive immediately prior to
such date or occurrence; provided, however, that, unless the Executive
consents to a different method, such health insurance benefits shall be
provided through a third-party insurer. In order to comply with Section 409A,
Executive shall pay the cost of such life, accident and health insurance
benefits for the first six months following the Executive's Date of
Termination. The Company shall reimburse Executive for the cost of such
coverage at the end of the six-month period and shall then provide such
coverage to the Executive for the remaining 12 months. Benefits otherwise
receivable by the Executive pursuant to this Section 6.1(B) shall be reduced
to the extent benefits of the same type are received by or made available to
the Executive during the eighteen (18) month period following the Executive's
termination of employment (and any such benefits received by or made available
to the Executive shall be reported to the Company by the Executive); provided,
however, that the Company shall reimburse the Executive for the excess, if
any, of the after-tax cost of such benefits to the Executive over such cost
immediately prior to the Date of Termination or, if more favorable to the
Executive, the first occurrence of an event or circumstance constituting Good
Reason. If the Severance Payments shall be decreased pursuant to Section 6.2
hereof, and the Section 6.1(B) benefits which remain payable after the
application of Section 6.2 hereof are thereafter reduced pursuant to the
immediately preceding sentence, the Company shall, no later than the later of
(i) six months and one day following the Executive's Date of Termination or
(ii) five (5) business days following such reduction, pay to the Executive the
least of (a) the amount of the decrease made in the Severance Payments
pursuant to Section 6.2 hereof, (b) the amount of the subsequent reduction in
these Section 6.1(B) benefits, or (c) the maximum amount which can be paid to
the Executive without being, or causing any other payment to be, nondeductible
by reason of section 280G of the Code.
(C) Notwithstanding any provision of any annual or long term
incentive plan to the contrary, the Company shall pay to the Executive a lump
sum amount, in cash, equal to the sum of (i) any unpaid incentive compensation
which has been allocated or awarded to the Executive for a completed fiscal
year or other measuring period preceding the Date of Termination under any
such plan and which, as of the Date of Termination, is contingent only upon
the continued employment of the Executive to a subsequent date, and (ii) a pro
rata portion to the Date of Termination of the aggregate value of all
contingent incentive compensation awards to the Executive for all then
uncompleted periods under any such plan, calculated as to each such award by
multiplying the award that the Executive would have earned on the last day of
the performance award period, assuming the achievement, at the target level,
of the individual and corporate performance goals established with respect to
such award, by the fraction obtained by dividing the number of full months and
any fractional portion of a month during such performance award period through
the Date of Termination by the total number of months contained in such
performance award period. In order to comply with Section 409A, the payment of
any compensation pursuant to this Section 6.1(C), shall be paid to the
Executive six months and one day following the Executive's Date of
Termination. This deferred payment will be paid with interest for the period
commencing on the Date of Termination and ending on the actual payment date
and will be calculated using an annual rate of 7%.
(D) In addition to the benefits to which the Executive is
entitled under each DC Pension Plan, the Company shall pay the Executive a lump
sum amount, in cash, equal to the sum of (i) the amount that would have been
contributed thereto by the Company on the Executive's behalf during the three
years immediately following the Date of Termination, determined (x) as if the
Executive made the maximum permissible contributions thereto during such period,
(y) as if the Executive earned compensation during such period at a rate equal
to the Executive's compensation (as defined in the DC Pension Plan) during the
twelve (12) months immediately preceding the Date of Termination or, if higher,
during the twelve months immediately prior to the first occurrence of an event
or circumstance constituting Good Reason, and (z) without regard to any
amendment to the DC Pension Plan made subsequent to a Change in Control and on
or prior to the Date of Termination, which amendment adversely affects in any
manner the computation of benefits thereunder, and (ii) the excess, if any, of
(x) the Executive's account balance under the DC Pension Plan as of the Date of
Termination over (y) the portion of such account balance that is nonforfeitable
under the terms of the DC Pension Plan. In order to comply with Section 409A,
any payments made pursuant to this Section 6.1(D), shall be paid to the
Executive six months and one day following the Executive's Date of Termination.
This deferred payment will be paid with interest for the period commencing on
the Date of Termination and ending on the actual payment date and will be
calculated using an annual rate of 7%.
(E) All restrictions on any restricted stock owned by the
Executive shall, at the time the Executive becomes entitled to the Severance
Payments provided herein, immediately cease and be of no further force and
effect and the Company shall deliver to the Executive the certificate
representing shares of such stock. All stock option agreements to which the
Executive is a party shall be amended to provide that such agreements shall
remain in effect until the expiration of the term thereof, notwithstanding
that the Executive has ceased to be an employee of the Company.
(F) The Company shall provide the Executive with outplacement
services suitable to the Executive's position for a period of two years or, if
earlier, until the first acceptance by the Executive of an offer of
employment.
6.2 (A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be received
by the Executive (including any payment or benefit received or to be received
in connection with a Change in Control or the termination of the Executive's
employment, whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement) (all such payments and benefits, including the
Severance Payments, being hereinafter referred to as the "Total Payments")
would not be deductible (in whole or part), by the Company, an affiliate or
Person making such payment or providing such benefit as a result of section
280G of the Code, then, to the extent necessary to make such portion of the
Total Payments deductible (and after taking into account any reduction in the
Total Payments provided by reason of section 280G of the Code in such other
plan, arrangement or agreement), the cash Severance Payments shall first be
reduced (if necessary, to zero), and all other Severance Payments shall
thereafter be reduced (if necessary, to zero); provided, however, that the
Executive may elect to have the noncash Severance Payments reduced (or
eliminated) prior to any reduction of the cash Severance Payments.
(B) For purposes of this limitation, (i) no portion of the
Total Payments the receipt or enjoyment of which the Executive shall have
waived at such time and in such manner as not to constitute a "payment" within
the meaning of section 280G(b) of the Code shall be taken into account, (ii)
no portion of the Total Payments shall be taken into account which, in the
opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the accounting firm which was, immediately prior to the Change
in Control, the Company's independent auditor (the "Auditor"), does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of
the Code, including by reason of section 280G(b)(4)(A) of the Code, (iii) the
Severance Payments shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of section 280G of the Code,
in the opinion of Tax Counsel, and (iv) the value of any noncash benefit or
any deferred payment or benefit included in the Total Payments shall be
determined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(C) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that, notwithstanding the
good faith of the Executive and the Company in applying the terms of this
Section 6.2, the Total Payments paid to or for the Executive's benefit are in
an amount that would result in any portion of such Total Payments being
subject to the Excise Tax, then, if such repayment would result in (i) no
portion of the remaining Total Payments being subject to the Excise Tax and
(ii) a dollar-for-dollar reduction in the Executive's taxable income and wages
for purposes of federal, state and local income and employment taxes, the
Executive shall have an obligation to pay the Company upon demand an amount
equal to the sum of (i) the excess of the Total Payments paid to or for the
Executive's benefit over the Total Payments that could have been paid to or
for the Executive's benefit without any portion of such Total Payments being
subject to the Excise Tax; and (ii) interest on the amount set forth in clause
(i) of this sentence at the rate provided in section 1274(b)(2)(B) of the Code
from the date of the Executive's receipt of such excess until the date of such
payment.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof shall be made on the date six months and one day following
the Executive's Date of Termination; provided, however, that if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good
faith by the Company of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments
(together with interest on the unpaid remainder (or on all such payments to
the extent the Company fails to make such payments when due) at 120% of the
rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest
at 120% of the rate provided in section 1274(b)(2)(B) of the Code). At the
time that payments are made under this Agreement, the Company shall provide
the Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
Tax Counsel, the Auditor or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made upon the later of (i)
six months and one day following the Executive's Date of Termination or (ii)
five (5) business days after delivery of the Executive's written requests for
payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
Notwithstanding any other provision of this Section 7 or any other provision
of this Agreement, for purposes of this Agreement a termination of employment
shall only occur if the Executive actually experiences a "separation from
service" in accordance with Section 409A. There shall be no separation from
service for purposes of this Agreement, and therefore no right to any
Severance Payment or other benefits under this Agreement (which are subject to
Section 409A), if the Executive continues to provide services as an employee
to the Company after a purported termination of employment at an annual rate
of 20% or more 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 Company in a capacity other than as an employee, if the
Executive is providing services at an annual rate of 50% or more 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.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set 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. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was called and
held for the purpose of considering such termination (after reasonable notice
to the Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the
date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator or a
court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been
perfected); provided, however, that the Date of Termination shall be extended
by a notice of dispute given by the Executive only if such notice is given in
good faith and the Executive pursues the resolution of such dispute with
reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given, until the Date of Termination, as
determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement
(other than those due under Section 5.2 hereof) and shall not be offset
against or reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Section 6 hereof
or Section 7.4 hereof. Further, except as specifically provided in Section
6.1(B) hereof, no payment or benefit provided for in this Agreement shall be
reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company 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 Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to the executors, personal representatives or administrators
of the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the Executive's signature
on the final page hereof and, if to the Company, to the address set forth
below, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:
To the Company:
Fedders Corporation
000 Xxxxxxxxxxxx Xxxx
Xxxxxxx Xxxxxx, XX 00000
Attention: Vice President and
General Counsel
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of any lack of compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. This Agreement
supersedes any other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have been made by
either party; provided, however, that this Agreement shall supersede any
agreement setting forth the terms and conditions of the Executive's employment
with the Company only in the event that the Executive's employment with the
Company is terminated on or following a Change in Control, by the Company
other than for Cause or by the Executive for Good Reason. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of New Jersey. All references to sections of
the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by
their nature may require either partial or total performance after the
expiration of the Term (including, without limitation, those under Sections 6
and 7 hereof) shall survive such expiration.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this Agreement
relied upon. The Board shall afford a reasonable opportunity to the Executive
for a review of the decision denying a claim and shall further allow the
Executive to appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that the Executive's claim has been
denied. Notwithstanding the above, in the event of any dispute, any decision
by the Board hereunder shall be subject to a de novo review by the arbitrator.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Morristown, New Jersey in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled
to seek specific performance of the Executive's right to be paid until the
Date of Termination during the pendency of any dispute or controversy arising
under or in connection with this Agreement.
15. Section 409A Compliance. Notwithstanding any provision in
this Agreement to the contrary, it is intended that the Agreement be
interpreted in a manner that complies with the requirements of Section 409A.
Accordingly, the authority of the [Compensation Committee] to effect such
compliance may be implemented (including, without limitation, by unilaterally
modifying, with prospective or retroactive effet, the terms of the Agreement
to reflect compliance with Section 409A) without regard to the Executive's
rights under the Agreement and without the Executive's consent.
16. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2
hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive
to substantially perform the Executive's duties with the Company (other than
any such failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure after the issuance of
a Notice of Termination for Good Reason by the Executive pursuant to Section
7.1 hereof) that has not been cured within 30 days after a written demand for
substantial performance is delivered to the Executive by the Board, which
demand specifically identifies 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 conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no
act, or failure to act, on the Executive's part shall be deemed "willful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company and (y) in the event of a dispute concerning
the application of this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the Board by clear and
convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from
the Company or its Affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities, excluding any
Person who becomes such a Beneficial Owner in connection with a merger or
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other corporation immediately following which the
individuals who comprise the Board immediately prior thereto constitute
at least a majority of the board of directors of (a) any parent of the
Company or the entity surviving such merger or consolidation (b) if there
is no such parent, of the Company or such surviving entity;
(II) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board or
nomination for election by the Company's stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so
approved or recommended;
(III) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation or other entity, other than (i) a merger or
consolidation which results in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof at least
51% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation; or
(IV) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the Company's
assets immediately following which the individuals who comprise the Board
immediately prior thereto constitute at least a majority of the board of
directors of (a) any parent of the Company or of the entity to which such
assets are sold or disposed or (b) if there is no such parent, of the
Company or such entity.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock and class B stock of the Company immediately prior to such
transaction or series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all of
the assets of the Company immediately following such transaction or series of
transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Company" shall mean Fedders Corporation and, except in
determining under Section 15(G) hereof whether or not any Change in Control of
the Company has occurred, shall include any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(J) Intentionally omitted
(K) "DC Pension Plan" shall mean any tax-qualified,
supplemental or excess defined contribution plan maintained by the Company and
any other defined contribution plan or agreement entered into between the
Executive and the Company which is designed to provide the Executive with
supplemental retirement benefits.
(L) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(M) "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 the Company.
(N) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(O) Intentionally omitted
(P) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(Q) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent which specifically references this Agreement) after any
Change in Control, or prior to a Change in Control under the circumstances
described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof
(treating all references in paragraphs (I) through (VII) below to a "Change in
Control" as references to a "Potential Change in Control"), of any one of the
following acts by the Company, or failures by the Company to act, unless, in the
case of any act or failure to act described in paragraph (I), (V), (VI) or (VII)
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as an executive officer of the
Company or a substantial adverse alteration in the nature or status of
the Executive's responsibilities from those in effect immediately prior
to the Change in Control other than any such alteration primarily
attributable to the fact that the Company may no longer be a public
company;
(II) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time;
(III) the relocation of the Executive's principal place of
employment to a location more than 15 miles from the Executive's
principal place of employment immediately prior to the Change in
Control or the Company's requiring the Executive to be based anywhere
other than such principal place of employment (or permitted relocation
thereof) except for required travel on the Company's business to an
extent substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation or to pay to the
Executive any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within seven (7) days
of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately prior
to the Change in Control which is material to the Executive's total
compensation, including but not limited to the Company's annual
incentive plans, or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue the Executive's
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of the Executive's
participation relative to other participants, as existed immediately
prior to the Change in Control;
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, savings, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all executives
of the Company and all executives of any Person in control of the
Company), the taking of any other action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by the
Company to provide the Executive with the number of paid vacation days
to which the Executive is entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control;
(VII) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 7.1 hereof; for purposes of this Agreement,
no such purported termination shall be effective; or
(VIII) the failure of the Company to obtain the assumption of
this Agreement, without limitation or reduction, by any successor to
the Company.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder. For purposes of any
determination regarding the existence of Good Reason, any claim by the
Executive that Good Reason exists shall be presumed to be correct unless the
Company establishes to the Board by clear and convincing evidence that Good
Reason does not exist.
(R) Intentionally omitted
(S) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(U) "Potential Change in Control Period" shall mean the
period commencing on the occurrence of a Potential Change in Control and
ending upon the occurrence of a Change in Control or, if earlier (I) with
respect to a Potential Change in Control occurring pursuant to Section
15(W)(I), immediately upon the abandonment or termination of the applicable
agreement, (ii) with respect to a Potential Change in Control occurring
pursuant to Section 15(W)(II), immediately upon a public announcement by the
applicable party that such party has abandoned its intention to take or
consider taking actions which if consummated would result in a Change in
Control or (iii) with respect to a Potential Change in Control occurring
pursuant to Section 15(W)(III) or (IV), upon the one year anniversary of the
occurrence of such Potential Change in Control (or such earlier date as may be
determined by the Board).
(V) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if consummated,
would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly
or indirectly, of securities of the Company representing 15% or more of
either the then outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding securities (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates); or
(IV) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control has
occurred.
(W) "Retirement" shall be deemed the reason for the
termination by the Executive of the Executive's employment if such employment is
terminated in accordance with the Company's retirement policy, including early
retirement, generally applicable to its salaried employees.
(X) "Section 409A" means the United States federal income tax
rules relating to nonqualified deferred compensation plans as provided in
Section 409A of the Code, and as such rules may be interpreted in applicable
regulations, rulings, pronouncements or other guidance issued by the Internal
Revenue Service, Department of Treasury or other governmental entity or person.
(Y) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(Z) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(AA) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(BB) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
FEDDERS CORPORATION
By:
--------------------------------------
Name:
Title:
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EXECUTIVE
Address:
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(Please print carefully)
The following executives of the Company entered into a Severance Agreement on
July 31, 2006:
Xxxxxxx Xxxxxxxx
President and Chief Executive Officer Elect
Xxxxxx X. Xxxxxxx, Xx.
Executive Vice President, Finance and Acquisitions
and Chief Financial Officer
Xxxx X.Xxxxxx
Executive Vice President, Administration
and Secretary
Xxxxx Xxxxxxxxx, Senior Vice President
and President, Fedders North America
Xxxxxx Xxxxx, Vice President and
President, Fedders China
